Multiplan Empen Unsp/Adr

Good morning, ladies and gentlemen. Welcome to the first quarter 2020 earnings results call for Multiplans. Today with us, we have Mr. José Izaqui-Pérez, CEO, Mr. Armando Dalmeida Neto, CFO and IRO, Mr. Marcelo Barnes, VP for Development, Mr. Hans Melschers, Executive Officer for Planning and Investors Relations. This presentation is going to be made available for download at ri.multiplan.com.wr. We'd also like to inform you that this event is recorded and all participants will be in a listen-only mode during the company's presentation. After Multiplan's remarks, there will be a question and answer session, and further instructions will be given. Should any participant need assistance during this call, please press star 02 to reach an operator. Before proceeding, let me mention that the forward-looking statements are based on the beliefs and assumptions of Multi-Plan Management and on information currently available to the company. And they involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. As I said, they depend on future events, which may or may not occur. Investors should understand that conditions related to the macroeconomic scenario, industry, and other factors could also cause results to differ materially from those expressed in such forward-looking statements. This teleconference will last 60 minutes, and after this period, the Investors Relations team will be available if any questions have not been answered. Now, I will turn the floor over to Mr. Jose Isaac Perez, the CEO, who will begin the presentation. Mr. Perez, good morning. Thank you for being here today, and you may begin, sir. Good morning. Thank you all for joining the call, ladies and gentlemen. So again, we're here to talk to you about how the quarter was to make a few comments that I believe are important. So one year after the onset of the pandemic, it's important that we analyze some aspects in the company's journey. We know that this is one of the greatest crises that we've ever faced. commerce and shopping is exhausted and it needs to go back to operating in full just for you to have an idea in a normal quarter we used to work 1028 hours and in this quarter we're reporting about we had 640 of what we normally do. If we deduct the activities that were not able to be carried out because of restrictions such as cinema, theater, and entertainment activities in general, then we would have approximately 50% of the regular hours. So, we had half of the normal work, and this in a context in which people are still staying at home. But I'd like to say that the company has weathered many crises in the past. And it's always important to look back on what has happened to prepare for the future. I have 58 years experience in my career and this company has been operating for 50 years. I'd like to tell you a little bit about the crisis we experienced in the 80s. We faced a severe recession in Brazil due to the oil crisis and the lack of resources to pay the foreign debt. Money was really expensive and we had a high level of debt. We had 15% capital and 85% debt. And the cost of the debt back in the day was about 150% a year. And in our five first shopping malls, Morumbi, Barra Shopping, the mall in Brasilia, and in Ribeirão Petro, and in Belo Horizonte, these were malls that were just at the beginning of their operations. I mentioned that and in the last months of Cernay's administration in 1984 inflation was at 80% just to give you an idea of how difficult it was to live and to carry out businesses back then so we devised a tool which was to sell shares and interest from the malls These were people that had a long-term view, and they accepted the idea, bought interest in shares, and this was mainly sold to pension funds. And later, we bought these interests back, and out of our 20 malls, the average ownership interest is 81%. Our debt to asset ratio is currently 10%, approximately. And our financial cost of the debt is low. It's 386%, so 3.86 a year. So you can see that we really are prepared to deal with these new challenges. But this crisis was also engendered due to the fact that the public healthcare in Brazil had already collapsed long ago, and also due to the lack of hospital beds. And due to another point that I thought was just tragic, which is that field hospitals were taken down last year. The government then simply shut down commerce, as if commerce was the culprit of the whole situation, but it is not the culprit. So our malls are generally the cleanest public locations with the best and highest control. And this is something that has been stated by last year. We carry out tests regularly. We hired an international company, ALS is the name of the company. And this company is the one conducting the tests, surface tests. They've been with us for six months now. And in these six months, we've carried out 700 tests and we have found no trace of the coronavirus, not in air conditioning, not on the floor tiles, not in the toilet. Last year, people were talking about how long the virus would survive on a desk surface or on shoes. and all of that was just rhetoric and that triggered panic in population. People are still very scared. We have been promoting information on the radio and on digital media showing people how we work so that they can feel safe and comfortable to go to the mall because it is a highly controlled environment. We are sure that the shopping mall segment will bounce back vigorously. And that is due to the fact that it is just human nature. Human nature has been the same for over 50,000 years. Humans are driven by desires and feelings and impulses that are primary and they haven't changed. Aristotle, who lived in the 4th century A.C. clearly defined that human behavior is basically that of a gregarious animal. That is, people yearn for other people. They want to be together with other people. So there is a suppressed demand for consumption and there is a suppressed demand and need for people Isolation is an inhumane way to address a pandemic. This is the third wave we're going through now, and we're going to surf it and improve when it's over. Shopping malls are the best antidepressant that exists in the urban environment. Shopping malls are areas where people gather, meet friends, and they're important for citizens. It is just an illusion to believe that e-commerce is going to have a significant impact on our malls because malls are no mere warehouses where wares are displayed. Our malls are an experience. They offer services to society with medical centers, gyms, banks, entertainment, and a lot more. Shopping malls are currently very different to what they were when they were first conceived of in the past. And the Brazilian shopping mall model is copied all over the world. And the International Association of Malls has made recommendations, which we did years ago, which is that malls should have medical centers. And this is an important point. Another important point I'd like to mention, and this is a point that was in the Wall Street Journal, is that with vaccines and relief packages from the government, we can see that the suppressed demand in conception is recovering. Some segments grew 45% a year. And now, you have $63 per share last year, and they were $120 today. So this is certainly going to have an impact on Brazil as well, Shopping malls are still growing very much in Brazil. And Multiplan is possibly the only company in Brazil that is building malls, which is going to be open this year, Jacarepagas Shopping Mall. It will be launched and open in October or November. It's a very modern mall, and it's certainly going to attract the attention. A shopping mall is a subproduct of chaos. 50 years ago, when I built my first mall, The urban context was chaotic. There was not enough parking place for vehicles and traffic was on the verge of collapse. So we gave retail an opportunity to develop. We gave them a new impulse and we took away from the street 100's, millions of vehicles that are now parked in shopping malls. Can you imagine what life would be like in great cities if you had all of the vehicles that are parked in malls parked in the streets? Where they would be exposed to the weather and to the lack of safety that we sadly see everywhere. So shopping malls are a solution, not a problem, be it during the pandemic or not. I'd like to say that people live in the real world and not in the digital world. Technology is a fantastic tool that will allow our consumers to consume better. We have our app called Multi. and it's an additional resource that will make it easier for you to buy in our malls. And we also have our delivery center, which is a logistics company. And the increase in use by tenants of our delivery service, our logistics company, shows that this was the right choice, that we're on the right path for more integration between brick and mortar shops and digital shops. So we can see that E-commerce is very important, but the physical experience, the real world experience is very important. A company was originally created as a real estate and construction company. And we're now focusing on major projects as well, generally in areas in the vicinity of our shopping malls. For example, the project we have in Porto Alegre called Golden Lake. This is similar to what we had in Rio de Janeiro with Golden Green on Lucio Costa Avenue with a private area for leisure and a lot of vegetation. So, Golden Lake is the largest project in the south of the country with 160,000 square meters in area, and it's connected to our bar or shopping mall. This is an unprecedented project in Brazil that will meet People want to have an area where they can have sports and leisure and safety and also have services for their families. The occupancy rate of that land lot is 10% only and 90% is open areas. It's going to be launched in August this year. It was a 417 million project. This is a project that took 10 years to be approved. And it was only approved due to the good relationship we have with local authorities. This is a major project. And it's going to be realized in the coming three to four years. The first projects are high quality and there's a great demand for them. People want to have freedom, they want to have space. We can give you further information on this project if you want to and you can really understand what Multiplan is all about. A land bank is relatively low. They were acquired generally a long time ago in the outskirts but close to shopping malls and these locations rose in value. So they were purchased at a low cost from an accounting perspective and they are going to lead to a high accounting to high accounting earnings, really. And every crisis will breed opportunities. And everything comes to an end, and the crisis will come to an end too. And the crisis gives the opportunity to compete in the market with less competition. So last year, to reinforce our commercial position, we sold a tower we had in Sao Paulo and that put us in a comfortable position to go through this period. But again, a crisis breeds opportunities. We were able to sell the tower at a very good price that led to high income to the company, high profit. and we feel relatively comfortable. We only sell an asset if it's at a very convenient price. And we are builders, right? So we develop and build and manage our assets. And I believe the real estate market will bounce back Powerfully. So we're giving a lot of focus to our real estate projects that are in very good locations. They're always vying for. And well, I just wanted to say that we are comfortable here at Multiplan from a financial perspective. And I'd like to thank you all who are here with us. And humans are the same all over the world. So I speak about humankind, and I don't mean only men. I mean men and women, of course. And I'm certain that if we had women in power today, the country would be better managed. So I never differentiate between men and women. But we are comfortable. The crisis will come to an end. It already is coming to an end. The government must stop smothering commerce. We can't wait any longer. We're already short of breath. So we need to grow and expand. So thank you very much. Thank you for your time. All right. So ladies and gentlemen, we'll now go into the question and answer session. For your question, you just need to press star nine on your phone. We already have a few questions. The first question is by Nicole Yui from Bank of America. Good morning, Nicole. Good morning. Thank you very much for your presentation. Thank you very much for this conference. So we are resuming operations at this point, you could say, right, with shopping malls. There was a lockdown in March. So I know it's a bit too early, but I'd like to hear what you have to say about this second moment in going back to business. Are people going back to the malls faster than they did last year? Many people have been vaccinated after all, right? So what is your take on this whole situation and going back to business? And Is there any major difference from a region to another? Thank you. Hi, Nicole. This is . I'll take your question. So there is a very strong suppressed demand. The volume of money in savings accounts in banks this year is four times as large as we had last year. So when they have the chance and having the money to invest, people are going to. People are eager to go back to their normal lives. We'll see what happened in Miami, probably, where we also have malls. According to my executives, about a week ago, We had so many people in the malls that they were already not taking more people in, so people couldn't go in. There were queues and all. So this is a sign that life is going back to normal. Many people are still scared of the virus, but I believe this is all going to end. Humans adapt. And now with vaccines, we're going to have the virus spreading less. and people are learning how to treat the disease as well. What we can see is that infection rates are going down. So probably have good time to work. We may have some restrictions, of course, because this is how it stands, but we need restrictions to be lifted at some point. And activities should resume and we should have more jobs coming up as well because many people have lost their jobs in this past period. And so I believe we're going to bounce back and bounce back in full swing. All right. Thank you. All right. So the next question is from Alex from . Alex, good morning. Good morning, Mr. Perez. Thank you for the presentation. I have two questions. The first is about the turnover. Turnover is very strong. We could see that in the first, rather in the fourth quarter and again in the first quarter. What is negotiation like at this point? Can we expect positive spreads? at this point, even in more adverse conditions? And the second question is about your land banks. Are you selling land lots? What could be expected from the sales of items in the land bank, like in Marseille, for example? What could you expect? Good morning, this is José Isaac Pérez. When we did the project in Maceió, we looked at a region that was quite deserted, and this is a project that we had that is a bit outside of our scope. We're not going to develop a real estate project there. We're going to sell the land loss. But we're selling it at three times the price that we bought when we built the mall. We have a mall in that region, and we have many activities in the surrounding area. And a land lot that costs $20 million can now be sold at $70 million. So it is a substantial profit in a relatively short period. And this has to do with our strategy to always create synergy between shopping malls and the prices of apartments and houses and hospitals and so on. Alex, would you like to compliment that? I actually wanted to go back to Nicole's question as well. We have the fast session network. And that was approximately 2.6% of our GLA. Almost 12,500 square meters. That will allow us to improve our mix even further. And we have two areas being negotiated. We have located a substantial part of another area, and we can see an increase in the square meter price, which is really generating value, diversifying experience and the sales mix in the mall. I just wanted to take advantage of another point to comment on Nicole's answer.

Well, you were mentioning about April and the numbers. from the quarter and well we only got 26% and the average of April is well if you take a look at the last week of April is 37% and if you look at the month of April and you compare it year on year the percentage of the working hours also we can extrapolate the performance of sales We can see that since the pandemic started, well, 14 months ago, we can see that the sales, well, have gone over the working hours. And another indicator that is very strong is that we had in the same quarter a record of the turnover that was negotiated. We had 16,594 square meters and 99 operations. So the biggest number of the largest land banks negotiated over the last quarter. And out of the 99 stores, 86 are our own tenants. So it shows the trustworthiness in our strategy and the, our, well, it shows our will to grow and the trust in our enterprise. so we can really face the challenges of the future. Thank you very much. Thank you, Armando, Dr. Perez. Okay, Nicole. Wonderful, thank you. Very well. Let's continue. The next question will be from Andres Mazini from Citibank. The floor is yours. Hi, good morning, Dr. Perez. Thank you for the opportunity. The first question is about your campaign. Well, the ESG, I wanted to know, well, more about that, and I wanted to understand Well, you're talking about data. I wanted to know your opinion on what was the outcome of that campaign. And from now on, the first question actually, well, within Rio de Janeiro, have a few of these, well, national campaigns that are, well, it's outperforming really here in Rio, for example, in Pivots Mall. Now, people are not traveling anymore. And part of, you know, people would shop abroad and now they're shopping, obviously, locally. For example, auto shopping is an option. So I believe that some of your malls are doing better than others. What do you think on that? Well, it's a little bit of everything that you told us because really, it's been, for example, got a modern shopping mall. It's unique. For example, when we launched the mall, we have 500 stores and We launched it and it seems, I had people telling me this was the most beautiful mall that I had ever seen. Very beautiful, comfortable, with pleasant parking lots. Everything seems to be good. And we launched this mall at the time of the Olympics, if you remember that, and the New York Times. gave the status because we also had other malls to compare, but this was one of the best ones. And the Village Mall actually services the public that is more selected. Maybe they have a little bit more money to spend, but during the pandemic, we are occupying Spaces that, of course, for example, we are an alternative to foreign purchasing. And people also, when they come to remote, they feel very safe. I believe that, I mean, it's evident that we, that people got to know us better. And once again, we have international tenants and those that used to shop abroad, they are obviously using the local alternatives. with a selection of products that is very wide. And we have the big international names of fashion and that attracts clientele. Certainly, we have to adapt. The turnover that you've mentioned is very positive because You have a tenant that might leave, but we will have a tenant that comes into the place of that tenant that left, and they probably have better products that will service the client better at the moment that we're living right now. But you can be certain that management will continue to look at turnover. While you were commenting that, yeah. Okay, I'm going to comment a little bit more. There was a campaign that was launched on TV, and it shows the hygiene, the care that we, the lengths that we go in our malls to make sure that they are clean and hygienic and safe, free of contamination. We didn't detect the presence of the virus in the mall. Any of our malls for that matter. So we did the testing and on a regular basis. And this really helps people that are looking from the outside. The malls are, in my opinion, the safest place to be. On the other hand, we also support our tenants. We had to forego a lot of our revenue, but we did that in a conscientious way so we can make sure that our partners, our tenants, we know that they're going through a very difficult time. And we are still paying taxes, very heavy duty taxes. And basically our Well, for us to keep our operations going, we have to keep on paying those taxes. But it's not just the government that might be an issue. We reduced to basically zero our income that comes, for example, from rent and other charges for our tenants. And basically, we almost forgone the entire revenue. Just so you know, since the beginning of the pandemic, We have not received close to $1 billion in revenue, but the company is still growing strong. I just want you to know that we are suffering a lot. The tenants are suffering a lot, but we are partners, and we are working with our associations, our associates, and we're providing services. And we are looking forward for the reopening, for getting back to work, because we cannot continue. We have a lot of unemployment and the government, the local governments, need to understand that we need to treat the disease, but also the financial health of the country. The country, you will have more people dying of hunger than the pandemic itself, if you think about this. The WHO recently mentioned that We've had six times more people dying of hunger than the pandemic, and Brazil is included in those numbers. We need to be sensitive enough to realize that, and the federal government will do whatever they can to, and we hope that they help us, that they help us because we've been, in my point of view, unfairly affected also by the economic downturn. And to continue with the question, for example, and you also have New York News and any of our malls, they are not working still at 100% occupancy. Like you said, they're not working at 100% power. And once we go back to our full capacity, 100%, well, If we had, for example, movies and other activities, we'd have a higher vacancy, of course. But the limitations of cars in the parking lot, we have a lot of limitations nowadays, restrictions. Nonetheless, we move on, and the laws have presented growth. So, these are some of the answers that Dr. Pettis already provided. The potential, therefore, of our operation, and a very solid operation, as you can see at the numbers. Thank you, Dr. Pettis and Armando. Very well.

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