Dear shareholders,

2020 will always be remembered for the COVID-19 outbreak. The pandemic forced us into a world we had not lived in nor did we know how long it would last. We never imagined that our shopping centers would remain closed for more than 8 months, with only essential businesses operating or with restrictions on business activities, entry restrictions for senior citizens and children, and with reduced business hours and capacity. However, we were always convinced that we had to protect our employees, visitors, and business partners through the proper implementation of the protocols established by the authorities, and we are proud to say that we were pioneers in the execution of these protocols, becoming a benchmark for different government agencies that adopted the Sendero model in their communities. Likewise, we launched the Sendero Limpio campaign in collaboration with Cloralex, making us the only Mexican shopping center operator to form a partnership with a leading cleaning brand in the country.

This was thanks to the commitment and tenacity of our team of collaborators, to whom I am profoundly grateful because they always faced the challenge with courage and great sense of duty, tackling this crisis as we have done in the past, and each time coming out stronger and with many lessons learned. Although we know that the pandemic is not over and we have challenges ahead of us, we are confident that we are on the right track and we are optimistic for what lies ahead. The well-being of our employees, visitors, and business partners is and will always be our priority.

In the face of a challenging 2020, the Company was able to move forward steadily in the execution of its business strategy, highlighting the listing of 100% of our subscribed and paid-in capital stock on the Mexican Stock Exchange under the ticker symbol GAV.

It is worth bearing in mind that this transaction was executed through the merger of the Company with a special purpose acquisition vehicle (SPAC) placed by Promecap (without an Initial Public Offering), making us the first issuer to be listed in the Mexican stock market as a result of the business combination with a SPAC. In this way, we raised USD$200 million to continue promoting the Sendero brand throughout Mexico, either by means of organic growth or by seizing attractive investment opportunities, without compromising our liquidity (a fundamental aspect in this backdrop).

In the same way and given the stronger balance sheet of the Company, we focused on controlling corporate expenses, optimizing the operation of the shopping centers under a strict expense management, paying all credits at the corporate level, and deferring all new investments until we had a clearer picture of the situation, except for Sendero Santa Catarina, which was opened in March 2021, since its construction was already well underway at the onset of the pandemic. Our objective was clear, to preserve the Company’s assets, to be ready to pursue new investment opportunities.

Regarding our commercial partners, given that a sizeable area of each Sendero shopping center remained from March (mainly retail stores, movie theaters, restaurants, gyms, and entertainment businesses in general), we supported our commercial partners with rent discounts and deployed initiatives to recover past-due receivables, while keeping a close communication with them in an effort to maintain the occupancy of our properties. In these dire times, our business partners needed our support and we responded. As a result, occupancy only dropped from 95% to 92%, a challenge that seemed difficult to overcome at the beginning of the pandemic, but we were able to beat thanks to teamwork and effective communication.

This is due to the fact that one of the key features of our Sendero brand (focused on meeting the commercial and entertainment needs of the Mexican population from socio-economic levels C and D+) is the incorporation of a supermarket as an anchor store in each shopping center, which, together with other businesses, such as department stores, pharmacies, public services, bank branches, and restaurants with home delivery service, allowed our properties to continue operating as they were considered essential activities for the economy.

Having a supermarket as our main anchor marked a very important difference in comparison to other shopping centers, since being an essential business, we never closed any shopping center completely and we continued to be in the “top of mind” of our frequent visitors, attracting other customer segments that never choose Sendero as their favorite shopping center. Clearly, the latter made Sendero their second home, feeling protected by the strict security protocols that we have upheld and will continue to follow until the pandemic is completely over.

Furthermore, to continue to strengthen the quality of our service and further adapt to the new normal, towards the end of 2020, we launched (initially available in Sendero Escobedo and Sendero Apodaca shopping centers, expecting to implement this platform in all Sendero shopping centers in the short term), an exclusive website fully managed by Grupo Acosta Verde. This portal was developed for our commercial partners to list their products and thus: i) help safeguard the health of our visitors, while boosting traffic in the shopping centers and parking lots, by implementing an online shopping system with a click & collection option, ii) drive the sales of our tenants; and iii) serve as a complementary revenue stream for the Company through a commission scheme on each transaction.

Moving into 2020 results, although occupancy decreased 3.4 pp. compared to 2019, it was above 92%, a remarkable achievement given the prevailing conditions. This level attests the effectiveness of the measures implemented to support our business partners, as well as the longlasting relationships we have built with national chains who accompany us in each project. Meanwhile, in line with the mobility restrictions implemented and the wariness shown by visitors to the risk of contagion, traffic declined 40.3% in 2020 to 65.1 million from 109.0 million in 2019.

Although the overall impact of the widespread lockdowns in 2Q20 and most of 3Q20 (with the exception of the aforementioned essential activities) and the variety of measures implemented by the authorities throughout the year (such as limitations on business hours, weekend closures, and restriction on access for children under 12, elderly and pregnant women) resulted in lower traffic, we are optimistic that visitor traffic rebounded significantly in 4Q20, setting a very positive momentum for the future.

Against this backdrop, total revenue reached Ps. 1,069 million, down 12% year-over-year, attributable to the combined effect of lower occupancy and rent discounts granted. Consequently, NOI and adjusted EBITDA posted year-over-year contractions of 32% and 14%, amounting Ps. 687 million and Ps. 718 million, respectively. As a result, the Company recorded a Ps. 404 million net loss for the full-year 2020.

Even though the effects of the health contingency weighed on our financial and operating metrics in 2020, the deployment of measures to strengthen our operations (including strict control of corporate and administrative expenses and CAPEX, and ongoing communication with suppliers), coupled with the proceeds from our recently launched IPO, will provide us with a solid foundation to pursue attractive M&A alternatives that will help Sendero’s brand grow and in turn improve cash flow generation.

Also, in order to drive greater value creation, we continue to execute different strategies and initiatives to solidify our adherence to ESG factors, a matter of utmost relevance to the Company’s values, given that it was an integral component of the vision of our founder, Jesús Acosta Verde, when he started the Company over 40 years ago.

Our environmental actions include extensive tree planting, cardboard recycling campaigns, and strict monitoring and measurement of our emissions, use of water and recycled waste, among others. In addition, 100% of the lighting in our shopping centers is provided by LED bulbs. Regarding corporate responsibility, we have a strong social commitment where our employees, including myself, regularly visit orphanages, hospitals, nursing homes, among other institutions, to support community activities as needed.

It is also relevant to note that, at Acosta Verde, we have always supported different institutions and schools with limited financial resources, inviting them to our shopping centers to spend a pleasant moment either at the movies, in the food court or entertainment area, making this action a hallmark of Sendero.

As for corporate governance, in Equity International and Promecap (headed by Sam Zell and Fernando Chico Pardo, respectively), we have strong allies with extensive and proven experience in the management of publicly traded companies, which undoubtedly provides a valuable competitive edge to Grupo Acosta Verde. Likewise, the expertise and commitment of our renowned independent directors, Carlos Salazar Lomelin, Javier Astaburuaga Sanjinez, Francisco Garza Zambrano, Paulino Rodríguez Mendívil, and David Contis, provides the Company and its stakeholders with the assurance that our operational, internal control, and decision-making processes are carried out in strict alignment with our mission, always with the objective of creating incremental value for our investors.

Wrapping up, I am confident that we will come out of this crisis in a solid position to honor the trust our investors have placed in us, drawing from: i) the capabilities of our young but tested team, most of whom are proudly from our own ranks, whose talent constitutes one of our greatest strengths; ii) our solid track record in the marketing, operation, and management of shopping centers over our 41-year history; iii) our emphasis on organic growth through the development of shopping centers (backed by more than 40 successfully developed projects) as well as the focus of our management team and partners on seeking investment opportunities that could complement our platform with inorganic growth; and, iv) the expertise of our institutional investors and independent directors.

We look towards the future with great enthusiasm and hope, confident that we will continue to be the second home of millions of Mexican families, whether they are looking for a new experience at Sendero or have chosen it as their shopping spot; but most of all because…you will surely visit Sendero many times!

Welcome to the Sendero family!

Best regards,
Jesús A. Acosta Castellanos
Chief Executive Officer of Grupo Acosta Verde