Earnings call transcript: LPA Q1 2025 sees 12.9% revenue rise and strong occupancy

LPA, a key player in the logistics and real estate sector with a market capitalization of $651.2 million, reported a solid start to 2025 with a 12.9% increase in revenue for the first quarter, reaching $11.8 million. The company’s net operating income rose by 6% to $9.4 million. The stock’s last recorded value showed a modest increase of 2.46% to $6.10, reflecting a positive market response. According to InvestingPro, the company maintains an impressive dividend yield of 15.08%, making it particularly attractive to income-focused investors.

Key Takeaways

• Revenue increased by 12.9% to $11.8 million.
• Net operating income grew by 6% to $9.4 million.
• A new building in Lima is 73% pre-leased before construction.
• The company expanded its footprint with a joint venture in Puebla, Mexico.
• Occupancy rates in the operating portfolio reached 100%.

Company Performance

LPA demonstrated robust performance in Q1 2025, driven by strong revenue growth and high occupancy rates. The company’s strategic investments in logistics and real estate, particularly in Latin America, contributed to its positive results. The expansion in Lima and a joint venture in Mexico highlight LPA’s commitment to strengthening its market position. InvestingPro analysis reveals the company has maintained dividend payments for 17 consecutive years, though analysts anticipate some sales decline in the current year.

Financial Highlights

• Revenue: $11.8 million, up 12.9% year-over-year.
• Net Operating Income: $9.4 million, a 6% increase from the previous year.
• Average rent per square foot increased by 1.9%.
• Stabilized occupancy rate reached 98%.

Market Reaction

LPA’s stock price showed a positive reaction, increasing by 2.46% to $6.10. This growth aligns with the company’s solid financial performance and strategic initiatives. Based on InvestingPro’s Fair Value analysis, the stock appears undervalued, with analyst price targets ranging from $11.50 to $15.00. The company maintains a FAIR Financial Health Score of 2.26, suggesting stable fundamentals despite current market positioning.

Outlook & Guidance

LPA is optimistic about its future prospects, expecting additional net operating income growth in 2025. The company plans to maintain a disciplined investment approach in Mexico, focusing on logistics assets. While LPA’s strong pipeline of investment opportunities positions it well for sustained growth, InvestingPro data shows some near-term challenges, with analysts revising earnings expectations downward for the upcoming period. Discover more insights and detailed analysis in InvestingPro’s comprehensive research report, available along with 8 additional ProTips for this stock.

Executive Commentary

CEO Esteban Sander Reaga expressed confidence in the company’s trajectory, stating, "We began 2025 with strong momentum and we’re maintaining that trajectory today." He emphasized the company’s strategic focus on logistics and the limited supply of Class A EDGE-certified facilities as key growth drivers.

Risks and Challenges

• Potential economic fluctuations in core markets like Peru and Mexico.
• Increased general and administrative costs due to public company requirements.
• Market saturation risks in logistics and real estate sectors.

LPA’s strategic focus and robust performance in Q1 2025 indicate a promising outlook, despite potential challenges in its operating environment.

Full transcript - Two (LPA) Q1 2025:

Operator: Good morning, and welcome to LPA’s First Quarter twenty twenty five Earnings Conference Call. My name is Audra, and I will be your operator for today’s call. At this time, all participants are in a listen only mode. And please note that this call is being recorded. There will be an opportunity for you to ask questions at the end of today’s presentation.

Now I would like to turn the call over to Mr. Camilo Ioja, Investor Relations. Please go ahead, sir.

Camilo Ioja, Investor Relations, LPA: Welcome to LPA’s first quarter twenty twenty five earnings conference call. My name is Camilo Ioja with LPA’s Investor Relations team. Joining me on today’s call are Esteban Sander Reaga, our Chief Executive Officer and Paul Smith, Chief Financial Officer. Before we proceed with a review of LTA’s financial and operating results, please note that the information presented during this call is intended for informational purposes only and does not constitute an offer to buy or sell any securities. Forward looking statements made during this call are subject to a number of risks and uncertainties, which are discussed in LPA’s filings with the SEC.

Our actual results, performance and prospective opportunities may differ materially from those expressed or implied in these statements. We undertake no obligation to update or revise any forward looking statements after this call. We have prepared supplemental materials that we may reference during the call. We encourage you to visit our website, ir.ltamericas.com, to download these materials. Esteban will begin today’s review.

Esevan, please go ahead.

Esteban Sander Reaga, Chief Executive Officer, LPA: Thank you, Camilo, and welcome, everyone. Thank you for joining our earnings call. LPA’s growth accelerated in the first quarter with revenue increasing 12.9% to $11,800,000 and NOI growing almost 6% to $9,400,000 Leading this growth was Peru as we continued cultivating our existing customers and deepening our relationships with them. These are regional and global companies operating as third party logistics providers, such as Switzerland based Kununaga, that continue expanding in Peru, which is a thriving domestic economy, thanks to strong consumer spending trends and highly favorable e commerce tailwinds. The country currently enjoys low inflation, minimal government debt, and low unemployment, with foreign trade bolstered by high performing mining commodities like copper and gold.

As such, Peru hasn’t been identified as a target for U. S. Tariffs nor have our other foundational markets, Colombia and Costa Rica. They also have similar healthy economic profiles and trends, and their operations in both countries also contributed to a revenue growth in the first quarter. Returning to Peru, at our Lima Sur Park, which consists of six buildings totaling around 1,300,000 square feet, we signed a new lease during the quarter with one of our long standing global customers, a leading logistics company that also leases space from us in Colombia.

This lease brought our entire operating portfolio of 5,600,000 square feet to 100% occupancy, marking a major milestone that further strengthens the long term value of our regional platform. Rental revenues from these recent contracts have not yet been fully reflected in our cash flow statement, but will begin to be over the coming months as customers settle into their space. On the development front, as we announced last month, we will increase our footprint in Lima with the construction of a 215,000 square foot building at Parque Lohisti Cucalla. Reflecting discursity of premium logistics facilities in the market, this planned building is already 73% pre leased even before construction started by repeat customers, one of which is Peru’s largest consumer products company and the other, the country’s largest pharmacy chain. Consistent with our business model, these are dollar denominated leases.

Keep in mind that once completed, Arcadia Park will eventually comprise of four premium buildings totaling over 1,000,000 square feet with only one last pad pending lease up and development launch. It’s a price location, one that’s adjacent to Lima’s International Airport, serving more than 10,000,000 people in the capital city, roughly a third of the country’s population, and which also provides seamless connectivity to the maritime port of Fajao. This location exemplifies the high barrier nature of our foundational markets where ownership of land is often fragmented, making land acquisitions difficult for development purposes. In this case, we worked with an institutional concessionaire that needed a strategic partner like LTA, a trusted institutional level player with a demonstrated track record and a strong reputation for development and operational excellence. LPA is a clear partner of choice for customers evidenced by GLA expansions by companies already in a rent roll.

And growing with our clients also means serving some of those that are expanding in Mexico. It’s a country with a far larger economy, and it’s a new avenue of long term growth

Paul Smith, Chief Financial Officer, LPA: for

Esteban Sander Reaga, Chief Executive Officer, LPA: LPA. Put another way, we intend to replicate our success there. Of course, we are mindful of the uncertainty around emerging U. S. Tariff policies and their potential impact on Mexico’s nearshoring sector, Which policies will be ultimately implemented and what their impact might be can be predicted at this time.

But we remain constructive on this country in the medium and long term. In the meantime, our approach to investment in Mexico remains disciplined, methodical and highly selective. We will avoid sectors heavily reliant on certain targeted exports, focusing instead on growing demand for logistics space in key submarkets, demand that’s driven by resilient domestic consumption, similar to the favorable economic dynamics of our foundational markets. By way of example, 39 new investments were announced during the first quarter according to Mexico’s Economy Ministry. Of the nearly $26,000,000,000 in aggregate investment, 43% is commerce related, reflecting a shift toward projects aimed at the domestic market amid the growing uncertainty about the export sector.

Our recent example of this is DHL’s one hundred and twenty million dollars expansion at its air hub in Queretaro. As a reminder, we intend to work with Mexican partners who have deep relationships in the country as well as crucial local market knowledge and expertise. Our first investment through LPA’s joint venture with Falcon will give us a controlling interest in two logistics assets located in Puebla, giving us a strategic foothold in Mexico as well as DHL as an anchor customer. As mentioned on our previous earnings call, we are making steady progress towards completing this transaction. We have successfully established our Mexican legal entities, completed due diligence, the asset is performing in line with expectations, and we anticipate announcing the closing soon.

With that, I’ll pass the call over to Paul, who will expand a bit on our first quarter results.

Paul Smith, Chief Financial Officer, LPA: Thank you, Stefan, and good morning, everyone. I’ll provide a few additional highlights of our first quarter performance, which was largely in line with internal forecast and reflects the strong underlying fundamentals of our regional platform. As explained in our earnings release, in addition to the stabilization of two facilities in Peru as well as a building in Costa Rica, Rental rate increases contributed to our double digit revenue growth. Compared to the first quarter of twenty twenty four, average rent per square foot increased 1.9% across our property portfolio. As Stephen noted, Peru, which represents 29% of LPA’s portfolio GLA, grew much of the quarter’s revenue increase.

Its rental income grew 38.4. Revenue from Costa Rica, which accounts for 47% of our property portfolio, increased 6.1%, while the remaining 24% of our portfolio in Colombia delivered a 2.6% revenue increase. Helping protect future revenue streams are mostly dollar based rents, inflation indexing as well as remaining lease terms, the weighted average of which is five years for our property portfolio. Compared to last year, our lease GLA grew 5.9%, and we finished this quarter with a stabilized occupancy rate of 98%, which reflects the highly favorable supplydemand imbalances in our target markets and our strong customer relationships that both support this level of operating efficiency. Our G and A increased 112%, mainly due to higher professional services and D and O insurance expenses that are required of public companies as well as share based compensation and increased headcount to support LPA’s growth.

Our financing costs decreased 5.6% versus first quarter twenty twenty four as we secured lower interest rates on LPA’s existing debt. Net debt to adjusted EBITDA also improved, decreasing 30 basis points over the same period. Additionally, LPA maintains a healthy maturity profile with no significant amount of debt coming due in the near term. Lastly, given LPA’s share price, we continue repurchasing our ordinary shares, acquiring another $800,000 worth during the quarter and bringing total buybacks to 2,100,000 as of quarter end. That concludes our first quarter review.

Operator, please open the call for any questions.

Operator: Thank you. At this time, we will open the floor for your questions. We’ll go first to Andre Mazzini at Citigroup.

Andre Mazzini, Analyst, Citigroup: Yes. Good morning, Esteban and Paul. Thanks for the call. So two quick questions. The number one, from what I heard you guys saying, it seemed to me you guys want to shy away from light manufacturing in Mexico, at least at this moment.

So would it be all light manufacturing or only the auto sector which seems more affected by tariffs and of course you guys are excited with logistics in general. So this is the first one on Mexico and the other one more broadly on all geographies. So are tenants still on a wait and see more regarding tariffs? Or do they think that the tariff situation is stable in the geographies you guys are located and leasing is on a normal basis, if you will, there’s no uncertainty that’s hampering the animal spirits of tenants? Thanks.

Esteban Sander Reaga, Chief Executive Officer, LPA: Thank you, Andre. Nice to hear you. On your first question, yes, I think we want to prioritize logistics assets in Mexico First, which is our bread and butter. Longer term, we’re constructive on like manufacturing. But at the moment, we probably want to be a little bit more selective as we see how the chips fall.

We do think there’s going to be improvement,

Paul Smith, Chief Financial Officer, LPA: but of

Esteban Sander Reaga, Chief Executive Officer, LPA: course, we want to be, again, as I mentioned, highly selective. We’re highly constructive in Mexico. You mentioned the word shy away. I think it’s an interesting portrayal. We’re still analyzing transactions for when things are probably more set in place.

But in terms of closing their first transactions in Mexico, we want to emphasize logistics, as you point out. On your second question, the foundational markets where we operate in are mostly consumer driven as opposed to export led. And therefore, tariffs have not been making such a dent or if they don’t even register, frankly, Peru, we’re seeing an acceleration. We’re ahead of our underwriting in our Cagal Park. We know it is a privileged location, and we’re seeing huge amounts of activity.

That’s one of the leases we signed in Q1 actually. So we’re seeing momentum accelerate. We referenced on our earlier remarks that more than 70% of the of one of the buildings we pre leased. So we are seeing acceleration. Carrots are not holding back for them.

But, again, these are mostly local domestic consumption players for whom tariffs are not really part of the equation.

Operator: Ladies and gentlemen, with that we will be concluding today’s audio question and answer. We will take the web questions now. And at this time, there are no further webcast questions. I would like to turn the call over to Esteban Saldorillaga for closing remarks.

Esteban Sander Reaga, Chief Executive Officer, LPA: Thank you, operator. We began 2025 with strong momentum and we’re maintaining that trajectory today. Accordingly, we still expect to drive additional NOI growth this year. Our foundational markets are demonstrating resilience as they continue growing, while our strong and diverse base of high quality customers would serve as a frontline in any adverse economic scenario that might arise. Further, we remain thoughtful about risk, continuing to be highly selective about the customers we accept as well as the investments we make to scale our unique regional platform and increase LPA’s earnings power.

Our confidence lies in the limited supply of Class A EDGE certified facilities like ours, which are needed in strategic locations of markets that are fragmented and where domestic consumption is robust. As such, we still have a strong pipeline of near and long term investment opportunities in our foundational markets and in Mexico. We also have the right team to assess those opportunities and execute. And as an internally managed real estate platform, we’ll continue to invest capital in ways that are closely aligned with our fellow shareholders. As always, we welcome the opportunity to engage with LPA shareholders as well as other investors, So please reach out to us if you’d like to arrange a call or meeting.

Thank you, everyone. We wish you a great day.

Operator: And this concludes today’s conference call. You may now disconnect.

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