second quarter 2016 earnings release - investor...
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2Q16 Earnings Release
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Second Quarter 2016 Earnings Release
Contact: Jaime Martínez Chief Financial Officer Tel: +5281-4160-1403 Email: [email protected]
2Q16 Earnings Release
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Fibra Mty Investment Model Key strategic aspects of our business plan
2Q16 Earnings Release
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FIBRA MTY ANNOUNCES RESULTS FOR SECOND QUARTER 2016
Monterrey, Nuevo Leon, Mexico – July 25, 2016 – Banco Invex, S.A., Institución de Banca Múltiple, Invex Grupo Financiero, Fiduciario, as Trustee of the Trust identified by the number F/2157, (BMV: FMTY14), (“Fibra Mty” or “the Company”), the first real estate investment trust 100% internally managed and advised by Administrador Fibra Mty, S.C., announced today its results for the second quarter of 2016 (2Q16). The figures presented in this report have been prepared in accordance with International Financial Reporting Standards (IFRS) and are expressed in millions of Mexican pesos (Ps.), unless otherwise indicated.
Second Quarter 2016 Highlights
Fibra Mty successfully concluded the subscription process of the CBFIs, issuing 178,035,420 CFBIs at a unit price of Ps. 12.70 equivalent to Ps. 2,261 million. Approximately 60% of the funds raised in the subscription were used in May to acquire the Nico 1 building and the Providencia portfolio.
Fibra Mty ended 2Q16 with 31 properties, including 8 office properties, 18 industrial properties and 5 retail properties.
At the close of 2Q16, Fibra Mty reported a total of 348,899 m2 of Gross Leasable Area (GLA).
The occupancy rate as of June 30, 2016 was 98.1%, in GLA terms.
The average monthly rent per square meter was US$19.4 for Corporate – Front Office, US$ 12.4 for Corporate – Back Office, US$4.0 for Industrial Properties and US$6.4 for Retail Properties.
Total Revenues reached Ps. 134.3 million, 13.5% higher than 1Q16.
Net Operating Income (NOI) was Ps. 119.3 million, 13.8% above 1Q16.
EBITDA in 2Q16 was Ps. 103.4 million, 16.4% higher than 1Q16
EBITDA margin went from 75.0% in 1Q16 to 76.9% in 2Q16; in June 2016 it reached 79.3% thanks to the economies of scale generated by acquisitions.
Funds from Operations (FFO) totaled Ps. 100.9 million, 25.7% above 1Q16, while Adjusted Funds from Operations (AFFO) were Ps. 96.7 million, up 31.1% compared to 1Q16.
As a result of its 2Q16 operating performance, Fibra Mty will distribute to its Holders Ps. 96.7 million, of which Ps. 23.9 million correspond to the month of April and were paid in the last week of that month, prior to concluding the CBFI subscription and issuance in May 2016. The 2Q16 distribution is equivalent to Ps. 0.2292 per CBFI, which is in line with guidance and is equivalent to an annualized return of 7.1% with respect to the closing price per CBFI at the end of 2015, which was of Ps. 12.90.
The distribution corresponding to June 2016 was of Ps. 0.0796 per CBFI, which is greater than the Ps. 0.0781 per CBFI corresponding to April 2016, before the dilution that resulted from the May 2016 CBFI issuance.
2Q16 Earnings Release
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Operating Highlights
2Q16 1Q16 4Q15 3Q15 2Q15 Δ%/pp
2Q16 vs 1Q16
Number of Properties 31 22 22 20 14 40.9%
Office 8 8 8 7 7 0.0%
Industrial 18 9 9 9 7 100.0%
Retail 5 5 5 4 NA 0.0%
Gross Leasable Area (GLA) m2 348,899 220,287 220,287 207,541 172,365 58.4%
Occupancy Rate 98.1% 97.2% 97.9% 97.8% 97.0% 90 pp
Average Rent / m2 Office – Front Office (US$)
$19.4 $19.5 $19.3 $19.0 $19.7 -0.5%
Average Rent / m2 Office – Back Office* (US$)(1)
$12.4 $12.6 $12.6 $12.0 $12.3 -1.6%
Average Rent / m2 Industrial (US$)(2) $4.0 $3.8 $3.8 $3.8 $3.7 5.3%
Average Rent / m2 Retail (US$)(1) $6.4 $6.7 $6.7 $6.9 NA -4.5%
(1) Decrease as a result of a higher exchange rate used when converting peso-denominated leasing contracts to U.S.
dollars
(2) Increase as a result of inclusion of Nico 1 and Providencia.
Summary of Acquisitions
In thousands of pesos (except GLA and lease term)
2Q16 1Q16
Accumulated 2015
4Q15 3Q15 2Q15
Number of New Properties
9 - 13 2 6 5
Acquisition Price 1,355,430 - 1,203,596 531,660 390,750 281,186
Annualized NOI 118,086 - 104,038 41,010 33,300 29,728
Gross Leasable Area (GLA) m2
128,182 - 87,589 12,746 35,176 39,667
Cap Rate (1) 8.7% - 8.6% 7.7% 8.5% 10.6%
Weighted Average Lease in NOI Terms (years)
5.6 - N/A 9.7 12.2 1.1
(1) The cap rate in cash is calculated by dividing NOI, corresponding to the twelve month period after the date of
acquisition, by the acquisition price of the property.
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Financial Highlights:
In thousands of pesos
2Q16 1Q16 4Q15 3Q15 2Q15 Var. Ps. 2Q16 vs
1Q16
Δ% 2Q16 vs
1Q16
Total Revenues 134,346 118,375 101,503 92,999 81,967 15,971 13.5%
Net Operating Income (NOI)
119,318 104,819 87,040 80,704 69,946 14,499 13.8%
EBITDA 103,379 88,793 73,919 66,803 58,672 14,586 16.4%
FFO 100,901 80,280 72,375 68,423 58,794 20,621 25.7%
AFFO 96,675 73,716 70,465 65,923 54,152 22,959 31.1%
Financial Highlights per CBFI:
2Q16(1) 1Q16 4Q15 3Q15 2Q15 Var. Ps. 2Q16 vs
1Q16
Δ% 2Q16 vs
1Q16
NOI 0.289 0.344 0.287 0.266 0.231 (0.055) (16.0%)
EBITDA 0.250 0.292 0.244 0.220 0.194 (0.042) (14.4%)
FFO 0.239 0.264 0.239 0.226 0.194 (0.025) (9.5%)
AFFO 0.229 0.242 0.233 0.218 0.179 (0.013) (5.4%)
Outstanding CBFIs (in thousands)
482,504.690 304,469.270 303,092.224 303,092.224 303,092.224
178,035.420 58.5%
(1) Financial indicators per CBFI in 2Q16 consider 304,469.27 thousand CBFIs for April and 482,504.69 thousand
CBFIs during May and June
Financial Margins:
2Q16 1Q16 4Q15 3Q15 2Q15 Var. Ps./pp
2Q16 vs 1Q16
Total Revenues 134,346 118,375 101,503 92,999 81,967 15,971
Net Operating Income (NOI)
88.8% 88.5% 85.8% 86.8% 85.3% 0.3 pp
EBITDA 76.9% 75.0% 72.8% 71.8% 71.6% 1.9 pp
FFO 75.1% 67.8% 71.3% 73.6% 71.7% 7.3 pp
AFFO 72.0% 62.3% 69.4% 70.9% 66.1% 9.7 pp
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Comments from the Chief Executive Officer
“Keep your head in the clouds and your feet on the ground.” -Popular saying
We are very proud of the results achieved during this quarter, as they prove the effectiveness of the business plan set forth by Fibra Mty 16 months ago. We successfully completed a stock issuance in the capital markets, in which we raised a similar amount to that obtained in our IPO concluded at the end of 2014. The results of this offering reflect that our investors, particularly institutional, are drawn to businesses opportunities aligned with their interests. In this sense, having raised capital at a price of Ps. 12.7, which was 5.8% greater than the price achieved in December 2014 is a direct reflection of this sentiment. Fibra Mty utilized approximately 60% of the funds obtained from the issuance for this period’s acquisitions, demonstrating that by efficiently managing the Company’s balance sheet, the subsequent dividend dilution is only a short term impact for investors. The June distribution is greater than the April distribution, which took place before the new CBFI issuance. Lastly, the EBITDA margin achieved shows the benefits of the internally-managed structure of the Company. The 1Q16 indicator was 75.0%, and for June, considering the acquisitions made during the quarter, this margin increased up to 79.3%, a 400 basis points improvement compared to previous quarter. This was one of the highest margins achieved by any fibra in Mexico up to 1Q16. The Company’s emphasis for the second half of 2016 will be the implementation of our SAP operational platform and the promotion of Fibra Mty in the market. Regarding SAP, as previously discussed, at the end of last year we started structuring and designing the base processes of our operating system. Currently, we are in the testing phase, with the intention to go live in November 2016. We believe that relying on one of the most powerful systems in terms of financial and real estate administration will position us to sustain the future growth of our business, maintaining the efficiency in the use of resources that has characterized Fibra Mty. With respect to our CBFIs, we will concentrate on expanding analyst coverage, as well as attracting a larger group of investors. In time, this strategy will yield a lower cost of capital for the Fibra and will provide greater liquidity to our CFBIs. I would like to take this opportunity to reiterate our commitment to our investors, and thank them for their trust. Sincerely,
Jorge Avalos Carpinteyro Chief Executive Officer
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Operating Performance
Portfolio and Geographic Locations
Fibra Mty’s portfolio comprises 31 properties located in 6 states of Mexico, with an average age of 11 years and an occupancy of 98.1% in terms of GLA.
Portfolio / Property Location GLA (m2)
2Q16 Total Revenues (Ps. thousands)
2Q15 Total Revenues (Ps. thousands)
2Q16 Occupancy
% GLA
2Q15 Occupancy
% GLA
1-3 OEP Portfolio* Nuevo León 44,831 104,889 90,703 87.9% 93.0%
4-6 CEN 333 Portfolio** Nuevo León 35,507 50,375 43,757 100% 100%
7 Danfoss Nuevo León 30,580 13,337 11,210 100% 100%
8 Cuadrante Chihuahua 4,519 6,102 4,895 81.3% 84.8%
9 Cuprum Nuevo León 17,261 5,817 4,486 100% 100%
10-14 Casona Portfolio (1) Multiple*** 39,667 18,523 2,929 100% 100%
15 Catacha(2) Nuevo León 5,430 1,826 100%
16-19 Monza Portfolio Chihuahua 13,679 9,382 100%
20 Santiago Querétaro 16,497 3,428 100%
21 Monza 2 Chihuahua 4,611 3,365 100%
22 Prometeo Nuevo León 8,135 21,899 100%
23 Nico 1(3) Nuevo León 43,272 4,997 100%
24-31 Providencia Portfolio (4) Coahuila 84,910 8,781 100%
Total / Average 348,899 252,721 157,980 98.1% 97.0%
(1) Properties acquired and incorporated to the portfolio of Fibra Mty on May 28, 2015.
(2) Increase of 430 m2 due to the expansion taken place in the second quarter.
(3) Property acquired and incorporated to the portfolio of Fibra Mty on May 19, 2016.
(4) Properties acquired and incorporated to the portfolio of Fibra Mty on May 25, 2016.
*Includes the real estate OEP Torre 1, OEP Torre 2 and OEP Plaza Central.
** Includes the real estate Neoris/GE, Axtel and Atento
*** Properties located in Chihuahua, Sinaloa and Guanajuato
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Gross Leasable Area
As of June 30, 2016, Fibra Mty’s GLA was equal to 348,899 m2, 26.7% corresponding to office space, 68.1% corresponding to industrial space and 5.2% to retail space.
Evolution of Fibra Mty’s Geographic Diversification
Fibra Mty’s Concentration in Monterrey (as % of Revenues, after each acquisition)
Upon completing the additional acquisitions agreed upon and announced to date, and which are currently in the due diligence process, the Company’s concentration in Monterrey as a percentage of revenues, would decline to 56.0%.
Portfolio Breakdown by Property Use
For the period from April 1 to June 30, 2016, Fibra Mty’s NOI reached Ps. 119.3 million, 64.2% attributable to office space, 30.7% corresponding to industrial space and 5.1% to retail space.
80%
11%
3%3% 3%
As of 1Q16 (% of NOI)
NL Chih Qro Sin Gto
70%
14%
9%
3% 2% 2%
As of 2Q16 (% of NOI)
NL Coah Chih Qro Gto Sin
96.2%86.8% 86.9%
80.8% 78.1% 80.4%70.1%
Initial Portfolio Casona Catacha Monza Santiago Prometeo Nico 1 +Providencia
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Tenant Breakdown by Economic Activity
Fibra Mty has a tenant base that is diversified in terms of economic activity, which enables the Company to minimize its revenue dependence on any specific type of tenant. The following graph presents a breakdown of its leasing contracts by economic activities carried out by the Company’s tenants:
*Breakdown of “Other Economic Sectors” described in the following graph:
22%
16%
15%14%
11%
8%
6%5% 3%
Distribution of Tenants by Economic Activity (% Rents)
Automotive
Technology
Manufacturing
Service
Other economic sectors*
Communications
Electronics
Consumer Products
Logistics
0.5%
0.6%
0.6%
1.1%
1.8%
2.4%
4.0%
Energy
Commerce
Agriculture
Financial Services
Industrial Gas
Const. and development
Other
Other Economic Sectors (11%)
2Q16 Earnings Release
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Key Indicators of Fibra Mty’s Portfolio Performance (% of revenues)
Occupancy
As of June 30, 2016, the occupancy rate of the operating properties owned by Fibra Mty was 98.1% (approximately 96% of revenues), registering an increase of 90 basis points compared to 1Q16. This occupancy was the result of the inclusion of Nico 1 and Providencia to our portfolio.
The occupancy rate of office space was 92.7%, while both, industrial and retail spaces, reached 100% occupancy.
Contract Maturity
As of June 30, 2016 Fibra Mty had 571 tenants; 61% were located in office spaces (including retail areas focused on services), 35% in industrial spaces and 4% in retail space.
As of June 30, 2016 the weighted average lease term required was 5.39 years. If current contracts are not renewed and no new leases are entered into, the Company would have a guaranteed rent flow for at least 72% of the total flow through 2020.
1 Tenants that rent various spaces in one or more properties are only counted once.
56%39%
5%
By asset type
Office Industrial Retail
70%
14%
9%3% 2%
2%
By Location
NL Coah Chih Qro Sin Gto
85%
15%
By currency
USD MXN
14%
14%
19%13%
20%
20%
By contract maturity (years)
0-1 1-3 3-5 5-7 7-10 10+
96%
4%
Occupancy
Rented Available
7.8%
6.5%
6.3%
6.3%5.1%
5.0%
4.5%
4.4%
4.3%3.8%
Main Tenants
Crisa Neoris
GE International México Axtel
Price Waterhouse Coopers Danfoss
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Portfolio Breakdown by Type of Property (% Rents) & Rent Level Evolution
In general, Fibra Mty’s rents are considered to be below the market levels, which represents a competitive advantage when renewing and/or negotiating new contracts. The price of industrial rent is in line with the market price.
1 The market price takes into account the price asked by landlords. Source: CBRE for Sta Maria and Industrial space; Fibra Mty Research for back office space.
13.4%11.2%
2.7%0.8%
18.5%
12.7%
0.4%
7.6%11.8%
0.0%
15.4%
0.8% 0.0% 0.0%4.7%
13.4%24.6% 27.3% 28.1%
46.6%
59.3% 59.7%67.3%
79.1% 79.1%
94.5% 95.3% 95.3% 95.3% 100%
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Contract Maturity
Maturity Accumulated
More than 71% of Fibra MTy's rental revenue mature after 2020
19.4
12.4
4.0
19.9
15.0
3.9 -
5.0
10.0
15.0
20.0
25.0
Corp. Office Back Office Industrial
Monthly1 rent US$ by square meter
Fibra Mty Market
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Use of Capital and CAPEX Current Portfolio The CAPEX budget for 2016 is Ps. 35 million, out of this amount, Ps. 20 million correspond to operation and Ps. 15 million to expansion activities. CAPEX budget for operation increased 100% compared to 2015, mainly due to the gradual increase of properties in operation during 2015. As of June 30, 2016 the Company has invested Ps. 4.5 million in CAPEX. Out of the Ps. 4.5 million invested, Ps. 1.9 million were registered in accordance with IFRS standards and the remaining Ps. 2.6 million were capitalized. The Company has established a reserve of Ps. 3.1 million for 2Q16. The actual expansion CAPEX budget amounts to Ps. 9.5 million. Fibra Mty continues to evaluate the physical condition of its properties to identify, in the short and medium terms, areas of improvement related to machinery, equipment and structure. In order to assure the best usage of the resources, the Company has hired a team of experts in this field.
Acquisitions Nico 1 (May 19, 2016)
The “Nico 1” building consists of a warehouse approximately 43,272 m2 in size and was built on a
land area spanning approximately 72,300 m2, located in the San Nicolás de los Garza municipality, within the Monterrey, Nuevo Leon metropolitan area. The property includes a new distribution center, designed and built-to-suit for a major multinational company with a strong presence in Mexico, who is currently the only tenant.
The contract terms include an initial 10-year lease, denominated in U.S dollars, and under a double net (NN) lease structure. In addition to the rent payments, the tenant will be responsible for operating costs and property taxes, while the landlord will only be in charge of the insurance payment.
Fibra Mty acquired this building for US$26.6 million, plus VAT corresponding to construction and other taxes, rights, costs and acquisition expenses. The Company expects this project to generate a potential NOI of US$2.2 million during the first year following its acquisition. The purchase price was paid fully with cash.
Providencia (May 25, 2016)
The “Providencia” portfolio consists of 8 industrial properties, with approximately 84,910 m2 of GLA,
constructed on 247,888 m2 of land. These buildings are, on average, 4 years old. All the properties are located within the metropolitan area of Saltillo, Coahuila. This portfolio is fully occupied by companies in the automotive and logistics sectors.
All leases are U.S. dollar-denominated and 65% of them are triple net leases (NNN) whereby, in addition to the rent, the tenant covers operating expenses, insurance, and property taxes. 23% of the leases are double net (NN), whereby the landlord is only responsible for paying the property taxes. The remaining leases are single net type (N) whereby the landlord is only responsible for paying the insurance and property taxes.
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The price of this transaction was US$47.1 million, plus the corresponding VAT related to construction and other taxes, as well as rights, costs and acquisition expenses. The “Providencia” portfolio is expected to potentially generate additional NOI of US$4.1 million during the twelve months following the acquisition. The purchase price was fully paid with cash.
This transaction represents not only the Company’s entrance into Saltillo’s industrial market, but it also brings with it a strategic alliance with an important local developer for future industrial projects.
Comments on the Real Estate Market
Office Market [2]
Monterrey
In 2015, more than 120,000 m2 of class A/A+ office space was completed in Monterrey; which,
added to the existing vacant 98,000 m2, totals approximately 218,000 m2 of available space.
In accordance to CBRE studies, the net absorption for 2015 was slightly below 70,000 m2, and is
expected to reach levels above 85,000 m2 per year starting in 2016. That is, for the past four years,
net absorption of office space has grown at an average rate of around 35% per year with
construction of new spaces growing at an annualized rate of slightly over 12%.
If this trend continues, the net availability rate for office space by the end of 2019 will be between
6% and 13%, compared to 22.1% in 4Q15.
Fibra Mty expects the office market in Monterrey metropolitan area will continue growing,
particularly in alternative areas such as Santa Catarina located west of the city and Apodaca which
is on the route to the Monterrey International Airport.
[2] Source: CBRE Research 4Q 2015
$21.00 $20.00 $19.75 $19.75 $20.00 $21.00 $20.75 $21.50 $21.75$24.10 $23.90 $23.65
(5,000)
-
5,000
10,000
15,000
20,000
25,000
30,000
1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015
Net Absorption of Offices vs Rents in Monterrey(in square meters and US$ per m2 of monthly GLA)
Net Absorption in m2 Rent US$/m2/month
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Mexico City Metropolitan Area
During 2015 the office market in the Mexico City metropolitan area registered net absorption of
more than 300,000 m2 of class A/A+ office space, similar amount compared to 2014, and an increase
of 52% compared to 2013. This could be interpreted as a lack of new available space at that time,
which triggered new construction growth, which is at levels never seen before at 1.5 million m2
under construction.
If we take into consideration the increase in rental prices registered in 2015, which were close to
6% compared to 2014 despite the peso vs. dollar devaluation, this is a strong indication that the
market is reacting positively in terms of demand for space, which will eventually lead to a decline in
the 11% average availability rate over the next few years.
It is worth noting that Lomas Altas, Polanco and Reforma Centro are areas with the highest
availability rates – surpassing the average in the region – and the highest rent levels exceed US$30
per square meter per month.
Guadalajara
Undoubtedly, the size and quality of the corporate market in Guadalajara (351,000 m2) does not
match such an important state, economically and socially, as Jalisco. Until recently it significant
lacked design, funding, construction and occupancy of class A/A+ office space.
The aforementioned is reflected in the availability rate, only 5.1%, which in absolute terms,
represents 17,900 m2 distributed across the city. In other words, there are no adjacent office
buildings larger than 2,000 m2 on average to fulfill demand, particularly in the IT and service sectors,
which continuously seek world-class office space. This represents an attractive investment
opportunity for developers and investment funds.
Fibra Mty estimates that during the coming years, the market will continue to show strong
dynamics, in the supply and demand, which will trigger a slight increase in rental prices that are
currently at levels of less than US$21 on average.
Industrial Market[3]
The domestic industrial market inventory grew significantly during the first quarter of 2016, from 62.7 million m2 to 64.2 million m2. New inventory became available with particular concentration in a number of markets, such as Queretaro (488,821 m2), Chihuahua (345,405 m2), and San Luis Potosi (309,100 m2), above traditional markets such as Mexico City (62,258 m2) or Monterrey (40,461 m2).
The absorption of available space was significant in Queretaro and San Luis Potosi, demonstrating that inventory growth was mainly driven by built-to-suit construction contracts, which were occupied immediately. Inventory absorption was at the level of 1.68 million m2, relatively low compared to that of 2015.
[3] Source: JLL Industrial Outlook, Mexico Q1 2016
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The simple average of vacancy rates is currently 5.2%. At the close of 2015, the rate was 5.6%, as space availability is now more limited. Average leases contracted slightly, from a monthly rate of US$4.02 per m2 to US$4.00 per m2.
JLL’s believes that demand will remain aggressive and that developers in certain markets have not caught up at the same pace. Availability rates in Monterrey and Mexico City have decreased to 7.8% and 3.1%, respectively.
Northern Region
The industrial activity in the northern region was positive during the first quarter of 2016. A number of significant infrastructure projects and transactions were undertaken by new and well-established companies in the region.
Similar to prior years, leasing activity for manufacturing and distribution remains strong in the regional markets. The northern region absorbed close to 334,000 m2 (approximately 3.6 million square feet) during January, February and March 2016.
Average rents remained similar to those reported at the end of 2015 at close to US$3.88 per m2 per month. The northern region includes important markets such as Monterrey, Ciudad Juarez, Tijuana, Reynosa and Saltillo. Collectively this region comprises approximately 56% of the inventory of Mexico.
Bajio Region
The Bajio region continues to add industrial space. The inventory grew 4.9% during 1Q16 to approximately 17.2 million m2. Queretaro accounted for over half of the region’s growth (488,821 m2) and San Luis Potosi accounted for over 309,000 m2. Queretaro absorbed nearly 488,000 m2. Therefore, the vacancy rate relative to the new inventory decreased to 6.9%, despite the new space. The largest transaction took place in Queretaro with an expansion of 40,000 m2.
Financial Performance
2Q16 results mainly reflect the positive impact of both the CBFI subscription carried out between April and May 2016, as well as the acquisition of the Nico 1 building and Providencia Portfolio during May. In addition, the quarter reflects the impact of rents generated by the Santiago building. Lastly, non-recurring capital expenditures were registered as operating expenses, in accordance with IFRS standards.
In order to make projections, we have included the financial results for the month of June, given that it includes the revenues from Nico 1, Providencia and Santiago. This enables more precise calculations about the future behavior of the funds from operations.
Total Revenues
Total Revenues for 2Q16 reached Ps. 134.3 million, an increase of 13.5% compared to the prior quarter. This result was mainly due to the start of operations of the Santiago building, as well as the acquisitions of Nico 1 and Providencia.
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During June, revenues were Ps. 52.1 million.
Operating Expenses
Property expenses reached Ps. 17.0 million, a 25.1% increase compared to 1Q16. This increase is mainly due to greater maintenance expenses, diagnostic studies and certain renovation projects. NOI margin was 88.8%, an increase of 30 basis points compared to 1Q16. During June, operating expenses were Ps. 5.4 million. Administrative services, trustee and general expenses
These expenses reached Ps. 16.3 million, in line with 1Q16 and the budget authorized by the Technical Committee. During June, these expenses reached Ps. 5.9 million and include the quarterly expense corresponding to auditing services for Ps. 0.5 million. CBFIs Executive Compensation Plan During 2Q16 Fibra Mty registered a provision of Ps. 7.1 million corresponding to the compensation plan for Fibra Mty’s key executives. This provision will be paid with CBFIs and is subject to the achievement of certain goals and market conditions previously approved by the Technical Committee. In accordance with IFRS standards, this provision was registered in the Income Statement. NOI & EBITDA
Net Operating Income (NOI) in 2Q16 reached Ps. 119.3 million, up 13.8% compared to 1Q16. As a result, NOI margin was 88.8%. Fibra Mty considers EBITDA margin as a relevant indicator to evaluate the operating efficiency of the Company. Particular to Fibra Mty, this indicator reflects the benefits of the internally-managed structure, as demonstrated in the June results, after acquisitions were made. Therefore, EBITDA was Ps. 103.4 million in 2Q16, 16.4% higher than 1Q16. EBITDA margin was 76.9%, which reflects the effects of the economies of scale of Fibra Mty’s internal administration. It is especially relevant that during June, EBITDA was Ps. 41.3 million for a 79.3% margin, one of the highest levels reached in the fibra sector up until 1Q16. It is worth mentioning that NOI and EBITDA exclude capital expenses from the profit and loss statement in accordance with IFRS. In addition, EBITDA excludes the provision corresponding to the Executive Bonus in CBFIs, given that this is a line item that will be settled through the issuance of CBFIs, and the revenue from properties measured at fair value.
2Q16 Earnings Release
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thousands of pesos 2Q16 1Q16 4Q15 3Q15 2Q15 Δ%
2Q16 vs 1Q16
Total Revenues 134,346 118,375 101,503 92,999 81,967 13.5%
Property Related Expenses
(16,961) (13,556) (14,463) (12,295) (12,021) 25.1%
Capex in profit and loss with accordance to IFRS
1,933 - - - - 100%
NOI 119,318 104,819 87,040 80,704 69,946 13.8%
Administrative Expenses (16,250) (16,291) (13,379) (14,086) (11,451) -0.3%
Excluding depreciation, amortization and accrued leasing commissions
311 265 258 185 177 17.4%
EBITDA 103,379 88,793 73,919 66,803 58,672 16.4%
Financial Result
Fibra Mty’s financial result for 2Q16 was (Ps. 32.1) million, a 405.4% decline compared to the prior quarter. This result was due to the unfavorable effect of the exchange results, from a Ps. 1.0 million gain to a Ps. 30.6 million loss, derived from the depreciation of the peso vs. dollar from Ps. 17.2509 per US$ as of March 31, 2016 to Ps. 18.5550 per US$ as of June 30, 2016. On the latter date, the syndicated loan was valued at US$38.5 million according to IFRS, and generated an unrealized loss of Ps. 50.2 million during 2Q16; this was partially offset by a foreign exchange financial gain of Ps. 16.6 million, generated by the acquisition of Nico 1 and Providencia, as well as from the operating exchange results. Financial income increased 537.0% as a result of cash obtained in the CBFI subscription, mainly reflected in May, given that cash was significantly lower during June, following the Nico 1 and Providencia acquisitions.
thousands of pesos 2Q16 1Q16 4Q15 3Q15 2Q15 Δ%
2Q16 vs 1Q16
Interest Income 7,631 1,198 1,054 2,263 2,055 537.0%
Interest expenses 9,115 8,584 2,164 - - 6.2%
Net Foreign Exchange (loss) gain (30,567) 1,044 (10,010) 1,384 (215) (3,027.9%)
Total (32,051) (6,342) (11,120) 3,647 1,840 405.4%
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Consolidated Comprehensive and Net Income Fibra Mty’s consolidated net income for 2Q16 reached Ps. 61.8 million, a decline of 22.8% compared to 1Q16. Excluding the variation in the CBFI Executive Compensation Plan and the effects of the foreign exchange loss mainly generated by the revaluation of bank loans, net of the favorable effect of acquisitions, Fibra Mty’s consolidated net income grew 23.2% mainly due to higher revenues from the acquisition of Nico 1 and Providencia, as well as the start of operations of the Santiago building. Consolidated comprehensive income for 2Q16 was Ps. 53.7 million, 16.8% lower than in 1Q16. Excluding the variation in the CBFI Executive Compensation Plan and the effects of the foreign exchange loss mainly generated by the revaluation of bank loans, net of the favorable effect of acquisitions, Fibra Mty’s consolidated comprehensive income grew 40.3% due mainly to the higher revenues from the acquisition of Nico 1 and Providencia, as well as the start of operations of the Santiago building; and to a lesser extent, due to a lower loss in the valuation of derivative instruments of Ps. 8.1 million compared to the loss in 1Q16 of Ps. 15.5 million. The Company registered Funds from Operations (FFO) of Ps. 100.9 million, a 25.7% growth, equivalent to Ps. 0.2391 per CBFI. The annualized FFO per CBFI for the quarter, divided by price of Ps. 12.90 at December 31, 2015, was 7.4%. In terms of CAPEX, Fibra Mty allocated a reserve of Ps. 3.1 million, in addition to payments made for Ps. 1.1 million. Therefore, Adjusted Funds from Operations (AFFO) reached Ps. 96.7 million, representing an increase of 31.1% compared to 1Q16 and an AFFO per CBFI of Ps. 0.2292. The annualized AFFO per CBFI for the quarter, divided by the price of Ps. 12.90, was 7.1%. The distribution for 2Q16 is equivalent to 100.0% of the AFFO. For the monthly result for June, FFO and AFFO per CBFI was Ps. 0.0835 and Ps. 0.0796, which on an annualized basis and divided by the CBFI price is equal to 7.8% and 7.4%, respectively.
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thousands of pesos 2Q16 1Q16 4Q15 3Q15 2Q15 Δ%
2Q16 vs 1Q16
Consolidated comprehensive income
53,722 64,604 578,766 59,258 57,509 (16.8%)
Expense (Income) from financial derivatives valuation
8,103 15,528 (349) - - (47.8%)
Consolidated Net Income 61,825 80,132 578,417 59,258 57,509 (22.8%)
(Income) expense from properties measured at fair value
- - (528,695) - - -
Foreign Exchange loss (gain), Net 31,993 (1,416) 10,555 (1,384) 215 (2359.4%)
Depreciation and Amortization 67 47 43 33 25 42.5%
Accrued Leasing Commissions 244 218 215 152 152 11.9%
Debt Cost Amortization 1,662 1,367 - - - 21.6%
Executive Compensation Plan based on CBFIs
7,074 1,789 12,493 10,708 2,681 295.4%
Straight line adjustment for leasing income
(1,361) (1,346) 188 188 (1,371) 1.1%
Income from Subsidiary (603) (511) (841) (532) (417) 18.0%
FFO 100,901 80,280 72,375 68,423 58,794 25.7%
Operating Capital Expenditures* (3,067) (5,000) (264) (2,500) (1,500) (38.7%)
Fixed and Intangible Assets (555) (1,395) - - - (60.2%)
Leasing Commissions (604) (169) (1,646) - (3,142) 257.4%
AFFO 96,675 73,716 70,465 65,923 54,152 31.1%
*As part of the 2Q16 results, there are Ps. 1.9 million in expenses corresponding to Capital Expenditures, but classified as Operating Expenses under IFRS.
2Q16 Earnings Release
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Distributions per CBFI
The distribution for 2Q16 is relevant as it reflects three important events. First, the April distribution occurred prior to the dilution that resulted from the CBFI issuance. Second, the May distribution reflects the lower cash distribution as a result of the CBFI issuance. Finally, the June distribution reflects the acquisitions made, and as a result the amount distributed was higher than the April amount and the 1Q16 amount. This distribution reflects the benefits of a balanced capital structure.
As a result of the 2Q16 operations, Fibra Mty will distribute its CBFI holders a total amount of Ps. 96.7 million, of which Ps. 23.9 million correspond to April and was paid out during the last week of that month, prior to the May 2016 issuance. The 2Q16 distribution is equivalent to Ps. 0.2292 per CBFI.
Therefore, the June distribution reached Ps. 0.0796, which is greater than Ps. 0.0781 distributed in April, and also greater than Ps. 0.0788, which is equal to the 1Q16 distribution on a monthly basis.
2Q16 Total
2Q16 June
2Q16 May
2Q16 April
1Q16
2Q15
Total CBFIs Outstanding (thousands)
482,504.69 482,504.69 482,504.69 304,469.27 304,469.27 303,092.224
CBFI Price (beginning of 2016)
Ps. 12.9 Ps. 12.9 Ps. 12.9 Ps. 12.9 Ps. 12.9 Ps. 12.2
Distributions (thousands of pesos)
Ps. 96,675 Ps. 38,401 Ps. 34,485 Ps. 23,789 Ps. 72,000 Ps. 54,152
Distributions per CBFI
Ps. 0.2292 Ps. 0.0796 Ps. 0.0715 Ps. 0.0781 Ps. 0.2365 Ps. 0.1787
Distribution Yield (Annualized)
7.1% 7.4% 6.6% 7.3% 7.3% 5.9%
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Debt and Cash Equivalents
At the close of 2Q16, Fibra Mty had 1 bank loan as outlined below:
thousands of pesos
2Q16 Currency Rate
Variable Rate as of June 30,
2016
Fixed Coverage
Rate 1Q16
Δ%
2Q16 vs 1Q16
Secured Loans
Bank Syndicate 714,368(1) USD Libor + 2.5 2.9421% 3.9870% 664,160(2) 7.56%
TOTAL 714,368 664,160
1Equivalent to USD $38,500 thousand dollars, using a FX rate of Ps. 18.5550 as of June 30, 2016. 2Equivalent to USD $38,500 thousand dollars, using a FX rate of Ps. 17.2509 as of March 31, 2016.
Fixed Rate 100% 4T15 USD-denominated 100%
Variable Rate 0% 1T16 MXN- denominated 0%
Maturity 2016 2017 2018 2019 2020 Total
Principal 0 0 22,548 23,584 668,236 714,368
Percentage 0% 0% 3% 3% 94% 100%
The US$38.5 million loan corresponds to the first tranche of the syndicated loan contracted on December 15, 2015, which was mainly used to pay for the acquisition of the Prometeo building and to pay the Ps. 90 million unsecured loan in advance. The variable rate of the loan was hedged with a swap with the same maturity at 3.987% in U.S. dollars.
Fibra Mty’s leverage was 10.1%, measured as per the Mexican Regulations Applicable to Issuers (“la Circular Única de Emisoras”), which is significantly lower than the 50% loan-to-value, as established in the applicable regulations.
Fibra Mty had Ps. 835.9 million in cash and cash equivalents, an increase of Ps. 557.2 million compared to December 31, 2015, mainly as a result of the CBFI issuance for Ps. 2,261 million, which was equivalent to 178,035,420 CBFIs at a price of Ps. 12.70 and net funds from operating activities of Ps. 97.6 million. This was compensated to a lesser extent by the Nico and Providencia acquisitions, work in progress for Ps. 1,446.3 million, prepayments for the acquisition of properties for Ps. 18.9 million, payments of bank loans and interests for Ps. 104.8 million, distributions to our CBFI holders
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for Ps. 166.4 million, and CBFI issuance costs and loan negotiations of Ps. 58.0 million and Ps. 11.6 million, respectively, as well as other minor items.
Recent Events
On April 11, 2016, Fibra Mty informed that the “Milwaukee” project, announced on September 21, 2015, was suspended indefinitely in the interest of the tenant that would utilize the property. This project represented less than 1% of Fibra Mty’s existing and pending incorporation portfolio value.
On April 18, 2016, and according to our estimates of the financial results for April 2016, the Technical Committee approved a distribution payment to our CBFI holders of Ps. 23.9 million corresponding to Ps. 0.0785 per CBFI, and was paid on April 27, 2016.
On April 19, 2016, Fibra Mty announced that it had reached a binding agreement, subject to certain conditions, for the acquisition of the “Fortaleza” Building, comprised of a Class-A+ office building with approximately 15,200 m2 of GLA. The “Fortaleza” Building is located within the Mexico City metropolitan area – specifically in the Interlomas corridor – and has an average age of approximately 11 years. 51% of the building’s rents are dollar-denominated. The approximate transaction price was Ps. 655 million, plus VAT and other taxes and acquisition related expenses. The acquisition is subject to compliance with certain suspensive conditions and, to the extent necessary, to corresponding corporate and governmental approvals, including, without limitation, to the authorization or no objection from the Mexican antitrust commission, Comision Federal de Competencia Economica (“COFECE”).
On May 19, 2016, Fibra Mty closed the acquisition of The “Nico 1” building. This building consists of a warehouse approximately 43,272 square meters in size and was built on a land area spanning approximately 72,300 square meters, located in the San Nicolas de los Garza municipality, within the Monterrey, Nuevo Leon metropolitan area. The contract includes a 10-year lease and is denominated in U.S dollars. Fibra Mty acquired this building for US$26.6 million, plus VAT and other taxes and acquisition expenses.
On May 25, 2016 Fibra Mty closed the acquisition of the “Providencia” portfolio. This portfolio consists of 8 industrial buildings, with approximately 84,910 m2 of GLA, constructed on 247,888 m2 of land. All the properties are located within the metropolitan area of Saltillo, Coahuila. This portfolio is fully occupied by multinational companies from the automotive and logistics sectors, with U.S. dollar-denominated contracts. As of the date of the agreement, the totality of the contracts had a remaining NOI-weighted average term of just over 5 years. The price of this transaction was US$ 47.1 million, plus the corresponding VAT and other taxes, permits, costs and acquisition expenses.
On May 26, 2016, Fibra Mty announced the Value Added Tax (VAT) reimbursement corresponding to the acquisition of the Prometeo building for an amount of Ps. 56.1 million, including an revaluation that added Ps. 0.4 million.
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2Q16 Conference Call
Fibra Mty (BMV: FMTY14)
cordially invites you to participate in its Second Quarter 2016 Earnings Conference Call
Date: Tuesday, July 26, 2016
Time: 12:00 p.m. Eastern Time 11:00 a.m. Mexico City Time
Presenting for Fibra Mty:
Jorge Avalos Carpinteyro, Chief Executive Officer Javier Llaca García, Chief Operating Officer
Jaime Martínez Trigueros, Chief Financial Officer
*** To access the Conference Call, please dial:
1-800-853-3893 (U.S. participants) 1-334-323-7224 (International participants)
Conference ID Number: 653411
To access the live and archived webcast presentation, visit: https://www.webcaster4.com/Webcast/Page/1443/15835
Conference Replay A replay of this call will be available for 30 days
To obtain the replay, please call: 1-877-919-4059 (U.S. participants)
1-334-323-0140 (International participants) Conference ID Number: 64482472
About Fibra Mty
Fibra Mty is a real estate investment trust (“FIBRA”) that initiated operations on December 11, 2014 identified by the
number F/2157 (“Trust 2157”), and also as “Fibra Mty” or “FMTY”. Fibra Mty’s strategy is based mainly on the acquisition,
administration, development and operation of corporate properties in Mexico, predominantly office properties. Fibra
Mty is a FIBRA qualified as a transparent entity under Mexican Income Tax laws; therefore, all revenues derived from Fibra
Mty’s operation are attributable to the holders of its CBFIs, given that Trust 2157 is not subject to Income Tax in Mexico.
In order to maintain FIBRA status articles 187 and 188 of Mexican Income Tax Law establish that FIBRA such as Trust 2157
must distribute annually at least 95% of their net income to holders of CBFIs and invest at least 70% of their assets in real
estate rental properties, among other requirements. Fibra Mty is internally-managed by Administrador Fibra Mty, S.C.,
making Fibra Mty the first investment vehicle of its kinds within the FIBRAS sector in Mexico, supported by an innovative
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corporate governance structure, aligned with investor interests, generating economies of scale and taking advantage of
the opportunities offered by the real estate market.
Note on Forward-Looking Statements
This press release may contain forward-looking statements or guidance related to Fibra Mty which includes estimates or considerations about the Company’s operations, business and future events. Statements about future events may include, without limitation, any statement that may predict, forecast, indicate or imply future results, operations or achievements, and may include words such as “anticipates”, “believes”, “estimates”, “expects”, “plans” and similar expressions, as they relate to the Company. Such statements reflect the current views of management and are subject to a number of risks and uncertainties and results may be materially different from the expressed in this report. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.
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Financial Statements
Consolidated Statements of Financial Position - Unaudited As of June 30, 2016 and December 31, 2015
Amounts expressed in thousands of Mexican Pesos ($)
2016 2015 Assets Current Assets:
Cash and cash equivalents $ 835,850 $ 278,632 Accounts receivable 17,720 5,763 Recoverable taxes 179,611 84,513 Other current assets 8,506 4,020
Total current assets 1,041,687 372,928 Investment properties 5,983,336 4,537,061 Derivative financial instruments - 349 Other assets 36,304 8,396
Non-current assets 6,019,640 4,545,806 Total assets $7,061,327 $4,918,734
Liabilities and Equity Current Liabilities:
Short-term bank loans $ - $ 89,272 Interest payable 1,189 1,295 Accounts payable 9,402 23,029 Taxes payable 938 9,726 Derivative Financial instruments 1,319 - Tenant deposits 2,557 2,474
Total Current Liabilities 15,405 125,796 Long-term bank loans 686,188 637,032 Deferred income tax 1,380 930 Derivative financial instruments 21,963 - Tenant deposits 58,274 40,768
Total liabilities 783,210 804,526 Equity:
Contributed equity 5,739,485 3,527,537 Accumulated results 561,914 586,322 Other comprehensive income (23,282) 349
Total Equity 6,278,117 4,114,208
Total liabilities and equity $7,061,327 $4,918,734
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Financial Statements
Consolidated Statement of Comprehensive Income – Unaudited
For the Periods of six months ended June 30, 2016 and 2015 Amounts expressed in thousands of Mexican pesos ($)
2016 2015 Total Revenues $ 252,721 $ 157,980 Property maintenance and operating expenses 22,124 13,733 Property management fee 3,767 4,561 Property tax 3,782 1,604 Property insurance 844 787 Management fees 25,977 15,555 Trustee fees and general expenses 6,564 6,992 CBFIs Executive compensation plan 8,863 2,681 Gain on investment properties measured at fair value - - Interest income 8,829 4,285 Interest expense 17,699 - Foreign exchange (loss) gain, net (29,523) 1,139 Income before income taxes 142,407 117,491 Income taxes 450 305 Consolidated Net Income 141,957 117,186 Other components comprehensive net income: Items that may be reclassified as consolidated net income Fair value adjustment on derivative financial instruments (23,631) - Total other components comprehensive net income (23,631) - Consolidated Comprehensive Income $118,326 $117,186
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Financial Statements
Consolidated Statements of Changes in Equity - Unaudited
For the Periods of six months ended June 30, 2016 and 2015 Amounts expressed in thousands of Mexican pesos ($)
Accumulated Other Total Equity Results Comprehensive Equity Income Balances at December 31, 2014 $3,424,821 $ 19,016 $ - $ 3,443,837 Contributed Equity, Casona acquisition 86,343 86,343 Distributions to CBFI holders (67,480) (67,480) CBFI-Executive compensation plan 2,681 2,681 Consolidated net and comprehensive Income 117,186 117,186 Balances at June 30, 2015 $3,513,845 $ 68,722 $ - $3,582,567 Balances at December 31, 2015 $ 3,527,537 $ 586,322 $ 349 $4,114,208 Contributed Equity, net issuance cost 2,203,085 2,203,085 Distributions to CBFI holders (166,365) (166,365) CBFI-Executive compensation plan 8,863 8,863 Consolidated Comprehensive Income: Consolidated net income 141,957 141,957 Fair value adjustment on derivative financial instruments - - (23,631) (23,631)
Total Consolidated Comprehensive
Income 141,957 (23,631) 118,326
Balances at June 30, 2016 $ 5,739,485 $ 561,914 $ (23,631) $ 6,278,117
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Financial Statements
Consolidated Statement of Cash Flow - Unaudited For the Periods of six months Ended June 30, 2016 and 2015;
Amounts expressed in thousands of Mexican pesos ($)
2016 2015
Cash flows from operating activities:
Income before income taxes 142,407$ 117,491$
Non-cash accounts:
Provisions 75 -
Straight line adjustment for leasing income (2,707) (1,371)
Leasing commissions 462 152
Employee benefits 7,369 3,354
CBFIs Executive compensation plan 8,863 2,681
Depreciation and amortization 114 38
Interest income (8,829) (4,285)
Interest expense 17,699 -
Unrealized foreign exchange loss (gain), net 47,172 (2,980)
Cash flows from operating activities before changes in
operating items212,625 115,080
Accounts Recievable (12,383) 479
Tax recoverable (97,087) (31,207)
Other Assets (5,534) 246,545
Accounts receivable from related parties - 598
Accounts payable (15,202) 8,640
Tenant deposits 15,136 4,118
Cash generated from operations 97,555 344,253
Income tax paid - (31)
Cash generated by operating activities 97,555 344,222
Cash flows from investing activities:
Acquisition of investment properties (1,446,275) (201,911)
Other Assets (25,570) (334)
Interest received 8,829 4,285
Cash used in investment activities (1,463,016) (197,960)
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Cash flows from financing activities
Bank loans (90,000) -
Interest payable (14,807) -
Debt cost (11,623) -
Distributions to CBFI holders (166,365) (67,480)
Resources obtained through CBFIs issuance 2,261,050 -
CBFIs issuance costs ___(57,965) __(5,115)
Net cash obtained (utilized) in financing activities 1,920,290 (72,595)
Increase in cash and cash equivalents 554,829 73,667
Initial balance of cash and cash equivalent 278,632 108,318
Effects of exchange rate on cash and cash equivalents held in foreign currencies
_____2,389 ___4,095
Ending balance of cash and cash equivalents $835,850 $186,080