#1Green Street Advisors ― ADVISORY & CONSULTING GROUP - VESTɅ Best Practices for Publicly Traded Real Estate Companies Lessons Learned from the U.S. REIT Market Justin Brown, Sr. Vice President Christos Savvinidis, Associate รา#2Agenda Introduction: • U.S. REIT Historical Returns and Pricing ● Pillars of U.S. REIT Outperformance Best Practices: · ● • Alignment of Interests • Capital Allocation Balance Sheet Management Overhead This is not a Research report. 2 Green Street Advisors ADVISORY & CONSULTING GROUP www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#3Introduction U.S. REIT Historical Returns and Pricing Pillars of U.S. REIT Outperformance This is not a Research report. 3 Green Street Advisors ― ADVISORY & CONSULTING GROUP - www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#4Global Landscape Green Street Advisors ADVISORY & CONSULTING GROUP The U.S. REIT market accounts for roughly half of the total global REIT market cap. With over 30 years of detailed financial disclosure, the U.S. market offers investors adequate data to draw conclusions regarding best practices. Mature >$1Tn market cap Established >$50Bn market cap per market Emerging <$25Bn market cap per market Nascent Little to No Public REITS www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC This is not a Research report. 4 Use of this report is subject to the Terms of Use listed at the end of the report#530% 20% 10% 0% -10% -20% Public Market Pricing Green Street Advisors ADVISORY & CONSULTING GROUP Pricing for real estate in the public market often diverges from private market pricing. Property sectors trade at premiums or discounts based on the macro outlook for their businesses. However, there is a wide range of observed premiums within sectors with the top companies often trading at substantially higher premium versus their peer set. Industrial REITs Observed GAV Premium Page -30% '03 '04 '05 05 30% 20% 10% 0% '06 90 Industrial Average Max Min '07 '08 '09 '10 '11 '12 '13 13 Min-Max Spread This is not a Research report. 5 '14 '15 '16 '17 '18 18 '19 Average 11% www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#6This is not a Research report. -5% SUI CUBE EXR 10% 25% FR AIV SLG DRE PROLOGIS PLD SPG 40% Where the Big Differences Lie Property-level performance does not differ by much across REITs. However, total return performance differs markedly. Differences in corporate structure, capital allocation, management track record, balance sheet management, and corporate governance account for much of the total return delta. Annualized NOI Growth and Total Returns (2009-2019) ■SS-NOI Growth ■Total Return MAC ELS SHO UDR CPT LSI DEI EGP HST BDN 6 ESS EQR PSB KRC MAA AVB PSA TCO ARE I P T BXP WRI LPT AKR FRT VNO ACC HIW REG KIM PEI HCP CUZ WRE CLI SKT CBL OFC LIBERTY PROPERTY TRUST www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report Green Street Advisors ADVISORY & CONSULTING GROUP#7The Four Pillars of REIT Out-Performance Green Street Advisors ADVISORY & CONSULTING GROUP The size and breadth of the U.S. REIT industry has provided insight into the key drivers of shareholder returns. The best performing REITs have a lot in common... as do the worst performing REITs. If a publicly traded real estate company aims to attract capital from global REIT investors, they need to consider adopting best practices in these four categories. E Alignment of Interests Capital Allocation Balance Sheet Management Overhead This is not a Research report. 7 www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#8Best Practices Alignment of Interests Capital Allocation Balance Sheet Management Overhead Green Street Advisors ― ADVISORY & CONSULTING GROUP - www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC This is not a Research report. 8 Use of this report is subject to the Terms of Use listed at the end of the report#9Alignment of Interests: Management Structure Green Street Advisors ADVISORY & CONSULTING GROUP The differences between internal and external management permeate beyond the total cost of each structure. How fees are calculated and how management is incentivized to spend their time often dictate where the next REIT dollar is allocated. O Internalized management expenses have fixed components, allowing G&A efficiencies with scale O Management comp not linked to transactions or growth о CEO departure subject to a board vote. The cost of removal varies by company Internal management is viewed as captive to the public market USA: 14% MX: 75% External Base fee as a % of equity or gross assts are common - incentivizes growth O Additional transaction fees reward activity over value creation O Internal Termination fees range from exorbitant (10x base) to non-existent USA: 86% MX: 25% Related party transactions are common O This is not a Research report. 6 www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#10Alignment of Interests: Poor Incentives in Action Green Street Advisors ADVISORY & CONSULTING GROUP There is a historical track record of externally managed companies growing while destroying shareholder value. Externally-Managed Senior Housing REIT Performance & External Fee Payment 250 Sr Housing Sector Avg. (Indexed as of Jan'11) Senior Housing Properties Trust External Management Base Fee 200 150 100 50 $31M $27M $25M $21M $37M $37M $36M $35M External manager earned an additional $56m in incentive fees for 2016 (their first year of outperformance) 0 2011 2012 2013 2014 2015 2016 2017 2018 This is not a Research report. 10 www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#11Alignment of Interests: Cornerstones of Corporate Governance Green Street Advisors ADVISORY & CONSULTING GROUP REITs with shareholder-friendly corporate governance trade at higher valuations. Independent boards and the elimination of conflicts of interest are crucial to attracting global capital. XX Best in Class Corporate Governance Non-Staggered, Independent Board with Proxy Access M No Anti-Takeover Provisions and Limited Power to Implement Them Significant Investment By Board and Management in the Company This is not a Research report. 11 No Conflict of Interest Related to Outside Interests Board Compensation Mostly in Stock www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#12Alignment of Interests: Board of Directors Green Street Advisors ADVISORY & CONSULTING GROUP The center of governance in any corporation is its board of directors. Boards that make themselves accountable to shareholders via annual elections are much more likely to behave in a shareholder-friendly manner. Also, boards comprised of members who have no conflicts and/or have serious "skin in the game" are desirable. Board Rating Metrics Ideal Structure This is not a Research report. Non-Staggered Board Past Conduct Independent Board Investment By Board Proxy Access | | | | | 12 12 • Non-staggered, no ability to stagger without shareholder vote • No blemishes, fair compensation • 80% independent • Large investment, compensation taken in shares • Shareholders can use corporate proxy materials to nominate directors www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#13Alignment of Interests: Anti-Takeover Provisions Green Street Advisors ADVISORY & CONSULTING GROUP Anti-takeover provisions are often overlooked as they don't impact day-to-day business. However, these provisions have been used to destroy significant shareholder value when entrenched management teams have employed them to fend off attractive takeover offers. $100 $84 $80 $60 $40 $71 Macerich Destroying Value for Shareholders Discount to NAV Premium to NAV Price NAV Macerich was offered $95.50/sh. by Simon Property Group. MAC declined the offering and in the following 3 years their stock has declined by ~50% $43 $20 1/15 6/15 11/15 4/16 9/16 2/17 7/17 12/17 5/18 10/18 3/19 This is not a Research report. 13 www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#14Alignment of Interests: Related Party Transactions Green Street Advisors ADVISORY & CONSULTING GROUP In the past, companies have executed related party transactions that were viewed by investors to be disadvantageous to the REIT shareholders. In these cases, investors have punished the REIT shares and expressed distrust toward management. $3.50 Logistics Focused Industrial REIT Share Price Performance $3.30 $3.10 $2.90 $2.70 $2.50 $2.30 $2.10 $1.90 REIT was outperforming its peers until executing a related party transaction that was perceived to be detrimental to the REIT shareholder мм سد $1.70 $1.50 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Case Study Total Return Performance vs. Global Industrial vs. Asia Real Estate *Period of comparison begins 11/30/12 *Global industrial: Prologis & Goodman Group *Asia Real Estate: FTSE EPRA/NAREIT Asia Pacific This is not a Research report. +55% -32% +6% -26% +2%* -31% Relative Returns 14 www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#15Alignment of Interests: Executive Compensation Green Street Advisors ADVISORY & CONSULTING GROUP There are several ways to structure executive compensation packages. Some practices are seen as better than others, such as awarding compensation based on relative total return performance versus a well-defined peer set. Overall, the best practice is to use common sense and reward management when shareholders do well. Base Salary • Market-based Merit-based • Subjective The Four Components of Executive Compensation Short-Term Incentive Plan • Operating metrics • 1-yr total returns • Paid in cash Individual performance Long-Term Incentive Plan 3-yr total returns • Three-year vesting • . Paid in equity Equity Plus Option • $1 cash = $1.20 equity Three-year vesting Employee election The Do's and Dont's of Executive Compensation Bonus Bonus Performance Pay Poor All in Cash Average Mixed Cash + Shares This is not a Research report. Good Mostly Shares No link to Share Price (i.e., ROE) Highest Pay Relative to Peers Linked to Absolute Returns or FFO Growth Pay In-Line with Peers Linked to Relative Total Return w/ Appropriate Peers Lowest Pay Relative to Peers 15 www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#16Capital Allocation: Introduction Green Street Advisors ADVISORY & CONSULTING GROUP The biggest advantage to being a public REIT is access to the broadest array of capital choices. REITs that consistently outperform typically feature management teams with outstanding long-term track records on capital allocation. Tools for Funding Value-Accretive Activities Effects on Performance (High to Low) Preferred Equity Covertible Equity Secured Mortgage Debt Bonds Common Equity This is not a Research report. New Acquisitions Unsecured Expansion / Redevelopment Bonds Debt Reduction Share Repurchases / Equity Issuance Development Dividend Payout 16 Total Returns www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#17$75 $65 $55 $45 $35 $25 Capital Allocation: Public/Private Arbitrage Green Street Advisors ADVISORY & CONSULTING GROUP The ability of REITs to buy and sell their own shares means they can effectively capture a pricing arbitrage between values in the public and private real estate markets. REIT executives who listen to market signals are able to create permanent value for shareholders, while those who ignore them tend to destroy value. Know when to grow... ...and when to shrink Realty Income NAV & Observed Share Price Premium to NAV Discount to NAV INAV / Sh. ⚫Sh. Price $28 $24 Shares trading at premium to the underlying value of the $20 real estate feb-2014 jun-2014 This is not a Research report. oct-2014 feb-2015 jun-2015 oct-2015 feb-2016 NET ASSET VALUE jun-2016 oct-2016 feb-2017 jun-2017 oct-2017 feb-2018 jun-2018 17 $16 $12 Jan-14 Host NAV & Observed Share Price Premium to NAV Discount to NAV NAV / Sh. -Sh. Price May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Shares trading at discount to the underlying value of the real estate Sep-16 NET ASSET VALUE May-17 Sep-17 Jan-17 Jan-18 May-18 Sep-18 Jan-19 www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#18Capital Allocation: High-Quality Outperforms Green Street Advisors ADVISORY & CONSULTING GROUP The markets' underestimation of cap-ex for lower-quality assets has seen REITs that focus on higher-quality assets generating better total returns over the long-term. 10-yr Return vs. Property Sector Peers Better Returns Cap Rates and Returns: Higher Cap Rates = Lower Returns 15% Relative Lower Cap Rates = Better Returns O Major Sectors REITS 8% 0% -8% -15% -1.2% -0.8% -0.4% 0.0% 0.4% This is not a Research report. Trendline Relative Higher Cap Rates = Inferior Returns Higher Cap Rates Nominal Cap Rate vs. Property Sector Peers 0.8% 18 1.2% U.S. REIT 10-Yr Average Return vs. Sector -5.8% Peers (Sept '09- Sept 19') 5.4% Cap Rates Above the Average Cap Rates Below the Average www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#19Capital Allocation: Development Risk and Reward Green Street Advisors ADVISORY & CONSULTING GROUP Development is a risky business for REITs. Doing it well can create a lot of shareholder value. Unfortunately, U.S. REITs have historically made their biggest bets at the wrong time. REIT Development Pipeline vs CPPI $45b Total Dev. Pipeline (Major Sectors) Unlevered Property Values 11% 127 126 $40b 123 $35b $30b $25b $20b 56 56 99 $15b $10b $5b $0b 44 57 63 73 20 82 91 97 97 1-25 68 66 99 80 60 95 90 90 95 102 112 4Q00 4Q01 4Q02 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 2Q17 This is not a Research report. 19 10-Yr Annualized Returns 10% 10-Yr Returns & Size of Development Pipelines 10.5% 9% 8.6% 8% 7% 6% 6.4% 5% <3% of Assets 3% -6% of Assets >6% of Assets www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#20Capital Allocation: Strategic Focus Green Street Advisors ADVISORY & CONSULTING GROUP The REIT market consists largely of companies focused on a single property sector. Conventional wisdom indicates that it is easier to export sector expertise over multiple geographies than to benefit from geographical expertise over multiple property types. Diversified REITs, on average, trade at a discount to their more focused peers. Last Three Years Average Observed Premium/Discount to GAV Based on % of Primary Sector vs. Total Portfolio Observed GAV Premium/Discount Count This is not a Research report. 6 -7.0% -4.5% Less than 80% 80%-99% % of NOI from Primary Sector 100%: sector-focus REIT <100%: diversified REIT 20 20 67 -0.7% 100% www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#215-year Annualized Return Capital Allocation: Dividend Policy Green Street Advisors ADVISORY & CONSULTING GROUP Investors who view high yields as a virtue are likely to be disappointed as REITs with above-average dividend yields have generally underperformed their lower-yielding peers. 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% 16 1% This is not a Research report. 2% ㅁ D 08 D 3% Dividends vs. Returns GSA Universe 80 00 4% ☑ D D D Dividend Yield D 5% ㅁㅁ %9 21 24 7% ㅁ ㅁ %8 D 5-year Total Return Comparison 2.3% Above Avg. Dividend Yield 12.4% Below Avg. Dividend Yield www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#22Impact on EV Balance Sheet: Optimal Leverage Green Street Advisors ADVISORY & CONSULTING GROUP History shows that costs associated with financial distress begin to show up even at leverage ratios below 40%, and that they become large at higher leverage ratios. Highly levered REITs are also in no position to play offence during times of distress. These two factors cause a REIT's weighted average cost of capital to increase once leverage exceeds roughly 30%. WACC The Effect of Leverage on Weighted Average Cost of Capital 7.0% 6.5% Cost of Financial Distress Cost of Missed Opportunities 6.0% 5.5% 0% 10% 20% 30% 40% Leverage Ratio 50% 60% 70% 80% And Corresponding Impact on Enterprise Value 0% 10% 20% 30% 40% 50% 60% 70% 80% 0% This is not a Research report. ■Cost of Financial Distress Cost of Missed Opportunities Leverage Ratio 22 22 -5% -10% -15% www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#23Balance Sheet: Leverage and Total Returns Green Street Advisors ADVISORY & CONSULTING GROUP The last two bull markets could not have presented a more benign backdrop for commercial property owners. Amidst that environment, balance sheet leverage should have turbo-charged returns, but evidence of such a boost is non-existent. In fact, REITs with lower leverage outperformed over both bull market time periods. Annualized Returns vs. Peers 15% 10% 5% 0% -5% -10% D 1997 to 2007 ◇ All REITs D D D D D 2012 to 2019 ◇ All REITs 00 ㅁ ㅁ ㅁ ㅁ ㅁ ☐ ㅁㅁ ㅁㅁ D ㅁ ㅁ ㅁ D ㅁ 0 0 -15% 25% 35% 45% 55% 65% 25% 35% Net Leverage Ratio This is not a Research report. 23 23 D ㅁ ㅁ ㅁ ㅁ 45% Net Leverage Ratio 55% 65% www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#24Balance Sheet: Leverage and Total Returns Green Street Advisors ADVISORY & CONSULTING GROUP Higher-levered companies saw 70%-90% of their equity value evaporate from '07-'09 and many of these companies' current stock prices are still well below pre-recession highs. Leverage and Total Return Performance Peak-to-Trough ('07-'09) 0% -10% -20% -30% Total Returns (Annualized) -40% -50% -60% -70% -80% -90% 00 ●Green Street Universe O O -100% 20% 30% 40% 50% This is not a Research report. 00 ●REIT Avg. 0 60% 70% 80% 90% 100% Leverage 24 24 www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#25Overhead: Operational Efficiency Green Street Advisors ADVISORY & CONSULTING GROUP A dollar of cash flow devoted to G&A is worth the same as a dollar of cash flow at the property level, and efficiency differences between the REITs can have a profound impact on share valuations. G&A differentials can easily warrant large percentage differences in share prices. - Firm G&A ($) ÷ Value of Assets Assessing G&A to +/- Firm Warranted Share Price G&A Spread Warranted Firm G&A Load Firm G&A = Load (%) G&A Spread Sector G&A Load A firm's G&A spend is assessed relative to the current value of their assets G&A Includes: Corporate Wages & Benefits Travel Marketing Bad Debts - Office Supplies/Equipment ― - · Professional Fees Communications & Data Processing G&A Excludes: - Property Expenses Cap-Ex This is not a Research report. The G&A% is compared to the sector average to determine the +/- adjustment made to the firm's price G&A Load by Property Type 67 61 (bps) 55 56 55 51 39 25 Mall Hotel Office Strip Center Net Lease Industrial Apartment 25 25 ÷ All REIT Nom. Cap Rate Price Adjustment An average nominal all REIT Cap Rate (6.7%) is applied to the G&A spread to calculate warranted price adjustment Current Warranted Share Price Adjustment Range +3.3% -5.8% Federal Realty Equity Commonwealth www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#26Management Targets Green Street Advisors ADVISORY & CONSULTING GROUP Historical U.S. REIT performance suggests every public real estate company management team should target the following best practices to maximize shareholder value: Capital Allocation: Develop a capital allocation strategy that maximizes the value of arbitrage opportunities available solely to public real estate companies Management Structure: An internal structure avoids potential conflict of interest Development: Ensure development makes sence through various points of the cycle Corporate Governance / Executive Comp: Employ a shareholder-friendly governance structure and tie executive comp to how well the company performs against global peers Operations/G&A: Operate properties effectively and efficiently This is not a Research report. Leverage: Establish a strong balance sheet, and a target a net leverage ratio of ~30% 26 www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#27Green Street's Disclosure Information Green Street Advisors ADVISORY & CONSULTING GROUP This is not a research report. The information contained in this presentation is intended only for the person or entity to whom it was addressed as it contains confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you have received this in error, please notify Green Street immediately by returning it to the sender and delete this copy from your system. 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This presentation may not be reproduced, re-distributed, sold, lent, licensed or otherwise transferred without the prior consent of Green Street. All other rights with respect to this presentation are reserved by Green Street. This is not a Research report. 27 www.GreenStreetAdvisors.com ©2019, Green Street Advisors, LLC Use of this report is subject to the Terms of Use listed at the end of the report#28VEST^ Vesta Day 2019 CORPORACIÓN INMOBILIARIA VESTA S.A. B. DE C.V. VESTA VESTA#29Safe Harbor VESTA This presentation has been prepared by Corporación Inmobiliaria Vesta, S.A.B. de C.V. ("Vesta" or the "Company") solely for use at this presentation. This presentation was prepared solely for informational purposes and does not constitute, and is not to be construed as, an offer or solicitation of an offer to subscribe for or purchase or sell any securities. This presentation is confidential to the recipient. 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Neither the Company nor any of its affiliates, advisers or representatives or any of their respective affiliates, advisers or representatives, accepts any responsibility whatsoever for any loss or damage arising from any information presented or contained in this presentation. The information presented or contained in this presentation is current as of the date hereof and is subject to change without notice and its accuracy is not guaranteed. Neither the Company nor any of its affiliates, advisers or representatives make any undertaking to update any such information subsequent to the date hereof. This presentation should not be construed as legal, tax, investment or other advice. Certain data in this presentation was obtained from various external data sources, and the Company has not verified such data with independent sources. Certain data was also based on the Company's estimates. Accordingly, the Company makes no representations as to the accuracy or completeness of that data or the Company's estimates, and such data and estimates involve risks and uncertainties and are subject to change based on various factors. 2#30Mexico: A Strong Foundation Javier Mancera Board member & Partner at De la Calle, Madrazo and Mancera VESTɅ#31Mexico's Economic Outlook June 2019 mm de la calle madrazo mancera#328 6 + 2 Mexico's GDP Growth Year on Year Percentage Change Seasonally adjusted de la calle madrazo mancera 0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2006 -2 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -4 -6 -8 Source: INEGI 5#33115 15 110 105 100 95 90 85 88 80 75 15 Industrial Production Series and cycle-trend Index, 2013-100 -Total -Mining Construction - Manufacturing industries 70 jajo ja jojajojajojajojajo jajojajojajojajojajojajoj Source: INEGI 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 March 6#34Employment in the formal sector (millions) 22 22 20 18 16 16 14 12 Labor Force Employment in the formal sector, in millions (bars) Total payroll, real terms, index base 100 = January 2002 (line) 175 155 135 115 115 Total payroll 10 95 2008 jmmj sn jmmj snjmmj sn jmmj sn jmmj sn jmmj sn jmmj sn jmmj sn jmj sn jmmj sn jmmj sn jmmj sn jmmj snjmmj sn jmmj snjmmj sn jmmj snjm 2002 2003 2004 2005 2006 2007 2009 2010 2012 2013 2014 2015 2016 2017 2011 2018 2019 April Source: INEGI and STPS 7#35Gross Fixed Investment Series Index de la calle madrazo mancera Total GFI Machinery and Equipment 130 125 120 115 110 105 100 95 90 90 jmm js nj mm j S nj mm jsnjm mj n jmm js n jm mjs nj 2013 2014 2015 2016 2017 2018 2019 February#36USD million Mexico's Exports Total Value In USD million Total exports Manufacturing Exports to the US 45,000 40,000 35,000 30,000 25,000 20,000 jfmamj jason dj fmamj jason dj fmamjjasondj fmamj jason dj fmamj jason dj fmamjjasondjfma 2013 2014 2015 2016 2017 2018 2019 Source: INEGI 9 April de la calle madrazo mancera#37120 110 100 90 80 70 60 60 Consumer Confidence Index de la calle madrazo mancera jajojajojajo ja jo ja jo jajojajo ja jo ja joj ajo ja jo ja 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019#389- N 4 6 Average Annual Growth by State Percentage 2011-2018 Average annual growth rate by State for the period 2011-2018 Baja California Sur Aguascalientes Quintana Roo Querétaro Guanajuato San Luis Potosí Chihuahua Jalisco Sonora Yucatán Hidalgo Colima Baja California México Michoacán Nuevo León Puebla CDMX Sinaloa Coahuila Nayarit National Durango Morelos Guerrero Veracruz Oaxaca Tamaulipas Zacatecas Tlaxcala Chiapas Tabasco Campeche cmm ●de la calle madrazo mancera#39Mexico is more important than other US trading partner 2011-2018 Annual trade in goods with foreign countries EXPORTS -NET TRADE BALANCE de la calle madrazo mancera Source: Census Bureau, figures in millions. IMPORTS Mexico $300 200 100 -100 -200 -300 -400 -500 China 1985 1995 2005 2015 1985 1995 2005 2015 $300 200 100 -100 -200 -300 Canada Japan 1985 1995 2005 2015 1985 1995 2005 2015#40Mexico has become considerably more sophisticated... de la calle madrazo mancera Digital Computer CPU with Some of Storage/ Input/Outpu 4.7% Transmit-receive apparatus for radio, Telegraphic Colour Television Apparatus, Receivers/ Nes Medium Monitors/ Sized Cars Projectors 3.9% 3.1% Parts for Spark 840734 841590 6.5% Motor Vehicle Parts Nes 1.8% Parts and Accessories of Bodies Nes for Motor Vehicle 870840 1.3% 1.0% Exports 2017 US$ 418 B 14.8x TV, etc. 3.0% 0.74% 0.92% 848180 854380 Ignition/Other Wiring Sets for Vehicles/ Aircraft/Ship Monolithic Integrated 852721 1.7% Electrical Control and Distribution Book Parts and Engines. Diesel Combined Refrigerator 851220 Exports 1982 Exports 1993 US$ 66.9 B 2.4x Petroleum Oils, Oils from Bituminous Minerals, Crude 4.7% ICT US$ 28.3 B Crude petroleum and oxobtained from bituminous materias 45.50% ICT 600 10.84% Travel and tourism 9.23% from 271000 74 Needles 901890 0.70% 902920 0.54% Small Sized... 870390 Drive... Steering.. 0.59% 0.58% 2.2% Large Sized.. Brake System Parts Except... Micro.. Medium Diesel Engine Cars Shock... Spark Ignition Engine Trucks Weighing < 5 Tonnes Diesel Powered Trucks 1.0% 4.2% Beer Made from Melt 0.98% Diesel Powered Road Tractors for Semi-Trailers Truck Tractors 1.5% 671039 0.80% Diesel Aircraft Farts Gold in Unwrought.... 710691 Avocados 070200 9.81% Parts of... 940510 1.0% 0.72% Source: Hausmann Atlas of Economic Complexity; The Observatory of Economic Complexity 1.7% 13#41Digital Computer CPU with Some of Storage/ Input/Outpu 4.7% ...And much more complex than other Latin American countries... Exports Mexico 2017 US$ 418 B Telegraphic Colour Television Apparatus, Receivers Medium Nes Monitors Sized Cars Projectors 3.9% 3.1% Parts for 840734 Spark 841590 6.5% Motor Vehicle Parts Nes 1.8% Parts and Accessories of Bodies Nes for Motor Vehicle 87084.0 1.3% 1.0% Source: The Observatory of Economic Complexity de la calle madrazo mancera Transmit-receive apparatus for radio, TV, etc. 3.0% 0.74% 0.92% 845100 854380 Ignition/Other Wiring Sets for vehicles Aircraft/Ship Monolithic Integrated 54% Small Sized... 870390 Drive.. Steering 0.59% 0.58% 2.2% Large Sized Brake System Parts Except Micro.. Medium Diesel Engine Cars Stock Semi-Trailers Truck Tractors 852721 Spark Ignition Engine Trucks Diesel Powered Trucks Road Tractors for 1.7% Parts and Engines Diesel Blectrical Costmi and Distribution Boards, tkv Combined Refrigerator. 851230 Weighing <5 Tonnes 1.0% 1.5% Diesel Powered 4.2% 0.80% Diesel 871039 Aircraft Parts Exports Brazil 2017 Iron Ore, Concentrate, Not Iron Pyrites,Unagglomerate 7.9% US$ 219 B Petroleum Oils, Oils from Bituminous Minerals, Crude Medium Sized Cars Fixed Wing Aircraft Semi-Finished Bus Iran or 1.8% 1.4% 1.6% Small Sized Cars Petroleum Oils, Oils from Bituminous Minerals, Crude 4.7% 271000 740311 Needics... 0.70% 901890 902920 Avocados 070200 0.72% Beer Made from Malt 0.98% Gold in Unwrought 710691 Parts of... 940510 1.0% 1.7% 7.9% 090111 Maize Except Seed Soya... Raw 12% Sugar,... 4.1% Say-BO-Cale and Other Solid Residues 2.3% 200919 Corn Fowl Outs & 020230 Offal Desc Except livers Fo 2.1% Swin Cits 2.2% 2.1% 340130 128710 Chem Wood Pula, Socia Sulphate-Confe Bleached 2.9% 2.0% Gold, Seni- Manufactured Otbu Not Ferra Alminim 150 1.2% 10431 Exports Chile 2017 US$ 71.9 B Copper Ores and Concentrates 24% Copper Cathodes and Sections of Cathodes Unwrought Exports Venezuela 2017 US$ 28.3 B Petroleum Oils, Oils from Bituminous Minerals, Crude 14 21% 80%#42Digital Computer CPU with Some of Storage/ Input/Outpu 4.7% Transmit-receive apparatus for radio, TV, etc. ...As complex as Spain and a slightly greater exporter Exports Mexico 2017 US$ 418 B Telegraphic Colour Television Apparatus, Nes Receivers/ Monitors/ Projectors 3.9% 3.1% Parts for Spark 840734 841590 Medium Sized Cars 6.5% 1.8% 870840 Exports Spain 2017 US$ 297 B Small Diesel Engine Cars Diesel Powered Trucks Weighing.. 1.6% 1.8% Motor Vehicle Parts Nes Medium Diesel Engine Cars 4.2% Medium Sized Cars Fixed Wing... Small Sized Cars 1.6% 1.0% 1.3% 1.0% Micro Cars 3.4% Parts and Accessories of Bodies Nes for Motor Vehicle 3.0% Ignition/other Wiring Sets for Vehicles! Aircraft/Ship 0.74% 0.92% BARTHO 854388 Homeúthic integrated 1.7% Electrical Control and Distribution Boards, Combined Refrigerator 0.54% Small Sized... 870390 Drive Steering Motor Vehicle Parts and... 0.59% 01.58% 2.2% Large Sized Brake System LI% Parts Except... Micro.. Medium Diesel Engine Cars Shack 852721 Spark Ignition Diesel Powered Road Tractors for Semi-Trailers Truck Tractors Engines Parts and.. Engines 851229 Petroleum Oils, Oils from Bituminous Minerals, Crude 271000 740391 4.7% Needles... 901890 0.70% 502320 Avocados 070200 Parts of... 940510 0.72% Source: The Observatory of Economic Complexity 1.7% Engine Trucks Weighing <5 Tonnes Trucks... 1.0% 070900 Oils Petroleum, Bituminous, Distillates, Except Crude 3.6% 260300 401110 Swine Outs... Unglazed... 1.5% 850330 Grape H Wines Nes Fortified Olive Oil... 4.2% Diesel Powered 0.80% Diesel. 871839 Aircraft Parts Beer Made from Bait 0.98% Gold in Unwrought 710691 1.0% Medicaments Nes, 382390 in Dosage 330300 2.3% Blood, Tows 1.1 %/ 15 de la calle madrazo mancera#43Issue Economy AMLO's first 100 days de la calle madrazo Mancera AMLO'S MESSAGE 4% growth average in the administration The peso has gained 4%, inflation is at 4.4% and consumer confidence at 120 points PUNDITS Need to raise investment to 25%/GDP to reach growth goal Deceleration in economic indicators (CGI, GFI, exports) • Increase in public investment Energy • "Rescue" Pemex and CFE: fight against corruption and increase • Restart oil rounds and electric tenders revenues • Focus on exploration and production • Need for new oil fields (including fracking) Labor • Infrastructure . Investment in electricity generation. More investment budget in Pemex (46%) and in CFE (64%) Increase oil production without fracking. Union freedom Minimum wage increase 220,628 new jobs Do not start projects that can't be finished during the administration: refinery, Mayan train, Transisthmian corridor, Santa Lucia airport Cancellation of the new Mexico City International Airport (NAICM) Investment in the Southeast Investment in transmission Change of union leaderships Minimum wage increase Minor annual percentage change in job creation since April 2014 Potential cancellation of the Dos Bocas refinery Doubts about Saint Lucia Airport Cancellation cost of NAICM Investment in the Southeast Social Policy • Pensions for the elderly Jóvenes Construyendo el Futuro Agriculture • Guaranteed prices Segalmex Security and rule of law • Creation of the National Guard • • Guarantee non-clientelist use of social programs • Price distortion Militarization of public security? 16#44IEEPA tariffs on Mexican imports May 30: White House announced the imposition of tariffs on Mexican imports • ● 5% on June 10 10% on July 1, 2019 • 15% on August 1 • 20% on September 1 • e de la calle madrazo mancera 25% on October 1 President Trump invoked the International Emergency Economic Powers Act of 1977 (IEEPA) which allows the president to regulate commerce after declaring national economic emergency Mechanism to pressure Mexico on immigration issues On the same day, day the White House and USTR sent the U.S. Congress the draft statement of administrative action on the U.S.-Mexico-Canada Agreement (USMCA) 30-day period before the introduction of the implementing legislation#45Mexico: A Strong Foundation Guillermo Díaz Chief Investment Officer VESTɅ#46Understanding Mexico's Structural Drivers Understanding Mexico's structural drivers is key to understanding its economy and Real Estate markets. There are three structural drivers: Geography Demographics Strategy By its nature, these drivers transcend temporary crises and market fluctuations Therefore, they create formidable forces that influence markets in logical directions. 18 8#47Mexico is a Country... VESTA 19#48... Conveniently located at the center of the world... VESTA 20#49VESTA .Next to the world's largest economy... 21 22#50...With a distinct competitive advantage... VESTA 1. Logistics to transport a 40' container 1. Shanghai - Chicago 2. Queretaro - Chicago ' 5 to 6 weeks US$ 7,200 3 to 5 days US$ 2,800 22 22#51VESTɅ ..an export platform for the world... 23#52Groups by Age ...and a demographic bonus to drive economic growth 85 y más 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 0-4 % of Total Population 2015 6 5 4 3 2 1 0 1 2 3 4 5 6 Source: INEGI, CONAPO * Total Population 2015 119,938,473 2018 124,587,124 VESTA 85 y más 80-84 53% Of population under 29 new households will be formed over the next 25 years Strong, sustained demand for: 75-79 70-74 27 M 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 0-4 Housing Durable goods Services (health, education etc.) Commerce, logistics 1.3 M new jobs per year over the next 25 years 24 24#53Economic-Demographic Driver Dynamics DRIVERS VESTA ECONOMIC IMPACT REAL ESTATE OPPORTUNITIES REFORMS INCREASE COMPETITIVENESS North America GEOGRAPHIC DRIVER INDUSTRIAL DEMOGRAPHIC DRIVER SYSTEM HR SUPPLY TALENT, LABOR CONSUMPTION POTENTIAL ASPIRATIONS ACCELERATE GROWTH INDUSTRIAL GROWTH MANUFACTURING GROWTH OFFICE GROWTH JOBS CORPORATE & FINANCIAL GROWTH CONSUMPTION HOTEL GROWTH HOUSING GROWTH RETAIL GROWTH 25 25#54Economic-Demographic Driver Dynamics VESTA DRIVERS ECONOMIC IMPACT REAL ESTATE OPPORTUNITIES REFORMS INCREASE COMPETITIVENESS ACCELERATE GROWTH INDUSTRIAL GROWTH MANUFACTURING OFFICE GROWTH North America GROWTH GEOGRAPHIC DRIVER INDUSTRIAL SYSTEM JOBS CORPORATE & FINANCIAL GROWTH DEMOGRAPHIC DRIVER HR SUPPLY TALENT, LABOR CONSUMPTION POTENTIAL ASPIRATIONS CONSUMPTION HOTEL GROWTH HOUSING GROWTH RETAIL GROWTH 26#55Over 25 Years, a New Industrial System Evolved in North America GDP North ROW America 35% 28% Sources: World Bank, INEGI China EU 15% 22% Industrial GDP North America 19% ROW 43% China 20% EU 18% The system became more important than the treaty from which it originated... ...and will continue to flourish. VESTA Exports ROW North America 15% 40% EU 34% China 11% Car Production ROW 34% North America 20% EU 18% China 28% 27 22#56Industrial Mexico Became the System's Key Component Mexico was transformed by NAFTA... VEST^ 600,000 500,000 400,000 300,000 200,000 100,000 Massive Foreign Investment... 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 ...and sustained economic growth... 5.3% 5.0% 4.3% 3.0% 3.1% 2.7% 0.1% 1.4% -0.6% 1999 2000 2001 Sources: World Bank, INEGI 1.4% 4.7% 5.1% 4.0% 4.0% 1.4% 2.1% 2.5% 2.3 % 2.1% 2.0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ...resulted in explosive export growth 500 400 300 200 100 From Mexico to NAFTA From Mexico to ROW US$ Billion 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 ...with high interdependence Composition of a car assembled in Mexico EU 4.70% Mexico 57.1%% USA 35% Canada 1.80% ...and became key to the region's success Asia 1.40% 28#57Mexico Became a World-Class Manufacturing Hub VESTA 4 Auto exports 100 3 Computer Export 80 6 Auto Parts Manufacturing Metal 5 Manufacturing exports 88852222° Mexico's Cost Competitiveness Digital Aerospace ■Mexico Canada Manufacturing R&D United States Germany Japan 8 Medical Devices Exports ...creating one of the world's most productive industrial systems 21 auto OEM's/ 28 plants Growing aerospace hub: 330 companies and 18 R&D centers 90 out of 100 important auto- parts companies worldwide operate in Mexico Leading Medical Devices Exporter: 641 exporting companies, 12 states Sources: ProMéxico, WTO, INA, FEMIA, World Bank, KPMG 29#58Mexican Millennials: A New Generation of Winners VEST^ A new generation with a new mind frame Born in an open economy Connected to the world Able to believe in being the best بلس Absorbing technology • Sound education . . Eagerness to learn Highly successful strategic educational projects Aerospace University in Queretaro IPN Mechatronics branch in Silao Mexican Labor: World- class productivity Not cheap labor, but highly productive labor "If we could only replicate the quality of the Silao plant here" 30#59Mexico: One of the Best Manufacturing Platforms in the World Newer industrial plants Advanced technology VEST^ THE world-class productivity RESULT Mexican plants named the best in their company systems CONSEQUENCE Production is allocated to the most productive plants: Mexican plants 31#60The Outlook: Industrial Mexico will Continue to Succeed Mexico is a crucial, efficient platform of global manufacturer's facilities... % Of world production from Mexico VESTA ...and continues to be the optimal location for export to the US Cost Index 100% 90% 1% ΤΟΥΟΤΑ 80% 5% 70% HONDA 60% 6% VOLKSWAGEN 50% 8% 40% FORD 12% 30% G.M. FIAT 20% 13% 10% MAZDA 15% 0% NISSAN 20% Labor 0% 5% 10% 15% 20% Land Distrib Electricity Gas Mexico United States Canada Germany Japan China Global corporations are heavily invested in México and developed deep supply chains GM Ford NISSAN FCA M FIAT CHRYSLER AUTOMOBI BOMBARDIER TOYOTA W Last 5 Yrs $6.1 B $3.8 $2.0 $1.7 $1.3 $1.0 $0.5 $1 B Sources: OICA AMIA, Deloitte Global Manufacturing Competitiveness Index, KPMG Competitive Alternatives 32 32#61Global Trends Favor Mexico VESTA US-China Trade War Global Supply Chain Disruption Risks Constraints imposed on China make Mexico more attractive US depends on Mexico to remain competitive Has the time for the North American Alliance arrived? Supply chains sensitive to multiple disruption risks Geographically integrated supply chains reduce disruption risks Reshoring Trend Increase in China's labor cost make it less competitive By comparison, Mexico's productivity make it a more attractive alternative 33#62Strong, Globally Diversified Tenant Base Attractive Relative Yield VESTA Many of the world's top OEMs established plants and developed deep supply chains in Mexico Dynamic industrial clusters have grown across the country, housed by world-class industrial parks US-style leases are the standard in Mexican industrial real estate • • • Long-term, non-cancellable US Dollar denominated Guaranteed by parent company The result is low-risk leases backed by valuable properties, yielding very attractive risk-adjusted returns 34#63Portfolio Performance: Diego Berho Chief Portfolio Officer BRP VESTɅ#64VESTA Portfolio Snapshot TIJUANA CD. JUÁREZ LOS MOCHIS Operating buildings Buildings under development Total Buildings Operating portfolio (sf) Development portfolio (sf) Total GLA (sf) LAGO DE MORENO GUANAJUATO AGUASCALIENTES SAN LUIS POTOSÍ CANCÚN VERACRUZ TLAXCALA TOLUCA PUEBLA CANCÚN VEST^ North Region 66 Bajio Region 87 Central Region Total 34 187 5 2 0 7 71 89 34 194 8,212,054 639,874 15,081,603 309,285 7,122,733 30,416,390 0 949,159 8,851,928 15,390,888 7,122,733 31,365,549 28% 49% 22% 100% 36#65Resilient Revenue Income Diversified portfolio (% of Occupied GLA, as of March 31, 2019) Recreational 23.4% 27.0% 49.6% ■ North ■ Bajio ■Central Logistics 28% Energy4.4% Vehicles 5.6% Medical Devices (1) As of 1Q19 1.9% Manufacturing 71% Paper 0.1% Plastics4.1% Other 16.1% Automotive 31.6% Aerospace 8.4% vestɅ Long-term and staggered lease maturity profile (1) (% of Occupied GLA, as of March 31, 2019) 53% 16% 13% 9% 8% 1% 2019 2020 2021 2022 2023 >2024 84.5% of our revenues are denominated in USD 5.3 yrs weighted average lease term 37#66INDEX 110 108 106 Portfolio Operational Performance Renewal vs Previous Lease Rate VESTA Mexico 104 2.3% 1.8% 102 100 98 96 96 94 92 22 90 90 4.7% -4.6% 3% vestɅ Over 92% retention rate average increase 7.5% 2.5% 88 2015 2016 2017 2018 2019 2020 38 38#67Portfolio Operational Performance VESTA 5.10 97.2% 96.8% 95.3% 5.03 94.2% 93.8% 4.98 4.66 4.61 4.59 4Q15 4Q16 4Q17 4Q18 1Q19 IUS rent/leased sf/year Stabilized Occupancy % 4.25 39#68Vesta Parks as Core Development Competence vestɅ PARK LAGOESTE 552 K sf GLA vestɅ PARK TIJUANA III 470 K sf GLA vestɅ PARK AGUASCALIENTES 5.6 million sf GLA DOUKI SEISAN PARK 2.1 million sf GLA vestɅ PARK TOLUCA I 1.0 million sf GLA vestɅ PARK TOLUCA II 1.5 million sf GLA vestɅ PARK EL COECILLO 1.4 million sf GLA vestɅ PARK JUÁREZ SUR 69 K sf GLA VESTA Number of Vesta Parks Average GLA per VP Land area Number of buildings Number of tenants vestɅ PARK GUANAJUATO 2.4 million sf GLA 15 2.5 M sf 100-200 acres VESTA PARK SAN LUIS POTOSÍ 368 K sf GLA 5 to 10 8 to 12 QUERETARO AEROSPACE PARK 2.18 million sf GLA vestɅ PARK QUERÉTARO 4.5 million sf GLA vestɅ PARK SAN MIGUEL DE ALLENDE 1.0 million sf GLA vestɅ PARK TLAXCALA 667 K sf GLA VESTɅ PARK PUEBLA 1.0 million sf GLA 40#69VESTɅ#70VESTɅ Market and Commercial Initiatives: Francisco Estrada Senior VP New Business Bajio BRP#71Why Bajio and the central regions? Understanding the Market Mexicali Tijuana (6.2) (2.3) Nogales (1.2) Juarez (6.0) Aguascalientes (22) Guanajuato (5.7) San Luis Potosi (3.2) Queretaro (5.5) Guadalajara (4.0) Toluca Mexico City (8.2) (3.2) Puebla (2.6) Source: JLL, LENS analysis, Noun Project Chihuahua (2.2) Nuevo Laredo (1.0) Reynosa (3.1) Saltillo (4.5) Monterrey (10.8) Matamoros (1.7) VESTA Vesta's market Class A GLA market size 43 43#72Queretaro Aerospace Park Case Study Specialized Sector Park Tenants VESTɅ Vesta grows with its clients- repeat business through subsidiaries: Year Company SF 2007 Bombardier (Fuselages / Structures) 95,799 SAFRAN 2008 Bombardier (Electrical Harnesses) 105,486 Year Company SF 2008 Meggit (Braking Systems) 243,264 2009 Messier Dowty (Landing gears) 281,412 2010 AE Petsche (3PL) 52,743 2009 Snecma México (Engine Components) 163,041 2010 Bombardier (Structures / Composites) 184,063 2011 Snecma America (Engines MRO) 172,653 2011 PCC (Structures) 47,361 Sames (Engine components 2013 96,767 2012 Bombardier (Stabilizer) 228,195 remanufacturing) 2015 Duqueine (Composites) 37,458 2016 Snecma Composites 334,122 Total 994,370 2018 Snecma México (Engine Components) 69,965 2019 Snecma America (Engines MRO) 37,673 Total 1,155,633 BOMBARDIER H DUQUEINE INVENTORY SAFRAN BOMBARDIER BOMBARDIER BOMBARDIER RE. Peische Co. BOMBARDIER CALLE DE RODAJE GANAL PISTA SAFRAN CALLE DE RODAJE PISTA UNWAY CARRETERA QUERETARO-TEQUISQUIAPAN MEGGITT SAFRAN SAFRAN SAFRAN SAFRAN GALLE DE DE RODAJE . PISTA QUERETARO AEROSPACE PARK 44 44#73Empty#74BOMBARDIER QUERETARO AEROSPACE PARK First Aerospace Cluster In Mexico VESTA Estrada +52 (475 festrada.vesta.com.mx PARQUE AEROESPACIAL DE QUERETARO,#75Empty#76Aerostructive#77Empty#78Empty#79VESTɅ Market and Commercial Initiatives: Adriana Eguía VP New Business Tijuana BRP#80Why Tijuana and border regions? Vesta Mexico Understanding the market CALI BAJA BI-NATIONAL MEGA-REGION Tijuana Mexicali THE BORDERPLEX ALLIANCE Ensenada Ciudad Juárez Nogales Hermosillo Chihuahua Piedras Negras VESTA Corredores carreteros +++ Vías férreas ● Puertos principales ● Puertos regionales Terminales intermodales interiores Aeropuertos de carga Puertos fronterizos principales Guaymas Topolobampo Nuevo Laredo Torreón Matamoros Monterrey Culiacán La Paz Gomez Palacio Durango Cd. Victoria Mazatlán Zaca cas SLP Altamira Tampico Aguascalientes Tepic Querétaro Tuxpan Partica Guadalajara Colima Morelia Manzanillo Jalapa Veracruz Coatzacoalcos Cuernavaca Lázaro Cárdenas Chilpancingo Оахаса Acapulco SalinaCruz Progreso Mérida Cancún Campeche Chetumal Tuxtla Gutiérrez Ciudad Hidalgo FUENTE: José San Martin Romero, "El desarrollo de cadenas de valor a través de los puertos maritimos y fronterizos y la red terrestre", SCT, mayo de 2011, p. 70. Disponible en: es.slideshare.net/CICMoficial/presentacion-jsmr 52 52#81Vesta Park Lagoeste success case Tijuana, Mexico Vesta Park Lagoeste VEST^ Vesta's strategic vision focused on client expansion and repeat business. AG INDUSTRIES Filtration Group Space considered for AG INDUSTRIES expansión - MAXON Year Company SF Medical device potential 2018 AG Industries Started their medical device operation with a 3 year vision plan 84,073 Jacuzzi Jacuzzi וווווווווווווני VESTA PARK LAGOESTE • 76 companies from OEMs to smaller suppliers • . 42,000 specialized Jobs Largest concentration of MD companies in Mexico. 70% is US Investment Supply 75% of hospitals and medical centers in the US 53 33#82Empty#83Empty#84Empty#8500 00#86Empty#87FINANCIAL POFILE Juan Sottil CFO VESTɅ VESTA VESTA#88VESTA Portfolio Sale • Deal Description • Sale of 8 buildings: 2 in Toluca and 6 in Queretaro 1.6 M sf • Typical Vesta portfolio that we can replicate • 7.1% Cap rate • Buyer was a Canadian pension fund • Price paid was $109 M-20% above NAV · • Direct deal, no broker involved in transaction Buyer hired Vesta as property manager for the portfolio acquired 59 59#89Attractive Risk Adjusted Returns VEST^ Industrial real estate in Mexico is priced to deliver an absolute return well above returns available in US or European industrial real estate. Projected total returns in Mexico appear in-line with the US and Europe after adjusting for sovereign risk. However, Mexico industrial assets that collect rent in US dollars avoid significant currency risk leading to an outsized risk-adjusted return profile. Private Market - Local Currency Returns Economic Estimated 20-'23 Long-Term Risk-Adjusted Cap Rate Inflation NOI Growth NOI Growth Expected Return Cap Ex Sector Cap Rate Reserve Mexico Industrial 7.5% 12% 7.0% 4.2% 3.0% 2.0% 8.9 US Industrial 4.9% 15% 4.2% 2.0% 4.2% 1.0% 5.9 European Industrial 4.3% 18% 3.9% 2.0% 3.1% 1.7% 5.8 Public Market - Local Currency Returns Private- Mkt Sector Return REIT GAV Prem G&A Load External Growth Public Return Mexico Industrial 8.9% -20.0% -0.6% +0.8% 11.4% 10 Year Return Premium to Govt Bond 10 Yr Govt Bonds (bps) 349 bps 7.9% US Industrial 5.9% 10.4% -0.4% 5.1% 2.5% 260 bps European Industrial 5.8% 0.3% -0.6% +0.4% 5.6% 1.1% 450 bps 10 Yr Bond Returns Benefit of US Dollar Denominated Leases Peso vs. USD Denominated Premium to Bond Return Mexico Industrial Adj. Return Premium vs. US & Europe 7.91% 4.50% 349 bps Peso Denominated Bonds 690 bps 690 bps 450 bps 260 bps USD Denominated Bonds Peso Denominated Bonds USD Denominated Bonds USD Denominated Mexico Industrial US Industrial European Industrial (1) Source: Greenstreet Advisors 60 60#90Attractive discounts... Higher book net asset value vs share market price 12.2% Average Discount/Premium 9.8% VESTA Amounts in US$ M Properties 1,847 -0.6% Land 125 2012 2013 2014 2015 2016 2017 2018 1Q19 Cash 60 Debt Cash Collateral -12.7% 4 Net Recoverable Taxes 10 33.6% -32.9% -35.5% -39.2% Assets 2,046 NAV vs share market price Remaining CAPEX (45) Debt (700) Tenant Deposit (14) 1.82 1.75 1.99 Liabilities 1.75 (759) 1.68 1.81 1.74 Net Asset Value 1,287 1.50 2012 2013 2014 2.16 2.11 2.03 1.53 1.21 1.23 1.45 1.36 2015 2016 2017 2018 1Q19 NAV Per Share (US$) Market Price Per Share (US$) ...Management's first priority is to create shareholder value by closing the current NAV discount at which the company currently trades in the public market through accretive asset sales, share repurchases, and continued value creating development 61#91Vesta: The best vehicle for exposure in Mexico Industrial Real Estate Alignment of interest High governance standards Operation / G&A Capital allocation Development risk Balance Sheet management Vesta is the only publicly listed real estate industrial company in Mexico without a fees paid to an external Advisor/Sponsor High governance standards since inception 80% independent members 100% committees chaired by independent Board members 86.2% Public Float 1 Share 1 Vote G&A/Property value ratio of 0.8% at par with our peers 0.9% despite having a development cost structure 11% Cap rate of development 10% Cap rate of acquisitions 10.3% Cap rate on Share buy backs 8% Cap rate for NAV 7.1% Cap rate for portfolio sale 10% approximately of GLA LTV 35% 5.5x Net Debt/EBITDA 6.2 years weighted average maturity 4.8% weighted average interest rate (fixed) BBB-Rating by Fitch Ratings VEST^ (1) As of 1Q19 62 62#92We continue to drive revenue and occupancy (US$ in millions) 2014-1Q19 18.1% CARG vestɅ 97.2% 96.8% 95.3% 94.2% 93.8% 138 133 92.4% 91 79 69 109 2014 2015 2016 2017 2018 1Q19 LTM Revenue Stabilized portfolio occupancy 63 63#93while expanding EBITDA margins 82.8% 84.0% VESTA 85.0% 85.1% 84.0% 0.20 83.7% 0.19 0.12 0.11 0.11 0.15 2014 2015 2016 IEBITDA per share 2017 2018 1Q19 LTM EBITDA margin 64#94FFO has grown exponentially since 2014 (Adjusted FFO per share) 2014-1Q19 16.2% CAGR 0.09 0.07 0.07 1 Pre-tax FFO for Vesta VESTA 0.13 0.13 0.12 2014 2015 2016 2017 2018 1Q19 LTM 55 65#95VESTA TODAY Lorenzo D Berho CEO VESTɅ VESTA VESTA#96Vesta today... VEST^ We have become an industry leader through our ability to identify the most dynamic regions and industries and make timely investments Economic growth in key sectors Index base year 2010=100; constant 2016 pesos Economic growth in key regions¹ Index base year 2010=100 Vesta Growth vs Market Growth Index base year 2010=100; GLA 190 145 280 Vesta 180 Transport equipment 140 260 Bajio manufacturing 170 135 160 130 240 Northwest 220 Metro² 150 Transportation, 125 200 loading and Central storage 140 120 180 National 130 120 National GDP 115 160 Industrial GLA Market 110 140 110 Machinery and 105 120 equipment manufacturing 100 100 100 '10 '12 '14 '16 '18 110 '12 '14 '16 '18 110 '12 '14 '16 '18 1ITAEE - INEGI's Quarterly State Economic Activity 2 Metro areas include Mexico City, Jalisco, and Nuevo Leon. Source: INEGI: National accounts system (2017); JLL; Vesta; LENS analysis. 67 10#97Total GLA has almost doubled since 2014 Goals met under Vesta Vision 2020 Plan CAGR 11.94% 30 27 23 20 17 2014 2015 2016 2017 2018 I 2019 33 VESTA 68 68#98Quality of growth... 14.3% CARG 30.4 GLA Increase 14.8% CARG 28.2 18.5% CARG 25.9 20.1 18.3 15.2 86.7% 90.8% Occupancy Increase VESTA 98.0% 96.8% 95.9% 94.2% Total Portfolio Stabilized Portfolio Same Store Portfolio Total Portfolio Stabilized Portfolio Same Store Portfolio 2015 1Q19 2015 1Q19 1) Million sf Develop portfolio using leading market intelligence Timely identification and acquisition of land Growth has come through inventory buildings representing ~60% 69#99FFO1 per share FFO has grown exponentially compared to our peers... We have nearly doubled our FFO per share executing our 2020 Strategy... VEST^ Index base year 2015=100 I 200 2015 16 17 '18 1Q 19 1Q 2019 190 180 170 Vesta's national peers FFO ps CAGR 2015-18: Vesta FFO ps 2015-18 CAGR: 24% 160 Peer 1: 6% Peer 2: 1% 150 ■ Peer 3: 4% 140 130 Peer 1 Visión 2020 GLA target 120 110 2015 Peer 2 100 Peer 3 90 80 90 100 110 120 130 140 150 160 170 GLA 1 Pre-tax FFO for Vesta. 2 Market capitalization weighted index of Mexican industrial FIBRAS. Sources: Companies annual reports and LENS analysis. 70#100NAV1 per share as well as our NAV growth VEST^ Our NAV per share has also grown consistently as we execute our 2020 Strategy... End of year values, index base year 2015=100 130 2015 16 17 18 1Q 19 120 110 100 00 90 2015 Peer 1 Peer 2 Peer 3 Vesta NAV ps 2015-18 CAGR: 7% 1Q 2019 Vesta's national peers NAV ps CAGR 2015-18: Peer 1: 1% Peer 2: 0% Peer 3: -5% 80 90 100 110 120 130 140 150 160 170 GLA 1 Market capitalization weighted index of Mexican industrial FIBRAS. Sources: Companies annual reports and LENS analysis. 71 I Visión 2020 target#101VESTA TOMORROW Lorenzo D Berho CEO VESTɅ VESTA VESTA#102Vesta tomorrow... VESTɅ Leading international real estate players typically adopt fully-integrated business model Real estate business models Securitized real estate Development oriented Fully integrated A real estate trust, usually managed and/or advised by a third party, that focuses on acquiring, leasing and managing properties. A real estate company with strong focus on development, mostly smaller private companies. A self-advised and self- managed real estate company which owns, manages, acquires, sells, develops and redevelops properties. VESTɅ Vesta Level 3 Yield focus through acquisitions Growth focus through development Value creation through flexible alternatives 73#103Level 3 Strategy .. VEST^ The new 5-year strategic plan is a new chapter in our journey toward success as a best-in- class, fully-integrated industrial real estate company Private to public Planning and execution of the IPO with a development plan focused on portfolio growth Institutionalization of the company Strengthening of development capabilities and deepening of key markets knowledge From a private to a public company Vesta Vision 2020 New debt and equity funding for an aggressive growth plan with, a clear strategy to capitalize the company's strengths and reserves The organization is strengthened to support institutionalization and increase asset management capabilities Level 3 Evolve into a world class company that creates value throughout the real estate cycle Continuous growth of the company's value through smart capital allocation, asset recycling and actively optimizing its portfolio Industry-leading management team 1998 2014 From a high-growth real estate developer to a leading national real estate company with a high-quality portfolio From a leading national 2019 developer to a best-in-class fully integrated real estate platform 2024 74#104Summary of Vesta's Level 3 strategy VESTɅ Our strategy will be structured around our three key business components, which in turn require us to strengthen some elements of our organizational structure Becoming a world class fully integrated industrial real estate company I. Manage, maintain and improve current portfolio II. Invest and / or divest for continuous value creation III. Keep strengthening our balance sheet and expand our funding sources مرا IV. Strengthen our organization to successfully execute our strategy Overall 2024 performance targets: ■ Pre-tax FFO per share of US$ 0.20 + NAV per share of US$ 3.0 + $ 75#105Level 3 Strategy... Summary of Vesta's Stage 3 strategy Becoming a world class fully integrated industrial real estate company I. Manage, maintain and improve current portfolio ☐ Improve portfolio quality through refurbishments and new developments / acquisitions and selected dispositions ■ Maintain a healthy contract expirations profile ■ Increase net effective rents ■ Maintain tenant base with high credit worthiness 2024 targets: VESTA ■ Occupancy levels of over 96% on our stabilized portfolio ■ Average portfolio age < 10 years ☐ ■ Average contract maturity > 5 years < 30% of new leases in automotive industry 76#106Level 3 Strategy .. Summary of Vesta's Stage 3 strategy Becoming a world class fully integrated industrial real estate company II. Invest and / or divest for continuous value creation ■ Invest at an appropriate pace in our core markets ▪ Enter new markets ■ Continue buy-back program and extend if arbitrage ☐ opportunities remain ■ Optimize investments and divestitures decisions VESTA 2024 targets: ■ Invest US$ 120 M + per year ■ Develop 16 M + SF over the next 6 years 77#107E-commerce growth in Mexico E-commerce will erode traditional retail over time reaching a higher share of total sales VESTɅ We expect the GLA used by e-commerce to grow by 16 M SF over 2018-2024 Retail and e-commerce sales growth in Mexico 2018-2024 US B E-commerce GLA growth in Mexico 2018-20241 M SF Retail sales (US$ B) 186 1.1 x 198 2018 2024 E-commerce 3.9% I share of retail 9.3% 10 17.6 2.6 x E-commerce sales (US$ B) 6.6 2018 2024 1. A ratio of 1.5 M SF demanded by each 1 B US$ of e-commerce sales was assumed to estimate the total e-commerce GLA demand. Sources: Euromonitor, Prologis Research, INEGI, LENS analysis. + 16 M SF 26 2018 2024 78#108Level 3 Strategy... Summary of Vesta's Stage 3 strategy Becoming a world class fully integrated industrial real estate company 2024 targets: ■ ~ Recycle US$ 1 for every 2 of invested capital ■ Net Debt to EBITDA ratio at or below 5.5x ■ LTV ratio below 40% ☐ ☐ VESTA III. Keep strengthening our balance sheet and expand our funding sources Expand our funding sources and improve our financial flexibility Recycle capital through selective asset dispositions to establish a track record of realizing value Selectively explore JVs and other alternative funding sources ■ Maintain a healthy dividend payout 12 79#109Level 3 Strategy .. Summary of Vesta's Stage 3 strategy Becoming a world class fully integrated industrial real estate company VESTA IV. Strengthen our organization to successfully execute our strategy ■ Implementing new IT platform to strengthen our innovation capabilities ☐ Keep strengthening our asset management and commercial teams ■ Continue building a qualified bench for top- and middle-management succession ☐ Maintain a strong incentive alignment vis-à-vis shareholders 80 88#110vestɅ Our team... C 81#111FFO growth throughout Level 3 Strategy ... Strategy aims to grow FFO per share 1.5x versus 2018 base VEST^ Vesta growth path 2014-2024 GLA in M SF / FFO¹ per share in US $ FFO per share (US$) 0.21 0.19 0.17 0.15 0.13 0.11 2014-2019 FFO per share CAGR: 15.3% 0.09 Vesta Stage 2 2024 Vesta Level 3 2019 2019-2024 projected FFO per share CAGR: 7.9% 0.07 2014 0.05 15 20 25 30 35 40 40 GLA (M SF) 1 Pre-tax FFO. Sources: Vesta financial statements and projections. 45 82 82#112NAV growth throughout Level 3 Strategy ... Strategy focuses on faster per share NAV growth than ever VEST^ Vesta growth path 2014-2024 GLA in M SF / NAV per share in US $ 3.2 NAV per share (US$) 3.0 2.8 2.6 2.4 2.2 2014-2019 NAV per share CAGR: 3.1% 2019 2.0 Vesta Stage 2 1.8 2014 1.6 15 20 Sources: Vesta financial statements and projections. 25 25 30 2024 Vesta Stage 3 GLA (M SF) 2019-2024 projected NAV per share CAGR: 7.4% 35 40 45 83 83#113GLA A history of successful delivery VEST^ In summary, Vesta Level 3 strategy will maintain strong growth and value creation. By 2024, we plan to reach FFO per share above US$ 0.20 50 Initial GLA 45 0.26 Stage 2 Level 3 GLA CAGR : 5.1% GLA CAGR : 16.4% 0.24 FFO CAGR: 8.1% Additional GLA FFO CAGR: 15.3% 0.22 40 40 Pre-Tax FFO Per Share 35 Total GLA 0.20 0.18 0.16 30 25 0.14 Stage 1 Follow-on GLA CAGR : 25.4% 0.12 20 20 Follow-on 0.10 IPO 15 0.08 0.06 10 0.04 5 LO 0.02 0.00 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18:19 '20 '21 22 23 24 NAV per share (US$) 1.5 1.7 1.8 1.8 1.8 2.0 2.1 2.1 2.3 2.5 2.5 2.8 3.0 84 US $#114Level 3 takeaways VESTA Our Business Model Fully integrated real estate company that creates value throughout the business cycle (Investment, Acquisitions, Development, Management, and Disposition) Our strategic focus Our factors differentiating Manage, maintain and improve current portfolio ■ Invest and / or divest for continuous value creation ■ Further strengthen our balance sheet and expand our funding sources ■ Continue building the best talent and organization Leading market knowledge ■ Talent Strong governance and alignment of interests Profitability per share 55 85#115vestɅ Thank you! www.vesta.com.mx