Total operating revenue:
During 2017, the total operating revenue amounted to $4,136.7 million pesos, which represents an increase of 33.2% with respect to 2016. This increase in total revenues was mainly driven by sound figures in both base rent and overage in the operating portfolio and to the consolidation of some of our properties, including Toreo Parque Central in its retail, office and hotel components. Torre Virreyes is fully occupied and operating at a 100% capacity, as well as the incorporation of Parque Puebla to our current Operating Portfolio. Fibra Danhos’ total operating revenue is composed by, Base Rent (62.9%), Overage, (5.8%) Tenant admission payments, (6.9%), Parking Revenues, (8.9%), and Maintenance, operation advertising and other revenue (15.5%.)
Base rent:
Amounted to $2,603.6 million pesos during 2017, which represents an annual increase of 30.9% with respect to 2016. This increase is primarily due to the consolidation of some of our properties, including Toreo Parque Central in its retail, office and hotel components, Torre Virreyes is fully occupied and operating at a 100% capacity, also the incorporation of Parque Puebla into our Current Operating Portfolio.
Overage:
Amounted to $240.7 million pesos during 2017, which represents an annual increase of 54.3% with respect to 2016. Primarily due to an increase in sales from our tenants in Parque Delta and Parque Tezontle, as well as an increase in hotel revenues and the incorporation of the Liverpool store in Toreo Parque Central.
The organic growth (same properties) in Base Rent and Overage during the year was 10.3%.
Tenant admission payments:
Accounting revenue from Tenant Admission Payments totaled $ 285.2 million pesos during 2017, which represents an annual increase of 76.8% with respect to 2016. Cash inflow from Tenant Admission Payments totaled $ 436.6 million pesos, this figure is significantly lower than the $ 799.7 million earned during 2016. Growth trend in NOI combined with lower cash flow via tenant admission payment is observed throughout the year, and means a more stable and predictable cash flow generation from our Operating Portfolio, derived from a decrease of projects under development and an increase of consolidated projects.
Parking revenue:
Amounted to $367.3 million pesos in 2017, which represents an annual increase of 22.0% with respect to 2016. This performance is primarily due to the annual increase in parking rates in some of our shopping malls as well as an increase in traffic flow in our properties, including Parque Delta, Torre Virreyes, Toreo Parque Central and Vía Vallejo.
Maintenance, operation advertising and other revenue:
Amounted to $639.8 million pesos in 2017, which represents an annual increase of 28.3% with respect to 2016. This increase can be attributed to the increase in maintenance, operation and advertising fees primarily caused by the consolidation of some of our properties, including Toreo Parque Central, Torre Virreyes, Vía Vallejo and Parque Puebla.
Expenses
Operating Expenses:
Amounted to $1,454.8 million pesos during 2017, which represents an increase of 22.2% with respect to 2016. This increase is mainly due to the addition of new projects to the operating portfolio. Of the total operating expenses, operating, maintenance and advertising expenses represented 44%, Advisory fees accounted for 38%, leasing administration fees accounted for 5.8%, third parties expenses and others 1.3%, property tax 8.8% and insurance expenses accounted for 2.1%.
Operating, Maintenance and Advertising Expenses:
Amounted to $639.9 million pesos in 2017, which represents an annual increase of 24.4% with respect to 2016. This increase was caused by the addition of Parque Puebla’s operating expense to the Operating Portfolio, as well as the consolidation of some of our properties during 2017, including Toreo Parque Central, Torre Virreyes, Vía Vallejo and Parque Puebla.
Advisory Fees and Leasing Administration fees:
Amounted to $552.5 million pesos and $ 84.7 million pesos, respectively, which represents variations of 19.1% and 3.3% with respect to 2016. The increase in the Advisory fees is primarily caused by an increase in Investment Properties value, which serve as the basis for the fee payment, as well as an increase in the calculation percentage which had a variation from 0.8750% to 0.9375% with respect to 2016, as established in the Initial Public Offering. The increase in the Leasing Administration fees is mainly due to the increase in revenues that serve as a basis for the calculation.
Third party expenses and others:
This expense, including fees paid to our accounting, legal, tax advisors and independent appraisers, totaled $ 19.3 million pesos in the year 2017.
Property Tax and Insurance:
Amounted to $128.2 million pesos and $ 30.2 million pesos in 2017, wich represents variations of 44% and 9% respectively with respect to 2016. These increases are mainly due to the addition of Toreo’s Parque Central “Torre A” and Parque Puebla to our Current Operating Portfolio. Additionally, in the case of insurance we observed an increase derived from the exchange rate fluctuation since the premiums in our policies are US dollar based.
Other Income (Expenses)
Financial income, financial expenses and foreign exchange gain (net):
Amounted to $ 113.3 million pesos in 2017 mainly derived from the investment of the cash balance in fixed income securities. In the same period, financial expenses totaled $ 130.4 million pesos, while the exchange gain was $ 18.4 million pesos, derived mainly from the appreciation of the dollar with respect to the Mexican peso due to dollar denominated revenues.
Adjustment to the fair value of Investment Properties (net):
Adjustments to the fair value of the Investment Properties as of December 31, 2017 and 2016 were for 2,520.1 million pesos and $ 3,789.4 million pesos, respectively. These adjustments are derived from the appraisals made by independent experts that determine the market value based on annual appraisals of our Investment Properties with quarterly adjustments.
NOI, EBITDA, Net Profit, FFO and AFFO
Net Operating Income:
Amounted to $ 3,253.6 million pesos in 2017, which represents an annual increase of 36.0% with respect to 2016. Same Properties growth during the year was 11.4%. Net operating margin, excluding income from tenant admission payments, was 77.1% for 2017, slightly higher than the margin reported in 2016 of 75.8%
EBITDA:
Amounted to $2,681.9 million pesos in 2017, which represents an annual increase of 40.0% with respect to 2016. EBITDA margin was 64.8%, higher than the 61.7% reported in 2016.
Net Income, FFO and AFFO:
Amounted to $5,166.3 million pesos, $2,649.5 million pesos, and $3,339.3 million pesos, respectively. These figures represent variations of -12.0%, 33.6% and 10.6%, respectively, with respect to the results obtained in 2016.
| Mexican Pesos | 2017 | 2016 |
|---|---|---|
| Net Income | 5,166,261,357 | 5,872,748,276 |
| Exchange rate gain-Net | (3,406,365) | 100,357,942 |
| Adjustment to the fair value of investment properties - Net | 2,520,134,043 | 3,789,379,865 |
| FFO | $ 2,649,533,679 | $ 1,983,010,469 |
| Capital expenditures | — | (5,074,040) |
| Net Tenant admission payments | 151,388,627 | 638,385,232 |
| Net anticipated rents | (5,116,639) | (1,466,465) |
| Net straight-line effect | (16,166,996) | (29,343,012) |
| Net property tax and insurance unaccrued | (701,893) | (3,648,803) |
| Net Advisory and Leasing admin fees | 560,383,265 | 436,991,674 |
| AFFO | $ 3,339,320,043 | $ 3,018,855,055 |
Cash distributions:
Due to the solid performance of our operating revenues during 2017, Fibra Danhos reached an AFFO of $3,339.3 million pesos, which represent an AFFO per CBFI with economic rights of $ 2.53 pesos. Our Technical Committee determined a distribution of $ 2.28 pesos per CBFI, which represents a growth of 7% with respect to the distribution of $ 2.13 pesos per CBFI during 2016; we kept the equivalent of $ 0.25 pesos per CBFI in cash for diverse corporate expenses.
| Debt | Institution/ Issuance | Currency | Interest rate | Issuance | Maturity | Tenor (years) | Balance | |
|---|---|---|---|---|---|---|---|---|
| Bonds | Local (DANHOS 16) | MXN | Fixed | 7.80% | 11-jul-16 | 29-jun-26 | 8.52 | $3,000,000,000 |
| Bonds | Local (DANHOS 16-2) | MXN | Variable | TIIE + 0.65% | 11-jul-16 | 23-dec-19 | 2.01 | $1,000,000,000 |
| Bonds | Local (DANHOS 17) | MXN | Fixed | 8.54% | 10-jul-17 | 28-jun-27 | 9.52 | $2,500,000,000 |
| Avg. | 0.00% | Avg. | 7.90 | $6,500,000,000 | ||||
Including our third issuance, our outstanding debt is 85% fixed and 15% floating. All debt was issued in pesos, the average weighted maturity of the debt is 7.90 years and our average cost of debt was 8.16% as of December 31, 2017.
| Covenants as of 4T17 | Fibra Danhos | Límit | Status |
|---|---|---|---|
| Loan to value (total debt/total assets) | 10.5% | 50% | OK |
| Secured debt Limit | 0% | 40% | OK |
| Debt Service coverage ratio (AFFO) | 6.8x | 1.5 x min | OK |
| Unencumbered assets to unsecured debt | 967% | 150% | OK |
Current Development Portfolio and Growth Plan
We have fulfilled 100% of the development commitments made during the IPO. We continue working on the development of Parque Las Antenas, whose opening is scheduled for next June and we have started pre-construction work in Parque Tepeyac. We have multiplied our Portfolio’s Initial GLA 3.3 times and have added more than 500,000 square meters of premier quality to our portfolio since October 2013.
As of December 31, 2017, Fibra Danhos’ Current Operating Portfolio consisted of thirteen properties, with a GLA of 771,660 square meters and a occupancy rate of 97.9% in same properties and 89.0% in total properties. Parque Las Antenas and Parque Tepeyac are under development with tentative opening dates for June 7, 2018 (Parque Las Antenas) and the first half of 2020 (Parque Tepeyac).
Flow of Visitors
Our retail portfolio registered an annual flow of visitors of 93.2 million people, an increase of 20.3% with respect to 2016. Same properties and Total Properties occupancy registered stable levels of 97.6% and 89.0%, respectively. Total Properties had an increase of 3.2% with respect to 2016.
Occupancy cost
In the case of those retail tenants who are the most significant in terms of GLA and Fixed Rent, cost incurred associated to occupying a premise, which consists of Base Rent, Overage Rent and common area maintenance and advertising fees, expressed as a percentage of the corresponding Tenant Sales, was 8.5% in 2017, slightly higher that of 2016 which was 8.1%. In the same period, the Renewal Rate (Result of dividing the gross leasable area of premises that were renewed, by the total gross leasable area of the portfolio) was slightly lower, from 99.55% in 2016 to 99.38% in 2017.
Delinquency rate
The delinquency rate (Rental payment delayed beyond 60 days) was 0.53% in 2017 and represents an annual increase of 0.24% with respect to 2016. Rent Loss (past due portfolio greater than 180 days as a percentage of annualized Fixed Income for the respective period) was 0.85% in 2017, increasing 61 basis points with respect to 2016.
