Syn Prop E Tech Sa S/Gdr

Good afternoon, ladies and gentlemen. Welcome to the SYN video conference to discuss the results of the third quarter of 2021. This video conference has been recorded and the replay can be accessed on the company's website, ri.syn.com.br. The presentation is also available for download. Please be advised that all attendees will only be watching the video conference during the presentation, and then we will start the Q&A session. when further instructions will be provided. For those who are watching the video conference in English, we advise you to download the presentation on the company website. Before proceeding, I would like to emphasize that the looking forward statements are based on the beliefs and assumptions of scene management and the current information available in the company. These statements may involve risks and uncertainties as they relate to further events and therefore depend on circumstances that may or may not occur. Investors, analysts, and journalists should be aware of events related to the microeconomic environment, the industry, and other factors that could cause results to differ materially from those expressed in the respective looking forward statements. Presenting this video conference are Mr. Thiago Muramatsu, CEO, CFO, and Investor Relations Officer of CIM, and Mr. Hector Leitão, Financial Superintendent of CIM. Now I would like to hand the floor over to Mr. Thiago Muramatsu, who will start the presentation. Please, Thiago, you can proceed. First of all, good afternoon to all of those who were with us during this resource video conference. from the second quarter call to this one, we've had an important move, especially in terms of the sales of assets. So let me go to the part of achievements here. And we want to explain in more details the transaction, talk a little about the results for the quarter and how As we said in the teleconference for the second quarter, we had a positive perspective for the leasing for offices and shopping centers and that has been confirmed, we were able to show those numbers. And those are the highlights. we defined here two enterprises, Faria Lima Financial Center and Tower D of the JK complex. And in the third trimester with the change of our names, we also had the change in our ticker in B3. And we also entered as a part of the B3 index for small caps. As I had mentioned before, we have signed, in the subsequent events, we have signed with Brookfield to sell the assets we have for four buildings, FL Financial Center, Faria Lima Square, JK 1455, and over, and Miss Silva Morizono, around 49,000 square meters with a price of around... 1.774 billion. In this period, we have signed for selling our participation in JK Financial Center. We have 66.57% of the total area. That means 4,864 square meters. The price was a transaction of 25,000 reais per area. Before advancing, we have these two transactions and most of the analysts and investors have talked to me or to Hector and Filipe And they are key teams to take doubts and understand a little better the transaction, so I can even consider the questions that may arise in Q&A. One of the main reasons why we took we we carried out the transaction is that we try to work with focus on profitability for stakeholders. and especially the shareholders. And so we found a good opportunity here because it's a moment the interests are in a tendency of going up and it will continue. So there is a strong correlation between the value of assets and the interest rates. So we were able to find a point of price that made sense for the exchange correlation with an attractive rate of five. And we also have a moment when we found a tax efficiency for the transaction. So the buildings are all in the company since they were open. So We had attribution window for that transaction to make sense, even though we know there may be an appreciation in the price of the rent. So these two facts brought an unique opportunity. And we are still managing the buildings, which is very important for us. We want to prove ourselves as managers as well. Since our follow on, we want to have a structure where we put part of the capital, and this is an investment of capital, where we would split the capital risk, so adding less capital, and adding to our personal leverage to manage the buildings. And so this brings an additional return. for shareholders. And the transaction of the JK Financial Center has to do with an effort we have carried out for some years to invest in assets that we have no control. So this building is one we didn't manage the building as a whole. We were a minority owner of the complex, so we had plans to make this investment, especially in this property, as we have done with some transactions with XP in this line of leaving the assets we don't have the control of. Continuing on, talking especially about the shopping centers and the shopping malls, we have some of what we see as the first and second wave for our resume and the sales recovery, where we have period that was stronger in the opening in July, then we have an acceleration and we were expecting a strong black November, Black Friday. And in the beginning of November, there were some signals of a second wave and it ended up going until December, in January. End of December, beginning of January, we started having some restrictions again. And then in March, April, closures again. And the recovery is above last year. We ended up focusing on sales and we have a sales flow that is very close to the one we had back in 2019. And there are some regional differences in Brazil. So when you look at the behavior in certain cities or regions, they vary a lot. And... in the regions we are present, we can notice the difference. But it seems, the signs show that from November on, we are going to have a strong recovery of sales. And talking a little about offices, our office is in Faria Lima Avenue, and on our day-to-day I've spent very little time working from home. I've always come to the office and we see traffic on the streets. We see people walking during lunch. we have a crowd and we still have an occupation restriction, but we can see the life coming back to a normal. And when we see the numbers of our offices, the offices we manage, in the beginning of the year, we had a population of around... 10 to 15% in the buildings. And now these numbers in some offices are around 70, 75%. So over 40% of the building's capacity going back to being used in all offices. So I think this is one of the evidences that the return is real. And that is why we have always been very excited with the recovery of our properties. One topic I talked a little during the second quarter conference was ESG. And I mentioned we were gathering some information we had of all the practices we carried out inside the company. And now in the past month, we were able to disclose a report. It was published. And if you want to know more, about the work we have done related to the environment, social and governance. We will have the report that was prepared by the RE department. And I congratulate everyone that is involved because it was an excellent work you did. And some of the highlights of these reports, one for each area, Some commitments as well for the next years. So in the environment, most of the water resources of our assets, the shopping malls and the buildings are from alternative sources, 85% of them, and half of the enterprise use incentivized energy. Besides in the social aspect, we have every year a census inside the company. And among several factors, we analyze age, gender, ethnicity, and we try to bring the most diversity inside the company. We think that is very important. We've highlighted a relevant point that is 50% of directors and 57% of managers and superintendents are female today. we have a diversity committee where we gather groups of some minorities to discuss how we can bring more diversity inside the company and we can do it internally and externally. In the social aspect, we also have the instituto scene where we have a percentage of the profit of the company being uh directed to the institute institute based on three pillars which is um the employment imprinted entrepreneurship and relationship and we want to bring this positive impact and we have some campaigns internally last year we were able to gather 80 tons of food that were distributed in the area surrounding our shopping malls. And we were able to help with over 100,000 doses of vaccinations. In terms of governance, we have independent members besides the members of the controlling board, the president, vice presidents, the rest of the board is independent. We have the committee of audit and compliance. And we also have a committee for people. Talking a little about the goals that we have for the next years, in five years, in terms of water resources, we want to get to 90% of them coming from alternative sources of water. And the energy we have within five years, we want to have 100% of the electricity consumed from incentivized sources. We want to raise the level of recycling for 70%. And the next five years, we want to use a majority of sustainable materials and the use of ETA and ETEs in our enterprises. So we have the treatment of influence. talking a little about our operational highlights, we start with the occupancy index. In the past five quarters, we had a decrease in physical occupation of 1%, but that 1% is impacted by This variation of area that we have specifically for the offices, we have the ITM impact and it's the most offensive. In this vacancy, we get to 70% and for the shopping malls in Grand Plaza, we have a small commercial tower that is available with around 4,000 square meters. And if we don't consider the tower and consider only the shops, we reach a level of occupation of around 91%. So we have the occupation here and four offices and shopping malls. For sales, we've had growth in total sales. We've also had reached a level of 87% of what we had in 2019. In the flow of cars in the parking lot, we were able to have 3 million, sorry, 2 million in the third quarter of 2021. And you had 3 million in the third quarter of 2019. So it went from this number to the other. And now Hector is going to talk a little about the financial highlights. So talking about the financial highlights, first of all, Thank you all for your presence in the conference. In terms of gross revenue, our growth was around 16%. with 116.6 million as revenue. And the highlight here are the shopping malls, as Thiago mentioned. The return has been interesting and the business in the offices are becoming more flat, more stable. In the net revenue, we had a non-recurring Francesca Cotrufo- Non current events that was the sales of one of our units and then, when we compare it to 2021 we have a growth of 20% and it adds to the net revenue parking lots and service provision that had an increase. in this aspect. So it was a good recovery for shopping malls when you see the net revenue. When you look at NOI, it's the same impact. We had a growth of 14.6% with a stable margin. And what we have here is a growth of EBITDA. of 44.1% and besides the revenues and costs of operational expenses of shopping malls, we have a recovery of the debts and we had an impact here. And so we were able to recover all that in a strong place. If you want to see More about that, we received more in rent than we had before and it impacted in the accounting indicator. We also had some other effects in SG&A, one of those is the reversion of legal action around 2 million and the other ones in different lines related to commercial expenses and all that related to the enterprise. In terms of net profit, we have the sales of 2021 and discounting that we have a growth of 45% in profit. And if you consider the adjusted FFO, we see a growth of 18% in IFRS and 1.1 in pro forma. The main impact here being in the financial Net expenses, we see throughout the semester a growth of 2% in SELIC and it caused a negative impact of 15 million in our results. And as I always explain, the difference between IFRS and proforma is the corporate debt where we have 100% almost of the debt with the balance in comparison to the enterprise balance. So that's why you have a difference. But with the financial difference, you have a growth that you can see here. And when you see the indebtment, We can see we have for the indebtedness, the net debt, and our main cognate was in 4.3 times. When you see the evolution of the financial expenses, we reached a balance of of uh 43.7 in comparison to 33 in the previous year and when you talk about our amortizations timetable we have a very stable timetable very coherent to our cash generation so in the past three months months we we still have 6.5 million amortization And the next year, 25%. So you can see the cost of the debt that has gone very close, especially in the corporate one that is around 100% added to the SELIC index. And then I conclude the financial part and we can start the Q&A session now. we will start the Q&A session for investors analysis. If you would like to ask any question, please press the reaction button or the raise your hand. If a question is answered, you can exit the queue by clicking on lower hand. If you'd like to ask the question in writing, please enter it in the Q&A field followed by your name and company. So wait for a minute while we gather all the questions. Our first question is from Mr. Gustavo Gambaúva. Please, Gustavo, you can open your mic and make the question. Mr. Gustavo, we can't listen to you. Now we can hear you, Mr. Gustavo. I'm sorry. But, well, I had two questions. The first, if you could talk a little about the sales of assets you mentioned in the beginning. I wanted to understand if, well, what is the expectation? I know there are some steps to conclude the sales process. So it will know your expectation on when it will be concluded. And if you could talk a little about the use of the resources coming from the sales. So basically when we look here, the impression is that the company has the potential to pay a high dividend and reduce the leverage and invest in new assets. So I wanted to know, How is it for you the use of around 2 million gross? How much will be for dividend? How much to reduce the leveraging? What are you going to do in this aspect? And my second question is, is about the class A offices. You talked about the vacancy and mentioned ITM, but there are some other class A offices with a very high vacancy. I wanted to know how you see the perspective for these segments, because we have seen more flight quality, the triple ways, And so for class A's, I think it's struggling a little more. So what do you think the performance will be like in the future? So these are my questions. Thank you. Thank you, Kamba Ufa. Let me start by the second question. We now, apart from ITM, we have two offices that are 100% rented and Birman Desk is 50% vacant and Brazil Machado is around 50% as well. And there is one more, 50%. And so these are the offices we have today. Birman Desk, we've had some conversations to rent 100% of it. So the conversation, the negotiation is interesting and we are positive about concluding it maybe this year or the next quarter of next year. And Brasilio Machado, has a problem in one of its spaces. We are regulating it and differently from the other offices. This one is at Villa Olympia in a region that we believe there is a very high liquidity. So as soon as we concluded the regulation of some floors, we will be able to rent It's a little faster because now we are a little stuck in the past remasters. And finally, for this, it's an office building in Salvador. We have commercialized an area there, but it's a market that it's more difficult for negotiation. We have changed a little our technique there, but it's a small area. Our participation is a little over 1,500 square meters. It's not going to make so much of a difference in terms of financial impact because the rental price is around 40 or 50 reais every square meter. So these are the class A classes. offices, ITM will be a little more challenging for a traditional kind of rental because it's an enterprise with 45,000 square meters. And we have a demand for renting two or 3,000 square meters, but it has to be a little more robust to justify the enterprise. So maybe 3,000 square meters would financially will not make sense, but we have studied some alternatives of use for the enterprise. And we hope that in 2022, we will be able to solve the problem we have there with the vacancy. Now, in terms of your first question, we are now in a good moment in the negotiation. So when you talk about the MOU, you know it as well as we do, that you have the commercial terms and we start negotiating the terms. And there's nothing that concerns us. What concerns us here is the term, the deadline to conclude the transaction, not only sign the documents, but really closing all that inside this year. maybe in the next 20 days, we are working with that. And with what you said about recent proceeds, I know that you said you do, you're right about the around 2 million of capital entering the company. A little less that after the taxes, We always have a very conservative view. We have discussed on the board the alternatives, the possibilities, and we have three great uses for the capital, which is reduction of the leveraging, especially in the capital moment we are living, some division of dividend and reinvestment. If I were to say the percentage I was going to do to each of those items. Actually, it's not defined. So that is a discussion that we are doing right now and we are thinking about the distribution, how we can be more efficient with capital and bring more of a return over capital. We have changed in August the board of the company and we brought people from different profiles and people that come from the startup and from other boards in infrastructure and education, for instance. So we are trying to get the most of the knowledge the board can bring to us. So you can think of what to do with the capital. And what we can say so far is that the idea of reallocating the capital, one part will be in technology, but one part will not. And it is very relevant when we consider the capital we're going to raise and the size of the company. But we are going to start with that, but we are not going to buy to... any company and spend half of these resources in an M&A, nothing like that. It will be a smaller purchase. And we are also considering how to allocate the capital in new investments in a way that we can have a better leverage with third-party capitals as well. together with the partnership that we have with SPX. We are partners of CPIB. And now we have a new partnership with Brook with the management of the three enterprises. And there may be new opportunities of business because the CEO, the one responsible for properties has been a CEO here too. And I believe we have some alternatives still to explore. So right now, I don't have a final answer. But we are working on it to see how we're going to work with this capital. Thank you, Thiago. Good afternoon. And just a reminder to ask questions, you can use the button raise hand or in writing in the Q&A button. Our next question is from Mr. Alex Ferraz from Itaú BBA. Mr. Alex, your microphone is released. Good afternoon, Tiago, Hector. Thank you for the presentation. I have a question related to not so much about results, but also sales. Thinking about your portfolio today. your post sales portfolio still have some shopping malls and you have single way assets. And in this reinvestment, I wanted to know what you are thinking about the mix about the assets to have the office strip away, explore new fronts, maybe in the area of sheds and maybe SPX, What would be your portfolio from now on? And if there will be any changes in it? Good question, Alex. What I can answer right now is, well, there are things that are being discussed and defined, but right now our appetite for investment in parts of this capital will not be to increase our participation in our exposure in shopping malls. We understand you have upsides in the investments we have. We have smaller investments to expand with a highlight for a possible expansion of the Cidade de São Paulo that are two other shopping malls that we can increment their area. Our participation is low, so it's around 40, 50 million. And in terms of SPX, we are interested in growing our participation. with the fund we have them of 300 million. So we have a capital of around 90 inside that fund, inside that initial resource of 150 million with SPX and inside the fund, We are looking at projects of residential corporation and logistic industrial sheds. We also have some investments in industrial sheds where we can work in a partnership or together with the fund with the SPX to be and a little more assertive. And then in the office line, we are going to compose the portfolio. And while we were selling to Brook, we purchased something in 2019. We bought their offices in 2019. So we are trying to have a little more of an opportunity and there's a buyer who has the same mindset. So other opportunities may come inside this partnership in the future. But I believe that's it. I don't know if I have answered exactly your question, but from what we can talk so far, I believe that's our intention. Great, Tiago. And a second question regarding to earnings. we see a recovery of the revenue in malls. I know the city of São Paulo is returning, so Grand Palácio and Tietê have a better performance. So what are the highlights here? What we have seen? In a micro panorama for the shopping malls in Brazil, in Southeast and Rio de Janeiro have a better performance. It's a little different in our portfolio. What has come back to the pre-pandemic levels is the first one, the shopping metropolitano. And on the other end, the ones struggling more are the malls with more exposure to the passing flows. So the shopping cidade de São Paulo, even though it has a dense area with a high income, they had a good audience around the offices and tourists, especially on the weekends. And so this mall has struggled more in our portfolio. and shopping Cidade São Paulo was the most productive and it's because Paulista was closed and we believe in January there will be a ramp up because of the news we have heard from the main offices there around the mall and the tower of Banco do Brasil for instance and shopping day with a higher movement of people. This one is in Marginal Tietê, and it has grown in the inflow. And the other three, Tietê, Gran Pazza, and Shopping Cerrado, have presented recovery before those two ones. So from now on, Shopping Start São Paulo and Shopping Day will be the ones recovering more, and the others will grow but in a lower rate. And I believe this is the general panorama that we have. Thank you, guys. Next question, Mr. Pedro Lobato with Bradesco BBI. Mr. Pedro, you can open your mic. Good afternoon, Tiago and Hector. My question is about vacancy in malls. How do you feel the commercial activities and your expectations looking forward? Thank you. Hi, Pedro. We have talked in other quarters that the turnover was very high. in the peak of the pandemic, but also people see it as an opportunity to enter the mall with a lower capex. So there was a consolidation of smaller franchises that were increasing their participation in several malls. these guys are present. So we still have a demand for rental areas, but the part of contract termination have stopped. On the next months, we know that in retail, it's the time for focusing on Christmas sales and investing stock. and structure a plan for Christmas, but we still have an interesting pipeline being negotiated. If we talk in numbers, it is around 1% of our BL in negotiation. So the expectation for the last quarter, it's not strong in rental because January, February are the months that historically are not so good for retail, but we see an interesting move in that direction. Thank you, guys. Remember that if you want to make your question, you can use the button raised hand or in writing in the Q&A button. Our next question is made by Mr. Eduardo Salma. And his question is, how is the XP fund? I see you have captured $50 million. What assets are you going to purchase? Do you have any continuity? Thank you for your question, Eduardo. we haven't concluded this transaction. XP has raised around 15 millions. And additionally, they have an internal debt inside the fund, leverage where they were the creditors. And we are probably going to, instead of 13 real estate, just one, the Estação BH, We are still on the path to conclude. And when we finish, when we define what we're going to do, we are going to let you know. But it's about the sales of Estação BH for now. Remember, to ask questions, you can press the button, raise hand, or... use the Q&A button to write it down. Our next question is by Mr. Leandro Scartesini. You still haven't decided to expect use of the 1.9 billion, but you could at least say if you could pay more dividends than in 2017. Thank you, Leandro. Hi, Leandro. I would like to answer that with precision, but we are still discussing it on the board on how to use the resources and seeing the alternatives. So in 2017, it was 347 million in dividends. So I still don't know. We don't have any definition if the distribution will be superior to that or not. It will all depend on the route we are going to follow and our investment pipeline in the short term for that definition. But as soon as we define it, you can be sure we will let you all know. Our next question is by Mr. Adriano Bittar. Mr. Adriano, you can open your mic. Hi, Hector and Tiago. Related to the performance of the malls, if you could bring us some more granularity, because we know the city of Sao Paulo was affected in the offices and tourism region, and we think of the assets post sales, we see 80% of your NOI was from shopping malls. And Cidade São Paulo will be relevant. One third of the NOI will be from there. And so you become a company of shopping malls with the best shopping malls. And this mall was affected and it puts the sales down. So what is the level of this specific asset? Because when it recovers, how much is it going to bring as a result? Yes, we can give you an idea specifically about this mall. We have around 30% below what was the sales on this mall in 2019. NOI is a little below what we had in 2019. And when we think about what we had planned for 2021, Sorry, 2020 and what we have for next year in terms of sales and NOI, we are talking about numbers above the ones we had in 2019 when we see rental and... Our delinquency, we are going to perform better in 2022 in comparison to 2019 in almost and especially the ones, the shopping malls in São Paulo. Yes, so that recovery is going to be very relevant, right? Yes, and Grand Plaza is also very relevant in our portfolio. We have numbers above the ones from 2019 and Metropolitan with 80%. and planning designed for 2022 that is very interesting. So I believe these three malls in comparison to the participation that we have, the largest participations that we have, they're going to have an interesting recovery for 2022. And when we talk about the TET, we have a project, the MRV project, a residential project on the side and we have another one close by. Can you feel a structural increment because of those initiatives? These assets is the one we see with most potential of growth on the short term. We have enormous potential for growth. We have that in Metropolitano in an area that has been only developed 10% of the total area. So it has a potential for a mega shopping mall. And when we talk about Tietê, we also see a huge potential there in a region that we call an immediate region around the mall. And what we see that the new enterprises that are people that are moving in. So the project is partially delivered for the families to leave. The audience is young couples with or without children. And the main driver of these people to go to the mall is entertainment and food. So we have focused a lot on these operations for this mall. Tietê has a potential of expansion of 7,000 or 8,000 square meters. We are considering to focus it on food and experience of the end user. And so we are very excited with these malls. It is especially because it is isolated in an area that is becoming more dense. So we see the effects of all that. And in the future, if you look at the flow of vehicles stagnating, the number of people will grow because people can access our malls very easily on foot. That's great. And just one more question. I know you still haven't considered on the board the investment, but given a risk of a tributary reform, your expectation is paying dividends this year? Probably. It makes sense. All right. Thank you. Remember, if you want to ask questions, you can use the raise hand button or send them in writing in the Q&A button. Wait while we collect more questions. Since there are no more questions, we are concluding our Q&A session. I would like now to hand the floor over to Mr. Thiago Muramatsu to make the company's final remarks. Thank you once again to all of you who have participated and made questions during the call. We are at your service to answer any other questions you may have later on. And to summarize everything we have talked about, we are very excited in all fronts the next quarter is shown very promising in the shopping malls, flow and sales improvements. And we have the office aspect, rental possibility for short and midterms of most of our portfolio that is vacant, even though we have had a good movement in the third quarter. And we are very focused now on concluding the transactions and discussing on the board how we are going to use the resources as soon as the transactions are concluded. And we are going to keep everyone up to date about all that. And we are going to announce all the decisions made. Thank you all. And we are available if you have any more questions. Thank you. Good afternoon. The C video conference is now closed. We appreciate your participation and have a good day.