Earnings Call Transcript - VTMX Q1 2024

Operator, Operator

Greetings, ladies and gentlemen. Welcome to the Vesta First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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, Investor Relations Officer. Please go ahead.

Fernanda Bettinger, Investor Relations Officer

Good morning everyone and welcome to our first quarter earnings call. Presenting today with me is Lorenzo Dominique Berho, Chief Executive Officer; and Juan Sottil, our Chief Financial Officer. The earnings release detailing our first quarter 2024 results was released yesterday after market closed and is available on the company’s website, along with our supplemental materials. It’s important to note on today’s call, management remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ. For more information on these risk factors, please review our public filings. Vesta assumes no obligation to update any forward-looking statements in the future. Additionally, note that all figures included herein were prepared in accordance with IFRS, which differs in certain significant respects from U.S. GAAP. All information should be read in conjunction with, and is qualified in its entirety by reference to our financial statements, including the notes thereto, and are stated in U.S. dollars unless otherwise noted. I’ll now turn the call over to Lorenzo Berho.

Lorenzo Dominique Berho, CEO

Thanks Fernanda and thank you all for joining us today. 2024 is off to a great start. Our team maintained Vesta's strong track record of leasing activity during the quarter, capturing increasing rents on new and renewal leases, securing Class A tenants for Vesta's development, and building out a solid pipeline for the future ahead. Probably our most exciting news for the quarter was Vesta's successful pre-lease to one of Latin America's largest e-commerce companies of our Mexico City, Vesta Park Punta Norte for a substantial 890,000 square feet. This is another significant milestone for Vesta and an important proof of concept for our company. Vesta anticipated market trends in the early stages of Mexico's nearshoring wave. We turned our strategic focus towards gaining a first-mover advantage within Mexico's most strategically relevant infill locations, successfully leveraging time-earned relationships and our outstanding balance sheet to acquire some of our country's most strategically relevant land. Today, Vesta has built a privileged position within Mexico's most desirable locations. Latin America's leading online marketplace has chosen to partner with Vesta and the robust consumer demand we're seeing continues to drive e-commerce aggressive expansion, an important tailwind for Vesta in 2024 and beyond. Stabilized occupancy for the first quarter 2024 increased 40 basis points to 97.1% with a strong and geographically diverse client base, reflecting balanced sector exposure. First quarter leasing activity reached 2 million square feet, 1 million square feet from new leases, among them, the leading Latin American e-commerce company and nearly 1 million square feet of renewals. Over the last 12 months, e-commerce renewals and re-leasing spreads reached 8%. As a related comment, according to Colliers, first quarter 2024 rental prices for Mexico's industrial space rose 22% year-on-year with an average cost of $6.89 per square meter driven by nearshoring strength. Our focus for the first quarter was therefore on long-term objectives and establishing a solid foundation for the year. We're evaluating land acquisitions with access to energy and utilities in urban entry locations, replicating the successful process I just described, acquiring optimally located land, developing best-in-class PEG buildings, and leasing and re-leasing to top-tier clients. Meanwhile, we are expanding relationships with existing tenants and connecting with new clients, many of which are referrals, maintaining Vesta's proven disciplined approach to the continued development of state-of-the-art facilities. This ensures we maintain the industry's best-in-class portfolio. The Vesta team has demonstrated an ability to innovate to create value with the capital to execute and importantly, develop aligned with our disciplined, sustainable, and profitable growth path. Moving to the broader Mexico industrial real estate market. Strong fundamentals continue to drive high rates of occupancy, particularly within our target markets. According to Kearney’s 2024 Foreign Direct Investment Confidence Ranking released this month, Mexico has returned to the top 25 countries, attracting the most foreign direct investment in the 21st position after having disappeared from the FDI Confidence Ranking for the last four years. This was driven by capital invested in the construction of plants, factories, and manufacturing production lines, which have migrated to Mexico from Asia and other places through nearshoring. The Mexican economy is expected to grow between 1.8% to 2.5% in 2024. A new incentive designed to boost nearshoring investment in 2024 and 2025 will help the economy as well. Given that Vesta's primary focus for new developments is on land-constrained markets, we're well-positioned in the current environment. Touching upon some other relevant highlights from the first quarter 2024. Vesta's total portfolio occupancy increased to 94% from 93.4% last quarter, while stabilized and same-store occupancy increased to 97.1% and 97.4% from 96.7% and 97%, respectively. We began construction on three new buildings in Monterrey and one in Macio for one of Vesta's long-time clients, aligned with our growth plan and reflecting today's strong market dynamics. Current construction in progress reached 4.1 million square feet by quarter and a $344 million estimated investment and a 10.1% yield on cost in Mexico City, Ciudad Juarez, Monterrey, and Bajio. We again delivered strong financial results, as Juan will discuss in more detail, with a 20.1% increase in adjusted NOI to $57.4 million and an adjusted NOI margin and adjusted EBITDA margin, which reached 96% and 84.7%, respectively. Vesta ended the quarter with FFO at more than $40 million, a 32.4% increase year-on-year. In closing, it was a great start to what we expect will be another excellent year. And while the outcome of our country's upcoming elections are uncertain, this quarter's results underscore that Vesta's path forward remains unchanged. Both the U.S. and Mexico benefit from robust institutional frameworks, strengthening consumer demand, and a broad range of industries that require premium industrial real estate to ensure uninterrupted supply chains. Vesta is optimally positioned to capture this and other exciting opportunities. Let me now pass our conversation to Juan, and I'll return for some brief closing remarks.

Juan Sottil, CFO

Thank you, Lorenzo, and good day, everyone. Let me begin with a summary of our first quarter results. Starting with our top line, we have a strong start of the year with total revenues, which grew 21% to reach $60.6 million, mainly due to rental revenue from new leases and inflationary adjustments on rental property during the quarter. In terms of current mix, 87.8% of our first quarter revenue was denominated in U.S. dollars, up from 86.7% from the first quarter 2023. Turning to our profitability. Adjusted net operating income increased 20% to $57.4 million, while the margin decreased 35 basis points to 96%. This increase was primarily driven by higher rental revenue from our rental properties as Lorenzo has described, including energy income. Adjusted EBITDA reached $50.6 million in the first quarter, a 20% increase reported to the prior year quarter, while the margin decreased slightly by 21 basis points to 24.7%, primarily due to higher costs and expenses. Initiative expenses during the quarter were impacted by the peso appreciation relative to the same period last year and the increase in auditing, legal, and consulting expenses driven by our recent equity transactions. We closed the first quarter of 2024 with a pre-tax income of $150.6 million compared to $43.1 million in 2023, which benefited from higher gains on revaluation of investment properties and higher interest income. Vesta's FFO increased 32%, reaching $40.4 million, as Lorenzo described. Turning to our capital structure and balance sheet, cash and equivalents stood at $445 million, and our total debt decreased slightly to $914 million at the end of the quarter. Net debt to EBITDA was 2.4 times, and our loan-to-value was 24%. As a result of our successful 2023 capital raises, we're starting this year with a very solid financial position that enables us to remain focused on execution while committed to our disciplined approach to sustainable and profitable growth. Finally, subsequent to the quarter's end on April 16, we paid a cash dividend for the first quarter, equivalent to MXN0.29 per ordinary share. This concludes our first quarter 2024 review. Operator, please open the floor for questions.

Operator, Operator

Thank you. We will now start the question-and-answer session. Your first question comes from Pablo Ricalde of Santander. Please go ahead.

Pablo Ricalde, Analyst

Hi, good morning Juan, Lorenzo. Congrats on the results. I have two questions. The first one is on the rental growth we saw in the quarter. I don't know if you can explain on a per-region basis, how are you seeing rent growth? That's the first one. And the other one is on the peso-denominated rents. I don't know if you have seen an increase of tenants asking for peso rents instead of USD?

Lorenzo Dominique Berho, CEO

Hola Pablo, thank you very much for your question and being on the call. Regarding your first question, we have definitely seen rent increases in most of the markets pretty much throughout the quarter, what we have presented and is actually out of the supplemental package is the rent increase that we have had in general terms, trailing 12 months, and we saw an increase of 8% which is based on renewals and re-leasing, which is a great spread way above inflation and reflects the importance of being able to mark-to-market rents coming from the spread between renewals as well as the spread between re-leasings. Pretty much the ranges vary market-by-market. What I can tell you is that there continue to be very strong markets where we have been able to have spreads of 20% to 40%. Such markets are Tijuana, Ciudad Juarez, Toluca, for example, but also in markets like the Bajio, we have seen rents increase between 10% to 20%. Some of the renewals have to be at the in-place rent plus inflation. But the combination of renewals that already have an increase on inflation combined with re-leasings, new re-leasings, we achieve a very attractive spread of approximately 8%. Regarding your second question, interestingly we've seen a huge interest for companies to lease in U.S. dollars. That was actually the example of some of the new leases that we recently did in logistics operations in Mexico City. We believe that the companies are agnostic about the currency; they want to lease good quality space, and Vesta has great quality space in good locations, which gives them better functionality for their operations, making them more efficient, more profitable and therefore, they are able to pay in the corresponding currency, which is dollars in our case. So, thank you.

Pablo Ricalde, Analyst

Thank you, Lorenzo. That was very good to hear.

Operator, Operator

Your next question comes from the line of Rodolfo Ramos from Bradesco BBI. Please go ahead.

Rodolfo Ramos, Analyst

Thank you. Good morning. Thanks for taking my question. My first one is a follow-up on Pablo's question. In terms of the leasing spreads that you're seeing, we're seeing some of your peers reporting higher numbers. Given that when you look at your expiration profile in 2025, we're going to see a pickup in expirations. I mean, how do you see the leasing spreads going forward in 2025 with these expirations? So that would be the first one. And second, we have seen more capital flowing to the sector, at least looking to enter, whether it's at the asset level or at the structural level. I mean, how does this greater appetite from investors, increased competition for land impact your growth trajectory more long term? Do you think that tenants will be able to absorb these costs and keep development yields stable at current levels? Thank you.

Lorenzo Dominique Berho, CEO

Thank you, Rodolfo, for your question. Regarding the 2025 expirations, we will maintain the same approach to be able to renew leases as well as re-lease buildings at market rents, so that we can capture some of the upside potential that some of these markets represent. We are very proactive in our asset management team to be close to our clients to try to recover as much as possible. We have approximately 7 million square feet expiring between 2024 and 2025. For that reason, we see a great potential upside in terms of rent; it will vary market-by-market and will depend on the lease agreement that is in place or the situation of each of the expirations. But I'm confident that the Vesta team is making the right decisions and working in the right direction to capture value from rent increases, which has been a significant portion of the overall revenue increase that we have seen just this quarter. Increasing revenues above 20% is an excellent number, which is a combination of new leases and existing leases that are increasing. Secondly, regarding your question on capital flow, there has indeed been a lot of activity in the market. Nevertheless, most of this activity is focused on acquisitions. Many of the players that have been raising capital do not have well-developed development capabilities and are just getting started in development, which is why their position is mostly going to be based on acquisitions. Many of them have expressed that. Doing acquisitions at cap rates in the range of 5.86% or even to 7%, including tenant improvements and amortized investments that have to be done over time, is a completely different approach. We think that all of them have various investment platforms and strategies. Therefore, we believe that for sizable development transactions, the companies that have raised capital do not possess those development capabilities, which is a sweet spot where Vesta has been able to acquire land. We are currently in that process to start construction as we have recently done to lease up during construction or the stabilization phase, and we can capture the most value, achieving spreads of 300 to 400 basis points above acquisition cap rates. The trend towards other companies and new players entering the market will push cap rates down, particularly for stabilized assets, which is another important trigger that will create better pricing for our assets looking forward.

Rodolfo Ramos, Analyst

Thank you, Lorenzo.

Operator, Operator

Your next question comes from the line of Jorel Guilloty from Goldman Sachs. Please go ahead.

Jorel Guilloty, Analyst

Good morning. I have two straightforward questions. First, I noticed there was no guidance in the release. Can we assume it remains unchanged from what you provided in the fourth quarter? Second, regarding Guanajuato, I saw there was a decrease in occupancy quarter-over-quarter of about 400 basis points, while most markets experienced an increase in occupancy. I would like to understand the dynamics at play and what we can expect moving forward. Thank you.

Lorenzo Dominique Berho, CEO

Thank you, Jorel, for your call. Regarding the Guanajuato question, we recently developed a building, an inventory building in Puerto Interior. We have been successful leasing out the rest of the space, and probably that's why you see a small adjustment in the total portfolio because it's a brand-new building that we recently incorporated. But if you look at the stabilized portfolio as well as same-store, we have kept that occupancy at 91%. I would suggest following the stabilized portfolio because that doesn't represent any major adjustments. The market is doing well; it's just the incorporation of a new spec building that we have recently developed, and we have been announcing that throughout the last quarters. Regarding your first question, yes, we will keep our guidance that we provided in the last call without any adjustments for the moment.

Jorel Guilloty, Analyst

And a quick follow-up, just to understand because when I look at the GLA for Guanajuato, it remains unchanged for about three quarters. So, you're saying it became incorporated right now? Or I'm just trying to understand how that works?

Lorenzo Dominique Berho, CEO

Yes. So, if you look at the numbers in Guanajuato or if you look at the supplemental package, Page number 10, you will see the new buildings that are currently part of the lease-up. We have one building in Guanajuato in Puerto Interior, measuring 231,000 square feet. If you look at the total portfolio, we currently have 4.6 million square feet. Last year, in the first quarter, it was 1.3 million square feet. So, it has changed by 230,000 square feet, which is basically that building.

Jorel Guilloty, Analyst

All right. Thank you.

Operator, Operator

Your next question comes from the line of Alan Macias from Bank of America. Please go ahead.

Alan Macias, Analyst

Hi, good morning and thank you for the call. Just if you can remind us on your land bank, what is the potential GLA that it represents? And just another question on recent spreads. I guess the assumption is that there is upside risk 48% going forward? Thank you.

Juan Sottil, CFO

Potential risk on the 8% going forward.

Lorenzo Dominique Berho, CEO

Hola Alan, thank you for your question. Regarding your second question on the rent spread, I think that more than risk, we believe there are greater opportunities for major rent adjustments. First of all, we think that in the current inflation environment, Vesta is very well positioned to hedge towards inflation very well because of how the leases are structured. The majority of the leases that will expire will have full adjustments towards inflation, either in the U.S. or Mexico, and I believe inflation currently is between 3% to 4%, depending on the currency. In the end, we think we are very well positioned. The upside on rent is not only due to inflation but also our ability to mark to market many of our leases at expiration or during re-leasing. We believe rents have been increasing in many, if not all markets, so we see considerable potential to renew. The market is incredibly hot right now. There's good demand, and companies that are established in Mexico are performing quite well. So, we don't see this trend changing in the near-term. Regarding land bank, we currently have land that could help us increase our portfolio by more than 10 million square feet. However, we are in the process of acquiring more land. We're looking into land in the northern part of Mexico, Tijuana, Juarez, and Guadalajara, Mexico City to incorporate a potentially larger pipeline opportunity, as we have done in the past. Thank you, Alan.

Alan Macias, Analyst

Thank you.

Operator, Operator

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

Gordon Lee, Analyst

Hi, good morning. Thank you very much for the call. Just very quickly, and this is sort of more out of curiosity, but in the last two or three quarters, you've had two or three properties, not many, but two or three properties that have been in the pipeline that have seen some delays for delivery. My question is, is there a common theme in some of those delays? Or is each of them sort of its own particular driver, maybe tenant modifications, et cetera? Or is it more to do maybe with permitting and infrastructure? And maybe that's a little bit more systemic. Thank you.

Lorenzo Dominique Berho, CEO

Thank you, Gordon, for your question. One of the good things is that we are incredibly active on construction. We currently have under construction over 4 million square feet, which is a great pipeline in all the regions where we operate. In many of these cases, at the same time that we're in construction, we are in the marketing phase. A good example is what we recently did in Mexico City. It's a very large building for e-commerce, very well located in Punta Norte. This building will be delivered at the end of the year, and we were able to lease this quarter to a great e-commerce company, as mentioned. In the process, sometimes we need to do a couple of adjustments, and sometimes that generates certain delays. That was actually the case of Queretaro, one of the projects which is leased to Eaton. We're working closely with them, and there have been some minor adjustments, which have represented some adjustments also on the date. So, it is fairly common that this might happen. There was another adjustment because it took us a little bit longer to commence the building than initially forecasted. We will communicate every time there's a situation with any of the dates, but we feel very comfortable that it doesn't represent a major impact on our potential income or value proposition.

Gordon Lee, Analyst

Perfect. That's very clear. Thank you very much.

Lorenzo Dominique Berho, CEO

Thank you.

Operator, Operator

Your next question comes from the line of Francisco Suarez of Scotiabank. Please go ahead.

Francisco Suarez, Analyst

Good morning. Congratulations on the results. I have two questions. I've noticed that Foxconn is one of your key tenants. Do you have any plans to expand beyond that, possibly by offering a full park or consolidating other assets that Foxconn might have in Mexico into one location as they typically prefer? My second question is whether there is any particular reason why the buildings in Tijuana and Juarez remain unleased. These markets seem to be completely sold out; could it be that potential tenants are looking for more energy-intensive buildings that you don't have the KPAs for? Is there anything else that might explain why these three buildings are still vacant?

Lorenzo Dominique Berho, CEO

Great. Thank you, Francisco, for your questions. Let me start with the latter. Yes, we have some buildings recently finished that are currently in the marketing stage in both Tijuana and Ciudad Juarez. These buildings are still in the marketing phase, but bear in mind that, for example, in Ciudad Juarez, we have leased four of the five buildings that we developed throughout last year. So, there's only one building which is currently in the marketing stage out of the five. The other four are leased to DB Schenker, DRP, Sage Electronics, and another one is in a letter of intent. We feel very comfortable with our position to have projects available in the marketing stage, and we're waiting for the best tenant to take this building. It has nothing to do with energy. Actually, the park is already running; a great example is the clients that we have already started operations. The same situation in Tijuana, where we leased to Home Depot, Amphenol, Airbus, and other companies, and we're currently working with excellent firms to take this space. Sometimes we are a bit more patient to take the best client rather than filling the space immediately. Normally, we give 12 months for a lease-up; our underwriting considers 12 months of lease-up stage. That's why we expect these to be converted to stabilize by the third quarter of 2024, but hopefully we'll close a transaction soon. Regarding Foxconn, absolutely, Foxconn is one of the best examples of nearshoring where they have been expanding rapidly in Mexico, particularly in Guadalajara, primarily because they already have presence there since before COVID. Since all these disruptions in terms of trade, supply chains, and adjustments have occurred, which have benefited nearshoring and frontshoring, Foxconn has been a great example of growth. They have taken several buildings inside our Vesta Park Guadalajara campus. So, they have a good position in several buildings where they're going to be incredibly active with various electronics manufacturing components. I’m pretty sure Foxconn will continue growing, and I’m optimistic that other companies similar to Foxconn will follow a similar process going forward.

Francisco Suarez, Analyst

Thank you. Congrats again.

Lorenzo Dominique Berho, CEO

Thank you.

Operator, Operator

Your next question comes from the line of Felipe Lenza from Citi. Please go ahead.

Felipe Lenza, Analyst

Good morning. Congrats on the results. My question is around 2024 guidance. First-quarter P&L could we expect the same level of margin for the full year beating the guidance?

Juan Sottil, CFO

Your question was a little bit garbled. So, I understand that you're asking about our rental growth, which was outstanding. I agree with you, and you were asking about the question itself. Can you repeat it, please?

Felipe Lenza, Analyst

Yes. About the NOI EBITDA margins too, they were a bit lower, could we expect the same levels of margins for the full year?

Juan Sottil, CFO

Yes. I think that NOI will continue to be expected higher throughout the year. In terms of EBITDA, we are seeing a higher impact of the debt exchange rate in those numbers. However, I feel confident that we will meet our guidance throughout the year.

Operator, Operator

Your next question comes from the line of Alejandra Obregon of Morgan Stanley. Please go ahead.

Alejandra Obregon, Analyst

Hi, good morning, Vesta team. Thank you for taking my question. I just have one on capital allocation. So, I'm thinking if you think of macro conditions, probably higher interest rates for longer, as you balance that with construction costs, your requirements for more land. You just dropped some properties into the development pipeline. So, you're probably looking at some acceleration there. When you put those things together and your debt and equity program, when do you think you could potentially tap the market, either debt or equity again? And when you think of your capital allocation structure or your capital structure, where do you see equity and debt balancing for you going forward, if that makes sense? Thank you.

Juan Sottil, CFO

Sure. It's an excellent question. Look, we have dry powder for more than $430 million. I think that we expect to invest about north of $300 million this year. As such, I believe we have about 18 to 20 months of dry powder to invest. We will tap the market at some point. I believe there are opportunities in debt. I do agree that it's higher for longer, but in times when inflation is coming under control in the U.S., I think that rates are going to be more amicable. Regarding equity, we take equity decisions very carefully. We have a good and strong balance sheet. Therefore, at some point in the latter part of next year, we will assess the best way to fund the company. I don't foresee any immediate offerings in either of the equity or debt.

Alejandra Obregon, Analyst

Got it. And could you remind us how much is your debt program? How much has it been approved?

Juan Sottil, CFO

Well, I think that $1.5 billion is somewhere around there from our shareholder meeting last year. I think that we did it for that amount, give or take. We're checking. I will let you know in the conference.

Alejandra Obregon, Analyst

Got you. Thank you very much and congratulations on the numbers.

Operator, Operator

Your next question comes from the line of Isabela Salazar of GBM. Please go ahead.

Isabela Salazar, Analyst

Hello. Thank you for taking my questions. I have two questions. The first one is, I was wondering if you could give a bit of color on the non-tenant reimbursement during the quarter. I'm just trying to understand what this means. The second question is I saw you sold some land in a region, and I was wondering what the driver for the sale was? And also if you could share your thoughts on the dynamics in the region?

Juan Sottil, CFO

Sure. We invest on behalf of the tenants on tenant improvements. There are some investments that tenants want that we basically decide are not part of our interest, and they ask us to manage the construction process. At some point, they reimburse us. That was the case with a larger amount in this particular quarter, about $14 million. We got reimbursed for a major investment. This has to do with properties that were sold some time ago for data REITs, which is why the number is so large. It's not common to see that amount of tenant improvement that we manage on behalf of our tenants. Regarding the land sale, this was a non-strategic asset outside of an industrial park, which is always better to divest of some assets. It was very small, below $1 million, and we obtained a major premium. Nevertheless, it was a small transaction.

Isabela Salazar, Analyst

Perfect. Thank you very much.

Operator, Operator

Your next question comes from the line of David of Scotiabank. Please go ahead.

Unidentified Analyst, Analyst

Hi, good morning. Thanks for taking my questions. Congrats on the results. I have a few questions. The first one is related to the recycling strategy. Should we expect investments in other regions? And my other questions are related to the development program. Is there any environment that could affect the delivery timeline? What should we expect in terms of lease ups in the next quarters?

Lorenzo Dominique Berho, CEO

What can we expect in the lease-up for the next quarters? Great question, thank you, David. Since we incorporated a Level 3 strategy, we decided to have an asset recycling program every now and then. However, currently, we are focusing on capital deployment from the funds raised recently from the IPO in the New York Stock Exchange. That's why we are more active in investment and development. On that regard, we foresee a strong pipeline, as Juan mentioned, with investments above $300 million throughout this year. We will continue seeing strong development activity. When we start the buildings, we don't see any major variables. As you remember, we have third-party contractors that take responsibility for construction. We have different contractors, so we manage the risk and development effectively. The markets where we're investing are very strong. Leasing activity is robust, as was demonstrated recently with some buildings leased before construction ends. For that reason, we think we will continue to see strong activity. Markets are at record high occupancies, and supply is still incredibly limited for good quality buildings, which affords Vesta a good opportunity.

Unidentified Analyst, Analyst

Perfect. Thanks.

Operator, Operator

And your next question comes from the line of Jeronimo Delgado from Santander. Please go ahead.

Jeronimo Delgado, Analyst

Apologies. Can you hear me now?

Lorenzo Dominique Berho, CEO

Yes, perfect.

Jeronimo Delgado, Analyst

Thanks. Congrats on the results, first of all; this is great for the company. Apologies if my question was already asked and I missed it, but I just wanted to ask given the current interest from multiple players in the market. Is it something you are currently evaluating as well? Is it something you're interested in? I would like to get some color? Thank you.

Lorenzo Dominique Berho, CEO

Thank you, Jeronimo. That's a good question. What I can say is that Vesta will continue focusing on its investment pipeline that we have presented. We believe that this particular focus and discipline gives us the ability to capture opportunities at above-market returns with higher spreads. For the moment, we want to maintain that discipline for our shareholders and keep the strategy that we have maintained, which has provided us with a great edge for the opportunities that Mexico is representing at the moment.

Jeronimo Delgado, Analyst

Great. Thank you so much.

Operator, Operator

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

Lorenzo Dominique Berho, CEO

Thank you, operator. 2024 is definitely off to a great start, and our portfolio results remain solid. The Vesta team continues to drive long-term value creation. We're very well positioned to take advantage of new opportunities with a strong capital base. As a team, we are laser-focused on execution and are committed to our long-term strategy. Thank you to the Vesta team, thank you to our shareholders, and see you on our next call. Thank you.

Operator, Operator

This concludes today's conference. You may now disconnect your lines. Thank you for your participation.