FIBRA Macquarie México Reports First Quarter 2020 Results

FIBRA Macquarie México (FIBRAMQ) (BMV: FIBRAMQ), owner of one of the largest portfolios of industrial and retail property in Mexico, announced its financial and operating results for the first quarter ended March 31, 2020.

FIRST QUARTER 2020 HIGHLIGHTS

• Increase in AFFO per certificate of 19.0% YoY to Ps. 0.7483
• Normalizing for Ps. 106.6 million early termination income recognized in the first quarter, increase in AFFO per certificate of 2.1% YoY to Ps. 0.6424
• Consolidated occupancy 95.3%, up 69 bps YoY
• Total liquidity of approximately US$264 million, comprised of US$210 million cash at bank and an undrawn revolver facility equivalent to US$54 million
• Authorization of a scheduled quarterly cash distribution of Ps. 0.4750 per certificate

"Notwithstanding the robust first quarter performance by FIBRAMQ, as demonstrated by growth in AFFO per certificate and an increase in portfolio occupancy, towards the end of the quarter we started to see the impact of the COVID-19 pandemic on our operations and the broader market," said Juan Monroy, FIBRA Macquarie's chief executive officer. "Since that time, we have been focused on managing the impact on our people, customers and overall business. Our approach has been to work with our customers and to grant selective rent relief to achieve mutually beneficial outcomes as we remain committed to creating long-term value for our certificate holders. Over the past few years, we have built a resilient business with a strong balance sheet through disciplined capital management. We believe that we are well positioned to manage through this challenging time. Our thoughts and wishes are with everyone impacted by the COVID-19 pandemic. As we navigate through the current uncertain environment, I want to thank the entire FIBRAMQ team for their support, hard work and commitment."

COVID-19 PANDEMIC UPDATE

Since the onset of the COVID-19 pandemic, FIBRA Macquarie has undertaken a proactive response, including prioritizing the health and safety of our team members, customers and other stakeholders.

The health and safety of FIBRAMQ associates continues to remain a priority, with property management teams remaining fully operational to respond to the needs of FIBRAMQ customers and properties across all of its portfolio.

At the portfolio level, FIBRAMQ has provided assistance to its customers by making available to its industrial portfolio customer staff a range of online mindfulness seminars to assist in their adjustment to working from home. In the community, FIBRAMQ has partnered with the state of Mexico to provide, free of charge, safe spaces within five of its shopping centers to support the Contingencia sin Violencia program established by the state authority which provides support to members of the community directly impacted by domestic violence.

In order to increase cash liquidity and financial flexibility, on March 24 FIBRA Macquarie drew down US$180.0 million on its revolving credit facility. As of 31 March 2020, FIBRAMQ had total liquidity of US$264.0 million, comprised of US$210.0 million cash at bank and an undrawn Mexican Peso-denominated revolver facility of Ps. 1,260 million (approximately US$54.0 million). In addition, FIBRAMQ does not have any material commitments with respect to growth capital expenditure and does not have any scheduled loan maturities until 2023. For further details on all these actions, please refer to the update release provided on April 22, 2020 which can be found at https://fibramacquarie.gcs-web.com/static-files/cf26f171-dfe2-468c-a13d-7fa28aa2b3d9.

Industrial portfolio

In terms of FIBRAMQ's industrial portfolio:

• Many of FIBRAMQ's customers continue to operate, given their "essential business" status, however a number of customers have suspended operations as a result of government restrictions
• No rental discounts have been granted to any of FIBRAMQ's industrial customers
• Rent relief has been requested by 36% of FIBRAMQ's industrial customers (by industrial portfolio Annualized Base Rent (ABR)), with all requests being evaluated on a case by case basis
• To date, FIBRAMQ has agreed short-term rent deferrals with approximately 24% of its industrial customers, with deferred rent to be predominantly collected in the second half of 2020
• Deferred rents represent approximately 2.1% of the industrial portfolio ABR
• April rent collections, excluding contractually agreed rent deferrals, total 90.4% of contractual amounts due. Taking into account agreed April rent deferrals, April rent collections total 97.6%

Retail portfolio

Across FIBRAMQ's retail portfolio, all shopping centers are supermarket anchored and remain open, however foot traffic has declined in line with non-essential store closures. Approximately 57% of FIBRA Macquarie's retail portfolio in terms of GLA and 42% in terms of ABR remains open.

As at 31 March 2020, FIBRA Macquarie's retail portfolio tenant composition was as follows:

In terms of FIBRAMQ's retail portfolio:

• No rent relief has been granted to customers that are operating or that are regarded as essential
• FIBRAMQ has proactively engaged with its impacted non-essential retail portfolio tenants on rent relief measures
• While discussions continue with a number of impacted customers, to date agreements involving rent relief have been concluded with 22% of non-essential tenants, or approximately 12% of the retail portfolio (by retail portfolio ABR)
• Rent relief has included both deferrals and limited discounts
• Deferred rent agreements typically involve collections commencing in the second half of 2020 and concluding in 2021
• April rent collections, excluding rent deferrals agreed, total 59% of contractual amounts due

   

FINANCIAL AND OPERATING RESULTS

Consolidated Portfolio

FIBRAMQ's consolidated portfolio results were as follows:

FIBRAMQ's consolidated portfolio, same store results were as follows:

Industrial Portfolio

The following table summarizes the results for FIBRAMQ's industrial portfolio:

For the quarter ended March 31, 2020, FIBRAMQ's industrial portfolio delivered record NOI of Ps. 727.1 million, up 7.5% compared to the prior comparable period. Higher occupancy and rental rates contributed to revenue growth, up 5.8% on the first quarter of 2019. Of note, property level expenses were lower by 11.8%, primarily driven by repairs and maintenance reducing by 33.5%. The strong top line performance together with cost control resulted in FIBRAMQ's industrial portfolio achieving a record NOI margin of 92.7%, up 146 basis points from the prior year.

The occupancy rate of the industrial portfolio as of March 31, 2020 was 95.7%, up 86 basis points versus the prior comparable quarter. During the quarter, FIBRAMQ signed 22 new and renewal leases, comprising 2.1 million square feet of industrial GLA. FIBRA Macquarie executed on five new leases totaling 0.4 million square feet, and, in addition, continued to experience healthy renewals, achieving a twelve-month retention rate of 85.3%. FIBRAMQ executed on 17 renewal leases totaling 1.7 million square feet. Following an active first quarter, leases accounting for a manageable 12.6% of ABR are scheduled to expire in the remainder of 2020.

For detail on FIBRAMQ's same store industrial portfolio results, please refer to First Quarter 2020 Supplementary Information materials located at www.fibramacquarie.com/investors/bolsa-mexicana-de-valores-filings.

Retail Portfolio

The following table summarizes the proportionally combined results of operations for FIBRAMQ's retail portfolio:

For the quarter ended March 31, 2020, FIBRAMQ's retail portfolio delivered NOI of Ps. 224.5 million, up 46.9% from the prior comparable period.

Included in the results is early termination income from a single tenant of Ps. 106.6 million received in the first quarter. The early termination income represented approximately 1.1x the lease's scheduled annual rental income. The premises were most recently used by the departed tenant for document storage and offices. The property is well located in a densely populated, urban area of Mexico City with good access. Given the prime location, large footprint, flexible use and zoning rights the property represents an exciting repositioning or releasing opportunity for FIBRA Macquarie. Following lease termination, the property was removed from GLA whilst future use of the property is determined.

Normalizing for the impact of this early termination income, the retail portfolio delivered NOI of Ps. 142.2 million, down 0.9% from the prior comparable period, although 2.4% higher on a sequential basis.

Excluding the early terminated lease, FIBRAMQ's retail portfolio average rental rates increased 3.1% over the prior comparable period; including the impact of the lease termination at the prime Mexico City property, total retail portfolio average rental rates declined 3.1% over the prior comparable period.

During the first quarter of 2020, FIBRAMQ signed 46 retail leases, representing 5.1 thousand square meters. This activity included 14 new leases and 32 renewals, representing a 78.1% retention rate for the trailing twelve-month period, driven mainly by the move-out during the first quarter of a 1.8 thousand square meter space by an entertainment-themed tenant at City Shops Valle Dorado.

For detail on FIBRAMQ's same store retail portfolio results, please refer to First Quarter 2020 Supplementary Information materials located at www.fibramacquarie.com/investors/bolsa-mexicana-de-valores-filings.

PORTFOLIO ACTIVITY

During the first quarter, FIBRAMQ progressed construction on a 217,000 square foot industrial building in Ciudad Juárez and a 38,000 square foot build-to-suit industrial expansion in Hermosillo, with both projects being in advanced stages of completion.

There are no existing committed capital expenditure projects of a material nature to report.

BALANCE SHEET

In January 2020, FIBRAMQ received its scheduled second tranche of deferred sale proceeds of US$11.2 million. Additional deferred sale proceeds of US$9.0 million are due to be received in the second half of 2020.

As of March 31, 2020, FIBRAMQ had approximately US$994.5 million of debt outstanding, US$54 million available on its undrawn revolving credit facility and US$210 million of unrestricted cash on hand. FIBRAMQ expects to repay the drawn revolver of US$180.0 million when market conditions normalize. FIBRAMQ's indebtedness was 82% fixed rate and had a weighted-average debt tenor remaining of 5.5 years.

FIBRAMQ's CNBV regulatory debt to total asset ratio was 41.6% and the debt service coverage ratio was 4.4x.

CERTIFICATE REPURCHASE FOR CANCELLATION PROGRAM

During the first quarter, FIBRA Macquarie repurchased 4.1 million certificates, bringing total repurchases to 49.7 million certificates since launching the program in June 2017. FIBRA Macquarie has a remaining program capacity of approximately Ps. 814.4 million through to June 25, 2020.

All repurchased certificates have or will be cancelled.

1Q20 DISTRIBUTION

On May 12, 2020, FIBRAMQ declared a cash distribution for the quarter ended March 31 of Ps. 0.4750 per certificate. The distribution is expected to be paid on June 12, 2020 to holders of record on June 11, 2020. FIBRAMQ's certificates will commence trading ex-distribution on June 10, 2020.

FY20 GUIDANCE

AFFO per certificate

FIBRA Macquarie is updating its AFFO guidance for 2020. FIBRAMQ now estimates total AFFO per certificate of between Ps. 2.52 and Ps. 2.62, compared to prior AFFO per certificate guidance of between Ps. 2.57 and Ps. 2.62.

The 2020 outlook is particularly challenging given that the full and final impact of COVID-19 for FIBRAMQ remains very uncertain. This guidance is based upon the following assumptions:

• An average exchange rate of Ps. 22.7 per US dollar for the remainder of the reporting year
• The relaxation of government restrictions regarding non-essential activities at the beginning of June 2020
• No further deterioration in broader economic and market conditions
• Timely collection of in-place scheduled rents, including deferred rents
• No material increases in agreed rent discounts
• No new acquisitions or divestments
• No certificate repurchases

Distribution per certificate

In respect to the full year 2020, FIBRAMQ re-affirms guidance of cash distributions of approximately Ps. 1.90 per certificate, expected to be paid in equal quarterly instalments of Ps. 0.475 per certificate.

The payment of cash distributions is subject to the approval of the board of directors of the Manager, stable market conditions and prudent management of FIBRAMQ's capital requirements.

WEBCAST AND CONFERENCE CALL

FIBRAMQ will host an earnings conference call and webcast presentation on Wednesday, May 13, 2020 at 7:30 a.m. CT / 8:30 a.m. ET. The conference call, which will also be webcast, can be accessed online at www.fibramacquarie.com or by dialing toll free +1-877-304-8957. Callers from Mexico may dial 01-800-926-9157 and other callers from outside the United States may dial +1-973-638-3235. Please ask for the FIBRA Macquarie First Quarter 2020 Earnings Call with conference number 5847447.

An audio replay will be available by dialing +1-855-859-2056 or +1-404-537-3406 for callers from outside the United States. The passcode for the replay is 5847447. A webcast archive of the conference call and a copy of FIBRA Macquarie's financial information for the first quarter 2020 will also be available on FIBRA Macquarie's website, www.fibramacquarie.com.

About FIBRA Macquarie

FIBRA Macquarie México (FIBRA Macquarie) (BMV:FIBRAMQ) is a real estate investment trust (fideicomiso de inversión en bienes raíces), or FIBRA, listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores) targeting industrial, retail and office real estate opportunities in Mexico, with a primary focus on stabilized income-producing properties. FIBRA Macquarie's portfolio consists of 235 industrial properties and 17 retail properties, located in 20 cities across 16 Mexican states as of March 31, 2020. Nine of the retail properties are held through a 50/50 joint venture. For additional information about FIBRA Macquarie, please visit www.fibramacquarie.com.

Cautionary Note Regarding Forward-looking Statements

This document includes forward-looking statements that represent our opinions, expectations, beliefs, intentions, estimates or strategies regarding the future, which may not be realized. These statements may be identified by the use of words like "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "will," "should," "seek," and similar expressions. The forward-looking statements reflect our views and assumptions with respect to future events as of the date of this document and are subject to risks and uncertainties.

Actual and future results and trends could differ materially from those described by such statements due to various factors, including those beyond our ability to control or predict. Given these uncertainties, you should not place undue reliance on the forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

None of the entities noted in this document is an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities.

THIS RELEASE IS NOT AN OFFER FOR SALE OF SECURITIES IN THE UNITED STATES, AND SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED. THIS ANNOUNCEMENT IS NOT FOR RELEASE IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA.