© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by, and welcome to Fibra UNO Q1 2021 Financial Results Conference Call on the 30th of April 2021. [Operator Instructions] Our host today from Fibra UNO team are Mr. Andre El-Mann, the CEO; Mr. Gonzalo Robina, Deputy CEO; Mr. Fernando Álvarez, VP of Finance; and Mr. Jorge Pigeon, VP Capital Market Investor Relations. Please go ahead.
Thank you, Michael. It is once again with great pleasure that I write the presence -- to present the results of our company.
I have 1:00. I got to go.
I have some noise on the line, please.
Elias?
Please go ahead.
Thank you. From the results of our company. I'm very pleased with the overall performance of the company. However, I'm not fully satisfied given there is still so much work to be done, and even if the crisis is waning, the effects of the pandemic and ensuing economy slow -- economic slowdown are not over.
I can probably say that our set of results distance themselves from the performance of the country's economy and from our peers. Now is the time that you can start to perceive the strength and solid fundamentals of our once criticized diversified company. Although we still have a long way to go, I think that we will be seeing how the retail and office space will be exiting the crisis in the coming months. Relying on our model and our investments in the past that are coming in line, we are certain that we will reach our goals both in the top line as well as in the bottom line.
I can't stress this fact enough as I have been talking about this for the last 10 years at every FUNO day, at every one-on-one meeting or group event, I have had the opportunity to talk proudly about the company we have created. FUNO has behaved as expected. FUNO has been defensive and resilient exactly as the design of the company since our IPO 10 years ago. We have seen that our business model continues to be the way to go even amidst the changes brought about by the digital revolution, globalization and many other factors that were not present in Mexico when we started our real estate business many years ago. Let me stress that our business model has proven to be defensive and resilient amidst the worst economic crisis on record in Mexico. I am proud and pleased of this but not satisfied given FUNO always strives to improve itself, to outdo what we have already done.
On the financial and operational front, a reflection of the validity of our business model is starting to show in the numbers. Just to quote a few of these, our total revenue net of COVID-19 support grew 3.9% year-over-year over the first quarter of 2020 at a time when the pandemic has not yet impacted our top line. Also, on a quarter-over-quarter basis, our top line grew 3.4%. This is indicative of the improving health of the economy and our tenant base as well.
On the operational front, we are seeing the effect of the crisis shown in our numbers, which are lagging the activity, we see on a daily basis going forward. For example, we saw a small drop in overall occupancy for FUNO, reaching 92.5% as a whole. The main drag on occupancy was the Office segment, which we anticipated to be soft during the first part of 2021; followed by retail, which we expect to bottom out in the first half of 2021; and lastly being pulled by the industrial space, which continue to outperform.
As you know, at the end of the quarter, we re-tapped the 2026 bond for a nominal amount of $300 million. The proceeds of this issuance have been used to repay debt, making the transaction debt-neutral for FUNO. Included in the report is a more detailed explanation of our liability management activities, some of which occurred after the quarter closed, given the issuance date of our re-tapped bond. The liability management exercises have yielded a savings cost on our debt of approximately MXN 120 million in interest savings.
Our current average cost of debt stands at 6.42%. I am pleased yet not fully satisfied with the cash flow generation of our company. The strength of our revenues plus collection work has enabled us to reverse on COVID-19 reserves for the second consecutive quarter. We are fully aware that the recovery, in particular, in retail is just underway. Nevertheless, we have been able to substantially increase our cash flow generation and remain keenly focused on collection management.
We continued our asset recycling activities. This time, we sold an office building and a plot of land for MXN 172 million and MXN 100 million, respectively, at multiples of NAV times 1.2 (sic) [ 1.2x ]. I want to stress that we continue to recycle noncore assets to premium to NAV. And we'll continue to use proceeds for these sales to: a, repay debt in the proportion of the debt weight of the company; and b, buyback our own CBFIs in the proportion of the equity base weight of FUNO, currently 60% equity and 40% debt.
The combination of sales above NAV and certificates buybacks is highly accretive for our shareholders. As of the distribution date, we expect to close with 3,799,999,999 just shy of 3.8 billion shares outstanding. As mentioned above, we expect to continue with our buybacks as long as the market value or certificates continue to offer an incredibly attractive investment opportunity for us. Today, we continue to trade approximately at a 45% discount to NAV. Since 2020, we have repurchased over 149 million certificates or 4% of the company. I want to communicate and stress that all certificates repurchased will be canceled and are not eligible for corporate or economic rights.
I am very pleased to announce that on the ESG front, we continue with activities that underpin our status as one of the leading companies globally in these matters. This quarter, we supported over 240 COVID patients who needed oxygen concentrators. Fundación FUNO inaugurated a water treatment plant in Acapulco that will benefit 3,000 families and will eliminate sewage discharges into the Acapulco Bay. We continue to support the program, La Escuela Mas Grande del Mundo, in which we provide WiFi access at our shopping malls, so students can attend virtually classes and/or download and upload their school work. And we are reopening our supporting activities to national and international NGOs in our shopping centers.
Lastly, I am pleased with the direction of our company. I believe we have touched bottom and we are in recovery trajectory. We expect volatility in some metrics with a clear path towards recovery in the coming quarters. I am pleased that I have once again confirmed that our real estate know-how has enabled us to create a company based on a tried and tested successful strategy.
FUNO has proven to be highly defensive and resilient company despite the many challenges that we have surpassed and the ones that we expect to continue to face. We have prevailed, and we will continue to lead our sector and to grow towards a world-class enterprise.
I would now like to pass the mic to Jorge Pigeon to talk about the numbers. Please, Jorge.
Thank you very much, Andre. Thank you, everybody, for joining our quarterly call. I will now go over the MD&A of our results as usual.
Starting with revenues. The total revenue line for Fibra UNO increased by MXN 178 million to MXN 5.369 billion or 3.4% above those of the fourth quarter of 2020. This is mainly a combination of several factors which includes the amount of related COVID-19 reliefs recorded during the quarter, the cancellation of reserves or reversal of reserves that we were able to carry out as we normalize our account receivables, and we can discuss this a little bit later; the effect of rent increases in active contract renewals; decrease in variable rents and kiosk mainly; and obviously the lower occupied gross GLA for the company.
In terms of occupancy, the total occupancy for Fibra UNO's operating portfolio saw the close of the quarter was 92.5%, a decrease of 60 basis points compared to the previous quarter. The industrial portfolio was at 96%, 30 basis points below that of the fourth quarter of 2020. Retail was at 90.2%, 70 basis points below the fourth quarter 2020. Office operating portfolio was at 76.4%, 220 basis points below those of the fourth quarter of 2020. And the Others segment was at 99.3%, 40 basis points below the fourth quarter of 2020. And the In Service category, which, as you may recall, is one where we have the properties that are in stabilization process, grew 10 basis points to 84.3% -- to 84.4%, sorry.
In terms of operating expenses, property taxes and insurance, we saw a decrease of MXN 32 million in operating expenses, 6% below those of the fourth quarter of 2020, mainly due to the seasonality of some expenses. Insurance expenses increased by MXN 5.8 million versus the fourth quarter of 2020 and property taxes increased by MXN 11.4 million or 8.3%, mainly due to the incorporation of properties that were under development and are now operational.
As a result of the above-mentioned factors, net operating income increased in the first quarter of '21 by MXN 107.6 million or 2.6% versus the fourth quarter of 2020 to reach MXN 4.22 billion with an NOI margin over total rental revenues of 86% and 78.6% compared to total revenues.
Our net interest income -- or net interest expense line decreased by 99 -- by MXN 93.3 million or 4.7% basically to a combination of several factors: a decrease in interest related to our revolving line of credit, which was repaid during the fourth quarter of 2020; interest gained from cash investment related to the resources from not distributed (sic) [ non-distributed ] cash that we held on our balance sheet during 2020; and obviously, the liability management activities that Andre mentioned earlier.
As a result, funds from operations, controlled by FUNO increased by MXN 230.4 million or 12.6% for -- compared to the fourth quarter of 2020 to reach a little over MXN 2 billion. And adjusted FFO decreased by MXN 12.2 million or minus 6% to MXN 2.1 billion mainly due to the smaller amount of gains from asset sales compared to the previous quarter.
On a per CBFI metric, since we bought back 54.3 million CBFIs or 1% -- 1.4% of the outstanding CBFIs at the closing of the quarter, we stood at 3.818 billion CBFIs and FFO and AFFO per average CBFI were MXN 0.5358 per share and MXN 0.5481 per share, respectively.
I want to take some time to address the -- our account receivables line, accounts receivable in the first quarter of '21 increased to 38 days receivable from a record low of 28 days receivable that we have recorded in the fourth quarter. As you may recall, we've mentioned that we have believed that we wanted to be very prudent with the reserves for doubtful accounts and collections, and we increased substantially the amount of our reserves to the point that we were at 28 days net receivables as of the fourth quarter of 2020. As of today, we stand at 38 days receivable. And if we would take into consideration the 5 largest debtors in which we are with negotiations and expect to have collections in the coming quarters, the receivables numbers will be closer to 33 or 34 days, which, as you know, looking back to Fibra UNO is more of a normal debt level for receivables for the company. So therefore, we feel we are -- as we mentioned, a lot of metrics are moving, but we are on a clear trajectory towards recovery and normalization of our activities.
Moving to investment properties. The value of our investment properties, including investment in associates, increased by almost MXN 5 billion, 1.7% compared to the fourth quarter of 2020 as a result of the acquisition of the Memorial Portfolio; the sale of the office building and the plot of land; normal progress of construction and process under management (sic) [ of projects under development ]; and the asset revaluation process, which is included in investment in associates in this case.
In terms of debt, gross debt increased by MXN 6.28 billion compared to the previous quarter. The variation is mainly due to new debt of MXN 3.4 billion that was used to carry out development and the acquisitions of Memorial, for example, that we mentioned. On the deleveraging side of the equation, we re-tap the senior notes for 300 -- 2026 year notes for $300 million. These were trading above par. So we received, in fact, $330 million -- close to $330 million. And these proceeds were used to refinance existing debt. Basically, we bought back bonds for MXN 100 million, purchased almost MXN 1 billion in UDIs. Since we have UDI Bond, what we did basically was bought the principal of that bond today to hold that to the maturity of the bond and have that -- the currency basically that we owe that bond already in our balance sheet ready for repayment and prepayment of bilateral lines of credit. Noteworthy is the fact that we had exchange rate depreciation from MXN 19.93 to MXN 20.60 per U.S. dollar, and obviously, that affects the debt levels for the company.
Total equity decreased by MXN 2.32 billion minus 1.3% compared to the previous quarter as a result of net income, which was negative for the quarter; derivatives valuation; the shareholders' distribution related to the fourth quarter of 2020 results; the provision for the ECP program for executives; and the repurchase of our own CBFIs.
In terms of the operating results, the leasing spread, moving into the different segments, we saw a positive result in the industrial of 570 basis points; flat retail and negative office of 230 basis points compared to the peso inflation rate. And for contracts denominated in dollars, we saw 60 basis points positive in retail, flat in industrial and a negative 5.4% for the Office segment.
In terms of constant property performance, the rental price per square meter in constant properties, which considers -- if we were to consider only the base rent, not included variable rent component and not including the effect of the foreign exchange rate valuation which moved dramatically from a year ago, decreased only basis points -- 20 basis points, sorry, compared to the annual weighted inflation of 2.75%. If we consider the exchange rate variations during the quarter and the reduction in variable rent as well, the change in rent per square meter is negative 980 basis points above that same annual weighted average inflation of 2.75%.
At the subsegment level, the total rent per square meter of our portfolio increased from MXN 166 to MXN 168, 0.7% and reflect -- this is a reflection mainly of increased GLA in the Industrial and Other segments from the Tepozpark/La Teja development and the acquisition of Memorial Portfolio which, on average, have a lower rent per square meter compared to the rest of the portfolio. As you know, industrial has the lowest rent level per square meter of the segments in which we operate as well as slight improvements in the leasing activity for properties in stabilization process.
The total NOI at property level for the quarter increased by almost 8% compared to the previous quarter. The variations are mainly due to the following: industrial segments, logistics' NOI increased by 0.1%, was almost flat. Light Manufacturing decreased by 2.7%. The variations are mainly due to exchange rate fluctuations. The Office segment NOI decreased by 3.1% due mainly to exchange rate variation; and secondly, to the occupancy losses. In the Retail segment, the Stand-alone subsegment remained stable. Fashion mall and regional subsegments increased significantly, 13.3% and 19.2%, respectively, mainly due to the elimination of most of the rent relief process that we have been seeing during 2020. The Others segment NOI increased by a significant 30% mainly due to the acquisition of the Memorial Portfolio as well as a decrease in support for our tenants.
With this, I would end the discussion on the results, and I would like to open the floor to Q&A. So thank you, Michael, if you can please open the floor for Q&A.
[Operator Instructions] Our first question comes from Ms. Vanessa Quiroga from Crédit Suisse.
The first one is regarding what you're seeing in terms of contract turns. We believe there is a few or a couple of small owners that decided to change some terms in contracting there in their malls on fixed to variable rents. So wondering if you saw those kinds of requests and what you expect to do in that sense. And the other one is on office a little bit longer term, but we have seen some articles proposing the idea of changing office buildings to apartment buildings in Mexico, but we have seen this type of comments in other parts of the world. So wondering if you -- what you think about the office situation in general and if you think this could be a possibility.
Thank you, Vanessa. This time, we have seen all types of requests, even the strangest ones, and we have addressed them one by one. At the beginning of the pandemic, I said that we will take care of our tenants, and we will see it and review one by one all the request in order to reach agreements with them. I think that we have reached, with the vast majority of our tenants, good agreements where we have 3 rules that we wanted to comply in order to give some relief to our tenants. The first one was that the relief that we would do, we would give should be in favor of their business to continue up and running; the second, that this relief won't hurt our finances; and the third, that we won't see our collectible rents or account receivable growth. I think we have reached the 3 of our goals. And I can tell you how strange requests we have received. But yes, we have received some that people want to be only on a variable rent. And we cannot agree to that. Maybe we have 1 or 2 exceptions. But a side of that, we want to agree. But we have been receiving the strangest requests during this pandemic.
But right now, the pandemic is on the way out, at least is what I'm feeling, both in the Retail and the Office segment. But the Retail is coming faster than the Office segment. And now as for the Office, the second question that you have, I think that we have been evaluating and exploring the opportunity in -- and the possibility to change our -- some of our buildings and not necessarily to residential. We have been -- and we seized the opportunity to change one of the -- a couple of our buildings, one in some part of the building and the other one in a whole tower to hospitals. So we are evaluating and we are exploring all the opportunities.
I don't think that the office space is done for good, quite the contrary. I think it's coming back and it's coming back hard. But nowadays, we need to seize all the opportunities we have, and we already decided to change one part of one building and one tower of a complex to hospitals. Today, we need hospitals in the country. And I think that, for us, it means a good business. So we took that -- made a decision to change those. And we are exploring all the rest of the opportunities. Again, every decision we make, we make consciously, and we are very professional and very thorough to review all the conditions and make a decision.
Our next question comes from Mr. André Mazini from Citigroup.
Yes, sure. The first question would be on the COVID relief. There had been some reversions, right, since last quarter, so in this quarter as well. So going forward, should we expect a little bit more reversions given that probably the retail tenants aren't doing as badly as maybe you guys provisioned for? And if that's correct, and what's been surprising of the upside, if you will, are indeed the retail tenants and not so much the office tenant? And the other question would be on the debt service coverage ratio, you guys had at 1.54x, right? And the covenant is at 1.5x. That's the only covenant which is a little bit tighter. All the other ones are -- there's a lot of leeway. We will [ roam it through ]. So on that covenant in particular, in which debt Is that covenant? And if by any chance, there's a breach of covenant you guys have to prepay, which -- what's the amount of the debt if it is the correct understanding?
Thank you. For the relief, I think that we made our share of reserves, and we're feeling very comfortable that we -- in that sense, our decision was correct, and we do not foresee more reserves in the future. Last quarter, I was talking about the last round that we were supposed to be facing with our tenants for the closure of [ December '20 ] to almost all of January. I think that we have been approached by the tenants, and I feel comfortable with the reserves we already made for the whole pandemic. As for [ DSSR ], I think, Jorge, can you give me the exact number because I don't feel that it's -- maybe it's 1.6 against last year's NOI, but this year should be much higher than that.
You're correct, Andre. It is a trailing 12-month calculation. And obviously, this is a quarter that is going to look the worst. And as we go forward and the cash generation of the company grows, it's going to improve. The number, I think, is 1.54 is correct. But it is -- as I mentioned, this is the quarter that we expected and we knew that was going to be the tightest. And from this point going forward, if that metric should get relaxed. I don't know, Fernando, if you want to add anything else.
Yes, as Jorge just pointed, we are expecting our revenue to continue to grow since the pandemic goes away. And secondly, we are more actively right now on asset sales. And as Andre explained at the beginning, and as we have been explaining, the asset sales, the proceeds from asset sales are going for 2 objectives. One is to repurchase our own shares and the second is to also reduce our leverage. So that also will help this metric to trend upwards.
And lastly, the liability management activities that we are constantly carrying out is also going to help improve those ratios. Regarding a potential breach of covenants, first, obviously, we don't see it. But secondly, if we were to see it, there is no acceleration of the debt or anything like that. The only thing that happens is that we have a cure period and we cannot increase the amount of leverage during that cure period.
I mean if you take in account this very quarter times 4, we are above 2x.
Correct.
So we feel comfortable.
Our next question comes from Ms. Sheila McGrath.
The last couple of quarters, you have been retaining cash from AFFO paying out about a little less than 60% of AFFO in dividends. Should we assume a similar payout ratio going forward while the shares are trading at a discount?
Sheila, as we mentioned, I think Andre went through in his letter, the idea, obviously, is to so long as we continue to trade at a significant discount to NAV. We're going to obviously comply with the minimum required by law, which is 95% of our net taxable income. And in the cases where we have more cash than the net taxable income because we have a loss, for example, we can distribute a little bit, which is what happened this quarter, to maintain more or less in yield terms a distribution similar to the one that we have been trading, which is roughly around 5% or 6%, it depends on how you look at the company. But the idea is not to have a fixed payout ratio of x percent of FFO, but rather to look at the yield of where we are and the minimum required by law fiscal result basically.
And the principal thing that we are looking at is we give the best use to that cash retention, which, in this case, in our case, is to repurchase the stock.
And then Andre, I was wondering if you could comment on the industrial sector in Mexico. I know it's benefiting from e-commerce and onshoring trends. Just give us your expectations for supply/demand and which are the strongest markets right now?
Remember that -- thank you for the question, Sheila. Remember that our view on the industrial space is leaning towards the distribution and logistics much more than the manufacturing. Today, the demand comes especially from the manufacturing side because of the dispute that the U.S. and China still have, and Mexico will relieve some of that pressure opening manufacturing sites in -- especially in the Northern border.
Our preference is the logistical distribution. Now the logistics itself, the scope is growing also and is growing hard. And we intend to continue to develop and continue to buy nowadays. To buy finished product is hard, is very expensive. And our preference is to continue to develop. And we are trying to seek the opportunities of land. Remember, again, that our preference is logistics and distribution but always through the glass, through the lens, through the lens of real estate. So we need to find the best land. And we don't hesitate to pay a little bit more in order to have the best location because in 10 years' or 15 years' time, the land will be too precious and is exactly what is happening with our properties today. We will continue to seek opportunities to develop. Our preference today is develop because by -- finished product is becoming expensive. It's very hot the market right now. So we need to develop our own new warehouses.
One last question. Is there any guidance that you could give us on the credit notes and the credit notes reserve kind of helping us forecast that for the balance of the year?
I'll pass to Jorge. He knows.
Not the credit notes, Andre. I can address that if you want.
Please.
Yes. Thanks, Sheila. As Andre just mentioned, we feel comfortable with the amount of reserves that we have been creating throughout the pandemic. Right now, we have an inventory of around MXN 780 million of reserves to offset future credit notes. So basically, right now, if the trend of the pandemic continues as we are seeing here in Mexico, we are not expecting to create more reserves. Of course, we have to be very -- to observe what's happening in the market, right? But for now, that's what we are expecting.
Our next question comes from Mr. Adrian Huerta from JPMorgan.
Question is on the office portfolio. If you can just tell us a little bit on the drop that we have seen on occupancy. It seems like the last 12 months being a drop of around 86,000 square meters on the Office portfolio. What are the type of tenants that have been leaving? And can you tell us a little bit how current negotiations are going with existing tenants and if you are foreseeing more tenants that could leave over the coming quarters? So any color more on the office portfolio to understand the type of tenants are leaving and the ones that will stay, what are they thinking and how negotiations are going.
Thank you, Adrian. Yes, you can see all types of tenants trying to get out of their contracts. Many people were afraid, and I said were on purpose. Now we are seeing people trying to take again some area. In reality, our occupancy dropped, I think, 6 points. I don't foresee that much -- drop more in the future. What I'm feeling today is that people is trying to get back to their space. They will face -- in the near future, they will face -- once people return to their offices, they will face the need for more space because people would want more space between them. So this condition that we foresaw last year, and we talked about it, is not present yet because nobody has returned to their offices at full speed, but they will.
I mean, if you take Citibank, they are at 15% today. But for October, they expect to be at 100%. Maybe they will start with 3 days on and 2 days off. I think that eventually, it will get back to the normal -- to regular normal because everybody is talking about new normal. In my view, there will be no new normal. People, themselves, the people that are today working from home, they want to get back to their office and see their colleagues and talk with them because it's the only way to develop and to grow. People grow from the experiences from others. This cannot be done by -- from home. But we need some time to do that because the biggest employers are giving hints that they will be back in the end of the summer. So let's wait and see. Today, we are feeling -- we have a large [Foreign Language].
Advertising.
Advertising company that finish their contract with us. They had 8,000 square meters And now they're back for 4,000. I can assure you they will be back for more. So we need to have patience. I don't see that dramatic drop in the office segment. I mean there's a drop, of course. Of course, there's a drop. But it's not dramatic. And I think it's coming back. slowly but it's coming back. I don't know if I answered the question correctly.
Yes. And happy to see the change on the dividend policy in order to reduce volatility on dividends. So good as you guys did that.
Thank you. Thank you, Adrian.
[Operator Instructions] Our next question comes from [ Ms. Essen Mogia from ECS ]. I think go ahead with your question.
Okay. Sorry about that. Yes. My question is regarding to the buyback program that you have. It's been -- on the last quarter, it seems that it has been on average around 120, 100 more. But on the buyback program, are we expecting to have this similar numbers for the following quarter between, I don't know, 3% or 3.5% on the flow?
Sorry, I didn't understand the question. If you can do a repeat...
Yes. Are we expecting to have similar numbers on the buyback program that you have for the following quarters?
Well, as we have been commenting, our buyback program is going to be dependent on the amount of cash that we retain from dividend; and second, the share of buyback -- the share of resources that goes to buyback from asset sales. So it's going to be dependent on that to see if it's going to be around the same or a little more. It's very dependent on the size of asset sales.
That's exactly on point. Yes, nothing to add.
Okay. And the second one is on the pipeline, these recycling assets that you might have on the target, probably it's too early to discuss. But this recycling, are you expecting to do it at the end of the year? Or it's depending on the situation and specific asset?
Absolutely, already...
Yes. Go ahead, Andre.
Gracias. I'm sorry, Gonzalo. Okay. Let's define recycling. We have been disposed of assets seldom. But we have been recycling as the example that I did earlier with one question that we changed the format of an office building to hospital. We will continue on both ends. We will continue to dispose noncore assets, and we will continue to recycle, either change a warehouse for a shopping mall or a shopping mall to a warehouse or an office building to a hospital or residences, et cetera, et cetera. So we are working on both ends. But we have not a target of how many buildings we will do at this time. We will take the opportunities as they show.
Our final question comes from Mr. Alejandro Chavelas from Crédit Suisse.
The first one is on variable rents. Obviously, that's a part of the equation that is still pending or upside to your current numbers. What level of traffic or mobility from 2019 levels do you think we would need to see to get variable rents again back to full normal or 90%? Do you have any guesses on that? And the second one on -- just on the idea of the recycling assets or converting assets, it appears to me that you are very well positioned because of your diversified portfolio to perhaps expand into very last-mile logistic projects. Are you interested in that opportunity? Is there something in the works there? Or is it out of your scope?
Thank you. Very interesting question. Thank you very much. Okay. The first part of the question, the variable rent, especially comes from the entertainment segment, from the cinema peers. As you know, the cinema peers just are coming back. Half of them, the Cinépolis ones are open but are open at a 30% maximum capacity. And the other one is closed, and he intends to open in the very next month. So we will need some time to regularize that the -- contrary to what I'm saying, the flow from the shopping malls is coming back very hard, but it will not reflect on the rent because the highest payer of variable rent, in our case, is closed or it's at 30%. So it will not show in the line of variable rents. We have variable rents on some other sectors, but it's not relevant.
The most relevant is the cinema peers. Having said that, we are seeing the flow of the shopping mall coming very hard. We have seen some of the tenants coming back at higher sales than pre-COVID, but the majority is struggling and is recovering their level of sales slowly. So we need -- I think we need a couple of quarters to see what is happening. But I am sure that we will recover from what happened in the past with the pandemic. So we'll wait and see.
As for the second part of the question, we have the privilege that we have the best located real estate. And most of it is suitable to become the last mile but the companies are not yet looking for the space to last mile. Their preference is to convert -- not convert, to have their sales point be the last mile. Today, 60% of the people that buys at -- for Internet, for e-commerce, their preference in Mexico is to go to the shop and pick up the goods. So the same shops that are today are retail spots are serving as the last mile because it's preference from the people who buys. I don't know if that will change. If you change, maybe we should convert that retail points into warehousing for the last mile. But today, it's a preference from the buyer. So we will be like that. We will be sailing like that for a while.
Our next question comes from Mr. Jorel Guilloty from Morgan Stanley.
I have one question focusing on the accounts receivables. So we noticed that the trend on this quarter was to allow accounts receivable to go up, whereas before, it had been flattish to down. And you mentioned on your release that part of this is because there's an assumption of a return to normalcy. So I just wanted to get a little bit more color on how you -- first off, is that increase in accounts receivable mostly focused on the retail part of the portfolio? And the second part is what led you to go back to this idea of accounts receivable going back to these levels. So those are my 2 questions.
Yes. The account receivable normally for the company has been running around 33, 34 days receivables. Today, we stand at 38. We were a record low of 28 the last quarter. And we just recorded that number because we're in negotiations with certain debtors that we expect to close imminently. That should reduce that number. If those negotiations would have come at the end of -- within the close of the quarter, we probably would have shown a number closer to 33 or 34 days receivable, which is the normal level for operations for the company. There's nothing else behind that thought process other than that. And we don't see necessarily an increase in account receivable. Rather, it's the fact that we are normalizing the combination of the level of accounts receivable we have with the reserves that we have in place to something that is the normal level for operations for the company.
And just to be clear, so this is mostly focused on the retail part of the portfolio?
That's where most of the accounts receivable came from last year, yes.
Our next question comes from Mr. Aldrin from SURA.
I just wanted to touch base and know what implications does the recent event that Mr. [ Teofilo ] had today? What implication does it have with the company directly?
There's no implication whatsoever. It's a separate thing, and it has nothing to do with the company, absolutely.
We are seeing no further questions at this point. So I'll pass the line back to the management team for the concluding remarks.
Thank you, Michael. Thank you, everybody, for listening to our call, and we expect to see you or hear from you in the next quarter results, the second quarter results. If you need anything, please do not hesitate to call our IR team. Thank you very much. Have a good weekend.
We want to remember (sic) [ remind ] you that next Monday at 11 p.m. -- 11 a.m. Mexico time, we will have our 10th anniversary event. You are all invited to be part of it. You must have the link on your computer but we will be resending everything this afternoon. Thank you, everyone.
Thank you.
Thank you very much. We will be concluding the call and closing all lines. Thank you.