Mexico-based Corporación Inmobiliaria Vesta S.A.B. de C.V., one of the leading pure-play industrial real estate companies, announced results for the third quarter ended September 30, 2022.
The company continues to benefit from significant rent increases across its portfolio, with in-place rents increasing 11.8% year on year while the vacancy rate has further declined, reaching record high total portfolio occupancies of 96.1%. This is a reflection of meaningful nearshoring and e-commerce growth tail winds.
Vesta again reported outstanding leasing activity for the 3Q22, reaching 3.8 million sf of GLA of which 1.0 million sf resulted from new leases with best-in-class companies such as Oxxo, Home Depot and DSV, among others. Importantly, leases signed by Home Depot in Tijuana and by DSV in Guadalajara were for buildings still under construction.
This trend has continued as Mexico industrial real estate vacancies remain at all-time lows; 3Q22 renewals reached 2.8 million sf with seven year weighted average lease terms and a 6.1% positive spread. Vesta renewed important leases during the quarter including Nestlé, Vesta’s largest tenant, which was renewed for a five-year term that matures in December 2028.
During the quarter Vesta acquired 8.7 acres of land in central Mexico City, further increasing its presence within key metropolitan areas which is directly aligned with the Company’s Level 3 Strategy. This exceptional inner-city location is particularly attractive to global logistics and e-commerce companies, with related high returns expected.
Vesta delivered an additional 169,984 sf in Queretaro and began construction of five new buildings during the third quarter 2022: two in Ciudad Juarez representing 529,389 total sf, two in Guadalajara totaling 735,907 sf and one 81,158 sf expansion in Queretaro with existing client Safran. Projects under construction reached 3.2 million sf reflecting an estimated US$ 188.9 million investment with a 10.0% return on cost.
Third quarter financial results reflect strong operational performance with an 11.0% year on year revenue increase to US$ 45.5 million, from US$ 41.0 million in 3Q21. This increase is primarily due to US$ 4.90 million from new revenue-generating contracts and a US$ 2.47 million favorable inflationary impact. 3Q22 NOI and EBITDA margins reached 94.9% and 85.0%, respectively.
The company further reinforced its balance sheet during 3Q22, closing a US$ 200 million sustainability-linked revolving credit line with a 160-basis point plus SOFR interest rate including a Green Building Certification target associated with the Company’s Gross Leasable Area (“GLA”).
Vesta received LEED certification for its Vesta Park Guadalajara Mercado Libre building and its Vesta Park Puebla PepsiCo building was LEED Silver certified during the third quarter 2022, aligned with the Company’s long-term commitment to green buildings as part of its ESG strategy.
3Q22 NAV per share increased by 10.6% to US$ 2.79, from US$ 2.53 in 3Q21, also aligned with Vesta’s Level 3 Strategy, while pretax FFO increased 18.3% to US$ 26.9 million compared to US$ 22.7 million in 3Q21. 3Q22 pretax FFO per share increased 19.1% to US$ 0.0391, from US$ 0.0328 in 3Q21.
Net Operating Income (NOI) increased 12.0% to US$ 43.2 million in 3Q22, compared to US$ 38.5 million in 3Q21. The 3Q22 NOI margin was 94.9%, an 88-basis-point increase due to a year-on-year decrease in properties generating rental income costs.
EBITDA increased 8.0% to US$ 38.7 million in 3Q22, as compared to US$ 34.3 million in 3Q21. 3Q22 EBITDA margin was 85.0%; a 115-basis-point increase due to a higher gross profit year on year.
3Q22 pre-tax funds from operations (pre-tax FFO) increased 18.3% to US$ 26.9 million, from US$ 22.7 million for the same period in 2021. Pretax FFO per share was US$ 0.0391 for the third quarter 2022, compared with US$ 0.0328 for the same period in 2021; a 19.1% increase. 3Q22 after tax FFO was US$ 20.4 million, compared to US$ 16.1 million in 3Q21. This increase was due to increased EBITDA and a lower current tax in 3Q22.
3Q22 total comprehensive gain was US$ 62.3 million, versus US$ 4.0 million in 2021. This increase was primarily due to an increase in investment property valuation and lower income tax expenses in 3Q22.
The total value of Vesta’s investment property portfolio was US$ 2.58 billion as of September 30, 2022; a 13.9% increase compared to US$ 2.26 billion at the end of December 31, 2021.