HR Ratings Assigns HR AA+ Outlook to FIBRA Shop Emissions

HR Ratings assigned a rating of HR AA with a positive outlook to FSHOP 25 and FSHOP 25U emissions from Mexico-based FIBRA Shop (FSHOP), citing positive 2024 performance metrics such as its Loan to Value (LTV) of 39.6% and an 11.3% increase in free cash flow.

HR Ratings’ emissions are part of a revolving program for an amount of up to MX$10 billion (US$508.2 million). The assignment reflects the rating of the FIBRA, which was ratified at HR AA with its outlook modified from Stable to Positive on Dec. 13, 2024.   

HR Ratings says it observed FSHOP’s balance sheet being strengthened in 2024, which resulted from the portfolio expansion strategy. This included an LTV of 39.6% in 2024, compared to 43.1% in 2023 and 41.2% expected in the base scenario. During 2024, FSHOP acquired three shopping centers, resulting in a Gross Leasable Area (GLA) of 698,621m² at 1Q25 compared to 645,033m² in 2023, financed primarily through CBFI placement. 

Revenue during 2024 reached MX$2.4 billion. EBITDA and NOI reached MX$1.8 billion and MX$1.9 billion, respectively. Free cash-flow generation reached MX$1.8 million in 2024 compared to MX$1.6 billion projected, representing an 11.3% increase over base scenario projections, attributed to higher EBITDA and lower working capital requirements. HR Ratings says that while a higher Investment Units (UDIS) valuation than expected resulted in increased debt service, the higher free cash-flow generation counteracted this increase, resulting in a debt service coverage ratio (DSCR) of 1.4x in line with projections.

HR Ratings' base scenario considers portfolio stabilization after one year of operation for the acquired properties, with an expected average occupancy factor increase to 94.7% compared to 93.3% in 2024. Projections consider the FHOP’s capacity to increase rent in line with projected inflation, resulting in a compound annual growth rate of 4.3% for revenue between 2024 to 2029, with total revenue reaching MX$2.9 billion by the end of 2029. Average weighted EBITDA is expected to be MX$2.3 billion between 2025 to 2029, compared to MX$1.8 billion in 2024, and average weighted NOI MX$2.3 billion compared to MX$1.8 billion in 2024. 

The rating also includes positive qualitative adjustments for superior ESG performance and labels, and for the high diversification of tenants, which reduces the impact of contract expirations.
HR Ratings says that factors that could potentially raise the rating include portfolio stabilization leading to improved operating flow and DSCR increasing to an average of 2.2x. Factors that could lower the rating include lower free cash flow generation compared to the base scenario, resulting in a deterioration of DSCR.