FIBRA STORAGE
Fitch Ratings has affirmed
The Rating Outlook is Stable. In addition, Fitch has affirmed Fibra Soma's senior unsecured issuance due 2031 at 'BBB-'.
The ratings reflect Fibra Soma's market position in the Mexican real estate industry focused on the high-end retail/commercial properties, as well as office spaces and hotels. The ratings also reflect the company's strong operational performance and Fitch's expectations that Fibra Soma will continue to execute on its growth strategy while stabilizing its net leverage ratio below 6x over the next couple years, while keeping a significant unencumbered pool of assets and low Loan-to-value (LTV). Fitch also factors in the expectation that the company will continue to maintain solid levels of unused committed credit lines as an additional source of financial flexibility.
Key Rating Drivers
Adequate Business Position: Fibra Soma's strong business position in the Mexican Real Estate Sector is supported by its difficult to replicate diversified asset based located in prime locations/ regions with growing economic activity and visitor flow. The company's portfolio is focused primarily on high-end shopping malls, in addition to office spaces and hotels. The company's portfolio consists of 10 fully operating assets, comprising over 465,000 sqm of Gross Leasable Area (GLA), with eight in the pipeline, expecting to add over 330,000 sqm of GLA by YE 2026. The company's expected income by segment as its development assets come online is 63% attributed to retail, 20% to offices, and 17% to hotel. Six of the operational properties are held through joint ventures with partners such as
Expansionary Strategy: Fibra Soma continues to develop new properties to tend to its growing customer base, especially in high-end areas. Last year, the company successfully incorporated the remaining 27.4% of Artz, a mixed-use asset (Soma now owns 100%), which has a GLA of 111,183 sqm, with a shopping mall and three office towers in operation. Additionally, in
Improving Capital Structure: Fitch expects the company's net leverage measured as total net debt/ EBITDAR after associates to stabilize to below 6.0x by 2024, as aforementioned developing assets become operational. Fitch does not expect the company to make dividend distributions in the next few years, as it executes on developing wholly owned and joint venture assets. Around 210,000 square meters will be added to the portfolio by YE2024 (consolidated basis), of this, 12,000 sqm are to have full year contributions by 2024, and 198,000 sqm to have a full year contribution in 2025. As of
Adequate Contract Base: Fibra Soma's contracted position is strong and well diversified, mitigating income concentration risk. Its contracted position is well laddered with 20.4% of its contracts expiring in 2023; 26.5% expiring in 2024; 20.0% in 2025 and 33.1% after 2026. The company's top-10 tenants represent 33.1% of its lease GLA and 27.7% of its rental income. Fibra Soma successfully managed to renew more than 95% of the leases that expired in 2Q23 with positive leasing spread rates at around 6%-8% over inflation.
Recovered Retail Operations: In terms of cash flow, Fibra Soma's operations in the retail segment are fully recovered from pre-pandemic levels, with 98% occupancy, improved same store sales for tenants and increased foot traffic. The sector is expected to continue adjusting to consumer preferences, with operators managing investment strategies to increase cash flow generation and operating margins. When development assets become operational, it is expected that retail spaces will represent 72% of total GLA and around 63% of total income (including JVs). These contracts are denominated in Mexican pesos and are adjusted annually for Mexican inflation.
Derivation Summary
Fibra Soma's 'BBB-' rating compares well with other Mexican real estate peers in the 'BBB' rating category such as
Fibra Terrafina and Vesta's larger asset bases are in the more resilient industrial segment, while the two peers and Soma all have similar capital structure with net leverage expected to be below 6.0x in the next few years. As of 2022, unencumbered asset was
Key Assumptions
Occupancy levels around 97%% during 2023-2025;
Fully owned properties GLA growing by 60,000 sqm by YE2024;
JV's proportional GLA growing by 147,000 sqm by YE2024;
No dividend distributions over the rating horizon;
EBITDA margins averaging 53% at the Fibra Level over the next few years.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Asset diversification;
Net leverage consistently below 5.0x;
Unencumbered assets-to-net unsecured debt coverage consistently around 3.0x;
Recurring Interest Coverage consistently above 2.5x;
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Net leverage consistently above 6.0x on a sustained basis;
LTV above 40%;
Unencumbered assets-to-net unsecured debt coverage consistently below 2.0x;
Recurring Interest Coverage consistently below 1.7x;
Failure to maintain consistently expected levels of committed unused credit lines plus available cash above
Liquidity and Debt Structure
Solid Liquidity: Fibra Soma has a sound liquidity base supported by strong cash on hand, strong cash flow generation, unencumbered asset base, manageable debt amortization profile and unused committed credit lines. As of
Fibra Soma's unencumbered asset to net unsecured debt coverage is viewed as solid at was 3.8x as of
Issuer Profile
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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