Date: September 21st, 2021 Industry: Real state

Recommendation: BUY Sector: Industrial

Current price: $35.47 MXN Stock Exchange: Bolsa Mexicana de Valores (BMV)
Target price: $46.63 MXN Ticker: VESTA* MM (BMV)
A Solid Bet Upside: 31.45% Market capitalization: 23,647.2 Millions MXN
USDMXN: $20.1331 Shares outstanding: 670.3 Millions

Figure 1: Price Performance Comparison Corporación Inmobiliaria Vesta, S.A.B. de C.V. is a top-notch publicly traded Mexican real
state company, that develops, operates and leases industrial buildings and distribution
centers throughout Mexico. Their world-class tenants are within strategic locations in 13
states, and their modern structures are constructed with eco-efficient standards.

INVESTMENT SUMMARY
We issue a BUY recommendation with a 12-month target price of MXN $46.63,
representing a 31.46% upside potential over the closing price of MXN $35.47 (September
Source: Bloomberg 21st, 2021) (Figure 1). Our target price is based on a discounted cash flow model (DCF) (80%)
Figure 2: Sales of E-Commerce in Mexico and a dividend discount model (DDM) (20%). In order to strengthen and support our
recommendation, we performed a Monte-Carlo simulation, sensitivity analysis, and relative
valuation.
Our recommendation lays on the following key catalysts: (1) e-commerce and logistic
expansion, (2) attractive opportunities for nearshoring in Mexico and, (3) strong tenant base
and industry diversification.
E-commerce and logistics expansion
As the e-commerce industry in Mexico continues to expand rapidly, Vesta is focusing its
efforts to become a leading player by entering the sector early and providing a wide variety
of services for specialized e-commerce operations. The increasing demand for e-commerce
represents an opportunity for Vesta to expand its client base and gross leasable area (GLA)
in order to sustain and outperform its existing growth rate.
Source: Euromonitor According to Euromonitor, the e-commerce industry in Mexico is expected to grow at a 39%
Figure 3: Anual Mexico's exports in CAGR between 2020 and 2025, with a value of MXN $356,239.2 million in 2020 and MXN
billions dollars $667,079.2 million in 2025 (Figure 2). Taking this into consideration, we believe that e-
commerce will be one of Vesta's primary accelerators, as the company will be able to exploit
this growing industry to exponential its own growth by providing its clients with the
improved logistics and infrastructure they require.
Attractive opportunities for nearshoring in Mexico
The industrial sector has been a major driver for Mexico's growth, and we believe this trend
will continue as a result of supply chain restructuring caused by the global pandemic.
Mexico has the perfect location for nearshoring and this can be seen with the consistent
growth in anual mexican exports (Figure 3). Nearshoring is a growing trend around the
Source: Banxico
world, and Vesta is well-positioned to benefit from it for the following reasons:
Figure 4: Current Portfolio Allocation Mexico has 13 free trade agreements with 50 countries, resulting in low trade tariffs, and
despite the pandemic was one of the USA's three main commercial partners in 2020.
Mexico has competitive labour costs when compared to China, and its strategic location
near the United States and as a hub for Latin American markets can help international
companies in simplifying supply chain strategies.
Strong tenant base and industry diversification
Vesta is known for having high-quality tenants, with a wide range of international and
local companies and sectors, including Coppel, Nissan, The Home Depot, Samsung, among
others. (Figure 4) Also, they preleased a development building with Eaton Corporation that
is currently under construction. As a result, they had a contract renewal rate of 92.5% this
2Q2021, they are paving the way for future expansion along with its tenant in alignment
with the Level 3 strategy plan (Appendix B5). Strong industrial real estate demand is still
driving the market, current supply and demand dynamics will become more positive on the
company because of management's focus on growing its tenant base to sustainable
Source: Company data
businesses, as well as a defined capital allocation and recycling strategy, leading into a
more circular economy and creating competitiveness.
BUSINESS DESCRIPTION Vesta is a fully integrated public company that began operations in 1998, it owns, manages,
acquires, sells, develops, and re-develops industrial properties in Mexico, with a presence in
Figure 5: 2Q 2021 Vesta's Geography
several markets that are considered strategic, including main logistics and trade corridors in
Bajio 48% the country. Vesta is therefore an asset management firm with a development vehicle for
North 30% growth. At the close of June 30th, 2021, Vesta's portfolio consisted of 189 industrial high-
Central 22%
value properties with a GLA of 2.93 million m² (31.59 million ft²) (Figure 6).

Vesta develops industrial warehouses and distribution centers through "Custom Buildings"
("Built to Suit") and "Custom Parks" ("Park to Suit"), which are buildings designed to
match the specific needs of clients or industries. They also build "Inventory Buildings",
which are buildings without a lease contract signed with a specific client and built to suit the
Source: Company data
need for immediate occupancy of current and future clients (Appendix B2).
Figure 6: Vesta´s Industrial Portfolio
The buildings are located in three strategical main regions: bajio 48%, north 30% and
central 30% (Figure 5). The design, quality and geographic location of the properties are key
to the optimization of customer operations that constitute an important link in the supply
chain in these regions. Vesta's mission is to achieve excellence in the development of
industrial real estate through an entrepreneurial team that generates efficient and
sustainable solutions.
Source: Company data

INDUSTRY OVERVIEW Mexico's industrial outlook

Figure 7: Net asset value (NAV) calculation
Mexico's advantageous geographic location, broad and diverse industrial production base
and low investment barriers have attracted foreign direct investment, increasing demand
for Vesta's buildings due to the unique and appealing product offering (Appendix B3). As we
can see in the net asset value (NAV) there is an increase of 10.8% in the number of
properties in one year (Figure 7).

Industrial real estate market in Mexico

- The light manufacturing markets, located strategically near the USA border and the
Bajío markets that primarily serve export-focused multinational tenants who typically enter
into 7-10 year leases denominated in US dollars and adjusted to the USA consumer price
index. Vesta's portfolio accounts for the majority in this category, with around 64.4%
distributed between the Bajío and the country's north. (Figure 4)

- The logistics and distribution markets, which are focused on supplying domestic
demand, are located in major consumption centers, serving tenants of the e-commerce and
food industries and beverages, who sign leases of 3 to 5 years denominated in pesos and
adjusted to Mexico's consumer price index. Vesta's portfolio accounts for more than a
Source: Company data, team analysis
quarter of this category, with around 35.6% of its assets located in the country's center.
(Figure 4)

Figure 8: Inflation 2016-2021 and forecast Macroeconomics

Further, looking back at prior periods of inflation (Figure 8) in relation to industrial real
estate, property values and rent levels have increased overall. Given the drivers of real
estate returns, a natural inflationary hedge is built into real estate investment, providing
security in times of economic volatility, like the one we were currently in because of Covid-
19, having a major impact on Vesta's Net Asset Value (NAV) with a percentage change of
26.9% from 2Q20 to 2Q21 (Figure 7). In the current environment, Mexico's GDP is expected
to have a YoY% of 6% in 2021, the major growth is also benefiting from the imports and
Source: Banxico, Bloomberg, contributor composite
exports (Figure 9).
Figure 9: Economic activity (YoY%)

Source: Bloomberg, contributor composite

Figure 10: Current Automotive supply
chain
Source: Company data
Figure 11: Euromonitor performance of
E-Commerce YoY % Retail Sales
Source: Euromonitor
Figure 12: ESG Leading Certifications
Source: Company data
Figure 13: Current Suppliers and
Process of Selection
Source: Team analysis
COMPETITIVE
POSITIONING
Figure 14: Peer comparison, 5 year
average
Vesta
Source: Team analysis, Refinitiv, Appendix D2
Main industry trends
The automotive industry is one of Mexico's most important sectors and the most
important for Vesta, accounting for 24.6% of its portfolio. According to the Mexican
Association of the Automotive Industry, Mexico will be the world's fifth-largest
manufacturer of vehicles by 2025. Automotive and logistics continue to drive future
investments within the Bajío region, with strong tenant expansions on build-to-suit
construction. For the pandemic outcome, the Tier 1 manufacturers have grown stronger as
a result of market consolidation, in which only the best and most profitable survived and
Original Equipment Manufacturer (OEM) were reduced, for Vesta is 1.1% in the second
quarter of 2021 (Figure 10).
E-commerce: According to Euromomitor, e-commerce will account for a YoY% growth of
15.6% of Mexico's retail sales in 2024. The pandemic has accelerated the country's adoption
of e-commerce from 5 to 3 years. Mexico already has one of the highest e-commerce
growth rates in the world (Figure 11). Furthermore, as e-commerce sales rise, so will the
demand for logistics and storage space. Vesta uses their dedicated logistics portfolio to
efficiently accommodate capacities such as larger warehousing spaces, last-mile and same-
day delivery services and relocating shipping from packages to pallets. Vesta's actual plan is
YoY% Growth an expansion in logistics and e-commerce, as this represented 2.6% in 2020 and now it
Estimates represents 4.7% of their portfolio for the 2Q2021, this is one of the company's key growth
drivers for expansion.
Portfolio innovation and technology
Optimal diversification: Vesta's portfolio is exceptionally diversified, none of its existing
tenants is accounting for more than 6% of its rental income in 2Q2021 (Appendix B1). This is
crucial to emphasize since it protects the portfolio's major income in the case of a
significant client exit, maintaining and growing the current portfolio value of $2.23bn USD.
Meaning Vesta's current portfolio structure is strong and ready to be redefined for future
plans.
Innovation and technology in Each park: All the parks are built in the most optimal way
so that all the waste it generates is treated optimally and responsible, also there is a direct
and indirect impact with the SDGs (Appendix B6). Vesta focuses on these parameters in
every project they develop: sustainable sites, water efficiency, energy and atmosphere,
materials and resources, indoor environmental quality and they include them in the green
agreements with each tenant along with the leading certifications (Figure 12).
Asset Management efficiency: Vesta has various indicators that help the management
and administration of its industrial properties, many of which are related to its ESG strategy.
Furthermore, Vesta has an asset recycling system derived from the level three strategy
(Appendix B5), such system has proven to be successful in July 2021 when they sold a USD
$100 million of industrial properties with a premium of 20% above book value
demonstrating to the market the quality of Vesta´s properties (Appendix B3). This recycling
system also broadens its sources of financing, reduces funding costs and optimizes Vesta's
capital structure. Additionally, they use high-quality contractors (Figure 13) and service
providers that are selected through a process of awarding contracts derived from tenants.
Peers description
FIBRAPL is a well-positioned company in six strategic geographical markets with an
occupancy rate of over 95%, they also take advantage of e-commerce. FUNO remains very
solid, in particular for logistics warehouses. TERRA located in 16 states, is highly exposed to
a dynamic light manufacturing activity in the north-east. FIBRAMQ has a resilient industrial
portfolio, their focus is on ownership of stabilized properties with development capability to
access growth opportunities. Finally. FIBRAMTY does not develop or purchase speculative
(unoccupied) buildings, they make acquisitions. (Appendix D2) Over the peer comparison 5
year average, we can see Vesta's superior performance among the average of the peers
Peer average (Figure 14).
Figure 15: Peers Presence per Region
2020
Source: Team analysis, Companies data
Figure 16: GLA Peer Comparision on
industrial properties in millions of
meters squared
Source: Team analysis , Companies data
Figure 17: Key differentiators among
peers
Source: Team Analysis, Companies data
ENVIRONMENTAL
SOCIAL AND
GOVERNANCE
Figure 18: ESG peer comparison
Source: Appendix C5 ,Capital IQ, Team analysis
Figure 19: ESG scorecard
Source: Appendix C5, team analyisis, Refinitiv
Growth opportunities against peers
Given its competitive edge, we believe Vesta has sufficient potential; it is one of the few
industrial companies against its peers that already have an e-commerce presence with
Mercado libre as a client (Appendix B1). Vesta is well positioned in terms of product and
customer quality, despite not being the largest company among its peers (Figure 16 &
Figure 15) it has an exponential growth gap premise for the logistics business because of
these three main drivers: 1) Vesta's flexibility 2) main strategies against peers and 3) world-
class certifications.
1) Vesta's flexibility: Another key point to note is that Vesta is the only one of the chosen
peers that is not classified as a REIT giving Vesta entire flexibility when it comes to dividend
payouts and acquiring/constructing additional properties. That's one key point on why
Vesta top clients are preferring their custom-build products for their supply chain needs.
2) Main strategies against peers: Vesta's portfolio is strategically scattered across the
Mexican territory (Figure 5). Additionally, thanks to the level three strategy (Appendix B5)
the portfolio is always being renewed, seeking constant updating of buildings and
demonstrating improvement quarter after quarter (Figure 17). Another important point to
mention is the opportunity to close up the GLA growth gap premise against its peers (Figure
16). Compared to the biggest GLA holder (Terrafina), Vesta has immense potential for
growth in the years to come.
Vesta is currently seeking to keep up with their sustainability performance target (STP)
which aims to obtain a sustainable certification for 20% of the GLA by 2026. (Appendix B7).
3) World-class certifications: 95% of the buildings within Vesta's portfolio under
development are in the process of LEED certification. This topic has grown in importance
over time, and as an asset management firm with intentions to expand current
certifications for existing and future buildings, Vesta will be able to attract new high-end
customers. Vesta is one of the industrial park companies with one of the best ESG systems
such as water treatments and certifications like “LEED, Worldcob, EcoVadis, CDP (C rating) S
& P / BMV Total ESG, GRESB (rating greater than 50% in each component relevant to the
ranking), DJSI MILA) (Figure 12 & Figure 17).
In terms of ESG Vesta outperforms its peers as is clear in figure 18, and we expect this
tendency to continue. Vesta has designed a whole structure surrounding ESG to make sure
they achieve its goals. The overall score of Vesta's ESG can be seen in figure 19, the
methodology is explained in Appendix C5.
Vesta follows three strategic guidelines in defining and implementing its ESG practices:
1.- Integrity and Governance: behaving in an honourable, responsible manner, with
respect and discipline, ensuring consistency between the company’s statements and
actions.
2.- Environment: minimizing the negative environmental impact of its industrial real estate
facilities and corporate offices
3.- Responsible Investment: Engage in constant dialogue with Vesta’s stakeholders,
staying well-informed of local needs and development possibilities
Environmental
Vesta prioritizes managing and improving the environmental impact of their activities.
Within their contracts, Vesta stresses the importance of environmental impact with a
"Green clause", which states that the tenants voluntarily share energy and water
consumption data as well as waste generation data. To make sure their environmental
practices comply with the internal goals, Vesta has processes in place to manage energy,
water, emissions, and waste, each of these categories aims to improve performance in pre-
established targets (Appendix C6).
Figure 20: Social Investment (Thousand of
USD)
Source: Team analysis, Company data
Figure 21: Materiality index
Governance Social
Source: Company data, team analysis
Figure 22: Table for materiality index
Source: Company data, team analysis
Figure 23: Board structure
Source: Appendix C2, team analyisis
Figure 24: Top holders
Institutional holders
Public and others
70.3%
Source: Appendix C4, Company data
Social
Vesta engages in business relationships that respect the universally recognized
fundamental human rights of their workers. Vesta has reduced their employee turnover
from 30% in 2016 to 9% in 2020, also there are more women employees from 38.5% to an
increase of 41.1% in 2020.
Vesta's business strategy is oriented towards the sustainable development of the
communities in which it operates. All of its parks and warehouses are located in areas that
local governments previously authorized as industrial zones. They seek to improve the
quality of life of the communities surrounding their properties.
In 2020 Vesta invested $618,790 USD (Figure 20) for the benefit of Mexican communities.
They supported 11 covid, 4 education, and 7 community development and inclusion
projects, as well as arranging the Vesta Challenge 2020, the proceeds of which were
invested in social investment projects in 2021. Vesta made an impact in 10 states and
benefited 2,600 people as a result of these efforts.
Governance
In terms of governance, we believe that Vesta has a solid structure that outperforms its
Environmental peers (Appendix C5), and delivers confidence for shareholders. The evaluation takes into
consideration a qualitative analysis of the board of directors, and a team made qualitative
assessment that considers: management score, shareholders score, and corporate social
responsibility score (Appendix C5) the results from the evaluation are displayed in figure 19.
The board of directors is made up of 10 members, of which 8 are independent (Appendix
C2). The Chairman of the Board is the founder of Vesta, Lorenzo Manuel Berho Corona, and
the other members are well-prepared people from various cultural and professional
backgrounds, with considerable experience in the real state business, specifically in the
industrial real state. They represent the shareholders with a set of unique skills in order to
assure Vesta's future growth.
The executive management is comprised of 11 members (Figure 25) that include 2
members of the Berho family (CEO and portfolio management) they carry heavy
responsibilities in day to day decision making, the rest of the executives are outsiders. Out
of all the members, there is only 1 female, we consider gender diversity a considerable area
of improvement in the future. Each of the members carries broad experience in their field
of contribution and remarkable academic preparation. (Appendix C1)
Talking about shareholder representation and corporate social responsibility Vesta's board
of directors relies on 6 committees (Figure 23) to assure that the shareholders are well
represented, and to lead the firm towards addressing its social duties as a corporation. The
committees are: audit, corporate practices, ethics, investment, social and responsibility, and
debt and equity. Each of these entities is the foundation for Vesta's strategy.
The ownership structure of Vesta can be observed in figure 24 and shows that no individual
holds more than 5%, which gives the company certain freedom. Various institutional
investors are the biggest holders followed by the Berho Family; founders and currently hold
important weight inside the company. Finally, there is the management group, it's
important for them to hold stock because they can act in the best interest of shareholders.
18.8% Figure 25: Organizational chart (executive management)
Berho Family
5.7%
Management
5.2%
Source: Appendix C1, Company data
 FINANCIAL ANALYSIS
Figure 26: Total Revenue
Source: Capital IQ, Company Data, Team analysis
Figure 27 : EBITDA & Gross Margins
Source: Capital IQ, Company Data, Team analysis
Figure 28 : Net Debt/EBITDA
Source: Capital IQ, Company Data, Team analysis
Figure 29 : Vesta's debt maturity
Source: Refinitiv, Team analysis
Figure 30 : Peers Dividends
Source: Capital IQ, Company Data, Team analysis
The team created a forecast for the three main financial statements. We analyzed a 10-year
period using horizontal and vertical analysis, as well as CAGR, in order to find patterns and
generate a more accurate forecast. We used this data to make a 5-year forecast and an
analysis of the company's financial health. Appendices E1, E2, and E3 contain the forecasts,
as well as appendix E4 contains the assumptions.
Strong revenue growth
Vesta's total revenue increased at an 11.55% CAGR between 2011 and 2020 (Figure 26). This
rate is primarily explained by one crucial factor: the GLA grew at a CAGR of 10.59% during
this period of time. Given that Vesta's revenue is mostly derived from rentals, raising the
GLA lets them attract more clients and hence improve their rental revenue. Given that 86 %
of Vesta's rental income is denominated in USD, we estimate that total revenue can
fluctuate in MXN depending on the exchange rate.
We estimate that the CAGR for future revenue growth will be 12%. Given the historical CAGR
and the key catalysts, we feel this CAGR is reasonable and sustainable. We anticipate that
Vesta will continue to increase its GLA while also expanding its total clientele and
diversifying into new industries such as e-commerce.
Reliable stability in margins
Vesta has demonstrated the ability to sustain high gross, operating, and net profit margins
in recent years. The average Gross Margin for the period is 93.68%, while the EBITDA
Margin has maintained over 81.76% (Figue 27). Finally, a net income margin of 66.11% on
average. Over a ten-year period, all margins have remained stable, indicating Vesta's solid
position in the market, as well as the fact that when compared to its peers (Appendix D2),
Vesta reaffirms its competitive advantage, outperforming its peers over a five-year period.
Satisfactory costs control
Vesta, as an asset manager, has low operating expenses, accounting for an average of
18.29% of revenue. Vesta can retain the previously mentioned high profits because to its
low operational costs. This feature allows the company to increase operational profitability
by increasing GLA in accordance with its investment objectives. At the same time, because
of Vesta's policy of boosting efficiency in each of its properties, the company has been able
to keep the percentage of its operating expenses to revenues stable. Vesta's major
operational costs were selling general and administrative charges, which accounted for
11.59% of sales on average.
Healthy debt levels
The company has been working on a healthy level of debt, with a Net Debt/EBITDA ratio of
4.1x 2Q 2021, which has been decreasing since 2011 when this ratio was at an 8.2x level.
The company's objective is to keep this ratio below 5.5x (Figure 28). The Total Debt/Equity
ratio of Vesta is 66.6% 2Q 2021, with an average of 60.37%. Finally, the issuer maintains a
healthy and appropriate amount of its short-term liabilities, with a Current Ratio of 7.2x 2Q
2021 and an average of 6.63X. The total long term debt of the issuer at the end of 2020 was
USD 843.4 million. During 2Q21, the Company paid off its syndicated debt, revolving credit
line, and one of the three Metlife credits. Vesta's debt is all fixed-rate, and it has balanced
maturities until 2031, when it must pay off the bonds it just issued (Figure 29).
Betting in capital expenditures
The company's CAPEX has grown to a CAGR of 21.11%. Vesta's strategy has been based on
growing the GLA and maintaining its current properties. Vesta, on the other hand, can grow
faster than a REIT since it is not required to pay out dividends. Vesta does pay dividends,
but at a lesser rate than its rivals, since it has the flexibility to reinvest its earnings in its own
growth, which would otherwise be slower (Figure 30). Vesta's key competitive advantage
over its peers (REITs) is that it offers a greater return to its investors, which, if given in the
form of a dividend, would mean that capital reinvestment would be lost, in addition to
having to pay dividend taxes.
Figure 31 : FFO per share Outperforming the industry returns
Vesta has historically outperformed its peers in terms of profitability because of efficient
capital allocation and decision-making. Vesta has outperformed its peers over the last five
years, with an ROE of 9% vs. 7.3% (Appendix D2). Due to the post-pandemic recovery, we
anticipate a greater ROE in the following years. This results in favorable shareholder returns
with Vesta delivering a CAGR of 9% in FFO per share between 2021 and 2026 (Figure 31).
Therefore, we expect Vesta to pass the excess earnings forward to an effective capital
allocation and to shareholders in the form of dividends.
Source: Company Data
With our valuation, we were able to reassert our BUY recommendation with a 12-month
VALUATION target price of $46.63 MXN presenting a 31.45% upside potential on the closing price of
$35.28 MXN on 21/09/2021. We based our target price 80% on a discounted cash flow
model (DCF), and 20% on a dividend discount model (DDM). In addition, we conducted a
Montecarlo simulation analysis, a sensitivity analysis, and a relative valuation in order to
give robustness to our recommendation.
Figure 32 : WACC inputs
We believe that Vesta will deliver this value if they are able to capitalize from the e-
commerce and logistics expansion, the nearshoring opportunities in Mexico´s industrial
sector and continue to host high-quality tenants, which we consider the main drivers for
Vesta´s growth.

Source: Appendix F2, Team analysis, Company data,
Bloomberg,
Refinitiv
Figure 33 : Growth rate inputs
Source: Appendix F2.1, Team analysis, Company data,
Damodaran
Figure 34 : Security market line (CAPM)
DCF valuation
For our DCF model (Appendix F1) we employed the Adjusted funds from operations (AFFO),
which in terms of real state is the equivalent of the free cash flow to equity (FCFE); a metric
that measures value delivery for shareholders, to arrive at the intrinsic value of the
company . This model allows accounting for the high growth of the company for the
forecasted period of 2021 through 2026.
WACC
We estimated a WACC of 7.27% (figure 32). To arrive at this, we computed an equity cost of
10.25% based on the CAPM methodology. The cost of equity considers an unlevered beta of
the peers and re-levered with Vesta´s operating risk, the risk-free rate of the Mexican 10-
year bond yield, and the equity risk premium of 4.81%. For the cost of debt, we computed a
3.35% rate that considers Vesta´s debt structure and an adjustment factor of 1.38 that
accounts for the credit rating and the country risk of the company (Appendix F2).
Growth rate
For the growth rate (Figure 33), we based our analysis on the methodology proposed by
Aswath Damodaran, which consists in multiplying the reinvestment rate of 179.44% times
the ability of the company to return value, that in this case can be represented as the return
over capital (ROC) of 4.12% to arrive at the value of 7.40% (Appendix F2.1).

Terminal growth
We expect that after the year 2025, the terminal growth rate will stabilize at the value of 2%
based on historical values of the Real GDP globally, consistent growth across Mexican
industrial sectors, and the consolidation of new markets such as e-commerce (Appendix
F1).
Source: Team analysis

Figure 35 : Montecarlo Simulation
Source:Appendix F4 ,Team analysis
Scenario analysis
In order to make our BUY recommendation more solid, we performed a Monte-Carlo
scenario analysis (Appendix F4) to the DCF valuation with S=100,000 simulations, stressing
the variables: WACC, Growth rate and Terminal growth rate. We found a 28% probability for
Vesta to remain at the current $35.47 MXN level or below. Additionally, we developed three
scenarios as can be seen in figure 36. We found a 20% probability for the bear case to take
place (px≤ 32.59 MXN), and a 30% probability for the bull case (px≥ 60.38) were px is the
price. The expected implied share price based on the Montecarlo analysis is MXN $51.48
meaning that if the company is able to maintain the current strong performance, and they
materialize our investment theses the company is very likely to present the stated 35.58%
implied upside from our robust valuation.
Figure 36 : Scenario analysis

Source: Team analysis, Company data

Figure 37 : Relative Valuation Peer Relative valuation
Comparison Multiples To back up our buy recommendation, we conducted multiples valuation (Appendix F5),
which compares Vesta to similar publicly traded firms in terms of business fundamentals
Implied share price 37.92
and risk exposure. Following our belief that Vesta has comparable industrial characteristics,
we build a five-peer table based on local industry peers (Appendix D2). We anticipate
significant upside for Vesta because we believe it should price closer to real estate
operating company multiples due to its greater competitive advantage and capital
allocation. As we can see in figure 37, the multiples used were: P/E, P/AFFO, P/BV,
EV/REVENUE, EV/EBITDA and EV/EBIT. The multiples used were averaged to arrive at an
implied share price of $37.92 MXN, which represents a 6.9% upside and backs up our
Source: Appendix F5, Team Analysis recommendation.
Figure 38 : Analysis of valuations
Sensitivity analysis
We performed a sensitivity analysis to asses how the variation of the inputs affect our
valuation. For all of the findings of the various scenarios, this sensitivity analysis already
considers a weighting of 80% DCF and 20% DDM. We evaluated the sensitivity of variables
such as WACC, terminal growth, GLA, AFFO, and the EV/EBITDA multiple to see how they
affect our buy recommendation (Appendix F3). We discovered that a 10% drop in the
current GLA in operations could have an impact on our recommendation (Figure 39). Given
the strong present renters, we believe such a significant drop in any of these inputs is highly
unlikely. A 5% increase in AFFO and a 1x increase in the EV/EBITDA multiple throughout the
Current price $35.47 Target price $46.63
predicted timeframe, on the other hand, will have little effect on our valuation.
Source: Team Analysis Furthermore, we believe that terminal growth has a greater upside potential than downside
risk.

Figure 39 : Sensitivity Analysis

Used GLA (M^2)
WACC

AFFO
WACC

Source:Appendix F3 ,Company data, Team analysis

Figure 40 : DDM Inputs
Source: Appendix F6, Team Analysis
Figure 41 : Dividend yield
Dividend growth 17.51%
Source: Company data
INVESTMENT RISKS
Figure 42 : Risk probability impact
Source: Team Analysis, Company Data
Figure 43 : Heat Map
Source: Team Analysis, Company Data
Dividend discount model
Taking into account the historical increase of the Net Operating Income (NOI) of the
company with a strong 5-year historical CAGR of 10.09% (Figure 40). We computed a DDM
model with a per-share price of just over $41.84 MXN, which takes into account Vesta's
cost of equity at 10.25% (Appendix F2) previously calculated on the DCF model and the
same for the terminal value. We calculated the dividend per share growth by multiplying
the payout ratio with the average of the historical 5 years of 39.48% by the NOI per share,
yielding a stable growth rate of 10% over the following five years. (Appendix F6).
Since Vesta is not a formal Reit, we consider using this approach of calculation because it
emphasizes the forecasted NOI while taking into consideration the cost of equity which is
important to acknowledge because this method brings to the present the expected
dividend shared price (DPS). Also, Vesta has a strong history of returning cash to
shareholders through dividends, with five-year dividend growth of 17.51%. (Figure 41).
We identify business disruptions, regulations, and a volatile market as the top three
investment risks for Vesta. Although we recognize that these threats may have a negative
impact on profitability and investment returns, we do not see any high probability and high
impact risks (Figure 42).
Business & Operational Risks: Business disruptions
Probability: Low Impact: High
O. Operations
O.1 Breaches with contractors that affect the delivery period: Vesta hires contractors
to build its parks and buildings, so there's always the possibility of a default.
Mitigation: Vesta chooses its suppliers with caution. Each project is entered into a
competition, during which the suppliers are evaluated and the development is completed
on schedule. Vesta distributes responsibility for damage recovery to its suppliers in the
case of noncompliance. They are also required to follow the rules outlined in the
Sustainable Construction Manual and to complete the checklist provided by Vesta.
O.2 Customer payment default: Vesta's most important cash flow comes from its
tenant's rent, therefore it is dependent on the formality and punctuality of their payments.
Mitigation: Vesta chooses high-quality clients (with investment-grade credit ratings) and
diversifies within industries, lowering the chance of payment default. Furthermore, it
pursues long-term connections with these clients, as seen by its 90.7% retention rate.
F. Finance
F.1 Acquisitions that have not been completed financially or in terms of integration,
or that have unanticipated obligations: Vesta confronts the risk of certain acquisitions
not being completed or financially integrated, as well as hidden obligations that have a
direct impact on the company's profitability.
Mitigation: Vesta recognizes the importance of each of its acquisitions, thus each one is
preceded by a thorough analysis and deliberate decision-making.
E. ESG
E.1 Environmental pollution and sustainability; waste, toxic emissions,
decarbonization, and greenhouse gas emissions for all operations: Vesta is at risk of
increasing its greenhouse gas emissions above what is allowed by law, it also has to work
to reduce its toxic and non-toxic waste as well as decarbonize its facilities.
Mitigation: Vesta deals directly with tenants and applies the sustainable purchasing policy,
in addition to trying to generate circular economies for the reduction of toxic and non-toxic
waste. Currently, Vesta is below the greenhouse gas emissions allowed by law, highlighting
that more than 98% of its current emission is generated indirectly by the operations of its
tenants.
Figure 44: Summary of key risks and
mitigation measures
Source: Team analysis, Company Data
Figure 45 : Historical USDMXN 2016-2021
Source: Bloomberg, Team analysis
E.2 Water and energy insufficiencies for operations: A lack of water and electricity
would be a major issue for Vesta, therefore it is critical that they consume these resources
in a sustainable manner.
Mitigation: To minimize the use of drinking water, Vesta offers a system for catching and
recycling rainwater, as well as technology that saves water usage and wastewater
treatment. Tenants at Vesta utilize more than 90% of the water consumed in the facilities.
Vesta already has solar panels, but it intends to increase their installation in order to
minimize its reliance on nonrenewable energy.
E.3 Impact by natural disasters, climate change and pandemic: Vesta has a well-
diversified national presence; nevertheless, this makes it more vulnerable to natural
catastrophes and/or climate change, and as 2020 shown, the impact of a pandemic must
be considered among the probable dangers.
Mitigation: Vesta carefully chooses the geographic regions where it has a presence
because, in addition to being the country's main hubs of trade, they have a low risk of
natural catastrophes. Vesta is working with the Task Force on Climate-related Financial
Disclosures (TCFD) to decrease environmental damage and mitigate the effects of climate
change. As we saw in the current pandemic, Vesta suffered little damage due to its
business model and its rapid adaptation, therefore it can be assumed that Vesta will have
no problem if a similar situation arises in the future.
E.4 Non-compliance with regulations and the Code of Ethics by stakeholders: Vesta
might be severely harmed if a stakeholder violates the regulations and/or the Code of
Ethics, since it could be a major offense.
Mitigation: Vesta has an ethics committee that is in charge of overseeing and monitoring
adherence to the code. They provide ongoing ethical and anti-corruption training to their
collaborators. Suppliers and clients are also bound by a code of ethics. They also use
Global Ethics services to check code compliance and follow-up on complaints.
Market Risks: Volatile market
Probability: Moderate Impact: High
M.1 USD depreciation and/or MXN appreciation: The USDMXN exchange rate is crucial
for Vesta since 86% of the company's activities are conducted in USD, and the fluctuation
of this exchange rate has a direct influence on the company's profitability.
Mitigation: Vesta does not have or need derivatives because the impact of the USDMXN
exchange rate is consistently favourable; nevertheless, if the scenario changes, Vesta will
be able to protect itself using these instruments to mitigate the negative impact as
historically proven (Figure 45).
M.2 Increase in Mexico’s country risk: The increase in Mexico's country risk would have
a direct impact on Vesta by lowering foreign investment, which might decrease demand for
Vesta's services.
Mitigation: Vesta has a low vacancy rate because of good client retention and long-term
contracts with a high renewal rate.
Political Risks: Regulations
Probability: Moderate Impact: Moderate
P.1 New government restrictions; new legislation and tax reforms: Vesta is regulated
by Mexico's legal system, which is constantly updated, therefore changes in the legal
structure might have a direct influence on Vesta's operations.
Mitigation: The legal direction is in charge of keeping Vesta updated and within the
corresponding legal structure.
LIST OF APPENDICES

APPENDIX A: GLOSSARY
Appendix A -Glossary

APPENDIX B: COMPANY DESCRIPTION

Appendix B1 - Clients overview
Appendix B2 - Products
Appendix B3 - M&A
Appendix B4 - Businessmodel / Value chain
Appendix B5 - Level 3 Business Strategy
Appendix B6 - SDGs
Appendix B8 - Sustainability Performance Target (STP)

APPENDIX C: ESG
Appendix C1 - Executive management
Appendix C2 -Overview of boardmembers management
Appendix C3 - Board highlights
Appendix C4 - Shareholders and insidertransactions
Appendix C5 - ESG scorecard
Appendix C6 - ESG targets and status

APPENDIX D: INDUSTRY AND COMPETITIVE POSITIONING

Appendix D1- Key differentiators comparison with peers
Appendix D2 - Peer Comparison
Appendix D3 - Porter's five forces analysis
Appendix D4 -SWOT analysis

APPENDIX E: FINANCIALS
Appendix E1 - Income statement
Appendix E2 - Balance sheet
Appendix E3 - Cash flow statement
Appendix E4- Asumptions

APPENDIX F: VALUATION
Appendix F1- Discounted cash flow model
Appendix F2 -WACC computation
Appendix F3- Sensitivity analysis
Appendix F4 -Monte Carlo simulation / Tornado chart
Appendix F5 - Relative valuation
Appendix F6 - Dividend Dicount model
APPENDIX A - GLOSSARY

Adjusted Funds From Operations (AFFO): Adjusted FFO; EBITDA less finance costs less transaction costs on debt
issuance. This measure is primarily used in the analysis of real estate investment trusts (REITs).

CAGR: Compound Annual Growth Rate.

Capital Expenditure (CAPEX): Funds used by a company to acquire, upgrade, and maintain physical assets such as
property, plants, buildings, technology, or equipment.

CDP: is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and
regions to manage their environmental impacts.

Discounted cash flow (DCF): is a valuation method used to estimate the value of an investment based on its
expected future cash flows.

Dividend discount model (DDM): is a quantitative method used for predicting the price of a company's stock based
on the theory that its present-day price is worth the sum of all of its future dividend payments when discounted back
to their present value.

Dow Jones Sustainability™ World Index: comprises global sustainability leaders as identified by S&P Global through
the Corporate Sustainability Assessment (CSA). It represents the top 10% of the largest 2,500 companies in the S&P
Global BMI based on long-term economic, environmental and social criteria.

Funds from operations (FFO): are calculated as: the total comprehensive gain/loss in the period minus the
conversion effect of the foreign operations, income tax, gain (loss) due to the revaluation of investment properties,
foreign exchange gain (loss), other income (expenses), interest income, depreciation of other assets and paid taxes in
cash.

GRESB: Is the leading organization in the assessment of the sustainability performance of real estate and
infrastructure portfolios and assets.

Gross Leasable Area (GLA): in square feet or square meters, a metric to measure properties.

LEED: (Leadership in Energy and Environmental Design) is the most widely used green building rating system in the
world.

Nearshoring: approach to business when a third-party company provides specific services from another geographic
location, which is relatively close to the company’s area.

Net Asset Value (NAV): represents the net value of an entity and is calculated as the total value of the entity’s assets
minus the total value of its liabilities.

Net operating income (NOI): is calculated as: rental income minus the operating cost for the investment properties
that generated income.

REIT: A real estate investment trust is a company that owns, operates, or finances income-generating real estate.

Relative Valuation: Relative valuation is based on the idea thatsimilar assetsshould sell at similar prices. Meaning
that one uses similar, comparable assets in valuing other assets.

SDG's: The Sustainable Development Goals or Global Goals are a collection of 17 interlinked global goals designed to
be a "blueprint to achieve a better and more sustainable future for all". The SDGs were set up in 2015 by the United
Nations General Assembly and are intended to be achieved by the year 2030.
 APPENDIX B1 - Clients overview / Average rental income per building in current
industrial parks in 2020

Source: Company data

APPENDIX B2- Products Source: Company data, Team analysis

Invetory Buildings: Designed for more fluid traffic within the

parks and built under standard industry specifications, ideal
for manufacturing and logistics industries, these can be shared
by two or more tenants.

Park to Suit: Ideal for the aerospace, automotive,

logistics and electronics industries. Designed and
built to suit the needs of our clients in two ways: as
clusters, where members of a supply chain can be
grouped, or as a vendor park for companies in the
same industry that supply one assembly firm.
Source: Company data
Built to Suit: a building tailor- made in design
and construction that follow the best
international practices and eco-efficiency
trends in the industry, to create facilities
appropriate to the specific needs of each client.

APPENDIX B3 - M&A
During the past months, Vesta has had considerable activity in terms of transactions
1. The day 27th of April of 2021, Vesta announced the results of a successful public offer, raising in total the equivalent of $200,000,000
USD at the price of $39, such resources will be used to develop “build to suit” buildings, logistical buildings, buy new territory, and
investments in working capital, all part of the “level 3 strategy” according to Vesta official press release.
2. On the 27th of July 2021, Vesta announced the sale agreement of 107.75 million of a real estate portfolio of 1,371,139 ft^2 in the
regions north and bajio. The transaction forms part of a USD $300 million asset recycling program derived from the “level 3 strategy”.
Based on the average USD per m^2 of $719.02 value of Vesta´s properties we consider this sale a success, given that this transaction
settled at $845.87 USD per m^2. Vesta got a considerable premium, demonstrating to the market the quality of its properties.

APPENDIX B4 -Business Model / Value Chain

To ensure competitive practices in the

selection of their construction and advanced
To provide world-class industrial real estate
engineering suppliers, Vesta puts the projects
that is at the cutting edge of industry best
out to tender, where the Executive Committee
practices, Vetsa collaborates with
evaluates the suppliers and the timely delivery
construction, engineering, design firms,
of the developments, while the Asset
contractors, and other vendors to ensure
Management team, in collaboration with the
that their bidding, operating, and
Purchasing department, is in charge of
maintenance processes are efficient, timely,
coordinating suppliers to ensure optimal
cost-effective, and increasingly sustainable.
maintenance once they're up and running.

Source: Company data

 APPENDIX B5 - Level 3 Business Strategy
1) Commitment Program:
- Social contribution: through three action lines: education, inclusion and
community development.
- Enviroment: Vesta strives to (i) reduce the environmental impact of
developments, in bioclimatic design and real estate constructions, (ii)
measure and reduce water and energy consumption, (iii) promote waste
reutilization and/or recycling, (iv) participate and implement mitigation
intiatives and adapting to climate change, and (v) ensure that Vesta’s
business does not affect protected natural zones.
2) ESG Operational Indicators:
They are s created to measure and improve Vesta’s activities with respect
to various ESG fronts, such as the "green clause" in all its contracts with
tenants.
3) Sustainable Construction and Building Certifications:
Vesta does not control the activities or consumption of resources by its
Source: Company data. tenants, it seeks to promote the application of best practices and the
creation of sustainable spaces through its Sustainable Construction
APPENDIX B6- SDGs Manual.

Direct impact
They have specific efforts that contribute to them for social initiatives
that promote education and growth, also they use technology to
optimize natural resource usage and reduce the environmental effect.
Priority SDGs
In 2011, Vesta signed the United Nations Global
Compact and since 2017, Vesta has worked to
Source: Company data, UN
align all of its initiatives with the 17 Sustainable
Indirect impact Development Targets, assuming their role as a
They formed strategic connections with their clients and value chain, significant participant in the scope of those goals
guaranteeing efforts for superior results. The use of solar panels or on which they have two alignment the direct or
wastewater treatment facilities are used in a large number of the parks indirect impact.
to reduce the environmental impact.

Source: Company data, UN

APPENDIX B7- Sustainability Performance Target (STP)

Figure: Sustainability Performance Target Key Perfomance Indicator (KPI)

Vesta will assess the Sustainability Performance
Target (SPT) annually from the period 2021 to
2030 providing a trajectory towards:
1) Percentage of certified sustainable GLA to be
equal to or greater than 20% by June 30, 2026
2) Percentage of certified sustainable GLA to be
equal to or greater than 28% by year-end 2030.

Vesta considers this SPT challenging as it will

require a near-doubling of its certified sustainable
GLA within 5 years. The KPI has an alignment with
an UN SDGs:
Source: Company data, UN.

09. Industry, innovation and

infrastructure

Source: UN.
 APPENDIX C1 - Executive management

Source: Team analysis, Company data

APPENDIX C2 -Overview of the Board of directors

Source: Team analysis, Company data

APPENDIX C3 - Board Highlights APPENDIX C4 - Shareholders with

The Board of Directors currently consists of 10 members and their major participation
respective alternates and is responsible for the administration,
surveillance and general control of the business.
It meets at least once every quarter, and requires that at least 75.0%
of its members be present.
In accordance with the LMV (Mexican securities law), at least 25.0%
of the members of the Board of Directors must be "independent".
Approve operations that involve the purchase or sale of assets with
a value equal to or greater than 5.0% of the assets. As of December, 2020, Shareholders with mayor participation.
APPENDIX C5- ESG Scorecard Methodology used for ESG scorecard:

We wanted to assign a quantitative property to our ESG

assessment, so we based our analysis in the Refinitiv ESG
score. The company describes the evaluation as:

"A measure of the company’s ESG performance based on

verifiable reported data in the public domain.
Refinitiv captures data grouped into 10 categories that
reformulate the three pillar scores and the final ESG score,
which is a reflection of the company’s ESG performance,
commitment and effectiveness based on publicly reported
information." (Refinitiv, 2020)

Based on the Refinitiv methodology, we estimated our own

ESG score arriving at the value of 71.3 of 100, said number
considers a deep understanding of the information available
and derives from our opinion regarding Vesta´s capacity in
handling ESG issues.
Source: Team analysis, Refinitiv

In order to compare Vesta with its peers in terms of ESG we

gathered information from the Total sustainability score by
S&P.

According to Bloomberg, a company's Total Sustainability

Score is the sum of all question scores and ranges from 0-
100. The Total Sustainability Score is based on individual
questions that roll up into criteria, which in turn roll up into
three dimensions - Economic, Environmental and Social.
Source: S&P sustainability score

APPENDIX C6 - ESG targets and status

Source: Bloomberg

APPENDIX D1- Key differentiators comparison with peers

Source: Team analysis, Anual´s peer report

APPENDIX D2- Peer comparison indicators

Leading real estate investment trust

(REIT) located in one of Latin America’s
largest economies. We’re focused on
acquiring, owning and managing
Class-A logistics and manufacturing
facilities. Strong relationship with
Prologis Inc., a leading American
developer. Source: Company data

We are a real estate investment trust

anchored by an industrial portfolio
and constituted to acquire, own,
develop and manage industrial real
estate in Mexico. Source: Company data

FIBRA Macquarie is a real estate

investment trust targeting industrial,
retail and office real estate
opportunities in Mexico with a
primary focus on stabilized income-
producing properties. Source: Company data

They acquire and manage a portfolio

of first-class corporate properties with
a focus on the office and industrial
sectors.
Source: Company data

FUNO is the first and largest REIT in

Mexico. In FUNO we focus in the
generation of sustainable value for
our investors through the operation,
acquisition, sale and development of
real estate for commercial use.
Source: Company data
Source: Company data , Capital IQ, Team analysis
APPENDIX D3- Porter's five forces analysis
Rivalry within the
industry Rivalry within the industry - 5 (Very high)
The main competitive factors are rental prices, location,
5 services provided, nature and condition of the facilities to be
4
3 leased. Main competitors include Fibra Uno, Prologis,
Bargainning power
of suppliers
2
1
Threat of new
entrants
Macquire, Fibra mty, and Terrafina they operate in the main
0
industrial spaces such as the metropolitan area of ​Mexico
Legend
0 No threat City, including Guadalajara and Monterrey.
1 Very low
2 Low
3 Moderate Bargainning power of suppliers - 3 (Moderate)
4 High
5 Very high Vesta outsource with third parties the construction, design,
Threat of substitutes Bargaining power of engineering, project management and related work services.
customers
Source: Team analysis Their suppliers are selected through a process of awarding
Threat of new entrants - 4 (High) contracts. If suppliers fail to comply with their obligations
under the respective contracts, Vesta is not be able to start
There are numerous acquirers, owners, developers, and
receiving rent payments until the construction of the new
operators of industrial buildings, some of whom could seek to
buildings is completed or the improvements requested by
acquire properties similar to Vesta in the same markets. Also
the client is made in the existing properties. Continuous
there are important regional competitors, but Vesta is
improvement of the ISO 9001:2015 quality management
disruptive, increasing efficiency based on the "GreenSeal"
system with suppliers.
standard, showing flexibility in adapting to change, and
strengthening the sustainability efforts. Threat of substitutes - 4 (High)
Bargainning power of customers- 2 (Low) If competitors offer leasable space at prices for below
market, in better locations within Vesta current area in the
The clients base is broad and diversified, mostly comprised of
Northern, Central, and Bajío regions in Mexico or in larger
multinationals companies (industries including aerospace,
facilities quality, Vesta can lose potential clients and be
automotive, food and beverage, among others) with high credit
pressured to reduce the rents in order to conserve them at
ratings. The leases with the clients is denominated in dollars
the end of their current leases.
and the retention rate in 2020 is 90.7% the added value is in
the sustainable education outreach program to promote the
benefits of sustainable development and certification.

APPENDIX D4- SWOT analysis

Vesta Level 3 growth plan No global operations.
S Strong ESG status
Diversified customers, 11 industrial sectors served
W Establishing a reputation on the internet will be
challenging.
Vesta is commited with human rights, employment Acquisition of properties with major climate risks.
standards, care of environment measures,
transparency provision and the fight against
corruption.
Providing social support to the communities.

O T
E- commerce development. Competitors with better research-intensive
Improving the environmental impact of the strategies.
portfolio. (certify with LEED O+M, BOMA BEST or New regulations by the goverment.
EDGE). Fluctuation of the currencies.
More partnerships in international associations Increase of interest rates.
to promote the development of the Mexican Climate change risks that relate directly to
real-estate industry. operations.

Source: Company data, Team analysis

APPENDIX E1 - Income statement

Source: Company data , Team analysis, Capital IQ

The last ten years of data were examined. For the purpose of simplicity, we are displaying 5 years.

APPENDIX E2 - Balance sheet

Source: Company data , Team analysis, Capital IQ

The last ten years of data were examined. For the purpose of simplicity, we are displaying 5 years.
 APPENDIX E3 - Cash flow statement

Source: Company data , Team analysis, Capital IQ

The last ten years of data were examined. For the purpose of simplicity, we are displaying 5 years.

APPENDIX E4 - Asumptions

Gain (Loss) On Sale Of Assets: In 2019, there was a sale for

109.26 million, which resulted in a profit of 17.9 million, or
16.38%. According to the results of 2019, we decided to
take the same proportion as an estimate of the sale that
would take place this year, resulting in 17.65 million from
the sale of 107.75 million, plus a gain of 8.6 million from
other transactions.

Source: Team analysis

 APPENDIX F1- Discounted cash flow model

Source: Team analysis, Company data

Source: Team analysis, Company data

AFFO (adjusted funds from operations): Measure that indicates value delivery for shareholders (FCFE). We computed
via the following formula (AFFO is defined as EBITDA less finance costs less transaction costs on debt issuance). REIT
equivalent to the free cash flow to equity (FCFE).

APPENDIX F2 - WACC

Source: Team analysis, Company data, Bloomberg

Source: Team analysis, Company data, Peers data Source: Team analysis, Company data, Bloomberg, Refinitiv

APPENDIX F2.1 - Growth Rate Risk free rate 10 year benchmark: According to Refinitiv on
21/09/21
AF (adjustment factor): According to Bloomberg, when the
company doesn´t have a fair market curve (FMC) an
assumed rate of 1.38 is used (the equivalent rate of a BBB+
Standard & Poor's long term currency issuer rating)
Cost of equity: To get the cost of equity of 10.26% we
multiplied the Vesta's levered beta (Using the peers) by the
risk free minus the expected market return and add the risk
free using the Capital Asset pricing model (CAPM) formula.
Source: Team analysis, Company data, Damodaran Market risk premium: To get the market risk premium of
4.81% we used the Security Market Line (Calculated with the
CAPM formula and using a beta of two) minus the expected
market return.

APPENDIX F3- Sensitivity analysis

Weighted DCF Sensitivity Analysis

Terminal Growth Rate Used GLA (M^2)

WACC
WACC

AFFO EV/EBITDA
WACC
WACC

Source: Team analysis

 APPENDIX F4 -Monte Carlo simulation
The Monte Carlo simulation was created to take into account
uncertainty and possible alteration to the following variables: WACC,
growth rate, terminal growth rate
We performed 100,000 simulations and the mean and standard
deviation of such parameters are based on historical numbers.
Results:

Source: Team analysis

APPENDIX F5 - Relative valuation

Source: Bloomberg, Capital IQ, Team analysis

Industry: Real estate operating companies worlwide (Capital IQ). Source: Bloomberg, Capital IQ, Team analysis

APPENDIX F6 - Dividend Discount model

Source: Bloomberg, Capital IQ, Team analysis

This DDM was created on the assumption that prospective dividend

payments are based on a payout ratio versus Net Operating Income (NOI).
These historical payout ratios are more constant than payout ratios based on
net income, making them more predictable in the future. The five-year
average of the DPS which give us the result of 39.48% was used to keep
payout ratios constant, while NOI was moved forward at a five-year CAGR of
10.09% from 2016 to 2020. From 2016 to 2020, shares outstanding are
estimated to stay the same for the next 5-year to account for the current
Vesta´s financing structure.

Source: Bloomberg, Capital IQ, Team analysis