Terrafina's 1Q14 Earnings Report - Amazon S3 in Mexico City: Contacts in New York: Francisco...

Contacts in Mexico City: Contacts in New York: Francisco Martinez/ Angel Bernal Maria Barona Investor Relations Officer / Chief Financial Officer i-advize Corporate Communications, Inc. Tel: +52 (55) 3601-0702 / +52 (55) 3601-0654 Tel: +1 (212) 406-3691 E-mail: [email protected] / [email protected] E-mail: [email protected]

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First Quarter 2014 Earnings Report

Mexico City, April 29, 2014 – Terrafina (“TERRA”) (BMV: TERRA13), a leading Mexican industrial real estate investment trust (“FIBRA”), externally advised by Prudential Real Estate Investors and dedicated to the acquisition, development, lease and management of industrial real estate properties in Mexico, today announced its first quarter 2014 earnings results. The figures in this report have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Figures presented in this report are presented in millions of Mexican pesos and millions of U.S. dollars unless otherwise stated. Additionally, figures can vary due to rounding. Terrafina’s financial results included in this report are unaudited; as a result, the figures used throughout this report could be adjusted in the future. Terrafina’s 1Q14 financial results are presented from January 1, 2014 to March 31, 2014. It is important to consider that comparisons in this earnings report are made to fourth quarter 2013 numbers since first quarter 2013 results only include operations for the period from March 20 to March 31, 2013. Additionally, 1Q13 results do not include the effects of the American industries – Kimco acquisition. Financial and Operational Highlights as of March 31, 2014

Operational

• Occupancy rate at March 31, 2014, was 90.6%, a 92 basis points increase compared to fourth quarter of 2013. Additionally, considering the signed letters of intent, occupancy for 1Q14 was 91.1%.

• Annualized average leasing rate per square foot for 1Q14 was US$4.74.

• Terrafina reported a total of 30.9 million square feet (msf) of Gross Leasable Area (GLA) comprised of 217 properties and 228 tenants in the first quarter 2014.

• 1Q14 leasing activity totaled 1.5 msf, of which 36.0% corresponds to new leasable area and 64.0% to lease renewals. Leasing activity was mainly concentrated in the Queretaro, Cuautitlán Izcalli, Ciudad Juárez Chihuahua, San Luis Potosi and Silao markets.

• In 1Q14, a BTS contract was signed for the development of 131 thousand square feet. This new development is expected to contribute US$0.6 million to Net Operating Income (NOI) for the 2015 period. The projected return rate, or yield on cost, for the new development is approximately 11.3%.

• A 120 thousand square foot plot of land was sold in the city of Apodaca, Nuevo Leon for a total sales price of US$0.8 million.

(1) NOI and EBITDA margin decreases are due to one-‐time property tax expenses, which are paid during the first quarter of the year and are non-‐recurring.

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Financial • 1Q14 net revenues reached US$37.5 million. In addition, rental revenues increased approximately 0.4% or US$0.1

million compared to 4Q13 reaching US$31.7 million.

• 1Q14 NOI was US$30.5 million; NOI Margin1 reached 86.4%, 112 basis points lower compared to 4Q13. Moreover, implied cap rate was 8.2%, considering the average share price for 1Q14 of US$1.92 (Ps. 25.08) and 2014 expected NOI of US$125 million.

• 1Q14 EBITDA reached US$26.9 million; EBITDA Margin1 was 76.2%, a 308 basis points decrease compared to 4Q13. • 1Q14 Adjusted Funds for Operations (AFFO) reached US$15.1 million; AFFO margin was 42.4%, a 215 basis points

increase compared to 4Q13. • 1Q14 distributions totaled US$15.1 million. As a result of 1Q14 operations, Terrafina will pay Ps. 0.5244 per CBFI

(US$0.0396 per CBFI) as distributions corresponding to the period from January 1 to March 31, 2014. This represents an increase of 10.0% in terms of pesos compared to 4Q13.

• An annualized CBFI distribution for 1Q14 was US$0.1585, considering the average share price for 1Q14 of US$1.92

(Ps. 25.08). Terrafina reached a dividend yield of 8.4%.

Figures in dollars in the Income Statement were converted into pesos at the average exchange rate for the period; for the Balance Sheet the exchange rate for the close of the period was used. (1) Millions of square feet. (2) Includes expansions and Built-‐to-‐Suits (BTS). (3) Indicates the lease renewal rate with contract expirations during the 1Q14 period. (4) Earnings before financial expenses, taxes, depreciation and amortization. (5) Real Estate Investment Certificates. (*) Revenues and expenses have been adjusted for the calculation of the above mentioned metrics. Please refer to the "1Q14 Financial Performance" and "Annexes" section available in this document. Source: PREI Latin America – Portfolio Management – Fund Accounting

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Financial Highlights

Operating 1Q14 4Q13 Var. Number of Developed Properties 217 216 1 Gross Leasable Area (GLA) (msf)

1 30.89 30.76 0.13 New Developments2 (msf) 0.13 0.09 0.05 Land Reserves (msf) 7.32 7.51 -‐0.19 Occupancy Rate 90.6% 89.7% 92 bps Avg. Leasing Rent / Square Foot (dollars) 4.74 4.76 -‐0.02 Weighted Avg. Remaining Lease Term (years) 3.59 3.74 -‐0.16

Renewal Rate3 81.8% 72.1% 973 bps

Quarterly Financial 1Q14 4Q13 Var. 1Q14 4Q13 Var.

fx 13.2344 13.0262

(million pesos unless otherwise stated) (million dollars unless otherwise stated)

Rental Revenues 441.9 437.8 0.9% 33.4 33.6 -‐0.6% Other Operating Income 54.2 52.6 3.0% 4.1 4.0 2.4% Net Revenues 496.1 490.4 1.2% 37.5 37.6 -‐0.3% Net Operating Income (NOI)* 404.3 404.1 0.1%

30.5 30.9 -‐1.1%

NOI Margin 86.4% 87.5% -‐112 bps

86.4% 87.5% -‐112 bps

EBITDA4* 357.4 365.9 -‐2.3%

26.9 28.0 -‐3.8% EBITDA Margin 76.2% 79.3% -‐308 bps 76.2% 79.3% -‐308 bps Funds from Operations (FFO)* 234.3 232.5 0.8% 17.7 17.7 -‐0.3% FFO Margin 50.0% 50.3% -‐24 bps 50.0% 50.3% -‐24 bps Adjusted Funds from Operations (AFFO)* 199.8 187.5 6.6% 15.1 14.3 5.2% AFFO Margin 42.4% 40.3% 215 bps

42.4% 40.3% 215 bps

Distributions 199.8 181.7 10.0%

15.1 13.9 8.2% Distributions per CBFI5 0.5244 0.4769 10.0%

0.0396 0.0366 8.2%

Balance Sheet Mar14 Dec13 Var. Mar14 Dec13 Var.

fx 13.0837 13.0765 _

(million pesos unless otherwise stated) (million dollars unless otherwise stated)

Cash & Cash Equivalents 594.1 728.6 -‐18.5% 45.4 55.7 -‐18.5% Investment Properties 21,118.0 21,146.3 -‐0.1% 1,614.1 1,616.2 -‐0.1% Land Reserves 956.9 966.6 -‐1.0% 73.1 73.9 -‐1.0% Total Debt 11,950.3 11,987.3 -‐0.3% 913.4 916.2 -‐0.3% Net Debt 11,356.2 11,258.7 0.9% 868.0 860.5 0.9%

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Comment by Alberto Chretin, Chief Executive Officer and Chairman of the Board During the first quarter 2014, Terrafina obtained positive results, underscored by a 90.6% occupancy rate, a 92 basis point increase compared to the previous quarter. We are pleased to see that results are in line with 2014 expectations of reaching an occupancy rate between 91.0% to 91.5%. As a result of our joint collaboration with our property managers, during this quarter leasing contracts reached 1.5 million square feet, of which 36% corresponded to new contracts and 64% to leasing renewals Moreover, we made progress in the development of a 131 thousand square foot BTS. This development will add approximately 550 thousand dollars to 2015 NOI. Among other relevant highlights, at the end of the quarter we obtained US$8.8 million from the VAT reimbursement, which was applied towards the HSBC credit facility denominated in pesos. Also, as a result of our solid operating performance for the quarter, Terrafina will distribute US$15.1 million, which is equivalent to an annualized distribution of US$0.15 per CBFI and an 8.4% dividend yield. Finally, I would like to mention the fact that recently, the Mexican Securities and Exchange Commission (CNBV) has proposed a series of changes to Fibra regulations that will aim to strengthen the industry with stronger controls in order to protect shareholder interests. Currently, we are analyzing these new regulatory proposals and will discuss their impact further with the market as they are approved. Sincerely, Alberto Chretin

Terrafina’s Chief Executive Officer and Chairman of the Board

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Operational Highlights

Highlights by Region

(as of March 31, 2014) North Bajio Central Total

# Buildings 150 40 27 217

# Tenants 148 41 39 228

GLA (msf) 18.4 6.4 6.0 30.9

New Developments1 (msf) 0.0 0.1 0.0 0.1

Land Reserves (msf) 3.7 0.1 3.6 7.3

Occupancy Rate 88.8% 91.8% 94.9% 90.6%

Average Leasing Rent / Square Foot (dollars) 4.59 4.82 5.10 4.74

Annualized Rental Base % 56.7% 21.5% 21.9% 100.0%

Renewal Rate 72.5% 100.0% 77.5% 81.8%

(1) Includes expansions and Built-‐to-‐Suit (BTS).

Source: PREI Latin America -‐ Portfolio Management

Leasing Activity

1Q14 4Q13 Var.

Operating Portfolio (msf): Renewals 1.0 1.9 -‐88.7%

New Leases 0.4 0.8 -‐40.4%

Properties Under Development 0.1 0.1 4.6%

Total Square Feet of Leases Signed 1.5 2.8 -‐124.6%

Renewal Rate 81.8% 71.7% 1,014 bps Source: PREI Latin America -‐ Portfolio Management

NORTH - Baja California - Sonora - Chihuahua - Coahuila - Nuevo Leon - Tamaulipas - Durango

BAJIO

- San Luis Potosi - Jalisco - Aguascalientes - Guanajuato - Queretaro

CENTRAL - Estado de Mexico - Distrito Federal - Puebla - Tabasco

Terrafina’s operations 1Q14.

31.4%

68.6%

Composibon by Asset Type as of 1Q14

(as a % of total GLA)

Distribulon Manufacturing

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Operational Highlights (continued)

Occupancy and Rents by Region Maturities and Renewals by Region

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Consolidated

(As of March 31, 2014)

Occupancy Rate

Avg. Leasing Rent/ Square Foot (dollars) (As of March 31, 2014)

Maturities (number of contracts)

% of Total Maturities

Renewals (number of contracts)

% of Total

Renewals

North 88.8% 4.59 North 18 75.0% 14 70.0%

Baja California 79.1% 4.57 Baja California -‐ 0.0% -‐ 0.0%

Sonora 86.3% 3.84 Sonora -‐ 0.0% -‐ 0.0%

Chihuahua 95.0% 4.79 Chihuahua 14 58.3% 11 55.0%

Coahuila 95.2% 4.36 Coahuila 0 0.0% -‐ 0.0%

Nuevo Leon 74.0% 4.50 Nuevo Leon 2 8.3% 2 10.0%

Tamaulipas 62.2% 4.11 Tamaulipas 2 8.3% 1 5.0%

Durango 85.2% 3.90 Durango -‐ 0.0% -‐ 0.0%

Bajio 91.8% 4.82 Bajio 3 12.5% 3 15.0%

San Luis Potosi 94.3% 4.74 San Luis Potosi -‐ 0.0% -‐ 0.0%

Jalisco 93.0% 5.36 Jalisco -‐ 0.0% -‐ 0.0%

Aguascalientes 100.0% 4.47 Aguascalientes -‐ 0.0% -‐ 0.0%

Guanajuato 98.0% 5.10 Guanajuato -‐ 0.0% -‐ 0.0%

Queretaro 84.1% 4.56 Queretaro 3 12.5% 3 15.0%

Central 94.9% 5.10 Central 3 12.5% 3 15.0%

Estado de Mexico 94.1% 5.10 Estado de Mexico 3 12.5% 3 15.0%

Distrito Federal 100.0% 10.30 Distrito Federal -‐ 0.0% -‐ 0.0%

Puebla 100.0% 4.01 Puebla -‐ 0.0% -‐ 0.0%

Tabasco 100.0% 5.18 Tabasco -‐ 0.0% -‐ 0.0%

Total 90.6% 4.74 Total 24 100.0% 20 100.0% Source: PREI Latin America -‐ Portfolio Management Source: PREI Latin America -‐ Portfolio Management

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1Q14 Operational Performance Composition by Geographical Diversification For 1Q14, the geographical diversification of Terrafina’s properties (based on GLA per square foot) was mainly located in the northern region of Mexico, representing 59.7% of GLA; for the Bajio and Central regions, it represented 20.9% and 19.4%, respectively.

1Q14

as a % of 1Q14 4Q13

as a % of 4Q13

North 18.44 59.7% 18.44 60.0%

Baja California 1.13 3.7% 1.13 3.7%

Sonora 0.28 0.9% 0.28 0.9%

Chihuahua 9.84 31.9% 9.84 32.0%

Coahuila 3.38 11.0% 3.38 11.0%

Nuevo Leon 1.58 5.1% 1.58 5.2%

Tamaulipas 1.76 5.7% 1.76 5.7%

Durango 0.46 1.5% 0.46 1.5%

Bajio 6.45 20.9% 6.32 20.5%

San Luis Potosi 1.87 6.1% 1.74 5.7%

Jalisco 1.29 4.2% 1.29 4.2%

Aguascalientes 0.75 2.4% 0.75 2.4%

Guanajuato 0.54 1.7% 0.54 1.8%

Queretaro 1.99 6.5% 1.99 6.5%

Central 6.00 19.4% 6.00 19.5%

Estado de Mexico 5.14 16.6% 5.14 16.7%

Distrito Federal 0.02 0.1% 0.02 0.1%

Puebla 0.18 0.6% 0.18 0.6%

Tabasco 0.65 2.1% 0.65 2.1%

Total 30.89 100.0% 30.76 100.0% Total Gross Leasable Area / million square feet. Potential leasable area of land reserves are not included.


Composition by Asset Type At the end of the 1Q14, 31.4% of Terrafina’s total portfolio consisted of distribution and logistics properties, and 68.6% were manufacturing properties, closing at stable levels compared to 4Q13.

1Q14 4Q13 Var.

Distribution 31.4% 31.3% 3 bps

Manufacturing 68.6% 68.7% -‐3 bps Source: PREI Latin America -‐ Portfolio Management

31.4%

68.6%

Composibon by Asset Type as of 1Q14

(as a % of total GLA)

Distribulon Manufacturing

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Composition by Sector As of March 31, 2014, tenant diversification by industrial sector was as follows:

Industrial Sector Diversification

1Q14 4Q13 Var.

Automotive 29.1% 27.8% 133 bps

Industrial properties 27.0% 27.4% -‐36 bps

Consumer goods 16.9% 17.5% -‐56 bps

Logistics and Trade 10.2% 10.6% -‐36 bps

Aviation 9.2% 9.1% 6 bps

Non-‐durable consumer goods 7.5% 7.6% -‐11 bps

Total 100.0% 100.0% Source: PREI Latin America -‐ Portfolio Management

Top Clients’ Composition Terrafina’s tenant leasing base is widely diversified across Mexico’s main cities. In 1Q14, Terrafina’s top client, top 10 clients and top 20 clients base, represented 4.9%, 22.8% and 33.9% of total revenues, respectively.

Top Clients

(As of March 31, 2014)

Leased Square Feet

(million) % Total GLA

% Total Revenues

Top Client 1.36 4.9% 4.9%

Top 10 Clients 6.08 21.7% 22.8%

Top 20 Clients 9.15 32.7% 33.9% Source: PREI Latin America -‐ Portfolio Management

29.1%

27.0% 16.9%

10.2%

9.2% 7.5%

Diversificabon by Sector as of 1Q14 (as a % of leased GLA)

Automolve

Industrial properles

Consumer goods

Logislcs and Trade

Avialon

Non-‐durable consumer goods

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Occupancy 1Q14 occupancy rate was of 90.6%, an increase of 92 basis points compared to 4Q13. Moreover, considering the letters of intent, occupancy rate was 91.1%. In the first quarter 2014, Terrafina’s leasing activity reached 1.5 msf, of which 36.0% correspond to new leasing contracts (including expansions and BTS) and 64.0% for contract renewals. Leasing activity took place mainly in the Queretaro, Cuautitlán Izcalli, Ciudad Juárez, Chihuahua, San Luis Potosi and Silao markets. In addition to this leasing activity, Terrafina signed letters of intent for an additional 0.17 msf, which are expected to be finalized during 2Q14. It is important to mention that Terrafina has historically closed approximately 90% of its letters of intent.

1Q14 4Q13 Var.

Leased GLA 90.6% 89.7% 92 bps

Vacant GLA 8.9% 9.5% -‐56 bps

Signed Letters of Intent 0.5% 0.9% -‐35 bps


Lease Maturities Terrafina had 228 leasing contracts in 1Q14. The leasing characteristics of these contracts have an average maturity of 3 to 5 years for logistics and distribution properties activities and 5 to 7 years for manufacturing activities. Annual average maturities remain at levels of 20% (as a percentage of annual base rents). The following table shows Terrafina’s leasing maturity schedule for the coming years:

Annual

Base Rent (million of dollars)

% of Total Occupied Square

Feet (million) % of Total

2014 16.65 12.6% 3.67 13.1% 2015 22.80 17.2% 4.69 16.7% 2016 17.12 12.9% 3.57 12.8% 2017 15.83 11.9% 3.29 11.7% 2018 9.72 7.3% 2.13 7.6% Thereafter 50.57 38.1% 10.64 38.0% Source: PREI Latin America -‐ Portfolio Management

90.6%

8.9% 0.5%

Occupancy as of 1T14 (as % of Total GLA)

Leased GLA Vacant GLA Signed Lemers of Intent

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Capital Deployment New Developments and Non-‐Strategic Asset Sales

New Developments In 1Q14, Terrafina signed a new leasing contract for the development of a 131 thousand square foot BTS in the city of San Luis Potosi. This new development will be used for manufacturing activities and will contribute US$0.6 million to 2015 NOI, which had a 11.3% estimated development yield, considering the total expected investment for US$4.9 million.

January -‐ March 2014

Capital Deployment -‐ New Developments

Square Feet (millions)

Total Expected Investment

(millions of pesos)

Total Expected Investment

(millions of dollars)

Cost per Square Feet

(dollars)

% Paying Rent by End of the Period

North 0.00 0.0 0.0 0.00 0.0%

Bajio 0.13 64.4 4.9 37.81 0.0%

Central 0.00 0.0 0.0 0.00 0.0%

Total 0.13 64.4 4.9 37.81 0.0%

Proforma NOI1 (million dollars)

0.6

Estimated Stabilized Yield2 11.3%

(1) Net Operating Income for the next twelve months

(2) Proforma NOI divided by the total expected investment Source: PREI Latin America -‐ Portfolio Management

Projects Under Development

1Q14 4Q13

Developed Properties 99.3% 99.7%

Properties Under Development 0.7% 0.3%


39.4%

60.6%

Type of Development as of 1Q14 (as a % of GLA)

Expansions Build-‐to-‐Suits (BTS)

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Capital Expenditures (CAPEX) Terrafina’s CAPEX are classified as those recurring expenses that materialize based on upcoming leasing maturities and properties improvements. The main goal of these expenses is the renewal of leasing contracts as well as the improvement of property conditions taking into account tenant requirements. Moreover, Terrafina expects capital expenses for vacant properties and the development of new GLA by means of expansions or new developments. Additionally, it is important to consider that capital expenditures intended for expansions and new developments are not financed with Terrafina’s operational cash flow and therefore do not pass through the income statement. Capital expenditures accounts are comprised as follows: 1) Tenant improvements resources as well as recurring maintenance CAPEX 2) Brokers and administrator fees 3) CAPEX for new developments, which due to their nature, are generally capitalized In 1Q14, Terrafina’s total CAPEX investment was US$8.0 million. The breakdown for 1Q14 CAPEX is shown in the following table:

1Q14 1Q14

(millions of pesos)


Tenant Improvements & Recurring CAPEX 23.8 1.8 Leasing Commissions 8.3 0.6 Development CAPEX1 74.1 5.6

Total CAPEX 106.2 8.0

Maintenance expenses for vacant properties are included in the Tenant Improvements

& Recurring CAPEX figures. (1) Capex for expansions/new developments.


Land Reserves Terrafina’s land reserves as of March 31, 2014 was comprised of 13 land reserve properties, which accounted for 7.3 msf of potential GLA for the development of future industrial assets. Terrafina’s 1Q14 land reserves distribution was as follows:

Square Feet (millions)

Land at Cost

(millions of pesos)

Land at Cost


Appraisal Value

(millions of pesos)

Market Value


North 3.7 450.1 34.4 489.3 37.4 Bajio 0.1 19.1 1.5 19.5 1.5 Central 3.5 584.0 44.6 448.1 34.3

Total Land Portfolio 7.3 1,053.2 80.5 956.9 73.1 Source: PREI Latin America -‐ Portfolio Management and Fund Accounting

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Non-‐Strategic Asset Sales During 3Q13, Terrafina initiated a capital recycling strategy through the sale of non-‐strategic properties. The implementation of this strategy is consistent with Terrafina’s objective of specializing in key markets in order to increase revenues, improving profitability of the assets and maintaining constant and sustainable growth for Terrafina and its shareholders. Terrafina expects that with this initiative, it can reach the sale of approximately US$150 to US$180 million of non-‐strategic assets.

Currently, we are reviewing different sales opportunities that once achieved, will be announced to the market. During 1Q14, a 119.6 thousand square foot tract of land was sold in Apodaca, in the state of Nuevo Leon for a sales price of US$0.8 million.

January -‐ March 2014

Capital Deployment -‐ Dispositions

Square Feet

(millions)

Total Proceeds (millions of pesos)

Total Proceeds (millions of dollars)

Property Dispositions 0.00 0.0 0.0 Land Dispositions 0.12 11.0 0.8

Total Dispositions 0.12 11.0 0.8 Source: PREI Latin America -‐ Portfolio Management

1Q14 Financial Performance Financial Results and Calculations Terrafina’s 1Q14 financial results are presented in Mexican pesos and U.S. dollars. Figures on the income statement for each period were converted to dollars using the average exchange rate for 1Q14, for the balance sheet, the exchange rate used at March 31, 2014. It is important to consider that comparisons in this earnings report are made to fourth quarter 2013 numbers since first quarter 2013 results only includes operations from March 20 to March 31, 2013 as well as it does not reveal the American industries – Kimco acquisition effects Terrafina has in place best accounting practices for measuring the FIBRA’s (REIT) performance results by providing relevant metrics to the financial community. Throughout the following financial performance section, additional calculations are available. It is important to note, that these metrics must not be considered individually to evaluate Terrafina’s results. It is recommended to use them in combination with other International Financial Reporting Standards metrics to measure the Company’s performance.

Terrafina presents in this earnings report additional metrics such as Net Operating Income (NOI), Earnings Before Interests, Taxes, Depreciation and Amortization (EBITDA), Funds from Operations (FFO), and Adjusted Funds from Operations (AFFO). Each breakdown calculation is available in this document.

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In addition, Terrafina recommends reviewing the Appendixes as a reference of the integration of different items of

Terrafina’s financial statement. This information is available in the last section of this document.

Rental Revenues In 1Q14, rental revenues totaled US$33.4 million, a 0.6% or US$0.2 million marginal decrease compared to 4Q13. Other Operating Income In 1Q14, other operating income totaled US$4.1 million, an increase of US$0.1 million or 2.4% compared to 4Q13; these mainly stem from leasing contract deposits refunds from Triple-‐Net Leases. Expenses reimbursable to Terrafina mainly include electricity, property taxes, insurance and repair and maintenance activities.

1Q14 net revenues reached US$37.5 million, a marginal decrease of US$0.1 million, or 0.3% compared to 4Q13.

1Q14 4Q13 Var. % 1Q14 4Q13 Var. %

(millions of pesos) (millions of dollars)

Rental Revenues 441.9 437.8 0.9% 33.4 33.6 -‐0.6%

Other Operating income 54.2 52.6 3.0% 4.1 4.0 2.4%

Net Revenues 496.1 490.4 1.2% 37.5 37.6 -‐0.3% Source: PREI Latin America -‐ Fund Accounting

For additional information regarding the revenue breakdown used to calculate additional metrics presented in this earnings report, please refer to Appendix 1 in the last section of this document.

Real Estate Expenses In 1Q14, real estate expenses totaled US$9.3 million, an increase of US$1.3 million or 16.3% compared to 4Q13. These expenses mainly include repair and maintenance, electricity, fees, property taxes and insurance expenses. A total of US$2.3 million in property taxes were paid in January, which represented 25% of the total real estate expenses for the first quarter. These are one-‐time expenses and are disbursed only in the beginning of the year. Therefore, we do not expect to see additional charges in the property tax account in the following quarters. It is important to differentiate between expenses directly related to the operation and maintenance of industrial portfolio, as these are used for the NOI calculation. The remainder of the accounts included into the real estate expenses are considered non-‐recurring expenses, and are used to calculate EBITDA and AFFO.

1) PLA Administradora Industrial, S. de R.L. de C.V., is a Mexican affiliate of PREI Latin America, and Advisor as per the Advisory Contract.

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For additional information regarding the real estate expenses breakdown, please refer to Appendix 2 in the last section of this document.

Net Operating Income (NOI) During 1Q14, NOI reached US$30.5 million, a decrease of 1.1%, or US$0.4 million compared with 4Q13. NOI margin decreased 112 basis points reaching 86.4% compared to 87.5% in 4Q13. The NOI decrease was mainly explained by property tax expenses paid in January, which are considered as one-‐time expenses for the year. The following table displays the calculation of NOI for 1Q14:

1Q14 4Q13 Var. % 1Q14 4Q13 Var. %

(millions of pesos unless otherwise stated) (millions of dollars unless otherwise stated)

Rental Revenues1 419.9 411.3 2.1% 31.7 31.6 0.3%

Other Operating income2 48.2 48.2 0.0% 3.6 3.7 -‐1.4%

Net Revenues for NOI Calculation 468.1 459.5 1.9% 35.3 35.3 0.1%

Repair and Maintenance -‐9.3 -‐8.7 6.9% -‐0.7 -‐0.7 0.0%

Property Taxes -‐29.5 -‐6.5 353.8% -‐2.2 -‐0.5 340.0%

Property Management Fees -‐6.5 -‐10.6 -‐38.7% -‐0.5 -‐0.8 -‐37.5%

Electricity -‐9.0 -‐16.7 -‐46.1% -‐0.7 -‐1.3 -‐46.2%

Property Insurance -‐3.7 -‐4.6 -‐19.6% -‐0.3 -‐0.4 -‐25.0%

Security -‐3.0 -‐3.6 -‐16.7% -‐0.2 -‐0.3 -‐33.3%

Other Operational Expenses -‐2.8 -‐4.7 -‐40.4% -‐0.2 -‐0.4 -‐50.0%

Real Estate Operating Expenses for NOI Calculation

-‐63.8 -‐55.4 15.2% -‐4.8 -‐4.4 9.1%

Net Operating Income3 404.3 404.1 0.05% 30.5 30.9 -‐1.1%

NOI Margin 86.4% 87.5% -‐112 bps 86.4% 87.5% -‐112 bps

(1)Excludes accrued income from straight-‐line rent adjustments, as it is a non-‐cash item. (2) Excludes tenant improvements reimbursements 'which are included in

AFFO calculation. (3) The income generated by the operation of the property, independent of external factors such as financing and income taxes. NOI is the result of Net Revenues (includes rental income and triple net leases expenses reimbursements) minus Real Estate Operating Expenses (costs incurred during the operation and maintenance of the industrial portfolio).

Source: PREI Latin America -‐ Fund Accounting

Fees and Administrative Expenses Fees and administrative expenses in 1Q14 totaled US$3.7 million, which decreased 2.8%, or US$0.1 million, compared to 4Q13. Fees and administrative expenses for 1Q14 were comprised as follows: • 32.7% were related to advisory fees paid to the external advisor1 • 32.5% for professional and consulting services • 34.8% for payroll, administrative and other expenses

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EBITDA In 1Q14, EBITDA totaled US$26.9 million, a decrease of US$1.1 million, or 3.8%, compared to 4Q13. EBITDA margin for 1Q14 was 76.2%, a 308 basis point decrease compared to the previous quarter.

The following shows the EBITDA calculation 1Q14:

1Q14 4Q13 Var. % 1Q14 4Q13 Var. %


Rental Revenues1 419.9 411.3 2.1% 31.7 31.6 0.3%

Other Operating income2 48.2 48.2 0.0% 3.6 3.7 -‐1.4%

Real Estate Expenses for EBITDA Calculation -‐65.2 -‐56.4 15.6% -‐4.9 -‐4.5 8.9%

Real Estate Operating Expenses for NOI Calculation -‐63.8 -‐55.4 15.2% -‐4.8 -‐4.4 9.1%

Advertising -‐0.2 -‐0.4 -‐50.0% 0.0 0.0 -‐

Admin. Property Insurance Expenses -‐0.7 -‐0.7 0.0% -‐0.1 -‐0.1 -‐

Other Admin. Real Estate Expenses -‐0.5 0.0 -‐ 0.0 0.0 -‐

Fees and Admin. Expenses -‐45.5 -‐37.2 22.3% -‐3.5 -‐2.8 25.0%

External Advisor Fees -‐26.2 -‐15.9 64.8% -‐2.0 -‐1.2 66.7%

Legal, Admin. and Other Professional Fees -‐13.0 -‐20.9 -‐37.8% -‐0.9 -‐1.6 -‐43.8%

Trustee Fees -‐0.8 6.6 -‐112.1% -‐0.1 0.5 -‐120.0%

Payroll -‐4.7 -‐5.5 -‐14.5% -‐0.4 -‐0.4 -‐

Other Expenses -‐0.8 -‐1.5 -‐46.7% -‐0.1 -‐0.1 -‐

EBITDA3 357.4 365.9 -‐35.8% 26.9 28.0 -‐3.8%

EBITDA Margin 76.2% 79.3% -‐308 bps 76.2% 79.3% -‐308 bps (1) Excludes accrued income from straight line rent adjustments as it is a non-‐cash item. (2) Excludes tenant improvements reimbursements which is included in AFFO calculation. (3) Earnings before interest, taxes, depreciation and amortization. Source: PREI Latin America -‐ Fund Accounting

For additional information regarding the commissions and administrative expenses breakdown used for the calculation of EBITDA and AFFO, please refer to Appendix 3 located in the last section of this document.

Financing Costs In 1Q14, Terrafina registered net financing costs of US$10.0 million, which decreased US$4.6 million or 31.7% compared to the prior quarter.

16

1Q14 4Q13 Var. % 1Q14 4Q13 Var. %


Interest Paid -‐123.6 -‐127.6 -‐3.1% -‐9.3 -‐9.8 -‐5.1%

Borrowing Expenses -‐10.0 -‐62.2 -‐83.9% -‐0.7 -‐4.8 -‐85.1%

Recurring -‐0.2 -‐6.4 -‐96.9% 0.0 -‐0.5 -‐

Non Recurring -‐9.8 -‐55.8 -‐82.4% -‐0.7 -‐4.3 -‐83.7%

Interest Income 0.7 0.6 16.7% 0.1 0.0 -‐

Total -‐132.9 -‐189.2 -‐29.8% -‐10.0 -‐14.6 -‐31.7% Source: PREI Latin America -‐Fund Accounting

Funds from Operations (FFO) Adjusted Funds from Operations (AFFO) In the 1Q14, Terrafina’s FFO was US$17.7 million and FFO Margin of 50.0%, which decreased 24 basis points compared to 4Q13. Additionally, Terrafina reported an AFFO of US$15.1 million, an increase of US$0.8 million, or 5.2%, compared to 4Q13. AFFO margin was 42.4%, an increase of 215 basis points versus 4Q13.

Funds from Operations (FFO)

1Q14 4Q13 Var. % 1Q14 4Q13 Var. %


EBITDA 357.4 365.9 -‐2.3% 26.9 28.0 -‐3.8% Finance Cost1 -‐123.1 -‐133.4 -‐7.7% -‐9.3 -‐10.3 -‐9.7%

Funds from Operations (FFO) 234.3 232.5 0.8% 17.7 17.7 -‐0.3%

FFO Margin 50.0% 50.3% -‐24 bps 50.0% 50.3% -‐24 bps

Tenant Improvements -‐23.8 -‐16.5 44.4% -‐1.8 -‐1.3 38.3% Leasing Commissions -‐8.3 -‐17.1 -‐51.5% -‐0.6 -‐1.3 -‐53.8% Other Non Recurring Expenses2 -‐2.4 -‐11.4 -‐78.9% -‐0.2 -‐0.8 -‐75.0%

Adjusted Funds from Operations (AFFO) 199.8 187.5 6.6% 15.1 14.3 5.2%

AFFO Margin 42.4% 40.3% 215 bps 42.4% 40.3% 215 bps

(1) Net Operational Interest Expenses comprised by interest paid, recurring borrowing expenses and interest income. (2) Related expenses to acquisitions, legal and other.


Net Profit (Loss) In 1Q14, Terrafina experienced a net loss of US$0.7 million, mainly as a result of fair value adjustment on investment properties. This was due to an adjustment made to the only property in Terrafina’s portfolio that is leased to a public homebuilding company. This property only represents 0.8% of Terrafina’s total GLA. Moreover it is important to mention that the rent income from this property is not considered in Terrafina’s 2014 NOI projections, thereby reaffirming the US$125 million NOI projected for the year.

17

The following table presents the calculation of Net (Loss) Profit for 1Q14:

1Q14 4Q13 Var. % 1Q14 4Q13 Var. %

(millions of pesos unless

otherwise stated) 0 (millions of dollars unless

otherwise stated) 0

Net Revenues 496.1 490.4 1.2% 37.5 37.6 -‐0.4%

Real Estate Expenses -‐123.4 -‐102.0 21.0% -‐9.3 -‐7.8 18.8%

Fees and Other Expenses -‐47.9 -‐48.7 -‐1.6% -‐3.7 -‐3.7 -‐1.0%

Gain (Loss) from Sales of Real Estate Properties 0.7 -‐110.1 -‐ 0.1 -‐8.4 -‐

Net Income (Loss) from Fair Value Adjustment on Investment Properties -‐104.2 153.2 -‐ -‐7.9 11.8 -‐

Net Income (Loss) from Fair Value Adjustment on Derivative Financial Instruments -‐13.1 2.6 -‐ -‐1.0 0.2 -‐

Net Income (Loss) from Fair Value Adjustment on Borrowings -‐84.5 139.9 -‐ -‐6.4 10.7 -‐

Foreign Exchange Gain (loss) 0.0 -‐9.9 -‐ 0.0 -‐0.8 -‐

Acquisition Related Expenses 0.0 -‐4.4 -‐ 0.0 -‐0.3 -‐

Operating Profit 123.8 511.0 -‐75.8% 9.3 39.8 -‐76.6%

Operating Margin 24.8% 105.7% -‐8,094 bps 24.8% 105.7% -‐8,094 bps

Financial Income 0.7 0.6 16.7% 0.1 0.0 0.0%

Financial Expenses -‐133.6 -‐189.8 -‐29.6% -‐10.0 -‐14.6 -‐31.3%

Net Financial Cost -‐132.9 -‐189.2 -‐29.8% -‐10.0 -‐14.6 -‐31.7%

Net Profit (Loss) -‐9.1 321.8 -‐102.8% -‐0.7 25.2 -‐102.6%

Net Margin -‐1.8% 67.0% -‐ -‐1.8% 67.0% -‐ Source: PREI Latin America -‐ Fund Accounting

Distributions per CBFIs Terrafina distributed US$15.1 million, or US$0.0396 per CBFI in 1Q14, an increase of 8.2%, compared to 4Q13.

Terrafina’s 1Q14 and 4Q13 distributions are presented in the following table:

(million of pesos unless otherwise stated) 1Q14 4Q13

Total Outstanding CBFIs1 (million shares) 381.0 381.0

CBFI Price (quarterly average) 25.08 24.26

Distributions 199.8 181.7

Distributions Per CBFI 0.5244 0.4769

FX Rate USD/MXN (closing period) 13.2344 13.0262

Distributions (million dollars) 15.1 13.9

Distributions Per CBFI (dollars) 0.0396 0.0366

Annualized Distribution Yield2 8.4% 7.9% (1) Total number of outstanding CBFIs: 381,014,635. (2) Distribution per share divided by the average CBFI price of the quarter. The distribution yield calculation has been annualized for comparison purposes. Source: PREI Latin America -‐ Fund Accounting

18

Total Debt As of March 31, 2014, Terrafina’s total debt reached for US$913.4 million. The average cost Terrafina’s long-‐term debt, which is U.S. dollar-‐denominated, was 3.72%. Most of Terrafina’s loans are set at variable interest rates and are hedged with interest rate caps and fixed rate options.

(as of March 31, 2013)

Currency millions of pesos

millions of dollars

Interest Rate Terms Maturity

Extension Option

Short Term Debt

HSBC Pesos 623.2 47.6 TIIE + 2.60% Interest + Principal Mar 2015 -‐

Long Term Debt

Citibank1 Dollars 6,499.5 496.8 Libor + 3.50% Interest Only Mar 2016 -‐

Banorte Dollars 501.1 38.3 Libor + 3.30% Interest + Principal May 2016 -‐

GEREM2,3 Dollars 3,701.2 282.9 Libor + 3.50% Interest + Principal Sep 2018 Sep 2020

HSBC3 Dollars 625.3 47.8 Libor + 3.50% Interest + Principal Sep 2018 Sep 2020

Total Debt 11,950.3 913.4

Net Cash 594.1 45.4

Net Debt 11,356.2 868.0 LTV4 53.8% (1) Syndicated loan facility with six banks. (2) Syndicated loan facility with four banks. (3) One-‐year interest only grace period. (4) Calculated as total debt divided by the value of the properties (including appraisals).

Source: PREI Latin America -‐ Fund Accounting and Capital Markets

19

About Terrafina Terrafina (BMV:TERRA13) is a Mexican real estate investment trust formed primarily to acquire, develop, lease and manage industrial real estate properties in Mexico. Terrafina’s portfolio consists of attractive, strategically located warehouses and other light manufacturing properties throughout the central, Bajio and northern regions of Mexico. It is internally managed by highly qualified industry specialists, and externally advised by Prudential Real Estate Investors Latin America. Terrafina owns 230 real estate properties, including 217 developed industrial facilities with a collective GLA of approximately 31 million square feet and 13 land reserve parcels, designed to preserve the organic growth capability of the portfolio. Terrafina’s objective is to provide attractive risk-‐adjusted returns for the holders of its certificates through stable distributions and capital appreciations. Terrafina aims to achieve this objective through a successful performance of its industrial real estate and complementary properties, strategic acquisitions, access to a high level of institutional support, and to its management and corporate governance structure. For more information, please visit www.terrafina.mx About Prudential Real Estate Investors PREI® is a leader in the global real estate investment management business, offering a broad range of investment vehicles that invest in private and public market opportunities in the United States, Europe, the Middle East, Asia, Australia and Latin America. Headquartered in Madison, N.J., the company also has offices in Atlanta, Chicago, Miami, New York, San Francisco, Frankfurt, Lisbon, London, Luxembourg, Munich, Paris, Abu Dhabi, Mexico City, Sao Paulo, Beijing, Hong Kong, Seoul, Singapore, Sydney and Tokyo. In addition, the company has representatives in Milan. PREI has gross assets under management of USD $55.7 billion ($41.0 billion net assets), as of December 31, 2013. For more information, please visit www.prei.com About Prudential Financial, Inc. Prudential Financial, Inc. (NYSE:PRU), a financial services leader with more than $1.1 trillion of assets under management as of December 31, 2013, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-‐related services, mutual funds and investment management. In the U.S., Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit www.news.prudential.com Forward Looking Statements This document may include forward-‐looking statements that may imply risks and uncertainties. Terms such as "estimate", "project", "plan", "believe", "expect", "anticipate", "intend", and other similar expressions could be construed as previsions or estimates. Terrafina warns readers that declarations and estimates mentioned in this document, or realized by Terrafina’s management imply risks and uncertainties that could change in function of various factors that are out of Terrafina’s control. Future expectations reflect Terrafina’s judgment at the date of this document. Terrafina reserves the right or obligation to update the information contained in this document or derived from this document. Past or present performance is not an indicator to anticipate future performance.

20

Conference Call

(BMV: TERRA13) Cordially invites you to participate in its

First Quarter 2014 Results Wednesday, April 30, 2014 12:00 p.m. Eastern Time 11:00 a.m. Central Time

Presenting for Terrafina:

Alberto Chretin, Chief Executive Officer Angel Bernal, Chief Financial Officer

***

To access the call, please dial: from within the U.S. 1-‐800-‐311-‐9404 from outside the U.S. 1-‐334-‐323-‐7224

Conference ID Number: 34974

Audio Webcast Link: http://www.videonewswire.com/event.asp?id=98731

Conference Replay

Will be provided for your call Dial 1-‐877-‐919-‐4059 or 1-‐334-‐323-‐0140 to listen

Passcode: 30392580

21

Appendix

Appendix 1 – Revenues Terrafina’s revenues are classified as rental revenues and other operating reimbursable revenues mainly. Additionally, there are accounting revenues that most be booked as IFRS indicates, nevertheless these are considered as non-‐cash items and therefore excluded in some calculations. Reimbursable tenant improvements are included in the tenant improvement expenses for the AFFO calculation.

Revenues

1Q14 4Q13 1Q14 4Q13


Revenues 441.9 437.8 33.4 33.6

NOI calculation Rental Revenue 419.9 411.3 31.7 31.6

Non Cash Accrued Income1 22.0 26.5 1.7 2.0

Other Operating Revenues 54.2 52.6 4.1 4.0

NOI calculation Reimbursable Expenses as Revenues2 48.2 48.2 3.6 3.7

AFFO calculation Reimbursable Tenant Improvements 2.7 4.4 0.2 0.3

Non Cash Other non-‐cash income 3.3 0.0 0.2 0.0

Net Revenue 496.1 490.4 37.5 37.6

(1) Straight line rent adjustment. (2) Triple net leases expenses reimbursed to Terrafina from its tenants.


22

Appendix 2 – Real Estate Expenses Real estate expenses are comprised of recurring figures related with the operation (used for the Net Operating Profit calculation) as well as non-‐recurring figures used for metric calculations such as Earnings Before Interests, Taxes, Depreciation and Amortization (EBITDA), Funds from Operations (FFO), Adjusted Funds from Operations (AFFO). Terrafina’s 1Q14 and 4Q13 real estate expenses breakdown is available in the following table and indicates the figures used for the calculation of these metrics:

Real Estate Expenses

1Q14 4Q13 1Q14 4Q13


Repair and Maintenance -‐35.8 -‐29.6 -‐2.7 -‐2.3

NOI calculation Recurring -‐9.3 -‐8.7 -‐0.7 -‐0.7

AFFO calculation Non Recurring -‐26.5 -‐20.9 -‐2.0 -‐1.6

Property Taxes -‐30.9 -‐7.2 -‐2.3 -‐0.6

NOI calculation Operating -‐29.5 -‐6.5 -‐2.2 -‐0.5

Non Cash Non Operating -‐1.4 -‐0.7 -‐0.1 -‐0.1

NOI calculation Property Management Fees -‐6.5 -‐10.6 -‐0.5 -‐0.8

NOI calculation Electricity -‐9.0 -‐16.7 -‐0.7 -‐1.3

AFFO calculation Brokers Fees -‐8.3 -‐17.1 -‐0.6 -‐1.3

Property Insurance -‐4.4 -‐5.3 -‐0.4 -‐0.5

NOI calculation Operating -‐3.7 -‐4.6 -‐0.3 -‐0.4 EBITDA

calculation Administrative -‐0.7 -‐0.7 -‐0.1 -‐0.1

NOI calculation Security -‐3.0 -‐3.6 -‐0.2 -‐0.3 EBITDA

calculation Publicity -‐0.2 -‐0.4 0.0 0.0

Other Expenses -‐3.3 -‐4.7 -‐0.2 -‐0.4

NOI calculation Operational Related -‐2.8 -‐4.7 -‐0.2 -‐0.4 EBITDA

calculation Administrative -‐0.5 0.0 0.0 0.0

Non Cash Bad Debt Expense -‐22.0 -‐6.8 -‐1.7 -‐0.5

Total Real Estate Expenses -‐123.4 -‐102.0 -‐9.3 -‐8.0


23

Appendix 3 – Fees and Administrative Expenses Fees and administrative expenses include figures used for metric calculations such as Earnings Before Interests, Taxes, Depreciation and Amortization (EBITDA), Funds from Operations (FFO), Adjusted Funds from Operations (AFFO). Terrafina’s 1Q14 and 4Q13 fees and administrative expenses breakdown is available in the following table and indicates the figures used for the calculation of these metrics:

Fees and Administrative Expenses

1Q14 4Q13 1Q14 4Q13


EBITDA calculation External Advisor Fees -‐26.2 -‐15.9 -‐2.0 -‐1.2

Legal Fees -‐2.3 -‐16.4 -‐0.1 -‐1.2

EBITDA calculation Recurring -‐0.6 -‐4.3 0.0 -‐0.3

AFFO calculation Non Recurring -‐1.7 -‐12.1 -‐0.1 -‐0.9

Other Professional Fees -‐2.6 -‐6.0 -‐0.2 -‐0.4

EBITDA calculation

Recurring -‐1.9 -‐6.7 -‐0.1 -‐0.5

AFFO calculation Non Recurring -‐0.7 0.7 -‐0.1 0.1 EBITDA

calculation Administrative Fees -‐10.5 -‐9.9 -‐0.8 -‐0.8

EBITDA calculation

Payroll -‐4.7 -‐5.5 -‐0.4 -‐0.4

EBITDA calculation Trustee Fees -‐0.8 6.6 -‐0.1 0.5

EBITDA calculation Other Expenses -‐0.8 -‐1.5 -‐0.1 -‐0.1

Total Fees and Admin. Expenses -‐47.9 -‐48.6 -‐3.7 -‐3.6


24

Appendix 4 -‐ Reconciliation

Reconciliation of Net Profit (Loss) to FFO, EBITDA and NOI 1Q14 4Q13 1Q14 4Q13

(million pesos) (million dollars)

Net Profit (Loss) -‐9.1 301.6 -‐0.7 23.1 Add (deduct) Cost of Financing Adjustment: Non Recurring Borrowing Expenses 9.8 55.8 0.7 4.3

Add (deduct) Non-‐Cash Adjustment: Acquisition Related Expenses 0.0 4.4 0.0 0.3 Foreign Exchange Adjustments 0.1 9.9 0.0 0.8 Fair Value Adjustment on Borrowings 84.3 -‐119.7 6.4 -‐9.2 Fair Value Adjustment on Derivative Financial Instruments 13.1 -‐2.6 1.0 -‐0.2 Fair Value Adjustment on Investment Properties 104.2 -‐153.2 7.9 -‐11.8 Sales of Real Estate Properties Adjustment -‐0.7 110.1 -‐0.1 8.4

Add (deduct) Expenses Adjustment: Non Recurring Repair and Maintenance 26.5 20.9 2.0 1.6 Non Operating Property Taxes 1.4 0.7 0.1 0.1 Brokers Fees 8.3 17.1 0.6 1.3 Bad Debt Expense 22.0 6.8 1.7 0.5 Non Recurring Legal Fees 1.7 12.1 0.1 0.9 Non Recurring Other Professional Fees 0.7 -‐0.7 0.1 -‐0.1

Add (deduct) Revenues Adjustment: Accrued Income -‐22.0 -‐26.5 -‐1.7 -‐2.0 Other Non-‐Cash Income -‐3.3 0.0 -‐0.2 0.0 Reimbursable Tenant Improvements -‐2.7 -‐4.4 -‐0.2 -‐0.3 FFO 234.3 232.5 17.7 17.7

Add (deduct) Cost of Financing Adjustment: Interest Paid 123.6 127.6 9.3 9.8 Recurring Borrowing Expenses 0.2 6.4 0.0 0.5 Interest Income -‐0.7 -‐0.6 -‐0.1 0.0 EBITDA 357.4 365.9 26.9 28.0

Add (deduct) Expenses Adjustment: External Advisor Fees 26.2 15.9 2.0 1.2 Recurring Legal Fees 0.6 4.3 0.0 0.3 Recurring Other Professional Fees 1.9 6.7 0.1 0.5 Administrative Fees 10.5 9.9 0.8 0.8 Payroll 4.7 5.5 0.4 0.4 Trustee Fees 0.8 -‐6.6 0.1 -‐0.5 Other Expenses 0.8 1.5 0.1 0.1 Advertising 0.2 0.4 0.0 0.0 Administrative Property insurance 0.7 0.7 0.1 0.1 Other Administrative Expenses 0.5 0.0 0.0 0.0 NOI 404.3 404.1 30.5 30.9

Add (deduct) Expenses Adjustment: Recurring Repair and Maintenance 9.3 8.7 0.7 0.7 Operating Property Taxes 29.5 6.5 2.2 0.5 Property Management Fees 6.5 10.6 0.5 0.8 Electricity 9.0 16.7 0.7 1.3 Operating Property Insurance 3.7 4.6 0.3 0.4 Security 3.0 3.6 0.2 0.3 Other Operational Expenses 2.8 4.7 0.2 0.4

Add (deduct) Revenues Adjustment:

Other Non-‐Cash Income 3.3 0.0 0.2 0.0 Accrued Income 22.0 26.5 1.7 2.0 Reimbursable Tenant Improvements 2.7 4.4 0.2 0.3

Net Revenue 496.1 490.4 37.5 37.6

25

Reconciliation of Net Profit (Loss) to AFFO

1Q14 4Q13 1Q14 4Q13

(million pesos) (million dollars)

Net Profit (Loss) -‐9.1 301.6 -‐0.7 23.1 Add (deduct) Cost of Financing Adjustment: Non Recurring Borrowing Expenses 9.8 55.8 0.7 4.3

Add (deduct) Non-‐Cash Adjustment: Acquisition Related Expenses 0.0 4.4 0.0 0.3 Foreign Exchange Adjustments 0.1 9.9 0.0 0.8 Fair Value Adjustment on Borrowings 84.3 -‐119.7 6.4 -‐9.2 Fair Value Adjustment on Derivative Financial Instruments 13.1 -‐2.6 1.0 -‐0.2 Fair Value Adjustment on Investment Properties 104.2 -‐153.2 7.9 -‐11.8 Sales of Real Estate Properties Adjustment -‐0.7 110.1 -‐0.1 8.4

Add (deduct) Expenses Adjustment: Non Operating Property Taxes 1.4 0.7 0.1 0.1 Bad Debt Expense 22.0 6.8 1.7 0.5

Add (deduct) Revenues Adjustment: Accrued Income -‐22.0 -‐26.5 -‐1.7 -‐2.0 Other Non-‐Cash Income -‐3.3 0.0 -‐0.2 0.0

AFFO 199.8 187.5 15.1 14.3

26

Appendix 5 -‐ Cap Rate Calculation Terrafina subtracts cash and land reserves book value for the cap rate calculation. In the following table, the cap rate calculation is shown assuming a CBFI quarterly average price of Ps. 25.08 pesos and a closing exchange rate as of March 31, 2014 of Ps. 13.0837.

Implied Cap Rate

Quarterly Average Price (dollars)¹ 1.92

(x) CBFIs (million shares) 381.0

(=) Market Capitalization 730.4

(+) Total Debt 913.4

(-‐) Cash 45.4

(=) Enterprise Value 1,598.3

(-‐) Landbank 80.5

(=) Implied Operating Real Estate Value 1,517.8

Net Operating Income (NOI) 2014e 125.0

Implied Cap Rate 8.2%

Figures expressed in million dollars unless otherwise stated.

(1) Quarterly average price of Ps.25.08 and exchange rate of Ps.13.0837 (as of March 31, 2014).

27

Financial Statements

Income Statement

1Q14

(thousands of pesos)

Rental revenues

$441,941

Other operating income

54,145

Real estate operating expenses

(123,384)

Fees and other expenses

(47,881)

Acquisition related expenses

-‐ Realized gain from disposal of investment properties

703

Net Income (Loss) from Fair Value Adjustment on Borrowings

(84,459)

Net gain (loss) from fair value adjustment on investment properties

(104,183)

Net (loss) gain unrealized from fair value on derivative financial instruments

(13,070)

Foreign exchange (loss) gain

46

Operating profit 123,858

Finance income

722

Finance cost

(133,719)

Finance cost -‐ net (132,997)

Net Profit for the period (9,139)

Results for the period January 01, 2014 to March 31, 2014.

28


Balance Sheet Mar-‐31-‐14 Dec-‐31-‐13 Var. (thousand pesos) Assets

Non-‐current assets Investment properties $21,117,969 $21,146,337 -‐0.1%

(Cost: 03/31/2014 -‐ $21,023,650; 12/31/2013 -‐ $20,949,047)

Derivative financial instruments $27,208 $39,852 -‐31.7% Current assets

Other assets $26,561

$38,513 -‐31.0%

Recoverable taxes $935,307 $1,064,715 -‐12.2% Prepaid expenses $28,580 $8,409 239.9% Deferred charges and accrued income $63,106 $41,282 52.9% Accounts receivable $66,106 $79,077 -‐16.4% (Net of allowance for doubtful accounts: 03/31/2014 -‐ $71,015; 12/31/2013 -‐ $49,279)

Restricted cash $60,436 $56,935 6.1%

Cash and cash equivalents $594,122 $728,550 -‐18.5%

Total assets 22,919,395 23,203,670 -‐1.2%

Net assets attributable to Investors Contributions, net $9,900,604 $9,900,604 0.0% Retained earnings $55,584

$246,413 -‐77.4%

Currency translation adjustment $518,830 $511,856 1.4%

Total net assets (Net Equity) 10,475,018 10,658,873 -‐1.7%

Liabilities Non-‐current liabilities

Borrowings $11,222,829

$11,183,919 0.3%

(Cost: 03/31/2014 -‐ $11,272,699; 12/31/2013 -‐ $11,311,842)

Tenant deposits $159,626 $147,986 7.9% Current liabilities

Trade and other payables $334,425

$409,537 -‐18.3%

Borrowings $727,497 $803,355 -‐9.4%

(Cost: 03/31/2014 -‐ $734,790; 12/31/2013 -‐ $816,134)

Total liabilities (excluding net assets attributable to the Investors) 12,444,377 12,544,797 -‐0.8%

Total net assets and liabilities 22,919,395 23,203,670 -‐1.2%

29


Attributable to Investors

Statement of Changes in Equity Net contributions

Currency translation adjustment

Retained earnings

Net assets attributable to Investors

(thousand pesos) Balance at January 1, 2014 (Audited) $9,900,604 $511,856 $246,413 $10,658,873 Distributions to Investors -‐ -‐ (181,690) (181,690) Comprehensive Income Net loss of the period -‐ -‐ (9,139) (9,139) Other Comprehensive Income Currency Translation -‐ 6,974 -‐ 6,974 Total Comprehensive (loss) income -‐ 6,974 (9,139) (2,165)

Net Assets attributable to investors for the period from January 1 to March 31, 2014 (Unaudited) $9,900,604 $518,830 $55,584 $10,475,018


30


Cash Flow Statement Mar-‐14

(thousand pesos)

Cash flows from operating activities (Loss) profit for the period $(9,139)

Adjustments: Net loss (gain) unrealized from fair value adjustment on investment properties 104,183

Net loss (gain) unrealized from fair value adjustment on derivative financial instruments 13,070 Net loss (gain) unrealized from fair value adjustment on borrowings

Realized gain from disposal of investment properties (703)

Bad debt expense 21,980

(Increase) in restricted cash (3,501)

(Increase) in accounts receivable (30,833)

Decrease in recoverable taxes 129,408

(Increase) in prepaid expenses (20,171)

Decrease in other assets 11,952

Increase in tenant deposits 11,640

(Decrease) in accounts payable (75,112)

Net cash (used in) generated from operating activities 237,233

Cash flows from investing activities Acquisition of investment properties (8,101)

Improvements of investment properties (66,003)

Dispositions of investment properties 11,011

Net cash (used in) generated from investing activities (63,093)

Cash flows from financing activities Acquisition of derivative financial instruments (275)

Proceeds from borrowings -‐

Principal payments on borrowings (126,752)

Distributions to investors (181,690)

Proceeds from CBFI issued -‐

Net cash (used in) generated from financing activities (308,717)

Net (decrease) in cash and cash equivalents (134,577)

Cash and cash equivalents at the beginning of the period 728,550

Exchange effects on cash and cash equivalents 149

Cash and cash equivalents at the end of the period $594,122


Terrafina's 1Q14 Earnings Report - Amazon S3 in Mexico City: Contacts in New York: Francisco...

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