FIBRA Monterrey Shines: Fitch Confirms Its Excellent Financial Solvency with AA+(mex) and BBB- Ratings

Fitch Ratings, a renowned credit rating agency, has reaffirmed FIBRA Monterrey's financial strength by assigning it a national rating of "AA+(mex)" and an international rating of "BBB-." These ratings indicate that FIBRA Monterrey has a solid capacity to meet its financial obligations. Although Fitch Ratings considers the real estate investment trust (REIT or FIBRA) financial outlook to be "stable" and does not expect to change the rating in the short term, the agency recognizes some vulnerability to potential adverse economic changes.

Two key factors have driven FIBRA Monterrey's credit rating: the high quality of its assets, concentrated on the industrial sector, and the stability of its rental income, supported by high occupancy rates and medium-term lease contracts. In addition, Fitch Ratings noted that the REIT's financial position was strengthened by the recent capital subscription of 7,810 million pesos (about 468 million dollars), which, between 2024 and 2026, will allow it to maintain a debt level (net leverage) of four to five times its capital amount, as well as ensure solid liquidity and keep its assets free of mortgages and liens.

The U.S. rating agency expects FIBRA Monterrey's investments to continue growing as they are focused on Mexico's industrial sector, which is currently experiencing a boom driven by nearshoring. In this regard, Fitch Ratings recalled that the real estate trust's growth strategy includes acquisitions of stabilized properties and client expansions over the next three years, with an approximate value of 900 million dollars.

Strengths of FIBRA Monterrey

FIBRA Monterrey's high financial grade is related to the quality and variety of its investments, guaranteeing its portfolio's stability and profitability.

According to Fitch Ratings, income generation with a balance between debt and equity, improvements in portfolio diversification by property, tenant, and region, and the high quality of its assets support confidence in the company. As an example, the agency mentions the acquisition of the "Zeus" real estate portfolio in 2023, with which FIBRA Monterrey doubled its gross leasable area (GLA), increased its financial exposure to the industrial sector, considering that its asset-linked income went from 50.4% to 71.9% of its total revenue, and improved the profitability of its properties with EBITDA margins close to its long-term goal of 80%.

In this sense, it is essential to mention that, at the end of 2023, FIBRA Monterrey operated 106 properties equivalent to 1.65 million square meters of GLA, while, at the end of 2022, the trust reported 60 properties covering about 818,864 square meters. Currently, the company's portfolio includes 19 office buildings, 81 industrial properties, six commercial premises, and 882,723 square meters of land reserves.

The trust's data also show that approximately 31.6% of its rental income comes from its top 10 clients and that Whirlpool, its most important tenant, contributes about 10.4%. These figures have decreased since 2021, when these percentages were 45% and 18.3%, respectively.

On the above, Fitch Ratings notes that the diversification of FIBRA Monterrey's income and its reduced dependence on key clients are positive aspects. In addition, it highlights the reduction in asset concentration in Nuevo Leon, from 56.5% to 41% between 2021 and 2023, as an advance in the geographical diversification of the portfolio, which contributes to the stability of investments and the reduction of long-term risks.

For the coming years, Fitch Ratings expects FIBRA Monterrey's occupancy rates to be around 96%, close to 2022 and 2023 when the trust reported rates of 90.9% and 96.3%. In a context where the agency expects the performance of the Mexican industrial real estate sector to remain solid, this increases the positive prospects for FIBRA Monterrey, as its focus on the industrial sector aligns with the general market trend. However, Fitch Ratings warns that certain risks, such as the lack of adequate infrastructure and the cost and availability of land, could hinder the anticipated growth of the industry in Mexico.

For more information on REITs' performance and development, visit SiiLA FIBRA Analytics or contact us at contacto@siila.com.mx.