Vesta Real Estate Corporation SAB de CV (VTMX) 2016 Q1 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Operator

  • Good morning. My name is Manny and I will be your conference operator today. At this time, I'd like to welcome everyone to Vesta's First Quarter 2016 Earnings Conference Call. Vesta issued its quarterly report on Wednesday, April 27, 2016. If you did not receive a copy via email, please do not hesitate to contact the Company at +52-55-5950-0070.

  • Before we begin the call today, I'd 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 nominal US dollars, unless otherwise noted.

  • Joining us today from Vesta in Mexico City is Lorenzo Berho, the Chief Operating Officer; Juan Sottil, the Chief Financial Officer; and Iga Wolska, the Investor Relations Officer.

  • I'd now turn the call over to Mr. Berho. Sir, please begin.

  • Lorenzo Berho - CEO

  • Thank you, Manny, and good morning everyone. Thank you for participating in today's conference call. Our positive first quarter result position Vesta for another year of growth and market outperformance. We have set the stage for a significant improvement on our debt position and the most competitive cost of debt in the industry once the recent loan agreements have been executed. This strong balance sheet will support our future growth.

  • In the first quarter our development pipeline included the recent acquisition in Tijuana, which will allow us to reach over 3 million square feet of growth for the second year in a row. This growth strategy is supported by the strongest deal pipeline that we have managed since the Company went public. Our 18-year unmatched track record of growth through development affirms Vesta as the leading industrial real estate developer with the most modern portfolio in Mexico.

  • During the quarter our leasing activity totaled 1.3 million square feet. Vesta signed leases totaling almost a million square feet with multinational companies in various market industries. The Company renewed leases on approximately 400,000 square feet of its property portfolio.

  • As of 1Q16, Vesta has renewed 74% of leases set to expire in 2016, marking a first quarter record. This result reflects the proactive, client-centric approach of our new asset management team. All contracts renewed at the prevailing rates

  • .

  • The 40 basis point increase in Vesta's same store portfolio occupancy rate to 95.9% underscores the strength of our rental income. Total portfolio occupancy improved 78 basis points to 87.5% and our stabilized portfolio occupancy rate was among the highest in the sector, rising 200 basis points to 93.7% year-over-year.

  • We continue to sign dollar leases, hence the proportion of revenue derived in US dollars increased to 82.6% from 75.8% a year earlier. This trend will limit our exposure to currency movements.

  • During the quarter we delivered two build-to-suit buildings ahead of schedule, Oxxo in Veracruz and Gestamp in Vesta Park Toluca II. We also acquired industrial property in Tijuana, which is occupied by Balboa Water Group, a spa and bath parts maker.

  • I am very pleased to report that revenue from rental income increased by 11.7%, while total revenue grew by 7.2% to $21.06 million. During the quarter funds from operations increased 37.4% to $10.82 million. Let me emphasize that despite the equity offering in the year-ago quarter, FFO per share grew by almost 30%. We are committed to maintaining our reputation through customer-centric innovation and the disciplined execution of our Vesta Vision 20/20, a strategic growth plan.

  • Thank you for your continued support. I will now hand the call over to our CFO, Juan Sottil for a disclosure of our first quarter results.

  • Juan Sottil - CFO

  • Thank you, Lorenzo. Good morning everyone. Thank you for joining us today. We had a solid start for the year as the quality of Vesta's investor portfolio generated positive financial and operating results. Our recent refinancing means our balance sheet is strengthened to support future growth, with a lower cost of debt and longer maturity schedule. These factors, along with supportive industry fundamentals, place Vesta in a strong position for 2016. We continue to expand our portfolio, focus on key trade, logistics and manufacturing corridors throughout the country.

  • Our clients seek state-of-the-art industrial buildings [paying out] to their needs and Vesta has a reputation for consistent quality. During the quarter, Vesta portfolio grew 20.6 million square feet. This reflected the completion of a new build-to-suit ahead of schedule and acquisition of an industrial property in Tijuana. Occupancy trends improved throughout our portfolio reflecting healthy demand in our key markets. The first quarter occupancy rate increased both on a stabilized and same-store basis year-over-year, while the vacancy rate declined 12.5%.

  • During the period, Vesta signed leases totaling nearly 903,000 square feet with global companies in various industries. We have almost 1.7 million square feet in buildings under construction, which we expect to contribute around $10.4 million to rental revenue, once projects have been stabilized.

  • Turning to our key financial metrics, our revenue grew 7.2% to $21.06 million in the first quarter of this year. As Lorenzo mentioned, we paid certain expenses of [no margin] on behalf of our clients. Upon reimbursement, these are recognized as other revenues. Excluding such other revenues, our first quarter revenues from rent, would have increased 11.7%. We have good revenue visibility for the year ahead, having renewed most leases set to expire in 2016 and we have a solid pipeline in place.

  • Operating cost as a share of total rental income fell 10 basis points on a year-on-year as rental income continues to grow at a faster rate. Net operating income rose 7.3% to $20.4 million helped by leasing demand and ongoing cost discipline. Our NOI margin rose 10 basis points to 96.9 as Vesta leveraged its efficient operating model. EBITDA grew 7.4% to $17.9 million, while EBITDA margin was broadly flat, up 10 basis points on a year-over-year to 84.9%, due mainly to our gain on the revaluation of investment properties. Total comprehensive income for the first quarter was $8.2 million versus a loss of $11.2 million in the year before. Funds from operations rose 37% to $10.8 million.

  • In terms of our balance sheet cash and cash equivalents were $20.7 million, down about $7 million from the prior quarter, as we develop our industrial property portfolio. Operating activities generated cash flow of $17.28 million. Investment activities were mainly focused on payments for works in progress on the construction of new buildings in Bajio, Ciudad Juarez, Tijuana and Central Mexico. Our investments for the quarter were $30.7 million.

  • Regarding our competitive cost of debt, which Lorenzo referred to, this month we signed agreements totaling $400 million. Importantly, once these agreements are finalized, the legal documentation and so forth, they could [scoot out] our cost of debt by nearly 300 basis points and extend its average term to nearly six years. The components of our new financing agreements include two commitment letters, including one for $150 million unsecured five-year term loan and another for $100 million unsecured three-year revolving credit facility. The third one is a $150 million letter of intent for a secured 10-year financing with Met Life. These agreements are subject to completion of legal documentation. Our new financing and our robust cash balance reflect Vesta's strong capital management, with a balance sheet that supports our strategy for [ambitions] long-term growth.

  • We ended the quarter with an overall balance of debt of $342.4 million, of these $86.3 million is related to short-term liabilities and $13.7 million represents the long-term debt. All debt remains denominated in US dollars and we have the financial resources to successfully address our year's maturity. For the remainder of 2016, we continue to forecast between 13% and 14% growth in rental revenues, with net operating income margin about 95% and an EBITDA margin about 83%. This assumes broadly stable exchange rates, interest rates and inflation, supportive conditions in the Mexican real estate industry and continued expansion in the US-Mexican economy.

  • We look to the year ahead with confidence, that Vesta will continue to successfully execute its Vision 20/20 growth strategy. As Mexico leading industrial real estate company, we have a strong balance sheet, the state-of-the-art facilities and are dedicated to producing sustainable long-term growth for all our stakeholders.

  • Thank you. I will open the floor for questions.

  • Operator

  • Thank you. We'll now be conducting a question-and-answer session. (Operator instruction)

  • Javier Gayol, GBM.

  • Javier Gayol - Analyst

  • Hi Lorenzo and Juan, thank you for the call. I have two questions. The first one would be related to Bajio area where we've seen that the occupancies are improving in that area, but also what we're seeing is that the investments that you guys are doing in your pipelines have been reducing in speed on that area specifically. So I just want to understand, if this is a strategy for you guys on that area? And how are you looking at the development of industrial activity? And also another question is related to the acquisition of the Tijuana property, can you give us a little bit of more color on the rationale of the acquisition? Was it only an acquisition opportunity that you guys looked at and took advantage of or is this part of a more strategic long-term plan?

  • Lorenzo Berho - CEO

  • Okay. Well, Javier, thank you very much for being here and thank you very much for your interest. Let me answer your questions. The first one is the Bajio, we see the Bajio with an outstanding potential and outstanding pipeline. We are really very active in all Bajio and according to the year planning investment activity, basically it all depends on, either you decide to invest in the inventory buildings, which is more the decision towards us on that side or if it's a build-to-suit. And then probably as you know, build-to-suit takes time, it takes time to mature, it takes time to negotiate and sign the last specifications. And that is what we are going through in the Bajio and there is some things that are -- whenever they are ready we will announce it. It is related with build-to-suits in the Bajio, important build-to-suits in the Bajio.

  • So I'm not worried about, on the contrary, I'm seeing very good and very strong pipeline. And our team, every Monday that we have meetings, and they help us see and they send the progress report to us.

  • Now on the other hand, related with the inventory buildings, not only the Bajio but in all regions, we are always very disciplined and very responsible. And that we have to have the same kind of speed in leasing as you can see the results we had this quarter and last quarter and we have to match that with the speed of development and we do that in a very responsible way. So I'm very happy about Bajio and I'm very positive about the speed of investment in the Bajio specifically this year.

  • On the other hand on Tijuana, as we have talked in the past, Vesta is a development company, most of our growth comes from all the value in new properties, either build-to-suit, brought-to-suite or inventory buildings, both -- we have never been close that whenever we find a good opportunity with great buildings and great returns, then we cut through that and negotiate and just as we did in the Thomson deal that we announced last month and also this one in Tijuana. In Tijuana this property specifically is a great property, it's very well maintained, there is company that had to leave to Bajio region, there's a new company coming in that we have in the process to get in and that's when we acquired that property. And having a 10.5% cap rate in that, that shows that we do not buy just because we want to grow, we do accretive acquisitions in which we can add value and the standards match the kind of buildings that we have.

  • Javier Gayol - Analyst

  • Thank you Lorenzo for your input, that's very helpful.

  • Operator

  • Alex Ferraz, Itau.

  • Alex Ferraz - Analyst

  • Hi guys, thanks for the presentation. Just some questions, as per your financing program, what can we expect in terms of acquisitions? Now overall, can you comment on the overall opportunity that you see in the market?

  • Juan Sottil - CFO

  • Yes, I will be happy to address these questions. As we announced, we basically have sufficient financial flexibility that we will finalize to get in the next month-and-a-half, after which we will be successfully repaying our obligations to Blackstone, to the Blackstone Groups, which were the acquirers of (inaudible) that we put in place in 2011. So after the rollover of the debt, we will still have substantial amount of funds. By the end of the second quarter I would expect them to be somewhere around $180 million, somewhere around there. And with that we will continue our growth path.

  • We do not acquire much portfolios, because as Lorenzo, he has mentioned we are very stringent on the returns of our investments and the quality of the buildings and the tenants. And therefore, even though we have participated in most bidding process, we end up offering what presents to us a good opportunity, but for the seller is not the most aggressive price. So we do opportunistic acquisitions as Lorenzo pointed out.

  • However, we have a very strong pipeline. Last year we grew 3 million square feet and we expect this year to match that growth rate of development by developing 3 million square feet, and we are very confident that we will reach that pace of growth.

  • Alex Ferraz - Analyst

  • Okay. Thank you.

  • Operator

  • Thank you. Alan Macias, Merrill Lynch.

  • Alan Macias - Analyst

  • Hi, good morning everyone and thank you for the call. Just I guess two questions. The first one is if you can give us an update on, if clients or potential clients have been pushing for leases in pesos given the strong dollar? And also, what is your ideal mixture of, in your portfolio in terms of US dollar rents given that your loans are in US dollars, what percentage would be the maximum in pesos? Thank you.

  • Lorenzo Berho - CEO

  • Okay. Thank you, Alan. Thank you very much for being with us today. And let me tell you that, I think that Vesta is in a -- the niche of clients that Vesta has target, had to do as you probably know, much more with manufacturing export companies, the multinationals that are based in Mexico in order to export. So those companies have their income in dollars and those represents close to 70% of our portfolio. So in that regard, we have not experienced any pressure from them. They match, we're part of their cost, their revenue comes in dollars.

  • But of course we also have some logistics and strong logistics mainly in Toluca, that's an area that whenever the maturity of the lease ends, that's when we probably could have some pressure. But I can tell you that today we have not had any pressure of any transition from dollar to pesos, even with some clients that they do sell in -- for the domestic market.

  • As the percentage that we feel comfortable with, I would say that at least 80% in dollars, is something that our Board, our investment committee and the management team feels very comfortable. And that's very reachable according to me, understanding the important markets in which we participate.

  • Juan Sottil - CFO

  • And Alan, good morning. Just to clarify Vesta's foreign exchange position, if we -- over the last year revenues, because it is just an easy way to look at it, we basically roughly speaking we saw -- we had revenues of $80 million, around 80% of those were dollar denominated. Therefore we had a $64 million, real dollars coming to our cash accounts, payment in dollars are around -- operating payments in dollars are around $30 million, $32 million. So we have a substantial long dollar position year-over-year, more than [running] an exchange rate position, what we want to achieve is the stability of income. Therefore we are very keen in looking for a dollar denominated rent, as we don't see, with [good eyes] that our revenue line should be a function of the exchange rate fluctuation. So we are very careful on peso leases and they have to meet certain additional hurdles for us to enter into them. Just to underline, we don't have any pressure from our client, any substantial pressure from our clients to switch to pesos and that's where we are.

  • Alan Macias - Analyst

  • Thank you. And just thinking of going forward, would you prefer to lower your exposure to Mexico peso rents, just to lower your exposure to rents in pesos and therefore have that limited exposure in your revenues in dollar terms, would that be a strategy you're looking at or you're still comfortable in maintaining the current exposure?

  • Lorenzo Berho - CEO

  • No, I really think Alan that our strategy is focused in understanding the kind of clients, multinational clients, export oriented companies that we are targeting in most parts of the country. I think that, that is very clear, that we are targeting and we feel comfortable to have this 80% of income -- of revenues in dollars.

  • Now, having said that, we are also very positive about the peso and the domestic market is also getting stronger, the middle class is arising and there will be needs and there will be good opportunities of great companies that we also want to target even if they have to be in pesos. But this percentage, this balance is something that we feel perfect in terms of hedge and in terms of the quality companies in which we want to participate in the market.

  • Alan Macias - Analyst

  • Thank you, great.

  • Lorenzo Berho - CEO

  • You're welcome.

  • Operator

  • Thank you. Vanessa Quiroga, Credit Suisse.

  • Vanessa Quiroga - Analyst

  • Thank you. And hello Vesta team, congrats for the results. My question is regarding more generally about the industry of the OEM investments that are still in that pipeline in Mexico. And do you expect that some of them will need a supplier spark and can you give us more color on, in which cases that is convenient for the OEM and so that we can have some kind of view on whether Vesta could have such kind of opportunities in the future? Thanks.

  • Lorenzo Berho - CEO

  • Sure. Thank you. Thank you very much Vanessa to be here today. Well, I think that your question is crucial in terms of understanding, that these opportunities that the OEMs represent for Mexico are not only the OEMs, also their supplier base. Well, first of all I have to tell you that, between January and February, we felt some slowdown in some of nomination process, some of them could be related with the global volatility and so people just took a little longer. Although -- and we know that the Audi plant in Puebla or San Jose Chiapa is delayed. They hope to launch in six months to start in a full production. So that probably was one of the aspects of some delay.

  • Now, having said that, what we have seen is very important pipeline and we are targeting that. Our team, four, five people of our team were in Germany in an event few weeks ago, related with the next nominations with Daimler, for example in our Aguascalientes. And they want us to be close to this process since the beginning and in Germany. So that's how according to their decisions we can be close to them. That's why we also, we have also been really acquiring more land in Aguascalientes, because we know that many of these companies will need to be there just at the time that Daimler starts formally all these nominations. So we're happy to do that.

  • And then the Bajio. The Bajio, I would say that it's a good combination of a couple of things. Some of them be very close to the park with Tier 1 and sometimes the Bajio has, it's so well communicated and so close from all these plants that have established their operations there that for some companies, it's better not to be in a specific park adjacent to the OEM, but they want to be in a strategic location to be able to supply two or three of these plants. And that's what we are -- this is why our offer of properties has to do more with different parks located in Guanajuato, in the Puerto Interior but we also have San Miguel de Allende, which is a niche that nobody have really explored before, then we have park in Queretaro, we're exploring another opportunity also in Queretaro which is still -- an important potential for growth.

  • So I would say definitely, the auto makers and especially the suppliers are going to be a key part for us going forward, is an important part of our Vesta Vision 20/20 plan. And what I'm seeing is that, a strong pipeline, it is depending of course on the timing of the nominations and some build-to-suits that they require, because they are looking to stay in the long run.

  • Vanessa Quiroga - Analyst

  • Okay Lorenzo, thank you very much.

  • Lorenzo Berho - CEO

  • Thank you, Vanessa.

  • Operator

  • Ivan Enriquez, HSBC.

  • Ivan Enriquez - Analyst

  • Hello Lorenzo and Juan, and yes, congratulations on the results and thank you for the call. My first question is regarding the trend we observed in the main acquisitions, I mean you have talked a lot on this [calendar], but I would like to know to what extent would you be relying on acquisitions or if you see potential JVs to achieve your 20/20 Vision going forward in terms of the plans that you have?

  • And the second question would be regarding management changes. We've seen in this quarter the departure of your Chief Development Officer and Chief Investment Officer for personal reasons. It seems that you have people that is going to substitute them, but in the past we also saw the departure of your Commercial and Communications Director. Just want to hear from you, if there is some sort of let's say, senior management internal restructure or something like that? And what do you think about your management in the future, because these people I think put you in the place that you are or helped you get to the place that you have now in the market? Thank you.

  • Lorenzo Berho - CEO

  • Thank you. Thank you, Ivan. Thank you very much for your question. And well, first of all, talking about acquisitions. Talking about acquisitions, well basically our plan, our Vesta Vision 20/20 plan is based only on development. So, but we have -- this is as you probably remember, we analyzed the infrastructure plan and region by region and industry by industry the potential growth. So we are based on -- we love to have new buildings, we have the most modern portfolio in Mexico, because we develop and we have the relations basically since day one with the tenants, which is something that is very valuable for us.

  • So our plan is to keep going on development. We are a developing company. But we also have the acquisition skills. Only, as Juan was mentioning before, only properties that are in the regions in which we operate, that we can have some synchrony and some synergy and we can service them well or expansion of some of our clients or we can add value or if they have a good -- the property is a good quality property and also the returns are just the same as if we were developing. That's the only case in which we will look at acquisitions. We will -- but we will not be doing is acquiring portfolios that in [10% ish] cap rates. So that's pretty much on the acquisition side.

  • On the management side, well, just as we do always, we -- whenever we have some changes, we just let all our investors know as soon as we can. But no -- as these changes had to do with personal decisions that came to us, and what is more important is that, for example in the case of development, we have developed, we have an internal promotions that we are doing. If somebody has been 10 years within the Company, move ahead. So far it's very natural step-up, which we look forward. There're several people in our Company and we open opportunities for them to grow up within the Company and that's the case of development.

  • And in the case of the CIO, it has a personal decision, family decision that needs to go to Germany. And the only thing I can tell you that given that this has been recent, it is interesting for me to see that the credibility by the Company has been, it has been really able to have people very interested in joining Vesta. And that's why I'm very confident that as we have told in past, when these things happen, all the companies and all the people, we are all dynamic, we're not static and I'm pretty sure that we will find the right talents to replace and keep growing the Company according to our plans.

  • Ivan Enriquez - Analyst

  • Okay. Thanks so much Lorenzo, fantastic answers.

  • Operator

  • Francisco Suarez, Scotia Bank.

  • Francisco Suarez - Analyst

  • Hi, thank you. Good morning. Thank you for the call. The questions that I have is one, can you expand a little bit on the dynamics between supply and demand of new properties and if that may create incentives enough for you to acquire more properties rather than to develop speculative properties. In other words, what are the trends that you may see? We're worried that there might be some cap compression in developing new properties that risk wise may not make sense to develop those, if you can expand a little bit on that?

  • And secondly, a follow-up to Ivan's questions on management changes, because you already created a nice incentive package to retain your talent. And as Ivan was mentioning, we saw major moves having -- [been placing] in Vesta. So the question here is, what could we enhance in Vesta in order to retain your talent and perhaps more importantly if these changes might or might not affect your overall discipline that we have seen over these several years in Vesta in terms of having clear eligibility criteria of what to do and what not to do in your overall business expansion? Thank you.

  • Juan Sottil - CFO

  • Thank you for the question, Francisco. Let me try to address that, both of them. The first is, well, you do know us from a long time Vesta, we're keen on developing properties. You mentioned risk, we actually see more risk in acquisition of large portfolios, you don't control the clients, you don't control the tenure of the leases, you don't control the locations necessarily, it's kind of a mix and good property, bad property, wrong maturity schedule in-place rents all over the place. So acquisitions of portfolio are a risky proposition. Accretive development growth is what we see adds more value. We control everything, we control client credit, which is of utmost importance, we control the maturity schedule of the new lease. We really favor long-term leases, they provide the stability to the Company and to our investors and debt holders. So we really perceive acquisitions as a risky growth vehicle. We're not gear towards it. Now if a cherry comes along, we're going to grab it, and that's available (inaudible) and we will continue to do that. And all the cherries that you can bring to us, we will certainly eat them and enjoy them. So that's what we do.

  • Now management, look, at the end of the day -- let's realize what Lorenzo did with Vesta. We -- our entrepreneurial origins are that Lorenzo gathered a group of young entrepreneurs to start off a very successful company, unlike any entrepreneur company, people accomplish cycles, the people that join Lorenzo have had a very successful professional carrier and sometimes they see the future different and they may begin to seek some personal interest as very important. And cycles happens and what's more important I think that the next skill that Lorenzo did was to transform very entrepreneurial organization with 25 people, when I joined six years ago, to a company of close to 60 people in just 5.5 years -- six years since I joined. And what we have today is a company that has a very structured managerial desk. We have tried to keep entrepreneurial spirit, we try to give a lot of latitude to all of our employees, but let's acknowledge that some of our original employees. But let's acknowledge that, some of our original founders may seek different personal goals. I mean -- and that's what you see on the three cases that you referred to, know. Our CIO is married to a German person and she has certain interest in going back to Germany. And they have the financial flexibility to accomplish that, why not, and so on and so forth.

  • The important thing is that we have transform the Company from a 25 young entrepreneurial organization to an enterprise of more than 60 people, given service to more than a 110 clients all over the country. And we have the management depth to absorb these changes. We're very happy to see that when you approach the market to seek out the skills we need in all aspects of the Company, people want to join us, because this is a good company to be in, this is a good company to grow, to look forward and that will be essentially my comment.

  • Francisco Suarez - Analyst

  • Okay, great answers as always, thank you.

  • Operator

  • (Operator Instructions) (inaudible) GBM.

  • Unidentified Participant

  • Hi, good morning Juan and Lorenzo. Congrats on the results. I have two questions. The first one is, could you give us some color regarding the increase in maintenance expenses this quarter? I mean, do you see some seasonality or one-off or something like that? And additionally I wanted to ask you about the ECP and how much of it was (inaudible) this year? I mean, and please correct me if I'm wrong, but I think it is measured each and every January, correct? Okay. Thank you very much. That's all.

  • Juan Sottil - CFO

  • Let me, address the questions in terms of, maintenance well, we have a very stringent maintenance program. In this particular year, we are beginning a cycle of maintenance for our properties that have -- a little bit older than six or seven years and that's I believe the increase you seek. I don't think this is a structural trend that we'll see in the portfolio. I think that it's really, we took advantage of the dry season to go through oldest facilities, which are not a lot. As Lorenzo keeps pointing out every time that he speaks to me and to you, we have the most modern portfolio, but we will have to take a look at our older facilities and we just took advantage of the dry season of the year to step up on that regard. But I don't see this as a trend that maintenance is going up or need to grow for the future.

  • Our maintenance expense is around $3 million for the year, that should be our management figure and I can give you more color later on if you want, on how we approach that on a cost per square feet on our entire portfolio. Now, can you repeat me -- so that would be my reaction to the maintenance. Your second question, can you repeat it to me please? On ECP, what do you mean by ECP?

  • Unidentified Participant

  • Yes, Employee Compensation Program.

  • Juan Sottil - CFO

  • Let me go through that. Look, the Employee Compensation Program that we put in place for top management. Let me start from the beginning. Every employee in Vesta is eligible to receive a bonus. Bonuses are really for extraordinary work, going beyond our own job description. And all of us from the receptionist to lawyers are entitled to a bonus. Top management, on top of that, have an additional incentive. The incentive is a retention program that implies aligning the interest of the top management with the shareholders. And that's what the key driver of what we did. That incentive program is non-cash oriented, it's really -- we're going to distribute shares that have already been approved, in our latest secondary offerings and we have to earn them. And we decided to earn them if and only if the investors make money on them.

  • On the first year of that plan Vesta did not met the hurdle rates that we hope to give our investors, and therefore top management were not eligible for that bonus, and that's what happened last year. However, if you review last year's financial statement, you will see a bonus provision, that is because according to IFRS regardless of the bonus amount, you have to provision the expected cost of the bonus program, regardless of the actual payments, in this case some shares to the employee. And that's what you see on the balance sheet of last year and that's what you see on the balance sheet of the first quarter of this year.

  • However, no dilution, no actual dilution has taken place to the investors, because we have not earned the shares. We are very hopeful that our efforts to restructure the debt, to continue to meet our growth goals of this year, we will be recognized by the market. And hopefully this year, we will have a sizable long-term [bonus] and therefore our top management will be accruing some actual shares for our long-term savings, but that's the essence of the plan. So to summarize, aligning the interest to investors, give them return and then pay the top management with some long-term compensation in that order.

  • Unidentified Participant

  • Thank you. That was very helpful, Juan.

  • Operator

  • Thank you. (Operator Instructions) Okay. It appears we have no further questions. I'd like to turn it back over to Mr. Berho, for any closing remarks.

  • Lorenzo Berho - CEO

  • Thank you. Thank you very much, Manny. I just want to add also that very soon we will give you the name of the person that will replace the CIO. If there is no more further questions at this time, I will turn the call back -- I'm sorry, thank you for participating in Vesta's first quarter 2016 conference call. We look forward to speaking with you again, when we release our second quarter 2016 results. And of course if you have any questions in the meantime, please do not hesitate to contact our Investor Relations department. And thank you very much and have a good day.

  • Operator

  • Thank you, ladies and gentlemen. This does conclude today's teleconference. You may disconnect your lines at this time. And thank you for your participation.