Multiplan Empen Unsp/Adr

Good morning. Welcome everyone to Multiplant's second quarter earnings conference call for 2021. We have today here Mr. Armando de Almeida-Narco, CFO N-I-R-O. We have Mr. Marcelo Banas. He is Vice VP of Development, CIO. Hans Melcher, he's the Executive Officer. Today's live webcast and presentation may be accessed through Multiplan's website at ir.multiplan.com.dr. We inform you, we would like to inform you that this event is recorded and that all participants will be in listen-only mode during the company's presentation. Thereafter, we're going to start the Q&A and then we will receive more instructions. Should you need any help, please let us know by email. to reach the operator. Before proceeding, we would like to let you know that forward-looking statements that are based on beliefs and assumptions of Multiplanet's management and on information currently available to the company, they are basically based on those beliefs, and they involve risks and uncertainties. that are related to future events and therefore depend on circumstances that may or may not occur. So the investors should understand that conditions related to macroeconomic scenarios, industry, and other factors could also cause different results that will differ materially from those expressed in such forward-looking statements. This earnings call will last for 60 minutes. Thereafter, the investor relations team will be available should you have any more questions. Now, I would like to give the floor to Mr. Armando Dalmeida, CFO, and he will start the presentation. Please, the floor is yours. Thank you, Juliana. Thank you, everyone. Thank you. And now we will not have exceptionally Dr. Perez. He is returning from his vacation. We're very happy with the operational performance of our shopping malls and also our results. But I would like to start today's conversation talking about ESG, which is extremely relevant at this time of regrowth. Now, I highlight several social initiatives that we've just implemented and that we have been implementing for many, many months. In June, Multiplan actually concluded the donation of 150 tons of food, stuff, and that benefited over 40,000 people all throughout the country. Our shopping malls have taken part in that campaign and have has gathered over 13 tons of food products and also we have received clothing items and even have worked to promote blood donation campaigns. We also continue to support the vaccination against COVID-19 and that already happens and takes place in five malls of Multiplan and we have started this week with Shopping Villa Olympia in Sao Paulo. Now, our ESG strategy has Operational Efficiency and it certainly reduces a lot of the losses here in this quarter. This is a relevant contribution for the tenants and also reinforces our environmental commitment. We are also creating the charging stations for the electrical vehicles. We have four. of those parking spots that are actually exclusive for that service. And now, we're going to have 17 docking stations, and by the end of the program, we should have 79. Therefore, we are contributing with the expansion of this new transport model that helps with the carbon emissions and being more carbon efficient. Now, I highlight that We are improving our governance. Our fiscal council here at Multiplan was reelected by unanimous and the general board in April. And we concluded June the migration of the files and local servers to a platform that is completely cloud-based. We are storing all the information of the company in a safer way. It increases mobility, allowing for for safer access to the data for many diverses, and also we are doing the audit related to the Brazilian GDPR. Now, let's go back to our results. We can see that vaccination has been advancing all throughout the country. The campaigns are bringing excellent perspectives for the business environment. And this is actually a sign of relief for all Brazilians. Life is closer to getting to normal back again. And our results in this quarter already reflect that. We see a strong operational recovery. And the step-by-step normalization and the normalization of the operations in our shopping malls. In April, we had 41% of the Normal or regular average time of operation in June we got to 87 and in July we're getting back to normal hours. Now the total for the second quarter we operated in about 70% of our usual of our normal working hours. And the sales were proportionally higher. We got to almost 80% of the levels pre-pandemic. Pre-pandemic levels. In July, the first 25 days of the month, we observed the sales of tenants getting traded 93.5%. Those are the levels compared to July of 2019, regardless of still facing a lot of restrictions here at the shopping malls. Now, we confirmed that the trend to flight to quality the search for exclusive areas, we are trying to find, people are trying to find the good spots here. And there's a greater demand from our tenants for those spaces in the shopping malls. The turnover was 13,800 square meters. And out of those, 87% are destined to satellite stores. And the rate of occupancy has reached 94.9%. in the month of June. That indicates a growing trust in tenants in wholesale and selling as a whole coming back to normal. So, we just got to a revenue from the rent 2% higher than the second quarter of 2019. So, that indicates the FSR of the rent of the same stores getting to 11.9% compared to the same period And in the second quarter, we should go over the 2019 numbers. If you look at that with the same basis, so the rent of the stores has grown in the second quarter, as I mentioned, 11.9% in comparison to the same period in 2019, 2021 compared to 2019. The evolution was even stronger in June. in the same stores, we have 19.5% higher than June of 2019 in terms of SSR rent. Now, the other results also follow up with a strong operational performance of the quarter. Now, when comparing to the last year, the EBITDA grew over 20 times, excluding the linearity effect. also has, well, without taking into consideration linearity, increased 10 times, and the revenue from parking grew seven times, showing that there is a gradual recovery of the flow. I believe that it's very important to mention the advances of our digital innovation initiatives, specifically through the omni-channels. Now, before we completed two years, our super app Mopi has reached recently the, what, 1 million downloads, which is something extremely positive from, you know, the number of users and actually their feedback, showing the importance of increasing customer relations all throughout our journey. And we know more about their habits and preferences, and we can offer more convenience and Well, a more comfortable experience. Our models are getting ready for the gradual return of the events that will reinforce our digital strategy based on the data science and focus on the experience that is more complete for our models all throughout the integration between the physical and the digital scenarios. To summarize, we're still facing a lot of restrictions and we are very far away from normal. But we can see a great demand from the tenants and a growing desire from our customers to go back to our malls. This improvement of the business environment is foretelling a really positive event with the launching of Parc Jaquara Parois in November. And this is a new mall that will be in operation, as I mentioned, in November. A proof of that is the advancement in the commercialization of the stores here at the mall, which we have 85% of ABL already sub-located, sub-rented. And the tenants are excited for the preparation. And after we deliver the keys, like I said, to the stores, by the end of July, we should restart. We should be getting ready for a great operation. Now, I would like to thank all of our tenants. for sharing with Multiplan our long-term overview or vision, and they're committed to making this new mall another enterprise that will be greatly successful. Starting from scratch is a great challenge. And we are very thankful to the tenants that trust our work, and they are alongside with us in this new enterprise. to launch a new shopping mall this year. After this really test, this very trying test of the pandemic is a demonstration of the trust that Multiplan has in the country and the real estate Brazilian market highlighting our commitment here in the country in comparison to other operations abroad. We have a lot of difficulties in Brazil, but we still believe that wholesale and commerce will recover in Brazil. Well, before I would finish, I would like to thank you. Thank our investors, our shareholders, to contribute to the fact that Multipland was for the sixth time in a role the best evaluated company in the real estate sector in Latin America by the being a leader in several categories such as ESG and the best IR investor relations team and to we have a new category which is crisis management during COVID-19 and that that was given by the institution investor magazine Now I would like to thank you once again to our tenants that helped us overcome this trying time and thank you to the shareholders. And the analysts as well. Everyone that is hearing and that is following up on the trajectory of the company all throughout these 47 years and everybody, all of our employees that work diligently to make Multiplan a better company every day. Now I give the floor to the Q&A session. Thank you once again for all of you that are here. Thank you. Juliana, the floor is yours. Thank you. We're going to start with a new session for the investors, shareholders, and analysts. Should you have any questions, please type SRS9 If your answer has been answered, you can press Part 9. The questions will be answered as we receive them. Please, if you can speak clearly during your questions, that will be greatly appreciated.

So, please, just wait a second, and we are going to get to the first questions.

First question, Mr. Alex from . Hello, good morning everyone and the team. Armando, thank you for the wonderful presentation. I have two questions. The first is related to the occupancy costs. We've seen that in regards to the recovery of rent and the sales that have been performing very well. They haven't really followed in the same measure, and I can mention that there is pressure, and we haven't really seen, well, there is also the taxes that are reducing in regards to 2019. Now, I wanted to know, can you quantify how much of that reduction of the condominium cost How much do you have in regards to the reduction of the condo rate? And can you, well, looking inside to the operation and even the initiatives on the ESG, of course, they contribute. Do you have anything that is regarding to the promotional fund, if you can approach that? And the second question in regards to, well, besides the maintenance charges or service charges or condominium, and occupancy, well, there's still some tenants that have not, let's just say, withered the storm during this challenging time. So, if you can talk a little bit more about the occupancy from the continuous, I know that there's a continuous demand, and I can imagine that you will have a recovery that will be more concrete on the occupancy side now that the pandemic is decreasing. Well, thank you for the question. The first part of your question. So the condominium charges or the occupancy costs, we are reducing expenses. Let me just say it the other way. Reducing expenses, we have two categories. One are permanent reductions. And by permanent, even because we see that this is an investment, For example, the photovoltaic energy investment. So many of these are efficiencies that will last for longer. And others, they're temporary in regards to the restrictions that we're living. For example, some stores were closed for a longer period and that would actually entail in a lower cost. So, as you go back to full capacity, you can actually have more indirect costs. You need cleaning, you need security, and also the promotional funds. And this was greatly reduced due to the finance and Now, this promotion fund as, well, it means that we can promote the shopping mall as we can help the tenant. In the marketing campaign promotion, for example, events, we can generate with those events, those promotions, that marketing, we can generate higher sales. So, we are talking about sales, and we are trying to reduce that cost. The second question, we've seen a gradual improvement in a factor that will change radically from one quarter to another. I've just seen one piece of news before we started. Sorry, I've just seen the news with the job market and the generation of new jobs, over 300,000 jobs. that were generated in June alone. This contributes for the growth and the restarting of the economy of the country and also providing some stability. So, decreasing the uncertainty. This is, you know, when you have uncertainty, you cannot plan. This is bad for the tenants. So, they need to prepare. They need to prepare inventory, logistics, and you have to have The surety that things are going to be open in the future. So we're evolving. We need to brew, create, let that trust grow and to create a positive scenario for the future that will create a great demand for the shopping mall and the tenants. And as I showed you, the occupancy rate was over 94%. These numbers for sales in the first 25 days of July, close to 94%, it already is exciting. This is generating a year that is what the tenants need. Transparency, clarity, and the security, surety that the operation will continue regardless of the economic turmoil. These are some of the factors that will allow for the regrowth in the following quarters. Great. Thank you, Armando. Thank you. It was very clear. Next question. Hello. Good morning, everyone. A few questions for you. First, I would like to understand a little bit better the shopping mall. Obviously, because we can say that the worst of the storm has gone by, but I still think that, you know, there might still be a lot of turnover in the shopping malls, even though this is a quarter that is marked by recovery. Do you still see a higher mortality, let's just say, rate in some of the tenants in some of the malls? So, the turnover is still high, from what I can evaluate. Do you believe that there is still a lot of tenants that are going to leave? Second question. I wanted to understand a little bit more the difference between the portfolio of your malls. I mean, the average was very good, but there were some malls that were doing very well. Brasilia, for example, Rio de Janeiro, and others. On the other hand, Vila Olimpia, Ribeirão Preto, they didn't tend so good. So, in this, they didn't tend so well. So, with this recovery, You're going to have differentiated work for each of these models, and you have a structural plan maybe for the models that are not doing so well. Maybe their starting point is going to be different here at this rate. So these are the two questions. Gustavo, thank you. The turnover that we've had for the quarters, they were very high. I mean, historically, we have over 14 years of data. And you see clearly that there is a turnover that is higher in the last quarters. Now, in this quarter specifically, it's a little bit less than in the last two quarters. I think that the turnover decreases gradually. I mean, it's normal. Once you have more operations and the malls are open, for example, you have, you know, more turnover maybe because we have more malls open. But specifically, once we exclude these new areas, I believe that we are going to see the turnover reducing a little bit, little by little, gradually, with numbers that are lower than what we've seen in the fourth quarter, the first quarter, or even the third quarter of last year. In regards to the shopping mall, we have a few specific issues. We have to deal with the situation as is. as you said specifically, Ribeirão Preto, Angelo Olimpia, I mean, you are surrounded primarily by offices in that region, and as we always comment, we've seen a good growth for, you know, people that are living there for residency. But most of Villa Olimpia, if you look at Sao Paulo, the offices are closed, so you don't have the public. So, you know, still, life is still going back to normal and people are not really going to the office. So, this is a reflection of all this in that specific mall. But of course, we normalize a lot of strategies and we have a lot of plans implemented to plan the recovery with an expedite recovery. Ribeiro is a city that really suffered with the closing in the second quarter. So it's kind of natural that you still have those difficulties. The unpredictability is very high. Can you imagine if you're storing all throughout and you have, for example, also the restaurants there, they have their inventory and they don't have customers sometimes. So as you have less, once you have less unpredictability, more security on the operations of what is going on, and there is a lot of positive events in the country and abroad. This will allow to contribute with the stability and therefore we're going to have a recovery even, for example, in the restaurant tour side of our business. Well, in regards to the mix, I think that we can talk about the segments. The tenants are changing. We see the malls. We have companies. trying to find the omnichannel it's not just selling on or offline there is a value creation with bubbles you have the journey of the customers and then you have demands of that type of tenant that is trying to expand there is omni channels and integrating all of them and there is the issue of the mall and the working hours are still playing a great part So by changing, for example, Rio de Janeiro, we've had positive working hours, and also we have a multi-use. We have even the homes, you know, the apartments near the shopping malls, and we have all of that, that integrated operation. So you have points for selling and for rent that will stimulate the tenants to try and, you know, really look for business in our malls. And we have less space. Now, today, for example, if you get to Barra Shopping, and I can see here the occupancy, 95% to 98%, we don't have the same amount of space. So, there's a lot of tenants that want specific spaces, spots, and they cannot find it anymore. and in the last quarter we ended up sublocating, subletting big areas with a red because this is the moment that finally some tenants could find those spaces. The spaces in the multi-plan malls, the sublocation is the subletting is getting, the best spots are getting difficult to find. That's the main point. Thank you. So now the next question is from Andremazzini from Citibank.