Corporación Inmobiliaria Vesta SAB de CV Q3 FY2024 earnings call

• Delivered strong financial performance with total income up 14.4% y-o-y, adjusted NOI margin 94.2%, adjusted EBITDA margin 84.5%, and Vesta FFO up 20.3% y-o-y. • Upwardly revised full-year 2024 guidance. • Third quarter leasing activity reached 1.3 million square feet (476k new leases, 787k renewals). • Saw continued recovery and heightened activity in Mexico City and Bajio; closed three new leases in Queretaro with European and American companies in automotive and electronics space. • Made a strategic investment in nearly 36 hectares of land bank in Tijuana Baja, California. • Benefited from longer-term client commitments with ~10-year lease terms for most new leases and attractive rental rates/8% spread for renewals/re-leasing.

Total income for the third quarter 2024 was $63.7 million, a 14.4% year-over-year increase. Adjusted NOI margin reached 94.2% and adjusted EBITDA margin was 84.5% for the quarter. Vesta FFO ended at $40.4 million for the quarter, a 20.3% year-on-year increase. In terms of revenue mix, 89% of the third quarter revenue was denominated in U.S. dollars, up from 86% in the third quarter 2023.

• Upwardly revised full-year 2024 revenue growth to exceed 17% (previously 16%-17%). • Adjusted NOI margin revised to 94.5% (previously 94%). • Adjusted EBITDA revised to 83.5% (previously 83%).

• Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ. For more information on risk factors, please review public filings.

Q: Just a couple on my side. We saw good occupancy, but down quarter-over-quarter. So just wanted to get a little bit of sense of how your commercial discussions are going on with your clients, whether the recent volatility around Mexican politics or U.S. election, whether this has had some clients delaying being in those final steps, perhaps pulling the trigger. So I wanted to get a sense there on your commercial discussions. And secondly, when you think about your development going forward, you have some developments in the Bajio region. You commented you had very positive comments around the automotive industry. So just wanted to see how -- what your outlook is more medium-term, whether you would expect more activity in the Bajio region to make more use of your land bank instead of more the strategic acquisitions in the North. Just wanted to see if you could have higher utilization of that part of your portfolio?

A: Thank you very much for being on the call, and for giving us the opportunity to address further on some of items coming to your question. Definitely, we have seen throughout the year, occupancy levels being quite good. Even that we -- in some markets, there has been an uptick in vacancy, we're coming from record low vacancies in the last couple of years and that's why it's the nature of the market to have some sort of adjustment. But still, we believe that current market conditions are strong as well as Vesta's occupancy levels, given that we had a minor tick on the total portfolio. But positively on the same-store portfolio, we saw an increase in occupancy but still at a very high level of 98% which represents well the commitment from existing clients committing to longer term renewing 90% of retention rate throughout the year and actually having very little move-outs. Maybe the only way -- the only reason why we saw a little bit higher -- lower occupancy is because of new projects coming online that we have been in lease-up stage and that have taken in this case, a little more than -- now more than 12 months. So we feel comfortable with year-end occupancy levels and year-end leasing activity. Part of the -- and this comes from our discussions with our commercial team with tenants and potential tenants, which interestingly, they are following more I would say, economic trends or market trends regarding taking up space, more than even political considerations. The reason being that many of these companies already have long-term contracts with OEMs, for example, or they have already -- so we have contracts with, let's call it, retailers in the U.S. So they need to start operations in 2025, 2026 and they have long-term contracts with many of these companies. And that's the reason why they continue to take on space and pretty much care less about political impacts, which they know that there's always uncertainty. So for that reason, we feel confident that we're going to end up a good year. And 2025, we will continue to see some positive demand. And those commercial discussions are we keep on doing them actively. I take the opportunity to remind everyone that we have local presence in many of the -- in all of the markets that we operate. We have immediate access to clients and potential clients. And that's one of the key reasons of being vertically integrated and internalized management team and not leaving external management structures to talk on behalf of the company. Having said that we believe that the development going forward will continue to come from the demand that we see on the market. As long as we see demand, we will continue to develop buildings. And for the moment, we see that there will be demand. So we will have an active development pipeline. We see strong -- industry is being strong in the Bajio Northern Central Mexico. E-commerce playing quite well. You see the big names expanding and expanding -- doing major investment announcements. We also see -- that's on the e-commerce front and logistics. We also are seeing a supply chain integration with North America which is a strong statement that nearshoring is not only robust but will stay for a while. And we're seeing industries like the auto industry also integrating further. Mexico has been playing out well in the last years in terms of manufacturing and in terms of integrating supply chains. And today, we continue to see the same trend. Obviously, we will remain cautious on company's decisions. And luckily Vesta has a lot of flexibility to adjust according to the market reaction. And for that reason, we will continue to follow very closely.