Vesta Real Estate Corporation SAB de CV (VTMX) 2014 Q4 法說會逐字稿

Good morning. My name is Robert, and I will be your conference operator today. At this time, I'd like to welcome everyone to Vesta's Fourth Quarter 2014 Earnings Conference Call. Vesta issued its quarterly report on Thursday, February 19, 2015. If you did not receive a copy of the email, please do not hesitate to contact the Company at +52-55-5950-0070.

Before we begin the call today, I would like to remind you that forward-looking statements made during today's conference call do not account for future economic circumstances, industry conditions, Company performance and financial results. These statements are subject to a number of risks and uncertainties. All figures included herein were prepared in accordance with IFRS and are stated in [US dollars], otherwise [first] noted.

Joining us today from Vesta in Mexico City is Lorenzo Berho, the Chief Executive Officer and Chairman; Juan Sottil, the CFO and Iga Wolska, the Investor Relations Officer. And now I'd like to turn the call over to Mr. Berho.

Thank you, Rob and good morning everyone. Thank you for your interest in Vesta and for participating in our conference call to discuss the fourth quarter 2014 results.

We are excited about the growth prospects for Mexican industrial real estate in the years to come and the success of our recent equity offering. As North America turns into a great powerhouse, these factors uniquely position us to take advantage of the many opportunities that will arise. Having raised $230 million, we are ready to deploy these proceeds in accretive projects which we believe will create significant value for our shareholders. These developments are the foundation of the Vesta Vision 20/20 growth plan, which seeks to double the size of the Company from a GLA standpoint by 2020. Our strategy is clear, grow our state-of-the-art portfolio with quite high quality tenants, maintain our leadership position in the high growth industrial sectors, uphold a world-class corporate governance structure and continue to deliver industry leading development returns.

A key first step in implementing the Vesta Vision 20/20 growth plan is the acquisition of strategic land reserves. In recent months, we made headway on this strategy, following land acquisitions in the Bajio region. This area, which accounts for approximately half of Vesta's portfolio, is one of the fastest growing regions in the country, thanks to the automotive industry production boom.

Turning to our operational and financial results, 2014 was another strong year for the Company. We continued our robust pace of growth, expanding GLA by 16% to 16.8 million square feet versus the prior year. Predictably, this significant expansion resulted in an increase in the total vacancy rate, which we expect to normalize as new inventory buildings are leased in the coming months. On a same store basis, however, we are pleased to report that the vacancy rate declined 111 basis points to 7.84% at the end of 2014, down from 8.95% at the end of the prior year. Funds from operations increased 87.5% year-over-year.

Our key financial results exceeded our annual guidance objectives. Rental revenues grew 18.5% versus a targeted expansion of 14%. Net operating income margin and EBITDA margin also beat our internal forecasts, coming in at 96% and 82.8% versus guidance of 93% and 81.5%, respectively.

We would also like to highlight Vesta's addition to the Mexican Stock Exchange Sustainability Index. This reinforces our position as one of Mexico's most sustainable public companies and confirms our commitment to sustainability, transparency, and accountability as we create shared value for all our stakeholders.

With the funds in place to execute on our attractive pipeline, we expect to be at the forefront of the industry's growth. The success of the follow-on offering shows that investors share the Vesta Vision 20/20 growth plan. We appreciate our shareholders' support for the approval of an executive compensation plan. The plan will not only further align the interests of shareholders and management, but will enable Vesta to retain and attract the talent we need to achieve our growth potential.

Thank you for your continued trust. And I will now hand the call over to our CFO, Juan Sottil, for a discussion of our fourth quarter and full year results.

Thank you, Lorenzo. Good morning everyone and thank you for joining us today to discuss our results for the fourth quarter of 2014. As Lorenzo discussed, 2014 was a transformational year for Vesta. Backed by unprecedented conditions in Mexican industrial real estate, we have embarked on an ambitious plan to double the size of the Company by 2020, to approximately 36 million square feet in terms of GLA. Over the next 12 to 24 months, our expansion will be funded by the proceeds from our January offering, which I am pleased to report was three times oversubscribed. Already we have seven equity projects underway that will require an investment of more than $300 million and [nab] over 7.3 million square feet of GLA.

The Vesta Vision 20/20 growth plan builds in our impressive growth track record and strong industrial fundamentals. This includes the automotive industry boom, energy reforms, the resurgence of US demand, and Mexico's position as one of the most competitive manufacturing platforms in the world. This positive growth backdrop is apparent in the strength of our 2014 results. As Lorenzo mentioned, we exceeded our annual guidance metrics and looking ahead at the current year, we expect to maintain our strong rate of expansion. We are currently forecasting rental revenue growth between 14.5% and 15.5% in 2015, with net operating income margin above 94% and an EBITDA margin of 81.75%. We also remain focused on cash flow generation. As in the prior year, our guidance is based on organic growth, the continued expansion of the manufacturing sector, which will benefit industrial park rentals, and supportive economic conditions in both the US and Mexico.

Turning now to the fourth quarter, our portfolio consisted of 109 high quality property with a total gross leasable area of 16.8 million square feet. During the quarter, we continued construction work on 16 buildings with a total GLA of 2.9 million square feet and a total investment of $137 million.

Our fourth quarter vacancy rate increased from 10.9% to 12.7%. This increase primarily reflects the completion of inventory business in Tijuana, which has not been leased to-date. During the quarter, Vesta acquired 47.3 hectares of land reserves within the Guanajuato Inland Port of Silao for a total cost of $18.2 million. We plan to develop approximately 2.3 million square feet in 12 buildings, representing a total investment of up to $91.5 million, including infrastructure costs.

We also signed a binding LOI to acquire land reserves totaling 30.7 hectares within the Poligono Empresarial San Miguel de Allende. The land will be used to develop approximately 1.5 million square feet in 11 buildings, representing a total investment of up to $61.4 million. Additionally, Vesta acquired 5 hectares in the same park to develop a 122,000 square foot build-to-suit project with STANT Corporation, a US automotive supplier. The investment will total $6.2 million and the rental payments will start on April of this year. The cap rate of this investment is expected to be 11.3%.

In terms of our key financial results, revenues increased by 19% to $18.7 million in the fourth quarter. I would like to note that more than 75% of Vesta's contracts are denominated in US dollars, which limits the impact of the recent depreciation of the peso on our results. Our lean profit structure, combined with the strong nature of our leases has enabled Vesta to expand margins and generate strong cash flows. In the fourth quarter, I am pleased to report that operating cost, as a share of total rental revenue, decreased by 50 basis points year-on-year, as rental income on properties grew at a faster rate than our increase in operating costs.

Net operating income increased 19.2% year-over-year to $18.1 million in the fourth quarter, while NOI margin increased 20 basis points to 96.8% due to improved operating scale. We also achieved operating leverage in our administrative expenses, which decreased by 330 basis points to 12.5% as a share of rental income in the final quarter of the year.

EBITDA increased 24.7% in the quarter to $15.4 million and the EBITDA margin was 82.5%, up from 78.8% in the prior-year period. Income before taxes amounted to $5.5 million compared to $65 million in the same quarter of last year. The decrease primarily reflects an exchange rate loss and a smaller year-over-year gain on revaluation, due to the early phase of construction of new properties. These same factors impacted our bottom line, resulted in a loss of $3.9 million in the quarter, compared with a profit of $42.9 million in the year ago period. I am pleased to note that the fourth quarter funds from operations increased 90.6% year-over-year to $9.2 million.

Turning to our balance sheet, Vesta cash and cash equivalents amounted to $105.7 million at the end of the year. Operating activities generated cash flow of $5.8 million and $32.8 million during the quarter and the year, respectively. Investment activities were primarily related to payments for work in progress in the construction of new buildings in Bajio, Toluca, Aguascalientes and Baja California. Total investments for the period amounted to $39.9 million. As of December 31, the balance of long-term debt reached $306.7 million, of which 97.2% represents long-term debt and the remaining 2.8% short-term liabilities; both are contracted with General Electric.

We are constantly seeking to optimize our capital structuring by balancing the mix of debt and equity. Currently, we are exploring a broad range of financing alternatives that will allow us to increase leverage and thereby minimize our weighted average cost of capital and diversify our funding activities. Vesta's strong performance has enabled us to become the leading company in the sector and backed by the success of our recent follow-on offering, we are in a great position to capitalize the attractive growth prospects of our industry.

Industrial real estate has been a key driver of Mexico's economic expansion, and we have built a strong and solid, diverse and actionable pipeline of projects and opportunities that will deliver our continued expansion. With a proven track record of growth and the proceeds of our recent transaction, we expect to generate continued strong returns for shareholders. We look forward to updating you on our progress in the upcoming quarters.

At this point, I would like to open the floor for questions and answers. So please, Rob, if you could take any question, please.

(Operator Instructions) [Javier Miguel, JMP].

I have just two quick questions. As you just mentioned in your 2020 plan, you have a projected growth towards the different sectors. I just wanted to know if you could give us some sort of breakdown as to which industries you see growing the most within your portfolio and which regions?

Let me address that. Basically, what we are planning to do is continue our expansion in the regions that we operate. Basically we have to stabilize our investments in the Toluca region, in our Tlaxcala investments, and in the recent land reserves that we pointed out in the remarks that I just made. So, for example, in the Guanajuato Port in Silao, we are expecting to invest around $100 million, on 12 new buildings, and in the San Miguel de Allende Park, we will invest around $61 million in 11 new buildings. This will be done prudently over the next 18 to 24 months. And we expect to deploy these monies, as we have done in the past, on a prudent and orderly fashion.

Regarding the industries for your clients, they see it more of an automotive or consumer, how do you see that sort of growth?

As we have explained, Vesta's portfolio today, the most important sectors in which we operate are, of course, automotive sector, we do have aerospace which is strongly positioned in our portfolio, logistics, and also food and beverage. Food and beverage, and logistics are pretty much for the domestic market, and that's a strong market that is growing, especially due to the fact that the middle class is rising and demanding more products and services every time. Both -- the strong driver is connected between the US recovering and the economy recovering and the fact that there are a lot of ultimatum factors establishing or expanding operations through their supply chain. Tier 1s, Tier 2 and Tier 3 are the niche of our business and we target those supply chains very strongly, especially as Juan was mentioning, we are strongly positioned in Queretaro, which has a lot of auto industry, especially Guanajuato is a state that has been growing very fast and with Honda and with the supply chain needed in these places -- and Mazda -- that's the one that we will target. The state, as you -- geographically, as you know, has different opportunities and one of them is the one that we bought into, which is the Guanajuato Inland Port, which is a park that is basically having -- I mean a perfect park is the one that has five main amenities; airport, railroad, access to the main highway, the (inaudible) temporary, not have to pay the taxes, and marine port. The only think that this park does not have is a marine port. This has -- including International Airport. And the land that we acquired is adjacent to the Volkswagen plant and behind the (inaudible) plant. So I think that we are very well located in order to capture the new opportunities coming.

In the other side, as Juan was saying, the San Miguel de Allende Industrial Park is a new park that is being developed. We already have one built to suit that we are finishing for STANT Corporation and we look forward to capture other companies that may need access to the NAFTA Highway, which is the 57 Highway. And that is how we plan to invest, and those are mainly the sectors that we are targeting, [Javier].

Just a final question, also regarding the 2020 plan you have, the leverage that you mentioned by the end of the call, just to get a sense, how much more leverage do you think that the Company will be able to handle going forward?

How much leverage? Okay, as we have pointed out, we are seeking to maximize our shareholders return and we will leverage the Company judiciously. As we speak, we are about to -- and as we have said in our meetings with all of you, we are seeking to -- for almost a $50 million transaction with a new provider of funds. We expect to close on a seven-year deal with five years interest only and at a very attractive rate of 4.35%. This transaction, it's about to happen. We are very close to finish it. We seek to lever the Company slowly to around a 40% debt to real estate assets and we will do that as we deploy the capital that we just raised.

Adrian Huerta, JPMorgan.

Congratulations on the good results. I have just one question. When looking at the quarter-over-quarter growth in revenues, I mean there was an increase of around $1.3 million, which is around 7%. Can you explain this increase quarter-over-quarter, especially considering that the occupancy came down during the quarter? In part, it was like around 1.8 percentage points down, but half of that probably explained by the new assets that were opened in the quarter. But you still had some other vacancies overall relative to the portfolio that you had as of the third quarter. So how do you explain this increase in total revenues?

Basically, Adrian, thank you for the question. Please bear in mind a couple of things. The vacancy -- we are quite stringent in our reporting methodology of vacancies and GLA. As soon as a building is handed over to us by a construction company, we report it as GLA. This is extremely conservative. And the idea of that is to let know all of investors the task that management has set up upon itself to lease this space as quickly as possible. And I think it's good that all of us also know; that you and we know that building has been delivered and that we need to lease it very quickly. So, a part of our -- and that's why we report vacancies in two buckets, same stores and same stores with growth component. Now same stores vacancy on a year-over-year basis came down 1.8% or something to that effect -- 1.1%. And that is what is driving the strong results that you mentioned.

Now, on the fourth quarter of last year, at the beginning of the fourth quarter, we had one important tenant that left one of our buildings and we report that vacancy as it is like a snapshot on the balance sheet. As of the end of the third quarter, the tenant vacated a building and we report that space as empty. Again, that's extremely conservative. However, on the fourth quarter, most of our buildings on the Nissan portfolio began to pay rent, and those buildings are the main drivers of the increasing rent of the fourth quarter and that somehow make you -- give raise to your question of raise in revenues with an increase in vacancy. So to summarize, the increase in vacancy is due to one tenant that left a building and it was a rather large space in Queretaro, in the Parque Bernardo Quintana. But, however, in spite of that a significant number of buildings in the Nissan portfolio began to pay very substantial rents, and then you have the -- there you have the two seemingly conflicting results.

So, basically you had some GLA that was reported as occupied as of the third quarter, but did not contribute on revenues, but it did now in the fourth quarter?

Yes. It's one tenant that left.

Marimar Torreblanca, UBS.

Thanks for the call and congratulations on your results. I was hoping you could give us an update on your new inventory buildings. Are they rented right now, at least a portion of them? If they are, at what level of rents they are rented or when you expect to see these leases closed?

Thank you, Marimar for being with us on this call. Basically, our inventory -- as you know, we are a development company. A development company -- a good development company has to take some risk. And the main risk that we take as a development company is to grow with inventory buildings. During the year, we had a substantial number of inventory buildings and our policy that what we strive to achieve is that as soon as an inventory building is delivered to us, we take six months to lease it. We have been quite successful in achieving this target over the last period. During the year, we've developed 12 inventory buildings and four build-to-suits. As they have been delivered to us within six months, we are expecting to lease it. All in all, we have been able to achieve that. On a couple of instances, we're on the borderline and we have good prospects to lease these buildings. So basically that's what I can tell you (multiple speakers).

I also want to point out that one of the ways that we segment the market is between clients that have time and clients that do not have time. The clients that have time are the ones that can go to different -- even countries, different states, different developers, different parks and then different buildings within the park, until they make their decision. And that is -- that is a good amount of some of our clients and we know how to deal with that and compete. And it takes a little longer for a -- that's part of the natural process of the business. Now on the other hand, there is some clients that always do not have time. These are the ones that suddenly they are called by Nissan or they are called by Audi or by Volkswagen or Mazda and said, I want you to be in Mexico, here is the order and you need to be producing in certain amount of months. And those clients that do not have time are the perfect clients for these inventory buildings. So, of course, we can announce that all different, we have either a binding LOI or a signed lease and that's the work we do in every region and every time. And that explains why we try to have at least one or two inventory buildings in each region in order to try to capture that and anticipate to the market.

Just a quick follow-up. What about the rents that you're expecting for these vacant spaces? Do you think that your in-place rent right now is pretty much at market level or do you think that you're going to get something above what you get right now or below what you're having (multiple speakers)?

Let me break it out in two different buckets, okay. For the existing portfolio, our in-place rent is at market in all of the regions that we operate. And that's one of the key measurements that we do to see how our portfolio can perform in the future. We don't expect -- so overall, on a portfolio level, we are at market on average, and on each region we are, on average, at market.

Now, the average, like any statistical measure, hides a little bit of the ones that are above market and the ones that are, for whatever reason, a little bit below market or at the market. And you have to take into account that when you have a -- and probably the strength of Vesta is the fact that our portfolio leases are very long term. Now, what happens as a consequence of our long-term leases, when a lease matures that has cumulated inflation, say, for 10 years, there is the risk always that the market rate has -- the market rate has become different than the inflated rent of your particular lease. And that's when you can -- that's when you have rent roll downs on the renovation of leases. Now, we track this number for you. And so, if you go to our revenue analysis, we specifically put a line there of rental rollovers, drop-down or increases. And if you track this number in the case of Vesta, since we are public, you can see that the rolldowns have been decreasing significantly over the quarters. And that is good. That means that market rates have been increasing and are just at or a little bit below our in-place rent. But that's definitely a number than I will encourage all of our investors to track in our research, because that's certainly one number that we keep track.

On the other bucket that we have that I want to segment the answer to your question, is on the empty space. On the empty space, we look it differently. When we build a building, we calculate the expected returns, so as to reach out hurdle rates. On inventory buildings, we build inventory buildings with the expectation to have an 11% cap rate on average, and or higher. So what we track is that once the building is delivered to us, we know how much it costs and that sets out what is the expected level of rent that we need to get for those buildings. And what we periodically report to our investment community is on the buildings that has been delivered to us, what was the actual cost and what is the rent level at what we close deals once they are leased.

Maria Madrazo, Credit Suisse.

Thank you for the call and congratulations on the results. My question is regarding your compensation plan for top management. Exactly how many people will benefit from this plan?

On the new compensation plan that was approved by the shareholders, it encompasses 15 employees of our employee base. So it's very broad-based. It covers 15 people and it covers two types of people. It covers the top management of the Company, from Lorenzo to the regional managers of the Corporation. But it also covers some middle management that we want to foster their growth with the Company and that we want to make them feel ownership about our project. These guys are what eventually over the years will manage the Company for you, so. So it's key for us to develop this knowledge base, as to keep them aligned with the interest of our shareholders as our top management is already aligned, no. So it covers 15 people, Maria.

Francisco Suarez, Scotia Bank.

Congrats on the results. Great execution as usual. My question relates with the new development in San Miguel. Do you think it is easy to attract tenants to that location? I mean what might be the potential differences between Queretaro and San Miguel and how hard it could be to make tenants move to San Miguel again, in particular, in terms of connectivity, in particular, and anything that you can actually share with us?

Yes, think you very much Francisco for being with us and thank you for your question and your interest as always. Let me tell you a little bit and sometimes it's easier to explain this to a Mexican that is very much related with the regions and the potential of the regions. But I was surprised at how well this was understood by people when we did our Road Show and explained a little bit and talked about this as an opportunity. The reality is that the Bajio region as a whole, we probably were the ones -- the first developers to understand and anticipate to what was coming to the region. And that's why we positioned ourselves, opened an operation very early, more than 20 years now, even before that we had our office in Queretaro. Then we started investing in San Luis Potosi, we invested in Aguascalientes, in Lagos de Moreno, Jalisco and also Guanajuato. And so we had had presence and we have been close to that market and understand the close opportunity. Now, Guanajuato's boom is explained by the fact of having great infrastructure, great locations, great connectivity, great government and where you promote, where you push forward, and also they (inaudible) they have established operations. Just to mention, General Motors has been there for a long time, both now with Mazda and Honda, it's amazing the amount of things that are needed in that state. Now, we can explain about the opportunities in other regions, and by the way, Guanajuato is probably one of the best states in terms of not concentration of opportunities. I would say that you can have -- it's perfect middle sizes cities, which are distributed across the state, and we like that in terms of the availability, compared to other states, which basically, the capital of the state having a strong population, and then the rest of the state is very empty. This state has very well distributed cities, middle size cities, which are easy to manage, great potential, and great education centers and everything.

Now, talking specifically about San Miguel de Allende, as you know, San Miguel de Allende, is a beautiful colonial city/town. It's considered a magic town, and it has won several awards in terms of the city. But, nobody has really explored the potential, in terms of industrial investments. And there were some local developers that understood this potential. They were the ones that had this vision; talked to the government, did the feasibility analysis and got the permits, started working, started investing, started attracting companies like STANT, and suddenly they ran out of money. So they really needed a strong partner who could take over this project, and that is exactly what we -- when we came in. I think it was a perfect match, because that's when we decided to acquire land inside their park, and with that money they would be able to finish the park. And then also, we took, very early in the process, the built to suite that they had already a lease signed. So this place is 11 minutes from our office in Queretaro, the park [inside] Queretaro and this is so close to the NAFTA Highway, the 57 Highway that we see that many, many of the benefits that the companies that have established in Queretaro have seen in the past. Now we'll have an option to also analyze this project as a good option. But on the other hand, if you analyze and we have several foreign directors of company that come to Mexico to run companies, that they will love to live in San Miguel de Allende and executives who love to live in that city and just drive few minutes and be at the park. So the connectivity, the place itself -- the beauty of the place, the availability of sources, plus the connectivity also with our supply chain with other industries, both in Queretaro and Guanajuato is what we believe that brings a very attractive position to this park.

My other question relates -- I am sorry for being so stubborn, because I'm asking this, however, and other [reading] opportunity I have with you guys, relates to your balance sheet. I mean, at what point, now that you have raised your equity, and you did a successful equity follow-on. At the end of the day, you have a very strong balance sheet and yet you still have a really expensive way of funding your balance sheet. Any update whatsoever on the potential refinancing on this facility with GE?

Francisco, thank you for the question. You are not being stubborn, you're as worried as we are and that keep us on our toes. So, thank you. Well it's very difficult to refinance that facility. Basically, it has to do with the current level of the yield curve vis-a-vis the locking rate that we have on the funding facility. I think there is possibilities as days to maturity get shorter. Right now we have, roughly speaking, 18 months or maybe 17 months. But as days to maturity become 12 or 13 months, there will be opportunities. We recently raised this 4.35% or in the process of raising this 4.35% deal for seven years. We are doing this deal for two purposes; one is to demonstrate to all of our shareholders the ability of Vesta to raise money at very attractive rates. And we also are doing this to clearly underline to GE the type of spreads we expect from them, if they want to hold on to Vesta as a client. And we, on purpose, do this. As you know, as you have pointed out, we have a strong balance sheet. But we want you to know our incremental debt cost, and we want our debt suppliers to know what type of rates we can expect in the future. And on top of that, I think that locking in this attractive rate for seven years doesn't hurt any company. So, that's basically my thoughts on your question.

And also, if you allowed me, Francisco, let me just share and add on to what Juan was saying, that on October last year we incorporated one new committee, which is called the Debt and Equity Committee out of independent board members. And that Committee, the specific situation which they have been tracking is, how can we always make Vesta best in class in terms of capital structure. And their expertise, working with the management, in making sure that according to our possibilities, we will both work always with the best sources of equity, which is why we decided to go for this follow-on very early on the year, once that our shareholders approved. That was part of the strategy, which I believe, as you mentioned, very low key and very successful and we want to thank our investor base for the response we had, especially on these volatile market conditions. But, on the other hand, they are very keen in making sure that we will -- as Juan was saying, we have the right amount of debt at the best possible conditions. The fact that we cannot break or renegotiate at this point, the GE loan, doesn't mean that we cannot start doing something else, as Juan was explaining, and we are very, very close to announce formally the closing of this new loan in order just to show the market that we have the ability to get this in a very competitive way. But also the fact that now we have options, we have more options. As the Company grows, as the market gets more deep, then we have more options and that is very good for our investors and that is very good for the Company.

(Operator Instructions) Gordon Lee, BTG.

Two quick questions. I Just wanted to see whether there's been any update on the Bombardier situation, and in particular the facility where the Learjet was being produced, whether they have notified you of what the intensity with that facility during the work stoppages? And the second question is just a much more general question, which is with the shift in sentiment towards Mexico that happened at the end of the year with the drop in the oil price, the weakness in the currency, have you sensed any palpable change from prospective clients as they take a look at your properties or as you get request for proposals?

Let me start by your second question, which relate with the oil and you have been very close to the Company, so you are very much aware of where is our niches, and where is the opportunities and where is the -- where we have been working in order to capture those opportunities and what industries are the ones that we track very globally. And we have never mentioned, even before the -- even when the oil price were close to $100 per barrel, we never mentioned that we were going to track the oil industry or the industry that supports the oil and energy industry as itself. Those are within the different regions and those -- I'm not saying that we will not analyze when opportunities come. Part of our Vesta Vision 20/20 plan was analyzing that. But the regions in which we operate and the projects and the sectors that we try to target are the ones that we have in our portfolio and are the ones that we believe will keep growing in the future as we move forward.

So in that regard, I mean the reduce of investments may have an impact on the country? Yes. It may have an impact in some budgets? Yes. We're tracking that very closely. But that basically has nothing to do with us. Now, the fact that Mexico will have lower electricity cost, that is a big impact or could be a big impact to gain more competitiveness to our clients and especially as you know, 60% of our tenants are manufacturing for exports. So the combination of lowering electricity costs will bring additional competitiveness. And we don't use that as a strong reason, but it happened and we have to mention the fact that there was -- this adjustment on the exchange rate in December brings additional competitiveness to the industry. But the most important driver really we believe is the strong recovery of the US economy. That is really what is making a difference in terms of the demand that we are getting, or these companies, our tenants are, in general terms, getting from the US, which is, as you know, 80% of our trade goes to that country. So that is how we are positioned. The oil, as per se, will really not make any difference to us. Now on the other hand, first of all, I want to really thank you, Gordon, for having come to Queretaro last week, and for having come to Bombardier personally and be with us, understanding where we are in the facilities in Fort Worth and I'm going to turn this -- the mike to Juan, just to tell you where we are.

Well, as Lorenzo mentioned, we toured the facilities of Bombardier and another client, and I felt that you will -- and I think that you will agree with me that what you saw was a vibrant region and a good tenant in the specific case of Bombardier. That particular building, as we saw, it has a work stoppage. And we have been -- we have initiated talks with them. It is a small building within our portfolio. It represents revenues of around $1 million a year. The spreads -- the thought that they are bringing other production -- parts that are being done abroad to [fill] out that facility, and they are asking us to work with them in supporting them in bringing these new works that they are bringing from other parts of their supply chain to Mexico. It will take them a couple of months, or around three or four months to begin this process. And we are seeing what we can do for them and how we can work this out.

There are no further questions at this time. I'll turn the call back over to Mr. Berho for any closing remarks.

Thank you all for participating in Vesta's 2014 fourth quarter conference call. We look forward to speaking with you again when we release our first quarter 2015 results. And if you have any questions in the meantime, please do not hesitate to contact our Investor Relations department. So thank you very much. Have a great weekend and we appreciate very much your interest and the opportunity to communicate the best we can with you in Vesta. So thank you very much.

This concludes today's conference call. We thank you for your participation. You may disconnect your lines at this time.