Syn Prop E Tech Sa S/Gdr

Good morning, ladies and gentlemen. Welcome to the SING video conference to discuss the results for the second quarter of 2022. This video conference is being recorded and the replay can be accessed on the company website, ri.sing.com.br. The presentation will also be available for download. Please be advised that all the 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. Before proceeding, I would like to emphasize that the forward-looking statements are based on the beliefs and assumptions of SIEM management and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events and, therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should be aware of events related to the macroeconomic environment, the industry and other factors could cause results to differ materially from those expressed in the respective forward-looking statements. Present in this video conference is Mr. Thiago Muramatsu, CEO of Sync, and Mr. Hector Leitão, CFO and IRO of the company. Now, I would like to give the floor to Mr. Thiago Muramatsu, who will start the presentation.

Please, Thiago, you can proceed. Good morning, everyone.

Thank you for your availability for our quarter results about what happened in this quarter so is starting our meeting now talking about what happened in this corner we start with the main events we did an anticipation of a payment of 98 million of 98% of return from one of the series that we emitted in 2021, 2020, that was due to 2024. We were trying to optimize a bit of our cash flow of our bankroll. We got our first debenture with a payment of 100 million in May of 2022. We also did a dividend share in 2022, in the end of May also. with the data tax of 16 of May 2022. And then we did a technology investment, a small investment inside of the strategy that we have to do some investments in technology that is Condo Conta, that is a digital bank focused on houses, on neighborhoods. They also have some corporative ones in this round we did an investment of 4.8 million 4.4 million dollars so we can have a share in the startup i think that an event that we would like to highlight in in this quarter is jaguar parade that is um is an action that is in in is in continuity of other parades we did in the past and this jaguar parade has a focus in raising funds for raising awareness for the the protection of the the spotted lions in their natural habitat and we had uh several different art pieces and they were exposed in in different shopping malls here in central del here in sao paulo some of these pieces will go to new york new york where they will be auctioned and all the funds will be reverted for the for raising awareness One of the species that will be auctioned is from an artist that we supported that is called Bakari from Santander. He did a live painting of this jaguar that he put in the shopping. We had one with an incredible reach. We had this exposition that we did, right? In relation to a website visits, we had more than 1,600,000 and it impacted more than a million people. Now talking about the operational side, we had a physical and financial occupying rate that is very close to this year's rate as well. Even though we had a very interesting commercial activity in our shopping malls, we had lots of replacement and that happened a lot in the first quarter as well. When we saw that these replacements, they are There are new occupations that are more productive than the last ones. So from the shopping side, we are having these classifications that are very productive in a general manner. You will see in the financial side how this is showing up to be very productive, seeing discounts and seeing payers and non-payers. and thinking that even though we had a similar level from the other quarters the quality that we've been doing and the volume that we're doing of negotiations it's very positive for our portfolio when we see the occupation of different classes i think that these these Class A portfolios, they are very impacted by these sorts of things. I believe this is in the next slide. I think that the shopping malls, I already talked a bit. Before we go into offices, let's talk about the sales that we had a very good increase in store sales and total sales. The same store sales we had We had a very interesting growth of 60%. And when we see our parking influx from the second trimester 2019 to the second trimester 2022, we had a decrease of almost 20%. We had other opportunities show up. obviously when we see this influx of people the the flux of people is not going uh down in the same proportion so we have 20 percent less in the vehicle influx but we have a compensation in the flux of people and when we talk about productivity and real state of parking spots we we have been able to enjoy this vacancy, let's say, of these 20% of our parking spots to other usages like media, like storages, like used car retail, utilizing it for events. And when we see in relationship to the financial part of our parking business, we have in the consolidated growth more than 14%, even though. So I think that that's the productivity that we've been trying to do so we don't get the real estate in a stagnant manner. From the time that Itaú had, we obviously have been working in these assets, but it is an asset that we have some difficulties in allocating it. When we look to the triple ways that we have a financial occupation that is near 90%, we have two other actives that we consider in this category, in shopping JK and in Rio de Janeiro that is on Barra da Tijuca. It's a neighborhood that we have lots of, it's a heavy neighborhood in Rio de Janeiro. because jk is 100 percent allocated we have a high vacancy in two assets in salvador and here in brazil machado i believe that in majano in the next quarters we will have good news regarding machado suarez has a good representative here inside the this vacancy basket. So I believe that in the next quarters we will have a good increment here in our occupying occupants rates. Now I'll give the floor to Hector to talk about the financial result that is a bit different from the operational. Good morning, everyone. Thank you, Thiago. Thank you, everyone. Let me start talking about the assets, the NOI. When I look at the total NOI from the quarter versus 2021, we had a decrease of 16%. And when we look at the semester, we see a decrease of 10.4%. And the big impact here, the great reason for this now for is because last year we sold five corporative buildings plus the shopping mall in Biagai Station. And these assets would bring, if you see the same base of last year, the same database of last year, would bring 14 million more of results. separate a bit of this effects of what's portfolio and what is the asset here in the right side as we see the noi of the same properties comparing the same assets and then we have a growth of 43.5 percent we've reached 45.5 uh percent of noi in in the second quarter And in the semester we reached 90.2 millions of NOI and growth of 61%. And here I would like to highlight something that is very important and you need to be very mindful of what we open in the release is the linearization effect of this count that is impacting a lot of our results. And we have a criteria changing this semester so since the beginning of the pandemic in 2020 most of the companies started linearizing the discounts that were given to the shopkeepers throughout their contracts because these discounts were conditioned to the payment to their payments if they were payment paying it right after the discounts And with the auditors, we understood that that should be linearized according to the financial rules and that had an important impact in our balance.

So when we get rid of this effect, we see a better result of our NOI.

So here we have this already adjusted. Another impact that we had in this trimester is for us to stop linearizing these discounts because we understand that the pandemic and the contractual grounds changed. We are kind of normalizing here. And we stopped linearizing these temporary discounts that we conceded in the trimester. So these also had an important impact versus the second quarter of 2021. So to really clear this noise from the numbers, we are aligning this here with you. uh we'll talk about this once again later because when we look at the results it looks like we are worse than we are justly because of these effects of linearizations that impact our results right here but it's not an impact on the bankroll here in the next slide looking to segments we see clearly that shopping malls are the the great highlight of the semester we wind up 5.8% in relation to 2019. And a lot in relation to 2021. It's what Thiago said. We are trying to up the productivity of real estate.

So we are getting smaller house complex so that the shop owners, they can handle the rent.

And also, we've been trying to find solutions for the parking spots that are vacant. We have people working hard in the shop segment so we can increase the productivity of the real estate. When we look to the semester, we have an increase of 8% in relation to 2019 and 83% in relation to 2021. uh an important commentaries when we look at the cash flow in shoppings the impact is even bigger we are almost doing uh 18 in 2019 and this difference is is because of pdd of people that don't pay that have a greater lag in relation to the to the financial one we have a criteria that we consider a loss after 12 months of a person not paying and that kinds of makes things differ a bit. But the great news is that shopping malls are having an interesting recovery from the sales side and also capitalizing the spaces. Looking towards buildings now, I think it is a segment that was a bit more resilient during the pandemic in terms of getting paid and getting rent and leasing squared. So we don't see an increase that's so big as the last year. We grew only 11.8%. And when we look towards the semester, we have a growth of 7% in relation to 2021. Thiago said that the AAA buildings are well located, and we have more bargaining power to increase rent, and that's been happening. And in the Class A buildings, we have part of the portfolio that has an important vacancy, so we didn't have any rent alteration. On the other hand, the ones that are renting it are good renters, and they have long contracts with a quality of renters that are very high. So we had a very stable behavior. So from the AAA, we are going up, and in the Class A, we are having a stabilization. And when we look at the adjusted EBITDA, looking at the actives and the DNA of the company, we see a fall from the last year of 40%, the same level from 2019. When we look to the semester, we have a fall of 23% in relation to the last year. And here, the great explanation, once again, is that we have a portfolio that was a bit smaller and from the expenses side we have less expenses now that mitigates a bit this result when we look to our financial demonstrations it looks like we have a growth of sdna in the semester but it's it's because of the bonus reduction that was very high in the last year uh in 2019 actually more than the last year. And we have a bit more of commercial expenses in this year than the last year because we've been having movements, you know, of new allocations that it's a bit higher than normal to make a front. against these vacancies, but I believe that in the running rates, we will have expenses that are much lower than 19 and 21. And we have more structure and we are more efficient in expenses. In the FFO side, aggregating EBITDA and the net expenses and the tax rates, we had a results of minus 15 millions in the second quarter. It is a lot worse than the other trimester shown here, but these can be explained by the increase of the inflation rate. And we have an acceleration of the main tax fund here in Brazil, the main tax rate. of the interest rate. So the central banks is increasing the interest rate. We went from 12% to almost 14% currently, and this has a very important impact in our financial result. We being an intensive capital segment, obviously we feel the impact very strongly of the interest rate surge. Here we can see in the next slide, we closed the trimester with 600 million in the back row and with a debt of 1,300 million. We increased the net debt from 594 to 1,125 million because of the dividends that we've paid in some investments in CAPEX. but we diminished the net total debt for amortization and should pay things as Thiago commented. We had the ending of the trimester with a leverage that is very comfortable, 5.83 times without the sales effects we would get in a level of five. that is very comfortable in our corners. And I think that the message here is that we've been having the management of bankroll and debt that is very comfortable about due dates and financial requirements. And we've been working a lot to maximize the capital allocation here. So we've been doing that a lot for payments and we will do one more that I will talk about in the next slide. Talking about amortizations, as I said, we have a very comfortable situation of amortization in the next year, in 2024.

We may anticipate this amortization so we can diminish the costs of the bankroll vis-a-vis the debt numbers.

So we will be in a very comfortable situation in the next two years if it is to refinancing. It is a strategy since we will have a high volatility period in the next quarters, be it through inflation, through interest, expectatives. uh they have been getting better but in elections they tend to be volatile so this strategy is that our horizon is is very a far away of financing and if we have a good window to to roll that and we will do that and we are aware of that and in the right side we see a bit how 30% of our debt is indexed to the interest rate, the IPCA, and the rest is CDI. Here we have a photo of the cost that is 60% of the corporative that is very impacted to the interest rates hike. So this debt can go up to 20%. So we had a very important impact in the first semester, but it is a good news. We have the... expectations of lowering the interest rate in the next semester. So we can see this debt level go down to 15%. So we believe that from now on, we will have a scenario that is a bit clearer of what we are going to do. And I think that's it. We are in a very, very comfortable situation. I think that in the financial part, I'm done. We will start now the Q&A session for investors and analysts. If you would like to ask any questions, please press the reaction button and then please raise hand. If your question is answered, you can exit the queue by clicking lower hand. If you would like to ask a question in writing, please enter it in the Q&A field, followed by your name and your company. Our first question is from Mr. Carlos Ferreira from insider.com. In balance, you have assets to sell for 115 million reais. Please, can you deliver some more details about these assets? How is this negotiation going? What are the perspectives for the partnership with XPX? I can answer the first one and the second one can go to you, okay? Thank you, Carlos. Good morning. Thank you for the question. These assets that we have on the balance that are available for sale, they are not necessarily in a negotiation. We've been commenting for a long time now that we have a recycling of asset strategy. We see a lot the return over capital and we are less patrimonialist. the beginning of the year we were seeing some possibilities of having a good negotiation window since we we've been going through a great sale that that was very successful last year so because of technical tributation uh reasons if we were to do this sale the word should sell these we we carry this active from permanent to available to sale but that doesn't mean that we have negotiations going on because if there were we should release a relevant fact about that to the market so to make that very clear nowadays we don't have any negotiation going on about these assets we don't have anyone interested we don't have Anyone talking about it? Nothing. Nothing in that regards. It was just we were carrying these assets from the last quarter, and that doesn't have any financial results. In terms of results and numbers, just to make everything clear, then you can tell me if I answered your question. Thank you, Hector. I think that the other question from the partnership with FPX. Last week, we made a new multi-strategy fund with them. And we have a diverse allocations inside the real estate segment, obviously. It wasn't the best point of capitation, but our perspective is that we keep growing the portfolio of assets and also the AUM in the next years. So the idea is really to make these funds grow. We have some strategies that we've been working inside and we are waiting for the right time to put all these strategies to use in the market. nowadays we have two funds that are already in course that is the total fee that is motor strategy to where we have the development of of a warehouse of residential Corporation and we also have these other Immobiliary funds where we have bricks and papers inside the strategy of this one. So the idea is to grow once the market leaves a window open. So now the question of Rafael was answered. So let's go to the next question of André. about the occupation costs and the efficiency of these house complexes. Do you see more space for gains in that front? How did that evolve during 2019? And what do you see as a trigger for a rent increase in 2019?

I can start, Hector.

Efficiency, space for efficiency, there's always this.

I believe that we've been working to firstly not increase that cost and trying other alternatives so we can keep the cost at the level that it is. or even decrease it. So to talk a bit about how these costs increased from 2019, I'll go back even further from 2016 to 2022. So in the last five and a half years, we didn't have any nominal increase in the complexes inside shopping malls. You can have an increase of five, a decrease of 10. So in general, nominally, since 2016 if you put inflation during this this time we had uh a decrease in more than 40 percent in this call so it's not something that is small and punctual it's something that is very uh expressive and obviously that opens a space for us to increase the rent in shopping malls, and we can increase this rent with negotiations where the costs for the shop owner, we can decrease the shopping tax so he can pay the rent higher. And I believe that's what's been happening more rapidly in this last semester how we can keep the the the rate in the shopping mall the lowest possible and with the increase of sale we can increase rent and maybe increase in the same proportion our next question is from isabelle betty

which will be the value destined to dividends in this semester?

Can I answer here, Tiago? Isabelle, thank you for the question. We should not pay dividends, right, in the next trimester because we only pay dividends by law if we have any problems. profit that it's been accumulated from other periods and we don't have that we remunerated our shareholder a lot in the last six seven months and we should have right when we as i talked in the last semesters i financial uh is preaching sprint should go through so we won't have that space to to to give dividends so i believe that our focus in the next semester is to make our assets more productive and increase the the capital uh structure and reach the optimal capital structure of the company our next question hobson sukagosh does the company has any expansion plan uh until the end of the year also we do have some expansion projects for three of our six uh shopping malls that are going on right now in different stages of approval in in the town hall some of those uh we are are trying to start in the next 12 months so i do not think it is very probable in in until the end of the year but in the next 12 months we will have at least two projects of expansion going on at the same time our next question is from carlos herrera from insider.com about the acquisition of 10 of condo counter is it already in the balance of the second quarter if not when will it come in and can you please explain what kind of synergies could have between the the company economic content in relation to the balance yes it is already in the investments account Do you want to talk about synergies, Thiago? Yes, yes. So, Diego, what we've been looking at is technology that is inside of our actuation spectrum. Some things are a bit far out, some things are a bit closer. I think that the main synergy that we can bring, it's not about integrating the solution with Condo Conta inside our property. It's more like take our know-how as managers of house complexes and shopping centers. They are not that different from residential complexes. So bringing this more corporative mindset inside Condo Conta so we can offer a solution that is more complete and eventually, obviously, there could be a synergy and we could pass part of our households of our cooperative complex inside Condo Conta. I believe that is more of a question of the growth of this platform alongside our knowledge and know-how so they can improve their Condo Conta solution.

Remembering that for asking questions, just click on raise hand or type by clicking the Q&A button. Again, to ask a question, please click on raise hand or type it by clicking on the Q&A button.

Our next question is from Diego Pinto. The fair value of our properties that is on our explicatives reports is what's on the discounted bank flow flux. Did you make the fair value case if you were going to sell them by reposition costs considering the value of the meter squares of the sellings of the last year? Diego C., I believe that valuation questions, they don't have a correct answer. We understand which is the value of the assets that goes through a mix of lots of things. Of course, the bank flux is one of them. we have the increase of rent. It's something we are mindful of. So I believe that it is a basket of variables and different methodologies of valuation that we use to estimate the value of these assets during a transaction. And when we put the value in, the the explicative reports we are following uh financial criteria so we can demonstrate the value of our properties but when we go through a sale negotiation in fact we have several and several different factors and methodologies that we use so we can arrive at the adequate uh sell price i think it is interesting when you see the fair price of the properties that we sold in the last years of us was being accounted in our balance we we tried to sell them for a bit higher than the financial price our next question is an oil from elder credential from btg pactual

Good morning, guys. I have two questions.

I'd like to understand how you're seeing the takeout of discounts in the next trimesters. We saw that in Star Sales in the same level as 2019. Do you think that that diminishing should be quicker or a bit slower? And then about the offices, do you want to update us? How are the negotiations going, the allocations going from the ITM and other investments as well? That will be interesting. Thank you very much. Do you want to answer the first sector? Okay. Yes. Thank you, Elvis. Thank you for the question. We have some lag. We have some lag, so we can see that in the balance because Usually we give discounts about three months, right? At the limit, six months, depending on the case, if the store owner is coming in right now in some new allocations, if he needs three months or so before launching. So I think that in negotiation, of course, we will have a discount.

We will have a...

We reduce discounts, of course, but that will be very gradual. We will see that during the trimesters. And we will show what is the impact of last quarters and trimesters in our money flow, in our cash flow. But as Thiago said, the trigger right here, the trigger is sale, right? If we can keep increasing sales, then of course we have the power to take the discounts out in a quicker manner. I don't want to be a futurologist right here, but that will depend a lot on the sales and how we are projecting that forward. And we've been seeing, yes, a very good recovery in the Cidade de São Paulo shopping. That's been the asset that has a very big representative in our result and has numbers that are lower than the 2019s. And that's a lot because of our hybrid work and that could and that should keep going on permanently but we we are seeing the frequency of tourists and an office in the paulista area has been slowly going up so i think that in the sales side they will go up we will have a gradual increase a lot because of the city of sao paulo shopping mall and as i said as the discounts are temporary we can have a power of rent increase very quick if that those sales increase fast enough move forward so continuing with the second question of elvis So besides our portfolio, besides our own portfolio, we are still managers from from the portfolio that we sold you to Anna. So we've been perceiving the market dynamics in the first semester. It was very, very strong. We could increase the value of the rents in our buildings in the IPO that actor showed us. But in this month of July, normally it is a month that is a bit weaker. The decision takers, they are on holidays or they are not all together to take decisions. So let's see now in this start of semester so we can take decisions and have allocations. uh in this year is not very typical we will have the elections and we will have the world cup that has a lower impact but we have lots of decisions that will be uh move forward to the next year having that said i believe that in our asset portfolio and we have not that many assets with vacancies

the CEO and the Forex trade has a dynamic that is a bit different because of the market localization. In the Forex trading, we've made some allocations, even though it is the best building in the country, it has a movement that is a bit more controlled.

We did some allocations in this year, but we have been trying to bring movement to the building. The CEO, in my opinion, is the best building in the Barra da Tijuca, but the market in Rio de Janeiro shrunk a bit and they are very concentrated in the middle area. So good buildings in Barra and on these neighborhoods, they have a bit of difficulties to move around and the location difficulties in Rio de Janeiro. It's about the middle area in Rio. So we have these challenges in Rio de Janeiro, but talking about Brasilis Machado, that is a big piece that we have in our portfolio. And when you see in our participation, they are small participations. So we have 2,500 meters, CO is 2,500 meters, Brasilis Machado is 4,000 meters. And in Brasilis Machado, I believe that in this one, we've been having uh very interesting uh rents so i think that there is is where we will have good news to give during the second semester finally talking about itm that has a big uh cost because of of its size and not because of the rent uh representability there the great challenge is that it is a big asset

of offices.

And there you have an efficiency question where you need a big renter so you can get the whole hotel because it is pricier to rent this whole hotel if you are going to get it vacant. You know, you have empty spaces.

so this is a big asset we eventually have 10 15 meters but it is a bit slower thank you very much

Our next question is from Rafael de Salis.

How do you analyze the price of the actions of the shares right now since the market tap is getting closer to the assets of the companies?

Thank you for the question.

I think that I don't know if you had the correct reading of the balance you can see the value that comes from the historical level of assets. I think that it doesn't reflect as the fair value of the assets, you know. Seeing that in the October of last year, when we announced the selling of our four buildings here in Faria Lima and JK. The market cap of the company was almost 1 billion 700 and 600. And we sold 1 billion and 800. So we always had this point of unmatching inside the private market in the asset transaction and in the public market of share trading. of stock trading actually so i believe that these uh reading of the market tap is a historical view of the assets best depreciation then eventually the the selling price the individual selling price of each of the properties

The Q&A session is over.

Now I'll give the floor back to Thiago Muramatsu so he can make the final considerations of the company. So I believe that after two years almost of struggle and fights because of the restrictions it's imposed, especially to the shopping malls, I think that things little by little are getting back to normal. and the operational results of this trimester and this semester as well, reflect a very positive movement inside our perspective. Of course, that is a bit obfuscated because of the interest rate and how that impacts our balances. But in our view and the view of most of the economies that we are talking to, the trend of stabilization and an interest rate falling, it is very interesting for our results of the business as a whole. And we have a perspective that is very optimistic in relation to the operational side because we are getting better corner to corner. And me and Hector have been working a lot to keep that going. so i'd like to thank everyone again of all the questions i think that the questions they they capture a lot about uh what we have as a perspective for our portfolio for our company and obviously me and actor and all the the the team of ri here is at your disposition to understand anything that you need to see clearer how our company is doing today so thank you everyone and good morning that's the end of the scene video conference thank you for your participation and good afternoon