Syn Prop E Tech Sa S/Gdr

Good morning, ladies and gentlemen, and thank you for holding. Welcome to the CCP conference call, where we will discuss the results relative to the third quarter of 2020. This call is being broadcast online at www.ccpsa.com.br. We'd like to inform you that this event is being recorded and all participants will be connected in listen-only mode during the company's remarks. After that, we'll start the Q&A session when further instructions will be given. Should you need assistance during the call, please request the help of an operator by dialing star zero. Before moving on, we would like to state that this conference call may contain predictions on future risks, which are subject to risks and uncertainties, and therefore depend on circumstances that may or may not materialize. These statements are referring to the date in which they were made and CCP is under no obligation of updating them. We have with us today Mr. Pedro Delto, CEO, and Tiago Muramatsu, Chief Financial and IR Officer.

Mr. Priddo, you may continue. Good morning, everyone.

Once again, I'd like to thank you all for listening to our third quarter earnings call. The third quarter of 2020 has been marked by are recovery and resumption of activities. We're going to be talking about this recovery soon, but I'd just like to start with some of the achievements we've had. So during this quarter, we had the bulk of our reopening and we basically started our operations again. On the results side, we had announced a shares buyback program. The first one was 6.5 million, and then we launched a new buyback program of 5.9 million. And basically we saw a brutal disconnection between our share prices and our assets value. And we thought it didn't make a lot of sense, so we decided to make use of this difference to generate value for our shareholders. We also sold a corporate park. This has been the strategy the company has taken, stepping away from the real estate we can't control. So this was the main transaction this quarter, and our strategy will remain the same. Wherever we do not have control, we will step out because it doesn't make sense and it wouldn't add a lot of value to our management. Continuing with the next slide, we talk about reopening shopping malls. We see that the flow of people has been increasing since June, which is when operations resumed or started resuming. In October, Especially the second half of October, things changed because of the reduced restrictions in the flow of people in São Paulo, where most of our portfolio is. And from the beginning of that reopening process, we had a monthly CAGR of 48%. In November, we expect this to continue. We included October here although it wasn't audited because this is a significant change which was the city of Sao Paulo becoming more flexible in the flow of people. So this is a great change and we decided to list this number here on the slide. Recovery of sales is also happening. It's up to 35% monthly CAGR. And this does not include the Estação BH shopping mall because it's managed by our partners and they didn't have data available yet. So this sales figure should be higher when we include Estação BH mall. The next slide shows our operational highlights. There was a reduction this quarter, and it was basically due to one piece of real estate, one property, which is not representative, ITMT. We have a direct or indirect share of 50%, and this had been announced before the pandemic that the renter would leave. So half of them left on the third quarter and half of them will leave during the fourth quarter. So the financial occupancy will continue to be a little bit lower in the fourth quarter. In our other properties, there were no major changes. This is a 4B property and we are studying and analyzing it very carefully because We see that the demand there is 3.5 times the area that will be available. People are looking at the property as the last mile. So it's very good for last mile storage. For the next quarters, we will probably see occupation go up in this specific property. So it is empty this quarter. In previous quarters, it hadn't been empty at a significant level. And also in shopping malls, with the third quarter, as we are reopening, we see that being offset by some malls. But the good news here is that in October, well, this is the third quarter months, but in October, we signed three times more... ABL than in October last year. So as we reopen, the demand in shopping malls is surprising us positively. We did not expect to sign three times more contracts than in October last year. November is doing well, so the demand for shopping malls is surprising and interesting and it really allows us to continue at the same pace so our financial occupancy should go up during the fourth quarter and offices what we're seeing so far also from october is that there is a higher demand we are putting out some rent contracts. There is a demand. Of course, there is a concern about a second wave of COVID. But if it does not happen here in Brazil, this demand will probably result in rent contracts. Malls are faster because retailers are seeing recovery in their sales. They're getting ahead of the demand and you know, renting areas that they would not rent if it were not for the pandemic. When we look at the next slide on shopping mall sales, here we also see a positive recovery. Same-store sales in the quarter have been going up month by month, and they took a leap in October. Several operations are selling more in October than they did in October of 2019. We believe that these trends will continue if nothing out of the ordinary happens. It will continue in November. And in early 2021, if we keep the same pace, we could have a positive SSS. Same store rent also improved it recovered. The fourth quarter also points to a continuous recovery. And this will probably go down between the fourth quarter of 2020 and the first quarter of 2021. But rents are recovering quickly. What is not recovering so quickly is parking flow. a lot of people are still avoiding shopping malls. So people who do go are being more assertive in what they need to buy. In the past, people would go and spend some time. And since entertainment options, especially movie theaters, are still receiving fewer people. They have reopened. They're doing better. Okay, but they're still receiving fewer people. So that impacts our parking flow. And this is something we expect to see in the next quarters. So I'll now pass the floor to Tiago, who will go over our financial highlights, and I'll come back for our questions and answers session. Good morning, everyone. Thank you for listening to our conference call. So continuing the presentation on uh financial highlights we'll continue with slide number nine which discusses our leasing revenues when we look at our offices there was a growth of 49 this quarter year on year and most of it came from triple a offices but it's important to adjust something here we are comparing different properties because We acquired the JK Towers in December last year, and we also sold the Corporate Park Class A office building. So when we disregard these two changes, we still have a growth of about 15% this quarter. On shopping mall leasing, it's obvious that shopping malls were closed during a good part of the year. And only now in October are we going back to activities in Sao Paulo operating 12 hours a day. So we have some losses which led to a negative impact on our leasing revenues. But as Pedro said in the previous slide, when we compare to the second quarter of this year, we have already taken back some of our performance. The next slide, slide number 10, shows our net revenue, which had a significant growth during the third quarter. That was exactly because of the sales of the corporate building, which is about $36 million. When we look at our leasing revenue, it's more balanced since it does not include the effect of sales and of services. So, we had a growth of 4.9% and 7.6% year-on-year. Our NOI had a small reduction, 3.8% this quarter. And when we look at the entire year, we did grow 3.1% in the first nine months. at a lower margin because of the costs we had to absorb during that time in which shopping malls were closed. And finally, on this slide, we have our adjusted EBITDA, which is not taking into account the acquisition, or excuse me, the sale of the corporate park building. So this is our operational result and it was a reduction of 11.7% this quarter and a drop of 7.4% in the first nine months. Looking at our results, we had a net profit growth of 105.6%. It practically doubled and it more than doubled in the first nine months. But the most important thing in this slide is our FFO. Here we are presenting our consolidated IFRS results. In this quarter we grew 89% and in the first nine months of the year, 97%. But the effort we made in our financial expenses, as you can see here, on the slide was obviously helped by the SELIC index, but this also came from our debt management and early this year changing our debt profile. And a good part of these savings were reflected directly on CCP's accounts. So this quarter we grew 120% in CCP proportion. And when we look at the pro forma results, the results went up threefold from 18.7 million to 75 million. These are CCP results with a consolidated growth of 97%. And this is basically due to the financial results we were able to post because of our liability management. The next slide. still discusses our debt. We finished the quarter with a net debt by EBITDA of 3.39 times. And this is an index that is deeply connected to the CDI. So most of our debt is connected to the CDI. We have an IPCA-backed debt, 16.7%, and a TR-backed debt of 4.7%. Also in liability management, we managed to extend our terms. So until 2025, we have an amortization schedule, which is very adequate for our cash generation and for the amount of cash we have in the company. So it is not being pressured by any renegotiations in the next years.

So this concludes our financial data.

We will now begin the questions and answers session for investors and analysts. If you'd like to ask a question, please dial star one. If your question has been answered, you may remove it from the queue by dialing star two.

Please hold while we poll for questions. Our first question will be asked by Gabriela Morais from Itaú BPA.

Hi, good morning. Thank you for your call. I have a couple of questions on our side. First, on what you informed on offices, we saw that there was a critical moment, but from the offices, we saw higher resilience. Looking ahead, do you expect more leasers to step away? And we'd also like to know a bit more about GTF. Looking at the mall's portfolio, we saw that sales went up a bit in the third quarter, but they went up in October. And was this led by Sao Paulo, or is there another region that is performing better? Are there any assets that are performing better?

Hi, Gabriela. This is Pedro. Those are some good questions.

On vacancies, up until the third quarter, and as far as I know, to the fourth quarter, this was concentrated in a single property. And it was a vacancy that was already scheduled to happen from the beginning of the year. I think we even mentioned it in other calls. I can't give you details on this property because this is... Well, this is... It used to be a mall, right? It's a very interesting... because it used to be a mall. It was already an expo center, and it's currently being used for office space. But it has a very good location for last-mile logistics. What we're seeing there is a very interesting demand for last-mile logistics. Since the previous lease or paid lease um very little we are seeing that the demand is higher than we expected for last mile logistics we're not sure if it's going to work but it has a lot of flexibility and it's a great location for that so the demand for area there is three times higher than the available area so this is what i can tell you specifically about this um property we're not seeing other leasers stepping out because of the location i think and you know later i realized that we didn't provide this information for this quarter maybe we should talk about that so Vacancy was negative, but only because of two properties, one in Rio and one in Salvador. And the Salvador property is only 300 square meters. So we basically did not review our vacancy except for these two. From the fourth quarter, so far, this hasn't changed. In Salvador, we have a very small share of which we expect to sell in the future. And in Rio, it's also a small property, which is not so relevant. So although it was negative this quarter, I can give you this information later. This was only because of Salvador and Rio and because of these two properties, which are not so relevant. We don't know if anyone is Vacating their lease is, I don't think so because we're close to the end of the quarter and so far we've had no relevant developments. GPM was definitely a positive surprise. It was not on our radar. I don't think it was on anyone's radar. And so far we've been able to pass it on. It hasn't been an issue. And we're able to pass on the space in malls and in offices. It could be that the situation changes over the quarter because this was unexpected. But so far, no complaints. It has been going in our favor. As you know, our debt is basically backed by the CDI. It has been providing good results. Right now, an asset like that is everything a manager would want to have. It could be that at some point we will need to make it more flexible, but this isn't what we've been seeing so far. Your question on malls was very good because what happened is until September, there were still a lot of restrictions, especially in Sao Paulo. In Belo Horizonte and Goiânia, there were some restrictions too. And they were removed in October, but they were removed in mid-October. So after October 12, which is Children's Day in Brazil. So the recovery was stronger in October, especially after restrictions were lifted. So this figure doesn't capture the entire recovery, only half of the month. I think as vaccines come out, this recovery will be stronger. Maybe this quarter, the fourth quarter, won't be as strong. I mean, it will be pulled by the holidays, but What we expect is that the first quarter of 2021 will be better than the first quarter of 2020 because the recovery has been strong. As I said, we leased three times more ABRs this October than in October 2019. And this trend will continue in November. If this continues, well, we're very excited with our occupation. We only got half of the IEPM in October and a half in November, so office occupation may be negatively affected. I don't think we'll be able to lease it this quarter because you know, offices or even the last mile segment we are having in this specific property tends to slow down by the end of the year. So we'll have to see. But since the recovery is so fast, something may happen.

I don't know if that answers your questions. Yes, it does. Thank you. As there are no further questions, we would like to give the floor to Mr. Pedro Delto for his closing remarks. There's just one point I forgot to answer.

They had asked if there's a standout region. In the third quarter, Rio, since it lifted its restrictions earlier, both in September and October, Rio has been growing significantly. at a stronger pace than in Sao Paulo, but I think it's just because of its timing. As Sao Paulo lifts restrictions, we believe it will recover quickly too. So closing remarks, I think we had a strong quarter. We're recovering. It's much better than the second quarter. CCP went into the pandemic at a relatively privileged position in terms of our capital structure, which allowed us to buy back some shares at a very good price, at a price that we believe is substantially below its value, according to our portfolio.

The recovery in the third quarter has been strong

It's not linear because regions are opening, you know, throughout the quarter, and Sao Paulo only started lifting restrictions in October. So the fourth quarter will still bear a good share of the recovery. And I don't think that these results reflect our business to date. CCP is focused on M&As, and we understand have been looking into alternatives in the warehouse segment. This was a segment we had some participation in in the past. We sold at a very good time. And if we go back into it, we believe it will be a good investment. The last mile segment is doing very well in that we have some locations which would serve this purpose well. And we believe that rent prices could be even higher than what they have now. The office segment has been very resilient and it continues to be. A proof of that is that we had a very low default level. Vacancy was concentrated in the single property, but this was positive because we can now repurpose it for other things like using it for last mile services, as I just said. IGPM has been recovered, and this will help us significantly since we had great liability management work last year listing all of our debt in CDI. The real interest rates were negative, so our assets are... having a much better performance than our liabilities. So I believe that from the fourth quarter, we'll start seeing these results. After the perfect storm in the second quarter, I think that we are in a much better place right now in the fourth quarter.

So we are all available if you... I have any further questions and this concludes our call. Thank you. This concludes CCP's earnings call. Thank you for listening and have a good day.