VTMX

Thanks, ladies and gentlemen, welcome to Vesta's Second Quarter 2026 Earnings conference call. All participants are currently in listen-only mode. A question and answer session will follow today's prepared remarks. As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Fernanda Bettinger, Vesta's Investor Relations Officer. Please go ahead.

Good morning, everyone, welcome to our review of Vesta's second quarter 2026 earnings results. Presenting today with me are Lorenzo Dominique Berho, our Chief Executive Officer, and Juan Sottil, our Chief Financial Officer. The earnings release detailing our second quarter 2026 results was released yesterday after market close and is available on Vesta's IR website, along with our supplemental package. It's important to note that on today's call, management remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risk and uncertainties that may cause actual results to differ. For more information on these risk factors, please review our public filings. Vesta assumes no obligation to update any forward-looking statements in the future. Additionally, please note that all figures were prepared in accordance with IFRS, which differ in certain significant respects from U.S. GAAP.

All information should be read in conjunction with and is qualified in its entirety by reference to our financial statements, including the notes thereto, and is stated in U.S. dollars unless otherwise noted. I'll now turn the call over to Lorenzo Berho.

Thank you, Fernanda, good morning to everyone. We're very pleased with our second quarter results. This was another strong quarter for Vesta, reflecting solid financial performance, excellent leasing activity, improved occupancy, importantly, demonstrated progress in the execution of our Route 2030 strategy. Last quarter, we spoke about the selective reactivation of development across high-conviction markets. In second quarter, our results demonstrate that execution is clearly underway. Vesta is converting demand into leases into occupancy, and our land bank into disciplined development. The strength of our performance this quarter reflects the quality of Vesta's platform and the confidence that global tenants continue to place in Mexico and in our company. Despite the ongoing uncertainty in the global trade environment, most recently due to tensions in the Middle East, our clients continue to make long-term decisions around Mexico as a strategic manufacturing and logistics platform.

The fundamentals supporting Mexico's industrial real estate sector remain firmly in place. North American supply chain integration, nearshoring, growing U.S.-Mexico trade flows, and increasing demand from higher-value industries. Regarding USMCA, without going into more detail that you're already likely aware, it's important to emphasize that the agreement remains in full force. In our view, even in a scenario where the agreement continues operating without a formal near-term extension, Mexico remains in a very strong position. Trade continues. The U.S. market continues to grow. Mexico remains one of the most competitive locations for companies seeking resilient North American supply chains, and demand for premium industrial real estate is clearly evident.

CBRE has noted that broader trade volumes between the U.S. and Mexico continue to grow, and according to U.S. Census statistics, in May, Mexico was the United States' largest goods trading partner and accounted for 17.4% of U.S. goods imports, compared with 7.5% for China. A remarkable shift. Export-driven demand for premium industrial leasing near the U.S. border and logistics demand in major population centers are enduring structural demand drivers despite trade policy uncertainty. Against this backdrop, Vesta delivered total second quarter leasing activity of approximately 2.4 million sq ft, including approximately 900,000 sq ft in new leases with new tenants. This resulted in more than 80% occupancy in Monterrey and 100% in both Mexico City and the Central Southeast region, and 1.5 million sq ft in renewals.

Notably, these renewals had a weighted average lease term of approximately seven years and a quarterly spread of nearly 217%. This is a very strong indication of tenant commitment to our portfolio. Total portfolio occupancy reached 91.7% by quarter end, a 200-basis point improvement from 89.7% in the first quarter. Stabilized occupancy reached 93.7%, and same-store occupancy remains strong at 95%. We're also seeing continued pricing power. Renewals and re-leasing activity for the second quarter reached 1.5 million sq ft, with a trailing 12-month weighted average spread of 10.3%. During the quarter, renewals were particularly strong in northern markets for Vesta, where we achieved significant mark-to-market increases, reflecting tenant demand for well-located, infrastructure-ready properties. This is important because it reinforces a key point we have made previously.

Even in markets where vacancy has increased, tenants continue to prioritize high-quality buildings: infrastructure, location, energy availability, and an experienced partner they know can support their long-term operations. For Vesta, the opportunity is not defined by broad market averages. It is determined asset by asset based on location, infrastructure, energy availability, tenant fit, and deep relationships. This is where our portfolio is exceptionally well-positioned. Across the portfolio, demand is increasingly coming from light manufacturing, electronics, AI-related infrastructure, logistics, aerospace, automotive, and other high-value sectors. This is consistent with broader market trends. CBRE has noted that tenant demand in Mexico is shifting toward diverse manufacturing and logistics, while technology-related activity tied to semiconductors, AI, and data centers continues to gain momentum. This trend is highly relevant for Vesta. Our clients are not only looking for industrial space, they are looking for locations that can support highly complex technology-enabled operations.

As AI adoption accelerates and data center investment expands, demand is increasingly connected to the broader industrial ecosystem that supports these technologies from electronics and components to cooling systems, power infrastructure, logistics, and specialized manufacturing. We are also living through a historic moment for advanced industries more broadly, including the growing visibility of the space economy and companies such as SpaceX, which underscores how rapidly aerospace, electronics, precision manufacturing, AI, and supply chain requirements are converging. For Vesta, this reinforces the importance of developing assets with reliable energy, connectivity, operational flexibility, dedicated tenant service, and the support of an experienced owner/operator. These requirements are becoming more important in our clients' long-term decisions, and Vesta is very well-positioned to meet them, and the strategy is working. Portfolio quality, infrastructure, energy availability, and tenant alignments are translating into results. Let me now turn to development and capital allocation.

As of quarter end, Vesta had approximately 1.8 million sq ft under construction, representing an estimated investment of approximately $162 million. This includes projects in Tijuana, Ciudad Juárez, Guadalajara, Querétaro, and Mexico City. Our approach remains disciplined. We are activating development in markets where we have strong tenant interest, strategic land, and the infrastructure needed to support long-term demand. Importantly, our development is supported by a secure land bank of approximately 23 million sq ft, giving us the flexibility to grow in phases and allocate capital efficiently. In the second half of the year, we expect to make significant infrastructure investments on land acquired last year, particularly in Monterrey, Guadalajara, and Ciudad Juárez. These investments are an important step in preparing those platforms for future growth and allowing us to respond to a strong tenant pipeline.

We also expect to begin new construction projects in Monterrey, Guadalajara, and select northern markets as demand continues to materialize. The follow-on equity offering completed earlier this year has further strengthened our balance sheet and positioned us to capture the growth opportunities we are now seeing. We raised capital not to chase size, but to support a visible development pipeline, invest in infrastructure, and maintain financial flexibility. The decision to strengthen the balance sheet has proven to be the right one, particularly as demand is materializing across several of our core markets. This is one of Vesta's key differentiators. We have the land, the balance sheet, the customer relationships, the local operating capabilities, and the development expertise to execute. In a market where many participants are focused on acquisitions and mergers or portfolio consolidation, Vesta is positioned to create value through development. From a financial perspective, our results were excellent.

Total rental income increased to $78.5 million, while rental revenue reached $76 million, a 16.2% year-over-year increase. Adjusted NOI increased 15.6% to $71.5 million, with a margin of 94%. Adjusted EBITDA increased 15.7% to $63.6 million, with a margin of 83.7%. Vesta FFO totaled $46.1 million, increasing 6.8% year-over-year. We are very pleased with this performance. The first half of the year positions us strongly with our current expectations. We have said consistently that value creation in our sector is driven by portfolio quality, disciplined development, and customer alignment. This quarter provides clear evidence of that. Vesta is converting market demand into execution, and we are doing so with disciplined conviction and a long-term view. Most importantly, our performance continued to be driven by successful execution of our Vesta 2030 strategy. With that, let me turn the call over to Juan to review our financial results in more detail.

Thank you, Lorenzo, and good day, everyone. Let me start with a brief overview of our second quarter results. On the top line, we delivered another quarter of strong results, as Loren mentioned, with total revenues increasing 16.7% to $78.5 million. While revenues excluding energy reached $76 million, a 16.2% increase year-over-year, primarily driven by rental income from new leases and inflationary adjustments across our portfolio. In terms of currency mix, 89.3% of second quarter 2026 rental revenues were U.S. dollar denominated, compared to 89.4% in the same period last year. Turning to profitability, Adjusted Net Operating Income increased 15.6% to $71.5 million. Our Adjusted NOI margin decreased 51 basis points year-on-year to 94%, reflecting higher operating property costs relative to rental revenues in the quarter.

Adjusted EBITDA totaled $63.6 million, up 15.7% year-over-year, while margin contracted by 41 basis points to 83.7%, primarily driven by higher costs and administrative expenses during the quarter. Vesta's FFO, excluding current tax, was up 6.8% to $46.1 million, compared to $43.1 million in the second quarter 2025. This increase was primarily due to higher EBITDA and partially offset by higher interest expense. We closed the quarter with pre-tax income of $98.8 million, compared to $54.5 million in 2025. This increase was primarily due to higher gains in the revaluation of investment properties, higher interest income, and higher other income. This was partially offset by higher interest expense, reflecting an increase in the debt balance during the period, along with lower foreign exchange gain and higher other expenses.

Turning to our balance sheet, we ended the quarter with $404 million in cash and cash equivalents and total debt of $1.2 billion. Net debt to EBITDA stood at 3.1x, and our loan-to-value ratio was 24.3%. The increase in our cash position reflects gross proceeds of nearly $270 million from our recent equity follow-on offer. This capital raise represents our proactive approach to strengthening the balance sheet ahead of anticipated demand, and it gives us the capital to fund the land and infrastructure investments that underpin our growth strategy. Finally, subsequent to quarter's end, on July 15, 2026, we paid a cash dividend for the second quarter equivalent to $0.38 per ordinary shares. This concludes our second quarter 2026 review. Operator, could you please open the floor for questions?

We are now opening the floor for question-and-answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Your first question comes from the line of Rodolfo Ramos of Bradesco BBI. Your line is now open.

Thank you. Good morning, Vesta team. Thanks for taking my question, and congratulations on the results. Two questions, if I may. We have seen this boom in AI-related products in terms of exports from Mexico to the U.S., and wanted to get a little bit more granular feedback from your commercial talks with these clients in the data center infrastructure and electronics. I don't know if you can talk about which specific companies you have signed leases with, and who do you think might be interested in those properties that you're currently developing in Guadalajara and Ciudad Juárez, which probably sees interest from those sectors as Jalisco and Chihuahua are big exporters there in terms of market share. Second, if you can give us a little bit of your thinking on the auto sector, and what it means for your growth and your current portfolio.

We've seen some headlines of companies shifting production back to the U.S. We saw that you signed new leases in the automotive sector, wanted to see your take in specific to that sector. Thank you.

Thank you. Thank you very much, Rodolfo, for being on today's call. Definitely, we are experiencing a great phenomenon related to AI. This is driving strong demand for data centers being built pretty much all over the world, particularly in North America. This has attracted huge investments in terms of capital, also huge demand for manufactured goods that have to be supplied to data centers. We have seen strong demand, particularly in markets like Guadalajara and Ciudad Juárez for electronics, as well as Tijuana. Particularly in Guadalajara, we have seen players that are working with some of the largest hyperscalers to get all the servers and all the digital infrastructure ready so that the data centers can be built out. We have seen that quickly ramping up.

That's going to continue for the foreseeable future as long as there's so much investment and capital going towards data centers. Also, on the industrial manufacturing front we are seeing clients or companies in, for example, the industrial sectors such as air conditioning units, fans, ventilators, that are required to cool down all of these huge data centers together with cabling equipment and electric equipment such as electric panels. That has created a lot of demand in markets such as Monterrey, which is a big industrial market, as well as markets like Tijuana and Ciudad Juárez.

Not only we saw that in the last few quarters, but we continue to see a very robust pipeline coming from these particular sectors. Actually some of these companies, many of them were already established in Monterrey or Mexico, but there's also new companies that are opening up shop. Secondly, shifting to the auto sector. Yes, we continue to see demand. We did a few of new leases in a few markets.

Not only are we seeing new demand, but also we see that existing supply chain in the auto sector continues to adapt to the new requirements and to the new supply chain in North America. We continue to see that Mexico is the most competitive place to manufacture and integrate to final OEMs in Mexico and in the U.S. As long as we see those companies continue to be favorable in Mexico, we believe that demand will continue. Of course, there's many adjustments that the companies have been doing, but we also continue to see some of those adjustments, somehow benefiting Mexico too, and maybe benefiting the whole North American region as a whole.

Thank you, Loren.

[Non-English content].

Your next question comes from the line of André Mazini of Citigroup. Your line is now open.

Thanks a lot. Juan, great to have questions here. Two questions. First one, if you think the current status of the USMCA can be a dampener for tenant demand, or the fact that the deal, as you said in the prepared remarks, is still in place with annual renewals, is business as usual for the companies? Digging into the markets, San Luis Potosí remains the weakest market with occupancy at 65%. Thoughts on the softness behind that market in particular, and of course, the properties that are becoming in their market, which is San Luis Potosí 4 and [empresa San Istán]. This is the first set of questions. The second one, on leasing spreads, pretty strong, almost 17% in this quarter. This is higher than I think you guys were printing before.

If this is probably sustainable going forward, or if there was some type of one-off in the quarter here for such high leasing spreads. Thank you so much.

Thank you, Andre, for being on today's call and for your questions. Let me address the questions in order. We definitely have seen that tenants and companies are trying to understand what the new rules of the game are going to be in terms of trade, in terms of USMCA. For that reason, we believe that the few scenarios that are in place, and maybe the one being the one with annual revisions, could be one that where companies will continue to invest in Mexico. However, nowadays, today, we still have no clarity on the new rules of the game. I think that's what companies are expecting. With that, companies will adjust. Maybe the most favorable outcome is that we might have some sort of result from the negotiations soon. It seems that there could be some tariffs. Tariffs could come in different sectors.

I think that the companies and tenants, what they just want is to have a bit more clarity. Just looking at what has happened just this year or end of last year, we have definitely seen that what we consider a zombie NAFTA, we have been already there, and companies are making decisions. Very different to start of last year. In the last quarters, we continue to see demand, and we continue to see companies trying to set up shop in Mexico just because how competitive the landscape will be and how competitive Mexico is in relative terms to all of the other countries. Look at just the numbers in terms of exports from Mexico to the U.S. and how other countries and other regions, particularly Asia, have dropped in terms of exports to the U.S. and trade with the U.S.

For that reason, we even think that whatever outcome might be, Mexico will continue to be the best beneficiary of the new rules in terms of trade. Secondly, to your question on San Luis Potosí, yes, it has been a very slow market. Nevertheless, we can tell you that we started to see a stronger pipeline this particular quarter. Hopefully for second semester, things start to shift towards a stronger demand. We continue to see rents have actually maintained its actual levels. There has not been any reduction in terms of rates. I think it was just a matter of being patient and waiting until the demand will come back for an important industrial market. Yes, it was a slow couple of years, but we definitely are seeing a recovery. Hopefully we can get some better news quite soon.

On your third question, Andre, on leasing spreads, I think that, yes, our bet is that this growth in terms of leasing spreads will be sustainable not only for this year, but maybe even for the next couple of years. Since, again, we think that demand will continue to go up. Supply for good quality buildings with infrastructure, with energy, is still constrained. As we have seen just this quarter, there is still demand, and demand is looking for better assets, flight to quality, and tenants are willing to pay higher rents, even the fair rents for fair market buildings.

It is great. Thank you, Loren. Have a good day.

[Non-English content], Andre.

Your next question comes from the line of Igor Machado of Goldman Sachs. Your line is now open.

Hi, team. Thanks for taking my question. We have two questions here on our side. First one, we are trying to understand here, what is your expectations for the lease up from Monterrey and Tijuana? In other words, how

I'm sorry, can you get a little closer to the microphone? I'm having a hard time hearing you. Thank you.

Can you hear me?

Yes, better. Thank you.

Yeah. Thanks. The first question is on the lease up on Monterrey and Tijuana, how quick can you see the lease up for those markets, and what sort of tenants are you looking for space in these markets? My second question is if you can talk about what sort of tenants are targeting for your recent projects in the north. This would help us.

Excellent. Thank you, Igor. That was very clear, I'm happy to elaborate on your questions. We have seen major lease up in Monterrey this particular quarter. As you might remember, we developed the last buildings for the Apodaca project last year, this year we signed two leases related with equipment for data centers and AI-related for two of the three buildings. Actually, the pipeline is quite strong, we are very optimistic about the second semester that we're going to be close to being able to fully lease those buildings. That maybe takes me to your second question, which is regarding recent projects. We are very excited that soon we're going to kick off with a construction for the new Vesta Park Monterrey, which is the one next to the airport.

It's probably one of the best sites in whole Mexico in terms of being well-positioned with good infrastructure, in the right corridors, where there's labor, where there's accessibility of energy. Hopefully, very soon we will start new buildings for this project. Actually, demand that we are seeing in sub-markets like of Apodaca or Monterrey is well-diversified between logistics. Actually, e-commerce continues to grow and continues to require more space of high-quality buildings. We're seeing clearly, again, industries related to data centers. As mentioned before, we continue to see strong demand on that. Also, third-party logistics, as well as other industrials. We're excited about this new start of projects, that we're going to be developing over this year and having available for next year. We're starting to build up the pipeline for those particular projects. Related to your question in Tijuana.

Tijuana is interesting because I would say that some market reports show that Tijuana has a higher vacancy. However, if you analyze in detail, a lot of this vacancy is related to sub-regions of Tijuana that actually has low accessibility to labor pools, low accessibility to logistic corridors, and energy. That's why we will continue to focus in the right sub-markets, such as Pacifico, where we continue to see strong demand with companies continue to expand in sectors such as aerospace, electronics, logistics, and medical devices. Those numbers have to be analyzed in detail, and that's what we continue to do because that's how we underwrite our decisions when we start a building. Actually, in many cases, we do start buildings with knowing that there's a clients of Vesta that will require space at some point.

Very clear. Thank you.

[Non-English content].

Your next question comes from the line of Francisco Chávez of BBVA. Your line is now open.

Hi. Thanks for the call, and congrats on the results. Looking at your development pipeline, most of the buildings are inventory. What kind of lease-up should we assume considering the current market conditions? Thank you.

[Non-English content], Francisco. Thank you very much for being on today's call. Well, normally we start buildings when we identify some potential demand, and that demand could come in a range of between zero to, let's say, 12 months of downtime. The numbers that we underwrite at is considering that there is some downtime for income to be generated, but we aim to make these deals become spec to suit buildings, which basically is being able to pre-lease the buildings while they are under construction. Yes, we were able to start some buildings this particular quarter. I think that the last quarters we were very successful being able to lease up the buildings for pre-lease while we were under construction.

Even in some cases, like Monterrey that I recently mentioned, sometimes it takes us a little bit longer to lease, but we are able to lease to the right client the right lease agreements and at the right rates that we continue to create value for our shareholders by being disciplined on our approach on how to lease up. Maybe considering or elaborating a bit more on the question, I think that Vesta has been very successful with this strategy. That's why we have been able to organically, through development, be able to increase revenues year-over-year and even quarter-over-quarter as we have done this particular quarter. Having revenues increases of 15% is because at some point we had the opportunity to start a building, we were able to lease and eventually generate income.

It all rolls up together with a lease-up and leasing spreads, and having that particular proactiveness in our portfolio generates these major revenue increases year-over-year in a sustained manner.

Thanks so much.

Gracias.

Your next question comes from the line of David Soto of Scotiabank. Your line is now open.

Hi. Thanks for taking my question. Just a quick one related to your follow-on proceeds. Could you please provide an update on the intended allocation for the proceeds between non-acquisition and development activity?

Sure. Maybe, Fernanda, if you can help me out with the table that we recently presented. Basically, David, first thank you for being on the call and for your question. Yes, we were able to raise equity in May in order to be able to support part of the growth plan that we have identified as part of our Route 2030 strategy, which is a major investment plan where we will invest in attractive markets and markets that Vesta has not only identified, but been able to acquire land and secure land so that we can continue to develop successful projects. The investment that we identify is basically, we raised approximately $300 million, and we identified $1.3 billion in investments. I'm sorry, $1.7 billion we're going to be investing in Monterrey. Give me one second, just quickly.

Fernanda, I think that it's the other table I need. Not the one of Route 2030, but the one we recently presented, which is basically we will invest $1.3 billion in projects such as the first one being Monterrey, with the Vesta Park Monterrey project, which will require the majority of the investment. We will also invest in Guadalajara, in Vesta Park Guadalajara 1 and 2. We will invest in Mexico City in a few projects. We will invest in Tijuana, Ciudad Juárez, and those will be the major projects that we're going to be investing not only this year where we're starting, but over the next years to finalize the Vesta Route 2030 plan. Basically, out of the almost $300 million, the rest of the capital needed for the growth plan is going to come via debt and retained earnings that the company has been able to generate.

Perfect. Just a follow-up question. Do you expect this capital to be deployed in the next 12-18 months?

Yeah. We don't give any particular guidance on CapEx and speed of investment. However, we have basically been investing at a rhythm of approximately $300 million per year in the past, and I think that's something that in order to be able to achieve this plan, we will have to be investing approximately a similar level.

Perfect. Thank you.

[Non-English content].

Your next question comes from the line of Elisa Gómez of BTG Pactual. Your line is now open.

Hi. Good morning. Thanks for taking my question. First, all results are tracking ahead of your full year guidance. What has been the main surprise relative to your original assumptions, and do you expect this outperformance to continue the second half? Thanks.

Thank you, Elisa. I had a little hard time taking your question. I don't know, if Juan, you were able to listen?

I can help.

Okay. Thank you.

First on the guidance. Look, we have had very good results for the first half of this year. For the second half of this year, we continue to expect very good results. Please bear in mind that on the second half of last year, we had a good leasing activity as well, that the market began to pick up. That was one of the basics of the decision of getting more funding, more funding in the balance sheet, more equity funding in the balance sheet. We see continued leasing activity, but by the same token, our strong leasing activity of the second half of this year will be compared to a strong leasing activity on the second half of last year. I feel comfortable with the guidance so far. There is expectations of positive optimism, but I have to see more data to come in our hands.

We have a strong leasing activity. I am optimistic about the guidance. We will just have to wait and see. That covers the guidance. You had another question. Can you repeat the second one that you had?

It is regarding what was being the positive surprises you have seen, I think you kind of answered that.

Yeah. Well, pricing, as Loren has mentioned, prices have not adjusted at all since last year. We have strong pricing activity in all of our leases since last year and on this first half. You can see that in the re-leasing activity. We are re-leasing existing leases with very strong pricing increases to our existing tenants. We continue to see strong markets, and we feel comfortable that the market trends are going to continue over the second half and beyond of the year. We are very comfortable with the way the markets are behaving, and we are very comfortable with our ability to find new tenants.

Perfect. Thank you.

Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Your next question comes from the line of Felipe Barragan of JPMorgan. Your line is now open.

Hey, good morning, guys. Thanks for taking my question. I have a question on the costs. Today we saw oil rise 6%, 7% this morning. I just want to get a refresher on what you guys saw, given the recent volatility in oil, if you guys saw an uptick in the construction costs. Thank you.

Thank you, Felipe, on your question. [Non-English content], Juan, [Non-English content].

Construction costs, we continue to see our development spread solid as we put out on the development pipeline. We don't see any particular increments on cost that worries us. We underwrite very carefully our new buildings, and we continue to have a very good development companies that are bidding for the project. We feel comfortable to see spreads on development on the usual ranges. If construction costs go up, in particular, I will take a look at cement prices, given that cement is heavily influenced by energy. I think that given the market that we operate and the demand that we have and the firming up of the leasing spreads, I do think that we can adjust the pricing accordingly. We just have to wait and see. So far so good, I would say.

Got it. Thank you, Juan. Appreciate the color.

Your next question comes from the line of Anton Mortenkotter of GBM. Your line is now open.

Hi, guys. Thank you for taking my question, and congrats on your results. We are seeing somewhat divergent signals across the economy. Construction consumption trends remains relatively soft in several sectors, while real estate and construction activity shows some signs of resilience or growth. How do you reconcile these dynamics? More specifically, what are your clients seeing or how are they deciding to act on these trends? Thank you. Gracias.

Let me take a jab at that.

Go ahead. [Non-English content], Juan.

Look, the Mexican economy has mixed results. On some parts, we have seen softness, as you point out, but on some other parts, we see quite optimistic signals. Take a look at the import of capital equipment. Those continue to rise, and usually when that happens, it implies that the import of capital equipment will translate into more demand for space. Yes, these are divergent signals, but at least in our sector, we are optimistic, and this is what we see on the results of Vesta. We have a very strong pipeline. We have clients that are demanding space, and we see very firm prices on leasing activity. Hopefully, that would translate into a broader strengthening of the Mexican economy. At least in our sector, we are very encouraged.

I agree, Juan, maybe to elaborate further, I think that we cannot just look at the general numbers because there are some, I would say, mixed results on the economy. We have to have a closer analysis on what's going on our particular sectors and our industries. Actually, there has been a lot of disruption, and I think we're benefiting from being a company that anticipates to the demand coming from certain sectors. We're talking about AI, and Vesta is benefiting from it. Electronic sector, adjustments in global supply chains, regionalization of supply chains, even e-commerce that continues to expand in Mexico. For that reason, I think that Vesta is a good example that we have to be analyzed differently than the general economy.

On that regard, Vesta will continue to look into the opportunities and look what could make our company not only very resilient because we have shown that the structure of our lease agreements, the type of tenants that we got, the tenure of our leases, it makes our company or the investment very resilient. Also every now and then, when there's an opportunity, take advantage of those. For that reason, we got to analyze carefully what are the right signals and how Vesta can adapt and react to those opportunities, Anton.

Very useful. Thank you, Lorenzo and Juan.

[Non-English content].

Your next question comes from the line of Alan Macías of Bank of America. Your line is now open.

Hi. Good morning, thank you for the call. Just a quick question on if you have seen any positive measures taken by the federal government towards supporting the industrial real estate market in Mexico. Perhaps something in electricity or anything you have seen. Thank you.

Thank you. Thank you, Alan. Maybe the most important effort that the Mexican government is doing is focusing on USMCA. That's going to be critical, and that's incredibly important. Of course, the USMCA is not only related to economic and commercial matters. It now has a more complex situation where they need to deal with different, even political issues related to migration, related to drugs, related to crime, and many other political issues. However, they know exactly how important the manufacturing sector and the export sector is to the Mexican economy. They also know that our sector is very strong in terms of being able to attract private investment, that doesn't necessarily require much. It's not very intensive on public spending, which is also very important.

For that reason, we have seen a strong support in our sector coming from the different instances from the government, from foreign affairs, from the Secretariat of Economy, from the Ministry of Finance, and even the president understanding quite well the importance of industrial parks and the industrial sector for the overall economy. Hopefully, we continue to get that support, and with that, Mexico will continue to be a strong and a winning formula in terms of establishing new manufacturing operations, logistics, and continue to integrate in the North America supply chain.

Thank you.

Great. [Non-English content], Alan.

There are no further questions. I'd now like to turn the call back to Mr. Berho for his concluding remarks. Please go ahead, sir.

Thank you. Thank you, everyone, for your questions and for your continued support. We're very pleased with Vesta's performance in the second quarter. The results demonstrate the strength of our portfolio, the quality of our tenant relationships, and the value of our disciplined development platform. The market environment remains dynamic, but Vesta is in a strong position. Mexico continues to be a strategic destination for global manufacturing and logistics. Tenant demand remains active, particularly from higher-value industries that require quality infrastructure, energy availability, and long-term scalability. These are precisely the areas where Vesta is differentiated. We enter the second half of the year with confidence. Our balance sheet is strong, our land bank is secure, our development pipeline is active, and our team continues to execute. As always, thank you for your continued interest in Vesta.

We look forward to updating you on our progress in the quarter ahead, including at our 2026 Vesta Day in New York on November 11.

This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation

Ladies and gentlemen, welcome to the Vesta first quarter 2026 earnings conference call. All participants are currently in listen-only mode. A question and answer session will follow today's prepared remarks, and as a reminder, this call is being recorded. It is now my pleasure to introduce your host, Fernanda Bettinger, Vesta's Investor Relations Officer. Please go ahead.

Good morning, everyone, and welcome to our review of the first quarter 2026 earnings results. Presenting today with me is Lorenzo Dominique Berho, Chief Executive Officer, and Juan Sottil, our Chief Financial Officer. The earnings release detailing our first quarter 2026 results was released yesterday after market close, and is available on Vesta's IR website, along with our supplemental package. It's important to note that on today's call, management remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risk and uncertainty that may cause actual results to differ. For more information on these risk factors, please review our public filings. Vesta assumes no obligation to update any forward-looking statements in the future. Additionally, note that all figures were prepared in accordance with IFRS, which differ in certain significant respects from U.S. GAAP.

All information should be read in conjunction with and is qualified in its entirety by reference to our financial statements, including the notes thereto, and are stated in U.S. dollars, unless otherwise noted. I'll now turn the call over to Lorenzo Berho.

Thank you for joining us today and for your continued interest in Vesta. The first quarter marked a strong start to the year, with solid leasing momentum and stable portfolio performance despite ongoing global tensions. Importantly, as our results demonstrate, we're seeing not only continued activity, but growing conviction from our tenants. This was reflected in new leasing and expansions with existing clients, as well as with exciting new clients during the quarter. Our performance reinforces the strength of Vesta's platform and reaffirms our approach for 2026 and of our Route 2030 strategy, which is centered on expanding a well-curated, high-quality portfolio through disciplined development, leveraging our privileged land bank to capture demand. We believe value creation in our space is driven more by quality than size.

While we are seeing increased competition for stabilized assets, Vesta's differentiation lies in our ability to develop and operate a selective portfolio aligned with global best practices and the evolving needs of our clients. Let me briefly highlight the key drivers of Vesta's results. As I noted, leasing activity remains strong, with total first quarter leasing reaching approximately 1.6 million sq ft, including 1 million sq ft in new leases with best-in-class companies. Total portfolio occupancy reached 89.7% by quarter-end, while stabilized and same-store occupancy reached 93.4% and 95% respectively, reflecting the strength and stability of our tenant relationships. During the quarter, we saw strength in the electronics and aerospace sectors and also in AI-related data center infrastructure, which is becoming an increasingly relevant demand driver that will benefit from long-term structural tailwinds.

On the development side, our pipeline continues to convert into active construction, with Vesta projects breaking ground across key markets. This is further evidence of both improving demand visibility and the strength of our land bank, which is expected to support stabilization and gradual recovery of occupancy. Along these lines, as leasing activity continues to gain momentum, we have selectively resumed development. We launched two new projects in Mexico City and one in Tijuana during the first quarter, which brings our total development pipeline to approximately 1.6 million sq ft. Importantly, our approach remains disciplined and demand driven, prioritizing tenant-backed projects in high conviction markets. From a financial perspective, results remain solid. Total rental income increased to $76.7 million, while rental revenues reached $74 million, a 14.1% sequential increase.

Also, we've sustained strength across our key profitability metrics, including NOI and EBITDA. Let me now turn to the broader market environment and how we are seeing it reflected across our portfolio. Recent data has focused on rising vacancy in certain regions, particularly in the north. However, what we're seeing is better characterized as a correction, not a structural slowdown or decline in underlying demand. Markets such as Tijuana reflect more uneven dynamics, but it's important to note that this is largely due to supply from less experienced developers. Vesta's high-quality, infrastructure-ready buildings continue to outperform, reinforcing our focus on portfolio quality. We're leveraging our strength in this market and launched a new project in Tijuana during the first quarter. New construction starts in key markets such as Monterrey have declined significantly year-over-year, reflecting a market that is adjusting quickly. In Mexico City, fundamentals remain strong.

According to CBRE, Mexico City gross absorption reached approximately 6.7 million sq ft during the quarter, with pre-leasing accounting for most of the activity and more than half of new supply delivered already pre-leased. This dynamic reinforces both demand depth and forward visibility across this market. It has also led us to launch the two new projects in Mexico City, which I have described. In Guadalajara, we are seeing healthy demand, particularly from electronics and technology-related tenants, a key driver of activity in the market. During the quarter, we successfully pre-leased the two Vesta buildings under construction, underscoring the strength of underlying fundamentals and the sustained momentum we're seeing in the region. Let me now turn to how we are executing against this environment. Our strategy remains consistent. Vesta will grow through a high-quality, well-created portfolio developed with discipline and aligned with the long-term demand.

As I have commented, our focus is on portfolio quality, not scale, ensuring that each asset meets the highest standards of infrastructure, energy, and operational performance. This is particularly relevant in the current environment. Despite the competition for stabilized assets we're seeing, we believe there is greater opportunity in selective development where we can create value and differentiate through product quality and tenant alignment. Before I conclude, let me briefly touch on our capital position and outlook. As Juan will discuss, we continue to operate with a strong and flexible balance sheet, maintaining a disciplined approach to leverage and liquidity, which enables us to execute our strategy while navigating uncertainty. Capital allocation remains selective, with a focus on high-quality projects supporting efficient growth. In closing, we are highly confident in our outlook. While near-term uncertainty persists, the underlying structural drivers underpinning our business are stronger than ever.

Tenant activity continues to be robust. Foreign direct investment is maintaining strong momentum and manufacturing exports are at record levels. At the same time, higher-value industries such as electronics, aerospace, semiconductors, and data infrastructure are accelerating demand for Vesta's premium properties. We also expect a more favorable interest rate environment together with greater clarity around USMCA to support activity in the quarters ahead. Let me now turn the call over to Juan to review our financial results in more detail.

Thank you, Lorenzo. Good day, everyone. Let me start with a brief overview of our first quarter results. On the top line, we delivered a solid start of the year, with total revenues increasing 14.4% to $76.7 million, primarily driven by rental income from new leases and inflationary adjustments across our portfolios. In terms of currency mix, 88.9% of first quarter 2026 rental revenues were U.S. dollar denominated, compared to 89.7% in the same period last year. Turning to profitability, adjusted net operating income increased 13.4% to $74.7 million. Our adjusted NOI margins decreased 52 basis points year-over-year to 95.1%, reflecting higher operating property costs relative to rental revenues in the quarter. Adjusted EBITDA totaled $62.1 million, up 12.4% year-over-year, while margin contracted by 130 basis points to 83.9%, primarily driven by higher operating and administrative expenses during the quarter.

Vesta's FFO, excluding current tax, was $43.1 million, compared to $45.1 million in the first quarter 2025. The decrease was primarily due to higher interest expense in the first quarter of 2026, compared to the same period in 2025. We closed the quarter with pretax income of $97.9 million, compared to $28.6 million in 2025. This increase was primarily due to higher gains in the revaluation of investment properties, higher interest income, and higher other income. This was partially offset by higher interest expense, reflecting an increase in the debt balance during the period, along with the increased foreign exchange losses and other expenses. Turning to our balance sheet, we ended the quarter with $206 million in cash and cash equivalents and total debt of $1.2 billion. Net Debt to EBITDA stood at 4.1x, and our loan-to-value ratio was 26%.

Down from the 28.1% at the year's end, reflecting the prepayment of the remaining $180 million MetLife III facilities. As of the end of the first quarter, we have no secured debt, with 100% of our debt denominated in U.S. dollars and 87.2% of our interest rate exposure on a fixed rate basis. Finally, consistent with our balanced capital allocation strategy, on April 22, 2026, Vesta's shareholders approved a $74.8 million dividend for 2026, representing a 7.5% increase year-over-year. On May 5th, we will pay a first quarter cash dividend. This concludes our first quarter 2026 review. Operator, could you please open the floor for questions?

We will now begin the question and answer session. Our first question will come from the line of Piero Trotta with Citibank. Please go ahead.

Hi, Lorenzo, Juan, and Fernanda. Thank you for the call. I have two questions. The first one is about the development in Tijuana. Given this start, could you elaborate to us on the key conditions that supported the decision to move forward with this project in a market where vacancies remain high? More specifically, what metrics or market signals are you monitoring most closely when allocating capital in Tijuana? Just to understand, as we see in the market of Tijuana, around 16% vacancy, and even in Vesta's portfolio is around 13%. What are you looking at when you are starting a new project in the region? The second one is about leasing spreads that remain positive at around 9%. I would like to understand how should we think about the sustainability of spreads from here as supply-demand dynamics continue to evolve across your markets.

Just to understand on this one. Thank you.

[Foreign language], Piero. Thank you very much for your question and for being on the call. Well, definitely this is a good quarter to start the year. I would like to highlight that, as mentioned before, Vesta will, little by little, start development in certain markets, certain projects. We did good land acquisitions last year, and that's why we start again with projects in Mexico City, as well in Tijuana, with the ones that we started before in Guadalajara and Querétaro. The Tijuana project, it's a continuation of our existing project mega region. As you remember, we did a land acquisition on adjacent land to develop the second phase. We did the land improvements last year, and today we're happy to be able to now start the first building of the second phase.

It will take us pretty much the rest of the year to conclude the building to be developed. The reason of developing it is because we believe we have a good pipeline from either existing clients or potential clients that want to be established in a state-of-the-art industrial park in a good location where you can have good access to labor, good access logistically, and very importantly, good access to energy. That's what we already have in our park in Tijuana. I understand that there's other vacant spaces in the Tijuana market. However, we know that none of them are so well located as this one, and that's a key advantage. There has been some new vacant buildings in other sub-markets of Tijuana. In many places actually, that lack energy, they lack logistic accessibility, and they also lack labor.

That's why they will probably remain for a longer period of time available until they find the right client. There's many, I would say, inexperienced industrial real estate developers. That's why we feel comfortable with the type of buildings that we develop, and we think that eventually these will turn into a successful project in a market that we know quite well. Secondly, on your question on spreads. Well, I think that the spreads will continue to be in a 10%-13% range somehow. This quarter was slightly lower just because of maybe the combination and computation of previous quarters. In the end, I think going forward, and we have stated this before, we think that over time we will continue to see double-digit growth in terms of spreads.

We have had some interesting re-leasing spreads throughout the quarter of projects in the 20%-50% range, which is quite attractive. I think that together with some of the new leases that have been signed also in some cases with rents 30%, 40%, 50%, depending on the market. This trend will continue. We see very strong rent levels in most of the markets, and in some markets, very strong rent growth still. We are confident that that will continue to be the same situation going forward. That continues to be a main driver of value for our existing portfolio with our existing clients and tenants, and we think that going forward, we will continue to see this positive trend.

Okay. Thank you very much.

Our next question will come from the line of Gordon Lee with BTG Pactual. Please go ahead.

Hi. Good morning. Thank you very much for the call. Just a quick question, and it's more of a general sector question. As you mentioned, there's a potential for pretty significant consolidation in the sector, which obviously, that's not something that you look at. Your business plan is different. I was wondering generally, Lorenzo, how you feel about consolidation in the sector, particularly this type of consolidation. Would you generally say that's good for better competitive dynamics or a bit more discipline on the ground? Specifically, do you think that might have also a positive effect in terms of discipline around development? Thank you.

Thank you. Thank you, Gordon, for your question. It's quite interesting, the market dynamics and what we have been seeing from a capital market perspective. I believe that, in some ways, this is a broader strategy from some global players that are active in Mexico, that actually, maybe their strength is on capital markets more than being on the local ground and having access to tenants as well as access to development at higher returns. That's why I think that's a particular strategy for some of them. I think this is an industry that is very intense in capital, and I think that seeing that there's a lot of capital chasing for transaction, chasing portfolios, even sometimes regardless of the type of assets they hold, because sometimes they don't even match the original consolidator assets.

In the end, I think it's more the appetite of having industrial assets and being larger consolidators. I think that we will continue to see that going forward. As long as there's strong capital chasing for attractive assets, I think that will continue to be the case. Also, I think it's relevant to consider that it sets pricing to transactions. Even for some assets that I believe are maybe below the quality of the Vesta standards, having those prices, I think it sends a good signal on the opportunity that we see in our own assets. That, remember that Vesta, we selectively define which markets we invest in. We're very mindful of the quality of assets we develop. We also strategically define the type of tenants. Over long term, we think that that makes our assets be way more valuable.

I think that for that reason, these consolidations create an attractive baseline of reference so that we can have some sort of comparables to our own valuations.

If I could just have a quick follow-up, do you think it has any implications, positive or negative, on competitive dynamics or development discipline for the sector as a whole, or no? Do you think your day-to-day would be unchanged regardless of what happens?

Frankly, most of these consolidators do not have development capabilities. I think it's only worth for certain merchant developers, but in the end, I think that we will continue to have our own discipline in terms of development. I think this will keep some of the acquirers more distracted in their own acquisition strategy, and I don't see them very active on the development.

Perfect. Makes sense. Thank you.

Our next question will come from the line of David Soto with Scotiabank. Please go ahead.

Hi. Good morning, and thanks for taking my question. Just a quick one. It's related to your microgrids. It would be great if you could tell us in which regions are you currently developing this kind of facility, and what are the challenges that you are facing to develop these kind of facilities within your industrial parks?

Do you mind repeating the question, David? Thank you.

Yes, of course. It's related to your microgrids. It would be great if you could tell us in which regions are you currently developing these kind of facilities, and which are the main challenges that you are facing?

Thank you. For which type of assets you mentioned?

For the assets that you are currently developing, if you are having this kind of development of microgrids within them?

Okay, David. Maybe if I understand correctly, the question is on which markets we might be developing. Well, currently we started a few projects in Mexico City in the land acquisition that we did last year. This is in the Cuautitlán corridor, a very attractive market that has shown growth, particularly coming from logistics as well as e-commerce and rental, and we continue to see rental growth. That's why returns are quite attractive, and for that reason, we believe that developing spec in the area is very appealing. We started a building in Tijuana, and very soon we will start also development in Guadalajara. As you could see in our report, we were able to lease the two projects that we had under construction, and we're happy to continue to see growth and demand coming in the electronics sector particularly.

Also this market has shown also strong dynamics in the logistics and e-commerce sector. Hopefully soon we're going to start some spec building similar to what we have done in the past in the Vesta Park, Guadalajara. We're confident that with the land acquisitions we did last year, we're going to repeat the success that we have previously in the Vesta Park, Guadalajara 1. Also, we acquired land recently in Monterrey, in La Palma, in Juárez, and these two markets are the ones that eventually we will also start developing spec buildings or build-to-suit projects. We have had good progress in the permitting licensing, and little by little, as long as we start seeing a strong momentum on the leasing, we will start buildings, and will be a strong signal that the markets are permitting again to have some projects.

This is mainly driven by the pipeline that we have been generating. We have definitely seen stronger demand from different sectors, particularly the ones related to electronics, the ones related to AI, to data center infrastructure, as well as e-commerce, logistics, and medical devices, to name a few. That's pretty much in most of the markets. We see that clients as well as potential new clients have regained confidence in their expansions. Many of these clients have had record high numbers in terms of production, and certainty is coming back again for them to continue expanding and continue opening up new operations in Mexico.

Our next question will come from the line of Anton Mortenkotter with GBM. Please go ahead.

Hi, guys. Congrats on your results, and thank you for taking my question. I have two quick questions. One is, you already mentioned a little bit of the dynamic that you saw that made you start the developments, but I was wondering if there is any specific sign that the market gave you in order for you to decide to move now and reactivate so strongly the development. That is one. The other one is, with all of these newly announced developments, it's getting close to the cash balance that you already have. How are you thinking about funding capacity from here? Specifically, do you see any need or opportunity in the near term to tap either the debt or equity markets?

Thank you, Anton, for your question. I think definitely we have internal metrics that we monitor in order to identify where we should be starting a project. Maybe just to use a positive example is the projects in Guadalajara that we started construction end of last year. We started without having a lease signed, but we identified that there was demand coming from certain sectors, and that's why our decision was to anticipate to those clients by starting construction soon, so that in the meantime, while we are under development, we could be able to close with the potential demand that we saw. This quarter, that's exactly what happened. We closed, again, we pre-leased with two current existing clients of Vesta that continue to grow and require flexible space, the standards that we have developed in the past.

Those particular metrics are the ones that we follow every time we start a building. Again, Mexico City, good dynamics. We have had some good success with the e-commerce clients. We think that there will continue to be demand for that. We feel comfortable with that start for a project that will be eventually developed at some point, end of the year. Again, Tijuana is a similar situation. Even though we have a few buildings available right now, which we are in a marketing stage. They're both in different regions of different sub-markets in Tijuana, different dynamics, and that's why starting a new building in this region makes sense because of some potential demand that we are already identifying. I think that this strategy has played out well.

In other markets, we continue to have a few buildings that we are in the marketing stage, but we're confident that this will continue to be a good year and good absorption, and we think that we'll continue to see good absorption. This is actually the third quarter in a row that we see strong demand and good absorption. I think that compared to, let's say, the start of last year, which the uncertainty was incredibly high and projects were pretty much, all of them, on hold. I think that dynamism has changed effectively end of last year and with a strong start of the year of clients looking for high-quality buildings with good reputation landlords where they can establish their new long-term operations and make their own investments in different sectors.

As for the balance sheet, well, look, we have a very strong balance sheet, and we will always be flexible and keep our options open. We have $200 million in cash. We have a low leverage, so we will tap the market whenever possible, and we can sell properties. We can do equity. We will always be flexible, and we'll see, as we continue to grow, what is the best market to tap. Remember, all of this was mentioned on the 2030 plan, and we have a long-term vision, and we will always take decisions that balance out the alternatives and balance out the capital requirements of the company. We're very flexible.

Super. Thank you very much.

Our next question comes from the line of Adrian Huerta with JPMorgan. Please go ahead.

Hi, everyone. Hi, Loren. I have two questions. One is if there's any opportunities for asset recycling. Are you looking for potential asset sales? The second one is how the yield on cost is today, given movements on construction and land cost relative to what you can charge on rents.

Thank you for your question, Adrian. On the second question, I think that the yield on cost continues to be very attractive in the 10% range, even in some cases, even higher than that. I think that one of the largest benefits to that has been our ability to acquire land at a lower cost basis. I think that we were very opportunistic last year and strategic so that we were able to acquire land at $0.70 to the dollar, and that's how, together with our ability to get competitive construction costs and with still attractive market rents, that's how we can be able to close a double-digit yield on cost. We're doing deals in Mexico City at 9.8% yield on cost, close to 10%. In other markets, even at 10.5%-11%, such as Querétaro, Tijuana, for example.

I think that our experience as developer and managing well the construction process and construction competitive process, I think that that's giving us an edge so that we can make high returns. More importantly, Adrian, is not the ability to make 10% return on costs, but it's the spread on the investment that we can make since we believe that properties in the larger portfolio environment that we're seeing are transacting at 7.5%-8% range. We think that assets similar class to Vesta could be trading closer to a 6%. Developing at a 10% and stabilizing at around 6%, that's a lot of spread, and this is exactly the value proposition that we have for our shareholders.

Look, as far as capital recycling, building recycling, we will always be open to do that. I think that we have been successful in selling parts of our portfolio at a higher than asset valuation value, and we will continue to look at those opportunities.

We do selectively. It's different to some of the FIBRA that they need to dump a lot of the assets they have recently acquired because they don't match their strategy. We don't need to do that. We sell selectively. Every now and then, we want to only make a scope to our portfolio. Frankly, we invest, we develop to hold, and we invest long-term, and every now and then, opportunistically, we sell.

Thank you, Loren and Juan.

Our next question, we'll go from the line.

Just to add on that, I think our discipline is a good example. We like to sell above net asset value above valuations where we believe we can actually create a premium and make a good profit. I think a good example has been in the past where we have sold 10%-20% above appraised value in the private market, and then we have been able to develop again at a 10%. I think that's the approach in terms of capital allocation. I think that's a discipline that we will continue to see going forward, and I think that's a main differentiator on Vesta. Sorry for the interruption. Thank you.

Thank you. Our next question will come from the line of Rodolfo Ramos with Bradesco BBI. Please go ahead.

Thank you, Lorenzo, Juan, for taking my question. I only have one left, and it's a follow-up on Gordon's on the consolidation angle here. Just to get a sense of the impact that you could see, if any, particularly in the northern markets, let's say Tijuana, Juárez, if further consolidation takes place, whether you think that this has any impact on your commercial efforts or on the lease spreads that you're able to get through. Maybe perhaps on the positive side, whether a more consolidated market might just lead to better discipline on that front. Thank you.

Thank you. Well, I think that industrial real estate in Mexico, it's a very fragmented sector. There's really no dominance from any player in any of the markets. I think that actually many of these consolidations, if you look carefully, most of the acquisitions are done in secondary and tertiary markets. Markets where actually we do not operate and are quite small. In the end, some of them, there's an overlap, but the majority is in secondary and tertiary markets. I don't think this could have a major impact when it comes to marketing certain regions as the ones that you mentioned. I don't know exactly what might happen with those secondary and tertiary markets, because in many of them we're not that active.

Yeah. Thank you.

Our next question will come from the line of Carlos Peyrelongue with Bank of America. Please go ahead.

Thank you. Thank you for taking my question, Lorenzo and Juan. Total occupancy remains stable at 90% in the quarter. Your expectation for this year is for this level to be maintained, or do you expect some increase? In that case, which markets do you think would drive that potential increase in occupancy?

Look, well, we generally don't project occupancy forward looking, which is not a guidance item. However, we're very optimistic of the market dynamics, as Lorenzo mentioned. I think that we will have good absorption in the quarters to come.

In terms of markets.

In the market.

Sorry.

The market.

Mm-hmm.

To be specific, currently we're in a marketing stage in Monterrey in our Apodaca project, and that's gaining strong momentum. We feel confident that we're going to see some good absorption in the next months, in the next quarters, and that will have a very positive impact in occupancy. As you mentioned, it has stabilized, and I think there's an opportunity to see an upward trend. We will continue to see demand. That's Monterrey will recover soon. Also in some markets in the Bajío, which have shown resilience, particularly in Querétaro. Actually, in some of the cases, we have good quality buildings, where sometimes we rather wait until we have a good tenant. We think that our projects as well as our parks are in good locations with good energy, infrastructure, with good quality buildings, again, good access to labor.

We think that eventually that will impact positive absorption and with that, have a positive impact on occupancy.

Good. Thank you, Lorenzo and Juan.

[Foreign language]

Before we take our next question, a quick reminder. To ask a question, simply press star one. Our next question comes from the line of Igor Machado with Goldman Sachs. Please go ahead.

Hi, team. Good morning. Thanks for taking my questions. First one is a follow-up on construction costs. Could you please comment, if given the ongoing conflict in the Middle East, are you seeing inputs already increasing in price, and do you have any means to understand how could this impact your costs? The second question is on the material exit in sales for SLP. Could you comment on what drove this? Is this low enough, and if you could please comment on how you're seeing the demand on the Bajío region too.

Excellent. Thank you for your question. Regarding marketing in San Luis Potosí. San Luis Potosí is a smaller market for Vesta. However, we have a project which is next to the BMW plant of San Luis Potosí. This market has a strong dependence on the auto industry, and I think that last year was quite slow. As we start seeing a little bit of some adjustments in the production lines of them, as well as other auto manufacturers, we think that there will be a better demand throughout this year, and with that, create a bit more absorption. We have a good quality project. Again, right next to BMW. We already have good tenants, but definitely, it's a slower market. It should not have a major impact on the overall strategy for Vesta.

On your construction cost, well, definitely that's something that we are monitoring carefully. What are the implications of the conflict in the Middle East on the construction cost? However, we have not seen any larger adjustments, so that could have a negative impact on construction. Nevertheless, I think that what is important to monitor is not only construction costs, but also FX, because we calculate everything on a $1 per sq ft basis. Even with that, I think that Vesta has been able to absorb well some fluctuations. Also, some of the projects that we have already started construction, we do them on guaranteed maximum price. Even if there's fluctuations in the pricing throughout the construction process, that is not impacted to our final cost because we have already guaranteed the price. That's kind of the natural process to it.

There are no further questions. I'd now like to turn the call back over to Mr. Berho for his concluding remarks. Please go ahead, sir.

[Foreign language]. In closing, we continue to deliver on the important milestones of our Vesta 2030 strategy, anchored in portfolio quality, discipline execution, and long-term value creation. Market dynamics are strong, particularly for high-quality, infrastructure-ready buildings, where demand continues to show resilience. This reinforces our confidence in the near-term outlook and our ability to capture incremental opportunities as activity continues to build. Against this backdrop, we remain committed to executing with discipline and expanding a well-curated platform to capture long-term demand. Along these lines, we look forward to sharing important updates, also on progress related to our Route 2030 strategy at our 2026 Vesta Day, to be held in New York on November 11. As always, thank you for your continued support. Goodbye.

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