annual report 2016 - fibrahotel.comletter from the ceo may 2017 dear fibrahotel certificate holders:...
TRANSCRIPT
Annual Report 2016
@ F i b r a H o t e l
2016 Highlights
Million hotel room nights
2.2
Stabilized portfolio
occupancy rate
67.2%
Stabilized portfolio RevPAR
increase
+12.3%
Operating hotels
75
Hotels under development
10
Million pesos invested in
hotels
Million distributed to CBFI holders
Increase in lodging contribution margin for managed hotels (2015
comparable perimeter)
Million: financial debt as of December
31st, 2016
1,749
503
+62bps
2,697
Live Aqua Monterrey Valle
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Content
Page
Letter from the CEO
Introduction to FibraHotel Presentation FibraHotel History Structure Senior Management Team
Industry overview Market Opportunity
FibraHotel Strategy Competitive Advantage Strategy Acquisitions Development
FibraHotel Portfolio Presentation of the FibraHotel Portfolio Portfolio Map Brand Affiliations Hotel Segments of the FibraHotel portfolio Operational indicators of the FibraHotel portfolio
Financial section 2016 Financial Results Cash flow and liquidity Capital Expenditures Cash distribution
FibraHotel Corporate Governance Technical Committee and FibraHotel Committees Long-term alignment of interest
FibraHotel on the Mexican Stock Exchange CBFI price Stock ownership
Post-2016 events
Consolidated Financial Statements
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8891011
1315
1616182021
242426313331
3636414344
454547
484848
49
50
NOTE: The publication date of this Annual Report is May 31st, 2017.
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Letter from the CEO
May 2017
Dear FibraHotel certificate holders:
AC by Marriott Querétaro
In 2016, FibraHotel finished its first inorganic growth phase as we opened an important number of
hotels that we had been develop-ing during the past few years. These hotels, along with additional actions taken by management during the year, will support AFFO growth per certificate for the coming quarters and years. I would like to highlight five full-service hotels out of these openings which complement our portfolio with highly valuable stra-tegic assets. These hotels are Live Aqua Monterrey Valle, Grand Fiesta Americana Monterrey Valle, Fiesta
Americana Pabellon M, AC by Mar-riott Queretaro and AC by Marriott Guadalajara, which added over 800 rooms and represented an invest-ment of over 1.6 billion pesos.
FibraHotel’s current portfolio com-prises 85 hotels with 12,000 rooms, an impressive achievement if you take into account that only four years ago it included 17 hotels and 2,500 rooms. During 2016 alone, our inor-ganic growth investment was more than 2.5 billion pesos through the acquisition of two hotels with 397 rooms, the opening of 11 hotels with 1,518 rooms from the development portfolio and we also added four new development hotels with 660 rooms. These assets diversified our portfo-lio with hotels in mixed-use projects with seven different brands across all service categories and with signif-icant exposure to gateway cities such as Monterrey, Mexico City, Guadala-jara and Queretaro. Our first growth phase took us a couple of years to achieve as we developed landmark hotels in mixed-use projects and gateway cities, and we are certain that this growth phase will be in the best long-term interest of our share-holders as we were able to round out our portfolio, improve its quality and prove our open architecture model as we now have over 2,000 rooms with international brands and over 2,000 full service rooms with agreements based on a mostly variable fee.
From an operating perspective, 2016 was again a record year for our hotels with a RevPAR growth of over 12% for
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Courtyard Cd. del Carmen
comparable properties and reaching an average occupancy of the stabi-lized portfolio for the year of 67%. This organic growth continues to be a key component of FibraHotel’s suc-cess and it will continue to provide tailwinds in recently opened hotels and hotels going through their sta-bilization period. In the past couple of years we have seen a very healthy and dynamic lodging market in Mex-ico with significant RevPAR growth across all sectors and regions. The highest growth areas continue to be the north and the Bajio regions and gateway cities including Mexico City, Monterrey and Guadalajara. These positive operating results are further highlighted by our diversified port-folio across 26 states with different underlying dynamics. Our operating team continues working on raising average daily rates and maintaining a leading penetration of our hotels in their respective markets.
In 2017, we will focus on stabilizing recently opened hotels, pushing fur-ther RevPAR growth and focusing on strong cost control to improve mar-gins. The recent merger between Marriott and Starwood will help sup-port these objectives by providing us with a larger partner in Mexico, as the two companies together will have a better distribution network and larger operating structure in the country. I am very proud of the man-agement team we have assembled at FibraHotel, which I believe is the best in the industry and that it along with our structure offers a good platform for future growth.
Regarding growth, for 2017 we have six new hotel open-ings, three of which have already opened and three more that will open by the end of the year. For 2018 and going forward we have an additional batch of full-service ho-tels currently in process until the core and shell of the buildings are finished. Depending on market conditions we will continue the development of these hotels and open them during the next few years. Our growth strat-egy continues to target hotels inside mixed-use projects with high barriers to entry that will improve quality and diversification of our portfolio.
During 2016, we distributed more than one peso per certificate to our holders. Additionally, during our fourth annual investor day event, we announced for the first time an AFFO growth guidance of 25% for 2017. I would like to thank all our certificate holders, em-ployees, and operating partners for the strong effort put together in 2016, which represented an important step in consolidating the company and positioning it for further future success.
Simón GalanteCEO FibraHotel
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Introduction to FibraHotel
PresentationFibraHotel is a Mexican trust created primarily to own, ac-quire, develop and operate hotels. FibraHotel is a Real Estate Investment Trust (REIT), known as Fideicomiso de Inversión en Bienes Raíces (FIBRA in Spanish) and is listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores). The trust is the first lodging REIT in Latin America and the best-positioned as owner of one of the largest and most diversified hotel portfo-lios in Mexico.
FibraHotel’s objective is to provide attractive returns to its CBFI holders through stable cash distributions and real estate value appreciation. In addition, FibraHotel will strive toward a high-quality portfolio through affiliations with different brands, prestigious operators as well as geographic diversification and segmentation.
FibraHotel owns the real estate and equipment of each hotel, as such, it does not operate hotels or own hotel brands. This open architecture makes it possible to maximize the cash flow of each asset by working with various operators or brands best suited to each specific hotel.
FibraHotel was established in late 2012, with a portfolio of 30 operating hotels and four hotels at different stages of de-velopment. Since then, FibraHotel has experienced sustained growth through a mix of acquisitions of operating hotels and
development of new hotels. This strong ex-pansion meant that in terms of geographic, segment, operators and brands, by December 31st, 2016, FibraHotel’s portfolio was comprised by the following:
> 75 hotels in operation:
• 62 hotels owned by FibraHotel as of De-cember 31st, 2015.
• Two hotels acquired during 2016.• 11 new hotels that opened during 2016
and were part of the development portfolio of FibraHotel as of December 31st, 2015.
> 10 hotels under development.
As of the date of this Annual Report, the FibraHo-tel portfolio comprises 85 hotels (78 in operation and seven under development) thanks to the opening of three hotels from the development portfolio during the first months of 2017.
The hotels are located in 26 Mexican states and are associated with strong hotel brands, which provide significant advantages and increased de-mand because of their i) service quality, ii) loyalty programs, iii) modern reservation systems, iv) national and international distribution channels, and v) growing demand from travelers in Mexico.
FibraHotel continues to expand its brand port-folio through development and acquisitions. In 2016, FibraHotel added to its portfolio the following brands: Live Aqua and Grand Fiesta Americana operated by Grupo Posadas, and AC by Marriott operated by Marriott International. FibraHotel’s portfolio offers lodging services across the country to business and leisure trav-elers. Most of its hotels are located in strategic sites with significant business and industrial activity, and are located inside or near mixed-use projects such as regional shopping centers, business centers, industrial parks, airports and bus terminals, among others; thus offering our guests access to a large variety of amenities and services.
Part of our development portfolio, including the Fiesta Americana Viaducto, Fiesta Americana Ve-racruz, Fiesta Americana Tlalnepantla and Live Aqua San Miguel de Allende hotels, are current-ly advancing construction only until the core and shell of the building. FibraHotel will deter-mine the best time to finish and open the hotels based on macroeconomic conditions and when FibraHotel considers it is the appropriate time to invest and generate value to the portfolio.
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FibraHotel HistoryMain events since the creation of FibraHotel until December 31st, 2016:
2012
2013
2015
2014
2016
May 31st, 2013: FibraHotel Follow-on Offering on the Mexican Stock Exchange,
raising MXN $4,878 million.
Acquisition of 19 hotels in operation (2,329 rooms / an investment of more than MXN
$2,500 million).
Opening of two hotels from the development portfolio (281 rooms).
Acquisition of six projects for hotels under development.
Acquisition of one hotel in operation (159 rooms).
Opening of five hotels from the development portfolio (670 rooms).
Acquisition of 10 hotel projects under development (1,349 rooms), suspension of one project in Toluca (100 rooms), and
increase in room inventory in some hotels (26 rooms).
July 31st, 2012: the Trust is formed.
November 30th, 2012: FibraHotel Initial Public Offering on the Mexican Stock
Exchange.
Acquisition of 13 hotels in operation (more than 1,800 rooms / an investment of more
than MXN $1,700 million).
Opening of four hotels from the development portfolio (274 rooms).
Acquisition of 10 hotel projects under development (1,201 rooms), one hotel
under a repositioning process (142 rooms), cancellation of the extended stay project
in Cancun (74 rooms) and reduction in room inventory in some hotels
(7 rooms).
Acquisition of two hotels in operation (397 rooms).
Opening of 11 hotels from the development portfolio
(1,518 rooms).
Acquisition of four projects under development (660 rooms) and a reduction
in rooms under development (7 rooms).
Live Aqua Monterrey Valle
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StructureThe following diagram outlines the FibraHotel structure:
Administradora Fibra Hotelera
Mexicana, S.A. de C.V. (Advisor)
Deutsche Bank México, S.A.
(Trustee)
CI Banco, S.A.(Common
Representative)
HotelManagement
Companies
Hotel Management Agreements
Guests
Revenue fromnon-room hotel
services.
ServicesCompanies
Rental Revenue(lodging)
ManagementSubsidiaryAgreement
84.3% 15.7%
> Provides personnel services.
> Empoyees: operating staff of hotel portfolio.
Advisory Agreement.
Annual fee of 1.00 % ofundepreciated book value of assets, net of debt, payable quarterly.
Service Agreements
Compensation of 5% ofGross Payroll.
> Elects Technical Committee and appoints Common Representative.
> Able to amend Trust Agreement or liquidate trust assets.
> Able to terminate Advisory Agreement without “cause”.
> Approves CBFIs issuance, delisting or cancel registration of CBFIs with CNBV.
> Approve large Real Estate transactions.
> Receives rental revenue from rooms and pays related costs and expenses as well as real estate expenses.
> Receives after – tax dividend from the Management Subsidiary and pays
> Provides hotel services and property management services (with assistance form third parties).
> Receives revenue from non-room related hotel services and pays related costs and expenses.
> Pays expenses related to its own operation.> Taxable entity.> Pays after-tax dividends to FibraHotel or
receives distributios to cover shortfall.
CBFIs HoldersAssembly
CBFIs
Holders
Control
Trust
The FibraHotel structure is composed of the following entities:
Advisor
FibraHotel is externally advised by Administradora Fibra Ho-telera, S.A. de C.V. the Advisor. It was established on September 20th, 2012 for the purpose of providing advisory services and it is dedicated solely to FibraHotel operations. Some of the responsibilities of the Advisor are to provide guidance and
advice to FibraHotel on hotel project development and acqui-sition strategies, long-term strategic and financial planning, implementation of important decisions, and relationships with investors. The Advisor is entitled only to perceive an annu-al commission, payable quarterly, equivalent to 1.00% of the non-depreciated book value, net of debt, of FibraHotel assets. The Advisor does not perceive any other commission (acquisi-tion commission, development commission or any other type of commission).
Hotel Portfolio
Fibra Hotelera, S.C. (Management
Subsidiary)
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Administrator
FibraHotel is internally managed by FibraHotelera S.C., the Ad-ministrator, which was established on October 5th, 2012 with the sole purpose of assuming responsibility for the day-to-day management of FibraHotel’s business. As of the date of this this Annual Report, the Administrator had a 29-person team (Senior Management, Administration and Finances, Legal, De-velopment, Operation and Maintenance). The Administrator is responsible, among other tasks, for the day-to-day manage-ment of FibraHotel’s business, property and hotel maintenance, due-diligence for potential acquisition and development op-portunities, overseeing renovation / redevelopment projects, supervising property insurance, negotiating on behalf of Fibra-Hotel and organizing the signing of management agreements associated with the hotels.
The Administrator is also responsible for providing certain services unrelated to room rental, such as food and bever-age, telephone services, Internet and other similar services for which the Administrator bills hotel guests separately; the in-come from such services being subject to tax payment. Since
the Administrator is not part of the REIT’s tax structure, it must pay taxes just as any other company does. The Admin-istrator, using profits generated from non-related room rental activities, pays its proportional share of FibraHotel’s general expenditures and its taxes. After-tax profits from the Admin-istrator are distributed to FibraHotel, which is responsible for any deficit between revenues and costs of the Administrator.
Service Companies
Because trusts cannot have employees, Service Companies provide FibraHotel with personnel necessary for hotel opera-tions.Ocassionally, hotel operators hire key staff, such as gen-eral managers, controllers, sales managers, and head house-keepers directly.
In accordance with the service agreement, service companies are entitled to receive a 5% commision over the total payroll they manage to cover their operational costs and expenses. On a monthly basis, FibraHotel reimburses servicecompanies wages paid to hotel service staff., by the end of 2016, service companies had approximately 3,330 employees.
Senior Management Team
FibraHotel Advisor
FibraHotel Administrator
Roberto Galante
Simón Galante
Alberto Galante
Eduardo LópezChief Executive Officer
> Controllership> Tresury> Fixed assets> Administration
> Operation> Maintenance> Capex
> Development> Acquisitions> Invertor Relations> International Brands Operation
> Legal issues
Edouard BoudrantChief Financial
Officer
José Luis JácomeChief Operations
Officer
Guillermo BravoHead of Corporate
Development &Investors
Lorena GarcíaLegal Counsel
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> Simón Galante Zaga. CEO of the Advisor and member of the FibraHotel Technical Committee. Founding member and Ex-ecutive Director of Grupo GDI. He has more than 20 years of experience in the hotel, commercial and residential seg-ments as a real estate developer and manager, as well as in the acquisition, development and financing of these types of projects. He is a member of the Fondo Hotelero Mexicano I/II, Fondo Comercial Mexicano, La Vista Country Club, Bosque Real and MERCAP, all Grupo GDI companies. He specialized in Business Administration from IPADE.
> Eduardo López García. CEO of the Administrator. He was Director of Hotel Investment and Development in Grupo Posadas from 1993 until he joined as Director of Hotels at Grupo GDI in 2006, when it owned only six hotels. Further-more, he negotiated an agreement with a Mexican developer, leader in real estate and with Grupo Posadas for the develop-ment of additional hotels to be managed by Grupo Posadas. He has more than 20 years of experience in hotel develop-ment and management.
> Edouard Boudrant. Chief Financial Officer of the Administrator. He has a bachelor’s in Business Administration from the Uni-versidad de las Americas (UDLA) in Puebla, Mexico, and from the Centre d’Études Supérieures Européennes de Management (CESEM) in Reims, France, and a Master’s degree in Corporate Law from the École Supérieure des Sciences Économiques et Commerciales (ESSEC) in Paris. His professional experience in-cludes eight years in investment banking both in France (Société Générale and Lazard-NATIXIS) and Mexico (BBVA Bancomer).
> Guillermo Bravo Escobosa. Head of Corporate Devel-opment and Investors Relations of the Administrator. He has a degree in Industrial Engineering from the Universidad Iberoamericana of Mexico, and a Master’s degree in Business Administration from the Chicago Booth School of Business. His professional experience includes working as a credit analyst and public rela-tions executive at Scotiabank Inverlat in Mexico, as well as Associate in Mergers and Acquisitions for Latin America and Diversified Industries in the United States, at J.P. Morgan, New York.
> Lorena García Núñez. Legal Counsel of the Administrator. She joined Grupo GDI in 2002 and has more than 15 years of experience in the hotel and real estate business.
> José Luis Jácome Herrera. He is the Chief Operations Of-ficer of the Administrator. He has a degree in Tourism Enterprise Management from Universidad Anhuac del Sur and a specialization from École Supérieure de Ges-tion (ESG), Paris, France, in Hotel, International and Luxury Marketing. Additionally, he has a Master s degree in Busi-ness Administration from IPADE Business School, Mexico, in conjunction with a Value Investing Course form Co-lumbia University, New York. His professional experience includes more than eight years in hotel management in different hospitality chains, such as Fairmont, Posadas and Las Brisas, holding different positions from Hotel Director, General Director and Reception Manager, and Manager of Food and Beverages.
The entire Administrator’s team is made up by 29 people at the date of this Annual Report, which includes the senior management team, development, operations, treasury, administration, legal, maintenance and fixed-assets departments. Accounting is per-formed externally by Conectum, a shared service center with more than 16 years of experience in the hospitality industry.
The FibraHotel Senior Management Team is formed by the following executives:
Management Team
One Durango
23.3
CAGR 2010-20167.02%
23.4 23.4 24.229.3 32.1 35
Source: Reporte de la Actividad Turística 2016 Source: Reporte de la Actividad Turística 2016
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CAGR 2010-20168.52%
11.9 12.7 13.9 16.2 17.7 19.6
0
10
20
30
40
2010
2011
2012
2013
2014
2015
2016
0
10
20
30
2010
2011
2012
2013
2014
2015
2016
23.3
CAGR 2010-20167.02%
23.4 23.4 24.229.3 32.1 35
Source: Reporte de la Actividad Turística 2016 Source: Reporte de la Actividad Turística 2016
12
CAGR 2010-20168.52%
11.9 12.7 13.9 16.2 17.7 19.6
0
10
20
30
40
2010
2011
2012
2013
2014
2015
2016
0
10
20
30
2010
2011
2012
2013
2014
2015
2016
13
Mexico’s hospitality industry con-tinues to have a promising outlook for the next few years.
Recently, we have seen a significant room demand growth driven by strong private consumption, foreign direct investment, growth in local and international tourism, low unemployment, a growing economy and macroeconomic stability. Accord-ingly to The Economist Intelligence Unit, projections indicate an average annu-al GDP growth of 3.2% during the next 15 years (2015 to 2030), driven by the strong structure of implemented reforms and Mexico’s demographic dividend. Mexico has also overcome the negative impact from the peso devaluation, the oil indus-try deceleration and uncertainty around the North America Free Trading Agree-ment (“NAFTA”).
Industry overview
of increased US demand, a favorable cost structure and increased competitiveness thanks to the depreciation of the peso and significant government investment in infrastructure. Nevertheless, manufacturing growth is at risk due to US protectionist policies and possible renegotiation of NAFTA, which could pressure foreign investment in the following years. According to UNC-TAD, foreign investment represented USD 26 billion in 2016 and an average of approximately USD 30 billion in the last five years.
As for tourism, this industry represented approximately 8.5% of Mexico’s GDP, according to OECD data, grow-ing at a Compounded Annual Rate of Growth (“CARG”) of 6.4% from2008 to 2015, according to INEGI, only behind the manufacturing industry and the service sector’s av-erage. Likewise, the number of visitors to the country has shown a favorable trend, mainly because of great service quality and tourist offering, backed by improved connectivity and attractive exchange rates for interna-tional travelers. On the other hand, Mexico occupies the sixth (6th) place worldwide in number of sites declared World Heritage by the United Nations Educational, Sci-entific and Cultural Organization, or UNESCO, 34 of them at last count, of which 27 are cultural, six are natural and one is mixed.
According to the World Tourism Organization, Mexico was the ninth (9th) most visited country in 2015, with approximately 32.1 million visitors, a 9.6% increase in relation to the previous year. Likewise, according to Mexico’s Ministry of Tourism, during 2016 Mexico re-ceived approximately 35 million international arrivals, 8.9% growth in relation to the year before. Cancun beat the record with approximately 7 million international visitors during 2016, positioning itself as the destina-tion with the greatest influx of foreign visitors during the year, followed closely by Mexico City and other tour-
Mexico has one of the most attractive population pyramids globally with a demographic dividend and has recently implemented structural reforms not only in the energy and telecommunications sectors, but also in education and politics in an effort to encourage healthy competition and attract great-er foreign investment. Private consumption continues being the country’s main growth engine and manufacturing continues gaining ground because
ist destinations such as Los Cabos and Puerto Vallarta. Mexico is well positioned to benefit from long-term international tourism trends because of its proximity to the United States and Canada, representing approximately 359 million people who are, on average, 3.5 hours of flight away (6 hours max.) from Mexico’s main tourist desti-nations. Additionally, as Mexican consumers continue having more spending power, we have seen and expect to continue seeing a growing interest for domestic travel.
The following chart illustrates Mexico’s international visitors and annual spending by foreign visitors from 2010 to 2016:
Fiesta Americana Monterrey Pabellón M
International Visitors to Mexico (million)
Annual expenditure of foreign visitors (Billions of Dollars)
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According to INEGI data, employment in the tourism in-dustry increased by 4.8% in 2016 (vs. previous year), only behind construction, restaurants and accommodation ser-vices, reaching approximately 15.6 million new direct jobs, representing 8.4% of total employment in 2016 for the Mexican economy.
We expect this increase in international visitors to con-tinue, based on key infrastructure developments to be concluded in the short term and strategic agreements for increased flight connectivity.
As reported by the World Travel and Tourism Council (WTTC), from 2010 to 2015 Mexico’s capital investment in tourism had a CARG of 5.4%, which represents, approxi-mately, twice the average annual growth of Mexico’s GDP in the same period. Capital investment in tourism is expected to reach MXN $240 billion pesos by 2026, in comparison with MXN $126 billion pesos expected in2016, which represents a CARG of 6.7%.
Moreover, Mexico reached a Bilateral Air Agreement with the United States, effective since August 21st, 2016. Accord-ing to the US Department of Transportation, this Bilateral Agreement aims to increase competition between airline companies and expand cross-border aviation market by eliminating restrictions on air route operations between both countries. The agreement allows foreign airlines to land and board local passengers and continue toward their destination, as well as not limiting the airlines allowed to use the same route.
The Mexican hotel market has been transformed, thanks to economic trends at national and local levels. Room de-mand is expected to continue increasing more rapidly than supply in 2017, and that should lead to a national increase in RevPAR year on year. Mexico has the most developed hospitality sector in Latin America, as demonstrated by the outstanding visitor levels during the last four years, dis-tributed among tourist and business destinations, as well as a growing and well-established business market, which will continue growing at par with the national economy.
The urban hotel industry continues to be an expanding mar-ket and is extremely fragmented, especially in regard to the economy hotel segment. According to HVS, the inventory of hotels in the country’s main markets shows a total of 1,328 hotels with 146,448 rooms oriented to serving travelers from 40 select markets in the country. Of those 1,328 ho-tels, 715 are independent and 613 are branded hotels.
According to HVS, Mexico has 30 hotel operating companies in the urban hotel sector, and more than 60 brands, both local such as Camino Real, Fiesta Americana, Quinta Real, Fiesta Inn, One Hotels, Real Inn, City Express, etc. and inter-national such as Marriott, Hilton, Holiday Inn, Ibis, Fairfield Inn, Hampton Inn, Courtyard, etc. Grupo Posadas is the most important operating company in Mexico, with 24% of the total branded urban hotels, followed by InterContinental Hotels Group which is primarily a franchisor with approxi-mately 23% and City Express with a mixed model at 15%.
According to HVS, the urban hotel industry in Mexico is still characterized by a high penetration of indepen-dent hotels, with the exception of the largest cities, such as Mexico City or Monterrey. Today, 54% of the sample analyzed by HVS comprises independent hotels (rep-resenting 38% of the total number of rooms), while in the United States, it is estimated that the branded ho-tel inventory covers approximately 65% of the total and reaches 70% to 80% in main urban and industrial cen-ters. Additionally, the Mexican hotel market has a limited number of owners with significant portfolios, several of whom are operators with franchised brands. Generally speaking, the hotel market is quite fragmented.
The hotel market in urban and industrial centers in Mexi-co has followed trends established in the past few years. Supply in several areas has increased in line with industri-al growth, with demand growing faster than supply overall. In an uncertain global environment influenced by geopolit-ical events, setbacks in several emerging economies, and election periods, especially in the United States, the Mex-ican economy has remained relatively healthy and well positioned. Mexico has positioned itself during the last two decades with fundamental changes in a closed econ-omy highly dependent on oil exports to an open economy based on domestic consumption, services and manufac-turing products for export. The automotive industry is a good example, as its development has fostered growth in infrastructure, qualified labor and suppliers, which have improved other manufacturing industries such as aeronau-tics. Structural reforms in the last few years, especially in
Types of Hotels Number of Hotels
% of the total
number of hotels
Number of rooms
% of the total
number of rooms
Affiliated to inter-national brands 323 24% 49,516 34%Affiliated to mexi-can brands 290 22% 40,632 28%Independent hotels 715 54% 56,300 38%
Total 1,328 100% 146,448 100%
Source: HVS
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the energy industry, should improve this favorable trend, though progress in the area could be slower while oil prices remain at limited levels.
Mexico has different regional economies, some with ro-bust economic activity and a high demand for hotel rooms, while others do not enjoy the same advantages and have a more limited hotel room demand. Investors and opera-tors study local dynamics, including current and expected economic conditions, and the supply and demand balance, in order to evaluate hotel and brand positioning and its potential behaviors in different projects and markets. Re-gionally, there are pockets of over-supply, but, in general, these are located in cities with important growth in the past few years and positive fundamental dynamics; as such, a balance between demand and supply is expected in the short- and medium-terms.
Hotel chains and brands continue to be bullish on the market and are looking to expand their presence and dis-tribution channels, and as such they look to expand their presence with quality owners, projects and locations in the country. This phenomenon is allowing for a more pro-fessionalized competitive dynamic overall, with a growth in conversions from independent hotels to branded hotels for a better segmentation of hotels available to consum-ers, in which they can find different options to satisfy their needs, and at the same time, allow investment groups to expand their portfolios in select markets.
Current ADR in Mexico, compared to the United States are as follows (1 USD = MXN $18.35):
> The ADR for limited service hotels is MXN $980 in Mex-ico compared to MXN $1,100 in the United States (12% higher than in Mexico).
> The ADR for selective service hotels is MXN $1,360 in Mexico compared to MXN $1,500 in the United States (10% higher than in Mexico).
According to STR, hotel demand in Mexico is expected to increase 3.5% in 2017, with an increase of 1.6 percentage points in hotel occupation due to the 1.2% increase in ex-isting supply with an increase of 0.9% in ADR and 0.7% in RevPAR. The new supply represents 63 hotels (9,273 rooms) under construction. There are 83 additional hotels (12,693 rooms) on the market in the planning process.
Regardless of the aforementioned growth tendencies and positive outlook, the country is not immune to the effects
15
of global economic deceleration, particularly in the Unit-ed States which is Mexico’s main business partner. Other possible short-term risks include further setbacks in the energy sector, political uncertainty and any deepening se-curity issues affecting the country.
Mexico has the most highly developed hospitality sector in Latin America and is well positioned to continue lever-aging the traveler levels into and within the country that we have witnessed in the past few years.
Market Opportunity
FibraHotel has an excellent position as an investment vehicle, which can offer investors a platform for growth and value creation with direct exposure to the lodging industry. By being only an asset owner, FibraHotel has attractive opportunities for synergies with other market participants such as international hotel companies, ho-tel operators and other players in the real estate market in Mexico. The hotel market offers interesting opportu-nities for sustained growth for both FibraHotel and their CBFI holders as a result of market trends in Mexico and of the stabilization process of FibraHotel’s recently devel-oped properties.
Additionally, FibraHotel is able to continue taking advantage of those opportunities thanks to its experi-enced Advisor, its management team, its relationships in Mexico’s hotel industry and the advantage of being a lodging REIT listed in the Mexican Stock Exchange, with access to capital and tax benefits for future asset con-tributors.
The competitive advantages and strategies that Fibra-Hotel has and will implement make and will continue making it possible for us to stand out among the compe-tition in Mexico and shall be a source of strength to our objective of building a portfolio of high-quality hotel as-sets in the country.
Live Aqua Monterrey Valle
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FibraHotel Strategy
Competitive Advantage FibraHotel has the following competitive advantages:
Market leader with a high-quality portfolio that includes multiple brands and operators, geographi-cally diversified and difficult to replicate.. FibraHotel has the largest and highest quality hotel portfolio in Mexico, geographically diversified with iconic properties like Live Aqua Monterrey Valle, Grand Fies-ta Americana Monterrey Valle, AC by Marriott Guadalajara and Pabellon M. The portfolio has important presence in the limited, select, full and extended stay service segments. The hotels are generally geared toward business and leisure travelers and operate in appealing segments within the Mexican hotel in-dustry, which is characterized not only by the potential to generate attractive return on investments but also the opportunity for substantive growth because of the unmet demand for facilities of this type in Mexico, and because of internal market growth, which has been significant and driven by different re-gional economies and direct foreign investment. Additionally, FibraHotel owns an important number of non-stabilized rooms due to recent development openings; once these rooms complete their stabiliza-tion process FibraHotel’s income should increase as well.
AC by Marriott Guadalajara
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FibraHotel expects to continue diversifying its portfolio via the acquisition and development of new hotels in unique loca-tions with attractive prospects. The hotels are associated with well-known brands that provide advantages such as reliable service quality, loyalty programs, reservation systems, and national and international distribution channels. FibraHotel has several well-known brands, such as Live Aqua, Live Aqua Boutique, Sheraton, Grand Fiesta Americana, Fiesta Ameri-cana, Camino Real, AC by Marriott, Fiesta Inn, Courtyard by Marriott, Fairfield Inn & Suites by Marriott, One Hotels, Camino Real Suites, and Fiesta Inn Lofts. These hotels are operated by different companies, including Grupo Posadas, Grupo Real Tur-ismo and Marriott International.
Hotels owned by FibraHotel are mostly in markets with con-siderable industrial, corporate and/or touristic activity, which leads to strong hotel service demand. Furthermore, they are located in strategic locations withentry barriers, within or near shopping centers, airports and/or industrial parks. These stra-tegic locations are not easy to replicate and provide
Strong relationships of the management team and Control Group provide wide access to investment opportunities. FibraHotel directors have extensive experience in hotel ac-quisition, development, financing, renovation, repositioning, redevelopment and management. Likewise, they possess in-depth knowledge of the Mexican real estate market and enjoy a broad contact network in the hotel industry, includ-ing long-term relationships with hotel owners, hotel operating companies, hotel brokers and other key industry participants, such as the most prominent real estate developers in Mexico (shopping centers, office and industrial parks, among others). By and through these different relationships, the management team identifies and assesses numerous potential acquisition and development opportunities for profitable growth of the Fi-braHotel portfolio.
Robust relationships between the management team and hotel operating companies provide FibraHotel with valuable brand concept knowledge and access to numerous opportunities for development and attractive acquisitions, several of which may not be available to other competitors. It is also important to mention that through their relationship with Grupo GDI, Fi-braHotel has access to potential acquisition opportunities and development projects.
Assets owner with an efficient and aligned operating model. A key element of FibraHotel strategy is that it holds agreements with hotel operating companies, which are paid predominant-ly variable commissions based on gross operating income, thus aligning FibraHotel interests with that of hotel operating companies and minimizing expenses on a down cycle, which provides great flexibility and makes it possible to take advan-tage of a relatively low break-even point.
The open architecture policy enables FibraHotel to partner with hotel operating companies and hotel brands best suited to each hotel and circumstance. Hotels under development are developed based on architectural plans that seek to maximize use of revenue-generating spaces and minimize both construc-tion and operational costs. Moreover, it emphasizes rigorous asset management, which improves operational productivity.
For instance, it proactively oversees and advises hotel oper-ating companies on most aspects of their operation, including real estate positioning and repositioning, operation analy-sis, physical design, renovation and essential improvements. As a result, FibraHotel has developed an efficient operational model that provides substantive operating leverage in a vari-ety of conditions and market cycles. FibraHotel considers there is a potential for increasing RevPAR, mainly by increasing ADR, which together with operating leverage will help increase the profitability as economic conditions improve in Mexico. It can and will continue increasing RevPAR and profit margins in the future as more hotels are added to the operating platform.
Strong balance sheet, access to capital and leading position on the Mexican hotel market. FibraHotel was the first lodging REIT listed in the Mexican Stock Exchange and is considered to be the best-positioned investment vehicle toward becoming a leader in the hospitality sector in Mexico. As a company listed in the Mexican Stock Exchange, it has and will have better ac-cess to capital and the opportunity to issue CBFIs to potential sellers in exchange for their properties, offering them an addi-tional, tax efficient, liquidity option.
FibraHotel enjoys, as of December 31st, 2016, a solid liquidity position. This fact, along with a solid asset base, means it has and will continue to have the capacity to incur debt, conser-vatively, without reaching its leverage limits, which will make it possible to take advantage of favorable development, ac-quisition and investment opportunities. As a result of the established and leading presence of FibraHotel on the Mexi-can hotel market, the scale of its operations, its high-quality portfolio and solid financial position, FibraHotel believes that it is and will be well positioned to take advantage of any acquisition opportunities in the highly fragmented ho-tel industry in Mexico, and of development opportunities by partnering with the largest hotel operating companies look-ing for an equity partner.
Solid growth history. The FibraHotel management team has a sound growth track record. Since the Initial Public Offering, the FibraHotel portfolio has grown from 17 operational hotels and 2,329 rooms from the Contribution Portfolio to 85 hotels and 12,023 rooms by the date of this Annual Report, which repre-sents a compounded annual growth higher than 62%.
Alignment of long-term interests with the Control Group and the management team. FibraHotel has a leading management team with vast experience in the sector and market. Additionally, the relationships between FibraHotel, its Advisor and Grupo GDI is structured so that all interests are closely aligned. Pursuant to the Trust Agreement and Adhesion Contracts, the Relevant Adherent Trustors have agreed to grant preferential rights to acquire any future lodging investment opportunity generated by any of them insofar as such opportunity substantially complies with every investment eligibility requirement set forth in the Trust Agreement, as long as the Voting Trust holds at least 15% of the CBFIs in circulation.
It is FibraHotel’s belief that significant shareholding by the Advisor’s directors and Relevant Adherent Trustors create the best alignment of interests between FibraHotel, the Advisor and Grupo GDI.
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awarded the hotel management contract if FibraHotel were to acquire the hotel.
Take advantage of organic growth opportunities. FibraHotel believes it is and will be able to leverage organic growth op-portunities since:
(i) its focus on the strategic location of its hotels in commer-cial and industrial centers will allow FibraHotel to be part of Mexican economic growth (and regional economies) as well as the increasing foreign direct investments and tour-ism;
(ii) It will continue to apply its efficient operating platform and disciplined management of its portfolio assets and of any acquisition/ development carried out; and
(iii) its larger size, due to new hotel acquisition and develop-ment, is an advantage when seeking improved operational margins of its portfolio hotels.
FibraHotel sees an opportunity to increase the RevPAR of its hotels. In 2016, based on 56 hotels in a comparable perimeter of stabilized properties, the RevPAR was MXN $670, represent-ing an increase of 12.3% versus 2015 (MXN $597), compared to a 3.4% inflation rate and a 2.4% Mexican GDP growth. This sig-nificant growth is partly due to market conditions and partly to its assets’ quality and managements.
There are several trends that make Mexico an interesting target for hotel investment including positive trends in Mexico’s inter-nal consumption, the recently implemented structural reforms, growth in tourism, increasing competition in the industrial sec-tor, stable country risk, dynamic and growing employment rates, solidly capitalized banking sector, low leverage in the private sector and diminishing demographic dependence index. All of these trends should continue favouring an increase in ho-tel demand.
It is a fact that it can and will increase operational efficiency of acquired hotels as they become part of the platform, and hotels in stabilization process or under development should improve portfolio efficiencies. Operational efficiencies include: operating under hotel management agreements with variable commission structures, disciplined asset administration, open architecture policy and management of hotel stabilization pro-cesses. Hotel investment opportunities will also be reviewed regularly for investing in hotels with the aim of enhancing their quality and appeal, increase their value in the long term and attractive returns on investment. The same rigorous asset management approach will be used for future hotel acquisi-tions.
Partnerships with leading hotel brands and hotel man-aging companies. Use of best-in-class brands and the FibraHotel relationship with leading hotel operating compa-
Strategy
The goal of FibraHotel is to generate attractive risk-adjust-ed returns for its CBFI holders, mainly through distribution of its taxable income and return on capital, as determined by the Technical Committee (in 2013, 2014, 2015 and 2016 FibraHo-tel distributed MXN $338 million, and MXN $424 million, MXN $436 million and MXN $503 million respectively to its certifi-cate holders). FibraHotel intends to achieve this goal through ownership, expansion and effective operation of a high-quality hotel portfolio with different brands, geographically diversified, operated by independent hotel operating companies renowned throughout Mexico capable of offering attractive investment returns and generate long-term value appreciation through ef-fective asset administration. It seeks to achieve this objective by using the following investment and development strategies:
Grow and consolidate Mexico’s hotel market. FibraHotel plans to continue growing in large, mature markets and those with strong industrial, commercial and touristic activity through ho-tel asset acquisition and development. In this sense, FibraHotel plans to invest in strategic locations that provide a convenient alternative for travelers.
It also seeks to continue being present in strategic locations with attractive real estate prospects, such as shopping malls, airports and industrial parks, aiming to improve the FibraHo-tel’s operating platform and maximize RevPAR. It also focuses on opportunities where value can be enhanced through proac-tive investment strategies, such as renovation, repositioning or rebranding, as in the cases of unbranded or mismanaged ho-tels.
FibraHotel believes that with its Advisor and management team’s extensive knowledge and extensive relationships with-in the local industry, it can specify opportunities with owners and operators of small or independent hotels and even with operators looking to sell hotels they currently own. Similarly, FibraHotel believes that with disciplined growth, focused on enhancing value for CBFI holders, its portfolio will continue to grow in the medium term and take advantage of characteristics of the Mexican market.
Pursuing opportunities using FibraHotel’s unique access to hotel investment opportunities. Through its relationship with Grupo GDI, FibraHotel has access to a wide range of pos-sible acquisitions, including preemptive rights regarding hotel investment opportunities. These, as well as the breadth of es-tablished relationships in the Mexican real estate and hotel industries, generate a continuous source of attractive invest-ment opportunities outside the competitive market process through which FibraHotel can grow its portfolio in a disciplined manner and increase the value to its CBFI holders. Also the use of independent hotel operating companies affords Fibra-Hotel access to investment opportunities, as these companies may provide possible operations with the expectation of being
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nies, both national (Grupo Posadas, Grupo Real Turismo) and international (Marriott International), offer significant advan-tages since these brands and hotel operators are prestigious, offer loyalty programs, modern reservation systems, effective product segmentation, national and international distribution, and are deeply aware of the needs of demand-driving guests, the outcome of which may be a higher occupancy rate, ADR and RevPAR, as a result of the open architecture strategy that makes it possible to partner with the hotel managing company best suited for each hotel and situation.
A strong relationship between the Advisor’s management team and main hotel operating companies, together with over 50 years of experience, will make it easy to work efficiently with those hotel operating companies, provide valuable knowledge related to brand-initiative as well as access to acquisition and development opportunities, many of which may not be avail-able to competitors.
Wide experience for growth in hotel development in Mex-ico. The important growth in hotel demand in Mexico during
the next few years will create attractive development oppor-tunities for hotels in strategic locations that are difficult to replicate, such as mixed-use projects and shopping centers and tourism hubs that will diversify the FibraHotel portfolio, always aiming to maximize long-term return on investment to CBFI holders.
FibraHotel will be able to capitalize on this opportunity as both its Advisor and its management team have vast experience in developing hotels in Mexico. In addition, the cost per key at which FibraHotel is able to develop hotels is highly competitive and uses independent companies for hotel construction and development, eliminating any conflict of interest and maximiz-ing its capacity to develop different hotels throughout Mexico while strategically maintaining the structure and supervision of hotel projects. This combination helps determine the most profitable projects, starting with selection of the most suitable location for a project as well as the best brand and operator, hotel size, including room area and amenities. All develop-ments focus on maximization of return on investment for CBFI holders and long-term portfolio diversification. FibraHotel has developed and opened more than 25 hotels.
AC by Marriott Querétaro
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FibraHotel has a development team that is continually creating a pipeline of opportunities that meet investment require-ments. An important part of these are unique to FibraHotel and based on the management team and Advisor’s relation-ships with participants in the hotel and real estate industries of Mexico. Furthermore, it seeks high-quality business hotels in strategic locations throughout the country that comple-ment the portfolio and generate value to CBFI holders. Every investment alternative is analyzed by an internal acquisi-tions committee and updated based on different negotiations conducted by the management team, choosing only the best opportunities for creating long-term value. FibraHotel is con-vinced that it has a viable acquisition strategy, which makes capitalizing on opportunities possible throughout the cycle in a sustainable manner and achieves continued growth by means of hotel acquisitions. The number of acquisitions that FibraHotel can accomplish is directly linked to market condi-tions and purchase options available at the right price.
Acquisitions
A central part of FibraHotel growth is based on the strategy of acquiring operating hotels at the right price so they can be incorporated into the portfolio, adding value to CBFI holders by increasing distribution per CBFI. The acquisition strategy is based on the disciplined purchase of only high-quality ho-tels in strategic locations and at the right price, which meet both proper cash flow generation (cap rate) and proper repo-sitioning cost (price per key). All acquisitions are evaluated internally ensuring they add value to CBFI holders. FibraHo-tel aims to acquire both stabilized hotels that are included in the portfolio under operating schemes with predominantly variable commissions and independent hotels with high real estate value which identify an opportunity for repositioning under a new brand and transferring it to a professional oper-ator in order to maximize cash flow upon portfolio inclusion.
Live Aqua Monterrey Valle
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Development
FibraHotel seeks to develop hotels in strategic locations, primarily within mixed use projects in highly dynamic areas that will maximize return on investment in the long term. The development strategy works as a complement of the acquisition. Under the same conditions, preference is given to the acquisition of hotels already under operation over the development of new hotels. Construction of new hotels will continue in situations where hotel acquisitions can only be done at an expensive price (both in terms of return on in-vestment and cost per key), while the location of the project gives competitive advantage by being in a mixed use project for example. By developing assets, FibraHotel seeks high-er return on investment in comparison with an acquisition.
The process of developing a new hotel starts by identify-ing strategic areas and mixed-use projects in development.
1. Aloft by Marriott Veracruz
Location: Boca del Río VeracruzBrand: AC by MarriottOperator: Marriott InternationalSegment: Full-ServiceRoom count: 166Estimated opening date: Fourth Quarter, 2017
The hotel structure and façade are almost finished and work is underway on interiors and MEP (mechanical, electrical and plumbing).
2. Fiesta Inn Buenavista
Location Ciudad de México. Inside the shopping center Fórum BuenavistaBrand: Fiesta InnOperator: Grupo PosadasSegment: Select-ServiceRoom count: 129Estimated opening date: Fourth Quarter, 2017
The steel structure is finished, the façade and civil works are 70% done, and work is underway on interiors and MEP (mechanical, electrical and plumbing).
Once the location has been defined, the characteristics of the hotel are determined through a market research, de-fining the service segment the hotel will cater, the size, amenities expected and different options of brands and op-erators available. The development of new hotels helps us diversify the portfolio through the construction of hotels made with the specifications of international brands and operators.
The Advisor and management team of FibraHotel have great experience in hotel development. Due to the amount of proj-ects great costs per key are being achieved maintaining general supervision and structure of the hotel projects.
As of the date of this report, the portfolio of hotels in develop-ment of FibraHotel is the following:
Expected Number of Investment by FibraHotel (MXN $ millions)
Hotel State completion date rooms under
construction Total Invested as of March 31st
2017 Remaining*
1 Aloft by Marriott Veracruz Veracruz Q4 2017 166 170.0 122.6 47.4 2 Fiesta Inn Buenavista Mexico City Q4 2017 129 185.0 94.9 90.1 3 Courtyard Toreo* Mexico City Q4 2017 146 45.0 - 45.0
4 Fiesta Americana Viaducto (VIA 515)** Mexico City TBD 255 600.0 104.9 495.1
5 Full Service Villa del Mar Veracruz** Veracruz TBD 173 275.0 39.1 235.9
6 Live Aqua San Miguel de Allende** Guanajuato TBD 134 550.0 142.6 407.4
7 Fiesta Americana Tlalnepantla** Mexico City TBD 224 475.0 99.8 375.2
Other incuding GICSA Various 194.5 Total 1,227 2,300.0 798.3 1,696.2
* Until the projects are restarted FibraHotel will only have to invest a portion of the remaining investment** Budget under review, investment should increase due to an enlargement in room inventory
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4. Fiesta Americana Viaducto (Vía 515)
Location: Mexico City. Inside the mixed-use project Vía 515Brand: Fiesta AmericanaOperator: Grupo PosadasSegment: Full-ServiceRoom count: 255Estimated opening date: To be determined
The project is in the foundation process. This hotel will be on hold after the structure and façade phase is completed.
6. Live Aqua San Miguel de Allende
Location: San Miguel de Allende. Historical Center of San Miguel de AllendeOperator: Grupo PosadasSegment: Full-ServiceRoom count: 134Estimated opening date: To be determined
Part of the structure is complete. This hotel will be on hold after completion of the structure phase.
5. Full-Service Villa Del Mar Veracruz
Location: Veracruz. Inside the mixed-use Project Villa del Mar VeracruzBrand: Fiesta AmericanaOperator: Grupo PosadasSegment: Full-ServiceRoom count: 173Estimated opening date: To be determined
The development is currently in the structure phase of the shopping center at the transfer slab to the hotel. This hotel will be on hold after finishing the structure and façade phase.
7. Fiesta Americana Tlalnepantla
Location: Mexico City. Inside the mixed-use project Sentura Tlalnepantla
Brand: Fiesta AmericanaOperator: Grupo PosadasSegment: Full-ServiceRoom count: 224Estimated opening date: To be determined
The development is currently in the structure phase of the shopping center. This hotel will be on hold until completion of the structure and façade phase.
3. Courtyard Toreo
Location: Mexico CityBrand: Courtyard by MarriottOperator: Marriott InternationalSegment: Select-ServiceRoom count: 146
Estimated opening date: Fourth Quarter, 2017
The hotel’s structure and façade are finished and work is underway on interiors and MEP (mechanical, electrical and plumbing).
2323Live Aqua Monterrey Valle
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FibraHotelPortfolio
FibraHotel opened 2016 with 80 hotels and 10,973 rooms, of which:
> 62 hotels (8,507 rooms) were in operation.> 18 hotels (2,466 rooms) were in different stages of de-
velopment.
Throughout 2016, FibraHotel increased the number of hotels in operation and hotel development projects thanks to:
> The acquisition of two hotels (397 rooms) in operation.> The opening of 11 hotels (1,518 rooms) from the develop-
ment portfolio. > The acquisition of four hotels development projects (660
additional rooms), the decrease of one hotel project (the Viaducto 515 project is new a Fiesta Americana hotel; it used to be a Fiesta Inn and Fiesta Inn Lofts during the initial project).
> Decrease in room inventory in the development portfolio (seven rooms).
FibraHotel closed 2016 with 85 hotels and 10,023 rooms, of which:
> 75 hotels (10,422 rooms) were in operation.> 10 hotels (1,601 rooms) were in different stages of devel-
opment.
From January 1st, 2017, to the date of this Annual Report, Fi-braHotel:
> Opened three hotels from the development portfolio (390 rooms).
> Increased room inventory for Courtyard Toreo hotel to 146 rooms (16 rooms)
As of the date of this Annual Report, FibraHotel has 85 hotels and 12,039 rooms, of which:
> 78 hotels (10,812 rooms) are in operation.> 7 hotels (1,227 rooms) are in different stages of development.
Presentation of the Portfolio
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SEGMENT Number of hotels % of hotels Number of
rooms % of rooms
Limited-Service 22 28.2% 2,792 25.8%Select-Service 41 52.6% 5,995 55.4%Full-Service 10 12.8% 1,649 15.3%Extended Stay 5 6.4% 376 3.5%Total FibraHotel 78 100.0% 10,812 100.0%
REGION Number of hotels % of hotels Number of
rooms % of rooms
Center and South 41 52.6% 5,579 51.6%Northeast 14 17.9% 1,805 16.7%Northwest 17 21.8% 2,476 22.9%West 6 7.7% 952 8.8%Total FibraHotel 78 100.0% 10,812 100.0%
As of the date of this Annual Report, FibraHotel has a well-diversified portfolio inside the Mexican Repub-lic and presence in 26 states, and the three most important hotels in terms of number of rooms (Sheraton Ambassador Monterrey, Fiesta Americana Hermosillo and Fiesta Inn Perisur), represent 661 rooms alto-gether, less than 6.1% of the total number of rooms in operation.
As of the date of this Annual Report, the distribution of hotels in operation is as follows:
Grand Fiesta Americana y Live Aqua, Monterrey Valle
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No. Hotel1 Fiesta Inn Culiacán2 Fiesta Inn Durango3 One Monterrey4 One Acapulco 5 One Toluca6 One Coatzacoalcos7 Fiesta Inn Tepic8 One Aguascalientes9 Fiesta Inn Hermosillo10 One Culiacán11 Fiesta Inn Ecatepec12 Fiesta Inn Perinorte13 Fiesta Inn Nuevo Laredo14 Fiesta Inn Naucalpan15 Fiesta Inn Cuautitlán16 Fiesta Inn Perisur17 Camino Real Puebla18 Fiesta Inn Chihuahua19 Fiesta Inn Guadalajara20 One Querétaro21 Fiesta Inn Aguascalientes 22 Fiesta Inn Monterrey23 Fiesta Inn Querétaro24 Fiesta Inn Saltillo
25 One Patriotismo26 Fiesta Inn Ciudad Juárez27 Fiesta Inn Mexicali28 Fiesta Inn León29 Fiesta Inn Monclova30 Fiesta Inn Torreón31 Real Inn Morelia32 Camino Real Puebla Suites33 One Tapatío34 Fiesta Inn Puebla FINSA35 Fiesta Inn Oaxaca36 One Puebla FINSA37 Real Inn Guadalajara38 Fiesta Inn Tlalnepantla39 Fiesta Inn Toluca Tollocan 40 Real Inn Mexicali41 Fiesta Inn Lofts Monclova42 One Monclova43 Grand Fiesta Americana Monterrey Valle44 Live Aqua Monterrey Valle45 Courtyard Vallejo46 FairfieldInnVallejo47 Fiesta Americana Aguascalientes48 Fiesta Inn Xalapa49 One Xalapa50 FairfieldInnVillahermosa51 Fiesta Inn Ciudad Obregón52 Fiesta Inn Lofts Querétaro53 Gamma León54 Courtyard Ciudad del Carmen55 Fiesta Inn Lofts Ciudad del Carmen56 Gamma Valle Grande57 FarifieldInnLosCabos58 Fiesta Inn San Luis Potosí59 Gamma Tijuana60 FairfieldInnSaltillo61 AC Torre Américas Guadalajara62 AC Antea Querétaro63 One Perisur64 Sheraton Ambassador Monterrey65 Live Aqua Boutique Playa del Carmen66 Fiesta Inn Los Mochis67 Fiesta Inn Cuernavaca68 One Cuernavaca69 FairfieldInn&SuitesJuriquilla70 One Durango71 Aloft Veracruz72 FairfieldInn&SuitesNogales73 Fiesta Inn Lofts Monterrey74 Fiesta Americana Viaducto (Via 515)75 One Cuautilán76 Fiesta Americana Pabellón M77 Fiesta Inn Villahermosa78 Fiesta inn Puerto Vallarta79 Fiesta Americana Hermosillo 80 Fiesta Inn Buenavista81 Full Service Villa del Mar Veracruz82 Fiesta Inn Monterrey Valle83 Live Aqua San Miguel de Allende84 Fiesta Americana Tlalnepantla85 Courtyard Toreo
The following illustration shows the distribution of the FibraHotel portfolio as of the date of the current Annual Report.
Portfolio Map
Desarrollo
Estabilizados
No estabilizados
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42
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Ciudad de México
75
85
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45 85 hotels(78 in operation)
12,039 rooms(10,812 in operation)
Presence in 26 states
Camino Real Puebla
Monterrey, Nuevo León
3 64 43
22 82 44
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SELECT SERVICE - MANAGED
Date of Acq. 2012 2013 2014 2015 2016
Annual Report
Date 1 * Fiesta Inn Aguascalientes 1/21/13 125 125 125 125 125 2 * Fiesta Inn Ciudad Juárez 1/21/13 166 166 166 166 166 3 * Fiesta Inn Ciudad Obregón 4/7/14 123 141 141 141 4 * Fiesta Inn Chihuahua 1/21/13 152 152 152 152 152 5 * Fiesta Inn Cuernavaca 12/15/14 155 155 155 155 6 * Fiesta Inn Culiacán 12/1/12 142 142 146 146 146 146 7 * Fiesta Inn Durango 12/1/12 138 138 138 138 138 138 8 * Fiesta Inn Ecatepec 12/1/12 143 143 143 143 143 143 9 * Fiesta Inn Guadalajara 1/21/13 158 158 158 158 158
10 * Fiesta Inn Hermosillo 12/1/12 155 155 155 155 155 155 11 * Fiesta Inn León 1/21/13 160 160 160 160 160 12 * Fiesta Inn Mexicali 1/21/13 150 150 150 150 150 13 Fiesta Inn Los Mochis 12/5/16 125 125 14 * Fiesta Inn Monclova 2/28/13 121 121 121 121 121 15 * Fiesta Inn Monterrey 1/21/13 161 161 161 161 161 16 * Fiesta Inn Monterrey Valle 8/1/16 177 177 17 * Fiesta Inn Naucalpan 12/1/12 119 119 119 119 119 119 18 * Fiesta Inn Nuevo Laredo 12/1/12 120 120 120 120 120 120 19 * Fiesta Inn Oaxaca 7/5/13 145 145 145 145 145 20 * Fiesta Inn Perinorte 12/1/12 123 123 123 127 127 127 21 * Fiesta Inn Puebla FINSA 7/3/13 123 123 123 123 123 22 * Fiesta Inn Querétaro 1/21/13 175 175 175 175 175 23 * Fiesta Inn Saltillo 1/21/13 149 149 149 149 149 24 * Fiesta Inn San Luis Potosi Oriente 7/21/14 140 140 140 140 25 * Fiesta Inn Tepic 12/1/12 139 139 139 139 139 139 26 * Fiesta Inn Tlalnepantla 6/24/13 131 131 131 131 131 27 * Fiesta Inn Torreón 12/19/12 146 146 146 146 146 146 28 * Fiesta Inn Toluca 4/30/13 144 144 144 144 144 29 Fiesta Inn Puerto Vallarta 1/30/17 144 30 * Fiesta Inn Villahermosa 12/2/15 159 159 159 31 * Fiesta Inn Xalapa 3/27/14 119 119 119 119 32 * Real Inn Guadalajara 8/1/13 197 197 197 197 197 33 * Real Inn Mexicali 7/1/13 158 158 158 158 158 34 * Real Inn Morelia 3/1/13 155 155 155 155 155 35 * Gamma Ciudad Obregón (Valle Grande) 5/30/14 135 135 135 135 36 * Gamma León (Fussion 5) 5/22/14 159 159 159 159 37 * Gamma Tijuana (Lausana Tijuana) 7/27/14 140 140 140 140 38 Courtyard Vallejo 2/24/17 125 39 * Courtyard Ciudad del Carmen 11/25/15 133 133 133
Subtotal 1,225 3,795 4,770 5,084 5,386 5,655
Number of rooms at end of period
The following illustrations shows the evolution of FibraHotel portfolio between 2012 and the date of this Annual Report:
Portafolio in detail
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LIMITED SERVICE - MANAGED 40 * One Acapulco 12/1/12 126 126 126 126 126 126 41 * One Aguascalientes 12/1/12 126 126 126 126 126 126 42 * One Coatzacoalcos 12/1/12 126 126 126 126 126 126 43 * One Cuernavaca 12/15/14 125 125 125 125 44 One Cuautitlán 11/17/16 156 156 45 * One Culiacán 12/1/12 119 119 119 119 119 119 46 One Durango 2/29/16 126 126 47 * One Guadalajara Tapatío 6/24/13 126 126 126 126 126 48 * One Xalapa 3/27/14 126 126 126 126 49 * One Monclova 11/1/14 66 66 66 66 50 * One Monterrey 12/1/12 126 126 126 126 126 126 51 * One Puebla FINSA 7/2/13 126 126 126 126 126 52 * One Querétaro 1/21/13 126 126 126 126 126 53 * One Toluca 12/1/12 126 126 126 126 126 126 54 * One Patriotismo 1/21/13 132 132 132 132 132 55 * One Perisur 7/16/15 144 144 144 56 Fairfield Inn & Suites Juriquilla 1/28/16 134 134 57 * Fairfield Inn Los Cabos 6/20/14 128 128 128 128 58 Fairfield Inn & Suites Nogales 11/8/16 134 134 59 * Fairfield Inn & Suites Saltillo 3/31/15 139 139 139 60 Fairfield Inn & Suites Vallejo 2/24/17 121 61 * Fairfield Inn & Suites Villahermosa 12/9/15 134 134 134
Subtotal 749 1,259 1,704 2,121 2,671 2,792
FULL SERVICE - MANAGED 62 * Fiesta Americana Aguascalientes 1/15/14 192 192 192 192 63 * Fiesta Americana Hermosillo 5/1/16 220 220 64 Fiesta Americana Pabellón M 3/31/16 178 178 65 Grand Fiesta Americana Monterrey Valle 6/13/16 180 180 66 Live Aqua Monterrey Valle 6/13/16 74 74 67 * Camino Real Puebla 12/1/12 153 153 153 153 153 153 68 * Sheraton Ambassador 11/18/14 229 229 229 229 69 AC by Marriott Antea Quéretaro 3/21/16 175 175 70 AC By Marriott Guadalajara 6/1/16 188 188
Subtotal 153 153 574 574 1,589 1,589
EXTENDED STAY - MANAGED 71 * Camino Real Hotel & Suites Puebla 3/1/14 121 121 121 121 72 * Fiesta Inn Lofts Ciudad del Carmen 9/8/15 120 120 120 73 * Fiesta Inn Lofts Monclova 11/1/14 37 37 37 37 74 Fiesta Inn Lofts Monterrey la Fé 7/19/16 48 48 75 * Fiesta Inn Lofts Querétaro 11/1/14 50 50 50 50
Subtotal - - 208 328 376 376
LEASED HOTELS 76 * Fiesta Inn Cuautitlán 12/1/12 128 128 128 128 128 128 77 * Fiesta Inn Perisur 12/1/12 212 212 212 212 212 212 78 * Live Aqua Playa del Carmen 11/19/14 60 60 60 60
Subtotal 340 340 400 400 400 400
TOTAL OPERATING ROOMS 2,467 5,547 7,656 8,507 10,422 10,812
TOTAL OPERATING HOTELS 18 39 56 62 75 78
* 2016 Stabilized Portfolio (56 stabilized hotels in operation)
Date of Acq. 2012 2013 2014 2015 2016
Annual Report
Date
Number of rooms at end of period
One Durango
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epor
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Evolution of the number of hotels
+ 6% vs. 2015
Evolution of the portfolio with number of hotels and rooms
Evolution of the number of rooms
+ 10% vs. 2015
No. of rooms indevelopment
No. of hotels indevelopment
No. of rooms inoperation
No. of hotels inoperation
Number of rooms at end of period
DEVELOPMENTOpening 2012 2013 2014 2015 2016
Annual Report
Date 79 Aloft en Veracruz 2S 2017 166 166 166 80 Fiesta Inn Buenavista 2S 2017 129 129 81 Courtyard Toreo 2017 130 130 130 146 82 Fiesta Americana Viaducto 515 TBD 269 255 255 83 Full-Service Villa del Mar Veracruz TBD 173 173 84 Live Aqua San Miguel de Allende TBD 134 134 85 Fiesta Americana Tlalnepantla TBD 224 224
Hotels opened to the Annual Report date development.
- 489 899 1,753 1,901 390 -
TOTAL DEVELOPMENT 489 899 1,883 2,466 1,601 1,227
NUMBER OF HOTELS IN DEVELOPMENT 4 8 14 18 10 7
TOTAL FIBRAHOTEL PORTFOLIO 2,956 6,446 9,539 10,973 12,023 12,039
NUMBER OF HOTELS 22 47 70 80 85 85
62 66 70 72 75 78
18 14 13 12 10 7
80 80 83 84 85 85
8,5
07
9,1
20
9,7
82
10
,00
7
10
,422
10
,812
2,466 1,853 1,743 1,696 1,601 1,227
10,973 10,973 11,525 11,703 12,023 12,039
2015
2016
Ann
ual R
epor
t
2015
1Q 2
016
2Q 2
016
3Q 2
016
1Q 2
016
2Q 2
016
3Q 2
016
2016
Ann
ual R
epor
t
62 66 70 72 75 78
18 14 13 12 10 7
80 80 83 84 85 85
8,5
07
9,1
20
9,7
82
10
,00
7
10
,422
10
,812
2,466 1,853 1,743 1,696 1,601 1,227
10,973 10,973 11,525 11,703 12,023 12,039
2015
2016
Ann
ual R
epor
t
2015
1Q 2
016
2Q 2
016
3Q 2
016
1Q 2
016
2Q 2
016
3Q 2
016
2016
Ann
ual R
epor
t2015 Q1 2016 Q2 2016 Q3 2016 2016 Annual Report
Operation 62 66 70 72 75 78Development 18 14 13 12 10 7Total 80 80 83 84 85 85
2015 Q1 2016 Q2 2016 Q3 2016 2016 Annual Report
Operation 8,507 9,120 9,782 10,007 10,422 10,812 Development 2,466 1,853 1,743 1,696 1,601 1,227 Total 10,973 10,973 11,525 11,703 12,023 12,039
Brand Affiliations
31
Hotels in our portfolio operate under solid and high-standard brands. As of the date of this Annual report, the hotels operate under the following brands:
> One Hotel (Limited service), Grupo Posadas> Fiesta Inn (Select service), Grupo Posadas> Fiesta Inn Lofts (Extended stay), Grupo Posadas> Gamma by Fiesta Inn (Select service), Grupo Posadas> Fiesta Americana (Full service), Grupo Posadas> Fiesta Americana Grand (Full service), Grupo Posadas> Live Aqua (Full service), Grupo Posadas > Live Aqua Boutique (Full service), Grupo Posadas > Real Inn (Select service), Grupo Real Turismo> Camino Real (Full service), Grupo Real Turismo> Camino Real Hotel & Suites (Extended stay), Grupo Real Turismo> Fairfield Inn & Suites by Marriott (Limited service), Marriott International> Courtyard by Marriott (Select service), Marriott International> AC by Marriott (Full service), Marriott International> Sheraton (Full service), Marriott International
The following table shows the brand affiliations of the hotels in operation as of the date of this Annual Report:
Hotel operating companies
Grupo Posadas. Grupo Posadas, S.A.B. de C.V. is the leading hotel operator in Mexico with 150 hotels and 24,500 owned, leased and managed rooms of the most important and visited city and beach destinations in Mexico. As a result of strong hotel brand positioning (Live Aqua, Grand Fiesta Americana, Fiesta Americana, The Explorean by Fiesta Americana, Fiesta Inn and One Hotels) Grupo Posadas is now a Mexican com-pany with important international recognition. Also, Posadas owns Fiesta Rewards, the most important loyalty and reward program in Mexico, as well as long-term vacation clubs (Fi-
ASÍ ES MI MUNDO DE LOS NEGOCIOS.
ASÍ ES MI MUNDO DE LOS NEGOCIOS.
esta Americana Vacation Club, Live Aqua Residence Club, one private club, and KIVAC; a vocational program based on re-ward points).
Grupo Real Turismo. Hoteles Camino Real is a Mexican hotel company founded in 1958 by the Banco Nacional de México (Banamex) and a group of private investors. In 1962, it signed an agreement to affiliate with Western International Hotels (which later became Westin) to establish the first group of luxury hotels in Mexico with international representation. In
Number of hotels % of hotels
Number of rooms % of rooms
One Hotels 16 20.5% 2,002 18.5%
Fiesta Inn + Gamma 36 46.2% 5,227 48.3%
Fiesta Inn Lofts 4 5.1% 255 2.4%
Fiesta Americana + Live Aqua 6 7.7% 904 8.4%
Grupo Posadas 62 79.5% 8,388 77.6%
Real Inn 3 3.8% 510 4.7%
Camino Real 1 1.3% 153 1.4%
Camino Real Hotel & Suites 1 1.3% 121 1.1%
Grupo Real Turismo 5 6.4% 784 7.3%
Marriott International 11 14.1% 1,640 15.2%
Marriott International 11 14.1% 1,640 15.2%
Total FibraHotel 78 100.0% 10,812 100.0%
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Operational framework
Bajo el esquema operativo de FibraHotel, la administración de los hoteles se lleva a cabo de la siguiente manera:
> Hotel operating companies do the following tasks: they administrate hotels with their own operating team, es-tablish annual hotel business plans (revenue and costs/expenses), determine room rate policies and marketing strategies, set food and beverage sales strategies and those of other types of revenue, provide correct pre-ventative maintenance of major equipment and general maintenance of properties, propose capital expenditures to maintain optimum physical condition of the hotels and hire personnel to operate the business units.
> FibraHotel performs the following tasks: approval of the hotels’ annual business plans, review of the hotels’ re-sults, approval of capital expenditures to maintain the hotels’ physical condition, responsibility for real estate activities (property taxes, insurance…) and funding of the hotels’ operating expenses, among others.
As of the date of this Annual Report, of the 78 hotels operating in the FibraHotel portfolio:
> 75 hotels are under hotel management agreements with hotel operating companies, which operate them on behalf of FibraHotel and deliver the hotels’ monthly operative re-sults to it. Their fees vary, corresponding to a percentage of the operating results of each hotel.
> Three hotels have a leasing agreement with Grupo Posadas and pay rent to FibraHotel (Fiesta Inn Cuautitlán, Fiesta Inn Perisur and Live Aqua Boutique Playa del Carmen), including a variable component, which depends on the hotel’s total revenue or results in the case of Live Aqua Boutique Playa del Carmen, while FibraHotel is responsible only for real es-tate expenditures. Live Aqua Boutique Playa del Carmen in under a leasing contract since Grupo Posadas took manage-ment of the property in December 2015.
Property maintenance policy
As the hotel owner, FibraHotel wants to maintain the proper-ties in optimal physical conditions, for which it does preventa-tive maintenance on them. The FibraHotel internal policy is to reserve five percent of the total revenue of their administrated hotels for capital expenditures for upkeep of the properties and equipment. Hotel operating companies are responsible for drawing up an annual capital expenditure budget, which Fibra-Hotel validates and implements throughout the year.
On the other hand, FibraHotel proceeds with periodical inspec-tion visits to the hotels in order to certify their physical aspect and correct maintenance of their main equipment. In turn, these are compared to the report submitted by each hotel company and done by an external agency, which conducts scheduled re-visions of the physical condition of each business unit.
1993, after 30 years of successful operation, the relationship with Westin concluded and it was acquired in June of 2000 by Grupo Empresarial Ángeles and incorporated as Grupo Real Turismo. Camino Real currently owns three brands: Quinta Real, Camino Real and Real Inn. It operates 40 hotels with approximately 6,659 rooms, including several world-renowned restaurants and op-erates in 23 states of Mexico, including Mexico City.
Marriott International, Inc. (NASDAQ:MAR). (NASDAQ:MAR) is a leading hotel company in the sec-tor, based in Bethesda, Maryland, with more than 6,000 properties in 122 countries and territories. Marriott operates and franchise hotels as well as licenses of resorts. The top 30 Marriott s brands are: Bulgari®, The Ritz-Carlton®, and The Ritz-Carlton Reserve® St. Regis®, W®, EDITION®, JW Mar-riott®, The Luxury Collection®, Marriott Hotels®, Westin®, Le Méridien®, Renaissance® Hotels, Sheraton®, Delta Hotels by MarriottSM, Marriott Executive Apartments®, Marriott Vacation Club®, Autograph Collection® Hotels, Tribute Portfolio®, Design Hotels™, Gaylord Hotels®, Courtyard®, FourPoints® by Sheraton, SpringHill Suites®, Fairfield Inn & Suites®, Residence Inn®, TownePlace Suites®, AC Hotels by Marriott®, Aloft®, Element®, Moxy® Hotels, and Protea Hotels by Marriott®. The company also operates the loyalty programs Marriott Rewards®, which includes The Ritz-Carlton Rewards® and Starwood Preferred Guest®.
We currently have agreements with three companies that provide us with hotel administration services and use their own brands for the hotels they operate. In the future, aside from continuing associating ourselves with these companies, we hope to use other leading companies, which will be able to use franchised brands owned by third parties.
33
Limited service
Limited service hotels offer convenient services but tradition-ally do not have bars, restaurants or conference and meeting rooms or offer additional services. However, in the last few years, the tendency has been for this class of hotels to offer a combination of these services, including business centers, gyms, pools, a limited selection of meals (breakfast included) and limited meeting room space.
As of the date of this Annual Report, FibraHotel has 22 Lim-ited service hotels in operation, which represent 2,792 rooms (approximately 25.8% of the total number of rooms in opera-tion), 16 of which are operated by Grupo Posadas under the “One Hotels” brand and six by Marriott International under the “Fairfield Inn & Suites by Marriott” brand.
Select services
These hotels offer some additional services to those offered by limited service hotels, including food and beverage (restau-rants, bars and room service), ballrooms for social events and workspaces, as well as other in-room services.
As of the date of this Annual Report, FibraHotel has 41 select service hotels in operation, which represent 5,995 rooms (ap-proximately 55.4% of the total number of rooms in operation), 36 of which are operated by Grupo Posadas under the “Fiesta Inn” and “Gamma by Fiesta Inn” brands, as well as three oper-ated by Grupo Real Turismo under the “Real Inn” brand and two by Marriott International under the “Courtyard by Mar-riott” brand.
Hotel Segments of the FibraHotel portfolio
The types of hotels in the FibraHotel portfolio, and those sought after with acquisitions and development, are described in detail below:
Full service
These hotels have a hearty food and beverage offer with various consumption centers (restaurants and bars), meeting rooms and conference rooms for social or business events for more than 500 people and additional services related to full service hotels: spas, extended room service schedule, valet parking, concierge, bellboys and larger common areas.
As of the date of this Annual Report, FibraHotel has 10 full service hotels in operation, which represent 1,649 rooms (ap-proximately 15.3% of the total number of rooms in operation), one operated by Grupo Real Turismo under the “Camino Real” brand, six operated by Group Posadas under the “Fiesta Amer-ican”, “Grand Fiesta Americana” brand and “Live Aqua”, three operated by Marriott International under the “AC by Marriott” brand and under the “Sheraton” brand.
Extended stay
The hotels in this segment are characterized by their suite lay-out, in one or two-bedroom studio layouts, nearly always with a full kitchen and dining and work areas. Some of the services offered by these hotels are laundry rooms for guest use, public recreation areas, no restaurant, but with the possibility of us-ing the restaurant in a neighboring hotel, as per strategy.
As of the date of this Annual Report, FibraHotel has five ex-tended stay hotels in operation with 376 rooms (approximate-ly 3.5% of the total number of rooms in operation), four oper-ated by Grupo Posadas under the “Fiesta Inn Lofts” brand, and one operated by Grupo Real Turismo under the “Camino Real Hotel & Suites” brand.
Fiesta Inn Perisur
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Operational indicators of the FibraHotel portfolio
As of December 31st, 2016, the operating hotels in the FibraHotel portfolio (75 hotels) reported the following:
> Occupancy rate of 62.7%.> ADR of MXN $1,011. > RevPAR of MXN $634.
The following graph shows the 2015 and 2016 quarterly operating indicators of the 56 stabilized hotels:
937
941
919
950
980
1,00
1
980
1,0
25
546 60
4
597
638
616 68
4
679
702
58.3% 64.2% 65.0% 67.2%ı
62.9% 68.3% 69.3% 68.5%ı
1Q 2
015
2Q 2
015
3Q 2
015
4Q
201
5
1Q 2
016
2Q 2
016
3Q 2
016
4Q
201
6
ADR RevPAR Occupancy
Fiesta Inn Tlalnepantla
Sheraton Ambassador Monterrey
35
Total Portfolio of Stabilized Hotels (56H) Total Portfolio (75H)
Year 2014 Year 2015 Year 2016 Year 2016
REGION Ocup. ADR RevPAR Ocup. ADR RevPAR Ocup. ADR RevPAR Ocup. ADR RevPAR
Northwest 58.1% $895 $520 62.7% $911 $571 65.3% $951 $620 64.5% $939 $606
Northeast 60.1% $843 $507 64.8% $917 $594 67.7% $1,024 $693 60.0% $1,119 $671 Center and South 62.1% $946 $587 63.9% $969 $619 67.2% $1,029 $691 62.2% $1,016 $632
West 59.0% $818 $483 63.3% $847 $536 73.1% $877 $642 67.8% $943 $639
Total 60.5% $907 $549 63.7% $937 $597 67.2% $997 $670 62.7% $1,011 $634
Vs. previous year 318 bp 3.2% 8.7% 355 bp 6.4% 12.3%
Total Portfolio of Stabilized Hotels (56H) Total Portfolio (75H)
Year 2014 Year 2015 Year 2016 Year 2016
SEGMENT Ocup. ADR RevPAR Ocup. ADR RevPAR Ocup. ADR RevPAR Ocup. ADR RevPAR
Limited-Service 58.3% $708 $413 63.7% $738 $470 63.2% $780 $493 58.9% $805 $475
Select-Service 62.1% $933 $579 64.8% $958 $620 69.7% $1,015 $707 67.9% $1,012 $687
Full-Service 58.8% $1,092 $642 57.5% $1,188 $683 60.1% $1,281 $770 50.7% $1,424 $722
Extended-Stay 31.5% $992 $313 59.7% $1,035 $618 63.6% $1,088 $691 52.3% $999 $523
Total 60.5% $907 $549 63.7% $937 $597 67.2% $997 $670 62.7% $1,011 $634
Vs. previous year 318 bp 3.2% 8.7% 355 bp 6.4% 12.3%
The following table shows some operating information by segment for the 56 stabilized hotels for the periods ending on Decem-ber 31st, 2014, 2015 and 2016:
The following table shows some operating information by region1 for the 56 stabilized hotels for the periods ending on December 31st, 2014, 2015 and 2016:
(1) Northwest refers to the following states: Baja California Norte, Baja California Sur, Chihuahua, Durango, Sinaloa and Sonora. Northeast refers to the following states: Coahuila, Nuevo León and Tamaulipas. Central and South regions correspond to the: Aguascalientes, Campeche, Mexico City, State of Mexico, Gua-najuato, Guerrero, Michoacán, Morelos, Oaxaca, Puebla, Querétaro, Quintana Roo, San Luis Potosí, Tabasco and Veracruz. West refers to Jalisco and Nayarit.
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Total revenue
The financial results described in this section refer to the finan-cial statements comprising 75 hotels in operation as of Decem-ber 31st, 2016:
> 72 hotels under a management agreement. > 3 hotels under a leasing agreement.
During 2016, total revenues were MXN $2,635 million, com-pared to MXN $2.008 million in 2015 (31.2% increase):
> MXN $2,057 million for room rental (78.1% of total reve-nue), an increase of 33.5%.
> MXN $468 million for food and beverages (17.8% of total revenue), an increase of 27.4%.
> MXN $79.8 million for the lease of (i) three hotels and (ii) retail space / antennas (3.0% of the total revenue), an in-crease of 4.9%.
> MXN $29.5 million (1.1% of the total revenue) for other rev-enue, an increase of 28.5%.
Financial Section2
2016 Financial Results
Revenues of hotels under management agreements rose by 32.6%, from MXN $1,927 million to MXN $2,555 million, due to the following factors:
> Increase in RevPAR for stabilized hotels (+12.3% for the 56 stabilized hotels).
> Acquisition of two hotel in operation during the year.> Opening of 11 hotels in the development portfolio.> Acceleration of the hotels opened in 2015 and 2016.
Total revenues from the first to the fourth quarter of 2016 rose because FibraHotel added hotels to the portfolio throughout the year:
> January 2016: opening of Fairfield Inn & Suites Juriquilla> February 2016: opening of One Durango> March 2016: openings of the hotels AC by Marriott Querétaro
and Fiesta Americana Pabellón M> May 2016: acquisition of the Fiesta Americana Hermosillo
Live Aqua Boutique Playa del Carmen
37
1Q 2016 2Q 2016 3Q 2016 4Q 2016 Year 2016
Rooms Revenues 420.3 492.8 546.9 597.2 2,057.3 Food and Beverage 91.5 118.4 120.0 138.5 468.4 Lease 18.6 17.7 20.9 22.6 79.8 Others 3.2 6.4 8.2 11.7 29.5 Total Revenues 533.5 635.3 696.1 770.1 2,635.0
Revenues - Managed Hotels 514.9 617.7 674.2 748.4 2,555.2 % of total revenues 96.5% 97.2% 96.9% 97.2% 97.0%
# of hotels in operation 66 70 72 75 75# of managed hotels 63 67 69 72 72# of leased hotels 3 3 3 3 3
The following table shows the KPIs of hotels under management agreements for the four quarters of 2016, considering only hotels that generated room revenues for FibraHotel (from the acquisition or opening date / without leased hotels):
Cost and general expenses
In 2016, the total costs and general expenses of FibraHotel’s managed hotels were MXN $1,792 million compared to MXN $1,338 million in 2015:
> MXN $1,103 million for indirect expenses (61.6% of total costs and general expenses), including the administra-tive costs, advertising and promotion, maintenance, human resources, energy and fees paid to hotel operat-ing companies.
> MXN $403 million for room expenses (22.5% of costs and general expenses) directly related to room rental revenues.
> MXN $286 million for food and beverages costs and ex-penses (16.0% of costs and general expenses) directly related food and beverages and others revenues.
Lodging contribution
The lodging contribution was MXN $843 million in 2016, rep-resenting 32.0% of total revenues, in comparison to MXN $670 million in 2015 representing 33.4% of total revenues. The de-crease in margin was due to the mix between hotels under management contracts and leasing contracts and to the mix between stabilized and non-stabilized hotels:
> MXN $764 million corresponded to managed hotels (29.9% margin), compared to MXN $589 million in 2015 (30.6% margin).
> MXN $79.5 million corresponded to leased hotels and retail spaces (100% margin), compared to MXN $81.2 million in 2015.
> June 2016: openings of the hotels AC by Marriott Guadalajara, Grand Fiesta Americana Monterrey Valle and Live Aqua Monterrey Valle
> July 2016: opening of Fiesta Inn Lofts Monterrey la Fe> August 2016: acquisition of the Fiesta Inn Monterrey Valle> November 2016: openings of the hotels Fairfield Inn & Suites Nogales and One Cuautitlán> December 2016: opening Fiesta Inn Los Mochis
Therefore FibraHotel revenues have increased every quarter:
(2) Except when mentioned, all figures in the report are in accordance with International Financial Information Standards (“IFRS”), expressed in nominal Mexican pesos. Some of the financial results in this section may differ by topic to audited, consolidated Financial Statements audited in 2015 without any modification to the results and financial position of FibraHotel.
(3) Hotels leased throughout 2016 are Fiesta Inn Cuautitlán, Fiesta Inn Perisur and Live Aqua Boutique Playa del Carmen
Year 2016 Available Rooms
Occupied Rooms Occup. Room Revenues Ps. $
Million ADR RevPAR
1st quarter 750,630 442,090 58.9% $420.3 $951 $560 2nd quarter 815,681 506,294 62.1% $492.8 $973 $604 3rd quarter 878,446 555,836 63.3% $546.9 $984 $623 4th quarter 899,291 571,656 63.6% $597.2 $1,045 $664
Total 3,344,048 2,075,876 62.1% $2,057.3 $991 $615
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The 67 basis point decrease in managed hotels lodging contribution margin between 2015 and 2016 is mainly due to recently opened hotels, which usually generate less profit than stabilized hotels for being in ramp-up period. Taking a comparable perim-eter into account (same hotels perimeter between 2015 and 2016), the managed hotels lodging contribution margin rose by 62 basis points, from 30.6% to 31.2%. That increase is mainly due to the growth of 13.6% in room revenues, the operating leverage at the hotel level (expenses and costs rose 12.3%, meaning 125 basis points less than the increase in total revenue), but in the same manner, it is due to Asset Management efforts carried out by the Administrator with hotel operating companies.
During 2016 the ramp-up portfolio has increase due to hotel openings from the development portfolio, and has shown a promis-ing trend in cash flow generation and margin performance, the contribution margin rose from 6.6% in the first quarter to 26.6% during the fourth quarter of 2016 (annual contribution margin: 19.2%).
The following chart and table show the evolution of revenues and contribution from the non-stabilized managed hotels dur-ing 2016:
Hoteles no estabilizados: evolución ingresos / contribución
$35.2 $63.4 $104.6 $143.0 $2.3 $5.8 $20.3 $38.0
6.6% 9.2%
19.4%
26.6%
1Q 2
016
2Q 2
016
3Q 2
016
4Q 2
016
Revenues Contribution Margin
Sheraton Ambassador Monterrey
Ps. $ millions 1Q 2016 2Q 2016 3Q 2016 4Q 2016 2016 FY
Total of managed hotels 12 15 16 19 19
Non stabilized managed hotels revenues 35 63 105 143 346 % of total managed hotels revenues 6.8% 10.3% 15.5% 19.1% 13.6%
Non stabilized managed hotels contribution 2 6 20 38 67 Margin 6.6% 9.2% 19.4% 26.6% 19.2%
% of total managed hotels contribution 1.6% 3.2% 10.2% 16.3% 8.7%
39
The previous chart shows, the upward trend in revenues and contribution generation; likewise a substantial increase in con-tribution margin, which was 19.2% for the whole of 2016, but reached 26.6% levels during last quarter of the year. The strong acceleration is driven mainly by the five full-service hotels opened between March and July of 2016 (AC Querétaro, Fiesta Americana Pabellon M, AC Guadalajara, Grand Fiesta Americana Monterrey Valle and Live Aqua Monterrey Valle). During the last quarter of 2016, these five hotels together had an occupancy rate of 46.5%, an ADR of MXN $1,865, a RevPAR of MXN $867 and provided MXN $22.6 million to the total lodging contribution. At a contribution level, results still underperform (less than 10% of total quarter’s lodging contribution), but margin is reaching 27.7% levels with an occupancy rate under 50%.
Operating profit
Other operating expenses of MXN $484 million are comprised mainly of real estate expenses (MXN $33.9 million), the corpo-rate expenses (MXN $48.5 million), the advisory fee (MXN $105 million) and depreciation for the period (MXN $297 million). In 2015, these operating expenses rose to MXN $385 million and the increase (+25.6%) is explained mainly by depreciation (larger number of real estate assets) as administrative expenses (to ac-company FibraHotel growth) and real estate expenses (more real estate assets) increased to a lower extent than the total lodging contribution.
Operating profit rose to MXN $359 million, representing 13.6 % of total revenues, compared to MXN $285 million (14.2% of to-tal revenues) in 2015.
Adjusted operating profit
During 2016, FibraHotel had non-operating expenses for MXN $107 million, which correspond mainly to expenses related to hotel acquisitions and development (taxes, appraisals, techni-cal audits and pre-operative expenses, among others), while in 2015, these expenses were MXN $77.7 million.
The adjusted operating profit rose to MXN $252 million, com-pared to MXN $207 million in 2015, equivalent to a 22.0% year-ly growth.
Comprehensive financing results
During 2016, FibraHotel had a net debt position of MXN $2,248 million (total debt of MXN $2,697 million) vs. MXN $476 million on December 31th, 2015 (total debt of MXN $852 million).
In the fourth quarter, FibraHotel started using available credit lines to finance its projects, including part of the development portfolio and generated financing costs for MXN $108 million interest during the period. In conformance with IFRS stan-dards, debt-related interest associated to development in the construction stage is capitalized as part of the investment for each specific project. During the fourth quarter of 2016, ap-proximately 62.5% of total debt was related to projects under development, for which FibraHotel capitalized MXN $68.0 mil-lion in interest for the quarter. It should be mentioned that the interest was paid with cash available for developments. After each development is opened to the public, the respective inter-est is no longer capitalized and the financial cost at that time is transferred to the FibraHotel income statement in accordance with IFRS standards.
Consolidated net profit
After taxes of MXN $1.8 million on profit not linked to room revenues (food and beverages…) at the subsidiary level, the consolidated net profit reached MXN $214 million. The consolidated net profit per CBFI rose to 43.27 cents (excluding CBFI corresponding to the Development Contribution Portfolio and did not have economic rights at the end of each quarter of 2016). For 2015, the consolidated net profit per CBFI reached to 47.86 cents. The decrease in consolidated net profit is due mainly to a drop in integral financing results of MXN $29.8 million for 2015 to (MXN $40.7 million) in 2016 because of interests related to credit lines, investment efforts made throughout 2016 and the interests rates increase throughout 2016 (Mexico’s Banks interest reference rate in-creased from 3.25% at 2015 to 5.75% at yearend 2016).
The following table shows a summary of FibraHotel consolidated net profit per CBFI for all four quarters of 2016:
In millions of pesos, except data per CBFI, in pesos.
1Q 2016 2Q 2016 3Q 2016 4Q 2016 Year 2016
Net Result 57.1 47.1 59.5 50.2 213.9
Number of CBFIs (million)With economic rights 494.3 494.3 494.3 494.3 494.3
Net Result / CBFINet Res. / CBFI with eco. right $0.1155 $0.0953 $0.1203 $0.1017 $0.4327
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2016, yearly and quarterly results (in millions of pesos)
1Q 2016 2Q 2016 3Q 2016 4Q 2016 Year 2016
Revenues
Rooms 420,318 492,819 546,894 597,226 2,057,257
Food and Beverage 91,451 118,413 120,044 138,489 468,397
Leases 18,594 17,702 20,896 22,639 79,832
Other 3,151 6,388 8,236 11,743 29,519
TOTAL REVENUES 533,516 635,322 696,070 770,097 2,635,004
Revenues - Managed Hotels 514,921 617,697 674,189 748,388 2,555,196
% of Total Revenues 96.5% 97.2% 96.9% 97.2% 97.0%
Costs and general expenses
Rooms 79,221 95,542 107,656 120,257 402,675
Food and Beverage 55,348 69,423 76,089 84,952 285,812
Administrative Expenses 233,559 268,871 291,204 309,448 1,103,083
Total Costs and General Expenses 368,129 433,837 474,949 514,657 1,791,571
TOTAL LODGING CONTRIBUTION 165,387 201,486 221,121 255,440 843,433
Total Lodging Contribution Margin 31.0% 31.7% 31.8% 33.2% 32.0%
Lodging Contribution - Managed Hotels 146,792 183,861 199,240 234,006 763,899
Margin 28.5% 29.8% 29.6% 31.3% 29.9%
Real Estate Expenses 8,573 8,103 9,698 7,536 33,910
NET OPERATING INCOME 156,814 193,383 211,422 247,904 809,523
NOI Margin 29.4% 30.4% 30.4% 32.2% 30.7%
Administrative Expenses Related to FibraHotel 12,398 12,961 12,313 10,859 48,530
Advisory Fee 26,093 26,102 26,182 26,296 104,673
EBITDA 118,324 154,320 172,927 210,749 656,320
EBITDA Margin 22.2% 24.3% 24.8% 27.4% 24.9%
Depreciation 58,017 64,518 68,807 105,587 296,930
INCOME / (LOSS) FROM OPERATIONS 60,306 89,802 104,120 105,162 359,390
Operating Income Margin 11.3% 14.1% 15.0% 13.7% 13.6%
Extraordinary Expenses, Net 4,406 39,749 34,133 28,642 106,931
ADJUSTED INCOME / (LOSS) FROM OPERATIONS 55,900 50,053 69,987 76,520 252,459
Non Operating Income / (Loss) 1,719 262 1,428 509 3,918
Comprehensive Financing Result (2,083) (2,278) (12,719) (23,621) (40,700)
INCOME BEFORE TAXES 55,537 48,037 58,696 53,408 215,678
Tax (1,556) 938 (756) 3,161 1,787
CONSOLIDATED NET (LOSS) INCOME 57,093 47,098 59,452 50,247 213,890
Net Income Margin 10.7% 7.4% 8.5% 6.5% 8.1%
41
Operating cash flow
During 2016, FibraHotel generated an operating cash flow of MXN $633 million compared to MXN $402 million in 2015. Ex-cluding investment-related activities (non-operating activities, payment and recuperation of VAT related to developments and acquisitions), the net operating cash flow was MXN $577 mil-lion compared to MXN $516 million.
Investment cash flow
During 2016, FibraHotel generated a negative investment cash flow of (MXN $1,736 million):
> (MXN $245 million) for the acquisition of 2016.> (MXN $1,261 million) for the development portfolio (with-
out capitalized interests).> (MXN $149 million) for renovation of hotels.> (MXN $94 million) for CAPEX maintenance.> MXN $2.1 million for investment revenues (fixed assets
sale…).> MXN $11.2 million for interests generated during the period.
During 2015, FibraHotel generated a net cash flow for negative investment activities of (MXN $2,530 million):
> (MXN $185 million) for 2015 acquisitions. > (MXN $2,122 million) for the portfolio development port-
folio.> (MXN $158 million) for renovation of hotels.> (MXN $100 million) for final payment of the Hotel Camino
Real Hotel & Suites Puebla.> MXN $6.5 million for CAPEX maintenance.> MXN $34.3 million for interests generated during the
period.
Financing cash flow
During 2016, FibraHotel generated a financing cash flow of MXN $1,231 million:
> MXN $1,845 million related to the credit lines draw down during the last quarter of 2016.
> (MXN $470 million) for distribution:
• (MXN $118 million) for distribution of the 2015 fourth quarter.
• (MXN $99 million) in respect to distribution of the 2016 first quarter.
• (MXN $119 million) in respect to distribution of the 2016 second quarter.
• (MXN $135 million) in respect to distribution of the 2016 third quarter.
> (MXN $57.4 million) for capitalized interest payments (total capitalized interest of MXN $68.0 millon for 2016).
> (MXN $46.3 million) for the acquisition of debt interest rate coverage and interest payment.
> (MXN $39.5 million) for interest payment and other finan-cial expenses paid.
During 2015, FibraHotel generated a financing cash flow of MXN $407 million:
> MXN $852 million related to the credit lines draw down during the last quarter of 2015.
> (MXN $429 million) for distribution:• (MXN $111 million) for distribution of the 2014 fourth
quarter. • (MXN $103 million) in respect to distribution of the
2015 first quarter.
Cash flow and liquidity
One Perisur
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The following table presents details of the debt position of FibraHotel:
• (MXN $109 million) in re-spect to distribution of the 2015 second quarter.
• (MXN $106 million) in re-spect to distribution of the 2015 third quarter.
> (MXN $16.4 million) for the ac-quisition of debt interest rate coverage and interest payment.
Adjusted Funds from Operations
During 2016, FibraHotel generated:
> Funds From Operations (FFO) of MXN $511 million compared to MXN $450 million in 2015, rep-resenting a 13.4% increase over last year.
> Adjusted Funds From Operations (AFFO) of MXN $494 million compared to $429 million in 2015, representing a 15.1% in-crease over last year.
Liquidity position
FibraHotel closed 2016 with:
> A cash position, including VAT, by carrying forward MXN $678 million (VAT to be recovered ascended to MXN $229 million). Excluding VAT, the cash position and cash equivalents amounted to MXN $449 million, compared to MXN $377 million on De-cember 31st, 2015.
> A total debt of MXN $2,697 million. As of December 31st, 2015, FibraHotel had a total debt of MXN $852 million. The net debt position (including VAT) is MXN $2,019 million.
> Approximately MXN $302 million available for unused credit lines.
The following table shows the FibraHotel liquidity position:
AC by Marriott Querétaro
Ps. $ millions 2016 Currency Interest rate Maturity
BBVA Bancomer 179.0 MXN TIIE 28d + 150bps Oct-27BBVA Bancomer 123.1 MXN TIIE 28d + 150bps Oct-27BBVA Bancomer 153.4 MXN TIIE 28d + 150bps Oct-27BBVA Bancomer 202.4 MXN TIIE 28d + 150bps Nov-27BBVA Bancomer 341.1 MXN TIIE 28d + 150bps Nov-27Banorte 1 1,000.0 MXN TIIE 91d + 200bps Oct-24Banorte 2 698.1 MXN TIIE 91d + 130bps* Jul-26
Total debt position 2,697.0
* The spread will increase to 200bps in September 2018 and to 250bps in September 2021.
Ps. $ thousand 2015 2016 Comment
Cash, cash equivalents and restricted cash 376,824 448,828 Available cash and cash equiv. - Operation 222,443 207,725 Hotels’ working capital Restricted cash and cash equiv. - Operation 39,798 56,294 Available for maintenance CapEx
Available cash and cash equiv. - Investment 114,583 184,809 Cash available for investment
Cash position without restricted cash 337,026 392,534
43
(4) For FibraHotel, the commitments correspond to i) debt service (principal and interest); ii) capital expenditures (CAPEX for maintenance of the hotels); and iii) non-discretionary developments (projects under development). Available resources correspond to i) cash and equivalents (exclu-ding restricted cash); ii) VAT carried forward, iii) operating profit after distribution payment and iv) available credit lines.
The following table shows details of the FibraHotel debt amortization schedule:
As of December 31st, 2016, and according to credit agreements, FibraHotel has entered into various financial instruments destined only to covering variations of the TIIE rate (Interbank Equilibrium Interest Rate) 74% of FibraHotel s debt is covered. These instru-ments cost were paid up-front, and they have a 5-year maturity with the following characteristics:
New regulation applicable to FIBRAs
During 2014, the Comisión Nacional Bancaria y de Valores (CNBV) issued a regulation to measure the leverage and index of REIT debt service coverage.
> Debt level: FibraHotel closed 2016 with a MXN $2,697 million indebtedness and total assets of MXN $12,430 million corre-sponding to a 21.7% debt level. It should be mentioned that the FibraHotel Trust agreement stipulates that the leveraging ratio cannot exceed 40%, while the regulation applicable to REITs indicates that this indicator cannot be over 50%.
> Debt service coverage ratio: The debt service coverage ratio is calculated by taking the capacity of FibraHotel to deal with pay-ments of their commitments with its available resources4 for the next six quarters. This ratio must be more than 1.0x. For the first, second, third and fourth quarters of 2016, FibraHotel debt service coverage ratio was 1.2x, 1.2x, 1.7x and 1.7x, respectively.
Capital Expenditures
As of December 31st, 2016, available capital reserve for maintenance expenses destined to maintain the state and conditions of hotels in operation and based on a percentage of the gross revenue of hotels under an operating agreement amounted to MXN $56.3 million compared to MXN $37.9 million to December 31st, 2015.
The most relevant FibraHotel capital expenditures during the year were:
> Maintenance CapEx: MXN $94.1 million.> Capital investment expenditures in current hotels: FibraHotel is constantly analyzing the opportunity to invest capital in the
current hotel portfolio when their expected returns justify the investment. During the year, FibraHotel invested MXN $149 mil-lion in capital expenditures for renovation, mainly in the Fiesta Americana Hermosillo, Sheraton Ambassador Monterrey and Live Aqua Boutique Playa del Carmen: • Fiesta Americana Hermosillo: Renovation of (i) rooms, (ii) hallways and (iii) common areas. The renovation has a budget
of MXN $85.0 million, of which MXN $70.6 million had been invested by December 31st, 2016. • Sheraton Ambassador Monterrey: Renovation of (i) rooms, (ii) hallways and (iii) common areas. The renovation has a bud-
get of USD $5.0 million, of which MXN $73.9 million had been invested by December 31st, 2016 (Ps. $13.2 million invested in 2016).
• Live Aqua Boutique Playa Del Carmen (repositioning under a new brand): (i) rooms and (ii) addition of consumption cen-ters. The renovation has a budget of MXN $26.3 million, of which MXN $18.0 million had been invested by December 31st, 2016.
Year Payment %2017 98.3 3.6%2018 102.1 3.8%2019 196.0 7.3%2020 200.1 7.4%2021 306.8 11.4%
2021 and after 1,793.7 66.5%Total 2,697.0 100.0%
Ps. $ millions Disposal Type Strike Limit
BBVA Bancomer 657.9 Cap Spread 5.0% 9.0%
BBVA Bancomer 341.1 Cap Spread 5.0% 7.0%
Banorte 1 1,000.0 Cap 6.0%
Non covered 698.1
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Distribution for 2016
FibraHotel seeks to create value for its CBFI holders. As a result, the FibraHotel Technical Committee approved distribution of a total amount of MXN $503 million for 2016, the details of which are shown in the following table:
For the 2015 tax year, FibraHotel distributed a total of MXN $436 million, representing MXN $0.8812 per CBFI. The distribution increase per CBFI between 2015 and 2016 was 15.5%.
CBFI with economic restrictions
During the IPO, and in addition to the issuance of 223’611,110 CBFIs that were offered to in-vestors, 80’290,656 CBFIs were issued to the Control Trust in exchange for 21 hotels in the Contribution Portfolio, four of which were at different stages of development (Contribution Portfolio in Development), representing a total of 9’697,897 CBFIs:
> Real Inn Morelia: issuance of 2’342,667 CBFIs.> One Guadalajara Tapatío: issuance of 688,564 CBFIs.> Camino Real Hotel & Suites Puebla: issuance of 1’538,461 CBFIs.> Courtyard by Marriott Toreo: issuance of 5’128,205 CBFIs.
These 9’697,897 CBFIs would not have economic rights (distribution…) until all four hotels under development are completed and operating. By December 31st, 2016, three of the hotels were in operation (Real Inn Morelia, One Guadalajara Tapatío and Camino Real Hotel & Suites Puebla) and the CBFIs economic rights issued in exchange for these three hotels have been released. The following table shows details of information on CBFIs, with and without eco-nomic rights.
Cash distribution
1Q 2016 2Q 2016 3Q 2016 4Q 2016 Year 2016
Total Distribution 99.0 119.0 134.7 150.5 503.2
Taxable income 9.2 0.0 38.7 0.0 47.9Capital Return 89.8 119.0 96.0 150.5 455.3
Number of CBFIs (million)Outstanding 499.4 499.4 499.4 499.4 499.4With economic rights 494.3 494.3 494.3 494.3 494.3
Distribution per CBFI $0.2003 $0.2408 $0.2726 $0.3045 $1.0181 Taxable income $0.0187 $- $0.0783 $- $0.0970 Capital Return $0.1816 $0.2408 $0.1943 $0.3045 $0.9211
In millions of pesos, except data per CBFI, in pesos.
1Q 2016 2Q 2016 3Q 2016 4Q 2016 Year 2016
Total number of CBFIs 499.4 499.4 499.4 499.4 499.4
CBFIs without economic rights 5.1 5.1 5.1 5.1 5.1Courtyard by Marriott Toreo 5.1 5.1 5.1 5.1 5.1
CBFIs with economic rights 494.3 494.3 494.3 494.3 494.3
In millions of pesos, except data per CBFI, in pesos.
45
FibraHotel Corporate Governance
To the date of this Annual Report, the FibraHotel Technical Committee is formed by 11 owner members, four of which are independent members (36%).
Members’ biographical information:
1. Roberto Galante Totah. Co-President of the FibraHotel Technical Committee, as well as Founding Partner and President of GDI, La Vista Country Club, Bosque Real and Mercap, GDI companies.
2. Alberto Galante Zaga. President of the FibraHotel Board, as well as a GDI partner and Vice President. He is an executive member of the Consejo de Fondo Hotelero Mexicano I and II, [Mexican Hotelier Fund Council I and II], Fondo Comercial Mexicano, La Vista Country Club, Bosque Real and Mercap, GDI companies.
3. Simón Galante Zaga. Founding partner and CEO of GDI with more than 20 years of experi-ence in hotel, residential and commercial real estate, and property developer and adminis-trator, as well as in the acquisition, development and financing of real estate projects. He is an executive member of the Consejo de Fondo Hotelero Mexicano I and II, Fondo Comercial Mexicano, La Vista Country Club, Bosque Real and Mercap, GDI companies. He specialized in Business Administration from the IPADE.
4. Adolfo Benjamín Fastlicht Kurián. CEO of Icon Group, a Mexican real estate development com-pany. Mr.. Fastlicht was cofounder and Co-CEO of Grupo Cinemex, the second movie theater chain in the country. Current CEO of The Lot Premium Cinemas in La Jolla, California. He has held the position of President of the Asociación de Desarrolladores Inmobiliarios (ADI), [Real Estate Developers Association], the Mexican real estate industry’s top association. He also takes an active part in Councils of various educational institutions. Mr. Fastlicht holds a BA in Hotel Ad-ministration from the University of Boston (1989) and a MBA from Harvard University (1993).
5. Sandor Valner Watstein. CEO of Walton Street Capital Latin America, a worldwide admin-istrator of real estate funds. Mr. Valner was Director of Credit Suisse First Boston in Mexico and member of the executive committee for Latin America. He has been a partner in EMVA and Valor Consultores, Investment Banks and worked with JP Morgan in corporate finances and M&A. He is cofounder and Vice President of the Asociación Mexicana de Fondos Inmo-biliarias y de Infrastuctura [Mexican Association of Real Estate Funds and Infrastructure] and member of the administrative council of various real estate companies in Latin America. He is an active member of the World Presidents’ Organization and holds Masters degrees in Engineering and Business Administration from Stanford University.
Technical Committee and FibraHotel Committees
Fiesta Americana Monterrey Pabellón M
AC by Marriott Querétaro
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6. Albert Galante Saadia. Graduated from the Universidad Autónoma Metropolitana de México with a degree in In-dustrial Engineering. He has been a member of the board of Mex Factor, Sofom E.N.R., a founding member of Nor-malización y Certificación Electrónica, S.C. and the elec-tronics certification agency established in 2001. Since 1987, Mr. Galante has been CFO, member of the board and consultant of Ampliequipos, S.A. de C.V., a safety testing laboratory as well as the Ampliaudio, S.A. de C.V. consul-tant, which imports and exports electronic equipment and supplies.
7. Mayer Zaga Bucay. CFO of Grupo Industrial Miro, a tex-tile and clothing manufacturer, as well as an import and export agent for brands such as Nike, Adidas and Victo-ria’s Secret, among others, with approximately 2,000 em-ployees. In 1983, he was cofounder of the award-winning clothing company Ocean Pacific, opening close to 50 stores throughout the country and supplying highly renowned department stores in Mexico. He is currently an investor in various real estate projects and a partner in GDI.
8. Manuel Zepeda Payeras. Mr. Zepeda has played a key role in most of the main institutions and regulatory framework of the housing and mortgage sectors in Mex-ico. Among other activities, he presided over the Fondo de Operación y Financiamiento Bancario a la Vivienda (FOVI) [Operating Fund and Bank Financing of Housing], a trust fund created to provide financial support for the acquisition and construction of social, affordable hous-ing. He was the founder and general director of the So-ciedad Hipotecaria Federal [Federal Mortgage Society], a financial institution created to develop primary and sec-ondary mortgage markets. He was President of the Unión Interamericana para la Vivienda [Inter-American Housing Union], an association of more than 100 financial inter-mediaries in Latin America for mortgage financing; and a consultant in various housing companies and mortgage financing companies, such as SARE Holding, MARHNOS Vivienda, ARKO Promoción Inmobiliaria, Crédito Inmo-biliario and the BBVA Fondo Inmobiliario INMESP [Real Estate Fund]. He was also Head Economist of the Presi-dential Advisory Office from 1976 to 1982 and has been a member of various non-profit organizations. He has a Master’s degree in Economy and another in Business Ad-ministration from the University of Chicago.
9. Jaime Zabludowsky Kuper. Current Executive President of the Consejo Mexicano de la Industria de Productos de Consumo [Mexican Council for the Consumer Products Industry], an association that brings together 43 of the most important high turnover consumer good compa-nies. He is also President of the Mexican Council on For-eign Relations, Vice President and Founding Partner of IQOM Inteligencia Comercial. He has been an independent consultant of the PEMEX Administration Council for Ex-ploration and Production, and in that capacity, held the position of President of its Acquisitions, Leasing, Works and Services Committee. He has also occupied differ-ent public offices, including, among others, Deputy Chief of Negotiation of the Free Trade Agreement between Mexico and the United States, Mexican Ambassador to the European Union, Head Negotiator for the Free Trade Agreement between Mexico and the European Union and Economist on the Economic Advisory Committee of the
Mexican Presidency (1985-1988). He has been a Consul-tant for Asian and Latin American governments as well as multi-lateral international organizations, international commerce and competiveness. He is a member of the advisory council of various companies, civil associations and public institutions. In 2014, he received the “Carrera al Universo” award, the highest distinction bestowed on one of its members by the Alumni Society of the Instituto Tecnológico Autónimo de México (ITAM) He has a PhD in Economics from Yale University.
10. Felipe de Yturbe Bernal. Former General Director of Grupo Financiero Scotiabank Inverlat Brokerage, as well as Deputy General Director of Corporate Banking, Invest-ment Banking and Markets, Treasury and Trust in the same institution. He was General Director of Deustche Bank México and General Manager of Banco Mexicano. He has been a partner in Yturbe, Laborde y Asociados, a company specializing in investment management. Mr. de Yturbe occupied various positions for 12 years in Banco Nacional de México, including, among others, Deputy General Director of Corporate Banking, Investment Bank-ing and the Trust Division. He was also the Treasurer and Financial Director of Cementos Anáhuac and Vice Presi-dent of The First National
11. Pablo de la Peza Berrios. Worked in Banamex from 1976 to 2013 and held various offices in Mexico and abroad: In-ternational Treasury Director, General Director of the Cali-fornia Commerce Bank, General Director of Seguros Bana-mex and AFORE Banamex, Corporate Director responsible for Strategic Planning and Corporate Development for Mexico, business affairs of Citi in Latin America, Corporate Director responsible for Banamex Asset Management af-fairs (Afore, Insurance, Pensions, Promotor of Investment Funds and Trust). He has been a member of Administration Councils of several investment societies administrated by Banamex and President of the Banamex Councils for Insur-ance, Afore and Fund Promotion. He retired from Banamex in 2013 but continues to participate in the Administration Council and Committees of various companies of that Fi-nancial Group. He is an independent member of the Techni-cal Committee and investment committees of some enti-ties listed on the Mexican Stock Exchange. He is a member of the investment committee of a large foundation, as well as a mentor in Endeavor. Mr. de la Pez Berrios earned an Industrial Engineering degree from the Universidad Iberoamericana.
For more information on how our Committees work (election/ destitution of members, sessions and voting, committee fac-ulties, remuneration of independent members…), refer to the 2016 Annual Report, available in Spanish in the FibraHotel webpage, www.fibrahotel.com or that of the Bolsa Mexicana de Valores [Mexican Stock Exchange], www.bmv.com.mx.
During 2016, the Technical Committee met four times to ap-prove the Financial Statements and distributions, with previ-ous approval of the Auditing Committee.
From January 1st, 2017 to the writing of this Annual Report, the Technical Committee met twice to approve the Financial State-ments and distributions, with the previous approval of the Au-diting Committee.
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Long-term alignment of interest
From the start, FibraHotel has sought to align long-term interests with its Consultant, GDI and its Holders, which translates as follows:
> GDI contributed all its assets of hotels in operation to FibraHotel.> GDI, through the Control Trust, is the majority shareholder and subject to a long-
term restricted sales period.> GDI granted FibraHotel preferential rights on any future hotel opportunity that cov-
ers FibraHotel investment parameters.> The FibraHotel Consultant charges only an advisory fee corresponding to 1.00% of
the value of non-depreciated assets and net debt.> CBFIs delivered to the Control Trust in exchange for property under development
have no economic rights (distribution…) until such hotels are in operation.
For more information on the FibraHotel Trust Agreement, Control Trust, sale restric-tion periods, among other… go to the 2017 Annual Report, available in Spanish on the FibraHotel website (www.fibrahotel.com) or on the Mexican Stock Exchange website (www.bmv.com.mx).
Fiesta Inn Monclova
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The following graph shows the evolution of FibraHotel REIT price and its volumes between January 1st and De-cember 31st, 2016.
FibraHotel on the Mexican Stock Exchange
CBFI price
Stock ownership
To the date of this Annual Report, FibraHotel shareholding is as follows:
Free Float
-
15.0
30.0
45.0
$12.0
$14.0
$16.0
$18.0
Nov
. 201
6
Dec
. 201
6
Dec
. 201
5
Oct
. 201
6
Sep.
201
6
Aug
. 201
6
Jul.
2016
Jun.
201
6
May
. 201
6
Apr
. 201
6
Mar
. 201
6
Feb.
201
6
Jan.
201
6
Volume FIHO Price FIHO IPC FIBRAS Index
Control Trust
15.7%
Public Investors 84.3%
AC by Marriott Guadalajara
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Opening of the Fiesta Inn Puerto Vallarta
On January 30th of 2017, FibraHotel announced the opening of the Fiesta Inn Puerto Vallarta hotel in inside La Isla Puerto Vallarta shopping center, with 144 select-services rooms operated by Grupo Posadas.
2016 fourth quarter results
On February 27th of 2017, FibraHotel announced its financial results and distribution of the fourth quarter of 2016.
Opening of the Courtyard by Marriott and Fairfield Inn & Suites by Marriott Vallejo
On March 1st of 2017, FibraHotel announced the opening of the 125-room select-service Courtyard by Marrio-tt Vallejo hotel and the 121-room limited-service Fairfield Inn & Suites by Marriott Vallejo hotel, both hotels will be operated by Marriott International.
Citi 2017 Global Property CEP Conference Presentation
On March 6th of 2017, FibraHotel presented in the CITI 2017 Global Property CEO Conference.
Post-2016 events
Fairfield Inn Villahermosa
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Fideicomiso Irrevocable No. F/1596 (Deutsche Bank México, S. A. Institución de Banca Múltiple, División Fiduciaria) and SubsidiaryConsolidated Financial Statements for the Years Ended December 31, 2016, 2015 and 2014, and Independent Auditors’ Report Dated March 31, 2017
Independent Auditors’ Report and Consolidated Financial Statements 2016, 2015 and 2014Page Table of contents
51 Independent Auditors’ Report54 Consolidated Statements of Financial Position55 Consolidated Statements of Comprehensive Income56 Consolidated Statements of Changes in Trustees’ Equity57 Consolidated Statements of Cash Flows58 Notes to the Consolidated Financial Statements
Consolidated Financial Statements
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52
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54
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Consolidated Statements of Financial Position
As of December 31, 2016, 2015 and 2014(In thousands of Mexican pesos)
Assets Notes 2016 2015 2014
Current assets:Cash, cash equivalents and restricted
cash 5. $ 448,829 $ 376,825 $ 2,091,905Trade accounts receivable and other
receivables 6. 242,685 207,912 169,174Due from related parties 13. - 3,190 3,190Recoverable taxes, mainly value-added tax 228,709 288,545 234,063Prepaid expenses 16,627 5,788 2,614
Total current assets 936,850 882,260 2,500,946
Non-current assets:Hotel properties, furniture and operating equipment – Net 7. 9,970,023 7,535,661 6,725,074Properties under development 8. 1,396,600 2,310,689 773,571Security deposits 2,380 1,813 1,654Deferred income taxes 11. 3,298 4,055 3,995Derivative financial instruments 12b. 120,887 11,441 -
Total non-current assets 11,493,188 9,863,659 7,504,294
Total assets $ 12,430,038 $ 10,745,919 $ 10,005,240
Liabilities and Trustees’ Equity
Current liabilities:Current portion of long-term debt 10. $ 98,288 $ 7,849 $ - Suppliers and accrued expenses 9. 348,107 316,936 233,880Taxes payable 6,868 5,110 4,370
Total current liabilities 453,263 329,895 238,250
Long-term liabilities:Debt 10. 2,598,743 844,619 -
Total long-term liabilities 2,598,743 844,619 - Total liabilities 3,052,006 1,174,514 238,250
Trustees’ equity:Contributions from trustees 14. 8,737,636 9,160,109 9,495,343Unsubscribed equity - (15) (15)Retained earnings 580,354 414,383 271,662
Valuation effect of derivative financial instruments 12b. 60,042 (3,072) -
Total trustees’ equity 9,378,032 9,571,405 9,766,990
Total liabilities and trustees’ equity $ 12,430,038 $ 10,745,919 $ 10,005,240
See accompanying notes to consolidated financial statements.
55
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2016, 2015 and 2014(In thousands of Mexican pesos)
Notes 2016 2015 2014
Revenues from:Rooms $ 2,057,257 $ 1,541,320 $ 1,162,025Food and beverages 468,397 367,525 289,662
Real estate rentals 79,832 75,393 68,797Other income 29,519 23,699 10,280
2,635,005 2,007,937 1,530,764Costs and expenses:
Rooms (402,676) (288,706) (198,587)Food and beverages (285,813) (215,273) (164,666)General and administrative (1,103,084) (833,778) (585,196)Property (33,911) (24,905) (21,644)Corporate (252,458) (211,953) (160,203)Depreciation 7. (296,930) (213,782) (162,930)Business acquisition costs (7,676) (15,766) (73,689)Other income (expenses), Net 3,913 5,930 (31,783)Interest income 11,173 34,327 120,807Interest expenses (40,282) - - Other financial expenses (13,948) (4,063) - Foreign exchange (loss) gain, Net 2,364 (508) 3,572
(2,419,328) (1,768,477) (1,274,319)
Income before income taxes 215,677 239,460 256,445
Income taxes 11. 1,787 2,884 2,742
Consolidated net income 213,890 236,576 253,703
Other comprehensive income: Gain (loss) on hedging instruments 63,114 (3,072) -
Consolidated net comprehensive income $ 277,004 $ 233,504 $ 253,703
Net income per weighted average CBFIs with economic rights (pesos) $ 0.4327 $ 0.4786 $ 0.5134
Net income per weighted average CBFIs (pesos)
$ 0.4282 $ 0.4737 $ 0.5080
Weighted average CBFIs with economic rights 494,273,561 494,273,561 494,189,262
Weighted average outstanding CBFIs $ 499,401,766 499,401,766 499,401,766
See accompanying notes to consolidated financial statements.
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Consolidated Statements of Changes in Trustees’ Equity
For the years ended December 31, 2016, 2015 and 2014
(In thousands of Mexican pesos)
Number of CBFIs
Contribu-tions from
trustees
Unsub-scribedequity
Retainedearnings
Valuation effect of
derivative financial
instruments
Totaltrustees’
equity
Balances as of January 1, 2014 $ 499,401,766 $ 9,846,459 $ (15) $ 84,845 $ - $ 9,931,289
Distribution to trustees - (351,116) - (66,886) - (418,002)
Consolidated net comprehensive income - - - 253,703 - 253,703
Balances as of December 31, 2014 499,401,766 9,495,343 (15) 271,662 - 9,766,990
Distribution to trustees - (335,234) - (93,855) - (429,089)
Consolidated net comprehensive income - - - 236,576 (3,072) 233,504
Balances as of December 31, 2015
499,401,766
9,160,109
(15)
414,383
(3,072)
9,571,405
Payment of unsubscribed equity - - 15 - - 15
Distribution to trustees - (422,473) - (47,919) - (470,392)
Consolidated net comprehensive income - - - 213,890 63,114 277,004
Balances as of December 31, 2016 $ 499,401,766 $ 8,737,636 $ - $ 580,354 $ 60,042 $ 9,378,032
See accompanying notes to consolidated financial statements.
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Consolidated Statements of Cash Flows
For the years ended December 31, 2016, 2015 and 2014
(In thousands of Mexican Pesos)
2016 2015 2014Cash flows from operating activities:
Consolidated net income $ 213,890 $ 236,576 $ 253,703
Adjustments for non-cash items:Income taxes recognized in net income 1,787 2,884 2,742
Adjustments for: (Gain) loss on sale of furniture and hotel equipment
(1,793) 2,439 15,982
Depreciation 296,930 213,782 162,930Interest income (11,173) (34,327) (120,807)Interest expenses 40,282 - - Other financial expenses 13,948 4,063 -
553,871 425,417 314,550
Changes in working capital:Trade accounts receivable and other receivables
(34,773) (38,738) (62,778)
Due from related parties 3,190 - (374)Recoverable taxes, mainly value-added tax
63,061 (52,879) (29,657)
Prepaid expenses (10,839) (3,174) (653)Security deposits (567) (159) (749)Suppliers and accrued expenses
5,785 83,056 76,720
Taxes payable 1,758 740 956Income tax paid (4,243) (6,331) (4,570)
Net cash generated by operating activities 577,243 407,932 293,445
Cash flows from investing activities:Businesses acquired (244,826) (189,359) (1,764,318)Acquisition of hotel properties, furniture and operating equipment
(243,266) (302,068) (663,319)
Proceeds from sale of furniture and hotel operating equipment
2,098 3,184 1,379
Investment in development projects (1,261,461) (2,071,817) (265,880)Interest received 11,173 34,109 120,807
Net cash used in investing activities (1,736,282) (2,525,951) (2,571,331)
Cash flows from financing activities:Proceeds from borrowings 1,844,562 852,468 - Derivative financial instrument payment (46,332) (14,513) - Capitalized interest (57,255) (1,864) - Interest paid (25,592) - - Distribution to trustees (470,392) (429,089) (418,002)Other financial expenses (13,948) (4,063) - Net cash generated by (used in) financing activities
1,231,043 402,939 (418,002)
Cash, cash equivalents and restricted cashNet increase (decrease) in cash, cash equivalents and restricted cash 72,004 (1,715,080) (2,695,888)
Cash, cash equivalents and restricted cash at the beginning of the year 376,825 2,091,905 4,787,793
Cash, cash equivalents and restricted cash at the end of the year (including restrictedcash of $241,103, $205,982 and $1,968,184 as of December 31, 2016, 2015 and 2014, respectively)
$ 448,829 $ 376,825 $ 2,091,905
See accompanying notes to consolidated financial statements.
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Notes to Consolidated Financial Statements
For the years ended December 31, 2016, 2015 and 2014
(In thousands of Mexican Pesos)
1. Activities and significant events
Fideicomiso F/1596 (Deutsche Bank México, S. A. Institución de Banca Múltiple, División Fiduciaria) andSubsidiary (jointly referred as to “FibraHotel”) was established as a real estate investment trust on July 31,2012 by Concentradora Fibra Hotelera Mexicana, S. A. de C. V., (the “Trustor”) and Deutsche Bank México,S. A., Institución de Banca Múltiple, División Fiduciaria (the “Trustee”). FibraHotel was established mainlyto develop, acquire and hold real estate properties for use in hotel operations. The hotel services offered maybe limited, select, complete and long stay, depending on the brand affiliation and service operators. The hotelsin the FibraHotel portfolio operate under the following brands:
Live Aqua One SheratonFiesta Americana Grand Fiesta Inn Lofts Fairfield Inn & Suites by MarriottFiesta Americana Live Aqua Boutique AC Hotels by MarriottFiesta Inn Camino Real & Suites Courtyard by MarriottGamma by Fiesta Inn Real Inn
To carry out its operations, FibraHotel has entered into planning advisory agreements with AdministradoraFibra Hotelera Mexicana, S. A. de C. V. (“Administradora Fibra Hotelera”) (a related party), under which itpays an annual fee payable each quarter, equivalent to 1% of the carrying value of undepreciated assets, netof debt. It also has entered into hotel operations contracts with Grupo Posadas, S. A. B. de C. V. (“Posadas”),Grupo Real Turismo, S. A. de C. V. (“Real Turismo”), Operadora Marriott, S. A. de C. V. (“MarriottInternational”) and Starwood Hotels & Resorts Worldwide, Inc. (“Starwood Hotels”) (collectively“Operadoras”), which establish a fee based on the hotels’ gross operating profit, among other metrics.FibraHotel has also entered into lease agreements with Posadas which provide fixed income and, as the casemay be, variable income, based on the income from operations.
FibraHotel has no employees and therefore no labor obligations, except for joint and several obligationswhich might arise due to noncompliance with the labor and tax obligations of the entities which render itpersonnel administrative and operating services. Any administrative services required are provided by relatedparties and third parties.
FibraHotel, as a real estate investment trust (“FIBRA”), qualifies to be treated as a pass-through entity forMexican federal income tax purposes in accordance with the Mexican Income Tax Law (“LISR”). Therefore,all income derived from FibraHotel’s operations is attributed to the holders of its real estate trust certificates(“CBFIs” for its name in Spanish) and FibraHotel itself is not subject to income tax in Mexico. In order tomaintain FIBRA status, the Income Tax Law (“ISR” for its name in Spanish) has established in Articles 187and 188, FibraHotel must, among other requirements, distribute at least 95% of its net taxable income eachyear to the holders of its CBFIs. On October 12, 2012, FibraHotel obtained a ruling from the MexicanTreasury Department, published in the Federal Official Gazette, formally establishing FibraHotel as a FIBRA.
Fibra Hotelera S. C. is a 99.99% owned subsidiary of Fideicomiso F/1596. Its responsibilities includemanaging the business, providing maintenance to the real estate properties and hotels, obtaining necessarylicenses and permits, supervising projects involving renovation, development and remodeling, providinginsurance coverage, oversight of public services, and negotiating hotel management contracts. Fibra Hotelera,S. C. is subject to the payment of regular Income Tax (“ISR”).
The address of FibraHotel is Avenida Santa Fe No. 481 Piso 7 Col. Cruz Manca, Cuajimalpa de Morelos,05349, Mexico City.
a. Portfolio Composition
The detail of the operating and leasing portfolio of FibraHotel by operator is as follows:
Number of hotels de hotels as of December 31 Operator 2016 2015 2014
Operating
agreementLeasesing
Operating
agreementLeasesing
Operating
agreementLeasesing
Posadas 58 3 49 3 46 3Real Turismo 5 - 5 - 5 -Marriott International 8 - 4 - 1 -Starwoods Hotels 1 1 - 1 -
Total 72 3 59 3 53 3
Total operating hotels 75 62 56Total rooms 10,422 8,507 7,656
As of December 31, 2016, 2015 and 2014, 10, 18 and 13 hotels were under development respectively.
Construction contracts have been signed with different real estate developers to perform the in part orthe complete construction of the hotels which make up the development portfolio. The investments byFibraHotel regarding properties under development as of December 31, 2016, 2015 and 2014, amount
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to $1,396,600, $2,310,689 and $773,571, respectively, presented in the statement of financial positionunder the heading “Properties under development”.
b. Business acquisition
During 2016, 2015 and 2014, FibraHotel concluded the acquisition of one hotel for 2016 and 2015,and 14 hotels for 2014. The fair value of the net assets acquired are as follows:
Year Land Building Hotel furniture and equipment Total
2016 $ 34,376 $ 203,533 $ 6,917 $ 244,8262015 $ 38,660 $ 133,847 $ 16,852 $ 189,3592014 $ 320,129 $ 1,269,354 $ 174,835 $ 1,764,318
The fair value of the aforementioned net assets acquired is determined based on the income approachand the market approach. The income approach is based on the present value of future cash flowsgenerated by the assets, taking into consideration the characteristics of the business, such as income,costs and expenses, among others, and is commonly used to determine the fair value for the types ofassets maintained by the Trust. As of December 31, 2016, 2015 and 2014, final fair values using theincome and market approach have been obtained. The fair value measurements of the net assetsacquired during the years ended December 31, 2016, 2015 and 2014, qualify as Level 2 measurementsin accordance with the fair value hierarchy.
Below is a summary of the revenue and net income from the entities acquired and included in theconsolidated statement of comprehensive income of FibraHotel, as well as pro forma revenue and netincome as if the hotels had been acquired on January 1 of the respective year.
2016 2015 2014
Reported amount Revenue $ 32,148 $ 3,291 $ 162,656
Net income $ 11,389 $ 1,603 $ 51,025
Projected amount to 12 months (Unaudited) Revenue $ 77,155 $ 39,492 $ 1,543,395
Net income $ 27,334 $ 19,236 $ 286,954
Acquisition costs of the acquired hotels, including development cost, for the years ended December 31,2016, 2015 and 2014 are $7,676, $15,766 and $73,689, respectively, which are recognized in theconsolidated statement of comprehensive income.
FibraHotel has established growth and expansion plans, and based on its investment policies willevaluate future acquisition projects that will be submitted for approval by the Technical Committee ofFibraHotel.
c. Significant events
a. Disposition of credit lines
During the year 2016, FibraHotel withdrew $543.5 million from the long-term line of creditwith BBVA Bancomer, S. A., Institución de Banca Múltiple, Grupo Financiero BBVA (BBVABancomer); in addition to the $456.5 million which had already been withdrawn in 2015, theconditions are maintained at 1.5 percentage points above the 28-day TIIE rate.
Furthermore, FibraHotel has a long-term line of credit with Banco Mercantil del Norte, S. A.,Institución de Banca Múltiple, Grupo Financiero Banorte (Banorte), from which the withdrawlscarried out between January and September 2016 were $604.1 million, which, together with thewithdrawls from 2015 in the amount of $395.9 million, reached the limit of the line of credit of$1,000 million. This line of credit accrues interest at 91 day-TIIE rate plus 1.25 points. InNovember 2016, as stated in the line of credit agreement, the debt passed from revolving periodto long-term period and as a result the interest rate changed to 91-day TIIE rate plus 2 points.
Finally FibraHotel negotiated a third line of credit with Banorte for an amount of $1,000million, of which it withdrew $698.1 million; this line of credit accrues interest at the 91-dayTIIE rate plus 1.3 during its revolving period. As of December 31, 2016, the undisposedbalance is $301.9 million.
As a result of the above, in order to maintain relatively stable interest rate payments, FibraHotelentered into interest rate hedges to cover the withdrawls from the BBVA Bancomer and firstBanorte lines of credit. For more information regarding the interest rate hedges please refer toNote 10.
b. Promise acquisition agreement of Hotel Fiesta Americana Hermosillo
On April 29, 2016, FibraHotel entered into a purchase-sale contract subject to a term,conditions precedent and a purchase option for the hotel named “Fiesta Americana Hermosillo”pursuant to the following clauses: i) the effective duration of the contract will be until January31, 2020, ii) the consideration will be that resulting from multiplying 10.06x average EBITDAof the hotel for the last three years, less the investment made in improvements anddisbursements for leasing, subject to a lower limit of $80.5 million. On the same date,FibraHotel entered into a noncancelable lease until 2020 for $10 million, which amount the
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lessor undertakes to invest in property improvements. Also, FibraHotel agrees under the sameterms to invest $75 million in such property. The sale of the property will be recognized onceall the aforementioned clauses are fulfilled.
2. Application of new and revised International Financial Reporting Standards
a. Application of new and revised IFRS and interpretations that are mandatorily effective for thecurrent year
In the current year, FibraHotel has applied a number of amendments to IFRS and new Interpretationissued by the International Accounting Standards Board (“IASB”) that are mandatorily effective foraccounting periods that begin on or after January 1, 2016.
Amendments to IAS 1 Disclosure Initiative
The amendments to IAS 1 give some guidance on how to apply the concept of materiality in practice.
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation andAmortization
The amendments to IAS 16 prohibit entities from using a revenue-based depreciation method for itemsof property, plant and equipment.
The amendments to IAS 38 introduce a rebuttable presumption that revenue is not an appropriate basisfor amortization of an intangible asset. This presumption can only be rebutted in the following twolimited circumstances:
i) When the intangible asset is expressed as a measure of revenue; or
ii) When it can be demonstrated that revenue and consumption of the economic benefits of theintangible asset are highly correlated.
Currently the management of FibraHotel uses the straight-line method for depreciation andamortization for its property, plant and equipment, and intangible assets respectively. FibraHotelbelieves that the straight-line method is the most appropriate method to reflect the consumption ofeconomic benefits inherent in the respective assets.
b. New and revised IFRSs in issue but not yet effective
The Entity has not applied the following new and revised IFRSs that have been issued but are not yeteffective. These IFRS allow earlier application, option that has not been elected by the Entity.
i) Effective for annual periods beginning on or after 1 January 2017, for which the Entitydoes not expect to have important effects on its consolidated financial information.
Amendments to IAS 12 Income Tax: Recognition of Deferred Tax Assets for Unrealized Losses
Provides requirements on the recognition and measurement of current or deferred tax liabilities orassets, and the amendments clarify the requirements on recognition of deferred tax assets forunrealized losses, to address diversity in practice.
Amendments to IAS 7 Statements of Cash Flows: Provide disclosures.
With the purpose to provide disclosures that allow users of financial statements evaluate thechanges in liabilities arising from financing activities, IASB requires that the changes inliabilities arising from financing activities are disclosed: (i) from financing cash flows; (ii) fromobtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes inforeign exchange rates; (iv) in fair values; and (v) other changes.
ii) Effective for annual periods beginning on or after 1 January 2018, for which it is notpracticable to provide a reasonably estimate of their effects on the consolidated financialstatements until having performed a detailed analysis and review.
IFRS 9 Financial Instruments
· IFRS 9 requires all recognized financial assets that are within the scope of IAS 39 FinancialInstruments: Recognition and Measurement are required to be subsequently measured atamortized cost or fair value. Specifically, debt investments that are held within a businessmodel whose objective is to collect the contractual cash flows, and that have contractual cashflows that are solely payments of principal and interest on the principal outstanding aregenerally measured at amortized cost at the end of subsequent accounting periods. Debtinstruments that are held within a business model whose objective is achieved both bycollecting contractual cash flows and selling financial assets, and that have contractual termsthat give rise on specified dates to cash flows that are solely payments of principal and intereston the principal amount outstanding, are generally measured at FVTOCI. All other debtinvestments and equity investments are measured at their fair value at the end of subsequentaccounting periods. In addition, under IFRS 9, entities may make an irrevocable election topresent subsequent changes in the fair value of an equity investment (that is not held fortrading) in other comprehensive income, with only dividend income generally recognized in netincome (loss).
· With regard to the measurement of financial liabilities designated as of fair value through profitor loss, IFRS 9 requires that the amount of change in the fair value of the financial liability thatis attributable to changes in the credit risk of that liability is presented in other comprehensive
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income, unless the recognition of the effects of changes in the liability’s credit risk in othercomprehensive income would create or enlarge an accounting mismatch in profit or loss.Changes in fair value attributable to a financial liability’s credit risk are not subsequentlyreclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value ofthe financial liability designated as fair value through profit or loss is presented in profit or loss.
· In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model,as opposed to an incurred credit loss model under IAS 39. The expected credit loss modelrequires an entity to account for expected credit losses and changes in those expected creditlosses at each reporting date to reflect changes in credit risk since initial recognition. In otherwords, it is no longer necessary for a credit event to have occurred before credit losses arerecognized.
· The new general hedge accounting requirements retain the three types of hedge accountingmechanisms currently available in IAS 39. Under IFRS 9, greater flexibility has beenintroduced to the types of transactions eligible for hedge accounting, specifically broadeningthe types of instruments that qualify for hedging instruments and the types of risk componentsof non-financial items that are eligible for hedge accounting. In addition, the effectiveness testhas been overhauled and replaced with the principle of an ‘economic relationship’.Retrospective assessment of hedge effectiveness is also no longer required. Enhanceddisclosure requirements about an entity’s risk management activities have also been introduced.
IFRS 15 Revenue from Contracts with CustomersThe core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer ofpromised goods or services to customers in an amount that reflects the consideration to which theentity expects to be entitled in exchange for those goods or services. Specifically, the Standardintroduces a 5-step approach to revenue recognition:• 1: Identify the contract(s) with a customer• 2: Identify the performance obligations in the contract• 3: Determine the transaction price• 4: Allocate the transaction price to the performance obligations in the contract• 5: Recognize revenue when (or as) the entity satisfies a performance obligation
Therefore, income should be recognized when a performance obligation is satisfied, i.e. when ‘control’of the goods or services underlying the particular performance obligation is transferred to thecustomer. Far more prescriptive guidance has been added to deal with specific scenarios, and extensivedisclosures are required. When IFRS 15 becomes effective, it will supersede the revenue recognitionguidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related Interpretations.
iii) Effective for annual periods beginning on or after 1 January 2019; during 2017 the Entitywill begin the analysis and evaluation of the effects of this standard, although given the natureof its operations it would not expect significant impacts.
IFRS 16, Leases
The new standard brings most leases on-balance sheet for lessees under a single model, eliminating thedistinction between operating and finance leases. A lessee would recognize a right-of-use asset and alease liability. The right-of-use asset is treated similarly to other non-financial assets and depreciatedaccordingly and the liability accrues interest. This will typically produce a front-loaded expense profile(whereas operating leases under IAS 17 would typically have had straight-line expenses) as anassumed linear depreciation of the right-of-use asset and the decreasing interest on the liability willlead to an overall decrease of expense over the reporting period. The lease liability is initiallymeasured at the present value of the lease payments payable over the lease term, discounted at the rateimplicit in the lease if that can be readily determined. If that rate cannot be readily determined, thelessee shall use their incremental borrowing rate.
For leases with a lease term of 12 months or less and containing no purchase options (this election ismade by class of underlying asset); and leases where the underlying asset has a low value when new,such as personal computers or small items of office furniture (this election can be made on a lease-by-lease basis), a lessee may elect to account for lease payments as an expense on a straight-line basisover the lease term.
3. Significant accounting polices
a. Statement of compliance
The consolidated financial statements have been prepared in accordance with International FinancialReporting Standards as issued by the IASB.
b. Basis of preparation
The consolidated financial statements of FibraHotel have been prepared on the historical costs basis,except for derivative financial instruments and hotel properties, furniture and equipment, andproperties under development, which were valued at fair value on 2012, at the date of contribution andacquisition, as explained in greater detail in the accounting policies below.
i. Historical cost
Historical cost is generally based on the fair value of the consideration given in exchange forgoods and services.
ii. Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
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orderly transaction between market participants at the measurement date, regardless of whetherthat price is directly observable or estimated using another valuation technique. In estimatingthe fair value of an asset or a liability, FibraHotel takes into account the characteristics of theasset or liability if market participants would take those characteristics into account whenpricing the asset or liability at the measurement date. Fair value for measurement and/ordisclosure purposes in these consolidated financial statements is determined on such a basis,except for share-based payment transactions that are within the scope of IFRS 2, leasingtransactions that are within the scope of IAS 17, and measurements that have some similaritiesto fair value but are not fair value, such as net realizable value in IAS 2 or value in use in IAS 36.
In addition, for financial reporting purposes, fair value measurements are categorized into Level1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observableand the significance of the inputs to the fair value measurement in its entirety, which aredescribed as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets orliabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that areobservable for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
c. Basis of consolidation
The consolidated financial statements incorporate the financial statements of the FibraHotel and thesubsidiaries over which it exercises control. Control is achieved when FibraHotel:
• Has power over the investee;• Is exposed, or has rights, to variable returns from its involvement with the investee; and• Has the ability to use its power to affect its returns.
FibraHotel reassesses whether it controls an entity if the facts and circumstances indicate that there arechanges to one or more of the three elements of control listed above.
The subsidiary is consolidated from the date on which control is transferred to FibraHotel, and is nolonger consolidated from the date that control is lost.
When necessary, adjustments to the financial statements of the subsidiary are made to align itsaccounting policies in accordance with the accounting policies of FibraHotel.
All balances and transactions between the subsidiary and FibraHotel have been eliminated in theconsolidation.
EntityOwnership
percentage 2016, 2015 y 2014
Activity
Fibra Hotelera, S. C. 99.99%
Provision of advisory services and technical, legal,tax, commercial and administrative consultingrelated to the purchase and sale, management,leasing and subletting of all kinds of land, houses,buildings, warehouses, hotels, malls andcommercial premises and offices.
FibraHotel reassessed whether it has maintained effective control over entities that provideadministrative, personnel and operational services mentioned in Note 1, and based on its assessment,management concluded that in accordance with IFRS 10, it does not have effective control due to thefollowing: (i) power, FibraHotel currently does not have the ability to direct the relevant activities, (ii)exposure or rights to variable returns; the trustors of the payroll entities have not received distributions,given that paying dividends is not the objective of the payroll entities. Furthermore administrativeservices fees are 5%, which is representative of market value for such services. This fee is notmodified for the benefit of FibraHotel. The fee covers the expenses incurred by the payroll entities fortheir operation and is sufficient to ensure that the payroll entities do not incur losses. In addition to theabove the assets of the payroll entities are of such a nature that they cannot be used in combinationwith FibraHotel for its operations.
d. Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferredin a business combination is measured at fair value, which is calculated as the sum of paid values ofthe assets transferred by FibraHotel, liabilities incurred by FibraHotel to the previous owners of theentity acquired and the equity issued by FibraHotel in exchange for control over the entity acquired atthe acquisition date. Acquisition-related costs are generally recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized attheir fair value.
Goodwill is measured as the excess over the sum of the consideration transferred, the amount of anynon-controlling interest in the entity acquired, and the fair value of the acquirer’s previous held equityinterest in the acquired (if any) over the net of the acquisition-date amounts of identifiable assetsacquired and liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of theidentifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred,the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’spreviously held interest in the acquiree (if any), the excess is recognized immediately in profit or lossas a bargain purchase gain.
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e. Financial instruments
Financial assets and financial liabilities are recognized when FibraHotel becomes a party to thecontractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that aredirectly attributable to the acquisition or issuance of financial assets and financial liabilities (other thanfinancial assets and financial liabilities at fair value through profit or loss) are added to or deductedfrom the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fairvalue through profit or loss are recognized immediately in profit.
f. Financial assets
Financial assets are classified into the following categories: financial assets ‘at fair value with changesthrough profit or loss’ (FVTPL), investments ‘available-for-sale’ (AFS), ‘financial assets loans andreceivables’. The classification depends on the nature and purpose of the financial assets and isdetermined at the time of the initial recognition. All regular way purchases or sales of financial assetsrecognized and derecognized on a trade date basis. Regular way purchases or sales are purchases orsales of financial assets that require the delivery of assets within the time frame established byregulation or convention in the marketplace.
Financial assets loan and accounts receivable
Accounts receivable to customers and other receivables which have fixed or determinable paymentsthat are not listed in an active market are classified as loans and accounts receivable, which aremeasured at amortized cost, using the effective interest method, minus any impairment.
Impairment of financial assets
Financial assets, other than those financial assets at fair value through profit or loss, are assessed forindicators of impairment at the end of each reporting period. Financial assets are considered to beimpaired when there is objective evidence that, as a result of one or more events that occurred after theinitial recognition of the financial assets, the future cash flows from the investment have been affected.
For AFS equity investments, a significant or prolonged decline in the fair value of the security belowits cost is considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
• Significant financial difficulty of the issuer or counterparty; or• Breach of contract, such as a default or delinquency in interest or principal payments; or• It becoming probable that the borrower will enter bankruptcy or financial re-organization; or• The disappearance of an active market for that financial asset because of financial difficulties.
Derecognition of financial assets
FibraHotel derecognizes a financial asset when the contractual rights to the cash flows from the assetexpire, or when it transfers the financial asset and substantially all the risks and rewards of ownershipof the asset to another party.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amountand the sum of the consideration received and receivable and the cumulative gain or loss that had beenrecognized in other comprehensive income and accumulated in equity is recognized in profit or loss.
g. Cash, cash equivalents and restricted cash
Cash and cash equivalents mainly consist of bank deposits in checking accounts and short-terminvestments. Cash is presented at fair value and cash equivalents are valued at fair value. FibraHotelconsiders as cash equivalents all highly liquid debt instruments acquired with a dated acquisitionmaturity of three months or less. Cash equivalents are represented mainly by government securities inwhich the resources are paid at maturity.
Restricted cash consists of cash corresponding to the fund for the investment in real estate, which willbe used for the acquisition of real estate of the contribution portfolio and to the capital expendituresfund which will be used for repairs, major replacements and other capital expenditures.
h. Hotel properties, furniture and operating equipment
Properties, furniture and operating equipment of the hotel are recorded initially at their acquisitioncost.
Hotel properties, furniture and operating equipment are presented at cost, less accumulateddepreciation and any accumulated loss from impairment.
The properties which are being constructed for purposes of exploitation, supply or administration arerecorded at cost, less any recognized loss for impairment. The cost includes professional fees and, inthe case of qualifying assets, capitalized interest, based on the accounting policy of FibraHotel. Theseproperties are classified into the appropriate categories of property, plant and equipment when they arecompleted for their intended use. The depreciation of these assets, as in other real properties, beginswhen the assets are ready for their intended use.
Depreciation is calculated using the straight-line method based on the remaining useful life of theasset, considering any residual values and considering components of each asset, as FibraHotel
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considers components more appropriate and consistent in relation to the methods used by the mostrepresentative entities of the sector. Based on technical studies, FibraHotel concluded that its buildingsand their different components have different useful lives and will be subject to replacements indifferent periods, 10 years in the case of certain common areas and up to 55 years for metallicstructures of the building. The residual value is 24% in the case of buildings; other fixed assets do nothave significant residual values, as determined by independent appraisers.
Estimated useful lives, residual values and the depreciation methods are reviewed at the end of eachreporting period, with the effect of any changes in estimates accounted for on a prospective basis.
Depreciation rates of hotel properties, furniture and operating equipment as of December 31 2016,2015 and 2014:
%
Building finishes 10Building improvements 10Building components 7Building civil construction 1Furniture and equipment 10
The gain or loss derived from the sale or disposal of an item of the hotel’s properties, furniture andoperating equipment is calculated as the difference between the resources received from the sale andthe carrying value of the asset, and is recognized in results.
i. Impairment in the value of long-lived assets
At the end of each reporting period, FibraHotel reviews the carrying values of its long-lived assets todetermine whether there is any indication that such assets have suffered a loss from impairment. Ifthere is any such indication, the recoverable amount of the asset is calculated to determine the amountof the loss from impairment (if any). When it is not possible to estimate the recoverable amount of anindividual asset, FibraHotel estimates the recoverable amount of the cash generating unit to which suchasset belongs. When a reasonable and consistent distribution basis can be identified, corporate assetsare also assigned to the individual cash generating units; otherwise, they are assigned to the smallestgroup of cash generating units for which a reasonable and consistent distribution basis can beidentified.
The recoverable amount is the higher of the fair value less the cost to sell the asset and its value in use.When evaluating the value in use, the estimated future cash flows related to the asset are discounted atpresent value using a discount rate before taxes which reflects the current market assessments of thetime value of money and the risks specific to the asset for which the future cash flow estimates havenot been adjusted.
If it is estimated that the recoverable amount of an asset (or cash generating unit) is lower than itscarrying value, the carrying value of the asset (or cash generating unit) is reduced to its recoverableamount. Losses from impairment are recognized immediately in results.
When a loss from impairment subsequently reverses, the carrying value of the asset (or cash generatingunit) is increased to the revised estimate of its recoverable amount, but so that the adjustment carryingamount does not exceed the carrying amount that would have been determined had no impairment lossbeen recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment lossis recognized immediately in profit or loss.
j. Income taxes
As discussed in Note 1, FibraHotel is classified as and intends to maintain its classification as a FIBRAfor income tax purposes; accordingly, it does not recognize a provision for income taxes, except for itssubsidiary Fibra Hotelera, S. C., which is subject to the payment of regular Income Tax (“ISR”). See Note 11.
k. Provisions
Provisions are recognized when FibraHotel has a present obligation (legal or implied) as a result of apast event, it is probable that FibraHotel will be required to liquidate the obligation and it can bereliably estimate that the amount of the obligation.
The amount recognized as a provision is the best estimate of the expenditure required to settle thepresent obligation, at the end of the reporting period, taking into account the risks and uncertaintiessurrounding the obligation. When a provision is measured using the cash flows estimated to settle thepresent obligation, its carrying amount is the present value of those cash flows (when the effect of thetime value of money is material).
l. Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all therisks and rewards of ownership to the lessee. All other leases are classified as operating leases.
- FibraHotel as lessor
Rental income from operating leases is recognized on a straight-line basis over the term of therelevant lease. Initial direct costs incurred in negotiating and arranging an operating lease areadded to the carrying amount of the leased asset and recognized on a straight-line basis over thelease term.
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m. Foreign currency
Transactions performed in foreign currency are recorded at the exchange rate in effect on the date eachtransaction took place. Monetary assets and liabilities denominated in foreign currency are valued inMexican pesos at the exchange rate in effect at the date of the financial statements. Exchange ratefluctuations are recorded in results.
n. Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance withthe substance of the contractual arrangements.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of FibraHotel afterdeducting all of its liabilities. Equity instruments are recognized at the proceeds received, net of directissue costs.
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financialliabilities’.
Other financial liabilities
Other financial liabilities (including ebt and trade and other payables) are subsequently measured atamortized cost using the effective interest method.
Derecognition of financial liabilities
FibraHotel derecognizes financial liabilities when, and only when, the FibraHotel’s obligations aredischarged, cancelled or have expired. The difference between the carrying amount of the financialliability derecognized and the consideration paid and payable is recognized in profit or loss.
o. Derivative financial instruments
FibraHotel enters into derivative financial instruments to manage its exposure to interest rates,including cap spread contracts. Further details of derivative financial instruments are disclosed in Note12b.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into andare subsequently remeasured to their fair value at the end of each reporting period. The resulting gainor loss is recognized in profit or loss immediately unless the derivative is designated and effective as ahedging instrument, in which event the timing of the recognition in profit or loss depends on the natureof the hedge relationship.
p. Hedge accounting
FibraHotel designates certain hedging instruments, which include cash flows hedge derivatives.
At the inception of the hedge relationship, FibraHotel documents the relationship between the hedginginstrument and the hedged item, along with its risk management objectives and its strategy forundertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoingbasis, FibraHotel documents whether the hedging instrument is highly effective in offsetting changesin fair values or cash flows of the hedged item attributable to the hedged risk.
Note 12b sets out details of the fair values of the derivative instruments used for hedging purposes.
q. Revenue recognition
FibraHotel recognizes its revenues as follows:
i. The revenues are obtained from the operation of the hotels, and include rentals for guest rooms,food and beverages and other revenues, which are recognized as such hotel services arerendered.
ii. The policy of FibraHotel for recognition of revenues from operating leases is described in Note3.l.
r. Classification of costs and expenses
The costs and expenses presented in the consolidated statement of comprehensive income wereclassified on their nature and function.
s. Statement of cash flows
FibraHotel presents its statement of cash flows using the indirect method. Interest received is classifiedas an investing cash flow, interest paid, distributions and dividends are classified as cash flows fromfinancing activities.
t. Net income per weighted average CBFI
Net income per weighted average CBFI with economic rights is determined by dividing consolidated
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net income by the weighted average number of outstanding CBFIs with economic rights, during theperiod. Net income from weighted average CBFIs with economic rights as of December 31, 2016,2015 and 2014 was calculated subtracting 499,401,766 of outstanding CBFIs, from 5,128,205 CBFIsof 2016, 2015 and 2014, related to the contribution portfolio under development, which are not entitledto receive economic rights until the construction of the hotels has concluded and the hotels are openedto the public (see Note 14).
4. Critical accounting judgments and key sources of estimation uncertainty
In the application of the FibraHotel’s accounting policies, which are described in Note 3, the FibraHotel’smanagement is required to make judgments, estimates and assumptions about the carrying amounts of assetsand liabilities that are not readily apparent from other sources. The estimates and associated assumptions arebased on historical experience and other factors that are considered to be relevant. Actual results may differfrom these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognized in the period in which the estimate is revised if the revision affects only that period,or in the period of the revision and future periods if the revision affects both current and future periods.
a. Critical judgments in applying accounting policies
Business combinations
Management uses its professional judgment to determine whether the acquisition of a property orportfolio of properties represents a business combination or an asset acquisition. Managementspecifically considers the following criteria:
i. Number of properties (land and building) acquired.
ii. The extent to which significant processes are acquired and in particular the extent of ancillaryservices provided by the acquiree (e.g., maintenance, cleaning, security, bookkeeping, otherproperty services, etc.).
iii. Whether the acquiree has allocated its own staff to manage the property and/or to deploy anyprocesses (including all relevant administration such as invoicing, cash collection, provision ofmanagement information to the entity’s owners and tenant information).
This determination can have a significant effect on the manner in which acquired assets and liabilitiesare recognized in financial information, both as of the acquisition date and subsequent thereto.Transactions that occurred during the periods presented in the accompanying consolidated financialstatements are determined to be business acquisition and presented in property, plant and equipment ofthe hotel.
Hotel classification (investment/asset ownership)
Investment property is held to earn rentals or for capital appreciation or both. Therefore, an investmentproperty generates cash flows independently of other assets held by FibraHotel. This distinguishes aninvestment property from an owner-occupied property.
FibraHotel is the owner of the property and manages the services provided to the hotel guests byholding operating and leasing contracts; if the services provided to the guests are significant, it is notclassified as an investment property but property of FibraHotel. A hotel managed by the owner is anoccupied property, rather than an investment property.
It can be difficult to determine whether the services provided are significant enough that a propertydoes not qualify as investment property. For example, the owner of a hotel sometimes transfers someresponsibilities to third parties under an operating agreement. The owner’s position could be, inessence, a passive investor or the owner may simply have outsourced day to day functions whileretaining significant exposure to variations in cash flows from the hotel operations.
Management uses its professional judgment to classify the contributed and acquired hotels as hotelproperty, plant and equipment, given that each hotel is used in its normal course of business and is,therefore, not considered as an investment property.
Lease classification
As explained in Note 3.1, leases are classified based on the extent to which the risks and rewardsinherent to the ownership of the asset under lease are transferred to FibraHotel or the tenant, dependingon the substance, rather than the legal form, of the lease. Based on its evaluation of contractual termsand conditions, FibraHotel has concluded that it essentially assumes all the significant risks andrewards inherent to the hotels under lease and therefore classifies the respective lease agreements asoperating leases.
b. Key sources of estimation uncertainty
Estimated useful and residual lives of fixed assets
Taking into consideration the opinion of internal experts from its development area, FibraHotelevaluates the useful lives and residual values of assets at the end of each reporting period based on itsoperating experience, the characteristics of its assets and their operation at date of the assessment. Anychanges in estimates are recognized prospectively, within accumulated depreciation in the consolidatedstatement of financial position and depreciation expense in the consolidated statement ofcomprehensive income.
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Allowance for doubtful accounts
FibraHotel has not recognized an allowance for doubtful accounts because credit ratings of itscustomers have not significantly changed and outstanding amounts are deemed to be recoverable.FibraHotel does not hold any collateral or other credit improvements with regard to these balances;likewise, it does not have the legal right to offset these amounts against its debts with the counterparty.
Fair value measurements and valuation processes
Some of the assets and liabilities of FibraHotel are measured at fair value in the consolidated financialstatements.
In estimating the fair value of an asset or a liability, FibraHotel uses observable market data when theyare available. When level 1 data are not available, FibraHotel hires a qualified appraiser to conduct anindependent valuation. Management works closely with the independent qualified appraiser toestablish the valuation techniques and appropriate input data for the model.
Information about the valuation techniques and inputs used in determining the fair value of individualassets and liabilities are disclosed in Note 9.
5. Cash, cash equivalents and restricted cash
2016 2015 2014
Cash and bank deposits $ 207,726 $ 170,843 $ 123,721Restricted cash: Real property investment fund (i) 184,809 168,445 1,926,518 Capital expenditure reserve fund (ii) 56,294 37,537 41,666
$ 448,829 $ 376,825 $ 2,091,905
Restricted cash
(i) Consists of a fund for the acquisition of the real properties and investment in the developmentportfolio. As with cash equivalents, the restricted cash is invested in government securities.
(ii) Represents amounts held in the capital expenditure reserve fund, which are restricted for the purposeof funding repairs, major replacements and other related capital expenditures. A total of up to 5% ofrevenues from the hotels is deposited in this fund. As in the case of cash equivalents, this restrictedcash is invested in government securities.
6. Trade accounts receivable and other receivables
2016 2015 2014
Clients $ 126,774 $ 101,639 $ 111,862Travel agencies 70,568 49,310 42,575Credit cards 18,749 13,305 6,363Other 20,784 38,545 2,927
236,875 202,799 163,727
RLease receivables from:Grupo Posadas, S. A. B. de C. V. (formerly Hoteles
y Villas Posadas, S. A. de
C. V.) 5,810 5,113 5,447
$ 242,685 $ 207,912 $ 169,174
Accounts receivable aging
FibraHotel currently has monthly collection levels that reflect its monthly billing; similarly, commercial andnegotiating practices allow it to keep the majority of accounts receivable aging at less than 90 days. Theaccounts receivable subject to legal proceedings are immaterial, for which reason they do not merit thecreation of an allowance for doubtful accounts.
2016 2015 2014
60-90 days $ 11,768 $ 9,871 $ 10,086More than 90-120 days 30,372 28,136 21,241
Total $ 42,140 $ 38,007 $ 31,327
Average aging (days) 84 78 40
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7. Hotel properties, furniture and operating equipment
2016 2015 2014
Land $ 1,566,756 $ 1,252,162 $ 1,176,161Building 7,487,919 5,701,739 5,015,764Hotel furniture and operating equipment 1,708,630 1,078,859 816,586
10,763,305 8,032,760 7,008,511
Less - Accumulated depreciation (793,282) (497,099) (283,437)
$ 9,970,023 $ 7,535,661 $ 6,725,074
Cost Land BuildingHotel furnitureand operating
equipmentTotal
Balances as of January 1, 2014 $ 827,570 $ 3,532,018 $ 498,326 $ 4,857,914Acquisitions: Contribution Portfolio 28,462 96,538 - 125,000
Acquisitions and transfer of properties
under development (1) 320,129 1,387,208 321,061 2,028,398
Disposals - - (2,801) (2,801)
Balances as of December 31, 2014 1,176,161 5,015,764 816,586 7,008,511Acquisitions:
Acquisitions and transfer of properties
under development (1) 76,001 685,975 262,273 1,024,249
Balances as of December 31, 2015 1,252,162 5,701,739 1,078,859 8,032,760Acquisitions:
Acquisition (1) 34,376 70,047 473,424 577,847 Transfer of properties under development 280,218 1,716,133 157,399 2,153,750Disposals - - (1,052) (1,052)
Balances as of December 31, 2016 $ 1,566,756 $ 7,487,919 $ 1,708,630 $ 10,763,305
Accumulated depreciation Building Hotel furniture andoperating equipment Total
Balances as of January 1, 2014 $ 65,858 $ 57,450 $ 123,308 Depreciation expense 84,110 78,820 162,930 Disposals - (2,801) (2,801)
Balances as of December 31, 2014 149,968 133,469 283,437 Depreciation expense 108,550 105,232 213,782 Disposals - (120) (120)
Balances as of December 31, 2015 258,518 238,581 497,099 Depreciation expense 140,337 156,593 296,930 Disposals - (747) (747)
Balances as of December 31, 2016 $ 398,855 $ 394,427 $ 793,282
Some real properties of FibraHotel are pledged against the credit lines described in Note 10, whichapproximate carrying value is $3,575 million.
(1) Acquisitions include business combination, as described in Note 10
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8. Properties under development
2016 2015 2014
GICSA Project $ 302,559 $ 186,306 $ - Vía Vallejo Project 272,227 69,527 35,577Fiesta Inn Los Mochis Project 141,464 39,672 10,114Live Aqua San Miguel Allende Project 137,419 - - Cencali Project 108,767 103,010 21,761Aloft Veracruz Project 102,125 34,397 - Fiesta Americana Via 515 Project 100,871 50,378 - Toreo Project 94,872 94,872 94,872Fiesta Americana Tlalnepantla Project 87,756 - - Full Service Villa del Mar Project 36,838 - - Mixto Trébol Monterrey Project - 640,390 292,303Pabellón M Project - 372,604 - Torre Américas 1500 Guadalajara AC Project - 243,517 136,337AC Antea Project - 190,039 28,833Juriquilla Project - 120,718 21,956Fairfield Inn Cuautitlán Project - 57,174 - One Durango Project - 53,639 - Fairfield Inn Nogales Project - 22,065 - Hotel Toluca Project - 8,228 8,200Ciudad del Carmen Project - - 17,407Fiesta Inn Lofts Ciudad del Carmen Project - - 47,927Fairfield Inn Saltillo Project - - 27,794Others 11,702 24,153 30,490
$ 1,396,600 $ 2,310,689 $ 773,571
As a result of the public offering dated November 30, 2012, Grupo GDI made a contribution of four hotels,and received 9,697,897 CBFIs, equivalent to $179,411. As a result of negotiations, affiliates of Grupo GDIundertook the construction of these hotels. When they are open to the public, the CBFIs will obtain economicrights and FibraHotel will pay the difference between the value of the contribution and the total cost of eachof the hotels.
The release of these CBFIs was carried out as follows: i) during 2013, Grupo GDI finished construction of thehotels One Guadalajara Tapatío and Real Inn Morelia, which were in the development portfolio; FibraHotelpaid the remaining investment and 3,031,231 CBFIs were released; and ii) Camino Real Hotel & SuitesPuebla opened in 2014, and FibraHotel paid the remaining investment as well as releases CBFIs totaling1,538,461. As of December 31, 2016 there are 5,128,205 CBFIs without economic rights related to a projectunder development.
9. Suppliers and accrued expenses
Suppliers $ 210,807 $ 165,125 $ 139,921Accrued expenses 79,258 73,724 73,714Other accounts payable, including interest
payable of borrowings for $27,407, $2,017 y $ - 58,042 78,087 20,245
$ 348,107 $ 316,936 $ 233,880
10. Debta. Long-term debt is as follows:
2016 2015
Long-term line of credit with mortgage securityexecuted with Banorte, accruing interest as of 31December 31, 2016 at 2.00 percentage points abovethe 91-day TIIE rate and as of 31 December 31, 2015at 1.25 percentage points above the 91-day TIIE rate.
$ 1,000,000 $ 395,933
Long-term line of credit with mortgage securityexecuted with Banorte accruing interest at 1.30percentage points above the 91-day TIIE rate.
698,067 -
Long-term line of credit with mortgage securityexecuted with BBVA Bancomer accruing interest at1.50 percentage points above the 28-day TIIE rate.
998,964 456,535
2,697,031 852,468
Less – Current portion (98,288) (7,849)
Long-term debt $ 2,598,743 $ 844,619
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b. Maturities of long-term debt:
Year Maturities
2018 $ 102,1502019 195,9772020 200,0972021 306,790
More than 5 years 1,793,729
$ 2,598,743
To maintain stability in the rates, FibraHotel entered into certain interest rate hedges to cover the creditlines with BBVA Bancomer and first Banorte line in accordance with the following assumptions:Four instruments, contracted with BBVA Bancomer, covering $657.9 million of the credit lines withBBVA Bancomer in accordance with the following assumptions:- If the TIIE is lower than 5.0%, FibraHotel pays the TIIE rate.- If the TIIE is between 5.0% and 9.0%, FibraHotel exchanges the TIIE rate and pays a rate of
5.0%.- If the TIIE is above 9.0%, FibraHotel exchanges the TIIE rate against a TIIE rate, less a rebate
of 4.0%.An instrument, contracted with Santander, covering $341.1 million of the credit line with BBVABancomer in accordance with the following assumptions:- If the TIIE is lower than 5.0%, FibraHotel pays the TIIE rate.- If the TIIE is between 5.0% and 7.0%, FibraHotel exchanges the TIIE rate and pays a rate of
5.0%.- If the TIIE is above 7.0%, FibraHotel exchanges the TIIE rate against a TIIE rate, less a rebate
of 4.0%.An instrument, contracted with Banorte, covering $1,000 million of the first credit line with Banorte inaccordance with the following assumptions:
- If the TIIE is lower than 4.5%, FibraHotel exchanges the TIIE rate and pays a rate of 5.0%.- If the TIIE is between 4.5% and 6.0%, FibraHotel pays the TIIE rate.- If the TIIE is above 6.0%, FibraHotel exchanges the TIIE rate and pays a rate of 6.0%.With Respect to the credit line with BBVA Bancomer and Banorte, FibraHotel must comply withcovenants. As of December31, 2016, FibraHotel was in compliance with such covenants.
11. Income taxesIn order to maintain its status as a FIBRA, per requirements of SAT, in conformity with Articles 187 and 188 of theIncome Tax Law (LISR), FibraHotel must annually distribute at least 95% of its taxable income to the holders ofthe CBFIs.
Fibra Hotelera, S. C. is subject to income tax (“ISR” for its acronyms in Spanish), the rate of current income is30%.a. Income taxes expense are as follows:
2016 2015 2014ISR:
Current tax $ 1,030 $ 2,944 $ 4,545Deferred tax 757 (60) (1,803)
$ 1,787 $ 2,884 $ 2,742
b. At December 31, 2016, 2015 and 2014 the deferred income tax asset is composed solely of temporarydifferences resulting from accrued expenses of $3,298, $4,055 and $3,995, respectively.
12. Financial instruments
Equity management
FibraHotel manages its equity to ensure its ability to continue as a going concern, while maximizing the networth of its trustors and distributions to the trustors by optimizing its use of debt and equity. FibraHotel’soverall strategy remains unchanged from 2015 and 2014.
The equity of FibraHotel is primarily composed by the net worth of its trustors. Equity managementobjectives include ensuring the availability of operating funds to maintain the consistency and sustainabilityof distributions paid to trustors, while funding the required capital expenditure requirements and providing theresources needed to acquire and develop new properties.
FibraHotel can acquire hotels subject to existing financial mortgages or other encumbrances; similarly, it canacquire new debt or refinance existing debt to acquire hotels, albeit subject to compliance with leveragepolicies. Under certain circumstances, it could have the obligation to pay distributions in excess of the cashavailable for this purpose; if necessary, it can utilize the resources generated by organizing future debt andequity offerings, selling assets or obtaining loans to make certain distributions. The debt service related to thisfinancing or indebtedness takes priority over any distributions related to the CBFIs.
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- Debt index
The debt index as of December 31, 2016 is a follows:
2016
Debt (i) $ 2,724,438
Total assets $ 12,430,038
Index of debt to total assets 22%
(i) Debt is defined as long and short-term loans (excluding derivatives), as described in Note 10.
Please note that the FibraHotel trust contract stipulates that the leverage level cannot exceed 40%;however, the new regulation for FIBRAS establishes that it cannot exceed 50%.
- Debt hedge index
As of December 31, 2016, the debt service coverage ratio is 1.68x. The commitments relate to:• Debt service of $390 million• Estimated capital expenditures of $265 million• Estimated non-discretionary expenditures of $287 million
- Categories of financial instruments
2016 2015 2014Financial assets:Cash, cash equivalents and restricted cash $ 448,829 $ 376,825 $ 2,091,905
Trade accounts receivable and other receivables $ 242,685 $ 207,912 $ 169,174
Due from related parties $ - $ 3,190 $ 3,190Derivative financial instrument $ 120,887 $ 11,441 $ -
Financial liabilities:Amortized cost $ 2,924,622 $ 1,083,601 $ 227,748
- Financial risk management objectives
Financial risk management is intended to manage financial expectations, while generating results ofoperations and cash flows to improve the financial position of FibraHotel and ensure its ability to makedistributions to the holders of the CBFIs and fulfill any future debt obligations.
The Technical Committee of FibraHotel is responsible for advising and instructing the trustee withregard to the sale or cancellation of the CBFIs, analyzing and improving potential investments, salesand acquisitions, providing business services, coordinating access to national financial markets, as wellas monitoring and managing the financial risks derived from the operations of FibraHotel throughinternal risk reports which provide an analysis of the level and magnitude of FibraHotel’s riskexposure. These risks include the market risk (including exchange rate and interest rate risks), creditrisk and liquidity risk.
- Market risk
The activities of FibraHotel expose it mainly to financial risks of interest rate changes. FibraHotelsubscribes a variety of financial derivatives to handle this exposure to exchange risk and interest raterisk, including interest rate cap spreads to mitigate the risk of interest rate increases.
Exposures to market risk are valued using the Value at Risk (VaR), supplemented by a sensitivityanalysis.
There have been no changes in the exposure of FibraHotel to market risks or the way in which theserisks are managed and valued.
a) Foreign currency risk management
As FibraHotel performs transactions denominated in U.S. dollars (“U.S. dollar”), it is exposedto exchange rate fluctuations involving the Mexican peso and the U.S. dollar.
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i. As of December 31, the foreign currency monetary position is as follows:
2016 2015 2014Thousands of U.S. dollars:
Monetary assets $ 2,508 $ 1,561
$
1,759Monetary liabilities (574) (238) (135)
Long position 1,934 1,323 1,624
Equivalent in Mexican pesos $ 39,964
$
22,764 $ 23,929
ii. Mexican peso exchange rates in effect at the date of the consolidates statement of financial positionand at the date of issuance of these consolidates financial statements were as follows:
December 31, 2016 December 31, 2015 December 31, 2014 March 31, 2017
U.S. dollar $ 20.6640 $ 17.2065 $ 14.7348 $ 18.7079
- Foreign currency sensitivity analysis
Management considers that its exchange rate risk is not significant, given the amount of its longposition in U.S. dollars.
If the exchange rate had increased or decreased by $1 peso per U.S. dollar and all other variables hadremained constant, the result of the year and net worth of FibraHotel for the year ended December 31,2016, 2015 and 2014 would have decreased/increased by approximately $1,934, $1,323 and $1,624,respectively.
iii. Interest rate risk management– Derivative financial instrument
FibraHotel is exposed to interest rate risk because it borrows funds at floating interest rates. The risk ismanaged by the FibraHotel by cap and or cap spread interest rate contracts. Hedging activities areevaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied. Detail of the derivative financial instruments is as follows:
Derivative financial instruments designed as interest rate hedge
Currentcontract
Maximumbenefit
%
Date of holding Due date
Notional value Fair value
Bank December 31,2016
December 31,2016
Cap Spread Bancomer, S.A. 4 18/nov/15 30/oct/20 $ 180,000 $ 10,025Cap Spread Bancomer, S.A. 4 16/dic/15 30/nov/20 153,400 8,703Cap Spread Bancomer, S.A. 4 27/ene/16 31/dic/20 202,400 11,712Cap Spread Santander, S.A. 4 11/mar/16 1/mar/21 341,067 14,182Cap Spread Bancomer, S.A. 4 1/dic/15 30/nov/20 123,333 6,996Collar Banorte, S.A. 6 15/sep/16 20/nov/21 1,000,000 69,269
$ 120,887
Based on the aforementioned financial derivatives, the debt hedged as of December 31, 2016 is 74%.
- Interest rate sensitivity analysis – Derivative financial instruments
The following sensitivity analyses have been determined based on the exposure to interest rates bothfor the derivatives and non-derivatives at the end of the reporting period. For variable rate liabilities,an analysis is prepared by assuming that the amount of the liability in effect at the end of the reportingperiod has been the liability in effect for the entire year. A sensitivity analysis was performed, takinginto account the following interest rate scenarios (28 and 91 day TIIE): +100 basis points, +25 basispoints, -25 basis points, -100 basis points, using a confidence level of between 95% and 99% for atime horizon of one day, the results of these effects as of December 31, 2016 are as follow:
28-day TIIE 91-day TIIEScenarios Impact
Less 100 basis points 5.11% 5.19% $ (15,000)Less 25 basis points 5.86% 5.94% (2,362)As of December 31, 2016 6.11% 6.19% - Plus 25 basis points 6.36% 6.44% 1,745Plus 100 basis points 7.11% 7.19% 7,336
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According to the results of the sensitivity analysis based on the scenarios and the characteristics andstructure of the derivatives positions analyzed, we conclude that the market risks to which the entity’sswaps position is exposed are principally: a) 28 day TIIE rate; b) TIIE-IRS Curve and c) thecorrelation between the risk factors. The greater the correlation, the greater the volatility of the riskfactors portfolio.
- Credit risk management
Credit risk refers to the situation in which counterparty defaults on its contractual obligations, therebygenerating a financial loss for FibraHotel. Virtually all the revenues generated by FibraHotel arederived from the provision of hotel services. Consequently, its performance depends on its ability tocollect revenues from hotel services from guests, as well as the capacity of the latter to make therequired payments. FibraHotel’s income and funds available for distribution would be adverselyaffected if a significant number of guests or its main leaseholders defaulted on their rental payments,closed their businesses or filed bankruptcy proceedings.
FibraHotel has adopted the policy of negotiating hotel leases with solvent counterparties and obtainingsufficient guarantees, when necessary, as a means of mitigating the risk of losses generated bynonpayment.
Credit risk is generated by the balances of cash and cash equivalents, trade accounts receivable andother receivables included in the consolidated statement of financial position.
- Liquidity risk management
Liquidity risk represents the risk whereby FibraHotel faces certain difficulties when fulfillingobligations associated with financial liabilities which must be settled in cash or through the delivery ofanother financial asset. As FibraHotel is responsible for liquidity risk management, it has established asuitable liquidity risk management structure to manage its short, medium and long-term financing,while satisfying liquidity management requirements. FibraHotel manages its liquidity risk bymaintaining adequate reserves, monitoring projected and actual revenue cash flows and reconciling thematurity profiles of financial assets and liabilities. The Treasury department monitors liabilitymaturities so as to program the respective payments.
The following table details the remaining contractual maturities of FibraHotel for its financialliabilities with reimbursement periods established. The table has been designed based on theundiscounted projected cash flows of the financial liabilities based on the date that FibraHotel mustgenerate/obtain the resources. The table includes the projected interest cash flows, taking into accountthe debt as of December 31 each year, as well as capital disbursements from the financial debtincluded in the statement of financial position. The variable interest rate financial debt is subject tochange; if the changes in variable interest rates differ from those interest rate estimates determined atthe end of the reporting period, the values below will differ:
Less than 1 year 1 and 3 years 3 + years Total
December 31, 2016Debt $ 98,288 $ 298,127 $ 2,300,616 $ 2,697,031Suppliers and accrued expenses 227,591 - - 227,591Projected variable inter-est of debt, net of derivative fi-nancial instrument. 194,130
540,669
711,877 1,446,667
Total $ 520,009 $ 838,796 $ 3,012,493 $ 4,371,289
December 31, 2015Debt $ 7,849 $ 253,429 $ 591,190 $ 852,468Suppliers and accrued expenses 238,982 - - 238,982Projected variable inter-est of debt, net of derivative fi-nancial instrument. 46,154 92,694 177,540 316,388
Total $ 292,985 $ 346,123 $ 768,730 $ 1,407,838
December 31, 2014Suppliers and accrued expenses $ 227,748 $ - $ - $ 227,748
- Fair value of financial instruments
Fair value of financial instruments recorded at amortized cost.Except for long-term debt, carrying value of trade accounts receivable and other receivables, due fromrelated parties, suppliers and accrued expenses are short-term in nature and, in certain cases, accrueinterest at rates linked to market indicators. FibraHotel therefore considers that the carrying value ofthese financial assets and liabilities recognized at amortized cost approximates their fair values. Thefair value of long-term debt is show as follows:
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Fair value of financial instruments carried at FVTPL on a recurring basis are as follows
Financialinstruments
Fair value at Fair valuehierarchy Techniques and key inputs
December 31, 2016
December 31, 2015
December 31, 2014
Debt $ 1,761,176 $ 616,308 $ - Level 3Market value. The fair value of debt is measured with unobservable information
Fair value of financial instruments carried at FVTPL on a recurring basis are as follows
Investments ingovernment
securities
Fair value at Fair valuehierarchy Techniques and key inputs
December 31, 2016
December 31, 2015
December 31, 2014
Debt $ 241,103 $ 205,982 $ 1,968,184 Level 1
Market value. The fair value ofinvestments is measured byquoted prices (unadjusted) inactive markets for identicalinstruments.
Derivatives designates as hedge instruments
Financial assets
Valor razonable al Fair valuehierarchy Techniques and key inputs
December 31, 2016
December 31, 2015
December 31, 2014
Derivative financial instruments designed as hedge hedge – Cap Spread
$ 120,887 $ 11,441 $ - Nivel 2
Discounted future cash flows are calculated on the basis of term interest rates (starting with the observable yield curves at the end of the period in question) and contractual interest rates, discounted at a rate which reflects the credit risk of various counterparties.
- Fair value of land and buildings acquired on business combination
Land and buildings that FibraHotel acquired on business combination are recorded at fair value at the acquisi-tion date, in accordance with IFRS 3.
The fair value of the land and buildings is determined based on the income a pro-ach. There has been no change in valuation technique during the period.
The fair value of the land and buildings of FibraHotel and the information about the hierarchy of fair val-ue as of December 31, is as follows:
2016 2015 2014 Level 2 Fair value
totalLevel 2 Fair value
totalLevel 2 Fair value
totalHotels of Acquisition Portfolio thatinclude:– Land $ 34,376 $ 38,660 $ 320,129– Buildings 203,534 129,483 1,269,354
$ 237,910 $ 168,143 $ 1,589,483
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Valuation techniques and assumptions applied for purposes of determining the fair value
· The fair value of financial assets and financial liabilities with standard terms and traded in active liquidmarkets are determined with reference to quoted market prices (including unlisted redeemable notes,bills of exchange, perpetual and government bonds).
· The fair value of other financial assets and liabilities (excluding those described above) are determinedin accordance with pricing models generally accepted, based on the analysis of discounted cash flowsusing prices from observable current transactions in the market and quotations for similar instruments.In particular, the fair value of long-term debt, which is calculated only for the purpose of thisdisclosure and not for the accounting of the debt, which is considered measurement Level 3, asdescribed below, it was determined using a model of discounted cash flows, using current ratesestimates based on observable market TIIE curves and credit spread estimated using observable creditsimilar entities, which is adjusted as needed.
Financial instruments measured at fair value after initial recognition are grouped in three levels, based on thedegree to which the fair value is observable:· Level 1 valuations at fair value are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities;· Level 2 valuations at fair value are those derived from inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derivedfrom prices); and
· Level 3 valuations at fair value are those derived from valuation techniques that include inputs for theasset or liability that are not based on observable market data (unobservable indicators).
13. Transactions and balances with related parties
a. Commercial transactions:
During the year, FibraHotel carried out the following transactions with related parties:
2016 2015 2014Administradora Fibra Hotelera, S. A. de C. V. Management fee $ 104,673 $ 103,669 $ 96,730
Group A: Administrative services $ 51,572 $ 41,465 $ 40,646
The Group A is comprised of Prestación de Servicios Hoteleros GG, S. A. de C. V., Soluciones yAdministración Estrátegica, S. A. de C. V., Fibra Hotelera, S. C., Solución de Recursos Humanos, S.A. de C. V., Administradora GDI, S. A de C. V., and Control y Desarrollo Administrativo, S. A. de C.V. FibraHotel pays an annual fee for the administrative services provision corresponding to personnelemployee benefits and taxes, of 5%. The above transaction is documented through renewable five-yearagreements.
b. Due from related parties:
2016 2015 2014
Controladora Cabi FHM $ - $ 2,174 $ 2,174Alterturismo, S. de R. L. de C. V. - 734 734Grupo Innovador Turístico y de Servicios, S. de R. L. de C. V. - 233 233Grupo Empresarial Hermosillo - 49 49
$ - $ 3,190 $ 3,190
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14. Trustees’ equity
Contributions
a. Equity contributions of trustors at par value are as follows:
Initial capital contribution Issuance of CBFIs Total
$ 15 $ 10,009,645 $ 10,009,660
On February 5, 2016 the initial contributed net worth of FibraHotel has been paid in full.
b. The net worth of FibraHotel is represented by an initial contribution of $15, the Contribution Portfolio,the Contribution Portfolio under Development and the resources generated by issuing the CBFIs in theIPO, as discussed below:
c. On May 30, 2013, FibraHotel held a subsequent offering of CBFIs in the Bolsa Mexicana de Valores(“BMV”) and in other international markets. The total amount of the offering was $4,877,725, offering195,000,000 CBFIs, including overallotment at $24.95. The Control Trust of FibraHotel participated inthe subscription of 2,000,000 CBFIs.
As of December 31, 2016, 2015 and 2014, there were 499,401,766 CBFIs outstanding.
Distributions-
a. As of December 2016, 2015 and 2014, the Technical Committee of FibraHotel has approved and paiddistributions of the tax income accounts, to the CBFIs owners as follows:
Date ofdistribution
approval
Distribution by CBFI (Pesos)
Distributions fromequity redemption
Distributions oftaxable income Total distributions
February 16, 2016 $ 0.2380 $ 117,659 $ - $ 117,659 April 19, 2016 0.2003 89,757 9,224 98,981
July 19, 2016 0.2408 119,008 - 119,008October 18, 2016 0.2726 96,049 38,695 134,744
Total December 2016 $ 422,473 $ 47,919 $ 470,392
Date ofdistribution
approval
Distribution by CBFI (Pesos)
Distributions fromequity redemption
Distributions oftaxable income Total distributions
February 19, 2015 $ 0.2250 $ 111,216 $ - $ 111,216 April 21, 2015 0.2074 85,452 17,052 102,504
July 21, 2015 0.2204 63,014 45,926 108,940October 20, 2015 0.2153 75,552 30,877 106,429
Total December 2015 $ 335,234 $ 93,855 $ 429,089
February 17, 2014 $ 0.2134 $ 105,001 $ - $ 105,001April 29, 2014 0.2001 98,590 - 98,590July 22, 2014 0.2313 47,421 66,886 114,307
October 21, 2014 0.2025 100,104 - 100,104
Total December 2014 $ 351,116 $ 66,886 $ 418,002
b. The distribution through CBFIs is the result of dividing earnings before interest, taxes, depreciationand amortization (EBITDA in English), less the CAPEX reserve and extraordinary expenses, by thenumber of CBFIs outstanding with economic rights. As of December 31, 2016, 2015 and 2014 theCBFIs without economic rights were 5,128,205.
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15. Minimum lease payments
The aggregate annual future minimum lease payments expected to be received under existing operating leases are as follows:
Period Fiesta Inn Live Aqua Boutique
Less than 1 year $ 53,487 $ 19,443
1 to 5 years 267,435 77,772
$ 320,922 $ 97,215
The lease contracts have remaining terms ranging from one to five years.
The aforementioned minimum lease payments do not include amounts expected to be received with respect to contin-gent rentals, which is mainly comprised of rent increases based on inflation and variable income, if any.Additionally, the payments disclosed only consider the compulsory lease term and do not consider anyrenewal periods, related to minimum future rentals.
16. Business segment information
a. Segments financial information
Segment information reported externally was analyzed on the basis of the types of room revenues,food and beverage income, operating expenses for the different types of hotel brands that comprise theinvestment portfolio of FibraHotel. However, the information analyzed by management who makesoperating decisions of the Trust for purposes of allocating resources and assessing segmentperformance is focused more specifically on the category of customer for each type of portfolio. Themain categories of customers for these goods are services provided and brand. FibraHotel segments toreport according to IFRS 8 are therefore the following:
Limited service
Limited service hotels offer a service, as its name implies, of convenience, which traditionally has nobars, restaurants or conference or meeting rooms, nor does it offer additional services, but in recentyears the trend has been that this class hotels offer a mix of services, including business centers, gymsand swimming pools, with a limited selection of food (breakfast included) and limited spacesboardrooms.
Select service
These hotels provide certain additional services to limited service hotels, including the offer of foodand drink, restaurants, bars and room service 24 hours. Rooms for social and business events, as wellas additional services within the room.
Extended stay
Hotels in this segment are characterized by a suite format in studio setups with one or two bedrooms,almost always with a full kitchen and a dining space and workspace. Among the services provided bythese hotels are public areas similar to a hotel of select services without meeting rooms.
Full service
These hotels have a robust supply of food and beverages with several centers of consumption(restaurants and bars), boardrooms and conference rooms for business and social events as well asin certain cases additional services related to complete service hotels such as spas, room service,valet parking, concierge, bell boys and more extensive public areas.
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b. Income and segment results
An analysis of income and results of the Trust of continuing operations is presented by reported segment:
2016 Select service Limited service Extended stay Full service Corporate Total
Revenue for:Rooms $ 1,252,953 $ 413,211 $ 67,985 $ 323,108 $ - $ 2,057,257Food and beverages 360,156 - - 108,241 - 468,397Real Estate Rentals 73,436 - - 6,396 - 79,832Others - - - - 29,519 29,519
1,686,545 413,211 67,985 437,745 29,519 2,635,005Costs and expenses:
Rooms 234,077 93,643 11,961 62,995 - 402,676Food and beverages 205,384 2,846 - 77,583 - 285,813General and administrative 704,060 192,021 7,564 199,438 - 1,103,083Corporate - - - - 290,133 290,133Depreciation - - - - 296,930 296,930
1,143,521 288,510 19,525 340,016 587,063 2,378,635
Financial expenses net and others (40,693)Income before income taxes $ 215,677
2015 Select service Limited service Extended stay Full service Corporate Total
Revenue for:Rooms $ 1,015,905 $ 309,166 $ 48,600 $ 167,649 $ - $ 1,541,320Food and beverages 298,442 - - 69,083 - 367,525Real Estate Rentals 74,251 - - 1,142 - 75,393Others - - - - 23,699 23,699
1,388,598 309,166 48,600 237,874 23,699 2,007,937Costs and expenses:
Rooms 181,793 65,309 7,718 33,886 - 288,706Food and beverages 171,081 - - 44,192 - 215,273General and administrative 572,623 142,612 1,509 117,034 - 833,778Corporate - - - - 246,694 246,694Depreciation - - - - 213,782 213,782
925,497 207,921 9,227 195,112 460,476 1,798,233
Financial expenses net and others 29,756Income before income taxes $ 239,460
2014 Select service Limited service Extended stay Full service Corporate Total
Revenue for:Rooms $ 839,237 $ 210,495 $ 14,565 $ 97,728 $ - $ 1,162,025Food and beverages 245,726 - - 43,936 - 289,662Real Estate Rentals 62,825 3,777 - 2,195 - 68,797Others - - - - 10,280 10,280
1,147,788 214,272 14,565 143,859 10,280 1,530,764Costs and expenses:
Rooms 139,077 43,245 1,907 14,358 - 198,587Food and beverages 138,670 1,641 - 24,355 - 164,666General and administrative 483,199 93,635 - 65,830 - 642,664Corporate - - - - 229,851 229,851Depreciation - - - - 162,930 162,930
760,946 138,521 1,907 104,543 392,781 1,398,698
Financial expenses net and others 124,379Income before income taxes $ 256,445
c. The main assets and liabilities by segment as of December 31, are as follows:
2016 Select service Limited service Extended stay Full service Others Total
Hotel properties, furniture and operating equipment – Net $ 1,772,760 $ 5,231,710 $ 415,481 $ 2,549,146 $ 926 $ 9,970,023
Properties under development $ 145,507 $ 768,498 $ 94,872 $ 387,723 $ - $ 1,396,600Long-term liabilities (1) $ - $ - $ - $ - $ 2,697,031 $ 2,697,031
2015 Select service Limited service Extended stay Full service Others Total
Hotel properties, furniture and operating equipment – Net $ 1,343,777 $ 5,030,418 $ 369,317 $ 791,306 $ 843 $ 7,535,661
Propiedades en desarrollo $ 253,596 $ 538,850 $ - $ 1,496,927 $ 21,316 $ 2,310,689Deuda (1) $ - $ - $ - $ - $ 852,468 $ 852,468
2014 Select service Limited service Extended stay Full service Others Total
Hotel properties, furniture and operating equipment – Net $ 946,500 $ 5,130,743 $ 125,000 $ 522,218 $ 613 $ 6,725,074
Properties under development $ 57,950 $ 179,731 $ 47,927 $ 457,473 $ 30,490 $ 773,571
Debt was issued at the holding level, which cannot be allocated to a specific segment.
17. Commitments and contingencies
Except as noted previously, neither FibraHotel nor its assets are subject to any type of legal action, other than those stemming from its routine operations and activity.
18. Authorization to issue the consolidated financial statements
The consolidated financial statements were autho-rized for issue on March 31, 2017, by Lic. Edouard Bou-drant Finance Director and Lic. Eduardo López, Man-aging Director of FibraHotel, consequently they do not reflect events after this date, and subject to the approval at the Gen-eral Ordinary Trustors meeting which may be modify them.
* * * * * *
Des
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La Bolsa Mexicana hace constar el listado de los Certificados Bursátiles Fiduciarios Inmobiliarios denominados FIBRAS emitidos por Concentradora Fibra Hotelera Mexicana,
S.A. de C.V., en su carácter de Fideicomitente.
Intermediarios Colocadores:
Asesor y Agente Estructurador de la Oferta:
Características de la Emisión:
Clave de Cotización:
Fecha de Listado en la BMV:
Monto Total de la Oferta Global Inicial:(con sobreasignación)
Monto Total de la Oferta en México:(con sobreasignación)
Monto Total de la Oferta Internacional: (con sobreasignación)
FIHO
30 de noviembre de 2012
$ 4,136,805,535.00
$ 2,685,163,334.00
$ 1,451,642,201.00
FIHO
Evercore Casa de Bolsa, S.A. de C.V
Evercore Partners México, S. de R.L.
Casa de Bolsa Banorte IXE, S.A. de C.V. Grupo Financiero Banorte
Casa de Bolsa BBVA Bancomer, S.A. de C.V. Grupo Financiero BBVA Bancomer
J.P. Morgan Casa de Bolsa, S.A. de C.V. J.P. Morgan Grupo Financiero
ISSUER:FibraHotel Torre Corporativo World PlazaAvenida Santa Fe # 481 Piso 7Colonia Cruz Manca, Delegación Cuajimalpa, C.P. 05349, Ciudad de Méxicowww.fibrahotel.com www.twitter.com/FibraHotel www.linkedin.com/company/fibrahotel
ADMINISTRATOR:Administradora Fibra Hotelera Mexicana, S.A. de C.V.Torre Corporativo World PlazaAvenida Santa Fe # 481 Piso 7Colonia Cruz Manca, Delegación Cuajimalpa, C.P. 05349, Ciudad de México
TRUSTEE:Deutsche Bank México, S.A., Institución de Banca Múltiple, División FiduciariaBlvd. Manuel Ávila Camacho, #40 Piso 17, Torre Esmeralda I, Colonia Lomas de Chapultepec, Delegación Miguel Hidalgo, C.P. 11000, Ciudad de México
COMMON REPRESENTATIVE:CI Banco S.A., Institución de Banca MúltipleAv. Paseo de las Palmas núm. 215 Piso 2, Col. Lomas de Chapultepec, Delegación Miguel Hidalgo, Ciudad de México
EXTERNAL AUDITOR:Deloitte – Galaz Yamazaki, Ruiz Urquiza, S.C.Miembro de Deloitte Touche Tohmatsu LimitedPaseo de la Reforma #115, Piso 6Colonia Cuauthémoc, Delegación Cuauthémoc, C.P. 06500, Ciudad de México
Directory
Live Aqua Trébol Monterrey
Torre Corporativo World Plaza
Av. Santa Fe No. 481-Piso 7,Col. Cruz Manca, CP 05349
Del. Cuajimalpa, México D.F. www.fibrahotel.com