- In February, the payment for distributable cash flow corresponding to the second semester of 2019 was made.
- Pei maintained the credit ratings of the equity securities (i-AAA), long-term bonds (AA+), and achieved, for the first time, a BRC1+ rating on short-term debt.
- The first quarter of the year did not show significant impact due to the health emergency related to COVID-19. The property manager at Pei shared details of the actions taken in response to this situation.
- In line with its strategy for developing a sustainable culture, Pei Asset Management has adopted the Principles for Responsible Investment (PRI) and embraced six of the United Nations’ Sustainable Development Goals.
Bogotá. Pei Asset Management, the real estate management company of Pei, held a second teleconference for Pei Investors (2020), where the results of the first quarter of this year were presented and an overview of the current portfolio asset situation was discussed in the context of the health emergency and the administrator’s management thereof.
The call was led by Jairo Corrales, President of PEI Asset Management, and Jimena Maya, Manager of investor relations, who discussed the most relevant topics during the first three months of 2020: the ratification of ratings for equity securities and long-term bonds, and portfolio management; the payment of distributable cash flow; the assets included in the portfolio; and the linking of the real estate manager to the Principles for Responsible Investment (PRI).
In the first quarter, Pei maintained the i-AAA rating for equity securities, the AA+ rating for long-term bonds, and the G-aaa portfolio management rating. Additionally, and for the first time, the vehicle received a BRC1+ rating on short-term debt, preparing it for potential commercial paper issuance.
Regarding asset management, the focus was on indicators at the end of March, where it was clarified that despite the challenging situation, the portfolio did not experience any impact, and that conversely, the retention rate of 94% of contracts, equivalent to 37,221 m, was highlighted.2and an additional amount of 4,5342 Rented spaces that were previously vacant.
By fulfilling previous commitments to acquire assets for the portfolio, the following were added during the period: the 33% portion of the Atrio North Tower; the acquisition of the Plaza Central Shopping Center property; the incorporation of the second healthcare asset, Sanitas Ciudad Jardín; and the acquisition of 50% of the Jardín Plaza Cúcuta Shopping Center. This brings the portfolio to 145 properties, more than 1 million square meters of leasable area, and more than 6.5 trillion pesos in assets under management.
In terms of portfolio occupancy, the average physical vacancy rate was 7.8% and the average economic vacancy rate was 8.6%. The increase in these two indicators is due to recent acquisitions.
The teleconference presented the vacancy rate of Pei’s properties in relation to the real estate market for different categories. Vacancy rates increased with the addition of Atrio to the portfolio, reaching market levels around 10%.
Commercial real estate shows an increase in vacancy rates to 7.6%; however, it is below the vacancy rate recorded by the market at 12.5%.
For logistics and industrial assets, the economic vacancy rate of Pei has decreased, falling from 7.8% to 4.8% and remains below market levels, which were previously higher at 13%. In specialized assets, the vacancy rate shows a decrease in both physical and economic terms due to the incorporation of customized assets in the healthcare category.
Regarding financial management, Pei provided its investors with distributable cash flow of COP 145 and 1,001,000, representing an increase of 55% compared to the previous year’s payout (93,, 198MM). This increase was driven by the strong performance of the vehicle during 2019, which saw revenue growth of 28%. Additionally, due to the issuance of ordinary bonds in November 2019, it was possible to reduce the vehicle’s financial expenses while increasing the payout.
The vehicle closed the period with a debt of COP 1.97 Bn, where 19% represents short-term debt and 81% represents long-term debt. Thanks to the strategy of issuing ordinary bonds, the cost of debt is located at 6.91% EA.
COYUNTURA COVID 19
The teleconference also addressed the management process for the current public health emergency situation and highlighted 3 main topics.
Initially, emphasis was placed on the vehicle’s structural strengths that allow it to withstand a contingency such as the current one. Key indicators highlighted included diversification by asset type, by geography, by tenants, and by sector; the liquidity of the vehicle; the low level of leverage consistent with the business dynamics; and finally, hedging schemes related to stabilizing assets. All of these characteristics mitigate the impact of the health emergency.
As a complement, the main actions undertaken within the vehicle’s management to address the situation were identified. An assessment of the operating status of the portfolio assets was conducted, and actions aimed at increasing the financial prudence of the vehicle’s management were highlighted, including optimizing operational expenses, controlling short-term leverage levels, and postponing non-priority investments in assets, among others.
Investors were also informed about the management of tenants affected by the health emergency, highlighting that there has been no widespread impact on lease agreements and that a specific policy is being followed for each one.
Emphasis was also placed on constant monitoring of this situation and sectors with the greatest impact.
An assessment of potential impacts on key variables such as vehicle revenue and portfolio, vacancy rates, as well as operating, financial, and working capital expenses was also conducted.
Finally, it was reported that Pei’s asset portfolio has been prepared for the opening of different economic sectors in accordance with the guidelines established by the National Government, complying with all planned protocols and regulations and ensuring the best operating standards for its tenants, users, and visitors.
Emphasis on sustainability
The real estate manager at Pei, Pei Asset Management, signed the Principles for Responsible Investment (PRI), which will further incorporate environmental, social, and governance criteria into asset management and relationships with tenants and investors. It is important to note that Pei Asset Management is the first real estate fund manager in Latin America to adopt this initiative.
On the other hand, Pei Asset Management adopted 6 of the UN’s Sustainable Development Goals (SDGs). These were gender equality, affordable and clean energy, decent work and economic growth, sustainable cities and communities, responsible production and consumption, and peace, justice, and strong institutions.
As is typical, the call ended with a question-and-answer session for investors, which was facilitated by the Pei Asset Management team.