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.

Now, we will read a question via webcast.

The question is, from Jimmy from Sun Invect. Good morning, everyone. Thank you for answering my question. Now, if you can please talk about the functionalities of MOLP, specifically the direct contact and the program is also about the potential of a, I want to know more about that, since those were not fully implemented for our descendants. And 60% potential still in all of the MOLPs that are in that loyalty or rewards program. Hi, Denise. Danielle, it's a pleasure to talk to you. Let me talk about multi as a whole. Well, and specifically the interactions of the tenants and clients and our loyalty program. Well, we had the interrelations between the clients and the tenants, we and our customers, of course, and we try to map that, and there is a correlation that might be inversely proportionate. Of course, if they're not open, if the malls are not open, we understand that the success of this program is in the best interest of our tenants. We are convinced of the potential of working to improve on the flow of customers with Multi. On the other hand, our loyalty program also grows. Multi and Rosé, which is a program, and we had other malls that had and didn't have the rewards program. First, we wanted to develop the loyalty program that we are going to develop those loyalty programs in the malls that already had it, and now we are going to start to extend those loyalty programs to the malls that didn't have it, and we're going to reward the users through a platform that will use gamification. So, we will transform the experience of our users in our malls as if it was a real game. You will walk three kilometers in the mall. You will receive a reward. You will do three purchases. You will get some number of points. Maybe you're going to buy something online. You're going to receive some other rewards. So we will strengthen our online footy and work with the online offline in a virtual cycle. Thank you for the question. We're just organizing the questions. We have many. Next question will be from Jorel from Morgan Stanley. Hello. Thank you. Can you hear me?

Thank you.

I have two questions. Well, first of all, I wanted to know if you can talk a little bit more about the other programs and how can we, well, the delinquency rate, quarter by quarter, and, well, I wanted to understand how you're dealing with it during the crisis with the gross delinquency rate by the fact that We have a drop in the books. So we have that trend maybe in the near future, so with an increase of the gross liability. So if you can talk a little bit more about the offices, the market. I know you sold some of your positions there, but I wanted to know if you can talk about the trend that might be interesting. Are you going back to the market or will you just focus more on the malls? That's it. Thank you. Joel, thank you. This is Armando. Joel, first of all, the accounts receivable is always depends on the comparison that you're doing. So you're saying that there is a drop and there's an increase in liabilities then you're comparing to December of 2020 and we have a drop that is Very simple, because you have a double rent, the rent that is higher, and the first quarter, you don't have it. And this is the reason why we have the delinquency rate. It might be higher in the first quarter and seasonal in its nature, because you invoice the rent in the first quarter, and then you receive it on the 5th or the 10th. of January therefore it's logged into the book later and then you might have an increase in invoicing in the fourth quarter and that's reflected in the first quarter after well that first quarter specifically there is another issue the operations so March we had the operations that we need to account for and in January Sao Paulo, the malls, and Belo Horizonte, they are still not working full time. Now, I also want to remind you, Dr. Perez has just mentioned, we are manufacturers. We have worked, well, we build a lot of real estate, commercial real estate, and some of them are adjacent to the shopping malls, and we're always taking a look at that opportunity. For example, for offices using our land based land bank. Now we have to evaluate the possibility of actually renting a few of our assets. And we've done that in Sao Paulo and many other cities of our portfolio. The actual sales of last year, we actually had that real estate built to actually be sold. We, of course, rented the Real Estate and we wanted to wait for a price submission that would make sense of course and that would be attractive enough and coincidentally that happened last year and that's what generated the restructuring of our capital and therefore the sale. So, once again, we are a real estate company and we will continue working with offices. But once again, the core business is wholesale, is shopping malls, but we will look at opportunities, future opportunities for the company. Wonderful. So, let me go back to the liabilities. You have these analyses. There is the issue of closing of the malls, but you are expecting that with the reopening, are you going to review the numbers? Looking at the second quarter of last year, Well, 16%. And there were restrictions in the operations. And nowadays, we can see that we have that liability dropping to less than 5%. And once again, you might have an issue and we're living The same issue, we're reliving the last quarter and we have the same expectations. Now, we will continue to manage our malls, improving the mix to service our clients, our customers. And this is a very effective, positive effect to recover the activities on the short term. This is our general overview. Thank you very much. Very well.

Next question, Elvis from DCG Pactual.

Elvis? Thank you, Dr. Pettis. First of all, logistics of the malls. You commented that, well, considering the negotiations that you have with the tenants Do you think that the malls will continue to... What do you think will be the future of the tenants in the shopping malls? Second is also, we see consolidation in the retail and tenants. Do you think that there... How are you going to renegotiate the contract with some of these tenants? In the future, will you do adjustments? Of course, looking at the portfolio, do you see any pressures from any side of the retail? Elvis, good morning. Well, we have focused, in our focus, in regards to your first question, in terms of mix of products, We are very dedicated to looking at the future and servicing the demands of our customers. We are always trying to predict the next wave of demands. And looking at the presentation, the distribution here, you have to realize, as you can see, there is a change in the percentage, whether it has increased. or decrease from 2011-2021, we have a 10-year comparison. Of course, we had a change that was very abrupt, very expressive in the short-term recently. What we are doing is working in an event-based matter. And the malls before were called a paradise for purchasing. But now, the shopping mall services more as a social hub. People go there to have fun, to meet each other, to feel safe. And not so long ago, when we had the food courts, for example, You had restaurants that were fantastic, spread through the shopping malls. So, we also have a food culture, and we have this becoming ever more relevant. Also, medical centers. We have medical centers created in the 90s that are close to the mall. For example, when we had the extension, the medical center was allocated for the medical center, of course, before the pandemic. So that demand for services is a natural demand of people. And the malls fulfill that function. Once we had, you know, we have the shopping mall as a solution for the urban chaos. And we have an effort to improve not only safety, security, but also hygiene. And this is what we try to show with all of our ESG campaigns. So this is a continuity of what we've done in the service sector. And we have the food service sector, on the other hand, You also see the selling of electronics and other activities. From 2015 onwards, this is going to, we're going to see a rebound of the appliances and electronics. And people want better equipment. In regards to your second question, the retail itself, the condition of our tenants, This is very relevant, of course. Your question is very appropriate. First, we need to think about the first quarter of 2021. Twenty-five biggest groups, and I'm talking about brands, and all the, for example, the tenants from the same economic group or the same brand, We have the account, the 25 biggest client of our clients correspond to a quarter of our revenue. So this shows, for example, the case of Andre about, you know, the international client leaving our malls. We saw that in a different way. We see this as an opportunity to improve our mix of products and improve our efficiency. However, one of the points that I would like to highlight is, step by step, the tenant is looking for a good spot to actually sell their products. So good localization, malls that are well managed with campaigns that attract the audience, the customers that have a relationship with the brands. That has another value and will continue to have value regardless of whether we have an increase in retail or the opposite movement. The tenant will try to be in places that will allow the tenant to have access to the customers. And therefore, they can have better sales and better productivity. Here, the most expensive store is not the one that pays the most rent. It's actually the store that doesn't sell anything. So you have to keep that in mind. in the management of our mix, of our portfolio, the way that we manage our malls on the day-to-day, we think about the general overall productivity of our tenants. And I would like to complement your question with something that happened 15 years ago when our brand was 25 years old. for Barra Shopping and they said that Barra Shopping was the face of Rio de Janeiro. Now, I was talking to the mayor back then and he tells me, Peres, you know that Barra Shopping is the third tourist attraction here in Rio?

I said, no, I didn't know.

Curiously, I asked, which are the first two? And I was joking around with that. Well, the first two, well, the first two, God actually made those two, but the third one, we actually made it. So, today, 15 years later, We are maybe the biggest tourist attraction in terms of the number of tourists because Barra Shopping receives about 25 million people per year. So, Rio de Janeiro today, Barra da Tijuca with the hotels and everything, the tourism, a lot of tourists go to Barra da Tijuca and, you know, there are campaigns in Ipanema, of course, eternal places in Rio de Janeiro. I love the southern region of Rio, but the development of the western region is inexorable, which is a region that has a space to grow. And therefore, I can only tell you the following. Our malls per year receive visitations in the order of 190 million Brazilians. It's basically one Brazil, almost a full Brazil population. That's the expression of our operation. And if you multiply this by the number of malls in Brazil, you can see the disaster that has happened by having the malls closed in the economy, for the citizens, and for everyone. The mall is the facilitator and will continue to be adapted. The technology will be used. and it will be used as a tool.

And I want to deliver to the tenant a virtual and on-site store.

And that's it.

Tawin used to say that it's about the survival of the fittest, right? So either you adapt or you don't survive. We'll continue to adapt and we'll continue to survive. And the last, or the latest rather, mall we build is always the best of all, right? Because we continue to build and improve. And we're making malls more and more efficient.

That's it.

Thank you. Thank you, Mr. Perez. Thank you. Have a good afternoon. Next question from Danielle Gasperetti from Credit Suisse. Hi, Danielle. Hello, everyone. Thank you for the conference. What are your views on the discount levels that have been given in 2020 and how they're going to continue in 2021? So, what are you expecting of changes? When it comes to the rents, how have you been adjusting or readjusting prices with tenants? And what impact has it been having? Thank you. I'll talk about contract renewals. Maybe from here on, everything that is modified in the Congress may lead to new indexes, not the ICP index. But the contracts, they are valid regardless of the situation. When I think about the IGP, dormant for a few years because the FX rate plays a role. I don't think IGP will continue to grow like this. The FX improved a bit recently. And we had a negative IGP for a while. So this is the rule of the contract. This is a crucial point in the law, right? You can't have laws that are retroactive. But we're always adapting. If we need to readapt contracts to use new indicators, then we will. And this is a point that has always existed and that will always exist. People always try to defend their own interests. But IGC was the same for a long time. It was an index that didn't grow, wasn't adjusted. And now it has increased. But I don't think it's going to continue to grow like this. From a contract perspective, we can always adapt. And part of the revenue from countries has to do with a percentage of sales by tenants. So when sales rise, then we charge more. We expect all of these money that is in savings accounts in banks right now that it should be invested, should be spent soon. We continue to invest in this sector. We believe in it. We'll continue to expand. And there's always one crisis or another in Brazil. If you're waiting for no crisis to do anything, you'll never do anything, really. Because every five years, we're hit by a crisis of some sort. So this is certainly a global crisis that we are facing now, but it's just another one. This is also a crisis that affected people psychologically on another level, but it will come to an end. Actually, the list counts, Daniel. There is a contract readjustment, and there is an activity that was interrupted for a long period of time in the first quarter. that you'll give a discount. This is part of the support we offer our tenants. We want to be there for them so that they can survive this crisis. We have reduced the marketing funds and we have reduced the rent so that they don't suffer too much from the decreasing sales. But when we start to rebound and sales start to grow again, then we'll readjust prices. But we're more optimistic now. We expect to have better sales because we look at the world and we see that that's what's happening around the world. Have I answered your question? Yes, you have. Just on what Perry said. Do you see any risk of retroactivity in the change of rules? Thank you. No, not really. As Dr. Perry just said, we don't think that it makes any sense for new laws to have a retroactive effect. What's been agreed on has been agreed on. But the readjustment of the IGP can be seen, and we're going through a crisis in this century. And we will see these impacts withering now. But it's important that we have activities we want to grow, we want to sell. And then it becomes a more mature and an easier discussion that we can have. Thank you, Omen. Thank you, everyone. Next question is from Fanny from . Fanny, please. Thank you for taking my question. Most of my questions have already been answered, but I would like to ask you to talk a little bit about the Villa Olympia shopping mall and how long you would expect that to take for the Villa Olympia shopping mall to go back to its regular occupancy rate. I can see there are not many people there at the moment. Thank you. Let me take your question, Fanny. So Olympia is in a central region of the city with many offices around and is a good neighborhood, but it's of course suffering because of the many restrictions that have been imposed for a long time now in the city of São Paulo. São Paulo is possibly the city with the most restrictions in Brazil. And the infection rates have gone down in Sao Paulo possibly because of that and isolation is worse than allowing people to move around many scientific authorities have said that but the result is that I mean the fact is that we never expected an atomic bomb to be dropped in Sao Paulo and everything to shut down that's what happened how can Villa Olympia Survive if it's basically in a region where you only have offices all of which are closed at this moment But it will go back to operating Also because this remote work right and video conferencing is tiring You have a meeting with 30 people and and they speak independently, but there's no real interaction. A company that works with marketing and construction works and the development of real estate like us, having a meeting with people on screen doesn't really work. But on-site activities will come back, so people are going to go back to their offices. My son-in-law works in a financial company, and he says he can't stand being home anymore, working from home. People need to have people around them. And you can see children, for example, they used to hate school, but the thing they long for the most now is for going back to school. Every upside has a downside. Everything has a flip side. So I think children are going to be fonder of school now. And I think that adults are going to be fonder of their workmates and work sessions too. At Multiplan, we're all together. We are all, of course, following hygiene and safety procedures with masks. There have been COVID cases in the company, but none of which were severe cases. So I think we're going to bounce back and bounce back in full swing as I said. But Sao Paulo is like a desert right now. I look out of my window and you see no one in the streets. No one will isolate at home forever. If a judge finds Someone guilty and that person is to have home arrest instead of being in a prison that person is going to be very happy because they're not going to be in the prison but going to be at home. But we are giving ourselves house arrest. This is the worst mental prison because it is fear and fear is crippling. You have the media reporting news in a criminal way, and it sounds like people only die of COVID nowadays. So we are trying to fight back and show people that shopping malls are safe location, that there can be social distancing within the shopping mall, they can wear masks, and that they can use hand sanitizer. So we're making additional investments to address issues in this critical moment. Think of Israel, for example. No one is wearing a mask in Israel anywhere, and people are going to the beach. Of course, they are a small country, and they have had vaccines, and they have had the discipline to reunite everything. And Brazil is as large as a continent, 220 million people to be vaccinated. I think people need to tone down when they talk about COVID, not portraying it as a monster so that people can live a normal life within reality. People need to be vaccinated with efficacious vaccines.

Thank you.

All right. The next question came from the webcast from Paolo Campos from Interacid. What are the main challenges in integrating e-commerce to shopping malls? Do you believe that this type of integration could be important to tenants? in and out of the food court in the future? And what do you expect as far as the format of shopping malls are concerned in the future? Should we continue to focus on retail or should shopping malls really become experience centers? These are questions from Paulo Santos. Thank you, Paulo. Let me take the first part of your question around the integration between e-commerce and shopping malls. Simpler put, we need to factor in three points for tenants to be digital in our malls first is that they need to have an online channel they need to the second point make their inventory and catalog digital so their products have to be available online and the third is the logistics right looking at these three points. They are really facilitated when you have economics of scale. And that's why we invested in Delivery Center. This is an integration hub that will bring together online channels, major online channels with tenant channels, integrating the inventories and catalogs that tenants have. And with that, we Elevate that to an economic scale that goes beyond our own shopping malls and goes to other malls too. And we like to say that the difference between online shopping and on-site shopping is getting smaller and smaller. Retail is retail wherever it be. So our digitalization goes to every tenant that will allow for better experience for all of them. Now, Armando? Well, I think that shopping centers, shopping malls have already become a social hub. It is not a place where you go buy something and then leave. This is something that you used to see in other countries like the United States. But in Brazil, when you think about what we went through in the 80s and 90s, shopping malls were already changed. This is why our model is so successful that was then copied by the rest of the world. So you have a lot of entertainment in shopping malls as well. And this is what allows them to fare so well. So there must be full integration when it comes to online and on-site sales, right? So you have retail, full stop, be it on the internet or on-site. And this is why it is so important that we can associate both worlds. You can't invest only in the physical world, you have to invest in the virtual world too. We want to make malls as convenient as possible to consumers. So we want to combine virtual and physical as much as possible to add value to tenants. And we as malls owners and managers always bear that in mind. There's one point I'd like to compliment talking about experience centers and Well, I think that shopping malls have always been experience centers. Multiplan has always seen shopping malls not only as shopping centers, but as experience centers. So you have Gastronomic Boulevard, you have entertainment, culture, nature, and a number of other things. This is something that we're already doing. and it's not only about technology right when you think about innovation is not only about technology there are things that we have transformed so shopping malls have leafier areas now there are that have ample open spaces. And a change in mix is another process. The way you active malls is another innovation. There are many innovations involved. And there's the innovation that focuses on technology as well, but there are a number of things that need to be innovated separately and differently. There are investments and the environment as well. We have some malls with power plants that will generate energy. And these are also examples of innovation. Well, the mall of the future is something we all see in Jacare Paguano. It's going to be Open in October, November. Every mall is updated as far as technologies are concerned. We have many thousand square meters of green areas and then a restaurant, you have a skating area, you have a gym, you have supermarkets. Leisure has really increased in shopping malls. And our malls are within cities. And if you are within the city, they want to go to the mall and use more services. The La Horizonte mall used to be further away from the town, and now it isn't that far. The habit has changed. Jacarepaguá is nearly ready, so you should go see it because you really see a new concept of shopping malls that we multiply in Brazil are working on. Okay, João from JPMorgan has a question. Hi, João. Thank you for the Hi, thank you for the call. Can you talk a little bit about your vision of the quarter and what do you have in other operating lines? Hi, Jerome. This is Armando. We didn't understand your question. Can you please ask it again? Can you talk a little bit more about allowances you have made, provisions you have made, what has increased? So, 18 millions more in allowances. that due to the increase in receivables. And we have been holding these allowances since last year. And as time goes by, you increase the percentage of allowances. So rent that were due 60 days ago and we have allowances for 90 days. So really being cautious so that we can deal with the reality that we're going through. And vacancy was higher in the spirit. We have more We had a campaign that was mentioned already and on that line we have an expense there, right? So someone said something here. And we have the campaign around the shopping mall being a place where people will capture themselves. So we really wanted to make the shopping mall a safe place and a place where people feel comfortable as consumers.

So 12,500,000 Reais, that was an offer. Thank you. And just a follow-up. Well, do you think that really the delinquency will continue to go up? How do you see this up ahead? Well, let me find the number here. That is what I am estimating. I think that the recovery will be very positive. We are talking about the risk reduction. However, we need to work with the sales. We need to have our tenants generating cash so they can pay So they can pay for their own accounts. We need to see how economically things are going to unfold. Well, we look at the quality of the property. We look at the demand for space. We look at the interest of the tenant of working with more malls of our community. of our networks, and these are positive numbers, and we can see what happened in many countries last week. We had, for example, textiles. We had a lot of the – well, in the United States, with clothing, in the United States, we had a rebound, and it's very positive. Talking about playing back to normality, it doesn't have to be exceptional normality, Well, to me with the recovery and once again, the liabilities, we are going to work with this rebound in a very positive way. Thank you very much. Okay, now, thank you for all the questions. We will close the Q&A session. And now we invite the participants to get in contact with the R.I. Department of Multiplan. They will answer the questions. Now, I would like to give the floor to Dr. Armando Almeida. Thank you very much. I would like to thank you all that are here for your trust, for your interest, for the amount of questions. It's a pleasure to be here with you. Even in a quarter that was very challenging, but it's a part of this process, the pandemic that we're living. If you can look at the managerial reports, we will have more details than what we are discussing here. And we have a new format. And we have the environmental social. Well, you can look at the reports on investment and many more details, operational details and financial details. Once again, thank you very much. And we continue to be at your disposal to answer any questions. Thank you. Well, now the earnings call of the first quarter of 2021 of Multiplon is closed. Thank you very much for your participation. Have a wonderful afternoon.