Multiplan Empen Unsp/Adr

Good morning ladies and gentlemen and welcome to Multiplan's second quarter earnings conference call. Today we have with us José Isaac Pérez, CEO, Mr. Armando Dalmeida Neto, CFO and IRO, Mr. Marcelo Barnes, CIO, Mr. Hans Melchers, Planning and Investor Relations Director, and Mr. Richard Schwarzman, Digital Strategy Director. We would like to tell you that today's event is available for download at the website irmultiplan.com.br. We would also like to let you know that the participants will only hear the earnings call during the presentation. Thereafter, we will start with a Q&A session when we will provide you with further instructions. Should you need any assistance during this earnings call, please press asterisk 0 to reach the operator. And before proceeding, let us mention that forward-looking statements that are based on the beliefs and assumptions of multi-plan management and non-information currently available to the company. Well, these forward-looking statements are not guarantees of performance and they involve uncertainties and risks that are related to future events. Therefore, they depend on circumstances that may or may not occur. Investors should understand that industry macroeconomic conditions may affect the results and may lead to results that are materially different from those expressed in the forward-looking statements. The earnings call should last about 60 minutes. Thereafter, the investor relations team will be available should you have any questions. Now I'd like to give the floor to Mr. José Isaac Pérez, CEO. He will start with the presentation. Mr. Pérez, the floor is yours. Hello, thank you. Ladies and gentlemen, it is a great pleasure to be here. A renewed pleasure, actually, to be here for our earnings call. I think that we have great things to talk about today. in the second quarter of 2022 Multiplan actually achieved new records. And we leveraged many of our results here from our management team. And it's great to see that the sales are increasing. With a growing number of people walking by our shopping malls, this is visible. even more movement than we had before the pandemic. And it's great to see that the customers are in a family environment, a happy environment, an environment that sparks joy because the shopping malls in Brazil are that. That combination of a growing quarter and the rate of occupancy that has grown a lot, many of the stores as well, with a low index of people that are having issues, economic issues. And now we have stability. We don't have that many defaults. And our tenants, as I've told you, are growing at an accelerated pace. We're talking about 4.9 billion reais in this quarter, reaching a new record in sales for the second quarter. Always the end of the year is the strongest quarter, but we have a total revenue of sales that we should get to 20 billion for this company. We never actually got to that number before. And that shows, that highlights actually, This result is 64% higher to the same period in 2021. And if you compare it to 2019, a year that we had a growth in the economy, we didn't have the pandemic, we had a growth of almost 29% in comparison to 2019. So we've had a growth in sales in our shopping malls, above 25% in comparison to the first quarter of 2021, and 14 of them actually grew on double digits in regards to the same period of 2019. And I'd like to actually mention a few exceptional cases. It's important to mention them. Park Shopping Canoas. It's a mall that is completing its five-year... Let's just say spectacular sales. We actually got a growth in sales to the same period of 2018, right? 2018. Yeah. Well, a growth of 86% since the second quarter of 2018. It is something fantastic. I mean, it's as if you are doubling the size of your shopping mall. You're doubling the sales. It's great. Also, we have to talk about Village Mall. And we have to highlight that in the second quarter of 2022, we have sales that surpass 59% in the same period of 2019. If you compare it to 2021, even higher, higher percentage of growth. The flow of vehicles has also grown and we are basically at the same levels of 2019, which is a great news. So the, we have the different transport systems with Uber or, you know, the, the regular, uh, privately owned cars that has grown and that's very good. We have to highlight that most of our tenants, they, They have e-commerce and it doesn't hinder the services provided for the shopping mall by the tenants. It actually complements. But remember, nothing actually surpasses the on-site sales. And I'd like to comment a little bit more on that. Our net revenue got to our gross revenue actually got to 473 million reais that's a revenue by the company and here there is a relation let's just say that i'd like to highlight i always noticed that usually the gross revenue of the shopping mall, it's always 10% of the actual value of the mall. So if the gross revenue is 2 billion, it's because probably we before got to 20 billion in the value of the mall, maybe more. But the beginning of the year is also a bit slower than the end of the year. And this year we have the elections. I don't think that the behavior of our customers will actually change. The operational revenue was 428 million Reais, also a record for the second quarter, the highest in the history of Multiplan in that period. That result allowed us to get to 300 million Reais in EBITDA just on this quarter. And I think that these numbers that we are presenting to you, they are amongst the best, the most important numbers of the listed companies in the stock exchange here in Brazil. And also, I would like to bring your attention to a point. We have had a better result if we didn't actually Denied, let's just say, we didn't get 1.3 billion Reais in revenue. And this is important because we relinquished that 1.3 billion Reais so we could actually allow some breathing room for our tenants. And that's the key issue here. There are partners. So we wanted to solve the issue of vacancy. We reallocated many of our tenants and many of these spaces, we actually implemented new technologies. And today we are hearing a lot about what we said that the onsite commerce is over and everything was going to be remote. No, that's not the way. People are gregarious by nature. They want to be somewhere physically. They want to be on site. Purchasing at a shopping mall is a party. And it's, you know, people are simply, they don't want to just buy things. They want to get the whole experience of getting to meet each other on site. So we would like to Always have a great experience, a fun experience, as we have in Jacarepagua, for example, at the end of last year. The shopping mall is one of the most beautiful and intriguing shopping malls of the country. And we always have to raise the bar. We have to have a reference. We are the reference. Our challenge is always to deliver more than the threshold, more than people actually expect. Jacarepaguá, if you can go there, you will see, I would say, the most unique shopping mall in the world. And not only internally, but externally. We have the park for children, for pets, for dogs, and for cats as well. I don't know if there's any other pets that you can actually bring to the shopping mall, but anyway, cats and dogs. We actually pay a lot of attention to the human factor, the desire of people, the feeling of, you know, getting together. And I always mentioned that at our company. We have desire because humans are a machine moved by desire and feelings as well. and it's on that with that thing in mind in Ribeirão Preto we implemented last year the management center of emotions so now we are servicing something that human beings actually are lacking sometimes that something that humans need we have an innovation the first one in the world When we had, for example, the medical centers and the shopping malls 30 years ago, we were the first ones, if you remember. People thought that that was not compatible, but now that's the norm. And we receive over 300,000 appointments monthly, 300 medical appointments per month. That's a lot. So the company will always go in the direction of what the client, the consumer needs. putting ourselves in the shoes of our customers. What would be good for our customer? And whatever is good for us is better, is the best actually for our customers. So we would always like to deliver more. And in that way, you give a wholesomeness sense and feeling to our clients, to our customers. And maybe this is one of the best performances in shopping malls in the world that we had this year. Not only in Brazil, in the world. Because this year was exceptional growth in sales, that is exceptional growth in revenue, growth in everything. I'm just going to stop with the philosophy and I will continue. Otherwise, I'm going to take too much of your time. Well, I've said that people are... Now, exercising the right to freedom that we couldn't exercise during the pandemic. Now, the collective will to live, our leitmotif, is what is behind the growth and the shopping malls. Remember, the human behavior is gregarious, and that's a key issue. And a poet said once, One, a poet said once that a monkey can never be a monkey by himself or by herself. They work in groups. And in the pandemic, we are advanced monkeys and we like to live in our gregarious groups. Remember, and with that thing that people like to get together, we've had over 170 events, 35 more than the second quarter in 2019. Just the first quarter, right? Second. Okay, what's the second? So we would like to highlight that one of the things that we did was the immersive show on Van Gogh, the Dutch painter. We have started actually in modern B shopping and it surpassed all expectations. And we had a global record of sales for the franchise of 370,000 tickets. I'm talking about 370,000 tickets to see the show based on Van Gogh. And just on this, we're talking about 370,000 tickets. And Modern B Shopping had a growth that was exceptional as well. In the second quarter, we grew 40% and 28% in traffic, car traffic, in comparison to the same period in 2019. So we are surpassing all the numbers from 2019. That project that is also in Rio de Janeiro and Brasilia, it just started in Brasilia, And the company continues with promotion, marketing that is ever stronger, adding news, news that is fun, that bring comfort, that bring culture. And now we get to Rio de Janeiro. with the 8K technology that just made its debut here in Barra Shopping. And we saw it in Sao Paulo. And also I mentioned that actually we have faced many adversities during the pandemic and Parque Jacarepaguá was one of the ones that we faced a lot of adversities as well. Now, we've went through many, many crises over these last 50 years since the inception of our company, and we've always learned, and this is not a Chinese invention, that crises generate opportunities. No. This is something that is in the DNA of any entrepreneur. You have to take the crisis and make it into an opportunity. Lemons into lemonade. I remember that in 1963, when we had the political changes here in Brazil and my first big business here, and we continued with resilience ever since. And finally, Multiplan. So I started my life in as an entrepreneur in 1963. And I believe that in the next year, I will have six years experience in the business. I am not, let's just say crazy. And we continue to create many, many things that many entrepreneurs cannot do because we are visionaries. And for many of you that look as age as something bad, don't do that. Growing old is something that happens naturally, but you can choose to feel old. You can choose to feel old at 40 years old, but you can be young in your mind at whatever age you have. And I am very happy to do what I love, which is to create, to innovate, to provide happiness to people, and that has brought a lot of good results for the company. And that's the feeling. You receive what you, you reap what you sow. So we have to deliver more than what people expect. The reality, we have to turn dreams into reality because when the reality is larger than the dream, it's always good. And that's what we are pursuing to surprise people, to all our clients and provide more comfort, more joy, sparking that joy in our clients. Because when you can actually work with health, work with the soul and work also with the desires, with what you covet, Then you have an environment that you can create a micro city. It's not a Disney world, but we could say that it's an oasis in our cities. That's the DNA of our company to invest in the joy of our clients, of our customers. I would like to highlight that real estate DNA Well, we started as a real estate company and now we have more projects. And remember, I would like to say that our project in Porto Alegre, Golden Lake, just by the side of Barra Shopping Zoo, right in front of Orla do Guaiba, it's still in expansion. And we just launched in October of last year. Our first core, several condominiums. It's a big condominium that encompasses several condominiums. It's like a neighborhood. So we actually sold already 50% of the DGB, which is estimated, which is 570 million. Now we just, regardless of the economic moment that it's of uncertainty in regards to politics, the election, the economy, the pandemic, the SARS-CoV-2, but we continue. We continue regardless, pushing forward regardless of the adversities. So I would like to say that Multiplan has 825,000 square meters in private area that is potential for future developments in real estate. And this is already paid. We already acquired these. Many of these real estate are around our malls, and they had an exceptional valuation. And 200,000 square meters of these 825,000 are expansions of our malls itself, which are projected. And we are just waiting for the most opportune moment to actually start the works. Also, what I would like to highlight and we've been working. It's the investments in technology. We continue to advance in digital innovation. Our app named Multi has over 2.5 million accumulated downloads and has been used in this quarter alone by 700,000 different customers. Over double what we actually got Last year, there is inside of the company a potential for digital content, a huge potential. There is almost one Brazil inside of all of our models, and we are still developing this potential to offer to our clients More sales, making purchasing easier, more awards, more points, more advantages. Therefore, inside of the company, we have this content. And those of you that go to our malls, ear on ear, you can see that. Once again, we can use this app for several of our services that we already provide. And I would like to highlight that we've been working for 15 years. Actually, it's been 15 years since we did our IPO. We take part on all the indexes of the stock exchange, IBRX50, IBOV, and there are several others. The secret to success is to do things right. Just to give you a bit of context of what has happened over these 15 years. We actually multiply the company. Since we did the IPO, this company already invested over. Well, it's, it's, it's, it's pure value over. So more than 20 billion reais. Uh, when we had the revenue that was half of that today, we have double the revenue and, uh, and The idea that the wholesale commerce, the on-site commerce would be over with the remote commerce, that fallacy is over. With the post-pandemic, we can see that people go and they want to go to our malls and they want to be there. Our customers, they're not simply satisfied standing in front of a computer and purchasing something and pressing a button, no. That on-site thing, seeing each other is something key of the human behavior. Maybe I got a bit over the time and I apologize for that. So I will finish saying that. What has happened over these last 15 years since the IPO for our shareholders? We have a revenue of 368 million reais in 2007. And now we catapulted that to 1.7 billion reais over the last 12 months. And I believe that we're going to get to close to 2 billion or even surpass the 2 billion mark. And in that IPO, the revenue of the company is $21 million in 2007 and now the revenue in the last 12 months is $657 million and I hope that this number is much better towards the end of the year. And that's all that I have to say to you. Thank you for your trust and now I apologize for taking too long and now I give the floor to our colleagues. Thank you very much.

Ladies and gentlemen, we are now going to start with the question and answers for investors.

Should you have any questions, please type asterisk 1.

And if you need anything, type asterisk 2. The questions will be serviced in the order they are received. We require that you use your phone when you ask the question. and then we will provide the best quality of sound. Please wait while we collect the questions.

Our first question is from Pedro Lobato, Bradesco, BBI. Hello, good morning. Thank you for that presentation and for the opportunity to ask a question. My first question has to do with capital allocation. specifically on your own capital. We saw the taxes for this quarter. We saw an impact due to the CP and we wanted to understand a little bit more about those taxes for the second semester. Since we know that historically, usually we have more taxes in the second semester, which is actually the fourth quarter. So we wanted to know more about that. And we have another question. We're trying to understand The failure to pay rates, we see that the provision in DR has increased, so we wanted to understand a little bit more about that too.

Hello, Pedro, this is Armando.

Thank you for your question. About capital allocation, well, this is related to what we were saying in the previous quarter call. I mean this year we've been very selective in terms of using resources and you've seen that there was there was a purchase of stock that is you know similar to the the line the level of capex that we had this first semester so we're trying to make capital work for us since we have a higher interest rate right now as well and thinking about the future well we have announced that there's going to be a of 150 million approximately. So we're leveraging, we're generating income, we're generating cash. So this allows us to understand the opportunities for growth a little bit better. We also have good return for shareholders and we can also purchase more shares. It's exactly what we have done in the past quarters. In terms of failure to pay, I'm going to turn it over to my colleague here. Well, when it comes to failure to pay, ever since 2019 and actually in the previous quarter, we have tried a few things. There are a few factors that are pretty obvious here. Of course, there was an increase in income. So of course, we're going to have that issue as well. It's a consequence. We know that we're more conservative now. We're looking at this average of five years approximately to understand accounts receivable. So it is going to remain conservative. It is part of the audit analysis that we have right now. We are trying to be more conservative for the future. And we have to remember that this is still better than what we had historically. For the first semester, I think we have to consider all these factors that lead to that. And about the first quarter, I think this is not determined for the increase of expenses at the shopping mall. So in Jacarepagua, for instance, we had great success in sales. We've seen a few other expenses that we have to consider as well, but that would be it. Excellent. Thank you for the details.

Thank you, Pedro, for the question.

Our next question is from one from XP Investimentos. Hello, good morning. Thank you for the opportunity to ask a question here. My first question has to do with the expectations in terms of sales. We've seen good sales in July, good expectations. Do you think that's going to remain the same trend for the next quarters? And also, about the same store rent, we've seen real growth and we believe that this was something that was recurrent for you. So we wanted to understand how do you see those adjustments in terms of the inflation? Do you think that's going to continue to happen? Should we, what kind of trend should we anticipate in the short term, especially? Hello, this is Armando. Thank you for that question. Of course, it's difficult to explain what we're expecting in terms of sales for retail. What I do believe is that we had a worse scenario for Brazil that we were expecting, but it turned out to be better than we expected. And this has been confirmed with the results, with the numbers that we're looking at for this previous quarter. Now, thinking about the economy, we believe that we can be optimistic that there was a good review of the GDP, for instance. We're looking at different analyses in Brazil that shows that the Brazilian economy is recovering. But what's important here is not what I am saying about that macro data. I'm sure there are more Empen Unsp-Adr Paris was talking about events with almost 200 events happening at the malls 170 approximately and that increases the amount of people the number of people coming to the malls and the number of cars as well vehicles so we continue to have a very good program a very good agenda for the next few quarters we have a full program full List of activities programmed for our shopping malls in 2023. We understand that we're also working with the mix. We want to work with that. Empen Unsp-Adr Good numbers and also good rent results. So what I wanted to reinforce is that activity that that Expectation actually that we have we are very positive that we're going to have an increase versus last year because we have changed the mix and There's this great strategy of promotions and campaigns that was re-established because Shopping Malls. I'm sorry, I'm just adjusting my mic, says the speaker. So as I was saying, our malls are ready to continue to work like that and to have a better market share. As for SSR, the same store rent. Let me just adjust my mic, says the speaker. So as I was saying about the same store rent. When I look at the growth that we had in 2019, I see this crooked picture, I would say, in a way, because ever since we I know I mean, we have contracts that are long term. So there is this change in inflation and then we have to see what happened. Of course, what happened in 2020, what happened in 2021 had a very important impact. We have to see those one-year periods of time. In 2020, we had a change of around 4%. In 2021, it was 7.9%. So if we only look at 2019, we're going to have the wrong expectations, that's not really going to reflect reality. But despite all that, we've seen a real growth of over 2% ever since 2019, around 2.5. So we have to remember that it was 87%, the SSR was 87% negative in 2020. But despite all that, We were able to deal with all the expenses and still have a real growth of 2.5%. So what I usually like to look at is the comparison against 2021, because comparing against 2019, I mean, versus the last normal year, so to speak. I mean, this was just to understand what kind of sales we were looking at, et cetera, but it's completely different now. So 2021 was a good year already to compare against. It's already normal operations somehow. So the third quarter, for instance, had great results. If we look at the real growth against 2021, we're looking at around 20%. It was 19 point something. So these are very good numbers. It shows our ability to manage. We're managing shopping malls in a very good way. So when you think about sales and same store, this is great. And what Louise is saying is also connected to all the shopping malls. That's the consequence. I hope I've answered your question. Excellent, thank you. Our next question is from from Santander.

Hello, good morning.

I have two questions thinking about the long term. I think one of you mentioned during the presentation that you like to create, right? So we see scenarios where there's a strong reduction in APL for the next few years. And we know that Multiplan is one of the companies that has developed the most in Brazil. So how do you see that development for the future? I understand this is not the best scenario right now because of the interest rates and all that, but How do you see that opportunity for the development of more greenfield in the next three to five years approximately? Think about ABL, which is the leaseable area. We were also thinking about the amount of shopping malls with photovoltaic I mean, what kind of impact is that going to have in occupancy and in other elements using that kind of energy, using that kind of source? And does it make sense to continue the rollout?

Well, this is Jose Perez.

I'm going to answer. Brazil has around 5,700 cities, approximately. And I think only 200 of them have a mall. There are places, cities with 100 or 120,000 inhabitants, but when you're talking about 100, this is nothing in Brazil. But if you go to Europe, of course, you see that cities are considered already a large city with 50,000 sometimes. Same thing in the United States. The number of cities is I mean, the population is well distributed, I would say, but in our case, we're mostly in large urban centers. That's what I'm trying to say. But these cities, they were embryos a few years ago, and they have grown so much. We know that in Brazil. I mean, Brazil still has a great potential for growth in every sense of the word. And now this is revealing also in agriculture. We understand that this has leveraged our development. We have green currency nowadays. I mean, it's not US dollars, but it is green because of the agriculture. So I understand that in the future, malls are going to be developed with a lower cost and they're going to be looking at very local needs. in these places in these cities we understand that retail nowadays I mean stores that are in three or four or five thousand places they don't really know where to go anymore so in the future I think we're going to look at these medium-sized cities to receive these new places I mean we're going to have more adapted equipment we're going to have this kind of analysis. We continue to follow what people want. We're trying to service people's needs. When we started with malls, Around 50 years ago, I remember in the United States at the time, we were looking at different cities in the US and Europe to try and understand what would be interesting because we didn't really have malls in Brazil. The first one was Ibirapuera in Sao Paulo, which was back in 73. It was built in 73. So I have to say that I was surprised with the idea of American people because The cinemas were not in the mall. And they said, well, that's because people who go to the movies, they don't really go to the mall. It's a different audience, they said. I said, okay, okay, it's different audiences, but We are different here. So I decided to put all of the movies, the cinema, within the shopping mall. I mean, here in Brazil, it's a real activity going to the movies. The first multiplex in Brazil was in Brasilia, the capital of Brazil. And people said at the time, that's crazy to create a multiplex. But I think around 30, People would say, well, Paris, that's not going to work. You're going to have to close after one year. And the first year of operations, we had over a million people going to the movies in Brasilia. And the closest competitor, which is no longer here, He said, okay, I bet you a box of Dom Perignon champagne that you are going to close within one year. So of course I won the bet, but I never got the champagne. But anyway, what I'm trying to say is we have this feeling here. We have this perception where we can interpret the wishes that people have. Our work here is really psychology in a way that's why we have created the first collective psychoanalysis center because psychoanalysis is usually a very expensive thing but here we are working to make sure that people all people are able to have that kind of service and it's more affordable I mean, instead of buying a shirt that is 150 reais, they can go to a therapist and get help for their mental health and spend the same amount and they don't get divorced, let's just say, or something like that. So we're helping people in terms of mental health. That's very important. So we're trying to offer more comfort to people. It has to be not just a material thing, but also We're trying to offer more joy to people. That's a very important thing. And if you look at this, I mean, when people go to a mall and it's crowded, I think the atmosphere is very positive. People change their behavior. I usually say that the best urban antidepressant is a shopping mall. I usually say that because people feel better after they go to the mall. Well, this is all very subjective, of course, but this is also what brings us closer to our objective. We're trying to transform these wishes or needs or sensations or feelings. We're trying to offer that joy. We're trying to bring more comfort. I still haven't, you know, put a hotel within a mall, but maybe someday. Well, I hope I have answered your question. Maybe it was a little bit abstract. I was a bit abstract in my answer, but you know, when you ask me about Brazil, I have to say this is, um, a place, a country where we really have most of the people centralized in these urban, this large urban areas. And now with COVID-19, there was kind of a change, of course. I think this happened in the United States as well. I mean, I was recently in Miami, and I noticed that there is this migration, I mean, from New York, from California, from Los Angeles. After the pandemic and all that, Empen Unsp-Adr Empen Unsp-Adr And I think it leads to a much lower cost for tenants in that place. But we are looking at canoas. We are looking at Parc Jacare Pagua, which are newer buildings. And they have this great structure for having their own source of energy. Of course, it's not enough to cover the entire consumption of the mall. But it's around 12 to 15% approximately of the consumption of them all. So this generates already an interesting reduction for the condominium charges. So that's a very good thing. We're going to have a better capex. So We're going to reuse water, we're going to have a better use of electric energy, etc. Actually, Marcelo Vaz is going to tell us more about that.

It's not just the photovoltaic. It's air conditioning, it's synergies and the use of water, reuse of water, the intelligent staircases, elevators. We have technology being implemented. Lighting, for example, all the lighting is much more economic. So there are several Empen Unsp-Adr to all the other malls. And another point, still about the first part of the question to Dr. Perez, to the new ABL. Well, we have the Greenfield, and we have new ABL, so the areas around the malls, and we have expansions around those leasable areas. And we have the period of leveraging the high interest rates, but we have many malls that are asking for an expansion. This is a great moment. And not only that, we are considering new urban centers. And we have to consider where the hotels are located, where the hospitals are located. It's a new world where you can move very easily and you can solve many things. On a trip, I remember that I used to go to Barra shopping every day and then I saw a friend and she told me, Why do you come here every day? And I say, well, I get everything done here at the shopping mall. That's it. You just have to have comfort to run your day-to-day errands, to solve your day-to-day business. Wonderful. Thank you very much.

Next question comes from Pedro, as you know, Credit Suites.

Hello, everyone. Thank you. Thank you for the time for the presentation. I have two questions. First is in regards to the leases adjustment. We have been using the pandemic 2019, the comparison base from that year. And you said that we have the cumulative growth that surpasses those numbers. Is there any buffer for discount? Something that happened, you know, not necessarily in 2019. We had a few points for improvement. So how do you see that real gains in leases? And the second question is the brands, as you've mentioned. the company invested in the shopping mall and the expenses could actually hinder the marketing of the shopping malls. So are you going to implement that same plan in other malls in terms of marketing? And do you see that towards the, well, down the line would this be positive promotion-wise? Pedro, thank you for the questions. Okay, I'm going to summarize my answer. Yeah, should I do it? No, you do it. No, you can do it. Okay, Pedro, here's the following. The point that you mentioned, which is the new shopping malls That issue of marketing, you know, before the shopping mall, the after three Christmases, you are maturing. Now we need five to six Christmases. The takeoff. So to get the plane in on the in the sky, you know, just at cruise level, it's not as quick as before. Before, we didn't have that many malls. It's a supply and demand issue. Before it was more exclusive. It was a privilege for the tenants to be in the shopping mall. Now Brazil has, I don't know the number, but 500, 600 malls, let's just say here in Brazil altogether. So that's, you know, we have 20 and we have the 20 top malls and then there is the whole rest, but anyway.

That's how it is, the market.

You cannot just take back the numbers of 40, 50 years ago. I remember that 40, 50 years ago, we got 50% Revenue and we would, we would be paying the installments just for the financing of the real estate and the interest rates were 12% plus, you know, correcting by the, uh, economic indexes, which got to sometimes 200%. So even though there was the revenue over 200, we managed to receive 50% that basically we had laying there the cashflow of the company. So it would pay for them all in 10 years. Now it's different. And my partner, so that there was a partner and then it, it, they stopped and I came to Multiplan and I was doing the malls for some time, obviously. the development that we saw at that time, it was almost a privilege to actually have your store in the mall. Now we're working with more simpler numbers. And I can say the following. The real estate entrepreneur, I used to pray for the day that Brazil would have interest rates of 12% without correcting by any index, 12, because 300% correction I remember the last month of Sarnay's government, and we had 80% inflation. I mean, 80% inflation, come on. And the supermarket would readjust the prices every day. Fortunately, we're not in that situation of the late 80s anymore. The world has changed and now we have a more civilized equation, more based on numbers. And today we see countries in Europe, for example, that are working with an interest rate of 12%, regardless of the inflation being much higher. But today, if you if you have a hike in interest rates, you have a lot of people filing for bankruptcy. You see the United States. If you grow higher, you're going to get bankruptcy. And I think that our central bank was very daring in having a strong hike and then a strong downturn in the interest rates. It was it was tough. But those of us that lived through the hyperinflation of the previous decades, we have records, we have We know how to deal with that. Those of us that took part of that, we know perfectly well how it is difficult to deal with 30 years of hyperinflation. Brazil, thanks to the institution of the economic institutions, has grown. And we've grown 10% per year, even, regardless of inflation, regardless of the period. So I would like to say that we are talking about. I think that I got a bit lost here with a question. No, no, I can continue. Pedro, here is the thing. Obviously, a great deal of the discounts are going to be phased out since the fourth quarter of last year. Actually, third quarter of last year was something that was we had the start of this very specifically. Of course, we have discounts. We have specific situations. And all the shopping mall today, the investors, the entrepreneurs, they're going to have to invest money. And those funds, they have to be enough to make the plane fly a cruise, a cruise level. So in getting to the takeoff, it takes a long time. It takes four or five years. In Jacarepaguá, for example, we are climbing up. We're still climbing. We're still reaching those cruising levels with the plane. There, we're servicing a demand that it's not easy. It's not easy for you to imagine that you're going to, you know, make a mall and it's a super mall and that in three years it's going to be flying by itself. No, it's something that we are creating out of zero. So, Pedro, discounts. If you get the situation of shopping Vila Olympia in Sao Paulo, there is still the influence, higher influence of of the offices than more than people living around. With people coming back to the office, there's a growth in terms of the second quarter of this year in over 100% in regards to the previous year, 112%. These are opportunities of you reducing the discounts, but they are much lower than what we did last year. And the marketing expenses, which Dr. Perez has commented perfectly well about Chaca de Pagua, it's what he said. The promotion fund is, let's just say, a saving account that we have been doing for some time. And we just started with a very small amount of money, if you say. And now this is a moment for investment to get this plane to take off. And as you said, As we say here and everywhere else, there is no free lunch. You have to purchase your materials. And we have several other opportunities. We have campaigns, one from Multi, another of influencers in the shopping malls. These are non-recurrent, one-off investments. And these are incentives to increase the traffic, the food traffic. And then we have a consequence reflected in higher sales. And whenever we see a good opportunity, we will invest in marketing, sure. But there's nothing that is extremely planned. There is always opportunities that pop up. And we plan that in the budget of the mall.

Thank you very much, Dr. Perez. Thank you. Next question.

Hi, good afternoon, everyone. Dr. Perez. I have a few questions here. The first one about sales. Your shopping malls, they were very strong in the last quarter, and the perspective is good, as Armando has said. And if we see month on month, there is an accelerated growth, comparing to 2019. I just wanted to understand and know if you've done a few studies. Is it more connected to wholesale, schedule? What is the speed of acceleration? And the second question is in regards to flow for traffic. I mean, I want you to understand what do you see in your end to explain this the standards comparing to 2019. And of course, we didn't have the pressures of last year. Maybe, you know, you have less foot traffic because we had we still don't have that many movies or the customers. They're changing their habits to online. What can you tell us about that? There is a saying that says here, you know, as long as we're paying for the Well, I am happy. And let's go back to March. Could you imagine that the sales would go 20, 30%, 25%? No way, no. Let's look at this backward. We cannot look at backwards and saying that this is the deceleration that we grew first 30 and then 25%. No, in comparison, this is still great growth month on month. This is also vacation time. Remember post pandemic that people want to leave travel. So it's evident that the cities and more and more than that. Let's look at another aspect. Let me give you a comparison here. I am looking at the occupancy cost, which is the question that you've been asking us day to day. And then I hope that today Many of these questions have been answered, but look at this inflation. IGPM that just was published is below 11%. You're going to see effects on GDPI. The growth are growing 25%, inflation 10, 11%. It's much more sustainable, differently from what we saw last year. in the previous years. So I'm not saying growing 20, 30% a deceleration. No, we're growing at a lower level, but it's exceptional growth. And we couldn't even foresee this. It's unimaginable. That number 23%, we almost, we got scared when we saw those numbers. They were so good. It's a good scary feeling of joy that we're seeing that our strategy is generating results and that allow us to have a result as we present it. And before we got the pandemic and the whole thing, we saw growth that was lower of the last vehicles first. First, we have to consider the Uber effect. You know, car sharing. That's a natural thing. And today, the malls are not isolated. They are part of a big, of a mini city. And we have, yeah, we have the multi-use, integrated lifestyles. We're talking about three malls of ours that are by Big buildings, and there is a point that I would like to highlight. The main shopping malls that are elected as the best shopping malls in Brazil, they are with Multiplan. In Sao Paulo, It's Marumbi was elected the best shopping mall in Sao Paulo. Barra Shopping always wins every year. Belo Horizonte the same year. Ribeirão, there is no competition. And Park Shopping as well. So if you take a look at everything that we have, our workhorses are always racing and getting there first. Are you unhappy with the results that we are providing today? I mean, wait for the end of the year, then you're, then you can see what we are doing. But the first time that I went to part shopping, there was only part shopping. And today we are surrounded, canoas that we did five years ago. plus Jacarepaguá. So all of that brings an impact that allows, well, Morumbi, it's an icon that has been developed. And there is more and more to grow, to develop. The vehicle traffic, it doesn't necessarily indicate a precise indicator of sales. Even vacancy is higher. With higher vacancy, we are still getting great growth. So we can see that the foot traffic and the vehicle traffic, my expectation is not to see a growth in vehicle traffic. I don't see that happening because the malls are more central. We have public transport. And people even go there, but by walking, you know, sometimes you, you get your kids at school and then you go have some lunch at the mall on foot. And we have to be very objective. Uh, inflation, unfortunately, inflation has, uh, you know, the, the, the market for the salesman, the lack of products created a market. by now, because I don't know when I'm going to receive this. Since the world stopped with production for two years, you don't have any stocks. You don't have televisions on stock. You don't have products on stock in the warehouse. So when you go to a store and in the shopping mind, the salesman say, buy this watch because I don't know when I'm going to get another one. Then there is another factor. I don't know how much it will cost in the future. It's evident that this is not good. Inflation is not good. The lack of products is not good, but this is the reality of today's world. And I traveled to Italy recently and I saw that everything was lacking. I mean, the products were not on the shelves. The world stopped producing. You know, just China grew.

Everybody else took a beating.

So there is another point that I would like to highlight. There are some activities that we are growing. Well, we have movies that are growing. We have a new launch, new launches. But this is an upside. I don't think that we are still looking at all the indicators. Again, inflation. Inflation is the reality of the moment. If you want to buy a car, we don't have the transistors. We don't have goods. You want to purchase a watch, you don't know when you're going to get the next one. Anything that is a bit more sophisticated, it's difficult to get your hands on it. And of course, the basic part of our lives, which is Empen Unsp. Food of course Brazil produces. Empen Unsp. A lot of. Empen Unsp. A lot of raw materials and crops and we of course are an agricultural have stronger agricultural industry here. Empen Unsp. And Brazil has everything in a sense to be a great world power, which is need more order and and and people understanding each other, thank you. Next question is from Andre Mazzini, Citibank. Hello, Dr. Perez Armando, everyone. A question about the real estate. You already talked about the marketing, the, well, I think that the last part was the vacancy expenses. Of course, ABL leasable area is key, the acquisitions, and higher vacancy than the pre-COVID time, but not so much. So if you can provide us with some color on how do you account for the vacancy in some of these malls when the vacancy is 90, 95, 95 a hundred. Can you dilute that, um, that expense in the condominium charges and then the tenant pays for it. So the portfolio above 95, but some malls, I would say that it's less than 80. So that's the math up until 95. Uh, you know, the condominium rates is multi the one that pays. So can you, can you tell us about that? And that. In our malls, the vacancy charges are covered by the entrepreneur. So your question is that specifically, right? Or is there any other point? No, that's it. Thank you. So the shopping malls expenses reflect a higher vacancy when compared to 2019, which is the base of use. And this is not an obligation and commitment of ours to forego the rent, the lease during the pandemic and received half of the minimum charge. We didn't get, we are not making the tenants pay in a few years, but actually we simply forgone that payment because we are partners with our tenants and that's how we can get a better recovery. The tenants that are with us, there are partners. We are not the middlemen. So to have a good tenant is a blessing. Of course, we have concessions according to their own business capacities, but we need to understand that this is a human company. We understand what's going on in the market and We thought that we stopped working during the pandemic. No, no, we continued diligently working. And we have problems with, in Brazil, we have problems with unemployment, but we've grown with 8 million spots here of jobs, formalized jobs here in Brazil. Maybe this is one of the few countries that has that unemployment has decreased. So we have to celebrate that even inflation will drop. So when the fuel cost decreased, it was a party. And I remembered that I heard people say now it's eight reais and now six, the leader. So this is a point. I always look at the fuel prices, a few mitigating Proposals have been implemented. Some measures that also create jobs have been implemented. The infrastructure will generate a lot of business here and will generate a lot of employment. Infrastructure has been, investment infrastructure has been key in Paramount and that will make Brazil move forward.

Thank you, Andre.

Thank you. Our next question is from Rafael from Safra.

Hello, good morning. Thank you for the presentation. I wanted to know more about the turnover. I understand there was a change in the last few quarters. So if you could tell us more about the new tenants and how the negotiations were with the new contract and also the contract that are due now, this month, this quarter, our negotiations in that regard.

Hello, Rafael.

Thank you for your question. For the turnover, you will find more on page 31 of the report. You can see the follow-up there, who is leaving, those who are starting now. So yes, we had different factors there. loss of around 1000 square meters, but I believe that we're expanding 752 and for apparel, we've had a very good growth in sales progressively. So as for the turnover volume, in the past 12 months, we've looked at around 60,000 square meters, is especially in two malls, but we have to remember that Jacarepagua is not going to be considered in this math and this number because it's new. And I mean, this shows that retail has a lot of strength. And alongside with sales performance, it also reflects the great moment that it is right now for shopping malls with a better occupancy rate. I hope I've answered your question. Yes, this is very clear. But I also wanted to know more about the contracts. Yes, that's true. I forgot, sorry. So we are negotiating I don't want to repeat myself, but I don't usually talk about spread because it's a very abstract concept. I mean, we are looking at an average of the five past years, the first rent and the last rent, but here we have to think about the rights and all that. And I don't really like that concept. New stores are being now, Negotiated for rent with a value per square meter that is higher than what we had last year. So the previous contract. Again, this is a very positive moment for malls. So you might ask, well, so they're already renting everything with a higher value. Well, we're progressively Improving in that regard. We have more operations. We're going to generate more value in malls in the long run and the medium run. And we're going to have higher margins, higher numbers than what we had in the past. Okay. Thank you for the answer. Have a great day.

Our next question is from Andrea Dib from Itaú PPA.

Hi, good morning. Thanks for the presentation. I have two questions here about what Dr. Paris was saying in the beginning. He mentioned an expectation for sales of 20 billion for 2022 with gross income. He mentioned the numbers for gross income. So I wanted to know more about sales. The sales number that you mentioned is that's going to represent around 20, 23% growth in the second semester, which is aligned with what we had in June and July. So I wanted to know is that additional makes, does that make sense? And how do you assess an upside risk for that number? And the second question has to do with the with the gross income, does that include just rent or does that include other elements as well? And also, does that include, I don't know, any other linear elements?

Hello, Andre. It's a pleasure to answer that question, Andre.

Well, the second semester is usually better than the first. Traditionally, I mean, historically, that's what we have noticed. So if we think about if we do the math here, we're reaching 5 billion approximately now for this quarter. So the next few months are going to be better for sure.

It has always been like that.

Unless there is a catastrophe. I don't know, but that's not something that we are expecting, of course. So what I wanted to know, what I wanted to say actually is that behavior, um, People is usually like that. I mean, second semester, we're going to have Christmas. Usually the last week before Christmas represents a whole month of sales and other months. So that's what we notice. And usually people's behavior, it's usually the same. Historically, that's what we have measured. So I cannot bet on this, of course, but it should be fine. Well, Andre, just to compliment on that, about the 10%, actually that is a simplification, really, that they used for an analogy. So that is why we said that, he said that, but it is better explained in the article. You will find much more detail in there. He was just simplifying the explanation here in terms of sales. Yes, I mean, if we're looking at the next 50 years, how can I explain this? Let me rephrase. The thing is, it is usually, sales are usually 10%. It's always been like that. So if we get to 20 billion, we're going to be invoicing too. So that's not the forecast. That's not what I'm saying. I am just doing basic math. It could be more and it could be less. It's really going to depend on the factors that we're going to see in the next few months. And especially with the elections now in October, that creates certain uncertainty. But if everything goes according to plan, of course, politics, you cannot really say according to plan, but still, I think if that happens, then Brazil is going to have good performance, I would say, despite everything. I am very optimistic. Okay, thank you, Andre. Thank you, Dr. Perez and Armando. Our next question is from Marcelo Mota from JP Morgan.

Hello, good morning.

Just a quick question. How do you see the, how do you see Golden Lake, the project? It's a very good location, we understand. So when we think about the next stages of this project, what do you think? We're going to have, I don't know, 80, 90% of sales in the first stage of sales. Does it depend on the macro scenario? I wanted to know more about that. Feel there's going to be some additional pressure factors or anything.

Hello, Marcelo. This is Josie Tucker.

Well, I've been in real estate for almost 60 years. So let me explain one important thing here. In real estate in the past, many years ago, there was no financing. You would have to sell around 80% before you started a project, but you had an interest rate of around 200 or 150% a year. So it was very difficult to get credit. Nowadays, with a lower interest rate, of course, you can obtain credit. You can get credit. and then turn it to the buyer. So when you see, I don't know, 50% nowadays, we understand the infrastructure is very advanced. We understand that the fixed investments are very advanced. And I would say that 50% of revenue can already pay for the project. You don't even have to get a credit line or something like that to build. So I would say that we could have even launched a second condominium, so to speak, and we haven't. We haven't done so so far because, of course, we are thinking or focusing mostly on selling of the first building but what we're looking at here is very very good apartments very very good apartments we're looking at 400 square meters so it's not a common apartment of course it's a very good size and this makes us Confident that we are going to sell 100% by the end of this project. There is a demand now for apartments that have around 160, 180 square meters. This is something that we have in our project. A lot of people have been asking for that. There's a huge demand for that, for that kind of size. And we will work on that, of course. I think this is one of the best projects that we have had so far in the country. It's really an icon. It's really a fantastic project. It's a region that we are rescuing, you know, with Borrow Shopping Seoul. There were around 600 houses that were not truly They were very poor, very simple. So we transferred 700 people that were there to a good neighborhood that we built to try and rescue, to try and recover really that region. And then we started with the building, with the project. So that's going to be great for the region. And same thing happens in the south of Brazil. Everyone is very happy with this fantastic project. I don't know if we're going to ever have anything like that again in Brazil, honestly. But anyway, it's multi-plan, trying to do its best every time. Thank you.

Thank you, Mr. Perez. Our next question is from Natalia Pereira, Morgan Stanley.

Hello, everyone. Thank you for the presentation. I have a quick question focused on Villa Olympia shopping mall. We know that the occupancy has been a bit lower than the usual portfolio, and we see that there was even a comment about that, if I'm not wrong. Maybe people going back to the offices, that's going to be better in the future. But I wanted to know more about that mall. Do you plan to have a different impact and occupancy rate? Do you have any strategies for the future? Thank you for the question, Natalia. Villa Olympia had a very interesting growth in the semester. It was very good. And this is basically due to the return of offices, people working in the offices in that neighborhood. And we have more residential buildings around that mall as well. So I'm sure it's going to be a region that it's going to continue to grow as usual. We do have a strategy, but of course we cannot give you any details because of competitors. There are many competitors around that region and that shopping specific shopping mall. But anyway, we do have a strategy. We understand that many people suffer with the first impact that were noticed, but I am sure that that's going to be solved right now. It is true. I agree. I think that with more people going back to offices now, this is going to have some momentum. We have around 70 or 80% of that number of people going back already. Not everything can be done via video calls. Of course, if you're talking about digital banking or something like that, you can do a lot of things online, but not every meeting can be can be held online. I mean, there are many projects that have to be discussed around the table, looking at spreadsheets, looking at physical documents, et cetera, et cetera. So I think During the pandemic, there are many buildings that had around 10 or 15% of occupancy and now it's back to 70 or 80%. And many of these people are actually the same that used those facilities before the pandemic. And again, Villa Olympia is a very good center. It's a very good neighborhood for that. It's true. And it's very difficult to replicate that in Sao Paulo again, because there's There is no neighborhood like that, and there is no other lot where you can build another shopping center in Ville Olympia. So, okay, thank you. Thank you very much.

Our next question is from Jerelle Gilot, Goldman Sachs.

Hello, thank you for the opportunity to ask a question. I have maybe a theoretical question. Thinking about the future, really, when we're looking at the mix and all that, we understand that it's back to the old levels where we're noticing that in rent, there is a reduction of 100 times in condominiums. I understand that There was an impact by multi by I don't know different factors, but my question is structurally. Is there going to be. An increased reduction. Maybe another 50 times or something like that beyond the 100 times. So basically, that's what I wanted to understand, that dynamic between the cost of condominium, the condominium charges and rent. What kind of trend do you see for the future? well that question about that question it is possible to reduce these charges even more if the company invests in a different source of energy such as photovoltaic for instance we can reduce that cost of energy of electric energy in around 50% so we usually purchase We used to purchase electricity at a very good cost in the past, so it didn't make sense to have that kind of investment in the past. But just like what we did in Village Mall, we might want to implement that kind of initiative in other places as well. It is a way to reduce costs. when it comes to location, when it comes to operations. Besides looking at rent, we're also trying to have more efficient buildings, just like Jacarepagua, for instance, which is going to be a very efficient condominium. It's going to have the best, the lowest charges. It's around 20% less than the average of the other buildings in Rio de Janeiro. Isn't that right? Yes, I don't have the exact number here, but it's around 20% below the average that we see in other malls. So electricity is something that we've been discussing. Photovoltaic alternatives are going to be very important in the future and some other alternatives. I think that the cost of electricity nowadays is probably 15 to 20% of the condominium charges. So that's something that we can reduce. And also other measures, safety measures. We understand that cities are usually safer around malls. We have really an army, I would say, of people to make sure that we have good safety in the premises of the mall. So we can think about all that. It is true. So Jarell, thank you. Thank you for that question. I hope we have answered your question. I just wanted to compliment on what Andre from Itaú was asking about sales, the 20 million that Mr. Perez mentioned. If we do the math very quickly, if we think about the sales in the third quarter last year, it was around 9.3 billion reais. And the first semester now, 8.9 million reais. So it was 18.2 million reais approximately. If we get to 20, we're looking at around 9%. So of course, we're doing the math very quickly here. But mathematically, I just wanted to show you our status right now.

Thank you.

Thank you very much for your questions. We have Included our Q&A session right now. If you have any further questions, please talk to the investor relations department. I will turn it over to Mr. Perez now for the last message.

Thank you.

Thank you very much for your attention, for your patience, and for all of the questions. It's very interesting for us to get your questions. We learn a lot as well, and you can remain sure that we are very satisfied. We're very positive. We've had good results this quarter, and hopefully we're going to have even better results until the end of the year. Thank you very much. Thank you, Mr. Perez. Thank you, everyone. This is the end of our Call for this quarter. You may disconnect now. Thank you very much.