Financial
analysis
Discussion and analysis of operating results
(201-1)
This section of management’s discussion and analysis of the results of our operations should be read together with the financial statements and the accompanying notes attached to this Annual Report.
Revenues
In 2022, total operating income was $5.51 billion pesos, a 15.7% increase compared to 2021. The growth is attributed primarily to three factors: i) the end of the discounts offered to tenants during the COVID-19 pandemic; ii) a pickup in economic activity, reflected in higher footfall in our properties; and iii) the inclusion of Parque Tepeyac in our operating portfolio.
Base rent accounted for about 66.7% of the total operating income of Fibra Danhos, while overage accounted for 5.1%, tenant admission payments 4.6%, parking fees 7.4%, and revenues from maintenance, operation, advertising and others 16.2%.
Revenues from base rent totaled $3.68 billion pesos in 2022, a year-to-year growth of 17.4%. This increase was due chiefly to the conclusion of facilities offered to certain tenants to support them during pandemic-related restrictions of 2020 and 2021. To a lesser extent, it is also attributable to the addition of Parque Tepeyac to our operating portfolio.
Income from overage totaled $279 million pesos in 2022, a year-over-year decrease of 0.8%, in part because of the conclusion of agreements with some tenants relating to the facilities and support extended during the pandemic.
Tenant admission payments (key money) (for accounting purposes) totaled $256 million pesos in 2022, a year-to-year reduction of 12.6% compared to 2021. The decline is primarily the result of the amortization of consideration accrued in prior years. The key money line is expected to recover in coming quarters as Parque Tepeyac gains more tenants.
Revenues from parking facilities totaled $408 million pesos in 2022, a year-over-year increase of 41.8%. This is the result of higher vehicle flow to our properties because of the economic reactivation.
Revenues from maintenance, operation, advertising and others reached $893.5 million pesos in 2022, which is 15.6% higher than in 2021. The change was the result of the gradual recovery of occupancy rates across our portfolio.
Expenses
Total operating expense for Fibra Danhos in 2022 was $1.96 billion pesos, a 15.5% increase compared to 2021. Operating, maintenance, advertising and other expenses accounted for approximately 44.6% of total operating expenses, advisory fees 33.3%, the representation service fee 5.7%, administrative expense 6.1%, property tax 8.1% and insurance 2.3%. These increases can be tied in part to the increased flow of visitors to our properties compared to 2021.
Operating, maintenance, advertising and other expenses totaled $875 million pesos in 2022, increasing 35.3% over 2021. Three factors are responsible for most of this increase: i) increases in general maintenance as properties returned to normal activity and footfall grew; ii) a reactivation of advertising campaigns to attract visitors; and iii) an increase in labor expenses due to minimum wage hikes.
Advisory and representation service fees totaled $654 million and $112 million pesos, respectively, increases of 1.5% and 22.5%, respectively, compared to 2021. The main reason for the rise in advisory fees was a broad-based increase in the valuation of our properties, and the inclusion of Parque Tepeyac in these investment properties, which serve as the basis for calculating these fees, as established in the planning advisory agreement. Representation service fees, on the other hand, grew mainly because of an increase in revenues billed and collected, stemming from the recovery of general economic activity, as these serve as the basis for calculating these fees.
For Fibra Danhos, administrative expenses consist primarily of fees paid to our accounting, legal and tax consultants, as well as independent appraisers, a total of $120 million pesos in 2022.
Property tax and insurance expenses came to $159 million and $45 million pesos in 2022, rising 5.9% and 12.5%, respectively, in comparison to the previous year.
Other income (expenses)
Interest income, interest expense, and foreign-exchange gain (net): Interest income on financial products totaled $29 million pesos in fiscal year 2022, generated primarily on the investment of its cash balance in fixed-income securities. In the same period, interest expense (in accounting terms) totaled $405 million pesos, mainly because we ceased capitalization of interest relating to the Parque Tepeyac project. The foreign-exchange loss was $6 million pesos, due primarily to the appreciation of the Mexican peso against the US dollar and its impact on the company’s collections in dollars.
Adjustments to the reasonable value of investment properties as of December 31, 2022 totaled $63 million pesos, the result of market value appraisals by independent experts who conducted annual assessments of our investment properties, with quarterly adjustments.
NOI, EBITDA, net income, FFO and AFFO.
Net operating income (NOI) in 2022 was $4.32 billion pesos, a year-over-year increase of 12.6% compared to 2021. The net operating margin, excluding tenant admission payments, was 77.3%.
Fibra Danhos generated $3.55 billion pesos in EBITDA in 2022, 15.7% higher than in 2021. The EBITDA margin was 64.4%.
Net income, FFO and AFFO in 2022 totaled $3.22 billion, $3.16 billion and $3.81 billion pesos, increases of of 14.8%, 15.0% and 17.8%, respectively, compared to those of 2021.
Cash Distributions
Because of the solid generation of cash flow from our operating portfolio in 2022, Fibra Danhos reported an AFFO of $3.81 billion pesos, which is an AFFO per CBFI with economic rights of $2.52 pesos. On this basis, our Technical Committee decided on a distribution to CBFI holders corresponding to the 2022 results, of $2.4007 pesos per CBFI, which is 20% more than the $2.0 pesos per CBFI paid out against the 2021 results. Fibra Danhos maintained the equivalent of $0.1220 pesos per CBFI in cash for various corporate purposes.
| Dec. 31, 2022 | Dec. 31, 2021 | % Chge. | |
|---|---|---|---|
| Net income | 3,219,416,592 | 2,804,001,154 | 15 |
| Net foreign-exchange gain | (5,549,300) | 17,300,124 | -132 |
| Adjustment to reasonable value of properties – Net | 62,921,007 | 58,669,921 | 7 |
| Estimate for uncollectable accounts | 1,950,411 | (19,542,018) | NA |
| FFO | 3,160,094,474 | 2,747,573,127 | 15 |
| Tenant Admission payments - Net | (58,623,418) | (183,300,679) | NA |
| Upfront rents - Net | 69,602,031 | 63,511,318 | 10 |
| Straight-line rent - Net | 3,139,526 | 13,395,820 | -77 |
| Unaccrued property tax and insurance | (13,323,329) | 514,176 | -2,691 |
| Advisory and Representation Fees -Net | 654,472,595 | 597,308,947 | 10 |
| AFFO | 3,815,361,879 | 3,239,002,708 | 18 |
Long-term debt
DANHOS 16: $3,000,000,000.00 (three billion Mexican pesos 00/100) at 10 years, at a fixed nominal coupon rate of 7.80% (Mbono 2026 + 185 bp).
DANHOS 17: $2,500,000,000.00 (two billion five hundred million Mexican pesos 00/100) at 10 years, at a fixed nominal coupon rate of 8.54% (Mbono 2027 + 169 bp).
BBVA Bancomer: A green line of credit totaling $560,000,000 (five hundred sixty million Mexican pesos 00/100) at a variable rate of 1.2 bp over the TIIE 28*.
| Ticker | Type of Debt | Currency | Amt. (millions) | Issue date | Exp. date | Benchmark | % Rate/Spread | Initial Term | Year Exp. |
|---|---|---|---|---|---|---|---|---|---|
| DANHOS16 | Securities Certificates | MXN | 3,000 | 11/07/2016 | 29/06/2026 | Mbono 2026 | 7.80% | 10 | 2026 |
| DANHOS17 | Securities Certificates | MXN | 2,500 | 10/07/2017 | 28/06/2027 | Mbono 2027 | 8.54% | 10 | 2027 |
| Revolving credit line | Credit line | MXN | 1,005 | NA | 25/03/2026 | TIIE28 | 1.2%* | NA | 2026 |
*Adjustable depending on level of compliance with ESG indicator.
Out of our total financing, 91% is at fixed rates and 9% floating. All of our debt is denominated in Mexican pesos, the weighted average remaining term of the debt is 3.9 years and the average cost of our debt as of December 31, 2022 was 8.5%. The following table shows the status of Fibra Danhos’ compliance with its financial debt covenants:
| Compliance with covenants as of December 31, 2022 | Fibra Danhos | Limit |
|---|---|---|
| Loan to value (total debt/total assets) | 8.7% | 50% |
| Leverage | 1.13x | 2.0x |
| Secured debt | 0% | 40% |
| Debt service coverage (AFFO) | 7.87x | 1.5x min |
| Total unencumbered assets | 1,127% | 150% |