- In February, the Distributable Cash Flow’s for the second semester of 2019 was paid.
- Pei maintained the i-AAA rating for its Equity Securities, the AA+ rating for its long-term bonds, and achieved, for the first time, the BRC1+ rating in short-term debt.
- The first quarter of the year was not significantly impacted as a result of the Covid-19 health emergency. Pei’s real estate manager published the number of actions it implemented in response to this situation.
- In line with its sustainable culture development strategy, Pei Asset Management, subscribed to the Principles for Responsible Investment (PRI) and committed to six of the UN’s Sustainable Development Goals.
Bogotá. Pei Asset Management, Pei’s real estate manager, held its second 2020-teleconference with Pei’s Investors, where it presented the current year’s first quarter results and discussed the portfolio’s assets situation in the context of the health emergency and its management thereof.
Jairo Corrales, PEI Asset Management’s President, and Jimena Maya, PEI Asset Management’s Investor Relations Manager led the call and presented the highlights of 2020’s first quarter: the confirmation of the Equity Securities’, long-term bonds’, and portfolio management’s ratings; the Distributable Cash Flow’s payment; the new assets incorporated into the portfolio; and the real estate manager’s subscription to the Principles for Responsible Investment (PRI).
During the first quarter, the ratings’ annual review is very relevant, as Pei maintained its Ewuity Securities’ i-AAA rating, long-term bonds’ AA+ rating, portfolio management’s G-aaa rating. Moreover, for the first time, the vehicle received a short-term debt’s BRC1+ rating, preparing for an eventual commercial notes’ issue.
In connection with the assets’ management, the metrics for the end of March were highlighted, clarifying that, in spite of the current situation, the portfolio has not been impacted; quite the contrary, the agreements’ retention amounted to 94%, equivalent to 37,221 m2, while an additional 4,534 m2 were leased in spaces that were vacant.
Complying with previous commitments on assets’ addition to the portfolio, the following were incorporated within the period: 33% of Atrio’s North Tower; Plaza Central Shopping Center’s ownership consolidation; Sanitas Ciudad Jardín, the second in the health category asset; and Jardín Plaza Cúcuta Shopping Center’s 50% acquisition. With the above, the portfolio completes 145 properties, over 1 million square meters of leasable area, and more than 6.5 billion pesos in assets under management.
In relation to the portfolio’s assets occupancy, the average physical vacancy was 7.8%, while the economic vacancy amounted on average to 8.6%. The recent acquisitions explain these two metrics’ increase.
The tele-conference also dealt with Pei’s vacancy behavior, in relation to the different real estate market categories. In connection with the corporate assets, the vacancy increased with Atrio’s entry to the portfolio, standing at market levels around 10%.
Commercial assets show an increase of their economic vacancy, to 7.6%; however, this number is below the market vacancy level, which is 12.5%
Pei’s economic vacancy in connection with Logistics and Industrial assets decreased from 7.8% to 4.8% and continues to be below the market levels, which were above 13%. The Specialized assets’ vacancy shows a decrease, both in physical and economic terms, given the incorporation of built-to-suit assets in the health category.
As to the financial management, Pei delivered to its Investors COP $145 thousand million in Distributable Cash Flow, showing a 55% increase compared to the DCF paid during the last year (93,198MM). The vehicle’s good performance in 2019 drove this increase, with a 28% income growth. Additionally, the ordinary bonds issue carried out in November 2019, made it possible to reduce the vehicle’s financial expenses, increasing the DCF.
The vehicle closed the period with a debt of COP 1.97 Bn, where 19% corresponds to short-term debt and 81% to long-term debt. Thanks to the ordinary bonds’ strategy, the debt service stands at 6.91% EA.
The current health emergency situation’s management was also discussed during the tele-conference. Three (3) main issues were highlighted:
First, the vehicle’s structural strengths, which allow it to face contingencies such as this one. The diversification metrics per type of asset, geography, tenants, and sectors were discussed, as well as the vehicle’s liquidity; the low indebtedness level, consistent with the business dynamics; and, lastly, the hedging schemes in relation to assets under stabilization. All of these characteristics mitigate the health emergency’s impact.
On the other hand, certain key actions were adopted by the vehicle’s management to address the situation. The portfolio assets’ operation status was reviewed, as well as certain actions aimed at increasing the vehicle’s financial management prudence, optimizing its operating expenses, controlling its short-term indebtedness level, and postponing non-priority assets investments, among other.
Investors were also informed about the actions adopted in connection with those tenants affected by the health emergency. It was emphasized that the lease agreements have not been massively impacted and that a case-by-case revision policy is being followed in connection with each.
The management’s permanent monitoring of this situation and the sectors most impacted thereby, was also highlighted.
The potential impacts on key variables such as the vehicle’s income and the portfolio’s receivables, the vacancy, the operation and financial expenses, and the working capital investments, were also discussed.
Finally, it was reported that Pei’s assets portfolio has been preparing for the upcoming opening of different economic sectors, in accordance with the National Government’s guidelines; therefore, it has been complying with all the protocols and regulations established and pursuing the best operating standards for its tenants, users, and visitors.
EMPHASIS ON SUSTAINABILITY
Pei Asset Management –Pei’s real estate manager–, became a signatory to the Principles for Responsible Investment (PRI). This will deepen the environmental, social, and governance criteria’s incorporation to the assets’ management and the relationships with tenants and investors. It is worth noting that Pei Asset Management is the first real estate vehicle manager in Latin America to suscribe to this initiative.
On the other hand, Pei Asset Management, adopted 6 of the UN’s Sustainable Development Goals (SDGs): gender equality, affordable and clean energy, dignified work and economic growth, sustainable cities and communities, responsible production and consumption and, peace, justice and solid institutions.
As usual, the call closed with a session of questions by the investors, which were answered by Pei Asset Management’s team.
ABOUT PEI ASSET MANAGEMENT
Pei Asset Management is Pei’s real estate manager. Within its management, its main objective is to optimize the value of the assets making up the vehicle’s portfolio, to obtain an attractive profitability transferable to Investors. Pei Asset Management was awarded a G-aaa rating by BRC Standard & Poors, the highest available for Portfolio Management Efficiency.
Pei is Colombia’s leading real estate investment vehicle. Pei’s unique characteristics in the local market allow Investors to participate in a diversified portfolio of income-generating commercial real estate assets. Pei used the international real estate trusts model, commonly known as REITs (Real Estate Investment Trusts) as reference. REITs are characterized by acquiring properties with the ability of generating cash flow from lease agreements.