Vesta Real Estate Corporation, S.A.B. de C.V. (VTMX) Q4 2025 Earnings Call Transcript

Greetings, ladies and gentlemen. Welcome to the VESTA fourth quarter 2025 earnings conference call. All participants are currently in listen-only mode. The question and answer session will follow today's prepared remarks. And as a reminder, this call is being recorded. It is now my pleasure to introduce your host, Fernanda Bettinger, VESTA's Investor Relations Officer. Please go ahead.

Good morning, everyone, and welcome to our review of the fourth quarter 2025 earnings results. Presenting today with me is Lorenzo Dominique Vero, Chief Executive Officer, and Juan Satis, our Chief Financial Officer. The earnings release detailing our fourth quarter 2025 results was released yesterday after market close, and is available on Vesta's IR website along with our supplemental package. It's important to note that on today's call, management remarks and answers to your question may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to be fair. For more information on these risk factors, please review our public files. Desta assumes no obligation to update any forward-looking statements in the future. Additionally, note that all figures were prepared in accordance with IFRS, which refers in certain significant respects from U.S. GAAP. All information should be written in conjunction with and is qualified in its entirety by reference to our financial statements, including the notes there too and are stated in U.S. dollars unless otherwise notes. I'll now send the call over to Lorenzo Bero.

Good morning, everyone, and thank you for joining us. 2025 was a year of discipline, execution, and strategic positioning for Vesta. We strengthened our platform, advanced Route 2030 on schedule, and made decisive decisions which enabled Vesta to capture what we believe will be a powerful demand cycle beginning in 2026 and accelerating into 2027. Early in the year, uncertainty is low decision-making, but we stay focused on operational discipline. During the year, our conviction to opportunistically give investors' presence in Mexico's most dynamic markets, specifically Mexico City, Guadalajara, and Monterrey, has proven decisive. The strategic steps we implemented throughout 2025 have materially strengthened Vestas' portfolio and positioned us to outperform. Throughout this transition, our focus did not change. We remained disciplined in capital allocation, selected in development, and stayed close to our clients while adapting with agility to capture unique opportunities as market conditions evolve. This defines VESTA, long-term strategic clarity with the operational flexibility required to perform across cycles. We're not building for one quarter, we're building for the long term, and in 2025, we set our sights on the next cycle. With improved visibility by the end of 2025, we're seeing momentum return, particularly in the second half when leasing activity accelerated. We saw roughly 1.4 million square feet in new leasing during the second half of the year, compared to half a million square feet during the first semester. This reinforces our view that the market has likely reached a turning point. Vesta also delivered solid financial results for the full year 2025, which one we'll touch upon in more detail. We exceeded guidance with rental revenues increasing 11.8% to reach $274 million, while adjusted full-year 2025 NOI margin reached 94.8% and adjusted EBITDA margin reached 84.4%. DEFTA FFO totaled $174.9 million in 2025, a 9.2% year-on-year increase. Let me share an overview of leasing and portfolio fundamentals in 2025. As I noted, leasing activity strengthened substantially in the second half of the year. Two-year leasing activity reached 6.9 million square feet with a waiter average lease term of seven years, which includes 1.9 million square feet in new leases and 5.0 million in lease renewals, representing the highest level of renewals recorded over the last three years. During 2025, renewals and re-leasing activity reached 5.4 million square feet with a trailing 12-month-waiter average leasing spread of 10.8%. Importantly, manufacturing returned with conviction in 2025. 86% of Vestas' new leases were manufacturing-related, with electronics leading this activity. I have commented previously that Mexico has overtaken China as the largest exporter of electrical and electronic equipment to the United States. And we are seeing that reflected directly in our leasing pipeline. This represents a notable shift from prior years, when e-commerce was the dominant driver. Today, we're benefiting from dual engines of demand. The resilient logistics and e-commerce days, combined with a powerful resurgence in advanced manufacturing. AI-driven infrastructure is becoming an important structural demand driver for Vesta. Data center expansions in the U.S. has translated into real manufacturing demand for related peripheral equipment. This includes producers of HVAC systems, racking, tabling, and microchip-related assembly. Guadalajara continues to benefit from these structural trends. It's sustained demand from global manufacturing tenants. Existing clients, including Foxconn, are actively expanding their footprint, reinforcing the market's strategic importance within our portfolio. From a development standpoint, we invested approximately $330 million in projects during the year on a cash flow basis. These investments are directly aligned with our Route 2030 strategy and are focused on high-conviction markets where we see sustained absorption. Turning to our fourth quarter results, leasing activity reached 1.9 million square feet, including 770,000 square feet of new leases with both existing and new best attendance across the electronics, aerospace, and automotive sectors, reflecting the improving market dynamics high-risk costs. Lease renewals, total 1.2 million square feet, with a greater average lease term of approximately five years. Total portfolio occupancy stood at 89.7%, at quarter end, while stabilized and same-store occupancy reached 93.6% and 95% respectively. We began construction on two new buildings during the quarter. One inventory building in Guadalajara and one built to suit in Teretaro. We ended the quarter with 800,000 square feet under construction. with an estimated investment of approximately $60 million and an expected yield on cost of 9.9%. Let me walk you through leasing momentum and sharing insights on market dynamics across our regions. Occupancy moderated in certain submarkets due to normal tenant rotation and isolated shutdowns during the year. This is not a structural shift. It's part of the normal rotation of tenants in a dynamic market. Vacancy levels remain healthy, and we're already seeing strong backfill activity, including assets with multiple bidders. The Monterrey market continues to stand out, with leasing momentum building in this high demand market, and we expect a continued increase during 2026. Mesa Parca Podaca, which was completed in the third quarter of this year, is now in active marketing. Three state-of-the-art buildings are drawing strong interest. particularly from advanced manufacturing and logistic tenants. And as a related update, the Vesta Parca Podaca Building 8 was awarded first place in the GRI Global Awards 2025 Industrial and Logistics Project of the Year category. The award is considered one of the global real estate industry's highest distinctions, recognizing the most visionary projects and companies worldwide for excellence in design, sustainability, innovation, and contribution to the urban environment. Also in Monterrey, infrastructure is scheduled to begin in the first half of 2026 on the 330 acres we acquired in the high-demand airport highway corridor as announced in October. Ciudad Juarez reached what we described last quarter as an inflection point. Activity has strengthened. Interest from electronics and supply chain integration tenancies robust. This market experienced the cyclical adjustments throughout 2025 that I described, but the fundamentals remain intact. Tijuana has stabilized, and we are seeing constructive tenant dialogue, including notable leasing activity with global companies during the third quarter. It's important to mention we continue seeing rents increasing across our markets, supported by discipline supply. Guadalajara remains a structural leader for Vesta, and we're seeing a growing number of high-tech electronics companies seeking large-scale projects. Many are leveraging the strong ecosystem that has developed in the region, including specialized talent, established supply chains, and existing industry clusters. This continued momentum reinforces Guadalajara's position as the leading technology and advanced manufacturing hub in Mexico, often referred to as the Silicon Valley of Mexico. Guadalajara also benefits from the manufacturing support data centers and AI demand, which I have described. Mexico City continues to benefit from its scale, consumption-based, and logistics importance. We're actively engaged in discussions with major players, particularly in the logistic sector. Our project in the Vesta Park Punta Norte ramped up to become the largest cross-docking operation in Latin America of all e-commerce players in the region. Turning to capital allocation, in 2025, we secured strategic land positions at attractive terms during periods of market uncertainty in 2025. These acquisitions will support the next four years of Route 2030 execution. We are two years into our six-year Route 2030 plan and are ahead of schedule in terms of capital deployment. That said, Vesta's growth will continue to be prudent and measured. As always, our development pace in 2026 will be calibrated carefully to demand and absorption levels in each market. We're clearly optimistic, but we remain visibly. Protecting long-term returns is not negotiable. Our balance sheet remains strong, liquidity solid, and leverage metrics are trending as expected. In closing, 2025 marked a transition year, while the environment required patience early on. The broader macro backdrop is increasingly constructive as we look forward to renewed acceleration in demand. Mexico's fundamentals remain compelling. According to preliminary data from INEGI, exports grew 7.6% year-over-year to approximately $664.8 billion, marking a second consecutive year in which trade served as a key engine of economic growth. Meanwhile, imports also reached record levels, rising 4.4% to over $664 billion. dollars, these figures underscored the scale, depth, and resilience of Mexico's integration within North American supply chains. Despite uncertainty, this integration into North American trade flows supports sustained export momentum into the U.S., validating Mexico's role as a strategic manufacturing and logistics hub. Top-tier global companies continue to view Mexico as a critical platform for serving North American demand. Foreign direct investment and exports reached record levels in 2025, while cumulative foreign direct investment inflows through the third quarter running 10.9% above full year 2024, reinforcing the structural drivers of growth that underpin Mexico in general and Vestos market in particular. Setting our Route 2030 strategy in 2024 and executing with precision in 2025 has been fundamental to positioning VESTA for 2026 and beyond. We're beginning to see the benefits of those decisions translate into stronger fundamentals, and we are confident that this momentum will continue to drive growth, converting by structural tailwinds, reinforcing our confidence in the long-term opportunity ahead. Our optimism is grounded in discipline. Even in the context of high occupancy and solid demand, we remain rigorous in how we allocate capital and underwrite new developments. We are closely monitoring supply pipelines and vacancy trends in each of our core markets, ensuring that growth remains balanced and value accreted. With that, let me pass the conversation to Juan.

Thank you, Lorenzo. Good day, everyone. Vesta closed the year with very solid financial results, as Lauren noted. Our total rental income increased to $283.2 million, while rental revenues reached $273.6 million, a 11.8% year-on-year increase, and exceeding the upper end of our full-year revenue guidance of 10 to 11%. Adjusted NOI margin exceeded our revised guidance of 94.5%, reaching 94.8%, while adjusted EBITDA margin was in line with our guidance at 84.4%. Vestas FFO ended 2025 at $174.9 million, a 9.2% increase compared to $160.1 million in 2024. Now, let me walk you to our fourth quarter results. Starting with our top line, total revenues were off 17.2% year over year, reaching 76.4 million dollars, primarily driven by rental income from new leases and inflationary adjustments across our rented portfolio. As for our current mix, 89.9% of our fourth quarter 2025 rental revenues were denominated in US dollars, up from 88.7% in the fourth quarter 2024. Turning to profitability, adjusted net operating income increased 17.2% to $69.4 million. our adjusted NOI margin remained strong at 94.6%, up 88 basis points from the prior year, reflecting higher revenue growth with stable cost. Adjusted EBITDA totaled $61.1 million at 18.2% increased year-over-year, with a margin expansion of 155 basis points to 83.3%, driven by a lower proportion of administrative expenses relative to revenue during the fourth quarter, 2025. VESTA FFO, excluding program tax, was $39.3 million, compared to $41.1 million in the fourth quarter, 2024. The decrease was primarily due to higher interest expense in the fourth quarter of 2025, compared to the same period of 2024. We closed the quarter with pre-tax income of $98.5 million, compared to $81.2 million in 2024. This increase was primarily due to higher gains on revaluation of investment properties, as well as a positive variance in exchange gains and higher interest income. This was partially upset by higher interest expense, reflecting the increase in debt balance during the period. Turning to our capital structure and balance sheet, we ended the year with $337 million in cash and cash equivalents and total debt of $1.28 billion. dollars net debt to evita was 4.4 times and our loan to value ratio was 28.1 percent subsequent to quarters end on february we prepaid the remaining medlife 3 facility of 118 million dollars this repayment leaves us with no secure debt enhancing our financial flexibility and completing our transition to a fully unsecured capital structure. In terms of capital allocation, during 2025, we strengthened our land reserves, positioning us well to capture future development opportunities, as Loren discussed. Looking ahead, we will maintain our disciplined investment approach, deploying capital selectively in markets where we see strong demand fundamentals. Our share repurchase program also remains a key pillar of our capital allocation strategy. We will continue to execute opportunistically, as we have done successfully in the past, with the objective of maximizing long-term shareholder value. Moreover, consistent with our balanced capital allocation approach, On January 15, 2026, we paid a cash dividend for the fourth quarter of $0.38 per ordinary Finally, I would like to discuss the outlook for the year. We are expecting to increase rental revenues between 10% to 11% year on year, while we expect to achieve 93.5% adjusted NOI margin and 83% adjusted EBITDA margin for the full year 2026 this concludes our fourth quarter 2025 review operator could you please open the floor for questions thank you we are now opening the floor for question and answer session if you'd like to ask a question please press star followed by one on your telephone keypad that's star followed by one on your telephone keypad your first question comes from the line

of Juan Ponce of Redesco VBI. Your line is now open.

Hi, good morning, Nesatim. Thanks for taking my question. It was interesting to see that 86% of 2025 leases were manufacturing related, which seems to be so in a scenario where the USMCA review does not reach an agreement in 2026 and transitions into annual reviews, how resilient is your current development pipeline under that environment? And specifically, you know, how confident are you in leasing ongoing projects in Guadalajara and Querétaro if trade visibility becomes more limited?

Juan, thank you very much for being on today's call. Well, we have experienced There's been some certainty regarding trade for the last years, and that has been not only seen in industries like in markets, in industries like ours, but also other corporates in other industries and even other regions of the world are facing similar challenges, whereas the manufacturing footprint, the global manufacturing footprint is adjusting and adapting. We believe that Mexico has invested for many years, maybe since NAFTA, to establish a more integrated supply chain in North America together with the U.S., Canada. But in the end, I think that that will continue thriving on top of whatever negotiations might take place regarding revisions of the USMCA, different scenarios. I think it's more about the strong supplier base that Mexico has for actually very – for different manufacturing industries and how important and how well linked it is to the U.S. What I've had is an excellent example of how the electronic sector has evolved, has been growing rapidly, and it's actually a good signal how the global manufacturing footprint for electronics is moving. And I think for that reason, we are very optimistic. That's why we started new buildings. We have a strong pipeline building up in Guadalajara, and eventually, actually, we have acquired more land for future projects. So, we are very optimistic. We think these are long-term investments. Many of these global companies continue to have strong bets on Mexico, and for that reason, we see a positive trend. Very similar to Querétaro, where actually we have seen in this case the auto sector very active in renewals and also very active in looking for new space, pipeline building up, aerospace sector, a similar case where many European companies have established long-term operations. We just expanded another operation with the Safran Group out of France, And this is another important case and good signal how committed global companies are to Mexico. Maybe just on the list of stage, we're confident that there's a stronger pipeline. We have available space that has been currently recently developed in Monterrey, for example, where we have – where we developed the last buildings of the Apodaca project. and Pipeline is building up well in different industries, logistics, e-commerce, manufacturing. So I'm pretty sure that 2026 is going to be a very successful year, and leasing will continue the same trend that we have seen, particularly in the last half of 2025.

Perfect. Thank you so much.

This question comes from the line of Andre Mazzini. Your line is now open.

Yes. Hi, Lauren, Juan, Fernando, thanks for the call. Two questions. The first one on leasing in recently completed development projects, how much was executed in the quarter and in the year, and how much is baked into 2026? So another way of asking, what's the occupancy of the stuff you deliver in 2025, as we expect in 2026, maybe that's another way of asking that. And the second one is about the huge land bank acquisition in Monterrey. Almost no land there last quarter. Now it's the biggest single region, right, in which you guys have land. Is that land all paid in cash? Is it paid in cash and land swaps as well, in which the landowners end up having a portion of the project? So, how is kind of the payment, the consideration there for this huge land bank acquisition that you guys had in Monterrey, and congrats for that acquisition. So, thank you.

Muchas gracias, André, and thank you very much for being on the call. I will start with your second question. Yes, last quarter we were able to buy, after a long negotiation, a strategic land parcel. So this is in Apodaca Corridor, right next to the airport, the initial phase is 330 acres. So this matches perfectly to our long-term strategy in the largest industrial market in Mexico, where we will continue to grow. We will have the most part of the capital deployment towards 2030 will be in Monterrey, And this is going to be a cornerstone project for the 2030 route. The Apodaca Corridor has been fantastic for companies in the e-commerce sector. It's a great logistic corridor, but also manufacturing continues to expand in the area. The area has good access to the main corridors towards the U.S., good access to the city. It actually has a good infrastructure in terms of energy, which is very helpful, and maybe just the only thing we can say about the transaction is that the payment was not done all at once. We've got seller financing, which is helpful for a development project and for the development development process and eventually we also have conditions to extend the land for a second So we're very excited and we will be more than happy to welcome you soon when we kick off the construction of these new sites. And regarding your first question on leasing, well, remember that our main focus is stabilized portfolio occupancy, which currently stands at 93.8%, I believe, a little bit lower than 95%. Definitely, the occupancy number is a little bit lower than before. We were coming from record high numbers, but what we feel confident is that most of our Our buildings here are actually brand new and we have seen that demand interest coming from outstanding companies. So we're very happy that the buildings are there and the demand is coming along. So I'm pretty sure that Querétaro and Monterrey will be very successful projects and we're confident that this will lease up well throughout 2026. Remember that another important thing is that we grow with existing clients. So, we're in close contact with them in order to be able to grow with them. So, hopefully, we can continue expanding our relationships. But more importantly is that we will continue with the discipline of having outstanding companies, strong credit rating companies, long-term leases, well-balanced between e-commerce, logistics, manufacturing sectors. So that discipline will prevail, and hopefully we can start getting some good results soon. Thanks, Jor-El. Thank you, Lauren.

Question comes from the line of Jor-El Piloti of Goldman Sachs. Your line is now open.

Thank you for taking my questions. So the first one on your guidance, I just wanted to get a sense of what the occupancy expectations are And then the second question, and I'm sorry if you answered this earlier, one of the best sense of the income tax expense for the quarter, it was around $36 million to the dollar.

Sure. Let me answer the second one briefly. It is related to the appreciation of the PESO, as you know, that generates some significant significant profit from our debt, which is incurred in dollars, and that accounts for most of the income tax impact that we saw on the income statement. As the Peso stabilizes, starting with a very low Peso dollar exchange rate close at the end of the year, I think that will be eliminated in 2026.

As for the first question, sure, we don't give any guidance on occupancy numbers, Jurel. However, if you see the trend on the occupancy towards the last quarter's years and having an understanding on the list of activity, we definitely think that even if it's a lower number, we are confident that that number will somehow pick up throughout the year. We think it's a healthy number and understanding that we're a development company. We have a strong, stabilized portfolio that generates important income, but also we have anticipated with good buildings on a spec basis that I'm pretty sure that we will continue to lease up throughout the year and that occupancy will improve. We have been in cycles like this one and we have outperformed and benefited from anticipating on the development front. So we're confident that being proactive on the asset management part is going to help Secondly, we think that even though last year was started as a slower leasing activity, we have seen rents actually have increased in the year. Some markets more than others, however, all of them with positive trends. So as long as we continue to see demand excelling throughout 2026 and we see that rents continue to be increasing, I think that we will benefit from that and take advantage and eventually be able to have better occupancy, better rental revenue, and also have a positive impact in our eventually net asset value from having good tenants inside of our buildings.

Is it envision more launches, more developments going forward, or is it just envisioning your company as it is today?

That's a good point, Jarrell, regarding development. Well, again, without the guidance, we don't give guidance specific on CAPEX as well as development and other numbers, but what we can say is that we prepare. We presented the 2030 route in 2024, which we have been executing successfully. 2025 was very important to secure land as the one I mentioned in Monterrey, but also in Mexico City, but also in Guadalajara and in other markets. So that land has to be still developed. We think that as long as we continue to see in a disciplined way more demand in certain markets and where we can start leasing up, we will definitely like to start construction soon. So 2026 will be a year where we will start construction on the land that we have acquired and follow through our 2030 route, and hopefully we can be able to develop built-to-suit spec buildings and eventually be able to replicate the success that we have had in investor park projects such as the ones in Guadalajara, in Apodaca, Tijuana, Ciudad Juarez, Mexico City. So, it's another cycle. We're entering a different stage. We're optimistic on 2026 and 2027. For that reason, I think that CAPEX will continue to be important as well as development starts. Thank you. Gracias, Joreb.

Your next question comes from the line of Enrique Cantu of GBM. Your line is now open.

Hi everyone thank you for the call and congrats on the results. I just have one question on your revenue growth guidance. What are the main drivers behind that outlook? Is it primarily additional GLA from developments, rent increases, or higher occupancy from leasing vacant space?

Look the guidance, as you know guidance, we make the guidance very carefully. We are assuming they're taking into account the buildings that we list up until December that will be in payment rent on the beginning in the first months of 2026, as well as the stabilization of the buildings that we have on occupied where we have a strong pipeline and I think there were significant tenants coming up on starting on the first quarter. So taking that into account, we feel confident to give you the guidance that we give you. I think that 2026 is a promising year. I think that we have a strong pipeline. I think that we're well advanced in talking to potential clients, and we are very optimistic indeed.

Perfect. Thank you very much.

I would add that we have also been able to renew leases and get market-to-market rents. That has been, on the existing portfolio, that has been, we have been very successful. So, the existing portfolio is not only the market on renewals, but also year over year, remember that our leases are indexed to inflation. So, the combination of existing leases at each anniversary indexed to inflation, plus plus mark-to-market on certain contracts, plus our ability to lease up vacant building together with new development all combined is part of how we forecast revenue growth and therefore guidance.

All right. Thank you very much.

Your next question comes from the line of Gordon Lee. Please go ahead.

Hi. Thank you very much for the call. A question a little bit more on the operating side, Loren, I was wondering, if you look at some of the northern markets, right, thinking of Tijuana, Ciudad Juarez, Monterrey, I've been surprised, I think it's been remarkable how stable rents have been, even as vacancy numbers have increased for the market as a whole. I was wondering what do you attribute that to and do you see any risk of that changing further worse in the in the quarters to come thank you can you repeat the question please just I think she broke off a bit okay no I was just my question was if you look at some if you look at Monterrey Tijuana what I think has been really interesting is market rents have stayed pretty stable even with rising vacancies so I was wondering what do you attribute that to and whether you see a risk to that going forward that's okay I got it thank you Gordon that's

That's a good question. We believe that what we experienced last year was a little bit somehow unexpected, where we saw a slowdown at the beginning of the year. You might remember January, U.S. President taking office, Liberation Day, and the high uncertainty that we experienced made a lot of companies not making any decisions and not making any, not leasing any space. Normally in an environment where you have a slower demand, normally you could see a reduction in rents. However, in this case, there was the market was just stout. So there was not even a need to reduce rents by any of our competitors. So for that reason, what we think is that demand started coming up back and it was not a matter of supply and demand. it was just a matter that there were no leases at the beginning and suddenly when they came back we think that the vacancy is actually not that high and that's why we continue to see that replacement costs of several buildings continue to be a high and returns have to be expected developers have been disciplined and and and and the vacancy and occupancy vacancies amongst most of the markets are at healthy numbers even that they are somehow a higher than before but we were at record low levels, but if you look at a longer period of time, we are still at good numbers. Going forward, I think that we will start to see more demand. We think that rents – I don't see a major risk regarding rents, frankly. I think that rents will hold up well or maybe even increase, but in the end I think that But over the long term, we think that rents are still competitive. Companies are in Mexico for its competitive advantage, particularly on manufacturing. And in terms of logistics, these are cities that continue growing. Consumer habits are still changing and more consumers are adapting to e-commerce, to logistics, more demand. So we're very optimistic and positive on most of the markets. So, we don't see any potential risks on rents. Perfect. Thank you very much.

Gracias.

Your next question comes from the line of Pablo Recalde. Palvitao, your line is now open.

Hi. Good morning, best of all. I have a question on the development pipeline. So, we finally see you, like, coming back into the BOTC project, the VITAPRAN building. So, maybe going forward, how can we think about the development pipeline on these built-to-suits and spec-to-suit buildings?

Great. Thank you, Pablo. So, we will continue to see built-to-suits and spec-buildings well-balanced. I think that what is more important is that now that we believe we are hitting a pivotal a moment where we will continue to see more demand. We will continue our strategy on spec buildings. It has paid off well to have spec buildings and then turn them into somehow build to suit. We call it spec to suit because we're able to prelease the buildings and in the meantime, make final adjustments for the tenants. But importantly is that we are able to kick off or to start the buildings in advance and dissipate to potential demand. However, we currently have some buildings in the market, so we want to have discipline. So as long as we continue to see a demand and leasing coming up, I'm pretty sure that we will start with some other spec buildings and build-to-suits, we are constantly looking for them. We recently closed an expansion with Safran, that's a good example. So I think that being close to our clients, close in the markets with a real estate community and broker community, I think that we're going to be able to continue to do both, particularly because the land acquisitions that we recently did is so well located that I'm sure that there's going to be many companies that would like to establish their operations in high quality parks with great infrastructure with access to energy and I think that will be a huge benefit for companies going forward. This year will be very important to focus on the development execution particularly to get all the infrastructure and urbanization of the land that we acquired in place and try to get ready so that when demand projects continue to kick in, we're already at a step forward and take advantage of those opportunities. And I think that's what makes Vesta different. We are an institutional portfolio manager, asset manager of industrial assets, but also So, we like to take advantage and capture the growth opportunities on the development front where we can continue to see returns at 10% or even higher return on cost. And that vis-a-vis acquisition cap rates in the 6% range, we think that there's a lot of spread that we can capture on the development front on new buildings. And I think that's a huge benefit for companies wanting to establish operations in Mexico.

Perfect, Lorenzo.

Muchas gracias.

Your next question, Pablo Moncivais of Barclays, your line is now open.

Good morning. Thanks for taking my question. Just a question on Aguascalientes. there's been some news that Nissan is flying to sell the Compass plant in Aguascalientes. And since you have big operations there and a considerable land bank, what's your take in this and that divestment could impact a little bit the dynamics in that region or probably not if the taker is a company that is growing? Just want to pick your brain on that news flow.

Thank you, Pablo, for being on the call, and thank you for your question. Yes, there's a lot of speculation on what might happen with that particular Compass plant. I think that whatever happens is going to be very positive for the sector, particularly because it's a – that plant is, I would say, brand new or state-of-the-art. It was developed together between Mercedes-Benz and Nissan, so it has a combination on a German technology and Japanese innovation. So I think it was a fantastic project, which for whatever reason didn't work out. However, I think that that's why it has a lot of interest from different players. So, again, without getting too much into the speculation, we think that Aguascalientes is a fantastic city where companies have been successful. and I think that understanding that Mexico continues to be an attractive manufacturing front, I think that definitely somebody will benefit from that plant and actually we think that eventually that will bring new suppliers from a new company and Vesta will continue to be there. I think that for Vesta, Aguascalientes is becoming every time a less relevant market However, we think we believe in long-term relationships. We have good relationships with several suppliers in the auto industry. And for that reason, we think that there could be some good upside to the new plant, or I'm sorry, to a potential buyer of a new plant.

Okay. And if I can squeeze another question there. Just want to understand, it is my understanding that your guidance for 2026 has a slightly lower margin versus 2025. What's the reason for that?

Pablo, this is Juan Sotil. As you know, the Peso-Bollar exchange rate is a little bit punitive to the company given the fact that we sell everything in dollars and all of our expenses mostly are in pesos basically our employee cost so so it's gonna be a difficult year it's a year where we will continue a very strong discipline on on cost control we're very successful doing that last year and we will continue to focus on on cost control and and being very mindful of the of the operation needs of in terms of people and the location of those people so so it is a challenging year in terms of operating costs but we will keep the discipline. Awesome, thank you very much. Thank you.

Your next question comes from the line of Abraham Fuentes of Valco Santanbar. Your line is now open.

Thank you.

So I wonder if are you considering any asset recycling during 2026 and the second one will be what could we expect in terms of dividends also for this year this is once again thank you for the question look asset recycle is something that we will continue to do it is an opportunity that we will that we will encounter in our portfolio we're keep on the on the lookout we sculpt our portfolio we believe that we are in the best regions in Mexico we believe that we have very successful buildings but we also believe that recycling all the buildings or buildings that have accrued good stabilization status they represent an opportunity to sell them there's other players that like to buy those types of assets and we will take advantage of that. So we will be on the lookout to sell buildings as an integral part of our development plan, of our growth plan, and we will be on the lookout. Regarding dividends, dividend is a part of our compensation to shareholders. We believe in total return. Total return implies our effort to grow the company so that the market recognizes that in in terms of appreciation of the stock price. And dividends are just an integral part of that total return. We will continue to pay dividends. We will continue to grow judiciously the dividend flow for the incoming year. You will see our dividend policy as soon as we have our shareholder meeting in the next month or so. So, that's very much what I think you should consider. Okay. Thank you so much.

If I may add, I think it's consistency on what we have done in the past, and that consistency will continue to be there going forward for dividends as well as for asset recycling.

Your next question comes from the line of David Soto of Scotiabank. Your line is now open.

Hi, good morning and thanks for taking my question. Just two quick ones. The first is related to your vacant buildings. Could you provide more detail about the marketing efforts and the current status of ongoing negotiations of those buildings and what kind of tenants are interested in such assets? And the second question is related to your leasing spreads. due during 2025 to report a double-digit leasing spread? Is it reasonable to assume that this could be maintained during 2026 and which regions could have this double-digit leasing spread?

Gracias, David, for your question. Maybe on the second one, I think that definitely we will continue to see the upward trend on the leasing spreads, particularly because this is a bit of a, it will continue to be an opportunity in the upcoming years as some of the leases continue to hit their maturities and that's when we have the ability to catch up. So that's something that has happened last year, will continue this year and maybe even the upcoming years as long as some of these long-term leases that were done some years ago hit their maturity stages, and we think that that's a great opportunity to – and we've been very, very active on that front. And then on your second question – on your first question regarding vacant buildings, well, we are very confident that pipeline is building up. We are very happy with the projects that we have developed, just as mentioned before, Just to give you an example, we have been getting awards on the Vesta Park APODACA project, particularly in one building, Building 8, we got awarded the GRI Global Award of Industrial and Logistics Project of the year. And I think that competing with other countries, with other developers all across the globe, this is a very, very nice recognition and award. And so, we do our best to develop the best projects, and I think that eventually will turn out into having a higher benefit with companies that want to be in the best projects in the most dynamic markets. The buildings that we develop on top of the certain specifications on design sustainability innovation, these are very flexible buildings. So, we can accommodate e-commerce clients as well as logistics, as well as light manufacturing. So, I think that strategy on spec buildings will be very helpful where we can be competitive in terms of cost in markets where we can have good access to labor, where we can have good infrastructure. So, for that reason, we are confident that the vacant buildings we have today are great buildings that will be leased up eventually.

Question comes from the line of Felipe Vaillagan. Your line is now open.

Hey, good morning, guys. Thanks for the confidence of taking my question. So it's been a year, a little over a year now that Claudia's been in office. You know, she announced an infrastructure program a few weeks ago. So, just want to get your sense if there's, I mean, comparing two years ago to where we're at today, what strides have you guys seen that are tangible on sort of getting permitting, electricity and whatnot for developments?

Great. Thank you for your question. We think I think that there has been a lot of very proactiveness towards our industry and our business coming from the Claudia Shemba administration. As you know, Claudia Shemba has been the only president or the first president to include industrial parks as part of a long-term infrastructure plan. She has considered 100 projects to be developed. Well, many of those are actually Vestas projects. And we have been having great access to some of the economic development councils, as well as the corresponding secretaries to have the best permittings and licensings and support in order to make these projects work. I think that she has a very good understanding on the opportunity that Mexico has to develop together with the private sector, good industrial infrastructure that creates better jobs, better paid jobs, which is very important for her as for the welfare and in terms of support for the people. So, in the end, I think that there's a strong alignment, there's good support, and I think that for them having companies that are institutional and well organized like Vesta is also a good recognition to our sector. Through the Mexican Association of Industrial Parks, which I happen to be at the board and I was previously a president, we have also a very close contact and very good access to the government agencies so that the presidency is successful, the country is successful, and we developers contribute a lot to that success. That was very clear. Thank you, Lore.

Gracias.

Your next question comes from the line of Pablo Muldez of GBM. Your line is now open.

Hello, thank you for the opportunity and congratulations on your results. I just have one question. How are you thinking about the pace of development in 2026 given the current occupancy levels and further market uncertainty? Thank you.

Thank you for your question, Pablo. Well, I think that Vesta will continue monitoring the markets and defining where we can start projects. I think a good example for that is Guadalajara, where we recently started two spec buildings end of last year. The reason of that being that we have list of our existing buildings. We continue to see strong demand and we want to anticipate to that particular demand. And so we have, in order to, how do we, the way we monitor it is through the real estate community, the broker community, as well as our existing clients. So I think that that same example will be used for the rest of the market. We think that there's, there are some good success stories in Juarez, in Tijuana, where we were able to lease up the second half of last year. That's going to be helpful in order to eventually start new buildings. And the same for Monterrey. Well, Monterrey we did that large acquisition on the Apodaca on the new land next to the airport in the Apodaca corridor. So we will kick start with the infrastructure and eventually when we see leasing some closings on the leasing front on the current project, we will kick off with new projects. So, we are definitely going to be more active than 2025, but we would like to continue being cautious and disciplined and in line to whatever we see a potential demand and not being oversupplying the market. And actually, as you know, development front and development cycles are long. I think that being able to acquire land last year and this year focus on infrastructure and some new buildings will put us in a great spot for 2027 to start generating income on those projects. And eventually our main focus will continue to be the 2030 route. So we're optimistic. We see the market positively. And we think that we have the capabilities to pick up some good development projects throughout the year.

Perfect. Gracias.

Your next question comes from the line of Federico Delassi. Your line is open.

Hi, everyone. Thank you for taking the call and congrats for the results. Two questions in particular. One, thinking in capital allocation, you used the buyback last year, assuming that you will cancel the Dutchess this year, and extend the maturity of the debt, etc. But thinking in the long-term strategic book of 2030, what do you find in terms of acquisition of land, development, etc., etc., not on a consolidated basis, but thinking more on a rational basis? Those are the two questions. Sorry, and the last one. Juan, what is the Mexican pesos that are using for the budget and the guidance for this year?

Well, look, the Mexican peso is surprisingly strong, so we made our forecast at 1750, but that has been proven a little bit too short. Again, the theme of the year in terms of the administration is cost control, and we will be keen on continuing to do that as the peso is very strong compared to the previous years, no? Now, in terms of capital allocation, look, I think that we have acquired about 90% of the land that the land requires. So I don't think that this year we will, I mean, there's always opportunistic acquisitions. Mexico City is one of the important markets where we will continue to look for important land. But the bulk of the land we have, this is a year of, as Loren has said, infrastructure investment. These great plots of land need to be made shovel-ready, and we are prepared to do that. We have to be ready for the upcoming demand, which we can see on our pipeline. So capital allocation will be mostly focused on making the land shovel-ready, opportunistic investments in land in places like Mexico City and just as I said before if there's opportunities to sell part of the portfolio we will so that's that's just keeping this running as a smooth company and taking every opportunity to to provide good results that the market will recognize okay thank you and congrats again for the results.

Thank you. Thank you. There are no further questions. I'd now like to turn the call back over to Mr. Birho for his concluding remarks. Please go ahead, sir.

Muchas gracias. Thank you everyone for joining us today. As we look ahead, we are confident in the opportunity and equally confident in our ability to execute with prudence across across cycles. If the next strong economic phase accelerates into 2027, as we believe it will, VESTA is uniquely positioned to capture that growth responsibly and at scale, as supply has moderated and pipeline conversations point to improving visibility over the next 12 to 24 months. Thank you all, and have a nice day.

Thank you for attending today's call. You may now disconnect. Goodbye.

Gracias.