LPA (LPA) Q2 2025: Colombia Rental Growth Hits 19% as Mexico Expansion Drives Platform Leverage
LPA’s regional logistics platform is scaling, with Colombia rental revenue up 19% and Mexico set to unlock operating leverage as new assets come online. Portfolio expansion and disciplined capital allocation signal durable value creation, though near-term one-time items obscure underlying strength. Investors should watch for Mexico execution and continued pricing power in supply-constrained markets.
Summary
- Colombia and Peru Lead Organic Expansion: Rental growth in Colombia and Peru outpaces expectations, offsetting Costa Rica softness.
- Mexico Entry Anchors Long-Term Growth: New country manager and pre-leased assets position LPA for accelerated scale in 2026.
- Operating Leverage Set to Expand: Fixed cost base stabilizes, setting up margin improvement as portfolio grows.
Performance Analysis
LPA’s Q2 results highlight a strategic inflection in regional logistics real estate, with Colombia’s rental revenue surging 19% and Peru up 10.7%, while Costa Rica declined 1% due to a lease termination and lower interest income. The company’s operating portfolio reached 98% leased, underscoring strong tenant relationships and demand for Class A logistics assets. Net operating income rose 3.7%, with six-month rental revenue up 9.6%.
Growth was tempered by one-time items, including tenant improvement loan reimbursements and early lease terminations, which impacted same-store figures but are not indicative of underlying demand. Operating expenses increased 21.7%, largely from deferred maintenance, new building stabilization, and a provision for a Colombian tenant’s financial condition. SG&A growth slowed to 0.5%, as post-IPO cost normalization kicked in, and financing costs dropped over 15% due to lower Colombian interest rates. Operating cash flow climbed 23.5% year-over-year, reflecting improved collection and portfolio expansion.
- Colombia Lease-Up Drives Upside: Two new leases, including Porsche, filled 125,000 square feet at a 28% rent premium.
- Development Pipeline Expands GLA: Total gross leasable area (GLA) grew 9.1%, with development GLA up 48% year-over-year.
- Stable Leverage Profile: Net debt to investment properties (LTV) stands at 42.2%, supporting future investment capacity.
Portfolio expansion and disciplined cost management position LPA for margin expansion as new assets in Peru and Mexico come online through 2026.
Executive Commentary
"Our entire operating portfolio was 98% leased, a commitment that we made when going public last year and which reflects the strength of our customer relationships in the region. On the expense side, you'll note that second quarter SG&A grew at a far slower pace, as we have now achieved a steadier base, and the costs related to taking LPA public in the first quarter, 2024, are now mostly behind us."
Esteban Saldarriaga, Chief Executive Officer
"Colombia led the quarter's revenue growth, increasing 19%, followed by Peru where rental revenue grew 10.7% while decreasing 1% in Costa Rica. These results were largely in line with our internal projections, although there were several non-recording items that partially offset our growth in the quarter, as I will explain."
Paul Smith, Chief Financial Officer
Strategic Positioning
1. Regional Platform Scale and Market Entry
LPA’s disciplined expansion into Mexico marks a pivotal move, extending its logistics platform into a market with sustained demand for premium industrial real estate. The appointment of a seasoned country manager and a partnership with ALES, a local operator with 65 years’ experience, provide on-the-ground expertise to navigate regulatory and market complexities. Mexico assets remain delayed due to regulatory intervention in the country’s real estate trust sector, but management remains confident in closing and sees these assets as foundational for long-term growth.
2. Development Pipeline and Lease Quality
Construction of Building 300 and Building 200 at Parque Logístico Callao in Lima adds nearly 466,000 square feet, with significant pre-leasing to global tenants under long-term, dollar-based contracts. Module A of Building 300 is fully leased to a major food and beverage brand for 10 years, while Building 200 is already 76% pre-leased. These assets will support revenue ramp in late 2025 and 2026, with LEED Gold certification enhancing tenant appeal and ESG credentials.
3. Operating Leverage and Cost Discipline
SG&A normalization post-IPO and a largely fixed cost base set the stage for operating leverage as new properties come online. Management expects incremental revenue from new developments and Mexican acquisitions to flow through at higher margins, as foundational costs are now embedded. Lower financing costs in Colombia further support margin expansion.
4. Tenant Quality and Pricing Power
Flight to quality remains evident, with global and regional leaders occupying 98% of LPA’s portfolio. The company achieved a 20% net effective rent increase on a recent Costa Rica lease renewal, demonstrating pricing power in supply-constrained markets. Average net effective rent per square foot increased 2.5% year-over-year, reflecting both tenant mix and market tightness.
5. Risk Management and Selective Capital Deployment
Management flagged caution around U.S. tariff policy uncertainty and its potential impact on Mexico-exposed tenants. LPA is avoiding sectors reliant on exports, instead focusing on domestic consumption-driven demand in key submarkets. This selective approach aims to mitigate external shocks and preserve portfolio resilience.
Key Considerations
LPA’s Q2 underscores a platform at an inflection, balancing near-term noise with long-term opportunity as it leverages scale and market entry into Mexico. Investors should track execution on delayed acquisitions and the pace of new lease-up in development assets.
Key Considerations:
- Mexico Ramp Timing: Regulatory delays in asset transfers could defer earnings contribution, but management’s local partnerships and pipeline remain robust.
- Development-Driven Growth: Pre-leased new builds in Lima are set to drive NOI acceleration as they come online in late 2025 and 2026.
- Cost Structure Stabilization: SG&A normalization post-IPO provides a base for margin improvement as revenue scales.
- Exposure to External Shocks: U.S. tariff policy and macro headwinds in Latin America could affect tenant demand, though LPA’s focus on domestic consumption markets provides some insulation.
Risks
LPA faces risks from regulatory delays in Mexico, tenant financial health (as seen in Colombia), and macroeconomic volatility, particularly U.S. trade policy shifts that could impact export-driven tenants. Management’s disciplined capital deployment and focus on domestic demand mitigate some risks, but execution on new market entry and maintaining high occupancy remain critical.
Forward Outlook
For Q3, LPA expects:
- Continued strong leasing in core markets, with Peru and Colombia leading growth.
- Initial revenue contribution from new Lima development as Module A of Building 300 becomes operational in Q4.
For full-year 2025, management maintained its outlook for:
- Portfolio expansion with Mexico entry expected to be earnings accretive by late 2025 or early 2026.
Management highlighted:
- Operating leverage as new assets dilute fixed costs.
- Disciplined capital allocation, with selective investment in Mexico and avoidance of export-reliant sectors.
Takeaways
LPA’s Q2 reflects a platform on the verge of scale-driven margin expansion, as disciplined execution and market entry in Mexico set up a multi-year compounding runway.
- Portfolio Growth Fuels Earnings Power: New developments and Mexico expansion are poised to drive NOI and cash flow as they come online.
- Cost Discipline Underpins Leverage: SG&A and financing cost normalization provide a margin tailwind as revenue accelerates.
- Execution in Mexico Is the Watchpoint: Timely closing of delayed acquisitions and continued high occupancy are key to realizing long-term value.
Conclusion
LPA’s Q2 results showcase a logistics platform with accelerating fundamentals, led by strong leasing, disciplined cost management, and a strategic push into Mexico. Execution on new market entry and portfolio expansion will determine the pace of value creation as operating leverage builds through 2026.
Industry Read-Through
LPA’s results highlight sustained demand for Class A logistics real estate across Latin America, with a clear flight to quality and pricing power in supply-constrained markets. The company’s Mexico entry underscores the region’s continued attractiveness for logistics investment, despite regulatory and macro risks. For peers, the quarter signals that domestic consumption-driven demand remains resilient, while disciplined capital allocation and tenant selection are critical to navigating external shocks and unlocking operating leverage in a maturing cycle.