Logistic Properties of the Americas (LPA) Q1 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to LPA's First Quarter 2026 Earnings Conference Call. My name is Ellie, and I will be your operator for today's call. [Operator Instructions] And please note that this call is being recorded. [Operator Instructions] Now I would like to turn the call over to Mr. Camilo Ulloa, Investor Relations. Please go ahead, sir.

Welcome to LPA's First Quarter 2026 Earnings Conference Call. My name is Camilo Ulloa with LPA's Investor Relations team. Joining me on today's call are Esteban Gaviria, our Chief Executive Officer; and Paul Smith, Chief Financial Officer. Before we proceed with a 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 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.lpamericas.com, to download these materials. Please also note that all comparisons that we will discuss during today's call are year-over-year unless we note otherwise. Esteban will begin today's review. Esteban, please go ahead.

Good morning, everyone, and thank you for joining us. We're off to a powerful start to 2026. We delivered a standout quarter with last year's momentum accelerating into 2026. Revenue jumped 21.6% and NOI grew even faster at 28.6%, reflecting the operating leverage that we've been building up as we scale our cross-border logistics platform, which remained 100% occupied in the first quarter. This growth wasn't just about portfolio expansion. Same-property NOI rose 10.9% and average rent per square foot climbed 9.8%, a direct result of the pricing power that we command in the underserved markets where we invest and operate. These numbers underscore the strength of our business model, disciplined execution, advantaged market positioning and a diverse high-quality customer base. They also reflect sustained demand for modern Class A facilities like ours, which remains scarce in our chosen markets. Additionally, the local economies we serve continue to benefit from resilient domestic consumption, e-commerce growth and the ongoing regionalization of supply chains. Of course, we still face challenges, including the one-time emergency tax levied by the Colombian government at the beginning of the year. This quarter, Peru led the way with revenue surging nearly 40% as new buildings stabilized in our prime location Callao Logistics Park in Lima, including the LEED Gold facility we delivered late last year to PepsiCo, one of many global brands we serve in the 4 countries where we operate. Colombia was another strong contributor with revenue up nearly 25%, helped in part by favorable FX. Notably, some of that growth came from PriceSmart, a major U.S. listed retailer that also leases one of our Costa Rica buildings, making it one of several cross-border customers on our roster. Other examples are Kuehne+Nagel, which occupies LPA facilities in both Colombia and Peru, and Natura, which operates in our Peruvian and Costa Rican properties. It is worth emphasizing here that our unique ability to offer multi-market solutions to international companies like these is the backbone of our business model and is integral to our growth strategy. In Costa Rica, revenue grew 3.3%, driven by re-leasing renewals and higher rental rates. Mexico also contributed this quarter with the 2 logistics facilities we acquired in Puebla. This marked our first investment in the country, a key growth market and essential to delivering a seamless cross-border solution for our customers. By extending our logistics platform to Mexico, we can further monetize our customer base by cross-selling to them in addition to accessing new customers and the considerable growth potential of this large and dynamic market. Through our recent agreement with Fortem Capital, one of Mexico's leading institutional real estate investors, we will acquire over time, approximately $200 million of stabilized dollar-denominated Class A assets within Central Park 57, beginning in the second and third quarters of this year. This is a modern large-scale industrial and logistics park that Fortem has been developing within the key logistics corridor and submarket of the Greater Mexico City area and 3 economically dynamic states, an area that's home to 35% of Mexico's population and that has an even higher proportion of spending power. Importantly, beyond accelerating LPA's expansion in Mexico, our strategic partnership with Fortem mitigates the risks normally associated with building and stabilizing a multiphase project like this one. Taken as a whole, Central Park 57 represents the equivalent of 36% of our current operating GLA. As we've previously communicated, we will fund the purchases of the Central Park 57 facilities through a combination of debt, local equity partners, as well as funds derived from recycling capital from the sale of certain assets within our existing property portfolio. Through an ever-expanding network of local relationships in Mexico, our team there continues locating and assessing similar assets to acquire in strategic locations within other Brazilian submarkets of the country, the local economies of which are also primarily consumer-driven as opposed to being export oriented. The team is also looking at opportunities to selectively develop properties where there is strong demand for facilities that meet the exacting standards of global and regional companies operating in Mexico, particularly as we observe heightened interest, both direct and indirect, tied to products along the AI infrastructure supply chain, aerospace, defense and broader electronics manufacturing. Although USMCA negotiations are expected to begin near the end of this month, and while the eventual outcome can't be predicted, Mexico's industrial and logistics market remains the linchpin of many U.S. supply chains that are critical, especially to curb inflationary pressures in the U.S. For now, we observed that Mexico's industrial and logistics real estate market remains resilient, albeit with corrections in certain northern markets where we have yet to deploy any capital. Rents continue to trend upward. Net absorption is stabilizing and new supply remains limited. Occupancy has softened modestly, but that's against the backdrop of exceptionally strong years of demand. We'll continue closely monitoring market data and benefiting from the intelligence that we gather through our local team and network within Mexico. Also, we are mindful of the potential economic fallout of the current situation in the Middle East, specifically its impact on interest rates. Therefore, we will remain disciplined with capital, only investing where we see clear opportunity to earn attractive risk-adjusted returns. We have the ability to look through economic cycles, recognizing that Mexico will remain strategically vital to the U.S. on the global economic stage. Turning to the development front. We continue expanding the GLA of LPA's regional platform with the construction of 2 facilities in our Callao Logistics Park in Peru. Importantly, 92% of their combined 440,000 square feet is already pre-leased, effectively derisking development. Both buildings remain on schedule for completion in the second and third quarters. And together, they will generate roughly $3.2 million in annualized revenue, fueling additional growth this year. Looking ahead, within this park, we have just one remaining shovel-ready pad to develop a fifth building. It represents another 210,000 square feet of space, which we expect to pre-lease this year at yields of approximately 13%, thanks to ongoing supply constraints for facilities like ours. Before Paul covers the financials, I'd like to take a brief moment to discuss LPA's share price performance. We share our fellow shareholders' frustration with the acute dislocation that remains between our market price and LPA's book value, which was roughly $8 per share at quarter end, particularly given our consistently strong financial performance. Among other initiatives to address the valuation gap, we continue engaging equity research analysts to initiate coverage with the goal of reaching the investors they serve and broadening the market understanding of our differentiated business and its strong growth potential. As part of this effort, we are already working with 2 specialized firms that provide equity research, one of which has already initiated coverage of LPA. Through the reach with institutional investors, we expect this to raise LPA's market visibility and help drive demand for our shares. I'll now turn the call over to Paul, who will discuss our first quarter results in more detail.

Thank you, Esteban, and good morning, everyone. I'll begin my review by providing a closer look at the acceleration of revenue growth in Peru and Colombia in the first quarter. The 39.9% increase in Peru's top line was primarily driven by incremental leasing activity and a higher level of stabilized occupancy. As Esteban pointed out, this included PepsiCo's occupancy of the new building in our Callao Logistics Park in Lima. The rapid absorption and large lease spreads we are achieving continue to reflect deep tenant demand for Class A facilities that remain in short supply in strategic locations like ours. As a more recent example, our team in Peru re-leased a soon-to-be vacated space just ahead of lease expiration, while securing a positive lease spread of 25% and without incurring any CapEx spend. The 24.8% revenue increase in Colombia's rental revenue was mainly due to re-leasing at higher mark-to-market rents and to contractual CPI-linked rent escalations. It's important to note, however, that the appreciation of the Colombian peso accounted for a large part of the revenue increase in the first quarter. When excluding the positive FX impact, Colombia's revenue increased 8.3% to $2.6 million. In Costa Rica, re-leasing and renewals primarily accounted for the 3.3% revenue increase there, both of which benefited from higher rental rates. In the aggregate, the rental increases across our cross-border platform resulted in 9.8% increase in average rent per square foot, which was $8.74 for the quarter. Turning to Mexico. It should be noted that with the acquisitions of the Central Park 57 facility that we expect to make this year, Mexico will become an increasingly stronger contributor to both revenue and NOI growth, along with the 2 new facilities that we will bring online this year in Peru. Our first quarter operating expenses decreased 4.1% to $2.2 million, mainly reflecting collection recoveries and a reduction in property taxes after a onetime adjustment in Peru last year. Driving the 28.6% increase in our net operating income in the quarter were higher levels of operating leverage in both Peru and Colombia. When excluding the positive FX impact on Colombia's revenue, NOI would have increased 24.4% to $11.7 million. Same-property cash NOI increased 10.9% to $9.8 million, primarily due to the growth in rental rates that I explained earlier and also to the expiration of rent abatements at certain properties. The addition of 3 properties since first quarter 2025 increased operating GLA of our platform by 9.7% to a total of 5.8 million square feet. 100% of which remained occupied during the first quarter. Lease GLA increased 6.9% to 6.2 million square feet, while our development GLA was slightly lower at 440,000 square feet. As Esteban noted, 92% of the development portfolio is pre-leased. Our general and administrative expenses increased 13.3% to $4 million, primarily due to the onetime emergency tax levied by the Colombian government in the first quarter. LPA's investment property valuation gain decreased from a positive $1.9 million in the first quarter of 2025 to a $9.2 million loss in the first quarter of 2026. The change was primarily due to the assumption-driven valuation adjustments and the effect of project normalization across our platform. This included the following 4 elements: Number one, a $7.2 million reduction in our Colombian assets, reflecting changes in underwriting assumptions used in the first quarter 2026 due to evolving market conditions; two, a $2.3 million decrease in our Callao park in Peru as the majority of development-related depreciation was recognized last year, given that asset was largely stabilized in the first quarter of 2026. Number three, a $1.1 million reduction at our Callao 2 park in Costa Rica due to an updated leasing assessment. And number four, $0.6 million negative impact related to capital expenditures during the first quarter. Our financing costs increased 12% to $5.9 million in the quarter. The increase was mainly due to higher interest expenses related to new financing activities, which included a bridge loan received in the fourth quarter of 2025, additional financing for a new building within our Callao Park in Peru and incremental interest related to a new loan that finances the development of a new facility at our Parque Logistico Callao. The higher financing costs were partially offset in the quarter, mainly by lower interest rates and scheduled loan amortization. Lastly, at the end of the quarter, LPA maintained its healthy debt profile with largely dollar-denominated debt, no significant debt maturing in the near term and net debt to investment properties standing at 42.1%. That concludes the review of the quarter. Operator, please open the call for any questions.

[Operator Instructions] The first question comes from the line of Eric Goldstein of Water Tower Research.

Very nice job in the quarter. I just had a few questions. I guess the first one is just around how do we think about Mexico in the near to medium term in terms of growth between asset acquisitions and development? And are there some particular parts of the country that you find more attractive?

Thank you for your questions. Look, fascinating. Look, Mexico, we see the enormous growth potential, and it has been a recurring theme of ours more recently, how we have pushed into the market. It's still in its early stages, but it is showing already -- it's bearing great fruit. So we're seeing that as a major market for us. So what we are expecting as we go forward is to make relevant deployments in acquisitions before year-end. So we're working on that front. Much of that can be seen through the lens of the Fortem forward purchase agreement that we have signed, but we're also selectively looking for new operating asset acquisitions that can enhance and accelerate that deployment into Mexico as we see a relatively interesting entry point given the, I would say, the noise around the market, but the long term -- the mid- and long-term potential for Mexico. So that's how we're framing Mexico, and that's why we also see that the capital reallocation that we are thinking about in our portfolio is going to be a catalyst. So that's on your first point. The second aspect, what markets are we seeing more with higher interest. Opportunities are coming our way, I would say, along the 57 corridor. We're looking at Mexico City outskirts. We like that. We're sticking to our knitting on dollar-denominated assets. We're sticking to our knitting in prioritizing global blue-chip customers who we want to continually serve across the platform. And for that reason, we're right now mostly focused towards, I would say, the center of the market, the central region of the country, but selectively looking at other northern markets where there might be, I would say, a dislocation and for us, we could come in and deploy capital there. We still want to be, I would say, more cautious because a lot of things need to still be defined through the USMCA renegotiations. But we see that, especially after the recent market moves with the tender preparing for Macquarie and all the movement in the market that will bode well for our acquisition activity going forward.

Okay. Great. Just a follow-up to that. I know we've talked some about the idea of recycling assets, maybe divesting assets and reinvesting the capital into some higher return areas. So I'm just curious, how do you go about choosing which assets to divest? And is there any thoughts or guidance you might have on the spread that you're looking to achieve in terms of the returns?

Wonderful question. When we look at how to process which assets to divest, we think, which are already stabilized, mature and have benefited from our development activity. Many -- 90% of our portfolio in what we call our foundational markets has been developed by LPA from the ground up. And therefore, we have already accretive value within them and think it could be a great moment to reallocate that capital towards Mexico. We think Colombia, Peru might be up next for that recycling process. And eventually, the spread that we can be seeing is a prolonged compression because we develop those assets that 11% yield, 12% yields. And now once they have grown, we can monetize them in the 7% to 8% range. It's hard to still see how those projects will come about. We are aware of the fact that we have election cycles in Colombia and Peru, but we feel highly confident in, one, the fact that we have a great track record in terms of occupancy, rental growth and that these assets have been highly optimized during our holding period. And that capital can now be reallocated towards Mexico where we are seeing better opportunities to be deployed at higher returns and again, to enhance the profile and diversification of our platform as a whole.

Okay. Great. And just the last question. So you recorded a valuation loss in the first quarter, which I think it's a little bit unusual for you guys. And it just seems like there were a few unusual onetime items. Is there any way -- how are we thinking about that going forward through the balance of the year?

Thank you. Let me take that one, Esteban. And this is Paul Smith. The largest impact we faced this quarter was in Colombia, and it's basically reflecting the evolution of the fiscal and economic landscape in that country. The changes that made recently had an impact on the valuation of our assets within Colombia, and we're simply reflecting those impacts as well. That's basically explaining the, I would say, the large components. The other items in the variance essentially result from the process of stabilizing assets in Peru. As you know, we have been very active, particularly within our Callao development. And essentially, what it is reflecting is we have very powerful quarters last year when the park started to stabilize, and we simply don't have the same dynamic this quarter. So that essentially captures it. But if you look at the balance sheet from an, I would say, aggregated perspective, you will see that net-net, the effect was muted. So essentially, we basically maintain the same asset valuation as last year.

[Operator Instructions] Your next question comes from the line of Brendan McCarthy of Sidoti.

I just wanted to start off on the emergency wealth tax, I think, that you highlighted impacting Colombia. I guess is there a way for you to structure new leases or anything along those lines to protect the bottom line? Or how can investors really think about that tax impact in the quarter?

Thank you very much for that thoughtful question. That tax, as you know, it's not necessarily a wealth tax. It was an emergency tax that was justified given certain meteorological conditions that happened within the country. Needless to say, we were not -- and the rest of the country was not prepared for something of that nature. So it did have a sizable impact. It was about $400,000 on our results for the quarter. And it's predicated on the value of the assets. So essentially, what it's doing, it's based on your IFRS reporting. And there's really a few things that you can do in terms of structuring leases to prevent it because it's not necessarily derived on anything other than the value you've created within the country. We remain constructive on the landscape, as you know, or I don't know if you know that, but this tax was actually challenged and it's currently being reviewed by the Colombian Supreme Court. And we remain constructive that the Supreme Court will review and see that perhaps this is not the best way to proceed fiscally moving forward and that things will normalize ahead.

Understood. I really appreciate the detail there, Paul. And turning to the Costa Rica portfolio, I think I saw revenue was right around -- revenue growth is right around 3% year-over-year. I believe that portfolio is at 100% occupancy as well. Can you kind of touch on the growth prospects for Costa Rica? Is there any substantial or notable lease renewal activity coming up? And how do you kind of weigh that growth versus the rest of the portfolio?

Wonderful question as well. Give me one second. Yes. Thank you. We were getting some echo here. The -- what we're seeing in terms of -- you're absolutely right, that portfolio is 100% occupied. And in terms of the re-leases, we are seeing some increases from the mark-to-market releases. I would say the spreads are being closer to double digits in terms of the release spreads. And we will announce, obviously, as they come due and as they happen. So yes, that's the status of that portfolio. And Esteban maybe would like to complement it as well.

Thank you for that, Paul. As we look forward to Costa Rica, it is already a significant portion of our portfolio. So we are guiding the majority of new capital investment towards Mexico. We are seeing growth opportunities in Costa Rica. What I would say is we're being much more selective. It's a market we have come to appreciate, and we have a very relevant and dominant position in. And for that reason, we see that the majority of the growth potential will likely be with third-party joint ventures, and we're trying to arrange for that as we go forward. So we preserve capital mostly to be deployed into Mexico. So in a way, we think about it, it is already relevant. It's around 45% of our company. We want to rather balance that out over time and shift our center of gravity, if you will, towards Mexico. And that's why we want to prioritize allocation into Mexico, where we're seeing a better risk-adjusted opportunity set, by the way. And that's the way we're thinking about it. So there are interesting opportunities. I think we're just being more selective in guiding ourselves into Mexico with a more important.

Our next question comes from the line of Elisa Gomez of BTG Pactual.

And regarding your expansion in Mexico, are you looking on any of the assets of Terrafina that are in sales? And if any of the [PGIM group] assets came into the market, will you be interested in those ones?

Thank you for that. We're constantly canvassing the market. And yes, there are acquisition opportunities that are very interesting for us. We have dialogue with relevant parties in multiple circumstances. That's one of the things that Mexico has is a deep opportunity set. So to answer your question, yes, we would definitely look at them. We have looked at them in other context in the past. We want to just continue canvassing because we see that there will be -- there could be even richer opportunities for us as these moves come along. But yes, there's a lot still to be done. We're trying to look for off-market proprietary deals that we're working through our local relationship network. And we want to stay away from competing or very tightly managed processes. We'd rather be in off-market transactions where we can get a more interesting opportunity for us. As you know, we like partnering, and that's, I think, where we can get -- we can offer more value and eventually get more value for our platform. That's the way we think about acquisitions. But for sure, after these consolidation efforts take place, we do expect more assets to be available for us to consider.

Ladies and gentlemen, there are no more questions from the phone lines. So we will now proceed with questions from the webcast platform. [Operator Instructions] The question comes from Bruce. Isn't LPA one of many companies whose share price is impacted by the liquidity and lack of equity?

Thank you for that question, Bruce. Yes, that certainly is something we're trying to enhance liquidity and tradability of our shares is something we want to enhance. That's why we're having what we would call an awareness push. It comes not only with the way we revamped our website, our communications, but also our engagement to the investor community. And that's something we're working towards. That's why we're working with equity research analyst firms. We welcome that. We benefit from that. And it is part of the reason why we're seeing our share price performance suffer the way it has, but that's precisely why there's so much room to improvement because it doesn't speak doesn't speak necessarily to value, but rather on technicals that we expect to correct as time progresses. And yes, that might be one of the reasons that why we might be affected at the moment, and we're trying to address that head on with these communication efforts to make sure that we try to bring and restore balance, if you will, to how we are understood in our markets.

Thank you. At this time, there are no further webcast questions. With that, we will be concluding today's question-and-answer session. I would like to turn the call over to Esteban for closing remarks.

Thank you, operator. I would like to end today's review with a few takeaways from the quarter. First, we continue to deliver quarter after quarter with revenue growth and profitability accelerating as our portfolio captures rising market rates and our development investments come online. Second, the fundamentals of our cross-border platform are very strong. They're backed by contracted predominantly dollar-denominated revenues, superior occupancy, observable pricing power and a high-quality tenant base, and we expect to build on this momentum throughout the rest of the year as rental growth materializes, additional development properties come online. The third point is that while the macro backdrop across both developed and emerging economies continues to evolve, navigating shifting political and economic conditions is one of our core competencies and our track record demonstrates that. Behind LPA is a talented, deeply experienced team that bridges local impact with global impact, making us a partner of choice for multinationals, for strategic partners and real estate investors alike. Finally, while we continue to monitor developments in the Middle East and the upcoming electoral cycle in Peru and Colombia, our conviction in Mexico and our foundational markets is stronger than ever, given the clear structural scarcity of institutional quality logistics facilities across the region. As an internally managed real estate company, you can count on us to invest thoughtfully and selectively with capital efficiency top of mind. We are well positioned to further scale and diversify LPA's vertically integrated platform, capture rising demand for institutional quality, well-located facilities and continue driving earnings power over time. As we continue to execute consistently, we are confident the public markets will increasingly recognize LPA's robust financial performance and long runway for growth and reward our shareholders by closing the gap to fundamental value. We're energized by the start we've had to 2026 and are confident in the path ahead. Thank you for joining us today. We look forward to speaking with you on our next call.

This concludes today's conference call. You may now disconnect. Goodbye.