FIBRA Monterrey is pressing ahead with its expansion strategy in Mexico's Northern and Bajio regions. Their latest move involves securing a $63 million unsecured credit agreement with Scotiabank. This substantial injection of funds is earmarked to expand three of its properties in Aguascalientes, Queretaro, and Nuevo Leon, totaling 45,700 square meters. This expansion equates to a 3% increase in their portfolio's gross leasable area (GLA), according to data from FIBRA Monterrey and SiiLA FIBRA Analytics.

These expansions are set to significantly boost the GLA of industrial warehouses such as Aguascalientes Finsa – 03, Santiago, and Danfoss by 50% to 90%. This move allows FIBRA Monterrey to extend lease terms and proactively negotiate rental increases across all properties, creating a "more attractive and defensive cash flow for investors."

The three expansions will be delivered between the third and fourth quarters 2024. Additionally, FIBRA Monterrey anticipates that these expansions will generate annual net operating income (NOI) of $4.2 million, representing a 25% increase over the trust's average annual NOI over the last three years. NOI, a crucial measure of a company's operational profitability, reflects how much money is earned from core operations after deducting direct operating costs, excluding taxes, interest, and other unrelated expenses.

With its strategic focus on intelligent industrial sector expansion, the company demonstrates its commitment to sustainable value creation for its investors and contributes to the ongoing growth of the country's industrial market. Over the last three years, FIBRA Monterrey's industrial portfolio's GLA has surged by 2.6 times. In the second quarter of 2020, the trust reported nearly 525,300 square meters of industrial space, accounting for 74% of its property portfolio. By the second quarter of 2023, this had increased to just under 1,380,000 square meters, equivalent to 86% of its real estate portfolio, as per data analyzed by SiiLA.

Beyond these expansions, the company announced that it is negotiating other portfolio expansion projects, indicating FIBRA Monterrey's intent to strengthen its industrial holdings further. This comes when the trust expects a surge in nationwide commercial activity driven by business expansion and new investments spurred by nearshoring.

The FIBRA Monterrey-Scotiabank Agreement

In broad strokes, the loan agreement with Scotiabank provides FIBRA Monterrey with the financial flexibility required for its expansion projects. It features a variable interest rate reviewed every three months and a relatively low-interest margin. Notably, the agreement stipulates a single payment of principal and interest upon the maturity of each disbursement, ensuring that investment timelines align with revenue generation from the expansions.

It's also worth emphasizing that the contract has an 18-month duration from signing. Upon expiration, FIBRA Monterrey intends to replace it with a long-term loan that better matches its debt maturity profile. This strategy aligns with the trust's philosophy of maintaining a balanced capital structure while pursuing orderly growth.

For further insights and trends related to REITs' performance, we invite you to visit SiiLA Resource or contact us at contacto@siila.com.mx.