Vesta Real Estate (VTMX) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues increased by 10.7% to $60.6 million, driven by rental revenues from new leases and inflationary adjustments [21] - Adjusted net operating income rose by 8.5% to $62.1 million, with a margin contraction of 10 basis points to 95.7% due to higher costs [21][22] - Adjusted EBITDA reached $55 million, a 9.3% increase year-over-year, with a margin increase of 50 basis points to 85.2% [22] - Pre-tax income decreased to $28.6 million compared to $150.6 million in 2024, primarily due to lower gains on revaluation of investment properties [23] - Cash and cash equivalents stood at $49 million, with total debt decreasing to $801 million [24] Business Line Data and Key Metrics Changes - Total leasing activity for Q1 2025 reached $1.4 million, comprising 139,000 square feet of new contracts and 1.2 million square feet in lease renewals [14] - Same store NOI increased by 4.3% year-over-year, reflecting strong tenant relationships and portfolio quality [13] Market Data and Key Metrics Changes - Vesta's revenues were 89.7% denominated in U.S. dollars, up from 87.8% in Q1 2024 [21] - Vacancy rates in Monterrey were around 7%, while Tijuana's rates were close to 8%, indicating healthy market conditions despite a slow quarter [132] Company Strategy and Development Direction - Vesta is focused on maturing leases and renewals, generating a 11.5% trailing 12-month weighted average spread, the highest since 2022 [13] - The company is making strategic land acquisitions in urban infill markets aligned with its Route 2030 strategy, particularly for e-commerce and last-mile logistics [15] - Vesta aims to maintain a diversified portfolio, with logistics and e-commerce making up about 50% of its tenant base [82] Management's Comments on Operating Environment and Future Outlook - Management noted that uncertainty continues to affect decision-making across industries, but Vesta's tenants are largely maintaining long-term plans [7][8] - The company views the current environment as an opportunity, leveraging its strong balance sheet for future growth [12] - Management expects an uptick in leasing activity for new tenants in upcoming quarters as uncertainties dissipate [30] Other Important Information - Vesta executed a share buyback program of $36 million during the quarter, acquiring 15.5 million shares [16][25] - The loan-to-value ratio was reported at 20.6%, one of the lowest in the industry, providing financial flexibility [17] Q&A Session Summary Question: What is the outlook for leasing activity in April and May? - Management sees an increase in leasing activity and expects new leases to pick up in upcoming quarters, despite the first quarter being slow due to uncertainty [30] Question: Can you provide details on tenant engagement and occupancy stabilization? - Management reported strong engagement with tenants, who are optimistic about Mexico, and expects occupancy to stabilize as clarity on trade rules improves [42][46] Question: What is the current state of market rents in Monterrey and Tijuana? - Vacancy rates are healthy, with rents stabilizing or increasing, indicating positive market dynamics despite a slow quarter [134] Question: Will Vesta continue to aggressively buy back shares? - Management will monitor market conditions and execute the $150 million buyback program when opportunities arise [124]