Structural strengths, commercial management, and support to tenants in response to an unprecedented situation
- During the first half of 2020, amidst the unprecedented situation caused by the health crisis, the company generated a distributable cash flow of COP $64,943 million.
- The vehicle’s commercial management achieved a 92% contract retention rate and established commercial agreements related to 1,012 contracts, taking into account the impact on tenants resulting from mandatory preventive isolation measures.
- The period’s average physical vacancy stood at 8.3%, while the average economic vacancy was at 9.5%.
- The debt-to-assets ratio was at 28%, while debt service decreased by 16 basis points, reaching a 6.70% D/A.
- Pei’s securities rank 15 among the most traded in the Colombia Stock Exchange. The average daily volume of TEIS transactions during the first semester was COP 2.841 million.
- The protection of the property users, the real estate management team, and the investments has been prioritized to ease the continuity and resumption of all the portfolio assets’ operations.
Bogotá, August 2020. The strengths of Pei –the country’s main real estate investment vehicle– lay on its portfolio’s diversification, commercial risks’ hedging schemes, liquidity, and a long-term conservative indebtedness scheme. These strengths have been fundamental to the vehicle’s facing of the current situation.
The vehicle’s preparations, aimed at maximizing the utilization of its assets, resulted in an occupancy rate of approximately 42.4% (measured by the number of people) by the end of June. This preparation required investments related to new health regulations and protocols, totaling nearly COP $1.166 MM.
The permanent assistance to the tenants resulted in reliefs under commercial arrangements structured for 1.012 lease agreements, generating an 11.4% estimated impact on Pei’s annual revenues.
In connection with the portfolio assets’ occupancy metrics, the commercial and corporate categories’ physical vacancies were mainly impacted, standing on average at 8.3% during the period. In turn, the economic vacancy registered an increase as a result of the recent acquisitions and lower invoicing in the commercial and specialized categories, standing at 9.5%. The logistics and industrial categories registered no significant variations during the second quarter, given the health emergency’s lower impact thereon.
The vehicle implemented a non-essential cost-saving strategy that has resulted in stable Net Operating Income (NOI) during the period, mitigating the impact of decreased revenue resulting from both tenant concessions and the decrease in variable income associated with tenant sales and other sources, such as parking space and common area revenues.
In the context of the unprecedented situation taking place in the second quarter of the year, the vehicle’s Distributable Cash Flow (DCF) from the operation in the first 6 months of the year, amounted to COP $64.943MM. This sum, added to the DCF paid on last February, amounts to a 4.52% annual profit paid as Distributable Cash Flow (Dividend Yield) in 2020.
As in every year, the portfolio assets appraisal’s update is ongoing. By the end of the first semester of the year, commercial appraisals for 64% of the assets under management were conducted, resulting in a total variation of -0.6% on the portfolio’s value. This impact has already been incorporated into the daily unit value released to the market.
The health situation affected the vehicle’s debt portfolio behavior. The net debt portfolio balance was at COP $46,112 MM pesos, 64% of which corresponds to the current debt portfolio associated to the reliefs granted by the vehicle, while the net past due debts correspond to 36%.
The vehicle ended the period with a debt amounting to COP 2.05 billion, of which 15% is short-term debt and 85% is long-term debt. Due to the management of the debt portfolio during the last months and the decline in interest rates, the weighted cost of the debt stands at 6.70% D/A.
SECOND SEMESTER OF 2020
The following priority activities, for the remaining months of 2020, were highlighted during the teleconference:
Continued assistance to tenants and reopening of properties: Pei team’s main work focus during the next months will be the detailed and permanent review of the tenants situation. This, with an aim to address their requests and needs without disregarding the investors interests, based on the fundamental premise of achieving a balance between the short and long terms.
The properties’ reopening process will also continue, encouraging the continuity of those whose occupation and operation have not decreased, and achieving a gradual and safe return to activities of those whose occupation was affected.
Capital market activity: TEIS securities’ migration to the Colombian Stock Exchange’s equity market is expected in the third quarter. The ordinary bonds’, commercial papers’, and green bonds’ issuance and placement programs will continue during the period.
Pei’s 2020 Investors General Assembly: The teleconference attendees were confirmed that Pei’s 2020 Investors Ordinary General Assembly would be held virtually, for the first time ever, on Thursday, August 20.
Assets’ Management in the Sustainable Development Goals Framework: The sustainability and responsible investment international standards and principles’ incorporation process into Pei and its assets portfolio will continue, in line with Pei Asset Management’s commitment therewith.
These actions are and will continue to be framed in 3 SDGs as follows: SDG # 7 – Affordable and Clean Energy, SDG # 11 – Sustainable Cities and Communities; and SDG # 12 – Responsible Production and Consumption.