News Press Releases

Terrafina Announces Second Quarter 2018 Earnings Report

PRU | July 26, 2018

MEXICO CITY, July 26, 2018 (GLOBE NEWSWIRE) -- Terrafina® (“TERRA” or “the Company”) (BMV:TERRA13), a leading Mexican industrial real estate investment trust (“FIBRA”), externally advised by PGIM Real Estate and dedicated to the acquisition, development, leasing and management of industrial real estate properties in Mexico, today announced its second quarter 2018 (2Q18) 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 may vary due to rounding. Terrafina’s financial results included in this report are unaudited. As a result, the mentioned figures in this financial report are preliminary figures and could be adjusted in the future.

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.

Operating and Financial Highlights as of June 30, 2018

Operating

As of June 30, 2018, the occupancy rate was 95.5%, a 68 basis point increase compared to the second quarter of 2017 (2Q17). Additionally, considering signed letters of intent (LOI), occupancy for 2Q18 was 96.4%.
Annualized average leasing rate per square foot at 2Q18 was US$5.07, a US$0.08 increase compared to 2Q17.
Terrafina reported a total of 40.9 million square feet (msf) of Gross Leasable Area (GLA) comprised of 286 properties and 298 tenants in 2Q18.
2Q18 leasing activity totaled 1.4 msf, of which 18.0% corresponded to new leases, 39.0% to lease renewals and 43.0% to early renewals. Leasing activity was mainly concentrated in the Chihuahua, Ciudad Juarez, Tijuana, Ramos Arizpe, Queretaro, Silao, Cuautitlan Izcalli, San Luis Potosi, Guadalajara, Irapuato and Hermosillo markets.

Financial

Rental revenues reached US$47.6 million, a 14.2% or US$5.9 million increase compared to 2Q17.
NOI was US$47.9 million, a 14.6% or US$6.1 million increase compared to 2Q17.
The NOI margin reached 94.9%, a 82 basis point increase compared to 2Q17.
EBITDA reached US$43.6 million, an increase of 15.0% or US$5.7 million compared to 2Q17.
EBITDA margin was 86.4%, a 111 basis point increase compared to 2Q17.
Adjusted funds for operations (AFFO) reached US$28.8 million, an increase of 18.2% or US$4.4 million compared to 2Q17.
AFFO margin was 56.7%, a 241 basis point increase compared to 2Q17.
Distributions totaled US$28.8 million. As a result, Terrafina will distribute Ps.0.7020 per CBFI (US$0.0364 per CBFI) for distributions corresponding to the April 1 to June 30, 2018 period.
The annualized distribution was US$0.1456; considering the average share price for the 2Q18 of US$1.47 (Ps.28.46), Terrafina’s dividend yield for the quarter was 9.9%.

Operating and Financial Highlights


*Operating*	Jun18		Jun17		Var.
Number of Developed Properties	286		260		26
Gross Leasable Area (GLA) (msf)¹	40.9		36.5		4.4
Land Reserves (msf)	6.17		6.26		-0.09
Occupancy Rate²	95.5	%	94.9	%	68 bps
Avg. Leasing Rent / Square Foot (dollars)	5.07		4.99		0.08
Weighted Average Remaining Lease Term (years)	3.46		3.49		-0.03
Renewal Rate³	90.4	%	87.9	%	245 bps

*Quarterly Financial*	2Q18		2Q17		Var.			2Q18		2Q17		Var.
							fx	19.3911		18.5666
	(millions of pesos unless otherwise stated)							(millions of dollars unless otherwise stated)
Rental Revenues⁴	921.8		773.6		19.2	%		47.6		41.6		14.2	%
Other Operating Income	50.9		45.8		11.2	%		2.6		2.5		7.8	%
Net Revenues	981.1		825.1		18.9	%		50.6		44.4		14.0	%
Net Operating Income (NOI)*	926.9		776.3		19.4	%		47.9		41.8		14.6	%
NOI Margin	94.9	%	94.1	%	82 bps			94.9	%	94.1	%	82 bps
EBITDA⁵*	842.0		704.5		19.5	%		43.6		37.9		15.0	%
EBITDA Margin	86.4	%	85.3	%	111 bps			86.4	%	85.3	%	111 bps
Funds from Operations (FFO)*	604.2		500.8		20.6	%		31.3		26.9		16.3	%
FFO Margin	62.0	%	60.6	%	145 bps			62.0	%	60.6	%	145 bps
Adjusted Funds from Operations (AFFO)*	555.3		452.5		22.7	%		28.8		24.3		18.2	%
AFFO Margin	56.7	%	54.3	%	241 bps			56.7	%	54.3	%	241 bps
Distributions	555.3		452.4		22.7	%		28.8		24.3		18.2	%
Distributions per CBFI⁶	0.7020		0.5720		22.7	%		0.0364		0.0308		18.2	%

*Balance Sheet*	Jun18		Mar18		Var.		fx	Jun18		Mar18		Var.
								19.8633		18.3445
	(millions of pesos unless otherwise stated)							(millions of dollars unless otherwise stated)
Cash & Cash Equivalents	2,042.4		2,035.7		0.3	%		102.8		111.0		-7.3	%
Investment Properties	46,176.3		42,165.3		9.5	%		2,324.7		2,298.5		1.1	%
Land Reserves	1,032.2		950.8		8.6	%		52.0		51.8		0.3	%
Total Debt	19,826.6		18,623.4		6.5	%		998.2		1,015.2		-1.7	%
Net Debt	17,784.2		16,587.7		7.2	%		895.3		904.2		-1.0	%

Figures in dollars in the Income Statement were converted into pesos using the average exchange rate for the period. (1) Millions of square feet. (2) Occupancy at the end of the period. (3) Indicates the lease renewal rate of the leases, includes early renewals. (4) Excluding accrued income as it is a non-cash item. (5) Earnings before interest, taxes, depreciation and amortization. (6) Certificados Bursátiles Fiduciarios Inmobiliarios - Real Estate Investment Certificates. (*) Revenues and expenses have been adjusted for the calculation of the above mentioned metrics. Figures in dollars in the Balance Sheet were converted using the closing exchange rate of the period. Please refer to the “2Q18 Financial Performance" and "Appendices" section available in this document.
Source: PGIM Real Estate – Asset Management and Fund Accounting

Comment by Alberto Chretin, Chief Executive Officer and Chairman of the Board

During the second quarter of 2018, we continued generating solid results --- integrating the benefits from the acquisitions of industrial assets that were concluded at the beginning of the second quarter. Moreover, the strength of the industrial real estate sector in Mexico was reflected in high leasing levels, which represented a total of 1.4 million square feet for Terrafina. The main leasing activity was concentrated in the markets of Chihuahua, Ciudad Juarez, Tijuana, Ramos Arizpe, Queretaro, Silao, Cuautitlan Izcalli, San Luis Potosi, Guadalajara, Irapuato and Hermosillo markets.

Renewal activity for Terrafina reached 0.6 million square feet and, in terms of early renewals, these were 0.6 million square feet; early renewals are a key indicator of the importance for our tenants to secure the permanence of their operation in the long-term. As a result of the strong leasing activity experienced in the first half of 2018, Terrafina lowered the remaining portion of the maturity schedule for the year from 8.1% in the first quarter to 5.2% in the second quarter of 2018.

Second quarter 2018 occupancy levels reached 95.5% and same-store occupancy was 95.2%. Including signed letters of intent, occupancy levels for the quarter reached 96.4%. Occupancy rates by region remained stable, reaching 97.2% in the Northern region, 92.2% in the Bajio region and 93.7% in the Central region.

Average annual leasing rent for 2Q18 was US$5.07 per square foot, a US$0.08 increase compared to the second quarter of 2017 and a US$0.01 increase compared to the first quarter of 2018. Average rents by region remained in line, with US$4.99 per square foot in the Northern region, US$5.16 per square foot in the Bajio region and a US$5.27 average rent per square foot in the Central region.

Terrafina’s main financial indicators for the second quarter of 2018, rental revenues reached US$47.6 million, Net Operating Income reached US$47.9 million with an NOI Margin of 94.9%, as well as generating US$28.8 million in Adjusted Funds from Operations. Finally, Annualized Distributions per CBFI were Ps. 2.81, or US$0.1456, which represented a 9.8% dividend yield, considering the average CBFI price for the second quarter of 2018.

Thank you for your interest in Terrafina.

Sincerely,

Alberto Chretin
Chief Executive Officer and Chairman of the Board

Operating Highlights


Highlights by Region
(as of June 30, 2018)	North		Bajio		Central		Total
# Buildings	201		55		30		286
# Tenants	203		56		39		298
GLA (msf)	25.5		9.1		6.3		40.9
Land Reserves (msf)	2.7		0.2		3.3		6.2
Occupancy Rate	97.2	%	92.2	%	93.7	%	95.5	%
Average Leasing Rent / Square Foot (dollars)	4.99		5.16		5.27		5.07
Annualized Rental Base %	62.4	%	22.0	%	15.7	%	100.0	%
Source: PGIM Real Estate - Asset Management


Leasing Activity
	2Q18	2Q17	Var.
Operating Portfolio (msf):
Renewals	0.6	0.9	-0.3
Early Renewals	0.6	0.1	0.5
New Leases	0.3	0.5	-0.3
Total Square Feet of Leases Signed	1.4	1.6	-0.1
Source: PGIM Real Estate - Asset Management


Occupancy and Rents by Region				Maturities and Renewals by Region
					Consolidated
(As of June 30, 2018)	Occupancy Rate		Avg. Leasing Rent / Square Foot (dollars)	(As of June 30, 2018)	Maturities (number of contracts)	% of Total Maturities		Renewals (number of contracts)	% of Total Renewals
North	97.2	%	4.99	North	7	53.8	%	5	71.4	%
Baja California	100.0	%	4.40	Baja California	1	7.7	%	1	100.0	%
Tijuana	100.0	%	4.40	Tijuana	1	7.7	%	1	100.0	%
Sonora	88.5	%	4.57	Sonora	1	7.7	%	1	100.0	%
Hermosillo	88.5	%	4.57	Hermosillo	1	7.7	%	1	100.0	%
Chihuahua	97.8	%	5.03	Chihuahua	3	23.1	%	3	100.0	%
Chihuahua	98.0	%	5.43	Chihuahua	1	7.7	%	1	100.0	%
Ciudad Juarez	97.8	%	4.70	Ciudad Juarez	2	15.4	%	2	100.0	%
Delicias	100.0	%	5.98	Delicias	0	0.0	%	0	0.0	%
Gomez Farias	100.0	%	3.34	Gomez Farias	0	0.0	%	0	0.0	%
Casas Grandes	100.0	%	4.21	Casas Grandes	0	0.0	%	0	0.0	%
Coahuila	96.4	%	5.05	Coahuila	2	15.4	%	0	0.0	%
Ciudad Acuña	100.0	%	6.11	Ciudad Acuña	0	0.0	%	0	0.0	%
Monclova	100.0	%	5.46	Monclova	0	0.0	%	0	0.0	%
Ramos Arizpe	96.2	%	4.88	Ramos Arizpe	1	7.7	%	0	0.0	%
Saltillo	91.0	%	5.44	Saltillo	1	7.7	%	0	0.0	%
Derramadero	100.0	%	6.64	Derramadero	0	0.0	%	0	0.0	%
San Pedro de las Colinas	89.3	%	2.10	San Pedro de las Colinas	0	0.0	%	0	0.0	%
Torreon	100.0	%	4.26	Torreon	0	0.0	%	0	0.0	%
Nuevo Leon	93.3	%	5.03	Nuevo Leon	0	0.0	%	0	0.0	%
Apodaca	100.0	%	5.51	Apodaca	0	0.0	%	0	0.0	%
Monterrey	91.0	%	4.84	Monterrey	0	0.0	%	0	0.0	%
Tamaulipas	100.0	%	4.65	Tamaulipas	0	0.0	%	0	0.0	%
Reynosa	100.0	%	4.65	Reynosa	0	0.0	%	0	0.0	%
Durango	100.0	%	4.79	Durango	0	0.0	%	0	0.0	%
Durango	100.0	%	4.95	Durango	0	0.0	%	0	0.0	%
Gomez Palacio	100.0	%	3.14	Gomez Palacio	0	0.0	%	0	0.0	%
Bajio	92.2	%	5.16	Bajio	5	38.5	%	5	100.0	%
San Luis Potosi	89.5	%	4.89	San Luis Potosi	0	0.0	%	0	0.0	%
San Luis Potosi	89.5	%	4.89	San Luis Potosi	0	0.0	%	0	0.0	%
Jalisco	100.0	%	6.51	Jalisco	1	7.7	%	1	100.0	%
Guadalajara	100.0	%	6.51	Guadalajara	1	7.7	%	1	100.0	%
Aguascalientes	100.0	%	4.76	Aguascalientes	0	0.0	%	0	0.0	%
Aguascalientes	100.0	%	4.76	Aguascalientes	0	0.0	%	0	0.0	%
Guanajuato	94.4	%	4.80	Guanajuato	3	23.1	%	3	100.0	%
Celaya	100.0	%	5.29	Celaya	0	0.0	%	0	0.0	%
Irapuato	81.8	%	5.24	Irapuato	1	7.7	%	1	100.0	%
Silao	100.0	%	4.55	Silao	2	15.4	%	2	100.0	%
Queretaro	85.8	%	4.78	Queretaro	1	7.7	%	1	100.0	%
Queretaro	85.8	%	4.78	Queretaro	1	7.7	%	1	100.0	%
Central	93.7	%	5.27	Central	1	7.7	%	1	100.0	%
Estado de Mexico	92.7	%	5.49	Estado de Mexico	1	7.7	%	1	100.0	%
Cuautitlan Izcalli	100.0	%	5.51	Cuautitlan Izcalli	1	7.7	%	1	100.0	%
Toluca	81.6	%	5.39	Toluca	0	0.0	%	0	0.0	%
Ciudad de Mexico	100.0	%	9.22	Ciudad de México	0	0.0	%	0	0.0	%
Azcapotzalco	100.0	%	9.22	Azcapotzalco	0	0.0	%	0	0.0	%
Puebla	100.0	%	3.20	Puebla	0	0.0	%	0	0.0	%
Puebla	100.0	%	3.20	Puebla	0	0.0	%	0	0.0	%
Tabasco	100.0	%	3.99	Tabasco	0	0.0	%	0	0.0	%
Villahermosa	100.0	%	3.99	Villahermosa	0	0.0	%	0	0.0	%
Total	95.5	%	5.07	Total	13	100.0	%	11	84.6	%
Source: PGIM Real Estate - Asset Management				Source: PGIM Real Estate - Asset Management *Over the number of matured leases in the quarter

2Q18 Operational Performance
Composition by Geographical Diversification
The geographic diversification of Terrafina’s properties at 2Q18 (based on GLA per square foot) was as follows: the Northern region of Mexico represented 62.4% of GLA, while the Bajio and Central regions represented 22.3% and 15.3% of GLA, respectively.


Geographic Distribution by Region and State
	2Q18	as a % of Total GLA 2Q18		2Q17	as a % of Total GLA 2Q17
North	25.55	62.4	%	21.01	57.5	%
Baja California	0.90	2.2	%	0.90	2.5	%
Tijuana	0.90	2.2	%	0.90	2.5	%
Sonora	0.33	0.8	%	0.33	0.9	%
Hermosillo	0.33	0.8	%	0.33	0.9	%
Chihuahua	14.29	34.9	%	13.66	37.4	%
Chihuahua	5.83	14.2	%	5.44	14.9	%
Ciudad Juarez	7.76	19.0	%	7.74	21.2	%
Delicias	0.52	1.3	%	0.29	0.8	%
Gomez Farias	0.08	0.2	%	0.08	0.2	%
Camargo	0.02	0.1	%	0.02	0.1	%
Casas Grandes	0.09	0.2	%	0.09	0.2	%
Coahuila	6.84	16.7	%	3.49	9.5	%
Ciudad Acuña	0.24	0.6	%	0.24	0.7	%
Monclova	0.35	0.8	%	0.34	0.9	%
Ramos Arizpe	4.54	11.1	%	2.00	5.5	%
Saltillo	0.62	1.5	%	0.62	1.7	%
Derramadero	0.54	1.3	%	0.00	0.0	%
San Pedro de las Colinas	0.15	0.4	%	0.15	0.4	%
Torreon	0.39	1.0	%	0.13	0.4	%
Nuevo Leon	1.94	4.7	%	1.38	3.8	%
Apodaca	0.50	1.2	%	0.50	1.4	%
Monterrey	1.44	3.5	%	0.89	2.4	%
Tamaulipas	0.47	1.1	%	0.47	1.3	%
Reynosa	0.47	1.1	%	0.47	1.3	%
Durango	0.78	1.9	%	0.78	2.1	%
Durango	0.71	1.7	%	0.71	1.9	%
Gomez Palacio	0.07	0.2	%	0.07	0.2	%
Bajio	9.12	22.3	%	9.26	25.4	%
San Luis Potosi	3.31	8.1	%	3.30	9.0	%
San Luis Potosi	3.31	8.1	%	3.30	9.0	%
Jalisco	1.66	4.0	%	1.81	5.0	%
Guadalajara	1.66	4.0	%	1.81	5.0	%
Aguascalientes	0.75	1.8	%	0.75	2.1	%
Aguascalientes	0.75	1.8	%	0.75	2.1	%
Guanajuato	1.42	3.5	%	1.42	3.9	%
Celaya	0.12	0.3	%	0.12	0.3	%
Irapuato	0.44	1.1	%	0.44	1.2	%
Silao	0.87	2.1	%	0.86	2.4	%
Queretaro	1.98	4.8	%	1.98	5.4	%
Queretaro	1.98	4.8	%	1.98	5.4	%
Central	6.25	15.3	%	6.25	17.1	%
Estado de Mexico	5.40	13.2	%	5.40	14.8	%
Cuautitlan Izcalli	4.26	10.4	%	4.26	11.7	%
Toluca	0.91	2.2	%	0.91	2.5	%
Huehuetoca	0.23	0.6	%	0.23	0.6	%
Ciudad de Mexico	0.02	0.1	%	0.02	0.1	%
Azcapotzalco	0.02	0.1	%	0.02	0.1	%
Puebla	0.18	0.5	%	0.18	0.5	%
Puebla	0.18	0.5	%	0.18	0.5	%
Tabasco	0.65	1.6	%	0.65	1.8	%
Villahermosa	0.65	1.6	%	0.65	1.8	%
Total	40.92	100.0	%	36.52	100.0	%
Total Gross Leasable Area / million square feet. Potential leasable area of land reserves are not included.
Source: PGIM Real Estate - Asset Management

Composition by Asset Type
At the end of 2Q18, 73.5% of Terrafina’s portfolio consisted of properties dedicated to manufacturing activities while 26.5% were dedicated to distribution and logistics activities.


Composition by Asset Type
	2Q18		2Q17		Var.
Distribution	26.5	%	26.4	%	9 bps
Manufacturing	73.5	%	73.6	%	-9 bps
Source: PGIM Real Estate - Asset Management

Composition by Sector
As of June 30, 2018, tenant diversification by industrial sector was as follows:


Industrial Sector Diversification
	2Q18		2Q17		Var.
Automotive	34.5	%	31.9	%	257 bps
Industrial properties	19.8	%	20.0	%	-26 bps
Consumer goods	14.5	%	15.2	%	-69 bps
Logistics and Trade	9.6	%	9.8	%	-21 bps
Aviation	9.8	%	10.4	%	-59 bps
Non-durable consumer goods	3.9	%	4.4	%	-47 bps
Electronics	8.0	%	8.3	%	-35 bps
Total	100.0	%	100.0	%
Source: PGIM Real Estate - Asset Management

Composition of Top Clients
Terrafina has a widely diversified tenant base that lease industrial properties throughout several of Mexico’s main cities. For 2Q18, Terrafina’s top client, top 10 clients and top 20 clients, represented 3.3%, 17.1% and 26.8% of total revenues, respectively.


Top Clients
(As of June 30, 2018)	Leased Square Feet (millions)	% Total GLA		% Total Revenues
Top Client	1.24	3.2	%	3.3	%
Top 10 Clients	6.75	17.3	%	17.1	%
Top 20 Clients	10.54	27.0	%	26.8	%
Source: PGIM Real Estate - Asset Management

Occupancy
2Q18 occupancy rate was 95.5%, a 68 basis point increase compared to 2Q17. Including signed LOIs for the quarter, the occupancy rate was 96.4% for the quarter. It is important to note that occupancy rate indicators presented in this report reflect the quarterly closing rate.

For 2Q18, Terrafina’s leasing activity reached 1.4 msf, of which 18.0% corresponded to new leasing contracts (including expansions), 39.0% for contract renewals and 43.0% for early renewals.

Leasing activity mainly took place in the Chihuahua, Ciudad Juarez, Tijuana, Ramos Arizpe, Queretaro, Silao, Cuautitlan Izcalli, San Luis Potosi, Guadalajara, Irapuato and Hermosillo markets. In addition to this leasing activity, Terrafina signed an additional 348,500 square feet in LOIs.


	2Q18		2Q17		Var.
Leased GLA	95.5	%	94.9	%	26 bps
Vacant GLA	3.6	%	4.9	%	-129 bps
Signed Letters of Intent	0.9	%	0.2	%	68 bps
Total	100.0	%	100.0	%
Source: PGIM Real Estate - Asset Management

Lease Maturities
Terrafina had 298 tenants under leasing contracts at the end of 2Q18. The leasing characteristics of these contracts have an average maturity of three to five years for logistics and distribution properties and of five to seven years for manufacturing properties. Annual average maturities (as a percentage of annual base rents) remain at levels of between 5% to 22% for the next five years.

The following table breaks down Terrafina’s leasing maturity schedule for the upcoming years:


	Annual Base Rent (millions of dollars)	% of Total		Occupied Sq. Ft (millions)	% of Total
2018	9.5	4.8	%	2.03	5.2	%
2019	34.8	17.6	%	7.12	18.2	%
2020	44.5	22.5	%	8.74	22.4	%
2021	37.0	18.7	%	7.23	18.5	%
2022	16.9	8.5	%	3.62	9.3	%
Thereafter	55.4	28.0	%	10.35	26.5	%
Source: PGIM Real Estate – Asset Management

Capital Deployment

Capital Expenditures (CAPEX)
Terrafina’s CAPEX is classified as recurring expenses that took place based on upcoming leasing maturities and property 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. Terrafina expects to apply CAPEX towards vacant properties as well as towards the development of new GLA by means of expansions and/or new developments.

Additionally, it is important to consider that CAPEX intended for expansions and new developments are not financed with Terrafina’s operating cash flow and therefore do not pass through the income statement.

Capital expenditures accounts are comprised as follows:

Tenant property improvement resources as well as recurring maintenance CAPEX.
Broker and administrator fees.
CAPEX for new developments, which due to their nature, are generally capitalized.

In 2Q18, Terrafina’s investments in tenant improvements and recurring CAPEX was US$1.3 million. Total CAPEX for 2Q18 is broken down in the following table:


Capital Expenditures
	2Q18	2Q18
	(millions of pesos)	(millions of dollars)
Tenant Improvements & Recurring Capex	25.3	1.3
Leasing Commissions	20.0	1.0
Development Capex¹	8.2	0.4
Total Capital Expenditures	53.4	2.7
Maintenance expenses for vacant properties are included in the Tenant Improvements & Recurring Capex figures. (1) Capex for expansions/new developments.
Source: PGIM Real Estate - Asset Management

Land Reserves
Terrafina’s land reserve as of June 30, 2018 was comprised of 12 land reserve properties, equivalent to 6.2 msf of potential GLA for the development of future industrial properties.

As of June 30, 2018, Terrafina’s land reserves were distributed as follows:


	As of June 30, 2018
	Square Feet (millions)	Land at Cost (millions of pesos)	Land at Cost (millions of dollars)	Appraisal Value (millions of pesos)	Market Value (millions of dollars)
North	3.0	514.3	25.9	592.8	29.8
Bajio	0.1	14.2	0.7	14.7	0.7
Central	3.1	737.8	37.1	424.7	21.4
Total Land Portfolio	6.2	1,266.3	63.7	1,032.2	51.9
Source: PGIM Real Estate - Asset Management and Fund Accounting

2Q18 Financial Performance

Financial Results and Calculations
Terrafina’s 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 2Q18, while for the balance sheet, the exchange rate at the close of June 30, 2018 was applied.

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.

In addition, Terrafina recommends reviewing the Appendices 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.

Past performance is not a guarantee or reliable indicator of future results.

Same-Store
The following table shows Terrafina’s 2Q18 same-store highlights and consolidated information:


(as of June 30, 2018)	Same-Store¹ 2Q18		Consolidated² 2Q18
Number of Properties	259.0		286.0
Occupancy Rate	95.2	%	95.5	%
Gross Leasable Area (GLA) (msf)	36.7		40.9
Avg. Leasing Rent / Square Foot (dollars)	5.02		5.07

	Same-Store 2Q18		Consolidated 2Q18		Same-Store 2Q18		Consolidated 2Q18
	(millions of pesos)				(millions of dollars)
Rental Revenues	816.4		921.8		42.1		47.6
Net Operating Income	824.2		926.9		42.6		47.9
NOI Margin	93.8	%	94.9	%	93.8	%	94.9	%
EBITDA	764.4		842.0		39.5		43.6
EBITDA Margin	85.2	%	86.4	%	85.2	%	86.4	%
FFO	530.7		604.2		27.4		31.3
FFO Margin	60.7	%	62.0	%	60.7	%	62.0	%
Adjusted Funds from Operations	479.8		555.3		24.8		28.8
AFFO Margin	54.6	%	56.7	%	54.6	%	56.7	%
(1) Same properties information evaluates the performance of the industrial properties without including recent acquisitions closed in January, September and December 2017. (2) Includes acquisitions closed in January, September and December 2017.
Source: PGIM Real Estate - Asset Management and Fund Accounting

Rental Revenues
In 2Q18, Terrafina reported rental revenues of US$47.6 million, a 14.2% or US$5.9 million increase compared to 2Q17.

Rental revenues do not include accrued revenues as these are a non-cash item.

Other Operating Income
In 2Q18, other operating income totaled US$2.6 million, a 7.8% or US$0.2 million decrease compared to 2Q17.

Other operating income mainly stem from tenant refunds from triple-net leases. Expenses reimbursable to Terrafina mainly included electricity, property taxes, insurance costs and maintenance.

Net revenues reached US$50.6 million in 2Q18, an increase of US$6.2 million, or 14.0% compared to 2Q17.


Revenues
	2Q18	2Q17	Var. %		2Q18	2Q17	Var. %
	(millions of pesos)				(millions of dollars)
Rental Revenue	921.8	773.6	19.2	%	47.6	41.6	14.2	%
Accrued Income¹	8.4	5.8	46.5	%	0.4	0.3	36.8	%
Other Operating Revenues	50.9	45.8	11.2	%	2.6	2.5	7.8	%
Reimbursable Expenses as Revenues²	40.7	36.0	13.1	%	2.1	1.9	10.3	%
Reimbursable Tenant Improvements	5.5	7.5	-26.1	%	0.3	0.4	-28.9	%
Other non-cash income	4.7	2.3	102.5	%	0.2	0.1	86.7	%
Net Revenue	981.1	825.1	18.9	%	50.6	44.4	14.0	%
(1) Straight line rent adjustment; non-cash item. (2) Triple net leases expenses reimbursed to Terrafina from its tenants.
Source: PGIM Real Estate - 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 2Q18, real estate expenses totaled US$7.1 million, an increase of 9.1% or US$0.6 million compared to 2Q17.

It is important to differentiate between expenses that are directly related to the operation and those that are for the maintenance of the industrial portfolio; the latter are used in the NOI calculation.

The remainder of the accounts included in real estate expenses are considered non-recurring expenses and are used to calculate EBITDA and AFFO.

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)
In 2Q18, NOI totaled US$47.9 million, a 14.6% or US$6.1 million increase compared with 2Q17. NOI margin increased by 82 basis points reaching 94.9% compared to 94.1% in 2Q17.

The following table displays the NOI calculation for 2Q18:


Net Operating Income
	2Q18		2Q17		Var. %		2Q18		2Q17		Var. %
	(millions of pesos unless otherwise stated)						(millions of dollars unless otherwise stated)
Rental Revenues¹	921.8		773.6		19.2	%	47.6		41.6		14.2	%
Other Operating income²	55.8		51.7		8.0	%	2.9		2.8		3.6	%
Net Revenues for NOI Calculation	977.6		825.2		18.5	%	50.5		44.4		13.6	%
Repair and Maintenance	-6.0		-8.2		-26.5	%	-0.3		-0.4		-30.4	%
Property Taxes	0.6		-0.4		-280.0	%	0.0		0.0		-266.5	%
Property Management Fees	-20.4		-16.6		23.0	%	-1.1		-0.9		17.8	%
Electricity	-13.1		-12.7		2.9	%	-0.7		-0.7		-5.0	%
Property Insurance	-2.9		-2.8		3.7	%	-0.2		-0.2		-0.4	%
Security	-5.0		-3.8		33.8	%	-0.3		-0.2		27.3	%
Other Operational Expenses	-3.9		-4.6		-14.0	%	-0.2		-0.2		-19.9	%
Real Estate Operating Expenses for NOI Calculation	-50.7		-48.9		3.6	%	-2.6		-2.6		-2.1	%
Net Operating Income³	926.9		776.3		19.4	%	47.9		41.8		14.6	%
NOI Margin	94.9	%	94.1	%	82 bps		94.9	%	94.1	%	82 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 ' (3) The income calculation 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: PGIM Real Estate - Fund Accounting

Fees and Administrative Expenses (G&A)

G&A in 2Q18 totaled US$5.6 million, a 13.1% or US$0.6 million increase compared to 2Q17.

The following table breaks down total G&A:


G&A
	2Q18	2Q17	Var. %		2Q18	2Q17	Var. %
	(millions of pesos unless otherwise stated)				(millions of dollars unless otherwise stated)
External Advisor Fees¹	-59.2	-47.7	24.1	%	-2.9	-2.6	11.3	%
Professional and Consulting Services	-6.1	-8.9	-31.1	%	-0.4	-0.5	-22.0	%
Payroll, Admin. Fees and Other Expenses	-45.6	-34.4	32.5	%	-2.3	-1.9	24.6	%
Total G&A²	-110.9	-91.0	21.9	%	-5.6	-4.9	13.1	%
(1) General and Administrative Expenses (2) PLA Administradora Industrial, S. de R.L. de C.V., is a Mexican affiliate of PGIM Real Estate and Advisor as per the Advisory Contract.
Source: PGIM Real Estate - Fund Accounting

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
In 2Q18, EBITDA totaled US$43.6 million, an increase of US$5.7 million, or 15.0%, compared to 2Q17. EBITDA margin for 2Q18 was 86.4%, a 111 basis point increase compared to 2Q17.

The following shows the EBITDA calculation for 2Q18:

EBITDA
	2Q18		2Q17		Var. %		2Q18		2Q17		Var. %
	(millions of pesos unless otherwise stated)						(millions of dollars unless otherwise stated)
Rental Revenues¹	921.8		773.6		19.2	%	47.6		41.6		14.2	%
Other Operating income²	55.8		51.7		8.0	%	2.9		2.8		3.6	%
Real Estate Expenses for EBITDA Calculation	-51.3		-51.1		0.4	%	-2.6		-2.8		-4.9	%
Real Estate Operating Expenses for NOI Calculation	-50.7		-48.9		3.6	%	-2.6		-2.6		-2.1	%
Advertising	-0.5		-0.2		109.5	%	0.0		0.0		-
Admin. Property Insurance Expenses	-0.7		-0.8		-14.3	%	0.0		0.0		-17.7	%
Other Admin. Real Estate Expenses	0.6		-1.1		-156.0	%	0.0		-0.1		-144.9	%
Fees and Admin. Expenses	-84.4		-69.6		21.2	%	-4.3		-3.8		12.3	%
External Advisor Fees	-59.2		-47.7		24.1	%	-2.9		-2.6		11.3	%
Legal, Admin. and Other Professional Fees	-15.0		-12.3		22.1	%	-0.8		-0.6		26.7	%
Trustee Fees	-0.3		-2.2		-84.9	%	0.0		-0.1		-86.7	%
Payroll	-6.8		-5.8		18.6	%	-0.4		-0.3		12.9	%
Other Expenses	-3.0		-1.7		75.2	%	-0.2		-0.1		63.6	%
EBITDA³	842.0		704.5		5.6	%	43.6		37.9		15.0	%
EBITDA Margin	86.4	%	85.3	%	111 bps		86.4	%	85.3	%	111 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: PGIM Real Estate - 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 Expenses
In 2Q18, financing expenses totaled US$12.7 million, an increase of 13.9% or US$1.6 million compared to 2Q17.


Financial Expenses
	2Q18	2Q17	Var. %		2Q18	2Q17	Var. %
	(millions of pesos unless otherwise stated)				(millions of dollars unless otherwise stated)
Interest Paid	-240.2	-205.4	17.0	%	-12.4	-11.1	12.2	%
Borrowing Expenses	-8.6	-3.8	127.2	%	-0.4	-0.2	105.9	%
Recurring	0.0	-0.3	-		0.0	0.0	-
Non Recurring	-8.6	-3.4	-		-0.4	-0.2	-
Interest Income	2.4	2.0	19.7	%	0.1	0.1	13.8	%
Total	-246.4	-207.1	18.9	%	-12.7	-11.2	13.9	%
Source: PGIM Real Estate - Fund Accounting

Funds from Operations (FFO) / Adjusted Funds from Operations (AFFO)
In 2Q18, FFO increased by US$4.4 million, or 16.3% compared to 2Q17, reaching US$31.3 million. FFO Margin was 62.0%, a 145 basis point increase compared to 2Q17. Additionally, Terrafina reported an AFFO of US$28.8 million, an increase of US$4.4 million, or 18.2% compared to 2Q17. AFFO margin was 56.7%, an increase of 241 basis points versus 2Q17.


Funds from Operations (FFO)
	2Q18		2Q17		Var. %		2Q18		2Q17		Var. %
	(millions of pesos unless otherwise stated)						(millions of dollars unless otherwise stated)
EBITDA	842.0		704.5		19.5	%	43.6		37.9		15.0	%
Finance Cost¹	-237.8		-203.7		16.7	%	-12.3		-11.0		12.0	%
Funds from Operations (FFO)	604.2		500.8		20.6	%	31.3		26.9		16.3	%
FFO Margin	62.0	%	60.6	%	145 bps		62.0	%	60.6	%	145 bps
Tenant Improvements	-25.3		-31.1		-18.8	%	-1.3		-1.7		-22.8	%
Leasing Commissions	-20.0		-13.2		51.6	%	-1.0		-0.7		45.7	%
Other Non Recurring Expenses³	-3.7		-4.1		-11.3	%	-0.2		-0.2		3.8	%
Adjusted Funds from Operations (AFFO)	555.3		452.5		22.7	%	28.8		24.3		18.2	%
AFFO Margin	56.7	%	54.3	%	241 bps		56.7	%	54.3	%	241 bps
(1) Net Operational Interest Expenses comprised by interest paid, recurring borrowing expenses and other interest income. (2) Capex reserve for expenses to acquisitions, dispositions, legal and other expenses.
Source: PGIM Real Estate - Fund Accounting

Comprehensive Income
Comprehensive Income For 2Q18 reached a profit of US$149.4 million, compared to a loss of US$45.3 million in 2Q17.

The following table presents the calculation of Comprehensive Income for 2Q18:


Comprehensive Income
	2Q18	2Q17	Var. %		2Q18	2Q17	Var. %
	(millions of pesos unless otherwise stated)				(millions of dollars unless otherwise stated)
Net Revenues	988.9	825.1	19.8	%	51.0	44.4	14.9	%
Real Estate Expenses	-137.4	-120.3	14.2	%	-7.1	-6.5	9.4	%
Fees and Other Expenses	-110.9	-91.0	21.9	%	-5.7	-4.9	15.8	%
Gain (Loss) from Sales of Real Estate Properties	0.0	1.9	-		0.0	0.1	-
Net Income (Loss) from Fair Value Adjustment on Investment Properties	4.1	-62.7	-		0.2	-3.4	-
Net Income (Loss) from Fair Value Adjustment on Derivative Financial Instruments	9.4	4.4	112.4	%	0.5	0.2	103.4	%
Net Income (Loss) from Fair Value Adjustment on Borrowings	246.3	-190.2	-		12.7	-10.2	-
Realized gain (loss) on derivative financial instruments	-0.2	-	-		0.0	-10.2	-
Foreign Exchange Gain (loss)	-69.0	50.8	-		-3.6	2.7	-
Operating Profit	931.1	418.1	122.7	%	48.0	22.4	113.9	%
Financial Income	2.4	2.0	19.7	%	0.1	0.1	-
Financial Expenses	-248.8	-209.1	19.0	%	-12.8	-11.3	14.0	%
Net Financial Cost	-246.4	-207.1	18.9	%	-12.7	-11.2	13.9	%
Share of Profit from Equity Accounted Investments	7.4	15.7	-		0.4	0.8	-
Net Profit (Loss)	692.1	226.6	205.5	%	35.7	12.1	194.1	%
Items Reclassified after Net Profit (Loss) - Currency Translation Adjustments	2,205.5	-1,066.9	-		113.7	-57.5	-
Comprehensive Income	2,897.6	-840.3	-		149.4	-45.3	-
Source: PGIM Real Estate - Fund Accounting

Distributions per CBFIs
In 2Q18, Terrafina generated US$28.8 million of AFFO and therefore will distribute US$0.0364 per CBFI.


Distributions
(millions of pesos unless otherwise stated)	2Q17		3Q17		4Q17		1Q18		2Q18		Var.% (2Q18 vs 2Q17)
Total Outstanding CBFIs (millions of CBFIs)	791.0		791.0		791.0		791.0		791.0		0.0	%
CBFI Price¹	32.35		31.29		30.20		28.68		28.46		-12.0	%
Distributions	452.4		410.4		484.9		505.2		555.3		22.7	%
Distributions Per CBFI	0.5720		0.5188		0.6130		0.6386		0.7020		22.7	%
FX Rate USD/MXN (average closing period)	18.57		17.83		18.93		18.78		19.39		4.4	%
Distributions (million dollars)	24.3		23.0		25.6		26.9		28.8		18.2	%
Distributions Per CBFI (dollars)	0.0308		0.0291		0.0324		0.0340		0.0364		18.2	%
Annualized Distribution Yield²	7.1	%	6.6	%	8.1	%	8.9	%	9.9	%	279 bps
(1) Average closing price for the period. (2) Annualized distribution per share divided by the average CBFI price of the quarter. Quarterly distribution yield calculation has been annualized.
Source: PGIM Real Estate - Fund Accounting

Debt
As of June 30, 2018, Terrafina’s total debt reached US$998.2 million. The average cost of Terrafina’s long-term debt was 4.99%. All of Terrafina’s debt is denominated in U.S. dollars.


Outstanding Debt
(as of June 30, 2018)	Currency	Millions of pesos	Millions of dollars	Interest Rate		Terms	Maturity	Extension Option	Derivatives
Long Term Debt
Citibank¹	Dollars	1,032.0	52.0	Libor + 2.45%		Interest Only	Jan 2023	-	US$120M swap⁴ / US$100M cap⁵
Metlife	Dollars	2,979.5	150.0	4.75	%	Interest Only	Jan 2027	-	-
Banamex²	Dollars	7,013.5	353.1	Libor + 2.45%		Interest Only	Oct 2022	-	US$105M swap⁶
Senior Notes³	Dollars	8,489.8	427.4	5.25	%	Interest Only	Nov 2022	-	-
New York Life	Dollars	311.9	15.7	5.19	%	Interest + Principal	Feb 2020	-	-
Total Debt		19,826.6	998.2
Net Cash		2,042.4	102.8
Net Debt		17,784.2	895.3
(1) Unsecured syndicated revolving credit facility. (2) Unsecured syndicated term loan facility; interest only for the first three years. (3) Value at Cost: US$425 million / Ps.7,977 million.
(4) Swap fixed rate: 1.286%. (5) Cap strike price: 1.75% (6) Swap fixed rate: 1.768%.
Source: PGIM Real Estate - Fund Accounting and Transactions

The following tables show leverage and debt service coverage as of June 30, 2018 as well as Terrafina’s projections for the following six quarters:


Loan-to-Value (LTV)
(as of June 30, 2018)	(millions of pesos)	(millions of dollars)
Total Assets	49,498.2	2,491.9
Total Debt	19,826.6	998.2

Loan-to-Value (LTV)¹		40.1	%
(1) Total Debt divided by Total Assets as defined by the National Securities and Banking Commission (CNBV)
Source: PGIM Real Estate - Fund Accounting and Capital Markets


Debt Service Coverage Ratio (DSCR)
	period	(millions of pesos)	(millions of dollars)
Cash & Cash Equivalents	June 30, 2018	2,042.4	102.8
Recoverable Taxes	Σ next 6 quarters	296.8	14.9
EBIT¹ after distributions	Σ next 6 quarters	1,719.7	86.6
Available Credit Line	June 30, 2018	4,818.7	242.6

	period	(millions of pesos)	(millions of dollars)
Interest Payments	Σ next 6 quarters	1,500.5	75.5
Principal Payments	Σ next 6 quarters	17.7	0.9
Recurring CAPEX	Σ next 6 quarters	193.9	9.8
Development Expenses	Σ next 6 quarters	290.9	14.6

Debt Service Coverage Ratio (DSCR)²			4.4x
(1) Earnings Before Interest and Taxes
(2) (Cash & Cash Equivalents + Recoverable Taxes + EBIT After Distributions + Available Credit Line) / (Interest Payments + Principal Payments + Recurring CAPEX + Development Expenses)
Source: PGIM Real Estate - Fund Accounting and Capital Markets

Moreover, as of June 30, 2018, Terrafina was in full compliance with its debt covenants related to the US$425 million bond issuance (November 2015), as follows:


Unsecured Bond Covenants
(as of June 30, 2018)	Terrafina		Bond Covenants
Loan-to-Value (LTV)¹	40.1	%	≤ 60%
Debt Service Coverage Ratio (DSCR)²	3.2x		≥ 1.5x
Secured Debt to Gross Assets Limitation	6.6	%	≤ 40%
Unencumbered Assets to Unsecured Debt Limitation	238	%	≥ 150%
(1) Total Debt divided by Total Assets. (2) (Net Income/Loss + Interest on Debt + Unrealized Gain /Loss of fair value changes)/ (all interest and principal payments on Debt)
Source: PGIM Real Estate - Transactions

Analyst Coverage
The following is a list of banks and institutions that regularly publish research reports on Terrafina:


- Barclays	- Invex
- BBVA Bancomer	- Itaú BBA
- Bradesco	- JPMorgan
- BofA ML	- Monex
- BTG Pactual	- Morgan Stanley
- BX+	- NAU Securities
- Citi Banamex	- Scotiabank
- Credit Suisse	- Vector
- GBM	- Santander
- HSBC	- UBS
- Interacciones

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 PGIM Real Estate.

Terrafina owns 298 real estate properties, including 286 developed industrial facilities with a collective GLA of approximately 40.9 million square feet and 12 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

PGIM Real Estate
PGIM Real Estate is the real estate investment business of PGIM Inc., the global investment management business of Prudential Financial, Inc. (NYSE:PRU). Redefining the real estate investing landscape since 1970, PGIM Real Estate has professionals in 18 cities in the Americas, Europe and Asia Pacific with deep local knowledge and expertise, and gross assets under management of US$69.6 billion (US$50.3 billion net) as of March 31, 2018. PGIM Real Estate’s tenured team offers to its global client base a broad range of real estate equity, debt and securities investment strategies that span the risk/return spectrum. For more information, visit www.pgimrealestate.com

About Prudential Financial, Inc.
Prudential Financial, Inc. (NYSE:PRU), a financial services leader with more than US$1 trillion of assets under management as of March 31, 2018, 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.

Conference Call

Terrafina
(BMV: TERRA13)
Cordially invites you to participate in its
Second Quarter 2018 Results

Friday, July 27, 2018
11:00 a.m. Eastern Time
10:00 a.m. Central Time

To access the call, please dial:
from within the U.S. 1-877-830-2576
from outside the U.S. 1-785-424-1726
Conference ID Number: Terrafina

Audio Webcast Link: https://www.webcaster4.com/Webcast/Page/1111/26311

Conference Replay
U.S. 1-844-488-7474
International (outside the US) 1-862-902-0129
Passcode: 24061815

Appendix

Appendix 1 – Revenues

Terrafina’s revenues are mainly classified as rental revenues and other operating reimbursable revenues.

Additionally, there are accounting revenues that must be registered according with IFRS; however, these are considered as non-cash items and therefore are excluded in some calculations.

Reimbursable tenant improvements are included in the tenant improvement expenses for the AFFO calculation.


	Revenues
		2Q18	2Q17	2Q18	2Q17
		(millions of pesos)		(millions of dollars)
NOI calculation	Rental Revenue	921.8	773.6	47.6	41.6
Non Cash	Accrued Income¹	8.4	5.8	0.4	0.3
	Other Operating Revenues	50.9	45.8	2.6	2.5
NOI calculation	Reimbursable Expenses as Revenues²	40.7	36.0	2.1	1.9
AFFO calculation	Reimbursable Tenant Improvements	5.5	7.5	0.3	0.4
Non Cash	Other non-cash income	4.7	2.3	0.2	0.1
	Net Revenue	981.1	825.1	50.6	44.4
NOI calculation	Share of Profit from Equity Accounted Investments²	15.1	15.7	0.8	0.9
	(1) Straight line rent adjustment. (2) Triple net leases expenses reimbursed to Terrafina from its tenants. (2) Profit from joint-venture developments.
	Source: PGIM Real Estate - Fund Accounting

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).

The following table presents the real estate expenses breakdown, which are used for the calculation of several metrics.


	Real Estate Expenses
		2Q18	2Q17	2Q18	2Q17
		(million of pesos)		(million of dollars)
	Repair and Maintenance	-36.8	-46.8	-1.9	-2.5
NOI calculation	Recurring	-6.0	-8.2	-0.3	-0.4
AFFO calculation	Non Recurring	-30.8	-38.6	-1.6	-2.1
	Property Taxes	-4.8	-12.7	-0.3	-0.7
NOI calculation	Operating	0.6	-0.4	0.0	0.0
Non Cash	Non Operating	-5.4	-12.4	-0.3	-0.7
NOI calculation	Property Management Fees	-20.4	-16.6	-1.1	-0.9
NOI calculation	Electricity	-13.1	-12.7	-0.7	-0.7
AFFO calculation	Brokers Fees	-20.0	-13.2	-1.0	-0.7
	Property Insurance	-3.6	-3.7	-0.2	-0.2
NOI calculation	Operating	-2.9	-2.8	-0.2	-0.2
EBITDA calculation	Administrative	-0.7	-0.8	0.0	0.0
NOI calculation	Security	-5.0	-3.8	-0.3	-0.2
EBITDA calculation	Advertising	-0.5	-0.2	0.0	0.0
	Other Expenses	-18.6	-6.1	-0.9	-0.3
NOI calculation	Operational Related	-3.9	-4.6	-0.2	-0.2
Non Cash	Non Operational Related	-15.3	-0.5	-0.8	0.0
EBITDA calculation	Administrative	0.6	-1.1	0.0	-0.1
Non Cash	Bad Debt Expense	-14.6	-4.7	-0.8	-0.2
	Total Real Estate Expenses	-137.4	-120.3	-7.1	-6.5
	Source: PGIM Real Estate - Fund Accounting

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 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
		2Q18	2Q17	2Q18	2Q17
		(million of pesos)		(million of dollars)
EBITDA calculation	External Advisor Fees	-59.2	-47.7	-2.9	-2.6
	Legal Fees	-1.4	-3.8	-0.1	-0.2
EBITDA calculation	Recurring	0.0	-0.3	0.0	0.0
AFFO calculation	Non Recurring	-1.3	-3.5	-0.1	-0.2
	Other Professional Fees	-4.8	-5.1	-0.3	-0.3
EBITDA calculation	Recurring	-2.4	-3.3	-0.2	-0.2
AFFO calculation	Non Recurring	-2.3	-1.7	-0.1	-0.1
	Administrative Fees	-35.4	-24.8	-1.8	-1.3
EBITDA calculation	Recurring	-12.5	-8.6	-0.6	-0.5
Non Operational related	Non Recurring¹	-22.9	-16.2	-1.1	-0.9
EBITDA calculation	Payroll	-6.8	-5.8	-0.4	-0.3
EBITDA calculation	Trustee Fees	-0.3	-2.2	0.0	-0.1
EBITDA calculation	Other Expenses	-3.0	-1.7	-0.2	-0.1
	Total Fees and Admin. Expenses	-110.9	-91.0	-5.6	-4.9
	(1) Non operational related administrative fees.
	Source: PGIM Real Estate - Fund Accounting

Appendix 4 – Reconciliation


Reconciliation of Net Profit (Loss) to FFO, EBITDA and NOI
	2T18	2T17	2T18	2T17
	(millions of pesos)		(millions of dollars)
Comprehensive Income (Loss)	2,897.6	-840.3	149.4	-45.3
Add (deduct) Currency Translation Adjustment:
Currency Translation Adjustment	-2,205.5	1,066.9	-113.7	57.5
Add (deduct) Cost of Financing Adjustment:
Non Recurring Borrowing Expenses	8.6	3.4	0.4	0.2
Add (deduct) Non-Cash Adjustment:
Foreign Exchange Adjustments	69.0	-50.8	3.6	-2.7
Gain (Loss) on Derivative Financial Instruments	0.2	-	0.0	-
Fair Value Adjustment on Borrowings	-246.3	190.2	-12.7	10.2
Fair Value Adjustment on Derivative Financial Instruments	-9.4	-4.4	-0.5	-0.2
Fair Value Adjustment on Investment Properties	-4.1	62.7	-0.2	3.4
Gain (Loss) from Sales of Real Estate Properties	0.0	-1.9	0.0	-0.1
Add (deduct) Expenses Adjustment:
Non Recurring Repair and Maintenance	30.8	38.6	1.6	2.1
Non Operating Property Taxes	5.4	12.4	0.3	0.7
Brokers Fees	20.0	13.2	1.0	0.7
Bad Debt Expense	14.6	4.7	0.8	0.3
Other Non Operational Related Expenses	15.3	0.5	0.8	0.0
Non Recurring Legal Fees	1.3	3.5	0.1	0.2
Non Recurring Other Professional Fees	2.3	1.7	0.1	0.1
Add (deduct) Revenues Adjustment:
Accrued Income	-8.4	-5.8	-0.4	-0.3
Other Non-Cash Income	-4.7	-2.3	-0.2	-0.1
Reimbursable Tenant Improvements	-5.5	-7.5	-0.3	-0.4
Add (deduct) Non Operational Administrative Fees
Non Operational Administrative Fees	22.9	16.2	1.2	0.9
FFO	604.2	500.8	31.3	26.9
Add (deduct) Cost of Financing Adjustment:
Interest Paid	240.2	205.4	12.4	11.1
Recurring Borrowing Expenses	0.0	0.3	0.0	0.0
Interest Income	-2.4	-2.0	-0.1	-0.1
EBITDA	842.0	704.5	43.6	37.9
Add (deduct) Expenses Adjustment:
External Advisor Fees	59.2	47.7	3.1	2.6
Recurring Legal Fees	0.0	0.3	0.0	0.0
Recurring Other Professional Fees	2.4	3.3	0.1	0.2
Administrative Fees	12.5	8.6	0.6	0.5
Payroll	6.8	5.8	0.4	0.3
Trustee Fees	0.3	2.2	0.0	0.1
Other Expenses	3.0	1.7	0.2	0.1
Advertising	0.5	0.2	0.0	0.0
Administrative Property insurance	0.7	0.8	0.0	0.0
Other Administrative Expenses	-0.6	1.1	0.0	0.1
NOI	926.9	776.3	47.9	41.8
Add (deduct) Expenses Adjustment:
Recurring Repair and Maintenance	6.0	8.2	0.3	0.4
Operating Property Taxes	-0.6	0.4	0.0	0.0
Property Management Fees	20.4	16.6	1.1	0.9
Electricity	13.1	12.7	0.7	0.7
Operating Property Insurance	2.9	2.8	0.2	0.2
Security	5.0	3.8	0.3	0.2
Other Operational Expenses	3.9	4.6	0.2	0.2
Add (deduct) Revenues Adjustment:
Other Non-Cash Income	4.7	2.3	0.2	0.1
Accrued Income	8.4	5.8	0.4	0.3
Reimbursable Tenant Improvements	5.5	7.5	0.3	0.4
Share of Profit from Equity Accounted Investments	-15.1	-15.7	-0.8	-0.8
Net Revenue	981.1	825.1	50.6	44.4


Reconciliation of Net Profit (Loss) to AFFO
	2T18	2T17	2T18	2T17
	(millions of pesos)		(millions of dollars)
Comprehensive Income (Loss)	2,897.6	-840.3	149.4	-45.3
Add (deduct) Cost of Financing Adjustment:
Non Recurring Borrowing Expenses	-2,205.5	1,066.9	-113.7	57.5
Add (deduct) Cost of Financing Adjustment:
Non Recurring Borrowing Expenses	8.6	3.4	0.4	0.2
Add (deduct) Non-Cash Adjustment:
Foreign Exchange Adjustments	69.0	-50.8	3.6	-2.7
Gain (Loss) on Derivative Financial Instruments	0.2	-	0.0	-
Fair Value Adjustment on Borrowings	-246.3	190.2	-12.7	10.2
Fair Value Adjustment on Derivative Financial Instruments	-9.4	-4.4	-0.5	-0.2
Fair Value Adjustment on Investment Properties	-4.1	62.7	-0.2	3.4
Gain (Loss) from Sales of Real Estate Properties	0.0	-0.8	0.0	0.0
Add (deduct) Expenses Adjustment:
Non Operating Property Taxes	5.4	12.4	0.3	0.7
Bad Debt Expense	14.6	4.7	0.8	0.3
Other Expenses Non Operational Related	15.3	0.5	0.8	0.0
Add (deduct) Revenues Adjustment:
Accrued Income	-8.4	-5.8	-0.4	-0.3
Other Non-Cash Income	-4.7	-2.3	-0.2	-0.1
Add (deduct) Non Operational Administrative Fees
Non Administrative Fees	22.9	16.2	1.2	0.9
Add (deduct) Capex Adjustment:
AFFO	555.3	452.4	28.8	24.3

Appendix 5 - Cap Rate Calculation

Terrafina subtracts cash and land reserves for the cap rate calculation.

Implied cap rate and under NAV (Net Asset Value) calculation are shown in the following tables:


Implied Cap Rate
Quarterly Average Price (dollars)¹	1.47
(x) CBFIs (million shares)	791.0
(=) Market Capitalization	1,161.0
(+) Total Liabilities	1,030.5
(-) Cash	102.8
(=) Enterprise Value	2,088.6
(-) Landbank	51.9
(=) Implied Operating Real Estate Value	2,036.7
Net Operating Income (NOI) 2018e	185.0
Implied Cap Rate	9.1	%
Figures expressed in millions of dollars unless otherwise stated.
(1) 2Q18 average share price of Ps.28.46; and average exchange rate of Ps. 19.3911

Cap Rate Calculation with NAV
(+) Investment Properties (excluding landbank)	2,261.0
(+) Land	51.9
(+) Cash	102.8
(-) Total Liabilities	1,030.5
(=) NAV¹	1,385.2
(/) CBFIs (million shares)	791.0
(=) NAV per CBFI (dollars)	1.8

CBFI Price (NAV calculation)	1.8
(x) CBFIs (million shares)	791.0
(=) Market Cap	1,385.2
(+) Total Debt and Liabilities	1,030.5
(-) Cash	102.8
(=) Enterprise Value	2,312.9
(-) Landbank	51.9
(=) Implied Operating Real Estate Value	2,261.0
Net Operating Income (NOI) 2018e	185.0
Implied Cap Rate	8.2	%

Financial Statements


Income Statement	2Q18			2Q18
	(thousands of pesos)			(thousands of dollars)

Rental revenues	$	930,232		$	47,972
Other operating income		58,635			3,024
Real estate operating expenses		(137,408	)		(7,086	)
Fees and other expenses		(110,920	)		(5,720	)
Realized gain (loss) from disposal of investment properties		-			-
Net gain (loss) from fair value adjustment on investment properties		4,109			212
Net gain (loss) from fair value adjustment on borrowings		246,282			12,701
Net gain (loss) unrealized from fair value on derivative financial instruments		9,358			483
Realized gain (loss) on derivative financial instruments		(207	)		(11	)
Foreign exchange (loss) gain		(69,004	)		(3,559	)
Operating profit		931,077			48,016

Finance income		2,422			125
Finance cost		(248,788	)		(12,830	)
Finance cost - net		(246,366	)		(12,705	)

Share of profit from equity accounted investments		7,378			380
Net Profit for the period		692,089			35,691

Items that may be subsequently reclassified to profit or loss- currency translation differences		2,205,470			113,736

Total Comprehensive income for the period		2,897,559			149,427

Financial Statements


Balance Sheet	Jun-31-18			Jun-31-18
(thousands of pesos)	(thousands of pesos)			(thousands of pesos)
Assets
*Non-current assets*
Investment properties	$	46,176,289		$	2,324,704
(Cost:30/06/2018 - Ps.45,597,200, US$2,351,450; 31/03/2018 - Ps.41,634,186, US$2,269,5735)
Investments accounted using equity method		449,436			22,626
Derivative financial instruments		70,828			3,566
Deferred charges and accrued income		208,263	-		10,485
Loan receivable		38,613			1,944
(Cost: 30/06/2018 - Ps.38,613, US$1,991;31/03/2018 - Ps.35,660, US$1,944)
Restricted cash		36,934			1,859
*Current assets*
Other assets		34,191			1,721
Loan receivable		632			32
(Cost: 30/06/2018 - 632, US$33; 31/12/2017 - Ps.1,244, US$63)
Recoverable taxes		296,763			14,940
Prepaid expenses		4,461			225
Deferred charges and accrued income		5,463			275
Accounts receivable		133,905			6,741
(Net of allowance for doubtful accounts: 30/06/2018 - 54,084, US$2,789; 31/03/2018 - Ps.36,454, US$1,987)
Cash and cash equivalents		2,042,416			102,824
Total assets		49,498,194			2,491,942
*Net assets attributable to Investors*
Contributions, net		19,513,306			982,380
Retained earnings		186,666			-
Currency translation adjustment		9,328,922			469,656
Total net assets (Net Equity)		29,028,894			1,452,036
Liabilities
*Non-current liabilities*
Borrowings		19,686,895			991,119
(Cost: 30/06/2018 - Ps.19,700,401, US$1,015,951; 31/03/2018 - Ps.18,194,058, US$991,799)
Tenant deposits		297,217			14,963
Accounts payable		4,866			245
*Current liabilities*
Trade and other payables		229,704			11,564
Borrowings		139,748			7,035
(Cost: 30/06/2018 - Ps.139,748, US$7,207;31/03/2018 - Ps.219,194, US$11,949)
Tenant deposits		110,870			5,582
Total liabilities (excluding net assets attributable to the Investors)		20,469,300			1,030,509
Total net assets and liabilities		49,498,194			2,482,545

Financial Statements


Cash Flow Statement	Jun-18			Jun-18
	(thousands of pesos)			(thousands of dollars)
Cash flows from operating activities
(Loss) profit for the period	$	798,114		$	40,180
Adjustments:
Net loss (gain) unrealized from fair value adjustment on investment properties		558,798			28,132
Net loss (gain) unrealized from fair value adjustment on borrowings		(398,921	)		(20,083	)
Net loss (gain) unrealized from fair value adjustment on derivative financial instruments		(38,921	)		(1,959	)
Realized gain from disposal of investment properties		17,836			898
Bad debt expense		22,953			1,156
Interest expense		458,960			23,106
Interest income on bank accounts		(3,180	)		(160	)
Share of profit from equity accounted investments		(12,943	)		(652	)
Decrease (increase) deferred rents receivable		(15,548	)		(783	)
Decrease (increase) in accounts receivable		(98,220	)		(4,945	)
Decrease (increase) in recoverable taxes		853,009			42,944
Decrease (increase) in reimbursed value added tax		(466,237	)		(23,472	)
Decrease (increase) in prepaid expenses		7,311			368
Decrease (increase) in other assets		(8,359	)		(421	)
Decrease (increase) in tenant deposits		19,318			973
(Decrease) in accounts payable		22,733			1,144
Net cash (used in) generated from operating activities		1,716,703			86,426
Cash flows from investing activities
Acquisitions s of investment properties		(481,977	)		(24,265	)
Improvements of investment properties		(24,183	)		(1,217	)
Proceeds from dispositions of investment properties		-			-
Acquisition prepayment		-			-
Interest income on bank accounts		3,180			160
Investments in joint venture		390			20
Loans receivable payment		594			30
Net cash (used in) generated from investing activities		(501,996	)		(25,273	)
Cash flows from financing activities
Proceeds from borrowings		-			-
Principal payments on borrowings		(879,578	)		(44,282	)
Interest expense		(449,479	)		(22,629	)
Distributions to investors		(990,293	)		(49,855	)
Restricted cash		(274	)		(14	)
Net cash (used in) generated from financing activities		(2,319,624	)		(116,779	)
Net (decrease) in cash and cash equivalents		(1,104,917	)		(55,626	)
Cash and cash equivalents at the beginning of the period		3,209,041			161,556
Exchange effects on cash and cash equivalents		(61,708	)		(3,107	)
Cash and cash equivalents at the end of the period	$	2,042,416		$	102,824

Financial Statements


Statement of Changes in Equity	Net contributions			Currency translation adjustment		Retained earnings			Net assets
(thousands of pesos)
Balance at January 1, 2018	$	19,844,088		$	9,169,409	$	48,063		$	29,061,560
Capital Contribution, Net of Issuing Costs		0			-		-			-
Distributions to Investors		(330,782	)		-		(659,511	)		(990,293	)
Comprehensive Income
Net loss of the period		-			-		798,114			798,114
Other Comprehensive Income
Currency Translation		-			159,513		-			159,513
Total Comprehensive (loss) income		-			159,513		798,114			957,627
Net Assets as of June 30, 2018	$	19,513,306		$	9,328,922	$	186,666		$	29,028,894
(thousands of dollars)
Balance at January 1, 2018	$	999,033		$	461,626	$	2,420		$	1,463,078
Capital Contribution, Net of Issuing Costs		0			-		-			-
Distributions to Investors		(16,653	)		-		(33,202	)		(49,855	)
Comprehensive Income
Net loss of the period		-			-		40,180			40,180
Other Comprehensive Income
Currency Translation		-			8,031		-			8,431
Total Comprehensive (loss) income		-			8,031		40,180			48,211
Net Assets as of June 30, 2018	$	982,380		$	469,656		-		$	1,461,834