Earnings call transcript: LPA reports strong growth in Q4 2024

LPA, a logistics real estate company with a market capitalization of $1.37 billion, has reported a robust financial performance for the full year 2024, with significant revenue and net operating income growth. The company announced an 11.2% increase in revenue, reaching $43.8 million, and a 7.1% rise in net operating income, totaling $36.6 million. According to InvestingPro data, LPA currently trades at an attractive P/E ratio of 5.72x, suggesting potential undervaluation compared to peers. Despite the absence of specific EPS and revenue forecasts for the quarter, LPA’s strategic initiatives and regional expansions have positioned it favorably in the market.

Key Takeaways

• Revenue increased by 11.2% year-over-year, reaching $43.8 million.
• Net operating income grew by 7.1%, amounting to $36.6 million.
• The company achieved a 98.3% occupancy rate, reaching 100% in its operating portfolio.
• LPA entered the Mexican market through a strategic joint venture.
• The company secured a $25 million loan for new warehouse construction in Peru.

Company Performance

LPA demonstrated solid performance in 2024, marking its first fiscal year as a public company. The company reported strong regional revenue growth, with Peru leading at an 18% increase, followed by Costa Rica at 8.7%, and Colombia at 8.3%. The strategic focus on emerging markets with low e-commerce penetration has allowed LPA to capitalize on domestic consumption growth and maintain a high occupancy rate.

Financial Highlights

• Revenue: $43.8 million, up 11.2% year-over-year
• Net Operating Income: $36.6 million, up 7.1% year-over-year
• Occupancy Rate: 98.3%, reaching 100% in the operating portfolio

Outlook & Guidance

Looking forward, LPA plans to expand across four geographies and expects its General and Administrative (G&A) expenses to normalize by Q2 2025. The company remains focused on disciplined capital allocation and is exploring diverse near and long-term opportunities. LPA’s strategic entry into the Mexican market and the development of a large logistics facility in Lima highlight its commitment to growth and innovation.

Executive Commentary

Esteban Saldorriaga, CEO of LPA, emphasized the company’s strong execution in 2024, stating, "2024 marked the year of strong execution as we closed out our first fiscal year as a public company." He also highlighted LPA’s selective approach to market expansion, saying, "We remain methodical and highly selective, avoiding sectors heavily tied and too reliant on exports."

Risks and Challenges

• Export sector uncertainties in Mexico could impact LPA’s growth strategy.
• The company’s expansion into new markets may face operational and regulatory challenges.
• Economic fluctuations in emerging markets could affect revenue and occupancy rates.
• Potential supply chain disruptions could impact construction and development timelines.
• Competition from other logistics and real estate companies may pressure margins.

LPA’s strategic focus and robust financial performance in 2024 underscore its potential for continued growth, despite the challenges and uncertainties in the markets it operates in. For deeper insights into LPA’s financial health, valuation metrics, and growth prospects, investors can access comprehensive analysis through InvestingPro, which offers exclusive access to detailed research reports and over 10 additional ProTips for this stock.

Full transcript - Two (LPA) Q4 2024:

Operator: Good morning, and welcome to LPA’s Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. My name is Mark, and I will be the operator for today’s call. At this time, all participants are in 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. Camille Olova, Investor Relations. Please go ahead, sir.

Camilo Olloa, Investor Relations, LPA: Welcome to LPA’s full year twenty twenty four earnings conference call. My name is Camilo Olloa with LPA’s Investor Relations team. Joining me on today’s call are Esteban Saldorriaga, our Chief Executive Officer and Paul Smith, Chief Financial Officer. Before we proceed with our review of LPA’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 release 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. I’ll now turn the call over to Severin, who will begin today’s review.

Esteban Saldorriaga, Chief Executive Officer, LPA: Thank you, Camilo. Good day, everyone. We appreciate you joining our conference call. 2024 marked the year of strong execution as we closed out our first fiscal year as a public company. We are pleased to report solid financial growth with revenue increasing 11.2% to $43,800,000 and NOI rising 7.1% to $36,600,000 Our commitment to delivering high quality, in the met logistics assets remains steadfast.

In the fourth quarter, occupancy in our operating portfolio surged 400 basis points from the previous quarter reaching 98.3% by year end, a momentum that we expect will drive further NOI growth this year. We continue to attract first rate tenants, signing new leases with Porsche, PSV, one of the largest transport and logistics companies, and earlier in the year with one of the top global food and beverage companies. These well known brands, like many of our tenants, choose LPA for our mission critical locations, institutional quality service and EDGE certified Class A facilities, an asset class and limited stock across our markets. Leveraging this highly favorable supplydemand dynamic, we remain patient and disciplined in leasing available space, capturing mark to market spreads that in some cases exceed 25% compared to expiring leases. Additionally, we successfully stabilized major property parks in Costa Rica and Peru, further strengthening our platform’s long term value.

Beyond operational success, we’ve positioned LPA for sustained growth with two major milestones: first, the listing of the New York Stock Exchange, enhancing our access to capital, increasing transparency and elevating governance standards in order to reinforce LPA’s reputation as a premier logistics provider and as a preferred partner to our customers. Second, we launched our entry campaign into the Mexican market with a strategic joint venture with a leading design build company, which we announced in November of last year. Our delivery expansion into Mexico is significant. LPA’s new local partner brings deep relationships with landowners and a robust network with over sixty five years of experience, thus expanding our reach in this pivotal geography. As we often say, real estate is to a high degree a local business.

And this joint venture’s on the ground team along with its technical engineering and construction expertise predominantly in the central region of the country will be very helpful to facilitate our rollout across multiple fronts. Furthermore, this alliance grants LPA a controlling interest in two compelling logistics assets in Pueblo, with DHL as the anchor tenant. We are on our way to close this transaction shortly and continue building off of that momentum. LPS track record, flexibility and ability to structure mutually beneficial arrangements will be a key resource in gaining a foothold in highly relevant, economically vibrant submarkets. Our ultimate goal is to remain the real estate solutions provider of choice for our global and U.

S.-based customers as they expand and operate in Mexico as well as other geographies. Of course, we are mindful of the uncertainty stemming from U. S. Tariff policies and their impact on Mexico’s nearshoring sector. We have seen some companies delay investments and in certain border towns such as Juarez, vacancies are trending up, making the price discovery process much more difficult.

In response, we remain methodical and highly selective, avoiding sectors heavily tied and too reliant on exports, especially in the automotive industry, and instead focusing on the growing demand for logistics space driven by resilient domestic consumption. Meanwhile, we continue to see expansion avenues in our foundational markets, Costa Rica, Peru and Colombia, which are largely uncorrelated with Mexico’s export driven economy. These countries have robust domestic consumption growth in two of these cases with economies growing at or above 4% per year and exhibit strong demand from household name companies and regional brands, including major e commerce players. As a reminder, e commerce penetration in these emerging economies remains low, underscoring significant long term upside. To capitalize on these trends, we are accelerating the development of Parque Lohisti Cucadhana, a trophy property located next to Lima’s airport.

With one building already operational out of a planned four, this project showcases our ability to deliver landmark logistics facilities. Once completed, it will span over 1,000,000 square feet housing high value tenants and further strengthening our presence in this dollar denominated market. The strong demand for logistics space is clearly reflected in our occupancy levels. At the end of twenty twenty four, nearly all of our development portfolio had been pre leased. And last month, we reached 100% occupancy in our operating portfolio, totaling 5,600,000 square feet.

At the same time, we have been tactically deploying capital to repurchase LPA shares, reinforcing our commitment to delivering shareholder value. This decision reflects our confidence in LPA’s intrinsic value, driven by a largely dollar denominated real estate platform, a tenant base of highly creditworthy multinational U. S. And regional companies and our strong future earnings potential. With that, I’ll turn it over to Paul to expand on our financial results.

Paul Smith, Chief Financial Officer, LPA: Thanks, Stefan. Good day, everyone. Our 2024 financial and operating results align with our internal projection, reinforcing LPA’s strong fundamentals. Double digit revenue growth in our operating assets was driven by a $3,600,000 in additional rents from the stabilization of three properties last year, along with $1,900,000 in higher rental rates from lease renewals and automatic contractual increases across our markets. Benefiting from the market’s lack of supply and leasing dynamics, we continue to capture significantly higher mark to market spreads compared to 2023.

Breaking down our regional performance. Colombo captured 8.3% revenue growth, largely driven by $1,500,000 increase in rental income from lease rollovers and contractual rent escalation. Peru recorded an 18% revenue increase, primarily due to the stabilization of two buildings at our logistic park Limassul property. Costa Rica’s revenue rose 8.7%, fueled by the stabilization of Building 400 at Parque L’Occitico San Jose, Berman. LPA’s top line growth combined with our platform’s operational efficiency led to a 7.1% increase in NOI.

However, we also saw a notable rise in G and A expenses throughout the year, mainly due to LPA’s transition to a public company, which brought higher compliance, auditing and reporting costs, expenses that will normalize by Q2 twenty twenty five. And the introduction of a new restricted stock unit compensation plan and a modest increase in headcount. Lastly, as Esteban mentioned, we are accelerating the development of the remaining space at Parque Los Chitico Callao in Lima. To support construction of new Class A warehouses, we secured a $25,000,000 fixed rate loan from Spanish bank, BBUBA Peru. This funding will allow us to capitalize rising demand for this strategic location.

That concludes our 2024 review. Operator, please open the call for questions.

Operator: Ladies and gentlemen, there is no question at this time. We will be concluding today’s audio question and answer session. We will take the webcast questions now. At this time, there are no questions. I would like to turn the call over to Stefan for closing remarks.

Stefan?

Esteban Saldorriaga, Chief Executive Officer, LPA: Thank you, operator. To summarize today’s call, LPA delivered strong financial and operating results in 2024, launching a fourth geography from our multinational yet overwhelmingly dollarized platform. We have high expectations for 2025 with the conviction that our team will be able to navigate what has kicked off to be a year of rapid change. As a reminder, we are in the early stages of scaling our diversified, vertically integrated real estate company across the region with a clear goal to significantly expand its size and earnings power. We have a strong pipeline of diverse near and long term opportunities that we are continually assessing, and LPA is well positioned to capitalize on them, thanks to our distinct competitive advantage, which include our growing reputation as a premier provider of Class A properties in underserved but thriving consumption centers.

We have a disciplined capital allocation plan, an experienced team, institutional grade operations and the broader business development capabilities necessary to continue enhancing our platform. These factors have made us a trusted and reliable partner for stakeholders across the region, especially as an integrated, internally managed company that is better aligned with stakeholders. Lastly, we

Operator: had

Esteban Saldorriaga, Chief Executive Officer, LPA: the pleasure of meeting several of you at the recent Citibank Global Property Conference, and we look forward to similar occasions in the future. We always welcome the opportunity to engage with investors, so please do not hesitate to reach out to arrange a meeting or a call. Thank you, everyone, and have a great day.

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

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