Syn Prop E Tech Sa S/Gdr

Ladies and gentlemen, and thank you for waiting. You're welcome to CCP's conference to discuss the results for the fourth quarter of 2020. The audios and visuals are simultaneously transmitted on the www.sa.com.br. I'd like to inform that all participants will be listening to the teleconference, and then we're going to start our Q&A session. In case any of you need assistance during the conference, please dial star zero for operator. Before moving on, we'd like to clarify that This teleconference provides anticipations about future events and contain risks that may not be contemplated and results will be different. CCP does not update them in case of new information. I would now like to introduce to you Mr. Laura Macos, Financial Director. Please move on. Thank you very much. First of all, good morning. And I'd like to thank you all for your participation and for dedicating some time to listen to our earnings release. 2020 was a very challenging year. It goes without saying in different areas of the economy, And because we depend a lot on the presence of people, it was very challenging, but I believe that we were able to close the year with very positive outcomes. I also think that the performance of our investment was above the expectations we had in the beginning of the pandemic. For the beginning of our presentation, we have dedicated part of our efforts to improve the return for shareholders. We had two programs that were carried out. One of them was a shared buyback. We canceled and improved shareholder satisfaction. We also understood that there was not a lot of opportunities for investment for the company. And therefore, we decided to have a distribution of dividends in the order of 135 million equivalent to 0.88 per share. We also had the acquisition of the fourth floor of Padilla Libre Financial Center. And from an operational point of view, we have two factors.

Was a bit negative.

But it was not significant, and we were able to close the year with an increase of 20%, and that represented approximately 15% of our total. And then in January, we signed an MOU with SPX, a resource. we will focus on the capital management of third parties. So now moving on to the next slide, we will talk about the recovery of the shopping mall. When it reopened in early June until the end of December, we had an increase of about 35% per month. October, the recovery was more accelerated. Between October and December, there was a small de-acceleration, but we still recovered our flow to levels very close to the levels before the pandemic. In terms of the recovery of sales, we had an average increase of about 32%. And then moving on to slide number six where I will talk about the consolidated results and then later I will talk about each one of the different segments. We concluded the fourth quarter in the year of 2020 with a financial occupancy of 89.5% and a physical occupancy of 86%, but I would like to make a few disclaimers here and I will talk a little bit about each one of the different segments so that you can better understand what the reason was for us to have such a significant decrease. So I'm going to start with the shopping mall. We closed the year with a 93.7%. we can see that we had a decrease in the order of 1% when compared to the previous year. So we were able to recover occupancy when we compare with the previous quarter of 2020, and we were very close to the last quarter of 2019. And then you can see here 94.8, and we concluded 2020 with 93.7 and therefore there was a decrease of about 1%. And an important compliment is that in January we had rentals and increased our occupancy, allowing us to be very close to the 2019 level. We closed the year with 75.9% of financial occupancy and 83.9% physical occupancy. And there were some factors that had an impact. And when we defined our assets on Fadialina and SA, in the AAA building, we had financial occupancy and physical occupancy of 91%. And I'd like to remind you that the two main impacts we had in the vacancy in AAA buildings was because XP left Saria Lima building. They had not left the building yet. And also, we purchased the empty floor. So these were the two main impacts we had in terms of physical and financial occupancy of the AAA building. And I'd like to remind you that in the case of Act B, we're going to have the payment for the anticipation cancellation, and we will be able to rent this area again without an adverse impact. In case of the Class A buildings, I think that we had already announced that Itaú partially left IPM and they're going to remain there until May. We have 40,000 square meters that are going to be vacant. But on the other hand, we have good expectations. We have had some demands. Today we have a demand which is even higher than the vacant area we're going to have when it totally leaves the building. And then moving on to slide seven and talking about the performance of our shopping mall. We closed with a negative result of 23.3%. We have reduced the gap when compared to 2019, quarter by quarter. In October 2020, we had a very good month. It was when the malls were reopened. We believed there was going to be a positive trend for November and December. In fact, with the increase of new cases and closure of other shopping malls in Brazil, we realized there was some retraction in the number of sales of all of our store renters. But we still had better results. when compared to the third quarter of 2020. We also increased same-store rent. We were minus 2.4% negative in the fourth quarter. We reached total sales of 71 million. And our total number was 2.2 in our investment. In slide nine, talking about the financial performance regarding renters, we had an increase of 45.7% in offices for the year. Our AAA buildings had a 56.5% increase in the year and 46.8 in the quarter. On December 26, 2019, when we compared the same properties, we can see that there was a positive growth for the quarter and for the year of about 12%. In Class A buildings for the quarter, we had a positive performance of 12% of growth. When we analyzed the whole year, there was a positive growth of 5.2% in Shelby Mall. the revenues with leasing, and this is before the discount, so this is for gross leasing or performance for the quarter. When compared to 2019, it was flat. But when we compare 2020 with 2019, we had a decrease of 10% regarding payments of users' rights. significant percentage decreases, but in absolute numbers, this is minor. This is something natural as our malls are maturing and basically totally occupied and therefore the trend is for this usage right to decrease over the lifetime. In slide number 10, talking about net revenue, we had a small decrease of 4.2% in the quarter and an increment of 3.3% in the year. The reason for us not to have ground is the parking flow. We were really affected and that is a rather relevant area for us. And therefore we had a growth which was below the leasing rate. And now the NOI was basically flat when we compare the fourth quarter over a year. And it was below 2% or around 2% when we compare the whole year. However, the loss we had in the mall was compensated by the better performance in the billions when we compare the assets. We also had a portfolio increase, which helped us to significantly improve our results. In slide number 11, we can see the net profit and adjusted FFO. We had a decrease in net profit when we compared one quarter to the quarter year over year, but that's because we had sales in 2019. And then when we analyzed the adjusted FFO and we have already discounted the sales effect, we had a 32% growth when we analyzed the consolidated basis. And we had an increase of 17.7%. with an increase of 19% for the fourth quarter. And when we analyzed the whole year in the consolidated basis, we had a 40% increase reaching 175 million. And in the adjusted base, we had an increase of 64%. We left from 50 million and reached 82 million. And even though the operational results was somehow flat, this investment had to do with a better performance of our debt. We had a positive impact with the reduction in the interest rate. And also, we concluded 2019 and early 2020 by exchanging some of our debt which were increased fixed amounts for CDI plus the spread. It enabled us to be able to enjoy this decrease in the interest rate, which was very good for us, especially in such a challenging year. And in slide number 12, we're going to talk about our debt analysis. We closed the year with a net debt over the ETDA of 4.7 times when we analyzed the nominal ETDA and when we analyzed the adjusted ETDA, we had a 4.4 times. Of course, there was an increase from the fourth to the third quarter due to the use of cash, both for distribution of dividends and also for shares buyback for right now. We think this is a very comfortable situation, and we have been able to meet our covenant without any major problems. In terms of cost, we exchanged our debt to TR, and therefore 80% of our debt was linked to CDI, 17% to IPCA, and a very small part with pre-fixed values and that is linked to the TR. And now moving on to the last slide in my presentation, slide number 13 with our amortization schedule. And something we have tried to do here is to have our amortization schedule without any major variations year over year. Because our business is capital intense, this management of our debt is very important. We have tried to have flat refinancing. In 2020, we have $230 million. And most of our payments for 2027 and over. I am done with my presentation and I now return to the operator. We're going to start our Q&A session for investors and analysts. In case you wish to ask any questions, please dial star one. If your question has been answered, you can remove yourself from the line. Alex from Itaú BBA would like to ask a question. Good morning, Tiago. Thank you for the presentation. I have two questions. The first one has to do with SPX regarding the debts and the types of assets that will be focused. And in the portfolio, you're going to look for new classes for investments. And regarding vacancy, you commented and you have already mentioned the disclaimer, but I'd like to know what the expectation is, especially for AAA, for the Alima and the financial center in terms of location. What do you think the timing is going to be? And do you have any significant change in the spread for this specific moment in time? Well, thank you for your questions, Alex, first of all. Talking about the partnership with SPX, we have two or three funds that may be explored. The first one of them I have already commented. It has to do with new revenues that may be generated.

We're focusing on it.

We have a partnership with the management of third parties. This is something very natural for us. The partnership with SPX allows us to further expand our capillarity in capital management. And the next one, regarding our core business, especially in offices. but also properties to generate revenue. We can expand our prospection ability. We will continue doing so. And eventually, SPX is going to be a relevant player. And with that, we will have an additional component in our market. Regarding our last question, we are negotiating co-investment rights and to capture third-party resources. And I will be able to invest directly in SBX assets and the eventual assets that they capture. Initially, our main focus is going to be on the class of assets we already work with, offices, but we can analyze other assets they may have. The mandate is going to be broad in real estate, going from Padilla Lima, block, and residential areas. It's not going to be our main focus. Our main focus will be in the areas of assets that we're more familiar with. Regarding vacancy, even though the numbers are high, when we analyze Padilla Lima Square, we're talking about two floors with a little over 2,400 square meters. We have already worked with these areas. We have some prospects that are visiting. And we're discussing prices. In Padilla Lima, the same is true. In Padilla Lima Square, we're talking about one floor. So in absolute numbers, the amounts are not so different. We only need one or two renters to zero our vacancy. And the same is true for the other building. Of course, the return for the office in our case in the case of our tenants, they were planning to come back in early February and they have postponed it to June. And of course, this slows the demand for new areas. But even though it has slowed, we have some interesting opportunities. I'm not going to tell you that we're going to rent in a faster or slower manner. but we have had some good discussions and some of them are evolving quite quickly. You asked about price. What we have discussed and the proposals we have received are in line and above the prices we already have for the building. And because there was not an expressive reduction in the market price, we continue having an opportunity to have the same positive spread.

Okay, thank you.

Mr. Jorrell from Bank Morgan Stanley would like to ask you a question. Good morning, Tiago. I wanted to ask something related to what Ferraz asked. I wanted to better understand the amounts that are being paid for STX. I'd like to know what we should consider in terms of living. We consider in terms of cash for you. The second question has to do with the fact that there has been a delay in the resumption of offices. But I would like to know whether you can see any differences in terms of demand. And the different types of offices you have, like AAA, is it a weaker or the demand growing. I would like to know whether there are any differences among these different profiles. Well, now I'm talking about the penalties for anticipated vacancy. In addition to the penalty, there are other amount we're going to receive. What we usually practice in our contract are in average between three or six months of living, but that depends on the contract. The Iqaul contract was very close to its end. still had some time to go with the contract. And this is what I can tell you now. And I don't know whether I have answered your first question. Have I done so? Yeah. Regarding demand, and the question was good, the demand varies depending on the region and depending on the type of asset. So starting with our Class A assets, Some of them are located in Shakira, San Antonio, and we also have ATM in the region, which is not even considered a CDB, but as amazing as it may sound, we now have more demand for ATM than for our assets in Shakira, San Antonio. Talking about Shakira, San Antonio, the main things we had in that area were basically with new tenants and book sales, very close to the south area of the marginal. And the demand for medium-sized ethics has not been significant, especially now that we have regions that are close to Sacramento, San Antonio, Parque da Cidade. And of course, there is a lot of price dispute with tenants for Chacra San Antonio. We have three properties. Of the three, two are totally rented. And we are now reviewing prices. It was very positive according to what we thought we could practice. Talking about IPM, this is a different type of tenant. These are large tenants In Saqqara, we have demands going from 600 square meters until 4,000 to 5,000 square meters. And there at the other area, we have 10,000, 15,000 square meters. It's a type of tenant who is looking for lower prices that they would find in prime regions. but they have a demand for a larger physical space and therefore what we've seen in our class A buildings is exactly that. And here in Faria Lima, we have some demands and there is a return to on-premise work. Part of the economy has had a lot of activity whenever we talk about asset management, investments, law firms. We also have Amazon. And law firms are some of our largest tenants. We were slow in the third quarter, but resumed quite strongly in this year. We have some good things going on in terms of capital market, and the generation of business has grown in this industry. The demand will heat up as our clients move from full-time home office going to a partial home office came. And so, we can see that in the second quarter, we will have more activity. I have another question. We have 40% of contracts of offices in 2021, and I would like you to tell us a little bit about the core and what you're considering, how you're going to do market to market, and what should we expect in terms of spread. Is it going to be in the five-digit order? What should we expect about these adjustments? We have two important factors. The first one is that we still have an adjustment level that is very high, according to the GPM, higher than the average of the last few years. And perhaps this will enable us not to use the revisional clause right now. And we can push this. for a year where the offer and demand ratio is more favorable for us as owners of assets. But we can still capture, at least partially, this readjustment so that we can take our prices closer to the main market prices. We have been able to negotiate The GPM adjustment almost totally because the contract is performing with an average lower than the market and whenever possible. We made some concessions, but we do not have to use the revisional clause. The revisional clauses are open and we can use them when we have a more favorable moment for the level of prices we have. I do not think that we have any possibilities in the short and mid term to use this clause against the tenant. In average, rentals are below or close to the market average. Okay, I get it. Thank you very much. Thank you, Joelle. Mr. Aguil from BPG Pactual would like to ask a question. Good morning, Tiago. Good morning, everyone. I have two questions. Both have to do with the mall. The first is about occupancy. Tiago, you mentioned you have the interesting amounts in January, which was close to the fourth quarter, but thinking about the third quarter as a whole, how do you see the volume of occupancy A contract cancellation. What is going to happen this year? I would like to know if, in fact, this is going to be closer to the average of the last year. Then this is regarding the malls. I have another question about same-store sales, same-store rent. There was a significant gap. I would like to know the reasons. I know that it has to do with promotions and it opened an opportunity to ease this gap, but could you comment about this? And I would also like to know what the behavior of this gap, I'm sorry, is going to be throughout 2021. Thank you for your questions, Elvis. And with regards to your first question in occupancy, I think that after Christmas, it is going to be maintained. According to what we've seen thus far, the cancellations were even lower than what we expected, and leasing was also higher than what we expected for the month of January. We will still have some cancellations over the first quarter, but it's not going to be different From what we've seen in the past years, it's natural in the first quarter. What we've done in terms of leasing, we were able to occupy large areas that had been vacant for a long time. And also, we have, from the point of view of... anticipation of payments and occupancy of tenants and the financial health of them all as a whole, everything has been very positive actually. And of course, it will all depend on how our sanitary conditions evolve. I'm optimistically careful about what is going to happen throughout the year. perhaps the first quarter is going to be a little bit more challenging. But this scenario will change with the vaccines. And I'm hoping that we will have a first half of the year, which is more similar to what we had in the pre-pandemic year 2019. Same short sale. has a high correlation with the flow of people in the malls. So as we have more restrictions for occupancy and time schedules, this number tends to be more negative. And then in the second quarter, we're going to have very high numbers Because we were closed in the second half of the year, we have good opportunities because we had a low level of sales in the previous period. And so if we keep the occupation levels with more people coming to the mall, this number, of course, tends to grow. You mentioned it, 12. We worked intensively while the mall was closed. We reduced 50% of our rentals. And then when we resumed activities, we resumed the food price.

And, of course,

it helps us not to be as negative than we would have for same-store sales. Of course, we gave some discounts in terms of the occupation level. If we take into account the discounts we gave, both for condominium fees, rentals, and the level of store owners' occupation rate, is going to be in the order of 12 or 12.5%. Perfect.

It was very clear. Thank you, Tiago.

We have three questions via webcast. The first is from Bruno. Good morning. I would like to know more about the partnership with SPX. Do you intend to migrate assets just to and be transformed totally into a real estate center or are going to do it only for some assets? Bruno, thank you for your question. Well, initially, we are not planning to have CCP migrating its assets totally or partially to this manager. This may happen, but it's not our initial plan. The plan is that along with the PX, we will prospect for new assets and then we would have a partnership. We would have part of the assets and we're partners of the manager as well. But part of this investment would be using third party capital. We can transfer some of our assets to But this partnership was not created with this purpose. It was done because Pedro decided to create a real estate asset manager with an investment strategy that goes through the acquisition of assets. And then we'll start working with this business and this strategy. And some of them may be SPX assets, but this is not what we have in mind for this partnership. I hope you have understood. Otherwise, you can send an email to us and we'll be happy to answer. The second question by a webcast is from Bruno Andrade. What is the current payout? Do you intend to keep it? Are you anticipating to distribute dividends? And what is the amount going to be? Well, what we have practiced and historically has been higher than this, but usually we use a minimum of 25%. We have had extraordinary payments of dividends. One in 2017 when we sold drologes. And then in 2018 when we sold Cidade de São Paulo and part of the Relay Mall. And now we have a dividend distribution because we opened our capital. And therefore, what we intend to keep in the short term is a minimum payout of 25% and not 6%. The other 75% right now, because we still see some opportunities for growth, we would like to keep a reserve of profit for expansion later on. The third question is from Raphael Rebate. Good morning. Regarding the revisions of contracts for 2021, is the 40% you mentioned related only to offices or does it include malls? How are you negotiating renewals with clients? Regarding the 42% of revision for 2021, what is the AAA percentage rate? Well, thank you very much. In response to your question regarding the 40%, they always have to do with corporate buildings. They are not for the malls. And this amount is also for the revenues that these rentals represent. Regarding the 40%, it has to do with AAA, both in revisional and also contract renewals. So of those 40%, over 35% relate to AAA. We have very few Class A assets. The ones we had were reviewed at the end of last year.

Is that all? I think that was all, right?

We have a fourth question from Claudia. Good morning. In the previous call, you talked about the store's resumption and I'd like to know whether you have any news on this topic. Hello, Claudia. I hope you're doing well. Well, we commented about it and we're still studying, analyzing the logistic warehouses in this area in general and for storage of products in general. We have spent more time with less-mile warehouses than with larger warehouses, big boxes. But we are still analyzing these two possibilities for logistic warehouses, both a large one with a distance of up to 30 kilometers from St. Paul and also less-mile warehouses. Thank you very much. I'd like to remind you that to ask questions,

you should dial star 1. I'd like to remind you that to ask questions, you should dial star 1.

Since we have no more questions, I'd like to turn over to Mr. Thiago with final considerations. Well, as I mentioned before, 2020 was a very challenging year for all of us. It was not different for CCP. In 2020, I'm sorry, in 2021, it's not going to be easy, but we have a more optimistic view for the year despite the whole sanitary conditions we're going through. We are now dealing with something we know about so there are less uncertainties. We are also having our immunization program, which will have a direct impact for the performance of our property. In terms of the shopping mall, the occupation level is very healthy. And also, Those stores have gone through these difficulties and came out as winners. And therefore, this is very comforting for us. As to the buildings and the AAA portfolio, we have a higher vacancy level. The views. It has to do with the Class A buildings and therefore the impact is not so bad. We will reach our normal levels throughout the year.

Depending on how the immunization plan is carried out.

We have reasonable levels of requirements of refunding, refinancing. So I think that this year you will see CCP very active and more active than last year. I'd like to take this opportunity to publicly thank Pedro for the last five and a half years, the head of the company. He did a very good job, a transformational job. We were able to do a lot. We had a lot of M&A, opened our capital, and were able to balance our capital area. This is all thanks to Pedro, and therefore, I would like to publicly thank him. And now... I will continue doing what has been done thus far, pursuing the growth of the company. I thank you all for your attention and for participating in the call. The CCP teleconference is now over. We thank you all for your participation and wish you a good day.