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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
| ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2023
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report:
Commission File Number: 333-275972
Logistic Properties of the Americas
(Exact name of Registrant as specified in its charter)
| Not Applicable | Cayman Islands | |
| (Translation of Registrant’s name into English) | (Jurisdiction of incorporation or organization) |
601 Brickell Key Drive
Suite 700
Miami, FL 33131
(Address of principal executive offices)
Esteban Saldarriaga, Chief Executive Officer
Plaza Tempo, Edificio B
Oficina B1, Piso 2
San Rafael de Escazú,
San José, Costa Rica
+506 2204 7020
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered | ||
| Ordinary Shares, par value $.0001 per share | LPA | NYSE American |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the shell company report: As of March 28, 2024, the issuer had 31,709,747 Ordinary Shares outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Emerging growth company | ☒ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☐ U.S. GAAP
☒ International Financial Reporting Standards as issued by the International Accounting Standards Board
☐ Other
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
TABLE OF CONTENTS
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INTRODUCTION
About this Annual Report
Throughout this Annual Report on Form 20-F (the “Report”), unless otherwise designated or the context otherwise requires, the terms “we,” “us,” “our,” “LPA” and “the Company” refer to Logistic Properties of the Americas and its subsidiaries, which prior to the Business Combination (defined below) was the business of Latam Logistics Properties, S.A. and its subsidiaries. References to “LLP” mean Latam Logistics Properties, S.A. and its consolidated subsidiaries, and references to “the registrant” mean LPA.
Discrepancies in any table between totals and sums of the amounts listed are due to rounding. Certain amounts and percentages have been rounded; consequently, certain figures may add up to be more or less than the total amount and certain percentages may add up to be more or less than 100% due to rounding.
Financial Statement Presentation
Logistic Properties of the Americas was incorporated as an exempted company with limited liability under the laws of the Cayman Islands on October 9, 2023, for the purposes of effectuating the Business Combination described herein. Prior to the consummation of the Business Combination, LPA had no material assets and did not operate any businesses.
LPA qualifies as a foreign private issuer as defined under Rule 405 under the Securities Act. The Company’s audited financial statements for the year ended December 31, 2023 have been prepared in accordance with IFRS and audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and are reported in U.S. dollars.
On March 27, 2024, LPA consummated the previously announced business combination (the “Business Combination”) pursuant to the Business Combination Agreement, dated as of August 15, 2023 (as amended, supplemented, and/or restated from time to time, the “Business Combination Agreement”), by and among two, a Cayman Islands exempted company (“TWOA”), LatAm Logistic Properties, S.A., a company incorporated under the laws of Panama (together with its successors, “LLP”), and, by joinder agreements, each of LPA, Logistic Properties of the Americas Subco, a Cayman Islands exempted company and a wholly-owned subsidiary of LPA (“SPAC Merger Sub”), and LPA Panama Group Corp., a company incorporated under the laws of Panama and a wholly-owned subsidiary of LPA (“Company Merger Sub”).
As a result of the Business Combination, LLP and TWOA became wholly-owned direct subsidiaries of LPA: (a) SPAC Merger Sub merged with and into TWOA, with TWOA continuing as the surviving company and a wholly-owned direct subsidiary of LPA; and (b) Company Merger Sub merged with and into LLP, with LLP continuing as the surviving company and a wholly-owned direct subsidiary of LPA.
The historical operations of LLP prior to the Business Combination are deemed to be those of the Company. Thus, the financial statements included in this Report reflect the historical operating results of LLP prior to the closing of the Business Combination. The audited financial statements as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022, and 2021, included in this Report have been prepared in accordance with IFRS, which we refer to as our financial statements. See Item 18 of this Report for our audited consolidated financial statements and other financial information.
Currency and Exchange Rates
In this Report, unless otherwise specified, all monetary amounts are in U.S. dollars and all references to “$” mean U.S. dollars. Certain monetary amounts described herein have been expressed in U.S. dollars for convenience only and, when expressed in U.S. dollars in the future, such amounts may be different from those set forth herein due to intervening exchange rate fluctuations.
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CERTAIN DEFINED TERMS
| ● | “Business Combination” refers to the business combination contemplated by the Business Combination Agreement. |
| ● | “Business Combination Agreement” refers to that certain business combination agreement, dated as of August 15, 2023, as it may be amended or supplemented, between and among TWOA and LLP, and by a joinder agreement, each of LPA, SPAC Merger Sub and Company Merger Sub. |
| ● | “BVC” refers to the Colombian Stock Exchange. |
| ● | “Charter” refers to LPA’s amended and restated memorandum and articles of association in effect as of the Closing of the Business Combination. |
| ● | “Closing” refers to the closing of the transactions contemplated by the Business Combination Agreement. |
| ● | “Closing Date” refers to March 27, 2024, the date of the Closing. |
| ● | “Code” refers to the Internal Revenue Code of 1986, as amended. |
| ● | “Colombia” refers to the Republic of Colombia. |
| ● | “Companies Act” refers to the Companies Act (As Revised) of the Cayman Islands, as amended from time to time and any regulations, codes of practice or orders promulgated pursuant thereto. |
| ● | “Company Merger Sub” refers to LPA Panama Group Corp., a company formed under the laws of Panama and, prior to its merger with LLP upon the consummation of the Business Combination, a wholly-owned subsidiary of LPA. |
| ● | “Company Merger” refers to the merger of Company Merger Sub with and into LLP, with LLP continuing as the surviving company. |
| ● | “Costa Rica” refers to the Republic of Costa Rica. |
| ● | “CPI” refers to the consumer price index. |
| ● | “DPA” refers to the Data Protection Act (Revised) of the Cayman Islands, as amended from time to time and any regulations, codes of practice or orders promulgated pursuant thereto. |
| ● | “Effective Time” refers to the effective time of the Mergers. |
| ● | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended. |
| ● | “Founder Registration Rights Agreement” refers to that certain registration rights agreement, dated as of March 29, 2021, entered into by TWOA, the Sponsor, two sponsor and the other parties thereto, as amended. |
| ● | “Founder Registration Rights Agreement Amendment” refers to the amendment to the Founder Registration Rights Agreement to be entered into by LPA, TWOA, the Sponsor and two sponsor (as well as any other parties necessary to effect such amendment) at or prior to the Closing. |
| ● | “GAAP” refers to generally accepted accounting principles as in effect in the United States of America. |
| ● | “GLA” or “Gross Leasable Area” refers to the total area designed for or capable of occupancy by tenants for their exclusive use. |
| ● | “Governmental Authority” refers to any federal, state, local, foreign or other governmental, quasi-governmental or administrative body, instrumentality, department or agency or any judge, court, tribunal, administrative hearing body, arbitration panel, commission, independent industry regulator or other similar dispute-resolving panel or body. |
| ● | “IASB” refers to the International Accounting Standards Board. |
| ● | “IFRS” refers to the International Financial Reporting Standards, as issued by the IASB. |
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| ● | “Insider Letter Agreement” refers to the letter agreement, dated March 29, 2021, among TWOA, two sponsor, the executive officers and directors of TWOA at the time of the IPO, and the Current Insiders, as amended. |
| ● | “IRS” refers to the U.S. Internal Revenue Service. |
| ● | “JOBS Act” refers to Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, as amended. |
| ● | “Leased GLA” refers to the GLA that are subject to a lease. |
| ● | “LLP” refers to LatAm Logistic Properties, S.A., a corporation organized under the laws of Panama (together with its successors). |
| ● | “LLP Shareholder” or “LLP Shareholders” refer to the shareholders of LLP ordinary shares prior to the consummation of the Business Combination. |
| ● | “Logistic Properties of the Americas,” “LPA,” “we,” “us,” “our,” “the Company” or “our company” means Logistic Properties of the Americas and its subsidiaries. |
| ● | “LPA Board” refers to the board of directors of LPA. |
| ● | “LPA Shareholders” refers to, collectively, the holders of Ordinary Shares. |
| ● | “Lock-Up Agreement” refers to the lock-up agreement, dated as of August 15, 2023, entered into by TWOA, a certain LLP shareholder and, by a joinder agreement, LPA in connection with the Business Combination Agreement. |
| ● | “Mergers” means, collectively, (a) the SPAC Merger and (b) the Company Merger. |
| ● | “NYSE American” refers to NYSE American LLC. |
| ● | “Occupied GLA” refers to the GLA for areas that are occupied by tenants in either operating properties or properties under development before Stabilization. |
| ● | “Operating GLA” refers to the GLA in operating properties. Operating properties are investment properties that have achieved a state of Stabilization. |
| ● | “Ordinary Shares” refers to the ordinary shares of LPA, par value $0.0001 per share. |
| ● | “PCAOB” refers to the Public Company Accounting Oversight Board (or any successor thereto). |
| ● | “Peru” refers to the Republic of Peru. |
| ● | “PFIC” refers to a passive foreign investment company. |
| ● | “PIPE Investment” refers to the private placement of 1,500,000 TWOA Class A ordinary shares at a price of $10.00 per share, consummated simultaneously with the Closing. |
| ● | “PIPE Shares” refers to the 1,500,000 TWOA Class A ordinary shares purchased under the PIPE Investment. |
| ● | “PIPE Subscriber” refers to Bonaventure Investments Holding Inc. and its permitted successors and assigns. |
| ● | “PIPE Subscription Agreement” refers to the subscription agreement entered into on February 16, 2024 between TWOA and the PIPE Subscriber, for the purchase of the PIPE Shares. |
| ● | “Registration Rights Agreement” refers to the registration rights agreement to be entered into by LLP shareholders, LPA and TWOA at or prior to the Closing. |
| ● | “RNVE” refers to the Registro Nacional de Valores y Emisores. |
| ● | “SEC” refers to the U.S. Securities and Exchange Commission. |
| ● | “Securities Act” refers to the U.S. Securities Act of 1933, as amended. |
| ● | “SPAC Merger Sub” refers to Logistic Properties of the Americas Subco, a Cayman Islands exempted company and, prior to its merger with TWOA upon consummation of the Business Combination, a wholly-owned subsidiary of LPA. |
| ● | “SPAC Merger” refers to the merger of SPAC Merger Sub with and into TWOA, with TWOA continuing as the surviving company. |
| ● | “Sponsor” refers to HC PropTech Partners III LLC, a Delaware limited liability company. |
| ● | “Trading Day” refers to any day on which Ordinary Shares are tradeable on NYSE American (or the principal securities exchange or securities market on which Ordinary Shares are then traded). |
| ● | “Transfer Agent” or “Continental” refers to Continental Stock Transfer & Trust Company, in its capacity as LPA’s transfer agent. |
| ● | “TWOA,” refers to two, a Cayman Islands exempted company and a wholly-owned subsidiary of LPA. |
| ● | “two Sponsor” refers to TWOA’s original sponsor. |
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EMERGING GROWTH COMPANY, FOREIGN PRIVATE ISSUER
AND CONTROLLED COMPANY STATUS
The Company is an “emerging growth company” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The Company will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year (a) following the fifth anniversary of the Closing of the Business Combination, (b) in which the Company has total annual gross revenue of at least $1.235 billion or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of Ordinary Shares held by non-affiliates is at least $700 million as of the last business day of the Company’s prior second fiscal quarter, and (ii) the date on which the Company issued more than $1.0 billion in non-convertible debt during the prior three-year period. The Company intends to take advantage of exemptions from various reporting requirements that are applicable to most other public companies, whether or not they are classified as “emerging growth companies,” including, but not limited to, an exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that the Company’s independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting and reduced disclosure obligations regarding executive compensation.
As a “foreign private issuer,” the Company will be subject to different U.S. securities laws than domestic U.S. issuers. The rules governing the information that the Company must disclose differ from those governing U.S. corporations pursuant to the Exchange Act. The Company will be exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders. Those proxy statements are not expected to conform to Schedule 14A of the proxy rules promulgated under the Exchange Act. In addition, as a “foreign private issuer,” the Company’s officers and directors and holders of more than 10% of the issued and outstanding Ordinary Shares, will be exempt from the rules under the Exchange Act requiring insiders to report purchases and sales of ordinary shares as well as from Section 16 short swing profit reporting and liability. In addition, JREP I Logistics Acquisition, LP currently controls a majority of the voting power of the outstanding Ordinary Shares. As a result, the Company is a “controlled company” as defined under the NYSE American rules. For as long as the Company remains a controlled company under that definition, the Company is permitted to elect to rely, and may rely, on certain exemptions from corporate governance rules.
As a result of the Company’s status as a “foreign private issuer” and a “controlled company,” among other things, the Company is not required to have (1) a majority of the board of directors consisting of independent directors; (2) a compensation committee consisting of independent directors; (3) a nominating committee consisting of independent directors; or (4) regularly scheduled executive sessions with only independent directors each year.
Accordingly, the Company’s shareholders may not receive the same protections afforded to shareholders of companies that are subject to all of NYSE American’s corporate governance requirements. The Company would cease to be a foreign private issuer at such time as more than 50% of its outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i) the majority of the Company’s executive officers or directors are U.S. citizens or residents, (ii) more than 50% of its assets are located in the United States or (iii) its business is administered principally in the United States. The Company is an “emerging growth company” as defined in the JOBS Act and has elected to comply with certain reduced public company reporting requirements. Foreign private issuers, similar to emerging growth companies, are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if the Company no longer qualifies as an emerging growth company but remains a foreign private issuer, it will continue to be exempt from the more stringent compensation disclosures required of public companies that are neither an emerging growth company nor a foreign private issuer. For further details, see “Risk Factors – Risks Relating to the Company’s Business and Operations – As a “foreign private issuer” under the rules and regulations of the SEC, LPA is permitted to file less or different information with the SEC than a company incorporated in the United States or otherwise subject to these rules and is permitted to follow certain home-country corporate governance practices in lieu of certain NYSE American requirements applicable to U.S. issuers.” If at any time the Company ceases to be a foreign private issuer, it will take all action necessary to comply with the applicable rules of the SEC and NYSE American.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Forward-looking statements relate to, among other things, our plans, objectives and expectations for our business, operations and financial performance and condition, and can be identified by terminology such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would,” “will,” “seek,” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management. Although we believe that the expectations reflected in forward-looking statements are reasonable, such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements.
These forward-looking statements are based on information available as of the date of this Report and on the current expectations, forecasts and assumptions of the management of the Company, involve a number of judgments, risks and uncertainties and are inherently subject to changes in circumstances and their potential effects and speak only as of the date of such statements. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed, contemplated or implied by these forward-looking statements. The forward-looking statements contained in this Report include, but are not limited to, statements about:
| ● | expectations regarding (and LPA’s ability to meet expectations regarding) LPA’s strategies and future financial performance, including LPA’s future business plans or objectives, operating expenses, market trends, revenues, liquidity, cash flows and uses of cash, capital expenditures, and | |
| ● | LPA’s ability to invest in growth initiatives; | |
| ● | the outcome of any legal proceedings that may be instituted against LPA; | |
| ● | the ability of LPA to raise financing in the future and comply with restrictive covenants related to indebtedness; | |
| ● | the ability to recognize the benefits of the Business Combination, which may be affected by, among other things, competition, LPA’s ability to grow and manage growth and profitability, maintain relationships with customers and suppliers and retain its management team and key employees; | |
| ● | the projected financial information, anticipated growth rate, and market opportunity for LPA, and its estimates of expenses and profitability; | |
| ● | LPA’s ability to maintain its listing on NYSE American following the Business Combination; | |
| ● | geopolitical risk, including the impacts of the ongoing conflict between Russia and Ukraine, and changes in applicable laws or regulations; | |
| ● | anticipated economic, business, and/or competitive factors; | |
| ● | anticipations regarding the impact of any major disease or epidemic that disrupts LPA’s business; | |
| ● | litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on LPA’s resources; | |
| ● | exchange rate instability; | |
| ● | the possibility that expansion of LPA’s customer offerings or certain operations may subject it to additional legal and regulatory requirements, including tort liability; | |
| ● | LPA’s ability to retain and grow its customer base; | |
| ● | LPA’s success in finding and maintaining future strategic partnerships and inorganic opportunities; | |
| ● | the potential liquidity and trading of public securities of LPA; | |
| ● | the ability of LPA to respond to general economic conditions; | |
| ● | expansion and other plans and opportunities of LPA; | |
| ● | any downturn in the real estate industry; | |
| ● | the ability of LPA to manage its growth effectively; | |
| ● | the ability of LPA to develop and protect its brand; and | |
| ● | the ability of LPA to compete with competitors in existing and new markets and offerings. |
Forward-looking statements are provided for illustrative purposes only and are not guarantees of performance. You should understand that the factors discussed under the heading “Risk Factors” and elsewhere in this Report could affect the future results of the Company, and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements in this Report.
Moreover, the risks described under the heading “Risk Factors” are not exhaustive. Other sections of this Report describe additional factors that could adversely affect the businesses, financial conditions, or results of operations of the Company. New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can the Company assess the impact of all such risk factors on our businesses, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. The Company undertakes no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
In addition, this Report contains statements of belief and similar statements that reflect the beliefs and opinions of the Company on the relevant subject. These statements are based upon information available to the Company as of the date of this Report, and while the Company believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and statements should not be read to indicate that the Company has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.
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SUMMARY OF RISK FACTORS
The Company’s business, results of operations, financial conditions and cash flows are subject to, and could be materially adversely affected by several risks and uncertainties, including risks relating to the nature of the Company’s business and its operations in Costa Rica. The following list summarizes some, but not all, of these risks. Please read the information in the section entitled “Risk Factors” for a more thorough description of these and other risks.
Risks Related to Our Business
| ● | The success of our business depends on general economic conditions and prevailing conditions in the industrial and logistics real estate industry. Accordingly, any economic slowdown or downturn in real estate asset values or leasing activity may have a material adverse effect on our business, financial condition, results of operations and prospects. |
| ● | The volatility of the financial markets may adversely affect our financial condition and/or results of operations. |
| ● | Real estate investments are not as liquid as certain other types of assets, which may adversely affect our financial conditions and results of operations. |
| ● | Investments in real estate properties are subject to risks that could adversely affect our business. |
| ● | We may not be successful in executing on our growth strategy if we are unable to make acquisitions of land or properties. |
| ● | We are dependent on our tenants for a substantial portion of our revenues and our business may be materially and adversely affected if a significant number of our tenants, or any of our major tenants, were to default on their obligations under their leases. |
| ● | We derive a significant portion of our rental income from a limited number of customers. |
| ● | Our clients operate in certain specific industrial sectors in Colombia, Costa Rica and Peru, and our business may be adversely affected by an economic downturn in any of those sectors. |
| ● | An increase in competition could lead to lower occupancy rates and rental income and could result in fewer investment opportunities. |
| ● | We are dependent on our ability to raise capital through financial markets, divestitures or other sources to meet our future growth expectations. |
| ● | Our levels of indebtedness may affect our cash flows and expose our properties to the risk of foreclosure. |
| ● | The agreements governing our existing indebtedness include financial and other covenants that impose limitations on our ability to pursue certain business opportunities or to take certain actions. |
| ● | We have previously breached covenants under our loan agreements and obtained waivers for such breaches. If we are unable to comply with our debt covenants in the future, we may continue to seek waivers from applicable lenders, which may not be granted. |
| ● | Our insurance coverage may not cover all the risks to which we may be exposed. |
| ● | Our tenants may default on their obligation to maintain insurance coverage. |
| ● | Our leases include certain provisions that may prove unenforceable. |
| ● | The value of our assets may suffer impairment losses that may adversely affect our results of operations. |
| ● | We are subject to risks related to the development of new properties, including due to an increase in construction costs and supply chain issues. |
| ● | We may fail to maintain, obtain or renew or may experience material delays in obtaining requisite governmental or other approvals, licenses and permits for the conduct of our business. |
| ● | Our real estate assets may be subject to eminent domain and dispossession by the governments of the countries in which we operate for reasons of public interest and other reasons. |
| ● | We may acquire properties and companies that involve risks that could adversely affect our business and financial condition. |
| ● | Delays or an increase in costs in the construction of new buildings or improvements could have an adverse effect on our business, financial condition, results of operations and prospects, including due to supply chain issues. |
| ● | We may be subject to claims for construction defects or other similar actions in connection with our lease management business. |
| ● | We are dependent on key personnel. The loss of one or more members of our management team, including our Chief Executive Officer, could have a material adverse effect on our operations. |
| ● | We are focused on a single business segment. Any negative impact on the industrial real estate industry could have a material adverse effect on our business, financial condition, results of operations and prospects. |
| ● | Increases in the prices of energy, raw materials, equipment or wages, including due to inflation, could increase our development and operating costs. |
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| ● | Our business and operations could suffer in the event of system failures or cybersecurity attacks. |
| ● | We have identified material weaknesses in our internal controls. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results. |
| ● | Complications in relationships with local communities may adversely affect our business continuity, reputation, liquidity, and results of operations. |
| ● | Our operations are subject to foreign exchange fluctuations. |
| ● | Our hedging of foreign currency and interest rate risk may not effectively limit our exposure to these risks. |
| ● | We are subject to fluctuations in interest rates. |
Risks Relating to LPA Operating as a Public Company
| ● | LPA’s only significant asset is its ownership of LLP, and such ownership may not be sufficient to pay dividends or make distributions or obtain loans to enable LPA to pay any dividends on the Ordinary Shares, pay its expenses or satisfy other financial obligations. |
| ● | LPA will incur higher costs as a result of operating as a public company. |
| ● | We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and share price, which could cause you to lose some or all of your investment. |
| ● | We may not be able to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act that apply to us following the consummation of the Business Combination. |
| ● | LPA’s management team has limited experience managing and operating a U.S. public company. |
| ● | The price of Ordinary Shares may be volatile. |
| ● | Reports published by analysts, including projections in those reports that differ from LPA’s actual results, could adversely affect the price and trading volume of its Ordinary Shares. |
| ● | An active, liquid trading market for Ordinary Shares may not develop, which may limit your ability to sell Ordinary Shares. |
| ● | LPA may issue additional Ordinary Shares under the Equity Incentive Plan, which would dilute the interest of LPA’s shareholders. |
| ● | LPA may or may not pay cash dividends in the foreseeable future. |
| ● | Because LPA is incorporated in the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited. |
| ● | It may be difficult to enforce a U.S. judgment against LPA or its directors and officers outside the United States, or to assert U.S. securities law claims outside of the United States. |
| ● | Provisions in the Charter may inhibit a takeover of LPA, which could limit the price investors might be willing to pay in the future for LPA’s securities and could entrench management. |
| ● | LPA is an “emerging growth company,” and it cannot be certain if the reduced SEC reporting requirements applicable to emerging growth companies will make Ordinary Shares less attractive to investors, which could have a material and adverse effect on LPA, including its growth prospects. |
| ● | As a “foreign private issuer” under the rules and regulations of the SEC, LPA is permitted to file less or different information with the SEC than a company incorporated in the United States or otherwise subject to these rules and is permitted to follow certain home-country corporate governance practices in lieu of certain NYSE American requirements applicable to U.S. issuers. |
| ● | LPA is “controlled company” within the meaning of the NYSE American rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies. |
| ● | If LPA is characterized as a passive foreign investment company for U.S. federal income tax purposes, its U.S. shareholders may suffer adverse tax consequences. |
| ● | Sales of a substantial number of LPA securities in the public market could adversely affect the market price of Ordinary Shares. |
Risks Relating to Regulatory, Legal and Tax Factors Affecting Us
| ● | We are subject to governmental regulations. |
| ● | We are subject to certain labor, health, construction/building and safety regulations in the various jurisdictions in which we operate, and may be exposed to liabilities and potential costs for lack of compliance. |
| ● | Our operations are subject to a large number of environmental laws and regulations, and our failure to comply with any such laws and regulations may give rise to liability and result in significant additional costs and expenses, which may materially and adversely affect our financial condition. |
| ● | We are exposed to the potential impacts of future climate change and could be required to implement new or stricter regulations, which may result in unanticipated losses that could affect our business and financial condition. |
| ● | Our real estate taxes could increase as a result of changes in the real estate tax rate or a revaluation, which could adversely affect our cash flows. |
| ● | Changes in tax laws, incentives, benefits and regulations may adversely affect us. |
| ● | Labor activism and unrest, or failure to maintain satisfactory labor relations, could adversely affect our results of operations. |
| ● | We are or may become subject to legal and administrative proceedings or government investigations, which could harm our business and our reputation. |
| ● | We are subject to anti-corruption, anti-bribery, anti-money laundering and antitrust laws and regulations in the countries in which we operate, and any violation of any such laws or regulations could have a material adverse impact on our reputation, financial condition and results of operations. |
| ● | Changes in government policies and actions, as well as judicial decisions in the countries where we operate, could significantly affect the local economy and, as a result, our results of operations and financial condition. |
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PART I
Item 1. Identity of Directors, Senior Management and Advisers
| A. | Directors and Senior Management |
| Not applicable. | |
| B. | Advisers |
| Not applicable. | |
| C. | Auditors |
| Not applicable. |
Item 2. Offer Statistics and Expected Timetable
| A. | Offer Statistics |
| Not applicable. | |
| B. | Method and Expected Timetable |
| Not applicable. |
Item 3. Key Information
| A. | [Reserved] |
| B. | Capitalization and Indebtedness |
| Not applicable. | |
| C. | Reasons for the Offer and Use of Proceeds |
| Not applicable. | |
| D. | Risk Factors |
| The following risk factors apply to our business and operations. These risk factors are not exhaustive, and investors are encouraged to perform their own investigation with respect to our business, financial condition and prospects. You should carefully consider all the following risk factors, together with all of the other information included or incorporated by reference in this annual report, including the financial information. |
Risks Relating to Our Business
In addition to the other information contained in this annual report, including the matters addressed under the heading “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the following risk factors presented in this annual report. The risk factors described below disclose both material and other risks, and are not intended to be exhaustive and are not the only risks facing us. Additional risks not currently known to us or that we currently deem to be immaterial, or which are not identified because they are generally common to businesses, also may materially adversely affect our business, financial condition, results of operations and cash flows in future periods.
The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may have a material adverse effect on the business, financial condition, results of operations, cash flows and future prospects of LPA, in which event the market price of Ordinary Shares could decline, and you could lose part or all of your investment. In general, investing in the securities of issuers in emerging market countries, such as Colombia, Costa Rica and Peru, involves risks that are different from the risks associated with investing in the securities of U.S. companies.
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The success of our business depends on general economic conditions and prevailing conditions in the industrial and logistics real estate industry. Accordingly, any economic slowdown or downturn in real estate asset values or leasing activity may have a material adverse effect on our business, financial condition, results of operations and prospects.
Our business is closely tied to general economic conditions and the performance of the industrial and logistics real estate industry. As a result, our financial and operating performance, the value of our real estate assets, our revenue stream and our ability to implement our business strategy may be affected by changes in national and regional economic conditions.
The performance of the real estate markets in which we operate tends to be cyclical and tied to the condition of the U.S. economy and the economies in the countries in which we operate, including Colombia, Costa Rica and Peru, as well as to investors’ perceptions regarding the global economic outlook. Fluctuations in nominal gross domestic product, or GDP, increased inflation, rising interest rates, declining employment levels, declining levels of investments and economic activity, declining demand for real estate, declining real estate values and periods of general economic slowdown or recession, or perceptions that any of these events may occur or are occurring, have had a negative impact on the real estate market in the past and may adversely affect our future performance. In addition, the performance of the economies of the countries in which we operate may be dependent on or driven by one or more specific industries and by other factors affecting local economies. Other factors that may affect general economic conditions or local real estate conditions include: population and demographic trends, employment and personal income trends, income and other tax laws, changes in interest rates and availability and costs of financing, increased operating costs (including insurance premiums, utilities and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents), changes in the price of oil, construction costs and weather-related events. Our ability to reconfigure our portfolio rapidly in response to changes in economic conditions is extremely limited.
In addition, some of our principal expenses, including the service of our debt, income and real estate taxes and operating and maintenance costs, including insurance costs, do not decrease when market conditions are unfavorable. These factors may impair our ability to respond in a timely manner to downturns in the performance of our industrial properties and may have an adverse effect on business, financial condition, results of operations and prospects. Any recession and/or downturn in the real estate industry, which may affect us again in the future, could give rise to:
| ● | a general decline in the price of rents or less favorable terms for new leases or renewals; |
| ● | the depreciation of the value of the properties in our portfolio; |
| ● | increased vacancy rates or our inability to lease our properties on favorable conditions; |
| ● | our inability to collect rents from our tenants; |
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| ● | reduced levels of demand for industrial space and industrial facilities, or changes in consumer preferences vis-à-vis our available properties; |
| ● | an increased supply of industrial facilities or more suitable spaces in the markets in which we operate; |
| ● | higher interest rates, increased leasing costs, increased construction costs, distressed supply chains for construction materials, increased maintenance costs, reduced availability of financing on favorable terms and shortage of mortgage loans, lines of credit and other capital resources, all of which could increase our costs and limit our ability to acquire or develop additional real estate assets or refinance our debt; |
| ● | measures that limit our ability to develop acquired land pursuant to existing plans; |
| ● | increased costs and expenses, including, among other things, for insurance, labor, energy, real estate appraisals, real estate taxes and compliance with applicable laws and regulations; and |
| ● | the adoption of restrictive government policies or the imposition of limitations on our ability to pass on costs to our customers. |
Furthermore, we expect that a limited number of financial institutions will hold all or most of our cash, including some institutions located in the United States. Depending on our cash balance in any of our accounts at any given point in time, our balances may not be covered by government-backed deposit insurance programs in the event of default or failure of any bank with which we maintain a commercial relationship. While the U.S. Federal Deposit Insurance Corporation provides deposit insurance of $250,000 per depositor, and the banks outside of the United States where some or all of our funds are currently held provide deposit insurance of less than US$50,000, per depositor, per insured bank. The amounts that we have in deposits in U.S. banks and non-U.S. may exceed these insurance amounts. Therefore, if the governments in the U.S. and other countries where our funds are held do not impose measures to protect depositors in the event a bank in which our funds are held fails, we may lose all or a substantial portion of our deposits. The occurrence of any default or failure of any of the banks in which we have deposits could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If economic and market conditions similar to those experienced between 2008 and 2010 or 2020 and 2021 were to return, our performance and profitability could deteriorate. In such event, we may not be able to comply with our financial covenants under our loan agreements and may be forced to seek waivers or amendments from our lenders or to refinance our indebtedness on terms that are consistent with our financial condition. No assurance can be given that we would be able to secure any such waiver or amendment on favorable terms or at all. In addition, if our business deteriorates, we may not have a level of liquidity sufficient to repay our debt at its maturity in the coming years, which would materially and adversely affect our business, financial condition, results of operations and prospects.
The volatility of the financial markets may adversely affect our financial condition and/or results of operations.
The volatility of the financial markets may have a negative impact on the availability of credit generally and may lead to a further weakening of the Colombian, Costa Rican, Peruvian, U.S., and global economies. Any disruption in the financial markets could materially impair the value of our real estate assets and our investments, have a negative impact on the availability of credit generally or on the terms (including as to maturity) on which we and our subsidiaries are or may be able to secure financing (including refinancing our indebtedness), impair our ability or the ability of our subsidiaries to make payments of principal and/or interest on our outstanding debt when due or to refinance that debt, or impair our clients’ ability to enter into new leases (including leases indexed to inflation or denominated in U.S. dollars) or meet their rent payment obligations under their existing leases.
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In 2008 and 2009, the global financial markets experienced a crisis of unprecedented magnitude. This crisis severely affected the availability of financing. While financial markets have stabilized since then, we cannot predict whether they will destabilize in the future. This uncertainty may lead market participants to take a more conservative approach, which may in turn lead to decreased demand and price levels in the markets in which we operate. As a result of the above, we may not be able to recover the current carrying value of our properties, land or investments as a means to repay or refinance our indebtedness.
In addition, global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the war between Russia and Ukraine. In February 2022, Russia launched a full-scale military invasion of Ukraine. Although the length and impact of the ongoing military conflict is unpredictable, the conflict in Ukraine has created and could lead to further market disruptions, including significant volatility in commodity prices, credit and capital markets. The war between Russia and Ukraine has led to sanctions and other penalties being levied by the United States, European Union and other countries mainly against Russia, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. The war is expected to have further global economic consequences, including but not limited to the possibility of severely diminished liquidity and credit availability, declines in consumer confidence, scarcity in certain raw materials and products, declines in economic growth, increases in inflation rates and uncertainty about economic and political stability. In addition, there is a risk that Russia and other countries supporting Russia in this conflict may launch cyberattacks against the United States and its allies and other countries, their governments and businesses, including the infrastructure in those countries. Any of the foregoing consequences, including those we cannot yet predict, may have a material adverse effect on our business, financial condition, liquidity and results of operations.
The market volatility experienced over the past several years has made the appraisal of real estate assets more difficult, and may continue to do so in the future. If we cannot identify suitable financing resources or if we are unable to refinance our existing indebtedness, we may be forced to sell some of our properties to fund our operations or to engage in forced restructurings with our creditors. The valuation and stability of the prices of our and our subsidiaries’ properties are subject to some level of uncertainty, which may result in the values of these properties being lower than expected. In addition, we may not be able to sell our properties in a timely manner as a result of a lack of a readily available market for our properties.
Real estate investments are not as liquid as certain other types of assets, which may adversely affect our financial conditions, results of operations and cash flows.
Real estate investments are not as liquid as certain other types of investments and this lack of liquidity may limit our ability to react promptly to changes in economic or other conditions. Significant expenditures associated with real estate properties, such as indebtedness payments, real estate taxes, maintenance costs, and the costs of any required improvements, are generally not reduced when circumstances cause a reduction in income from the investments. We may dispose of certain properties that have been held for investment to generate liquidity. If we need to sell any of our properties to obtain liquidity, we may not be able to sell those properties at market prices, which could have a material adverse effect on our business, financial condition and/or result of operations. If we believe there is too much of a risk of incurring taxes on any taxable gains from the sale, or if market conditions are not attractive in the relevant regional market, we may not pursue those sales.
We may decide to sell properties to third parties to generate proceeds to fund other real estate projects that we deem as more attractive. Our ability to sell or contribute properties on advantageous terms is affected by: (i) competition from other owners of properties that are trying to dispose of their properties; (ii) economic and market conditions, including those affecting the different regions where we operate; and (iii) other factors beyond our control. We cannot assure you that future market conditions will not affect our real estate investments or our ability to sell our assets at a profit, in a timely manner or at all. If our competitors sell assets similar to assets we intend to divest in the same markets or at valuations below our valuations for comparable assets, we may be unable to divest our assets at favorable pricing or at all. The third parties who might acquire our properties may need to have access to debt and equity capital, in the private and public markets, in order to acquire properties from us. Should they have limited or no access to capital on favorable terms, then dispositions and contributions could be delayed.
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If we do not have sufficient cash available to us through our operations, sales or contributions of properties or available credit facilities to continue operating our business as usual, we may need to find alternative ways to increase our liquidity. Those alternatives may include, without limitation, divesting properties at less than optimal terms, incurring debt, accessing other capital resources, entering into leases with new customers at lower rental rates or less than optimal terms or entering into lease renewals with our existing customers without an increase in rental rates. We may intend to seek financing from financial institutions but cannot assure you that we will be able to access these or other sources of capital. There can be no assurance that these alternative ways to increase our liquidity will be available to us. Our inability to raise additional capital on reasonably favorable terms may jeopardize our future growth and affect our financial condition and/or results of operations. Additionally, taking measures to increase our liquidity may affect our business, and in particular, our distributable cash flow.
Investments in real estate properties are subject to risks that could adversely affect our business.
Investments in real estate properties are subject to varying degrees of risk. While we seek to minimize these risks through geographic diversification of our portfolio, diversification among industries, market research and tenant diversification, these risks cannot be eliminated. Factors that may affect real estate values and cash flows include:
| ● | local conditions, such as oversupply or a reduction in demand; |
| ● | technological changes, such as reconfiguration of supply chains, robotics, 3D printing or other technologies; |
| ● | the attractiveness and quality of our properties, and related services, to potential tenants and competition from other available properties; |
| ● | increasing costs of maintaining, insuring, renovating and making improvements to our properties; |
| ● | our ability to reposition our properties due to changes in the business and logistics needs of our customers; |
| ● | our ability to lease properties at favorable rates, including periodic increases based on inflation or exchange rates, and control variable operating costs; |
| ● | social problems, including safety, affecting certain regions; |
| ● | governmental and environmental regulations and the associated potential liability under, and changes in, environmental, community rights, zoning, usage, tax, tariffs and other laws; and |
| ● | reduction on the supply, price increases and other restrictions affecting the supply of key resources, such as water and electricity, may affect the construction industry and the operation of rental facilities in Colombia, Costa Rica, and Peru. |
These factors may affect our ability to recover our investment in our properties and result in impairment charges.
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We may not be successful in executing on our growth strategy if we are unable to make acquisitions of land or properties.
Our growth strategy includes the acquisition of individual properties or real estate assets when opportunities arise. Our ability to make acquisitions on favorable terms and to integrate them successfully into our existing operations is subject to various risks, including the risk that:
| ● | we may not be able to acquire desired properties particularly in markets in which we do not currently operate; |
| ● | we may need additional land bank to accelerate our portfolio growth and execute our growth strategy to meet our goals; |
| ● | we may not be able to obtain financing for the relevant acquisition given our existing leverage position and increased interest rates; |
| ● | the properties we acquire may not prove accretive to our results, or that we may not be able to successfully manage and lease those properties to meet our goals; |
| ● | we may not be able to generate sufficient operating cash flows to make an acquisition; |
| ● | we may need to spend additional amounts than budgeted to develop a property or make necessary improvements or renovations; |
| ● | competition from other potential acquirors may significantly increase the purchase price of a desired property; |
| ● | we may spend significant time and money on potential acquisitions that we are unable to make as a result of the lack of satisfaction of customary closing conditions included in the agreements for the acquisition of properties, including the satisfactory completion of due diligence investigations; |
| ● | we may not be able to obtain any or all regulatory approvals necessary to complete the acquisition, including from regulatory authorities in the countries in which we operate; |
| ● | the process of pursuing and consummating an acquisition may distract the attention of our management team from our existing business operations; |
| ● | we may experience delays (temporary or permanent) if there is public or government opposition to our activities in any of the markets in which we operate; and |
| ● | we may not be able to rapidly and efficiently integrate new acquisitions, especially acquisitions of real estate portfolios, to our existing operations. |
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We cannot assure you that we will be able to successfully manage all factors necessary to grow our business. If we are unable to find suitable acquisition targets, or if we find them and are unable to complete the acquisitions on favorable terms or to manage acquired properties to meet our goals, our business, financial condition, results of operations and prospects could be materially and adversely affected. In addition, we face risks arising from the acquisition of properties not yet fully developed or in need of substantial renovation or redevelopment, including, in particular, the risk that we overestimate the value of the property, the risk that the cost or time to complete the renovation or redevelopment will exceed our budget and the risk that the relevant location is never developed. Those delays or cost overruns may arise from:
| ● | any shortages of materials or skilled labor; |
| ● | any delays in receiving materials, including as a result of global or regional supply chain issues; |
| ● | a change in the scope of the original project; |
| ● | the difficulty in obtaining necessary zoning, land-use, environmental, health & safety, building, occupancy, antitrust and other governmental permits; |
| ● | economic or political conditions affecting the relevant location; |
| ● | an increase in the cost of building materials and equipment; |
| ● | the discovery of structural or other latent defects in the property once construction has commenced; and |
| ● | delays in securing tenants. |
Any failure to complete a development project in a timely manner and within budget or to lease the project after completion could have a material adverse effect on our business, financial condition, results of operations and prospects.
Where opportunities arise, we may explore the acquisition of properties or real estate assets in markets in the countries in which we operate. Our ability to make acquisitions in new markets and to successfully integrate those acquisitions to our existing operations is subject to the same risks as our ability to do so in the markets in which we currently operate. In addition to these risks, we may not possess the same level of familiarity with the dynamics and market conditions of any new markets that we may enter, which could adversely affect our ability to expand into or operate in those markets and, consequently, our business, financial condition, results of operations and prospects. We may not be able to achieve the desired return on our investments in new markets. If we are unsuccessful at expanding into new markets, our business, financial condition, results of operations and prospects could adversely affected.
We are dependent on our tenants for a substantial portion of our revenues and our business may be materially and adversely affected if a significant number of our tenants, or any of our major tenants, were to default on their obligations under their leases.
A majority of our revenues consists of rental income received from our tenants at our industrial real estate properties. Accordingly, our performance depends on our ability to collect rent payments from our tenants and on our tenants’ ability to make those payments. The revenues and financial resources available to service our debt and make distributions could be materially and adversely affected if a significant number of our tenants, or any of our major tenants, or tenants affected in certain geographic regions, were to postpone the commencement of their new leases, decline to extend or renew their existing leases upon expiration, default on their rent and maintenance-related payment obligations, close down or reduce the level of operations of their businesses, enter reorganization proceedings or similar proceedings, or file for bankruptcy. Any of these events may be the result of various factors affecting our tenants. Any of these events could result in the suspension of the effects of each lease, the termination of the relevant lease and the loss of or a decrease in the rental income attributable to the suspended or terminated lease.
If upon expiration of a lease for any of our properties, a tenant does not renew its lease, we may not be able to re-rent the property to a new customer, may need to incur substantial capital expenditures to re-lease the relevant properties, or the terms of the renewal or new lease (including the cost of renovations for the customer) may be less favorable to us than current lease terms. If a significant number of tenants were to default on their obligations under their leases, we could experience delays and incur substantial expenses in enforcing our rights as landlord.
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A general decline in the economy may result in a decline in demand for space at our properties. As a result, tenants may delay lease commencement, fail to make rental payments when due or declare bankruptcy. Any such event could result in the termination of that tenant’s lease and losses to us, and funds available for distribution to investors may decrease. If tenants were unable to comply with the terms of their leases for any reason, including because of rising costs or falling sales, we may deem it advisable to modify lease terms to allow tenants to pay a lower rent or smaller share of taxes, insurance and other operating costs. If a tenant becomes insolvent or bankrupt, we cannot be sure that we could recover the premises from the tenant promptly or from a bankruptcy trustee or equivalent appointee in any bankruptcy proceeding relating to the tenant. We also cannot be sure that we would receive rent in the proceeding sufficient to cover our expenses with respect to the premises. Bankruptcy laws in some instances may restrict the amount and recoverability of our claims against the tenant. A tenant’s default on its obligations to us could adversely affect our financial condition and the cash we have available for distribution.
In historical periods, we have had material amounts of past due rental income under our lease portfolio. We cannot make assurances that this will not continue to occur in the future. See “Item 4.D. Information on the Company – Property, plants, and equipment.”
We derive a significant portion of our rental income from a limited number of customers.
As of and for the years ended December 31, 2023, 2022, and 2021, our 10 largest tenants accounted for approximately 38.5%, 49.0%, and 59.6% of our total Leased GLA and approximately 47.4%, 55.1%, and 59.6% of our rental income, respectively. Kuehne + Nagel, Pequeno Mundo, AliCorp, PriceSmart and Natura were our largest customers in terms of Leased GLA for the years ended December 31, 2023, 2022, and 2021, collectively representing 25.2%, 29.8%, and 31.4% of our Leased GLA for the years ended December 31, 2023, 2022, and 2021, respectively. Those same customers were our largest customers in terms of rental income, representing 28.8%, 32.6%, and 38.1% of our rental income for the years ended December 31, 2023, 2022, and 2021, respectively.
If any of our principal tenants were to terminate their leases or seek the restructuring of their leases, as applicable, as a result of any conditions affecting any of them, and we were unable to renew those leases on terms reasonably acceptable to these tenants or at all upon their expiration, our business, financial condition and results of operation could be materially and adversely affected. In addition, should any such tenant elect not to renew their leases upon their expiration, depending on the condition of the market at the time, we may find it difficult and time-consuming to lease these properties to new customers. We cannot assure you that we would be able to quickly re-lease any of these properties or at all, or that our results of operations would not be affected as a result of our inability to do so. Any delay in re-leasing a substantial portion of our GLA may affect our business, financial condition and results of operations.
Further, while all of our leases are classified as operating leases, as of December 31, 2023, one of our leases included a purchase option at fair market value at the end of the lease term. As of December 31, 2023, the remaining lease term for this lease is 11.8 years. This lease accounted for approximately 2.0% of our total GLA. If our tenant was to exercise such purchase options, this could affect our business, financial condition and results of operations.
In addition, if any of our principal tenants were to experience a downturn in business or a weakening of its financial condition, that tenant may not be able to meet its rent payment obligations when due or could default on its other obligations under its lease, either of which could have a material adverse effect on our business, financial condition and results of operations.
Our clients operate in certain specific industrial sectors in Colombia, Costa Rica and Peru, and our business may be adversely affected by an economic downturn in any of those sectors.
Our clients operate in certain specific industrial sectors in Colombia, Costa Rica and Peru. As of December 31, 2023, our tenant base in terms of Leased GLA was comprised primarily of companies engaged in the Third Party Logistics (25.0%), Retailer (31.6%), Consumer Goods Distribution (36.9%) and Others (6.5%). Our exposure to these industries subjects us to the risk of economic downturns or other adverse events affecting these sectors. If any of these risks were to materialize, our business, financial condition and results of operations could be materially and adversely affected.
For instance, in Peru, companies operating in the Third Party Logistics (3PL), Retailer, Consumer Goods Distribution, and related industries face various risks. Economic volatility in the country can affect consumer spending and overall business activity. Changes in regulations and policies, such as import/export rules, tax policies, and customs procedures, can create operational challenges. Peru’s infrastructure limitations, including inadequate warehousing facilities and challenges in last-mile delivery, can hinder operations and increase costs. Moreover, the 3PL, Retailer and Consumer Goods Distribution sectors in Peru are highly competitive, requiring constant innovation, cost management, and differentiation strategies to maintain market share. Supply chain disruptions caused by natural disasters, political unrest, or global events can also impact the movement of goods and logistics operations.
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An increase in competition could lead to lower occupancy rates and rental income and could result in fewer investment opportunities.
We compete with a growing number of investors, developers of real estate projects and operators of industrial properties in Colombia, Costa Rica and Peru, many of which offer products similar to ours or may be interested in the same assets or properties. Some of our competitors may have significantly larger financial and other resources than ours and may be able or willing to undertake more risks than those we can manage.
Our principal competitors include Grupo Montecristo and Mobilaire, which operate industrial properties in Costa Rica, and Aldea Logistica Global S.A.C., which operates industrial properties in Peru. Additional competitors include Megacentro and Bodegas San Francisco Inmobiliaria Alquife S.A.C., which owns industrial assets in Peru and Chile. We also compete with local REITs, which own a significant number of industrial properties in Costa Rica. In addition, in the future we may face competition from other regional participants present in one or several of our markets.
Any future increase in competition could lead to a decrease in the number of investment opportunities available to us, to an increase in the bargaining power of prospective sellers of real estate assets or to an increase in the value of real estate assets that may be attractive to us. Moreover, financially stronger competitors may have more flexibility than we do to offer rent incentives in order to attract tenants. If our competitors offer space for lease at prices below the prevailing market prices or which are lower than the prices we currently charge to our tenants, we may lose existing or potential tenants and may be forced to reduce our prices or offer substantial rent abatements, improvements, early termination options or more favorable renewal terms in order to retain our tenants when their leases expire. In any such event, our business, financial condition, results of operations and prospects.
For example, the real estate projects in Peru are currently facing a significant increase in competition, primarily from the parties mentioned above, which poses risks for companies operating within these developments. One of the primary risks in the Peruvian market is the potential impact on occupancy rates. With a larger number of competing businesses offering rentals in a limited market, there is a higher likelihood of increased vacancy rates. The competition for tenants becomes more intense, making it crucial for businesses to implement effective strategies to attract and retain tenants for their real estate projects. Another risk associated with increased competition is the potential downward pressure on rental rates. The Company may find it challenging to maintain or increase rental prices as it strives to remain competitive and attract tenants amidst the expanding market options. This can negatively impact the Company’s profitability and financial performance.
We are dependent on our ability to raise capital through financial markets, divestitures or other sources to meet our future growth expectations.
We are dependent on our ability to secure financing, divest assets or access other capital resources to expand our real estate portfolio and meet our future growth expectations. We may seek financing from financial institutions but cannot assure you that we will be able to access these or other sources of capital. We also face the risk that the terms of available new financing may not be as favorable as the terms of our existing indebtedness, particularly if interest rates continue to rise in the future, and we may be forced to allocate a material portion of our operating cash flow to service our debt, which would reduce the amount of cash available to fund our operations and capital expenditures or future business opportunities or for other purposes.
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In addition, our ability to raise capital through the issuance and sale of ordinary shares to finance our future growth will depend in part on the prevailing market price for our Ordinary Shares, which depends on a number of market conditions and other factors that may vary from time to time, including:
| ● | the appetite of investors; |
| ● | our financial performance and that of our tenants; |
| ● | our ability to meet market expectations and the expectations of our investors with respect to our business; |
| ● | the reports of financial analysts with respect to our business; |
| ● | the prevailing economic, political and social environments in Colombia, Costa Rica, and Peru; |
| ● | the condition of the capital markets, including changes in the prevailing interest rates for fixed-income securities; |
| ● | the prevailing legal environments in Colombia, Costa Rica, and Peru with respect to the protection of minority shareholder interests; |
| ● | distributions to our shareholders, which largely depend on our operating cash flows, which in turn are dependent on the increase of revenues from our developments and acquisitions, the increase of our rental income, and on committed projects and capital expenditures; and |
| ● | other factors, such as changes in regulation (including, in particular, any changes in tax, labor and environmental regulation) or the adoption of other governmental or legislative measures affecting the real estate industry generally or us particularly. |
Adverse changes in our credit ratings could impair our ability to obtain additional debt or equity financing on favorable terms, if at all. Our credit ratings are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analysis of us. Our credit ratings can affect the amount and type of capital we can access, as well as the terms of any financings we may obtain. There can be no assurance that we will be able to maintain our credit ratings. In the event our credit ratings deteriorate, it may be more difficult or expensive to obtain additional financing or refinance existing obligations or commitments. Also, a downgrade in our credit would trigger additional costs or other potentially negative consequences under our current and future credit facilities and debt instruments.
Our inability to raise additional capital on reasonably favorable terms may jeopardize our future growth and affect our business, financial condition, results of operations and prospects.
For example, the prevailing economic, political, social, and legal environments in Peru present various risks to consider. These risks can impact different aspects of operations and overall business performance. Economic risks arise from factors such as economic volatility, fluctuations in currency exchange rates, and changes in consumer spending patterns. Peru’s economy is subject to both internal and external influences, and businesses must carefully monitor economic indicators and adapt their strategies accordingly.
Political risks stem from uncertainties in Peruvian government policies, changes in regulations, and political instability. Shifts in Peruvian political landscapes can lead to policy changes that may directly impact businesses, affecting areas such as taxation, trade agreements, and industry regulations. Social risks in Peru are associated with societal factors, including labor relations, social unrest, and cultural dynamics. Issues such as labor strikes, protests, or changes in consumer preferences can disrupt business operations and impact market demand.
Legal risks in Peru arise from factors such as changes in laws and regulations, compliance requirements, and legal disputes. The Peruvian legal system may experience updates or modifications that impact various industries and business practices. Additionally, legal risks can stem from contract enforcement, intellectual property protection, and labor laws. Contractual disputes or difficulties in enforcing agreements can disrupt business operations and lead to financial and reputational consequences. Intellectual property infringement or inadequate protection measures can also pose risks to businesses operating in Peru. Compliance with labor laws and regulations is crucial to maintain positive employee relations and avoid legal penalties.
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Our levels of indebtedness may affect our cash flows and expose our properties to the risk of foreclosure.
Since 2016, we have grown our portfolio through the development of new industrial real estate properties. Historically, we have financed our acquisitions and real estate purchases with equity contributions of our shareholders and cash proceeds from secured loans and credit facilities that have been typically secured by a mortgage or similar interest on the relevant property. If we were to acquire stabilized portfolios in the future, we may continue to use this acquisition strategy and enter into similar secured loans. As of December 31, 2023, our total outstanding debt was $269.9 million. For more information on our existing indebtedness, see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Debt.”
We may from time to time incur additional indebtedness to finance strategic acquisitions, investments or joint ventures, or for other purposes. Although our bylaws do not currently contain any provisions that establish debt ratios or limitations on the incurrence of debt, any debt issued through bonds requires approval at our general shareholders’ meeting. Additionally, certain agreements we have entered into or may enter into in the future may establish limitations on our ability to incur debt, including approval from our shareholders. If we incur additional indebtedness or renegotiate the terms of our existing loans and credit facilities, our financial obligations may increase significantly and our ability to service our debt may be adversely affected.
In addition, we may be subject to risks related to our financing in the form of debt instruments, including the risk that our cash flow may not be sufficient to meet our scheduled payments of principal and interest, the risk that we may be unable to refinance our debt (particularly as a result of our failure to renegotiate terms with large numbers of investors) and the risk that our level of indebtedness may increase our vulnerability to economic or industry downturns, placing us at a disadvantage compared to other competitors that are less leveraged. Our debt service obligations may also limit our flexibility to anticipate or react to changes in the real estate industry or the business environment generally, including by incurring additional debt to take advantage of attractive opportunities. Our failure to comply with the financial and other restrictive covenants in the agreements that govern our indebtedness would constitute an event of default that, unless cured or waived, would result in our failure to service our indebtedness and the foreclosure on the properties securing our obligations. Moreover, our reputation could be damaged and/or our business harmed if we are viewed as developing underperforming properties, suffer sustained losses on our investments, default on a significant level of loans or experience significant foreclosure of our properties. If any of these risks were to materialize, our business, financial condition and results of operations could be materially and adversely affected.
The agreements governing our existing indebtedness include financial and other covenants that impose limitations on our ability to pursue certain business opportunities or to take certain actions.
The agreements governing our existing indebtedness, or any future indebtedness we incur, include or are likely to include financial and other covenants that impose limitations on our ability to:
| ● | incur additional indebtedness; |
| ● | repay our debts prior to their stated maturities; |
| ● | make acquisitions or investments or take advantage of business opportunities; |
| ● | create or incur additional liens; |
| ● | divest assets when they are subject to collateral restrictions; |
| ● | transfer or sell certain assets or merge or consolidate with other entities; |
| ● | implement mergers, spin-offs or business reorganizations of our business; |
| ● | enter into certain transactions with affiliates; |
| ● | sell shares in our subsidiaries and/or enter into joint ventures; and |
| ● | take certain other corporate actions that would otherwise be desirable. |
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These limitations may adversely affect our ability to finance our future operations, address our capital requirements or pursue available business opportunities. Our breach of any of these covenants would constitute an event of default that could give rise to the termination of the relevant agreement and the acceleration of our payment obligations. In such event, our lenders could declare immediately due and payable the outstanding principal amount of and accrued interest on our debt obligations and other fees, and could take collateral enforcement actions (including foreclosing on our assets). Any of these events could force us to enter reorganization proceedings or file for bankruptcy, which would materially and adversely affect our business.
We have previously breached covenants under our loan agreements and obtained waivers for such breaches. If we are unable to comply with our debt covenants in the future, we may continue to seek waivers from applicable lenders, which may not be granted.
As of December 31, 2022, we were not in compliance with certain debt covenants set forth in our loan agreements with Banco Davivienda, Bancolombia and ITAÚ. Since the liabilities were payable on demand as of December 31, 2022, and we did not have the right to defer our settlement for at least twelve months after that date, we reclassified the debt balance with Banco Davivienda, Bancolombia and ITAÚ totaling $87,366,478 to be current liabilities as of December 31, 2022. We received the waivers for the requirement to comply with the Banco Davivienda and Bancolombia financial covenants on February 17, 2023 and September 25, 2023, respectively. In April 2023, we refinanced its Banco Davivienda debt, thereby relieving any covenant requirement with that lender. The Bancolombia waiver was effective through December 31, 2023 and ratio compliance testing will next be applicable for this loan in June 2024.
The current interest rate environment in Colombia could result in further covenant breaches and require further covenant waivers from financial institutions. No assurance can be provided that any such waivers will be obtained. Any default by us under our existing credit agreements that is not waived by the applicable lenders could materially adversely impact our results of operations and financial position, make it more difficult to obtain future financing and adversely impact our investors and business prospects.
Our insurance coverage may not cover all the risks to which we may be exposed.
We carry insurance coverage for our properties against various risks, including general liability, earthquakes, floods and business interruption. We determine the type of coverage and the policy specifications and limits based on what we deem to be the risks associated with our ownership of properties and our business operations in specific markets. That coverage typically includes property damage and rental loss insurance resulting from perils such as fire, windstorm, flood, and commercial general liability insurance. We believe our insurance coverage contains the policy specifications and insured limits customarily carried by companies owning similar properties, and taking part in similar business activities in our industry in Costa Rica, Colombia and Peru.
We believe our properties are adequately insured. Certain losses, however, including losses from floods, earthquakes, acts of war, acts of terrorism, riots, pandemics, pollution or environmental matters generally are not insured against or not fully insured against because it is not deemed economically feasible or prudent to do so. If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of our properties, we could experience a significant loss of capital invested and future revenues in these properties and could remain obligated under any recourse debt associated with the property.
Furthermore, we cannot be sure that the insurance companies will be able to continue to offer products with sufficient coverage at commercially reasonable rates. If we experience a loss that is uninsured or that exceeds insured limits with respect to one or more of our properties or if the insurance companies fail to meet their coverage commitments to us in the event of an insured loss, then we could lose the capital invested in the damaged properties, as well as the anticipated future revenues from those properties and, if there is recourse debt, then we would remain obligated for any financial obligations related to the properties. Any such losses or higher insurance costs could adversely affect our business, financial condition, results of operations and prospects.
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A number of our investments are located in areas in Colombia, Costa Rica and Peru that are known to be subject to natural disasters, such as earthquakes. We generally carry earthquake insurance on our properties located in areas historically subject to seismic activity, subject to coverage limitations and deductibles.
Our tenants may default on their obligation to maintain insurance coverage.
Under the terms of our leases, our tenants are required to purchase and maintain general liability, inventory insurance coverage, as well as insurance coverage for their employees and visitors. If our tenants default on these obligations, we will be forced to purchase insurance coverage in their stead and to pursue action to obtain reimbursement from those tenants. These unanticipated costs and expenses could have an adverse impact on our business, financial condition, results of operations and prospects.
In Peru, for instance, our lease agreements typically provide that if a tenant does not purchase, acquire, maintain or renew the insurance policy or level of insurance required by the agreement, the parties must coordinate local and temporal insurance at the levels required. If local and temporal insurance coverage is not in place within five (5) business days from the date of the request, LPA may terminate its lease agreement with that tenant, in accordance with the provisions of Article 1430 of the Civil Code of Peru.
In addition, if our tenants fail to maintain sufficient or adequate insurance, we may be held liable for losses otherwise attributable to those tenants or their businesses, which losses may not be covered by our own insurance policies. However, some of our leases provide that in the event of any loss attributable to the tenant, the tenant shall be obliged to directly respond for all damages and harm that LPA or third parties may suffer. In the event of an occurrence at a property whose tenant has failed to purchase or maintain adequate insurance coverage or in respect of which we ourselves do not maintain insurance coverage, we may lose a significant portion of our capital investment in or our projected cash flows from that property while remaining obligated to service the debt for which that property served as collateral, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our leases include certain provisions that may prove unenforceable.
All of our leases are governed by Colombian, Costa Rican, and Peruvian law, as applicable. While some of our leases provide that the tenant will not be entitled to rent withholding in the event of damage to or destruction of all or part of the relevant property (which are known as “hell or high water” provisions), under applicable law, the tenant will not accrue rent until repairs are made or may request a rent abatement equal to the percentage of the property that became damaged or destroyed. Our leases in Peru and Colombia do not include hell or high water provisions, and instead provide that in extraordinary situations, tenants may suspend rent payments for as long as the extraordinary situation results in the inability to use the leased property. Furthermore, if the extraordinary situation makes the use of the leased property permanently or definitively impossible, the tenant may invoke the termination of the contract. Additionally, some or all of our leases are subject to arbitration provisions. In those cases, we cannot give you any assurance as to whether an arbitrator in the applicable country would uphold the relevant provisions of our leases or find them unenforceable. In the latter event, our rental income would decrease and our business, financial condition, results of operations and prospects could be adversely affected.
The value of our assets may suffer impairment losses that may adversely affect our results of operations.
We review the carrying amounts of our real estate assets on a regular basis to determine whether there is any indication that those assets have suffered an impairment loss. The determination as to the existence of impairment indicators is based on factors such as market conditions, tenant performance and legal structure. For example, the termination of a lease by a tenant may lead us to recognize an impairment loss through a third party valuation. We determine the value of our real estate assets based on the net present value of our future property net operating income and other revenues from or charges against those assets, divided by a determined discount rate determined by a third party appraiser. That discount rate may vary as a result of changes in interest rates and other market conditions over which have no control. The higher the discount rate, the lower the value of our assets. In 2023, 2022, and 2021, we recognized a gain on the revaluation of our properties of $20.2 million, $3.5 million, and $13.2 million, respectively.
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If we determine that an impairment loss has occurred, we will adjust the net carrying value of the relevant property to account for that loss, which may materially and adversely affect the collateral provided to creditors (thereby requiring additional collateral to be provided) or our results of operations for the relevant reporting period and our business, financial condition, results of operations and prospects.
We are subject to risks related to the development of new properties, including due to an increase in construction costs and supply chain issues.
We are subject to risks related to our development and leasing activities that may adversely affect our results of operations and available cash flows, including, among others, the risk that:
| ● | we may not be able to lease space in our new properties at profitable prices; |
| ● | we may abandon development opportunities and fail to capitalize on our investments in research and valuation in connection with those opportunities; |
| ● | we may not be able to obtain or may experience delays in obtaining all of the requisite zoning, building, occupancy and other governmental permits and authorizations; |
| ● | the feasibility studies for the development of new properties may prove incorrect once the development has commenced; |
| ● | our business activities may not be as profitable as expected as a result of increased costs of land reserves; |
| ● | actual costs of construction of a project may exceed our original estimates or the construction may not be completed on schedule, for example, as a result of delays attributable to contractual defaults, local climate conditions, nationwide or local strikes by construction workers or shortages of construction materials or electric power or fuel for our equipment, any of which would render the project less profitable or unprofitable; |
| ● | we may be forced to incur additional costs to correct defects in construction design or that are demanded by our tenants; and |
| ● | we may be held jointly liable for any underlying soil contamination on any of our properties with the party that caused that contamination, even if that contamination was not identifiable by us. |
Any of these risks could give rise to material unanticipated delays or expenses and could in certain circumstances prevent the completion of our development or renovation projects once they have commenced, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Construction materials, labor, and other related expenses can fluctuate, impacting the overall cost of developing new properties. In Peru, for example, according to the Peruvian Chamber of Construction (CAPECO), construction costs in Peru increased by an average of 3.2% in 2020. Such cost increases can affect project budgets, profitability, and timelines. Regarding supply chain issues, Peru’s geography and transportation infrastructure can present challenges in procuring construction materials and equipment. Delays or disruptions in the supply chain, whether due to natural disasters, political unrest, or global events, can impact project timelines and increase costs. For instance, the El Niño phenomenon in 2017 caused severe flooding in Peru, leading to supply chain disruptions and construction delays.
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We may fail to maintain, obtain or renew or may experience material delays in obtaining requisite governmental or other approvals, licenses and permits for the conduct of our business.
We are subject to numerous governmental and local regulations and require various approvals, licenses, permits, concessions and certificates in the conduct of our business. We cannot assure you that we will not encounter significant problems in obtaining new or renewing existing approvals, licenses, permits, concessions and certificates required in the conduct of our business, or that we will continue to satisfy the current or new conditions to those approvals, licenses, permits, concessions and certificates that we currently have or may be granted in the future. There may also be delays on the part of regulatory and administrative bodies in reviewing our applications and granting approvals, which have become increasingly common since the beginning of the COVID-19 pandemic due to closures and/or reduced operations of public offices.
The implementation of new laws and regulations on environmental protection, health and safety-related matters in the jurisdictions in which we operate may create stricter requirements to comply with, including requirements relating to the demands of communities where the real estate is located. This could delay our ability to obtain the related approvals, licenses, permits, concessions and certificates, or could result in us not being able to obtain them at all. If previously obtained approvals, licenses, permits and certificates are revoked and/or if we fail to obtain and/or maintain the necessary approvals, licenses, permits, concessions and certificates required for the conduct of our business, we may be required to incur substantial costs or temporarily suspend or alter the operation of one or more of our properties, industrial parks, or projects in construction or any relevant component thereof, which could affect the general operation of these locations or our compliance with any leases at those locations, which in turn could have a material adverse effect on our business, financial condition, results of operations and prospects.
While we have not been subjected in the past to material civil, regulatory or criminal penalties resulting from untimely compliance or non-compliance with applicable laws and regulations, we could be subjected to civil, regulatory and criminal penalties that could materially and adversely affect the continued operation of our businesses, including: loss of required licenses to operate one or more of our locations, potential breach of our obligations under our lease agreements, significant fines or monetary penalties, or closing of our locations as a preventative measure. In addition, changes in these laws and regulations may restrict our existing operations, limit the expansion of our business and require operating changes that may be difficult or costly to implement.
We are subject to specific legal risks concerning the maintenance, acquisition, renewal, or delays in obtaining necessary governmental approvals, licenses, and permits for our business operations in the countries in which we operate. These risks are influenced by the legal framework and regulatory processes in the countries in which we operate. One significant risk is the potential failure to obtain or renew requisite approvals, licenses, and permits. This can arise due to changes in regulations, administrative processes, or compliance requirements. Specifically in Peru, businesses may need to obtain permits and licenses from various government entities, such as municipal authorities, environmental agencies, or specialized regulatory bodies, depending on the nature of their operations. Failure to obtain or renew these approvals in a timely manner can disrupt business activities and result in financial and legal consequences.
Our real estate assets may be subject to eminent domain and dispossession by the governments of the countries in which we operate for reasons of public interest and other reasons.
Our real estate assets may be subject to eminent domain and dispossession by the governments of the countries in which we operate for reasons of public interest and other reasons.
For example, the Colombian government could seize or expropriate our assets under certain circumstances for fair compensation. Pursuant to Articles 58 and 59 of the Colombian constitution, the government can exercise its eminent domain powers in respect of private property assets in the event such action is deemed by the Government to be required in order to protect public interests. According to Law 388 of 1997, eminent domain powers may be exercised through: (i) an ordinary eminent domain proceeding, or (ii) an administrative eminent domain. In all cases we would be entitled to a fair compensation for the expropriated assets. Also, as a general rule, compensation must be paid before the asset is effectively expropriated. However, the compensation may be lower than the price for which the expropriated asset could be sold in a free-market sale or the value of the asset as part of an ongoing business. The aforementioned Article 59 of the Colombian constitution establishes eminent domain for war reasons, which require that compensation be paid before eminent domain but can only be executed on a temporary basis.
The Peruvian government could expropriate our assets, provided that the requirements set forth in Article 70 of the Political Constitution of Peru and Legislative Decree No. 1192, which approves the Framework Law on the Acquisition and Expropriation of Real Property, are met. These requirements include that the expropriation is based on grounds of national security or public necessity, authorized by express law of the Congress of the Peru in favor of the State; and carried out after payment of just compensation, which includes compensation for any potential damages. In some cases, the owner of the real estate asset subject to eminent domain can request a review of the appraisal value of the asset through arbitration or judicial means if there is a valid claim that the compensation offered does not amount to the market value of the asset. In the event of irregular eminent domain or confiscation of a company’s productive assets in Peru, an arbitration claim can be filed, provided there is an Investment Protection Treaty (which would allow, for example, arbitration claims before the ICSID or another arbitral institution). Alternatively, in cases of irregular eminent domain, parties whose assets are subject to eminent domain can file amparo actions for violation of the right to property, and if the judicial system does not provide a favorable resolution, parties may seek recourse with the Inter-American Human Rights System.
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In Costa Rica, real estate assets may be subject to eminent domain by the government for proven and declared public interest. Pursuant to Costa Rican Expropriation Law, Law number 7495, the government has the authority to encumber an owner of the property’s constitutional right to private property through the prior payment of fair compensation. The expropriation procedure in Costa Rica commences with a declaration of public interest for the eminent domain. Upon notification to the owner, the government prepares an administrative valuation that the owner must either accept or reject. If the owner accepts, the agreed-upon payment is made, and the property is transferred to the government. If the owner does not accept the administrative valuation, the government must initiate a judicial eminent domain process, during which the fair price is examined. To initiate this judicial process, the government must deposit the amount determined in the administrative valuation, allowing the judge to order the government’s possession of the property. Simultaneously, a judicial valuation is conducted to review the price, and either party may request a third valuation. Once all valuations are completed, the judge issues a decision defining the fair price. Regardless of the outcome of the judicial valuations, the owner is paid the price determined in the administrative valuation. Consequently, the decision can either confirm the fair price or increase the property’s value.
If the government of any of the countries in which we operate seeks eminent domain of one or more of our properties, we may be subjected to unexpected legal fees and/or the ultimate loss of one or more of our properties at a price less than we could have obtained for it in the open market, which in turn could have a material adverse effect on our business, financial condition, results of operations and prospects.
We may acquire properties and companies that involve risks that could adversely affect our business and financial condition.
We have acquired properties and will continue to acquire properties through the direct acquisition of real estate or the acquisition of entities that own real estate. The acquisition of properties involves risks, including the risk that the acquired property will not perform as anticipated, that any actual costs for rehabilitation, repositioning, renovation and improvements identified in the pre-acquisition due diligence process will exceed estimates, or that any such contingencies are not indemnifiable. When we acquire properties, we may face risks associated with a lack of market knowledge or understanding of the local economy, forging new business relationships in the area and unfamiliarity with local government and permitting procedures. Additionally, there is, and it is expected there will continue to be, significant competition for properties that meet our investment criteria as well as risks associated with obtaining financing for acquisition activities. The acquired properties or entities may be subject to liabilities, including tax liabilities, which may be without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were asserted against us based on our new ownership of any of these entities or properties, then we may have to pay substantial sums to settle it.
We may be unable to integrate the operations of newly acquired companies and realize the anticipated synergies and other benefits or do so within the anticipated timeframe. Potential difficulties we may encounter in the integration process include: (i) the inability to dispose of assets or operations that are outside of our area of and unforeseen increased expenses, delays or regulatory conditions associated with these transactions; and (iii) performance shortfalls as a result of the diversion of management’s attention caused by completing these transactions and integrating the companies’ operations.
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Delays or an increase in costs in the construction of new buildings or improvements could have an adverse effect on our business, financial condition, results of operations and prospects, including due to supply chain issues.
Delays or an increase in costs in the construction of new buildings or improvements to our existing properties could have an adverse effect on our business, financial condition, results of operations and prospects. The engineering, design and construction phases of new projects typically require nine to twelve months, and improvements to existing properties typically require one to three months. If we experience engineering, design or construction delays as a result of our vendors’ failure to meet their obligations or otherwise, we may not be able to deliver our new projects or tenant improvements at existing properties on schedule and will not receive rental income from those properties in the meantime. Accordingly, any such delay could affect our reputation and have a material adverse effect on our business, financial condition, results of operations and prospects. In addition, some of our leases may provide for penalties for every day that we fail to deliver the property. If this were to occur, we may be able to pass on these liabilities to our contractors, but we can provide no assurance that we will be able to do so. If we are unable to pass on to our contractors the costs associated with construction delays, our business, financial condition, results of operations and prospects may be materially adversely affected.
We rely on an extensive network of suppliers around the world that produce and deliver the materials we require for construction of new buildings or improvements. Our results are, therefore, impacted by current global supply constraints that have led to increased lead times, backordered products and scarcity.
We may be subject to claims for construction defects or other similar actions in connection with our lease management business.
In our capacity as lease managers, we retain independent contractors to provide engineering, construction and project management services for our properties, and oversee their performance. We cannot give any assurance that we will not be subject to claims for construction defects or other similar actions, even if those defects are not attributable to us. An adverse outcome in any claim or litigation arising from construction defects or property management issues could have a material adverse effect on our business, financial condition, results of operations and prospects.
We are dependent on key personnel. The loss of one or more members of our management team, including our Chief Executive Officer, could have a material adverse effect on our operations.
Our continuing success is attributable to a significant degree to the efforts of our management team, including our Chief Executive Officer, Esteban Saldarriaga. Our Chief Executive Officer and other members of our management team have favorable reputations in the real estate industry at both the national and regional level. Our Chief Executive Officer is responsible, to a significant degree, for attracting new business opportunities and leading negotiations with lenders, potential joint venture partners and large institutional clients. The loss of our Chief Executive Officer or any or all of the other members of our management team, including our Chief Financial Officer, regional acquisition manager, and country managers in Colombia, Costa Rica and Peru, for any reason, their inability to remain in their current positions or our inability to replace them, could have a material adverse effect on our business, financial condition, results of operations and prospects and a negative impact on our business relationships with our lenders and clients.
In addition, the experience and skill of certain members of our management team has proven critical in identifying and attracting local clients and opportunities. We consider especially relevant the relationships of our officers in the countries and regions in which we operate. As we continue to grow, our success will depend to a significant extent on our ability to recruit and retain qualified personnel in all areas of business and we can provide no assurance that we will be able to do so. Our ability to retain senior management as well as experienced personnel will in part depend on our having in place appropriate staff remuneration and incentive schemes. The remuneration and incentive schemes we have in place may not be sufficient for retaining the services of our experienced personnel.
We are focused on a single business segment. Any negative impact on the industrial real estate industry could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our corporate purpose consists of holding shares in companies engaged in the development, acquisition, leasing, management and financing of modern, efficient and sustainable logistics parks.
To the extent that this particular sector is negatively impacted, all of our operations and our business may be negatively impacted as well. Further, within the industrial segment, we focus on premium assets (Class A). This may present a risk to the extent that it narrows our target market, and therefore a decrease in demand in this market may affect our growth. Focusing our operations in a single business segment could have a material adverse effect on our business, financial condition, results of operations and prospects.
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Increases in the prices of energy, raw materials, equipment or wages, including due to inflation, could increase our development and operating costs.
Our business is significantly exposed to the price of energy, raw materials and components, including, among others, the price of cement and steel, as well as the price of purchasing or leasing equipment. Certain inputs used by us in our operations are susceptible to significant fluctuations in prices, over which we may have little control. The prices of some of these inputs are affected to a significant extent by the prices of commodities, such as oil and steel. Global oil prices decreased in 2018, increased in 2019, declined significantly in 2020 as a result of the COVID-19 pandemic but reached pre-COVID-19 levels by the end of 2020, increased in 2021 due to supply shocks and the resurgence of demand, and, more recently, rose sharply in early 2022 due to the conflict between Ukraine and Russia.
We cannot assure you that the prices of relevant commodities or inputs will decrease in the future. Substantial increases in the prices of those commodities generally result in increases in our suppliers’ or contractors’ operating costs and, consequently, lead to increases in the prices they charge for their products or services. In addition, growing demand for labor, especially when coupled with a globalized shortage of qualified labor, may result in significant wage inflation. To the extent that we are unable to pass along to our clients increases in the prices of our key inputs or increases in the wages that we must pay, our cost of development could be materially adversely impacted.
In the countries in which we operate, energy prices have experienced fluctuations due to changes in global oil prices and domestic energy policies. The Peruvian government, for example, has implemented measures to reduce energy subsidies, leading to potential increases in electricity costs for businesses. The prices of raw materials in the countries in which we operate can also be influenced by global market trends, supply and demand dynamics, and import/export regulations. Fluctuations in commodity prices, such as metals, construction materials, or agricultural products, can impact production costs and overall development expenses.
Similarly, equipment costs in the countries in which we operate can be subject to changes due to factors such as currency exchange rates, import tariffs, and technological advancements. For instance, fluctuations in the foreign currencies against major currencies can impact the cost of imported machinery and equipment. Wage increases can occur due to changes in labor laws, collective bargaining agreements, or market competition for skilled labor.
While most of our leases include inflation related adjustments, these are not a perfect hedge for inflation, so our operating costs are also affected by inflation in the countries in which we operate.
Our business and operations could suffer in the event of system failures or cybersecurity attacks.
Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal and hosted information technology systems, our systems are vulnerable to damages from any number of sources, including energy blackouts, natural disasters, terrorism, war, telecommunication failures and cybersecurity attacks, such as malware, ransomware, or unauthorized access. Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business. We may incur additional costs to remedy damages caused by those disruptions. Third-party security events at vendors, sub-processors, and service providers could also impact our data and operations via unauthorized access to information or disruption of services which may ultimately result in financial losses. Despite training, detection systems and response procedures, an increase in email attacks (phishing and business email compromise) may create disruption to our business and financial risk.
The growing frequency of attempted cybersecurity attacks may lead to increased costs to protect us and respond to any events, including additional personnel, consultants and protection technologies. Any compromise of our security could result in a violation of applicable privacy and other laws, unauthorized access to information of ours and others, significant legal and financial exposure, damage to our reputation, loss or misuse of the information and a loss of confidence in our security measures, which could harm our business. Additionally, remediation costs for security events may not be covered by our insurance.
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We have identified material weaknesses in our internal controls. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
Prior to the consummation of the Business Combination, we have been publicly registered in Colombia and not subject to the financial reporting requirements of the SEC and have not had the accounting personnel and other resources required for SEC financial reporting purposes and to monitor such work while maintaining appropriate segregation of duties. Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure control and procedures, are designed to prevent fraud. In the course of preparing our consolidated financial statements, we identified material weaknesses in our internal control over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As a result of the issues described above, deficiencies were identified, that either individually or in the aggregate, resulted in the identification of material weaknesses related to each component of the Internal Control — Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework, including control environment, risk assessment, control activities, information and communication, and monitoring activities. The material weaknesses have led to the material misstatement and subsequent restatement of our consolidated financial statements for the years ended December 31, 2021 and 2022, and if not remediated timely may lead to material misstatements in the future. Following the identification of the material weaknesses, we have taken and plan to continue to take remedial measures. We cannot assure you, however, that these measures will fully address these material weaknesses in our internal control over financial reporting or that we will not identify additional material weaknesses or significant deficiencies in the future.
To remediate our identified material weaknesses, we intend to adopt several measures intended to improve our internal control over financial reporting. These measures include strengthening our finance, operations and information technology teams, and implementation of further policies, processes and internal controls relating to our financial reporting. Specifically, our planned remediation efforts include the following:
| ● | establishing controls to identify, assess, and respond to risks of material misstatement and working to formalize internal control processes and documentation; |
| ● | strengthening supervisory reviews by our management in charge of financial issues; |
| ● | hiring additional qualified accounting and finance personnel and engaging financial consultants to enable the implementation of internal control over financial reporting and to segregate duties amongst our accounting and finance personnel; |
| ● | improving our accounting systems and implementing information technology general controls; and |
| ● | engaging third parties as required to assist with technical accounting, application of new accounting standards, tax matters, valuations of investment properties, and ESG sustainability metrics, among other matters. |
We are committed to maintaining a strong internal control environment, and we expect to continue our efforts to ensure the material weaknesses described above and all control deficiencies are remediated. However, these material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. There is no assurance that we will be able to remediate the material weaknesses in a timely manner or that in the future additional material weaknesses will not exist or otherwise be discovered. If we are not able to remediate these material weaknesses, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could adversely affect our business, financial condition, results of operations and prospects.
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Complications in relationships with local communities may adversely affect our business continuity, reputation, liquidity, and results of operations.
We make significant efforts to maintain good long-term relationships and continuous communication with local and neighboring communities where we operate or build, including indigenous communities that previously held real estate in the regions where we operate. However, there can be no assurance that we have obtained or will obtain all permits claimed by those communities or that those communities will not have or will not develop interests or objectives which are different from, or even in conflict with, our objectives, which could result in legal or administrative proceedings, civil unrest, protests, negative media coverage, direct action or campaigns, including, but not limited to, requests for the government to revoke or deny our concessions, licenses or other permits to operate. Any such events could cause delays or disruptions in our operations, result in operational restrictions or higher costs, or cause reputational damage, which could materially and adversely affect our business, reputation, liquidity and results of operations.
In the industrial and logistics real estate sector in the countries in which we operate, complications arising from relationships with local communities can have adverse effects on business continuity, reputation, liquidity, and results of operations. These complications are particularly relevant due to the nature of industrial and logistics projects and their potential impact on surrounding communities. Engaging with local communities is crucial for industrial and logistics real estate projects, as they often involve land acquisition, construction, and ongoing operations that can affect nearby communities. Concerns related to environmental impact, land rights, noise pollution, traffic congestion, and socio-economic benefits can significantly influence project development and operations in Peru.
Adverse impacts on business continuity in the countries in which we operate can arise from community opposition, protests, or legal challenges that disrupt project timelines and operations. Delays or interruptions in construction or operational activities can have financial implications and impact overall project success. Reputation is vital in the industrial and logistics real estate sector, and negative perceptions or conflicts with local communities can harm a company’s image and credibility. Negative publicity, social media backlash, or reputational damage can deter potential tenants or investors and affect long-term business prospects.
Our operations are subject to foreign exchange fluctuations.
Exchange rate fluctuations could adversely affect the economies of the countries in which we operate, and therefore, our results of operations. For example, the revenues, costs and expenses of our operations in Colombia are denominated in local currency (Colombian peso). Therefore, a material devaluation of the Colombian peso against the U.S. Dollar may affect the profitability of projects, and consequently, our business, financial conditions and results of operations. Additionally, fluctuations of the Costa Rican colon can affect our tax expenses. Exchange fluctuations can also have significant implications for businesses operating in Peru due to the country’s dependence on international trade and exposure to global economic conditions. Peru’s currency, the Peruvian Sol (PEN), is subject to fluctuations against major foreign currencies such as the US Dollar and the Euro. Foreign exchange fluctuations can impact our cost of financing and debt repayment. If the foreign currencies weaken against the currency in which our debts are denominated, it can increase the repayment amount, potentially affecting cash flow and financial stability.
We cannot assure you that any measures taken by the governments in the countries in which we operate would be sufficient to control any resulting fiscal or exchange imbalances.
Our hedging of foreign currency and interest rate risk may not effectively limit our exposure to these risks.
We may attempt to mitigate our risk by borrowing in the currencies in which we have significant investments thereby providing a natural hedge. We may also enter into derivative financial instruments that we designate as net investment hedges, as these amounts offset the translation adjustments on the underlying net assets of our foreign investments. Although we attempt to mitigate the potential adverse effects of changes in foreign currency rates there can be no assurance that those attempts will be successful. In addition, we occasionally may use interest rate swap contracts to manage interest rate risk and limit the impact of future interest rate changes on earnings and cash flows. As of December 31, 2023, none of our indebtedness was hedged with interest rate hedge contracts.
Hedging arrangements involve risks, such as the risk of fluctuation in the relative value of the foreign currency or interest rates and the risk that counterparties may fail to honor their obligations under these arrangements. The funds required to settle those arrangements could be significant depending on the stability and movement of the hedged foreign currency or the size of the underlying financing and the applicable interest rates at the time of the breakage. The failure to hedge effectively against foreign exchange changes or interest rate changes may adversely affect our business.
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We are subject to fluctuations in interest rates.
Fluctuations in interest rates present a risk for the development of new projects and therefore the growth rate of our business, to the extent that substantial increases in interest rates may affect the profitability of our investment opportunities, including financing of the development or acquisition of properties. We cannot assure you that interest rates will remain stable in the countries in which we operate. Any substantial increase in the interest rates could negatively affect our business and financial condition.
Fluctuations in interest rates globally can affect the following aspects of our operations. An increase in interest rates increases the cost of borrowing for real estate projects. Higher interest rates increase borrowing costs, potentially affecting project profitability and cash flow. This can impact our ability to finance new projects or expansions. Fluctuations in interest rates can influence investment decisions in the industrial and logistics real estate sector. Higher interest rates make borrowing less attractive, potentially impacting the feasibility of new projects or expansions. This can affect our ability to pursue growth opportunities in the market. Our existing loan portfolio is adversely affected by increases in interest rates and has and could continue to reduce cash flow available for operations, investment opportunities and debt service requirements.
Moreover, if interest rates increase, then so would the interest expense on our unhedged variable rate debt, which would adversely affect our business, financial condition, results of operations and prospects. As of December 31, 2023 and December 31, 2022, 23.0% and 0%, respectively, of our outstanding indebtedness bore fixed interest rates, respectively. In addition, we refinance fixed rate debt at times when we believe rates and terms are appropriate. Our efforts to manage these exposures may not be successful. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our business, financial condition, results of operations and prospects. Termination of interest rate hedge contracts typically involves costs, such as transaction fees or breakage costs.
Risks Relating to LPA Operating as a Public Company
LPA’s only significant asset is its ownership of LLP, and such ownership may not be sufficient to pay dividends or make distributions or obtain loans to enable LPA to pay any dividends on the Ordinary Shares, pay its expenses or satisfy other financial obligations.
LPA is a holding company and does not directly own any operating assets other than its ownership of interests in LLP. LPA depends and will depend on LLP for distributions, loans and other payments to generate the funds necessary to meet its financial obligations, including its expenses as a publicly traded company, and to pay any dividends. The earnings from, or other available assets of, LLP may not be sufficient to make distributions or pay dividends, pay expenses or satisfy LPA’s other financial obligations.
LPA will incur higher costs as a result of operating as a public company.
We are a public company and incur significant additional legal, accounting, insurance and other expenses, including costs associated with public company reporting requirements that we did not incur prior to becoming a publicly traded company. LPA incurs and expects to continue to incur higher costs associated with complying with the requirements of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and related rules implemented by the SEC and NYSE American. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these laws and regulations to increase our legal and financial compliance costs since becoming a public company and expects to render some activities more time-consuming and costly, although LPA is currently unable to estimate these costs with any degree of certainty. LPA may need to hire more employees or engage outside consultants to comply with these requirements, which will increase its costs and expenses since becoming a public company. These laws and regulations could make it more difficult or costly for LPA to obtain certain types of insurance, including directors’ and officers’ liability insurance, and LPA may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for LPA to attract and retain qualified persons to serve on the LPA Board or board committees or as executive officers. Furthermore, if LPA is unable to satisfy its obligations as a public company or the requirements of NYSE American, it could be subject to delisting of its Ordinary Shares, fines, sanctions and other regulatory action and potentially civil litigation.
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We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and share price, which could cause you to lose some or all of your investment.
We may be forced to write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in us reporting losses. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that charges of this nature are reported could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate covenants to which we may be subject. Accordingly, any of our shareholders could suffer a reduction in the value of their Ordinary Shares as a result of the foregoing factors and would be unlikely to have a remedy for such reduction in value.
We may not be able to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act that apply to us following the consummation of the Business Combination.
As a result of the consummation of the Business Combination on March 27, 2024 and the transactions related thereto, we will be required to provide management’s attestation on internal controls in connection with our second annual report on Form 20-F following consummation of the Business Combination (i.e. our annual report on Form 20-F for the fiscal year ended December 31, 2024). The standards required for a public company under Section 404(a) of the Sarbanes-Oxley Act are significantly more stringent than those that were required of us as a company that was not publicly listed in the United States. Our management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that apply following the Business Combination. If we are not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our Ordinary Shares.
LPA’s management team has limited experience managing and operating a U.S. public company.
Members of LPA’s management team have limited experience managing and operating a U.S. publicly traded company, interacting with U.S. public company investors, and complying with the increasingly complex laws pertaining to U.S. public companies. Its transition to being a U.S. public company subjects LPA to significant regulatory oversight and reporting obligations under the U.S. federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from its senior management and could divert their attention away from the day-to-day management of its business. LPA may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of U.S. public companies. The development and implementation of the standards and controls necessary for LPA to achieve the level of accounting standards required of a public company may require costs greater than expected. To support its operations as a U.S. public company, LPA plans to recruit additional qualified employees or external consultants with relevant experience, which will increase its operating costs in future periods. Should any of these factors materialize, LPA’s business, financial condition and results of operations could be adversely affected.
The price of Ordinary Shares may be volatile.
The price of Ordinary Shares may fluctuate due to a variety of factors, including:
| ● | actual or anticipated fluctuations in its quarterly and annual results and those of other public companies in its industry; mergers and strategic alliances in the industry in which it operates; |
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| ● | market prices and conditions in the industry in which it operates; | |
| ● | changes in government regulation; | |
| ● | potential or actual military conflicts or acts of terrorism; | |
| ● | the failure of securities analysts to publish research about us, or shortfalls in its operating results compared to levels forecast by securities analysts; | |
| ● | announcements concerning LLP, LPA or its competitors; and | |
| ● | the general state of the securities markets. |
These market and industry factors may materially reduce the market price of Ordinary Shares, regardless of LPA’s operating performance.
Reports published by analysts, including projections in those reports that differ from LPA’s actual results, could adversely affect the price and trading volume of its Ordinary Shares.
LPA’s management currently expects that securities research analysts will establish and publish their own periodic projections for its business. These projections may vary widely and may not accurately predict the results LPA actually achieves. LPA’s share price may decline if its actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on LPA downgrades its stock or publishes inaccurate or unfavorable research about its business, its share price could decline. If one or more of these analysts ceases coverage of LPA or fails to publish reports on it regularly, its share price or trading volume could decline. While LPA’s management expects research analyst coverage, if no analysts commence coverage of LPA, the trading price and volume for Ordinary Shares could be adversely affected.
An active, liquid trading market for Ordinary Shares may not develop, which may limit your ability to sell Ordinary Shares.
Prior to the completion of the Business Combination, there was no public market for Ordinary Shares. Although Ordinary Shares are listed on NYSE American under the ticker symbol “LPA,” an active trading market for Ordinary Shares may never develop or be sustained. The current trading price of the Ordinary Shares may not be indicative of the market price of Ordinary Shares that will prevail in the open market going forward. A public trading market having the desirable characteristics of depth, liquidity and orderliness depends upon the existence of willing buyers and sellers at any given time, such existence being dependent upon the individual decisions of buyers and sellers over which neither we nor any market maker has control. The failure of an active and liquid trading market to develop and continue would likely have a material adverse effect on the value of Ordinary Shares. An inactive market may also impair our ability to raise capital to continue to fund operations by issuing Ordinary Shares.
LPA may issue additional Ordinary Shares under the Equity Incentive Plan, which would dilute the interest of LPA’s shareholders.
LPA may issue a substantial number of additional Ordinary Shares under the Equity Incentive Plan. The issuance of additional Ordinary Shares:
| ● | may significantly dilute the equity interest of investors; | |
| ● | may subordinate the rights of holders of Ordinary Shares if preferred shares are issued with rights senior to those afforded to Ordinary Shares; | |
| ● | could cause a change of control if a substantial number of shares of LPA are issued, which may affect, among other things, LPA’s ability to use its net operating loss carry forwards, if any, and could result in the resignation or removal of its present officers and directors; and | |
| ● | may adversely affect prevailing market prices for LPA’s securities, including Ordinary Shares. |
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LPA may or may not pay cash dividends in the foreseeable future.
Any decision to declare and pay dividends in the future will be made at the discretion of the LPA Board and will depend on, among other things, applicable law, regulations, restrictions, LPA’s and LLP’s respective results of operations, financial condition, cash requirements, contractual restrictions, the future projects and plans of LPA and LLP and other factors that the LPA Board may deem relevant. In addition, LPA’s ability to pay dividends depends significantly on the extent to which it receives dividends from LLP and there can be no assurance that LLP will pay dividends. As a result, capital appreciation, if any, of Ordinary Shares will be an investor’s sole source of gain for the foreseeable future.
Because LPA is incorporated in the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited.
LPA is an exempted company incorporated in the Cayman Islands with limited liability. As a result, it may be difficult for investors to effect service of process within the United States upon LPA’s directors or officers, or enforce judgments obtained in the United States courts against LPA’s directors or officers.
LPA’s corporate affairs are governed by the Charter, the Companies Act and the common law of the Cayman Islands. LPA is also be subject to the federal securities laws of the United States. The rights of LPA shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of LPA’s directors to LPA under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of LPA’s shareholders and the fiduciary responsibilities of LPA’s directors under Cayman Islands law are different from what they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less prescriptive body of securities laws as compared to the United States, and certain states, such as Delaware, may have more fully developed and judicially interpreted bodies of corporate law. In addition, Cayman Islands exempted companies may not have standing to initiate a shareholders derivative action in a federal court of the United States.
LPA has been advised by its Cayman Islands legal counsel that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce judgments of United States courts obtained against LPA or its directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or (ii) in original actions brought in the Cayman Islands, to impose liabilities against LPA predicated upon the securities laws of the United States or any state in the United States, so far as the liabilities imposed by those provisions are penal in nature.
In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive, given by a court of competent jurisdiction (the courts of the Cayman Islands will apply the rules of Cayman Islands private international law to determine whether the foreign court is a court of competent jurisdiction), and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
As a result of all of the above, LPA shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as shareholders of a corporation incorporated in the United States.
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It may be difficult to enforce a U.S. judgment against LPA or its directors and officers outside the United States, or to assert U.S. securities law claims outside of the United States.
LPA is a Cayman Islands exempted company incorporated with limited liability and not all of its assets are located in the United States. In addition, some of LPA’s directors and officers reside outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in the Cayman Islands courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, some of whom are not residents in the United States and whose assets may be located outside of the United States. It may be difficult or impossible for you to bring an action against us in the Cayman Islands if you believe your rights under the U.S. securities laws have been infringed. In addition, there is uncertainty as to whether the courts of the Cayman Islands would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state and it is uncertain whether such Cayman Islands courts would hear original actions brought in the Cayman Islands against LPA or such persons predicated upon the securities laws of the United States or any state.
Provisions in the Charter may inhibit a takeover of LPA, which could limit the price investors might be willing to pay in the future for LPA’s securities and could entrench management.
The Charter contains provisions that may discourage unsolicited takeover proposals that shareholders of LPA may consider to be in their best interests. Among other provisions, subject to the rights of the shareholders of LPA as specified in the Charter, the ability of the LPA Board to issue additional shares, with or without preferred, deferred or other rights or restrictions, whether in regard to dividend, voting, return of capital or otherwise and to such persons, at such times and on such other terms as the LPA Board may determine, to the extent authorized but unissued, and without shareholder approval, may make it more difficult for LPA’s shareholders to remove incumbent management and accordingly discourage transactions that otherwise could involve payment of a premium over prevailing market prices for LPA’s securities. However, under Cayman Islands law, the LPA Board may only exercise these rights and powers granted to them under the Charter for a proper purpose and for what they believe in good faith to be in the best interests of LPA.
LPA is an “emerging growth company,” and it cannot be certain if the reduced SEC reporting requirements applicable to emerging growth companies will make Ordinary Shares less attractive to investors, which could have a material and adverse effect on LPA, including its growth prospects.
LPA is an “emerging growth company” as defined in the JOBS Act. LPA will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of the Business Combination, (b) in which LPA has total annual gross revenue of at least $1.235 billion or (c) in which LPA is deemed to be a large accelerated filer, which means the market value of Ordinary Shares held by non-affiliates exceeds $700 million as of the last business day of LPA’s prior second fiscal quarter, and (ii) the date on which LPA issued more than $1.0 billion in non-convertible debt during the prior three-year period. LPA intends to take advantage of exemptions from various reporting requirements that are applicable to most other public companies that are classified as “emerging growth companies,” including, but not limited to, an exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that LPA’s independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting and reduced disclosure obligations regarding executive compensation.
Furthermore, even after LPA no longer qualifies as an “emerging growth company,” as long as LPA continues to qualify as a foreign private issuer under the Exchange Act, LPA will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including, but not limited to, the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, LPA will not be required to file annual reports and financial statements with the SEC as promptly as U.S. domestic companies whose securities are registered under the Exchange Act, and are not required to comply with Regulation FD, which restricts the selective disclosure of material information.
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As a result, LPA shareholders may not have access to certain information they deem important. LPA cannot predict if investors will find Ordinary Shares less attractive because it relies on these exemptions. If some investors find Ordinary Shares less attractive as a result, there may be a less active trading market and share price for Ordinary Shares may be more volatile.
As a “foreign private issuer” under the rules and regulations of the SEC, LPA is permitted to file less or different information with the SEC than a company incorporated in the United States or otherwise subject to these rules and is permitted to follow certain home-country corporate governance practices in lieu of certain NYSE American requirements applicable to U.S. issuers.
LPA is considered a “foreign private issuer” under the Exchange Act and is therefore exempt from certain rules under the Exchange Act, including the proxy rules, which impose certain disclosure and procedural requirements for proxy solicitations for U.S. and other issuers. Moreover, LPA is not required to file periodic reports and financial statements with the SEC as frequently or within the same time frames as U.S. companies with securities registered under the Exchange Act, although it may elect to file certain periodic reports and financial statements with the SEC on a voluntary basis on the forms used by U.S. domestic issuers. LPA is not required to comply with Regulation FD, which imposes restrictions on the selective disclosure of material information to shareholders. In addition, LPA’s officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of LPA’s securities.
In addition, as a “foreign private issuer”, LPA is permitted to follow certain home-country corporate governance practices in lieu of certain NYSE American requirements. LPA currently follows some, but not all, of the corporate governance requirements of NYSE American. With respect to the corporate governance requirements of NYSE American that it does follow, LPA cannot give any assurances that it will continue to follow such corporate governance requirements in the future, and may therefore in the future rely on available NYSE American exemptions that would allow LPA to follow its home country practice. Unlike the requirements of NYSE American, LPA is not required, under the corporate governance practice and requirements in the Cayman Islands, to have its board consist of a majority of independent directors, nor is LPA required to have a compensation committee or a nominating and corporate governance committee consisting entirely of independent directors, or have regularly scheduled executive sessions with only independent directors each year. Such Cayman Islands home country practices may afford less protection to holders of Ordinary Shares. For additional information regarding the home country practices LPA intends to follow in lieu of NYSE American requirements, see the section of this Report entitled “Item 16G — Corporate Governance.”
LPA would lose its status as a “foreign private issuer” under current SEC rules and regulations if more than 50% of LPA’s outstanding voting securities becomes directly or indirectly held of record by U.S. holders and one of the following is true: (i) the majority of LPA’s directors or executive officers are U.S. citizens or residents; (ii) more than 50% of LPA’s assets are located in the United States; or (iii) LPA’s business is administered principally in the United States. If LPA loses its status as a foreign private issuer in the future, it will no longer be exempt from the rules described above and, among other things, will be required to file periodic reports and annual and quarterly financial statements as if it were a company incorporated in the United States. If this were to happen, LPA would likely incur substantial costs in fulfilling these additional regulatory requirements and members of LPA’s management would likely have to divert time and resources from other responsibilities to ensuring these additional regulatory requirements are fulfilled.
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LPA is “controlled company” within the meaning of the NYSE American rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.
In addition to being a foreign private issuer, immediately following the Business Combination, LPA is a “controlled company” as defined under the NYSE American rules, because JREP I Logistics Acquisition, LPA currently controls a majority of the voting power of the Ordinary Shares. For as long as LPA remains a controlled company under that definition, LPA is permitted to elect to rely, and may rely, on certain exemptions from corporate governance rules, including an exemption from the rule that a majority of the LPA Board must consist of independent directors, that LPA has to establish a compensation committee composed entirely of independent directors or that LPA has independent director oversight of director nominations. Although LPA currently has a compensation committee and nominating committee, such committees are not composed entirely of “independent directors.” As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements. For additional information regarding the corporate governance practices LPA intends to follow in lieu of NYSE American requirements, see the section of this Report entitled “Item 16G — Corporate Governance.”
If LPA is characterized as a passive foreign investment company for U.S. federal income tax purposes, its U.S. shareholders may suffer adverse tax consequences.
If LPA is a passive foreign investment company (“PFIC”) for any taxable year (or portion thereof) that is included in the holding period of a U.S. holder of Ordinary Shares, the U.S. holder may be subject to adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. If a U.S. holder does not make a QEF election or a mark-to-market election, as described in the section of this Report entitled “Item 10.E. Taxation — Material U.S. Federal Income Tax Considerations — Ownership and Disposition of Ordinary Shares by U.S. Holders”, such U.S. holder will be subject to the default “excess distribution regime” under the PFIC rules with respect to (i) any gain realized on a sale or other disposition (including a pledge) of such U.S. holder’s Ordinary Shares, and (ii) any “excess distribution” that a U.S. holder receives on his or her Ordinary Shares (generally, any distributions in excess of 125% of the average of the annual distributions on Ordinary Shares during the preceding three years or U.S. holder’s holding period, whichever is shorter).
Whether LPA is treated as a PFIC for U.S. federal income tax purposes is a factual determination that must be made annually at the close of each taxable year and, thus, is subject to significant uncertainty. Accordingly, we are unable to determine whether LPA will be treated as a PFIC for the taxable year of the Business Combination or for future taxable years, and there can be no assurance that LPA will not be treated as a PFIC for any taxable year. LPA’s U.S. counsel expresses no opinion with respect to LPA’s PFIC status for any taxable year. In addition, for any taxable year with respect to which LPA determines it is a PFIC, upon request of a U.S. holder, LPA intends to use commercially reasonable efforts to make available information reasonably necessary to compute income of such U.S. holder as a result of LPA’s status as a PFIC, including timely providing a PFIC Annual Information Statement to enable such U.S. holder to make a QEF Election with respect to PFIC stock. Please see the section entitled “Taxation—Material U.S. Federal Income Tax Considerations — Ownership and Disposition of Ordinary Shares by U.S. Holders — Passive Foreign Investment Company Rules” for a more detailed discussion with respect to LPA’s potential PFIC status and the implications to U.S. holders if LPA is a PFIC, U.S. holders are urged to consult their tax advisors regarding the possible application of the PFIC rules to holders of Ordinary Shares.
Sales of a substantial number of LPA securities in the public market could adversely affect the market price of Ordinary Shares.
Sales of a substantial number of Ordinary Shares in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of the Ordinary Shares. The PIPE Subscriber (as defined herein) has certain resale registration rights pursuant to the terms of the PIPE Subscription Agreement (as defined herein). Pursuant to the Registration Rights Agreement dated March 27, 2024, among Logistic Properties of the Americas and each of the holders listed on the signature pages thereto, (the “LLP Registration Rights Agreement”), certain LLP Shareholders received demand and piggy-back registration rights with respect to their Ordinary Shares in the Business Combination. In addition, LPA assumed the registration obligations of TWOA under that certain Registration Rights Agreement, dated as of March 29, 2021, by and among TWOA, the Original Sponsor and certain shareholders named therein (as amended, the “Founder Registration Rights Agreement”), which obligations, pursuant to the amendment thereto dated March 27, 2024, became applicable to the Ordinary Shares into which the Founder Shares were converted as a result of the Business Combination. The registration of these securities will permit the public resale of such securities, subject to any applicable lock-up periods. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of Ordinary Shares.
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Risks Relating to Regulatory, Legal and Tax Factors Affecting Us
We are subject to governmental regulations.
We are subject to laws, ordinances and regulations relating to, among other things, taxes, environmental matters, labor, equal opportunity, construction, occupational health and safety, civil and consumer protection and general building and zoning requirements in the various jurisdictions in which we operate.
We are subject to certain labor, health, construction/building and safety regulations in the various jurisdictions in which we operate, and may be exposed to liabilities and potential costs for lack of compliance.
We are subject to labor, health, construction/building and safety laws and regulations in the various jurisdictions in which we operate that govern, among other things, the relationship between us and our employees, and the health and safety of our employees. If an adverse final decision that we violated any labor or health and safety laws is issued, we may be exposed to penalties and sanctions, including the payment of fines.
For instance, under Peruvian law, these fines might be remitted to the Labor Authority, the amount being contingent on the severity of the violation and the number of affected employees. Additionally, there may be a legal obligation to provide compensation to the injured employee, the quantum of which would be determined by the court. Furthermore, the company could face a temporary shutdown lasting up to 30 calendar days. Moreover, the legal representative of the company could be subject to prosecution for the offense of “Attempt against safety and health conditions at work” potentially resulting in a prison sentence ranging from one to four years. In cases where an employee suffers fatal injuries, the prison sentence would be not less than four nor more than eight years; for serious injuries, the prison term would range from three to six years.
Our operations are subject to a large number of environmental laws and regulations, and our failure to comply with any such laws and regulations may give rise to liability and result in significant additional costs and expenses, which may materially and adversely affect our financial condition.
Our operations and properties are subject to statutory laws and regulations in the countries in which we operate relating to the protection of the environment and the use of natural resources.
We anticipate that the regulation of our business operations under Colombian, Costa Rican and Peruvian federal, state and local environmental laws will increase and become more stringent over time. We cannot predict the effect that the enactment of additional environmental laws, regulations or official standards would have on our cash flows, costs for compliance, capital requirements or liabilities relating to damages claims, business, financial condition, results of operations and prospects.
In addition, applicable environmental laws and regulations with respect to responsibility for remediation differs in the different countries in which we operate. In Costa Rica, for example, unless some type of direct liability can be attributed to LPA or its subsidiaries, the tenant would be responsible for assuming the totality of the remediation costs. However, according to applicable environmental laws and regulations in Peru and Colombia, we are jointly and severally liable with our tenants for the costs of remediation of soil pollution, even if the pollution was caused by the tenant. While our leases provide that the tenant is liable for the cost of any remediation actions, we can give no assurance that tenants would meet their obligations. If any of our tenants were to pollute the soil of our properties and fail to take remediation action or pay for the cost thereof, we would be required to undertake the remediation ourselves and could be held liable for any damages, which could materially and adversely affect our business, financial condition, results of operations and prospects.
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Additionally, requirements and efforts to address climate change through statutory laws requiring the reductions in greenhouse gas emissions, or GHG emissions, may lead to economic risks and uncertainty for our business. These risks could include costs to process and obtain permits, additional taxes, as well as of the installation of equipment necessary to reduce emissions to meet new GHG limits or other required technology standards. Given the uncertain nature of current and future legal and regulatory requirements for GHG emissions at local and international levels, it is not possible to predict the impact on operations or financial position, or to make reasonable forecasts of potential costs that may result from those requirements.
Peruvian environmental legislation establishes specific requirements for the development and operation of industrial and logistics real estate projects. These requirements include obtaining environmental permits and licenses, conducting environmental impact assessments, proper management of waste and wastewater, among others. Non-compliance with these laws and regulations can lead to administrative penalties such as fines and temporary or permanent closure of facilities. Additionally, affected parties may file civil lawsuits for damages, resulting in significant legal costs. It is important to note that environmental legislation in Peru is constantly evolving and being updated. Therefore, it is crucial for companies in the industrial and logistics real estate sector to stay updated on legal requirements and ensure proper compliance.
We are exposed to the potential impacts of future climate change and could be required to implement new or stricter regulations, which may result in unanticipated losses that could affect our business and financial condition.
We are exposed to potential physical risks from possible future changes in climate. Our properties may be exposed to rare catastrophic weather events, such as severe storms, drought, earthquakes, floods, wildfires or other extreme weather events. If the frequency of extreme weather events increases, our exposure to these events could increase and could impact our tenants’ operations and their ability to pay rent. We carry comprehensive insurance coverage to mitigate our casualty risk, in amounts and of a kind that we believe are appropriate for the markets where each of our properties and their business operations are located given climate change risk.
We may be adversely impacted as a real estate owner, developer and manager in the future by potential impacts to the supply chain or stricter energy efficiency standards or greenhouse gas regulations for the commercial building sectors. Compliance with new laws or regulations relating to climate change, including compliance with “green” building codes, may require us to make improvements to our existing properties or result in increased operating costs that we may not be able to effectively pass on to our tenants. Any such laws or regulations could also impose substantial costs on our tenants, thereby impacting the financial condition of our tenants and their ability to meet their lease obligations and to lease or re-lease our properties. We cannot give any assurance that other such conditions do not exist or may not arise in the future. The potential impacts of future climate change on our real estate properties could adversely affect our ability to lease, develop or sell those properties or to borrow using those properties as collateral and may impact our business, financial condition, results of operations and prospects.
In addition to the risks identified above arising from actual or potential statutory and regulatory controls, severe weather, rising seas, higher temperatures and other effects that may be attributable to climate change may impact any manufacturing sector in terms of direct costs (e.g., property damage and disruption to operations) and indirect costs (e.g., disruption to customers and suppliers and higher insurance premiums). To the extent that those conditions negatively affect our operations, they could have a material adverse effect on our business, financial condition, results of operations and prospects.
Peru, for instance, has taken steps to address climate change through various policies and legislation. Colombia, Costa Rica and Peru have ratified the Paris Agreement and have set targets for reducing greenhouse gas emissions. Additionally, the countries in which we operate implemented measures to promote sustainable development and resilience in the face of climate change impacts. While specific data on the potential losses or impacts related to future climate change in the industrial and logistics real estate sector in these countries may not be readily available, there are potential risks and uncertainties associated with climate change. This includes the possibility of stricter regulations, increased costs for adaptation and mitigation measures, and potential disruptions to operations due to extreme weather events or changing market dynamics.
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Our real estate taxes could increase as a result of changes in the real estate tax rate or a revaluation, which could adversely affect our cash flows.
We have an obligation to pay state and local taxes in respect of each of our real estate assets. Such real estate taxes may increase as a result of the change in the tax regime, the applicable tax rate or as a result of the valuation or revaluation of our real estate assets by the tax authorities in each of the countries in which we operate. Therefore, the real estate tax amount to be paid in the future may differ from the real estate tax amount paid in the past. If such real estate tax amounts increase, it could adversely affect our financial condition, results of operations and cash flow.
The tax legislation in Peru, for example, specifically designates the property tax as the exclusive tax associated with the ownership of real estate assets. Nevertheless, there exists a fiscal implication within the framework of income tax that becomes relevant when considering a potential property sale.
In Peru, we are required to make property tax payments for each of our real estate holdings. The property tax rates may undergo adjustments due to changes in the tax regime, but it should not change based on the tax authority’s valuation or revaluation of our real estate assets in Peru.
Furthermore, a newly introduced tax called “Participation in the Increase in Land Value” exists. This tax is triggered by positive externalities that affect properties, resulting from some factors such as development projects, investments in public infrastructure, and others. However, there is an ongoing debate surrounding the application of this tax, primarily due to concerns about potential violations of constitutional tax rights.
Changes in tax laws, incentives, benefits and regulations may adversely affect us.
Changes in tax laws, regulations, related interpretations and tax accounting standards in Colombia, Costa Rica, Peru, or other countries in which we may operate in the future may result in a higher tax rate on our earnings, which may significantly reduce our profits and cash flows from operations. However, it is not possible to precisely predict if and how potential changes may affect our business, but one or more states or municipalities, the federal government in the countries in which we operate or other countries may seek to challenge the taxation or procedures applied to our transactions, and could impose taxes or additional reporting, record-keeping or indirect tax collection obligations on our business. New taxes could also require us to incur substantial costs to collect and remit taxes. For example, in Colombia, the latest tax reform was approved in the Colombian Congress, which increased the capital gain tax from 10% to 15%.
In Costa Rica, the 2019 tax reform introduced a dual system of taxation for capital gains and income derived from the use of rights or derived from the disposition of or the leasing of real estate property. These changes in the taxation system may affect taxation of local operations. Under the approved changes made by the Costa Rican Congress in 2019, taxpayers may be subject to either a 30% or 15% tax rate depending on whether the income is derived or related to regular lucrative activities. Some uncertainties remain regarding the interpretation of the applicable rates due to the lack of jurisprudence or administrative criteria. Moreover, the taxation base capital gains were broadened to include any capital gains resulting from changes on the taxpayer patrimony. Previously, the indicated tax reform capital gains were only subject to taxation if they were part of a commercial activity or derived from depreciable assets. In Colombia, a tax reform approved by the Colombian Congress in December 2022 increased capital gain tax from 10% to 15% and also implemented a new tax of 3% on value assets over COP 2.107.000.000 when selling the asset, as a contribution.
In Peru, beginning in 2023, buildings and constructions can be depreciated at a maximum annual rate of 33.33% for income tax purposes, subject to specific conditions. Another reform was the recent implementation of the “Participation in the Increase in Land Value” tax by the Peruvian government. This tax is implemented in response to positive externalities that impact properties, arising from factors such as development projects, investments in public infrastructure, among others.
We cannot guarantee that any tax benefits we rely on will remain in place or that we will continue to qualify for them. If certain tax incentives are not retained or renewed, our profits may decline.
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Labor activism and unrest, or failure to maintain satisfactory labor relations, could adversely affect our results of operations.
Labor activism and unrest may adversely affect our operations and thereby adversely affect our business, liquidity, financial condition, results of operations and prospects. Although we have not been affected by any significant labor disputes in the past, we cannot assure you that we will not experience labor unrest, activism, disputes or actions in the future, including as a result of labor laws and regulations that have recently been enacted or that could come into effect in the future, some of which may be significant and could adversely affect our business, liquidity, financial condition, results of operations and prospects.
For instance, in Peru, there is an ongoing debate in Congress that requires a second voting round to approve modifications in labor hours. These proposed changes encompass a revised method for calculating the night shift and the starting time of the workday.
We are or may become subject to legal and administrative proceedings or government investigations, which could harm our business and our reputation.
From time to time, we have been and in the future may become involved in litigation, investigations and other legal or administrative proceedings relating to claims arising from our operations, either in the normal course of business or not, or arising from violations or alleged violations of laws, regulations or acts. These may include, for example, tax assessments, claims relating to employee or employment matters, intellectual property matters, regulatory matters, contract, advertising and other claims, including proceedings with probable, possible and remote risks of loss.
In Peru, we have occasionally been a party to, and may also be in the future, party to administrative proceedings related to compliance with regulations on the protection of trademarks, notices, trade names, logos, and, in general, any distinctive sign owned by the company (Legislative Decree 1075, which approves Complementary Provisions to Decision 486 of the Andean Community Commission establishing the Common Regime on Industrial Property). Similarly, in the normal course of business, we may be affected by advertising practices that damage the company’s reputation, i.e., behaviors that qualify as acts of unfair competition, in accordance with the regulations set forth in Legislative Decree 1044, Unfair Competition Repression Act.
Our provisions are recorded pursuant to accounting rules, based on an individual analysis of each contingency by our internal and external legal counsel. We constitute provisions for proceedings that our external counsel evaluates as having a probable risk of loss. In cases where unfavorable decisions in claims involve substantial amounts, or if the actual losses are significantly higher than the provisions constituted, the aggregate cost of unfavorable decisions could have a significantly adverse effect on both our financial condition and operating results. Moreover, our management may be forced to dedicate time and attention to defend against these claims, which could prevent it from concentrating on our core business. Therefore, we cannot assure you that these or any of our other regulatory matters and legal proceedings, including any that may arise in the future, will not harm our reputation or materially affect our ability to conduct our business in the manner that we expect or otherwise materially adversely affect us should an unfavorable ruling occur, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
As of December 31, 2023 and December 31, 2022, we provisioned $0.2 million and $0.3 million, respectively, to legal proceedings to which we were a party. Legal proceedings are inherently unpredictable and subject to significant uncertainties. If one or more legal proceedings in which we are currently involved or may come to be involved were to result in a judgment against us in any reporting period for amounts that exceeded our management’s expectations, the impact on our results of operations or financial condition for that reporting period could be material.
We are subject to anti-corruption, anti-bribery, anti-money laundering and antitrust laws and regulations in the countries in which we operate, and any violation of any such laws or regulations could have a material adverse impact on our reputation, financial condition and results of operations.
We are subject to anti-corruption, anti-bribery, anti-money laundering, antitrust and other international laws and regulations and are required to comply with the applicable laws and regulations in Colombia, Costa Rica Peru, and similar laws and regulations.
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Specifically in Peru, we are obligated to comply with the measures established in Legislative Decree 1034, the Anti-Competitive Practices Repression Act, whose primary objective is to penalize anticompetitive behaviors in order to promote economic efficiency in markets for the benefit of consumers. Additionally, the company must align its actions and business operations with the guidelines outlined in Law 29038, which incorporates the Financial Intelligence Unit of Peru (UIF-PERU) into the Superintendence of Banking, Insurance, and Private Pension Fund Administrators. This law also establishes duties related to the preparation of information reports for companies falling under its scope of application. Although we have implemented policies and procedures, which include training certain groups of our employees, seeking to ensure compliance with anti-corruption and related laws, there can be no assurance that our internal policies and procedures will be sufficient to prevent or detect all inappropriate practices, fraud or violations of law by our affiliates, employees, directors, officers, partners, agents and service providers or that any such persons will not take actions in violation of our policies and procedures. If we fail to fully comply with applicable laws and regulations, the relevant government authorities in the countries in which we operate may have the power and authority to investigate us and, if necessary, impose fines, penalties and remedies, which could cause us to lose clients, suppliers and access to debt and capital markets. Any violations by us, or the third parties we transact with, of anti-bribery, anti-corruption, anti-money laundering, antitrust and international trade laws or regulations could have a material adverse effect on our business, financial condition, results of operations and prospects.
Changes in government policies and actions, as well as judicial decisions in the countries where we operate, could significantly affect the local economy and, as a result, our results of operations and financial condition.
Our results of operations and financial condition may be adversely affected by changes in governmental policies and actions, and judicial decisions, involving a broad range of matters, including interest rates, fees, exchange rates, exchange controls, inflation rates, taxation, banking and pension fund regulations and other political or economic developments affecting Colombia, Costa Rica, and Peru. The governments in the countries in which we operate have historically exercised substantial influence over their economies, and their policies are likely to continue to have a significant effect on companies, including us.
Moreover, regulatory uncertainty, public dialogue on reforms in Colombia, Peru and Costa Rica and other countries where we may operate, or the approval of reforms, may be disruptive to our business or the economy and may result in a material and adverse effect on our financial condition and results of operations.
Specifically, Peru’s legal framework for real estate is subject to government policies and actions that shape the business environment. Changes in regulations, tax policies, land use planning, or investment incentives can directly influence the operations and profitability of industrial and logistics real estate companies. Additionally, judicial decisions can have implications for the sector. Court rulings related to land ownership, property rights, contractual disputes, or environmental issues can impact the development and operation of real estate projects, potentially leading to financial losses or delays.
Furthermore, understanding the political and legal landscape, including the stability of institutions and the rule of law, is crucial for companies operating in the real estate sector in Peru. Changes in government administrations, shifts in policy priorities, or uncertainties in the legal system can introduce risks that may affect the overall economic environment and, consequently, the financial performance of businesses.
Item 4: Information on the Company
A. History and Development of the Company
Logistic Properties of the Americas was incorporated as an exempted company with limited liability under the laws of the Cayman Islands on October 9, 2023. The mailing address of the Company’s registered office is c/o Ogier Global (Cayman) Limited, 89 Nexus Way, Camana Bay, Grand Cayman, KY1-9009, Cayman Islands and its telephone number is +1 506 2204-7020. The Company’s principal executive office address is 601 Brickell Key Drive, Suite 700, Miami, FL 33131 and its chief administrative office is Plaza Tempo, Edificio B Oficina B1, Piso 2 San Rafael de Escazú, San José, Costa Rica.
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On the Closing Date, LPA consummated the previously announced Business Combination pursuant to the Business Combination Agreement. As a result, on the Closing Date (i) SPAC Merger Sub merged with and into TWOA, with TWOA surviving the merger (the “SPAC Merger”) and, in connection therewith, each issued and outstanding security of TWOA immediately prior to the effective time of the Mergers (as defined below) (the “Effective Time”) was automatically canceled and deemed no longer outstanding, in exchange for the right of the of each holder thereof to receive a substantially equivalent amount of Ordinary Shares; (ii) Company Merger Sub merged with and into LLP, with LLP surviving the merger (the “Company Merger,” and, together with the SPAC Merger, the “Mergers”) and, in connection therewith, each issued and outstanding security of LLP immediately prior to the Effective Time was automatically cancelled and deemed no longer outstanding, in exchange for the right of each holder thereof to receive Ordinary Shares; and (iii) as a result of the Mergers, TWOA and LLP each became wholly-owned subsidiaries of the Company, and our Ordinary Shares were listed on NYSE American, all upon subject to the terms and upon satisfaction or waiver of the conditions set forth in the Business Combination Agreement, the documents and agreements ancillary to the Business Combination Agreement, and in accordance with applicable law, including LLP and LPA’s waiver of the Minimum Cash Condition (as defined in the Business Combination Agreement).
In connection with the Business Combination, on February 16, 2024, TWOA entered into a subscription agreement (the “PIPE Subscription Agreement”) with Bonaventure Investments Holding Inc. (such investor and its permitted successors and assigns, the “PIPE Subscriber”) to purchase 1,500,000 TWOA Class A ordinary shares (the “PIPE Shares”) at a price of $10.00 per share, for an aggregate purchase price of $15,000,000, in a private placement (the “PIPE Investment”) that was consummated at the Effective Time. The PIPE Shares were converted into 1,500,000 Ordinary Shares in connection with the Mergers. In connection with the PIPE Investment, the PIPE Subscriber was granted certain registration rights and entered into a lock-up agreement on the same terms as the Lock-Up Agreement (as defined herein). See “Item 7.B. Major Shareholders and Related Party Transactions—Related Party Transactions—Transactions Related to the Business Combination” for a description of the terms of the Lock-Up Agreement as well as a description of certain other agreements entered into in connection with the consummation of the Business Combination.
Prior to the consummation of the Business Combination, LPA’s business was operated by LLP, a C-corporation organized under the laws of the Republic of Panama. LLP was originally incorporated as a limited liability company, as provided in Law. No 4 of 2009 by Public Deed No. 6409 dated April 29, 2015, and registered before the Public Registry of Panama on May 4, 2015. On January 13, 2021, LLP was converted into a C-corporation regulated by Law No. 32 of 1927, resolution duly registered before the Public Registry of Panama on January 13, 2021. Additional information regarding the history and development of the Company are described below in “Item 4.B. Information on the Company–Business Overview.”
For a description of the Company’s principal capital expenditures, see “Item 4.D. Information on the Company – Property, Plants, and Equipment” and “Item 5.B. Operating and Financial Review and Prospects–Liquidity and Capital Resources–Capital Expenditures.” We currently do not have any significant divestitures in progress.
The Company’s principal website address is lpamericas.com. We do not incorporate the information contained on, or accessible through, the Company’s websites into this Report, and you should not consider it a part of this Report. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The SEC’s website is http://www.sec.gov.
B. Business Overview
Our Mission
Our goal is to be the leading developer, owner and manager of logistics facilities of the future for Central and South America. Our mission is to provide logistics and industrial real estate solutions that enable the most efficient distribution of goods for a more environmentally conscious society.
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Overview
We are a fully integrated, internally managed real estate company that develops, owns and manages a diversified portfolio of warehouse logistics assets in Central America and South America. We focus on modern Class A logistics real estate in high growth and high barrier-to-entry markets that are undersupplied and have low penetration rates. We believe we are a leading institutional industrial, development and logistics platform in each of our three countries of operation today — Costa Rica, Colombia and Peru. We have significant expertise in designing and developing logistics assets, which we own, manage and lease on a long-term basis. Our strategic footprint and operational expertise enable us to provide our tenants with “last mile” distribution capabilities that are critical to logistics infrastructure and are well located to leverage strong e-Commerce and “nearshoring” trends.
Our business model is designed to generate recurring revenue from long-term leases with creditworthy tenants, which we believe drives attractive unit economics. We believe our corporate structure provides us with the following advantages:
| ● | Investment focus: We have designed our business model to participate across the real estate value creation chain including (i) structuring and financing, (ii) development, (iii) lease-up and (iv) asset management, as opposed to REITs that are generally required to focus on stabilized or near stabilized properties; | |
| ● | Management fee structure: We manage our properties internally and do not charge management fees, which we believe better aligns our interests with investors, as opposed to the externally managed REIT model; and | |
| ● | Long term value creation: We develop and manage our assets with a focus on the quality of our real estate and maximizing its long-term value, as opposed to managing our development, operations and maintenance activities to achieve shorter term dividend targets. |
As of December 31, 2023, our operating portfolio was comprised of 28 properties with a GLA of more than four and a half million square feet, a stabilized occupancy rate of 100.0% and weighted average remaining lease term of 5.3 years on our current leases. Our revenue and profit for the year ended December 31, 2023 was $39.4 million and $7.2 million, respectively, and for the year ended December 31, 2022 was $32.0 million and $11.4 million, respectively. Between December 31, 2022 and December 31, 2023, we increased our Cash Net Operating Income, or Cash NOI, by a Compound Annual Growth Rate, or CAGR, of 32%. For a reconciliation of Cash NOI to the nearest IFRS measure, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results”.
Our portfolio is comprised of Class A industrial warehouses that are well positioned to serve the key logistical functions of the growing e-Commerce market and nearshoring trade. Our properties are certified by EDGE, a green building certification system sponsored by the IFC, a member of the World Bank Group, and administered by GBCI (Green Business Certification Inc.), which promotes the development of sustainable buildings — both internally, with expansive floor capacity, natural light and sufficient height clearance levels, as well as externally, with shared truck maneuvering yards, optimized platforms and container parking. These modern specifications enable our tenants to drive operational efficiencies for timely delivery of their goods and implement highly advanced operational and logistics processes that enhance their ability to compete. The following table sets forth a summary of our real estate portfolio as of December 31, 2023, 2022, and 2021:
| As of and for the year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Number of operating real estate properties | 28 | 24 | 22 | |||||||||
| Operating GLA (sq. ft) | 4,618,806 | 4,037,886 | 3,388,446 | |||||||||
| Leased GLA (sq. ft)(1) | 5,308,454 | 4,820,273 | 4,176,284 | |||||||||
| Number of tenants | 53 | 51 | 43 | |||||||||
| Average rent per square foot | $ | 7.80 | $ | 6.88 | $ | 7.10 | ||||||
| Weighted average remaining lease term | 5.3 years | 6.2 years | 7.1 years | |||||||||
| Stabilized occupancy rate (% of GLA) | 100 | % | 99.6 | % | 97.9 | % | ||||||
| Total rental revenue | $ | 39,327,779 | $ | 31,890,569 | $ | 25,553,931 | ||||||
| U.S. dollar denominated revenue as a % of total revenue(2) | 79.3 | % | 81.9 | % | 81.4 | % | ||||||
| (1) | Includes GLA that are subject to a lease. |
| (2) | Based on foreign currency exposure as of period end. |
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Core Geographies
Our portfolio is strategically located within key trade and logistics corridors in the capital cities of Costa Rica, Colombia and Peru. We target some of the most dynamic industrial markets with the lowest vacancy rates across the Class A logistics segment in Central and South America. These markets are generally characterized by strong GDP growth, population growth, and monetary and fiscal policies that attract multinational and regional corporations. Our asset base is geographically diversified with approximately 51%, 27% and 22% of our operating GLA located in Costa Rica, Colombia and Peru, respectively, as of December 31, 2023. We believe this diversification mitigates economic, political and other risks and provides significant expansion opportunities in attractive geographies for our tenants. For further information regarding our principal markets, including a breakdown of total revenues by category of activity, geographic market and segments, and other factors material to the company’s business or profitability see “Item 4.D. Properties, Plants and Equipment” and “Item 5.A. Operating and Financial Review and Prospects—Operating Results.”
Regulation
We are subject to laws, ordinances and regulations relating to, among other things, taxes, environmental matters, labor, equal opportunity, construction, occupational health and safety, civil and consumer protection and general building and zoning requirements in the various jurisdictions in which we operate. See “Risk Factors –Regulatory, Legal and Tax Factors Affecting Us –We are subject to governmental regulations.”
LLP has been registered in the Registro Nacional de Valores y Emisores (“RNVE”) managed by the SFC since April 23, 2021, and with the Colombian Stock Exchange (“BVC”) since May 4, 2021. There are currently 168,142,740 LLP ordinary shares listed in Colombia. As a consequence of its status as an issuer of securities in Colombia, LLP is under the supervision of the SFC, and subject to the SFC’s obligations for registered issuers. The main SFC obligations that LLP is subject to are filing quarterly and annual reports, including an annual corporate governance report, filing quarterly and annual financial information, disclosing any material information to the SFC upon occurrence of such event, and filing certain forms regarding its shareholders, beneficial owners and general financial information with the SFC. LPA is in the process of de-listing the LLP ordinary shares in Colombia.
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Our operations in Costa Rica must comply with a series of laws and regulations related to its economic activities. Our corporate structure includes various Costa Rican subsidiaries that must comply with corporate obligations such as tax payments, filings of declarations and additional compliance matters. Furthermore, LLP’s main economic activity involves the lease of industrial facilities subject to, among other regulations, the Leases Act (Ley General de Arrendamientos Urbanos y Suburbanos) which regulates the obligations and responsibilities of landlords, tenants and other general provisions for the lease agreements.
Our operations in Peru are governed by a set of legal frameworks and regulations specific to Peru. These include, but are not limited to, the General Law of Companies (Ley General de Sociedades), which outlines the requirements and obligations for companies with operations in Peru. Additionally, we must comply with tax regulations, labor laws, environmental regulations, municipal ordinances, and any other applicable laws and regulations related to industrial and logistics operations. In Peru, there is no specific legislation to regulate civil leases, so general civil leasing rules established in the Peruvian Civil Code apply to our lease agreements.
In addition, Peru’s legal framework for real estate is also influenced by government policies and can be subject to changes in regulations, tax policies, and land use planning. These factors directly impact the operations and profitability of industrial and logistics real estate companies, including LPA. Judicial decisions regarding land ownership, property rights, contractual disputes, and environmental issues can also have significant implications for the sector.
The Colombian Civil Code regulates the real estate industry, and therefore LLP’s operations in Colombia. There is no specific branch of the Colombian government that governs the regulation of real estate, hence everything that concerns real estate is governed by the general principles of civil law of Colombia. LLP’s lease agreements are governed by financial and banking laws of Colombia. LLP is also subject to urban planning regulations in Colombia, which consist of a set of legal regulations and provisions aimed at organizing the development of urban and rural areas in the country. This includes the Urban Land Use Plans (POT) that define land use zones, density and building height regulations, as well as regulations on land use, construction standards, and permit acquisition procedures.
C. Organizational structure
The following diagram illustrates the structure of LPA as of the date hereof.
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D. Property, plants, and equipment
Our Properties
Our properties consist of stabilized assets (which we define as properties that have reached GLA occupancy of approximately 90% in relation to the total GLA of such property or that have been completed for more than one year, whichever occurs first), properties that are in the development phase, and the land reserves we own or control.
Stabilized Portfolio. The table below sets forth information regarding our real estate portfolio of stabilized assets as of and for the year ended December 31, 2023 and year ended December 31, 2022, respectively.
| Property | Location | Total GLA (sq ft) | Total GLA (sqm) | % of Portfolio GLA | Rental Revenue for the year ended December 31, 2023 (USD in thousands) | % of Rental Revenue for the year ended December 31, 2023 (USD in thousands) | First Year of Operations | Number of Buildings | Appraisal Value(1) as of December 31, 2023 (USD in thousands) | |||||||||||||||||||||||||
| Costa Rica | ||||||||||||||||||||||||||||||||||
| Latam Logistic Park Coyol 1 | San José, Coyol | 831,331 | 77,233 | 18.00 | % | $ | 8,087 | 20.56 | % | 2016 | 5 | $ | 89,150 | |||||||||||||||||||||
| Latam Logistic Park Coyol 2 | San José, Coyol | 270,573 | 25,137 | 5.86 | % | $ | 2,479 | 6.30 | % | 2019 | 1 | $ | 29,708 | |||||||||||||||||||||
| Latam Logistic Park Coyol 3 | San José, Coyol | 92,032 | 8,550 | 1.99 | % | $ | 1,195 | 3.04 | % | 2020 | 1 | $ | 9,809 | |||||||||||||||||||||
| Latam Logistic Park Coyol 4 | San José, Coyol | 121,633 | 11,300 | 2.63 | % | $ | 936 | 2.38 | % | 2021 | 1 | $ | 11,316 | |||||||||||||||||||||
| Latam Bodegas Atenas | Atenas | 48,685 | 4,523 | 1.05 | % | $ | 462 | 1.18 | % | 2019 | 1 | $ | 4,638 | |||||||||||||||||||||
| Latam Bodegas Aurora | Heredia | 103,108 | 9,579 | 2.23 | % | $ | 717 | 1.82 | % | 2019 | 2 | $ | 6,714 | |||||||||||||||||||||
| Latam Bodegas San Joaquin | Heredia | 90,923 | 8,447 | 1.97 | % | $ | 914 | 2.32 | % | 2019 | 2 | $ | 9,886 | |||||||||||||||||||||
| San Rafael Industrial Park | San Rafael | 120,760 | 11,219 | 2.63 | % | $ | 1,208 | 3.07 | % | 2019 | 1 | $ | 13,665 | |||||||||||||||||||||
| Latam Logistic Park San José – Verbena | San José | 679,657 | 63,142 | 14.71 | % | $ | 6,032 | 15.34 | % | 2022 | 4 | $ | 69,987 | |||||||||||||||||||||
| Colombia | ||||||||||||||||||||||||||||||||||
| Latam Logistic Park Calle 80 | Bogota, Calle 80 | 1,255,409 | 116,631 | 27.18 | % | $ | 8,038 | 20.44 | % | 2019 | 5 | $ | 106,957 | |||||||||||||||||||||
| Peru | ||||||||||||||||||||||||||||||||||
| Latam Logistic Park Lima Sur | Lima, Lurin | 1,004,695 | 93,339 | 21.75 | % | $ | 9,260 | 23.55 | % | 2019 | 5 | $ | 92,240 | |||||||||||||||||||||
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| Property | Location | Total GLA (sq ft) | Total GLA (sqm) | % of Portfolio GLA | Rental Revenue for the year ended December 31, 2022 (USD in thousands) | % of Rental Revenue for the year ended December 31, 2022 (USD in thousands) | First Year of Operations | Number of Buildings | Appraisal Value(1) as of December 31, 2022 (USD in thousands) | |||||||||||||||||||||||||
| Costa Rica | ||||||||||||||||||||||||||||||||||
| Latam Logistic Park Coyol 1 | San José, Coyol | 831,328 | 77,233 | 20.5 | % | $ | 7,979 | 25.2 | % | 2016 | 5 | $ | 88,851 | |||||||||||||||||||||
| Latam Logistic Park Coyol 2 | San José, Coyol | 270,572 | 25,137 | 6.7 | % | $ | 2,427 | 7.7 | % | 2019 | 1 | $ | 30,613 | |||||||||||||||||||||
| Latam Logistic Park Coyol 3 | San José, Coyol | 92,031 | 8,550 | 2.3 | % | $ | 1,283 | 4.1 | % | 2020 | 1 | $ | 9,667 | |||||||||||||||||||||
| Latam Logistic Park Coyol 4 | San José, Coyol | 121,632 | 11,300 | 3.0 | % | $ | 598 | 1.9 | % | 2021 | 1 | $ | 11,204 | |||||||||||||||||||||
| Latam Bodegas Atenas | Atenas | 48,685 | 4,523 | 1.2 | % | $ | 462 | 1.5 | % | 2019 | 1 | $ | 4,710 | |||||||||||||||||||||
| Latam Bodegas Aurora | Heredia | 103,107 | 9,579 | 2.6 | % | $ | 587 | 1.9 | % | 2020 | 2 | $ | 6,286 | |||||||||||||||||||||
| Latam Bodegas San Joaquin | Heredia | 87,866 | 8,163 | 2.2 | % | $ | 778 | 2.5 | % | 2019 | 2 | $ | 8,157 | |||||||||||||||||||||
| San Rafael Industrial Park | San Rafael | 120,760 | 11,219 | 3.0 | % | $ | 1,562 | 4.9 | % | 2019 | 1 | $ | 13,400 | |||||||||||||||||||||
| Latam Logistic Park San José – Verbena | San José | 213,114 | 19,799 | 5.3 | % | $ | 1,864 | 5.9 | % | 2022 | 1 | $ | 21,408 | |||||||||||||||||||||
| Colombia | ||||||||||||||||||||||||||||||||||
| Latam Logistic Park Calle 80 | Bogota, Calle 80 | 1,144,099 | 106,290 | 28.3 | % | $ | 5,691 | 18.0 | % | 2019 | 4 | $ | 70,646 | |||||||||||||||||||||
| Peru | ||||||||||||||||||||||||||||||||||
| Latam Logistic Park Lima Sur | Lima, Lurin | 1,004,692 | 93,339 | 24.9 | % | $ | 8,351 | 26.4 | % | 2019 | 5 | $ | 87,523 | |||||||||||||||||||||
| (1) | We value our portfolio on a quarterly basis utilizing an independent appraisal conducted by an independent appraiser. |
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Properties Under Development. We pursue attractive development projects by leveraging our existing portfolio of strategic land positions to support our expansion strategy. We target locations that meet our investment criteria and support our multinational and regional tenant base, typically by developing assets that are specifically designed to meet their needs. As of December 31, 2023, occupancy of our operating portfolio was 100.0% and approximately 78.5% of our assets under development (by GLA) were pre-leased, which significantly mitigates our development risk. We target average yields-on-cost, which we define as Cash NOI to aggregate estimated investment, that are 200 to 300 basis points above our estimates of where similar stabilized assets trade. From a Return-on-Equity, or ROE, perspective, we target mid-to-high teens returns when we retain full ownership of the properties, and potentially higher returns when we partner through joint ventures. In order to manage our return profile, we typically use third-party developers under negotiated fixed price arrangements. As of December 31, 2023, we were developing four buildings across our markets, with expected GLA of nearly seven hundred thousand square feet. The table below sets forth our portfolio of development assets as of December 31, 2023.
| Total Expected Investment | Investment to Date | Estimated | ||||||||||||||||||||||||||||||||||
| Project GLA | Land and Infrastructure | Shell(1) | Total | Land and Infrastructure | Shell(1) | Total | Leased |
Stabilization Date |
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| (sq ft) | (USD in thousands) | (USD in thousands) | (%) | |||||||||||||||||||||||||||||||||
| Costa Rica | 157,692 | $ | 5,798 | $ | 7,276 | $ | 13,074 | $ | 3,623 | $ | 4,567 | $ | 8,190 | 68.6 | % | June 2024 | ||||||||||||||||||||
| Colombia | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | - | - | |||||||||||||||||||||
| Peru | 512,299 | $ | 17,731 | $ | 17,178 | $ | 34,909 | $ | 15,001 | $ | 10,156 | $ | 25,157 | 81.5 | % | April 2024(2) | ||||||||||||||||||||
| (1) | A shell is generally comprised of the primary structure, the building envelope (roof and façade), and related mechanical and supply systems including electricity, water and drainage. |
| (2) | As of the date of issuance of this Form 20-F, stabilization for these properties in Peru were achieved. |
Land Reserves. We intend to develop our land reserves over time based on our evaluation of the opportunities these reserves present, supply and demand and other market conditions, and the cost and availability of capital, among other factors. Although we have not entered into any material contracts or agreements with respect to the development of these reserves, we routinely conduct licensing and permitting activities to explore and preserve our options with respect to them. The table below sets forth our land reserves and development potential, as of December 31, 2023 and December 31, 2022, respectively.
| Location | Total Land Reserves |
% of Total Land Reserves |
Appraisal Value as of December 31, 2023 | Estimated GLA to be Developed | ||||||||||||
| (acres) | (%) | (USD) | (sq ft) | |||||||||||||
| Costa Rica | - | - | % | $ | - | - | ||||||||||
| Colombia | 50.6 | 56.3 | % | $ | 619,976 | 101,284 | ||||||||||
| Peru | 39.2 | 43.7 | % | $ | 24,100,447 | 81,571 | ||||||||||
| Location | Total Land Reserves |
% of Total Land Reserves |
Appraisal Value as of December 31, 2022 | Estimated GLA to be Developed | ||||||||||||
| (acres) | (%) | (USD) | (sq ft) | |||||||||||||
| Costa Rica | 8.0 | 7.3 | % | $ | 6,155,000 | 168,208 | ||||||||||
| Colombia | 50.6 | 46.2 | % | $ | 16,394,722 | 1,090,211 | ||||||||||
| Peru | 51.0 | 46.5 | % | $ | 7,190,000 | 1,202,988 | ||||||||||
Our Tenants
We have developed longstanding relationships with our well-diversified tenant base of leading multinational and regional companies. Our tenants operate in a wide range of industries, which we believe provides us with significant portfolio diversification. Our tenant base generally consists of companies with significant e-Commerce activities requiring specialized “last mile” distribution capabilities. As of December 31, 2023, we had more than 50 tenants, with no single tenant accounting for more than 15% of our total Leased GLA. Our weighted average remaining lease term as of December 31, 2023 was 5.3 years, and nearly 80% of our rental revenue for the year ended December 31, 2023 was denominated in U.S. dollars.
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For the year ended December 31, 2023, our ten largest tenants accounted for less than half of our rental income. The following table sets forth the information on our largest tenants for the year ended as of December 31, 2023.
| Tenant | Industry | Country | Share of Total Rental Revenue |
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| Alicorp | Consumer Goods | Peru | 6.9 | % | ||||
| Pequeño Mundo | Other Retail | Costa Rica | 6.3 | % | ||||
| Kuehne+Nagel | Third-Party Logistics | Colombia and Peru | 5.7 | % | ||||
| Natura | Consumer Goods | Peru and Costa Rica | 5.3 | % | ||||
| PriceSmart | Other Retail | Costa Rica | 4.7 | % | ||||
| Farmanova | Other Retail | Costa Rica | 4.2 | % | ||||
| Rex Cargo | Third-Party Logistics | Costa Rica | 3.9 | % | ||||
| Indurama | Consumer Goods | Peru | 3.9 | % | ||||
| Expeditors | Third-Party Logistics | Costa Rica | 3.6 | % | ||||
| Grupo Vargas | Other Retail | Costa Rica | 3.0 | % | ||||
For the year ended December 31, 2022, our ten largest tenants accounted for less than half of our rental income. The following table sets forth the information on our largest tenants for the year ended December 31, 2022.
| Tenant | Industry | Country | Share of Total Rental Revenue |
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| Kuehne+Nagel | Third-Party Logistics | Colombia and Peru | 6.3 | % | ||||
| Alicorp | Consumer Goods | Peru | 6.8 | % | ||||
| Grupo Exito | Other Retail | Colombia | 4.2 | % | ||||
| Pequeño Mundo | Other Retail | Costa Rica | 7.6 | % | ||||
| Natura | Consumer Goods | Peru and Costa Rica | 6.4 | % | ||||
| Samsung | Consumer Goods | Peru | 3.4 | % | ||||
| Pricesmart | Other Retail | Costa Rica | 5.9 | % | ||||
| Indurama | Consumer Goods | Peru | 3.9 | % | ||||
| Ceva | Third-Party Logistics | Colombia | 0.7 | % | ||||
| Rex Cargo | Third-Party Logistics | Costa Rica | 4.1 | % | ||||
We estimate that over 90% of our Leased GLA as of December 31, 2023 and December 31, 2022 served logistics needs for our tenants. The following table contains a breakdown of our tenants’ use for the year ended December 31, 2023.
| Tenant use | Rental Revenue | Share of Total Rental Revenue | Share of Total Leased GLA | |||||||||
| Consumer Goods | $ | 12,132,666 | 30.9 | % | 36.2 | % | ||||||
| Third-Party Logistics | $ | 10,026,757 | 25.5 | % | 20.4 | % | ||||||
| Other Retail | $ | 13,631,520 | 34.7 | % | 40.5 | % | ||||||
The following table contains a breakdown of our tenants’ use for the year ended December 31, 2022.
| Tenant use | Rental Revenue | Share of Total Rental Revenue | Share of Total Leased GLA | |||||||||
| Consumer Goods | $ | 10,085,351 | 31.6 | % | 31.7 | % | ||||||
| Third-Party Logistics | $ | 9,038,134 | 28.3 | % | 27.3 | % | ||||||
| Other Retail | $ | 9,005,637 | 28.2 | % | 33.3 | % | ||||||
Our stabilized assets have historically achieved high occupancy rates. The following table shows our stabilized occupancy rates as of December 31, 2023, December 31, 2022 and 2021.
| Occupancy rate | As of December 31, | |||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Costa Rica | 100.0 | % | 99.2 | % | 96.0 | % | ||||||
| Colombia | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
| Peru | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
| Aggregate stabilized portfolio | 100.0 | % | 99.6 | % | 97.9 | % | ||||||
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Our Leases
As of December 31, 2023, we had 77 leases in place. Our leases are typically for initial terms ranging from 5 to 10 years and generally grant our tenants renewal options for one or more additional terms of varying lengths. Our security deposits typically approximate one or two months of rent. We are responsible for latent defects in the properties and we are typically required to perform structural maintenance periodically and as needed. Our leases entitle us to rescind the lease and collect rents that are due and owing if a tenant defaults on its rent payment obligation, vacates the property, or enters bankruptcy or insolvency proceedings (to the extent permitted under applicable local laws and regulations). We are also entitled to terminate the lease in the cases of:
| ○ | failure by the tenant to comply with its payment obligations under the lease; | |
| ○ | assignment or sublease without prior written consent, subject to exceptions under applicable laws; | |
| ○ | unauthorized construction in, or modification of, the premises; | |
| ○ | unauthorized use of the premises; | |
| ○ | failure to comply with any applicable regulations where the premises are located; | |
| ○ | obstruction of access for authorized inspections by us; | |
| ○ | breach of any tenant obligation that remains uncured for more than 30 days; | |
| ○ | strikes or other labor disturbances lasting longer than 60 days if the matter causes the tenant to breach its obligations under the lease, subject to exceptions under local law; and | |
| ○ | creation of any lien over the premises or any portion thereof, or the filing of any claim derived from any work or installation carried out by the tenant or in its name. |
We routinely inspect our properties and we proactively manage our relationships with our tenants. We strive to maintain regular dialogue with our tenants regarding their real estate intentions, and we actively manage our portfolio of leases to avoid large expirations in any given year in order to manage cash flows and mitigate re-leasing risk. The following table sets forth the expiration profile of our lease portfolio as of December 31, 2023:
Rent under our lease accrues monthly and is adjusted annually for inflation based on a consumer price index (“CPI”) or by a contractual percentage rate. Our tenants are typically responsible for the costs of improvements and structural modifications needed to tailor the facilities. We believe this investment responsibility increases our tenants switching costs and leads to strong occupancy rates for us. As of December 31, 2023, only one of our leases, the Grupo Vargas lease at our LLP Coyol III project, includes a purchase option on the property.
We have established rigorous tenant selection criteria, including minimum eligibility standards. We evaluate applicants based on their financial capacity and that of their guarantors, among other factors. As of December 31, 2023, approximately 67% of our leases were secured by guarantees or other credit support mechanisms. We maintain standard procedures to manage our past due rent portfolio and doubtful accounts, which vary based on the amount of the receivable, period outstanding and other considerations. As of December 31, 2023, nineteen of our operating net lease receivables were outstanding for more than 90 days, totaling to an amount of less than $0.83 million.
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Development and Acquisition Activities
We actively develop logistics properties, analyze potential acquisitions of new land and building assets, and evaluate potential joint venture arrangements. We focus on Class A logistics facilities and target properties for development and acquisition in major population centers with established infrastructure.
We pursue development projects by leveraging our existing portfolio of strategic land positions. For our development activities, we target average yields-on-cost, which we define as Cash NOI to total estimated investment, that are 200 to 300 basis points above our estimates of where similar stabilized assets trade. From a Return-on-Equity, or ROE, perspective, we target mid-to-high teens returns when we retain full ownership of the properties, and potentially higher returns when we partner with fee-paying local partners through joint ventures.
In evaluating a particular real estate development or acquisition, both within our existing countries of operation and potential new markets, our management team conducts a thorough analysis of the characteristics of the property and the market in which it is located, including the:
| ○ | strategic importance of the location relative to our existing and prospective tenant base; | |
| ○ | location of the property relative to our existing footprint and where we have access to reputable personnel familiar with local market dynamics; | |
| ○ | proximity of the asset in relation to existing or planned local infrastructure with convenient access to major transportation options; | |
| ○ | favorable economic dynamics and tax and regulatory environments; | |
| ○ | population density and population growth potential; | |
| ○ | regional, market and property-specific supply and demand dynamics, including prevailing market rents and the potential for rent growth; | |
| ○ | existing and potential competition from other property owners and operators; | |
| ○ | barriers to entry and other property-specific competitive advantages; | |
| ○ | quality of construction and design, and existing physical condition of the asset; and | |
| ○ | opportunity to increase the property’s operating performance and value. |
As part of our strategy, we intend to enter into joint ventures if we determine that doing so would be the most effective means of financing, developing or managing specific projects and to manage our exposure to different countries, submarkets and tenants.
Environmental, Social and Governance Matters
Our mission is to provide logistics and industrial real estate solutions that enable the most efficient distribution of goods for a more environmentally conscious society. Sustainability is a key part of the core of our corporate culture, and we design our assets to minimize their environmental impact to enable our tenants achieve their sustainability goals. All of our warehouses comply with the high standards of efficiency and environmental sustainability, as designated by EDGE certification, which promotes the development of sustainable buildings with savings of at least 20% of potable water, electricity consumption and carbon footprint levels compared with conventional buildings. All our projects in Costa Rica are also registered with the Ecological Blue Flag Program (Bandera Azul), an award program that acknowledges effort and volunteer work seeking to improve social and environmental conditions.
Insurance
We maintain insurance policies covering our properties against various risks, including general liability, earthquakes, floods, and business interruption. We determine the type of coverage and the policy specifications and limits based on what we deem to be the risks associated with our ownership of properties and our business operations in specific markets. That coverage typically includes property damage and rental loss insurance resulting from perils such as fire, windstorm, flood, and commercial general liability insurance. See “Item 3.D. Key Information — Risk Factors”.
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Item 4A. Unresolved Staff Comments
Not applicable.
Item 5: Operating and Financial Review and Prospects
In this section, the terms “we,” “us,” “our,” and “the Company” refers to Latam Logistics Properties, S.A. and its consolidated subsidiaries.
A. Operating Results
Revenue
We generate revenue through investment property rental income and development fees.
Investment property rental income primarily consists of rental payment from tenants through operating lease agreements. Our leases qualify as operating leases, and we transfer the right of use of the property and the related services to the lessee on a straight-line basis. This is included as rental revenue on our consolidated statements of profit or loss and comprehensive loss.
Development fees are determined in accordance with the terms specified on each arrangement with customers. The fees are recognized as revenue when they are earned under the agreement with customers. This is included in other revenue in our consolidated statements of profit or loss and comprehensive loss.
Investment property operating expense
Investment property operating expense primarily includes the direct operating expenses of the property such as repairs and maintenance, property taxes, insurance, and utilities, among others. Property operating expenses are mostly recovered through the rental recoveries charged to the tenants.
General and administrative expense
General and administrative expenses include personnel and related operating costs of the business support functions, including finance and accounting, legal, human resources, administrative, as well as services and professional fees, office expenses, and bank service charges.
Investment property valuation gain
Investment property valuation gain is the investment properties’ change in fair value. The valuation analysis is performed by an external firm, which determines the fair market value of the investment properties. The fair market value of an investment property depends on the type of property. We hold operating properties, properties under development, and land.
Interest income from affiliates
Interest income from affiliates mainly consists of interest generated by issuing notes to related parties and key personnel. The main terms of the notes are payment of the balance at maturity including interest receivable, the possibility of early payments without penalty, guarantees over ordinary shares, and promissory notes.
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Financing costs
Financing costs consist of interest expense, debt modification or extinguishment costs, costs of raising debt, and amortization expense of deferred financing costs. These costs include various fees and charges associated with the process of issuing debt, refinancing the debt, and other fees and commissions paid to third parties involved in the financing process. Debt modification or extinguishment gain or loss is incurred when a company modifies or terminates its debt terms before the scheduled maturity date. Interest expense represents the interest costs incurred through mortgage loans and bridge loans.
Net foreign currency gain
Net foreign currency consists of the net profit or loss generated through the settlement of monetary items or the translation of monetary items at rates different from those at which they were translated upon initial recognition. The settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition.
Gain (loss) on sale of investment property
Gain (loss) on sale of investment property consists of profit or loss recognized through disposal of our held-for-sale investment properties. The properties are carried at fair value prior to disposal. Disposals of our properties require a deduction of the cost of selling the property from the fair value price, which may result in a loss on the sale.
Gain on sale of asset held for sale
Gain on sale of investment property consists of profit or loss recognized through disposal of our held-for-sale investment properties. The properties are carried at fair value prior to disposal. Disposals of our properties require a deduction of the cost of selling the property from the fair value price, which may result in a gain on the sale.
Other income
Other income consists of interest income and gain or loss on the sale of fixed assets.
Other expenses
Other expenses consist of transaction-related costs, losses on the disposition of fixed assets, and legal provision expenses.
Income tax expense
Income tax expense refers to the amount of tax owed to the relevant tax authority. Income tax on the profit comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted as of the reporting date, and any adjustments to tax payable in respect of previous periods. Deferred tax is recognized using the balance sheet liability method in accordance with IAS 12 on taxable temporary differences between the tax base and the accounting base of items included in our consolidated statement of financial position.
Our Segments
Our three reportable segments are the geographic regions we operate in, Colombia, Peru and Costa Rica. The three geographic segments primarily derive revenue from various operating lease agreements with customers for the rental of warehouses. Our portfolio is strategically located within key trade and logistics corridors in the capital cities of Costa Rica, Colombia and Peru to conduct commercial operations.
Costa Rica: As of December 31, 2023, Costa Rica is our largest operating segment, with 18 buildings and holding an Operating GLA of 2.4 million square feet.
Colombia: As of December 31, 2023, Colombia has 5 buildings and holds an Operating GLA of 1.3 million square feet with a land reserve of 50.6 acres.
Peru: As of December 31, 2023, Peru has 5 buildings and holds an Operating GLA of 1.0 million square feet with a land reserve of 39.2 acres.
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Revenue by segment
Our management analyzes revenue by comparing actual monthly revenue to internal projections and prior periods across the operating segments in order to assess performance, identify potential areas for improvement, and determine whether the segments are meeting management’s expectations.
Segment Net Operating Income (NOI)
Our management defines NOI as revenue without other revenue (which primarily relates to development fee revenue) less investment property operating expense. Our management uses NOI by segment to assess financial performance at the segment level.
Results of Operations for the year ended December 31, 2023 compared to the year ended December 31, 2022
The results of operations presented below should be reviewed in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2023, filed with this Report. The following table presents information from our consolidated statements of profit or loss for the years ended December 31, 2023 and 2022:
| For the Year Ended December 31, | ||||||||||||||||
| 2023 | 2022 | $ Change | % Change | |||||||||||||
| REVENUE | ||||||||||||||||
| Colombia | $ | 8,038,441 | $ | 5,690,569 | $ | 2,347,872 | 41.3 | % | ||||||||
| Peru | 9,260,197 | 8,350,957 | 909,240 | 10.9 | % | |||||||||||
| Costa Rica | 22,029,141 | 17,849,043 | 4,180,098 | 23.4 | % | |||||||||||
| Other | 108,564 | 92,998 | 15,566 | 16.7 | % | |||||||||||
| Total revenues | 39,436,343 | 31,983,567 | 7,452,776 | 23.3 | % | |||||||||||
| Investment property operating expense | ||||||||||||||||
| Colombia | (989,404 | ) | (599,084 | ) | (390,320 | ) | 65.2 | % | ||||||||
| Peru | (1,476,086 | ) | (1,288,280 | ) | (187,806 | ) | 14.6 | % | ||||||||
| Costa Rica | (2,677,460 | ) | (3,520,075 | ) | 842,615 | (23.9 | )% | |||||||||
| Total investment property operating expense | (5,142,950 | ) | (5,407,439 | ) | 264,489 | (4.9 | )% | |||||||||
| General and administrative | (8,508,862 | ) | (4,609,195 | ) | (3,899,667 | ) | 84.6 | % | ||||||||
| Investment property valuation gain | 20,151,026 | 3,525,692 | 16,625,334 | 471.5 | % | |||||||||||
| Interest income from affiliates | 664,219 | 561,372 | 102,847 | 18.3 | % | |||||||||||
| Financing costs | (31,111,064 | ) | (11,766,726 | ) | (19,344,338 | ) | 164.4 | % | ||||||||
| Net foreign currency gain | 284,706 | 299,762 | (15,056 | ) | (5.0 | )% | ||||||||||
| Gain (loss) on sale of investment properties | 1,165,170 | (398,247 | ) | 1,563,417 | (392.6 | )% | ||||||||||
| Gain on sale of asset held for sale | 1,022,853 | - | 1,022,853 | 100.0 | % | |||||||||||
| Other income | 307,822 | 100,127 | 207,695 | 207.4 | % | |||||||||||
| Other expenses | (6,132,636 | ) | (611,173 | ) | (5,521,463 | ) | 903.4 | % | ||||||||
| Profit before taxes | 12,136,627 | 13,677,740 | (1,541,113 | ) | (11.3 | )% | ||||||||||
| Income tax expense | (4,980,622 | ) | (2,236,507 | ) | (2,744,115 | ) | 122.7 | % | ||||||||
| PROFIT FOR THE YEAR | $ | 7,156,005 | $ | 11,441,233 | $ | (4,285,228 | ) | (37.5 | )% | |||||||
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Revenue: Rental revenue increased by $7.5 million, or 23.3%, to $39.4 million for the year ended December 31, 2023 from $32.0 million for the year ended December 31, 2022. This was primarily attributable to:
| ● | a $6.9 million increase in rental revenue is primarily attributable to the growth in Occupied GLA, which expanded from 4.3 million square feet as of December 31, 2022 to 4.8 million square feet as of December 31, 2023, representing an 8% increase in GLA increase and $4.8 million of increase in rental revenue. Increase in rental revenue is contributed by an increase in rental price per square foot from December 31, 2022 representing an increase of $0.6 million year over year. Additionally, there were three properties stabilized during the second half of 2022 that had a full year of revenue during the year ended December 31, 2023 representing an increase of $1.5 million in rental revenue during fiscal year 2023. The increase in Occupied GLA can be attributed to each segment; |
| ● | a $0.8 million increase in rental recoveries is primarily due to the increase in rental recovery fees related to common area maintenance and utilities in Colombia, Peru and Costa Rica of $0.3 million, $0.1 million and $0.4 million, respectively, due to the increase in Occupied GLA from the year ended December 31, 2022 |
Colombia – Revenue in Colombia increased by $2.3 million, or 41.3%, to $8.0 million for the year ended December 31, 2023 from $5.7 million for the year ended December 31, 2022. This was primarily attributable to the establishment of two buildings in Colombia which contributed to a total Occupied GLA increase. This increase was partially offset by the decrease in Occupied GLA due to a building being sold in 2023. Overall, the total Occupied GLA increased by 0.4 million square feet or 47% as of December 31, 2023 compared with December 31, 2022. In addition, the average rental price per square feet increased by 9% as of December 31, 2023 compared with December 31, 2022.
Peru – Revenue in Peru increased by $0.9 million, or 10.9%, to $9.3 million for the year ended December 31, 2023 from $8.4 million for the year ended December 31, 2022. This was primarily attributable to the average rental price per square feet increasing by 17% as of December 31, 2023 compared with December 31, 2022.
Costa Rica - Revenue in Costa Rica increased by $3.9 million, or 21.8%, to $21.7 million for the year ended December 31, 2023 from $17.8 million for the year ended December 31, 2022. This was primarily attributable to the establishment of three buildings for a total Occupied GLA increase of approximately 0.3 million square feet or 14%. Additionally, there were two properties stabilized during the second half of 2022 that had a full year of revenue during the year ended December 31, 2023. The average rental price per square feet remained relatively stable from 2022 to 2023.
Investment property operating expense: Investment property operating expense decreased by $0.3 million or 4.6%, to $5.1 million for the year ended December 31, 2023 from $5.4 million for the year ended December 31, 2022. This was primarily attributable to a decrease of $1.6 million in expected credit loss due to one tenant experiencing financial difficulties, resulting in a one-time expected credit loss expense in 2022. This was offset by an increase of repairs and maintenance of $0.7 million, real estate taxes and other property related expenses of $0.6 million.
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Colombia – Investment property operating expense in Colombia increased by $0.4 million, or 65.2%, to $1.0 million for the year ended December 31, 2023 from $0.6 million for the year ended December 31, 2022. This was primarily attributable to an increase in repairs and maintenance, real estate taxes and other property related expenses, and property management expenses resulting from two additional buildings being in operation during the year ended December 31, 2023 compared to the year ended December 31, 2022. Additionally, there was an increase in real estate taxes due to a reassessment that occurs every five years.
The investment property operating expense was 12.3% of revenue for the year ended December 31, 2023 compared to 10.5% of revenue for the year ended December 31, 2022. The Segment NOI was $7.0 million for the year ended December 31, 2023 as compared to $5.1 million for the year ended December 31, 2022. This change is primarily due to property operating expenses increasing at a slightly higher rate than revenue due to two buildings being completed during the period, which results in slightly lower margins while the building becomes fully operational, offset by the increase in average rental price per square foot.
Peru – Investment property operating expense in Peru increased by $0.2 million, or 14.6%, to $1.5 million for the year ended December 31, 2023 from $1.3 million for the year ended December 31, 2022. This was primarily attributable to an increase in repairs and maintenance, real estate taxes and other property related expenses, and property management expenses during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
The investment property operating expense was 15.9% of revenue for the year ended December 31, 2023 compared to 15.4% of revenue for the year ended December 31, 2022. The slight increase was primarily due to additional real estate taxes being accrued for a reassessment. The Segment NOI was $7.8 million for the year ended December 31, 2023 as compared to $7.1 million for the year ended December 31, 2022.
Costa Rica - Investment property operating expense in Costa Rica decreased by $0.8 million, or 23.9%, to $2.7 million for the year ended December 31, 2023 from $3.5 million for the year ended December 31, 2022. This was primarily attributable to a decrease of expected credit loss due to a tenant who was experiencing financial difficulties during 2022 which did not reoccur in 2023, offset by an increase in repairs and maintenance, real estate taxes and other property related expenses, and property management expenses resulting from three more properties becoming stabilized during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
The investment property operating expense was 12.2% of revenue for the year ended December 31, 2023 compared to 19.7% of revenue for the year ended December 31, 2022. The Segment NOI was $19.4 million for the year ended December 31, 2023 as compared to $14.3 million for the year ended December 31, 2022. This is primarily due to revenue increasing at a higher rate than operating expenses primarily driven by the decrease in expected credit loss from the year ended December 31, 2022 to the year ended December 31, 2023.
General and administrative: General and administrative increased by $3.9 million or 84.6%, to $8.5 million for the year ended December 31, 2023 from $4.6 million for the year ended December 31, 2022. This was primarily attributable to an increase of audit fees of $2.0 million, legal services fees of $0.8 million related to the merger with TWOA, and a remaining $1.1 million variance related to accounts that are immaterial on the individual level.
Investment property valuation gain: Investment property valuation gain increased by $16.6 million or 471.5%, to $20.2 million for the year ended December 31, 2023 from $3.5 million for the year ended December 31, 2022. The increase in valuation gain primarily relates to the development and stabilization of multiple investment properties from December 31, 2022 to December 31, 2023, as there is an increase in value that occurs when a property changes from land bank to properties under development, and from properties under development to operating properties. The $16.9 million increase is mainly driven by the fair value gain of $4.9 million for the properties in Peru, $9.1 million increase in fair value for the properties in Colombia, and a $2.6 million increase in fair value for the properties in Costa Rica. The increases are also attributed to various valuation inputs and assumptions such as increase in rental revenue and CPI year over year. The fair value change of the corresponding investment properties was further discussed in Note 12 to our consolidated financial statements included elsewhere in this filing.
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Interest income from affiliates: Interest income from affiliates increased by $0.1 million or 18.3%, to $0.6 million for the year ended December 31, 2023 from $0.5 million for the year ended December 31, 2022 primarily due to an increase in the related party loan balances.
Financing costs: Financing costs increased by $19.3 million or 164.4%, to $31.1 million for the year ended December 31, 2023 from $11.8 million for the year ended December 31, 2022. This was primarily attributable to an increase in interest expenses of $7.7 million due to an increase in the debt balance. There were also loan extinguishment losses of $8.3 million in the year ended December 31, 2023 and a $3.5 million decrease in loan modification gains from the year ended December 31, 2022. Additionally, there was an increase in general financing costs relating to the refinancing and issuance of new loans during the year ended December 31, 2023.
Net foreign currency gain: Net foreign currency gain remained stable at $0.3 million for the years ended December 31, 2023 and 2022.
The following table summarizes the foreign currency exchange rates for the U.S. dollar as of December 31, 2023 and 2022:
| As of December 31, | ||||||||
| Exchange Rate | ||||||||
| 2023 | 2022 | |||||||
| Costa Rican Colones | CRC | 527 | CRC | 602 | ||||
| Peruvian Soles | PEN | 3.713 | PEN | 3.820 | ||||
| Colombian Pesos | COP | 3,822 | COP | 4,810 | ||||
Gain (loss) on sale of investment properties: Gain on sale of investment properties increased by $1.6 million or 392.6%, to $1.2 million for the year ended December 31, 2023, compared to a loss of $0.4 million for the year ended December 31, 2022. During the year ended December 31, 2023, we sold a building in Colombia and recorded a gain of $1.2 million. The year ended December 31, 2022 had a loss of $0.4 million relating to the disposal of two operating properties.
Gain on sale of assets held for sale: Gain on sale of assets held for sale increased by $1.0 million or 100.0%, to $1.0 million for the year ended December 31, 2023. This was due to the sale of land inventory during the year ended December 31, 2023, which resulted in a gain of $1.0 million.
Other income: Other income increased by $0.2 million or 207.4%, to $0.3 million for the year ended December 31, 2023 from $0.1 million for the year ended December 31, 2022. This was primarily to a $0.2 million increase in interest income earned on certificate of deposit accounts.
Other expense: Other expense increased by $5.5 million or 903.4%, to $6.1 million for the year ended December 31, 2023 from $0.6 million for the year ended December 31, 2022. This was primarily attributable to the professional service fees associated with our merger with TWOA totaling $5.8 million, offset by a $0.4 million decrease in legal reserve.
Income tax expense: Income tax expense increased by $2.7 million or 122.7%, to $5.0 million for the year ended December 31, 2023 from $2.2 million for the year ended December 31, 2022. The increase is attributable to an increase in withholding tax of $2.8 million, an increase in the foreign rate differential of $1.4 million, and an increase in alternative minimum tax in Colombia of $1.2 million, offset by a decrease in the impact of tax expense attributable to exchange gain or loss of $1.2 million, a decrease of $0.6 million for other tax expense changes, a decrease in $0.4 million in total tax expense calculated at Costa Rica’s statutory tax rate, and a decrease of $0.5 million in tax expense attributable to the change in unrecognized deferred tax assets. This resulted in an increase in the effective tax rate from 16.4% for fiscal year ended 2022 to 41.0% for the fiscal year ended 2023.
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Results of Operations for the year ended December 31, 2022 compared to the year ended December 31, 2021
The following table presents information from our consolidated statements of profit or loss for the years ended December 31, 2022 and 2021:
|
For The Year Ended December 31, |
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| 2022 | 2021 | $ Change | % Change | |||||||||||||
| REVENUE | ||||||||||||||||
| Colombia | $ | 5,690,569 | $ | 4,714,197 | $ | 976,372 | 20.7 | % | ||||||||
| Peru | 8,350,957 | 5,244,208 | 3,106,749 | 59.2 | % | |||||||||||
| Costa Rica | 17,849,043 | 15,595,526 | 2,253,517 | 14.4 | % | |||||||||||
| Other | 92,998 | 42,142 | 50,856 | 120.7 | % | |||||||||||
| Total revenues | 31,983,567 | 25,596,073 | 6,387,494 | 25.0 | % | |||||||||||
| Investment property operating expense | ||||||||||||||||
| Colombia | (599,084 | ) | (454,333 | ) | (144,751 | ) | 31.9 | % | ||||||||
| Peru | (1,288,280 | ) | (1,037,161 | ) | (251,119 | ) | 24.2 | % | ||||||||
| Costa Rica | (3,520,075 | ) | (2,595,871 | ) | (924,204 | ) | 35.6 | % | ||||||||
| Total investment property operating expense | (5,407,439 | ) | (4,087,365 | ) | (1,320,074 | ) | 32.3 | % | ||||||||
| General and administrative | (4,609,195 | ) | (5,394,201 | ) | 785,006 | (14.6 | )% | |||||||||
| Investment property valuation gain | 3,525,692 | 12,610,127 | (9,084,435 | ) | (72.0 | )% | ||||||||||
| Interest income from affiliates | 561,372 | 424,838 | 136,534 | 32.1 | % | |||||||||||
| Financing costs | (11,766,726 | ) | (9,799,558 | ) | (1,967,168 | ) | 20.1 | % | ||||||||
| Net foreign currency gain (loss) | 299,762 | (707,570 | ) | 1,007,332 | (142.4 | )% | ||||||||||
| Loss on sale of investment properties | (398,247 | ) | - | (398,247 | ) | 100.0 | % | |||||||||
| Other income | 100,127 | 151,391 | (51,264 | ) | (33.9 | )% | ||||||||||
| Other expenses | (611,173 | ) | (1,367,647 | ) | 756,474 | (55.3 | )% | |||||||||
| Profit before taxes | 13,677,740 | 17,426,088 | (3,748,348 | ) | (21.5 | )% | ||||||||||
| Income tax expense | (2,236,507 | ) | (8,756,703 | ) | 6,520,196 | (74.5 | )% | |||||||||
| PROFIT FOR THE YEAR | $ | 11,441,233 | $ | 8,669,385 | $ | 2,771,848 | 32.0 | % | ||||||||
Revenue: Rental revenue increased by $6.4 million, or 25.0%, to $32.0 million for the year ended December 31, 2022 from $25.6 million for the year ended December 31, 2021. This was primarily attributable to:
| ● | an increase of $6.3 million in rental income from increase in the number of tenants and Occupied GLA. The number of tenants increased from 45 for the year ended December 31, 2021 to 50 for the year ended December 31, 2022, and expansion of Occupied GLA from existing tenants resulted in a 26.8% increase in Occupied GLA. Primary drivers include increase of $1.9 million related to the stabilization of two buildings in Costa Rica which increased Occupied GLA by 369,482 square feet and an increase of $2.0 million is related to the stabilization of two buildings in Peru which increased Occupied GLA by 335,812 square feet. |
| ● | an increase of $0.3 million in rental income resulting from increases on rent from adjustments for inflation in accordance with our leases; |
| ● | an increase of $0.2 million resulting from the reimbursement of expenses paid by us on behalf of our customers and accounted for under rental income; |
| ● | and an increase of $0.1 million due to an increase in third party development fees. |
This increase was partially offset by:
| ● | a decrease of US$0.6 million in rental income from leases that expired and were not renewed on 2022. |
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Colombia – Revenue in Colombia increased by $1.0 million, or 20.7%, to $5.7 million for the year ended December 31, 2022 from $4.7 million for the year ended December 31, 2021. This was primarily attributable to a 20.5% increase in leased square feet from December 31, 2021 to December 31, 2022.
Peru – Revenue in Peru increased by $3.1 million, or 59.2%, to $8.3 million for the year ended December 31, 2022 from $5.2 million for the year ended December 31, 2021. This was primarily attributable to a 5.7% increase in leased square feet from December 31, 2021 to December 31, 2022, as well as three properties that were operating for the full year ended December 31, 2022 as construction was completed during 2021.
Costa Rica - Revenue in Costa Rica increased by $2.3 million, or 14.4%, to $17.9 million for the year ended December 31, 2022 from $15.6 million for the year ended December 31, 2021. This was primarily attributable to a 17.1% increase in leased square feet from December 31, 2021 to December 31, 2022, as well as the increase in the number of real estate properties that were operating for the full year which increased from 11 during the year ended December 31, 2021 to 13 during the year ended December 31, 2022.
Investment property operating expense: Investment property operating expense increased by $1.3 million or 32.3%, to $5.4 million for the year ended December 31, 2022 from $4.1 million for the year ended December 31, 2021. This was primarily attributable to an increase of repairs and maintenance of $0.4 million, real estate taxes and other property related expenses of $0.2 million, and property management expenses of $0.3 million resulting from the growth in operating properties. In addition, there was an increase of $0.4 million in expected credit loss due to one tenant experiencing financial difficulties which was resolved subsequently in 2023.
Colombia – Investment property operating expense in Colombia increased by $0.1 million, or 31.9%, to $0.6 million for the year ended December 31, 2022 from $0.5 million for the year ended December 31, 2021. This was primarily attributable to an increase in repairs and maintenance, real estate taxes and other property related expenses, and property management expenses resulting from one property, previously under development, becoming operational during the year ended December 31, 2022.
The investment property operating expense was 10.5% of revenue for the year ended December 31, 2022 compared to 9.6% of revenue for the year ended December 31, 2021. The Segment NOI was $5.1 million for the year ended December 31, 2022 as compared to $4.3 million for the year ended December 31, 2021. This change is primarily as a result of an overall increase in operating costs from certain properties becoming stabilized during the year ended December 31, 2022.
Peru – Investment property operating expense in Peru increased by $0.3 million, or 24.2%, to $1.3 million for the year ended December 31, 2022 from $1.0 million for the year ended December 31, 2021. This was primarily attributable to an increase in repairs and maintenance, real estate taxes and other property related expenses, and property management expenses resulting from the increase in the number of properties that became operating properties during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
The investment property operating expense was 15.4% of revenue for the year ended December 31, 2022 compared to 19.8% of revenue for the year ended December 31, 2021. The Segment NOI was $7.1 million for the year ended December 31, 2022 as compared to $4.2 million for the year ended December 31, 2021. The change was primarily due to rental revenue increases as a result of inflation, rental recoveries charged to tenants starting in the year ended December 31, 2022, and more properties becoming stabilized in 2022.
Costa Rica - Investment property operating expense in Costa Rica increased by $0.9 million, or 35.6%, to $3.5 million for the year ended December 31, 2022 from $2.6 million for the year ended December 31, 2021. This was primarily attributable to an increase in repairs and maintenance, real estate taxes and other property related expenses, and property management expenses resulting from the increase in the number of properties that became operating properties during the year ended December 31, 2022 as compared to the year ended December 31, 2021. In addition, there was an increase of $0.4 million in expected credit loss due to one tenant experiencing financial difficulties.
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The investment property operating expense was 19.7% of revenue for the year ended December 31, 2022 compared to 16.6% of revenue for the year ended December 31, 2021. The Segment NOI was $14.3 million for the year ended December 31, 2022 as compared to $13.0 million for the year ended December 31, 2021. The change was mainly driven by the expected credit loss expense we recorded in the year ended December 31, 2022.
General and administrative: General and administrative decreased by $0.8 million or 14.6%, to $4.6 million for the year ended December 31, 2022 from $5.4 million for the year ended December 31, 2021. This was primarily attributable to a decrease of $0.7 million in employee bonuses. While our internal performance targets were achieved, the board decided against the bonus due to uncertainties regarding external market conditions.
Investment property valuation gain: Investment property valuation gain decreased by $9.1 million or 72.0%, to $3.5 million for the year ended December 31, 2022 from $12.6 million for the year ended December 31, 2021. Typically, a substantial increase in fair value occurs when land is placed into development and to a lesser degree when subsequently placed into operation. The decrease in investment property valuation gain was a result of fewer properties being under development during the year ended December 31, 2022 compared to the year ended December 31, 2021. The fair value change of the corresponding investment properties was further discussed in Note 12 to our consolidated financial statements included elsewhere in this proxy statement/prospectus.
Interest income from affiliates: Interest income from affiliates increased by $0.2 million or 32.1%, to $0.6 million for the year ended December 31, 2022 from $0.4 million for the year ended December 31, 2021 primarily due to an increase in the related party and key personnel loan balances.
Financing costs: Financing costs increased by $2.0 million or 20.1%, to $11.8 million for the year ended December 31, 2022 from $9.8 million for the year ended December 31, 2021. This was primarily attributable to an increase of $6.1 million in interest expense due to increases in both the outstanding principal debt balances and the interest rates associated with our debt, and partially offset by an increase of $3.8 million in debt modification gains. There was also an increase of $0.3 million in deferred financing cost amortization.
Net foreign currency gain (loss): Net foreign currency increased by $1.0 million or 142.4%, to a net foreign currency gain of $0.3 million for the year ended December 31, 2022, from a net foreign currency loss of $0.7 million for the year ended December 31, 2021. This is primarily related to the exchange rate fluctuations for the Peruvian Sol and Costa Rican Colon, as these two countries have VAT receivables denominated in local currency that are impacted by the change in exchange rates.
The following table summarizes the foreign currency exchange rates for the U.S. dollar as of December 31, 2022 and 2021
| As of December 31, | ||||||||
| Exchange Rate | ||||||||
| 2022 | 2021 | |||||||
| Costa Rican Colones | CRC | 594 | CRC | 639 | ||||
| Peruvian Soles | PEN | 3.808 | PEN | 3.965 | ||||
| Colombian Pesos | COP | 4,810 | COP | 3,981 | ||||
Loss on sale of investment properties: Loss on sale of investment properties increased by $0.4 million or 100.0%, to $0.4 million for the year ended December 31, 2022, compared to the year ended December 31, 2021. This was due to the sale of two properties during the year ended December 31, 2022 with carrying values of $9.3 million for consideration of $8.9 million resulting in a loss of $0.4 million. No sales of properties occurred during the year ended December 31, 2021.
Other income: Other income decreased by $0.1 million or 33.9%, to $0.1 million for the year ended December 31, 2022 from $0.2 million for the year ended December 31, 2021. This was primarily attributable to a decrease in interest income earned on certificate of deposit accounts.
Other expense: Other expense decreased by $0.8 million or 55.3%, to $0.6 million for the year ended December 31, 2022 from $1.4 million for the year ended December 31, 2021. This was primarily attributable to a decrease in costs incurred for the unsuccessful Colombia initial public offering in 2021, offset by an increase in legal provision expense of $0.3 million.
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Income tax expense: Income tax expense decreased by $6.5 million or 74.5%, to $2.2 million for the year ended December 31, 2022, from $8.8 million for the year ended December 31, 2021. This was due to the following: a decrease of $3.7 million in profit before taxes, resulting in a decrease of $1.1 million in tax expense at statutory rates; a decrease in the foreign rate differential of $0.5 million; a decrease in the impact of tax expense attributable to exchange gain or loss of $3.9 million; a decrease of $1.3 million in the tax expense attributable to the change in unrecognized deferred tax assets; and an increase of $0.3 million for other tax expense changes.
Non-IFRS Financial Measures and Other Measures and Reconciliations
In addition to our financial results reported in accordance with IFRS, we also report Adjusted EBITDA, NOI, Same Property NOI, Cash NOI, Same Property Cash NOI, FFO, Adjusted FFO, Net Debt to Adjusted EBITDA, and Net Debt to Investment Properties, all of which are non-IFRS measures. Our management believes these measures are useful to investors as they provide additional insight into how we assesses our performance and financial position. These non-IFRS financial measures should not be considered as a substitute for, or superior to, similar financial measures calculated in accordance with IFRS. These non-IFRS financial measures may differ from the calculations of other companies and, as a result, may not be comparable to similarly titled measures presented by other companies.
Use of Constant Currency
As exchange rates are an important factor in understanding period-to-period comparisons, we believe the presentation of certain financial metrics and results on a constant currency basis in addition to the IFRS reported results helps improve investors’ ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant currency information is non-IFRS financial information that compares results between periods as if exchange rates had remained constant period-over-period. We use results on a constant currency basis as one measure to evaluate our performance. We currently present Same Property Cash NOI on a constant currency basis. We calculate constant currency by calculating prior period-end results using current-period foreign currency exchange rates. We generally refer to such amounts calculated on a constant currency basis as excluding the impact of foreign exchange. These results should be considered in addition to, not as a substitute for, results reported in accordance with IFRS. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with IFRS.
Reconciliations of non-IFRS Measures
Adjusted EBITDA – We define Adjusted EBITDA as profit for the period adjusted by (a) interest income from affiliates, (b) income tax expense, (c) depreciation and amortization, (d) investment property valuation gain, (e) financing costs, (f) net foreign currency gain, (g) other income, (h) gain or loss on sale of investment properties, (i) gain on disposition of asset held for sale and (j) other expenses. Management uses Adjusted EBITDA to measure and evaluate the operating performance of our business, which consists of developing, leasing and managing industrial properties, before our cost of capital and income tax expense. Adjusted EBITDA is a measure commonly used in our industry, and we present Adjusted EBITDA to supplement investor understanding of our operating performance. Our management believe that Adjusted EBITDA provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and fair value adjustments of our assets. The table below includes reconciliations of Adjusted EBITDA to the most directly comparable IFRS measure, profit for the respective period:
| For the years ended December 31, | ||||||||||||
| (USD in thousands) | 2023 | 2022 | 2021 | |||||||||
| PROFIT FOR THE PERIOD | $ | 7,156 | $ | 11,441 | $ | 8,669 | ||||||
| Interest income from affiliates | (664 | ) | (561 | ) | (425 | ) | ||||||
| Income tax expense | 4,981 | 2,237 | 8,757 | |||||||||
| Depreciation and amortization (1) | 168 | 228 | 237 | |||||||||
| Investment property valuation gain | (20,151 | ) | (3,526 | ) | (12,610 | ) | ||||||
| Financing costs | 31,111 | 11,767 | 9,800 | |||||||||
| Net foreign currency gain | (285 | ) | (300 | ) | 708 | |||||||
| Other income (2) | (308 | ) | (100 | ) | (151 | ) | ||||||
| (Gain) loss on sale of investment properties | (1,165 | ) | 398 | - | ||||||||
| Gain on sale of asset held for sale | (1,023 | ) | - | - | ||||||||
| Other expenses (3) | 6,133 | 611 | 1,368 | |||||||||
| ADJUSTED EBITDA | $ | 25,953 | $ | 22,195 | $ | 16,353 | ||||||
| (1) | Depreciation and amortization includes amortization of right-of-use assets. The amounts are included within general and administrative expense in the consolidated statement of profit or loss. |
| (2) | Other income included interest income on certificates of deposit of $0.3 million for the year ended December 31, 2023, and less than $0.1 million for the years ended December 31, 2022, and 2021. |
| (3) | Other expenses included transaction-related costs of $6.2 million, $0.3 million and $1.4 million for the years ended December 31, 2023, 2022, and 2021, respectively. Other expenses also included a loss on disposition of fixed assets of $0.1 million for the year ended December 31, 2023, and less than $0.1 million for the years ended December 31, 2022, and 2021. Additionally, other expenses included legal provision expense of ($0.1) million, $0.3 million, and $0 for the years ended December 31, 2023, 2022, and 2021 respectively. |
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Net Operating Income, or NOI – We define NOI as profit for the period adjusted by (a) other revenue (which primarily relates to development fee revenue), (b) general and administrative expenses, (c) investment property valuation gain, (d) interest income from affiliates, (e) financing costs, (f) net foreign currency gain or loss, (g) other income, (h) gain or loss on sale of investment properties, (i) gain on disposition of asset held for sale, (j) other expenses, and (k) income tax expense. NOI, Same Property NOI, Cash NOI, and Same Property Cash NOI are supplemental industry reporting measures used to evaluate the performance of our investments in real estate assets and our operating results. Same Properties refers to properties that we have owned and that have been operating for the entirety of the applicable period and the comparable period. Our management believes that these metrics are useful for investors as performance measures and that they provide useful information regarding our results of operations because, when compared across periods, they reflect the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unlevered basis, providing perspectives that may not be immediately apparent from a review of our audited consolidated financial statements.
We define Same Property NOI as NOI less non same-property NOI. We evaluate the performance of the properties we own using a Same Property NOI, and our management believes that Same Property NOI is helpful to investors and management as a supplemental performance measure because it includes the operating performance from the population of properties that is consistent from period-to-period, thereby eliminating the effects of changes in the composition of our portfolio on performance. When used in conjunction with IFRS financial measures, Same Property NOI is a supplemental measure of operating performance that our management believes is a useful measure to evaluate the performance and profitability of our investment properties. Additionally, Same Property NOI is a key metric used internally by our management to develop internal budgets and forecasts, as well as to assess the performance of our investment properties relative to budget and against prior periods. Our management believes presentation of Same Property NOI provides investors with a supplemental view of our operating performance that can provide meaningful insights to the underlying operating performance of our investment properties, as these measures depict the operating results that directly result from our investment properties, is consistent period-over-period, and excludes items that may not be indicative of, or are unrelated to, the ongoing operations of the properties.
We define Cash NOI as NOI adjusted for straight-line rental revenue during the relevant period. We defines Same Property Cash NOI as Cash NOI less non same-property cash NOI and adjusted for constant currency. The same property population for a given period includes the operating properties that were owned during the entirety of that period and the corresponding prior year period. Properties developed or acquired are excluded from the same property population until they are held in the operating portfolio for the entirety of both such periods, and properties that sold during such periods are also excluded from the same property population. As of December 31, 2023, 2022, and 2021, the same property population consisted of 22, 17, and 15, buildings aggregating approximately 64%, 42%, and 43% of our total square feet owned during such period, respectively.
The table below reconciles these measures to the most directly comparable IFRS financial measure, profit for the period:
| For the years ended December 31, | ||||||||||||
| (USD in thousands) | 2023 | 2022 | 2021 | |||||||||
| PROFIT FOR THE PERIOD | $ | 7,156 | $ | 11,441 | $ | 8,669 | ||||||
| Other revenue | (109 | ) | (93 | ) | (42 | ) | ||||||
| General and administrative | 8,509 | 4,609 | 5,394 | |||||||||
| Investment property valuation gain | (20,151 | ) | (3,526 | ) | (12,610 | ) | ||||||
| Interest income from affiliates | (664 | ) | (561 | ) | (425 | ) | ||||||
| Financing costs | 31,111 | 11,767 | 9,800 | |||||||||
| Net foreign currency gain | (285 | ) | (300 | ) | 708 | |||||||
| Other income (1) | (308 | ) | (100 | ) | (151 | ) | ||||||
| (Gain) loss on sale of investment property | (1,165 | ) | 398 | - | ||||||||
| Gain on sale of asset held for sale | (1,023 | ) | - | - | ||||||||
| Other expenses (2) | 6,133 | 611 | 1,367 | |||||||||
| Income tax expense | 4,981 | 2,237 | 8,757 | |||||||||
| NOI | $ | 34,185 | $ | 26,483 | $ | 21,467 | ||||||
| Gain on impact of foreign currency translation | 507 | (141 | ) | (72 | ) | |||||||
| Less: Non Same-Property NOI | 11,177 | 11,628 | 8,941 | |||||||||
| SAME-PROPERTY NOI | $ | 23,515 | $ | 14,714 | $ | 12,454 | ||||||
| NOI | $ | 34,185 | $ | 26,483 | 21,467 | |||||||
| Straight-line rental revenue | (1,036 | ) | (2,423 | ) | (1,984 | ) | ||||||
| CASH NOI | $ | 33,149 | $ | 24,060 | $ | 19,483 | ||||||
| Constant currency impact | - | 233 | 7 | |||||||||
| Less: Non Same-Property Cash NOI | 9,647 | 9,884 | 5,526 | |||||||||
| SAME-PROPERTY CASH NOI | $ | 23,502 | $ | 14,409 | $ | 13,964 | ||||||
| (1) | Other income included interest income on certificates of deposit of $0.3 million for the year ended December 31, 2023, less than $0.1 million for the years ended December 31, 2022 and 2021. |
| (2) | Other expenses included transaction-related costs of $6.2 million, $0.3 million and $1.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. Other expenses also included a loss on disposition of fixed assets of $0.1 million for the year ended December 31, 2023, and less than $0.1 million for the years ended December 31, 2022 and 2021. Additionally, other expenses included legal provision expense of ($0.1) million, $0.3 million, and $0 for the years ended December 31, 2023, 2022, and 2021, respectively. |
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Funds From Operations, or FFO (as defined by us) – We define FFO as profit for the period, excluding investment property valuation gain, gain or loss on sale of investment properties, gain on sale of asset held for sale, depreciation and amortization, non-cash financing costs, interest income from affiliates, and unrealized foreign currency gain or loss. We define Adjusted FFO as FFO less realized foreign currency gain or loss and straight-line rental revenue. We use FFO and Adjusted FFO to help analyze the operating results of our assets and operations. Our management believes that FFO is useful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, as well as certain noncash items, but which do not directly relate to our ongoing business operations or cash flow generation. Our management believes FFO can facilitate comparisons of operating performance between periods, while also providing an indication of future earnings potential. However, since FFO does not capture the level of capital expenditures or maintenance and improvements required to sustain the operating performance of properties, which has a material economic impact on operating results, Our management believes the usefulness of FFO as a measure of performance may be limited. Our computation of FFO may not be comparable to FFO measures reported by other real estate companies that define or interpret the FFO definition differently. The table below includes reconciliations of FFO and Adjusted FFO to the most directly comparable IFRS financial measure, profit, for the respective periods:
| For the years ended December 31, | ||||||||||||
| (USD in thousands) | 2023 | 2022 | 2021 | |||||||||
| PROFIT FOR THE PERIOD | $ | 7,156 | $ | 11,441 | $ | 8,669 | ||||||
| Investment property valuation gain | (20,151 | ) | (3,526 | ) | (12,610 | ) | ||||||
| (Gain) loss on sale of investment property | (1,165 | ) | 398 | - | ||||||||
| Gain on sale of asset held for sale | (1,023 | ) | - | - | ||||||||
| Depreciation and amortization (1) | 107 | 124 | 140 | |||||||||
| Non-cash financing costs (2) | 5,957 | (2,685 | ) | 991 | ||||||||
| Interest income from affiliates | (664 | ) | (561 | ) | (425 | ) | ||||||
| Unrealized foreign currency gain (3) | (507 | ) | (325 | ) | 303 | |||||||
| FFO | $ | (10,290 | ) | $ | 4,866 | $ | (2,932 | ) | ||||
| Realized foreign currency (3) | 88 | 25 | 405 | |||||||||
| Straight-line rental revenue | (1,036 | ) | (2,423 | ) | (1,984 | ) | ||||||
| ADJUSTED FFO | $ | (11,238 | ) | $ | 2,468 | $ | (4,511 | ) | ||||
| (1) | Included within general and administrative expense in the consolidated statement of profit or loss. |
| (2) | Included within financing costs in the consolidated statement of profit or loss and reflects debt extinguishment or modification gain or loss, amortization of debt issuance cost and accrued interest. |
| (3) | Included within net foreign currency gain (loss) in the consolidated statement of profit or loss. |
Net Debt — Net Debt is defined as our total debt (defined as long term debt plus long-term debt—current portion) less cash and cash equivalents. Net Debt to Adjusted EBITDA represents Net Debt divided by Adjusted EBITDA. Our management believes that this ratio is useful because it provides investors with information on our ability to repay debt, compared to our performance as measured using Adjusted EBITDA. Net Debt to Investment Properties represents Net Debt divided by Investment Properties (end of period value). We believe that this ratio is useful because it shows the degree in which Net Debt has been used to finance our assets. The table below includes reconciliations of Net Debt to the most directly comparable IFRS financial measures:
| As of December 31, | ||||||||||||
| (USD in thousands except for ratio data) | 2023 | 2022 | 2021 | |||||||||
| Long term debt | $ | 253,151 | $ | 98,383 | $ | 165,172 | ||||||
| Long term debt—current portion | 16,703 | 110,943 | 23,547 | |||||||||
| Cash and equivalents(1) | (37,923 | ) | (18,241 | ) | (21,290 | ) | ||||||
| Net debt | $ | 231,931 | $ | 191,085 | $ | 167,429 | ||||||
| Net Debt to Net Income | 32.4 | x | 16.7 | x | 19.3 | x | ||||||
| Net Debt to Adjusted EBITDA | 8.9 | x | 8.6 | x | 10.2 | x | ||||||
| Net Debt to Investment Properties (end of period value) | 45 | % | 43 | % | 39 | % | ||||||
| (1) | Includes $2.7 million, $3.2 million, and $3.9 million of restricted cash associated with the total debt as of December 31, 2023, 2022, and 2021, respectively. |
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The following table presents a summary our non-IFRS measures for the years ended December 31, 2023, 2022 and 2021:
| For the years ended December 31, | ||||||||||||
| (USD in thousands except for ratio data) | 2023 | 2022 | 2021 | |||||||||
| Adjusted EBITDA | $ | 25,953 | $ | 22,195 | $ | 16,353 | ||||||
| NOI | 34,185 | 26,483 | 21,467 | |||||||||
| Same Property NOI | 23,515 | 11,193 | 12,454 | |||||||||
| Cash NOI | 33,149 | 24,060 | 19,483 | |||||||||
| Same Property Cash NOI | 23,502 | 15,503 | 13,964 | |||||||||
| FFO | (10,290 | ) | 4,866 | (2,932 | ) | |||||||
| Adjusted FFO | (11,238 | ) | 2,468 | (4,511 | ||||||||
| Net Debt (end of period value) to Adjusted EBITDA | 8.9 | x | 8.6 | x | 10.2 | x | ||||||
| Net Debt to Investment Properties (end of period value) | 45 | % | 43 | % | 39 | % | ||||||
| B. | Liquidity and Capital Resources |
For the years ended December 31, 2023, 2022 and 2021, we had profits of $7.2 million, $11.4 million, and $8.7 million, respectively. As of December 31, 2023, we also had cash, restricted cash equivalents- short term, and restricted cash equivalents- long term of $35.2 million, $2.0 million and $0.7 million, respectively. We require significant cash resources to, among other things, fund our working capital requirements, increase our headcount, make capital expenditures, and expand our business through acquisitions. Our future capital requirements will depend on many factors, including the cost of future acquisitions, the scale of increases in headcount, our revenue mix, incremental costs relating to the implementation of new contracts, and the timing and extent of spending to support warehouse development efforts.
If we were to require additional funding, seek additional sources of financing or desire to refinance our debt, we believe that our historical ability to raise and deploy capital to fund the development of our logistic warehouses facilities and expansion of our operations would enable us to access financing on reasonable terms. However, there can be no assurance that such financing would be available to us on favorable terms or at all. If financing is not available, or if the terms of such financing are not acceptable to us, we may be forced to decrease the level of investment in our logistic warehouses facilities, scale back our operations, defer investments to execute on our growth strategy or execute a combination of these cost management strategies, which could have an adverse impact on our business and financial prospects. The profits in current and prior periods we have recognized are consistent with our strategy and plans for continued growth and expansion. We expect to continue to recognize profits as we executes on our operating plan and expands our warehouse offerings in the near term.
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As described further in Note 16 to our audited consolidated financial statements, we were in compliance with our financial covenants or otherwise had waivers for all debt covenants with our lenders as of December 31, 2023. As of December 31, 2022 we did not comply with certain financial covenants for non-recourse loans with the financial institutions of Banco Davivienda, Bancolombia and ITAÚ Corpbanca; however we obtained waivers or refinanced those debt agreements. The covenants breached as of December 31, 2022 required our subsidiary acting as borrower to achieve or exceed a specific debt service coverage ratio as defined in the lending agreements. This ratio was defined as 1.10x for the ITAÚ Corpbanca loan and 1.20x for the Banco Davivienda and Bancolombia loans. In addition to these breaches as of December 31, 2022, we breached this debt service coverage ratio covenant with Bancolombia in June 2023. These were our only covenant breaches and did not trigger covenant breaches or events of default for any of our other loans. Despite not missing any debt service payments, each of these covenant breaches constitute an “event of default” under our credit agreements and may cast significant doubt regarding our ability to continue as a going concern. However, we have a history of successfully refinancing our debt as a matter of customary business practice and we have successfully completed the Business Combination including the PIPE Investment, which has provided us with additional funding.
In order to mitigate the effects of the Banco Davivienda breach, we obtained a waiver which removed our obligation to comply with the financial covenants in February 2023. This debt was subsequently refinanced in April 2023 with Banco Nacional de Costa Rica, with which we are currently in compliance.
As part of the sale of the Colombian investment property, the ITAÚ Corpbanca Colombia loan was fully repaid in August 2023, thus curing any covenant breach.
In September 2023, we restructured our Bancolombia debt to defer principal payments until May 2024, at which point we will have 12 months to pay the deferred principal and interest in full at no additional cost. We also obtained a waiver for the covenant breaches, which waives compliance with the debt service coverage ratio through December 31, 2023, after which the next debt service coverage ratio compliance testing date will be in June 2024.
While we have fulfilled all debt service payments required by our lending agreements in all jurisdictions to date, current interest rates in Colombia make it probable that further debt waivers, restructuring, or repayment will be necessary relating to the Bancolombia loan prior to May 2024, when principal payments resume on the loan. Our lending agreements in Colombia are only collateralized by four Colombian investment properties. No other guarantees have been provided by our other subsidiaries that would put our operations outside of Colombia at risk in event of foreclosure. Furthermore, our operations outside of Colombia are expected to be profitable and generate adequate liquidity to provide for continued operations. Therefore, in the event that we are unable to obtain further debt waivers, restructure the debt, or otherwise repay the Bancolombia loan, a foreclosure by Bancolombia on the Colombian property would not create material uncertainty as to our ability to continue as a going concern in regards to our operations outside of Colombia. Accordingly, our plan for mitigating actions are sufficient to alleviate the significant doubt about our ability to continue as a going concern.
Debt
Overview
As of December 31, 2023, our total outstanding debt was $269.9 million, of which $253.2 million, or 93.81%, consists of long-term debt. As of December 31, 2022, our total outstanding debt was $209.3 million, of which $98.4 million, or 47.0%, consists of long-term debt.
As of December 31, 2023, 2022, and 2021, all of our outstanding debt was secured by our investment properties.
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Debt Agreements
On May 21, 2021, we entered into a U.S. dollar denominated secured bridge loan agreement of $15.0 million with BTG Pactual, S.A – Cayman Branch. The proceeds of the loan were used to fund the continued growth of the Company. As per the initial conditions, the credit facility was scheduled to mature on June 17, 2022, with a fixed annual interest rate of 5.85%. In June 2022, we extended this bridge loan to March 17, 2023, including a substitution of the fixed interest rate to a variable interest rate consisting of SOFR annual average plus 600 basis points. The agreement restricted Latam Logistic Properties S.R.L (the predecessor to LLP) from changing its ownership, except in the event of an IPO if Jaguar Growth Partners LLC remained as the final beneficiary of the debtor. This loan was repaid in full by December 31, 2023.
On May 31, 2017, we entered into the IFC secured credit facility, which included financing for the full development of Latam Logistic Lima Sur through a two-tranche facility. Latam Logistic Lima Sur is a total of six buildings development divided in two phases. The loan had an aggregate borrowing capacity of $53,000,000 and was divided in two tranches corresponding to each development phase.
Tranche 1 – This tranche was for the financing of the development of phase 1. The loan had a total borrowing capacity of $27,100,000 and was interest only until January 15, 2020 with a balloon payment of $6,865,611 at expiration on July 15, 2028. As of December 31, 2022, we had disbursed all of the tranche.
Tranche 2 – This tranche was for the financing of the development of phase 2. The loan had a total borrowing capacity of $25,900,000 and was interest only until January 15, 2022 with a balloon payment of $6,475,000 at expiration on July 15, 2030. As of December 31, 2022 we had disbursed $15,607,323.
The loan required a commitment fee over unborrowed amounts until December 15, 2022 as follows:
| ● | June 16, 2019 – December 31, 2019 – 0.50% over unborrowed amount. | |
| ● | January 1, 2020 – June 30, 2021 – 1.00% over unborrowed amount. | |
| ● | July 1, 2021 – January 15, 2022 – 1.50% over unborrowed amount. |
On March 14, 2022, we negotiated a new interest rate on the IFC Tranche 1, reducing the spread by 100 basis points, to 425 basis points, effective July 15, 2022. All the other terms and conditions of the loan with IFC remained the same. A gain of $351,503 was recognized as part of modification of this debt facility and is included in financing costs in the consolidated statements of profit or loss in the year ended December 31, 2022.
On October 26, 2023, we drew on our debt facilities with IFC for a total of $10,292,677 to finance the construction of the Lurin I project in Peru. The related interest expense directly attributable to the construction is capitalized.
On December 15, 2023, we refinanced the debt outstanding with IFC Tranche 1 and Tranche 2 for a total amount of $46,973,443 with a mortgage loan denominated in U.S. dollar with BBVA Perú for an aggregate amount of $60,000,000. A loss of $1,651,793 was recognized as part of the extinguishment of this debt facility and is included in financing costs in the consolidated statements of profit or loss in the year ended December 31, 2023.
As per the IFC loan agreement, we had to maintain a cash collateral account as a guarantee of the principal during the construction and leasing period. As of December 31, 2022, we had a restricted cash equivalent of $1,205,162 in the cash collateral account, which was released from restricted cash in connection with the loan refinancing on December 15, 2023.
On January 6, 2021, we entered into a COP denominated secured construction loan facility with ITAU Corpbanca Colombia, S.A. (“ITAU”) for a total borrowing capacity of COP35.0 billion ($8.8 million). Proceeds were used for the financing of the construction of building 500 in Latam Logistic Park Calle 80 in Bogota, Colombia. The loan had a maturity date of July 6, 2033 and an annual interest rate of IBR (a short-term interest rate for the Colombian Peso determined by the board of directors of Colombia’s Central Bank) plus 447 basis points and had an annual commitment fee of 0.50% of the undrawn amount of the credit line. The loan was interest only until April 20, 2022 and was fully drawn in October 2021. The debt facility with ITAU was paid in full through a sale of the mortgaged property to a subsidiary of Bancolombia. The subsidiary of Bancolombia provided an advance of the payment directly to ITAU on August 31, 2023 in order to settle the outstanding debt. The administrative transfer process was initiated on September 27, 2023 and was completed in November 2023. As of December 31, 2022, the interest rate was 14.9%.
On January 22, 2021, we entered into a COP denominated financing agreement of COP44.5 billion ($11.2 million) with Bancolombia, S.A. for the financing of the construction of building 300 in Latam Logistic Park Calle 80 in Bogota, Colombia. As of December 31, 2021, the financing was fully disbursed. The financing bears an interest rate of IBR plus 365 basis points, commitment fees of 0.1% per month of the undrawn amount of the loan and has a 15-year term with a balloon payment of 40% at maturity (COP17.8 billion, or $4.6 million). We began to make principal payments in November 2021. As of December 31, 2023 and December 31, 2022 the interest rate on the loan was 15.5% and 13.8%, respectively.
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On September 22, 2023, we negotiated a deferral of principal with Bancolombia, deferring all principal payments for seven months, beginning on October 1, 2023. All the other terms and conditions of the loan with Bancolombia remained the same. A gain of $70,058 was recognized as part of the modification of this debt facility and is included in financing costs in the consolidated statements of profit or loss in the year ended December 31, 2023.
In March 2021, we entered into two U.S. dollar denominated mortgage loan facilities with BAC Credomatic, S.A. for an aggregate amount of $10.0 million for the financing of the acquisition of two operating properties in San José, Costa Rica. The loans had a fifteen-year term and an annual interest rate of three-month LIBOR plus 423 basis point with a minimum interest rate of 5.0%. One of these loans was refinanced with Banco Nacional de Costa Rica on April 28, 2023. As of December 31, 2022, the interest rate as of December 31, 2022 was 7.7%.
On July 7, 2021, we entered into a U.S. dollar denominated mortgage loan facility of up to $45.5 million with Banco BAC San José, S.A. on behalf of LatAm Parque Logístico San José - Verbena partnership. Proceeds will be used to finance the construction of LatAm Parque Logístico San José - Verbena, a five-building class-A master-planned logistic park totaling 829,898 square feet of net rentable area, in the Alajuelita submarket in San José, Costa Rica. The loan can be drawn in multiple disbursements for up to approximately 60% of the total investment amount of the project. The mortgage loan has a term of 10 years with a 15-year amortization profile. The stated interest rate was the three-month LIBOR plus 423 basis points. In October 2022, the stated interest rate on the debt facility changed to the three-month Secured Overnight Financing Rate (SOFR) plus 378 basis points. The debt facility has an amortization grace period of 30 months and does not accrue any commitment fees. On March 1, 2023, we negotiated a reduced interest rate with BAC, reducing the interest rate from 3-month SOFR plus 378 basis points to 8.1% for six months. On October 5, 2023, we negotiated to keep the reduced interest rate of 8.12% for six more months. As of December 31, 2023 and December 31, 2022, the interest rate on the loan was 8.1% and 7.6%, respectively.
On February 16, 2022, we repaid one of the loans with BAC Credomatic due to the sale of the underlying property. The loan outstanding balance at the time of the sale was $2,868,155 and we recognized a loss of $586 due to the extinguishment of the debt facility which is included in financing costs in the consolidated statements of profit or loss. On March 1, 2023, we negotiated a reduced interest rate with BAC Credomatic, S.A., reducing the interest rate from 3-month SOFR plus 378 basis points to 8.12% for six months. All the other terms and conditions of the loan remained the same. A gain of $121,038 was recognized as part of the modification of this debt facility and is included in financing costs in the condensed consolidated statements of profit or loss. On October 5, 2023, we negotiated to keep the reduced interest rate of 8.12% for six more months. All the other terms and conditions of the loan remained the same. A loss of $47,466 was recognized as part of the modification of this debt facility and is included in financing costs in the condensed consolidated statements of profit or loss.
On August 16, 2021, we entered into a U.S. dollar denominated mortgage loan of $7.0 million with Banco Promerica de Costa Rica, S.A. for the purchase of an 118,403 square feet logistic facility located in the Coyol submarket in San José, Costa Rica. The loan has a fifteen-year term. The stated interest rate is the U.S. Prime Rate plus 475 basis points. This loan was refinanced with Banco Nacional de Costa Rica on April 28, 2023. As of December 31, 2022, the interest rate on the loan was 8.3%.
On January 31, 2022, we entered into a U.S. dollar denominated mortgage loan of $2.4 million with Banco Davivienda de Costa Rica for the acquisition of a container parking lot. The loan has a fifteen-year term. The loan bears an annual interest rate of U.S. Prime Rate plus 175 basis points. As part of the sale of related investment property, the purchaser of the investment property assumed the balance on the loan on October 31, 2022.
As of December 31, 2022, we have borrowed $1.0 million of a U.S. dollar denominated mortgage loan facility of up to $1.0 million with Banco BAC San José, S.A. for the financing of the renovations in LatAm Bodegas San Joaquin. The loan matures on June 24, 2032. The loan bears an annual interest rate at the U.S. Prime Rate plus 110 basis points with no minimum interest rate. This loan was refinanced with Banco Nacional de Costa Rica on April 28, 2023. The interest rate as of December 31, 2022 was 7.4%.
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On April 28, 2023, we entered into four U.S. dollar denominated mortgage loans with Banco Nacional de Costa Rica for an aggregate amount of $107,353,410. The loans have a twenty-five-year term. The loans bear a fixed annual interest rate for the first two years and a variable rate thereafter. The interest rate as of December 31, 2023 was 5.9% for three of the loans and 6.4% for one loan.
On August 25, 2023 and August 30, 2023, we entered into two new line of credit agreements with BTG Pactual Colombia S.A. for COP 15,000,000,000 and COP 10,000,000,000, respectively (approximately $3,679,266 and $2,433,042, respectively, at the date the transactions were initiated). Interest is calculated and paid monthly at the rate of a one-month Colombian IBR plus 720 basis points. Principal repayment is due at maturity, on August 25, 2024 and August 30, 2024, respectively. These debt agreements are guaranteed by the trust established for Latam Logistic Col Propco Cota 1, where Banco BTG Pactual Colombia S.A is established as a guaranteed creditor, with three underlying properties as collateral. As of December 31, 2023, the interest rate on the loans was 20.2%.
On October 19, 2023, we entered into a new line of credit agreement with El Banco BBVA Perú for $2,000,000. The line of credit agreement has a nominal rate of 14.45% fixed and an annual effective rate of 8.35%. The line of credit agreement matures in 9 months and follows a monthly repayment schedule. This debt agreement is a senior unsecured loan and is not guaranteed by any of the properties of LPA. As of the issuance date, the Company has fully drawn the line of credit.
On November 1, 2023, we refinanced the debt outstanding with Banco Nacional de Costa Rica, S.A. ($7,373,460) with a mortgage loan denominated in U.S. dollar with Davivienda de Costa Rica for an aggregate amount of $8,000,000. The new mortgage loan matures in 15 years. The loan is subject to a fixed interest rate of 7.00% in the first year, and a rate of 6-month SOFR plus 2.4% adjustable monthly from the second year onwards.
On December 15, 2023, we entered into a mortgage loan with El Banco BBVA Perú for a total of $60,000,000. The mortgage loan consists of two components: Tranche A and Tranche B. The Tranche A totaling $48,670,000 was used to refinance our existing debt with IFC. The Tranche B totaling $11,330,000 is expected to finance our other real estate projects. Tranche A and B will mature in 10 years (with a 35% balloon payment for Tranche A) and carry a fixed interest rate of 8.5% and 8.4%, respectively.
Compliance with Debt Covenants
The loans described above are subject to certain affirmative covenants, including, among others, (i) reporting of financial information and (ii) maintenance of corporate existence, the security interest in the properties subject to the loan and appropriate insurance for such properties. In addition, the loans are subject to certain negative covenants that restrict our ability to, among other matters, incur additional indebtedness under or create additional liens on the properties subject to the loans, change our corporate structure, make certain restricted payments, enter into certain transactions with affiliates, or amend certain material contracts.
The loans contain, among others, the following events of default: (i) non-payment; (ii) false representations; (iii) failure to comply with covenants; (iv) inability to generally pay debts as they become due; (v) any bankruptcy or insolvency event; (vi) disposition of the subject properties; and (vii) change of control of the subject properties.
As of December 31, 2023, our only loan agreements requiring compliance with specific financial covenants were those loans with Bancolombia, BAC Credomatic, and a loan agreement with Bank Davivienda entered into in November 2023. The agreements with Bancolombia require that the borrower maintain a debt to service coverage ratio of at least 1.20x and a debt to equity ratio no greater than 58% debt to 42% equity. The agreement with BAC Credomatic requires that the borrower maintains a debt to service coverage ratio of at least 1.20x and a total liabilities debt to equity ratio no greater than 2:1. The agreement with Bank Davivienda requires a debt service coverage ratio of at least 1.20x. We are required to report to our lenders compliance with the financial ratio debt covenants associated with the BAC Credomatic on a quarterly basis, while the financial ratio debt covenants with Bancolombia and Bank Davivienda require semiannual compliance reporting. Compliance with these covenants has been detailed within the Notes to the Consolidated Financial Statements for the period ending December 31, 2023.
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During the month of December 2023, we refinanced our loan with International Finance Corporation with a loan from El Banco BBVA Perú, which requires semiannual compliance reporting beginning in June 2024. As of December 31, 2023, we were in compliance with our BAC Credomatic covenants and had a waiver in place related to the debt service coverage ratio related to the Bancolombia loan covenant.
As of December 31, 2022, we had instances of non-compliance with certain of our debt covenants. On November 22, 2022, we did not expect to meet debt service coverage ratio covenants for the loan with Davivienda related to Latam Logistic CR Propco Alajuela I SRL, for the year ended December 31, 2022. We applied for a covenant waiver on the same date, and the covenant waiver was successfully obtained on February 17, 2023. Since the waiver was received subsequent to December 31, 2022, $48.1 million related to this debt was classified within Long-term debt – current portion in the consolidated statement of financial position for the year ended December 31, 2022. Additional breaches occurred in December 2022 relating to Latam Logistic COL PropCo Cota 1 S.A.S., due to the rising interest rates in Colombia. The breaches related to Latam Logistic COL PropCo Cota 1 S.A.S.’s three debt facilities, two of which were with Bancolombia as lender and one of which was with ITAU as lender. Although no communication of the breach was received from any of the lenders, in September 2023, we negotiated a debt restructuring along with a covenant waiver for our debt facilities with Bancolombia. Meanwhile, the debt facility with ITAU was paid in full through a sale of the mortgaged property to a subsidiary of Bancolombia. The subsidiary of Bancolombia provided an advance of the payment directly to ITAU on August 31, 2023 in order to settle the outstanding debt, and the administrative transfer process was initiated on September 27, 2023 and was completed in November 2023. Since the waiver was received subsequent to December 31, 2022, $39.2 million of this debt was classified as Long-term debt – current portion in the consolidated statement of financial position as of December 31, 2022.
Capital Expenditures
For the year ended December 31, 2023, 2022, and 2021, we incurred capital expenditures totaling $28.4 million, $41.0 million, and $48.3 million, respectively, in connection with construction projects to develop warehouses on the land acquired in Colombia, Peru, and Costa Rica.
Cash Flows
The following table summarizes our consolidated cash flows provided by (used in) operating, investing, and financing activities for the years ended December 31, 2023, 2022, and 2021:
| For the Year Ended December 31, | $ Change | % Change | ||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 vs 2022 | 2022 vs 2021 | 2023 vs 2022 | 2022 vs 2021 | ||||||||||||||||||||||
| Net cash generated by operating activities | $ | 17,199,470 | $ | 19,611,145 | $ | 9,852,251 | $ | (2,411,675 | ) | $ | 9,758,894 | (12.3 | )% | 99.1 | % | |||||||||||||
| Net cash used in investing activities | (23,200,222 | ) | (36,483,936 | ) | (66,861,963 | ) | 13,283,714 | 30,378,027 | (36.4 | )% | (45.4 | )% | ||||||||||||||||
| Net cash provided by financing activities | 25,977,456 | 14,804,304 | 59,264,058 | 11,173,152 | (44,459,754 | ) | 75.5 | % | (75.0 | )% | ||||||||||||||||||
| Effects of exchange rate fluctuations on cash held | 277,547 | (303,754 | ) | (352,796 | ) | 581,301 | 49,042 | (191.4 | )% | 13.9 | % | |||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 20,254,251 | (2,372,241 | ) | 1,901,550 | 22,626,492 | (4,273,791 | ) | (953.8 | )% | (224.8 | )% | |||||||||||||||||
| Cash and cash equivalents at the beginning of year | 14,988,112 | 17,360,353 | 15,458,803 | (2,372,241 | ) | 1,901,550 | (13.7 | )% | 12.3 | % | ||||||||||||||||||
| Cash and cash equivalents at the end of year | $ | 35,242,363 | $ | 14,988,112 | $ | 17,360,353 | $ | 20,254,251 | $ | (2,372,241 | ) | 135.1 | % | (13.7 | )% | |||||||||||||
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Cash flows from operating activities
Cash flows generated by operating activities for the year ended December 31, 2023 amounted to $17.2 million, a decrease of $2.4 million, or 12.3%, compared to $19.6 million for the year ended December 31, 2022. Decrease in cash provided by operating activities was primarily attributed to a decrease in cash due to an increase in payments for taxes of $6.2 million and contributed by a decrease related to adjustments to other current assets of $0.3 million. Decrease in cash flows from operating activities are partially offset by a decrease in cash paid for services received for managing the real estate and G&A expenses of $4.5 million, and an increase in cash collected from rental income of $3.6 million.
Cash flows generated by operating activities for the year ended December 31, 2022 amounted to $19.6 million, an increase of $9.8 million, or 99.1%, compared to $9.9 million for the year ended December 31, 2021. This increase in cash provided by operating activities was primarily due to an increase in cash inflows from the increase in cash revenue of $5.9 million from new properties that were previously under development and began operating and were leased in 2022. In addition, there was an increase in cash inflows for a $3.8 million VAT receivable received during 2022. This increase was offset by outflows for tenant improvements.
Cash flows from investing activities
Cash flows used in investing activities for the year ended December 31, 2023 amounted to $23.2 million, a decrease in cash use of $13.3 million, or 36.4%, compared to $36.5 million for the year ended December 31, 2022. This was primarily due to a $12.6 million decrease in capital expenditure on investment properties, a $6.1 million decrease in cash proceeds from sale of asset held for sale, offset by a $2.1 million increase in cash proceeds from sale of investment properties and a $4.3 million decrease in cash provided to loans to affiliates.
Cash flows used in investing activities for the year ended December 31, 2022 amounted to $36.5 million, a decrease in cash use of $30.4 million, or 45.4%, compared to $66.9 million for the year ended December 31, 2021. This was primarily impacted by the cash paid for investment properties acquisition of $22.4 million in the year ended December 31, 2021, the proceeds from sale of investment properties of $8.9 million in the year ended December 31, 2022, and a $7.3 million decrease in capital expenditure on investment properties partially offset by an increase of $3.9 million in loans to tenants for leasehold improvement and an increase of $1.4 million in loans to affiliates.
Cash flows from financing activities
Cash flows provided by financing activities for the year ended December 31, 2023 amounted to $26.0 million, a increase of $11.2 million, or 75.5%, compared to cash flows provided by financing activities of $14.8 million for the year ended December 31, 2022. This was primarily related to a $161 million increase in long-term debt borrowings, a $139.1 million increase in long-term debt repayment, a $1.1 million increase in cash paid for raising debt, a $2.5 million increase in debt extinguishment cost paid, a $10.4 million increase in interest and commitment fees paid, a $5.2 million increase in capital contributions from non-controlling partners, and a $2.5 million increase in distributions to non-controlling partners.
Cash flows provided by financing activities for the year ended December 31, 2022 amounted to $14.8 million, a decrease of $44.5 million, or 75.0%, compared to cash flows provided by financing activities of $59.3 million for the year ended December 31, 2021. This was primarily related to a $34.4 million decrease in long-term debt borrowings, a $5.1 million increase in cash paid for interest and commitment fees, a $3.4 million decrease in capital contributions from non-controlling partners, a $1.5 million increase in long term debt repayment and a $1.0 million increase in distributions to non-controlling partners, offset by a $1.0 million decrease in cash paid for raising debt.
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| C. | Research and Development, Patents and Licenses, Etc. |
Not applicable.
| D. | Trend Information |
See “Item 5.A. Operating and Financial Review and Prospects — Operating Results”.
In addition to the information set forth in above sections, additional information about the trends affecting our business can be found in “Item 3.D. Key Information — Risk Factors”.
| E. | Critical Accounting Estimates |
Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB. The preparation of the consolidated financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the value of assets and liabilities — as well as contingent assets and liabilities — as reported on the statements of financial position, and revenues and expenses arising during the periods presented. We evaluate our assumptions and estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
For more information, see Note 2 to our audited consolidated financial statements.
Valuation of Investment Properties
Investment properties are initially recognized at cost, and are subsequently measured at fair value. We engage external appraisers in order to obtain an independent opinion on the market value of all our investments properties, including operating properties, properties under development and land bank. Our management submits an updated rent roll of the investment property portfolio to the appraiser and provides them access to the properties, leasing contracts and specific operating details of the portfolio.
The independent appraiser uses a combination of valuation techniques such as the discounted cash flows approach, sales comparison approach, and direct capitalization approach to value the investment properties. The valuation techniques used to estimate the fair value of our investment properties rely on assumptions, which are not directly observable in the market, including discount rates, occupancy rates, net operating income, and market rents. Our operating properties are primarily appraised using the discounted cash flows method and direct capitalization method. Our properties under development are primarily appraised using discounted cash flows and direct capitalization methods, adjusted by the net present value of the cost to complete and vacancy in the properties under construction. Our land bank is primarily appraised using a combination of direct capitalization, discounted cash flow, sales comparison approach (or market approach).
To review the appraisers’ valuations, we leverage our familiarity with individual properties and regional portfolios, coupled with insights in evaluating factors like interest rate fluctuations, turnover rates, and other judgment factors used in the valuation process. We then evaluate the reasonableness of the results based on these criteria and compare the reported values to those from the previous period to monitor changes. As part of the review process, we offer feedback concerning inconsistencies in factual information and inaccurate statements, before the appraisal reports are finalized.
For more information, see Note 12 to our audited consolidated financial statements for the year ended December 31, 2023 and 2022, filed with this Report. Our management believes that the chosen valuation methodologies are appropriate for determining the fair value of the types of investment properties we own.
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| FMV as of December 31, 2023 | # of Buildings | NRA(1) (sq ft) | Leased % | Occupied % | |||||||||||||||
| Land bank: | |||||||||||||||||||
| Owned properties | |||||||||||||||||||
| Colombia | $ | 24,100,446 | 4 | 1,090,215 | n/a | n/a | |||||||||||||
| Sub-total | 24,100,446 | 4 | 1,090,215 | n/a | n/a | ||||||||||||||
| Properties under right-of-use(2) | |||||||||||||||||||
| Peru | 619,976 | 3 | 878,025 | n/a | n/a | ||||||||||||||
| Sub-total | 619,976 | 3 | 878,025 | n/a | n/a | ||||||||||||||
| Total land bank | 24,720,422 | 7 | 1,968,240 | n/a | n/a | ||||||||||||||
| Properties under development: | |||||||||||||||||||
| Owned properties | |||||||||||||||||||
| Peru | 22,230,781 | 2 | 346,384 | 79.8 | % | 15.6 | % | ||||||||||||
| Costa Rica | 10,891,000 | 1 | 157,692 | 68.6 | % | 0.0 | % | ||||||||||||
| Sub-total | 33,121,781 | 3 | 504,076 | 76.3 | % | 10.7 | % | ||||||||||||
| Properties under right-of-use | |||||||||||||||||||
| Peru | 12,260,000 | 1 | 165,915 | 85.0 | % | 0.0 | % | ||||||||||||
| Sub-total | 12,260,000 | 1 | 165,915 | 85.0 | % | 0.0 | % | ||||||||||||
| Total properties under development | 45,381,781 | 4 | 669,991 | 78.5 | % | 8.0 | % | ||||||||||||
| Operating properties: | |||||||||||||||||||
| Owned properties | |||||||||||||||||||
| Colombia | 106,957,000 | 5 | 1,255,409 | 100.0 | % | 100.0 | % | ||||||||||||
| Peru | 92,239,857 | 5 | 1,004,695 | 100.0 | % | 100.0 | % | ||||||||||||
| Costa Rica(3) | 244,873,221 | 18 | 2,358,702 | 100.0 | % | 100.0 | % | ||||||||||||
| Total operating properties | 444,070,078 | 28 | 4,618,806 | 100.0 | % | 100.0 | % | ||||||||||||
| Total operating and properties under development | 489,451,859 | 32 | 5,288,797 | 97.3 | % | 88.4 | % | ||||||||||||
| Total | $ | 514,172,281 | 39 | 7,257,037 | n/a | n/a | |||||||||||||
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FMV as of December 31, 2022 |
# of Buildings |
NRA (1) (sq ft) |
Leased % |
Occupied % |
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| Land bank: | |||||||||||||||||||
| Owned properties | |||||||||||||||||||
| Colombia | $ | 16,394,722 | 4 | 1,090,211 | n/a | n/a | |||||||||||||
| Peru | 7,190,000 | 4 | 1,202,988 | n/a | n/a | ||||||||||||||
| Costa Rica | 6,155,000 | 1 | 168,208 | n/a | n/a | ||||||||||||||
| Total land bank | 29,739,722 | 9 | 2,461,407 | n/a | n/a | ||||||||||||||
| Properties under development: | |||||||||||||||||||
| Properties under right-of-use(2) | |||||||||||||||||||
| Peru | 614,523 | 1 | 165,915 | 23.8 | % | 0.0 | % | ||||||||||||
| Sub-total | 614,523 | 1 | 165,915 | 23.8 | % | 0.0 | % | ||||||||||||
| Owned properties | |||||||||||||||||||
| Colombia | 20,708,910 | 2 | 399,148 | 100.0 | % | 40.4 | % | ||||||||||||
| Peru | 9,793,481 | 1 | 122,752 | 14.8 | % | 0.0 | % | ||||||||||||
| Costa Rica | 35,715,220 | 3 | 462,021 | 73.8 | % | 33.8 | % | ||||||||||||
| Sub-total | 66,217,611 | 6 | 983,921 | 77.1 | % | 32.3 | % | ||||||||||||
| Total properties under development | 66,832,134 | 7 | 1,149,836 | 69.4 | % | 27.6 | % | ||||||||||||
| Operating properties: | |||||||||||||||||||
| Owned properties | |||||||||||||||||||
| Colombia | 70,645,712 | 4 | 1,144,099 | 100.0 | % | 100.0 | % | ||||||||||||
| Peru | 87,523,052 | 5 | 1,004,692 | 100.0 | % | 100.0 | % | ||||||||||||
| Costa Rica(3) | 194,296,013 | 15 | 1,889,095 | 99.2 | % | 99.2 | % | ||||||||||||
| Total operating properties | 352,464,777 | 24 | 4,037,886 | 99.6 | % | 99.6 | % | ||||||||||||
| Total operating and properties under development | 419,296,911 | 31 | 5,187,722 | 92.9 | % | 83.7 | % | ||||||||||||
| Total | $ | 449,036,633 | 40 | 7,649,129 | n/a | n/a | |||||||||||||
| (1) | Square feet included for estimated potential building area in the land bank and buildings under development and operation. | |
| (2) | Properties under right-of-use are mainly related to the investment properties developed on leased land. More specifically, they are associated with a land lease agreement the Parque Logistic Callao S.R.L. (Parque Logistic), a partnership entity controlled by us, entered into with Lima Airport Partners S.R.L. (“LAP”) whereas Parque Logistic committed to lease a land parcel for a period of 30 years, with the intention of developing warehouses on the leased land. The amount includes the right-of-use asset associated with our access to a piece of land lot, as well as the capitalized construction costs. | |
| (3) | As of December 31, 2023 and 2022, the operating properties in Costa Rica include patios and open-air rentable land totaling 521,275 square feet, and 521,275 square feet, respectively, for the use of trailer parking and open-air warehousing. As of December 31, 2023 and 2022, the patios and open-air rentable land had a fair value of $6,062,000, and $5,945,450, respectively, with a weighted average capitalization rate of 7.9%. The net rentable area (NRA) included in the table above excludes net rentable area of the patios or the open-air rentable land. |
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Item 6. Directors, Senior Management and Employees
| A. | Directors and Senior Management |
The following table lists the names, ages and positions of the individuals who currently serve as directors and executive officers of LPA:
| Name | Age | Position(s) | ||
| Esteban Saldarriaga | 39 | Chief Executive Officer | ||
| Annette Fernandez | 47 | Chief Financial Officer | ||
| Guillermo Zarco B. | 49 | Colombia Country Manager | ||
| Aris Stamatiadis | 42 | Costa Rica Country Manager | ||
| Alvaro Chinchayan | 47 | Peru Country Manager | ||
| Thomas McDonald | 59 | Director | ||
| Roger Lazarus | 65 | Director | ||
| Gloria Canales Saldaña | 42 | Director | ||
| Mauricio Salgar | 54 | Director | ||
| Diego Durruty | 53 | Director |
Esteban Saldarriaga has served as the Chief Executive Officer of LLP since November 2022, following his tenure on the board of directors from 2016 until his appointment as CEO. Mr. Saldarriaga assumed the role of Chief Executive Officer of LPA upon the consummation of the Business Combination. Since 2019, Mr. Saldarriaga has been a member of the board of directors and the Investment Committee of Colombian Healthcare Properties, a Jaguar Growth Partners portfolio company. Previously, he served as an Investments Principal, VP, and Associate at Jaguar Growth Partners, a global investment management firm specializing in real estate operating companies in emerging markets. Before that, he held several roles in the financial industry, including M&A Associate from 2013 to 2015 at a Latin American conglomerate based in Lima, Grupo Gloria, working on cross-border acquisitions and integrations, and as an Investment Banking Analyst from 2010 to 2013 at J.P. Morgan’s Advisory Group, based in Bogota, covering a broad array of sectors in Central and South America. Mr. Saldarriaga holds an MBA from Columbia Business School in New York and a bachelor’s and master’s degree in Economics from Pontificia Universidad Javeriana in Bogota, Colombia.
Annette Fernandez has served as Chief Financial Officer of LLP since 2017 and Chief Operating Officer of LLP since 2023 and assumed the same roles at LPA upon the consummation of the Business Combination. Prior to her time at LLP, Ms. Fernandez spent 13 years at Prologis, a real estate investment trust that invests in logistics facilities, and 5 years at PwC. Ms. Fernandez holds a bachelor’s degree in Accounting from University of Puerto Rico, Mayaguez.
Guillermo Zarco has served as Country Manager-Colombia of LLP since 2016 and assumed the same role at LPA upon the consummation of the Business Combination. Prior to his time at LLP, Mr. Zarco spent 5 years as Logistic Portfolio Manager at Terranum. Mr. Zarco holds a bachelor’s degree in industrial engineering from Universidad de los Andes in Bogota, Colombia, and a master’s degree in supply chain management from University of Aix-en-Provence, France.
Aris Stamatiadis has served as Country Manager-Costa Rica and Regional Acquisitions Manager of LLP since 2015 and assumed the same roles at LPA upon the consummation of the Business Combination. Since 2023, Mr. Stamatiadis has served as a member of the board of directors of Deindustrial Inmobiliaria Limitada, Productos Maky S.A. and 3-101-837501 S.A. Prior to his time at LLP, Mr. Stamatiadis served as General Manager for Colliers International. Aris holds a bachelor’s degree in Finance and Commerce from Concordia University.
Alvaro Chinchayán has served as Country Manager-Peru of LLP since 2016 and assumed the same role at LPA upon the consummation of the Business Combination. Prior to his time at LLP, Mr. Chinchayán served as general manager at BSF Almacenes del Perú and Papelera Alfa. Mr. Chinchayán holds an MBA from Incae Business School and a degree in Civil Engineer from Ricardo Palma University of Peru.
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Thomas McDonald became a member of the LPA Board upon the consummation of the Business Combination and has served on the board of directors of LLP since 2021. Mr. McDonald is the co-founder of Jaguar Growth Partners Group, LLC and Jaguar Growth Partners, LLC. Mr. McDonald has been Managing Partner of Jaguar Growth Partners Group, LLC as well as Managing Partner and Head of Americas of Jaguar Growth Partners, LLC since their formation in 2013. Mr. McDonald has served as managing member of Jaguar Growth Assets Management, LLC since 2013. In addition to serving on the board of directors of LLP, Mr. McDonald serves on the boards of directors for Hoteles City Express (BMV: HCITY), Colombia Healthcare Properties, Opea Securitizadora SA, and Bresco, and previously for Vesta (BMV: VESTA), Aliansce Sonae SA (BZ: ALSO3), Gafisa (NYSE: GFA), BR Malls (BZ: BRML3), Tenda (BZ: TNDA3), Parque Arauco (SNSE: PARAUCO), Bracor, AGV Logistics, and Brazilian Finance and Real Estate. Before the creation of Jaguar Growth Partners, Mr. McDonald served as Chief Strategic Officer of Equity International, LLC, where he was primarily responsible for developing its collaborative, partner-oriented investment style through establishing, building and optimizing relationships, as well as coordinating investment and portfolio management activities. From 1997 to 1999, Mr. McDonald was Executive Vice President of Anixter International (NYSE: AXE) and was responsible for global sales. From 1993 to 1997, Mr. McDonald resided in Argentina and was responsible for establishing operating businesses for Anixter in Brazil, Argentina, Chile, Venezuela and Colombia. Previously, Mr. McDonald resided in Mexico and Puerto Rico, holding operating and business development leadership roles with American Airlines and Quadrum SA de CV. Mr. McDonald is a member of the Emeritus Board of IES Abroad, and former member of the University of Chicago’s Booth School of Business Global Advisory Board. Mr. McDonald founded, and is President of the board of Coprodeli USA, a non-profit supporting the integral development of Peru’s impoverished. Mr. McDonald graduated from the University of Notre Dame and received his MBA from the University of Chicago’s Booth School of Business. Mr. McDonald has extensive experience in private equity investing in emerging markets over the past 24 years and his extensive public company, private company and non-for-profit board experience.
Roger Lazarus became a member of the LPA Board upon the consummation of the Business Combination and has served on the board of directors of LLP since 2021, and has served as the chairperson of LLP’s audit and compensation committees since March 2021. Mr. Lazarus has also served as the Chief Financial Officer of Chain Bridge I, a special purpose acquisition company (Nasdaq: CBRG) since November 2021, and has been a venture partner to Marcy Venture Partners and its portfolio companies since March 2020. In addition to serving on the board of directors of LLP, Mr. Lazarus has served on the board of directors of Heliogen, Inc. (NYSE: HLGN) since March 2023. From 1997 to 2019 he was a partner at Ernst & Young LPA, where he advised on acquisitions and investments for corporate and private equity clients. During his career with Ernst & Young, he served in a variety of roles, including as the Chief Operating Officer and board member of Ernst & Young’s LatAm North region, where he managed internal operations and oversaw financial and operating reporting for 13 countries from 2017 to 2019, as a managing partner and Chief Operating Officer of Ernst & Young Colombia from 2013 to 2019, and as the managing partner of Ernst & Young´s West Region Transactions service-line from 2006 to 2009. He is chair of the audit committee of the Goldman Environmental Foundation, the sponsor of the annual Goldman Environmental Prize. Mr. Lazarus is a Chartered Accountant (ICAEW), holds a Bachelor of Arts degree with honors in Economics from the University of York, England and completed the international certification of the Institute of Directors in London, England in 2020. Mr. Lazarus possesses valuable financial and operational expertise across both developed and emerging markets.
Gloria Canales Saldaña became a member of the LPA Board upon the consummation of the Business Combination and also serves as a member of the board of directors of Fundación Harvard en México, where she has served since 2019. Ms. Canales Saldaña also serves as a member of the advisory board of Samishop, a venture of Credicorp Peru, where she has served since 2023. Ms. Canales Saldaña is currently the Digital Director of Coppel, a privately owned retailer with a presence in Mexico and Latin America. Previously, Ms. Canales Saldaña was the Marketing Director of Amazon Mexico and held various other commercial roles at Amazon from 2014 to 2022. She holds a bachelor’s degree in Economics from ITESM, as well as a degree in International Business from the University of British Columbia. Ms. Canales Saldaña also holds an MBA from Harvard Business School. Ms. Canales Saldaña possesses extensive knowledge of the Latin American market and experience in retail and e-commerce.
Mauricio Salgar became a member of the LPA Board upon the consummation of the Business Combination and serves as an external advisor to Advent International, a global private equity firm based in Bogota, Colombia. He previously served as Managing Director of Advent International from October 2012 to December 2023. Mr. Salgar serves as a member of the board of directors of Holding Hotelera GHL, a privately held company in Colombia and as a member of the board of directors of Grupo Aval Acciones Y Valores S.A. (NYSE: AVAL). Previously, Mr. Salgar served as a member of the boards of directors of AI Inversiones Palo Alto II S.A.C. (CANVIA) from June 2017 to November 2023, Sophos Solutions S.A.S. from December 2020 to September 2023, Enjoy S.A. (SSE: ENJOY) from January 2018 to April 2021, Lifemiles B.V. from August 2015 to October 2021, Oleoducto Central S.A. “Ocensa” from January 2014 to February 2020 and Alianza Fiduciaria and Alianza Valores from January 2014 to April 2019. Mr. Salgar holds a Bachelor of Science degree in Industrial Engineering from Universidad de los Andes in Bogota, Colombia, and an MBA from the MIT Sloan School of Management, and has expansive experience in the Latin American region.
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Diego Durruty became a member of the LPA Board upon the consummation of the Business Combination and has served as Executive Vice President of Grupo Urbana, a real estate investment, development, and operations company based in Chile, since March 1996. Mr. Durruty also serves as member of the board of directors of D’Barbers since March 2020 and B21 since October 2019. Mr. Durruty has 28 years of professional experience in the real estate investment, development and operations industry in Chile and Latin America. His institutional involvement with major real estate groups has provided him with insight into various verticals, including mixed-use developments, multi-family properties, offices, shopping centers, self-storage, and parking facilities. Throughout his career, Mr. Durruty has successfully acquired 14 companies, solidifying his position as a leader in the real estate industry. Mr. Durruty pursued coursework in architecture and management at the Pontifical Catholic University of Chile, and has expansive experience in the real estate industry.
Family Relationships
There are no family relationships between the directors or executive officers.
| B. | Compensation |
Under Cayman Islands law, we are not required to disclose compensation paid to our senior management on an individual basis and we have not publicly disclosed this information elsewhere.
For the year ended December 31, 2023, we paid our executive officers and directors as a whole an aggregate of $1,550,470. This amount is comprised of salaries, bonuses, and non-cash benefits.
Logistic Properties of the Americas Equity Incentive Plan
The Company has adopted the Logistic Properties of the Americas Equity Incentive Plan filed as Exhibit 4.5 to this Report (the “Equity Incentive Plan”) in order to give the Company a competitive advantage in attracting, retaining, awarding and motivating directors, officers, employees and consultants by granting equity and equity-based awards. The Equity Incentive Plan permits the grant of options to purchase Ordinary Shares, stock appreciation rights, restricted stock, restricted stock unit awards, performance-based awards, and other equity-based awards, in each case, in respect of Ordinary Shares and cash incentive awards, thus enhancing the alignment of employee and shareholder interests.
As of the date of this Report, no awards have been granted under the Equity Incentive Plan.
| C. | Board Practices |
Board Composition
The size of the LPA Board is seven (7) directors, with five (5) directors currently appointed and two (2) vacancies. At each annual general meeting, each of the Directors of the relevant class, the term of which shall then expire, shall be eligible for re-election to the Board for a period of three years.
The LPA directors are divided among the three classes as follows:
| ● | the Class I director is Diego Durruty and his term will expire at the first annual general meeting; |
| ● | the Class II directors are Roger Lazarus and Mauricio Salgar and their terms will expire at the second annual general meeting; and |
| ● | the Class III directors are Thomas McDonald and Gloria Canales Saldaña and their terms will expire at the third annual general meeting. |
As a result of the staggered board, only one class of directors will be appointed at each annual general meeting, with the other classes continuing for the remainder of their respective terms.
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Director Independence
The LPA Board has determined that each of the directors (other than Mr. McDonald) qualifies as an independent director, as defined under listing rules of NYSE American, and the LPA Board consists of a majority of “independent directors,” as defined under the rules of the SEC and the listing rules of NYSE American relating to director independence requirements. In addition, LPA is subject to the rules of the SEC and NYSE American relating to the membership, qualifications, and operations of the audit committee, as discussed below.
Role of the Board in Risk Oversight
One of the key functions of the LPA Board is informed oversight of LPA’s risk management process. The LPA Board administers this oversight function directly through the board as a whole, as well as through various standing committees of the board that address risks inherent in their respective areas of oversight. In particular, the LPA Board is responsible for monitoring and assessing strategic risk exposure and the audit committee is responsible for considering and discussing LPA’s major financial risk exposures and the steps its management should take to monitor and control such exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee also monitors compliance with legal and regulatory requirements. The compensation committee also assesses and monitors whether LPA’s compensation plans, policies and programs comply with applicable legal and regulatory requirements.
Duties of Directors
Under Cayman Islands law, LPA’s directors owe fiduciary duties to LPA, including a duty of loyalty, a duty to act honestly, and a duty to act in what they consider in good faith to be in LPA’s best interests. LPA’s directors must also exercise their powers only for a proper purpose. LPA directors also owe to LPA a duty to act with skill and care that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to LPA, the directors must ensure compliance with the Charter, as amended and restated from time to time. LPA has the right to seek damages if a duty owed by its directors is breached. In limited exceptional circumstances, a shareholder may have the right to seek damages in LPA’s name if a duty owed by its directors is breached.
The functions and powers of the LPA Board include, among others:
| ● | conducting and managing the business of LPA; |
| ● | representing LPA in contracts and deals; |
| ● | appointing attorneys for LPA; |
| ● | selecting senior management such as managing directors and executive directors; |
| ● | providing employee benefits and pension; |
| ● | convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; |
| ● | declaring dividends and distributions; |
| ● | exercising the borrowing powers of LPA and mortgaging the property of LPA; |
| ● | approving the transfer of shares of LPA, including the registering of such shares in LPA’s register of members; and |
| ● | exercising any other powers conferred by the shareholders of LPA under the Proposed Charter, as it may be amended from time to time. |
Board Committees
The LPA Board has the authority to appoint committees to perform certain management and administration functions. The LPA Board has established an audit committee, a compensation committee, and a nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Members will serve on these committees until their resignation or until otherwise determined by the LPA Board. Copies of the charters for each committee are available on the investor relations portion of LPA’s website.
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Audit Committee
The audit committee consists of Messrs. Lazarus and Durruty and Ms. Canales Saldaña, and Mr. Lazarus serves as the chair of the audit committee. Mr. Lazarus satisfies the criteria of an audit committee financial expert as set forth under the applicable rules of the SEC. Each of Messrs. Lazarus and Durruty and Ms. Canales Saldaña satisfy the requirement for an “independent director” within the meaning of the NYSE American listing rules and the criteria for independence set forth in Rule 10A-3 of the Exchange Act and is expected to be financially literate. In arriving at such determination, the LPA Board examined each audit committee member’s scope of experience and the nature of their prior and/or current employment. Both LPA’s independent registered public accounting firm and management will periodically meet privately with the audit committee.
The functions of this committee include, among other things:
| ● | evaluating the performance, independence and qualifications of LPA’s independent auditors and determining whether to retain LPA’s existing independent auditors or engage new independent auditors; |
| ● | reviewing LPA’s financial reporting processes and disclosure controls; |
| ● | reviewing and approving the engagement of LPA’s independent auditors to perform audit services and any permissible non-audit services; |
| ● | reviewing the adequacy and effectiveness of LPA’s internal control policies and procedures, including the effectiveness of LPA’s internal audit function; |
| ● | reviewing with the independent auditors the annual audit plan, including the scope of audit activities and all critical accounting policies and practices to be used by LPA; |
| ● | obtaining and reviewing at least annually a report by LPA’s independent auditors describing the independent auditors’ internal quality control procedures and any material issues raised by the most recent internal quality-control review; |
| ● | monitoring the rotation of LPA’s independent auditor’s lead audit and concurring partners and the rotation of other audit partners as required by law; |
| ● | prior to engagement of any independent auditor, and at least annually thereafter, reviewing relationships that may reasonably be thought to bear on their independence, and assessing and otherwise taking the appropriate action to oversee the independence of LPA’s independent auditor; |
| ● | reviewing LPA’s annual and quarterly financial statements and reports, including the disclosures contained in Item 5, and discussing the statements and reports with LPA’s independent auditors and management; |
| ● | reviewing with LPA’s independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy, and effectiveness of our financial controls and critical accounting policies; |
| ● | reviewing with management and LPA’s auditors any earnings announcements and other public announcements regarding material developments; |
| ● | establishing procedures for the receipt, retention and treatment of complaints received by LPA regarding accounting, internal accounting controls, auditing or other matters; |
| ● | reviewing LPA’s major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented; and |
| ● | reviewing and evaluating the audit committee charter annually and recommending any proposed changes to the LPA Board. |
The composition and function of the audit committee complies with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC and NYSE American rules and regulations.
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Compensation Committee
LPA’s compensation committee consists of Messrs. McDonald, Salgar and Durruty. Mr. Salgar serves as the chair of the compensation committee. The LPA Board has determined that each of the members of the compensation committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act and, other than Mr. McDonald, each of the members satisfies the independence requirements of NYSE American. The functions of the committee include, among other things:
| ● | reviewing and approving the corporate objectives that pertain to the determination of executive compensation; | |
| ● | reviewing and approving the compensation and other terms of employment of LPA’s executive officers; | |
| ● | reviewing and approving performance goals and objectives relevant to the compensation of LPA’s executive officers and assessing their performance against these goals and objectives; | |
| ● | making recommendations to the LPA Board regarding the adoption or amendment of equity and cash incentive plans and approving amendments to such plans to the extent authorized by the LPA Board; | |
| ● | reviewing and making recommendations to the LPA Board regarding the type and amount of compensation to be paid or awarded to non-employee board members; | |
| ● | reviewing and assessing the independence of compensation consultants, legal counsel and other advisors as required by Section 10C of the Exchange Act; | |
| ● | administering equity incentive plans, to the extent such authority is delegated by the LPA Board; | |
| ● | reviewing and approving the terms of any employment agreements, severance arrangements, change in control protections and any other compensation, perquisites and special or supplemental benefits for executive officers; | |
| ● | reviewing with management LPA’s disclosures under the caption “Compensation Discussion and Analysis” in periodic reports to be filed with the SEC to the extent such caption is included in any such report; | |
| ● | reviewing and evaluating the compensation committee charter annually and recommending any proposed changes to the LPA Board. |
Nominating and Corporate Governance Committee
LPA’s nominating and corporate governance committee consists of Messrs. McDonald, Lazarus and Ms. Canales Saldaña. Mr. McDonald serves as the chair of the nominating and corporate governance committee. The LPA Board has determined that, other than Mr. McDonald, each of the members of the nominating and corporate governance committee satisfies the requirements for an “independent director” within the meaning of the NYSE American listing rules. The functions of this committee include, among other things:
| ● | identifying, reviewing and making recommendations of candidates to serve on the LPA Board; | |
| ● | evaluating the performance of the LPA Board, committees of the LPA Board and individual directors and determining whether continued service on the LPA Board is appropriate; | |
| ● | evaluating nominations by shareholders of candidates for election to the LPA Board; | |
| ● | evaluating the current size, composition and organization of the LPA Board and its committees and making recommendations to the LPA Board for approvals; | |
| ● | developing a set of corporate governance policies and principles and recommending to the LPA Board any changes to such policies and principles; | |
| ● | reviewing issues and developments related to corporate governance and identifying and bringing to the attention of the LPA Board current and emerging corporate governance trends; and | |
| ● | reviewing periodically the nominating and corporate governance committee charter, structure and membership requirements and recommending any proposed changes to the LPA Board. |
Limitation on Liability and Indemnification of Directors and Officers
Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against willful default, fraud or the consequences of committing a crime. The Charter provides for indemnification of LPA’s officers and directors to the maximum extent permitted by law, including for any liability incurred in their capacities as such, except through their own actual fraud, willful default or willful neglect. LPA has also purchased a policy of directors’ and officers’ liability insurance that insures LPA’s officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and will insure LPA against its obligations to indemnify its officers and directors.
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| D. | Employees |
As of December 31, 2023, we had a total of 23 employees, including 13 employees in Costa Rica, 5 employees in Colombia and 5 employees in Peru. We outsource our construction, engineering and project management and related activities, as well as maintenance of our properties, to third parties. As of December 31, 2023, none of our employees were affiliated with labor unions.
| E. | Share Ownership |
Ownership of the Company’s shares by its directors and executive officers is set forth in Item 7.A and Item 6.B (equity compensation) of this Report.
| F. | Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation |
Not applicable.
Item 7. Major Shareholders and Related Party Transactions
| A. | Major Shareholders |
The following table sets forth information regarding the beneficial ownership of Ordinary Shares as of the date hereof by:
| ● | each person known by us to be the beneficial owner of more than 5% of outstanding Ordinary Shares; | |
| ● | each of our directors and executive officers; and | |
| ● | all our directors and executive officers as a group. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if that person possesses sole or shared voting or investment power over that security. A person is also deemed to be a beneficial owner of securities that person has a right to acquire within 60 days including, without limitation, through the exercise of any option, warrant or other right or the conversion of any other security. Such securities, however, are deemed to be outstanding only for the purpose of computing the percentage beneficial ownership of that person but are not deemed to be outstanding for the purpose of computing the percentage beneficial ownership of any other person. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities.
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As of the date hereof, there are 31,709,747 Ordinary Shares issued and outstanding.
Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all Ordinary Shares beneficially owned by them.
| Name and Address of Beneficial Owner | ||||||||
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Number of Ordinary Shares |
% of Ordinary Shares |
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| Directors and Executive Officers Post-Business Combination(1): | ||||||||
| Esteban Saldarriaga | - | - | ||||||
| Annette Fernandez | - | - | ||||||
| Guillermo Zarco B. | - | - | ||||||
| Aris Stamatiadis | - | - | ||||||
| Alvaro Chinchayan | - | - | ||||||
| Thomas McDonald(2) | 26,312,000 | 83.0 | % | |||||
| Roger Lazarus | - | - | ||||||
| Gloria Canales Saldaña | - | - | ||||||
| Mauricio Salgar | - | - | ||||||
| Diego Durruty | - | - | ||||||
| All directors and executive officers of LPA post-Business Combination as a group | 26,312,000 | 83.0 | % | |||||
| Other 5% Shareholders Post-Business Combination: | ||||||||
| HC PropTech Partners III LLC(3)(4) | 2,130,693 | 6.7 | % | |||||
| JREP I Logistics Acquisition, LP(5) | 26,312,000 | 83.0 | % | |||||
(1) Unless otherwise noted, the business address of each of the following entities or individuals is c/o Logistic Properties of the Americas, Plaza Tempo, Edificio B Oficina B1, Piso 2 San Rafael de Escazú, San José, Costa Rica.
(2) Represents shares held by JREP I Logistics Acquisition, LP (see footnote 5 below) and Latam Logistic Equity Partners, LLC. Latam Logistic Equity Partners is managed by JREP I Logistics Acquisition, LP. Thomas McDonald disclaims beneficial ownership of the reported securities other than to the extent of any pecuniary interest he may have therein, directly or indirectly.
(3) Mr. Thomas D. Hennessy exercises voting and investment control over LPA shares that are held by HC PropTech Partners III LLC.
(4) The business address of the reporting person is 195 US HWY 50, Suite 208, Zephyr Cove, NV 89448.
(5) Represents shares held by JREP I Logistics Acquisition, LP, Jaguar Real Estate Partners, LP, and Latam Logistic Equity Partners, LLC. Latam Logistic Equity Partners is managed by JREP I Logistics Acquisition, LP. JREP I Logistics Acquisition, LP and Jaguar Real Estate Partners, LP are investment funds managed by JREP GP, LLC. JREP GP, LLC is managed by Jaguar Growth Partners Group LLC, managing members of which are Gary R. Garrabrant and Thomas McDonald, who share equally in the voting and investment discretion with respect to investments held by such funds. Gary R. Garrabrant and Thomas McDonald disclaim beneficial ownership of the reported securities other than to the extent of any pecuniary interest they may have therein, directly or indirectly. The business address of the reporting person is 601 Brickell Key Drive, Suite 700, Miami, FL 33131.
Significant Changes in Ownership
To our knowledge, other than as disclosed in this annual report and in our other filings with the SEC, there has been no significant change in the percentage of ownership held by any major shareholder since the consummation of the Business Combination.
Registered Holders
Based on a review of the information provided to us by our Transfer Agent, as of April 23, 2024 there were 44 registered holders of our Ordinary Shares, 34 of which were United States registered holders holding a total of 27,696,422 Ordinary Shares, representing approximately 87% of our total outstanding shares.
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| B. | Related Party Transactions |
Loan Receivables from Affiliates
On June 25, 2015, we entered into an agreement with Latam Logistic Investments LLC (“LLI”) to provide loans to LLI to meet certain tax obligations. LLI is wholly-owned by one of the prior executives of LLP and was the owner of 8.0% of the equity of LLP at the time. In July 2020, we increased the notes receivable from LLI from $3,015,000 to $4,165,000 and extended the term to December 31, 2023. In June 2021, we increased the notes receivable from LLI from $4,165,000 to $4,850,000. In May 2022, we increased the notes receivable from LLI from $4,850,000 to $6,950,000. The expiration of the term remained as December 31, 2023. As of December 31, 2023, the notes receivable had a fixed interest rate of 9.0%. The main terms of the notes receivable were payment of the balance at maturity, including interest receivable, the possibility of early payments without penalty, pledge of ordinary shares as collateral and a promissory note. As of December 31, 2023, the notes receivable balance, including accrued interest, was $9,463,164. The loan receivable was considered settled on the Closing Date, in accordance with an assignment agreement entered into between LLP and LLI. See Note 25 of our audited consolidated financial statements for more information.
Management and Advisory Services
We paid Jaguar Growth Partners LLC $554,571 for management and advisory services provided to us during the year ended December 31, 2023. On May 12, 2023, and effective as of November 17, 2022, we entered into an agreement with Jaguar Growth Partners LLC to pay $50,000 per quarter for management advisory services related to compensation for Esteban Saldarriaga, LLP’s Chief Executive Officer.
We reimburse our executives for reasonable travel-related expenses incurred while conducting business on our behalf.
Legal Services
Ramirez & Cardona Abogados, whose managing partner was an LPA board member and an LLP board member prior to the consummation of the Business Combination, provided legal services to us at a cost of $87,689 for the year ended December 2023.
Transactions Related to the Business Combination
Certain other related agreements have been entered into in connection with the Business Combination. This section describes the material provisions of certain additional agreements entered into pursuant to the Business Combination (the “Related Agreements”) but does not purport to describe all of the terms thereof. The following summary is qualified in its entirety by reference to the complete text of each of the Related Agreements, and you are urged to read such Related Agreements in their entirety.
Registration Rights Agreement
At the time of the closing of the Business Combination, certain LLP shareholders entered into a registration rights agreement (the “Registration Rights Agreement”) dated March 27, 2024 with LPA, pursuant to which, among other matters, such LLP Shareholders were granted substantially the same priorities and registration rights as the Sponsor and other “Holder” parties under the Founder Registration Rights Agreement, as amended by the Founder Registration Rights Agreement Amendment, and which Registration Rights Agreement became effective as of the Closing.
Founder Registration Rights Agreement Amendment
At the time of the closing of the Business Combination, LPA, TWOA and the Sponsor entered into an amendment (the “Founder Registration Rights Agreement Amendment”) dated March 27, 2024, to the registration rights agreement entered into by TWOA, the Sponsor and the other parties thereto at the time of TWOA’s IPO (the “Founder Registration Rights Agreement”). Pursuant to the Founder Registration Rights Agreement Amendment, the Founder Registration Rights Agreement was amended to, among other things, add LPA as a party and to reflect the issuance of Ordinary Shares pursuant to the Business Combination Agreement, reconcile with the provisions of the Registration Rights Agreement, and to provide that, notwithstanding that the other provisions of the Founder Registration Rights Agreement and the Registration Rights Agreement provide substantially the same rights and priorities to holders of registrable securities under such agreements, LPA is not required to effect or permit any registration, or cause any registration statement to become effective, with respect to any registrable securities held by any holder of the Ordinary Shares into which the Founder Shares were converted until after the expiration of 18 months following the Closing.
Amendment to Insider Letter Agreement
Simultaneously with the execution and delivery of the Business Combination Agreement, TWOA, the Sponsor, the two sponsor, and certain other TWOA shareholders and, by a joinder agreement, LPA, entered into an amendment (the “Amendment to Letter Agreement”) to the insider letter agreement entered into in connection with TWOA’s initial public offering (the “Insider Letter”) dated as of August 15, 2023. The Amendment to Letter Agreement (i) added LPA as a party to the Insider Letter, (ii) revised the terms of the Insider Letter to reflect the transactions contemplated by the Business Combination Agreement, including the issuance of Ordinary Shares in exchange for the TWOA Ordinary Shares, (iii) amended the terms of the lock-up set forth in the Insider Letter to conform with the lock-up terms in the Lock-Up Agreement dated as of August 15, 2023 by and among TWOA, the Sponsor, two sponsor, each of the shareholders of TWOA listed on the signature pages thereto, and, by joinder agreement LPA, and (iv) provided LLP with the ability to enforce, prior to the Closing, the lock-up and voting provisions of the Insider Letter.
Second Amendment to Insider Letter Agreement
At the time of the Closing of the Business Combination, TWO, the Sponsor, two sponsor, and each of the holders listed on the signature pages thereto entered into a second amendment (the “Second Amendment to the Letter Agreement”) to the Insider Letter dated as of March 27, 2024 in order to amend the terms of the lock-up set forth therein. Pursuant to the Second Amendment to the Letter Agreement, the parties agreed not to transfer the restricted securities during the period commencing from the Closing and ending on the 18-month anniversary of the Closing or earlier, if LPA consummates a third-party tender offer, stock sale, liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of LPA’s shareholders having the right to exchange their equity holdings in LPA for cash, securities or other property.
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Lock-Up Agreement
Simultaneously with the execution and delivery of the Business Combination Agreement, the majority LLP Shareholder entered into a Lock-Up Agreement with TWOA and by a joinder agreement, LPA (the “Lock-Up Agreement”) dated as of August 15, 2023. Pursuant to the Lock-Up Agreement, such LLP shareholder agreed not to, during the period commencing from the Closing and ending on the 12-month anniversary of the Closing or earlier, if LPA consummates a third-party tender offer, stock sale, liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of LPA’s shareholders having the right to exchange their equity holdings in LPA for cash, securities or other property (and, with respect to 50% of such restricted securities, subject to early release if the last trading price of the Ordinary Shares equals or exceeds $12.50 for any 20 Trading Days within any 30 Trading Day period commencing at least 180 days after the Closing): (i) lend, offer, pledge, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any restricted securities, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such restricted securities, or (iii) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (i) or (ii) above is to be settled by delivery of the restricted securities or other securities, in cash or otherwise (in each case, subject to certain limited permitted transfers, provided that the transferred shares will continue to be subject to the Lock-Up Agreement).
| C. | Interests of Experts and Counsel |
| Not applicable. |
Item 8: Financial Information
| A. | Consolidated Statements and Other Financial Information |
The historical operations of LLP prior to the Business Combination are deemed to be those of the Company. Thus, the financial statements included in this Report reflect the historical operating results of LLP prior to the closing of the Business Combination. The audited financial statements as of December 31, 2023 and 2022, and for the years ended December 31, 2023, 2022, 2021, included in this Report have been prepared in accordance with IFRS, which we refer to as our financial statements. See Item 18 of this Report for financial statements and other financial information.
Legal Proceedings
The Company may, from time to time, and may in the future be, a party to certain claims and legal proceedings incidental to the normal course of the Company’s business. From time to time, LPA may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business. Although the results of litigation and claims are inherently unpredictable and uncertain, LPA is not currently a party to any legal proceedings the outcome of which, if determined adversely to LPA, are believed to, either individually or taken together, have a material adverse effect on its business, operating results, cash flows or financial condition. Regardless of the outcome, litigation has the potential to have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
From time to time, we have been and in the future may become involved in litigation, investigations and other legal or administrative proceedings relating to claims arising from our operations, either in the normal course of business or not, or arising from violations or alleged violations of laws, regulations or acts. These may include, for example, tax assessments, claims relating to employee or employment matters, intellectual property matters, regulatory matters, contract, advertising and other claims, including proceedings with probable, possible and remote risks of loss.
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In Peru, we have occasionally been a party to, and may also be in the future, party to administrative proceedings related to compliance with regulations on the protection of trademarks, notices, trade names, logos, and, in general, any distinctive sign owned by the company (Legislative Decree 1075, which approves Complementary Provisions to Decision 486 of the Andean Community Commission establishing the Common Regime on Industrial Property). Similarly, in the normal course of business, we may be affected by advertising practices that damage the company’s reputation, i.e., behaviors that qualify as acts of unfair competition, in accordance with the regulations set forth in Legislative Decree 1044, Unfair Competition Repression Act.
Our provisions are recorded pursuant to accounting rules, based on an individual analysis of each contingency by our internal and external legal counsel. We constitute provisions for proceedings that our external counsel evaluates as having a probable risk of loss. In cases where unfavorable decisions in claims involve substantial amounts, or if the actual losses are significantly higher than the provisions constituted, the aggregate cost of unfavorable decisions could have a significantly adverse effect on both our financial condition and operating results. Moreover, our management may be forced to dedicate time and attention to defend against these claims, which could prevent it from concentrating on our core business. Therefore, we cannot assure you that these or any of our other regulatory matters and legal proceedings, including any that may arise in the future, will not harm our reputation or materially affect our ability to conduct our business in the manner that we expect or otherwise materially adversely affect us should an unfavorable ruling occur, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
As of December 31, 2023 and December 31, 2022, we provisioned $0.2 million and $0.3 million, respectively, to legal proceedings to which we were a party. Legal proceedings are inherently unpredictable and subject to significant uncertainties. If one or more legal proceedings in which we are currently involved or may come to be involved were to result in a judgment against us in any reporting period for amounts that exceeded our management’s expectations, the impact on our results of operations or financial condition for that reporting period could be material.
Dividend Policy
The LPA Board may from time to time declare dividends (including interim dividends) in accordance with the respective rights of the shareholders if it appears to the LPA Board that such dividends are justified by LPA’s financial position and that such dividends may lawfully be paid. LPA has not paid any cash dividends on its shares to date. The LPA Board has not adopted a dividend policy with respect to payment of any future dividends.
The payment of cash dividends in the future will be dependent upon LPA’s revenues and earnings, if any, capital requirements and general financial condition of LPA. The payment of any cash dividends will be within the discretion of the LPA Board at such time, and LPA will only pay such dividend out of its profits or share premium (subject to solvency requirements) as permitted under Cayman Islands law. Dividends may be paid either in cash or otherwise.
Under the laws of the Cayman Islands, a Cayman Islands exempted company may pay a dividend on its shares out of either profit or the share premium account, provided that in no circumstances may a dividend be paid if following such payment the exempted company would be unable to pay its debts as they fall due in the ordinary course of business. No dividend shall be paid otherwise than out of profits or, subject to the requirements of the Companies Act and listing rules of the applicable stock exchange, the share premium account.
If several persons are registered as joint holders of any share, any of them may give valid receipts for any dividend or other monies payable on or in respect of the share. Unless provided for by the rights attached to a share, no dividend shall bear interest against LPA.
| B. | Significant Changes |
Except as disclosed elsewhere in this Report, no significant change has occurred since the date of the Annual Financial Statements.
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Item 9. The Offer and Listing
| A. | Offer and Listing Details |
| Not applicable except for Item 9.A.4. |
Markets
Our Ordinary Shares commenced trading on NYSE American on March 28, 2024. Prior to that, there was no public trading market for our Ordinary Shares.
| B. | Plan of Distribution |
| Not applicable. | |
| C. | Markets |
| Ordinary Shares are listed on NYSE American under the ticker symbol “LPA.” | |
| D. | Selling Shareholders |
| Not applicable. | |
| E. | Dilution |
| Not applicable. | |
| F. | Expenses of the Issue |
| Not applicable. |
Item 10. Additional Information
| A. | Share Capital |
| Not applicable. | |
| B. | Memorandum and Articles of Association |
LPA is a Cayman Islands exempted company and its affairs are governed by its Amended and Restated Memorandum and Articles of Association (the “Charter”), the Companies Act and other legislation and common law of the Cayman Islands. As provided in the Charter, subject to the Companies Act, LPA’s objects are unrestricted and it has unrestricted corporate capacity to carry on or undertake any business or activity, do any act or enter into any transaction.
Pursuant to the Charter, LPA is authorized to issue 450,000,000 Ordinary Shares and 50,000,000 preference shares, $0.0001 par value each (the “Preference Shares”). The following are summaries of material provisions of the Charter insofar as they relate to the material terms of the LPA Ordinary and Preference Shares. The full Charter is incorporated by reference to Exhibit 3.1 to LPA’s Shell Company Report on Form 20-F (File No. 333-275972) filed with the SEC on March 29, 2024.
Ordinary Shares
Ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders. Voting at any meeting of shareholders shall be decided on a poll. A poll shall be taken in such manner as the chairperson of the meeting directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. In the case of an equality of votes, the chairperson of the meeting shall be entitled to exercise a casting vote.
Unless specified in the Charter, or as required by applicable provisions of the Companies Act or applicable stock exchange rules, the affirmative vote by ordinary resolution, being a resolution passed at a general meeting of shareholders by a simple majority of the votes cast by, or on behalf of, the shareholders entitled to vote at such general meeting, is required to approve any such matter voted on by LPA shareholders. Approval of certain actions will require a special resolution under Cayman Islands law and pursuant to the Charter, being a resolution passed at a general meeting of shareholders by a majority of at least two-thirds (2/3) of such shareholders as, being entitled to do so, vote in person or by proxy at such general meeting. Such actions include amending the Charter and approving a statutory merger (other than with certain subsidiaries of LPA) or consolidation with another company.
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LPA may by ordinary resolution appoint or remove any director. The LPA Board may also appoint any person as a director, either to fill a vacancy or as an additional director. The LPA Board is divided into three classes. The term of only one class of directors expires each year and each class (except for those directors appointed prior to LPA’s first annual general meeting) serves a three-year term. There is no cumulative voting with respect to the appointment of directors, with the result that the holders of more than 50% of the shares voted for the appointment of directors can appoint all of the directors. As an exempted company incorporated in the Cayman Islands, there is no requirement under the Companies Act for LPA to hold annual or extraordinary general meetings to appoint directors.
The Ordinary Shares are not entitled to pre-emptive rights, and are not subject to conversion, redemption or sinking fund provisions. LPA shareholders are entitled to receive ratable dividends when, as and if declared by the LPA Board out of funds legally available therefor.
Preference Shares
The Charter authorizes 50,000,000 Preference Shares. Subject to the limitations set out below, the LPA Board is authorized to issue shares with or without preferred, deferred or other special rights or restrictions whether in regard to dividend, voting, return of capital or otherwise. Accordingly, the LPA Board is able to, without shareholder approval, issue Preference Shares with voting and other rights that could adversely affect the voting power and other rights of the holders of the Ordinary Shares and could have anti-takeover effects. The issuance of Preference Shares, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of LPA and might adversely affect the market price of Ordinary Shares and the voting and other rights of the holders of Ordinary Shares.
As of the consummation of the Business Combination, no Preference Shares are outstanding. Although LPA does not currently intend to issue any Preference Shares, it is not assured that LPA will not do so in the future.
Treasury Shares
LPA directors may, prior to the purchase, redemption or surrender of any share, determine that such share shall be held as a treasury share. As of the date of this Report, LPA has no shares in treasury.
Issuance of Shares
Subject to the Charter and, where applicable, the rules and regulations of the applicable stock exchange, the SEC and/or any other competent regulatory authority or otherwise under applicable law, LPA directors may, in their absolute discretion and without approval of the existing LPA shareholders, issue, grant options over or otherwise deal with any unissued shares of LPA to such persons, at such times and on such terms and conditions as they may decide. No share shall be issued at a discount to par, except in accordance with the provisions of the Companies Act. In accordance with its Charter and the Companies Act, LPA shall not issue bearer shares.
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Register of Members
Under the Companies Act, LPA must keep a register of members and there should be entered therein:
| ● | the names and addresses of the members of the company, a statement of the shares held by each member, which: | ||
| o | distinguishes each share by its number (so long as the share has a number); | ||
| o | confirms the amount paid, or agreed to be considered as paid, on the shares of each member; | ||
| o | confirms the number and category of shares held by each member; and | ||
| o | confirms whether each relevant category of shares held by a member carries voting rights under the Charter, and if so, whether such voting rights are conditional; | ||
| ● | the date on which the name of any person was entered on the register as a member; and | ||
| ● | the date on which any person ceased to be a member. | ||
For these purposes, “voting rights” means rights conferred on shareholders, including the right to appoint or remove directors, in respect of their shares to vote at general meetings of the company on all or substantially all matters. A voting right is conditional where the voting right arises only in certain circumstances.
Under Cayman Islands law, the register of members of an exempted company is prima facie evidence of the matters set out therein (i.e. the register of members will raise a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members is deemed as a matter of Cayman Islands law to have legal title to the shares as set against its name in the register of members. LPA’s register of members has been updated as of the consummation of the Business Combination, and the shareholders recorded in the register of members are deemed to have legal title to the Ordinary Shares set against their name. However, there are certain limited circumstances where an application may be made to a Cayman Islands court for a determination on whether the register of members reflects the correct legal position. Further, the Cayman Islands court has the power to order that the register of members maintained by an exempted company should be rectified where it considers that the register of members does not reflect the correct legal position. If an application for an order for rectification of the register of members were made in respect of the Ordinary Shares, then the validity of such shares may be subject to re-examination by a Cayman Islands court.
Dividends
The LPA Board may from time to time declare dividends (including interim dividends) in accordance with the respective rights of the shareholders if it appears to the LPA Board that they are justified by LPA’s financial position and that such dividends may lawfully be paid. LPA has not paid any cash dividends on its shares to date. The payment of cash dividends in the future will be dependent upon LPA’s revenues and earnings, if any, capital requirements and general financial condition of LPA. The payment of any cash dividends will be within the discretion of the LPA Board at such time, and LPA will only pay such dividend out of its profits or share premium (subject to solvency requirements) as permitted under Cayman Islands law. Dividends may be paid either in cash or otherwise.
Under the laws of the Cayman Islands, a Cayman Islands exempted company may pay a dividend on its shares out of either profit or the share premium account, provided that in no circumstances may a dividend be paid if following such payment the exempted company would be unable to pay its debts as they fall due in the ordinary course of business. No dividend shall be paid otherwise than out of profits or, subject to the requirements of the Companies Act and listing rules of the applicable stock exchange, the share premium account.
If several persons are registered as joint holders of any share, any of them may give valid receipts for any dividend or other monies payable on or in respect of the share. Unless provided for by the rights attached to a share, no dividend shall bear interest against LPA.
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Transfer of Shares
Subject to applicable laws, including applicable securities laws, and the restrictions contained in the Charter, any LPA shareholder may transfer all or any of their Ordinary Shares by an instrument of transfer in the usual or common form or any other form prescribed by applicable stock exchange or approved by the LPA Board from time to time. LPA shall be entitled to retain any instrument of transfer which is registered. However, an instrument of transfer which the directors refuse to register shall be returned to the person lodging it when notice of the refusal is given by the directors.
If the shares in question were issued in conjunction with rights, options or warrants issued pursuant to the Charter on terms that one cannot be transferred without the other, the directors shall refuse to register the transfer of any such shares without evidence satisfactory to them of the like transfer of such option or warrant. Further, subject to applicable law the directors may suspend registration of the transfer of shares at such times and for such periods, not exceeding 30 days in any calendar year, as they determine.
The transferor shall be deemed to remain the holder of any transferred shares until the name of the transferee is entered into LPA’s register of members.
Calls on Ordinary Shares and Forfeiture of Ordinary Shares
The LPA Board may from time to time make calls upon LPA shareholders for any amounts unpaid for the purchase of their Ordinary Shares. The Ordinary Shares that have been called upon and remain unpaid are, after a notice period, subject to forfeiture.
Variations of Rights of Shares
If at any time the share capital of LPA is divided into different classes of shares, all or any of the rights attached to any class (unless otherwise provided by the Charter or the terms of issue of the shares of that class) may be varied with the consent in writing of the holders of not less than two-thirds (2/3) of the issued shares of that class or with the sanction of a special resolution passed in accordance with the Charter at a separate general meeting of the holders of the shares of that class. To every such separate general meeting, the provisions of the Charter relating to general meetings shall mutatis mutandis apply, except that: (a) the necessary quorum shall be any one or more persons holding or representing by proxy not less than one-third of the issued shares of the applicable class; and (b) any shareholder holding issued shares of the class, present in person or by proxy or, in the case of a corporate shareholder, by its duly authorized representative, may demand a poll.
The rights conferred upon the holders of the shares of any class shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
Redemption, Purchase and Surrender of Own Shares
Subject to the provisions of the Companies Act and to any rights for the time being conferred on shareholders holding a particular class of shares, and, where applicable, applicable stock exchange rules, the rules and regulations of the SEC and/or any other competent regulatory authority or otherwise under applicable law, LPA may by its directors:
| ● | issue shares that are to be redeemed or are liable to be redeemed at the option of the shareholder or LPA, on the terms and in the manner its directors determine before the issue of those shares; |
| ● | with the consent by special resolution of the shareholders holding shares of the relevant class, vary the rights attaching to that class of shares so as to provide that those shares are to be redeemed or are liable to be redeemed at the option of LPA on the terms and in the manner determined by the directors at the time of such variation; and |
| ● | purchase all or any of its own shares (including any redeemable shares) in such manner and on such other terms as the directors determine at the time of such purchase. |
LPA may make a payment in respect of the redemption or purchase of its own shares in any manner permitted by the Companies Act, including out of capital.
In addition, under the Companies Act no such share may be redeemed or repurchased (i) unless it is fully paid-up, (ii) if such redemption or repurchase would result in there being no shares in issue (other than treasury shares), or (iii) if LPA has commenced liquidation.
LPA directors may also accept the surrender of any fully paid share for no consideration.
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General Meetings of Shareholders
As a Cayman Islands exempted company, LPA is not obliged by the Companies Act to call annual general meetings; however, the Charter provides that to the extent required by stock exchange listing rules or any applicable law, LPA will hold an annual general meeting at such time and place as the LPA Board may determine. At annual general meetings, the annual accounts and report of the directors (if any) shall be presented.
At least five clear calendar days’ notice shall be given for any general meeting. Every notice shall be exclusive of the day on which it is given or deemed to be given and of the day for which it is given or on which it is to take effect and shall specify (a) the place, the day and the hour of the meeting, (b) if the meeting is to be held in two or more places, the technology that will be used to facilitate the meeting, (c) the general nature of the business to be transacted, and (d) if a resolution is proposed as a special resolution, the text of that resolution; provided that a general meeting of LPA shall, whether or not the notice specified in the regulation has been given and whether or not the provisions of the Charter regarding general meetings have been complied with, be deemed to have been duly convened if it is so agreed: (i) in the case of an annual general meeting, by all the shareholders (or their proxies) entitled to attend and vote thereat; and (ii) in the case of an extraordinary general meeting, by shareholders (or their proxies) having a right to attend and vote at the meeting, together holding not less than 95% of the votes entitled to be cast at such extraordinary general meeting. The accidental omission to give notice of a meeting to or the non-receipt of a notice of a meeting by any shareholder shall not invalidate the proceedings at any meeting.
The LPA Board may call extraordinary general meetings, and must convene an extraordinary general meeting upon the requisition of LPA shareholders holding at the date of deposit of the requisition not less than 40% of the right to vote at such general meeting. The requisition must (a) be in writing, (b) specify the purpose of the meeting, (c) be signed by or on behalf of each requisitioner and (d) be delivered in accordance with the notice provisions of the Charter. If the directors do not within 21 clear calendar days from the date of the deposit of the requisition duly proceed to convene a general meeting, the requisitioner(s) may themselves convene a general meeting within three months after the end of that period.
No business shall be transacted at any general meeting unless a quorum of shareholders is present at the time when the general meeting proceeds to business. The holders of at least one third of the issued and outstanding shares of LPA, being individuals present in person or by proxy or if a corporation or other non-natural person, by its duly authorized representative or proxy and entitled to vote at the general meeting, will constitute a quorum. If a quorum is not present within 15 minutes from the time appointed for the meeting, or if at any time during the meeting it becomes inquorate, then: (i) if the meeting was requisitioned by shareholders, the meeting shall be cancelled, or (ii) in any other case, the meeting shall stand adjourned to the same time and place seven days from the date of the initial meeting or to such other time and place as is determined by the directors. If a quorum is not present within 15 minutes of the time appointed for the adjourned meeting, then the meeting shall be dissolved.
The chairperson of the LPA Board or such other director as the directors have nominated to chair LPA Board meetings in the absence of the chairperson shall preside as chairperson at every general meeting of LPA. If at any meeting the chairperson of the LPA Board is not present within fifteen minutes after the time appointed for holding the meeting or is unwilling to act as chairperson of the meeting, the directors present shall elect one of their number to be chairperson of the meeting. If no director is present within 15 minutes of the time appointed for the meeting, or if no director is willing to act as chairperson, the shareholders present or by proxy shall choose one of their number to chair the meeting.
The chairperson of the meeting may with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting) adjourn a meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for twenty clear calendar days or more, not less than five clear calendar days’ notice of the date, time and place of the adjourned meeting and the general nature of the business to be transactions shall be given to shareholders.
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Record Dates
In accordance with the Charter, the directors may fix any time and date as the record date for: (a) calling a general meeting of shareholders; (b) declaring or paying a dividend; (c) making or issuing an allotment of shares; or (d) conducting any other business required pursuant to the Charter. The record date may be before or after the date on which a dividend, allotment or issue is declared, paid or made.
Directors
Appointment, Disqualification and Removal of Directors
The management of LPA is vested in the LPA Board. The Charter provides that there shall be a board of directors consisting of no less than one (1) and no more than nine (9) directors; provided that LPA may, from time to time, increase or decrease the limits on the number of directors by ordinary resolution. The size of the LPA Board is seven (7) directors, with five (5) directors having been appointed at Closing and two (2) vacancies.
The Charter provides that the directors shall be divided into three (3) classes designated as Class I, Class II and Class III, with as nearly equal a number of directors in each group as possible. Subject to the Charter, directors must be assigned to each class in accordance with a resolution or resolutions adopted by the LPA Board.
Director nominees may be appointed by the directors as outlined above or elected by an ordinary resolution at a general meeting. The seats of those directors whose terms expire at each annual general meeting will be filled at such annual general meeting. For illustrative purposes, at the 2025 annual general meeting, the term of office of the initial Class I directors shall expire and Class I directors shall be elected for a full term of three (3) years. At the 2026 annual general meeting, the term of office of the initial Class II directors shall expire and Class II directors shall be elected for a full term of three (3) years. At the 2027 annual general meeting, the term of office of the initial Class III directors shall expire and Class III directors shall be elected for a full term of three (3) years. Subject to the Charter, at each succeeding annual general meeting, directors shall be elected for a full term of three (3) years to succeed the directors of the class whose terms expire at such annual general meeting.
Without prejudice to the power of LPA to appoint a person to be a director by ordinary resolution and subject to the Charter, the directors shall have power at any time to appoint any person who is willing to act as a director, either to fill a vacancy or as an additional director. A director elected to fill a vacancy resulting from the death, resignation or removal of a director shall serve for the remainder of the full term of the director whose death, resignation or removal shall have created such vacancy and until their successor shall have been elected and qualified.
In the case of an equality of votes on any matter arising at any meeting of the directors, the chairperson of the LPA Board may exercise a second or casting vote.
Indemnity of Directors and Officers
The Companies Act does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against willful default, willful neglect or the consequences of committing a crime. The Charter provides for indemnification of LPA officers and directors to the maximum extent permitted by applicable law, including for any liability incurred in their capacities as such, except through their own actual fraud, willful default or willful neglect.
In accordance with the Charter, LPA may pay, or agree to pay, a premium in respect of a contract insuring each of the following persons against risks determined by the directors (other than liability arising out of that person’s dishonesty): (a) an existing or former director (including alternate director), secretary, officer or auditor of LPA, LPA’s existing or former subsidiaries, a company in which LPA has or had an interest (whether direct or indirect); or (b) a trustee of an employee or retirement benefits scheme or other trust in which any of the aforementioned is or was interested.
Inspection of Books and Records
The LPA Board will determine whether, to what extent, at what times and places and under what conditions or regulations the accounts and books of LPA will be open to the inspection by LPA shareholders not being directors, and no LPA shareholder (not being a director) will otherwise have any right of inspecting any account or book or document of LPA except as required by the Companies Act (and every other law and regulation of the Cayman Islands for the time being in force concerning companies and affecting LPA) or authorized by the LPA Board or by LPA shareholders by ordinary resolution.
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Changes in Capital
LPA may from time to time by ordinary resolution do any of the following and amend its memorandum of association for such purpose:
| ● | increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution will prescribe; | |
| ● | consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares; | |
| ● | convert all or any of its paid up shares into stock, and reconvert that stock into paid up shares of any denomination; | |
| ● | sub-divide its existing shares or any of them into shares of an amount smaller than that fixed by the memorandum, provided, however, that in the sub-division, the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in case of the share from which the reduced share is derived; and | |
| ● | cancel any shares that at the date of the passing of the resolution have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled. |
Subject to the provisions of the Companies Act (and any other law and regulation of the Cayman Islands applicable to LPA) and any rights for the time being conferred on shareholders holding a particular class of shares, LPA may by special resolution reduce its share capital in any way.
Winding Up
If LPA shall be wound up, the liquidator may, subject to the rights attaching to any shares and with the approval of a special resolution and any other approval required by the Companies Act, divide amongst the shareholders in kind the whole or any part of the assets of LPA (whether such assets shall consist of property of the same kind or not) and may for that purpose value any assets and determine how the division shall be carried out as between the shareholders or different classes of shareholders. The liquidator may, with the like approval, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the shareholders as the liquidator, with the like approval, shall think fit, but so that no shareholder shall be compelled to accept any asset upon which there is a liability.
Certain Differences in Corporate Law
Cayman Islands exempted companies are governed by the Companies Act. The Companies Act is modeled on English law but does not follow recent English law statutory enactments, and differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the material differences between the provisions of the Companies Act applicable to LPA and the laws applicable to companies incorporated in the United States and their shareholders.
Mergers and Similar Arrangements. In certain circumstances, the Companies Act allows for mergers or consolidations between two Cayman Islands exempted companies, or between a Cayman Islands exempted company and a company incorporated in another jurisdiction (provided that is facilitated by the laws of that other jurisdiction) so as to form a single surviving company.
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Where the merger or consolidation is between two Cayman Islands exempted companies, the directors of each exempted company must approve and enter into a written plan of merger or consolidation containing certain prescribed information. That plan or merger or consolidation must then be authorized by either (a) a special resolution (usually a majority of two-thirds in value of the voting shares voted at a general meeting) of the shareholders of each exempted company; or (b) such other authorization, if any, as may be specified in such constituent company’s articles of association. No shareholder resolution is required for a merger between a parent company (i.e., a company that holds issued shares that together represent at least 90% of the votes at a general meeting of the subsidiary company) and its subsidiary company. The consent of each holder of a fixed or floating security interest of a constituent company must be obtained, unless the court waives such requirement. If the Cayman Islands Registrar of Companies is satisfied that the requirements of the Companies Act (which includes certain other formalities) have been complied with, the Registrar of Companies will register the plan of merger or consolidation.
Where the merger or consolidation involves a foreign company, the procedure is similar, save that with respect to the foreign company, the directors of the Cayman Islands exempted company are required to make a declaration to the effect that, having made due enquiry, they are of the opinion that the requirements set out below have been met: (i) that the merger or consolidation is permitted or not prohibited by the constitutional documents of the foreign company and by the laws of the jurisdiction in which the foreign company is incorporated, and that those laws and any requirements of those constitutional documents have been or will be complied with; (ii) that no petition or other similar proceeding has been filed and remains outstanding or order made or resolution adopted to wind up or liquidate the foreign company in any jurisdictions; (iii) that no receiver, trustee, administrator or other similar person has been appointed in any jurisdiction and is acting in respect of the foreign company, its affairs or its property or any part thereof; (iv) that no scheme, order, compromise or other similar arrangement has been entered into or made in any jurisdiction whereby the rights of creditors of the foreign company are and continue to be suspended or restricted; and (v) that there are no reasons why it would be against the public interest to allow the merger or consolidation.
Where the surviving company is the Cayman Islands exempted company, the directors of the Cayman Islands exempted company are further required (in addition to the declarations set out above) to make a declaration to the effect that, having made due enquiry, they are of the opinion that the requirements set out below have been met: (i) that the foreign company is able to pay its debts as they fall due and that the merger or consolidated is bona fide and not intended to defraud unsecured creditors of the foreign company; (ii) that in respect of the transfer of any security interest granted by the foreign company to the surviving or consolidated company (a) consent or approval to the transfer has been obtained, released or waived; (b) the transfer is permitted by and has been approved in accordance with the constitutional documents of the foreign company; and (c) the laws of the jurisdiction of the foreign company with respect to the transfer have been or will be complied with; (iii) that the foreign company will, upon the merger or consolidation becoming effective, cease to be incorporated, registered or exist under the laws of the relevant foreign jurisdiction; and (iv) that there is no other reason why it would be against the public interest to permit the merger or consolidation.
Where the above procedures are adopted, the Companies Act provides certain limited appraisal rights for dissenting shareholders to be paid a payment of the fair value of such holder’s shares upon their dissenting to the merger or consolidation if they follow a prescribed procedure. In essence, that procedure is as follows: (a) the shareholder must give their written objection to the merger or consolidation to the constituent company before the vote on the merger or consolidation, including a statement that the shareholder proposes to demand payment for their shares if the merger or consolidation is authorized by the vote; (b) within 20 days following the date on which the merger or consolidation is approved by the shareholders, the constituent company must give written notice to each shareholder who made a written objection; (c) a shareholder must within 20 days following receipt of such notice from the constituent company, give the constituent company a written notice of their intention to dissent including, among other details, a demand for payment of the fair value of their shares (including their name, address, and number and classes of shares in respect of which such person dissents); (d) within seven days following the date of the expiration of the period set out in paragraph (b) above or seven days following the date on which the plan of merger or consolidation is filed, whichever is later, the constituent company, the surviving company or the consolidated company must make a written offer to each dissenting shareholder to purchase their shares at a price that the company determines is the fair value and if the company and the shareholder agree upon the price within 30 days following the date on which the offer was made, the company must pay the shareholder such amount; and (e) if the company and the shareholder fail to agree a price within such 30 day period, within 20 days following the date on which such 30 day period expires, the company must (and any dissenting shareholder may) file a petition with the Cayman Islands Grand Court to determine the fair value and such petition must be accompanied by a list of the names and addresses of the dissenting shareholders with whom agreements as to the fair value of their shares have not been reached by the company. At the hearing of that petition, the court has the power to determine the fair value of the shares together with a fair rate of interest, if any, to be paid by the company upon the amount determined to be the fair value. Any dissenting shareholder whose name appears on the list filed by the company may participate fully in all proceedings until the determination of fair value is reached. These rights of a dissenting shareholder are not available in certain circumstances, for example, to dissenters holding shares of any class in respect of which an open market exists on a recognized stock exchange or recognized interdealer quotation system at the relevant date or where the consideration for such shares to be contributed are shares of any company listed on a national securities exchange or shares of the surviving or consolidated company.
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Moreover, Cayman Islands law has separate statutory provisions that facilitate the reconstruction or amalgamation of companies in certain circumstances, commonly referred to in the Cayman Islands as a “scheme of arrangement,” which may be tantamount to a merger. Schemes of arrangement will generally be more suited for complex mergers or other transactions involving widely held companies. In the event that a merger was sought pursuant to a scheme of arrangement (the procedures for which are more rigorous and take longer to complete than the procedures typically required to consummate a merger in the United States), the arrangement in question must be approved (i) in relation to a compromise or arrangement between a company and its creditors or any class of them, a majority in number of such creditors or class of creditors with whom the arrangement is to be made and who must in addition represent 75% in value of such creditors or class of creditors, as the case may be, that are present and voting either in person or by proxy at a meeting summoned for that purpose; and (ii) in relation to a compromise or arrangement between a company and its shareholders or any class of them, shareholders who represent 75% in value of the company’s shareholders or class of shareholders, as the case may be, that are present and voting either in person or by proxy at a meeting summoned for that purpose. The convening of the meetings and subsequently the terms of the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder would have the right to express to the court the view that the transaction should not be approved, the court can be expected to approve the arrangement if it satisfies itself that:
| ● | LPA is not proposing to act illegally or beyond the scope of its corporate authority and the statutory provisions as to majority vote have been complied with; | |
| ● | LPA shareholders have been fairly represented at the meeting in question; the arrangement is such as a businessman would reasonably approve; and | |
| ● | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act or that would amount to a “fraud on the minority.” |
If a scheme of arrangement or takeover offer (as described below) is approved, any dissenting shareholder would have no rights comparable to appraisal rights (providing rights to receive payment in cash for the judicially determined value of the shares), which would otherwise ordinarily be available to dissenting shareholders of United States corporations.
Squeeze-out Provisions. When a tender offer is made and accepted by holders of 90% in value of the shares affected to whom the offer relates within four months, the offeror may, within a two-month period after the expiration of the initial four month period, give notice in the prescribed manner specified in the Companies Act to any dissenting shareholder that it desires to acquire that person’s shares on the terms of the offer and, where such notice is given, the shareholder shall (unless otherwise provided for in the Companies Act) transfer such shares to the offeror. An objection can be made to the Grand Court of the Cayman Islands, but this is unlikely to succeed unless there is evidence of fraud, bad faith, collusion or inequitable treatment of the shareholders.
Further, transactions similar to a merger, reconstruction and/or an amalgamation may in some circumstances be achieved through means other than these statutory provisions, such as a share capital exchange, asset acquisition or control, or through contractual arrangements of an operating business.
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Shareholders’ Suits. Ogier (Cayman) LLP, LPA’s Cayman Islands legal counsel, is not aware of any reported class action having been brought in a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts, and the Cayman Islands courts have confirmed the availability for such actions. In most cases, LPA will be the proper plaintiff in any claim based on a breach of duty owed to LPA, and a claim against (for example) LPA officers or directors usually may not be brought by a shareholder. However, based both on Cayman Islands authorities and on English authorities, which would in all likelihood be of persuasive authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:
| ● | a company is acting, or proposing to act, illegally or ultra vires (beyond the scope of its authority); |
| ● | the act complained of, although not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been obtained; or |
| ● | those who control the company are perpetrating a “fraud on the minority.” |
A shareholder may have a direct right of action against LPA where the individual rights of that shareholder have been infringed or are about to be infringed.
Enforcement of Civil Liabilities. The Cayman Islands has a different body of securities laws as compared to the United States and provides less protection to investors. Additionally, Cayman Islands companies may not have standing to sue before the Federal courts of the United States.
LPA has been advised by Ogier (Cayman) LLP, as LPA’s Cayman Islands legal counsel, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against LPA judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against LPA predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
Special Considerations for Exempted Companies. LPA is an exempted company with limited liability (meaning its public shareholders have no liability, as members of the company, for liabilities of the company over and above the amount paid for their shares) under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except for the exemptions and privileges listed below:
| ● | annual reporting requirements are minimal and consist mainly of a statement that the company has conducted its operations mainly outside of the Cayman Islands and has complied with the provisions of the Companies Act; |
| ● | an exempted company’s register of members is not open to inspection; |
| ● | an exempted company does not have to hold an annual general meeting; |
| ● | an exempted company may issue shares with no par value; |
| ● | an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance); |
| ● | an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; |
| ● | an exempted company may register as a limited duration company; and |
| ● | an exempted company may register as a segregated portfolio company. |
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Anti-Money Laundering—Cayman Islands
In order to comply with legislation or regulations aimed at the prevention of money laundering and terrorist financing, LPA is required to adopt and maintain anti-money laundering procedures, and will require current or prospective shareholders to provide evidence to verify their identity, address and source of funds. Where permitted, and subject to certain conditions, LPA may also delegate the maintenance of its anti-money laundering procedures (including the acquisition of due diligence information) to a suitable person.
LPA reserves the right to request such information and evidence as is necessary to verify the identity, address and source of funds of a current or prospective shareholder.
In the event of delay or failure on the part of the prospective shareholder in producing any information or evidence required for verification purposes, LPA may refuse to accept the application, in which case any funds received will be returned without interest to the account from which they were originally debited. LPA will not be liable for any loss suffered by a prospective shareholder arising as a result of a refusal of, or delay in processing, an application from a prospective shareholder if such information and documentation requested has not been provided by the prospective shareholder in a timely manner.
LPA also reserves the right to refuse to make any distribution payment to a shareholder if our directors or officers suspect or are advised that the payment of such distribution to such shareholder might result in a breach of applicable anti-money laundering or other laws or regulations by any person in any relevant jurisdiction, or if such refusal is considered necessary or appropriate to ensure our compliance with any such laws or regulations in any applicable jurisdiction.
If any person resident in the Cayman Islands knows or suspects, or has reasonable grounds for knowing or suspecting, that another person is engaged in criminal conduct or is involved with terrorism or terrorist property and the information for that knowledge or suspicion came to their attention in the course of business in the regulated sector or other trade, profession, business or employment, the person will be required to report such knowledge or suspicion to (i) the Financial Reporting Authority of the Cayman Islands, pursuant to the Proceeds of Crime Act (As Revised) of the Cayman Islands if the disclosure relates to criminal conduct or money laundering or (ii) the Financial Reporting Authority or a police officer of the rank of constable or higher if the disclosure relates to involvement with terrorism or terrorist financing and property. Such a report will not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.
By applying for shares, the prospective shareholder consents to the disclosure of any information about them to regulators and others upon request in connection with money laundering, terrorist financing and similar matters both in the Cayman Islands and in other jurisdictions.
Data Protection in the Cayman Islands—Privacy Notice
This privacy notice explains the manner in which we collect, process, and maintain personal data about investors of LPA pursuant to the Data Protection Act (Revised) of the Cayman Islands, as amended from time to time and any regulations, codes of practice, or orders promulgated pursuant thereto (the “DPA”).
We are committed to processing personal data in accordance with the DPA. In our use of personal data, we will be characterized under the DPA as a “data controller,” whilst certain of our service providers, affiliates, and delegates may act as “data processors” under the DPA. These service providers may process personal data for their own lawful purposes in connection with services provided to us. For the purposes of this Privacy Notice, “you” or “your” shall mean the shareholder (including prospective shareholders) and shall also include any individual connected to the shareholder.
By virtue of your investment in LPA, we and certain of our service providers may collect, record, store, transfer, and otherwise process personal data by which individuals may be directly or indirectly identified. We may combine personal data that you provide to use with personal data that we collect from, or about you. This may include personal data collected in an online or offline context including from credit reference agencies and other available public databases or data sources, such as news outlines, websites and other media sources and international sanctions lists.
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Your personal data will be processed fairly and for lawful purposes, including (a) where the processing is necessary for us to perform a contract to which you are a party or for taking pre-contractual steps at your request, (b) where the processing is necessary for compliance with any legal, tax, or regulatory obligation to which we are subject, (c) where the processing is for the purposes of legitimate interests pursued by us or by a service provider to whom the data are disclosed, or (d) where you otherwise consent to the processing of personal data for any other specific purpose. As a data controller, we will only use your personal data for the purposes for which we collected it. If we need to use your personal data for an unrelated purpose, we will contact you.
We anticipate that we will share your personal data with our service providers for the purposes set out in this privacy notice. We may also share relevant personal data where it is lawful to do so and necessary to comply with our contractual obligations or your instructions or where it is necessary or desirable to do so in connection with any regulatory reporting obligations. In exceptional circumstances, we will share your personal data with regulatory, prosecuting, and other governmental agencies or departments, and parties to litigation (whether pending or threatened), in any country or territory including to any other person where we have a public or legal duty to do so (e.g. to assist with detecting and preventing fraud, tax evasion, and financial crime or compliance with a court order).
Your personal data shall not be held by LPA for longer than necessary with regard to the purposes of the data processing.
We will not sell your personal data. Any transfer of personal data outside of the Cayman Islands shall be in accordance with the requirements of the DPA. Where necessary, we will ensure that separate and appropriate legal agreements are put in place with the recipient of that data.
We will only transfer personal data in accordance with the requirements of the DPA, and will apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of the personal data and against the accidental loss, destruction, or damage to the personal data.
If you are a natural person, this will affect you directly. If you are a corporate investor (including, for these purposes, legal arrangements such as trusts or exempted limited partnerships) that provides us with personal data on individuals connected to you for any reason in relation to your investment into LPA, this will be relevant for those individuals and you should transmit this document to those individuals for their awareness and consideration.
You have certain rights under the DPA, including (a) the right to be informed as to how we collect and use your personal data (and this privacy notice fulfils our obligation in this respect), (b) the right to obtain a copy of your personal data, (c) the right to require us to stop direct marketing, (d) the right to have inaccurate or incomplete personal data corrected, (e) the right to withdraw your consent and require us to stop processing or restrict the processing, or not begin the processing of your personal data, (f) the right to be notified of a data breach (unless the breach is unlikely to be prejudicial), (g) the right to obtain information as to any countries or territories outside the Cayman Islands to which we, whether directly or indirectly, transfer, intend to transfer, or wish to transfer your personal data, general measures we take to ensure the security of personal data, and any information available to us as to the source of your personal data, (h) the right to complain to the Office of the Ombudsman of the Cayman Islands, and (i) the right to require us to delete your personal data in some limited circumstances.
If you do not wish to provide us with requested personal data or subsequently withdraw your consent, you may not be able to invest in LPA or remain invested in LPA as it will affect the LPA’s ability to manage your investment.
If you consider that your personal data has not been handled correctly, or you are not satisfied with our responses to any requests you have made regarding the use of your personal data, you have the right to complain to the Cayman Islands’ Ombudsman. The Ombudsman can be contacted by email at info@ombudsman.ky or by accessing their website here: ombudsman.ky.
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Certain Anti-Takeover Provisions of the Charter
The Charter provides that the LPA Board is classified into three classes of directors. As a result, in most circumstances, a person can gain control of the LPA Board only by successfully engaging in a proxy contest at two or more annual general shareholder meetings.
LPA’s authorized but unissued Ordinary Shares and Preference Shares are available for future issuances without shareholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved Ordinary Shares and Preference Shares could render more difficult or discourage an attempt to obtain control of LPA by means of a proxy contest, tender offer, merger or otherwise. However, under Cayman Islands law, the LPA Board may only exercise the rights and powers granted to them under the Charter for a proper purpose and for what they believe in good faith to be in the best interests of LPA.
Listing of Securities
The Ordinary Shares are listed on NYSE American under the symbol “LPA”.
| C. | Material Contracts |
See “Item 4.B. Information on the Company—Business Overview,” “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources,” “Item 6.B. Directors, Senior Management and Employees — Compensation,” “Item 7.A. — Major Shareholders and Related Party Transactions—Major Shareholders” and “Item 7.B. Major Shareholders and Related Party Transactions—Related Party Transactions.” Except as otherwise disclosed in this Report (including the Exhibits), we are not currently, and have not been in the last two years, party to any material contract, other than contracts entered into in the ordinary course of business.
| D. | Exchange Controls |
There are no governmental laws, decrees, regulations or other legislation in the Cayman Islands that may affect the import or export of capital, including the availability of cash and cash equivalents for use by LPA, or that may affect the remittance of dividends, interest, or other payments by LPA to non-resident holders of Ordinary Shares. There is no limitation imposed by laws of Cayman Islands or in the Charter on the right of non-residents to hold or vote Ordinary Shares.
| E. | Taxation |
Certain Material U.S. Federal Income Tax Considerations
The following is a discussion of certain material U.S. federal income tax considerations relevant to the ownership and disposition of Ordinary Shares. This discussion applies only to Ordinary Shares held as capital assets for U.S. federal income tax purposes (generally, property held for investment) and does not discuss all aspects of U.S. federal income taxation that might be relevant to holders in light of their particular circumstances or status, including alternative minimum tax and Medicare contribution tax consequences, or holders who are subject to special rules, including:
| ● | brokers, dealers and other investors that do not own their Ordinary Shares as capital assets; |
| ● | traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; |
| ● | tax-exempt organizations, qualified retirement plans, individual retirement accounts or other tax deferred accounts; |
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| ● | banks or other financial institutions, underwriters, insurance companies, real estate investment trusts or regulated investment companies; |
| ● | persons liable for alternative minimum taxes; |
| ● | U.S. expatriates or former long-term residents of the United States; |
| ● | persons that own (directly, indirectly, or by attribution) 10% or more (by vote or value) of the Ordinary Shares; |
| ● | partnerships or other pass-through entities for U.S. federal income tax purposes, including S corporations, and beneficial owners of partnerships or other pass-through entities; |
| ● | persons holding Ordinary Shares as part of a straddle, hedging or conversion transaction, constructive sale, or other arrangement involving more than one position; |
| ● | persons required to accelerate the recognition of any item of gross income with respect to Ordinary Shares as a result of such income being recognized on an applicable financial statement; |
| ● | persons whose functional currency is not the U.S. dollar; |
| ● | persons that received Ordinary Shares as compensation for services; or |
| ● | controlled foreign corporations or passive foreign investment companies. |
This discussion is based on the Code, its legislative history, existing and proposed Treasury regulations promulgated under the Code (the “Treasury Regulations”), published rulings by the IRS and court decisions, all as of the date hereof. These laws are subject to change, possibly on a retroactive basis. This discussion is necessarily general and does not address all aspects of U.S. federal income taxation, including the effect of the U.S. federal alternative minimum tax or the Medicare contribution tax, or U.S. federal estate and gift tax, or any state, local or non-U.S. tax laws to a holder of Ordinary Shares. We have not and do not intend to seek any rulings from the IRS regarding the statements made and positions or conclusions described in this summary.
ALL HOLDERS OF PURCHASER SECURITIES SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES AND CONSIDERATIONS RELATING TO THE OWNERSHIP AND DISPOSITION OF ORDINARY SHARES, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE, AND LOCAL AND NON-U.S. TAX LAWS.
U.S. Holders
The section applies to you if you are a U.S. holder. For purposes of this discussion, a U.S. holder means a beneficial owner of Ordinary Shares that is, for U.S. federal income tax purposes:
| ● | an individual who is a citizen or resident of the United States; |
| ● | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
| ● | an estate whose income is subject to U.S. federal income tax regardless of its source; or |
| ● | a trust if (1) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust; or (2) the trust has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. |
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Ownership and Disposition of Ordinary Shares by U.S. Holders
Distributions on Ordinary Shares
This section is subject to further discussion under “— Passive Foreign Investment Company Rules” below.
Distributions paid by LPA out of current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) generally will be taxable to a U.S. holder as dividend income. Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of the U.S. holder’s basis in the Ordinary Shares and thereafter as capital gain. However, LPA does not intend to maintain calculations of its earnings and profits in accordance with U.S. federal income tax accounting principles. U.S. holders should therefore assume that any distribution by LPA with respect to its shares will be treated as dividend income. Such dividends will not be eligible for the dividends-received deduction allowed to U.S. corporations with respect to dividends received from other U.S. corporations. U.S. holders should consult their own tax advisors with respect to the appropriate U.S. federal income tax treatment of any distribution received from LPA.
Dividends received by non-corporate U.S. holders (including individuals) from a “qualified foreign corporation” may be taxed as “qualified dividend income” (“QDI”) at reduced rates of taxation, provided that certain holding period requirements and other conditions are satisfied. For these purposes, a non-U.S. corporation will be treated as a qualified foreign corporation if the Ordinary Shares are readily tradable on an established securities market in the United States. United States Treasury Department guidance indicates that the Ordinary Shares, which are listed on the NYSE American, are readily tradable on an established securities market in the United States. Thus, we believe that any dividends we pay on the Ordinary Shares to non-corporate U.S. Holders will be potentially eligible for these reduced tax rates. However, there can be no assurance that Ordinary Shares will be considered “readily tradable” on an established securities market in future years. Non-corporate U.S. holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the Code (dealing with the deduction for investment interest expense) will not be eligible for the reduced rates of taxation regardless of LPA’s status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to the positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. LPA will not constitute a qualified foreign corporation for purposes of these rules if it is a PFIC for the taxable year in which it pays a dividend or for the preceding taxable year. See discussion below under “— Passive Foreign Investment Company Rules.” U.S. holders should consult their tax advisors regarding the availability of the lower rate for dividends paid with respect to Ordinary Shares.
Subject to certain exceptions, dividends on Ordinary Shares will generally constitute foreign source income for foreign tax credit limitation purposes. If such dividends are QDI (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by a fraction, the numerator of which is the reduced rate applicable to QDI and the denominator of which is the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by LPA with respect to the Ordinary Shares generally will constitute “passive category income” but could, in the case of certain U.S. holders, constitute “general category income.”
Sale, Exchange, Redemption or Other Taxable Disposition of Ordinary Shares
This section is subject to further discussion under “— Passive Foreign Investment Company Rules,” below.
A U.S. holder generally will recognize gain or loss on any sale, exchange, redemption or other taxable disposition of Ordinary Shares in an amount equal to the difference between (i) the amount realized on the disposition and (ii) such U.S. holder’s adjusted tax basis in such Ordinary Shares. Any gain or loss recognized by a U.S. holder on a taxable disposition of Ordinary Shares generally will be capital gain or loss. A non-corporate U.S. holder, including an individual, who has held the Ordinary Shares for more than one year generally will be eligible for reduced tax rates for such long-term capital gains. The deductibility of capital losses is subject to limitations. Any such gain or loss recognized generally will be treated as U.S. source gain or loss. In the event any non-U.S. tax (including withholding tax) is imposed upon such sale or other disposition, a U.S. holder’s ability to claim a foreign tax credit for such non-U.S. tax is subject to various limitations and restrictions. U.S. holders should consult their tax advisors regarding the ability to claim a foreign tax credit.
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Passive Foreign Investment Company Rules
Generally. The treatment of U.S. holders of the Ordinary Shares could be materially different from that described above if LPA is treated as a PFIC for U.S. federal income tax purposes. A PFIC is any non-U.S. corporation with respect to which either: (i) 75% or more of the gross income for a taxable year constitutes passive income for purposes of the PFIC rules (the “PFIC Income Test”), or (ii) more than 50% of such foreign corporation’s assets in any taxable year (generally based on the quarterly average of the value of its assets during such year) is attributable to assets, including cash, that produce passive income or are held for the production of passive income (the “PFIC Asset Test”). Passive income generally includes dividends, interest, certain royalties and rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains. The determination of whether a foreign corporation is a PFIC is based upon the composition of such foreign corporation’s income and assets (including, among others, its proportionate share of the income and assets of any other corporation in which it owns, directly or indirectly, 25% or more (by value) of the stock), and the nature of such non-U.S. corporation’s activities. A separate determination must be made after the close of each taxable year as to whether a non-U.S. corporation was a PFIC for that year. Once a non-U.S. corporation qualifies as a PFIC it is, with respect to a shareholder during the time it qualifies as a PFIC, always treated as a PFIC with respect to such shareholder, regardless of whether it satisfies either of the qualification tests in subsequent years (unless the U.S. holder makes a deemed sale election with respect to the stock of the PFIC held by such U.S. holder once such PFIC ceases to satisfy either of the qualification tests).
LPA’s status as a PFIC for its taxable year, and in any future taxable year, is an annual determination that can be made only after the end of that year. Accordingly, there can be no assurances regarding LPA’s status as a PFIC for its taxable year and for any future taxable year. Because LPA’s status as a PFIC depends on facts that are not known at this time, counsel is unable to opine on LPA’s status as a PFIC in its current or any future taxable year. Further, even if LPA determines that it is not expected to be a PFIC for a taxable year, the IRS could take a different view as to whether or not LPA is a PFIC, either because of a different evaluation of income and assets or because the IRS determines that TWOA should be treated as a predecessor of LPA. The determination of whether or not LPA is a PFIC for a taxable year will depend on the composition of LPA’s income and assets, and the fair market value of its assets from time to time, including its unbooked goodwill, which may be determined by reference to LPA’s share price (which could fluctuate significantly). In addition, LPA’s possible status as a PFIC will also depend on the application of complex statutory and regulatory rules that are subject to potentially varying or changing interpretations. The composition of LPA’s assets will also be affected by LPA’s holding of significant cash balances. The application of the PFIC rules is subject to uncertainty in several respects and, therefore, no assurances can be provided that the IRS will not assert that LPA is a PFIC for the taxable year or in a future year.
If LPA is or becomes a PFIC during any year in which a U.S. holder holds Ordinary Shares, there are three separate taxation regimes that could apply to such U.S. holder under the PFIC rules, which are the (i) excess distribution regime (which is the default regime), (ii) QEF regime, and (iii) mark-to-market regime. A U.S. holder who holds (actually or constructively) stock in a non-U.S. corporation during any year in which such corporation qualifies as a PFIC is subject to U.S. federal income taxation under one of these three regimes. The effect of the PFIC rules on a U.S. holder will depend upon which of these regimes applies to such U.S. holder. However, dividends paid by a PFIC are generally not eligible for the lower rates of taxation applicable to qualified dividend income under any of the foregoing regimes.
Excess Distribution Regime. If a U.S. holder does not make a QEF election or a mark-to-market election, as described below, such U.S. holder will be subject to the default “excess distribution regime” under the PFIC rules with respect to (i) any gain realized on a sale or other disposition (including a pledge) of U.S. holder’s Ordinary Shares, and (ii) any “excess distribution” that a U.S. holder receives on his or her Ordinary Shares (generally, any distributions in excess of 125% of the average of the annual distributions on Ordinary Shares during the preceding three years or U.S. holder’s holding period, whichever is shorter). Generally, under this excess distribution regime:
| ● | the gain or excess distribution will be allocated ratably over the period during which such U.S. holder held his or her Ordinary Shares; |
| ● | the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which LPA is a PFIC, will be taxed as ordinary income; and |
| ● | the amount allocated to each of the other taxable years will be subject to the highest tax rate in effect for that taxable year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
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The tax liability for amounts allocated to years prior to the year of disposition or excess distribution will be payable generally without regard to offsets from deductions, losses and expenses. In addition, gains (but not losses) realized on the sale of a U.S. holder’s Ordinary Shares cannot be treated as capital gains, even if such U.S. holder holds the shares as capital assets. Further, no portion of any distribution will be treated as QDI.
QEF Regime. If LPA is a PFIC, a U.S. holder of Ordinary Shares may avoid taxation under the excess distribution rules described above by making a QEF election. However, a U.S. holder may make a QEF election with respect to its Ordinary Shares only if LPA provides U.S. holders on an annual basis with certain financial information specified under applicable U.S. Treasury Regulations. Because LPA currently intends to make commercially reasonable efforts to provide U.S. holders with such information upon request, it is expected that U.S. holders generally would be able to make a QEF election with respect to their Ordinary Shares.
Mark-to-Market Regime. Alternatively, a U.S. holder of Ordinary Shares may also avoid taxation under the excess distribution rules by making a mark-to-market election. The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded on a qualified exchange or other market, as defined in applicable U.S. Treasury Regulations. The Ordinary Shares, which are expected to be listed on the NYSE, are expected to qualify as marketable stock for purposes of the PFIC rules, but there can be no assurance that they will be “regularly traded” for purposes of these rules. If a U.S. holder makes a valid mark-to-market election with respect to its Ordinary Shares, such U.S. holder will include as ordinary income each year, the excess, if any, of the fair market value of the Ordinary Shares at the end of the taxable year over the U.S. holder’s adjusted basis in the Ordinary Shares. Such U.S. holder will also be allowed to take an ordinary loss in respect of the excess, if any, of such holder’s adjusted basis in the Ordinary Shares over the fair market value of such Ordinary Shares at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. holder’s basis in the Ordinary Shares will be adjusted to reflect any such income or loss amounts. Any gain that is recognized on the sale or other taxable disposition of Ordinary Shares would be ordinary income and any loss would be an ordinary loss to the extent of the net amount of previously included income as a result of the mark-to-market election and, thereafter, a capital loss. A mark-to-market election cannot be made for any lower-tier PFICs. U.S. holders should consult their tax advisors regarding the application of the PFIC rules to their indirect ownership of shares in any lower-tier PFICs.
PFIC Reporting Requirements. A U.S. holder who owns, or who is treated as owning, PFIC stock during any taxable year in which LPA is classified as a PFIC may be required to file IRS Form 8621. U.S. holders of Ordinary Shares should consult their tax advisors regarding the requirement to file IRS Form 8621 and the potential application of the PFIC regime.
Additional Reporting Requirements
Certain U.S. holders holding specified foreign financial assets with an aggregate value in excess of an applicable dollar threshold are required to report information to the IRS relating to Ordinary Shares, subject to certain exceptions (including an exception for Ordinary Shares held in an account maintained with a U.S. financial institution), by attaching a complete IRS Form 8938, Statement of Specified Foreign Financial Assets, with their tax return, for each year in which they hold Ordinary Shares. U.S. holders should consult their tax advisors regarding the effect, if any, of these rules on the ownership and disposition of Ordinary Shares.
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Non-U.S. Holders
The section applies to you if you are a non-U.S. holder. For purposes of this discussion, a non-U.S. holder means a beneficial owner (other than a partnership or an entity or arrangement so characterized for U.S. federal income tax purposes) of Ordinary Shares that is not a U.S. holder, including:
| 1. | a nonresident alien individual, other than certain former citizens and residents of the United States; | |
| 2. | a foreign corporation; or | |
| 3. | a foreign estate or trust; |
but generally does not include an individual who is present in the United States for 183 days or more in the taxable year of disposition.
Ownership and Disposition of Ordinary Shares by Non-U.S. Holders
A non-U.S. holder of Ordinary Shares will not be subject to U.S. federal income tax or, subject to the discussion below under “— Information Reporting and Backup Withholding,” U.S. federal withholding tax on any dividends received on Ordinary Shares or any gain recognized on a sale or other disposition of Ordinary Shares (including, any distribution to the extent it exceeds the adjusted basis in the non-U.S. holder’s Ordinary Shares) unless the dividend or gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States, and if required by an applicable tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States. In addition, special rules may apply to a non-U.S. holder that is an individual present in the United States for 183 days or more during the taxable year of the sale or disposition, and certain other requirements are met. Such non-U.S. holders should consult their own tax advisors regarding the U.S. federal income tax consequences of the sale or disposition of Ordinary Shares.
Dividends and gains that are effectively connected with a non-U.S. holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base in the United States) generally will be subject to U.S. federal income tax at the same regular U.S. federal income tax rates applicable to a comparable U.S. holder and, in the case of a non-U.S. holder that is a corporation for U.S. federal income tax purposes, also may be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.
Information Reporting and Backup Withholding
Information reporting requirements may apply to dividends received by U.S. holders of Ordinary Shares and the proceeds received on the disposition of Ordinary Shares effected within the United States (and, in certain cases, outside the United States), in each case other than U.S. holders that are exempt recipients (such as corporations). Backup withholding may apply to such amounts if the U.S. holder fails to provide an accurate taxpayer identification number (generally on an IRS Form W-9 provided to the paying agent of the U.S. holder’s broker) or is otherwise subject to backup withholding. Any redemptions treated as dividend payments with respect to Ordinary Shares and proceeds from the sale, exchange, redemption or other disposition of Ordinary Shares may be subject to information reporting to the IRS and possible U.S. backup withholding. U.S. holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
Information returns may be filed with the IRS in connection with, and non-U.S. holders may be subject to backup withholding on amounts received in respect of their Ordinary Shares, unless the non-U.S. holder furnishes to the applicable withholding agent the required certification as to its non-U.S. status, such as by providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI, as applicable, or the non-U.S. holder otherwise establishes an exemption. Dividends paid with respect to Ordinary Shares and proceeds from the sale or other disposition of Ordinary Shares received in the United States by a non-U.S. holder through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding unless such non-U.S. holder provides proof of an applicable exemption or complies with certain certification procedures described above, and otherwise complies with the applicable requirements of the backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against the U.S. holder’s U.S. federal income tax liability, and a U.S. holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for a refund with the IRS and furnishing any required information.
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Material Cayman Islands Tax Considerations
The following is a discussion on certain Cayman Islands income tax consequences of an investment in the securities of LPA. The discussion is a general summary of present law, which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor’s particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.
Under Existing Cayman Islands Laws
Payments of dividends and capital in respect of LPA’s securities will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of the securities nor will gains derived from the disposal of the securities be subject to Cayman Islands income or corporation tax.
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains, or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to LPA levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. There are no exchange control regulations or currency restrictions in the Cayman Islands.
No stamp duty is payable in respect of the issue of Ordinary Shares or on an instrument of transfer in respect of such shares. Stamp duty may apply to an instrument of transfer in respect of an Ordinary Share if executed in or brought into the Cayman Islands.
LPA has been incorporated under the laws of the Cayman Islands as an exempted company with limited liability and, as such, has applied for and received an undertaking from the Financial Secretary of the Cayman Islands substantially in the following form on October 10, 2023.
The Tax Concessions Act
Undertaking as to Tax Concessions
In accordance with the Tax Concessions Act (Revised) of the Cayman Islands, the following undertaking is hereby given to LPA:
1. That no law which is hereafter enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to LPA or its operations; and
2. In addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable:
2.1 on or in respect of the shares, debentures or other obligations of LPA; or
2.2 by way of the withholding in whole or in part of any relevant payment as defined in the Tax Concessions Act (Revised).
These concessions shall be for a period of twenty years from October 10, 2023.
| F. | Dividends and Paying Agents |
| Not applicable. |
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| G. | Statement by Experts |
| Not applicable. | |
| H. | Documents on Display |
We are subject to certain of the informational filing requirements of the Exchange Act. Since we are a “foreign private issuer,” we are exempt from the rules and regulations under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act, with respect to their purchase and sale of our shares. In addition, we are not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we are required to file with the SEC an Annual Report on Form 20-F containing financial statements audited by an independent accounting firm. We may, but are not required, to furnish to the SEC, on Form 6-K, unaudited financial information after each of our first three fiscal quarters. The SEC also maintains a website at http://www.sec.gov that contains reports and other information that we file with or furnish electronically with the SEC.
| I. | Subsidiary Information |
| Not applicable. | |
| J. | Annual Report to Security Holders |
| Not applicable. |
Item 11. Quantitative and Qualitative Disclosures About Market Risk
LPA is exposed to a variety of market and other risks, including the effects of changes in interest rates and foreign currency risk.
Interest Rate Risk
LPA holds financial liabilities (e.g., long-term debt) subject to interest rate risk. Changes in interest rates as of the reporting date would affect profit or loss and cash flows. As of December 31, 2023 and December 31, 2022, the debt balance that was subject to variable rates was $207.9 million and $209.3 million, respectively. Assuming no change in the principal amounts outstanding, the impact of a 1% increase or decrease in the assumed weighted average interest rate on interest expense would be approximately $2.1 million for the year ended December 31, 2023.
Liquidity Risk
Liquidity risk is the risk that LPA will encounter difficulty in meeting the obligations associated with financial liabilities that are met by delivering cash or another financial asset. LPA’s approach to managing liquidity is to ensure, to the extent possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to LPA’s reputation, and to maintain a balance between continuity of funding and flexibility through the use of bank deposits and loans.
Typically, LPA ensures that it has sufficient cash on demand, including deposits at banks and the balances of short-term credit facilities with diverse funding resources and committed borrowing facilities, to meet expected operating expenses for a period of 90 days, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot be reasonably predicted, such as natural disasters.
LPA has access to a sufficient variety of sources of funding to repay debt maturing within 12 months in the normal course of business. See Notes 2 and 16 of our audited consolidated financial statements for more information on a debt covenant matter that arose effective December 31, 2022, as a result of which LPA categorized the related debt balance as repayable on demand. The waiver was subsequently obtained on February 17, 2023 and LPA remains in compliance with all covenants as of the date the financial statements were issued.
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Foreign Currency Risk
LPA is exposed to market risk from changes in foreign currency exchange rates primarily in connection with all of LPA’s subsidiaries. LPA is subject to fluctuations in the Costa Rican colones, Peruvian soles and Colombian pesos to U.S. dollar currency exchange rates. LPA attempts to mitigate its net exposure to the changes in interest rates by ensuring its debt and revenue are denominated in the same currencies. In addition, LPA keeps minimal cash in local currencies and holds the majority of cash in its functional currency of U.S. dollar. As of December 31, 2023 and 2022, the net assets in foreign operations of LPA in its operations in Colombia, which uses the Colombian peso as its functional currency amounted to $88.7 million and $49.4 million, respectively. As of December 31, 2023 and 2022, a hypothetical 10% strengthening or weakening of the U.S. dollar against the local currencies of the subsidiaries would have decreased or increased profit for the year by $0.3 million and $0.4 million, respectively.
Market Risk
LPA is exposed to market risks primarily from changes in interest rates and foreign currency exchange rates. LPA does not use derivatives for trading purposes to generate income or to engage in speculative activity.
Item 12: Description of Securities Other Than Equity Securities
| Not applicable. | |
| A. | Debt Securities |
| Not applicable. | |
| B. | Warrants and Rights |
| To be confirmed. | |
| C. | Other Securities |
| Not applicable. | |
| D. | American Depositary Shares |
| Not applicable. |
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PART II
Item 13: Defaults, Dividend Arrearages and Delinquencies
Not applicable.
Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
Item 15: Controls and Procedures
| A. | Disclosure Controls and Procedures |
Our Chief Executive Officer and Chief Financial Officer are responsible for implementing disclosure controls and procedures to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such information is necessary for our officers who certify the Company’s financial reports and for other members of senior management and the CEO and CFO as appropriate to allow timely decisions regarding required disclosure. Because of these inherent limitations, our disclosure controls and procedures may not prevent or detect misstatements. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The CEO and CFO conducted an evaluation of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) under the Exchange Act) as of December 31, 2023. Based upon our most recent evaluation, our CEO and CFO has concluded that our disclosure controls and procedures were not effective as of December 31, 2023, as a result of the material weaknesses in our internal controls over financial reporting described above.
Prior to this filing, we have been publicly registered in Colombia and not subject to the financial reporting requirements of the SEC and have not had the accounting personnel and other resources required for SEC financial reporting purposes and to monitor such work while maintaining appropriate segregation of duties. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As a result of the issues described above, deficiencies were identified, that either individually or in the aggregate, resulted in the identification of material weaknesses related to each component of the Internal Control — Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework, including control environment, risk assessment, control activities, information and communication, and monitoring activities. The material weaknesses have led to the material misstatement and subsequent restatement of our consolidated financial statements for the years ended December 31, 2021 and 2022, and if not remediated timely may lead to material misstatements in the future.
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To remediate our identified material weaknesses, we have adopted and intend to adopt several measures intended to improve our internal control over financial reporting. These measures include strengthening our finance, operations and information technology teams, and implementation of further policies, processes and internal controls relating to our financial reporting. Specifically, our planned remediation efforts include the following:
| ● | establish controls to identify, assess, and respond to risks of material misstatement and working to formalize internal control processes and documentation; |
| ● | strengthening supervisory reviews by our management in charge of financial issues; |
| ● | hiring additional qualified accounting and finance personnel and engaging financial consultants to enable the implementation of internal control over financial reporting and to segregate duties amongst our accounting and finance personnel; |
| ● | improving our accounting systems and implementing information technology general controls; and |
| ● | engaging third parties as required, under management’s supervision, to assist with technical accounting, application of new accounting standards, tax matters, valuations of investment properties, and ESG sustainability metrics, among other matters. |
We are committed to maintaining a strong internal control environment, and we expect to continue our efforts to ensure the material weaknesses described above are remediated. However, these material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Notwithstanding the material weaknesses in our internal control over financial reporting, we have concluded that the combined financial statements included in this Report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with IFRS.
See Exhibits 12.1 and 12.2 for the certifications required by this Item.
| B. | Management’s Annual Assessment on Internal Control Over Financial Reporting |
This Report does not include an annual assessment on internal control over financial reporting due to a transition period established by the rules of the SEC for newly public companies.
| C. | Attestation Report of the Registered Public Accounting Firm |
This Report does not include an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. For so long as we qualify as an “emerging growth company” as defined under the JOBS Act, our independent registered accounting firm is not required to issue an attestation report on our internal control over financial reporting.
| D. | Changes in Internal Control over Financial Reporting |
Except for the changes described above in connection with our remediation activities associated with the material weaknesses that existed as of December 31, 2023, there have been no other changes during the year ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 16: [Reserved]
Item 16A. Audit Committee Financial Expert
Our board of directors has determined that Roger Lazarus, a member of our audit committee, is a “financial expert,” as defined in Item 16A of Form 20-F. Mr. Lazarus is “independent”, as defined in Rule 10A-3 under the Exchange Act. For a description of Mr. Lazarus’ experience, see Item 6.A.
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Item 16B. Code of Ethics
LPA has adopted a Code of Conduct and Ethics that applies to all of LPA’s employees, officers and directors. The full text of LPA’s Code of Conduct and Ethics is posted on the Company’s website here: https://ir.lpamericas.com/governance/governance-documents/default.aspx. LPA intends to disclose future amendments to, or waivers of, the Company’s Code of Conduct and Ethics, as and to the extent required by SEC regulations, at the same location on the Company’s website identified above or in public filings. Information contained on the Company’s website is not incorporated by reference into this Report and you should not consider information contained on the Company’s website to be part of this Report.
Item 16C. Principal Accountant Fees and Services
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered and billed by Deloitte & Touche, S.A., our independent registered public accounting firm for the periods indicated.
| For the years ended, December 31 | ||||||||
| 2023 | 2022 | |||||||
| Audit fees | $ | 2,329,368 | $ | 260,968 | ||||
| All other fees | 17,383 | 15,404 | ||||||
| $ | 2,346,751 | $ | 276,372 | |||||
Audit fees include the aggregate fees billed for each of the fiscal years for professional services rendered by our independent registered public accounting firm for the audit of our annual and interim financial statements.
All other fees include the aggregate fees billed in each of the fiscal years for products and services provided by our independent registered public accounting firm, other than the services reported under audit fees, audit-related fees, and tax fees.
Item 16D.
Not applicable.
Item 16E.
Not applicable.
Item 16F.
Not applicable.
Item 16G. Corporate Governance
LPA is considered a “foreign private issuer” under U.S. securities laws and the rules of NYSE American. Under the applicable securities laws of the U.S., foreign private issuers are subject to different disclosure requirements than U.S. domiciled issuers. As a foreign private issuer, we are permitted to follow home country practice in lieu of certain corporate NYSE American governance rules, subject to certain requirements. We currently rely, and will continue to rely, on the foreign private issuer exemption with respect to the following rules:
| ● | Section 703 of the NYSE American Company Guide, which requires that a company provide shareholders with a written notice at least ten days in advance of all shareholder meetings and to provide for such notice in its by-laws. | |
| ● | Section 704 of the NYSE American Company Guide, which requires that company hold an annual meeting of shareholders no later than one year after the end of the company’s fiscal year. |
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| ● | Section 705 of the NYSE American Company Guide, which requires that a company solicit proxies from its shareholders pursuant to a proxy statement in connection with its shareholder meetings. | |
| ● | Section 804 of the NYSE American Company Guide, which requires that a company have a nomination committee that is comprised solely of “independent directors,” or by a majority of the independent directors, as defined by the NYSE American. Although we currently have a nomination and corporate governance committee, under the laws of the Cayman Islands we are not required, nor do we intend to, have such committee comply with Section 804 of the NYSE American Company Guide; | |
| ● | Section 805 of the NYSE American Company Guide, which requires that a company’s compensation committee be comprised solely of “independent directors” or, in the case of a company that does not have a compensation committee, that all of the members of the board of directors be independent. Although we currently have a compensation committee, under the laws of the Cayman Islands we are not required, nor do we intend to, have such committee comply with Section 805 of the NYSE American Company Guide. |
Item 16H.
Not applicable.
Item 16I.
Not applicable.
Item 16J. Insider Trading Policies
Not applicable.
Item 16K. Cybersecurity
Risk Management and Strategy
We have structured and implemented a set of security policies, procedures, and system redundancies intended to reduce the vulnerability of our systems and protect the confidentiality and availability of our critical systems. We engaged a managed IT service provider with a longstanding relationship with the Company (since 2016) to assist us with managing cybersecurity risks. Our managed IT service provider conducts testing of our controls and environment that enables us to assess, identify, manage, and remediate material risks from cybersecurity threats to our information systems.
We have developed a cybersecurity risk management program that includes processes and policies in areas related to identity and access management, incident response, employee training on cybersecurity matters, device management, and patch and vulnerability management, among others. Our managed IT Service provider provides LPA with advice on technology, infrastructure, management, and productivity in relation to its information technology capabilities across different departments of our company.
In the event of a potential cybersecurity incident, or a series of related cybersecurity incidents, we have implemented an Information Security Incident Response Plan designed to establish company-wide incident response processes and procedures for response to Information Security Incidents. The Information Risk Committee (“IRC”) is the executive body with ultimate oversight over all Information Security Incidents. It is formed by our Chief Financial Officer, our managed IT services provider and outside legal counsel. The Company’s IRC provides oversight and policy guidance on physical, cyber and information security, as well as business continuity, throughout the Company’s operations. It is responsible for designing, implementing, monitoring and supporting effective physical and technical security controls for the Company’s physical assets, business systems and operational technologies. Additionally, LPA has information technology general controls in place to support internal control over financial reporting. These controls are tested by LPA’s internal control procedures, and deficiencies, if any, are reported to senior management and the Audit Committee of the LPA Board.
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We have an employee education program that is designed to raise awareness of cybersecurity threats to reduce our vulnerability as well as to encourage consideration of cybersecurity risks across functions. We also monitor risks relating to potential compromises of sensitive information at our third-party business partners where relevant and reevaluate the risks at these partners semi-annually. Before contracting with certain third-parties, such as our local property managers, or purchasing third-party technology or other solutions that involve exposure to sensitive company or tenant information, we conduct diligence on those third-parties, which includes a security review, including, as appropriate, conducting a review of security ratings of and System and Organization Controls (“SOC”) reports provided by actual and potential vendors. We maintain back-ups and disaster recovery plans to restore our information in the event of an incident.
There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully enforced, complied with or effective in protecting our systems and information. We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. We face certain ongoing risks from cybersecurity threats that, if realized, are reasonably likely to materially affect our operations, business strategy, results of operations, or financial condition. For an additional description of our cybersecurity risks and potential related impacts on us, see the section entitled “Risk Factors – Our business and operations could suffer in the event of system failures or cybersecurity attack” in this Report.
Cybersecurity Governance
Our third-party managed IT service provider reports monthly to our Chief Financial Officer on cybersecurity matters, including cybersecurity risks. Our CFO is involved in the management of information security procedures and quarterly briefs the LPA Board on information security matters.
The LPA Board plays an important role in our risk oversight and discharges its duties both as a full board and through the Audit Committee. The LPA Board is involved in risk oversight through its direct decision-making authority with respect to certain significant matters and review of our overall business strategy, as well as indirectly through the further oversight of management delegated to each of the board’s committees. The LPA Board relies on management to bring significant matters impacting our company to its attention. If a material cybersecurity incident occurred, the IRC would report it to the Audit Committee and LPA Board.
As reflected in the Audit Committee Charter, which is available on our website, the committee oversees our processes and policies relating to certain risk assessment and risk management matters, including with respect to cybersecurity risks. The audit committee administers its risk oversight function by receiving periodic reports from members of senior management on areas of material risk to our company. Our Audit Committee discusses our cybersecurity program at least annually, receives updates on relevant developments and considers steps that our management has taken to monitor and seek to mitigate any risk exposures.
LPA’s CFO and the team leader for its managed IT services provider, who collectively lead our IRC, have relevant degrees and certifications in Information Technology and Security and more than 10 years of experience in their current and prior roles related to IT Security. Along with leading LPA’s cybersecurity learning and awareness trainings, they also participate in various third-party industry conferences and trainings.
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PART III
Item 17. Financial Statements
See Item 18.
Item 18. Financial Statements
The audited consolidated financial statements as required under Item 18 are attached hereto starting on page F-1 of this Report. The audit report of Deloitte & Touche, S.A., an independent registered public accounting firm, is included therein preceding the audited consolidated financial statements.
Additionally, the condensed financial statements of Latam Logistic Properties, S.A are included as a supplement on Schedule I - Parent Only Condensed Financial Information as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021, prepared in accordance with Rule 12-04 of Regulation S-X. Our investment properties are included as a supplement on Schedule III - Schedule of Real Estate as of December 31, 2023, prepared in accordance with Rule 12-28 of Regulation S-X.
Item 19. Exhibits
We have filed the following documents as exhibits to this Report:
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* Filed herewith.
+ Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). Logistic Properties of the Americas agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon its request.
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this report on its behalf.
| LOGISTIC PROPERTIES OF THE AMERICAS | ||
| By: | /s/ Esteban Saldarriaga | |
| Esteban Saldarriaga | ||
| Chief Executive Officer | ||
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LatAm Logistic Properties, S.A. |
| Consolidated Financial Statements |
| As of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 |
LATAM LOGISTIC PROPERTIES, S.A.
TABLE OF CONTENTS
| F- |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Latam Logistic Properties, S.A.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Latam Logistic Properties, S.A. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of profit or loss and other comprehensive income (loss), changes in equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes and the schedules listed in the Index at Item 18 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche, S.A.
San José, Costa Rica
April 26, 2024
We have served as the Group’s auditor since 2017
Firm ID – 01108
| F- |
LATAM LOGISTIC PROPERTIES, S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME (LOSS)
(in U.S. Dollars)
| For the years ended December 31, | ||||||||||||||
| Notes | 2023 | 2022 | 2021 | |||||||||||
| REVENUES | ||||||||||||||
| Rental revenue | 2m, 4 | $ | 39,327,779 | $ | 31,890,569 | $ | 25,553,931 | |||||||
| Other | 108,564 | 92,998 | 42,142 | |||||||||||
| Total revenues | 39,436,343 | 31,983,567 | 25,596,073 | |||||||||||
| Investment property operating expense | 5 | (5,142,950 | ) | (5,407,439 | ) | (4,087,365 | ) | |||||||
| General and administrative | (8,508,862 | ) | (4,609,195 | ) | (5,394,201 | ) | ||||||||
| Investment property valuation gain | 2j,12 | 20,151,026 | 3,525,692 | 12,610,127 | ||||||||||
| Interest income from affiliates | 22 | 664,219 | 561,372 | 424,838 | ||||||||||
| Financing costs | 16 | (31,111,064 | ) | (11,766,726 | ) | (9,799,558 | ) | |||||||
| Net foreign currency gain (loss) | 2c | 284,706 | 299,762 | (707,570 | ) | |||||||||
| Gain (loss) on sale of investment properties | 2j,12 | 1,165,170 | (398,247 | ) | — | |||||||||
| Gain on sale of asset held for sale | 13 | 1,022,853 | — | — | ||||||||||
| Other income | 6 | 307,822 | 100,127 | 151,391 | ||||||||||
| Other expenses | 6 | (6,132,636 | ) | (611,173 | ) | (1,367,647 | ) | |||||||
| Profit before taxes | 12,136,627 | 13,677,740 | 17,426,088 | |||||||||||
| INCOME TAX EXPENSE | 20 | (4,980,622 | ) | (2,236,507 | ) | (8,756,703 | ) | |||||||
| PROFIT FOR THE YEAR | $ | 7,156,005 | $ | 11,441,233 | $ | 8,669,385 | ||||||||
| OTHER COMPREHENSIVE INCOME (LOSS): | ||||||||||||||
| Items that may be reclassified subsequently to profit or loss: | ||||||||||||||
| Translation gain (loss) from functional currency to reporting currency | 2c | 18,373,064 | (13,533,732 | ) | (12,522,802 | ) | ||||||||
| Total comprehensive income (loss) for the year | $ | 25,529,069 | $ | (2,092,499 | ) | $ | (3,853,417 | ) | ||||||
| PROFIT FOR THE YEAR ATTRIBUTABLE TO: | ||||||||||||||
| Owners of the Group | $ | 3,139,333 | $ | 8,028,610 | $ | 4,126,505 | ||||||||
| Non-controlling interests | 18 | 4,016,672 | 3,412,623 | 4,542,880 | ||||||||||
| Total profit for the year | $ | 7,156,005 | $ | 11,441,233 | $ | 8,669,385 | ||||||||
| TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: | ||||||||||||||
| Owners of the Group | $ | 21,512,397 | $ | (5,505,122 | ) | $ | (8,396,297 | ) | ||||||
| Non-controlling interests | 18 | 4,016,672 | 3,412,623 | 4,542,880 | ||||||||||
| Total comprehensive income (loss) for the year | $ | 25,529,069 | $ | (2,092,499 | ) | $ | (3,853,417 | ) | ||||||
| Weighted average number of shares – basic and diluted | 168,142,740 | 168,142,740 | 168,142,740 | |||||||||||
| Earnings per share attributable to owners of the Group – basic and diluted | 19 | $ | 0.019 | $ | 0.048 | $ | 0.025 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F- |
LATAM LOGISTIC PROPERTIES, S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in U.S. Dollars)
| As of December 31, | ||||||||||
| Notes | 2023 | 2022 | ||||||||
| ASSETS | ||||||||||
| CURRENT ASSETS: | ||||||||||
| Cash and cash equivalents | 8 | $ | 35,242,363 | $ | 14,988,112 | |||||
| Due from affiliates | 22 | 9,463,164 | 8,798,945 | |||||||
| Lease and other receivables, net | 9 | 3,557,988 | 2,516,525 | |||||||
| Receivable from the sale of investment properties – short term | 12 | 4,072,391 | — | |||||||
| Asset held for sale | 2l,13 | — | 2,977,147 | |||||||
| Prepaid construction costs | 1,123,590 | 2,317,383 | ||||||||
| Restricted cash equivalent – short term | 8 | 2,000,000 | — | |||||||
| Other current assets | 10 | 3,443,518 | 1,708,313 | |||||||
| Total current assets | 58,903,014 | 33,306,425 | ||||||||
| NON-CURRENT ASSETS: | ||||||||||
| Investment properties | 2j,12 | 514,172,281 | 449,036,633 | |||||||
| Tenant notes receivables – long term, net | 9 | 6,002,315 | 6,796,584 | |||||||
| Receivable from the sale of investment properties – long term | 12 | 4,147,507 | — | |||||||
| Restricted cash equivalent – long term | 8 | 681,110 | 3,252,897 | |||||||
| Property and equipment, net | 11 | 354,437 | 427,719 | |||||||
| Deferred tax asset | 20 | 1,345,859 | 239,281 | |||||||
| Other non-current assets | 5,218,787 | 4,559,330 | ||||||||
| Total non-current assets | 531,922,296 | 464,312,444 | ||||||||
| TOTAL ASSETS | $ | 590,825,310 | $ | 497,618,869 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| CURRENT LIABILITIES: | ||||||||||
| Accounts payable and accrued expenses | 14 | $ | 13,127,502 | $ | 8,591,922 | |||||
| Deposits for the sale of assets | 13 | — | 2,400,000 | |||||||
| Income tax payable | 20 | 2,024,865 | 663,703 | |||||||
| Retainage payable | 2n | 1,737,805 | 3,001,433 | |||||||
| Long term debt – current portion | 16 | 16,703,098 | 110,943,460 | |||||||
| Other current liabilities | 2i | 959,539 | 54,983 | |||||||
| Total current liabilities | 34,552,809 | 125,655,501 | ||||||||
| NON—CURRENT LIABILITIES: | ||||||||||
| Long term debt | 16 | 253,151,137 | 98,383,315 | |||||||
| Deferred tax liability | 20 | 37,451,338 | 37,215,884 | |||||||
| Security deposits | 1,790,554 | 1,706,959 | ||||||||
| Other non-current liabilities | 2i | 2,936,555 | 590,740 | |||||||
| Total non-current liabilities | 295,329,584 | 137,896,898 | ||||||||
| TOTAL LIABILITIES | 329,882,393 | 263,552,399 | ||||||||
| EQUITY: | ||||||||||
| Common share capital | 17 | 168,142,740 | 168,142,740 | |||||||
| Retained earnings | 67,878,645 | 64,739,312 | ||||||||
| Foreign currency translation reserve | 2c | (13,694,983 | ) | (32,068,047 | ) | |||||
| Equity attributable to owners of the Group | 222,326,402 | 200,814,005 | ||||||||
| Non-controlling interests | 18 | 38,616,515 | 33,252,465 | |||||||
| Total equity | 260,942,917 | 234,066,470 | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 590,825,310 | $ | 497,618,869 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F- |
LATAM LOGISTIC PROPERTIES, S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in U.S. Dollars)
| Attributable to owners of the Group | ||||||||||||||||||||||||||||||||||||||||||
| Membership Units | Common Shares | |||||||||||||||||||||||||||||||||||||||||
| Notes | Number of Units | Membership units | Additional Paid—in Capital | Number of Shares | Common share capital | Retained Earnings | Foreign currency translation reserve | Equity attributable to owners of the Group | Non—Controlling Interests | Total Equity | ||||||||||||||||||||||||||||||||
| BALANCE AS OF JANUARY 1, 2021 | 100 | $ | 100 | $ | 168,142,696 | — | $ | — | $ | 52,584,197 | $ | (6,011,513 | ) | $ | 214,715,480 | $ | 23,605,352 | $ | 238,320,832 | |||||||||||||||||||||||
| Profit for the year | — | — | — | — | — | 4,126,505 | — | 4,126,505 | 4,542,880 | 8,669,385 | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | 2c | — | — | — | — | — | — | (12,522,802 | ) | (12,522,802 | ) | — | (12,522,802 | ) | ||||||||||||||||||||||||||||
| Total comprehensive loss for the year | — | — | — | — | — | 4,126,505 | (12,522,802 | ) | (8,396,297 | ) | 4,542,880 | (3,853,417 | ) | |||||||||||||||||||||||||||||
| Conversion from S.R.L. to S.A. | 1 | (100 | ) | $ | (100 | ) | $ | (168,142,696 | ) | 168,142,740 | $ | 168,142,740 | $ | — | $ | — | $ | (56 | ) | $ | — | $ | (56 | ) | ||||||||||||||||||
| Capital contributions | 18 | — | — | — | — | — | — | — | — | 4,084,160 | 4,084,160 | |||||||||||||||||||||||||||||||
| Distributions paid to non-controlling interest | 18 | — | — | — | — | — | — | — | — | (1,024,747 | ) | (1,024,747 | ) | |||||||||||||||||||||||||||||
| BALANCE AS OF DECEMBER 31, 2021 | — | — | — | 168,142,740 | $ | 168,142,740 | $ | 56,710,702 | $ | (18,534,315 | ) | $ | 206,319,127 | $ | 31,207,645 | $ | 237,526,772 | |||||||||||||||||||||||||
| Profit for the year | — | — | — | — | — | 8,028,610 | — | 8,028,610 | 3,412,623 | 11,441,233 | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | 2c | — | — | — | — | — | — | (13,533,732 | ) | (13,533,732 | ) | — | (13,533,732 | ) | ||||||||||||||||||||||||||||
| Total comprehensive loss for the year | — | — | — | — | — | 8,028,610 | (13,533,732 | ) | (5,505,122 | ) | 3,412,623 | (2,092,499 | ) | |||||||||||||||||||||||||||||
| Capital contributions | 18 | — | — | — | — | — | — | — | — | 700,000 | 700,000 | |||||||||||||||||||||||||||||||
| Distributions paid to non-controlling interest | 18 | — | — | — | — | — | — | — | (2,067,803 | ) | (2,067,803 | ) | ||||||||||||||||||||||||||||||
|
BALANCE AS OF DECEMBER 31, 2022 |
— | — | — | 168,142,740 | $ | 168,142,740 | $ | 64,739,312 | $ | (32,068,047 | ) | $ | 200,814,005 | $ | 33,252,465 | $ | 234,066,470 | |||||||||||||||||||||||||
| Profit for the year | — | — | — | — | — | 3,139,333 | — | 3,139,333 | 4,016,672 | 7,156,005 | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | 2c | — | — | — | — | — | — | 18,373,064 | 18,373,064 | — | 18,373,064 | |||||||||||||||||||||||||||||||
| Total comprehensive income for the Year |
3,139,333 | 18,373,064 | 21,512,397 | 4,016,672 | 25,529,069 | |||||||||||||||||||||||||||||||||||||
| Capital Contributions | 18 | — | — | — | — | — | — | — | — | 5,870,314 | 5,870,314 | |||||||||||||||||||||||||||||||
| Distributions paid to non-controlling interest | 18 | — | — | — | — | — | — | — | — | (4,522,936 | ) | (4,522,936 | ) | |||||||||||||||||||||||||||||
|
BALANCE AS OF DECEMBER 31, 2023 |
— | — | — | 168,142,740 | $ | 168,142,740 | $ | 67,878,645 | $ | (13,694,983 | ) | $ | 222,326,402 | $ | 38,616,515 | $ | 260,942,917 | |||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F- |
LATAM LOGISTIC PROPERTIES, S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. Dollars)
| For the years ended December 31, | ||||||||||||||
| Notes | 2023 | 2022 | 2021 | |||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Profit for the year | $ | 7,156,005 | $ | 11,441,233 | $ | 8,669,385 | ||||||||
| Adjustments: | ||||||||||||||
| Depreciation and amortization | 11 | 107,229 | 124,287 | 139,896 | ||||||||||
| Adjustment for expected credit losses | 9 | (87,723 | ) | 1,470,990 | 1,062,133 | |||||||||
| Net foreign currency (gain) loss | 2c | (507,152 | ) | (325,135 | ) | 302,638 | ||||||||
| Amortization of right-of-use assets | 2i,15 | 60,666 | 104,198 | 96,662 | ||||||||||
| Investment property valuation gain | 2j,12 | (20,151,026 | ) | (3,525,692 | ) | (12,610,127 | ) | |||||||
| Financing costs | 16 | 31,111,064 | 11,766,726 | 9,799,558 | ||||||||||
| (Gain) loss on sale of investment properties | 2j,12 | (1,165,170 | ) | 398,247 | — | |||||||||
| Loss on disposal of property and equipment | 11 | 83,389 | 30,269 | 925 | ||||||||||
| (Gain) loss on disposition of asset held for sale | 13 | (1,022,853 | ) | — | — | |||||||||
| Straight-line rent | 2j | (1,035,592 | ) | (2,423,347 | ) | (1,984,366 | ) | |||||||
| Interest income | 22 | (763,208 | ) | (561,372 | ) | (424,838 | ) | |||||||
| Income tax expense | 20 | 4,980,622 | 2,236,507 | 8,756,703 | ||||||||||
| Working capital adjustments | ||||||||||||||
| (Increase) decrease in: | ||||||||||||||
| Lease and other receivables, net | 9 | (1,180,448 | ) | 1,092,549 | (5,185,489 | ) | ||||||||
| Other current assets and other assets | (1,378,914 | ) | (1,295,515 | ) | 1,414,116 | |||||||||
| Increase (decrease) in: | ||||||||||||||
| Accounts payable and accrued expenses | 14 | 4,963,720 | (1,558,595 | ) | 619,206 | |||||||||
| Security deposits | 454,556 | 346,458 | 417,547 | |||||||||||
| Retainage payable | 2n | (1,147,401 | ) | 74,730 | 663,420 | |||||||||
| Income tax payable | 20 | 1,361,162 | 539,231 | (492,438 | ) | |||||||||
| Income tax paid | 20 | (4,639,456 | ) | (324,624 | ) | (1,392,680 | ) | |||||||
| Net cash provided by operating activities | $ | 17,199,470 | $ | 19,611,145 | $ | 9,852,251 | ||||||||
| Cash flows from investing activities: | ||||||||||||||
| Capital expenditure on investment properties | 2j,12 | $ | (28,409,164 | ) | $ | (40,975,109 | ) | $ | (48,254,733 | ) | ||||
| Acquisitions of investment properties, net of closing costs | 2j,12 | — | — | (22,443,229 | ) | |||||||||
| Purchase of property and equipment | 11 | (126,476 | ) | (88,487 | ) | (97,687 | ) | |||||||
| Proceeds from sale of asset held for sale | 2l,13 | 1,600,000 | 1,200,000 | 1,200,000 | ||||||||||
| Proceeds from sale of investment properties | 2j,12 | 2,778,063 | 8,874,753 | — | ||||||||||
| Loans to affiliates | 22 | — | (2,100,000 | ) | (685,000 | ) | ||||||||
| Loans to tenants for leasehold improvement | 9 | (389,695 | ) | (4,687,480 | ) | (801,384 | ) | |||||||
| Repayments on loans to tenants | 9 | 775,263 | 671,937 | 407,600 | ||||||||||
| Restricted cash equivalent | 8 | 571,787 | 620,450 | 3,812,470 | ||||||||||
| Net cash used in investing activities | $ | (23,200,222 | ) | $ | (36,483,936 | ) | $ | (66,861,963 | ) | |||||
| Cash flows from financing activities: | ||||||||||||||
| Long term debt borrowing | 16 | $ | 205,676,643 | $ | 44,217,867 | $ | 78,626,400 | |||||||
| Long term debt repayment | 16 | (152,482,361 | ) | (13,335,183 | ) | (11,860,052 | ) | |||||||
| Cash paid for raising debt | 16 | (1,175,820 | ) | (41,550 | ) | (1,070,987 | ) | |||||||
| Debt extinguishment cost paid | 16 | (2,473,134 | ) | — | — | |||||||||
| Interest and commitment fee paid | 16 | (24,862,976 | ) | (14,505,955 | ) | (9,391,336 | ) | |||||||
| Capital contributions from non-controlling partners | 18 | 5,868,152 | 700,000 | 4,084,160 | ||||||||||
| Distributions to non-controlling partners | 18 | (4,522,936 | ) | (2,067,803 | ) | (1,024,747 | ) | |||||||
| Repayment of office lease liabilities | 15 | (50,112 | ) | (163,072 | ) | (99,380 | ) | |||||||
| Net cash provided by financing activities | $ | 25,977,456 | $ | 14,804,304 | $ | 59,264,058 | ||||||||
| Effects of exchange rate fluctuations on cash held | 277,547 | (303,754 | ) | (352,796 | ) | |||||||||
| Net increase (decrease) in cash and cash equivalents | 20,254,251 | (2,372,241 | ) | 1,901,550 | ||||||||||
| Cash and cash equivalents at the beginning of year | 14,988,112 | 17,360,353 | 15,458,803 | |||||||||||
| Cash and cash equivalents at the end of year | $ | 35,242,363 | $ | 14,988,112 | $ | 17,360,353 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F- |
LATAM LOGISTIC PROPERTIES, S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. Dollars)
1. NATURE OF BUSINESS
Latam Logistic Properties, S.A. (“LLP”) is a company organized in accordance with the laws of the Republic of Panama, constituted as a limited liability company, by public deed dated April 29, 2015, and registered before the Public Registry of Panama on May 4, 2015. The registered office is located in BMW Plaza, 9th floor, Calle 50, Panama City, Republic of Panama.
Latam Logistic Properties, S.A., through its affiliates and subsidiaries (jointly referred to as “the Group” and individually as “Group entities”), is a fully-integrated, internally managed real estate company that develops, owns and manages a diversified portfolio of warehouse logistics assets in Central and South America.
The consolidated financial statements of the Group as of December 31, 2023 and 2022 and the years ended December 31, 2023, 2022 and 2021 include the consolidated financial information of LLP and its subsidiaries. Information on the Group’s structure is provided in Note 2.
As of December 31, 2023, and 2022, Latam Logistic Properties, S.A. ownership structure was as follows:
SCHEDULE OF OWNERSHIP STRUCTURE
| 2023 | 2022 | |||||||||||||||
| Number of Common Shares | % of Ownership | Number of Common Shares | % of Ownership | |||||||||||||
| JREP I Logistics Acquisition, L.P. (1) | 149,378,010 | 88.8 | % | 149,378,010 | 88.8 | % | ||||||||||
| Latam Logistics Investments, LLC | 13,451,419 | 8.0 | % | 13,451,419 | 8.0 | % | ||||||||||
| Latam Logistic Equity Partners, LLC | 5,313,311 | 3.2 | % | 5,313,311 | 3.2 | % | ||||||||||
| Total | 168,142,740 | 100.0 | % | 168,142,740 | 100.0 | % | ||||||||||
| (1) | JREP I Logistics Acquisition L.P. (“JREP I”) is the Group’s majority shareholder and controlling investor with 88.8% ownership. JREP GP LLC has exclusive management control over JREP I, which was engaged by Jaguar Growth Asset Management LLC to have full control over JREP I. The ultimate Group’s capital partner is Jaguar Growth Partners LLC, a New York based private equity fund with ample experience in real estate developments throughout emerging markets. |
Business Combination Agreement -
On August 15, 2023, two, a Cayman Islands exempted company (“TWOA”), announced the execution of a definitive business combination agreement (“Business Combination Agreement”) with LLP, and, by joinder agreements, each of Logistic Properties of the Americas, a Cayman Islands exempted company (“Pubco”), Logistic Properties of the Americas Subco, a Cayman Islands exempted company and a wholly-owned subsidiary of Pubco (“SPAC Merger Sub”), and LPA Panama Group Corp., a company incorporated under the laws of Panama and a wholly-owned subsidiary of Pubco (“Company Merger Sub”), for a proposed business combination among the parties (the “Business Combination”). Under the Business Combination Agreement, at the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”), among other matters, (a) SPAC Merger Sub will merge with and into TWOA, with TWOA continuing as the surviving company (the “SPAC Merger”), and, in connection therewith, each issued and outstanding security of TWOA immediately prior to the effective time of the Mergers (as defined below) (the “Effective Time”) will no longer be outstanding and will automatically be canceled, in exchange for the right of the holder thereof to receive a substantially equivalent security of Pubco; (b) Company Merger Sub will merge with and into LLP, with LLP continuing as the surviving company (the “Company Merger,” and, together with the SPAC Merger, the “Mergers”), and, in connection therewith, the LLP shares issued and outstanding immediately prior to the Effective Time will be canceled in exchange for the right of the holders thereof to receive ordinary shares of Pubco (“Pubco Ordinary Shares”); and (c) as a result of the Mergers, TWOA and LLP will each become wholly-owned subsidiaries of Pubco, and Pubco Ordinary Shares will be listed on The New York Stock Exchange (“NYSE”) under the symbol “LPA”, all upon the terms and subject to the conditions set forth in the Business Combination Agreement. The Business Combination was consummated on March 27, 2024. Refer to Note 25 for more details.
| F- |
Conversion from S.R.L. to S.A.
On January 2, 2021, the General Assembly of Shareholders unanimously approved the transformation and conversion of LatAm Logistic Properties, S.A. from a limited liability company to a corporation, resolution duly registered with the Public Registry of Panama on January 13, 2021 (the “Conversion”). In accordance with the bylaws of a limited liability company and up to conversion date on January 2, 2021, the capital structure of Latam Logistic Properties, S.A. was through Membership Units.
The Group evaluated the facts and circumstances and concluded the Conversion represented a capital restructuring, which was reflected in the consolidated statements of changes in equity prospectively. Additionally, the Conversion resulted in an exchange of equity interest that was akin to a stock split. As such, the change in capital stock was reflected retrospectively for earnings per share (“EPS”) purposes.
2. MATERIAL ACCOUNTING POLICY INFORMATION
a. Basis of Accounting - The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).
The consolidated financial statements have been prepared on the historical cost basis except certain investment properties that are measured at fair value as of end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The Group management believes that all adjustments that are required for a proper presentation of the financial information are incorporated in these consolidated financial statements.
b. Going Concern - The accompanying consolidated financial statements are prepared on a going concern basis in accordance with International Accounting Standard (“IAS”) 1 Presentation of Financial Statements, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
As described further in Note 16, the Group obtained a waiver relating to compliance with the debt service coverage ratio as required by its loan covenants with Bancolombia. This waiver remains in force through December 31, 2023.
In September 2023, the Group restructured its Bancolombia debt to defer principal payments until May 2024, at which point the Group will have 12 months to pay this accrued principal and interest in full at no additional cost and will subsequently be tested for compliance with the debt service coverage ratio on June 30, 2024 as required by its debt covenants. The outstanding Bancolombia loan balance as of December 31, 2023 was $41.8 million, with $1.1 million classified within current liabilities on the consolidated statement of financial position.
| F- |
While the Group has fulfilled all debt service payments required by its lending agreements in all jurisdictions to date, current interest rates in Colombia make it probable that further debt waivers, restructuring, or repayment will be necessary relating to the Bancolombia loan prior to May 2024, when principal payments resume on the loan. The Group’s lending agreements with Bancolombia are only collateralized by four Colombian investment properties, which were valued at $90.3 million and $67.5 million as of December 31, 2023 and 2022, respectively. No other guarantees have been provided by the Group’s other subsidiaries that would put the Group’s operations outside of Colombia at risk in event of foreclosure. While the $8.0 million in revenue generated by the Group’s Colombian operations for the year ended December 31, 2023 represents approximately 20.4% of the Group’s consolidated revenues for the year, the Group’s operations outside of Colombia are expected to be profitable and generate adequate liquidity to provide for continued operations. In the event that the Group is unable to obtain further debt waivers, restructure the debt, or otherwise repay the Bancolombia loan, there is a possibility Bancolombia may initiate proceedings to foreclose on its Colombian properties without further recourse. However, this would not create material uncertainty as to the Group’s ability to continue as a going concern in regards to its operations outside of Colombia. Additionally, upon the consummation of the Group’s merger with TWOA on March 27, 2024, the Group gained access to additional capital which further supports the Group’s ability to finance ongoing operations. (refer to Note 25 for additional information on the merger).
c. Foreign Currency -
| ● | Functional and Presentation Currency - The consolidated financial statements are presented in U.S. dollars (USD), which is the functional currency of Latam Logistic Properties, S.A. and its subsidiaries, except for the Colombian subsidiaries of Latam Logistic COL OpCo, S.A. and Latam Logistic COL PropCo Cota I, S.A.S, for which the functional currency is the Colombian Peso. As of December 31, 2023 and 2022, the sell-exchange rates for a USD to relevant currencies for the Group $1.00 were the following: |
SCHEDULE OF FOREIGN CURRENCY EXCHANGE RATE
| 2023 | 2022 | |||||||
| Costa Rican Colones (“CRC”) | CRC 527 | CRC 602 | ||||||
| Peruvian Soles (“PEN”) | PEN 3.713 | PEN 3.820 | ||||||
| Colombian Peso (“COP”) | COP 3,822 | COP 4,810 | ||||||
The average rates for a USD to relevant currencies for the Group $1.00 were the following for the years ended December 31, 2023, 2022, and 2021:
| 2023 | 2022 | 2021 | ||||||||||
| Costa Rican Colones (“CRC”) | CRC 547 | CRC 651 | CRC 624 | |||||||||
| Peruvian Soles (“PEN”) | PEN 3.747 | PEN 3.840 | PEN 3.885 | |||||||||
| Colombian Peso (“COP”) | COP 4,321 | COP 4,255 | COP 4,743 | |||||||||
| ● | Foreign Currency Transactions - Transactions in foreign currencies are translated into the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. |
| F- |
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognized in profit or loss.
Foreign Operations - The assets and liabilities of foreign operations, for which the functional currency is other than the USD are translated into USD at exchange rates in effect at the date of the consolidated statement of financial position. The income and expenses of foreign operations are translated at exchange rates at the dates of the transactions. Components of equity are translated into USD at the historical exchange rates.
Foreign currency differences are recognized in other comprehensive income (OCI) and accumulated in a separate line item in the Group’s consolidated statements of changes in equity under “Foreign currency translation reserve”, except to the extent that the translation difference is allocated to non-controlling interests (NCI). When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the foreign currency translation reserve account related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes only part of an associate while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.
d. Use of Significant Judgements and Estimates - In preparing the consolidated financial statements, management has made judgments, estimates, and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income, and expenses. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. Actual results may differ from these estimates.
The following are the critical accounting judgements and key sources of estimation uncertainty, that the management have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognized in financial statements.
| ● | Leases - The Group applied the following judgements that significantly affect the determination of the amount and timing of income from lease contracts: |
Definition of a lease
Under IFRS 16, a lease is a contract (i.e., an agreement between two or more parties that creates enforceable rights and obligations), or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.
| F- |
Property lease classification – the Group as lessor
The Group has entered into leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the property, that it retains substantially all the risks and rewards incidental to ownership of this property and accounts for the contracts as operating leases.
Estimating the incremental borrowing rate – the Group as lessee
The Group cannot readily determine the interest rate implicit in leases where it is the lessee, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).
| ● | Receivable from the sale of investment properties – The receivable from the sale of investment properties is related to the disposition of an investment property, Latam Parque Logistico Calle 80 Building 500A, as discussed in detail in Note 12. The receivable balance was initially determined by applying a discount rate to the expected future proceeds. The discount rate was estimated based on several Level 2 valuation inputs such as senior unsecured Option Adjusted Spread (“OAS”) and the Colombia sovereign yield curve. |
| ● | Investment Properties - Investment properties are initially recognized at cost. The Group elects to subsequently remeasure investment properties at fair value. As of each period end, valuations for the Group’s investment properties are generally performed by an external valuation firm. Note 12 provides detailed information about the key assumptions used in the determination of the fair value of the investment properties. |
| ● | Impairment of Financial Assets – Allowances for expected credit losses are made based on the risk of non-payment taking into account aging, previous experience, economic conditions and forward-looking data, which are evaluated on a quarterly basis. Allowances for tenant notes receivables are measured as 12-months expected credit losses. Allowances for lease receivables are measured as lifetime expected credit losses depending on changes in the credit quality of the counterparty, with 100% of balances being reserved for if a counterparty exhibits characteristics of default. The definition of default is determined by considering whether there is a breach of financial covenants or information developed internally or obtained from external sources. |
| ● | Control for partnership agreements – Management has assessed whether its interest over investees represents a parent / subsidiary relationship and requires consolidation as per IFRS 10 control criteria. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Management considers all relevant facts and circumstances in assessing whether it has power over an investee including contractual arrangement contained within partnership agreements, rights arising service contracts with other vote holders for partnership arrangements and decision-making authority for the Group. |
| F- |
e. Basis of Consolidation - The consolidated financial statements incorporate the financial statements of the Group and entities controlled by the Group (its subsidiaries) at the end of each reporting year. Control is achieved when the Group:
| ● | Has the 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 affects its returns. |
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
When the Group has less than a majority of the voting rights of an investee, it considers that it has power over the investee when the contractual rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power, including:
| ● | The size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; |
| ● | Exposure, or rights, to variable returns from its involvement with the investee |
| ● | Any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made including the ability to use its power over the investee to affect the amount of the investor’s returns |
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control. Specifically, the results of subsidiaries acquired or disposed of during the year are included in profit or loss from the date the Group gains control until the date when the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive loss are attributed to owners of the Group and to the non-controlling interests. Total comprehensive income of the subsidiaries is attributed to the owners of the Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation.
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests of non-controlling shareholders that are present ownership interests entitling their holders to a proportionate share of net assets upon liquidation may initially be measured at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Other non-controlling interests are initially measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Group.
When the Group loses control of a subsidiary, the gain or loss on disposal recognized in profit or loss is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value, as of the date control is lost, of any retained interest in the subsidiary and (ii) the previous carrying amount of the assets (including goodwill), less liabilities of the subsidiary and any non-controlling interests. All amounts previously recognized in other comprehensive loss in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as required/permitted by applicable IFRS Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 Financial Instruments when applicable, or the cost on initial recognition of an investment in an associate or a joint venture.
| F- |
The consolidated financial statements include the financial information of Latam Logistic Properties, S.A. (parent entity) and its subsidiaries:
SCHEDULE OF SUBSIDIARIES
| Ownership Interest | Non-controlling Interest | |||||||||||||||||
| Entities | Country | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Latam Logistic Property Holdings LLC | United States | 100 | % | 100 | % | |||||||||||||
| Latam Logistic COL HoldCo I, S de R.L. | Panamá | 100 | % | 100 | % | |||||||||||||
| Latam Logistic CR HoldCo I, S de R.L. | Panamá | 100 | % | 100 | % | |||||||||||||
| Latam Logistic Pan HoldCo S de R.L. | Panamá | 100 | % | 100 | % | |||||||||||||
| Latam Logistic Pan Holdco El Coyol II S de R.L. | Panamá | 50 | % | 50 | % | 50 | % | 50 | % | |||||||||
| Latam Logistic Pan Holdco Cedis Rurales S de R.L. | Panamá | 100 | % | 100 | % | |||||||||||||
| Latam Logistic Pan HoldCo San Joaquin I S de R.L. | Panamá | 100 | % | 100 | % | |||||||||||||
| Latam Logistic Pan Holdco Verbena I S de R.L. (1) | Panamá | 47.6 | % | 47.6 | % | 52.4 | % | 52.4 | % | |||||||||
| Latam Logistic Pan Holdco Verbena II S, S.R.L. (2) | Panamá | 47.6 | % | 47.6 | % | 52.4 | % | 52.4 | % | |||||||||
| Latam Logistic Pan Holdco Santiago I, S de R.L. | Panamá | 100 | % | 100 | % | |||||||||||||
| Latam Logistic Pan Holdco Santo Domingo, S de R.L. | Panamá | 100 | % | 100 | % | |||||||||||||
| Latam Logistic Pan Holdco Medellin I, S.R.L. | Panamá | 100 | % | 100 | % | |||||||||||||
| LatAm Logistic Pan HoldCo Bodegas los Llanos, S.R.L. | Panamá | 100 | % | 100 | % | |||||||||||||
| Latam Logistic PER OpCo, S.R.L. | Perú | 100 | % | 100 | % | |||||||||||||
| Latam Logistic PER PropCo Lurin I, S. de R.L. | Perú | 100 | % | 100 | % | |||||||||||||
| Latam Logistic PER PropCo Lurin II, S. de R.L. | Perú | 100 | % | 100 | % | |||||||||||||
| Latam Logistic PER PropCo Lurin III, S. de R.L. | Perú | 100 | % | 100 | % | |||||||||||||
| Parque Logístico Callao, S.R.L. | Perú | 40 | % | 50 | % | 60 | % | 50 | % | |||||||||
| Latam Logistic COL OpCo, S.A. (3) | Colombia | 100 | % | 100 | % | |||||||||||||
| Latam Logistic COL PropCo Cota I, S.A.S. | Colombia | 100 | % | 100 | % | |||||||||||||
| Latam Logistic CR OpCo, S.R.L. | Costa Rica | 100 | % | 100 | % | |||||||||||||
| Latam Logistic CR PropCo Alajuela I, S.R.L. | Costa Rica | 100 | % | 100 | % | |||||||||||||
| Latam Propco El Coyol Dos S de R.L. | Costa Rica | 50 | % | 50 | % | 50 | % | 50 | % | |||||||||
| Latam Logistic Propco Bodegas San Joaquín S de R.L. | Costa Rica | 100 | % | 100 | % | |||||||||||||
| Latam Logistic Propco Cedis Rurales Costa Rica S de R.L. | Costa Rica | 100 | % | 100 | % | |||||||||||||
| 3101784433, S.R.L. | Costa Rica | 23.6 | % | 23.6 | % | 76.4 | % | 76.4 | % | |||||||||
| Latam Logistic PropCo Bodegas los Llanos S de R.L. | Costa Rica | 100 | % | 100 | % | |||||||||||||
| Latam Logistic CR Zona Franca, S. de R.L. | Costa Rica | 100 | % | 100 | % | |||||||||||||
| Latam Logistics SLV OpCo S.A. de C.V. | El Salvador | 100 | % | 100 | % | |||||||||||||
| (1) | Formerly known as Latam Logistic Propco Pedregal Panamá S de R.L. | |
| (2) | Formerly known as Latam Logistic Pan Holdco Pedregal Panamá S de R.L. | |
| (3) | Formerly known as Latam Logistic COL OpCo, S.A.S. |
f. Financial Instruments – All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. All recognized financial assets are measured subsequently in their entirety at either amortized cost or fair value, depending on the classification of the financial assets.
Classification of Financial Assets – Financial assets that meet the following conditions are measured subsequently at amortized cost:
| ● | The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and |
| ● | The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
Financial assets that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):
| ● | The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and |
| ● | The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
| F- |
By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL). Despite the foregoing, the Group may make the following irrevocable election/designation at initial recognition of a financial asset:
| ● | The Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met; and |
| ● | The Group may irrevocably designate a financial asset that meets the amortized cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch. |
Amortized Cost and Effective Interest Method – The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest income over the relevant year.
For financial assets other than purchased or originated credit-impaired financial assets, the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the financial asset, or, where appropriate, a shorter period, to the gross carrying amount of the financial asset on initial recognition. For purchased or originated credit-impaired financial assets, a credit-adjusted effective interest rate is calculated by discounting the estimated future cash flows, including expected credit losses, to the amortized cost of the financial asset on initial recognition.
The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortized cost of a financial asset before adjusting for any loss allowance.
For financial assets other than purchased or originated credit-impaired financial assets, interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired. For financial assets that have subsequently become credit-impaired, interest income is recognized by applying the effective interest rate to the amortized cost of the financial asset. If, in subsequent reporting years, the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognized by applying the effective interest rate to the gross carrying amount of the financial asset.
Impairment of Financial Assets – The Group recognizes a loss allowance for expected credit losses (“ECL”) on lease receivables, tenant notes receivables as well as due from affiliates. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.
| F- |
Measurement of Expected Credit Losses - For lease receivables, the Group performs an assessment for all tenants to evaluate their current financial state and historical payment behavior. For tenants who show indicators of financial difficulties, the Group creates a specific reserve for those tenants covering 100% of their outstanding balance. For lease receivables where tenants are not specifically reserved for, the Group applies a lifetime ECL using a provision matrix. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument.
For tenant notes receivables and due from affiliates, the Group assess and monitors if there has been a significant increase in credit risk since initial recognition. If the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance at an amount equal to 12-month ECL; otherwise, the Group recognizes lifetime ECL. Based on the result of the assessment for the year ended December 31, 2023 and 2022, the Group concluded there has not been a significant increase in credit risk since initial recognition for tenant notes receivables and due from affiliates.
The Group only extends such financial arrangements to tenants who have successfully undergone the comprehensive background check procedures. Occasionally, the Group extends loans to related party, or affiliate, where the Group conducts a thorough examination of borrower’s reputation, credit history, and payment record. The Group applies continuous monitoring whereby tenants are evaluated on a monthly basis to ensure there are no indicators that may suggest an increase in credit risk.
Due to there not being a significant increase in credit risk, the Group measures the loss allowance for tenant notes receivables and due from affiliates at an amount equal to 12-month ECL, which represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. The 12-month ECL are estimated using the probability of default approach, which is a function of the probability of default, loss given default (i.e., the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date.
The Group writes off a financial asset when there is information indicating that the debtor is in a financial difficulty and there is no realistic prospect of recovery, e.g., when the debtor has been placed under liquidation or has entered into bankruptcy proceedings. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognized in profit or loss.
Refer below for the definition of terms:
| i. | Significant Increase in Credit Risk - In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. |
| F- |
| ii. | Definition of Default – The Group considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that financial assets that meet either of the following criteria are generally not recoverable: |
| ● | When there is a breach of financial covenants by the debtor; or |
| ● | Information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collateral held by the Group). |
Irrespective of the above analysis, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.
| iii. | Credit – impaired Financial Assets – A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following events: |
| ● | Significant financial difficulty of the issuer or the borrower; |
| ● | A breach of contract, such as a default or past due event (see (ii) above); |
| ● | The lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; |
| ● | It is becoming probable that the borrower will enter bankruptcy or other financial reorganization; or |
| ● | The disappearance of an active market for that financial asset because of financial difficulties. |
| iv. | Recognition of Expected Credit Losses – The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account. The Group records a provision for possible loss if the collection of a receivable balance is considered doubtful. As of December 31, 2023 and 2022, the Group recorded an allowance for expected credit losses related to receivables from clients of $946,006 and $2,772,977, respectively. |
| v. | Concentration of Credit Risk – There are no individual customers that make up 10% or more of the Group’s revenue for the years ended December 31, 2023, 2022 and 2021. |
| F- |
Classification of Financial Liabilities – All financial liabilities are measured subsequently at amortized cost using the effective interest method.
Financial Liabilities Measured Subsequently at Amortized Cost – Debt instruments that meet the following conditions are measured subsequently at amortized cost:
Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held-for-trading, or (iii) designated as at FVTPL, are measured subsequently at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant year. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortized cost of a financial liability.
Embedded derivatives - An embedded derivative is a component of a hybrid contract that also includes a non-derivative host with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative.
Derivatives embedded in hybrid contracts with hosts that are not financial assets within the scope of IFRS 9 (e.g., financial liabilities) are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through profit or loss (FVTPL). Further, such derivatives are initially recognized at fair value and the residual amount is the initial carrying value of the host contract liability. If an embedded derivative is identified, it is presented as a non-current asset or a non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative relates is more than 12 months and is not expected to be realized or settled within 12 months.
Derecognition of Financial Liabilities – The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
| F- |
When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability. If the modification is not substantial, the difference between: (1) the carrying amount of the liability before the modification under the effective interest rate method; and (2) the present value of the cash flows after modification (discounted using the effective interest rate before the modification) should be recognized in profit or loss as the modification gain or loss within other gains and losses.
i. Leases - The Group evaluates if a contract contains a lease at the commencement date. The Group recognizes a right-of-use asset and a corresponding lease liability regarding all lease contracts in which it is a lessee, except for short-term leases (term of 12 months or less) and leases of low value assets, such as personal computers and small office furniture devices. For these leases, the Group recognizes the lease payments as an operating lease under the straight-line method through the valid term of the lease, unless other method is more representative of the pattern in which economic benefits from the use of the underlying asset is diminished.
Lease liability is initially measured at present value of the lease payments that are not paid on the commencement date, discounted from the implicit interest rate in the contract. If this rate cannot be readily determined, the Group shall use incremental rates.
The lease payments included in the measurement of lease liability consist of:
| ● | Fixed payments, including in substance fixed payments, less any lease incentives received; |
| ● | Variable lease payments that depend on an index or a rate, initially measured using the index or rate at the commencement date; |
| ● | Amount expected to be paid by the lessee under residual value guarantees; |
| ● | The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and |
| ● | Payments of penalties for terminating the lease if the lease term reflects the lessee exercising an option to terminate the lease. |
Lease liability is included in the other current and non-current liabilities in the consolidated statement of financial position.
Lease liability is subsequently measured by increasing the carrying amount to reflect the interest earned on the liability lease (using the effective interest method) and reducing the carrying amount to reflect the lease payments made.
| F- |
Right-of-use assets consist of the amount of the initial measurement of the corresponding lease liability, the lease payments made on or before the commencement date, less any lease incentive received and any initial direct cost. The subsequent valuation is the cost less the accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period between the lease period and the useful life of the underlying asset. If a lease transfers the ownership of the underlying asset, or the cost of the right-of-use asset reflects that the Group plans to exercise a purchase option, the right-of-use asset will be depreciated over the useful life. Depreciation starts on the date of the commencement of the lease.
The right-of-use assets are shown as a separate component in the statement of financial position.
As practical expedient, IFRS 16 allows a lessee to not separate the non-lease components and instead account for any lease components and its associated non-lease components as a single lease component. The Group has not used this practical expedient. For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
j. Investment Properties - Investment properties are buildings and lands held to obtain rent, surpluses, or both. Investment properties are initially recorded at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at fair value at least on annual basis. Fair value is determined by the commercial value of each real property performed by an independent appraiser. The commercial value of each real property is calculated using a combination of methods including present value of the net cash flows that are expected in the future and direct capitalization for operating properties and properties under development and comparable for land. Gains and losses arising from changes in the fair value of investment properties are recognized in profit and loss in the period in which they arise. Note 12 provides detailed information about the key assumptions used in the determination of the fair value of the investment properties.
The Group categorizes its investment properties into three groups: land bank, properties under development and operating properties. The land bank category encompasses land acquisitions made by the Group, including land purchase expenses, along with certain allocated permit and infrastructure costs. The investment properties transition to properties under development once the Group secures construction permits for land development and initiates construction activities. Subsequently, they are reclassified as operating properties once they achieve a state of “stabilization”. The Group defines stabilization as the earlier of the point at which a developed property has been completed for one year, or when it reaches a 90% occupancy rate.
As described below, the Group recognizes rental income using the straight-line method. Any temporary difference between the recognized rental income and the amount billed is recorded in the rent leveling balance sheet account. The temporary difference between cash and accrual payments will ultimately be reversed and eliminated by the end of the lease. The Group concludes that rent leveling constitutes an integral component of the fair value of the investment properties because the expected cash flows of the leases are already reflected in the fair value of the investment properties. Therefore, the recognition of rental revenue on a straight-line basis over the lease term would require an adjustment to the fair value of the investment property to avoid double counting.
| F- |
An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from used and no future economic benefits are expected form the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net sale proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognized.
k. Fair value measurements - Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for leasing transactions that are within the scope of IFRS 16, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 Inventories or value in use in IAS 36 Impairment of Assets.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
| ● | Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. |
| ● | Level 2 - Inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and |
| ● | Level 3 - Inputs are unobservable inputs for the asset or liability, among others, statistics information, and own Group’s information, in some instances based on the information provided by some independent experts. |
The Group has a control framework established in relation to the measurement of fair values. This includes the supervision of management of all significant fair value measurements, including the fair values of level 3.
The Group’s management regularly reviews the significant unobservable variables and the valuation adjustments. If a third-party information, such as broker quotes or pricing services, is used to measure fair values, supervision includes evidence obtained from third parties to support the conclusion that those valuations meet the requirements of IFRS, including the level within the hierarchy of fair value within these valuations should be classified.
| F- |
l. Assets Held for Sale - The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. The criteria for held for sale classification is regarded as met when the sale is highly probable, and the non-current asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. The Group should be committed to the plan to sell the asset and the sale is expected to be completed within 1 year from the date of the classification.
For investment properties measured at fair value that are classified as held for sale, the Group continues to measure the investment properties under the fair value model.
Assets and liabilities classified as held for sale are presented separately in the statement of financial position.
m. Revenue Recognition -
Investment Property Rental Income - The Group earns rental income from acting as a lessor of operating properties in arrangements which do not transfer substantially all of the risks and rewards incidental to ownership of an investment property. Rental income is recognized under the requirements of IFRS 16, Leases (“IFRS 16”) and revenue on the non-lease components is recognized under the requirements of IFRS 15, Revenue from Contracts with Customers (“IFRS 15”).
The Group’s leases with tenants (customers) under agreements are classified as operating leases. The Group recognizes the total minimum lease payments provided for under the leases on a straight-line basis over the lease term.
Lease components
The right to use an asset represents a separate lease component from other lease components if two criteria are met:
a. The lessee can benefit from the use of the asset either on its own or together with other readily available resources.
b. The underlying asset must not be highly dependent on or highly interrelated with other underlying assets in the contract.
The Group generally identifies the right to use the warehouses and underlying land as lease components in its lease contracts with tenants based on the above two criteria. In some cases, the Group might also grant tenants the right to use dedicated parking spots, or other types of assets, which could also be considered as lease components.
| F- |
Non-lease components
When identifying non-lease components, the Group considers whether a good or service is transferred to the lessee. Typically, maintenance activities, including common area maintenance (“CAM,” e.g., cleaning a lobby of a building, property management services, general repairs), provided by the lessor along with utilities are considered non-lease components because they represent goods or services transferred to the Group separately from the right to use the underlying asset.
The Group applies IFRS 15 to allocate the consideration in the contract between lease and non-lease components, on the basis of stand-alone selling prices. Stand-alone selling price represents the price at which an entity would sell a good or service on a stand-alone (or separate) basis at contract inception.
Principal/agent considerations for non-lease components
For the identified non-lease components that are accounted for under IFRS 15, the Group concludes that they should in general be presented gross in the consolidated statement of profit or loss and other comprehensive loss, because the Group is typically acting as a principal, because the Group controls the promised good or service before the it transfers the good or service to a customer. The Group is itself contractually obliged to provide these services to its tenants and is ultimately responsible for fulfilling the promise to provide the services.
Rental Revenues in the consolidated statements of profit or loss and other comprehensive loss.
Disaggregation of rental revenue arising from contracts with customers from other sources of revenue is disclosed in Note 4.
The Group performs credit analyses of our customers prior to the execution of the leases and continue these analyses for each individual lease on an ongoing basis in order to ensure the collectability of rental revenue. The Group recognizes revenue to the extent that amounts are determined to be collectible.
Other – Other sources of revenue consists of fees earned from customers which are determined in accordance with the terms specific to each customer arrangement. The third-party development fees are recognized as revenue under the requirements of IFRS 15 when they are earned under the agreement with the customers.
n. Retainage Payable - Construction contract retainage represents payments which have been partially withheld from subcontractors pending the completion of a project or other contractual conditions. The Group accrues a liability for construction retainage throughout the construction phase, based on the percentage of completion of the construction. Such liability is subsequently released upon completion of construction when the retainage is paid.
o. Income Tax - Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
| ● | Current Tax - Current tax comprises the expected tax payable or receivable on the taxable income or loss for the period and any adjustment to tax payable or receivable in respect of previous periods. |
The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted as of the date of the consolidated statement of financial position. Current assets and liabilities are offset only if certain criteria are met.
| F- |
| ● | Deferred Tax - Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Deferred tax is not recognized for: |
| – | Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; |
| – | Temporary differences related to investments in subsidiaries and associates to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that it will not reverse in the foreseeable future; and, |
| – | Taxable temporary differences arising on the initial recognition of goodwill. |
Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available, against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves.
Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset only if certain criteria are met.
3. NEW AND AMENDED IFRS ACCOUNTING STANDARDS
| a) | New and amended IFRS Accounting Standards That are Effective for the Current Year |
The accounting policies adopted and methods of computation followed are consistent with those of the previous financial year, except for items disclosed below.
There are several new amendments to standards and interpretations which are applicable for the first time in the current year, but many are either not relevant or do not have an impact on the consolidated financial statements of the Group. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective, except for the ones specifically disclosed, as outlined below.
| F- |
| ● | Amendments to IFRS 3 Reference to the Conceptual Framework - The Group has adopted the amendments to IFRS 3 Business Combinations for the first time in the current year. The amendments update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework. They also add to IFRS 3 a requirement that, for obligations within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets, an acquirer applies IAS 37 to determine whether at the acquisition date a present obligation exists as a result of past events. For a levy that would be within the scope of IFRIC 21 Levies, the acquirer applies IFRIC 21 to determine whether the obligating event that gives rise to a liability to pay the levy has occurred by the acquisition date. The adoption of the amendment has no material impact to the Group. |
| ● | Amendments to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use - The Group has adopted the amendments to IAS 16 for the first time in the current year. The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced before that asset is available for use, i.e. proceeds while bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Consequently, an entity recognizes such sales proceeds and related costs in profit or loss. The entity measures the cost of those items in accordance with IAS 2 Inventories. |
The amendments also clarify the meaning of “testing whether an asset is functioning properly”. IAS 16 now specifies this as assessing whether the technical and physical performance of the asset is such that it is capable of being used in the production or supply of goods or services, for rental to others, or for administrative purposes.
If not presented separately in the statement of comprehensive income, the financial statements shall disclose the amounts of proceeds and cost included in profit or loss that relate to items produced that are not an output of the entity’s ordinary activities, and which line item(s) in the statement of comprehensive income include(s) such proceeds and cost. The adoption of the amendments has no material impact to the Group.
| ● | Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract - The Group has adopted the amendments to IAS 37 for the first time in the current year. The amendments specify that the cost of fulfilling a contract comprises the costs that relate directly to the contract. Costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract (examples would be direct labour or materials) and an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract). The adoption of the amendment has no material impact to the Group. |
| ● | Amendments to IAS 12 Income Taxes - The amendments require an exception to IAS 12, whereby an entity does not recognize or disclose information about deferred tax assets and liabilities specifically related to tax laws that have been enacted or substantively enacted to implement the Organization for Economic Co-operation and Development’s international tax reform recommendations known as the Pillar Two model rules. The Group has applied the exception which was effective upon the issuance of the amendments and did not have any DTAs or DTLs on December 31, 2023 that had not been recognized as a result of the application of this exception. The adoption of the amendment has no material impact to the Group. |
| F- |
| ● | Amendments to IAS 1 - Presentation of Financial Statements - Classification of Liabilities as Current or Non-Current (“2020 Amendment”) - The amendments clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability, explain that rights are in existence if covenants are complied with at the end of the reporting period, and introduce a definition of “settlement” to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The Group has early adopted the amendment as of January 1, 2023 together with the 2022 Amendment mentioned below. |
| ● | Amendments to IAS 1 - Presentation of Financial Statements - Non-Current Liabilities with Covenants (“2022 Amendment”) - The amendments specify that only covenants that an entity is required to comply with on or before the end of the reporting period affect the entity’s right to defer settlement of a liability for at least twelve months after the reporting date (and therefore must be considered in assessing the classification of the liability as current or non-current). Such covenants affect whether the right exists at the end of the reporting period, even if compliance with the covenant is assessed only after the reporting date (e.g. a covenant based on the entity’s financial position at the reporting date that is assessed for compliance only after the reporting date). |
The IASB also specifies that the right to defer settlement of a liability for at least twelve months after the reporting date is not affected if an entity only has to comply with a covenant after the reporting period. However, if the entity’s right to defer settlement of a liability is subject to the entity complying with covenants within twelve months after the reporting period, an entity discloses information that enables users of financial statements to understand the risk of the liabilities becoming repayable within twelve months after the reporting period. This would include information about the covenants (including the nature of the covenants and when the entity is required to comply with them), the carrying amount of related liabilities and facts and circumstances, if any, that indicate that the entity may have difficulties complying with the covenants.
The Group early adopted the amendment as of January 1, 2023. Note 16 contains the detail disclosures related to the Group’s compliance with debt covenants.
| ● | Amendments to IAS 1 - Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements - The IASB amended IAS 1 to require entities to disclose their material rather than their significant accounting policies. The amendments define what is ‘material accounting policy information’ and explain how to identify when accounting policy information is material. They further clarify that immaterial accounting policy information does not need to be disclosed. If it is disclosed, it should not obscure material accounting information. To support this amendment, the IASB also amended IFRS Practice Statement 2 Making Materiality Judgements to provide guidance on how to apply the concept of materiality to accounting policy disclosures. |
| F- |
| ● | Amendments to IAS 8 - Accounting Policies Changes in Accounting Estimates and Errors - The amendment to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors clarifies how companies should distinguish changes in accounting policies from changes in accounting estimates. The distinction is important, because changes in accounting estimates are applied prospectively to future transactions and other future events, whereas changes in accounting policies are generally applied retrospectively to past transactions and other past events as well as the current period. The adoption of the amendment has no material impact to the Group. |
| ● | Amendments to IAS 12 Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction - The amendments to IAS 12 Income Taxes require companies to recognize deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. They will typically apply to transactions such as leases of lessees and decommissioning obligations, and will require the recognition of additional deferred tax assets and liabilities. The amendment should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, entities should recognize deferred tax assets (to the extent that it is probable that they can be utilized) and deferred tax liabilities at the beginning of the earliest comparative period for all deductible and taxable temporary differences associated with: (i) right-of-use assets and lease liabilities; and (ii) decommissioning, restoration and similar liabilities, and the corresponding amounts recognized as part of the cost of the related assets. The cumulative effect of recognizing these adjustments is recognized in retained earnings, or another component of equity, as appropriate. The adoption of the amendment has no material impact to the Group. |
| b) | New and amended IFRS Accounting Standards issued but not yet Effective - At the date of authorization of these financial statements, the Group has not applied the following new and revised IFRS Accounting Standards that have been issued but are not yet effective: |
| ● | Amendments to IAS 21 – Lack of exchangeability – The amendments to IAS 21 require companies to assess whether a currency is exchangeable and how it should determine a spot exchange rate when exchangeability is lacking. Specifically, the amendment state that when a currency is not exchangeable into another currency, the entity is required to estimate the spot exchange rate at the measurement date and will need to disclose information about the effect on entity’s financial performance, financial position, and cash flows. The amendments will be effective for annual reporting periods beginning on or after 1 January 2025. The directors of the Group anticipate that the application of these amendments may have an impact on the Group’s consolidated financial statements in future periods should such transactions arise. |
| ● | Amendments to IFRS 10 - Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - The amendments to IFRS 10 and IAS 28 deal with situations where there is a sale or contribution of assets between an investor and its associate or joint venture. Specifically, the amendments state that gains or losses resulting from the loss of control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the equity method, are recognised in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that associate or joint venture. Similarly, gains and losses resulting from the remeasurement of investments retained in any former subsidiary (that has become an associate or a joint venture that is accounted for using the equity method) to fair value are recognised in the former parent’s profit or loss only to the extent of the unrelated investors’ interests in the new associate or joint venture. |
| F- |
| ● | The effective date of the amendments has yet to be set by the IASB; however, earlier application of the amendments is permitted. The directors of the Group anticipate that the application of these amendments may have an impact on the Group’s consolidated financial statements in future periods should such transactions arise. |
4. REVENUE
The Group’s revenue was as follows:
SCHEDULE OF REVENUE
| Year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Non-lease components of rental arrangements | $ | 4,194,415 | $ | 3,287,013 | $ | 2,235,529 | ||||||
| Other | 108,564 | 92,998 | 42,142 | |||||||||
| Revenue from contracts with customers (IFRS 15) | 4,302,979 | 3,380,011 | 2,277,671 | |||||||||
| Rental income | 35,133,364 | 28,603,556 | 23,318,402 | |||||||||
| Total revenue | $ | 39,436,343 | $ | 31,983,567 | $ | 25,596,073 | ||||||
Note 7 contains further information of the Group’s revenue based on segment and geography.
The Group, through its subsidiaries, has entered into various operating leases agreements with customers for the rental of its investment properties. Most of the Group’s lease agreements associated with the investment properties contain an initial lease term from 5 to 10 years and generally include renewal options for one or more additional terms of varying lengths. The Group’s weighted average lease term remaining on leases in the operating properties and properties under development, based on square feet of all leases in effect as of December 31, 2023, 2022 and 2021 was 5.3 years, 6.3 years and 8.0 years, respectively.
These leases are based on a minimum rental payment in USD for properties located in Costa Rica and Peru, and COP for properties in Colombia, plus maintenance fees and recoverable expenses, and guarantee deposits associated with the agreements, which are commonly used for covering any repair, improvement tasks or as a final payment when the lease agreement ends.
The following table summarizes the Group’s minimum lease payments under non-cancellable operating leases as of December 31, 2023:
SCHEDULE OF MIMIMUM LEASE PAYMENTS UNDER NON-CANCELLABLE OPERATING LEASES
| Amount | ||||
| 2024 | $ | 38,723,655 | ||
| 2025 | 35,919,432 | |||
| 2026 | 32,869,113 | |||
| 2027 | 29,297,600 | |||
| 2028 | 21,488,945 | |||
| Thereafter | 69,406,401 | |||
| Total | $ | 227,705,146 | ||
| F- |
COVID-19 Rent Relief - The COVID-19 outbreak has disrupted financial markets and the ultimate impact on global, national and local economies is uncertain. Existing and potential customers of the logistics facilities may be adversely affected by the decrease in economic activity, which in turn could temporarily disrupt their business and have a negative impact on the Group. Any prolonged economic downturn, escalation of the outbreak or disruption in the financial markets may adversely affect the Group financial condition and results of operations.
In response to the COVID-19 pandemic, the Group provided to some of the customers rent concessions, as a deferral of the rent payment with a rent repayment schedule within the following 12 months and with no significant impact on revenue recognition. Through December 31, 2023, all of these deferrals were repaid.
5. INVESTMENT PROPERTY OPERATING EXPENSES
Investment property operating expenses include the direct operating expenses of the property such as repair and maintenance, property management, property taxes, utilities, and other property related costs. Property operating expenses are mostly recovered through the rental recoveries charged to the tenants. The Group does not incur significant direct property operating costs from investment properties under development that did not generate rental income during the period.
Rental property operating expenses were as follows:
SCHEDULE OF RENTAL PROPERTY OPERATING EXPENSES
| Year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Repair and maintenance | $ | 2,351,598 | $ | 1,661,900 | $ | 1,234,863 | ||||||
| Property management | 1,062,320 | 1,072,509 | 783,495 | |||||||||
| Real estate taxes | 731,261 | 357,457 | 333,613 | |||||||||
| Adjustment for expected credit losses | (87,723 | ) | 1,470,990 | 1,062,133 | ||||||||
| Other property related expenses | 1,085,494 | 844,583 | 673,261 | |||||||||
| Total | $ | 5,142,950 | $ | 5,407,439 | $ | 4,087,365 | ||||||
6. OTHER INCOME AND OTHER EXPENSES
Other income for the years ended December 31, 2023, 2022 and 2021 were as follows:
SCHEDULE OF OTHER INCOME
| 2023 | 2022 | 2021 | ||||||||||
| Interest income | $ | 300,189 | $ | 94,130 | $ | 87,923 | ||||||
| Other | 7,633 | 5,997 | 63,468 | |||||||||
| Total | $ | 307,822 | $ | 100,127 | $ | 151,391 | ||||||
Other expenses for the years ended December 31, 2023, 2022 and 2021 were as follows:
SCHEDULE OF OTHER EXPENSES
| 2023 | 2022 | 2021 | ||||||||||
| Transaction-related costs | $ | 6,150,988 | $ | 306,059 | $ | 1,367,647 | ||||||
| Loss on disposition of fixed assets | 83,389 | 30,270 | — | |||||||||
| Legal provision | (101,741 | ) | 274,844 | — | ||||||||
| Total | $ | 6,132,636 | $ | 611,173 | $ | 1,367,647 | ||||||
| F- |
7. SEGMENT REPORTING
The Group has three operating segments, based on geographic regions consisting of Colombia, Peru, and Costa Rica. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), the Group’s Chief Executive Officer, in deciding how to allocate resources and assess the Group’s financial and operational performance. The CODM receives information and evaluates the business from a geographic perspective and reviews the Group’s internal reporting by geography in order to assess performance and allocate resources. As a result, the Group has determined the business operates in three distinct operating segments based on geography.
The three geographic segments, Colombia, Peru, and Costa Rica primarily derive revenue from various operating lease agreements with customers for the rental of warehouses. Each of these locations and corresponding operations are presented and managed separately. The operating segments are each reportable segments, and aggregation of segments is not applied. Unallocated revenue consists of other revenue streams earned by operating subsidiaries that are not allocated to segments for CODM’s review. Unallocated expenses consist of certain corporate general and administrative expenses that are not allocated to segments for CODM’s review, as well as financing costs for the bridge loan held by the parent entity.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. There was no inter-segment revenue for the years ended December 31, 2023, 2022 and 2021.
The tables below present information by segment presented to the CODM and reconciliations to the Group’s consolidated amounts.
| F- |
The Group evaluates the performance of its reportable segments based on net operating income. Segment net operating income consists of segment investment property rental revenue less segment investment property operating expense.
SCHEDULE OF REPORTABLE SEGMENTS BASED ON NET OPERATING INCOME
| Year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Revenue: | ||||||||||||
| Colombia | $ | 8,038,441 | $ | 5,690,569 | $ | 4,714,197 | ||||||
| Peru | 9,260,197 | 8,350,957 | 5,244,208 | |||||||||
| Costa Rica | 22,029,141 | 17,849,043 | 15,595,526 | |||||||||
| Unallocated revenue | 108,564 | 92,998 | 42,142 | |||||||||
| Total | $ | 39,436,343 | $ | 31,983,567 | $ | 25,596,073 | ||||||
| Investment property operating expense: | ||||||||||||
| Colombia | $ | (989,404 | ) | $ | (599,084 | ) | $ | (454,333 | ) | |||
| Peru | (1,476,086 | ) | (1,288,280 | ) | (1,037,161 | ) | ||||||
| Costa Rica | (2,677,460 | ) | (3,520,075 | ) | (2,595,871 | ) | ||||||
| Total | $ | (5,142,950 | ) | $ | (5,407,439 | ) | $ | (4,087,365 | ) | |||
| Net operating income | ||||||||||||
| Colombia | $ | 7,049,037 | $ | 5,091,485 | $ | 4,259,864 | ||||||
| Peru | 7,784,111 | 7,062,677 | 4,207,047 | |||||||||
| Costa Rica | 19,351,681 | 14,328,968 | 12,999,655 | |||||||||
| Total | $ | 34,184,829 | $ | 26,483,130 | $ | 21,466,566 | ||||||
| General and administrative: | ||||||||||||
| Colombia | $ | (1,182,837 | ) | $ | (897,455 | ) | $ | (1,048,445 | ) | |||
| Peru | (1,745,286 | ) | (765,572 | ) | (721,501 | ) | ||||||
| Costa Rica | (2,945,824 | ) | (2,421,168 | ) | (3,017,494 | ) | ||||||
| Corporate and other | (2,634,915 | ) | (525,000 | ) | (606,761 | ) | ||||||
| Total | $ | (8,508,862 | ) | $ | (4,609,195 | ) | $ | (5,394,201 | ) | |||
| Financing costs | ||||||||||||
| Colombia | $ | (8,068,416 | ) | $ | (6,267,603 | ) | $ | (2,753,390 | ) | |||
| Peru | (5,431,535 | ) | (1,997,204 | ) | (1,421,466 | ) | ||||||
| Costa Rica | (17,611,113 | ) | (3,483,685 | ) | (5,620,317 | ) | ||||||
| Corporate and other | — | (18,234 | ) | (4,385 | ) | |||||||
| Total | $ | (31,111,064 | ) | $ | (11,766,726 | ) | $ | (9,799,558 | ) | |||
The following table reconciles segment net operating income to profit before taxes for the years ended December 31, 2023, 2022 and 2021:
SCHEDULE OF RECONCILES SEGMENT NET OPERATING INCOME TO PROFIT BEFORE TAXES
| Year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Net operating income | $ | 34,184,829 | $ | 26,483,130 | $ | 21,466,566 | ||||||
| Unallocated revenue | 108,564 | 92,998 | 42,142 | |||||||||
| General and administrative | (8,508,862 | ) | (4,609,195 | ) | (5,394,201 | ) | ||||||
| Investment property valuation gain | 20,151,026 | 3,525,692 | 12,610,127 | |||||||||
| Interest income from affiliates | 664,219 | 561,372 | 424,838 | |||||||||
| Financing costs | (31,111,064 | ) | (11,766,726 | ) | (9,799,558 | ) | ||||||
| Net foreign currency gain (loss) | 284,706 | 299,762 | (707,570 | ) | ||||||||
| Gain (loss) on sale of investment properties | 1,165,170 | (398,247 | ) | — | ||||||||
| Gain on sale of asset held for sale | 1,022,853 | — | — | |||||||||
| Other income | 307,822 | 100,127 | 151,391 | |||||||||
| Other expenses | (6,132,636 | ) | (611,173 | ) | (1,367,647 | ) | ||||||
| Profit before taxes | $ | 12,136,627 | $ | 13,677,740 | $ | 17,426,088 | ||||||
| F- |
Segment Assets and Liabilities
For the purposes of monitoring segment performance and allocating resources between segments, the CODM monitors select assets and liabilities attributable to each segment. The following table summarizes the Group’s total assets and liabilities by reportable operating segment as of December 31, 2023 and 2022:
SCHEDULE OF TOTAL ASSETS AND LIABILITIES BY REPORTABLE OPERATING SEGMENT
| 2023 | 2022 | |||||||
| Segment investment properties | ||||||||
| Colombia | $ | 131,057,446 | $ | 107,749,342 | ||||
| Peru | 127,350,614 | 105,121,058 | ||||||
| Costa Rica | 255,764,221 | 236,166,233 | ||||||
| Total | $ | 514,172,281 | $ | 449,036,633 | ||||
| Reconciling items: | ||||||||
| Cash and cash equivalents | 35,242,363 | 14,988,112 | ||||||
| Due from affiliates | 9,463,164 | 8,798,945 | ||||||
| Lease and other receivables, net | 3,557,988 | 2,516,525 | ||||||
| Receivable from the sale of investment properties - short term | 4,072,391 | — | ||||||
| Asset held for sale | — | 2,977,147 | ||||||
| Prepaid construction costs | 1,123,590 | 2,317,383 | ||||||
| Other current assets | 3,443,518 | 1,708,313 | ||||||
| Tenant notes receivables - long term, net | 6,002,315 | 6,796,584 | ||||||
| Receivable from the sale of investment properties - long term | 4,147,507 | — | ||||||
| Restricted cash equivalent | 2,681,110 | 3,252,897 | ||||||
| Property and equipment, net | 354,437 | 427,719 | ||||||
| Deferred tax asset | 1,345,859 | 239,281 | ||||||
| Other non-current assets | 5,218,787 | 4,559,330 | ||||||
| Total assets | $ | 590,825,310 | $ | 497,618,869 | ||||
| Segment long-term debt | ||||||||
| Colombia | $ | 47,654,090 | $ | 55,260,326 | ||||
| Peru | 61,260,237 | 35,662,360 | ||||||
| Costa Rica | 160,939,908 | 118,404,089 | ||||||
| Total | $ | 269,854,235 | $ | 209,326,775 | ||||
| Reconciling items: | ||||||||
| Accounts payable and accrued expenses | 13,127,502 | 8,591,922 | ||||||
| Deposits for the sale of assets | — | 2,400,000 | ||||||
| Income tax payable | 2,024,865 | 663,703 | ||||||
| Retainage payable | 1,737,805 | 3,001,433 | ||||||
| Other current liabilities | 959,539 | 54,983 | ||||||
| Deferred tax liability | 37,451,338 | 37,215,884 | ||||||
| Security deposits | 1,790,554 | 1,706,959 | ||||||
| Other non-current liabilities | 2,936,555 | 590,740 | ||||||
| Total liabilities | $ | 329,882,393 | $ | 263,552,399 | ||||
Geographic Area Information
SCHEDULE OF GEOGRAPHIC AREA INFORMATION
| 2023 | 2022 | |||||||
| Long-lived assets | ||||||||
| Colombia | $ | 131,147,272 | $ | 107,807,334 | ||||
| Peru | 127,416,698 | 105,448,377 | ||||||
| Costa Rica | 256,000,132 | 236,471,570 | ||||||
| Total | $ | 514,564,102 | $ | 449,727,281 | ||||
| F- |
8. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash equivalents are considered by the Group to be highly liquid investments such as short-term deposits with banks, the maturity of which do not exceed three months at the time of deposit and which are not restricted. Such deposits bear interest at a negligible interest rate and the book value of these assets approximates their fair value. Available cash are held in bank accounts and overnight deposits.
The Group’s cash are predominantly denominated in USD and, in part, in COP, PEN and CRC.
Cash and cash equivalents were as follows as of December 31, 2023, and 2022:
SCHEDULE OF CASH AND CASH EQUIVALENTS
| (in USD) | 2023 | 2022 | ||||||
| Bank accounts: | ||||||||
| In COP | $ | 1,445,179 | $ | 1,117,352 | ||||
| In CRC | 6,599 | 15,287 | ||||||
| In PEN | 479,057 | 237,240 | ||||||
| In USD | 33,311,528 | 13,618,233 | ||||||
| Total | $ | 35,242,363 | $ | 14,988,112 | ||||
As of December 31, 2023 and 2022, cash disclosed in the consolidated statements of financial position and in the consolidated statements of cash flows included $2,993,045 and $2,465,008, respectively, that were held in partnership entities in which the ownership is shared with other private investors. These cash deposits were designated for the sole purpose of investing in development and operations of the properties held by the partnership entities and were therefore not available for general use by other entities within the Group.
In addition, the Group had short-term and long-term restricted cash equivalent related to additional guarantees for the Group’s debt and corporate credit cards. As disclosed in Note 16, certain debt agreements require the Group to maintain cash in a restricted bank account in order to comply with conditions over minimum debt service coverage. The funds can only be used for debt service repayments for the associated debt agreement. Certificates of Deposit have maturities ranging from 3 to 12 months and renew until the outstanding balance for the associated debt agreement is liquidated.
As of December 31, 2023, and 2022, the Group’s total restricted cash equivalents amounted to $2,681,110 (of which $2,000,000 was classified as short-term) and $3,252,897 (all was classified as long-term), respectively. The classification of restricted cash equivalents as short-term or long-term aligns with the corresponding loan agreements’ classification on the consolidated statements of financial position, reflecting the terms of restriction.
Non-cash transactions
Changes in assets and liabilities arising from investing and financing activities not requiring cash relate to an increase in accrued payables for investment properties of $2,078,508, $1,247,256 and $2,891,858 in the years ended December 31, 2023, 2022 and 2021, respectively, an increase for new lease liabilities for $2,623,092, $376,325 and $0 in the years ended December 31, 2023, 2022 and 2021, respectively. Additionally, in relation to the sale of investment properties, Latam Parque Logistico Calle 80 Building 500A in the year ended December 31, 2023, the Group records non-cash activities for an increase in receivables from the sale of $7,577,092 and decrease of long-term debt of $8,299,867 related to settlement of the loan with ITAÚ Corpbanca Colombia, S.A. (“ITAÚ”), refer to Note 12 for transaction details related to the sale. Furthermore, the Group records a non-cash capital contribution from a non-controlling partner of $2,162 in the year ended December 31, 2023.
| F- |
9. LEASE AND OTHER RECEIVABLES, NET
As of December 31, 2023, and 2022, lease and other receivables, net were as follows:
SCHEDULE OF LEASE AND OTHER RECEIVABLES, NET
| 2023 | 2022 | |||||||||
| (a) | Lease receivables, net | $ | 2,703,760 | $ | 1,644,555 | |||||
| (b) | Tenant notes receivables - short term, net | 804,749 | 751,908 | |||||||
| Others | 49,479 | 120,062 | ||||||||
| Sub-total | 3,557,988 | 2,516,525 | ||||||||
| Tenant notes receivable - long term, net | 6,002,315 | 6,796,584 | ||||||||
| Lease and other receivables, net | $ | 9,560,303 | $ | 9,313,109 | ||||||
| (a) | Lease Receivables - The average credit period on rents is 30 days. No interest is charged on outstanding lease receivables. |
The Group always measures the expected credit loss for lease receivables, net of cash security deposits, at an amount equal to lifetime ECL. The expected credit losses on lease receivables are estimated using a provision matrix by reference to past default experience of the debtor, default trend report from third-party reputable credit rating agency (i.e., Moody’s), and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date.
To measure the expected credit losses, lease receivables have been grouped based on shared credit risk characteristics and the days past due. The Group adopts a two-part reserve method: 1) with a specific reserve at 100% against all lease receivables from tenant who has shown indicators of severe financial difficulty, such as consecutive months of rent non-payment, or if the tenant is undergoing liquidation or bankruptcy proceedings. 2) with a general reserve recognizing expected credit loss allowance of 100% against all lease receivables over 90 days outstanding and percentage reflecting Moody’s average one-year default rate for all companies against lease receivables that are less than 90 days outstanding, net of cash security deposits. The lifetime ECL is calculated as gross carrying amount net of security deposit and multiply by loss rate described above. None of the lease receivables that have been written off is subject to enforcement activities.
The gross carrying amount and loss allowance provision for lease receivables was as follows as of December 31, 2023 and 2022:
SCHEDULE OF GROSS CARRYING AMOUNT AND LOSS ALLOWANCE PROVISION FOR LEASE RECEIVABLES
| 2023 | 2022 | |||||||
| Gross carrying amount | $ | 3,535,565 | $ | 4,290,892 | ||||
| Loss allowance provision | (831,805 | ) | (2,646,337 | ) | ||||
| Lease receivables, net | $ | 2,703,760 | $ | 1,644,555 | ||||
| (b) | Tenant Notes Receivables - The Group finances some of its specific tenant improvements that customers request. As of December 31, 2023, loans outstanding to tenants bear weighted average annual interest rate of 10.7% and had a weighted average remaining loan term of 7.2 years. |
As of December 31, 2022, loans outstanding to tenants bears a weighted average annual interest rate of 10.7% and have a weighted average remaining loan term of 8.1 years.
The Group always measures the expected credit loss allowance for tenant notes receivables at an amount equal to 12-month ECL. The expected 12-month ECL on tenant notes receivables are estimated using the probability of default approach, which is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward looking information. As for the exposure at default, for financial assets, this is represented by the gross carrying amount at the reporting date. None of the tenant notes have exhibited a significant increase in credit risk.
The gross carrying amount and loss allowance provision for tenant notes receivables as of December 31, 2023 and 2022 was as follows:
SCHEDULE OF GROSS CARRYING AMOUNT AND LOSS ALLOWANCE PROVISION FOR TENANT NOTES RECEIVABLES
| 2023 | 2022 | |||||||
| Gross carrying amount - short term | $ | 818,250 | $ | 764,523 | ||||
| Loss allowance provision - short term | (13,501 | ) | (12,615 | ) | ||||
| Tenant notes receivables - short term, net | $ | 804,749 | $ | 751,908 | ||||
| Gross carrying amount - long term | 6,103,015 | 6,910,609 | ||||||
| Loss allowance provision - long term | (100,700 | ) | (114,025 | ) | ||||
| Tenant notes receivables - long term, net | $ | 6,002,315 | $ | 6,796,584 | ||||
The expected credit loss allowance provision for lease receivables and tenant notes receivables as of December 31, 2023, 2022 and 2021 reconciled to the opening loss allowance for that provision as follows:
SCHEDULE OF CREDIT LOSS ALLOWANCE PROVISION FOR LEASE RECEIVABLES AND TENANT NOTES RECEIVABLES
| 2023 | ||||||||||||
| Lease Receivables | Tenants Notes Receivables | Total | ||||||||||
| Beginning balance | $ | 2,646,337 | $ | 126,640 | $ | 2,772,977 | ||||||
| Adjustments in loan loss allowance recognized in profit or loss during the year | (81,017 | ) | (6,706 | ) | (87,723 | ) | ||||||
| Receivables written-off during the year as uncollectible | (1,733,515 | ) | (5,733 | ) | (1,739,248 | ) | ||||||
| Ending balance | $ | 831,805 | $ | 114,201 | $ | 946,006 | ||||||
| 2022 | ||||||||||||
| Lease Receivables | Tenants Notes Receivables | Total | ||||||||||
| Beginning balance | $ | 1,294,649 | $ | 62,089 | $ | 1,356,738 | ||||||
| Adjustments in loan loss allowance recognized in profit or loss during the year | 1,406,439 | 64,551 | 1,470,990 | |||||||||
| Receivables written-off during the year as uncollectible | (54,751 | ) | — | (54,751 | ) | |||||||
| Ending balance | $ | 2,646,337 | $ | 126,640 | $ | 2,772,977 | ||||||
| 2021 | ||||||||||||
| Lease Receivables | Tenants Notes Receivables | Total | ||||||||||
| Beginning balance | $ | 243,245 | $ | 51,360 | $ | 294,605 | ||||||
| Adjustments in loan loss allowance recognized in profit or loss during the year | 1,051,404 | 10,729 | 1,062,133 | |||||||||
| Receivables written-off during the year as uncollectible | — | — | — | |||||||||
| Ending balance | $ | 1,294,649 | $ | 62,089 | $ | 1,356,738 | ||||||
| F- |
10. OTHER CURRENT ASSETS
The details of other current assets as of December 31, 2023 and December 31, 2022 were as follows:
SCHEDULE OF DETAILS OF OTHER CURRENT ASSETS
| 2023 | 2022 | |||||||
| Value added tax receivable | $ | 2,207,983 | $ | 179,566 | ||||
| Prepaid taxes | 651,925 | 816,138 | ||||||
| Other | 583,610 | 712,609 | ||||||
| Total | $ | 3,443,518 | $ | 1,708,313 | ||||
11. PROPERTY AND EQUIPMENT, NET
Property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. As of December 31, 2023, and 2022, the Group’s property and equipment, net were as follows:
SCHEDULE OF PROPERTY AND EQUIPMENT, NET
| Vehicles | Furniture and Office Equipment | Computer Equipment | Leasehold Improvements | Total | ||||||||||||||||
| Gross assets: | ||||||||||||||||||||
| Balance as of January 1, 2022 | $ | 16,022 | $ | 354,437 | $ | 192,418 | $ | 375,878 | $ | 938,755 | ||||||||||
| Additions | 4,103 | 20,734 | 38,122 | 25,528 | 88,487 | |||||||||||||||
| Retirements | — | (4,174 | ) | (1,366 | ) | (152,390 | ) | (157,930 | ) | |||||||||||
| Foreign currency translation effect | — | (10,030 | ) | (3,286 | ) | 6,909 | (6,407 | ) | ||||||||||||
| Balance as of December 31, 2022 | $ | 20,125 | $ | 360,967 | $ | 225,888 | $ | 255,925 | $ | 862,905 | ||||||||||
| Additions | 18,235 | 27,704 | 6,478 | 74,059 | 126,476 | |||||||||||||||
| Retirements | (1,000 | ) | (36,296 | ) | (251 | ) | (182,033 | ) | (219,580 | ) | ||||||||||
| Foreign currency translation effect | — | 12,383 | 5,912 | 1,864 | 20,159 | |||||||||||||||
| Balance as of December 31, 2023 | $ | 37,360 | $ | 364,758 | $ | 238,027 | $ | 149,815 | $ | 789,960 | ||||||||||
| Accumulated depreciation: | ||||||||||||||||||||
| Balance as of January 1, 2022 | $ | 6,370 | $ | 128,216 | $ | 87,206 | $ | 214,219 | $ | 436,011 | ||||||||||
| Additions | 2,458 | 50,955 | 31,454 | 39,420 | 124,287 | |||||||||||||||
| Retirements | — | (2,217 | ) | (524 | ) | (123,475 | ) | (126,216 | ) | |||||||||||
| Foreign currency translation effect | — | (4,255 | ) | (1,861 | ) | 7,220 | 1,104 | |||||||||||||
| Balance as of December 31, 2022 | $ | 8,828 | $ | 172,699 | $ | 116,275 | $ | 137,384 | $ | 435,186 | ||||||||||
| Additions | 3,689 | 49,188 | 34,866 | 19,486 | 107,229 | |||||||||||||||
| Retirements | (100 | ) | (20,856 | ) | (11 | ) | (95,904 | ) | (116,871 | ) | ||||||||||
| Foreign currency translation effect | — | 6,205 | 3,152 | 622 | 9,979 | |||||||||||||||
| Balance as of December 31, 2023 | $ | 12,417 | $ | 207,236 | $ | 154,282 | $ | 61,588 | $ | 435,523 | ||||||||||
| Net book value as of December 31, 2022 | $ | 11,297 | $ | 188,268 | $ | 109,613 | $ | 118,541 | $ | 427,719 | ||||||||||
| Net book value as of December 31, 2023 | $ | 24,943 | $ | 157,522 | $ | 83,745 | $ | 88,227 | $ | 354,437 | ||||||||||
The Group recorded losses of $83,389, $30,269 and $925 in other expenses in the consolidated statements of profit or loss and other comprehensive loss, related to the disposal of property and equipment for the years ended December 31, 2023, 2022 and 2021, respectively.
Depreciation expense for the years ended December 31, 2023, 2022 and 2021 was $107,229, $124,287 and $139,896, respectively, recognized in General and administrative expense on the consolidated statements of profit or loss and comprehensive loss.
| F- |
12. INVESTMENT PROPERTIES
The Group’s investment properties are located in Colombia, Peru and Costa Rica and they are primarily measured using Level 3 inputs from the IFRS fair value hierarchy. The values, determined by the external appraisers, are recognized as the fair value of the Group’s investment property at the end of each reporting period. Gains or losses arising from changes in the fair values are included in the consolidated statement of profit or loss and other comprehensive loss in the period in which they arise. For the years ended December 31, 2023, 2022 and 2021, the Group recorded a gain of $20,151,026, $3,525,692 and $12,610,127, respectively.
As of December 31, 2023, and 2022 all owned investment properties are guaranteeing the Group’s debt.
As of December 31, 2023, and 2022, the fair market value (“FMV”) of investment properties were as follows:
SCHEDULE OF FAIR MARKET VALUE OF INVESTMENT PROPERTIES
| FMV as of | FMV as of | |||||||
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Land bank: | ||||||||
| Land bank under right-of-use | ||||||||
| Peru | $ | 619,976 | $ | — | ||||
| Sub-total | 619,976 | — | ||||||
| Owned land bank | ||||||||
| Colombia | 24,100,446 | 16,394,722 | ||||||
| Peru | — | 7,190,000 | ||||||
| Costa Rica | — | 6,155,000 | ||||||
| Sub-total | 24,100,446 | 29,739,722 | ||||||
| Total Land Bank | $ | 24,720,422 | $ | 29,739,722 | ||||
| Properties under development: | ||||||||
| Properties under right-of-use | ||||||||
| Peru | $ | 12,260,000 | $ | 614,523 | ||||
| Sub-total | 12,260,000 | 614,523 | ||||||
| Owned properties | ||||||||
| Colombia | — | 20,708,910 | ||||||
| Peru | 22,230,781 | 9,793,481 | ||||||
| Costa Rica | 10,891,000 | 35,715,220 | ||||||
| Sub-total | 33,121,781 | 66,217,611 | ||||||
| Total properties under development | $ | 45,381,781 | $ | 66,832,134 | ||||
| Operating Properties | ||||||||
| Owned properties | ||||||||
| Colombia | $ | 106,957,000 | $ | 70,645,712 | ||||
| Peru | 92,239,857 | 87,523,052 | ||||||
| Costa Rica | 244,873,221 | 194,296,013 | ||||||
| Sub-total | 444,070,078 | 352,464,777 | ||||||
| Total operating properties | $ | 444,070,078 | $ | 352,464,777 | ||||
| Total operating properties and properties under development | $ | 489,451,859 | $ | 419,296,911 | ||||
| Total | $ | 514,172,281 | $ | 449,036,633 | ||||
There were no transfers between Levels 1, 2 or 3 during the years ended December 31, 2023 and 2022.
The Group uses an external appraiser in order to determine the fair value for its investment properties. The independent appraiser holds a recognized and relevant professional qualification and has recent experience of the location and category of the investment property being valued. The valuation model is in accordance with the guidance recommended by the International Valuation Standards Committee. These valuation models are consistent with the principles in IFRS 13.
| F- |
Disclosed below is the valuation technique used to measure the fair value of investment properties, along with the significant unobservable inputs used.
Valuation Techniques - This fair value measurement is considered Level 3 of the fair value hierarchy, except where otherwise noted below.
| – | Operating Properties - The valuation model considers a combination of the present value of net cash flows to be generated by the property, the direct capitalization of the net operating income, and the replacement cost to construct a similar property. |
| i. | The present value of net cash flows generated by the property takes into account the expected rental growth rate, vacancy periods, occupancy rate, lease incentive costs such as rent-free periods and other costs not paid by tenants. The expected net cash flows are discounted using risk adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location, tenant credit quality and lease terms. | |
| ii. | The direct capitalization method. This method involves capitalizing a fully leased net operating income estimate by an appropriate yield. This approach is best utilized with stabilized assets, where there is little volatility in the net income and the growth prospects are also stable. It is most commonly used with single tenant investments or stabilized investments. involves capitalizing the property net operating income at a market capitalization rate. The net operating income is determined by using the property Effective Gross Income (EGI) net of operating expenses. The EGI is determined by the property’s Potential Gross Income (PGI) through analysis of the property actual historic income and an analysis of competitive current market income rates and deducting the PGI with an estimate for vacancy and collection. | |
| iii. | The cost approach. The cost approach involves the estimation of the replacement cost of the building and site improvements that a prudent and rational person would pay no more for a property than the cost to construct a similar and competitive property - assuming no undue delay in the process. |
| – | Properties Under Development - The valuation model considers the present value of net cash flows, direct capitalization, and the cost approaches adjusted by the net present value of the cost to complete and vacancy in the properties under construction. |
| – | Land Bank - The valuation model used for the land portfolio is a combination of sales comparison approach (or market approach), cost approach, residual land value approach and the discounted cash flow method. For undeveloped land, the market approach is used. For land that is under development, the market approach is used in conjunction with the cost approach and residual land value approach, and the discounted cash flow approach, to determine the fair value of the finished lots. |
| i. | The sales comparison approach. This approach compares sales or listing of similar properties with the subject property using the price per square feet (Level 2 input). This approach is given supporting weight in this analysis because of the well-supported range of value within this approach and the likelihood that the subject could be purchased by an owner-user. |
| ii. | The cost approach. This approach is based on the principle of substitution that a prudent and rational person would pay not more than the cost to construct a similar property. This approach generally considers estimated replacement cost of the land and the site improvements (e.g., infrastructure) and estimated depreciation accrued to the improvements (Level 2 input). |
| F- |
| iii. | The residual land value approach. This approach involves residual amount after deducting all known or anticipated costs required to complete the development from the anticipated value of the project when completed after consideration of the risks associated with the completion of the project (Level 2 input). |
Significant Inputs as of December 31, 2023 and 2022 —
SCHEDULE OF SIGNIFICANT UNOBSERVABLE INPUTS
| Property | Fair value hierarchy | Valuation techniques | Significant unobservable inputs | Value | Relationship of unobservable inputs to fair value | |||||
| Operating Properties | Level 3 | Discounted cash flows |
Risk adjusted residual capitalization rate | 2023: 7.9%, 2022: 7.8% | The higher the risk adjusted residual rate, the lower the fair value. | |||||
| Risk adjusted discount rate | 2023: 10.8%, 2022: 10.5% | The higher the risk adjusted discount rate, the lower the fair value. | ||||||||
| Direct capitalization method | Occupancy rate | 2023: 98.2%, 2022: 98.1% | The higher the occupancy rate, the higher the fair value. | |||||||
| Going in stabilized capitalization rate | 2023: 7.9%, 2022: 7.5% | The higher the stabilized capitalization rate, the lower the fair value | ||||||||
| Properties Under Development | Level 3 | Discounted cash flows |
Risk adjusted residual capitalization rate | 2023: 8.1%, 2022: 7.8% | The higher the risk adjusted residual rate, the lower the fair value. | |||||
| Risk adjusted discount rate | 2023: 10.8%, 2022: 10.4% | The higher the risk adjusted discount rate, the lower the fair value. | ||||||||
| Direct capitalization method | Occupancy rate | 2023: 97.7%, 2022: 98.8% | The higher the occupancy rate, the higher the fair value. | |||||||
| Going in stabilized capitalization rate | 2023: 8.0%, 2022: 7.8% | The higher the stabilized capitalization rate, the lower the fair value | ||||||||
| Land Bank | Level 3 | Discounted cash flows |
Risk adjusted residual capitalization rate |
2023: 7.75%, 2022: 7.75% |
The higher the stabilized capitalization rate, the lower the fair value |
|||||
| Risk adjusted discount rate | 2023: 11.75%, 2022: 11.25% | The higher the risk adjusted discount rate, the lower the fair value. |
Fair value sensitivity:
The following table presents a sensitivity analysis to the impact of 10 basis points (“bps”) increase or decrease of the discount rates and exit cap rate and the aggregated impact of these two on fair values of the investment properties - land and buildings representing leased land and buildings valued using the discounted cash flows and direct capitalization method as of December 31, 2023 and 2022:
SCHEDULE OF FAIR VALUE SENSITIVITY ANALYSIS
| 2023 | ||||||||||||
| Impact of+10 bps on exit cap rate |
Impact of+10 bps on discount rate |
Impact of+10 bps on exit cap rate and discount rate |
||||||||||
| Building and land (decrease) | $ | (2,987,585 | ) | $ | (3,356,702 | ) | $ | (6,264,419 | ) | |||
| Impact of-10 bps on exit cap rate |
Impact of-10 bps on discount rate |
Impact of-10 bps on exit cap rate and discount rate |
||||||||||
| Building and land increase | $ | 2,987,585 | $ | 3,356,702 | $ | 6,264,419 | ||||||
| F- |
| 2022 | ||||||||||||
| Impact of+10 bps on exit cap rate |
Impact of+10 bps on discount rate |
Impact of+10 bps on exit cap rate and discount rate |
||||||||||
| Building and land (decrease) | $ | (2,697,642 | ) | $ | (2,905,108 | ) | $ | (5,565,415 | ) | |||
| Impact of-10 bps on exit cap rate |
Impact of-10 bps on discount rate |
Impact of-10 bps on exit cap rate and discount rate |
||||||||||
| Building and land increase | $ | 2,697,642 | $ | 2,905,108 | $ | 5,565,415 | ||||||
The reconciliation of investment properties for the year ended December 31, 2023, 2022 and 2021, were as follows:
SCHEDULE OF RECONCILIATION OF INVESTMENT PROPERTY
| 2023 | 2022 | 2021 | ||||||||||
| Balance at beginning of year | $ | 449,036,633 | $ | 428,275,741 | $ | 364,307,039 | ||||||
| Additions | 33,704,768 | 47,774,104 | 70,082,968 | |||||||||
| Foreign currency translation effect | 28,914,062 | (21,265,904 | ) | (16,361,576 | ) | |||||||
| Disposal of investment property | (17,634,208 | ) | (9,273,000 | ) | — | |||||||
| Transfer to asset held for sale | — | — | (2,362,817 | ) | ||||||||
| Gain on revaluation of investment property | 20,151,026 | 3,525,692 | 12,610,127 | |||||||||
| Balance at end of year | $ | 514,172,281 | $ | 449,036,633 | $ | 428,275,741 | ||||||
Investment Properties Acquisitions —
There were no acquisition activities during the years ended December 31, 2023 and 2022. During the year ended December 31, 2021, the Group acquired two operating investment properties for a total purchase price of $14,710,000 and one trailer parking of $4,050,000. The closing costs incurred related to these acquisitions were $355,322, which were capitalized as part of investment properties as the Group considered these transactions as asset acquisitions.
Investment Properties Dispositions —
On November 24, 2023, the Group closed the sale of its investment property, Latam Parque Logistico Calle 80 Building 500A (with a carrying value of USD 17,634,208 as of closing), to a third party for consideration of COP 79,850,000,000 (equivalent of USD 19,512,112 as of closing). Of the total consideration, COP 33,829,392,065 (equivalent of USD 8,266,536 as of closing) was transferred directly to ITAÚ to settle the liabilities directly associated with the investment property. The remaining consideration is expected to be received within fifteen months after closing, through six installment payments. The Group has received the first installment payment of COP 11,505,151,984 (equivalent of USD 2,778,063 as of the payment date) in October 2023, and expects to receive the remaining in 2024 and 2025. The total future installments were discounted by an implicit rate estimated based on certain Level 2 inputs discussed in Note 2 resulting in the receivable from the sale of investment properties of $8,219,898 as of December 31, 2023. The discount on total installments would be subsequently accreted back over the time over the remaining payment term. During the year ended December 31, 2023, the Group recognized a gain on sale of investment property of $1,165,170 and interest income of $98,990 included in other income in the statements of profit or loss and other comprehensive income (loss).
| F- |
In accordance with the purchase and sale agreement, the deferred cash payments will be paid to the Group in the upcoming five installments based on the following schedule:
SCHEDULE Of PURCHASE AND SALE AGREEMENT Of THE DEFERRED CASH PAYMENTS
| Consideration | ||||
| 1st Installment Payment due in February 2024 | $ | 1,204,082 | ||
| 2nd Installment Payment due in May 2024 | 1,204,082 | |||
| 3rd Installment Payment due in August 2024 | 1,204,082 | |||
| 4th Installment Payment due in November 2024 | 1,204,082 | |||
| 5th Installment Payment due in February 2025 | 4,214,286 | |||
| Discount on future payments | (810,716 | ) | ||
| Total consideration outstanding, net of discount | $ | 8,219,898 | ||
| Receivables from the sale of investment properties - short term | 4,072,391 | |||
| Receivables from the sale of investment properties - long term | $ | 4,147,507 | ||
During 2022, The Group sold two of its investments Properties with a carrying amount totaling $9,273,000 and received net proceeds of $8,874,753 related to the companies Latam Logistic Propco Bodegas San Joaquin S de R.L. and Latam Logistic Propco Lagunilla I S de R.L. The Group recognized a loss on sale of investment property of $398,247.
There were no disposition activities during the year ended December 31, 2021.
13. ASSET HELD FOR SALE
During the year ended December 31, 2021, the Group engaged in an active sale negotiation for the sale of certain land lot with a third-party buyer. The land lot held for sale is part of a land lot that is owned by LatAm Parque Logistico San José - Verbena partnership, within the Costa Rica segment.
On May 21, 2021, the Group signed on behalf of LatAm Parque Logistico San José - Verbena partnership, the purchase and sale agreement for the sale of the fully serviced land parcel for $4,000,000. In accordance with the purchase and sale agreement, the sale will be paid in three installments based on the following schedule:
SCHEDULE OF ASSET HELD FOR SALE WILL BE PAID IN THREE INSTALLMENTS
| Amount | ||||||||
| 1st Installment Payment | $ | 1,200,000 | Upon the signing of the Purchase and Sale Agreement. | |||||
| 2nd Installment Payment | 1,200,000 | Upon conclusion of land infrastructure work. | ||||||
| 3rd Installment Payment | 1,600,000 | Upon title transfer of the property to the buyer. | ||||||
| $ | 4,000,000 | |||||||
On May 24, 2021, the Group, through LatAm Parque Logistico San José - Verbena partnership, received the first installment payment of $1,200,000 from the buyer. The Group received the second installment of $1,200,000 on January 27, 2022 upon the conclusion of the land infrastructure work. Although the Group initially anticipated the sale to be completed within one year from the agreement execution date, unforeseen administrative delays related to title transfer arose, thereby extending the expected sale duration beyond one year. These delays were triggered by events or circumstances beyond the Group’s control. The sale subsequently closed on April 23, 2023 upon the transfer of the property title and the receipt of the third installment payment of $1,600,000.
The Group recognized a gain on sale of asset held for sale of $1,022,853 during the year ended December 31, 2023. As of December 31, 2022, the land lot and its respective infrastructure work is presented as an asset held for sale within the consolidated statements of financial position, with a value of $2,977,147 representing the carrying value of the asset.
| F- |
14. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses as of December 31, 2023 and 2022 were as follows:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| 2023 | 2022 | |||||||
| Trade payables | $ | 6,276,451 | $ | 1,875,979 | ||||
| Accrued interest | 752,874 | 2,650,535 | ||||||
| Accrued development cost | 1,308,567 | 2,411,190 | ||||||
| Accrued employee benefits and related obligations | 976,268 | 307,673 | ||||||
| Accrued professional service fees | 3,007,558 | 268,939 | ||||||
| Other accrued expenses | 805,784 | 1,077,606 | ||||||
| Total | $ | 13,127,502 | $ | 8,591,922 | ||||
Trade payables are non-interest bearing and are normally settled on 30-day terms.
15. LEASES
Group as a lessor
The Group enters into leases on its property portfolio. Refer to Note 2 for further information.
Group as a lessee
Offices Right-of-Use (ROU) Asset and Liability - The Group leases its office spaces from third parties. The remaining weighted average lease term was 2.2 and 3.3 years as of December 31, 2023 and 2022, respectively.
The Group does not include renewal options in the lease term for calculating the lease liability unless the Group is reasonably certain that will exercise the option, or the lessor has the sole ability to exercise the option.
As of December 31, 2023, and 2022, the Group carried short-term office lease liability amounting to $65,886 and $54,327, respectively, and long-term lease liability amounting to $135,612 and $88,553, respectively. Short-term office lease liability and long-term office lease liability are included in other current liabilities, and other non-current liabilities, respectively.
The weighted average discount rate was 7.1%, 7.1% and 7.3% as of December 31, 2023, 2022 and 2021, respectively. The Group recorded interest expense on lease liabilities of $11,667, $13,400 and $15,292 for the years ended December 31, 2023, 2022 and 2021, respectively.
The Group had total cash outflows for leases of $50,112, $163,072 and $99,380 for the years ended December 31, 2023, 2022 and 2021, respectively. The Group also had non-cash additions to right of use assets amounting to $115,100, $148,326 and $0 in the years ended December 31, 2023, 2022 and 2021, respectively, that were replaced by new leases.
The Group did not have short-term lease expenses or leases of low value assets during the years ended December 31, 2023, 2022 and 2021.
| F- |
Offices ROU assets are amortized using the straight-line method over the term of the operating lease. Original lease terms and remaining lease terms of the corporate offices operating leases were as follows:
SCHEDULE OF ORIGINAL LEASE TERMS AND REMAINING LEASE TERMS
| Office Location | Original Lease Term |
Remaining Term as of December 31, 2023 | ||||||
| (in years) | (in years) | |||||||
| Costa Rica | 2.9 | 2.2 | ||||||
| Colombia | 3.8 | 2.1 | ||||||
| Weighted average | 3.3 | 2.2 | ||||||
As of December 31, 2023 and 2022, the Group’s office right-of-use assets, included in other non-current assets, were as follows:
SCHEDULE OF RIGHT-OF-USE ASSETS, INCLUDED IN OTHER NON-CURRENT ASSETS
| Total | ||||
| Gross assets: | ||||
| Balance as of January 1, 2022 | $ | 452,460 | ||
| Additions | 148,326 | |||
| Retirements | (112,740 | ) | ||
| Foreign currency translation effect | (30,321 | ) | ||
| Balance as of December 31, 2022 | $ | 457,725 | ||
| Additions | 115,100 | |||
| Retirements | (339,721 | ) | ||
| Foreign currency translation effect | 30,509 | |||
| Balance as of December 31, 2023 | $ | 263,613 | ||
| Accumulated depreciation: | ||||
| Balance as of January 1, 2022 | $ | 317,337 | ||
| Additions to accumulated depreciation | 104,198 | |||
| Retirements | (111,688 | ) | ||
| Foreign currency translation effect | 17,476 | |||
| Balance as of December 31, 2022 | $ | 327,323 | ||
| Additions to accumulated depreciation | 60,666 | |||
| Retirements | (311,951 | ) | ||
| Foreign currency translation effect | 8,115 | |||
| Balance as of December 31, 2023 | $ | 84,153 | ||
| Net book value as of December 31, 2022 | $ | 130,402 | ||
| Net book value as of December 31, 2023 | $ | 179,460 | ||
During the years ended December 31, 2023, 2022 and 2021, the Group recorded ROU amortization expense related to office space of $60,666, $104,198 and $96,662, respectively, in the consolidated statements of profit or loss and other comprehensive loss under General and administrative expenses.
Investment Property ROU Asset and Liability – In December 2022, the Group, through Parque Logístico Callao (“Parque Logístico Callao”), a partnership entity controlled by the Group, entered into a land lease agreement with a third party, whereas Parque Logístico Callao is committed to lease a land parcel for a period of 30 years, with the intention of development warehouses on the leased land (“Land Lease”). Since the ROU asset is held by the Parque Logístico Callao to construct and develop for future use as investment property and lease out the constructed assets under one or more operating leases, the ROU asset meets the definition of an investment property under IAS 40 Investment Property and therefore, it was recognized as part of investment properties.
| F- |
Under IAS 40, the Group applies the fair value model to the investment property ROU assets, which need to be remeasured at fair value at each period end. As a result, there is no amortization expense associated with the Land Lease. The Group’s investment property ROU asset was $12,260,000 and $227,999 as of December 31, 2023 and 2022, respectively.
The associated land lease liability was recorded at the present value of the remaining lease payment using a discount rate of 8.5%. The Group recorded interest expense on lease liabilities of $237,916, $0 and $0 for the years ended December 31, 2023, 2022 and 2021, respectively, as part of the general and administration expense in the consolidated statement of profit or loss and other comprehensive income (loss). The Group had short-term and long-term lease liability, respectively, in relation to the land leases of $172,963 and $2,800,943 as of December 31, 2023, and $7,875 and $2,728,115 as of December 31, 2022. Short-term land lease liability and long-term land lease liability are included in other current liabilities, and other non-current liabilities, respectively.
The Group also had no cash outflows for the land leases for the years ended December 31, 2023, 2022 and 2021. The Group also had non-cash additions to land lease ROU assets amounting to $2,507,992, $227,999 and $0 in the years ended December 31, 2023, 2022 and 2021, respectively.
Lease commitment for office and land leases - The following table summarizes the fixed, future minimum rental payments, excluding variable costs, for which the leases have commenced by December 31, 2023 with amounts discounted at lease commencement by our incremental borrowing rates to calculate the lease liabilities of the Group’s leases:
SCHEDULE OF LEASE COMMITMENT FUTURE MINIMUM RENTAL PAYMENTS
|
As of December 31, 2023 |
||||
| 2024 | $ | 271,483 | ||
| 2025 | 346,403 | |||
| 2026 | 315,639 | |||
| 2027 | 268,064 | |||
| 2028 | 268,953 | |||
| Thereafter | 6,711,858 | |||
| Total undiscounted rental payments | $ | 8,182,400 | ||
| Less: imputed interest | (5,006,996 | ) | ||
| Total lease liability | $ | 3,175,404 | ||
| F- |
16. DEBT
As of December 31, 2023 and 2022, the debt of the Group was as follows (all loans are USD denominated, except loans in Colombia are COP denominated):
SCHEDULE OF DEBT
|
Financial Institution |
Type |
Expiration |
Annual Interest Rate |
Restricted Cash at December 31, 2023 |
Restricted Cash at December 31, 2022 |
Remaining Borrowing Capacity at December 31, 2023 |
Amount Outstanding at December 31, 2023 |
Amount Outstanding at December 31, 2022 |
||||||||||||||||||||
| Costa Rica (USD denominated) | ||||||||||||||||||||||||||||
| Banco Davivienda Costa Rica, S.A | Mortgage Loan | Refinanced | 3Mo Secured Overnight Financing Rate (“SOFR”) + 435 bps, no min. rate | $ | — | $ | 874,210 | $ | — | $ | — | $ | 30,411,676 | |||||||||||||||
| Banco Davivienda Costa Rica, S.A | Mortgage Loan | Refinanced | 3Mo SOFR + 435 bps, no min. rate | — | 309,814 | — | — | 11,355,244 | ||||||||||||||||||||
| Banco Davivienda Costa Rica, S.A | Mortgage Loan | Refinanced | 3Mo SOFR + 435 bps, no min. rate | — | 142,244 | — | — | 4,856,716 | ||||||||||||||||||||
| Banco Davivienda Costa Rica, S.A | Mortgage Loan | Refinanced | 3Mo SOFR + 442 bps, no min. rate | — | 339,900 | — | — | 10,731,686 | ||||||||||||||||||||
| Banco Davivienda Costa Rica, S.A | Mortgage Loan | Refinanced | 3Mo SOFR + 435 bps, no min. rate | — | 320,940 | — | — | 3,865,901 | ||||||||||||||||||||
| Banco Davivienda Costa Rica, S.A. | Mortgage Loan | Nov, 2038 | Year 1: 7.0% Year 2: 7.3% Thereafter: 3Mo SOFR + 240 bps | — | — | — | 7,974,306 | — | ||||||||||||||||||||
| BAC Credomatic, S.A. | Mortgage Loan | Refinanced | 3Mo SOFR + 432 bps, no min. rate | — | — | — | — | 2,218,382 | ||||||||||||||||||||
| BAC Credomatic, S.A. | Mortgage Loan | Refinanced | 3Mo SOFR + 440 bps, no min. rate | — | — | — | — | 3,034,137 | ||||||||||||||||||||
| F- |
|
Financial Institution |
Type |
Expiration |
Annual Interest Rate |
Restricted Cash at December 31, 2023 |
Restricted Cash at December 31, 2022 |
Remaining Borrowing Capacity at December 31, 2023 |
Amount Outstanding at December 31, 2023 |
Amount Outstanding at December 31, 2022 |
||||||||||||||||||||
| BAC Credomatic, S.A. | Mortgage Loan | Refinanced | US Prime Rate + 110 bps, no min. rate | — | — | — | — | 972,476 | ||||||||||||||||||||
| BAC Credomatic, S.A. | Mortgage Loan | Refinanced | 3Mo SOFR + 439 bps, no min. rate | — | — | — | — | 6,562,983 | ||||||||||||||||||||
| BAC Credomatic, S.A. | Mortgage Loan | July 2031 | 3Mo SOFR + 378 bps, no min. rate (except for the fixed rate of 8.1% from March 2023 to March 2024) | — | — | 1,141,001 | 46,908,999 | 34,997,899 | ||||||||||||||||||||
| Banco Promerica de Costa Rica, S.A. | Mortgage Loan | Refinanced | Prime Rate + 275 bps, no min. rate | — | 2 | — | — | 6,697,365 | ||||||||||||||||||||
| Banco Nacional de Costa Rica, S.A. | Mortgage Loan | Refinanced | 0-2 years: 6.5%, Thereafter: 290 bps + US Prime Rate, no min. rate | — | — | — | — | 7,583,783 | ||||||||||||||||||||
| Banco Nacional de Costa Rica, S.A. | Mortgage Loan | April 2048 | Year 1: 5.9% Year 2: 6.2% Thereafter: 3Mo SOFR +140 bps | — | — | — | 65,727,171 | — | ||||||||||||||||||||
| Banco Nacional de Costa Rica, S.A. | Mortgage Loan | April 2048 | Year 1: 5.9% Year 2: 6.2% Thereafter: 3Mo SOFR +140 bps | 480,000 | — | — | 18,285,023 | — | ||||||||||||||||||||
| Banco Nacional de Costa Rica, S.A. | Mortgage Loan | April 2048 | Year 1: 5.9% Year 2: 6.2% Thereafter: 3Mo SOFR +140 bps | — | — | — | 15,164,206 | — | ||||||||||||||||||||
| Banco Nacional de Costa Rica, S.A. | Mortgage Loan | April 2048 | Year 1: 6.4% Year 2: 7.3% Thereafter: 3Mo SOFR + 280 bps | 140,485 | — | — | 6,918,421 | — | ||||||||||||||||||||
| F- |
|
Financial Institution |
Type |
Expiration |
Annual Interest Rate |
Restricted Cash at December 31, 2023 |
Restricted Cash at December 31, 2022 |
Remaining Borrowing Capacity at December 31, 2023 |
Amount Outstanding at December 31, 2023 |
Amount Outstanding at December 31, 2022 |
||||||||||||||||||||
| Total Costa Rica Loans | $ | 620,485 | $ | 1,987,110 | $ | 1,141,001 | $ | 160,978,126 | $ | 123,288,248 | ||||||||||||||||||
| Peru (USD denominated) | ||||||||||||||||||||||||||||
| International Finance Corporation Tranche 1 | Mortgage Loan | Refinanced | 6Mo SOFR + 425 bps, no min. rate | — | — | — | — | 21,671,047 | ||||||||||||||||||||
| International Finance Corporation Tranche 2 | Mortgage Loan | Refinanced | 6Mo SOFR + 525 bps no min. rate | — | 1,205,162 | — | 15,009,719 | |||||||||||||||||||||
| BBVA Peru Tranche 1 | Mortgage Loan | March 2053 | 8.50% | — | — | — | 48,670,000 | — | ||||||||||||||||||||
| BBVA Peru Tranche 2 | Mortgage Loan | March 2053 | 8.40% | — | — | — | 11,330,000 | — | ||||||||||||||||||||
| BBVA Peru | Mortgage Loan | July 2024 | 8.35% | 2,000,000 | — | — | 2,000,000 | — | ||||||||||||||||||||
| Total Peru Loans | $ | 2,000,000 | $ | 1,205,162 | $ | $ | 62,000,000 | $ | 36,680,766 | |||||||||||||||||||
| Colombia (COP denominated) | ||||||||||||||||||||||||||||
| Bancolombia, S.A. | Mortgage Loan | January 2036 | IBR +327 bps no min. rate | — | — | — | 23,087,020 | 18,688,521 | ||||||||||||||||||||
| Bancolombia, S.A. | Mortgage Loan | May 2036 | IBR +365 bps no min. rate | — | — | — | 18,738,132 | 15,145,128 | ||||||||||||||||||||
| BTG | Secured Bridge Loan | August 2024 | IBR +720 bps no min. rate | — | — | — | 6,540,992 | — | ||||||||||||||||||||
| ITAÚ Corpbanca Colombia, S.A. | Mortgage Loan | Paid | IBR +447 bps no min. rate | — | — | — | — | 7,047,004 | ||||||||||||||||||||
| Total Colombia Loans | $ | — | $ | — | $ | — | $ | 48,366,144 | $ | 40,880,653 | ||||||||||||||||||
| Panama (USD dominated) | ||||||||||||||||||||||||||||
| Banco BTG Pactual S.A. — Cayman Branch | Secured Bridge Loan | Paid | SOFR + 600 bps, no min rate | — | — | — | — | 15,000,000 | ||||||||||||||||||||
| Total Panama Loans | $ | — | $ | — | $ | — | $ | — | $ | 15,000,000 | ||||||||||||||||||
| Total | $ | 2,620,485 | $ | 3,192,272 | $ | 1,141,001 | $ | 271,344,270 | $ | 215,849,667 | ||||||||||||||||||
| Accrued financing costs | 752,874 | 2,823,170 | ||||||||||||||||||||||||||
| Debt issuance costs, net | (2,242,909 | ) | (9,346,062 | ) | ||||||||||||||||||||||||
| Total debt | 269,854,235 | 209,326,775 | ||||||||||||||||||||||||||
| Less: Current portion of long-term debt | (16,703,098 | ) | (23,576,982 | ) | ||||||||||||||||||||||||
| Less: Reclassified to short term due to debt waiver on Banco Davivienda Alajuela I SRL and Bancolombia & ITAÚ loans | — | (87,366,478 | ) | |||||||||||||||||||||||||
| Total Long-term debt | $ | $ | 253,151,137 | $ | 98,383,315 | |||||||||||||||||||||||
| F- |
Debt Agreements
Secured Bridge Loan
On May 21, 2021, the Group entered into a USD Denominated secured bridge loan agreement of $15.0 million with BTG Pactual, S.A – Cayman Branch. The proceeds of the loan were used to fund the continued growth of the Group. As per the initial conditions, the credit facility was scheduled to mature on June 17, 2022, with a fixed annual interest rate of 5.85%. In June 2022, the Group extended the denominated secured bridge loan to March 17, 2023, including a substitution of the fixed interest rate to a variable interest rate consisting of SOFR annual average plus 600 basis points. The agreement restricts Latam Logistic Properties S.R.L from changing its ownership. This excludes the event of an IPO if Jaguar Growth Partners LLC remains as the final beneficiary of the debtor. This loan was repaid in full by December 31, 2023.
IFC
The IFC secured credit facility includes full development of Latam Logistic Lima Sur through a two-tranche facility. Latam Logistic Lima Sur is a total of six buildings development divided in two phases. The loan has an aggregate borrowing capacity of $53,000,000 and is divided in two tranches corresponding to each development phase.
| ● | Tranche 1 – The loan is for the financing of the development of phase 1. The loan has a total borrowing capacity of $27,100,000 and is interest only until January 15, 2020 with a balloon payment of $6,865,611 at expiration on July 15, 2028. As of December 31, 2022, the Group had disbursed all of the tranche. | |
| ● | Tranche 2 – The loan is for the financing of the development of phase 2. The loan has a total borrowing capacity of $25,900,000 and is interest only until January 15, 2022 with a balloon payment of $6,475,000 at expiration on July 15, 2030. As of December 31, 2022 the Group had disbursed $15,607,323. |
The loan bears a commitment fee over unborrowed amounts until December 15, 2022 as follows:
| – | June 16, 2019 – December 31, 2019 – 0.50% over unborrowed amount. | |
| – | January 1, 2020 – June 30, 2021 – 1.00% over unborrowed amount. | |
| – | July 1, 2021 – January 15, 2022 – 1.50% over unborrowed amount. |
On March 14, 2022, the Group negotiated a new interest rate on the IFC Tranche 1, reducing the spread by 100 basis points, to 425 basis points, effective July 15, 2022. All the other terms and conditions of the loan with IFC remained the same. A gain of $351,503 was recognized as part of modification of this debt facility and is included in financing costs in the consolidated statements of profit or loss in the year ended December 31, 2022.
On October 26, 2023, the Group drew on its debt facilities with IFC for a total of $10,292,677 to finance the construction of the Lurin I project in Peru. The related interest expense directly attributable to the construction is capitalized.
On December 15, 2023, the Group refinanced the debt outstanding with IFC Tranche 1 and Tranche 2 for a total amount of $46,973,443 with a mortgage loan denominated in USD with Banco Bilbao Vizcalla Peru (“BBVA Peru”) for an aggregate amount of $60,000,000. A loss of $1,651,793 was recognized as part of the extinguishment of this debt facility and is included in financing costs in the consolidated statements of profit or loss in the year ended December 31, 2023.
| F- |
As per the loan agreement, the Group has to maintain a cash collateral account as a guarantee of the principal during the construction and leasing period. As of December 31, 2022, the Group had a restricted cash equivalent of $1,205,162 in the cash collateral account, which was released from restricted cash in connection with the loan refinance on December 15, 2023.
ITAÚ
On January 6, 2021, LLP entered into a COP denominated secured construction loan facility with ITAÚ Corpbanca Colombia, S.A. (“ITAÚ”) for a total borrowing capacity of COP$35,000 million ($10.1 million as of closing). Proceeds were used for the financing of the construction of building 500 in Latam Logistic Park Calle 80 in Bogota, Colombia. The loan matures on July 6, 2033. The loan bears an annual interest rate of IBR (a short-term interest rate for the Colombian Peso determined by the board of directors of Colombia’s Central Bank) plus 447 basis points and has an annual commitment fee of 0.50% of the undrawn amount of the credit line. The Group was obligated to pay interest only until April 20, 2022 and this loan was fully drawn in October 2021. The debt facility with ITAÚ was paid in full through a sale of the mortgaged property to a third party buyer. The buyer provided an advance of the payment directly to ITAÚ on August 31, 2023 in order to settle the outstanding debt. A loss of $118,073 was recognized as part of the extinguishment of this debt facility and is included in financing costs in the consolidated statements of profit or loss in the year ended December 31, 2023.
Bancolombia
On January 22, 2021, LLP entered into a COP denominated financing agreement of COP44,500 million ($12.8 million as of the transaction date) with Bancolombia, S.A. for the financing of the construction of building 300 in Latam Logistic Park Calle 80 in Bogota, Colombia. As of December 31, 2021, the financing was fully disbursed. This financing agreement was further increased by COP$30,000 million ($7.0 million of extension). The financing bears an interest rate of IBR plus 365 basis points, commitment fees of 0.1% per month of the undrawn amount of the loan and has a 15-year term with a balloon payment of 40% at expiration (COP$29,901 million, or $6.9 million as of extension). LLP began to make principal payments in November 2021. On January 19, 2022, the Group increased by COP$34,000 million ($8.4 million per the transaction date exchange rate, same applies to hereafter) its existing financing facilities denominated in COP with Bancolombia from COP$57,810 million ($14.3 million) to COP$91,810 million ($22.7 million). The financing has a fourteen-year term with a balloon payment of COP$42,866 million ($11.4 million) at expiration. The interest accrues at IBR plus 327 basis points. A loss of $653,847 was recognized as part of modification of the debt facility and is included in financing costs in the consolidated statements of profit or loss in the year ended December 31, 2022.
On September 22, 2023, the Group negotiated a deferral of principal with Bancolombia, deferring all principal payments for seven months, beginning on October 1, 2023. All the other terms and conditions of the loan with Bancolombia remained the same. A gain of $70,058 was recognized as part of the modification of this debt facility and is included in financing costs in the consolidated statements of profit or loss in the year ended December 31, 2023.
BAC Credomatic
In March 2021, LLP entered into two U.S. dollar denominated mortgage loan facilities with BAC Credomatic, S.A. for an aggregate amount of $10.0 million for the financing of the acquisition of two operating properties in San José, Costa Rica. The loans have a fifteen-year term and bear an annual interest rate of three-month LIBOR plus 423 basis point with a minimum interest rate of 5.0%. This loan was refinanced to Banco Nacional de Costa Rica on April 28, 2023.
| F- |
On July 7, 2021, LLP entered into a U.S. dollar denominated mortgage loan facility of up to $45.5 million with Banco BAC San José, S.A. (“BAC”) on behalf of LatAm Parque Logístico San José - Verbena partnership. Proceeds will be used to finance the construction of LatAm Parque Logístico San José - Verbena, a five-building class-A master-planned logistic park totaling 829,898 square feet of net rentable area, in the Alajuelita submarket in San José, Costa Rica. The loan can be drawn in multiple disbursements up to approximately 60% of the total investment of the project. The mortgage loan has a term of 10 years with a 15-year amortization profile. The stated interest rate is the three-month LIBOR plus 423 basis points. In October 2022, the stated interest rate on the debt facility changed to the three-month SOFR plus 378 basis points. The debt facility has an amortization grace period of 30 months and does not accrue any commitment fees.
On February 16, 2022, the Group repaid one of the loans with BAC Credomatic due to the sale of the underlying property. The loan outstanding balance at the time of the sale was $2,868,155 and the Group recognized a loss of $586 due to the extinguishment of the debt facility and is included in financing costs in the consolidated statements of profit or loss. On March 1, 2023, the Group negotiated a reduced interest rate with BAC Credomatic, S.A. (“BAC”), reducing the interest rate from 3-month SOFR plus 378 basis points to 8.12% for six months. All the other terms and conditions of the loan with BAC remained the same. A gain of $121,038 was recognized as part of the modification of this debt facility and is included in financing costs in the condensed consolidated statements of profit or loss. On October 5, 2023, the Group negotiated to keep the reduced interest rate of 8.12% for six more months. All the other terms and conditions of the loan with BAC remained the same. A loss of $47,466 was recognized as part of the modification of this debt facility and is included in financing costs in the condensed consolidated statements of profit or loss.
As of December 31, 2022, LLP has borrowed $1.0 million of a U.S. dollar denominated mortgage loan facility of up to $1.0 million with Banco BAC San José, S.A. for the financing of the renovations in LatAm Bodegas San Joaquin. The loan matures on June 24, 2032. The loan bears an annual interest rate at the U.S. Prime Rate plus 110 basis points with no minimum interest rate. This loan was refinanced to Banco Nacional de Costa Rica on April 28, 2023.
Banco Promerica
On August 16, 2021, LLP entered into a U.S. dollar denominated mortgage loan of $7.0 million with Banco Promerica de Costa Rica, S.A. for the purchase of a 118,403 square feet logistic facility located in the Coyol submarket in San José, Costa Rica. The loan has a fifteen-year term. The stated interest rate is the U.S. Prime Rate plus 475 basis points. This loan was refinanced to Banco Nacional de Costa Rica on April 28, 2023.
Banco Davivienda
On January 6, 2022, the Group negotiated a new interest rate on the Davivienda de Cosa Rica loans 3-month LIBOR plus 475 basis points and eliminated the interest rate floor, all the other terms and conditions of the loans with Davivienda de Costa Rica remained the same. A gain of $4,077,399 was recognized as part of modification of this debt facility and is included in financing costs in the consolidated statements of profit or loss in the year ended December 31, 2022.
| F- |
On January 31, 2022, LLP entered into a U.S. dollar denominated mortgage loan of $2.4 million with Banco Davivienda de Costa Rica for the acquisition of a container parking lot. The loan has a fifteen-year term. The loan bears an annual interest rate of U.S. Prime Rate plus 175 basis points. As part of the sale of related investment property, the purchaser of the investment property assumed the balance on the loan on October 31, 2022.
Banco Nacional
On April 28, 2023, the Group refinanced all outstanding loans with Banco Davivienda de Costa Rica, Banco Promerica de Costa Rica, S.A. and all loans except one with BAC Credomatic, S.A., with Banco Nacional de Costa Rica, S.A. A loss of $6,555,113 was recognized as part of extinguishment of these debt facilities and is included in financing costs in the condensed consolidated statements of profit or loss for the year ended December 31, 2023. The Group entered into four U.S. dollar denominated mortgage loans with Banco Nacional de Costa Rica for an aggregate amount of $107,353,410. The loans have a twenty-five-year term. The loans bear a fixed annual interest rate for the first two years and a variable rate thereafter.
On November 1, 2023, LLP refinanced the debt outstanding with Banco Nacional de Costa Rica, S.A. ($7,373,460) with a mortgage loan denominated in USD with Davivienda de Costa Rica for an aggregate amount of $8,000,000. The new mortgage loan matures in 15 years. The loan is subject to a fixed interest rate of 7.00% in the first year, and a rate of 6-month SOFR plus 2.4% adjustable monthly from the second year onwards.
BTG
On August 25, 2023 and August 30, 2023, LLP entered into two new line of credit agreement with BTG Pactual Colombia S.A. for COP 15,000,000,000 and COP 10,000,000,000, respectively (approximately $3,679,266 and $2,433,042, respectively, at the date the transactions were initiated). Interest is calculated and paid monthly at the rate of a one-month Colombian IBR plus 720 basis points. Principal repayment is due at maturity, on August 25, 2024 and August 30, 2024, respectively. This debt agreement is guaranteed by the trust established for Latam Logistic Col Propco Cota 1, where Banco BTG Pactual Colombia S.A is established as a guaranteed creditor, with three underlying properties defined as guarantees.
BBVA Peru
On October 19, 2023, the Group entered into a new line of credit agreement with El Banco BBVA Peru for $2,000,000. The line of credit agreement has a nominal rate of 14.45% fixed and an annual effective rate of 8.35%. The line of credit agreement matures in 9 months and follows a monthly repayment schedule. This debt agreement is a senior unsecured loan and is not guaranteed by any of the properties of the Group. As of the issuance date, the Company has fully drawn the line of credit.
On December 15, 2023, LLP entered into a mortgage loan with El Banco BBVA Peru for a total of $60,000,000. The mortgage loan consists of two components: Tranche A and Tranche B. The Tranche A totaling $48,670,000 was used to refinance the Group’s existing debt with IFC. The Tranche B totaling $11,330,000 is expected to finance LLP’s other real estate projects. Tranche A and B will mature in 10 years (with a 35% balloon payment for Tranche A) and carry a fixed interest rate of 8.5% and 8.4%, respectively.
LIBOR Rate – The Group modified all of its Costa Rican loans from LIBOR rate to SOFR by December 31, 2022. In July 2023, the Group modified the rate for IFC loans from 6-month LIBOR to 6-month SOFR.
| F- |
Long-Term Debt Maturities – Scheduled principal and interest payments due on the Group’s debt as of December 31, 2023, are as follows:
| Mortgage Loan | Secured Bridge Loan | Total | ||||||||||
| Maturity: | ||||||||||||
| 2024 | $ | 10,162,104 | $ | 6,540,992 | $ | 16,703,096 | ||||||
| 2025 | 9,569,893 | — | 9,569,893 | |||||||||
| 2026 | 10,215,729 | — | 10,215,729 | |||||||||
| 2027 | 11,410,890 | — | 11,410,890 | |||||||||
| 2028 | 11,835,657 | — | 11,835,657 | |||||||||
| Thereafter | 211,609,005 | — | 211,609,005 | |||||||||
| Accrued and deferred financing cost, net | (1,490,035 | ) | — | (1,490,035 | ) | |||||||
| Total | $ | 263,313,243 | $ | 6,540,992 | $ | 269,854,235 | ||||||
Financing Cost – The following table summarizes the weighted average net effective interest rate by type of financing facility as of December 31, 2023 and 2022:
| 2023 | 2022 | |||||||||||||||
| Weighted Average Interest Rate (1) | Amount Outstanding | Weighted Average Interest Rate (1) | Amount Outstanding | |||||||||||||
| Mortgage Loan | 8.5 | % | $ | 264,803,278 | 9.2 | % | $ | 200,849,667 | ||||||||
| Bridge Loan | 20.2 | % | 6,540,992 | 10.7 | % | 15,000,000 | ||||||||||
| Total | 8.8 | % | $ | 271,344,270 | 9.3 | % | $ | 215,849,667 | ||||||||
| (1) | The interest rate presented represent the effective interest rate (including debt issuance costs) at the end of the year for the debt outstanding. |
The following table summarizes the components of financing cost including the deferred financial cost amortization for the year ended December 31, 2023, 2022 and 2021:
| 2023 | 2022 | 2021 | ||||||||||
| Gross interest expense | $ | 22,557,977 | $ | 15,568,346 | $ | 9,506,320 | ||||||
| Gross commitment fees | 128,410 | 225,261 | 286,117 | |||||||||
| Amortization of debt issuance cost | 203,237 | 1,089,893 | 659,072 | |||||||||
| Debt modification gain | (143,630 | ) | (3,775,054 | ) | — | |||||||
| Debt extinguishment loss | 8,370,997 | — | — | |||||||||
| Other expense | 593,623 | 112,542 | 238,740 | |||||||||
| Total financing cost before capitalization | 31,710,614 | 13,220,988 | 10,690,249 | |||||||||
| Capitalized amounts into investment properties | (599,550 | ) | (1,454,262 | ) | (890,691 | ) | ||||||
| Net financing cost | $ | 31,111,064 | $ | 11,766,726 | $ | 9,799,558 | ||||||
| Total cash paid for interest and commitment fees | $ | 24,862,976 | $ | 14,505,955 | $ | 9,391,336 | ||||||
Debt Reconciliation – The reconciliation of long term debt as of December 31, 2023 and 2022 were as follows:
| 2023 | 2022 | |||||||
| Beginning balance | $ | 209,326,775 | $ | 188,719,114 | ||||
| Secured bank debt borrowings | 199,135,651 | 44,217,867 | ||||||
| Bridge loan borrowings | 6,540,992 | — | ||||||
| Secured bank debt repayments | (152,416,321 | ) | (13,335,183 | ) | ||||
| Bridge loan repayments | (66,040 | ) | — | |||||
| Long—term accrued interest | — | (9,733 | ) | |||||
| Debt issuance cost | (814,661 | ) | (41,550 | ) | ||||
| Deferred financing cost amortization | 184,423 | 1,037,824 | ||||||
| Debt extinguishment loss | 8,370,997 | — | ||||||
| Debt modification gain | (143,630 | ) | (3,775,054 | ) | ||||
| Foreign currency translation effect | (263,951 | ) | (7,486,510 | ) | ||||
| Ending balance | $ | 269,854,235 | $ | 209,326,775 | ||||
| F- |
To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determined the amount of debt issuance costs eligible for capitalization. Debt issuance costs incurred of ($814,661), ($41,550) and ($1,070,987) for the years ended December 31, 2023, 2022 and 2021, respectively, were capitalized.
Financial Debt Covenants – The loans described above are subject to certain affirmative covenants, including, among others, (i) reporting of financial information; and (ii) maintenance of corporate existence, the sec urity interest in the properties subject to the loan and appropriate insurance for such properties; and (iii) maintenance of certain financial ratios. In addition, the loans are subject to certain negative covenants that restrict Latam Logistic Properties ability to, among other matters, incurs in additional indebtedness under or create additional liens on the properties subject to the loans, change its corporate structure, make certain restricted payments, enter into certain transactions with affiliates, amend certain material contracts.
The loans contain, among others, the following events of default: (i) non-payment; (ii) false representations; (iii) failure to comply with covenants; (iv) inability to generally pay debts as they become due; (v) any bankruptcy or insolvency event; (vi) disposition of the subject properties; or (vii) change of control of the subject properties.
As of December 31, 2023, the group was compliant with, or otherwise had waivers for all debt covenants with its lenders.
As of December 31, 2022, the Group was not in compliance with certain debt covenants set forth in its loan agreements with Banco Davivienda, Bancolombia and ITAÚ. Since the liabilities were payable on demand as of December 31, 2022, and the Group did not have the right to defer its settlement for at least twelve months after that date, the Group reclassified the debt balance with Banco Davivienda, Bancolombia and ITAÚ totaling $87,366,478 to be current liabilities as of December 31, 2022. The Group received the waivers for the requirement to comply with the Banco Davivienda and Bancolombia financial covenants on February 17, 2023 and September 25, 2023, respectively. In April, 2023 the Group refinanced its Banco Davivienda debt, thereby relieving any covenant requirement with that lender. The Bancolombia waiver was effective through December 31, 2023 and ratio compliance testing will next be applicable for this loan in June, 2024. The Group was in compliance with all the other debt covenants as of December 31, 2022.
Latam Logistic Properties, S.A. shareholders authorized a single class of common stock of 300,000,000 shares from which 168,142,740 shares were issued and fully paid with a nominal (par) value of $1.00 per share as of December 31, 2023 and 2022. Refer to Note 1 for more information on the corporate conversation that occurred on January 13, 2021.
All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at shareholders’ meetings of Latam Logistic Properties, S.A.
For the years ended December 31, 2023, 2022 and 2021 non-controlling partners have made capital contribution to the Group of $5,870,314, $700,000 and $4,084,160 respectively, and the Group made distributions to the non-controlling partners of $4,522,936, $2,067,803 and $1,024,747, respectively.
Retained earnings consist of legal reserves and accumulated earnings. According to the legislation in effect in several countries in which the Group operates, the Group’s subsidiaries must appropriate a portion of each year’s net earnings to their respective legal reserve. The legal reserve amount varies by jurisdiction and ranges from 5% to 10% of the net earnings generated by operating entities, up to a cap of 10% to 50% of that entity’s capital stock.
| F- |
18. NON—CONTROLLING INTERESTS
In September 2018, the Group entered in a real estate partnership for the development of Latam Parque Logistico Coyol II in Costa Rica. The partnership includes two entities that the Group consolidates but does not own 100% of the equity (Latam Propco El Coyol Dos S de R.L. and Latam Logistic Pan Holdco El Coyol II S de R.L., collectively, “Latam Parque Logistico Coyol II”). The Group reports a non-controlling interest in relation to this partnership. The Group has complete responsibility, authority and discretion in key decision activities management of the partnership. The Group, through its position of Directing Partner, is responsible for the operations of the Latam Parque Logistico Coyol II and has the existing rights and ability to direct the relevant activities of the entities, indicating the Group’s power over the non-controlling investee.
In December 2020, the Group entered in a real estate partnership for the development of Latam Parque Logistico San Jose in Costa Rica. The partnership includes three entities that the Group consolidates but does not own 100% of the equity (Latam Logistic Pan Holdco Verbena I S de R.L., Latam Logistic Pan Holdco Verbena II S, S.R.L., and 3101784433, S.R.L., collectively, “Latam Parque Logistico San José — Verbena”). The Group reports a non-controlling interest in relation to this partnership. The Group has complete responsibility, authority and discretion in the day-to-day management of the partnership. Through its position as Managing Partner, the Group is responsible for the daily operations of Latam Parque Logistico San José — Verbena without prior approval of the other managers and equity holders, and has the existing rights and ability to direct the relevant activities of the entities, indicating the Group’s power over the non-controlling investees.
In March 2021, the Group entered into a real estate partnership with Capia Sociedad Administradora de Fondos de Inversion, S.A., through its investment fund Capia Radix Fondo de Inversion (Capia Radix) (together as “CAPIA”), an investment fund managed by CAPIA for the development of Parque Logístico Callao located in the submarket of Callao in Lima, Peru within the Jorge Chavez International Lima Airport land concession. Parque Logístico Callao will be developed in four phases of a building per phase. The partnership includes one entity that the Group consolidates but does not own 100% of its equity (Parque Logístico Callao, S.R.L., “Parque Logístico Callao”). According to the initial terms of the partnership agreement, the Group participation in the partnership entity will be of 50% during the construction of the first two phases with a dilution in the construction of the remaining two phases for a total participation of 33% at the end of the fourth phase. On November 24, 2023, both partners agreed to modify the ownership interest, whereas CAPIA became owner of 60% of the shares of the Partnership and LLP’s interest was decreased to 40%, which was supported by an additional capital contribution from CAPIA to the Partnership, effective as of the date of the agreement. The Group reports a non-controlling interest in relation to this partnership. The Group has complete responsibility, authority and discretion in the day-to-day management of the partnership. The Group, through the position of General Manager, is responsible for the daily operations of the Parque Logístico Callao, and has the existing rights and ability to direct the relevant activities of the entity, indicating the Group’s power over the non-controlling investee.
On September 17, 2021, the Group entered into a real estate partnership for the acquisition of LatAm Lagunilla Industrial Park in Costa Rica. The partnership includes two entities that the Group consolidates but do not own 100% of the equity (Latam Logistic Pan Holdco Lagunilla I, S.R.L., and Latam Logistic Propco Lagunilla I S de R.L., collectively, “Latam Lagunilla Industrial Park”). The Group reports a non-controlling interest in relation to this partnership. The Group has complete responsibility, authority and discretion in the day-to-day management of the partnership, and it has the ability to direct the relevant activities of Latam Lagunilla Industrial Park, indicating the Group’s power over the non-controlling investee. On October 31, 2022, the Group sold its interest in the real estate partnership to the non-controlling investee and recognized a loss of $486,863 in the loss on sale of investment properties in the consolidated statements of profit or loss for the year ended December 31, 2022. As of December 31, 2022, the two entities within Latam Lagunilla Industrial Park were no longer consolidated within the Group’s consolidated financial statements.
The following table summarizes the Group ownerships percentage and NCI as of December 31, 2023 and 2022. Each NCI partnership in the following table corresponds to multiple entities in Note 2 (e).
SCHEDULE OF GROUP OWNERSHIPS PERCENTAGE AND NON CONTROLLING INTERESTS
| Ownership Percentage | NCI | |||||||||||||||||
| Entity | Country | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
| Latam Parque Logistico Coyol II | Costa Rica | 50.0 | % | 50.0 | % | $ | 4,818,254 | $ | 8,885,098 | |||||||||
| Latam Parque Logistico San José — Verbena | Costa Rica | 23.6 | % | 23.6 | % | 27,971,004 | 23,567,619 | |||||||||||
| Parque Logístico Callao | Peru | 40.0 | % | 50.0 | % | 5,827,257 | 799,748 | |||||||||||
| Total | $ | 38,616,515 | $ | 33,252,465 | ||||||||||||||
During the years ended December 31, 2023 and 2022, the partnership entities paid distribution to the NCI partners as follows:
SCHEDULE OF PARTNERSHIP ENTITIES PAID DISTRIBUTION TO NON-CONTROLLING INVESTEE PARTNERS
| 2023 | 2022 | 2021 | ||||||||||
| Latam Parque Logístico Coyol II | $ | 3,675,054 | $ | 350,000 | $ | 250,000 | ||||||
| Latam Parque Logístico San José —Verbena | 847,882 | 754,231 | 774,747 | |||||||||
| Latam Lagunilla Industrial Park | — | 963,572 | — | |||||||||
| Total distributions paid to non—controlling partners | $ | 4,522,936 | $ | 2,067,803 | $ | 1,024,747 | ||||||
| F- |
Summarized financial information of non-controlling partnership entities’ total assets and total liabilities as of December 31, 2023 and 2022 was as follows:
SCHEDULE OF NON-CONTROLLING PARTNERSHIP ENTITIES TOTAL ASSETS AND TOTAL LIABILITIES
| As of December 31, 2023 | ||||||||||||
| Latam Parque Logistico Coyol II | Latam
Parque Logístico San José —Verbena |
Parque Logistico Callao | ||||||||||
| ASSETS | ||||||||||||
| CURRENT ASSETS: | ||||||||||||
| Cash and cash equivalents | $ | 1,301,121 | 1,666,657 | 25,267 | ||||||||
| Lease and other receivables, net | 34,021 | 7,326,802 | 2,023,086 | |||||||||
| Other current assets | 37,932 | 843,894 | 274,592 | |||||||||
| NON-CURRENT ASSETS: | ||||||||||||
| Investment properties | 29,708,000 | 80,878,055 | 12,879,976 | |||||||||
| Property and equipment, net | — | 25,613 | 4,108 | |||||||||
| Deferred tax asset | — | — | 688,485 | |||||||||
| Restricted cash equivalent | 480,000 | — | — | |||||||||
| Total assets | $ | 31,561,074 | 90,741,021 | 15,895,514 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| CURRENT LIABILITIES: | ||||||||||||
| Accounts payable and accrued expenses | $ | 229,988 | 3,027,672 | 3,148,102 | ||||||||
| Due to affiliates | — | 15,269 | — | |||||||||
| Other current liabilities | — | — | 325,811 | |||||||||
| NON-CURRENT LIABILITIES: | ||||||||||||
| Long—term debt | 18,285,023 | 44,926,842 | — | |||||||||
| Security deposits | 195,000 | 336,145 | 51,394 | |||||||||
| Other non-current liabilities | — | — | 2,800,943 | |||||||||
| Deferred tax liability | 3,214,523 | 5,863,957 | — | |||||||||
| Total liabilities | $ | 21,924,534 | 54,169,885 | 6,326,250 | ||||||||
| EQUITY: | ||||||||||||
| Equity attributable to owners of the Group | $ | 4,818,286 | 8,600,132 | 3,742,007 | ||||||||
| Non—controlling interests | $ | 4,818,254 | 27,971,004 | 5,827,257 | ||||||||
| December 31, 2022 | ||||||||||||
| Latam Parque Logistico Coyol II | Latam
Parque Logístico San José —Verbena |
Parque Logistico Callao | ||||||||||
| ASSETS | ||||||||||||
| CURRENT ASSETS: | ||||||||||||
| Cash and cash equivalents | $ | 896,623 | $ | 484,230 | $ | 1,084,155 | ||||||
| Lease and other receivables, net | 15,587 | 6,406,948 | 87,168 | |||||||||
| Other current assets | 17,695 | 16,126 | — | |||||||||
| Prepaid construction | — | 1,020,664 | 86,693 | |||||||||
| NON-CURRENT ASSETS: | ||||||||||||
| Investment properties | 30,613,000 | 63,278,220 | 386,525 | |||||||||
| Asset held for sale | — | 2,996,471 | — | |||||||||
| Property and equipment, net | — | 3,795 | — | |||||||||
| Deferred tax asset | — | — | 34,639 | |||||||||
| Restricted cash equivalent | 339,900 | — | — | |||||||||
| Other non-current assets | — | 587,064 | — | |||||||||
| Total assets | $ | 31,882,805 | $ | 74,793,518 | $ | 1,679,180 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| CURRENT LIABILITIES: | ||||||||||||
| Accounts payable and accrued expenses | $ | 315,637 | $ | 1,874,696 | $ | 28,290 | ||||||
| Deposits for the sale of assets | — | 2,400,000 | — | |||||||||
| NON-CURRENT LIABILITIES: | ||||||||||||
| Long—term debt | 9,780,656 | 34,947,249 | — | |||||||||
| Security deposits | 195,000 | 196,755 | 51,394 | |||||||||
| Deferred tax liability | 3,821,316 | 4,511,336 | — | |||||||||
| Total liabilities | $ | 14,112,609 | $ | 43,930,036 | $ | 79,684 | ||||||
| EQUITY: | ||||||||||||
| Equity attributable to owners of the Group | $ | 8,885,098 | $ | 7,295,863 | $ | 799,748 | ||||||
| Non—controlling interests | $ | 8,885,098 | $ | 23,567,619 | $ | 799,748 | ||||||
| F- |
For the years ended December 31, 2023, 2022 and 2021, net earnings attributable to NCI were as follows:
SCHEDULE OF NET EARNINGS ATTRIBUTABLE TO NON-CONTROLLING PARTNERSHIP
| 2023 | 2022 | 2021 | ||||||||||
| Net earnings (loss) attributable to non-controlling interests | ||||||||||||
| Latam Parque Logistico Coyol II | $ | (215,926 | ) | $ | 1,358,675 | $ | 130,433 | |||||
| Latam Parque Logistico San Jose - Verbena | 4,682,615 | 2,177,996 | 4,323,820 | |||||||||
| Latam Lagunilla Industrial Park | — | (111,583 | ) | 111,583 | ||||||||
| Parque Logístico Callao | (450,017 | ) | (12,465 | ) | (22,956 | ) | ||||||
| Total | $ | 4,016,672 | $ | 3,412,623 | $ | 4,542,880 | ||||||
The Group determines basic earnings per share based on the weighted average number of shares of common stock outstanding during the year. The Group computes diluted earnings per share on the weighted average number of shares outstanding combined with the incremental weighted average effect from all outstanding potentially dilutive instruments. As described in Note 1, the Conversion of the Group from S.R.L. to S.A. represents a change in the form of legal ownership, which is akin to a stock split. The calculation of earnings per share has been adjusted retrospectively to accommodate this change in company structure.
SCHEDULE OF BASIC AND DILUTED EARNINGS PER SHARE
| 2023 | 2022 | 2021 | ||||||||||
| Earnings per share – basic and diluted | $ | 0.019 | $ | 0.048 | $ | 0.025 | ||||||
| Net earnings attributed to owners of the Group | $ | 3,139,333 | $ | 8,028,610 | $ | 4,126,505 | ||||||
| Weighted average number of shares – basic and diluted | 168,142,740 | 168,142,740 | 168,142,740 | |||||||||
20. INCOME TAX
For the years ended December 31, 2023, 2022 and 2021, income tax from continued operations was as follows:
SCHEDULE OF INCOME TAX FROM CONTINUED OPERATIONS
| 2023 | 2022 | 2021 | ||||||||||
| Current income tax expense | $ | 6,209,629 | $ | 1,044,399 | $ | 175,631 | ||||||
| Deferred income tax (benefit) expense | (1,229,007 | ) | 1,192,108 | 8,581,072 | ||||||||
| Tax expense | $ | 4,980,622 | $ | 2,236,507 | $ | 8,756,703 | ||||||
Reconciliations of income taxes from the Costa Rica national statutory rate of 30% to the consolidated effective income tax rate are as follows:
SCHEDULE OF EFFECTIVE INCOME TAX EXPENSES
| 2023 | 2022 | 2021 | ||||||||||
| Net profit before taxes | $ | 12,136,627 | $ | 13,677,740 | $ | 17,426,088 | ||||||
| Income tax expense calculated at Costa Rica statutory tax rate of 30% | 3,640,988 | 4,103,322 | 5,227,826 | |||||||||
| Foreign rate differential | 1,442,871 | 61,500 | 551,388 | |||||||||
| Tax attributable to exchange gain/loss | (3,048,684 | ) | (1,882,252 | ) | 2,056,492 | |||||||
| Change in unrecognized deferred tax assets | (648,037 | ) | (238,549 | ) | 1,039,818 | |||||||
| Withholding tax | 2,750,903 | — | — | |||||||||
| Alternative minimum tax | 1,161,583 | — | — | |||||||||
| Other | (319,002 | ) | 192,486 | (118,821 | ) | |||||||
| Tax expense | $ | 4,980,622 | $ | 2,236,507 | $ | 8,756,703 | ||||||
| F- |
The Group distributed income from an entity in Costa Rica to the parent entity in Panama. While Panama does not tax foreign source earnings, the Costa Rica entity is subject to a 15% withholding tax payable to Costa Rica for earnings distributed out of the country. The Group accrued $2.8 million withholding tax in the current year.
The Group is subject to a newly enacted alternative minimum tax (“AMT”) of 15% in Colombia. The Colombia AMT is based on financial reporting income, subject to certain allowances and adjustments. The Group’s current tax liability in Colombia increased by $1.2 million in the current year due to the Colombia AMT.
Details of the Group’s deferred tax assets and liabilities are as follows:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
| 2023 | 2022 | |||||||
| Deferred Tax Assets | ||||||||
| Net operating loss and tax credit carryforwards | $ | 2,428,097 | $ | 1,035,315 | ||||
| Allowance for uncollectible accounts | 261,877 | 816,340 | ||||||
| Other accruals | 480,299 | 130,407 | ||||||
| Fixed assets | 133,781 | 191,031 | ||||||
| Employee benefits | 209,820 | 209,535 | ||||||
| Office rent liability | 65,656 | 47,845 | ||||||
| Deferred debt interest | 741,560 | — | ||||||
| Other | 7,691 | 26,929 | ||||||
| Total deferred tax assets | $ | 4,328,781 | $ | 2,457,402 | ||||
| 2023 | 2022 | |||||||
| Deferred tax liabilities: | ||||||||
| Investment properties unrealized gain | $ | (36,507,341 | ) | $ | (36,806,923 | ) | ||
| Prepaid and other assets | (141,469 | ) | (96,537 | ) | ||||
| Deferred financing cost | (3,698,940 | ) | (2,388,299 | ) | ||||
| Right-of-use asset | (86,510 | ) | (142,246 | ) | ||||
| Total deferred tax liabilities | $ | (40,434,260 | ) | $ | (39,434,005 | ) | ||
| Net deferred tax liability | $ | (36,105,479 | ) | $ | (36,976,603 | ) | ||
All movement in the deferred tax assets and deferred tax liabilities (“DTLs”) was reflected in continuing operations and no other component of income.
As of December 31, 2023, the Group had $4,328,781 and $40,434,260 in DTAs and DTLs, respectively. The DTAs included approximately $2,428,097 related to net operating loss carryforwards (NOLs) that can be used to offset taxable income in future periods and reduce the Group income taxes payable in those future periods. These recognized NOLs have carryforward periods ending prior to 2034.
The Group operates in Colombia, Costa Rica, and Peru using local country operating corporations, generally owned by holding companies in Panama. The Panama holding companies are not subject to tax on income sourced outside of Panama, and the Group has no deferred tax liability recognized for its investment in subsidiaries.
As of December 31, 2023, the Group considered it more likely than not that the benefit from certain entities’ NOL carryforwards will not be used to offset taxable profits and there are no other tax planning opportunities or other evidence of recoverability in the near future to realize these DTAs. In addition, it is possible that some or all of these NOL carryforwards could ultimately expire unused due to carryforward periods ending prior to 2035. In recognition of this risk, the Group has unrecognized deferred tax assets of $3,347,445 related to these NOL carryforwards.
| F- |
The Group files income tax returns as required by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Group may be subject to examination by local tax authorities. As of December 31, 2023, in general, the Group’s local income tax years between 2018 and 2023 remain open and are subject to examination. The Group has no unrecognized tax benefits as of December 31, 2023.
In December 2021, the Organisation for Economic Co-operation and Development issued model rules for a new global minimum tax framework (“Pillar Two”), and various government around the world have passed, or are in the process of passing, legislation on this. Certain Pillar Two rules take effect in 2024 and 2025, depending on whether a particular jurisdiction has integrated the legislation into local law. LLP is continuing to monitor these impacts on its operating footprint and does not anticipate an increase in income tax expense associated with Pillar Two.
21. EMPLOYEE BENEFITS
Employee benefits are recognized in general and administrative expense in the consolidated statements of profit or loss and comprehensive loss, and for the years ended December 31, 2023, 2022 and 2021, consisted of the following:
SCHEDULE OF EMPLOYEE BENEFITS
| 2023 | 2022 | 2021 |
||||||||||
| Short-term employee benefits | $ | 2,961,866 | $ | 2,126,750 | $ | 3,019,824 | ||||||
| Severances | 17,506 | 247,860 | 22,329 | |||||||||
| Total | $ | 2,979,372 | $ | 2,374,610 | $ | 3,042,153 | ||||||
22. RELATED PARTY TRANSACTIONS
Transactions between the Group and its related parties are made on terms equivalent to those that prevail in arm’s length transactions.
Subsidiaries
Transactions between the Group and its subsidiaries are eliminated on consolidation and therefore are not disclosed. Details of the principal group companies are given in Note 2. Partnerships the Group enters into are fully consolidated as disclosed in Note 18.
Key Management Personnel Compensation
The amounts disclosed in the table represent the amounts recognized as general and administrative expenses in the consolidated statements of profit or loss and comprehensive income (loss), related to key management personnel for the years ended December 31, 2023, 2022 and 2021.
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
| 2023 | 2022 | 2021 | ||||||||||
| Salaries | $ | 772,793 | $ | 835,448 | $ | 827,412 | ||||||
| Statutory bonus | 52,284 | 104,956 | 93,168 | |||||||||
| Cash performance bonus | 576,148 | — | 346,118 | |||||||||
| Non-executive director’s fees | 125,329 | 90,000 | 57,000 | |||||||||
| Non-cash benefits | 4,783 | 4,587 | 4,962 | |||||||||
| Severance benefits | — | 224,593 | — | |||||||||
| Total | $ | 1,531,337 | $ | 1,259,584 | $ | 1,328,660 | ||||||
| F- |
Due from affiliates – On June 25, 2015, the Group entered into an agreement with Latam Logistics Investments, LLC (“LLI”). In July 2020, the Group expanded the loan receivable from LLI to $4,165,000 from $3,015,000 and extended the term to December 31, 2023. In June 2021, the Group expanded the loan receivable from LLI to $4,850,000 from $4,165,000 and in May 2022, the Group expanded the loan receivable from LLI to $6,950,00 from $4,850,000. The expiration date of the loan remains as of December 31, 2023. The loan bears an annual interest rate of 9.0%. Principal and interest are due at maturity.
LLI is a wholly owned company of one of the prior executives of the Group and it owns 8.0% of the Group. The interest income for LLI was $644,219 and $561,372 for the years ended December 31, 2023, and 2022, respectively. As of December 31, 2023, and 2022, the loan receivable from affiliates balances outstanding were as follows:
SCHEDULE OF LOAN RECEIVABLE
| 2023 | 2022 | |||||||
| Interest receivable: | ||||||||
| Latam Logistics Investments, LLC | $ | 2,324,041 | $ | 1,848,945 | ||||
| Notes receivable: | ||||||||
| Latam Logistics Investments, LLC | 7,139,123 | 6,950,000 | ||||||
| Total due from affiliates | $ | 9,463,164 | $ | 8,798,945 | ||||
As of December 31, 2023, and 2022, the loan receivable has a fixed interest rate of 9% and a due date of December 31, 2023. The main conditions of the loan receivable are payment of the balance at maturity including interest receivable, the possibility of early payments without penalty, guarantee over common shares and a promissory note.
The loan receivable is collateralized by the affiliate’s equity interests in the Group (refer to Note 25 for additional information).
As of December 31, 2023, and 2022, there was no amount owed to related parties.
Additional transactions with key management personnel – A related party entity provided $567,764 of management and advisory services to the Group for the year ended December 31, 2023.
23. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
| a. | Capital Management |
For the purpose of the Group’s capital management, capital includes issued capital, share premium and all other equity reserves attributable to the equity holders of the Group. The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The primary objective of the Group’s capital management is to ensure that it remains within its quantitative banking covenants and maintains a strong credit rating. No changes were made in the objectives, policies or processes during the years ended December 31, 2023 and 2022.
| F- |
As disclosed within Note 16, the Group has various debt facilities in place. In certain cases, the facilities may have financial covenants which are generally in the form of minimum debt service coverage ratios, debt leverage ratios, restricted cash equivalent accounts required for debt service coverage, as well as non-financial covenants which require financial statement presentation to the creditor. Refer to Note 16 for more information on debt covenants and waivers as applicable.
The Group may also be subject to legal reserves in the countries in which it operates. Refer to Note 17 for more information.
| b. | Financial Risk Management |
The Group has exposure to the following risks arising from financial instruments:
| ● | Credit risk |
| ● | Liquidity risk |
| ● | Market risk |
| a. | Risk Management Framework – The Group’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s Chief Executive Officer (CEO) is responsible for developing and monitoring the Group’s risk management policies. The CEO reports regularly to the Board of Directors on its activities. |
The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligation.
| b. | Credit Risk – Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risks from lease receivables, tenant notes receivables as well as due from affiliates. |
Exposure to Credit Risk – The following financial assets as of December 31, 2023 and 2022 represent the maximum credit exposure:
SCHEDULE OF FINANCIAL ASSETS
| Notes | 2023 | 2022 | ||||||||||
| Cash and cash equivalents | 8 | $ | 35,242,363 | $ | 14,988,112 | |||||||
| Receivables from the sale of investment properties | 12 | 9,030,614 | — | |||||||||
| Lease and other receivables | 9 | 10,506,310 | 9,313,109 | |||||||||
| Due from affiliates | 22 | 9,463,164 | 8,798,945 | |||||||||
| Restricted cash equivalent | 8 | 2,681,110 | 3,252,897 | |||||||||
| Total financial assets | $ | 66,923,561 | $ | 36,353,063 | ||||||||
Cash and restricted cash equivalent are held in reputable financial institutions and carries minimal risk.
The credit quality of the tenant is assessed at the time of entering into a lease agreement. The outstanding lease and other receivables figures disclosed in the aforementioned table pertain to the gross amounts of outstanding lease and other receivables, prior to accounting for expected credit losses. Likewise, receivables arising from the sale of investment properties are presented at their undiscounted balances. The outstanding balances are regularly monitored. An impairment analysis is performed at each reporting date on an individual basis for each counterparty. In general, concentration risk in lease and other receivables is limited due to the receivables being dispersed across different counterparties. Refer to Note 9 for details.
| F- |
| c. | Liquidity Risk – Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing is to ensure, to the extent possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring in unacceptable losses or risking damage to the Group’s reputation, and to maintain a balance between continuity of funding and flexibility through the use of bank deposits and loans. |
Typically, the Group ensures that it has sufficient cash on demand, including deposits at banks and the balances of short-term credit facilities with diverse funding resources and committed borrowing facilities, to meet expected operating expenses for a period of 90 days, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot be reasonably predicted, such as natural disasters.
The Group has access to a sufficient variety of sources of funding to repay debt maturing within 12 months in the normal course of business. Refer to Notes 2 and 16 for more information on a debt covenant matter that arose effective December 31, 2022, as a result of which the Group categorized the related debt balance as repayable on demand. As disclosed in Note 16, the Group resolved this matter and received the waivers for the requirement to comply with the financial covenants for the related debt relating to Banco Davivienda and Bancolombia on February 17, 2023 and September 25, 2023, respectively. In April 2023 the Group refinanced its Banco Davivienda debt, thereby relieving any covenant requirement with that lender. The Bancolombia waiver was effective through December 31, 2023. The Group was in compliance with all the other debt covenants as of December 31, 2023 and 2022.
Exposure to Liquidity Risk – The following tables detail the remaining contractual maturities of financial liabilities at the end of reporting period. The amounts are gross and undiscounted cash flows and include contractual interest payments.
SCHEDULE OF MATURITY ANALYSIS FOR FINANCIAL LIABILITIES
| December 31, 2023 | Notes | On demand | Less than 3 months | 3 to 12 months | 1 to 5 years | Thereafter | Total | |||||||||||||||||||||
| Accounts payable and accrued expenses | 14 | $ | 764,016 | $ | 4,472,279 | $ | 7,891,207 | — | $ | — | $ | 13,127,502 | ||||||||||||||||
| Lease liability | 15 | 8,530 | 33,060 | 238,423 | 1,199,059 | 6,703,328 | 8,182,400 | |||||||||||||||||||||
| Income tax payable | 20 | — | 2,024,865 | — | — | — | 2,024,865 | |||||||||||||||||||||
| Retainage payable | — | 155,207 | 1,582,598 | — | — | 1,737,805 | ||||||||||||||||||||||
| Security deposits | — | 83,234 | 287,727 | 1,790,554 | — | 2,161,515 | ||||||||||||||||||||||
| Long and short-term debt | 16 | — | 1,624,415 | 15,078,681 | 43,032,169 | 211,609,005 | 271,344,270 | |||||||||||||||||||||
| Total | $ | 772,546 | $ | 8,393,060 | $ | 25,078,636 | $ | 46,021,782 | $ | 218,312,333 | $ | 298,578,357 | ||||||||||||||||
| F- |
| December 31, 2022 | Notes | On demand | Less than 3 months | 3 to 12 months | 1 to 5 years | Thereafter | Total | |||||||||||||||||||||
| Accounts payable and accrued expenses | 14 | $ | 382,317 | $ | 6,899,250 | $ | 1,310,355 | $ | — | $ | — | $ | 8,591,922 | |||||||||||||||
| Lease liability | 15 | — | 15,637 | 47,085 | 96,954 | — | 159,676 | |||||||||||||||||||||
| Income tax payable | 20 | — | 663,703 | — | — | — | 663,703 | |||||||||||||||||||||
| Retainage payable | — | 302,066 | 2,699,367 | — | — | 3,001,433 | ||||||||||||||||||||||
| Security deposits | — | — | — | 1,706,959 | — | 1,706,959 | ||||||||||||||||||||||
| Deposit for the asset held for sale | 13 | — | — | 2,400,000 | — | — | 2,400,000 | |||||||||||||||||||||
| Long and short-term debt | 16 | 87,906,445 | 5,888,900 | 17,666,699 | 29,632,991 | 74,754,632 | 215,849,667 | |||||||||||||||||||||
| Total | $ | 88,288,762 | $ | 13,769,556 | $ | 24,123,506 | $ | 31,436,904 | $ | 74,754,632 | $ | 232,373,360 | ||||||||||||||||
The Group’s minimum lease payments are disclosed on Note 15.
| d. | Market Risk – Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. Market risk comprises two types of risks: interest rate risk and currency risk. |
Currency Risk – Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to its operating activities (when revenue or expense is denominated in a foreign currency) and its loans with financial institutions, some of which are denominated in foreign currency. The functional currency of the Group is USD.
As of the reporting date, the Group has monetary assets and liabilities in currencies other than the functional currency. The main foreign currencies used by the Group are as follows:
| ● | CRC | |
| ● | PEN | |
| ● | COP |
In respect of monetary assets and liabilities denominated in CRC, PEN and COP, the Group’s policy is to ensure that its net exposure is kept at an acceptable level by buying or selling CRC, PEN and COP at spot rates when necessary to address short-term imbalances.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:
SCHEDULE OF FOREIGN CURRENCY EXCHANGE
| (in USD) | As of December 31, 2023 | |||||||||||
| Monetary assets and liabilities denominated in: | CRC | PEN | Total | |||||||||
| Cash and cash equivalents | $ | 6,599 | $ | 479,057 | $ | 485,656 | ||||||
| Lease and other receivables, net | 60,248 | 135,275 | 195,523 | |||||||||
| Other current and non-current assets | 3,150,470 | 3,694,802 | 6,845,272 | |||||||||
| Sub-total | 3,217,317 | 4,309,134 | 7,526,451 | |||||||||
| Accounts payable and accrued expenses | 2,569,080 | 1,658,228 | 4,227,308 | |||||||||
| Sub-total | 2,569,080 | 1,658,228 | 4,227,308 | |||||||||
| Net | $ | 648,237 | $ | 2,650,906 | $ | 3,299,143 | ||||||
| F- |
| (in USD) | As of December 31, 2022 | |||||||||||
| Monetary assets and liabilities denominated in: | CRC | PEN | Total | |||||||||
| Cash and cash equivalents | $ | 15,287 | $ | 237,240 | $ | 252,527 | ||||||
| Lease and other receivables, net | 33,017 | 104,889 | 137,906 | |||||||||
| Other current and non-current assets | 1,716,789 | 2,306,510 | 4,023,299 | |||||||||
| Sub-total | 1,765,093 | 2,648,639 | 4,413,732 | |||||||||
| Accounts payable and accrued expenses | 181,451 | 179,676 | 361,127 | |||||||||
| Sub-total | 181,451 | 179,676 | 361,127 | |||||||||
| Net | $ | 1,583,642 | $ | 2,468,963 | $ | 4,052,605 | ||||||
As of December 31, 2023, and 2022, the net assets in foreign operations of the Group whose functional currency is different from the USD and for which the differences in foreign currency were recognized in OCI amounting to $88,689,861 and $49,411,608, respectively.
Sensitivity Analysis – The following tables detail the Group’s sensitivity to a 10% appreciation or depreciation in the USD against foreign currencies listed above. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis reflects foreign currency revaluation or translation impacts on the Group’s net income and equity through OCI for a 10% change in foreign currency exchange rates. A 10% strengthening (weakening) of the USD against the foreign currencies as of December 31, 2023, 2022, and 2021 would have decreased (increased) net income and equity through OCI by the amounts shown below. This analysis assumes that all other variables, particularly interest rates, remained constant.
SCHEDULE OF SENSITIVITY ANALYSIS
| For the year ended December 31, 2023 | Strengthening | Weakening | ||||||
| Profit or Loss | $ | 329,914 | $ | (329,914 | ) | |||
| Equity | $ | 8,868,986 | $ | (8,868,986 | ) | |||
| For the year ended December 31, 2022 | Strengthening | Weakening | ||||||
| Profit or Loss | $ | 405,261 | $ | (405,261 | ) | |||
| Equity | $ | 4,941,161 | $ | (4,941,161 | ) | |||
| For the year ended December 31, 2021 | Strengthening | Weakening | ||||||
| Profit or Loss | $ | 508,411 | $ | (508,411 | ) | |||
| Equity | $ | 6,191,813 | $ | (6,191,813 | ) | |||
Interest Rate Risk – Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to its long-term debt obligations with floating interest rates. Therefore, variations in interest rates at the reporting date would affect profit or loss.
Sensitivity Analysis – A 1% and 2% strengthening (weakening) of the rate associated with each long-term debt, as of December 31, 2023 and 2022 would have decreased (increased) net income by the amounts shown below. This analysis assumes that all other variables remained constant.
SCHEDULE OF SENSITIVITY ANALYSIS OF LONG-TERM DEBT
| Long-term
Debt with Variable Interest Rate as of December 31, 2023 |
1% | 2% | ||||||||||
| Increase in Interest rate | $ | 207,854,235 | $ | (2,078,542 | ) | $ | (4,157,085 | ) | ||||
| Decrease in Interest rate | 207,854,235 | 2,078,542 | 4,157,085 | |||||||||
| F- |
| Long-term
Debt with Variable Interest Rate as of December 31, 2022 |
1% | 2% | ||||||||||
| Increase in Interest rate | $ | 209,326,775 | $ | (2,093,268 | ) | $ | (4,186,536 | ) | ||||
| Decrease in Interest rate | 209,326,775 | 2,093,268 | 4,186,536 | |||||||||
| e. | Fair Values – Management of the Group assessed the fair value of its financial assets and liabilities and concluded that their carrying value approximates their fair value. |
24. COMMITMENTS AND CONTINGENCIES
Commitments
In the normal course of operation, the Group secures construction loans in order to fund capital expenditure commitments. Debt guarantees are disclosed in Note 16. The Group does not conduct its operations through entities that are not consolidated in these consolidated financial statements and has not guaranteed or otherwise contractually committed to support any material financial obligations not reflected in these consolidated financial statements.
As of December 31, 2023, the Group had agreed construction contracts with third parties and is consequently committed to future capital in respect to investment property under development of $8,067,067. There are no contractual commitments in respect of completed investment property.
The Group does not have any lease contract that has not yet commenced as of December 31, 2023. Refer to the Group’s future minimum rental payments for its non-cancellable lease contracts in Note 15.
Legal Proceedings
In the ordinary course of business, the Group may be party to legal proceedings. On September 13, 2023, the Group has become aware that a lawsuit was filed against a subsidiary of the Group by a construction company for services rendered prior to the reporting date. On February 29, 2024, subsequent to the fiscal year ended December 31, 2023, the Group has settled with the counterparty for a total settlement amount of $244,151.
On November 30, 2023, the Group became aware that a lawsuit was filed against them by a former employee of the Group who rendered services for the Group prior to the reporting date. The Group is currently vigorously defending this lawsuit and believes the claims are without merit. The Group is in the process of analyzing this matter but currently does not have a sufficient basis for concluding whether any loss is probable.
The Group is not currently involved in any other litigation or arbitration proceedings for which the Group believes it is not adequately insured or indemnified, or which, if determined adversely, would have a material adverse effect on the Group’s consolidated financial statements.
| F- |
25. SUBSEQUENT EVENTS
The Group’s management has evaluated the occurrence of the significant events after the reporting date of the financial statements and the following has been considered as significant to disclose:
Business Combination –
As discussed in Note 1, on August 15, 2023, TWOA announced the execution of Business Combination Agreement with LLP and other parties. On March 27, 2024, the Business Combination was consummated. Upon Closing, the Business Combination was accounted for as a capital reorganization in accordance with IFRS. For purposes of the Business Combination, TWOA will be treated as the “acquired” company for financial reporting purposes and for accounting purposes will be treated as an acquisition of assets. Accordingly, the net assets of LLP will be stated at historical cost, with no goodwill or other intangible assets recorded. The deemed costs of the shares issued by LLP represents the fair value of the shares that the Pubco would have had to issue for the ratio of ownership interest in the entity. Since TWOA does not meet the definition of a business in accordance with IFRS 3, Business Combinations, the transaction is accounted for within the scope of IFRS 2, Share-based payment. Any excess of fair value of Pubco shares issued over the fair value of TWOA’s identifiable net assets acquired represents compensation for the service of a stock exchange listing for its shares and is expensed as incurred.
Loan receivable from affiliates –
The loan receivable from affiliates (refer to Note 22) were in default as of January 2, 2024. The Group subsequently provided notice of the default to the affiliate and began foreclosure proceedings on the collateral, the affiliate’s equity interest in LLP. On March 12, 2024, LLI entered into an assignment agreement with LLP, pursuant to which LLI unconditionally and irrevocably assigned in favor of LLP the right to receive 2,288,000 LPA Ordinary Shares as a result of the merger and the Business Combination Agreement. Pursuant to the assignment agreement, the Group agreed to waive its right to receive the LLI assigned shares with the intention of not issuing shares of LPA to LLP. The loan receivable was considered settled on the date of the Business Combination closing on March 27, 2024, in accordance with the assignment agreement.
26. APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements were authorized for issue by the Group’s management on April 26, 2024.
| F- |
Financial Statement Schedules
Schedule I - Parent Company Only Condensed Financial Information
The condensed financial statements of Latam Logistic Properties, S.A., the parent company of the Group (the “Parent Company”), have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of the subsidiaries of LLP exceed 25% of the consolidated net assets of the Group. The ability of the Parent Company’s operating subsidiaries to pay dividends may be restricted due to certain clauses in the subsidiaries’ debt agreements and legal reserve requirements.
The condensed financial statements of the Parent Company have been prepared using the same IFRS accounting principles and policies described in the other notes to the consolidated financial statements. The Parent Company accounts for its investment in subsidiaries using the cost less accumulated impairments method. The Parent Company received a dividend from its subsidiaries during the year ended December 31, 2023. The Parent Company did not receive any dividends from its subsidiaries during the years ended December 31, 2022 and 2021. These condensed financial statements should be read in conjunction with the Group’s consolidated financial statements and related notes thereto.
LATAM LOGISTIC PROPERTIES, S.A. (Parent Company Only)
CONDENSED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (LOSS)
(in U.S. Dollars)
| For the years ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Dividend income | $ | 18,210,046 | $ | — | $ | — | ||||||
| General and administrative | (2,878,896 | ) | (498,457 | ) | (429,990 | ) | ||||||
| Interest income from affiliates | 694,628 | 632,490 | 626,047 | |||||||||
| Financing costs | (718,844 | ) | (1,226,265 | ) | (584,487 | ) | ||||||
| Transaction-related costs | (6,128,965 | ) | — | — | ||||||||
| Other income (expense), net | 61,530 | (4,875 | ) | (1,187,272 | ) | |||||||
| Income (loss) before taxes | 9,239,499 | (1,097,107 | ) | (1,575,702 | ) | |||||||
| Income tax expense | (2,745,090 | ) | — | — | ||||||||
| Comprehensive income (loss) | $ | 6,494,409 | $ | (1,097,107 | ) | $ | (1,575,702 | ) | ||||
| F- |
LATAM LOGISTIC PROPERTIES, S.A. (Parent Company Only)
CONDENSED STATEMENTS OF FINANCIAL POSITION
(in U.S. Dollars)
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 788,008 | $ | 2,823,003 | ||||
| Due from subsidiaries and affiliated companies | 9,463,164 | 9,055,658 | ||||||
| Other current assets | 11,454 | 23,315 | ||||||
| Total current assets | 10,262,626 | 11,901,976 | ||||||
| NON-CURRENT ASSETS: | ||||||||
| Investments in subsidiaries | 168,496,857 | 166,927,780 | ||||||
| Restricted cash equivalent | — | 1,205,162 | ||||||
| Property and equipment, net | 46,767 | 64,394 | ||||||
| Total non-current assets | 168,543,624 | 168,197,336 | ||||||
| TOTAL ASSETS | $ | 178,806,250 | $ | 180,099,312 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | 5,086,924 | $ | 336,055 | ||||
| Due to subsidiaries and affiliated companies | 2,459,935 | — | ||||||
| Long term debt - current portion | — | 14,998,275 | ||||||
| Total current liabilities | 7,546,859 | 15,334,330 | ||||||
| TOTAL LIABILITIES | 7,546,859 | 15,334,330 | ||||||
| EQUITY: | ||||||||
| Total equity | 171,259,391 | 164,764,982 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 178,806,250 | $ | 180,099,312 | ||||
| F- |
LATAM LOGISTIC PROPERTIES, S.A. (Parent Company Only)
CONDENSED STATEMENTS OF CASH FLOWS
(in U.S. Dollars)
| For the years ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Gain (loss) for the year | $ | 6,494,409 | $ | (1,097,107 | ) | $ | (1,575,702 | ) | ||||
| Adjustments: | ||||||||||||
| Depreciation and amortization | 17,627 | 12,607 | 11,133 | |||||||||
| Financing costs | 718,844 | 1,226,265 | 584,487 | |||||||||
| Interest income from subsidiaries and affiliated companies | 694,628 | 632,490 | 626,047 | |||||||||
| Income tax expense | 2,745,090 | — | — | |||||||||
| Working capital adjustments: | ||||||||||||
| Decrease in other current assets: | 11,860 | 21,149 | 481,608 | |||||||||
| Increase (decrease) in accounts payable and accrued expenses | 4,812,824 | (118,149 | ) | 392,249 | ||||||||
| Increase in due to subsidiaries and affiliated companies | 104,935 | — | — | |||||||||
| Income tax paid | (2,745,090 | ) | — | — | ||||||||
| Net cash generated by operating activities | $ | 12,855,127 | $ | 677,255 | $ | 519,822 | ||||||
| Cash flows from investing activities: | ||||||||||||
| Increase in equity investment in subsidiaries | $ | (1,569,077 | ) | $ | (2,822,487 | ) | $ | (11,735,281 | ) | |||
| Purchases of property and equipment | — | (25,100 | ) | (63,034 | ) | |||||||
| Increase in loans to subsidiaries and affiliated companies | (1,102,134 | ) | (800,973 | ) | (4,228,344 | ) | ||||||
| Restricted cash equivalent | 1,205,162 | 594,838 | 3,884,868 | |||||||||
| Net cash used in investing activities | $ | (1,466,049 | ) | $ | (3,053,722 | ) | $ | (12,141,791 | ) | |||
| Cash flows from financing activities: | ||||||||||||
| Long-term debt borrowing | — | — | 15,000,000 | |||||||||
| Repayment of long-term debt | (14,998,275 | ) | — | — | ||||||||
| Increase in loans from subsidiaries and affiliated companies | 2,355,000 | — | — | |||||||||
| Cash paid for raising debt | — | (5,175 | ) | (196,785 | ) | |||||||
| Interest paid | (780,798 | ) | (1,102,499 | ) | (446,063 | ) | ||||||
| Net cash (used) provided by financing activities | $ | (13,424,073 | ) | $ | (1,107,674 | ) | $ | 14,357,152 | ||||
| Net decrease in cash and cash equivalents | (2,034,995 | ) | (3,484,141 | ) | 2,735,183 | |||||||
| Cash and cash equivalents at the beginning of year | 2,823,003 | 6,307,144 | 3,571,961 | |||||||||
| Cash and cash equivalents at the end of year | $ | 788,008 | $ | 2,823,003 | $ | 6,307,144 | ||||||
* * * * *
| F- |
Schedule III - Schedule of Real Estate
The following is a summary of the Group’s investment properties as of December 31, 2023 prepared in accordance with Rule 12-28 of Regulation S-X:
LATAM LOGISTIC PROPERTIES, S.A.
SCHEDULE III - SCHEDULE OF REAL ESTATE
AS OF DECEMBER 31, 2023
(in U.S. Dollars)
|
Description |
Number of buildings | Encumbrances (a) |
Land (b) |
Building
& Improvements (c) |
Costs Capitalized Subsequent to Acquisition | Land | Building & Improvements | Total
(d) |
Fair
Value Adjustments (e) |
Cumulative Foreign Currency Translation Effect | Fair
Value at the End of the Year (f) |
Date
of Construction/ Acquisition (g) |
||||||||||||||||||||||||||||||||||||
| Land Bank | ||||||||||||||||||||||||||||||||||||||||||||||||
| Peru | ||||||||||||||||||||||||||||||||||||||||||||||||
| Latam Parque Logistico Callao | 3 | — | — | 619,976 | — | — | 619,976 | 619,976 | — | — | 619,976 | N/A | ||||||||||||||||||||||||||||||||||||
| Colombia | ||||||||||||||||||||||||||||||||||||||||||||||||
| Latam Logistic Park Calle 80 | 4 | 4,317,135 | 14,114,108 | 11,806,349 | — | 14,114,108 | 11,806,349 | 25,920,457 | 4,976,620 | (6,796,631 | ) | 24,100,446 | N/A | |||||||||||||||||||||||||||||||||||
| Total of Land Bank | 7 | 4,317,135 | 14,114,108 | 12,426,325 | — | 14,114,108 | 12,426,325 | 26,540,433 | 4,976,620 | (6,796,631 | ) | 24,720,422 | N/A | |||||||||||||||||||||||||||||||||||
| Properties Under Development | ||||||||||||||||||||||||||||||||||||||||||||||||
| Peru | ||||||||||||||||||||||||||||||||||||||||||||||||
| Latam Logistic Park Lima Sur | 2 | 11,580,125 | 6,653,190 | 9,073,731 | — | 6,653,190 | 9,073,731 | 15,726,921 | 6,503,860 | — | 22,230,781 | N/A | ||||||||||||||||||||||||||||||||||||
| Latam Parque Logistico Callao | 1 | — | 2,802,475 | (d) | 10,764,104 | — | 2,802,475 | 10,764,104 | 13,566,579 | (1,306,579 | ) | — | 12,260,000 | N/A | ||||||||||||||||||||||||||||||||||
| Costa Rica | ||||||||||||||||||||||||||||||||||||||||||||||||
| Latam Logistic Park San José – Verbena | 1 | 6,474,777 | 2,643,646 | 6,425,029 | — | 2,643,646 | 6,425,029 | 9,068,675 | 1,822,325 | — | 10,891,000 | N/A | ||||||||||||||||||||||||||||||||||||
| Total of Properties Under Development | 4 | 18,054,902 | 12,099,311 | 26,262,864 | — | 12,099,311 | 26,262,864 | 38,362,175 | 7,019,606 | — | 45,381,781 | N/A | ||||||||||||||||||||||||||||||||||||
| Operating Properties | ||||||||||||||||||||||||||||||||||||||||||||||||
| Colombia | ||||||||||||||||||||||||||||||||||||||||||||||||
| Latam Logistic Park Calle 80 | 5 | 44,049,009 | 11,555,745 | 70,356,507 | 64,414 | 11,555,745 | 70,420,921 | 81,976,666 | 30,736,797 | (5,756,463 | ) | 106,957,000 | 2019-2023 | |||||||||||||||||||||||||||||||||||
| Peru | ||||||||||||||||||||||||||||||||||||||||||||||||
| Latam Logistic Park Lima Sur | 5 | 48,419,875 | 19,249,353 | 45,431,126 | 469,879 | 19,249,353 | 45,901,005 | 65,150,358 | 27,089,499 | — | 92,239,857 | 2019-2022 | ||||||||||||||||||||||||||||||||||||
| Costa Rica | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Latam Logistic Park Coyol 1 | 5 | 59,809,375 | 19,500,336 | 42,764,576 | 941,658 | 19,500,336 | 43,706,234 | 63,206,570 | 25,943,795 | — | 89,150,365 | 2016-2020 | ||||||||||||||||||||||||||||||||||||
| Latam Logistic Park Coyol 2 | 1 | 18,285,023 | 7,292,476 | 12,332,799 | 169,446 | 7,292,476 | 12,502,245 | 19,794,721 | 9,913,279 | — | 29,708,000 | 2019 | ||||||||||||||||||||||||||||||||||||
| Latam Bodegas Atenas | 1 | 2,612,593 | 1,658,000 | 1,942,000 | — | 1,658,000 | 1,942,000 | 3,600,000 | 1,038,000 | — | 4,638,000 | 2019 | ||||||||||||||||||||||||||||||||||||
| Latam Bodegas San Joaquin | 2 | 5,495,094 | 2,621,468 | 2,778,532 | 2,171,917 | 2,621,468 | 4,950,449 | 7,571,917 | 2,314,083 | — | 9,886,000 | 2019 | ||||||||||||||||||||||||||||||||||||
| Latam Bodegas Aurora | 2 | 5,917,796 | 3,399,610 | 2,401,986 | 492,177 | 3,399,610 | 2,894,163 | 6,293,773 | 420,227 | — | 6,714,000 | 2019 | ||||||||||||||||||||||||||||||||||||
| San Rafael Industrial Park | 1 | 7,974,306 | 5,777,658 | 5,222,342 | — | 5,777,658 | 5,222,342 | 11,000,000 | 2,665,000 | — | 13,665,000 | 2019 | ||||||||||||||||||||||||||||||||||||
| Latam Logistic Park Coyol 3 | 1 | 7,056,519 | 1,354,320 | 6,169,680 | — | 1,354,320 | 6,169,680 | 7,524,000 | 2,284,801 | — | 9,808,801 | 2020 | ||||||||||||||||||||||||||||||||||||
| Latam Logistic Park Coyol 4 | 1 | 6,918,421 | 2,849,259 | 7,547,831 | 482,641 | 2,849,259 | 8,030,472 | 10,879,731 | 436,269 | — | 11,316,000 | 2021 | ||||||||||||||||||||||||||||||||||||
| Latam Logistic Park San José – Verbena | 4 | 40,434,222 | 15,612,670 | 35,080,999 | 69,233 | 15,612,670 | 35,150,232 | 50,762,902 | 19,224,153 | — | 69,987,055 | 2022-2023 | ||||||||||||||||||||||||||||||||||||
| Total of Operating Properties | 28 | 246,972,233 | 90,870,895 | 232,028,378 | 4,861,365 | 90,870,895 | 236,889,743 | 327,760,638 | 122,065,903 | (5,756,463 | ) | 444,070,078 | ||||||||||||||||||||||||||||||||||||
| GRAND TOTAL | 39 | $ | 269,344,270 | $ | 117,084,314 | $ | 270,717,567 | $ | 4,861,365 | $ | 117,084,314 | $ | 275,578,932 | $ | 392,663,246 | $ | 134,062,129 | $ | (12,553,094 | ) | $ | 514,172,281 | ||||||||||||||||||||||||||
| (a) | Encumbrances include mortgage loans for constructions and other financing arrangements guaranteed by the respective properties. |
| F- |
The following table reconciles encumbrances per Schedule III to the Condensed Consolidated Statement of Financial Position at December 31, 2023:
| Total encumbrances per Schedule III | $ | 269,344,270 | ||
| Debt not guaranteed by Investment Properties | 2,000,000 | |||
| Long term debt accrued financing costs | 752,874 | |||
| Debt issuance costs, net | (2,242,911 | ) | ||
| Total per Consolidated Statement of Financial Position | $ | 269,854,233 |
| (b) | Land information includes land that are owned and land under right—of—use, which are separately labeled with in our real estate portfolio. |
| (c) | Amounts presented in building and improvements include building improvements costs, and acquisition costs, land improvements costs incurred on land banks. |
| (d) | This property under development at Latam Logistic Callao is leased under right—of—use contract rather than owned by the Group. |
| (e) | The Group uses an external appraiser in order to determine the fair value for all of its investment properties. The independent appraiser holds a recognized and relevant professional qualification and has recent experience of the location and category of the investment property being valued. The valuation model is in accordance with the guidance recommended by the International Valuation Standards Committee. These valuation models are consistent with the principles in IFRS 13. |
| (f) | See Note 12 of our audited consolidated financial statements as of December 31, 2023, for the reconciliation of investment properties for the year ended December 31, 2023. |
| (g) | Date of construction or acquisition represents the date we stabilized the building or acquired the building through acquisition. |
| F- |
Exhibit 4.36
|
Credit Document Banco BTG Pactual Colombia S.A. (the “Creditor”) |
||
| I. Parties | ||
| Creditor: |
Banco BTG Pactual Colombia S.A. |
|
| NIT: |
901.491.551-0 |
|
| Debtor: |
Latam Logistic COL PropCo Cota I S.A.S. |
|
| NIT: | 900.986.856-3 | |
| II. The Credit | ||
| Amount: | Fifteen billion pesos (COP15,000,000,000) | |
| Disbursement Date: | August 25, 2023 | |
| Use of resources: | Working Capital | |
| Term: | Twelve (12) months | |
| Frequency of principal payments: | Bullet (one payment on the Due Date) | |
| Due Date: | August 26, 2024 | |
| Interest Rate: | IBR 1M + 7.20% p.a. | |
| Calculation Basis | Days actually elapsed over 360-day years. i.e. Current/360 | |
| Interest Calculation Period | Monthly | |
| Interest Payment Frequency |
Monthly |
|
| Effective Interest Rate as of today | 21.710891% E.A | |
| Default interest: | In case of default in capital, interest will be recognized at the highest possible rate in Colombia. In the case of interest, to the extent allowed by the law, interest will be recognized at the highest possible rate in Colombia. | |
| Promissory note | As guarantee of the Credit, the Debtor will electronically sign a blank promissory note with an instruction letter in favor of the Creditor. The Depósito Centralizado de Valores de Colombia (Deceval S.A) will be responsible for the issuance and custody of the promissory note. | |
| Page |
| Payments | Any date for payment of an amount to the Creditor that does not correspond to a Business Day will be extended to be paid on the next Business Day. For purposes of this Credit Document, the term “Business Day” means any day, other than Saturday, Sunday or holiday, on which financial institutions are authorized or required by law to open their offices in the city of Bogotá D.C. | |
| III. Other Elements of the Credit | ||
| Financial Information | The Debtor agrees to share with the Creditor within the first 120 days of the year the Debtor’s audited financial statements. Likewise, quarterly unaudited financial statements, within 60 calendar days after the close of the quarter. | |
| Guarantee(s) | AMENDEMENT No. 5 TO THE GUARANTEE, ADMINISTRATION AND PAYMENTS COMMERCIAL TRUST AGREEMENT, - LATAM LOGISTIC TRUST COL PROPCO COTA 1, for which registration as a Secured Creditor of Banco BTG Pactual Colombia S.A. is required. In the FC-LATAM LOGISTIC COL PROPCO COTA 1 Trust, identified with NIT 830.053.812-2 and whose spokesperson is Alianza Fiduciaria S.A. for a value of THIRTY-SEVEN BILLION PESOS ($37,000,000,000), having as assets subject to the guarantee (i) the area of future expansion that is in reserve under the Useful Area – Parcel 001 identified with the real estate registration folio 050N-20864652 and (ii) the private units called (a) 800 A identified with the real estate registration number 050N-20908823 and (b) 800B identified with the real estate registration number 050N-20918258, through the subscription of the Amendment No 8 Amendment that is signed with this contract. | |
| Preceding conditions for disbursement | That the Amendment No. 8 has been signed. | |
| Prepayment Penalty |
If a principal payment is made in advance, the Parties shall pay the Creditor a prepayment penalty in accordance with the following table: |
|
| Month | Prepayment Penalty | |
| 1 | 0.40% | |
| 2 | 0.38% | |
| 3 | 0.36% | |
| 4 | 0.34% | |
| 5 | 0.32% | |
| 6 | 0.30% | |
| 7 | 0.28% | |
| 8 | 0.23% | |
| 9 | 0.21% | |
| 10 | 0.19% | |
| 11 | 0.13% | |
| 12 | 0.06% |
|
|
For clarity, this amount will be charged on the prepaid amount and may be offset on the amounts paid. Likewise, the months begin to count from the Disbursement Date.
This prepayment penalty will be applicable exclusively on voluntary prepayments. |
| Page |
| Acceleration Causes |
In addition to the default in the payment of interest or principal, in the event of any of the following cases, the Creditor may declare the early termination of the Credit: |
| Ø | In the event that the Debtor, its direct and indirect shareholders, its affiliates, including its owners, directors and officers (who cannot be dismissed immediately after the occurrence of the event), are: (i) found criminally responsible for felonies such as source crimes of Money Laundering, Financing of Terrorism, Financing of the Proliferation of Weapons of Mass Destruction, Corruption or Bribery in the Criminal Code; (ii) included in any of the lists binding in Colombia, issued by national, international or foreign authorities; (iii) criminally charged or administratively linked to any type of investigation or proceeding, carried out by any Government Authority for the alleged commission of any crime related to Money Laundering, Financing of Terrorism, Financing of the Proliferation of Weapons of Mass Destruction or crimes against the public administration and offenses contemplated in Law 1474 of 2011. | ||
| Ø | The existence of a Change of Control of the Debtor. Control is understood as the direct or indirect power to direct or cause to be directed the administration or policies of a Person, whether through the exercise of voting rights, by contract or by any other means in accordance with the provisions of articles 260 and 261 of the Commercial Code. “Controlling” and “Controlled” have the correlative meanings of this definition. | ||
| Ø | If the obligations arising from the Credit Documents cease to be principal obligations that will not be subordinated to the payment of any other obligations, whether these are current or future obligations of the Debtor. | ||
| Ø | Failure to comply with any indebtedness owed by the Debtor to any other creditor in an amount greater than five billion pesos ($5,000,000,000) for a period exceeding sixty (60) calendar days. | ||
| Ø | Enter merger, consolidation, spin-off, liquidation or dissolution transactions. | ||
| Ø | Failure to comply with any other obligation contained herein the Credit Document. |
| Page |
| Accordingly, the principal of the Loan shall be payable immediately together with interest accrued on such principal, as well as any other obligations of the Debtor arising under the Note, without the need for filing, private or judicial counterclaim, protest, denunciation, claim, requirement, or additional notice of any nature, all of which the Debtor irrevocably waives by entering into this Credit Document. | ||
| Mandatory Prepayment | The Debtor undertakes to make the prepayment of the loan with the proceeds from the sale of warehouse 500A of the 80th Street Logistics Park. | |
| Authorization to Disburse |
We authorize the disbursement to be credited to the following account:
Current Account: 0560482869994087 Bank: Davivienda Owner: Latam Logistic Col Propco Cota 1 S.A.S. C.C./NIT: 900.986.856-3 |
|
|
Debtor Notifications
|
Attn: Annette Fernandez Pagan Email: annette@latamlp.com Address: Condominium Paseo del Sol, house 13, Pozos, Santa Ana Phone: +506 6475 0264 |
|
|
Creditor Notices
|
Attn: Felipe Peláez Restrepo E-mail: felipe.pelaez@btgpactual.com, with copy to: OL-BackofficeBTG-COL@btgpactual.com; OL-LegalBTG-COL@btgpactual.com Address: Carrera 43 A # 1 – 50, Tower 2, Floor 7, Medellín, Colombia Phone: +(574) 4484300 |
|
| Assignment | Creditor may assign or endorse (as the case may be) all or a portion of its rights and obligations under this Credit Document and the Note. Once the assignment has been made, the Creditor must notify the Debtor. All costs and expenses incurred because of the assignment shall be borne by the Creditor. The Debtor may not assign its contractual position in the Credit Document or the Promissory Note without the prior written approval of the Creditor. |
| Page |
| Taxes | Any costs, expenses, taxes, or liens incurred related to the execution, development and/or performance of the Credit Document or the promissory note shall be borne by the Debtor. Any payment made by the Debtor or any person on behalf of the Debtor under the Credit Document shall be made free and free of any applicable taxes, fees, contributions, withholdings, or reductions of any kind, including, but not limited to, any withholding tax at source (hereinafter referred to as the “Taxes”).”). If Applicable Law requires the Debtor to deduct any Tax from any amount payable under the Credit Document: the Debtor shall assume the payment of any deductions or withholdings that must be made pursuant to the Applicable Law. | |
| Governing Law | This Credit Document shall be governed by the laws of the Republic of Colombia. | |
| Electronic signature | This Credit Document may be signed by electronic signature, under the terms established in Decree 2364 of 2012, and other regulations that modify, add or replace them. The electronic mechanism will have the same validity and legal effects as a handwritten signature, meets the criteria of authenticity, integrity, reliability and appropriability, in the terms indicated in Decree 2364 of 2012 and may be made up of codes, passwords, biometric data or cryptographic keys, generally understood as data messages, which allow the signatory to be identified. | |
| Date of Signature | August 24, 2023 |
The Debtor
_______________________
Number: Annette Fernandez Pagan
Passport: 644243033
Legal Representative
Latam Logistic COL PropCo Cota I S.A.S.
NIT 900.986.856-3
The Creditor
_______________________
Name: Mabel Constanza Moreno Ochoa
Citizenship card: 43.740.801
Legal Representative of Banco BTG Pactual Colombia S.A.
NIT 901.491.551-0
| Page |
Exhibit 4.37
|
Credit Document Banco BTG Pactual Colombia S.A. (the “Creditor”) |
||
| I. Parties | ||
| Creditor: |
Banco BTG Pactual Colombia S.A. |
|
| NIT: |
901.491.551-0 |
|
| Debtor: |
Latam Logistic COL PropCo Cota I S.A.S. |
|
| NIT: | 900.986.856-3 | |
| II. The Credit | ||
| Amount: | Ten billion pesos (COP10,000,000,000) | |
| Disbursement Date: | August 30, 2023 | |
| Use of resources: | Working Capital | |
| Term: | Twelve (12) months | |
| Frequency of principal payments: | Bullet (one payment on the Due Date) | |
| Due Date: | August 30, 2024 | |
| Interest Rate: | IBR 1M + 7.20% NAMV | |
| Calculation Basis | Days actually elapsed over 360-day years. i.e. Current/360 | |
| Interest Calculation Period | Monthly | |
| Interest Payment Frequency |
Monthly |
|
| Effective Interest Rate as of today | 21.710891% E.A | |
| Default interest: | In case of default in capital, interest will be recognized at the highest possible rate in Colombia. In the case of interest, to the extent allowed by the law, interest will be recognized at the highest possible rate in Colombia. | |
| Promissory note | As guarantee of the Credit, the Debtor will electronically sign a blank promissory note with an instruction letter in favor of the Creditor. The Depósito Centralizado de Valores de Colombia (Deceval S.A) will be responsible for the issuance and custody of the promissory note. | |
| Page |
| Payments | Any date for payment of an amount to the Creditor that does not correspond to a Business Day will be extended to be paid on the next Business Day. For purposes of this Credit Document, the term “Business Day” means any day, other than Saturday, Sunday or holiday, on which financial institutions are authorized or required by law to open their offices in the city of Bogotá D.C. | |
| III. Other Elements of the Credit | ||
| Financial Information | The Debtor agrees to share with the Creditor within the first 120 days of the year the Debtor’s audited financial statements. Likewise, quarterly unaudited financial statements, within 60 calendar days after the close of the quarter. | |
| Guarantee(s) | AMENDEMENT No. 5 TO THE GUARANTEE, ADMINISTRATION AND PAYMENTS COMMERCIAL TRUST AGREEMENT, - LATAM LOGISTIC TRUST COL PROPCO COTA 1, for which registration as a Secured Creditor of Banco BTG Pactual Colombia S.A. is required. In the FC-LATAM LOGISTIC COL PROPCO COTA 1 Trust, identified with NIT 830.053.812-2 and whose spokesperson is Alianza Fiduciaria S.A. for a value of THIRTY-SEVEN BILLION PESOS ($37,000,000,000), having as assets subject to the guarantee (i) the area of future expansion that is in reserve under the Useful Area – Parcel 001 identified with the real estate registration folio 050N-20864652 and (ii) the private units called (a) 800 A identified with the real estate registration number 050N-20908823 and (b) 800B identified with the real estate registration number 050N-20918258, through the subscription of the Amendment No 8 Amendment that is signed with this contract. | |
| Preceding conditions for disbursement | That the Amendment No. 8 has been signed. | |
| Prepayment Penalty |
If a principal payment is made in advance, the Parties shall pay the Creditor a prepayment penalty in accordance with the following table: |
|
| Month | Prepayment Penalty | |
| 1 | 0.40% | |
| 2 | 0.38% | |
| 3 | 0.36% | |
| 4 | 0.34% | |
| 5 | 0.32% | |
| 6 | 0.30% | |
| 7 | 0.28% | |
| 8 | 0.23% | |
| 9 | 0.21% | |
| 10 | 0.19% | |
| 11 | 0.13% | |
| 12 | 0.06% |
|
|
For clarity, this amount will be charged on the prepaid amount and may be offset on the amounts paid. Likewise, the months begin to count from the Disbursement Date.
This prepayment penalty will be applicable exclusively on voluntary prepayments. |
| Page |
| Acceleration Causes |
In addition to the default in the payment of interest or principal, in the event of any of the following cases, the Creditor may declare the early termination of the Credit: |
| Ø | In the event that the Debtor, its direct and indirect shareholders, its affiliates, including its owners, directors and officers (who cannot be dismissed immediately after the occurrence of the event), are: (i) found criminally responsible for felonies such as source crimes of Money Laundering, Financing of Terrorism, Financing of the Proliferation of Weapons of Mass Destruction, Corruption or Bribery in the Criminal Code; (ii) included in any of the lists binding in Colombia, issued by national, international or foreign authorities; (iii) criminally charged or administratively linked to any type of investigation or proceeding, carried out by any Government Authority for the alleged commission of any crime related to Money Laundering, Financing of Terrorism, Financing of the Proliferation of Weapons of Mass Destruction or crimes against the public administration and offenses contemplated in Law 1474 of 2011. | ||
| Ø | The existence of a Change of Control of the Debtor. Control is understood as the direct or indirect power to direct or cause to be directed the administration or policies of a Person, whether through the exercise of voting rights, by contract or by any other means in accordance with the provisions of articles 260 and 261 of the Commercial Code. “Controlling” and “Controlled” have the correlative meanings of this definition. | ||
| Ø | If the obligations arising from the Credit Documents cease to be principal obligations that will not be subordinated to the payment of any other obligations, whether these are current or future obligations of the Debtor. | ||
| Ø | Failure to comply with any indebtedness owed by the Debtor to any other creditor in an amount greater than five billion pesos ($5,000,000,000) for a period exceeding sixty (60) calendar days. | ||
| Ø | Enter merger, consolidation, spin-off, liquidation or dissolution transactions. | ||
| Ø | Failure to comply with any other obligation contained herein the Credit Document. |
| Page |
| Accordingly, the principal of the Loan shall be payable immediately together with interest accrued on such principal, as well as any other obligations of the Debtor arising under the Note, without the need for filing, private or judicial counterclaim, protest, denunciation, claim, requirement, or additional notice of any nature, all of which the Debtor irrevocably waives by entering into this Credit Document. | ||
| Mandatory Prepayment | The Debtor undertakes to make the prepayment of the loan with the proceeds from the sale of warehouse 500A of the 80th Street Logistics Park. | |
| Authorization to Disburse |
We authorize the disbursement to be credited to the following account:
Current Account: 0560482869994087 Bank: Davivienda Owner: Latam Logistic Col Propco Cota 1 S.A.S. C.C./NIT: 900.986.856-3 |
|
|
Debtor Notifications
|
Attn: Annette Fernandez Pagan Email: annette@latamlp.com Address: Condominium Paseo del Sol, house 13, Pozos, Santa Ana Phone: +506 6475 0264 |
|
|
Creditor Notices
|
Attn: Felipe Peláez Restrepo E-mail: felipe.pelaez@btgpactual.com, with copy to: OL-BackofficeBTG-COL@btgpactual.com; OL-LegalBTG-COL@btgpactual.com Address: Carrera 43 A # 1 – 50, Tower 2, Floor 7, Medellín, Colombia Phone: +(574) 4484300 |
|
| Assignment | Creditor may assign or endorse (as the case may be) all or a portion of its rights and obligations under this Credit Document and the Note. Once the assignment has been made, the Creditor must notify the Debtor. All costs and expenses incurred because of the assignment shall be borne by the Creditor. The Debtor may not assign its contractual position in the Credit Document or the Promissory Note without the prior written approval of the Creditor. |
| Page |
| Taxes | Any costs, expenses, taxes, or liens incurred related to the execution, development and/or performance of the Credit Document or the promissory note shall be borne by the Debtor. Any payment made by the Debtor or any person on behalf of the Debtor under the Credit Document shall be made free and free of any applicable taxes, fees, contributions, withholdings, or reductions of any kind, including, but not limited to, any withholding tax at source (hereinafter referred to as the “Taxes”).”). If Applicable Law requires the Debtor to deduct any Tax from any amount payable under the Credit Document: the Debtor shall assume the payment of any deductions or withholdings that must be made pursuant to the Applicable Law. | |
| Governing Law | This Credit Document shall be governed by the laws of the Republic of Colombia. | |
| Electronic signature | This Credit Document may be signed by electronic signature, under the terms established in Decree 2364 of 2012, and other regulations that modify, add or replace them. The electronic mechanism will have the same validity and legal effects as a handwritten signature, meets the criteria of authenticity, integrity, reliability and appropriability, in the terms indicated in Decree 2364 of 2012 and may be made up of codes, passwords, biometric data or cryptographic keys, generally understood as data messages, which allow the signatory to be identified. | |
| Date of Signature | August 29, 2023 |
[Signature Pages Follow]
| Page |
The Debtor
_______________________
Number: Annette Fernandez Pagan
Passport: 644243033
Legal Representative
Latam Logistic COL PropCo Cota I S.A.S.
NIT 900.986.856-3
The Creditor
_______________________
Name: Mabel Constanza Moreno Ochoa
Citizenship card: 43.740.801
Legal Representative of Banco BTG Pactual Colombia S.A.
NIT 901.491.551-0
| Page |
Exhibit 4.38
LONG-TERM LOAN AGREEMENT
DATED DECEMBER 15, 2023
FOR THE AMOUNT OF
US$ 60,000,000.00
BETWEEN BBVA PERU BANK
AS LENDER
AND
LATAM LOGISTIC PER PROPCO LURIN I S.R.L.
AS BORROWER
INDEX
| SECTION I DEFINITIONS, INTERPRETATION, AND BACKGROUND |
| Clause 1.01: Definitions |
| Clause 1.02: Agreement Interpretation |
| Clause 1.03: Background |
| SECTION II LOAN |
| Clause 2.01: Object of the Agreement |
| Clause 2.02: Loan Disbursement Proceeding |
| Clause 2.03: Term |
| Clause 2.04: Loan Payment |
| Clause 2.05: Compensatory Interest |
| Clause 2.06: Default Interest |
| Clause 2.07: Default Event Fee |
| Clause 2.08: Voluntary and Mandatory Prepayments |
| Clause 2.09: Structuring Fee |
| Clause 2.10: Taxes |
| Clause 2.11: Promissory Notes |
| Clause 2.12: Guarantees |
| SECTION III LOAN CONDITIONS |
| Clause 3.01: Closing Conditions |
| Clause 3.02: Loan Disbursement Conditions |
| SECTION IV STATEMENTS AND REPRESENTATIONS |
| Clause 4.01: Statements and Representations |
| SECTION V OBLIGATIONS TO DO, NO TO DO, AND FINANCIAL OBLIGATIONS |
| Clause 5.01: Obligations to Do |
| Clause 5.02: Obligations Not to Do |
| Clause 5.03: Financial Obligations |
| SECTION VI DEFAULT |
| Clause 6.01: Default Events |
| Clause 6.02: Default Event Consequences |
| SECTION VII MISCELLANEOUS |
| Clause 7.01: Amendments |
| Clause 7.02: Communications |
| Clause 7.03: Delay in Communications |
| Clause 7.04: Costs and Expenses |
| Clause 7.05: Applicable Law |
| Clause 7.06: Assignment of Rights |
| Clause 7.07: Severability |
| Clause 7.08: Waiver or Delay in Exercising Rights |
| Clause 7.09: Total Agreement |
| Clause 7.10: Cost Increase Clause |
| Clause 7.11: Confidentiality |
| Clause 7.12: Indemnification |
| Clause 7.13: Compensation |
| Clause 7.14: Dispute Resolution |
| ANNEX I LOAN DETAILS |
| ANNEX II COMMISSIONS AND EXPENSES |
| ANNEX III PROMISSORY NOTE TEMPLATE |
| ANNEX IV PAYMENT SCHEDULES |
| ANNEX V COMPLIANCE CERTIFICATE |
| ANNEX VI DISBURSEMENT NOTIFICATION |
| ANNEX VII COMMUNICATIONS |
| ANNEX VIII COMMITMENT LETTER |
| ANNEX IX GUARANTEES |
| ANNEX X ASSIGNMENT COMMUNICATION TEMPLATE |
| ANNEX XI INSURANCE POLICIES |
Dear Notary,
Please extend, in your registry of Public Deeds, the LONG-TERM LOAN AGREEMENT entered by the following Parties:
(i) BBVA PERU BANK, identified with RUC No. 20100047218, located at Juan de Arona No. 893 Avenue, San Isidro district, province and department of Lima, duly represented by Sandra Elba Bianco Roa, bearer of ID No. 40325030, and by Frank Erick Babarczy Rodríguez, bearer of ID No. 09339170, according to powers registered in entries C00494 and C00331, respectively, of the Electronic Entry No. 11014915 of the Registry of Legal Entities of Lima (hereinafter, the “Bank” or the “Lender”); and,
(ii) LATAM LOGISTIC PER PROPCO LURIN I S.R.L., identified with RUC No. 20601055539, located at Gasoducto Lot 2 Avenue, Las Praderas de Lurin, Lurin district, province and department of Lima, duly represented by Alvaro Alejandro Chinchayán Cornejo, bearer of ID No. 10472790, according to powers granted by the General Shareholders’ Meeting dated November 3, 2023 (hereinafter, the “Borrower”).
On the following terms and conditions:
SECTION I
DEFINITIONS, INTERPRETATION, AND BACKGROUND
CLAUSE 1.01: DEFINITIONS
The terms detailed below shall have the following meanings for the purposes of this Agreement:
(i) “Assets”: The sum or total of the amount recorded as the Borrower’s assets in the balance sheet prepared in accordance with IFRS.
(ii) “Annex(es)”: The document or documents prepared pursuant to the provisions of the Agreement and which are an integral part thereof.
(iii) “Government Authority”: Any competent authority of the Peruvian State, including any entity exercising executive, legislative, regulatory, or administrative functions of, or corresponding to, the Peruvian government at the central, regional, or municipal level.
It also includes State-owned enterprises, or mixed economy companies.
(iv) “Change of Control”: Means the occurrence of the following events: (i) Thomas McDonald resigns as Chairman of the Board of LatAm Logistic Properties S.A. or Logistic Properties of the Americas (Pubco), according to the merger agreement announced on August 15, 2023, and (ii) Esteban Saldarriaga resigns as Chief Executive Officer (CEO) of LatAm Logistic Properties S.A. or Logistic Properties of the Americas (Pubco), according to the merger agreement announced on August 15, 2023.
(v) “Default Event Fee(s)”: The penalty for the occurrence of Default Events other than payment obligations as referred to in Clause 2.07 of the Agreement and established in Annex I of the Agreement.
(vi) “Commitment Letter”: The letter that the Borrower will send to the Bank on the Closing Date, whereby the terms and conditions under which the Structuring Fee will be cancelled in accordance with Annex VIII will be established.
(vii) “Compliance Certificate”: The document by which the Borrower makes quarterly declarations to the Bank that it is faithfully complying with all obligations and/or commitments in general referred to in the Agreement. The Compliance Certificate shall be issued within forty-five (45) calendar days of the end of each quarter, and shall additionally, where applicable, refer to the Financial Obligations for each semester ending on June 30 and December 31. The Compliance Certificate model is attached as Annex V to the Agreement.
(viii) “Assignment of Rights”: The assignment of rights or Contractual position under the Agreement and other Loan Documents - total or partial - that the Bank could make in favor of third parties as established in Clause 7.06 of the Agreement, which shall take effect from the date the Borrower is notified of the respective Assignment Communication.
(ix) “Civil Code”: The Civil Code of Peru in force at the date of signing of the Agreement.
(x) “Structuring Fee”: The structuring fee agreed between the Bank and the Borrower as detailed in Annex II and which must be paid to the Bank by the Borrower in relation to this Agreement and the Loan Documents, as set forth in the Commitment Letter.
(xi) “Prepayment Fee”: The fee that the Borrower must pay to the Bank on the amount prepaid, plus the corresponding Taxes, in accordance with Clause 2.08.
(xii) “Assignment Communication”: The communication that the Bank will send to the Borrower (according to the template established in Annex X) by means of which the latter will be notified regarding the percentage of the Agreement subject to an Assignment of Rights.
(xiii) “Knowledge”: With respect to the Borrower, it means the actual knowledge acquired by the general manager or other officer holding a managing position or performing similar or equivalent functions to such officers, by virtue of their involvement in the business of the Borrower and/or by virtue of the responsibilities they assume, in accordance with the ordinary diligence standards required for this type of business.
(xiv) “Agreement” or “Loan Agreement”: This document with its Annexes and amendments.
(xv) “Asset Trust Agreement”: The collateral trust agreement entered on the Closing Date between the Borrower, as settlor, La Fiduciaria S.A., as trustee, the Bank, as beneficiary, and the natural person who will act as depositary under said agreement, with the purpose of constituting the Asset Trust, including its expansions, modifications, and/or novations thereafter.
(xvi) “Cash Flow Trust Agreement”: The collateral trust agreement entered on the Closing Date between the Borrower, as settlor, La Fiduciaria S.A., as trustee, the Bank, as beneficiary, and the natural person who will act as depositary under said agreement, with the purpose of constituting the Cash Flow Trust, including its expansions, modifications, and/or novations thereafter.
(xvii) “Existing Loan Agreement”: The Loan Agreement dated May 31, 2017, entered between the Borrower and the Existing Lender, as well as its subsequent extensions and/or modifications.
(xviii) “Lease Agreements”: The agreements entered or to be entered into between the Borrower and its Tenants for the leasing of the Real Estate.
(xix) “Payment Schedules” or “Schedules”: The loan payment schedules set forth in Annex IV of the Agreement, corresponding to Tranche A and Tranche B, detailing the amount of each Installment to be paid by the Borrower, as well as the corresponding Payment Dates.
(xx) “Tranche A Disbursement Account”: Shall have the meaning assigned to such term in the Cash Flow Trust Agreement. The disbursement of Tranche A will be made into this account.
(xxi) “Tranche B Disbursement Account”: Shall have the meaning assigned to such term in the Cash Flow Trust Agreement. The disbursement of Tranche B will be made into this account.
(xxii) “Collection Account”: Shall have the meaning assigned to such term in the Cash Flow Trust Agreement.
(xxiii) “Reserve Account”: Shall have the meaning assigned to such term in the Cash Flow Trust Agreement.
(xxiv) “Disbursement Accounts”: Together, the Tranche A Disbursement Account and the Tranche B Disbursement Account.
(xxv) “Installment”: The amount of principal and compensatory interest that shall be paid by the Borrower to the Bank on each Payment Date.
(xxvi) “Balloon Installment”: The last installment of the Payment Schedule corresponding to Tranche A.
(xxvii) “Loan Disbursement(s)”: The disbursement(s) of the total amount or partial amounts of the Loan that the Bank will make to the Borrower and are subject to the preceding disbursement conditions referred to in Clause 3.02 of the Agreement.
(xxviii) “Use of Funds - Tranche A”: The use that the Borrower must give to the funds provided by the Bank corresponding to Tranche A and detailed in Annex I of the Agreement.
(xxix) “Use of Funds - Tranche B”: The use that the Borrower must give to the funds provided by the Bank corresponding to Tranche B and detailed in Annex I of the Agreement.
(xxx) “Financial Debt”: Shall be understood as all payment obligations with financial institutions or capital markets, including guarantees or bonds, as well as any other payment obligation that accrues interest (except for accounts payable to commercial suppliers assumed by the Borrower).
(xxxi) “Business Day”: Means any day other than Saturday, Sunday, recognized holiday in the jurisdiction of Lima, Peru, or any other day on which banking institutions in Lima are authorized to remain closed.
(xxxii) “Loan Documents”: All documents that the Borrower has signed or will sign for the financing granted by the Bank to the Borrower under the Agreement, including but not limited to: (i) the Loan Agreement; (ii) the duly signed Promissory Notes; (iii) the documents by which the Guarantees are constituted; and (iv) any extension and/or modification of the aforementioned documents, and other documents to be executed, entered into, or signed to implement and formalize the Loan granted under the Loan Agreement and ensure its proper execution.
(xxxiii) “Dollar” or “US$”: The legal currency of the United States of America.
(xxxiv) “Material Adverse Effect”: Means any substantially adverse effect on: (i) the Borrower’s ability to fulfill its obligations under the Loan Documents; (ii) the Bank’s ability to exercise the rights or remedies provided for in the Loan Documents; (iii) the Guarantees in favor of the Bank and/or (iv) the legality, validity, or enforceability of any of the Loan Documents.
(xxxv) “Default Event(s)”: Any event indicated in Clause 6.01 of the Agreement.
(xxxvi) “Cash Surplus”: The balance credited to the Collection Account referred to in paragraph (vi) of clause 9.1.2 of the ninth clause of the Cash Flow Trust Agreement.
(xxxvii) “Closing Date”: The date on which the Agreement is signed.
(xxxviii) “Disbursement Date”: The date on which the Bank will disburse the Loan to the Borrower once the conditions precedent for disbursement referred to in Section III have been fulfilled.
(xxxix) “Payment Date(s)”: Those dates on which the Borrower shall make payment of the principal and/or interest of the Loan according to the Schedules.
(xl) “Asset Trust”: The autonomous estate that will be constituted on the Closing Date pursuant to the Asset Trust Agreement, to guarantee the fulfillment of all the Borrower’s obligations arising from the Loan Documents.
(xli) “Cash Flow Trust”: The autonomous estate that will be constituted on the Closing Date pursuant to the Cash Flow Trust Agreement, to guarantee the fulfillment of all the Borrower’s obligations arising from the Loan Documents.
(xlii) “Guarantees”: The guarantees constituted by the Borrower and/or third parties in favor of the Bank and detailed in Annex IX of the Agreement and constituted in accordance with Clause 2.12 of the Agreement.
(xliii) “Existing Guarantees”: The guarantees constituted under the Security Documents - as such term is defined in the Existing Loan Agreement.
(xliv) “Existing Mortgage”: Shall have the meaning assigned to the term “Mortgage Agreement” in the Existing Loan Agreement.
(xlv) “Real Estate”: The real estate listed in Annex 1 of the Asset Trust Agreement, transferred in fiduciary ownership to the Asset Trust, in accordance with the provisions of the Asset Trust Agreement.
(xlvi) “Compensatory Interest - Tranche A”: The interest referred to in paragraph “(i)” of Clause 2.05 of the Agreement applicable to Tranche A and established in Annex I of the Agreement.
(xlvii) “Compensatory Interest - Tranche B”: The interest referred to in paragraph “(ii)” of Clause 2.05 of the Agreement applicable to Tranche B and established in Annex I of the Agreement.
(xlviii) “Default Interest”: The interest referred to in Clause 2.06 of the Agreement and established in Annex I of the Agreement.
(xlix) “Law 26702”: The General Law of the Financial System, of the Insurance System and Organic of the Superintendency of Banking and Insurance, Law No. 26702, and its modifying or substituting regulations.
(liv) “Liquidation of IFC Debt”: It is the amount of US$45,922,467.36 (Forty-Five Million Nine Hundred Twenty-Two Thousand Four Hundred Sixty-Seven and 36/100 Dollars).
(lv) “Tenant(s)”: The counterparties of the Borrower in the Lease Agreements.
(lvi) “IFRS”: Means the International Financial Reporting Standards approved by the International Accounting Standards Board.
(lvii) “Disbursement Notification”: It is the communication that the Borrower must make to the Bank to proceed with the Loan Disbursement. Disbursement Notifications must contain at least the information set forth in Annex VI.
(lviii) “Obligations to Do”: The obligations of the Borrower referred to in Clause 5.01 of the Agreement.
(lix) “Obligations Not to Do”: The obligations of the Borrower not to perform referred to in Clause 5.02 of the Agreement.
(lx) “Financial Obligations”: They are the financial obligations referred to in Clause 5.03 of the Agreement.
(lxi) “Promissory Note”: It is each promissory note duly signed and delivered by the Borrower to the Bank in accordance with the format set forth in Annex III.
(lxii) “Logistics Park”: It is the Borrower’s logistics park dedicated to renting warehouses to third parties located on the Real Estate.
(lxiii) “Parties”: The Borrower and the Bank, as well as any other natural or legal person who intervenes in the Agreement and/or becomes a Party to the Agreement.
(lxiv) “Net Equity”: It is the amount listed as net equity of the Borrower in its balance sheet prepared in accordance with IFRS.
(lxv) “Appraiser”: It is a top-tier international real estate auditing firm, holding RICS and MAI certifications, to be selected from the list established in Annex 3 of the Asset Trust Agreement.
(lxvi) “Availability Period”: It is the period during which the Borrower may submit a Disbursement Notification to the Bank, as detailed in Annex I.
(lxvii) “Peru”: It is the Republic of Peru.
(lxviii) “Insurance Policies”: The insurance policies taken out by the Borrower on the Real Estate, which are listed in Annex XI. This definition includes subsequent renewals and extensions of the Insurance Policies.
(lxix) “Existing Lender”: It is the International Finance Corporation.
(lxx) “Loan”: It is the present long-term credit facility that the Bank will disburse to the Borrower, consisting of Tranche A and Tranche B, in accordance with the terms stipulated in the Agreement and whose total amount is set forth in Annex I of the Agreement.
(lxxi) “Existing Loan”: It is the loan granted by the Existing Lender to the Borrower under the Existing Loan Agreement.
(lxxii) “Coverage Ratio”: It has the meaning ascribed to such term in Clause 5.01.
(lxxiii) “Debt Service Coverage Ratio”: It is the result of dividing: (i) Net Income by (ii) Debt Service.
(lxxiv) “Equity Ratio”: It is the result of dividing: (i) Net Equity by (ii) Assets.
(lxxv) “Representatives”: The shareholders, partners, administrators, directors, officers, employees, agents, representatives of the Borrower (including, but not limited to advisors, lawyers, employees, and personnel), or any other person acting on behalf of or in the interest of the Borrower.
(lxxvi) “Net Income”: The revenue received from Agreements with Tenants, net of the corresponding real estate taxes, as such taxes appear in the income statement of the Borrower’s financial statements.
(lxxvii) “Debt Service”: It is the sum of the principal repayment payments of debts with a term greater than one year, plus financial expenses for a given period.
(lxxviii) “Public Servants” are individuals who provide services to the State in any Government Authority, including any public official, public manager, trust employee, and civil servant, in accordance with the definition of Law No. 30057, its modifying and regulatory norms. This definition includes any person linked to a Public Servant or person who may influence such a servant.
(lxxix) “Soles” or “S/.”: It is the legal currency in Peru.
(lxxx) “SUNARP”: It is the National Superintendence of Public Registries.
(lxxxi) “Tranches”: Tranche A and Tranche B.
(lxxxii) “Tranche A”: It is the amount of the Loan amounting to US$48,670,000.00 (Forty-Eight Million Six Hundred Seventy Thousand and 00/100 Dollars).
(lxxxiii) “Tranche B”: It is the amount of the Loan amounting to US$11,330,000.00 (Eleven Million Three Hundred Thirty Thousand and 00/100 Dollars).
(lxxxiv) “Tax”: It is any tax, fee, contribution, existing or future, deduction, or withholding that may be applicable and that is linked to the Loan, including any interest, surcharge, fine, or penalty related thereto.
CLAUSE 1.02: INTERPRETATION OF THE AGREEMENT
(a) The Parties acknowledge that the headings of the Sections or Clauses of the Agreement are solely for reference purposes and shall not necessarily be considered for the interpretation of their content and scope.
(b) All references in the Agreement to a Section, Clause, or Annex refer to the corresponding Clause or Annex in this Agreement, unless expressly stated otherwise.
(c) References in this Agreement to a Clause include all paragraphs within it, and references to a Section include all clauses within the corresponding Section.
(d) Unless the context requires a different interpretation, the plural includes the singular and vice versa; and the masculine includes the feminine and vice versa.
(e) References to laws or regulations shall be understood and interpreted as comprehensive of all legal or regulatory provisions that modify, expand, consolidate, specify, amend, or replace the law or regulation mentioned in the Agreement.
CLAUSE 1.03: BACKGROUND
(a) The Borrower is a privately held company validly incorporated and existing under the laws of Peru, which, within the scope of its corporate purpose, is engaged in the purchase of land and the construction of logistics warehouses intended for operational leasing on a medium to long-term basis.
(b) The Borrower requires long-term credit up to the amount established in Annex I of the Agreement, which is comprised of Tranche A and Tranche B, which will be used solely and exclusively for the Purpose of Funds - Tranche A and the Purpose of Funds - Tranche B, respectively.
(c) The Bank has evaluated the request submitted by the Borrower and has undertaken to grant the Loan to the Borrower in accordance with the terms and conditions set forth in the Agreement, subject to compliance with the conditions set forth in Section III of the Agreement.
SECTION II
LOAN
CLAUSE 2.01: PURPOSE OF THE AGREEMENT
(a) Under the Agreement, the Bank grants a Loan in the currency specified in Annex I in favor of the Borrower up to the amount indicated in Annex I of the Agreement, which will consist of Tranche A and Tranche B.
(b) The Loan will be disbursed to the Borrower to the extent that the Preconditions for Disbursement of the Loan set forth in Section III, Clause 3.02 of the Agreement have been fulfilled.
(c) The Borrower undertakes to allocate Tranche A and Tranche B of the Loan solely and exclusively to the Purpose of Funds - Tranche A and the Purpose of Funds - Tranche B, respectively.
CLAUSE 2.02: PROCEDURE FOR DISBURSEMENT OF THE LOAN
The Loan (comprised of Tranche A and Tranche B) will be disbursed on the occasions and conditions stipulated in Annex I, once the Preconditions for Disbursement of the Loan set forth in Clause 3.02 of Section III of the Agreement have been fulfilled and within the Availability Period established in Annex I, computed from the Closing Date.
The disbursement of the Loan will be made into the Disbursement Accounts, as applicable, in accordance with the terms of the Flow Trust Agreement.
The Borrower shall pay the Bank the Structuring Fee, in accordance with the terms and conditions established in the Commitment Letter.
The Bank shall not disburse the Loan (both Tranche A and Tranche B) if it has not received a Disbursement Notification within the Availability Period and the conditions set forth in Clause 3.02 have not been met.
CLAUSE 2.03: TERM
The term for the repayment of the Loan is detailed in Annex I.
The Agreement shall remain in force if the Borrower is required to fulfill any obligation to the Bank under the Loan Documents.
CLAUSE 2.04: PAYMENT OF THE LOAN
(a) The Borrower shall pay the principal of the Loan according to the Payment Schedules.
(b) If any payment due under the Agreement falls on a non-Business Day, such payment shall be made on the next succeeding Business Day. The payment shall include the principal and the interest calculated as of the Payment Date, without the Bank being entitled to receive any interest or payment for the deferral.
(c) It is a condition of this Agreement, especially regarding the payment of the principal and compensatory and default interests, as well as other expenses, fees, services, and taxes, that all payments shall be made in the same currency in which the Loan has been agreed or granted or the payment of the fee, expenses, or Taxes has been agreed.
(d) The Loan shall be paid in full without deducting any expenses for commission, Tax, or any other similar discount from that amount, since it is the Borrower’s obligation to return the entire Loan to the Bank, with the Borrower assuming the full amount of such discounts.
(e) The Borrower shall make sufficient funds available to the Bank to fully cover the payment of the Installments, as well as commissions and any other amount applicable to the Borrower under the Agreement and the Flow Trust Agreement. In case the amounts owed to the Bank are not covered, for any reason, by the amounts received under the Flow Trust Agreement, the Borrower expressly and irrevocably authorizes the Bank to debit the amounts owed to any of its accounts held or that may be held at the Bank, at any of its offices and/or branches, domestically or abroad, and/or to dispose of any funds, deposits, or securities in any currency it holds to be credited, without the need for prior authorization or subsequent agreement, and without the Bank assuming any responsibility for the exchange rate used, in case the account, deposit, or funds are in a different currency than the payments the Borrower must make, at the Bank’s discretion and acknowledging that this right extends to the entire amount owed under the Loan Documents. Likewise, the Bank is authorized by the Borrower to retain and apply to the cancellation of overdue debts, any asset or financial instrument it holds and is intended to be credited or delivered, authorizing the Bank to dispose of them directly for the application of the overdue debt, releasing the Bank from any responsibility for the price obtained from the sale.
The Bank assumes no responsibility for deciding whether to exercise the right granted to it by this clause.
Likewise, the Borrower waives the right to set off against the Bank, its affiliates, subsidiaries, and/or related parties any obligations they may have in their favor derived from the Loan Documents or any other document, act, or legal transaction entered into.
(f) In accordance with the relevant provisions of the Civil Code, any payment made by the Borrower shall be imputed first to penalties and expenses, then to default interests, to compensatory interests, and finally to the repayment of the principal of the Loan.
CLAUSE 2.05: COMPENSATORY INTERESTS
The Borrower shall pay compensatory interests from the Disbursement Date on the amount of the capital disbursed by the Bank and outstanding, as follows: (i) for Tranche A, it shall apply an interest rate of 8.50% effective fixed annually; and (ii) for Tranche B, it shall apply an interest rate of 8.40% effective fixed annually. All interest calculations shall be made based on a year of three hundred sixty (360) days for the actual number of days (excluding the initial day but including the maturity day) elapsed in the period for which such interests shall be payable. Each determination by the Bank regarding an amount owed under this Agreement shall be considered conclusive and binding for all purposes, except for manifest error.
Interests shall be calculated on an accrued basis and paid on each Payment Date.
CLAUSE 2.06: DEFAULT INTERESTS
The Borrower’s failure to pay the principal, interests, or any other sum of money due in relation to the Loan on their respective due dates shall be subject, in addition to the payment of compensatory interests referred to in Clause 2.05 of the Agreement, to the payment of default interests at the effective annual rate of two percent (2.00%) on the outstanding amount, which the Borrower accepts in addition to the compensatory interests.
For the purposes of the provision in the preceding paragraph, and in accordance with the provision of article 1333°, paragraph 1 of the Civil Code, the Borrower shall automatically incur default without the need for any judicial or extrajudicial requirement or notice.
CLAUSE 2.07: DEFAULT EVENT CHARGE
In the event of a Default Event occurring, other than that established in clause 6.01(a), and until such Default Event is remedied or the Agreement is terminated, the Bank may apply to the Loan, as a penalty, an additional 1.50% to the compensatory interest rate established in Clause 2.05. The provisions of this clause do not imply a waiver of the compensation that the Borrower must pay for any damages suffered by the Bank in addition to the Default Event Charge.
CLAUSE 2.08: VOLUNTARY AND MANDATORY PREPAYMENTS
(a) Voluntary Prepayments
In accordance with the provisions of Clause 2.04 of the Agreement, the Loan shall be paid on the Payment Dates indicated in the Schedules. Notwithstanding the foregoing, the Borrower may voluntarily prepay the Loan at any time during the term of the Agreement, provided the following conditions are met:
(i) The Borrower must notify the Bank in writing and with at least thirty (30) calendar days’ notice of its intention to make a partial or total prepayment of the Loan. Prepayments may only be made on Payment Dates.
(ii) Partial prepayments shall be made in minimum amounts of US$1,000,000.00 (one million and 00/100 Dollars) and always in multiples of US$1,000,000.00 (one million and 00/100 Dollars) above said amount.
(iii) If a voluntary prepayment is made, a prepayment fee (the “Prepayment Fee”) shall be applied, depending on the year in which the voluntary prepayment is made, in accordance with the following table, which shall be applied to the principal amount of the Loan being prepaid:
| Period |
Commission |
|
| Up to the third anniversary of the Closing Date |
2.00% |
|
| From the third anniversary of the Closing Date to the fifth anniversary of the Closing Date |
1.50% |
|
| From the fifth anniversary of the Closing Date onwards |
1.00% |
The Prepayment Fee will not apply in case the Loan is prepaid, either partially or entirely, through loan structuring or facilities structured by the Bank.
(b) Mandatory Prepayments
The Borrower shall make mandatory prepayments of the Loan in the situations indicated in this subparagraph (b). In such mandatory prepayments, the Prepayment Fee will not apply. The prepayment shall be made in accordance with the payment mechanism established in the Flow Trust Agreement.
(i) Payments Derived from Insurance Policies: In the event of an occurrence of an insured event, loss, or destruction of the Real Estate for an amount equal to or greater than US$ 3,000,000.00 (Three Million and 00/100 Dollars), the Bank may apply the amount received from the respective Insurance Policies as prepayment of the Loan, for which it will be sufficient to send an instruction to the trustee of the Asset Trust to that effect.
In the event that: (a) the amount of the loss or destruction of the Real Estate is less than the amount indicated in the first paragraph of this subparagraph, or (b) notwithstanding that the amount of the loss or destruction of the Real Estate is equal to or greater than the amount indicated in the first paragraph of this subparagraph, as determined by the Bank, the amount received as indemnification will be delivered to the Borrower solely for: (x) the repair or reconstruction of the affected Real Estate or the acquisition or construction of new real estate, as applicable; or (y) working capital if so instructed by the Bank. For this purpose, the Bank undertakes to send an instruction to the trustee of the Asset Trust to transfer to the Borrower the amount received from the respective Insurance Policies as compensation.
(ii) Indemnifications: In the event the Borrower receives from any of its counterparts any indemnification related to the early termination of one or more Lease Agreements or a breach of any Agreement (including Lease Agreements), the Bank may, at its sole discretion, apply the amount received as such indemnification to the early repayment of the Loan, for which it will be sufficient to send an instruction to the trustee of the Flow Trust to that effect.
(iii) Payments for Expropriation: In the event the Borrower receives any type of payment for expropriation, confiscation, compulsory acquisition, seizure, nationalization, or any other action or event by the Republic of Peru regarding one or more of the Real Estate and receives compensation, the Bank may, at its sole discretion, apply said amount received to the early repayment of the Loan, for which it will be sufficient to send an instruction to the trustee of the Asset Trust to that effect.
(iv) Asset Sale: Notwithstanding what is established in subparagraph (e) of Clause 5.02, in the event of a sale, transfer, total or partial disposition, collectively, successively, or in a single act, of any fixed assets and/or assets of the Borrower in exchange for an amount equal to or greater than the sum of US$ 1,000,000.00 (One Million and 00/100 Dollars), the Bank may, to the extent that the disposition of such asset is not to replace it with another asset of similar quality, apply the amount received from said disposition to the early repayment of the Loan, for which it will be sufficient to send an instruction to the trustee of the Asset Trust or the Flow Trust, as applicable, to that effect. Any sum received from asset disposition for an amount less than US$ 1,000,000.00 (One Million and 00/100 Dollars) may be used for the substitution of said assets, without requiring prior authorization from the Bank.
(v) Sweep of Funds: In the event the Debt Service Coverage Ratio is less than 1.25x, the Borrower shall mandatorily allocate, on each Payment Date throughout the term of the non-compliance with said financial ratio, fifty percent (50%) of the Cash Surplus for the mandatory prepayment of the Loan, for which the Bank must instruct the Flow Trust trustee to transfer said sum to the account indicated by the Bank; and said amount shall be applied by the trustee in accordance with the provisions of the Flow Trust Agreement.
In the event any flows derived from the concepts indicated in the preceding subparagraphs are received directly by the Borrower or any of its subsidiaries or affiliates, the Borrower shall be obliged to deliver or cause to be delivered such amounts to the Flow Trust within no more than three (3) Business Days following the receipt of such funds.
(c) Common Provisions for all Prepayments
(i) In the event of a partial prepayment of the Loan, whether voluntary or mandatory, the Bank shall send to the Borrower, within ten (10) Business Days following the prepayment date, new Payment Schedules having recalculated the amounts to be paid on each Payment Date.
(ii) The Parties expressly agree that partial prepayments will not modify the Payment Dates but will reduce the amount of the Installments on each Payment Date on a pro-rata basis to the prepaid amount.
(iii) Prepayments, whether voluntary or mandatory, will be applied pari passu to the repayment of Tranche A and Tranche B.
(iv) Prepayments, whether voluntary or mandatory, will in no case be considered, nor may they be construed to exempt the Borrower from the payment of its other obligations under the Loan Documents.
CLAUSE 2.09: STRUCTURING FEE
The Borrower acknowledges the Structuring Fee that will apply to the Loan and agrees to pay it under the terms and conditions set forth in the Commitment Letter.
CLAUSE 2.10: TAXES
(a) All Taxes, current and/or future, which may be levied on the Loan, including its interests, expenses, and commissions, shall be borne exclusively by the Borrower. This Clause does not apply to the Income Tax (or any tax of similar nature, regardless of its denomination) levied on the Bank’s operations.
(b) The Borrower undertakes to reimburse the Bank for any new Taxes that the Bank must pay in relation to the Loan and/or the Loan Documents, including its interests, surcharges, fines, and penalties. The reimbursement shall be made within ten (10) calendar days following the date on which the Bank requests such reimbursement from the Borrower.
(c) All principal, interest, and expenses payments made by the Borrower to the Bank under the Loan Documents shall be made without deduction or withholding of existing or future Taxes or other Taxes applicable in Peru or abroad, if applicable. If the Borrower or the Bank is required to make any withholding or deduction for Taxes, the amounts paid to the Bank shall be increased by the amount necessary for the Bank to receive the total amount that would correspond if such Taxes did not exist.
(d) In cases where withholdings or deductions are related to payments of principal, interest, and expenses made by the Borrower to non-domiciled subjects in Peru as a result of any transfer or assignment made by the Bank under this Agreement, the Borrower may choose to assume the Income Tax levied on them, in which case it will not be necessary to increase the sums paid to said non-domiciled subjects. The assumption of the Income Tax shall proceed strictly in accordance with the provisions of Article 47 of the Income Tax Law.
(e) References to the Bank in this Clause 2.10 include any of its assignees or participants, whether domiciled or not domiciled for tax purposes in Peru.
CLAUSE 2.11: PROMISSORY NOTES
The disbursement of the Loan shall be evidenced by the issuance by the Borrower of a Promissory Note for each Tranche, representing the entirety of each Tranche.
The issuance of the Promissory Notes in favor of the Bank, their renewal, or extension shall not result in novation of the obligations assumed by the Borrower under the Agreement and/or the Loan Documents, and in no case shall it determine the extinction of the obligation, or the Guarantees constituted, even if such securities are impaired even due to the Bank’s fault. The Bank undertakes to return the Promissory Notes to the Borrower upon the cancellation of the Loan and of any sum owed to the Bank under the Agreement and/or the Loan Documents.
The Promissory Notes shall be delivered incomplete regarding their maturity date and the amount thereof. Said Promissory Notes shall be completed by the Bank according to the following rules:
(i) Each Promissory Note shall be completed by the Bank for the total amount stated in the debtor balance liquidation corresponding to each Tranche, which shall correspond to the total amount of the obligations derived from this Agreement that the Borrower owes to the Bank for each Tranche, as applicable, on the date the Borrower declares all the terms of the Agreement due for having triggered a Default Event. The liquidation shall include the amount of the principal of the corresponding Tranche, the corresponding compensatory interest of the applicable Tranche, the default interest, all the fees owed under this Agreement, and any other payment that the Borrower owes in accordance with the Agreement.
(ii) The Borrower agrees that, from the maturity date of each Promissory Note until its effective payment, the amount stated therein shall accrue compensatory interest equivalent to the Compensatory Interest - Tranche A and the Compensatory Interest - Tranche B, as applicable, and default interest at the rates agreed and with the amounts established in the Agreement. For the payment of default interest, the constitution of default shall not be necessary, as it shall be automatic.
(iii) The issuance date of the Promissory Notes shall be the Disbursement Date, or the date on which a Rights Assignment becomes effective in accordance with Clause Seven of the Loan Agreement. The Bank shall record as the maturity date of each Promissory Note the date of the declaration of maturity of the terms referred to in the previous paragraph (i).
(iv) Each Promissory Note shall be issued with the “without protest” clause. Notwithstanding the foregoing, the holder may protest it, with the Borrower bearing the expenses of such action.
(v) The Borrower authorizes the Bank to complete each Promissory Note as provided for in Statement No. G-0090-2001 or the regulations replacing it if the Bank declares all the terms of the Agreement due to having triggered a Default Event in accordance with Clause 6.02 of the Loan Agreement.
(vi) The Bank shall deliver to the Borrower a copy of each signed Promissory Note, and such delivery shall be acknowledged in a receipt.
(vii) The Bank undertakes not to transfer the Promissory Notes unless such transfer is made as part of a Rights Assignment provided for in Clause 7.06 of the Loan Agreement. In this regard, the Promissory Notes may be transferred, if what is established in said clause has been complied with (especially regarding the prior coordination that must be carried out with the Borrower). The Borrower shall not be obligated to issue new Promissory Notes in favor of the new creditor in the event of an assignment of the contractual position or an assignment of all rights under the Agreement.
(viii) In accordance with the provisions of Article 1279 of the Civil Code, the issuance, renewal, or other accessory change of each Promissory Note, including its substitution and/or replacement with another similar one, shall not constitute novation of the obligations established in the Agreement. The obligations contained in each Promissory Note shall not be extinguished even if, due to the Bank’s fault, such Promissory Note is impaired; this constitutes a pact against the provisions of Article 1233 of the Civil Code.
(ix) For the purpose of completing the Promissory Note, the Bank shall not require approval or consent from the Borrower or any third party, nor a resolution or judgment issued by a judge, court, or administrative authority. The Borrower expressly acknowledges the protective mechanisms granted by law regarding the issuance and acceptance of an incomplete promissory note.
CLAUSE 2.12: GUARANTEES
The fulfillment of the obligations arising from the Loan shall be guaranteed by:
| - | The Assets Trust, established under the Assets Trust Agreement; and, |
| - | The Cash Flow Trust, established under the Cash Flow Trust Agreement. |
The Guarantees are provided as support for the fulfillment of each and every obligation assumed by the Borrower in the Agreement and in the other Loan Documents in favor of the Bank, expressly declaring that the Guarantees are extended to guarantee the payment of any sum ordered to be paid in favor of the Bank by any arbitral award or judgment issued by any arbitrator, court, or tribunal, arising from the Agreement and the other Loan Documents, or from the remedies or protective mechanisms that, under the applicable law, the Bank may have against the Borrower.
SECTION III
LOAN CONDITIONS
CLAUSE 3.01: CONDITIONS FOR CLOSING
The following conditions must be met for the execution of the Agreement:
(a) That, in the Bank’s judgment, there has been no substantial adverse change in: (i) the local and/or international financial markets; and/or (ii) the political and/or economic situation of Peru.
(b) The credit approval of the Loan and other Loan Documents by the respective internal committees of the Bank.
(c) That the Bank has received from the Borrower, to its satisfaction: (i) a certified copy of the resolution of the competent corporate body approving the terms and conditions of this operation and authorizing the representatives who will sign the Loan Documents, and (ii) a copy of the request for registration in public records of such powers granted to the representatives of the Borrower who will sign the Loan Documents.
(d) That the Bank has, to its entire satisfaction: (i) received the report and legal due diligence questionnaires from the Borrower, (ii) received a signed copy by the Borrower of the affidavit regarding the due diligence report, and (iii) conducted a financial due diligence of the Borrower.
(e) That all Loan Documents (except the Promissory Notes) have been executed to the entire satisfaction of the Bank.
(f) That the Bank has received from the Borrower the Commitment Letter duly executed to its entire satisfaction.
(g) That the Borrower has submitted to the Bank a copy of its audited financial statements for the last fiscal year and the latest interim financial statements and that since the date of such financial statements, no material adverse change has occurred, in the Bank’s judgment, in the business, operational capacity, financial condition, or results of the Borrower.
(h) That on the Closing Date, there is no event, in the Bank’s judgment, which may be considered to have a Material Adverse Effect.
(i) That the representations and warranties made by the Borrower and set forth in clause 4.01 are complete, true, and accurate in their entirety, and remain in effect.
CLAUSE 3.02: CONDITIONS FOR DISBURSEMENT OF THE LOAN
The disbursement of the Loan shall be subject to the satisfaction by the Borrower and to the satisfaction of the Bank, of each one of the following conditions precedents:
(a) That, in the Bank’s judgment, there has been no substantial change in: (i) the local and/or international financial markets; and/or (ii) the political and/or economic situation of Peru.
(b) That there has been no occurrence of any event that results in a change in the direct ownership structure of the Borrower or that results in a change in the indirect ownership structure of the Borrower that triggers a Change of Control.
(c) That, in the Bank’s judgment, there has been no occurrence of any event affecting the legal or financial status of the Borrower in such a manner that a Material Adverse Effect could be triggered.
(d) That there is no Event of Default or any default or event in general that, with notice or the passage of time, or both, would become an Event of Default.
(e) That the representations and warranties made by the Borrower and set forth in clause 4.01 are complete, true, and accurate in their entirety, and remain in effect.
(f) That the Promissory Notes referred to in Clause 2.11 of the Agreement have been issued and delivered.
(g) That the Borrower has delivered to the Bank a Disbursement Notice signed by its general manager or authorized legal representative whose submission by the Borrower and its acceptance confirms compliance with the foregoing conditions referred to in the preceding subparagraphs (d) and (e).
(h) That the Borrower has paid the Structuring Fee and the applicable expenses as provided in the Commitment Letter, the Agreement, and/or the Loan Documents.
(i) That the Bank has received an instruction letter from the Borrower to make, on account of the Loan Disbursement, the payment of: (i) the Structuring Fee owed to the Bank; and (ii) the previously agreed fees to legal advisors and other advisors, if applicable.
(j) That the Borrower is in compliance with all its obligations under the Loan Documents.
(k) That the legal advisors of the Bank and the Borrower have each provided the Bank with a legal opinion regarding the Borrower’s capacity to execute the Loan Documents and the validity and enforceability of the Loan Documents.
(l) That the Borrower has: (i) informed the Bank of the appointment of an Appraiser chosen by the Bank to conduct appraisals of the Real Estate Properties, in accordance with the terms of the Assets Trust Agreement, and (ii) provided the Bank with final appraisal reports of the Real Estate Properties.
(m) That the Disbursement Accounts have been opened, in accordance with the terms of the Cash Flow Trust Agreement.
(n) That the Borrower has subordinated all its obligations to shareholders, partners, and/or affiliates to the satisfaction of the Bank.
If any of the foregoing conditions precedent are not met, the Bank, without any liability, shall be entitled to suspend and/or deny the Disbursement, and the Borrower shall have no right to make any claim against the Bank.
SECTION IV
REPRESENTATIONS AND WARRANTIES
CLAUSE 4.01: REPRESENTATIONS AND WARRANTIES
On the Closing Date and the Disbursement Date, the Borrower represents and warrants to the Bank that:
(a) It is a validly constituted and existing entity under Peruvian laws and has all powers and authority required to conduct its business, to own its properties, and to fulfill the rights and obligations under the Agreement.
(b) The execution of the Agreement and the Loan Documents, and the performance of its obligations thereunder are within its corporate powers, have been duly authorized by the appropriate corporate bodies, and do not violate or contravene: (i) its bylaws; (ii) any law, decree, regulation, or any other legal norm applicable to it; any order, judgment, award, resolution of any judicial, arbitral, or other court or administrative authority applicable to it and that has been communicated or notified to it; or (iii) any Agreement, instrument, or other commitment to which the Borrower is a party or to whose terms and conditions it is bound, in a manner that could affect its ability to comply with the obligations assumed under the Agreement or its current economic and/or financial situation.
(c) Each of the Loan Documents has been validly executed and contains valid and legally enforceable obligations in accordance with its terms.
(d) No authorization or approval of or notice to any Governmental Authority is required for the due execution and performance by the Borrower of the Agreement.
(e) It is not aware of any proceedings or mandates, whether pending or imminent, in judicial, administrative, or arbitral proceedings, which could reasonably be expected to have a Material Adverse Effect.
(f) The financial statements delivered to the Bank are the latest approved ones and fairly represent the financial condition and results of operations of the Borrower in accordance with IFRS and applied consistently, and that, since the date of such financial statements, there has been no material adverse change in such conditions or operations that affects or could affect the Borrower’s ability to meet its obligations under the Agreement.
(g) To its knowledge, it is not in violation of any laws, decrees, regulations, or any other applicable legal norm, nor are there any court or extrajudicial or administrative rulings or judgments against the Borrower that could have a Material Adverse Effect in the future or affect the legality, validity, or performance of the Agreement.
(h) To its knowledge, it is not in default regarding any burdens, duties, commitments, or material contractual obligations, nor has any event occurred that would allow the acceleration of terms and the enforceability of its obligations under one or more Agreements validly entered into with third parties, the breach or occurrence of which could generate a Material Adverse Effect.
(i) It has complied with its formal and substantial tax obligations, or it has filed a claim against a tax assessment or penalties that the Borrower considers unwarranted and has adequate accounting provisions for this purpose in accordance with IFRS.
(j) No information, report, or attachment provided by the Borrower to the Bank in connection with the negotiation of the Agreement or pursuant to its terms contains, to the Borrower’s knowledge, falsehood or material inaccuracy regarding facts or omits any necessary and relevant information regarding the Borrower.
(k) The Borrower has provided and facilitated to the Bank all information within its knowledge related to any other Agreement, agreement, or operation, fact, and/or circumstance related to the Use of Funds - Tranche A and the Use of Funds - Tranche B that could in any way have a Material Adverse Effect.
(l) The Borrower is subject to the general legal framework, and it does not have any kind of immunity or special privilege in the event of resorting to the jurisdictional organs.
(m) It has all necessary legal and regulatory authorizations for the normal performance of its operations.
(n) The Borrower is not in breach of the rules regulating and protecting the environment applicable to it.
(o) It expressly acknowledges and agrees that the Bank’s failure to exercise any of the rights and powers established in the Agreement does not imply the waiver or loss of such rights, and the Bank may exercise them at any time.
(p) The Borrower, its subsidiaries, and Representatives have not engaged in or are being investigated for acts of corruption and/or bribery, illegal or improper practices regarding any national or foreign authority, and have not provided payments, gifts, promises of payment, advantages, present or future personal benefits, or similar contrary to law to Public Servants for obtaining permits, licenses, approvals, authorizations, rights, or privileges that could benefit the Borrower or third parties.
(q) The Borrower, its subsidiaries, and Representatives are not under investigation or have committed or are linked to crimes against public administration, money laundering, illicit drug trafficking, and/or terrorism financing in Peru or abroad.
(r) The business and movable and immovable property of the Borrower have not been affected or remain affected by force majeure events, such as fire, explosion, accidents, pandemics, strikes, lockouts, or any other significant labor issue, drought, storm, hail, earthquakes, seizures, or similar, that materially and negatively affect the Borrower or its respective operations, or that could produce a Material Adverse Effect.
(s) The payment of the Loan is not or will not be subordinated in priority, rank, or payment to any other debt or obligation, incurred before or after the Closing Date, except for those preferential obligations according to the applicable laws in liquidation or bankruptcy scenarios, and maintains and will continue to maintain at least pari passu status with respect to other non-subordinated secured debts.
(t) The Borrower does not have any financial debt with any shareholder, partner, director, administrator, officer, affiliate, and/or subsidiary.
SECTION V
OBLIGATIONS TO DO, NOT TO DO, AND FINANCIAL OBLIGATIONS
CLAUSE 5.01: OBLIGATIONS TO PERFORM
The Borrower undertakes to the Bank specifically, while any amount under the Agreement remains outstanding, the following positive obligations or obligations to perform (unless otherwise authorized by the Bank in express written form):
(a) To provide the Bank with the following documentation:
(i) Annual audited financial statements within one hundred twenty (120) calendar days following the close of each fiscal year.
(ii) Quarterly financial statements within forty-five (45) calendar days following March 31, June 30, September 30, and December 31 of each year during the term of the Agreement.
(iii) The Compliance Certificate regarding the Obligations to Perform, Non-Performance Obligations, and Financial Obligations in the format attached in Annex V, within forty-five (45) calendar days following March 31, June 30, September 30, and December 31 of each year during the term of the Agreement.
(b) To inform the Bank within a maximum period of three (3) Business Days of the occurrence of the following:
(i) Any action or proceeding or attachment or seizure over any of its assets, or its existing and future income flows, before any judicial or arbitral court, or before any administrative or municipal entity that generates a Material Adverse Effect.
(ii) If it has been initiated or has become aware that it is about to be initiated any bankruptcy or insolvency proceeding or that it has incurred in a case that merits a request to commence bankruptcy or other insolvency process before INDECOPI.
(iii) Any event that could have a Material Adverse Effect.
(iv) The occurrence of one or more Events of Default and/or a situation in which the Representations and Warranties contained in Clause 4.01 of this Agreement cease to be true or accurate.
(v) The early termination or acceleration of terms and the enforceability of its obligations under: (x) one or more of its Agreements entered with third parties that may have a Material Adverse Effect, and/or (y) one or more Lease Agreements.
(c) To keep its books and accounting records in accordance with IFRS.
(d) To comply with all obligations contained in current legal regulations and contractual provisions applicable to it, including those related to Taxes, social security, labor and pension regime, environment, and in general any applicable legal provision, as well as the requirements of Governmental Authorities, except for those obligations whose non-compliance does not generate a Material Adverse Effect.
(e) To comply with all contractual obligations arising from the Lease Agreements.
(f) To comply with the payment of all Taxes in accordance with the legislation of Peru, those currently established or to be established in the future.
(g) To maintain the obligations of the Agreement on similar terms, privileges, and rank, at least pari passu, with respect to any other present or future secured obligation contracted by the Borrower, except those whose claims are preferred based on a general application norm on asset restructuring, bankruptcy, insolvency, asset recovery, liquidation, or similar.
(h) To allow the Bank’s representatives to visit and inspect all operations and/or businesses, accounting books, corporate books, Agreements, and tax records, copy extracts, and discuss business, assets, financial, legal, or economic situation, operating results, or prospects with the Borrower’s officers on occasions reasonably required by the Bank upon prior coordination with the Borrower with at least five (5) Business Days’ notice, as well as to provide the Bank with all information reasonably requested.
(i) To preserve, maintain, and, if applicable, obtain: (i) its corporate existence as a legal entity, maintaining its corporate purpose and main business; (ii) the permits, concessions, licenses, approvals, registrations, privileges required for the conduct of its businesses; and (iii) the Agreements necessary to maintain the continuity of substantial operations in the manner currently conducted, unless such Agreements are replaced by others that are substantially equivalent or superior.
(j) To keep its assets, including those transferred to the Asset Trust, in good condition, and to make the necessary repairs and replacements for such assets, which must be properly insured by insurance companies with a first-rate risk rating, maintaining such insurance - including expressly the Insurance Policies - in force during the term of this Agreement and the Loan Documents.
(k) To endorse the Insurance Policies in favor of the Asset Trust, in accordance with the terms of the Asset Trust Agreement, within six (6) Business Days following the execution by the Existing Lender of the public deed for the release of the Existing Mortgage.
(l) To formalize and register, within sixty (60) calendar days from the Closing Date, the Guarantees constituted in accordance with Clause 2.11 of the Agreement in the corresponding Public Registries, expressly including the Chattel Mortgage Registry and the Real Estate Property Registry.
(m) To maintain the minimum coverage ratios established for the Guarantees.
(n) To subordinate all debts, financial or for services rendered or other obligations of any nature, with existing and future shareholders, partners, and/or affiliates to the obligations of the Borrower contained in this Agreement and the Loan Documents.
(o) To send to the Bank, on the Disbursement Date, the evidence of the total repayment of the Existing Loan, in accordance with the terms of the Flow Trust Agreement.
(p) To ensure: (i) the execution by the Existing Lender and the Borrower of the public deed for the release and cancellation of the Existing Guarantees within three (3) Business Days following the Disbursement Date; and (ii) the registration in the corresponding Public Registries of the release and cancellation of the Existing Guarantees within thirty (30) Business Days following the Disbursement Date. The Borrower will deliver to the Bank the registration entries in the corresponding Public Registries of such releases and cancellations within two (2) Business Days following each registration.
(q) To update the valuations of the assets transferred to the Asset Trust annually, in accordance with the terms of the Asset Trust Agreement.
(r) At each opportunity when Tranche B funds are used for the Use of Funds - Tranche B, to present to the Bank, within 2 (two) Business Days following the use of such funds, informative documentation supporting such use.
(s) To always maintain the commercial value of the Real Estate properties transferred to the Asset Trust at an amount equivalent to at least 1.5 times the balance of the amounts owed by the Borrower
(x) The Borrower shall request, within twenty (20) Business Days following the Closing Date, before the District Municipality of Lurin, the work compliance and building declaration of the buildings executed in the Logistic Park in accordance with Building Licenses No. 308-2021-SGOPR-GDU-ML, 153-2017-SGLAU-GDUGT/ML, 002-2019-SGOPR-GDU/ML, 293-2021-SGOPR-GDU-MP, and 158-2020-SGOPR-GDU/ML. Likewise, the Borrower shall obtain the work compliance within a period of two (02) months counted from the Closing Date. Said period may be extended at the request of the Borrower, at the Bank’s discretion, in case the delay in obtaining the work compliance is not attributable to the Borrower. Within a maximum period of five (05) Business Days from obtaining the work compliance and building declaration, the Borrower shall submit to SUNARP the registration of the building declaration of the buildings and shall obtain the registration thereof within a maximum period of three (03) months counted from the submission to SUNARP referred to above.
(y) The Borrower shall send, within two (02) Business Days following the Closing Date, a copy of the proof of submission of the relevant documents for registration in the public records of the Guarantees.
(z) The Borrower shall send, within twenty (20) Business Days following the Closing Date, a copy of the registration entry in public records of the powers of attorney granted to the legal representatives of the Borrower for the execution of the Loan Documents, in accordance with the provisions of clause 3.01(c).
(aa) The Borrower and the Bank shall use their best efforts to, within a period not exceeding ninety (90) calendar days from the Closing Date, execute an amendment to this Agreement incorporating the necessary clauses for the Loan to have a “sustainable loan” typology, subject to compliance with the Key Performance Indicator(s) (KPIs) to be mutually agreed upon and determined in accordance with an external sustainability advisor.
CLAUSE 5.02: NON-PERFORMANCE OBLIGATIONS
The Borrower undertakes to the Bank specifically, while any amount owed to the Bank under the Agreement remains outstanding, the following obligations of non-performance (unless otherwise authorized by the Bank in express written form):
(a) The Borrower shall not agree to the direct or indirect distribution of profits, reduce its share capital, pay dividends either in cash or in kind, make deliveries of movable or immovable property, money, rights, obligations, securities, and other participation in the company’s capital, nor pay subordinate loans or loans from shareholders, partners, and/or affiliates when it has incurred in a Default Event and while it remains in effect.
(b) Not to grant financings or guarantees or other guarantees to third parties, including related companies, for a total amount exceeding US$ 250,000.00 (two hundred fifty thousand and 00/100 Dollars) or its equivalent in Soles, in addition to those that are outstanding at the Closing Date, unless prior written authorization is obtained from the Bank.
(c) With the exception of subordinated debts and obligations referred to in clause 5.01(n) above, refrain from assuming new indebtedness without prior written authorization from the Bank, except for Financial Debt with a term of less than 360 (three hundred sixty) days and for aggregate amounts less than US$ 500,000.00 (five hundred thousand and 00/100 Dollars) or its equivalent in Soles.
(d) Not to dispose of in any way assets that are relevant to the Borrower’s operations unless prior written authorization is obtained from the Bank.
(e) Not to donate, lease, leaseback, lend, create movable collateral, mortgage, antichresis, constitute a right of way, and in general, dispose of, constitute a guarantee, or encumber in any way the movable and immovable property, income, credits, and other rights of the Borrower in favor of third parties, unless these are Guarantees or the Borrower has the prior written consent of the Bank. This obligation shall be excepted in the following cases: (i) when it concerns inventory assets, (ii) when it concerns obsolete assets (those whose book value equals zero), and (iii) when the operations regulated here (x) do not exceed the amount of US$250,000.00 (two hundred fifty thousand and 00/100 Dollars) or its equivalent in Soles and (y) do not result in a breach of the Guarantee Coverage Ratio.
(f) Not to enter operating leases for a total amount exceeding US$ 250,000.00 (two hundred fifty thousand and 00/100 Dollars) or its equivalent in Soles, without prior written authorization from the Bank.
(g) Not to make any significant changes to the main business line and/or that alter the nature of the main business, unless prior written authorization is obtained from the Bank.
(h) Not to subordinate the Loan to other obligations that the Borrower may have to third parties or to others assumed after the Agreement.
(i) Not to transfer, delegate, or assign the Loan, its contractual position, or any of the rights and/or obligations related thereto, under any modality, without the prior written authorization of the Bank.
(j) Not to merge, split, consolidate, transfer its productive fixed assets, acquire other businesses, or carry out any type of reorganization authorized by law, regardless of its activity, without the prior written authorization of the Bank.
(k) Not to participate, without the prior written authorization of the Bank, in processes that may cause (i) a change in the direct ownership structure of the Borrower; and/or (ii) a change in the indirect ownership structure of the Borrower that results in a Change of Control.
(l) Not to pay its directors, authorities, and employees, fees and remunerations or other benefits that are not in compliance with current legal provisions, or that depart from the practices consistently used by the Borrower in the past, in the latter case, to the extent that such payments are expected to generate a Material Adverse Effect or a Default Event.
(m) Not to make significant changes to accounting policies and practices, unless required by IFRS or abroad.
(n) Not to enter into Agreements of any nature with its subsidiaries or affiliates in which the consideration stipulated is less favorable to the Borrower than those prevailing in the market.
(o) Not to enter into loan agreements and/or Agreements with its subsidiaries or affiliates that are not domiciled in the Republic of Peru for a cumulative maximum amount of US$ 1,000,000.00 (one million and 00/100 Dollars). Not applicable for the use of Tranche B funds.
(p) Not to enter into agreements and/or Agreements with its subsidiaries or affiliates that are not at market conditions and value.
(q) Not to generate assets (short or long-term accounts receivable, deposits, or others) with related companies except in the ordinary course of the Borrower’s business.
(r) Not to allocate the Loan funds to uses other than the Use of Funds - Tranche A, and the Use of Funds - Tranche B, as appropriate.
(s) Not to make investments - other than the Use of Funds - Tranche B - in amounts exceeding US$
1,000,000.00 (one million and 00/100 Dollars) or its equivalent in Soles unless prior written authorization is obtained from the Bank.
(t) Not to terminate in advance any Lease Agreements, without prior written authorization from the Bank.
(u) Not to engage in acts of corruption, bribery, or illegal or improper acts or practices regarding any national or foreign Government Authority. Not to grant payments, gifts, promises of payment, advantages, present or future personal benefits, or like Public Servants contrary to law for obtaining consents, permits, licenses, approvals, authorizations, or rights or privileges that could benefit the Borrower or third parties.
(v) To ensure that its Representatives and subsidiaries do not engage in acts of corruption, bribery, or illegal or improper acts or practices regarding any national or foreign Government Authority for the benefit of the Borrower, subsidiaries, or related parties.
(w) Not to commit and not to be involved in the commission of crimes against public administration, money laundering, illicit drug trafficking, and/or terrorism financing in Peru and abroad.
CLAUSE 5.03: FINANCIAL OBLIGATIONS
The Borrower undertakes to the Bank specifically, while any amount owed to the Bank under the Agreement and/or Loan Documents remains outstanding, the following Financial Obligations:
1. Debt Service Coverage Ratio not less than 1.25x.
2. Equity Ratio not less than 0.4x.
Compliance with the Financial Obligations shall be verified by the Bank at the end of each semester ending on June 30th and December 31st. To calculate the Financial Obligations, the figures from the Borrower’s individual Income Statement for the last two (2) preceding semesters prior to the closing date of each semester, as well as the figures from the individual Balance Sheet as of that date, shall be considered.
SECTION VI
BREACH
CLAUSE 6.01: DEFAULT EVENTS
Any of the following events shall constitute a Default Event under the Agreement and/or Loan Documents:
a) If on any Payment Date or other relevant date established in the Loan Documents, the Borrower fails to timely pay any Installments or any other sum under the Agreement and/or Loan Documents other than Installments, including but not limited to fees, expenses, and Taxes. In this case, no notice shall be required, as provided for in Article 1333° of the Civil Code. Therefore, upon Borrower’s default, it shall automatically be deemed to be in default.
b) Falsehood or inaccuracy in any of the representations and warranties made by the Borrower in any of the Loan Documents and/or in the sworn statement regarding the due diligence report referred to in subparagraph (ii) of clause 3.01(d), and especially those detailed in Section IV of the Agreement, and/or in the information and documents provided by the Borrower to the Bank.
c) When the Agreement or any of the other Loan Documents are terminated and/or declared null and/or void and/or invalid and/or ineffective by a competent authority.
d) In case any Guarantees granted in favor of the Bank are declared null or void or invalid or ineffective, except, in the event that such nullity, invalidity or ineffectiveness has been requested by the Borrower or one of its affiliates, that they are replaced by other guarantees of similar coverage to the satisfaction of the Bank within a period not exceeding thirty (30) Business Days following said declaration.
e) The Borrower uses the proceeds from Tranche A and/or Tranche B for purposes other than the Use of Funds - Tranche A and Use of Funds - Tranche B, respectively.
f) Default by the Borrower in any of the Financial Obligations, Positive Obligations, or Negative Obligations.
g) Breach of any commitment or obligation established in the Loan Documents.
h) Default of any obligation assumed under any other Agreement, agreement, and/or agreement entered with any third party for amounts individually or jointly exceeding US$ 1,000,000.00 (one million and 00/100 Dollars). It shall also be considered a Default Event if any Agreement, and/or contract entered by the Borrower for amounts individually or jointly exceeding US$ 1,000,000.00 (one million and 00/100 Dollars) is accelerated or terminated.
i) Default by the Borrower of any obligations assumed with the Bank and/or its related companies in any other Agreement signed other than the Agreement and/or the Loan Documents or operation in force during the term of the Agreement.
j) Initiation of bankruptcy proceedings against the Borrower and such proceedings not being annulled within a period of forty-five (45) calendar days from the initiation of the proceedings, with said period being extendable by fifteen (15) additional days, at the Bank’s discretion, if the Borrower requests it and has previously provided the Bank, to its satisfaction, with a legal opinion from a top-tier law firm supporting the need to extend the aforementioned period in order to validly annul the ongoing bankruptcy proceedings. This clause encompasses any process aimed at declaring it insolvent or bankrupt, or liquidating, dividing, restructuring it; or for the purpose of appointing a trustee, fiduciary, custodian, or similar regarding the Borrower.
k) If the assets, business, or activities of the Borrower, either in whole or in substantial part, are expropriated, nationalized, seized, intervened, or any other action or event arising from governmental decisions; or if any measure is taken that displaces the management of the Borrower or limits its authority in carrying out its business.
l) If the Borrower acknowledges its inability to pay its debts or voluntarily initiates any bankruptcy proceedings before the competent authority.
m) If (i) a judgment, arbitral award, or final and unappealable order is issued against the Borrower for an amount exceeding US$ 500,000.00 (five hundred thousand and 00/100 Dollars) or its equivalent in Soles; (ii) an attachment or similar process is imposed or executed against any of the Borrower’s assets for an amount exceeding US$ 500,000.00 (five hundred thousand and 00/100 Dollars); or (iii) the Borrower fails to comply with the execution of any judicial, arbitral, or administrative decision, after exhausting the corresponding appeals for an amount exceeding US$ 500,000.00 (five hundred thousand and 00/100 Dollars) or its equivalent in Soles.
n) If the Borrower and/or its shareholders or partners agree to dissolve the company.
o) If the Borrower fails to keep valid the authorizations, licenses, permits, and other rights granted to it by the State or by any competent authority for the development of its activities and operations that constitute its corporate purpose.
p) If a change in the direct ownership structure of the Borrower is agreed upon without the prior express written consent of the Bank and/or if a change in the indirect ownership structure of the Borrower occurs resulting in a Change of Control.
q) If any event or any act, fact, or circumstance occurs that generates or may generate a Material Adverse Effect.
CLAUSE 6.02: CONSEQUENCE OF DEFAULT EVENT
In the event that any of the Default Events described in the preceding Clause 6.01 occurs, the Bank may, by operation of law, declare this Agreement terminated, in accordance with the provisions of Article 1430° of the Civil Code, by means of written communication sent by notarial means to the Borrower, and/or accelerate the Loan, accompanying the liquidation of the outstanding balance referred to in paragraph 7 of Article 132c of the General Law, without the need for any other communication or formality, with all deadlines being deemed expired and immediate payment of the amounts owed being demanded; in which case the Bank shall have the right to execute and/or judicially demand the cancellation of the entire sums owed, including the execution of the Promissory Notes issued as a result of the Loan Disbursement, and the Guarantees that back it.
The Bank’s delay in exercising this right shall not, in any case, imply a waiver thereof.
In the event contemplated in the first paragraph of this clause and as long as the Bank does not collect the full amounts owed by the Borrower, including the payment of penalties, fees, expenses, professional fees, costs and court costs, collection costs, accrued or to be accrued, compensatory and default interest at the rates established in this Agreement shall apply to said debt.
Additionally, from the occurrence of the Default Event until the Agreement is remedied or resolved, the Bank shall apply the Event(s) of Default Charge, as indicated in Clause 2.07.
The termination of this Agreement in no way affects the Guarantees granted in favor of the Bank, which shall remain in full force and effect until full payment of the obligations owed by the Borrower.
SECTION VII
MISCELLANEOUS
CLAUSE 7.01: AMENDMENTS
No amendment or modification regarding any obligation related to the Loan Documents shall under any circumstances be effective unless such amendment or modification is signed by the Parties. The Bank may grant waivers or consents to waive the Borrower’s compliance with any obligation, in which case it shall suffice for them to be granted in writing by the Bank, without requiring the Borrower’s signature.
The Bank’s failure to exercise, or any delay in exercising any right, power, or waiver under the Loan Documents shall not be deemed a waiver of such rights, powers, or waivers, and any single or partial execution of such rights, powers, or waivers shall not be deemed a waiver of the exercise of any other right, power, or waiver. The waivers granted are cumulative and not exclusive of any other waiver granted by law.
CLAUSE 7.02: COMMUNICATIONS
Any notification, request, demand, consent, designation, direction, instruction, certificate, or other communication occurring under the Agreement shall be made in writing and sent personally or by email (with confirmation of receipt) to the persons designated in Annex VII of the Agreement, at the addresses and email addresses stated therein.
Any variation of the information previously indicated shall be communicated in writing to the other Party with an advance notice of ten (10) calendar days, without which such variation shall have no legal effect.
Any notification delivered by:
(a) Personal delivery or delivery service, with evidence of delivery, shall be deemed delivered on the date of receipt thereof.
(b) By email, it shall be deemed delivered on the date of receipt of the corresponding email, provided that such email is sent before 6:00 p.m. local time on a Business Day at the place of receipt, or if sent after 6:00 p.m. local time or on a day that is not a Business Day, such email shall be deemed delivered on the next Business Day.
CLAUSE 7.03: DELAYS IN COMMUNICATIONS
The Parties expressly agree that the Bank shall not be liable for any damage or harm caused or that may be caused as a result of any delay in responding to any request, inquiry, or requirement made by the Borrower or any third party, in accordance with the terms established in the Agreement, except in cases of fraud or gross negligence; however, the Bank shall make its best effort to respond promptly.
CLAUSE 7.04: COSTS AND EXPENSES
Except for provisions to the contrary established in the Agreement, all payments that must be made under the Loan Documents shall be borne and paid by the Borrower, including the granting of the public deed generated by this draft, the granting of the public deed of the Loan Documents, payment of legal advisor fees, notarial fees, and fees for fiduciary services, payment of registration fees, and any other costs or expenses that must be incurred under the Loan Documents.
CLAUSE 7.05: APPLICABLE LEGISLATION
(a) In all matters not provided for in this document, the Agreement shall be governed by the laws in force in Peru.
(b) Likewise, any reference to specific legislation or regulation contained in the Agreement shall be understood to refer to the laws in force in Peru.
CLAUSE 7.06: ASSIGNMENT OF RIGHTS
The Borrower expressly and in advance agrees and accepts that the Bank may assign, in whole or in part, in favor of any person, or even to other financial institutions, whether Peruvian or foreign, its position in the Agreement and other Loan Documents, as well as any rights derived therefrom. The Borrower shall not be responsible for the costs incurred in formalizing the assignment under this Clause. The assignment that occurs may take the form of an assignment of contractual position or an assignment of rights.
As soon as the assignment occurs and within fifteen (15) Business Days thereof, the Bank shall notify the Borrower, indicating the name of the assignee and their participation in the assigned Loan.
For these purposes, the Parties agree that the Assignment of Rights shall take effect from the date on which the Borrower is notified with a Notice of Assignment.
CLAUSE 7.07: SEVERABILITY
The Parties acknowledge that the sections of the Agreement are severable and that the nullity of one or more of them shall not affect the remaining ones if the essence of the Agreement is maintained. If any section of the Agreement is declared null, the Parties shall make every reasonable effort to devise and implement a legally valid solution that achieves the result closest to that sought to be obtained with the null clause or section.
CLAUSE 7.08: WAIVER OR DELAY IN EXERCISING RIGHTS
If at any time the Bank fails to demand from the Borrower the fulfillment or rectification of partial, late, or defective compliance with any obligation under the Agreement and/or the Loan Documents, this shall not be construed as an express or implied waiver of demanding such compliance or rectification subsequently, before the breach is remedied and/or the rectification has occurred, or at a future opportunity, in case of partial, late, or defective compliance or breach of any other obligation under the Agreement and/or the Loan Documents.
CLAUSE 7.09: ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the Parties with respect to its subject matter and supersedes all prior agreements, written or oral, that may exist between them, unless expressly stipulated otherwise in said instrument.
CLAUSE 7.10: INCREASE IN COSTS CLAUSE
If due to any change in (i) the applicable regulations applicable to the Agreement and/or the Loan Documents on the Closing Date, (ii) any legal requirement or the interpretation or application thereof, or (iii) any guideline, request or mandate (whether legal or not) from any central bank or similar national or foreign entity or other Governmental Authority, as the case may be, issued after the Closing Date:
(i) Any reserve, special deposit, or similar requirement is imposed, modified, or made applicable against the assets held by deposits or other liabilities for disbursements, loans, or other credits, or any other acquisition of funds, made by any office of the Bank that was not included in the determination of the interest rate applicable to Tranche A and/or Tranche B; or,
(ii) Any other condition directly related to any advance made under the Agreement or the obtaining of funds for it is imposed on the Bank; the Bank’s funding rate is increased; and the result of any of the circumstances described above increases the Bank’s cost, in an amount that the Bank considers substantial to make or maintain the Loan; or any amount receivable under this Agreement fixed as of the Closing Date is reduced; then:
(a) The Bank shall notify the Borrower in writing of any of the events detailing the additional amounts and/or charges generated as a result of the imposition described in subparagraphs (i) and (ii) above, in order for the Parties to reach an agreement.
(b) If thirty (30) calendar days have elapsed since the receipt of the communication without the Borrower having replied to the Bank’s communication, the Bank shall have the right to request prepayment of the Loan balance within the thirty (30) calendar days following the submission of such request.
CLAUSE 7.11: CONFIDENTIALITY
The Bank, the Borrower, and the third parties involved in the Agreement, as well as the personnel and officials of each of these, are prohibited from disclosing any information regarding any of the Parties that has not been disclosed to the public, provided exclusively for the celebration of the Agreement, without the prior written consent of the Borrower or the Bank, unless (i) they are its directors, officials, employees, agents, external legal advisors, and counselors, and in such case, informing such individuals of the confidential nature of such information, or (ii) potential participants or assignees of the transaction, and, in such case, informing such advisors or potential participants of the confidential nature of such information, or (iii) disclosure of such information is required by a Governmental Authority within the current legal framework, or is required to disclose such information in compliance with securities market regulations.
Notwithstanding the foregoing, the Parties agree that they may publicize the Loan subject to the Agreement, therefore mutually authorizing each other to use the distinctive signs of the other party solely for these purposes.
CLAUSE 7.12: INDEMNIFICATION
The Borrower undertakes to indemnify and hold harmless the Bank and its respective affiliates and subsidiaries, and their respective officers, directors, representatives, employees, and agents (each, an “Indemnified Person”) against any damage, claim, loss, liability, debt, and expenses (including fees and advisory expenses) incurred by any of them as a result of, arising from, or directly or indirectly related to the Loan Documents, except in the case of losses, claims, damages, debts, and expenses resulting from willful misconduct or fault attributable to an Indemnified Person, as determined by a final and unappealable decision of a competent court.
In the event that any Indemnified Person is involved in any action, proceeding, or judicial or administrative investigation arising from the activities carried out pursuant to this Agreement, the Borrower shall reimburse them for legal and/or other expenses incurred for the defense of such Indemnified Persons against such actions, proceedings, or investigations, unless such action, proceeding, or investigation is a result of fault or willful misconduct of the Indemnified Person, duly determined by a final and unappealable decision of a competent court.
CLAUSE 7.13: SET-OFF
The Borrower shall have the right to set off any obligation it has in favor of the Bank arising from this Loan against the overdue, due, and payable obligations owed by the Bank, with such set-off having canceling effects up to the amount set off.
CLAUSE 7.14: DISPUTE RESOLUTION
(a) Except as provided in subparagraphs (b) and (c) below, any difference, dispute, litigation, or claim arising between the Parties regarding the interpretation, execution, resolution, termination, effectiveness, nullity, voidability, or validity of the Agreement, which cannot be resolved by mutual agreement between them, shall be submitted to arbitration.
The arbitrators shall be three, of which the Bank shall appoint one arbitrator and the Borrower shall appoint another arbitrator. If there are multiple entities on one side, the appointment of the arbitrator shall be made collectively. The appointment of the first arbitrator shall be made with the arbitration request, and the appointment of the second arbitrator within fifteen (15) calendar days from receipt of the arbitration request by the party requesting arbitration. The two arbitrators thus appointed shall appoint the third arbitrator, who shall preside over the arbitral tribunal. If the party required to arbitrate fails to appoint the arbitrator within fifteen (15) calendar days from receipt of the arbitration request, or if within a period of fifteen (15) calendar days from the appointment of the last arbitrator, the two arbitrators fail to agree on the appointment of the third arbitrator, the appointment shall be made, at the request of either Party, by the National and International Conciliation and Arbitration Center of the Lima Chamber of Commerce (“CCL”).
If, for any reason, a substitute arbitrator must be appointed, this shall be done following the same procedure set forth in this Clause for the appointment of the arbitrator being replaced.
The rules applicable to the arbitration shall be those of the Arbitration Rules of the CCL, and the language of the arbitration shall be Spanish.
The arbitration shall take place in the city of Lima, at the place determined by the arbitral tribunal.
The arbitral tribunal shall have a period of one hundred twenty (120) Business Days from its installation to issue the respective arbitral award, which shall be final and unappealable. Likewise, the arbitral tribunal may be entrusted with precisely determining the dispute and may grant an extension if necessary to issue the award.
In the event that either Party files a motion to set aside the arbitral award requesting the suspension of its execution, it shall provide a single, solid, irrevocable, and automatically enforceable bank guarantee issued by a first-tier bank in favor of the Bank or the Borrower, as appropriate, (i) for the amount of the outstanding obligations at that time, in order to guarantee faithful compliance with the award; (ii) in the event that the arbitral award simultaneously grants claims with and without quantification, the bank guarantee shall be for the latter in the amount of US$ 500,000 (five hundred thousand and 00/100 United States dollars), which shall serve as a guarantee of faithful compliance with the award. This requirement shall be enforceable even in cases where the condemnation (total or partial) is declaratory in nature, not quantifiable in money, or requires other procedures or steps to be followed for its determination other than simple mathematical calculation.
The guarantee shall be granted and delivered to the other Party prior to the filing of the motion to set aside and shall have a term of validity of no less than one year, with the party providing the guarantee being obliged to renew it in case the proceeding to set aside is not concluded within the original term of the guarantee.
This bank guarantee shall be returned to the Party filing the motion to set aside only if such motion is upheld by a final ruling. Otherwise, the bank guarantee shall be executed and applied as a penalty by the Bank or the Borrower, as the case may be.
The expenses incurred in the arbitration shall be borne by the Parties in the proportion indicated in the award, and may be borne by a single Party, at the discretion of the arbitral tribunal.
(b) The execution of the Guarantees shall be carried out in accordance with the stipulations of the Agreement(s) in which each of them is established.
(c) The execution of the Promissory Notes or other securities issued pursuant to the provisions of the Agreement shall be subject to the jurisdiction and competence of the judges and courts of the Judicial District of Lima-Cercado, with the Parties waiving the jurisdiction of their domiciles.
Please add, Mr. Notary Public, the other legal clauses, as well as the documents referenced throughout the Agreement and a copy of the document evidencing the granting of powers to the representatives of the Borrower for approval and execution of the Agreement.
Lima, December 15, 2023
THE BANK
| By: | Sandra Elba Bianco Roa | By: | Frank Erick Babarczy Rodríguez |
THE BORROWER
| By: |
Alvaro Alejandro Chinchayán Cornejo |
|
| DNI No. 10472790 | ||
ANNEX I
LOAN DETAILS
1. Loan Amount: US$ 60,000,000.00 (Sixty Million and 00/100 Dollars), consisting of Tranche A and Tranche B.
2. Currency: Dollars.
3. Loan Term: Up to ten (10) years.
4. Compensatory Interest Rate:
a. Compensatory Interest - Tranche A: 8.50% effective fixed annually.
b. Compensatory Interest - Tranche B: 8.40% effective fixed annually.
5. Default Interest Rate: 2.00% annually.
6. Event(s) of Default Charge: 1.50% annually.
7. Number of Amortizations:
a. Tranche A: 40 quarterly installments, plus the Balloon Installment, according to the Tranche A Payment Schedule, starting in the third month computed from the Closing Date.
b. Tranche B: 40 quarterly installments, according to the Tranche B Payment Schedule, starting in the third month computed from the Closing Date.
8. Use of Funds - Tranche A:
a. Full payment of Existing Loan.
b. Structuring Commission settlement.
c. Funding of one hundred percent (100%) of the Reserve Account.
d. Settlement of legal fees of the Bank’s legal advisors, and costs and expenses related to the formalization of the Loan Documents indicated in Clause 7.04 of the Agreement.
9. Use of Funds - Tranche B:
a. Real Estate investments on behalf of the Borrower and/or its affiliated companies.
10. Loan Disbursement Opportunities and Conditions: One (1) single disbursement within the Availability Period.
11. Availability Period: Until December 20, 2023.
ANNEX II
COMMISSIONS AND EXPENSES
1. Structuring Fee: 1.25% of the total principal amount of the Loan, which shall be paid upon disbursement of Tranche A, in accordance with the terms of the Cash Flow Trust Agreement.
ANNEX III
PROMISSORY NOTE TEMPLATE
By:
Due Date:
We, [●] (the “Debtor”), identified with Taxpayer Registry No. [●], registered under Electronic Entry No. [●] of the Registry of Legal Entities of Lima and Callao - Lima Headquarters, with address for these purposes at [●], represented by Mr. [●], identified with DNI No. [●], and Mr. [●], identified with DNI No. [●], according to powers in entries [●] and [●], respectively, of Electronic Entry No. [●] of the Registry of Legal Entities of Lima, must and hereby undertake to pay, in accordance with the provisions set forth in this promissory note (the “Promissory Note”), unconditionally on the due date indicated in this Promissory Note, by means of immediately available funds and in the same currency to the order of BANCO BBVA PERU (the “Bank”) or to whoever this Promissory Note has been transferred to by deposit into Account No. 0011 - [●], in US Dollars, or another designated account, debit to any accounts held by the Debtor at the Bank, or at the place where this Promissory Note is presented for collection, the sum of US$ [●] (United States Dollars), plus the corresponding compensatory and default interest, and any other amounts owed pursuant to this Promissory Note and the Loan Agreement (as defined in this Promissory Note).
The amount indicated above is owed by us to the Bank for obligations incurred under the Long-Term Loan Agreement entered between the Debtor and the Bank on [●] (the “Loan Agreement”), and the Promissory Note is being integrated in accordance with the instructions for completion contained in Clause 2.12 of the Loan Agreement.
The Debtor unconditionally undertakes to pay, from the due date of this Promissory Note until the effective date of its full payment, compensatory interest at an effective annual rate of [●] %, calculated based on a year of three hundred sixty (360) days.
Likewise, the Debtor undertakes to pay default interest, in addition to the compensatory interest, from the due date of this Promissory Note until the effective date of its full payment, at a rate equivalent to two percent (2%) effective annually. Default interest will be applied automatically, without the need for prior demand or notice by the Bank.
All payments to be made in accordance with this Promissory Note must be made free of, and without deduction for, present or future taxes, including deductions or withholdings for non-domiciled persons. In case we are legally obligated to make any withholding or deduction, we will pay additional amounts necessary to ensure that the net amount received by the Bank is equal to what it would have received if such withholdings or deductions had not been made, or we will assume the payment of such taxes and pay the applicable amounts directly to the tax authority when due, so that the net amount received by the Bank is equal to what it would have received if the law had not required us to make such withholdings or deductions. We also undertake to pay all fees and expenses that the Bank may liquidate and notify us of.
Likewise, it is established that the obligations contained in this Promissory Note will not be extinguished even if this Promissory Note has been impaired due to the fault of the Bank, constituting this agreement a pact to the contrary of what is provided for in Article 1233° of the Civil Code. In application of what is provided for in Article 49° of Law No. 27287 (“Law of Securities”), the Debtor expressly authorizes the Bank to extend the due date of this Promissory Note, without the express subscription of the Debtor being required. It will suffice for the extension to be noted in this same document without it being necessary for the Debtor to subscribe it again. The amount of this Promissory Note and/or the corresponding compensatory and/or default interest, as well as any other amount owed under this Promissory Note, must be paid by the Debtor in the same currency in which the amount representing the Promissory Note is established.
The Debtor unconditionally undertakes to pay the Bank collection expenses, notarial expenses, as well as any other expenses, fees, costs, and judicial and extrajudicial costs, taxes, and any other amounts that may be applicable (including attorney’s fees and advisors) and/or any other sum due to the Bank in relation to the Promissory Note, undertaking the Debtor to pay the same compensatory and default interest agreed in this Promissory Note on such expenses from the day following their due date until the total cancellation of the amount settled by the Bank. In accordance with the provisions of Article 52° of the Law of Securities, this Promissory Note does not require protest. However, the holder is authorized to protest it for non-payment if deemed appropriate; in which case, we will bear the costs of such notarial diligence or the corresponding substitute formality. The protest may be made by notification sent to the Debtor’s address indicated in this Promissory Note.
This Promissory Note is subject to the provisions of the Law of Securities and other laws and regulations of the Republic of Peru. Any reference in the Promissory Note to the Bank shall be understood as made to any holder thereof, whether acquired by endorsement or by any other means permitted by law. In this act, the Debtor declares to have received a copy of this Promissory Note to their complete and entire satisfaction. We expressly submit to the jurisdiction and competence of the Judges and Courts of the Judicial District of Lima-Cercado, waiving the jurisdiction of our domicile and designating as the address for these purposes the one indicated in this Promissory Note.
This Promissory Note consists of two (2) pages that constitute a single instrument.
Lima, [●] of [●], [●].
[NOMBRE]
Taxpayer Registry No. [●]
Address: [●]
|
[●]
DNI No. [●]
Manager |
[●]
DNI No. [●]
Manager |
ANNEX IV
PAYMENT SCHEDULES
The Parties agree that the present Schedules are for reference only and may be substituted and/or modified by the Bank in a justified manner, considering the provisions of the Agreement and other Loan Documents.
In this sense, it is expressly established that, for the purpose of the modification, it shall suffice for the Bank to communicate in writing to the Borrower the substitution of the present Schedule, attaching to said communication a copy of the substitute Schedule.
PAYMENT SCHEDULE - TRANCHE A
Values in US$, subject to modification once the disbursement has been made.
| Quarter No. | Initial Balance | Principal | Interest | Payment | Final Balance | |||||||||||||||
| 1 | $ | 48,670,000 | $ | 509,707 | $ | 1,034,238 | $ | 1,543,944 | $ | 48,160,293 | ||||||||||
| 2 | $ | 48,160,293 | $ | 520,538 | $ | 1,023,406 | $ | 1,543,944 | $ | 47,639,755 | ||||||||||
| 3 | $ | 47,639,755 | $ | 531,600 | $ | 1,012,345 | $ | 1,543,944 | $ | 47,108,156 | ||||||||||
| 4 | $ | 47,108,156 | $ | 542,896 | $ | 1,001,048 | $ | 1,543,944 | $ | 46,565,260 | ||||||||||
| 5 | $ | 46,565,260 | $ | 554,433 | $ | 989,512 | $ | 1,543,944 | $ | 46,010,827 | ||||||||||
| 6 | $ | 46,010,827 | $ | 566,214 | $ | 977,730 | $ | 1,543,944 | $ | 45,444,613 | ||||||||||
| 7 | $ | 45,444,613 | $ | 578,246 | $ | 965,698 | $ | 1,543,944 | $ | 44,866,367 | ||||||||||
| 8 | $ | 44,866,367 | $ | 590,534 | $ | 953,410 | $ | 1,543,944 | $ | 44,275,833 | ||||||||||
| 9 | $ | 44,275,833 | $ | 603,083 | $ | 940,861 | $ | 1,543,944 | $ | 43,672,750 | ||||||||||
| 10 | $ | 43,672,750 | $ | 615,898 | $ | 928,046 | $ | 1,543,944 | $ | 43,056,851 | ||||||||||
| 11 | $ | 43,056,851 | $ | 628,986 | $ | 914,958 | $ | 1,543,944 | $ | 42,427,865 | ||||||||||
| 12 | $ | 42,427,865 | $ | 642,352 | $ | 901,592 | $ | 1,543,944 | $ | 41,785,513 | ||||||||||
| 13 | $ | 41,785,513 | $ | 656,002 | $ | 887,942 | $ | 1,543,944 | $ | 41,129,511 | ||||||||||
| 14 | $ | 41,129,511 | $ | 669,942 | $ | 374,002 | $ | 1,543,944 | $ | 40,459,569 | ||||||||||
| 15 | $ | 40,459,569 | $ | 684,178 | $ | 859,766 | $ | 1,543,944 | $ | 39,775,390 | ||||||||||
| 16 | $ | 39,775,390 | $ | 698,717 | $ | 845,227 | $ | 1,543,944 | $ | 39,076,673 | ||||||||||
| 17 | $ | 39,076,673 | $ | 713,565 | $ | 830,379 | $ | 1,543,944 | $ | 38,363,108 | ||||||||||
| 18 | $ | 38,363,108 | $ | 728,728 | $ | 815,216 | $ | 1,543,944 | $ | 37,634,380 | ||||||||||
| 19 | $ | 37,634,380 | $ | 744,214 | $ | 799,731 | $ | 1,543,944 | $ | 36,890,166 | ||||||||||
| 20 | $ | 36,890,166 | $ | 760,028 | $ | 783,916 | $ | 1,543,944 | $ | 36,130,138 | ||||||||||
| 21 | $ | 36,130,138 | $ | 776,179 | $ | 767,765 | $ | 1,543,944 | $ | 35,353,959 | ||||||||||
| 22 | $ | 35,353,959 | $ | 792,673 | $ | 751,272 | $ | 1,543,944 | $ | 34,561,286 | ||||||||||
| 23 | $ | 34,561,286 | $ | 809,517 | $ | 734,427 | $ | 1,543,944 | $ | 33,751,769 | ||||||||||
| 24 | $ | 33,751,769 | $ | 826,719 | $ | 717,225 | $ | 1,543,944 | $ | 32,925,050 | ||||||||||
| 25 | $ | 32,925,050 | $ | 844,287 | $ | 699,657 | $ | 1,543,944 | $ | 32,080,763 | ||||||||||
| 26 | $ | 32,080,763 | $ | 862,228 | $ | 681,716 | $ | 1,543,944 | $ | 31,218,535 | ||||||||||
| 27 | $ | 31,218,535 | $ | 880,550 | $ | 663,394 | $ | 1,543,944 | $ | 30,337,984 | ||||||||||
| 28 | $ | 30,337,984 | $ | 899,262 | $ | 644,682 | $ | 1,543,944 | $ | 29,438,722 | ||||||||||
| 29 | $ | 29,438,722 | $ | 918,371 | $ | 625,573 | $ | 1,543,944 | $ | 28,520,351 | ||||||||||
| 30 | $ | 28,520,351 | $ | 937,887 | $ | 606,057 | $ | 1,543,944 | $ | 27,582,464 | ||||||||||
| 31 | $ | 27,582,464 | $ | 957,817 | $ | 586,127 | $ | 1,543,944 | $ | 26,624,647 | ||||||||||
| 32 | $ | 26,624,647 | $ | 978,171 | $ | 565,774 | $ | 1,543,944 | $ | 25,646,476 | ||||||||||
| 33 | $ | 25,646,476 | $ | 998,957 | $ | 544,988 | $ | 1,543,944 | $ | 24,647,520 | ||||||||||
| 34 | $ | 24,647,520 | $ | 1,020,185 | $ | 523,760 | $ | 1,543,944 | $ | 23,627,335 | ||||||||||
| 35 | $ | 23,627,335 | $ | 1,041,863 | $ | 502,081 | $ | 1,543,944 | $ | 22,585,472 | ||||||||||
| 36 | $ | 22,585,472 | $ | 1,064,003 | $ | 479,941 | $ | 1,543,944 | $ | 21,521,469 | ||||||||||
| 37 | $ | 21,521,469 | $ | 1,086,613 | $ | 457,331 | $ | 1,543,944 | $ | 20,434,856 | ||||||||||
| 38 | $ | 20,434,856 | $ | 1,109,704 | $ | 434,241 | $ | 1,543,944 | $ | 19,325,152 | ||||||||||
| 39 | $ | 19,325,152 | $ | 1,133,285 | $ | 410,659 | $ | 1,543,944 | $ | 18,191,867 | ||||||||||
| 40 | $ | 18,191,867 | $ | 18,191,867 | $ | 386,577 | $ | 18,578,444 | $ | 0 | ||||||||||
PAYMENT SCHEDULE – TRAMP B
Values in US$, subject to modification once the disbursement has been made.
| Quarter No. | Initial Balance | Principal | Interest | Payment | Final Balance | |||||||||||||||
| 1 | $ | 11,330,000 | $ | 183,545 | $ | 237,930 | $ | 421,475 | $ | 11,146,455 | ||||||||||
| 2 | $ | 11,146,455 | $ | 187,399 | $ | 234,076 | $ | 421,475 | $ | 10,959,056 | ||||||||||
| 3 | $ | 10,959,056 | $ | 191,335 | $ | 230,140 | $ | 421,475 | $ | 10,767,722 | ||||||||||
| 4 | $ | 10,767,722 | $ | 195,353 | $ | 226,122 | $ | 421,475 | $ | 10,572,369 | ||||||||||
| 5 | $ | 10,572,369 | $ | 199,455 | $ | 222,020 | $ | 421,475 | $ | 10,372,914 | ||||||||||
| 6 | $ | 10,372,914 | $ | 203,643 | $ | 217,831 | $ | 421,475 | $ | 10,169,271 | ||||||||||
| 7 | $ | 10,169,271 | $ | 207,920 | $ | 213,555 | $ | 421,475 | $ | 9,961,351 | ||||||||||
| 8 | $ | 9,961,351 | $ | 212,286 | $ | 209,188 | $ | 421,475 | $ | 9,749,064 | ||||||||||
| 9 | $ | 9,749,064 | $ | 216,744 | $ | 204,730 | $ | 421,475 | $ | 9,532,320 | ||||||||||
| 10 | $ | 9,532,320 | $ | 221,296 | $ | 200,179 | $ | 421,475 | $ | 9,311,024 | ||||||||||
| 11 | $ | 9,311,024 | $ | 225,943 | $ | 195,532 | $ | 421,475 | $ | 9,085,081 | ||||||||||
| 12 | $ | 9,085,081 | $ | 230,688 | $ | 190,787 | $ | 421,475 | $ | 8,854,393 | ||||||||||
| 13 | $ | 8,854,393 | $ | 235,532 | $ | 185,942 | $ | 421,475 | $ | 8,618,861 | ||||||||||
| 14 | $ | 8,618,861 | $ | 240,479 | $ | 180,996 | $ | 421,475 | $ | 8,378,382 | ||||||||||
| 15 | $ | 8,378,382 | $ | 245,529 | $ | 175,946 | $ | 421,475 | $ | 8,132,853 | ||||||||||
| 16 | $ | 8,132,853 | $ | 250,685 | $ | 170,790 | $ | 421,475 | $ | 7,882,169 | ||||||||||
| 17 | $ | 7,882,169 | $ | 255,949 | $ | 165,526 | $ | 421,475 | $ | 7,626,219 | ||||||||||
| 18 | $ | 7,626,219 | $ | 261,324 | $ | 160,151 | $ | 421,475 | $ | 7,364,895 | ||||||||||
| 19 | $ | 7,364,895 | $ | 266,812 | $ | 154,663 | $ | 421,475 | $ | 7,098,083 | ||||||||||
| 20 | $ | 7,098,083 | $ | 272,415 | $ | 149,060 | $ | 421,475 | $ | 6,825,668 | ||||||||||
| 21 | $ | 6,825,668 | $ | 278,136 | $ | 143,339 | $ | 421,475 | $ | 6,547,533 | ||||||||||
| 22 | $ | 6,547,533 | $ | 283,976 | $ | 137,498 | $ | 421,475 | $ | 6,263,556 | ||||||||||
| 23 | $ | 6,263,556 | $ | 289,940 | $ | 131,535 | $ | 421,475 | $ | 5,973,616 | ||||||||||
| 24 | $ | 5,973,616 | $ | 296,029 | $ | 125,446 | $ | 421,475 | $ | 5,677,588 | ||||||||||
| 25 | $ | 5,677,588 | $ | 302,245 | $ | 119,229 | $ | 421,475 | $ | 5,375,342 | ||||||||||
| 26 | $ | 5,375,342 | $ | 308,592 | $ | 112,882 | $ | 421,475 | $ | 5,066,750 | ||||||||||
| 27 | $ | 5,066,750 | $ | 315,073 | $ | 106,402 | $ | 421,475 | $ | 4,751,677 | ||||||||||
| 28 | $ | 4,751,677 | $ | 321,689 | $ | 99,785 | $ | 421,475 | $ | 4,429,987 | ||||||||||
| 29 | $ | 4,429,987 | $ | 328,445 | $ | 93,030 | $ | 421,475 | $ | 4,101,542 | ||||||||||
| 30 | $ | 4,101,542 | $ | 335,342 | $ | 86,132 | $ | 421,475 | $ | 3,766,200 | ||||||||||
| 31 | $ | 3,766,200 | $ | 342,384 | $ | 79,090 | $ | 421,475 | $ | 3,423,816 | ||||||||||
| 32 | $ | 3,423,816 | $ | 349,575 | $ | 71,900 | $ | 421,475 | $ | 3,074,241 | ||||||||||
| 33 | $ | 3,074,241 | $ | 356,916 | $ | 64,559 | $ | 421,475 | $ | 2,717,325 | ||||||||||
| 34 | $ | 2,717,325 | $ | 364,411 | $ | 57,064 | $ | 421,475 | $ | 2,352,915 | ||||||||||
| 35 | $ | 2,352,915 | $ | 372,063 | $ | 49,411 | $ | 421,475 | $ | 1,980,85 | ||||||||||
| 36 | $ | 1,980,851 | $ | 379,877 | $ | 41,598 | $ | 421,475 | $ | 1,600,97 | ||||||||||
| 37 | $ | 1,600,974 | $ | 387,854 | $ | 33,620 | $ | 421,475 | $ | 1,213,12 | ||||||||||
| 38 | $ | 1,213,120 | $ | 395,999 | $ | 25,476 | $ | 421,475 | $ | 817,121 | ||||||||||
| 39 | $ | 817,121 | $ | 404,315 | $ | 17,160 | $ | 421,475 | $ | 412,806 | ||||||||||
| 40 | $ | 412,806 | $ | 412,806 | $ | 8,669 | $ | 421,475 | $ | 0 | ||||||||||
ANNEX V
CERTIFICATE OF COMPLIANCE
LATAM LOGISTIC PER PROPCO LURIN I S.R.L., with Tax ID No. 20601055539, with registered address at [Gasoducto Lot 2 Avenue, Las Praderas de Lurin, district of Lurin, province and department of Lima] (the “Borrower”), duly represented by its General Manager, Mr. [●], bearer of ID No. [●], according to powers registered in entry No. [●] of registry No. [●] of the Registry of Legal Entities of Lima, issues this Certificate of Compliance in favor of:
BANCO BBVA PERU (the “Bank”), identified with Tax ID No. 20100130204, with address at República de Panama Avenue, No. 3055, district of San Isidro, province and department of Lima, for the purpose of certifying (as a sworn statement) and as of the date of issuance of this document, the faithful compliance with the following obligations contained in the Long-Term Loan Agreement signed between the Borrower and the Bank dated [●] (the “Loan Agreement”):
(i) The faithful compliance with the obligations to Do and Not to Do contained in clauses 5.01 and 5.02 of the Loan Agreement, which remain fully valid as of the date of issuance of this document.
(ii) The faithful compliance with the Financial Obligations contained in clause 5.03 of the Loan Agreement, which remain fully valid as of the date of issuance of this document and at the following levels as of the closing of the semester ending on [June 30 / December 31] of 20[●]:
1. Debt Service Coverage Ratio not less than 1.25.
2. Equity Ratio not less than 0.40.
Likewise, through this Certificate of Compliance, the Borrower declares that in the event the information certified herein is not, to the satisfaction of the Bank, true, accurate, or suffers from any kind of inaccuracy, it will constitute a “Default Event” pursuant to the provisions of clause 6.01 of the Loan Agreement, with the Bank having the right to take all corresponding actions established in clause 6.02 of the Loan Agreement.
Lima,
By: [●]
ANNEX VI
DISBURSEMENT NOTIFICATION
Lima, [DATE]
To:
BANCO BBVA PERU
City:
Attn: [●]
Dear Sirs,
We hereby refer to the Long-Term Loan Agreement signed on [DATE] (the “Agreement”).
In accordance with Clause 3.02 (g), we hereby request the disbursement of the sum of [●]. Said sum shall be disbursed to the following account:
[INSERT ACCOUNT DETAILS]
Likewise, we declare the following:
1. That, as of the date, all statements and assertions made by our company in the Agreement are true, correct, and complete as set forth in said document.
2. That, as of the date, no event affecting our shareholding/composition of partners, or our legal status has occurred in such a way that a Material Adverse Effect could arise under the Agreement.
3. That, as of the date, we are not in breach of any of the obligations of our company established in the Agreement.
4. That, as of the date, there is no Default Event or any breach or event in general that, with notice or the passage of time, or both, would become a Default Event.
5. That, the Guarantees established in the Agreement have been constituted.
Without further ado, we remain at your disposal.
By: [●]
ANNEX VII
COMMUNICATIONS
In accordance with the provisions of clause 7.02 of the Agreement, the Parties agree that any communication to be effective against the other party shall be addressed to the person(s) and at the address stated in this Annex.
For BANCO BBVA PERU:
- Attention: Monica Jaramillo / Jessica Mendoza
- Address: Av. Santa Cruz 685 - 695 Floor 2, Miraflores, Lima
- Email: miaramillo@bbva.com / imendoza@bbva.com
For LATAM LOGISTIC PER PROPCO LURIN I S.R.L.:
- Attention: Alvaro Chinchayan Cornejo
- Address: Calle Andres Reyes 338, Floor 2 - Office 126, San Isidro, Lima
- Email: alvaro@latamlp.com / carlos@latamlp.com República de Panamá Avenue, 3055 San Isidro
ANNEX VIII
LETTER OF COMMITMENT
San Isidro, [Date]
To:
BANCO BBVA PERU
Attn: Mr. [●]
Through this Letter of Commitment, LATAM LOGISTIC PER PROPCO LURIN I S.R.L. (the “Company”) commits to the following:
a. The payment to the Bank of a Structuring Fee, equivalent to 1.25% of the total amount of the Loan, which will be paid from the disbursement of Tranche A, in accordance with the terms of the Cash Flow Trust Agreement; and,
b. The payment of legal advisory costs and other related to the Loan.
This commitment shall remain in force if the Loan Agreement is in force.
[Name]
ID No. [●]
[● / Company]
ANNEX IX
GUARANTEES
1. Asset Trust: It is the fiduciary estate constituted under the Asset Trust Agreement on the Closing Date, which will include real estate. The minimum coverage of the assets in trust shall be 1.5 times the Loan balance (at market value).
2. Cash Flow Trust: It is the fiduciary estate constituted under the Cash Flow Trust Agreement on the Closing Date, to which the flows generated by the Tenants under the Lease Agreements will be transferred. The Cash Flow Trust will also include: (i) the Reserve Account to cover debt service (CRSD) equivalent to a period of three (3) months, (ii) the assignment of security deposits associated with the Lease Agreements and, in the case of security deposits granted through guarantees or bonds, the amounts resulting from their execution, and (iii) the assignment of Insurance Policies.
ANNEX X
MODEL OF ASSIGNMENT COMMUNICATION
San Isidro, [Date]
To:
[Address]
Attn: Mr. [●]
Through this letter and in relation to the Long-term Loan Agreement signed on [Date] and up to an amount of [●] (hereinafter, the “Agreement”), we inform you that the Bank has made an Assignment of Rights as provided in Clause 7.06 of the Agreement, in favor of [●] (hereinafter, the “Assignee”), for a percentage equivalent to [●]% of the total rights contemplated in the Agreement.
[Name]
ID No. [●]
[● / Company]
ANNEX XI
INSURANCE POLICIES
1. Property Multi-risk Insurance Policy No. LP1-64-00014-3, contracted by the Borrower and granted by Liberty Seguros S.A. The Borrower and/or related companies and/or subsidiaries and/or companies with common shareholding forming part of the Borrower’s group are designated as insured. The coverage period is from March 31, 2023, to March 31, 2024; and,
2. Extra-Contractual Liability Insurance Policy No. LP1-20-00179-5, contracted by Latam Logistic Per Opco S.R.L., an affiliated company of the Borrower, and granted by Liberty Seguros S.A. The Borrower is designated as the main insured and the Existing Lender as additional insured. The coverage period is from March 31, 2023, to March 31, 2024.
Exhibit 4.39
COMPLETION DATE: 19/10/2023
| FORMALIZATION LOAN NUMBER:0011-0377-9600318479-91 | CURRENCY:US DOLLARS | |
| NAME OF APPLICANT:
LATAM LOGISTIC PER P ROPCO LURIN III SRL |
||
| AMOUNT GRANTED: 2,000,000.00 | LOAN TYPE: BEC CAP. TRAB | |
| CF NAME OF THE GUARANTOR: | ||
| ADDRESS: AV JUAN DE ARONA 151 SAN ISIDRO | DEBIT/CREDIT ACCOUNT NUMBER: 0011-0377-0100052734-99 |
CONTRATO DE CREDITO COMERCIAL
This document contains the “COMMERCIAL CREDIT” agreement with benefits, entered by BANCO BBVA PERU, duly represented by the officials who sign this document, hereinafter referred to as “THE BANK”; and, on the other hand, the applicant, whose identification and other information is set out herein; hereinafter referred to as “THE CLIENT”; on the following terms and conditions:
| 1. | PURPOSE OF THE CONTRACT |
At the request of THE CLIENT, THE BANK approves and grants commercial credit up to the amount indicated in this document, usable only once.
The credit is disbursed by credit to the “Debit/Credit Account” indicated by THE CLIENT and indicated in the heading of this contract.
| 2. | TERM AND PAYMENT METHOD |
The payment of the credit subject matter of this Agreement, including interest, commissions, expenses, and insurance set forth in the Summary Information Sheet that as Annex No. 1, forms an integral part of this contract, will be made in installments, on the dates and for the amounts shown in the respective Payment Schedule that THE CLIENT knows and accepts. THE CLIENT agrees for the Payment Schedule to be sent to the email address registered with the BANK, such sending being sufficient proof of its delivery.
Payment of the fees may be made by means of credits at the branches of THE BANK or by direct debit. THE CLIENT authorizes THE BANK to charge the installments to the “Charge/Credit Account” indicated at the top of this document, with the payment being charged in the order indicated in Article 1257 of the Civil Code.
THE CLIENT irrevocably undertakes to maintain sufficient funds in the account, and specifically on the payment dates established in the schedule, and specifically on the payment dates established in the schedule, to cover the full amount of the applicable fee and the applicable fees and expenses detailed in Annex 1 to this contract. If there are no funds available in the aforementioned account, THE CLIENT authorizes THE BANK to charge the amounts due and due for such concepts, in any other account that it has or may have, -including in other currencies- for the corresponding consideration, releasing THE BANK from all responsibility for the exchange rate that is applied and the opportunity in which it makes use of this authorization.
Payments by direct debit shall be deemed to have been made when the respective account(s) has sufficient available funds for the full payment of the contributions due and due. If the account(s) does not have sufficient funds for the full payment of at least one installment, the payment will not be deemed to have been made.
In the case of credits in foreign currency, payments will be made in the same foreign currency, unless THE BANK accepts payments in national currency, for which THE BANK will apply the sales exchange rate in force on the date on which THE CLIENT makes the payment, THE BANK being released from any responsibility for the exchange difference that may exist.
| 3. | APPLICABLE FEES, COMMISSIONS, EXPENSES, AND OTHER CHARGES |
THE CLIENT accepts that the credit granted will accrue compensatory interest, as well as default interest, penalty and/or any other concept that the regulations allow to be applied in the event of non-payment, which appear in Annex No. 1 which, duly signed by the parties, forms an integral part of this contract.
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Among other cases, and without this list being considered exhaustive, THE BANK reserves the right to modify the rate of compensatory and default interest, the penalty, or any other applicable concept, when it considers that market, credit or risk conditions of the listed or the Line, even if they merit or occur an event beyond Your and the Bank’s control, for which, at the Bank’s discretion, the conditions initially granted must be modified. The amendments will take effect at five.
(05) calendar days of communication to THE CLIENT under the means of communication that THE BANK has at its disposal, giving preference to messages through e-mails and periodic information, at the discretion of THE BANK.
The constitution in default will be automatic. In the event of default, the collection of default interest, penalty or another concept established in Annex No. 1 of this contract will automatically accrue.
Likewise, THE CLIENT declares to be aware of and accept the application of the commissions and expenses detailed in Annex No. 1 and undertakes to pay such items in a timely manner. THE BANK reserves the right to modify the amount of such commissions and expenses, establish new commissions and/or charge additional expenses to those established in Annex No. 1, if it notifies THE CLIENT in the manner and within the deadlines established in this clause.
| 4. | ADVANCE PAYMENTS |
THE CLIENT has the right to make advance payments, in full or in part. If you do so, the interest charged by the Bank will be reduced proportionately to the day of payment and any fees and expenses that may be due on that date will be deducted.
If THE CLIENT decides to make a partial advance payment, he/she must previously choose between reducing the amount of the installments or reducing the term of the Loan, for which a new payment schedule will be issued if requested by the Client.
Likewise, THE CLIENT may pay his/her installment before the due date (advance payment) without this meaning that it is an advance payment. The Client may make the advance payment or the advance of installments if he/she is up to date with the payment of his/her installments of the schedule.
| 5. | SPECIAL CHECKING ACCOUNT |
THE CLIENT authorizes THE BANK to open in the name of THE CLIENT a checking account without a checkbook in the name of THE CLIENT, in which it may record the debits and credits made by reason of this contract and the other’s that it has entered with THE BANK. The parties expressly state that the opening of the current account does not imply novation of the obligations assumed under this Agreement.
| 6. | OBLIGATIONS OF THE CLIENT |
THE CLIENT, in general and without the enumeration being exhaustive, undertakes the following:
| a) | To comply with all obligations contained in applicable legal regulations, as well as the requirements of governmental authorities, including but not limited to licenses, certificates, permits, franchises, and other authorizations necessary for the conduct of the business. Environmental and other laws related to social security are also included. |
| b) | Not to change the ordinary course of their business, not to carry out or finance illegal activities, such as those whose performance results in any type of damage to the environment or to labor and social regulations. |
| c) | That the funds obtained from THE BANK will be used exclusively for the purpose for which they have been requested from THE BANK. |
| d) | THE CLIENT undertakes to inform the Bank, within a period of no more than five (5) business days, of any fact or circumstance that could give rise to a substantial deterioration in its income, profits, payment capacity and/or equity situation or also any relevant increase in its expenses. Likewise, it undertakes to report any event that may diminish the value of its assets or compromise its control over them. |
| e) | THE CLIENT must inform the Bank of any action or procedure, seizure, or seizure, on any of its assets before any judicial or arbitral court, or before any administrative or municipal entity for an amount greater than US$ 100,000.00 (One hundred thousand and 00/100 US Dollars) |
| f) | It must also inform whether a creditor insolvency process or a bankruptcy or restructuring of liabilities procedure has been initiated or is about to be initiated in accordance with the current legal framework. |
| g) | THE CLIENT undertakes to make its best efforts to comply with THE BANK’s Environmental Policy. |
| h) | THE CLIENT undertakes not to carry out. |
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No offer, gift, gift, promise of payment, payment or other similar, direct, or indirect, in favor of any public or private official for the purpose of influencing a decision or omission of any authority to obtain benefits related to the financed project.
| i) | THE CLIENT undertakes to keep its accounting books and records in accordance with the accounting principles and practices generally accepted in Peru, allowing THE BANK to obtain information from such books and records. |
| j) | THE CLIENT undertakes to implement the corrective measures requested by THE BANK if the latter becomes aware, considers or verifies that THE CLIENT does not comply with the requirements of the labor, social or environmental regulations in force; within a period that must not exceed 60 (sixty) days from the date on which THE BANK requests the measure. If necessary, THE DEADLINE may be extended by THE BANK, taking into consideration the nature of the event. |
| k) | THE CLIENT shall provide, if applicable, the necessary facilities to the representatives and/or consultants of THE BANK or to the persons designated by it, to visit the facilities of THE CLIENT. |
| l) | Take out the insurance policies that THE BANK deems necessary in accordance with the line of business and the nature of its activity. |
| m) | To report to THE BANK the updated Financial Statements while this contract is in force, on a semi-annual basis in the case of the Balance Sheet and the Profit and Loss Statement and annually in the case of the Statements of Changes in Equity and Cash Flow. For qualified clients such as Micro and Small Business, only the Cash Flow information will be required. |
| 7. | EARLY TERMINATION OF TERMS |
The parties agree that THE BANK may consider all the terms of the credit expired and demand the immediate reimbursement of the entire amount owed by THE CLIENT under this Agreement, including compensatory interest, moratoriums, penalties, commissions, expenses, and other applicable concepts, if any of the following occur:
a. If THE CLIENT fails to pay one or more installments established in the Schedule de Pago.
b. If THE BANK verifies that any information, documentation, or data provided by THE CLIENT to support or obtain the credit granted under this Agreement or any other credit or transaction carried out before THE BANK, are false or, in the case of documents, have been adulterated or modified.
c. If, if this is the case, THE CLIENT ceases to attend or suspends its commercial activities.
d. If THE CLIENT disposes of or encumbers more than 25% of its assets, changes its corporate purpose or carries out acts or contracts that could, in the opinion of THE BANK, negatively influence its economic solvency.
e. If THE CLIENT voluntarily submits or is subjected by its creditors to any bankruptcy proceedings.
f. If within 5 business days of the request by THE BANK, THE CUSTOMER does not comply with updating their credit and financial information.
g. If THE CLIENT fails to comply with any of its obligations set forth in this Agreement.
h. If THE BANK determines that a Material Adverse Event has occurred. A Material Adverse Event is understood to be any event that adversely changes the conditions of the capital and financial market or the financial, political, economic, legal, exchange, local and/or international banking conditions or political and/or economic situation of the Republic of Peru.
| 8. | TERMINATION OF THE CONTRACT |
Without prejudice to the provisions of the preceding clause and in accordance with the provisions of Article 1430 of the Civil Code, in the event of non-payment of one or more of the fees established in the Payment Schedule THE BANK may terminate the contract, and THE CLIENT is obliged to immediately reimburse the total debit balance resulting from the settlement made by THE BANK, consisting of the amount due to date, compensatory and moratorium interest, penalties or other concepts, commissions, and expenses applicable to this contract.
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Such liquidation shall be enforceable in accordance with the relevant legal provisions.
| 9. | POWER OF CENTRALIZATION AND COMPENSATION |
In the event of non-compliance with any obligation assumed by THE CLIENT vis-à-vis THE BANK, THE BANK may centralize, in one or more of the accounts held or held by THE CLIENT, the debit or credit balances presented by each of them, without the need for prior authorization or subsequent approval, without THE BANK being responsible for the opportunity in which it makes use of this authorization and/or for the exchange rate used. This authorization includes the right of THE BANK to offset its debts with any property, title or any object of value or rights of THE CLIENT that THE BANK has or may have in its possession and/or in any of the company’s subsidiaries or linked to THE BANK, without any limitation, except in the case of legally excluded assets. THE BANK may offset any debt owed by THE CLIENT, including the amounts derived from any obligation of any nature - civil, commercial, direct, indirect, discount or collection of overdue credit instruments in which THE CLIENT has the status of debtor, acceptor, discounter, guarantor or guarantor - even when they are obligations assigned or endorsed in favor of THE BANK by third parties, or acquired by THE BANK from third parties for any title.
THE CLIENT irrevocably authorizes THE BANK and/or any of its subsidiaries and related companies to carry out in its name and on its behalf all the operations and transactions that are necessary for the purposes of the paragraphs in order to collect its credits, releasing THE BANK from all liability for the opportunity in which it makes the sale. by the price they obtain for the goods sold, and/or by the exchange rate used.
| 10. | ISSUANCE OF SECURITIES |
The parties agree that the issuance and/or delivery of securities in favor of THE BANK, or their renewal or extension, will not produce novation of any of the obligations assumed by THE CLIENT, unless expressly agreed otherwise. Likewise, pursuant to Article 1233 of the Civil Code, the parties agree and agree that the issuance and/or delivery of securities in favor of THE BANK in no case determines the extinction of the original obligations, even if such securities have been damaged for any reason.
| 11. | INCOMPLETE PROMISSORY NOTE |
Pursuant to the provisions of Law No. 27287 and SBS Statement No. G-0090-2001, the parties agree that, on behalf of the loan granted under this Contract, THE CLIENT issues and signs an incomplete promissory note payable to the order of the BANK, which will be completed and issued by the BANK in accordance with the following rules:
| ● | When the promissory note is issued, the credit transaction to which it is linked will be recorded. |
| ● | The date of issuance of the promissory note shall be the date of execution of this contract. |
| ● | THE CLIENT authorizes THE BANK to complete the promissory note in the cases set forth in Clauses 6 and 7 of this Agreement, at the time it deems appropriate. |
| ● | The amount of the promissory note will be the amount resulting from the settlement made by THE BANK and will include the total amount due up to the date of such settlement, including capital, compensatory interest, moratoriums, penalties or other concepts, commissions, insurance and expenses at the highest rates established by THE BANK in its Tariff Schedule on the date on which such settlement is made or, at the option of THE BANK, at any of the interest rates, commissions and expenses that it has established in its Tariff Schedule since the obligation was contracted. |
| ● | For the payment of default interest, penalty, or any other concept, it will not be necessary to constitute a default, which is automatic. |
| ● | The maturity date of the promissory note shall be the date on which the Bank settles the amount due. |
| ● | The promissory note will be issued with the No Protest clause. Notwithstanding the foregoing, the holder may protest it by THE CLIENT assuming the costs of such diligence. |
| ● | THE CLIENT accepts that from the due date of the promissory note until its effective payment, the amount stated in said security will accrue compensatory and moratorium interest, penalty, or other applicable concept, at the agreed rates and with the established amounts until the cancellation. |
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THE CLIENT declares that he/she has received a copy of the incomplete promissory note that he/she has issued and signed and that he/she has been informed by THE BANK of the legal mechanisms that protect it and authorizes the BANK to transfer the promissory note without any reservation or limitation.
| 12. | MODIFICATION OF THE CONTRACT |
THE BANK reserves the right to modify the terms and conditions established in this contract, without the need for intervention, prior authorization, or subsequent confirmation from THE CLIENT, to whom it will be communicated under the communication mechanisms established by the Bank for the modification of interest rates and commissions and with no less than five (05) calendar days in advance of their entry into force.
| 13. | SENDING INFORMATION |
THE CLIENT authorizes THE BANK to send information about the debit balance, payment dates, last payments, charges made, commercial campaigns and any other information related to the operations maintained in THE BANK, through telephone banking, Internet, e-mail, messaging, ATMs, SMS text messages, and any other means that THE BANK deems appropriate. refer you through any of these mechanisms.
Likewise, THE CLIENT acknowledges that the definitive and valid information regarding the transactions carried out by THE CLIENT are those registered with THE BANK.
| 14. | ASSIGNMENT OF RIGHTS |
THE CLIENT acknowledges and accepts that THE BANK may assign its rights derived from this contract, either through an assignment of rights or through the constitution of the autonomous equity for the purposes of its securitization or similar mechanisms, or sale of portfolio, or issuance of mortgage instruments or bonds and/or any other way permitted by law, That THE CLIENT hereby gives its express and irrevocable consent to such assignments and transfers, including the corresponding guarantees that it may have constituted in favor of THE BANK in support of its obligations, for which it is sufficient that THE BANK communicates the identity of the new creditor or holder of the rights and guarantees assigned.
| 15. | PRUDENTIAL RULES |
If THE CLIENT incurs in any of the cases established by the prudential regulations issued by the Superintendence of Banking, insurance and AFPs, THE BANK may modify the contract in aspects other than interest rates, commissions, and expenses, in which case the term indicated in clause 3 will not apply, and/or terminate this contract by communicating such decision within seven days thereafter. Likewise, in application of the prudential rules, the BANK may decide not to contract with THE CLIENT.
| 16. | ENHANCED LOAN |
The Bank and Listed may agree to contract a Financial Derivative (Operation Swap) in parallel (associated) with the financing, under this Agreement. In this case, through this Financial Derivative, a payment obligation will be generated parallel to that indicated in the Financing Schedule in a currency other than the one agreed.
If listed has contracted a Financial Derivative associated with financing, it will not be able to make partial or total advance payments. Listed shall only comply with the payment of the Financial Derivative Schedule in the currency and amount set forth therein. The same direct debit and clearing rules as set out in this clause apply.
| 17. | DOMICILE AND APPLICABLE JURISDICTION |
THE CLIENT indicates as the address indicated in this document, to which THE BANK will send the necessary communications, as well as the judicial and extrajudicial notifications to which it may be applicable; unless, by means of a notarized letter or any other means implemented by THE BANK, THE CLIENT informs THE BANK of the change in his/her domicile.
THE BANK indicates as its domicile the premises of its commercial offices in this city. In the case of Lima, the domicile will be the headquarters located at República de Panamá N° 3055, San Isidro.
Likewise, the parties submit to the jurisdiction of the judges of the judicial district corresponding to the Office of THE BANK where the credit subject matter of this Agreement was granted.
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| 18. | BAIL |
The guarantor(s) who sign this document are parties to this Agreement (jointly and severally with each other) as joint and several guarantor(s) of THE CLIENT, without benefit of exemption, undertaking to pay the obligations assumed by THE CLIENT in favor of THE BANK; including compensatory interest, arrears, penalties or other concepts, commissions and expenses of any kind arising from this Agreement, without reservation or limitation of any kind. The Guarantor(s) undertakes to pay, indistinctly and jointly and severally against THE BANK, the promissory note mentioned in Clause 10 of this Agreement.
In accordance with the provisions of Article 1877 of the Civil Code, THE CLIENT must replace the guarantor or offer another guarantee to the satisfaction of THE BANK, if the guarantor becomes insolvent.
THE BANK shall send to the address of the Guarantor(s) indicated in this Agreement, the judicial and extrajudicial notifications that may be applicable; The provisions of clause 13 of this contract shall apply.
The guarantor(s) and THE CLIENT accept from now on the extensions and renewals that they may grant to THE BANK, without the need for them to be communicated or subscribed by them.
Likewise, they waive the right to make use of the power granted by Article 1899 of the Civil Code. The guarantor(s) hereby irrevocably authorizes THE BANK, if it so decides, to compensate the partial or total amount of the obligations arising from this Agreement in its ordinary current account or in any other account that it has or may have in THE BANK, if such amounts are not paid by THE CLIENT.
The guarantor(s) waive the right to demand from THE BANK the transfer of the guarantees granted by the guarantor, in the event that it complies with the payment of the obligations assumed by THE CLIENT by virtue of this Agreement, the Promissory Note indicated in clause 11, the compensatory interest, moratoriums, penalties or other concepts, commissions and expenses that may be generated; as well as any other obligation arising therefrom.
The guarantor(s) submit to the judges and courts of the jurisdiction of the judges of the judicial district corresponding to the Office of THE BANK in which the credit subject matter of this Agreement was granted.
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I hereby CERTIFY that this Credit Agreement, as well as the corresponding promissory note(es), have been signed in my presence by the parties thereto.
Name:
Office:
Registration:
Location, SIGNATURE
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BUSINESS LOAN
COMPANY
Annex N° 1
INFORMATION SUMMARY
ANNEXED TO CONTRACT NO. 0011-0377-9600318479-91
| COMMERCIAL PRODUCT | WORKING CAPITAL | |
| Main Requested: | 2,000,000.00 | |
| Number of quotas | 008 | |
| Periodicity of quotas: | PERIOD MEN | |
| Total amount top pay: | 2,120,799.27 | |
| Commission for early liq: (2-ii) : | 5% | |
|
Physical Shipping Commission from |
24.00 |
|
| Periodic Information (3) | NO APLICA | |
| Insurance Tax Relief Modality | NO APLICA | |
| Nominal Annual Default | YES 14.45% | |
| Interest Rate (1 ,iv) | US$ 11.62% |
CURRENCY US DOLLARS
| Annual Effective Internal | ||
Compensatory Rate |
8.350000 % |
|
| (TEA)(1.i) | 13 | |
| Date of Payment of Fees | 009 MONTHS | |
| Total Duration | ||
| Total Amount of | 120,775.27 | |
| Compensatory Interest to Be Paid | ||
| Operational Management Fee (8) | 10.000000% | |
Annual Effective |
NO APPLY | |
| Default Interest Rate | 245.00 | |
| (1,iii) Cia Aseguradora | ||
| Penalty for Failure to Pay | ||
| (4-i) | 245.00 | |
| (4-ii) |
This document reflects the interest rates, commissions, penalties and any other concept that the current regulations allow to be applied in the event of non-payment, as well as the expenses applicable to the Commercial Loan.
| 1. | Fees |
| i. | Fixed Compensatory Interest Rate (TEA) |
It is calculated on a 360-day basis.
| ii. | Annual Effective Cost Rate (APR) |
Rate that expresses the total cost of the loan, which includes the amount of all installments (principal and interest) and all charges made by the Bank for commissions, expenses and applicable insurance.
The rate will be determined at the time of credit approval and will be reflected in the payment schedule.
| iii. | Annual Effective Rate of Default Interest |
It is the interest that is applied in cases where the customer fails to pay at least one installment on the dates established in the Payment Schedule. Delinquency is automatic. It is calculated on the basis of 360 days based on the days in arrears. The moratorium TEA applies to Legal Entities other than Microenterprises.
| iv. | Nominal Annual Interest Rate |
It applies in case of default in the timely payment of your loan installment, based on the days of arrears. Applies to Individuals with Business and Microenterprises Failure to pay generates a report to the Risk Center with the corresponding classification.
| 2. | Early Settlement Fee |
You will pay the amount of the commission established in this document for the new settlement to be made by the Bank for the total or partial advance payment or advance of installments.
The Client has the right to make advance payments, in whole or in part. Advance payment is a payment greater than two (02) installments (which includes the one due in the period). If you do so, the interest charged by the Bank will be reduced proportionately to the day of payment and any fees and expenses that may correspond to that date will be deducted. If the Client decides to make a partial prepayment, he/she must first choose between reducing the amount of the Installments or reducing the term of the Loan, for which a new payment schedule will be issued upon request.
Likewise, the Client may pay his/her Installment before the due date (advance payment) without this meaning that it is an advance payment and without reducing interest, commissions or expenses. The Installment Advance is the payment less than or equal to two (02) installments (which includes the one due in the period).
The Client may make the advance payment or the advance of installments, provided that he/she is up to date with the payment of his/her installments of the schedule and his/her insurance(s).”
Not applicable to Developer Loans. Not applicable to Refinanced Loans.
Not applicable to loans secured by invoices and/or drafts.
| i. | 2.00% applies to commercial loans with a term of more than 90 days and less than 12 months. |
| ii. | 5.00% applies to commercial loans with a term greater than 12 months. |
This commission DOES NOT APPLY to Individuals with businesses and Micro-Enterprises.
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| 3. | Commission for Sending Periodic Information |
| Loan on national currency: | S/ | 8.50 | |
| Loan on foreign currency: | US$ | 3.00 |
| 4. | Penalty for Failure to Pay |
The following will be applied to the fee not paid in a timely manner, from the day following its due date until the effective date of payment:
| i. | 2.00% of the amount of the installment to be paid, applicable from the first day of delay until the thirtieth (30th) following day, as long as there are no overdue and unpaid installments, since in that case the penalty greater than 30 days will be applied. The maximum amount of this penalty during this period is US$5.00 (for loans in foreign currency) or S/15.00 (for loans in national currency) and as a maximum amount it will be US$50.00 (for loans in foreign currency) or S/150.00 (for loans in national currency). |
| ii. | 5.00% of the amount of the fee to be paid, applicable from the thirty-first (31st) day of delay in the payment of the fee until the effective date of payment and on the due date of all outstanding installments. The maximum amount of the penalty during this period is US$10.00 (for loans in foreign currency), 6 S/35.00 (for loans in national currency) and as a maximum amount it will be US$50.00 (for loans in foreign currency) or S/150.00 (for loans in national currency). |
This penalty shall be applied^ in addition to default interest. In the event of non-payment by you, the corresponding report will be made to the Risk Centers with the corresponding rating, in accordance with the Regulations for the Evaluation and Classification of the Debtor and the Requirement of Provisions.
This charge DOES NOT APPLY to Natural Persons with business and Microenterprise.
| 5. | Title Study Fee: US$150.00. |
Applicable for the provision of guarantees in favor of the Bank.
| 6. | Warranty Formalization Fee: |
| Real Estate | 0.12% of the commercial value of the guarantee |
| Movable Assets | 0.10% of the commercial value of the guarantee |
The minimum amount to be paid for this commission is US$50.00 and the maximum is S$1,000.00.
| 7. | Annual Warranty Review Fee |
| Real Estate | 0.06% of the commercial value of the quotation |
| Movable Assets | 0.10% of the commercial value of the quotation |
The minimum amount to be paid for this commission is US$50.00 and the maximum is S$1,000.00.
| 8. | Commission for Operations |
| Operational Management for loans less than or equal to 12 months (Applies to any amount). |
.2% of the principal amount of the loan requested. |
Minimum: S/300 6 US$ 100. If you are a Business and Corporate Banker. |
Minimum: S/300 6 US$ 100. If you are a Retail Banker. |
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| Operational Management for loans longer than 12 months (Applies to loans less than or equal to S/ 85,000 6 US$30,500). |
0.5% of the principal amount of the loan requested. |
Minimum: S/350 6 US$ 120. If you are a Business and Corporate Banker. |
Minimum: S/350 6 US$ 120. If you are a Retail Banker. |
In the case of Global Clients and Investment Banking, this fee is called the Credit Report Management Fee, applicable to the credit evaluation.
This commission DOES NOT APPLY to Natural Persons with Business and Microenterprise.
| 9. | Structuring Commission for Medium Term commercial loans (Greater than 12 ITIGSGS). |
For operations greater than S/85,000 6 US$30,500: 3.5% of the amount of the commercial loan.
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This commission DOES NOT APPLY to Natural Persons with a business or Microenterprise.
| 10. | Endorsed Insurance Policy Rating: US$ 60.00 |
For the service of review and evaluation of conditions and coverages, endorsements and renewals of policies. The payment is made each time the policy is presented/modified/renewed. Likewise, for the annual verification of the validity of the policy, which will also generate a charge on each anniversary of the insurance and throughout its validity. The commission will be charged to the Associated Account, however, if there is no money (funds) in the Account, the Bank may charge it from any account that is or may be held by the Bank.
This commission DOES NOT APPLY to the Evaluation of the Endorsed Tax Relief Insurance Policy, for the segments Natural Person with Business and Microenterprise.
| 11. | Fee for Debt Review |
Loans with Mortgages/Industrial Pledges and Vehicle Pledges (vehicle value less than 40UIT) At the minute level (I) US$100.00
Loans with Mortgages/Industrial Pledges and Vehicle Pledge (vehicle value greater than or equal to a 40UIT) at the level of public deed (ii) US$ 150.00
(j)y (ii): In both cases, the costs for registry services must be added.
This commission DOES NOT apply to Individuals with a business or micro-enterprise.
| 12. | Registration Fees: |
By concept
Mortgage
| - | Registration of the transfer of immovable property |
| - | Legal Constitution of the Mortgage |
| - | Registry blocking of each item of the property(s) |
| - | Presentation of the title of each property |
| - | Registry entry sheet consulted in Public Registries |
Secured Transactions
| - | Legal constitution of the security interest |
| - | Presentation of the title of the movable security |
| - | Negative certificate of the movable security |
| - | Lien Certificate |
Vehicle Secured Transactions
| - | Registration of the transfer of the vehicle |
| - | Legal constitution of the security interest |
| - | Registry entry sheet consulted in Public Registries |
The expenses for these concepts must be paid by you directly to the Notary and before disbursement, according to the rates of Public Registries in force at the time of the act.
| 13. | Expenses for Notary Fees |
These are the costs for the notary services necessary to complete the credit transaction and the guarantees that cover it. The amount of these expenses is that provided by the Notary: (i) for the constitution of a mortgage guarantee, or (ii) for the constitution of any movable guarantee. These expenses will not be financed by the Bank and must be paid by UstecT directly to the Notary (published in the Bank’s Tariff Book). It applies if the customer provides a guarantee in favor of the Bank.
| 14. | Appraisal Fees |
First Appraisal
Real Estate: 0.08% of the appraised commercial value
Personal Property: 0.10% of the appraised commercial value
For Post-Disbursement Appraisals
Real Estate: 0.04% of the appraised commercial value
Personal Property: 0.10% of the appraised commercial value
The minimum amount to be paid to appraisers is US$50.00 and the maximum amount is US$800.00.
Both compensatory interest and default interest will be capitalized daily.
The capitalization of default interest does not apply to Natural Persons with Business and Microenterprises.
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| 16. | Other Expenses and Court Fees: |
Refinancing, judicial or out-of-court settlement: 3%. Expenses apply to secured or unsecured debt.
Total debt cancellation with guarantee: 0-45 days: 13%; 46-90 days: 10%; 91-180 days: 7%; 181 days or more: 5%. Expenses applied when the debt that is secured goes to judicial collection. Applicable on the impaaa debt, depending on the days elapsed of the debt in court.
It does not apply to PNN and Micro Enterprises.
Total unsecured debt cancellation: 0-90 days: 15%: 91 or more: 12%. Expenses applied when the unsecured debt goes to judicial collection. Applicable on unpaid debt, depending on the number of days elapsed of the debt in court. NNP and Microenterprises do not apply.
| 17. | Insurance |
Expense that the Bank will incur in the event that the client requests the contracting of Property Insurance, Vehicle Insurance, Tax Relief Insurance, as well as other insurances related to other guarantees that cover the loan. To this end, the customer authorises the bank to debit the amount of the “Insurance” premiums from the associated account and/or any other account of which it is the holder, while the loan remains in force. If required by the Bank, such insurance must necessarily be constituted as a condition for the present credit operation.
| 17.1 | Tax Relief Insurance |
The insurance policy will be taken out with Rimae Seguros y Reaseguros. This insurance does not apply to the Legal Entities Segment, so no charge for this concept will be displayed in your payment schedule.
The monthly premium of this insurance will be calculated by applying the rate (percentage) on the outstanding balance of the loan. The coverages provided by the tax relief insurance are: 1. Death of the Insured; 2. Total and Permanent Disability due to accident; 3. Total and permanent disability due to illness. Survival coverage is also included in the Insurance with Refund modality, which allows the insured to request a refund of a percentage of the premiums (cost of insurance) from the insurance company as provided for in the certificate. This modality applies only to loans with a term equal to or greater than 24 months.
Policy Number in Soles : 8710500001 Policy Number in Dollars: 8710500002
| 17.2 | Seguro del Bien (otros seguros) |
The risks covered by the insurance of the property, stocks and fixed machinery are: All risk of fire and aligned lines. Additional coverages, exclusions and conditions can be found in the relevant insurance policy.
The risks covered by machinery and mobile equipment insurance are: All risks of machinery equipment and contractors. Additional coverages, exclusions and conditions can be found in the relevant insurance policy.
The risks covered by vehicle insurance are: own damage and civil liability to third parties. Additional coverages, exclusions and conditions can be found in the relevant insurance policy.
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INSURANCE Client Merchant Rate |
Policy Numbers | |||
| Property - House Habitation Property - Commercial Premises |
0.33% 0.40% |
501647 (Regular Goods) 501649 (Restricted Goods) |
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Stock Machinery & Stationary Equipment Machinery & Mobile Equipment |
0.49% 0.89% 0.95% |
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Vehicles |
The amount of the premium will depend on the brand. The Type of the year of manufacture of the vehicle, as indicated in the insurance policy provided. |
755223 (Regular Goods) 755225 (Restricted Goods) |
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NOTE:
1. The information provided here is for information purposes only. More information on coverage, exclusions and conditions can be found in the Certificate of Insurance. In the event of an accident, you must contact the Rimae Emergency Center: Alo Rimae at 411 -1111 or the BBVA Office at (01) 595-0000, where you will be provided with the appropriate information.
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IMPORTANT NOTES:
| 17.2.1 | The annual effective Compensatory Interns Rate is calculated over 360 days and is compounded daily. In case you have a grace period, the interest generated during it will be capitalized. |
| 17.2.2 | If, as a result of duly proven intent or fault, Listed is misled and, as a result, it makes an overpayment, such amount is recoverable and will accrue until its repayment the maximum amount of compensatory interest agreed for this credit operation or, failing that, legal interest. |
| 17.2.3 | Transactions carried out based on the loan will be subject to the Financial Transaction Tax (FTT). Being that the collection of 0.005% of the total operations will be made iaual or greater than S/1000 or US$ 1000 and any other tax according to legal provisions. |
| 17.2.4 | You have the right to request a copy of the appraisal if a guarantee has been provided in favour of the bank. |
| 17.2.5 | The joint and several guarantors and/or guarantors support the credit transaction, and any other present or future, direct or indirect obligation that You have contracted or assume with the Bank during the term of the Loan. The term of the warranty will be indefinite and will only be released when You meet all the guaranteed obligations. |
| 17.2.6 | The granting of the loan entails the opening or maintenance of an associated account (savings or current). It is subject to the conditions set out in your own contract. |
| 17.2.7 | The payment schedule is sent to the Customer’s email. |
You declare that the Fact Sheet, as! and the Contract, were delivered to you for your reading and your doubts were absolved and you sign this document in serial acceptance and agreement of all the information contained therein.
MIRAFLORES, 19-10-2023
| CLIENT SIGNATURE | BBVA |
| Name: | |
| Address: | |
| Legal Representative: | |
| DNI/RUC: |
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| RUC. 20100130204 | TERMINATION:............... |
REF.: LOAN AGREEMENT N°:0011-0377-9600318479-91
NAME OF DEBTOR: LATAM LOGISTIC PER PROPCO LURIN III SRL
ACCOUNT: 0011-0377-0100052734-99
AMOUNT
CURRENCY:____________________
PROMISSORY NOTE
(Issued pursuant to Article 10 of Law No. 27287 and SBS Circular No. G-0090-2001)
We will pay jointly and severally to the order of BANCO BBVA PERU, on the due date indicated, the sum of amount corresponding to the settlement of the sums owed to the Bank, by virtue of the Credit Agreement of the reference.
From its maturity date until its total cancellation, the amount of this promissory note will accrue compensatory interest and moratoriums. The constitution in arrears will be automatic. Likewise, until the date of its total cancellation, I will also pay the commissions and expenses that may arise.
The compensatory interest rates, moratoriums, as well as the commissions and expenses that I am obliged to pay according to the preceding paragraph, appear in the tariff of BANCO BBVA PERU that I declare to know and accept, the same that is at my disposal in its offices and may be unilaterally modified by BANCO BBVA PERU, The publication of the tariff at the offices of BANCO BBVA PERU is sufficient for communication. The rates applicable to compensatory interest, moratoriums, as well as the commissions and expenses indicated will be the highest rates that the Bank has at the time of payment or, at the Bank’s option, any of the interest rates, commissions and expenses that would have been in force since the time of the issuance of this title.
This promissory note shall not require protest for its execution. However, the holder may protest against it, in which case we will assume the expenses and commissions of such diligence.
I accept the total or partial extensions that are noted in this document even if they are not subscribed by me (us). This promissory note may be freely transferred and negotiated by the holder.
I expressly authorize BANCO BBVA PERU to debit any of my accounts or deposits with the Bank at the maturity of this promissory note or its extensions, as well as to proceed to apply to the debt any balance that the Bank had in my favor, without the need for prior notice or subsequent confirmation. This authorization for direct debit is extended to accounts in national or foreign currency, for the corresponding value, and will be paid to BANCO BBVA PERU for the opportunity in which it makes use of this authorization and for the exchange rate applicable to the operation.
This promissory note, as well as its prorogations, shall not constitute novation of the obligation contained in the referendum contract; and in accordance with Article 1233 of the Civil Code, its issuance, extension or renewal shall not extinguish in any case the principal or original obligation, even if it is impaired for any reason.
This promissory note is commercial in nature and is subject to the provisions of the Securities Law, the Banking Law and the enforcement process indicated in the Code of Civil Procedure, where applicable.
For the purposes of the execution of this title, I designate as my address the one stated at the bottom of the same and I submit to the jurisdiction of the judges of _______________________________________.
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Exhibit 8.1
SUBSIDIARIES OF LOGISTIC PROPERTIES OF THE AMERICAS
The following table sets forth our subsidiaries as of the date of this Report.
| Legal Name | Jurisdiction of Incorporation | |
| Latam Logistic Properties, S.A. | Panamá | |
| two | Cayman Islands | |
| Latam Logistic Property Holdings LLC | United States | |
| LPA Corporate Services Inc. | United States | |
| Latam Logistic COL HoldCo I, S de R.L. | Panamá | |
| Latam Logistic CR HoldCo I, S de R.L. | Panamá | |
| Latam Logistic Pan HoldCo S de R.L. | Panamá | |
| Latam Logistic Pan Holdco El Coyol II S de R.L. | Panamá | |
| Latam Logistic Pan Holdco Cedis Rurales S de R.L. | Panamá | |
| Latam Logistic Pan HoldCo San Joaquin I S de R.L. | Panamá | |
| Latam Logistic Pan Holdco Verbena I S de R.L. (1) | Panamá | |
| Latam Logistic Pan Holdco Verbena II S, S.R.L. (2) | Panamá | |
| Latam Logistic Pan Holdco Santiago I, S de R.L. | Panamá | |
| Latam Logistic Pan Holdco Santo Domingo, S de R.L. | Panamá | |
| Latam Logistic Pan Holdco Medellin I, S.R.L. | Panamá | |
| LatAm Logistic Pan HoldCo Bodegas los Llanos, S.R.L. | Panamá | |
| Latam Logistic PER OpCo, S.R.L. | Perú | |
| Latam Logistic PER PropCo Lurin I, S. de R.L. | Perú | |
| Latam Logistic PER PropCo Lurin II, S. de R.L. | Perú | |
| Latam Logistic PER PropCo Lurin III, S. de R.L. | Perú | |
| Parque Logístico Callao, S.R.L. | Perú | |
| Latam Logistic COL OpCo, S.A. (3) | Colombia | |
| Latam Logistic COL PropCo Cota I, S.A.S. | Colombia | |
| Latam Logistic CR OpCo, S.R.L. | Costa Rica | |
| Latam Logistic CR PropCo Alajuela I, S.R.L. | Costa Rica | |
| Latam Propco El Coyol Dos S de R.L. | Costa Rica | |
| Latam Logistic Propco Bodegas San Joaquín S de R.L. | Costa Rica | |
| Latam Logistic Propco Cedis Rurales Costa Rica S de R.L. | Costa Rica | |
| 3101784433, S.R.L. | Costa Rica | |
| Latam Logistic PropCo Bodegas los Llanos S de R.L. | Costa Rica | |
| Latam Logistic CR Zona Franca, S. de R.L. | Costa Rica | |
| Latam Logistics SLV OpCo S.A. de C.V. | El Salvador |
| (1) | Formerly known as Latam Logistic Propco Pedregal Panamá S de R.L. |
| (2) | Formerly known as Latam Logistic Pan Holdco Pedregal Panamá S de R.L. |
| (3) | Formerly known as Latam Logistic COL OpCo, S.A.S. |
Exhibit 12.1
LOGISTIC PROPERTIES OF AMERICAS
SECTION 302 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
I, Esteban Saldarriaga, certify that:
| 1. | I have reviewed this annual report on Form 20-F of Logistic Properties of the Americas; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; | |
| 4. | The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | [Intentionally omitted]; | |
| (c) | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
| By: | /s/ Esteban Saldarriaga | |
| Name: | Esteban Saldarriaga | |
| Title: | Chief Executive Officer | |
| Date: | April 26, 2024 |
Exhibit 12.2
LOGISTIC PROPERTIES OF AMERICAS
SECTION 302 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
I, Annette Fernandez, certify that:
| 1. | I have reviewed this annual report on Form 20-F of Logistic Properties of the Americas; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; | |
| 4. | The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | [Intentionally omitted]; | |
| (c) | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
| By: | /s/ Annette Fernandez | |
| Name: | Annette Fernandez | |
| Title: | Chief Financial Officer | |
| Date: | April 26, 2024 |
Exhibit 13.1
LOGISTIC PROPERTIES OF THE AMERICAS
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Logistic Properties of the Americas on Form 20-F for the fiscal year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Esteban Saldarriaga, Chief Executive Officer, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Esteban Saldarriaga | ||
| Name: | Esteban Saldarriaga | |
| Title: | Chief Executive Officer | |
| Date: | April 26, 2024 | |
Exhibit 13.2
LOGISTIC PROPERTIES OF THE AMERICAS
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Logistic Properties of the Americas on Form 20-F for the fiscal year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Annette Fernandez, Chief Financial Officer, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Annette Fernandez | ||
| Name: | Annette Fernandez | |
| Title: | Chief Financial Officer | |
| Date: | April 26, 2024 | |
Exhibit 97.1
LOGISTIC PROPERTIES OF THE AMERICAS
POLICY
FOR THE
RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
A. OVERVIEW
In accordance with the applicable rules of the NYSE American Company Guide (the “NYSE American Rules”), Section 10D and Rule 10D-1 (“Rule 10D-1”) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Board of Directors (the “Board”) of Logistic Properties of the Americas (the “Company”) has adopted this Policy (the “Policy”) to provide for the recovery of erroneously awarded Incentive-based Compensation from Executive Officers. All capitalized terms used and not otherwise defined herein shall have the meanings set forth in Section H below.
B. RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
(1) In the event of an Accounting Restatement, the Company will reasonably promptly recover the Erroneously Awarded Compensation Received in accordance with NYSE American Rules and Rule 10D-1 as follows:
| (i) | After an Accounting Restatement, a committee composed of a majority of independent directors serving on the Board (the “Committee”) shall determine the amount of any Erroneously Awarded Compensation Received by each Executive Officer and shall promptly notify each Executive Officer with a written notice containing the amount of any Erroneously Awarded Compensation and a demand for repayment or return of such compensation, as applicable. |
| (a) | For Incentive-based Compensation based on (or derived from) the Company’s share price or total shareholder return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in the applicable Accounting Restatement: |
| i. | The amount to be repaid or returned shall be determined by the Committee based on a reasonable estimate of the effect of the Accounting Restatement on the Company’s share price or total shareholder return upon which the Incentive-based Compensation was Received; and |
| ii. | The Company shall maintain documentation of the determination of such reasonable estimate and provide the relevant documentation as required to NYSE American. |
| (ii) | The Committee shall have discretion to determine the appropriate means of recovering Erroneously Awarded Compensation based on the particular facts and circumstances. Notwithstanding the foregoing, except as set forth in Section B(2) below, in no event may the Company accept an amount that is less than the amount of Erroneously Awarded Compensation in satisfaction of an Executive Officer’s obligations hereunder. |
| (iii) | To the extent that the Executive Officer has already reimbursed the Company for any Erroneously Awarded Compensation Received under any duplicative recovery obligations established by the Company or applicable law, it shall be appropriate for any such reimbursed amount to be credited to the amount of Erroneously Awarded Compensation that is subject to recovery under this Policy. |
| (iv) | To the extent that an Executive Officer fails to repay all Erroneously Awarded Compensation to the Company when due, the Company shall take all actions reasonable and appropriate to recover such Erroneously Awarded Compensation from the applicable Executive Officer. The applicable Executive Officer shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in recovering such Erroneously Awarded Compensation in accordance with the immediately preceding sentence. |
(2) Notwithstanding anything herein to the contrary, the Company shall not be required to take the actions contemplated by Section B(1) above if a determination is made by a majority of the independent members of the Board of Directors (the “Subcommittee”) that recovery would be impracticable and any of the following three conditions are met:
| (i) | The Subcommittee has determined that the direct expenses paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered. Before making this determination, the Company must make a reasonable attempt to recover the Erroneously Awarded Compensation, documented such attempt(s) and provided such documentation to NYSE American; |
| (ii) | Recovery would violate home country law where that law was adopted prior to November 28, 2022, provided that, before determining that it would be impracticable to recover any amount of Erroneously Awarded Compensation based on violation of home country law, the Company has obtained an opinion of home country counsel, acceptable to NYSE American, that recovery would result in such a violation and a copy of the opinion is provided to NYSE American; or |
| (iii) | Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Internal Revenue Code of 1986, as amended, and regulations thereunder. |
C. DISCLOSURE REQUIREMENTS
The Company shall file all disclosures with respect to this Policy required by applicable U.S. Securities and Exchange Commission (“SEC”) filings and rules.
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D. PROHIBITION OF INDEMNIFICATION
The Company shall not be permitted to insure or indemnify any Executive Officer against (i) the loss of any Erroneously Awarded Compensation that is repaid, returned or recovered pursuant to the terms of this Policy, or (ii) any claims relating to the Company’s enforcement of its rights under this Policy. Further, the Company shall not enter into any agreement that exempts any Incentive-based Compensation that is granted, paid or awarded to an Executive Officer from the application of this Policy or that waives the Company’s right to recovery of any Erroneously Awarded Compensation, and this Policy shall supersede any such agreement (whether entered into before, on or after the Effective Date of this Policy).
E. ADMINISTRATION AND INTERPRETATION
This Policy shall be administered by the Committee, and any determinations made by the Committee shall be final and binding on all affected individuals; provided, that with respect to the determination of impracticability of recovery as described in Section B(2) above, such determination shall be made by the Subcommittee.
The Committee is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy and for the Company’s compliance with NYSE American Rules, Section 10D, Rule 10D-1 and any other applicable law, regulation, rule or interpretation of the SEC or NYSE American promulgated or issued in connection therewith.
F. AMENDMENT; TERMINATION
The Committee may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary. Notwithstanding anything in this Section F to the contrary, no amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into account any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate any federal securities laws, SEC rule or NYSE American Rules or any other applicable corporate governance laws or regulations.
G. OTHER RECOVERY RIGHTS
This Policy shall be binding and enforceable against all Executive Officers and, to the extent required by applicable law or guidance from the SEC or NYSE American, their beneficiaries, heirs, executors, administrators or other legal representatives. The Committee intends that this Policy will be applied to the fullest extent required by applicable law. Any employment agreement, equity award agreement, compensatory plan or any other agreement or arrangement with an Executive Officer shall be deemed to include, as a condition to the grant of any benefit thereunder, an agreement by the Executive Officer to abide by the terms of this Policy. Any right of recovery under this Policy is in addition to, and not in lieu of, any other remedies or rights of recovery that may be available to the Company under applicable law, regulation or rule or pursuant to the terms of any policy of the Company or any provision in any employment agreement, equity award agreement, compensatory plan, agreement or other arrangement.
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H. DEFINITIONS
For purposes of this Policy, the following capitalized terms shall have the meanings set forth below.
(1) “Accounting Restatement” means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements (a “Big R” restatement), or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (a “little r” restatement).
(2) “Clawback Eligible Incentive Compensation” means all Incentive-based Compensation Received by an Executive Officer (i) on or after the effective date of the applicable NYSE American rules, (ii) after beginning service as an Executive Officer, (iii) who served as an Executive Officer at any time during the applicable performance period relating to any Incentive-based Compensation (whether or not such Executive Officer is serving at the time the Erroneously Awarded Compensation is required to be repaid to the Company), (iv) while the Company has a class of securities listed on a national securities exchange or a national securities association, and (v) during the applicable Clawback Period (as defined below).
(3) “Clawback Period” means, with respect to any Accounting Restatement, the three completed fiscal years of the Company immediately preceding the Restatement Date (as defined below), and if the Company changes its fiscal year, any transition period of less than nine months within or immediately following those three completed fiscal years.
(4) “Erroneously Awarded Compensation” means, with respect to each Executive Officer in connection with an Accounting Restatement, the amount of Clawback Eligible Incentive Compensation that exceeds the amount of Incentive-based Compensation that otherwise would have been Received had it been determined based on the restated amounts, computed without regard to any taxes paid.
(5) “Executive Officer” means each individual who is currently or was previously designated as an “officer” of the Company as defined in Rule 16a-1(f) under the Exchange Act. For the avoidance of doubt, the identification of an executive officer for purposes of this Policy shall include each executive officer who is or was identified pursuant to Item 401(b) of Regulation S-K or Item 6.A of Form 20-F, as applicable, as well as the principal financial officer and principal accounting officer (or, if there is no principal accounting officer, the controller).
(6) “Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and all other measures that are derived wholly or in part from such measures. Share price and total shareholder return (and any measures that are derived wholly or in part from share price or total shareholder return) shall, for purposes of this Policy, be considered Financial Reporting Measures. For the avoidance of doubt, a Financial Reporting Measure need not be presented in the Company’s financial statements or included in a filing with the SEC.
(7) “Incentive-based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial Reporting Measure.
(8) “NYSE American” means the NYSE American.
(9) “Received” means, with respect to any Incentive-based Compensation, actual or deemed receipt, and Incentive-based Compensation shall be deemed received in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-based Compensation award is attained, even if the payment or grant of the Incentive-based Compensation to the Executive Officer occurs after the end of that period.
(10) “Restatement Date” means the earlier to occur of (i) the date the Board, a committee of the Board or the officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement, or (ii) the date a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement.
Effective as of March 27, 2024.
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Exhibit A
ACKNOWLEDGEMENT AND AGREEMENT TO THE POLICY FOR THE RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
By my signature below, I acknowledge and agree that:
| ● | I have received and read the attached Policy for the Recovery of Erroneously Awarded Compensation (this “Policy”) of Logistic Properties of the Americas (the “Company”). |
| ● | I hereby agree to abide by all of the terms of this Policy both during and after my employment with the Company, including, without limitation, by promptly repaying or returning any Erroneously Awarded Compensation to the Company as determined in accordance with this Policy. |
| ● | I hereby waive any right to the indemnification, insurance or advancement of expenses by the Company with respect to any Erroneously Awarded Compensation in accordance with Section D of this Policy. |
| Signature:________________________________________ | |
| Printed Name:_____________________________________ | |
| Date:____________________________________________ |
