- In February, the Distributable Cash Flow payment for the second half of 2019 was made.
- Pei maintained its i-AAA Equity Securities rating and its AA+ long-term bond rating, and, for the first time, obtained a BRC1+ short-term debt rating.
- The first quarter of the year did not show a significant impact from the COVID-19 health emergency. Pei’s real estate manager shared an overview of the actions implemented in response to the situation.
- In line with its strategy to build a sustainable culture, Pei Asset Management became a signatory of the Principles for Responsible Investment (PRI) and adopted six UN Sustainable Development Goals.
Bogotá. Pei Asset Management, Pei’s real estate manager, held the second 2020 teleconference for Pei Investors, presenting the results for the first quarter of the current year and an overview of the current status of the portfolio’s assets in the context of the health emergency and the Real Estate Manager’s response.
The call was led by Jairo Corrales, President of PEI Asset Management, and Jimena Maya, Investor Relations Manager, who covered the most relevant topics from the first three months of 2020: the affirmation of the Equity Securities and long-term bond ratings, and portfolio management; the Distributable Cash Flow payment; assets added to the portfolio; and the real estate manager’s adherence to the Principles for Responsible Investment (PRI).
In the first quarter, the annual ratings review stood out, in which Pei maintained its i-AAA Equity Securities rating, its AA+ long-term bond rating, and its G-aaa portfolio management rating. In addition, for the first time, the vehicle received a BRC1+ short-term debt rating, preparing for what could eventually be a commercial paper issuance.
Regarding asset management, emphasis was placed on indicators as of the close of March, clarifying that despite the situation, the portfolio saw no impact — on the contrary, 94% contract retention stood out, equivalent to 37,221 m2, along with an additional 4,534 m2 leased in previously vacant spaces.
Fulfilling prior commitments to add assets to the portfolio, the following were added during the period: 33% of Atrio’s North Tower; full consolidation of ownership of the Plaza Central shopping center; the addition of a second healthcare-sector asset, Sanitas Ciudad Jardín; and the acquisition of 50% of the Jardín Plaza Cúcuta shopping center. As a result, the portfolio now comprises 145 properties, more than 1 million square meters of leasable area, and more than 6.5 trillion pesos in assets under management.
Regarding portfolio occupancy, average physical vacancy stood at 7.8% and average economic vacancy at 8.6%. The increase in both indicators is explained by recent acquisitions.
The teleconference presented Pei’s vacancy performance relative to the real estate market across the different categories. In corporate assets, vacancy increased with Atrio’s addition to the portfolio, reaching market levels of around 10%.
In commercial assets, economic vacancy rose to 7.6%; however, this remains below the 12.5% vacancy recorded by the market
For Logistics and Industrial assets, Pei’s economic vacancy decreased from 7.8% to 4.8% and remains below the market, which was running at levels above 13%. In Specialized assets, both physical and economic vacancy declined due to the addition of built-to-suit assets in the healthcare category.
Regarding financial management, Pei delivered COP 145 billion in Distributable Cash Flow to its Investors, a 55% increase over the DCF paid the prior year (93,198 MM). This increase was driven by the vehicle’s strong performance during 2019, when it posted 28% revenue growth. In addition, thanks to the ordinary bond issuance carried out in November 2019, it was possible to reduce the vehicle’s financial expense, further increasing the DCF.
The vehicle closed the period with debt of COP 1.97 Bn, of which 19% is short-term debt and 81% is long-term debt. Thanks to the ordinary bond strategy, the cost of debt stands at 6.91% EA.
COVID-19 SITUATION
The teleconference also addressed the management process for the current public health emergency situation and highlighted 3 main topics.
First, emphasis was placed on the vehicle’s structural strengths that allow it to face a contingency like the current one. Key highlights included diversification indicators by asset type, geography, tenants, and sector; the vehicle’s liquidity; its low leverage level in line with the business’s dynamics; and, finally, coverage schemes related to assets in stabilization. All of these are features that help mitigate the impact of the health emergency.
In addition, the main actions taken as part of the vehicle’s management to address the situation were outlined. A review of the operating status of the portfolio’s assets was presented, highlighting actions aimed at increasing the prudence of the vehicle’s financial management, optimizing operating expenses, controlling short-term leverage levels, and postponing non-priority investments in assets, among others.
Investors were also informed of the management carried out with tenants affected by the health emergency, noting that there has not been a mass impact on lease contracts and that a case-by-case review policy is being followed for each one.
Emphasis was also placed on the constant monitoring of this situation and the most affected sectors.
An assessment was also presented of the potential impacts on key variables such as the vehicle’s revenue and receivables, vacancy, as well as operating, financial, and working-capital investment expenses.
Finally, it was reported that Pei’s asset portfolio has been preparing for the reopening of the various economic sectors in accordance with the National Government’s guidelines, complying with all applicable protocols and regulations and pursuing the highest operating standards for its tenants, users, and visitors.
FOCUS ON SUSTAINABILITY
Pei’s real estate manager, Pei Asset Management, became a signatory of the Principles for Responsible Investment (PRI), which will deepen the incorporation of environmental, social, and governance criteria into asset management and relationships with tenants and investors. It is worth noting that Pei Asset Management is the first real estate vehicle manager in Latin America to join this initiative.
In addition, Pei Asset Management adopted 6 UN Sustainable Development Goals (SDGs): Gender Equality, Affordable and Clean Energy, Decent Work and Economic Growth, Sustainable Cities and Communities, Responsible Consumption and Production, and Peace, Justice, and Strong Institutions.
As usual, the call closed with a Q&A session with investors, addressed by the Pei Asset Management team.