FIRST QUARTER 2015 EARNINGS REPORT

Transcription

1 FIRST QUARTER 2015 EARNINGS REPORT Mexico City, April 23, 2015 Terrafina ( TERRA ) (BMV: TERRA13), a leading Mexican industrial real estate investment trust ( FIBRA ), externally advised by Prudential Real Estate Investors and dedicated to the acquisition, development, lease and management of industrial real estate properties in Mexico, today announced its first quarter 2015 (1Q15) earnings results. The figures in this report have been prepared in accordance with International Financial Reporting Standards ( IFRS ). Figures presented in this report are presented in millions of Mexican pesos and millions of U.S. dollars. Additionally, figures may vary due to rounding. Terrafina s financial results included in this report are unaudited. As a result, the mentioned figures in this financial report are preliminary figures and could be adjusted in the future. Financial and Operational Highlights as of March 31, 2015 Operational As of March 31, 2015, the occupancy rate was 93.7%, a 305 basis point increase compared to the first quarter of 2014 (1Q14). Additionally, considering the signed letters of intent, occupancy for 1Q15 was 94.0%. Annualized average leasing rate per square foot at year- end was US$4.87, a 13 dollar cent increase compared to 1Q14. Terrafina reported a total of 28.2 million square feet (msf) of Gross Leasable Area (GLA) comprised of 196 properties and 208 tenants in 1Q15. 1Q15 leasing activity totaled 1.7 msf, of which 6.9% corresponded to new leasable area, 83.8% are lease renewals and 9.3% correspond to early renewals. Leasing activity was mainly concentrated in the Ciudad Juarez, Chihuahua, Ramos Arizpe, Cuautitlan Izcalli and Guadalajara markets. Total developments for 1Q15 included 489,000 square- feet of GLA, which are expected to contribute US$2.1 million to Net Operating Income (NOI) for the 2016 period. The return rate for the expansions made during 1Q15 was 12.5%. The sale of a portfolio comprised of 3.7 msf of land reserves and industrial space located in the northeast region for US$101 million took place during 1Q15. Contacts in Mexico City: Contacts in New York: Francisco Martinez/ Angel Bernal Maria Barona / Juan Carlos Gomez Stolk Investor Relations Officer / Chief Financial Officer i-advize Corporate Communications, Inc. Tel: +52 (55) / +52 (55) Tel: +1 (212) / (646) francisco.martinez@terrafina.mx / angel.bernal@terrafina.mx mbarona@i-advize.com / / jgomezstolk@i-advize.com 1

2 Financial 1Q15 rental revenues reached US$33.4 million, a 5.4% or US$1.7 million increase compared to 1Q14. 1Q15 NOI was US$31.9. million, a 4.4% or US$1.4 million increase compared to 1Q14. Moreover, implied cap rate was 8.2%, considering the average share price for 1Q15 of US$2.11 (Ps ) and 2015 expected NOI of US$125 million NOI guidance was revised to US$125 million as a result of the recent asset sale The NOI margin for 1Q15 reached 86.1%, a 28 basis points decrease compared to 1Q14. 1Q15 EBITDA reached US$28.5 million, an increase of 5.6% or US$1.5 million compared to 1Q14. The EBITDA margin for 1Q15 was 76.8%, a 58 basis points increase compared to 1Q14. 1Q15 adjusted funds for operations (AFFO) reached US$19.9 million, a 31.6% increase compared to 1Q14. 1Q15 AFFO margin was 53.3%, a 1,085 basis point increase compared to 1Q14. 1Q15 distributions totaled US$19.9 million. As a result of 1Q15 operations, Terrafina will pay Ps per CBFI (US$ per CBFI) as distributions corresponding to the period from January 1 to March 31, The annualized distribution of 1Q15 was US$0.1309; considering the average closing share price for the quarter of US$2.11 (Ps.31.52), Terrafina s dividend yield for the quarter was 6.2%. 2

3 Financial Highlights Operating Mar15 Mar14 Var. Number of Developed Properties Gross Leasable Area (GLA) (msf) New Developments 2 (msf) Land Reserves (msf) Occupancy Rate % 90.6% 305 bps Avg. Leasing Rent / Square Foot (dollars) Weighted Average Remaining Lease Term (years) Renewal Rate % 82.3% 1,508 bps Quarterly Financial 1Q15 1Q14 Var. 1Q15 1Q14 Var. (millions of pesos unless otherwise stated) fx (millions of dollars unless otherwise stated) Rental Revenues % % Other Operating Income % % Net Revenues % % Net Operating Income (NOI)* % % NOI Margin 86.1% 86.4% - 28 bps 86.1% 86.4% - 28 bps EBITDA 6 * % % EBITDA Margin 76.8% 76.2% 58 bps 76.8% 76.2% 58 bps Funds from Operations (FFO)* % % FFO Margin 57.9% 50.0% 788 bps 57.9% 50.0% 788 bps Adjusted Funds from Operations (AFFO)* % % AFFO Margin 53.3% 42.4% 1,085 bps 53.3% 42.4% 1,085 bps Distributions % % Distributions per CBFI % % Balance Sheet Mar15 Dec14 Var. Mar15 Dec14 Var. (millions of pesos unless otherwise stated) fx (millions of dollars unless otherwise stated) Cash & Cash Equivalents 5, , % % Investment Properties 23, , % 1, , % Land Reserves % % Total Debt 10, , % % Net Debt 4, , % % Figures in dollars in the Income Statement were converted into pesos at the average exchange rate for the period; for the Balance Sheet the exchange rate for the close of the period was used. (1) Millions of square feet. (2) Includes expansions and Built- to- Suits (BTS). (3) Occupancy at the end of the period. (4) Indicates the lease renewal rate of the leases, includes early renewals. (5) Excluding accrued income as it is a non- cash item (6) Earnings before Interest, taxes, depreciation and amortization. (7) Certificados Bursátiles Fiduciarios Inmobiliarios - Real Estate Investment Certificates. Figures in dollars in the Balance Sheet were converted using the closing exchange rate of the period. (*) Revenues and expenses have been adjusted for the calculation of the above mentioned metrics. Please refer to the 1Q15 Financial Performance" and "Annexes" section available in this document. Source: PREI Portfolio Management Fund Accounting 3

4 Comment by Alberto Chretin, Chief Executive Officer and Chairman of the Board In the first quarter of 2015, Terrafina achieved solid operating results supported by a sound financial performance. In March 2015, we concluded the sale of a portfolio of land reserves and industrial space for US$101 million, which in combination with first quarter leasing activity, increased the occupancy rate to 93.7%. Likewise, there were improvements in key indicators, such as average annualized leasing rent and average portfolio age as a result of this sale. Additionally, we expect to generate savings in operating, maintenance, financial and external advisor commission expenses during the next quarters. The first quarter of 2015 same- store occupancy rate increased 30 basis points compared to the fourth quarter of 2014 and 90 basis points compared to the first quarter of This was the result of new leasing activity, mainly in the Cuautitlan Izcalli, Chihuahua and Guadalajara markets. Overall, this asset sale, along with the new leasing activity for the quarter, experienced a positive outcome, increasing the occupancy rate by region, where it reached 94.6% in the Northern region, 90.8% in the Bajio and 94.2% in the Central region. Terrafina s leasing activity in the first quarter of 2015 included 1.7 million square- feet in leasing contracts comprised of 6.9% in new leasing contracts, 83.8% in lease renewals and 9.3% in early renewals. Additionally, the average annual leasing rent was US$4.87 per square foot, a 5 dollar cent increase compared to the fourth quarter of 2014 and a 13 dollar cent increase compared to the first quarter of Average rents by region also strengthen whereby the Northern region reached US$4.76 per square foot, the Bajio region reached US$4.89 per square foot and finally, the Central region reached a US$5.13 average rent per square foot. Lastly, and with respect to the main financial indicators for the first quarter, rental revenues reached US$33.4 million, Net Operating Revenue reached US$31.9 million and the Operating Margin reached 86.1% and generated US$19.9 million in Adjusted Operating Funds. Also, distribution per CBFI reached Ps or US$0.0327, which represented an annualized distribution of Ps or US$ per CBFI, and a 6.2% dividend yield, considering the average CBFI price for the first quarter of Sincerely, Alberto Chretin Terrafina s Chief Executive Officer and Chairman of the Board 4

5 Operational Highlights Highlights by Region (as of March 31, 2015) North Bajio Central Total # Buildings # Tenants GLA (msf) New Developments 1 (msf) Land Reserves (msf) Occupancy Rate 94.6% 90.8% 94.2% 93.7% Average Leasing Rent / Square Foot (dollars) Annualized Rental Base % 55.2% 22.3% 22.5% 100.0% (1) Includes expansions and Built- to- Suit (BTS). Source: PREI - Portfolio Management BAJIO - San Luis Potosí - Jalisco - Aguascalientes - Guanajuato - Querétaro Terrafina s operations 1Q15. NORTH - Baja California - Sonora - Chihuahua - Coahuila - Nuevo León - Tamaulipas - Durango CENTRAL - Estado de México - Distrito Federal - Puebla - Tabasco Composidon by Asset Type as of 1Q15 (as a % of total GLA) Leasing Activity Operating Portfolio (msf): 1Q15 1Q14 Var. 69.7% Distribufon 30.3% Manufacturing Renewals Early Renewals New Leases Total Square Feet of Leases Signed Source: PREI - Portfolio Management 5

6 Operational Highlights (continued) Occupancy and Rents by Region Maturities and Renewals by Region (As of March 31, 2015) Occupancy Rate 0 Consolidated Avg. Leasing Rent/ Square Foot (dollars) (As of March 31, 2015) Maturities (number of contracts) % of Total Maturities Renewals (number of contracts) % of Total Renewals North 94.6% 4.76 North % % Baja California 91.8% 4.63 Baja California 2 6.1% % Sonora 86.3% 4.18 Sonora 0 0.0% 0 0.0% Chihuahua 96.3% 4.93 Chihuahua % % Coahuila 96.2% 4.44 Coahuila 3 9.1% % Nuevo Leon 74.4% 5.36 Nuevo Leon 3 9.1% % Tamaulipas 88.6% 4.39 Tamaulipas 2 6.1% % Durango 100.0% 3.82 Durango 0 0.0% 0 0.0% Bajio 90.8% 4.89 Bajio % % San Luis Potosi 100.0% 4.81 San Luis Potosi 2 6.1% % Jalisco 96.1% 5.42 Jalisco 0 0.0% 0 0.0% Aguascalientes 100.0% 4.51 Aguascalientes 0 0.0% 0 0.0% Guanajuato 87.5% 4.88 Guanajuato 0 0.0% 0 0.0% Queretaro 78.6% 4.75 Queretaro 2 6.1% % Central 94.2% 5.13 Central 2 6.1% % Estado de Mexico 93.2% 5.23 Estado de Mexico 2 6.1% % Distrito Federal 100.0% Distrito Federal 0 0.0% 0 0.0% Puebla 100.0% 3.83 Puebla 0 0.0% 0 0.0% Tabasco 100.0% 4.62 Tabasco 0 0.0% 0 0.0% Total 93.7% 4.87 Total % % Source: PREI - Portfolio Management Source: PREI - Portfolio Management *Out of the matured leases in the quarter 6

7 1Q15 Operational Performance Composition by Geographical Diversification The geographical diversification of Terrafina s properties, at 1Q15 (based on GLA per square foot), was mainly located in the northern region of Mexico, representing 55.9% of GLA, while for the Bajio and Central regions, it represented 22.9% and 21.2%, respectively. Geographic Diversification by Region and State as a % of 1Q15 Total GLA 1Q15 1Q14 as a % of Total GLA 1Q14 North % % Baja California % % Sonora % % Chihuahua % % Coahuila % % Nuevo Leon % % Tamaulipas % % Durango % % Bajio % % San Luis Potosi % % Jalisco % % Aguascalientes % % Guanajuato % % Queretaro % % Central % % Estado de Mexico % % Distrito Federal % % Puebla % % Tabasco % % Total % % Total Gross Leasable Area / million square feet. Potential leasable area of land reserves is not included. Source: PREI - Portfolio Management Composition by Asset Type At the end of the first quarter 2015, 30.6% of Terrafina s total portfolio consisted of distribution and logistics properties and 69.4% were manufacturing properties. Composidon by Asset Type as of 1Q15 (as a % of total GLA) 69.7% 30.3% Composition by Asset Type 1Q15 1Q14 Var. Distribution 30.3% 31.4% bps Manufacturing 69.7% 68.6% 107 bps Source: PREI - Portfolio Management Distribufon Manufacturing 7

8 Composition by Sector As of March 31, 2015, tenant diversification by industrial sector was as follows: Diversificadon by Sector as of 1Q15 (as a % of leased GLA) Automofve Industrial properfes Consumer goods Logisfcs and Trade Aviafon Non- durable consumer goods Electronics 10.1% 10.9% 7.3% 6.6% 17.4% 27.2% 20.4% Diversification by Industrial Sector 1Q15 1Q14 Var. Automotive 27.2% 28.7% bps Industrial Goods 20.4% 19.7% 68 bps Consumer Goods 17.4% 16.2% 123 bps Logistics and Trade 10.9% 10.0% 94 bps Aerospace 10.1% 9.2% 94 bps Non- durable Consumer Goods 6.6% 7.4% - 82 bps Electronics 7.3% 8.8% bps Total 100.0% 100.0% Source: PREI - Portfolio Management Top Clients Composition Terrafina s tenant leasing base is widely diversified across Mexico s main cities. For 1Q15, Terrafina s top client, top 10 clients and top 20 clients, represented 4.7%, 23.4% and 35.4% of total revenues, respectively. Top Clients (as of March 31, 2015) Leased Square Feet (millions) % Total GLA % Total Revenues Top Client % 4.7% Top 10 Clients % 23.4% Top 20 Clients % 35.4% Source: PREI - Portfolio Management 8

9 Occupancy 1Q15 occupancy rate was 93.7%, a 305 basis point increase compared to 1Q14. It is important to mention that occupancy rate metrics presented in this report only show the quarterly closing rate. During the month of March 2015, Terrafina concluded the sale of a portfolio with an occupancy rate of 69.4%, improving 1Q15 occupancy rate 220 bps compared to the fourth quarter of 2014 (4Q14). Additionally, same- store occupancy increased 30 bps compared to the 91.2% reported during the previous quarter. For the first quarter 2015, Terrafina s leasing activity reached 1.7 msf, of which 6.9% accounted for new leasing contracts (including expansions), 83.8% for contract renewals and 9.3% for early renewals. Leasing activity mainly took place in the Ciudad Juarez, Chihuahua, Ramos Arizpe, Cuautitlan Izcalli and Guadalajara markets. In addition to this leasing activity, Terrafina signed letters of intent for an additional 84,000 square feet. Occupancy as of 1Q15 (as % of Total GLA) 6.3% 0.8% 1Q15 1Q14 Var. Leased GLA 93.7% 90.6% 305 bps Leased GLA Vacant GLA Signed Lelers of Intent Vacant GLA 6.3% 8.9% bps Signed Letters of Intent 0.8% 0.5% 26 bps Total 100.0% 100.0% Source: PREI - Portfolio Management 93.7% Lease Maturities Terrafina had 208 leasing contracts at the end of 1Q15. The leasing characteristics of these contracts have an average maturity of 3-5 years for logistics and distribution properties activities and 5-7 years for manufacturing. Annual average maturities (as a percentage of annual base rents) remain at levels of 11% to 20% for the next five years. The following table shows Terrafina s leasing maturity schedule for the coming years: Annual Base Rent (millions of dollars) % of Total Occupied Sq. Ft(millions) % of Total % % % % % % % % % % Thereafter % % Source: PREI Portfolio Management 9

10 Capital Deployment Acquisitions, New Developments and Non- Strategic Asset Sales New Developments In 1Q15, Terrafina signed 489,000 square feet of new contracts. These new developments were distributed as follows: 27.4% in the northern region (Apodaca) 19.9% in the Bajio region (San Luis Potosi) and 52.7% in the Central region (Cuautitlan Izcalli). It is important to note that these new developments will contribute US$2.1 million to 2016 NOI, which had a 12.5% estimated development yield, considering the total expected investment for US$16.8 million. January - March 2015 Square Feet (millions) Total Expected Investment (millions of pesos) Total Expected Investment (millions of dollars) Cost per Square Feet (dollars) % Paying Rent by End of the Period North % Bajio % Central % Total % Proforma NOI 1 (millions of dollars) 2.1 Estimated Stabilized Yield % ( 1) Net Operating Income for the next twelve months. (2) Proforma NOI divided by the total expected investment. Proforma figures are not a guarantee of future results. Source: PREI - Portfolio Management Projects Under Development 1Q15 1Q14 Developed Properties 97.8% 99.3% Properties Under Development 2.2% 0.7% Total 100.0% 100.0% Source: PREI - Portfolio Management Capital Expenditures (CAPEX) Terrafina s CAPEX is classified as those recurring expenses that took place based on upcoming leasing maturities and property improvements. The main goal of these expenses is the renewal of leasing contracts as well as the improvement of property conditions taking into account tenant requirements. Terrafina expects to apply CAPEX towards vacant properties as well as towards the development of new GLA by means of expansions and/or new developments. Additionally, it is important to consider that CAPEX intended for expansions and new developments are not financed with Terrafina s operating cash flow and therefore do not pass through the income statement. 10

11 Capital expenditures accounts are comprised as follows: 1) Tenant improvements resources as well as recurring maintenance CAPEX. 2) Broker and administrator fees. 3) CAPEX for new developments, which due to their nature, are generally capitalized. In 1Q15, Terrafina s total CAPEX investment was US$4.8 million. CAPEX breakdown is shown in the following table: 1Q15 (millions of pesos) 1Q15 (millions of dollars) Tenant Improvements & Recurring CAPEX Leasing Commissions Development CAPEX Total Capital Expenditures Maintenance expenses for vacant properties are included in the Tenant Improvements & Recurring CAPEX figures. (1) CAPEX for expansions/new developments. (2) CAPEX reserve made in 2Q14 for maintenance activities is reimbursed in Total CAPEX account. Source: PREI - Portfolio Management Land Reserves Terrafina s land reserve as of March 31, 2015 was comprised of nine land reserve properties, which accounted for 5.9 msf of potential GLA for the development of future industrial assets. Terrafina s 1Q15 land reserves distribution was as follows: as of March 31, 2015 Square Feet (million) Land at Cost (million pesos) Land at Cost (million dollars) Appraisal Value (million pesos) Market Value (million dollars) North Bajio Central Total Land Portfolio 5.9 1, Source: PREI - Portfolio Management and Fund Accounting 11

12 Non- Strategic Asset Sales In 1Q15, Terrafina sold land reserves and industrial space at the appraisal value of the properties for US$101 million. Terrafina concluded with this transaction an asset sale of 3.7 msf located predominantly in the northeast region of Mexico. As a result, Terrafina s main portfolio s operating indicators will improve as the sale increases occupancy rates and average leasing rents and lowers the average portfolio age. Additionally, this transaction is expected to have a relatively neutral impact on Terrafina s AFFO as it will generate savings in operating, maintenance, financial and external advisor commission expenses. January - March 2015 Square Feet (millions) Transaction Proceeds (millions of pesos) Transaction Proceeds (millions of dollars) Industrial Properties 2.8 1, Land Reserves Total 3.7 1,

13 1Q15 Financial Performance Financial Results and Calculations Terrafina s 1Q15 financial results are presented in Mexican pesos and U.S. dollars. Figures on the income statement for each period were converted to dollars using the average exchange rate for 1Q15. The March 31, 2015 exchange rate was applied to the balance sheet. Terrafina has in place best accounting practices for measuring the FIBRA s (REIT) performance results by providing relevant metrics to the financial community. Throughout the following financial performance section, additional calculations are available. It is important to note, that these metrics must not be considered individually to evaluate Terrafina s results. It is recommended to use them in combination with other International Financial Reporting Standards metrics to measure the Company s performance. Terrafina presents in this earnings report additional metrics such as Net Operating Income (NOI), Earnings Before Interests, Taxes, Depreciation and Amortization (EBITDA), Funds from Operations (FFO), and Adjusted Funds from Operations (AFFO). Each breakdown calculation is available in this document. In addition, Terrafina recommends reviewing the Appendices as a reference of the integration of different items of Terrafina s financial statement. This information is available in the last section of this document. Past performance is not a guarantee or reliable indicator of future results. 13

14 Rental Revenues In 1Q15, Terrafina registered US$33.4 million in rental revenues, a 5.4% or US$1.7 million increase compared to 1Q14. Rental revenues do not include accrued revenues, as these are a non- cash item. Other Operating Income In 1Q15, other operating income totaled US$4.7million, a 15.5% or US$0.6 million increase compared to 1Q14. Other operating income mainly stems from leasing contract deposits and refunds from triple- net leases. Expenses reimbursable to Terrafina mainly include electricity, property taxes, insurance costs and maintenance activities. Net revenue reached US$37.1 million in 1Q15, a decrease of US$0.4 million, or 1.0% compared to 1Q14 resulting from a lower accrued income (non- cash item) as part of the straight line rent adjustments. 1Q15 1Q14 Var. % 1Q15 1Q14 Var. % (millions of pesos) (millions of dollars) Rental Revenue % % Accrued Income Other Operating Revenues % % Reimbursable Expenses as Revenues % % Reimbursable Tenant Improvements % % Other non- cash income % % Net Revenue % % (1) Straight line rent adjustment; non- cash item. (2) Triple net leases expenses reimbursed to Terrafina from its tenants. Source: PREI - Fund Accounting For additional information regarding the revenue breakdown used to calculate additional metrics presented in this earnings report, please refer to Appendix 1 in the last section of this document. Real Estate Expenses In 1Q15, real estate expenses totaled US$8.0 million. These expenses mainly included repair and maintenance, electricity, fees, property taxes and insurance expenses. A total of US$2.5 million in property taxes were paid in January, which represented 31% of the total real estate expenses for the first quarter. These are one- time expenses and are disbursed only at the beginning of the year. Therefore, we do not foresee any additional charges in the property tax account in the following quarters of this year. It is important to differentiate between expenses directly related to the operation and maintenance of the industrial portfolio, as these are the ones used to calculate NOI. The remainder of the accounts included in real estate expenses are considered non- recurring expenses and are used to calculate EBITDA and AFFO. 14

15 For additional information regarding the real estate expenses breakdown, please refer to Appendix 2 in the last section of this document. Net Operating Income (NOI) In 1Q15, NOI totaled US$31.9, a 4.4% increase, or US$1.4 million compared with 1Q14. NOI margin decreased 28 basis points reaching 86.1% compared to 86.4% in 1Q14. The following table displays the calculation of NOI for 1Q15: 1Q15 1Q14 Var. % 1Q15 1Q14 Var. % (millions of pesos) (millions of dollars) Rental Revenues % % Other Operating income % % Net Revenues for NOI Calculation % % Repair and Maintenance % % Property Taxes % % Property Management Fees % % Electricity % % Property Insurance % % Security % % Other Operational Expenses % % Real Estate Operating Expenses for NOI Calculation % % Net Operating Income % % NOI Margin 86.1% 86.4% - 28 bps 86.1% 86.4% - 28 bps (1)Excludes accrued income from straight line rent adjustments as it is a non- cash item. (2) Excludes tenant improvements reimbursements which are included in AFFO ' (3) The income calculation generated by the operation of the property, independent of external factors such as financing and income taxes. NOI is the result of Net Revenues (includes rental income and triple net leases expenses reimbursements) minus Real Estate Operating Expenses (costs incurred during the operation and maintenance of the industrial portfolio). Source: PREI - Fund Accounting 15

16 Fees and Administrative Expenses (G&A) G&A in 1Q15 totaled US$13.8 million, a 273.3%, or US$10.1 million increase compared to 1Q14. This increase was mainly explained by the Incentive fee payment to our external advisor, which is a non- cash item, and by the administrative expenses related to the asset sale. The following table shows total G&A: 1Q15 1Q14 Var. % 1Q15 1Q14 Var. % (millions of pesos) (millions of dollars=) External Advisor Fees % % Professional and Consulting Services % % Payroll, Admin. Fees and Other Expenses % % Total G&A % % (1) General and Administrative Expenses (2) PLA Administradora Industrial, S. de R.L. de C.V., is a Mexican affiliate of PREI, and Advisor as per the Advisory Contract. Source: PREI - Fund Accounting Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) In 1Q15, EBITDA totaled US$28.5 million, an increase of US$1.5 million, or 5.6%, compared to 1Q14. EBITDA margin for 1Q15 was 76.8%, a 58 basis point increase compared to the previous year. The following shows the EBITDA calculation 1Q15: 1Q15 1Q14 Var. % 1Q15 1Q14 Var. % (millions of pesos) (millions of dollars) Rental Revenues % % Other Operating income % % Real Estate Expenses for EBITDA Calculation % % Real Estate Operating Expenses for NOI Calculation % % Advertising % Admin. Property Insurance Expenses % Other Admin. Real Estate Expenses Fees and Admin. Expenses % % External Advisor Fees % % Legal, Admin. and Other Professional Fees % % Trustee Fees % % Payroll % % Other Expenses % EBITDA % % EBITDA Margin 76.8% 76.2% 58 bps 76.8% 76.2% 58 bps (1) Excludes accrued income from straight line rent adjustments as it is a non- cash item. (2) Excludes tenant improvements reimbursements which is included in AFFO calculation. (3) Earnings before interest, taxes, depreciation and amortization. Source: PREI - Fund Accounting 16

17 For additional information regarding the commissions and administrative expenses breakdown used for the calculation of EBITDA and AFFO, please refer to Appendix 4 located in the last section of this document. Financing Costs In 1Q15, financing costs totaled US$7.0 million, a decrease of 29.7%, or US$3.0 million, compared to 1Q14. This result was mainly due to the debt payment made in December 2014, which lowers financing expenses during this quarter. 1Q15 1Q14 Var. % 1Q15 1Q14 Var. % (millions of pesos) 0 (millions of dollars) 0 Interest Paid % % Borrowing Expenses % % Recurring % % Non Recurring Interest Income % % Total % % Source: PREI - Fund Accounting Funds from Operations (FFO) Adjusted Funds from Operations (AFFO) In 1Q15, Terrafina s FFO increased by US$3.8 million, or 21.3%, compared to 1Q14, reaching US$21.4 million. FFO Margin was 57.9%, a 788 basis point increase compared to 1Q14. Additionally, Terrafina reported an AFFO of US$19.9 million, an increase of US$4.8 million, or 31.7%, compared to 1Q14. AFFO margin was 53.3%, an increase of 1,085 basis points versus 1Q14. 1Q15 1Q14 Var. % 1Q15 1Q14 Var. % (millions of pesos) (millions of dollars) EBITDA % % Finance Cost % % Funds from Operations (FFO) % % FFO Margin 57.9% 50.0% 788 bps 57.9% 50.0% 788 bps Tenant Improvements % % Leasing Commissions % % Other Non Recurring Expenses % % Adjusted Funds from Operations (AFFO) % % AFFO Margin 53.3% 42.4% 1,085 bps 53.3% 42.4% 1,085 bps (1) Net Operational Interest Expenses comprised by interest paid, recurring borrowing expenses and interest income. (2) Related expenses to acquisitions, legal and other. Source: PREI - Fund Accounting 17

18 Comprehensive Income Comprehensive Income for 1Q15 reached US$40.7 million, compared to the US$0.2 million loss of 1Q14. The following table presents the calculation of Comprehensive Income: 1Q15 1Q14 Var. % 1Q15 1Q14 Var. % (millions of pesos) (millions of dollars) Net Revenues % % Real Estate Expenses % % Fees and Other Expenses % % Gain (Loss) from Sales of Real Estate Properties Net Income (Loss) from Fair Value Adjustment on Investment Properties % % Net Income (Loss) from Fair Value Adjustment on Derivative Financial Instruments Net Income (Loss) from Fair Value Adjustment on Borrowings % % Foreign Exchange Gain (loss) Acquisition Related Expenses Operating Profit % Financial Income % Financial Expenses % % Net Financial Cost % % Net Profit (Loss) Items Reclassified after Net Profit (Loss) - Currency Translation Adjustments % % Comprehensive Income Source: PREI - Fund Accounting Distributions per CBFIs In 1Q15, Terrafina distributed US$19.9 million, or US$ per CBFI. Terrafina s 1Q15, 4Q14 and 1Q14 distributions are presented in the following table: (millions of pesos unless otherwise stated) 1Q15 4Q14 1Q14 Var. 4 Total Outstanding CBFIs 1 (millions of CBFIs) % CBFI Price % Distributions % Distributions Per CBFI % FX Rate USD/MXN (average closing period) % Distributions (million dollars) % Distributions Per CBFI (dollars) % Annualized Distribution Yield 3 6.2% 5.6% 8.4% bps (1) In 3Q14, Terrafina increased its number of CBFIs from 381,014,635 to 602,487,069. 4,723,291 CBFIs were paid to the xternal advisor as a result of an Incentive Fee. Number of CBFIs at the end of each period (2) Average closing price for the eriod. (3) Annualized distribution per share divided by the average CBFI price of the quarter. Quarterly distribution yield alculation has been annualized. (4) Comparison between 1Q15 and 1Q14. Source: PREI - Fund Accounting 18

19 Total Debt As of March 31, 2015, Terrafina s total debt reached US$680.3 million. The average cost of Terrafina s long- term debt, which is U.S. dollar- denominated, was 3.88%. Additionally, it is important to mention that the Citibank credit facility maturity was extended until March 2017 during 1Q15. This allows Terrafina enough flexibility to seek different alternatives to refinance its current debt. Most of Terrafina s loans are set at variable interest rates and are hedged with interest rate caps and fixed rate options. (as of March 31, 2015) Currency Millions of pesos Millions of dollars Interest Rate Terms Maturity Extension Option Long Term Debt Citibank 1 Dollars 5, Libor % Interest Only Mar GEREM 2,3 Dollars 4, Libor % HSBC 3 Dollars Libor % Total Debt 10, Net Cash 5, Net Debt 4, Interest + Principal Interest + Principal (1) Syndicated loan facility with six banks. (2) Syndicated loan facility with four banks. (3) One- year interest only grace period. Source: PREI - Fund Accounting and Capital Markets Sep 2018 Sep 2020 Sep 2018 Sep 2020 Additionally, Terrafina s leverage (LTV) and debt service coverage ratio (DSCR) metrics are included as requested by the Mexican Securities and Exchange Commission (CNBV) as part of the new regulations. The following tables show Terrafina s leverage and debts service coverage as of March 31, 2015 and based on projections for the next six quarters: Leverage (LTV) (as of March 31, 2015) (millions of pesos) (millions of dollars) Total Assets 29, ,947.2 Total Debt 10, Loan- to- Value (LTV) % (1) Total Debt divided by Total Assets as defined by the National Securities and Banking Commission (CNBV) Source: PREI - Fund Accounting and Capital Markets 19

20 Debt Service Coverage Ratio (DSCR) period (millions of pesos) (millions of dollars) Cash & Cash Equivalents March 31, , Recoverable Taxes Σ next 6 quarters EBIT 1 after distributions Σ next 6 quarters Available Credit Line March 31, , period (millones de pesos) (millones de dólares) Interest Payments Σ next 6 quarters Principal Payments Σ next 6 quarters - - Recurring CAPEX Σ next 6 quarters Development Expenses Σ next 6 quarters Debt Service Coverage Ratio (DSCR) 2 9.5x (1) Earnings Before Interest and Taxes (2) (Cash & Cash Equivalents + Recoverable Taxes + EBIT After Distributions + Available Credit Line) / (Interest Payments + Principal Payments + Recurring CAPEX + Development Expenses) Source: PREI - Fund Accounting and Capital Markets 20

21 About Terrafina Terrafina (BMV:TERRA13) is a Mexican real estate investment trust formed primarily to acquire, develop, lease and manage industrial real estate properties in Mexico. Terrafina s portfolio consists of attractive, strategically located warehouses and other light manufacturing properties throughout the Central, Bajio and Northern regions of Mexico. It is internally managed by highly qualified industry specialists, and externally advised by PREI. Terrafina owns 208 real estate properties, including 196 developed industrial facilities with a collective GLA of approximately 28.2 million square feet and 9 land reserve parcels, designed to preserve the organic growth capability of the portfolio. Terrafina s objective is to provide attractive risk- adjusted returns for the holders of its certificates through stable distributions and capital appreciations. Terrafina aims to achieve this objective through a successful performance of its industrial real estate and complementary properties, strategic acquisitions, access to a high level of institutional support, and to its management and corporate governance structure. For more information, please visit About Prudential Real Estate Investors Prudential Real Estate Investors is the global real estate investment business of Prudential Financial, Inc. (NYSE: PRU). Investing in real estate on behalf of institutional clients since 1970, PREI today has more than 650 employees located in 19 cities around the world, and gross assets under management of $58.7 billion ($44.1 billion net) as of December 31, PREI offers to its global client base a broad range of real estate investment vehicles across the risk- return spectrum and geographies, including core, core plus, value- add, opportunistic, debt, securities, and specialized investment strategies. For more information, visit About Prudential Financial, Inc. Prudential Financial, Inc. (NYSE:PRU), a financial services leader with more than $1 trillion of assets under management as of December 31, 2014, has operations in the United States, Asia, Europe, and Latin America. Prudential s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement- related services, mutual funds and investment management. In the U.S., Prudential s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit Forward Looking Statements This document may include forward- looking statements that may imply risks and uncertainties. Terms such as "estimate", "project", "plan", "believe", "expect", "anticipate", "intend", and other similar expressions could be construed as previsions or estimates. Terrafina warns readers that declarations and estimates mentioned in this document, or realized by Terrafina s management imply risks and uncertainties that could change in function of various factors that are out of Terrafina s control. Future expectations reflect Terrafina s judgment at the date of this document. Terrafina reserves the right or obligation to update the information contained in this document or derived from this document. Past or present performance is not an indicator to anticipate future performance. 21

22 Conference Call (BMV: TERRA13) Cordially invites you to participate in its First Quarter 2015 Results Friday, April 24, :00 a.m. Eastern Time 10:00 a.m. Central Time Presenting for Terrafina: Alberto Chretin, Chief Executive Officer Angel Bernal, Chief Financial Officer *** To access the call, please dial: from within the U.S from outside the U.S Conference ID Number: Audio Webcast Link: Conference Replay Will be provided for your call Dial or to listen Passcode:

23 Appendix Appendix 1 Revenues Terrafina s revenues are mainly classified as rental revenues and other operating reimbursable revenues. Additionally, there are accounting revenues that must be registered according with IFRS; however these are considered non- cash items and therefore are excluded in some calculations. Reimbursable tenant improvements are included in the tenant improvement expenses for the AFFO calculation. Revenues 1Q15 1Q14 1Q15 1Q14 (million of pesos) (million of dollars) NOI calculation Rental Revenue Non Cash Accrued Income Other Operating Revenues NOI calculation Reimbursable Expenses as Revenues AFFO calculation Reimbursable Tenant Improvements Non Cash Other non- cash income Net Revenue (1) Straight line rent adjustment. (2) Triple net leases expenses reimbursed to Terrafina from its tenants. Source: PREI - Fund Accounting 23

24 Appendix 2 Real Estate Expenses Real estate expenses are comprised of recurring figures related with the operation (used for the Net Operating Profit calculation) as well as non- recurring figures used for metric calculations such as Earnings Before Interests, Taxes, Depreciation and Amortization (EBITDA), Funds from Operations (FFO), Adjusted Funds from Operations (AFFO). The following table presents the real estate expenses breakdown, which are used for the calculation of several metrics. Real Estate Expenses 1Q15 1Q14 1Q15 1Q14 (millions of pesos) (millions of dollars) Repair and Maintenance NOI calculation Recurring AFFO calculation Non Recurring Property Taxes NOI calculation Operating Non Cash Non Operating NOI calculation Property Management Fees NOI calculation Electricity AFFO calculation Brokers Fees Property Insurance NOI calculation Operating EBITDA calculation Administrative NOI calculation Security EBITDA Advertising calculation Other Expenses NOI calculation Operational Related EBITDA calculation Administrative Non Cash Bad Debt Expense Total Real Estate Expenses Source: PREI - Fund Accounting 24

25 Appendix 3 Fees and Administrative Expenses Fees and administrative expenses include figures used for metric calculations such as Earnings before Interests, Taxes, Depreciation and Amortization (EBITDA), Funds from Operations (FFO), Adjusted Funds from Operations (AFFO). Terrafina s fees and administrative expenses breakdown is available in the following table and indicates the figures used for the calculation of these metrics: Fees and Administrative Expenses 1Q15 1Q14 1Q15 1Q14 EBITDA calculation External Advisor Fees Legal Fees EBITDA calculation Recurring AFFO calculation Non Recurring Other Professional Fees EBITDA calculation Recurring AFFO calculation Non Recurring Administrative Fees EBITDA calculation Recurring Non Operational related Non Recurring EBITDA calculation Payroll EBITDA calculation Trustee Fees EBITDA calculation Other Expenses Non Cash Performance Fee Total Fees and Admin. Expenses (1) Non operational related administrative fees; 1Q15 expenses related to asset sale transaction activities. Source: PREI - Fund Accounting 25

26 Appendix 4 Reconciliation Reconciliation of Net Profit (Loss) to FFO, EBITDA and NOI 1Q15 1Q14 1Q15 1Q14 (millions of pesos) (millions of dollars) Comprehensive Income (Loss) Add (deduct) Cost of Financing Adjustment: Non Recurring Borrowing Expenses Add (deduct) Cost of Financing Adjustment: Non Recurring Borrowing Expenses Add (deduct) Non- Cash Adjustment: Foreign Exchange Adjustments Fair Value Adjustment on Bank Investment Fair Value Adjustment on Borrowings Fair Value Adjustment on Derivative Financial Instruments Fair Value Adjustment on Investment Properties Sales of Real Estate Properties Adjustment Add (deduct) Expenses Adjustment: Non Recurring Repair and Maintenance Non Operating Property Taxes Brokers Fees Bad Debt Expense Non Recurring Legal Fees Non Recurring Other Professional Fees Add (deduct) Revenues Adjustment: Accrued Income Other Non- Cash Income Reimbursable Tenant Improvements Add (deduct) Non Operational Administrative Fees Non Operational Administrative Fees Add (deduct) Incentive Fee: Incentive Fee FFO Add (deduct) Cost of Financing Adjustment: Interest Paid Recurring Borrowing Expenses Interest Income EBITDA Add (deduct) Expenses Adjustment: External Advisor Fees Recurring Legal Fees Recurring Other Professional Fees Administrative Fees Payroll Trustee Fees Other Expenses Advertising Administrative Property insurance Other Administrative Expenses NOI Add (deduct) Expenses Adjustment: Recurring Repair and Maintenance Operating Property Taxes Property Management Fees Electricity Operating Property Insurance Security Other Operational Expenses Add (deduct) Revenues Adjustment: Other Non- Cash Income Accrued Income Reimbursable Tenant Improvements Net Revenue

27 Reconciliation Net Profit (Loss) to AFFO 1Q15 1Q14 1Q15 1Q14 (millions of pesos) (millions of dollars) Comprehensive Income (Loss) Add (deduct) Cost of Financing Adjustment: Non Recurring Borrowing Expenses Add (deduct) Cost of Financing Adjustment: Non Recurring Borrowing Expenses Add (deduct) Non- Cash Adjustment: Foreign Exchange Adjustments Fair Value Adjustment on Bank Investment Fair Value Adjustment on Borrowings Fair Value Adjustment on Derivative Financial Instruments Fair Value Adjustment on Investment Properties Sales of Real Estate Properties Adjustment Add (deduct) Expenses Adjustment: Non Operating Property Taxes Bad Debt Expense Add (deduct) Revenues Adjustment: Accrued Income Other Non- Cash Income Add (deduct) Non Operational Administrative Fees Non Administrative Fees Add (deduct) Incentive Fee: Incentive Fee AFFO

28 Appendix 5 - Cap Rate Calculation Terrafina subtracts cash and land reserves book value for the cap rate calculation. In the following table, the cap rate calculation is shown assuming a CBFI quarterly average price of Ps pesos and an average exchange rate for 1Q15 of Ps Implied Cap Rate Quarterly Average Price (dollars)¹ 2.11 (x) CBFIs (million shares) (=) Market Capitalization 1,281.8 (+) Total Debt (- ) Cash (=) Enterprise Value 1,594.9 (- ) Land reserve 78.6 (=) Implied Operating Real Estate Value 1,516.3 Net Operating Income (NOI) 2015e Implied Cap Rate 8.2% Figures expressed in millions of dollars unless otherwise stated. (1) 1Q15 average share price of Ps.31.52; and average exchange rate of Ps

29 Financial Statements Income Statement (thousand pesos) 1Q15 1Q14 Rental revenues $483,476 $441,941 Other operating income 70,269 54,145 Real estate operating expenses (118,853) (123,384) Fees and other expenses (209,538) (47,881) Realized gain from disposal of investment properties Net Income (Loss) from Fair Value Adjustment on Borrowings Net gain (loss) from fair value adjustment on investment properties Net (loss) gain unrealized from fair value on derivative financial instruments (272) ,108 (84,459) (29,811) (104,183) (468) (13,070) Foreign exchange (loss) gain (89,831) 46 Operating profit 159, ,858 Finance income 4, Finance cost (108,988) (133,719) Finance cost - net (104,499) (132,997) Net Profit for the period 54,581 (9,139) Items that may be subsequently reclassified to profit or loss- currency translation differences 545,494 6,974 Total Comprehensive income for the period 600,075 (2,165) 29

30 Financial Statements Balance Sheet Mar Dec Var. (thousands of pesos) Assets Non- current assets Investment properties $23,487,201 $24,298, % (Cost:31/03/ Ps.22,814,228; 31/12/ Ps.23,843,700) Derivative financial instruments Current assets Other assets 109,795 54, % Recoverable taxes 125, , % Prepaid expenses 22,908 8, % Deferred charges and accrued income 86,182 98, % Accounts receivable 58,193 40, % (Net of allowance for doubtful accounts: 31/03/ Ps.77,151; 31/12/ Ps.61,871) Restricted cash 53,441 53, % Cash and cash equivalents 5,565,750 5,002, % Total assets 29,509,005 29,673, % Net assets attributable to Investors Contributions, net 15,629,142 15,681, % Retained earnings 3,046,366 2,500, % Currency translation adjustment 15,629,142 15,681, % Total net assets (Net Equity) 18,675,508 18,182, % Liabilities Non- current liabilities Borrowings 10,309,887 10,974, % (Cost: 31/03/ $10,478,762; 31/12/ $11,086,558) Tenant deposits 166, , % Current liabilities Trade and other payables 356, , % Total liabilities (excluding net assets attributable to the Investors) 10,833,497 11,490, % Total net assets and liabilities 29,509,005 29,673, % 30