Corporación Inmobiliaria Vesta (VTMX) Q2 2025 Earnings Call July 25, 2025 11:00 AM ET Company ParticipantsFernanda Bettinger - Director of Investor RelationsLorenzo Dominique Berho Carranza - CEOJuan Felipe Sottil Achutegui - CFOPiero Trotta - AVP - Equity ResearchAntonio Hernández Vélez - Head - Equity Research & DirectorFrancisco Suarez - Director - Global Research - LatAm EquitiesGordon Lee - Head of ResearchAlejandra Obregón Martínez - VP - Equity ResearchArmando Rodriguez - Director GeneralConference C ...

Financial Data and Key Metrics Changes - Funds from operations (FFO) for Q2 2025 were $0.76 per fully diluted share, an increase from $0.66 per share in Q2 2024 [12] - Cash same store net operating income (NOI) growth for the quarter was 8.7%, driven by rental rate increases and new and renewal leasing [12][13] - In-service occupancy at the end of the quarter was 94.2%, down 110 basis points from the previous quarter [13] Business Line Data and Key Metrics Changes - Overall cash rental rate increase for new and renewal leasing was 33%, and 38% when excluding a large fixed-rate renewal in Central Pennsylvania [8] - Approximately 2,500,000 square feet of leases commenced during the quarter, with 400,000 being new leases and 2,100,000 being renewals [13] Market Data and Key Metrics Changes - Vacancy in Tier one U.S. markets was 6.3% at the end of Q2, up 30 basis points from the prior quarter [6] - Year-to-date net absorption nationally totaled 16,000,000 square feet, with 5,000,000 square feet in target markets [7] - New construction start volume was 62,000,000 square feet in Q2, down from 66,000,000 square feet in Q1 2025 and 72% lower than the peak in Q3 2022 [7] Company Strategy and Development Direction - The company is focused on securing and serving existing and new customers to drive long-term cash flow growth [17] - The company plans to continue executing new starts in markets with good fundamentals and unmet demand [21] - The company remains cautious about new development starts due to the need for more consistent development lease signings [21] Management's Comments on Operating Environment and Future Outlook - Management noted that uncertainty around tariffs continues to dampen decision-making momentum [5] - There is an expectation for improved confidence and timely decision-making once the tariff situation becomes clearer [17] - The company anticipates a higher interest expense in the second half of the year due to funding its development pipeline and the recent bond offering [24] Other Important Information - The company was upgraded by Fitch to BBB+ in early May, which facilitated a public bond offering of $450,000,000 at a coupon rate of 5.25% [11] - The guidance range for NAREIT FFO for the year remains at $2.92 per share at the midpoint, with a narrowed range of $2.88 to $2.96 per share [14] Q&A Session Summary Question: How attractive are incremental development starts today compared to three or six months ago? - Management indicated that they would like to see more consistent development lease signings before increasing new starts [20] Question: Is there anything abnormal in the second quarter FFO? - Management noted that higher interest expense in the second half is expected due to funding the development pipeline and the recent bond offering being slightly dilutive [24] Question: Can you clarify the new lease that was not in the $1,600,000 target? - Management confirmed that the new lease announced has positively impacted their guidance, reducing the expected drag on FFO [31] Question: What is the current demand for build-to-suit projects? - Management stated that while they do execute on build-to-suit projects, their platform is more targeted towards speculative development [51] Question: How are private industrial developers behaving in the current environment? - Management observed that where there are more choices, concessions have increased, but there is no material difference across the landscape for developers [67] Question: What is the outlook for specific markets? - Nashville and certain submarkets in Dallas and Houston are performing well, while Southern California saw a 5% decline in market rents from Q1 to Q2 [99][103]

Financial Data and Key Metrics Changes - Kite Realty Group reported NAREIT FFO per share of $0.55 and core FFO per share of $0.53 for Q1 2025, benefiting from a $0.03 contribution from a large termination fee [14][15] - Same property NOI grew by 3.1%, driven by a 350 basis point increase from minimum rent and a 90 basis point increase in net recoveries [15] - The company raised its 2025 NAREIT and core FFO per share guidance by $0.02 each at the midpoints [9][15] Business Line Data and Key Metrics Changes - Blended cash leasing spreads in Q1 were just under 14%, with non-option renewal spreads at 20% [7] - Starting rents for comparable new shop leases were nearly $41 per square foot, approximately 20% higher than the current portfolio average [7] - New and non-option renewal shop leases signed in Q1 had weighted average rent bumps of 360 basis points, nearly 100 basis points higher than three years ago [8] Market Data and Key Metrics Changes - Demand for anchor spaces remains strong, with significant interest from larger format tenants [8] - The office component of Legacy West is 98.7% leased, while the retail component is 95% leased [23] Company Strategy and Development Direction - The acquisition of Legacy West in a joint venture with GIC is seen as a pivotal step forward, enhancing portfolio quality and solidifying the company's position in the market [10][11] - The company aims to pivot towards mixed-use properties while still maintaining a diverse portfolio that includes grocery-anchored centers [60][61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to produce strong results in 2025 and deliver long-term value for stakeholders [12] - The company is optimistic about the mark-to-market opportunities within the Legacy West acquisition, expecting significant rent growth over the next three years [22][44] Other Important Information - The company has increased its general bad debt reserve midpoint by 15 basis points to 100 basis points of total revenues, reflecting increased economic uncertainty [16] - The acquisition of Legacy West is expected to be immediately accretive to FFO per share while modestly increasing pro forma leverage [12][19] Q&A Session Summary Question: Expected NOI growth rate for Legacy West and current occupancy rates - The embedded rent bumps for Legacy West are 2.6%, above the portfolio average of 1.7%, with office occupancy at 98.7% and retail at 95% [22][23] Question: Office demand and recent leasing activity - The office product is strong, with high tenant satisfaction and a sub-market lease percentage of 95% [24][26] Question: Relationship with GIC and future investment opportunities - The company is actively working on a second joint venture with GIC and sees potential for further investments [30] Question: Changes in bad debt reserve and tenant conversations - The shift in reserves reflects general market uncertainty rather than specific tenant issues, with no increase in aged accounts receivable [35][38] Question: Transaction environment and pricing sensitivity - The market remains healthy with competitive cap rates, and there is good demand for larger format deals [39] Question: Sales productivity comparison among Legacy properties - Legacy West is expected to have similar or slightly better sales productivity compared to Southlake, with a higher concentration of luxury retail [110][113]

Financial Data and Key Metrics Changes - The company's earnings for Q1 2025 exceeded both street expectations and internal projections significantly, with strong performance in NOI and leasing results [6][7][10] - The company closed nearly $200 million worth of DPE investments in the past nine months and is negotiating a pipeline of over $1.2 billion in new debt investments [10][12] Business Line Data and Key Metrics Changes - The debt-related businesses are expected to account for increasing profits, with management indicating that these earnings are a meaningful component of the company's identity [11][12] - The acquisition of 500 Park was completed, achieving 100% occupancy shortly after, and a significant improvement program is planned to increase rents [12][13][76] Market Data and Key Metrics Changes - The CNBS market for New York City office properties saw $6.9 billion completed year-to-date in 2025, a significant increase compared to previous years [32] - The company noted a fight for quality in the market, with New York City demonstrating resilience and positive momentum despite macroeconomic turbulence [31][34] Company Strategy and Development Direction - The company remains focused on both growing its equity portfolio and capitalizing on opportunities in the commercial debt market, with a strong emphasis on high-quality office development sites in Midtown Manhattan [12][49] - Management is optimistic about the long-term viability of the New York market, indicating a commitment to significant new developments despite current market uncertainties [49][50] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the leasing pipeline, noting that there has not yet been a slowdown in tenant activity despite macroeconomic challenges [25][60] - The company is confident in its ability to meet its leasing targets for the year, with a strong start in Q1 and expectations for continued demand driven by a return to office trends [71][72] Other Important Information - The Summit One Vanderbilt has become a leading experiential attraction in New York City, setting a ticket pre-sale record recently, indicating strong demand despite concerns over international tourism [14][120] - The company is actively pursuing office-to-residential conversions, with several viable projects underway that could significantly reduce available office space in the market [110] Q&A Session Summary Question: Can you discuss the trends in pre-built spaces and their economic rent potential? - Management indicated that pre-builds are essential for competitiveness, especially for smaller tenants, and they have a competitive advantage in executing high-quality designs [19] Question: How do you assess the impact of market sell-offs on leasing activity? - Management noted that there has been no slowdown in their pipeline, with an increase in tenant activity despite recent market disruptions [25] Question: What are the trends in the overall debt financing markets? - Management expects some turbulence in credit markets but believes New York City will remain resilient, with a strong demand for tangible assets [31][34] Question: Can you provide updates on your leasing targets and occupancy rates? - Management remains confident in achieving their leasing targets, with a strong start in Q1 and ongoing demand for office space [71][72] Question: What is the status of the casino license process? - The process is moving forward, with expectations for local approval by September and a license award by year-end [56] Question: How are concessions and free rents trending in the market? - Concessions have remained stable, with potential tightening in certain submarkets as face rents increase [65] Question: What is the outlook for the office-to-residential conversion opportunities? - Management sees a significant volume of conversion candidates and anticipates that this trend will firm up the market over time [110]