Analysis of
results

Total operating revenue:

During 2018, Total Operating Income was $ 5,153 million pesos, which represents an increase of 24.6% over 2017. This increase is mainly due to the consolidation of some of our properties including Toreo Parque Central in its commercial components, of office and hotel, the operation and economic occupation to 100% of Torre Virreyes, Vía Vallejo and Parque Puebla, as well as the incorporation of Parque Las Antenas to our Portfolio in Current Operation. Of the total operating income of Fibra Danhos, Fixed Income accounted for approximately 65%, Variable Income represented approximately 4.4%, revenue for Single Considerations represented approximately 7%, parking revenues represented approximately 8.2%, and maintenance income, operation, advertising and others accounted for approximately 15.3%.

Base rent:

Fixed Income for Fibra Danhos reached $ 3,346.4 million pesos during 2018, which represents an annual increase of 28.5% with respect to 2017. This increase is mainly due to the consolidation of some of our properties, including Toreo Parque Central in its commercial, office and hotel components, the operation and economic occupation to 100% of Torre Virreyes, Vía Vallejo and Parque Puebla, as well as the incorporation of Parque Las Antenas to our Current Operation Portfolio.

Overage

Income from overage reached $ 229 million pesos during 2018, which represents an annual decrease of 4.9%. This decrease is mainly due to a conversion of overage to fixed income of some of our tenants in Parque Delta and Parque Tezontle.

The organic growth (same properties) in Fixed Income and overage during the year was 10.6% with respect to 2017.

Tenant admission payments:

The Tenant admission payments (accounting) totaled $ 366 million pesos during 2018, which represents an annual increase of 28.3% with respect to 2017. The Tenant admission payments (cash flow) totaled $ 305.1 million pesos, this figure is less than the $ 436.6 million obtained during 2017. This growth trend in NOI combined with lower cash flow from Tenant admission payments is observed throughout the year, and means a more stable and predictable cash flow generation from our Operating Portfolio, derived from a smaller development pipeline and the increase of stabilized properties in operation.

Parking revenue:

Fibra Danhos' parking revenue reached $ 421.5 million pesos in 2018, which represents an annual increase of 14.7% with respect to 2017. This increase is caused by the annual increase in rates in some of our commercial components and the increase in flow of vehicles in our properties such as Parque Puebla, as well as the incorporation of Parque Las Antenas to our Current Operation Portfolio.

Maintenance, operation advertising and other revenue:

The income from Maintenance, Operation, Advertising and Other of Fibra Danhos reached $ 790.2 million pesos in 2018, which represents an annual increase of 23.5% with respect to 2017. This increase is due to the maintenance fees, operation and advertising derived of the consolidation of some of our properties including Toreo Parque Central, Vía Vallejo and Parque Puebla, as well as the incorporation of Parque Las Antenas to our Operational Portfolio.

Expenses

Operating Expenses:

Fibra Danhos' total operating expenses were $ 1,727 million pesos during 2018, which represents an increase of 18.7% versus 2017. This increase is mainly due to the recognition of operating expenses of the projects included in the Operating Portfolio, as well as projects that were consolidating during 2018. Of the total operating expenses, operating, maintenance, advertising and other expenses accounted for approximately 43%, the Advisory Commission for 35%, the Commission for Representation Services for 6%, administration 1.3%, property tax expense 7.4% and insurance expenditure 2%.

Operating, Maintenance and Advertising Expenses:

Operating, maintenance, advertising and other expenses of Fibra Danhos reached $ 739.7 million pesos in 2018, which represents an annual increase of 29.9%. This increase is mainly due to the recognition of operating expenses of the projects incorporated into the Current Operating Portfolio, as well as projects that were under consolidation during 2018, including Toreo Parque Central, Vía Vallejo and Parque Puebla, as well as the opening of Parque Las Antenas.

Advisory and Representation Services fees:

The Advisory and Representation Services fee of Fibra Danhos totaled 609.1 million pesos and $ 100.3 million pesos, respectively, representing an increase of 10.2% and 18.4% with respect to 2017.

The increase in the Advisory fee is mainly due to the increase in the Investment Properties that serve as the basis for the calculation, as well as the percentage for the calculation that increased from 0.9375% to 1.0% on Investment Properties, as it is established in the Documents of the Initial Public Offering.

The increase in the Representation Services fee is mainly due to the increase in the revenues collected and invoiced that serve as a basis for the calculation.

Third party expenses and others:

The third party expenses Fibra Danhos, which mainly include the fees paid to our accounting, legal and tax advisors, as well as independent appraisers, totaled $ 117.2 million pesos in the year 2018.

Property Tax and Insurance:

Property and insurance expenses reached $ 127.1 million pesos and $ 33.6 million pesos in 2018, respectively. This 0.8% decrease is mainly due to a fluctuation in the property tax of our properties.

Additionally, in the case of insurance, although we observe a decrease derived from the fluctuation, the premiums in our policies have variations because they are quoted in US dollars, the increase is mainly due to the opening of Parque Las Antenas.

Other Income (Expenses)

Financial income, financial expenses and foreign exchange gain (net):

Financial income of Fibra Danhos totaled $ 80.2 million pesos in the 2018 fiscal year, mainly derived from the investment of the cash balance in fixed income securities. In the same period, the financial expenses (accounting) of Fibra Danhos totaled $ 333 million pesos, while the exchange gain was $ 6.6 million pesos, derived mainly from the appreciation of the dollar with respect to the Mexican peso.

Income taxes of the subsidiary

The income form taxes the of the subsidiary correspond to the Administrator, which is an entity that declares and taxes all. In fiscal year 2018, the subsidiary's income taxes totaled $ 2.63 million pesos.

Adjustment to the fair value of Investment Properties (net):

The adjustments to the fair value of the Investment Properties as of December 31, 2018 and 2017 were 727.7 million pesos and $ 2,520.1 million pesos, respectively. These adjustments are derived from the difference of appraisals made by independent appraisers that determine the market value of our Investment Properties annually with quarterly adjustments.

NOI, EBITDA, Net Profit, FFO and AFFO

Net Operating Income:

The Net Operating Income of Fibra Danhos reached $ 4,152.3 million pesos in 2018, which represents an annual increase of 24.9% with respect to 2017. Organic growth (same properties) during the year was 12.5%. The net operating margin, excluding the income from tenant admission payements, was 79.1% for 2018, slightly higher than the 78.9% margin reported in 2017.

EBITDA:

EBITDA of Fibra Danhos reached $ 3,426.0 million pesos in 2018, which represents an annual increase of 27.7% with respect to 2017. The EBITDA margin was 66.5% in 2018 versus the 64.8% reported in 2017.

Net Income, FFO and AFFO:

Net Income, FFO and AFFO of Fibra Danhos for 2018 totaled $ 3,891.8, $ 3,170.9, and $ 3,710.3 million pesos, respectively. These figures represent variations of -24.7%, 19.7% and 11.1%, respectively, with respect to the results obtained in 2017.

Mexican Pesos	2018	2017
Net Income	3,891,797,290	5,166,261,363
Exchange rate gain-Net	(6,827,971)	(3,406,365)
Adjustment to the fair value of investment properties - Net	727,748,088	2,520,134,043
FFO	3,170,877,173	2,649,533,685
Capital expenditures
Net Tenant admission payments	(60,845,507)	151,388,627
Net anticipated rents	3,189,217	(5,116,639)
Net straight-line effect	(15,217,792)	(16,166,996)
Net property tax and insurance unaccrued	(6,120,788)	(701,893)
Net Advisory and Leasing admin fees	618,445,671	560,383,265
AFFO	3,710,327,975	3,339,320,049

Cash distributions:

Due to the solid generation of cash from our Operating Portfolio during 2018, Fibra Danhos reached an AFFO of $ 3,710.3 million pesos, which represents an AFFO per CBFI with economic rights of $ 2.68 pesos. In this sense, our Technical Committee determined a distribution to our holders of CBFIs in 2018 corresponding of $ 2.40 pesos per CBFI, which represents a growth of 5.2% with respect to the distribution of $ 2.28 pesos per CBFI made in 2017, keeping in cash for uses different corporate entities the equivalent of $ 0.28 pesos per CBFI.

DANHOS 16: 3,000,000,000.00 (three billion 00/100 Mexican pesos) with a fixed nominal rate issued for a 10-year period with a 7.80% coupon rate (Mexican 10-year bond yield + 185 basis points).

DANHOS 16-2: 1,000,000,000.00 (one billion 00/100 Mexican pesos) with a floating rate issued for a 3.5-year period with a TIIE28 + 65 basis points coupon rate.

DANHOS 17: 2,500,000,000.00 (two thousand five hundred million 00/100 Mexican pesos) with a fixed nominal rate issued for a 10-year period with an 8.54% coupon rate (Mexican 10-year bond yield + 169 basis points).

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 6.90 years and our average cost of debt was 8.30% as of December 31, 2018.

Covenants as of 4T18	Fibra Danhos	Limit	Status
Loan to value (total debt/total assets)	10.0%	50%	OK
Secured debt Limit	0%	40%	OK
Debt Service coverage ratio (AFFO)	7.76x	1.5 x min	OK
Unencumbered assets to unsecured debt	993%	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 Tepeyac, whose opening is scheduled for 2021. We have multiplied the GLA of our Portfolio in Initial Operation 3.8 times and have added more than 615,143 square meters of premier quality to our portfolio since October 2013.

As of December 31, 2018, Fibra Danhos' Current Operating Portfolio consisted of fourteen properties, with an GLA of 882,067 square meters with an occupancy rate of 98.3% and 90.6% of total properties. Parque Tepeyac is under development and will start operations in 2021.

Flow of Visitors

Our commercial portfolio registered an annual influx of visitors of 110 million, an increase of 18.0% with respect to 2017. The occupation to same properties registered a stable level of 98.3%, while the occupancy to total properties was 90.6%, an increase of 0.7% and 1.6% respectively with respect to 2017.

Occupancy cost

The Occupancy Cost of the most significant institutional commercial tenants in terms of GLA and Fixed Income (the cost incurred associated with the occupation of a location, which includes Fixed Income, Overage, as well as maintenance fees for common areas and advertising expressed as a percentage of the sales of said tenants), was 8.7% in 2018, slightly higher than 8.5 calculated for 2017. In this same period, the Renewal Rate (result of dividing the gross profitable area of the premises that were renovated in a given period, between the gross total profitable area of the portfolio) was slightly lower, from 99.38% in 2017 to 98.10% in 2018.

Delinquency rate

The Delinquency rate (payment of the rent with a delay greater than 60 days as a percentage of the annualized Fixed Income revenues of the respective period) in the properties of our Initial Operating Portfolio was 0.26% in 2018 and represents a decrease against the 0.53% reported in 2017. Income Loss (overdue portfolio greater than 180 days as a percentage of annualized Fixed Income income for the respective period) was 0.63% in 2018, having a decrease of 22 bp with respect to 2017.s