Macquarie Mexican REIT (MMREIT) (BMV:FIBRAMQ) today announced its financial results for the second quarter and six months ended June 30, 2014, including the declaration of a cash distribution of Ps.0.475 per certificate for the quarter.
MMREIT reported an increase in total proportionately combined revenues of 38.6% to Ps.571.4 million for the quarter ended June 30, 2014 compared with Ps.412.4 million in the prior comparable period. Proportionately combined revenue includes results from consolidated properties and MMREIT’s 50% interest in the joint venture with Grupo Frisa accounted for using the equity method.
Total revenue for the six months ended June 30, 2014 rose 34.7% to Ps.1.1 billion from Ps.818.1 million in the prior comparable period. The increase primarily reflects expansion of MMREIT’s portfolio over the past year partially offset by modest declines in average rental rates. The rental rate decline was mainly attributed to the acquisition of an industrial portfolio from affiliates of DCT Industrial Inc. with a lower average rental rate compared with the broader portfolio.
Funds From Operations (FFO) increased 30.5% to Ps.287.7 million, or Ps.0.476 per certificate, in the second quarter of 2014 compared with Ps.220.4 million, or Ps.0.389 per certificate, in the prior comparable period. FFO increased 28.3% to Ps.553.8 million for the six months ended June 30, 2014 compared with Ps.431.7 million for the six months ended June 30, 2013. FFO increased primarily due to growth through acquisitions, partially offset by increased cash interest expense associated with borrowings for the acquisitions.
MMREIT’s reduction in Profit for the Period in the quarter and six months periods as calculated in accordance with International Financial Reporting Standards is primarily due to the non-cash impact of foreign exchange movements.
“We are pleased to have delivered another solid quarter of performance. Contributions from acquisitions completed in late 2013 and early 2014 are now in our top-line. We expect additional improvement in the performance of these acquired properties as our leasing teams continue to engage tenants and potential tenants to drive occupancy and positive rental rate growth at rollover,” said Jaime Lara, CEO of MMREIT. “We believe MMREIT is well positioned to capitalize on what we are foreseeing to be an active second half of the year.”
NOI includes rental income, plus expense recoveries and parking income, minus property operating expenses (including property administration fees). FFO is equal to NOI minus corporate general and administrative expenses, debt service and management fees.
MMREIT is including Adjusted Funds From Operations (AFFO) as a component of its financial reporting in this and future reporting periods.
MMREIT derives AFFO by adjusting FFO for normalized capital expenditure, tenant improvements and leasing commissions. AFFO may be calculated in a different manner by other market participants thereby limiting its use as a comparative measure. Use of AFFO in the analysis of the financial performance of MMREIT should be in addition to and not in lieu of other financial measures as required under International Financial Reporting Standards.
MMREIT reported AFFO for the quarter ended June 30, 2014 of Ps.262.6 million or Ps.0.434 per certificate. A reconciliation is included in the Supplementary Financial Information materials.
“We remain positive on the fundamentals driving the industrial segment and believe we will see an active second half of the year in terms of leasing. Our now internalized industrial property administration platform including the leasing teams are doing an excellent job of getting in front of existing and prospective tenants in order to understand their needs and offer them competitive space solutions. We are in advanced discussions on a number of lease transactions in some of our most active markets,” noted Lara.
Rental rates across the retail/office segment increased $0.22 to $10.64 per square meter, per month, during the quarter. The increase reflects strong demand for retail properties in major metropolitan markets such as the Mexico City Metropolitan Area.
“We are pleased with the contributions made from our retail/office segment during the quarter. Mexico continues to experience a growth in its middle class and report positive trends in consumer confidence, all of which bodes well for the performance of our retail/office properties. We remain focused on increasing occupancy and driving rental rate growth across this segment,” noted Lara.
On July 28, 2014, MMREIT declared a cash distribution of Ps.0.475 per certificate for the quarter ended June 30, 2014. MMREIT reaffirmed its distribution guidance for the full year 2014 of Ps.1.90 per certificate.
Commencing in the first quarter of 2015, MMREIT will use AFFO as the basis for determining distributions. AFFO more closely aligns with the sustainable cash generation of MMREIT’s portfolio over the long term, after taking into consideration necessary and appropriate reinvestments in those properties and other items, which to date have been funded out of surplus cash provisions.
The payment of a cash distribution is at all times subject to the approval of the board of directors of the Manager, the continued stable performance of the properties in the portfolio, and prevailing economic conditions.
MMREIT is in compliance with these requirements and does not anticipate any material impact to its business model as a result of the regulations as a whole. Investor approval will be sought in a duly convened holders meeting for changes required to MMREIT’s constituent documents to conform them to the new regulations.
MMREIT has established an Indebtedness Committee to oversee MMREIT’s compliance with the new leverage requirements. The committee is comprised of independent members of MMREIT’s Technical Committee and MMREIT’s CEO and COO. Dr. Alvaro de Garay will chair the committee.
In accordance with the new FIBRA regulations:
Please refer to the Supplementary Financial Information materials for details of how the above ratios are calculated together with detailed disclosures regarding MMREIT’s portfolio level debt facilities.
MIRA is a business within the Macquarie Funds Group division of Macquarie Group and a global alternative asset manager focused on real estate, infrastructure, agriculture and energy assets. MIRA has significant expertise over the entire investment lifecycle, with capabilities in investment sourcing, investment management, investment realization and investor relationships. Established in 1996, MIRA has approximately US$105 billion of total assets under management as of June 30, 2014 with more than 400 employees managing 50 listed and unlisted funds worldwide.
Macquarie Group (Macquarie) is a global provider of banking, financial, advisory, investment and funds management services. Macquarie’s main business focus is making returns by providing a diversified range of services to clients. Macquarie acts on behalf of institutional, corporate and retail clients and counterparties around the world. Founded in 1969, Macquarie operates in more than 70 office locations in 28 countries. Macquarie employs approximately 13,900 people and has assets under management of over US$396 billion (as of March 31, 2014).
None of the entities noted in this document is an authorised 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.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION AS AT JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013