Vesta Real Estate Corporation, S.A.B. de C.V. (VTMX) Q3 2026 earnings call transcript

Good morning, everyone, and welcome to our review of Vesta's third quarter 2026 earnings results. Presenting today with me are Lorenzo Dominique Vero, our Chief Executive Officer, and Juan Sotil, our Chief Financial Officer.

The earnings release detailing our third quarter 2026 results was released yesterday after market close, and is available on Vesta's IR website along with our supplemental package. It's important to note that on today's calls, management remarks and answers to your questions may contain forward-looking statements.

Forward-looking statements address matters that are subject to risk and uncertainties that may cause actual results to differ. For more information on these risk factors, please review our public filings. Vesta assumes no obligation to update any forward-looking statements in the future. Additionally, please note that all figures were prepared in accordance with RFRS, which differ in certain significant respects from U. S. gap. All information should be written in conjunction with and is qualified in its entirety by reference to our financial statements, including the notes thereto and is stated in U. S. dollars unless otherwise noted.

I'll now turn the call over to Lorenzo Overo.

Thank you, Fernanda, and good morning to everyone joining us today. I'm extremely pleased with Vesta's results for the third quarter. This was an outstanding quarter for our company, reflecting record new leasing activity, a substantial improvement in portfolio occupancy, strong financial performance, and important progress in the execution of our Route 2030 strategy. Importantly, our performance gives us the confidence to raise our full-year 2026 guidance.

Last quarter, I spoke about execution being clearly underway. I described how Vesta was converting demand into leases, leases into occupancy, and our land bank into discipline development opportunities. This quarter, we deliver on that commitment. Our results demonstrate that the opportunities we have been discussing throughout the year are translating into signed contracts, higher occupancy, new construction, and growing rental income.

And we are accomplishing this while maintaining the financial discipline that has always been central to the best strategy. Let me begin with the broader environment. The third quarter brought encouraging signs that industrial investment decisions in Mexico are gaining momentum. Following a period of caution and adjustment, we are seeing renewed investment in machinery and equipment, accelerating demand tied to electronics and AI-related industries.

And companies moving forward with expansion plans despite continued uncertainty surrounding global trade. What is particularly encouraging is that this renewed activity is translating into tangible commitments, and Vesta is directly benefiting from these trends. As I've noted previously, Mexico is particularly well-positioned in this environment. Its deep integration with North America, established manufacturing base, and competitive advantages provide a solid foundation for continued investment.

While uncertainty surrounding trade negotiations and the USMCA review continues to influence the timing of some investment decisions, we're encouraged by the progress in discussions and, importantly, by what our customers are doing.

Companies are continuing to invest, expand, and make long-term commitments in Mexico. Recent U. S. trade data reinforces this point. According to U. S. Census Bureau figures, U. S. imports from Mexico reached approximately $60.6 billion in August, a record level, with Mexico accounting for approximately 18% of total U. S. goods imports. We're also encouraged by signs of recovery in investment in machinery and equipment following a period of slower activity.

This is an important indicator because investment in productive capacity can translate into future demand for manufacturing and logistic facilities. Together with the expansion of electronics-related trade and the continued regionalization of supply chains, these trends reinforce our confidence in Mexico's industrial competitiveness. Mexican electronics exports have increased approximately 2.5 times from 2024 to 2026, reflecting the country's growing role in supplying the technology and digital infrastructure industries. At the same time, we are witnessing a significant transformation in the industry's driving demand for industrial space. Investment associated with artificial intelligence and digital infrastructure is creating new requirements across the manufacturing supply chain. As we have discussed in previous calls, the opportunity extends well beyond the data centers themselves.

It includes the production and distribution of electronics, servers, electrical equipment, cooling systems, components, and other products required to develop and operate digital infrastructure. We're seeing how these requirements are translating into opportunities for industrial real estate in Mexico, alongside continued activity from automotive, logistics, e-commerce, food and beverage, and other established sectors. For Vesta, the significance is clear. As manufacturing and supply chains become more sophisticated, customers increasingly require high-quality buildings with reliable energy, strong infrastructure, access to labor, and connectivity to critical logistics corridors.

These are precisely the characteristics we prioritize in our portfolio and development strategy. And our third quarter leasing results provide compelling evidence that this approach is working. During the quarter, Vesta signed approximately 2.3 million square feet of leases, including a record 1.6 million square feet of new leases. This was an exceptional level of new leasing activity involving customers across electronics, e-commerce, logistics, automotive, and consumer goods. What is particularly encouraging is the diversity of these transactions.

We are seeing demand across different industries and regions, from multinational companies expanding established operations to other businesses investing in their growth in Mexico. We are particularly pleased to see established clients such as BMW, DSV Logistics, and Mercado Libre continue to grow with Vesta. These relationships demonstrate the value of our customer-focused operating model, while the diversity of activity across industries and geographies reinforces the resilience of our portfolio. This is an important part of our strategy, building long-term relationships with high-quality companies while continuously broadening our customer base.

Most importantly, these are not simply prospects or expressions of interest. These are customers making decisions, signing long-term leases, and committing to Vesta properties. It's why we have remained confident in our market positioning, even as broader industrial market conditions have been mixed. Our leasing performance translated into a significant improvement in occupancy. Total portfolio occupancy reached 93.9% at quarter end, an increase of 220 basis points from the second quarter.

Stabilized occupancy reached 93.9%, while same-store occupancy increased to 95.5%. This is an important milestone reflecting the strength of our commercial execution and our ability to lease high-quality space in strategically selected locations. We also completed approximately 700,000 square feet of lease renewals, with a waiter average lease term of approximately five years. Our trailing 12-month waiter average leasing spread remains strong at 10%, demonstrating the continued value consumers place on our properties. Vesta's competitive advantage is a combination of deep local market knowledge, long-standing customer relationships, an exceptional commercial team, and the ability to deliver high-quality properties in the locations where our customers want to operate.

In industrial real estate, it is not enough to be present in an attractive city. Success depends on owning and developing properties in the specific corridors where customers want to operate, and our long-standing focus on these locations is paying off. Let me highlight a few examples from the quarter. In Monterrey, we made substantial progress leasing our existing Vesta Park and Podaca properties.

This progress has supported the next phase of growth at our new Vesta Park, Monterrey. Our success in leasing existing properties has provided a strong foundation for advancing the infrastructure and construction required to serve future customers in this strategic market. In the Bajillo, we're also encouraged by leasing activity involving established industrial companies, including BMW in San Luis Potosí. This reflects the continued importance of Mexico within the North American automotive supply chain, while reinforcing the value of our long-standing relationships with multinational customers. Diversifying our customer base across industries is an important element of our approach to managing risk and creating a resilient portfolio.

In Guadalajara, we deliver a building ahead of schedule during the third quarter. Together, with a building delivered in Querétaro, both properties were fully occupied upon completion. These deliveries demonstrate our ability to coordinate development and commercial execution while meeting our customers' operational needs. Across Vesta, we're encouraged not only by the amount of leasing achieved, but by the quality of our customers, the diversity of demand, and the improved visibility these contracts provide.

And this is what distinguishes our performance from broader market averages. Industrial markets do not necessarily recover at the same pace, and conditions can differ significantly between sub-markets, as I have noted in the past.

Let me now turn to development and capital allocation. Strong leasing performance together with our strategic land investments has enabled us to significantly accelerate development. During the third quarter, we initiated approximately 1.9 million square feet of new construction across five inventory buildings, three in Monterrey, one in Ciudad Juarez, and one in Guanajuato. Following these starts and the delivery of two fully occupied buildings, our development pipeline reached approximately 3.3 million square feet under construction, representing an estimated investment of $282.5 million and an expected yield on cost of 10.2%. This represents an important milestone in the execution of Route 2030. We are translating the strategic land positions we secure into infrastructure, new buildings, and opportunities for future rental income.

Our most significant development priority is Monterrey, where the successful leasing of our existing Apodaca property has enabled us to advance development at our new Vesta Park Monterrey. We're also investing in infrastructure and development in Ciudad Juarez, Guadalajara, Mexico City, and other selected markets where we see attractive long-term opportunities. This is a natural progression of our strategy.

First, we identify unsecured exceptional locations. We then develop the infrastructure necessary to support our customers' operations and progressively build, new capacity as demand materializes. And our approach remains disciplined. We're not developing simply to grow the size of our portfolio. We're focused on projects where the quality of the location, customer requirements, infrastructure, and expected returns support sustainable long-term value creation. Following quarter end, we also acquired an additional land parcel in Mexico City, comprising approximately 689,000 square feet. This investment further strengthens our development capacity in one of Mexico's most important logistics markets and advances our Route 2030 land requirements. Equally important, our growth strategy is supported by a strong and increasingly flexible financial position as Juan will discuss Together with our successful equity offering earlier this year these actions have strengthened our ability to fund development infrastructure and future growth opportunities while maintaining a prudent balance sheet We believe this combination of development capabilities and financial discipline is especially important in the current market.

From a financial perspective, the third quarter was also very strong, with rental revenue increasing 10.8% year-over-year to $77.5 million. Adjusted NOI increased 10.4% year-over-year to $72.9 million with a 94% margin. Adjusted EBITDA increased 9.2% year-over-year to $65.2 million and an 84.1% margin. Vesta FFO for the quarter, excluding current income tax, total $47.1 million, a 0.7% decrease compared with the third quarter of 2025.

These results reflect the contribution from newly leased properties, continued revenue growth, and our focus on operational efficiency. Importantly, this performance has enabled us to raise our financial guidance for 2026. Juan will share these details shortly. We're extremely pleased with our performance and the progress we have made during the first nine months of the year. At the same time, we recognize that the pace of investment decisions and leasing activity can vary from quarter to quarter.

Our confidence is grounded in what we have achieved, the quality of our portfolio and the long-term opportunities ahead. As we enter the final months of 2026 and prepare for 2027, we remain focused on sustaining strong operating performance, advancing developments that create value, and maintaining the financial flexibility to respond to attractive opportunities. We have built a company with the assets, customer relationships, expertise, and financial strength to succeed across different market conditions. This quarter demonstrates the effectiveness of the strategy. I would like to recognize our entire Vesta team for their exceptional work and thank our clients for continuing to place their trust in us.

With that, let me turn the call over to Juan to discuss our financial results in greater detail.

Thank you, Lorenzo, and good day everyone. We deliver another strong quarter, continuing the momentum we built since the start of the year. Given this consistent performance, we are raising our full year 2026 guidance as Lorden noted. We now expect revenue growth of 11.5% to 12.5%, up from our prior guidance of 10% to 11%, reflecting higher than expected rental income from properties added this year. We also now expect adjusted NOI and adjusted EBITDA margins to reach 94% and 84% respectively by year end, up from our prior guidance of 93.5% and 83%. Underscoring our continuing focus on expense control and on delivering strong results.

Now, let me walk you through our third quarter results. Starting with our top line, total revenues increased 9.9% to $79.6 million, while revenues excluding energy reached $77.5 million, a 10.8% increase year over year. This growth was primarily driven by rental income from new leases and inflationary adjustments across our portfolio. In terms of currency mix, 89.4% of our third quarter 2026 rental revenues were denominated in U. S. dollars, unchanged from the same period last year.

Moving to profitability, adjusted NOI increase 10.4% to $72.9 million. Our adjusted NOI margin decreased 33 basis points year over year to 94.1%. percent, reflecting higher operating property costs relative to rental revenues in the quarter. Adjusted EBITDA totaled 65.2 million, up 9.2 percent year over year, while the margin contracted 123 basis points to 84.1 percent, primarily due to higher costs and administrative expenses during the quarter. FFO excluding current tax was relatively flat at $47.1 million in the third quarter. Pre-tax income was $104 million compared to $52.4 million in the third quarter 2025.

The increase was primarily due to higher gains on the revaluation of investment properties, higher interest income, and higher other income. Partially upset by higher interest expense, higher other expenses, and a foreign exchange loss.

Turning to our balance sheet and capital allocation, we ended the quarter with $240 million in cash and cash equivalents, and total debt of $1.1 billion. Net debt to EBITDA stood at 3.3 times and our loan-to-value ratio was 22.3%. During the quarter, both Standard & Poor's global ratings and Fitch ratings upgraded our long-term issuer credit rating to BBB with a stable outlook, from BBB- with a positive outlook. These upgrades validate the quality of our portfolio and the strength of our balance sheet, and they should support a more efficient cost of capital going forward.

Also, aligned with ensuring balance sheet strength, we took decisive steps this quarter to further strengthen our capital structure. We announced a prepayment of $105 million under two private financings, retiring both well ahead of maturity. As a result, we have no significant maturity over the next years, which gives us greater flexibility and allows us to stay focused on growth.

Finally, on October 15, we paid a cash dividend for the third quarter equivalent to 37 cents in pesos per ordinary shares. This concludes our third quarter 2026 review. Operator, could you please open the floor for questions?

What? Juan, can you repeat what you mean with the demand? The AI-related industries? You mentioned that it's an emerging source of demand for industrial space in Mexico. So I'm just trying to get a sense of how big do you think this opportunity could become in the next two, three years?

Thank you very much for your question and for being on today's call. Definitely, we have seen a tremendous increase in demand related with data center industries as well as AI related.

We have in the previous years, we have been very close to the electronic sector. As you may know, some of our clients include Foxconn and others that are currently being contractors for data centers, producing servers and data center related equipment. But also we have seen equipment in the cooling system, AVAC, conditioning, ventilation, electric switches. And this is this is we believe that this could be pretty big. As you can see, the export numbers in terms of electronics from Mexico to the U. S. , they have increased dramatically in the last couple of years. Today's export represent in the electronic sector, represent the majority of exports to the U. S. probably right now already exceeding the exports in the automotive industry.

So we think that as long as this continues to accelerate, we will continue to see demand. And we believe that we will have strong demand coming in markets such as Guadalajara, where we are well positioned, Ciudad Juarez, where we have seen also this particular trend. And if you look at the exports of Jalisco as well as Chihuahua, particularly coming from Ciudad Juarez, it is very much linked to these companies.

But also in other markets such as Tijuana, Monterrey, and maybe some later on in the Bajio region, particularly for electric switches and panels. We don't have an estimate on GLA, but if you track closely on the closings on Vesta, not only this quarter, but in the previous years, this particular wave continues to increase. So we're glad to see that Vesta is well positioned with industrial parks that have not only available space, but many of these buildings require energy. energy, and we're well positioned in terms of energy in many of these projects like Guadalajara and Ciudad Juarez. So we think that this particular trend will continue as long as we see these billions and trillions of dollars being invested in AI data centers and hyperscalers among the industry.

Thank you.

Thank you very much for your question. As you as you as you well know, Vesta has a strong bet towards towards e-commerce and logistics related to e-commerce. And Vesta has made a strong bet, particularly in these metro areas like Guadalajara, Monterrey, Mexico City. And we believe that the demand in this particular sector will continue to increase. We have seen major growth from these companies. Mercado Libre is currently Vesta's largest tenant and continues to grow. We recently closed an important transaction again with Mercado Libre in Monterrey. So we think that if you analyze carefully the countries with advanced adoption of e-commerce, e-commerce represents more than 30% of total retail sales. While Mexico being still an early adoption has definitely accelerated since the pandemic, but we are still at 17, 15% of total sales.

And if you look at the public numbers, some companies such as Walmart and Liverpool, they are way below what they could be doing in other markets. So we continue to see strong demand in the long term. And you mentioned this well. We think that there could be a strong demand also for last mile operations, for reverse logistics. So that's why our strategy will continue to tap those markets. We recently did a land acquisition in Mexico City again trying to be closer to the demand driven by these large e companies So we are excited of the trends in our sector related to e too Actually I think that some of these e players will continue to expand not only in the large metro areas, but also in other markets that have a large population and are well positioned.

And logistically, they all need to supply quicker. Competition is tough, but I think that all these players are understanding better the Mexican consumer habits, which are rapidly changing, too.

Excellent. Gerald, thank you very much for being on the call and for making these questions. I will start with your second question regarding land bank and competition and Mexico City specifically.

We believe that Vesta has made smart decisions by being able to identify the markets where we want to continue growing. These are markets with a strong dynamism and markets that we believe will represent a higher demand. And that's why Vesta has acquired land in the last quarters, in the last cycle in Monterrey, in Juarez, in Tijuana, Guadalajara, and Mexico City. And particularly Mexico City, we recently did an acquisition where we're going to be able to develop approximately 700,000 square feet. This together with a project that we have under development, also in the Mexico City CTT corridor. But we continue to look into Mexico City so that we can have different alternatives in the different Mexican city, in the different sub markets.

We're focusing strongly in urban infield locations with higher barriers of entry. and that's why we have a sharpshooter strategy in Mexico City and we have some great case studies and successful cases like the one in Punta Norte, the one in La Villa where we were able to get record high rental rates in great locations, great buildings with outstanding investment grade tenants. That's why we will continue to buy land in Mexico City. For the other sites, we believe that we have pretty much the land that we require in order to execute our long-term plan. The Route 2030 strategy will give more detail at our best today.

But we're very happy to today have a larger pipeline. And the pipeline, it's actually a result of stronger leasing activity. And let me use one example, Monterrey. Monterrey, starting in the year, we had three buildings that we developed on spec.

We had on list-up stage. And as of today, almost at the end of the year, we are almost fully list in Monterrey with tenants in different sectors, which relates to your first question. We have tenants in the e-commerce industry, AI-related industries, as well as other logistics and manufacturing. So this is a very well-diversified base of tenants. And if we look forward, we started three buildings in the new Vesta Park Monterrey, which is right next to the airport on the same Vesta-Podaca corridor on the Apodaca road to the airport. So we started three buildings. Two of them are kind of our, let's call it bread and butter buildings, multi-tenant buildings that we can accommodate different type of tenants in the 200,000 to 300,000 square feet range.

And we also develop another larger format, like the one we did in Apodaca, which was very successful, where I got actually several awards worldwide in terms of our development specifications. So the larger format will be an 800,000 square foot spec building. So even that we start them on spec, our strategy is to eventually, while we develop, to lease up and hopefully get some of the potential tenants signing leases before we finalize the buildings. But we feel very comfortable with the strategy.

Returns are attractive. Rents in those markets are holding well. So we can still make returns in the double-digit range, 10% return on costs. And for that reason, we believe that Vesta has the right strategy to start building some spec while we have already some pipeline and we have already that contact with potential clients. Many of our clients are the ones that we believe will continue to expand. And by starting the spec, we anticipate to potential demand of clients who want to be in the best assets in the right locations in the best sub markets in many of these regions. We have currently a pipeline of projects in Mexico City, Guadalajara. We recently started a building in Puerto Interior, in Silado, in Bajío, Monterrey, Ciudad Juarez, and Tijuana.

markets where we have a strong leadership and a strong presence and contact with the market. Thank you. With that, I think I covered both of your questions.

Well, this is actually very much in line to what we recently did in Apodaca last year and that we released this year. This is a format that accommodates very well for e-commerce players as well as logistics, as well as light manufacturing. So that's why, and this pay out very well in Apodaca. We have done this also in Mexico City, and we have done it in Guadalajara. I think these are very flexible buildings.

We can have subdivisions in the buildings, but we can also accommodate whenever there comes a large transaction, and we already have the building. Remember that there have been several transactions in the, let's call it, almost million square feet range, particularly from logistics e-commerce, but also some in the light manufacturing sector. So with this, I think that this is a good example that Vesta has identified a good opportunity.

And not only the buildings are large, but what is important, the type of Vesta parks that we are developing are unique. There's no other parks that have the energy in place, the accessibility to logistic corridors, accessibility to labor, which is important for light manufacturing. and at the same time have a large format building where companies can rapidly access and they can do their own tenant improvements and start a ramp-up stage quickly.

Pablo, thank you very much for your questions. And yes, we can give you some more clarity as to the markets. This particular quarter was outstanding because of several reasons. One of them, not only we saw some sort of turning point in terms of demand, But also, we were able to see demand coming in different regions. And I would like to highlight the regions where we closed leases in this particular quarter.

San Luis Potosi, which was a slow market for some quarters or a few years, has recovered, particularly driven by auto industry with electric vehicles, with BMW being maybe the the highlight of the transactions, but BMW-related suppliers. Silao, another electronic company from Europe, taking an important space. Tijuana, with companies in different sectors, one of them related to food and beverage, and the other one related to manufacturing.

Monterrey, as mentioned, e-commerce, as well as manufacturing. Puebla Auto Industry, Querétaro Auto Industry, Ciudad Juarez, logistics and electronics. I think this is a great representation on different markets that are little by little thriving, coming back, and probably represent the strength on many of these markets. For that reason, I think that going forward, we still think that there could be demand coming from different sectors. As you may recall, even that we have seen electronics growing rapidly.

Mexico is well positioned among different sectors in different regions. And all of them, we believe, have shown resilience in this particular couple of years, which on the geopolitical side have been challenging. So Mexico still represents an opportunity for many of these companies to continue to be competitive, and this particular quarter was an example to that.

Muchas gracias, Alex.

Thank you very much, Alejandra, for your question. Yes, I think that we analyze carefully whenever we want to tap in certain markets. As of today, there's several macro indicators that we believe can show an important trend towards what could be happening. in the case of, let's use example of Guadalajara, which is the second largest city in Mexico in terms of population. But we have seen in the last years, strong demand coming from the electronic sector. And that's why it is no surprise to see the major increase in exports coming from the state of Jalisco related to manufacturing and more specifically on electronics So everything somehow kind of relates and that why we continue to invest in a market where we believe there will still be demand in different industries particularly electronics and e On top of that, we have currently a 100% occupied portfolio.

And for that reason, we think that those are strong indicators that the market holds out well, that companies require high-quality buildings that have the right infrastructure, including energy and other utilities. And I think that for that reason, we continue to invest in these markets. Another important example could be Ciudad Juarez with strong macro trends in the electronic sector. But if you look into detail markets such as Monterrey with several transactions related to the industries that we like, those numbers continue to thrive. That's why it's hard to look at economic growth just as a general figure in terms of GDP because it includes too many different components.

But when we look closer and we analyze deeper and we see on the previous data, we think that that is more constructive whenever it comes to making decisions. make decisions.

That's a good question. Yields on costs remain at double digits. We estimate returns between 10% to 11% return on costs. I would say that maybe since the pandemic, we saw a major change in terms of construction costs, but we have also seen major increase in rents, and that makes the returns hold. Lately, we have seen even that rates have remained steady in certain markets, and actually we have seen rents increase in some markets. So these are pretty healthy numbers, and these are very supportive to be able to get attractive high returns.

And in addition to that, if I may, it's not only about the return on cost, but as you remember and you recall, Vesta adjusts at each – the lease agreements have adjustments at every anniversary, and we adjust them to inflation. So nowadays that we see that inflation might be a little stickier than expected, we believe that Vesta is incredibly well hedged towards inflation because of the nature of our lease agreements. So I think that it's not only about the return on cost, the ongoing return on cost, but if you look at it from a long-term return perspective, I think that we are on the right side of the equation to make sustainable, attractive, risk-adjusted returns.

And maybe if I may, Alejandra, if I may elaborate, continue to elaborate on your question, I would probably like to talk about the cap rates that we continue to see in the market. There continues to be strong demand for stabilized assets, and we see some of our peers still doing acquisitions in the, let's say, 6% range in terms of cap rates. 6% to 7% cap rates. So if you look at our 10% to 11% return on costs vis-a-vis with new buildings in the strong markets, vis-a-vis stabilized assets in the 6% to 7%, I think that we are delivering strong spread to our investors, understanding that the capital market is still very supportive for cap rates in these 6% to 7% return.

So we're glad to see that there's liquidity on the market, there's liquidity on the private side, and for that reason, I think that these spreads are very appealing for our shareholders.

Look, we have paid close attention to the fixed tax package that was presented to the local congress. It has not been approved. I see implications in the monthly payments which are temporary advances over our annual tax bill. However, I think that on the annual tax bill, it is unclear to me if we want to have any impact at all. So, look, so far we have to analyze it. We have to see how it impacts our ability. And we will keep you posted.

Gracias, André.

I think that, yes, we have followed carefully the interest rate environment, of course, like many of you. I think that cap rates do not necessarily move immediately to any changes in interest rates. I think that over the long term, it does have an impact. But I think that today we're experiencing too much volatility, and we have not seen a major adjustment on cap rates. I think that the dynamic is still a little bit lagging on that particular change, so that when interest rate increase, not necessarily cap rates increase. and maybe when interest rates even drop, we don't see that drop immediately also. So it kind of goes both ways on the short term. So let's see how that particular long-term rate holds, and then let's analyze carefully on the cap rates.

What we do track is cap rates on the private market, and I think that we have not seen major changes on the cap rate, even with an increase in interest rates, not recent, but even in the longer period of time, which maybe I think we believe that that's a result of having a high, there's liquidity on the market and there's expectation on rent growth. And for that reason, cap rates remain at certain levels, as mentioned before, 6%, 7%. We have even seen transactions of some of our peers at sub 6%, which I view, which is, it's still an overspread to the 10-year treasury, but clearly closer. But I think even if interest rates increase and we believe that there could continue to be volatility, that's why our focus will continue to be on the development yields, which are very steady, sustainable at a 10% to 11% return on cost.

There's definitely a lot of spread for our investors. So even with some movements in interest rates that could impact the cost of debt in our sector, there continues to be great spread. And that is definitely representative that has, as a result, major shareholder shareholder value. So I think that we are, again, on the right side on the equation of investment strategy, which is focusing on spread.

Excellent.

Gracias, David. Thank you very much for your question. Yes, we, as you recall, VESTA has a strategy to develop a spec building as well as build-to-suit projects. But more importantly, what we like is to develop industrial parks that can accommodate both. So we acquire land in strategic locations. We have the infrastructure and the urbanization and the utilities to have the paths ready. so that whenever we find an opportunity and we see the market dynamics, we anticipate and we develop, either on spec or build-to-suits. And that's why we believe that it was a good moment to get back to develop high-quality buildings. I think that we have the right locations, land we acquired recently, and developing today, which will provide us finalized buildings at some point next year.

We think that over next year, we will continue to have strong demand that might be late as to start their own project. And that's why we believe that Vesta can anticipate to the demand of these companies that normally need to make decisions very, very rapidly. That's why we think, and this strategy at high returns, 10 to 11% return on cost, has always paid off.

Additionally, I think that you mentioned Mexico City and Guadalajara being very strong markets at the moment. We actually think that even in other markets, which, yes, that have been and remain softer, there's always pockets of clients and opportunities that we can tap. And we have seen that from existing clients as well as new clients that require high-quality buildings that has already infrastructure, energy, particularly in the right locations. And that's why we believe that the play towards certain sub-markets, urban infield, good locations, pays off, even in markets that might be somewhat softer than others. Our build to suit strategy will continue to be there. We think that we have the development capabilities to address those needs.

We have done a lot of spec to suit, build to suits and spec to suits. So definitely over the next 12 to 24 months, maybe one third to half of the projects will continue to be in the build to suit area inside of our parks, which again, we can accommodate spec and build to suit.

Gracias, and thank you all for being on today's call. Looking ahead, we remain confident in Mexico's strategic position within North American supply chain and investors' unique ability to capture attractive opportunities. While broad market recovery may vary across regions, we will continue leveraging our strengths to capture opportunities, investing with discipline, and advancing Route 2030 to create sustainable long-term value for our shareholders.

We look forward to sharing more about our strategy and development opportunities at Vesta Day in New York on November 11. Thank you all for joining us today and for your continued interest in Vesta. Have a great day.