Syn Prop E Tech Sa S/Gdr

Good morning, ladies and gentlemen. Welcome to this video call at SYNC to discuss the results on the fourth quarter 2022. This video conference is being recorded and you can watch it later at the company website, ri.sync.com.br. The presentation will be available for download. We'd like to inform that all the participants will be watching this call during this presentation And right after that, we open up the floor for Q&A session and further instructions. Before starting, I'd like to reinforce that all the declarations are based on beliefs and supposition of SIN administration and the current information that we have available at the company. This statement brings risks and uncertainties considering they consider future events. So they do depend circumstances that may or may not happen. Investors, analysts, and journalists should consider that events related to the macroeconomic environment, the segment, and other factors. May these results be material different from the ones expressed in the prospective statements we have here in this call. Mr. Thiago Muramatsu, president and COC, and Mr. Hector Leiton, financial CEO and investor relationship at this company. I'd like to pass the microphone to Mr. Muramatsu to start up this presentation. Mr. Muramatsu, the floor is yours. Thank you so much for being here, participating in this call. We are going to talk about the results of 2022. And to start up this year's conference, we are going to see the highlights. The year was... active when you see the structure of capital just to remind you in the end of 2021 we conclude the sales of four buildings the transaction of Brookfield we sell one more AAA in JK to double the participation that we had in the BH shopping mall and 40% of the project We conclude the year with a volume of cash that was high. Although we had a distribution of December of 1 billion 250, we finished the year with over 1 billion in cash and great part of this resource was for paying debt. So we prepaid the seventh debenture, the ninth debenture, the first and the second series. of the 11th debenture as well. I also prepaid the first series of the third debenture, everything at 700 million in prepayment. And we understand the year that we saw difficulties for new investment, this choice was assertive and this strategy proven to be correct throughout the year to reduce the debt. although the spread that we have on the base rate, great part of CDI, is low cost. But with the increase of Selic that happened, and we end the year with almost 14%, and we believe that it was a good movement to anticipate as much as we could the debt. And these ones here with little or none prepayment And also now in the end of the year, we had the elevation of the rating. This was part of the movement of the capital modes could not elevate our rate of the A plus Brazilian for AA Brazilian. So we are two ranks up, although the environment is more hostile. Last year, we also received two awards. We were awarded. One is Valor New, that we were awarded the best company of real estate investments and development. That is the second time we participate, but it's the first time we were awarded. And one more time that we were awarded is recognition of 100 startups, open startups as one of the most innovative companies in Brazil, category real estate and construction. And the main investment that we had in technology was an investment in Condo Conta. It's one of the biggest rounds of investment that we had in Brazil last year. With DrivePoint, we got this investment at Hakota. And... The investment was 24 million, and the total was 10% that we acquired of this company. And then the second year in a row, we have been working on our side, ESG, and this is the second year that we issued a report. And here we see the main points of the pillars of ESG, environmental in 2021, we closed with almost a very high number, 85% of the water resources come from alternative sources. Energy, this is a more expressive figure, 100% of the buildings strip away, use some kind of energy source that is incentivating and at the most, we have most, half of the malls using already energy sources that are incentivized. Social aspects, for many years we have been working in our institute by SIN and in 2022 we invested more than 4 million in social initiatives distributed here in four big pillars in this institute. In addition to that, we foster, this topic is very relevant when we manage big audience, big malls, shopping malls, three, four million people in our developments every month. So together with the University Zumbi dos Palmares, we had a training session anti-racist for the security guards and great part of the employees of the mall and here corporate company, they were part, they attended this training session. So we try and understand how we decrease the effects of racist attitudes inside our development. And finally talking about gender equity, we have 50% of our body of directors of the board of directors and 67 of the managers are women. if we get top management more than half is composed of leadership positions by women and governance in 2021 we changed the shape of our board of directors in addition to leo and i we have more for advisors and they are independent so we have a comfortable number of advisors based on governance with a relevant number of advisors that are independent. And finally, in the end of the year, moving with the ESG actions, you see more ahead, some more results of these initiatives that we have been working on ESG at the company. We instituted a committee of ESG and sustainability in November 2022. Now talking about operational performance, in my point of view, the year was very good. And the year was more focused on inside the financial aspect and also in the very beginning, I mentioned about the prepayment of debts that we had in 2022. And also we are going to see The operational results, and I believe they showcase that. First, let's talk about financial occupation. We are back to the rates near 90% in the fourth quarter 22. And physical occupation, it was 83.6. Out of these, we have ITM representing very big rate, almost half of our vacancies ITM. So if you remove ITM, and I'll talk more about it, the occupation of our buildings and the relevance of ITM in this occupation rate, we would reach 93%. And remember that everything that we sold on corporate buildings, they were 100% located. So ITM is more relevant now. Moving ahead and talking about the shopping malls, first, we are so pleased to see this result that we achieved in occupation at the malls. And we finalized financial occupation 94.5%. But this 94.5% is the average of the quarter in our final day of 2022. We finalized financial occupation almost 96%. And when we see physical occupation, we finished with 95.2. And there is a commercial building, Grand Plaza, 5,000 meters. And we started the year with it vacant, but now we have 1,400 meters. And if we move it out, we see that the year is 96.7. This is the average of the quarter for the end of the year, more than 97%. And the vacancy rate is under 3%. This result is very good, even when we see the history of the performance of the most. Moving ahead, sales, we finalized the year with 873 million, already more than 10%. Almost 10% above the fourth quarter, 2021. And the vehicles flow ended the year with the quarter with 2.1 tied with the fourth quarter of 2021. And store sales, same store sales, 7.7. And I would like to talk about same store sales. is also a result of several changes that happened throughout the last three years in the malls. And I mentioned that we could elevate the occupation of our development, and I believe the same store sale that was not so high as we would like to see due to several factors. Our portfolio is concentrated in São Paulo, a little bit in Rio de Janeiro, I believe that the cities that suffered this growth delayed compared to 2019 North and Northeast. But I believe that a very important point that I would like to bring is representing a little bit of same sort, say of not so accelerate throughout the last two years, we have been working replacing the store and qualifying this mix. So this volume of location in 2022 was replacement retailers that was bad in performance or problems in their operation. And we are professionalizing and improving the operator's quality. And of course, this will bring an impact of the same store sale because we moved the stores compared to the last year, but we believe that now We have occupation cost with good growth with NOI. When we see the same properties in malls in 2021 and 2022, we grew more than 30% on results with the occupation cost that is healthier. And I believe that from this point on, we can capture more of these changes that we had, improving the mix, in same store sale, but currently we captured this already on day one, when we see our results. Corporate buildings now, we finished the financial occupation of 75 and physical 61. When we see ITM, excluding ITM, we would go next there 85%. And we have currently two problems in our portfolio on vacancy ITM that is a typical building. Initially, it was conceived to be textile center and then it became an exposition center. Finally, it has begun office buildings in the region that is more challenging. We see the complex of occupation of the city in general It doesn't matter the quality of this asset, the location is a very important factor for our location. In our buildings, here in our regions, we have a leasing spread in 2022 above 22%, near 25%, and I believe this shows the strength that the real estate has in this region compared to other regions that AAA suffer vacancy. But opposite to that, when we see Class A buildings, we have three buildings in a region with lots of vacancy, but they are 100% rented with long contracts. And one of the tenants started the operation in 2022. And we have contracts varying from terms, four and nine years. So we are at ease with these other properties. Another building that is a challenge is Brasil Machado. We had some technical problems in that building, making it difficult renting it. And we spent a year and a half solving, troubleshooting, And we believe that we concluded this troubleshooting in the end of this quarter. And I believe that is a good perspective to rent this building representing 6, 7% of our vacancy in office buildings. When we see general aspect of cash, generation, general why of the portfolio, these two assets considering 100% rented, we have an increase seven, 8% in our NOI. And I believe that although we report a number that seems to be, and it is a number that is not so good, at the same time, we have been dedicating time to address all these assets. They are special assets. And the weight that they have in our results is not so relevant, but of course there's nothing that we can feel comfortable about. So we have been addressing these two assets, especially. I pass the floor to Hector. Now he's going to talk about financial performance. Good morning, everybody. Before starting deep diving into numbers, just on top of Tiago's introductions about 21 and 22, and it's important to remember that We see the reflection on these figures, NOI, not of the same properties, but then total NOI, they beat the FFO lower than 2021 because we decreased 35, 40% the results of our assets. But on the other hand, we had a distribution of dividends over 1 billion and 300,000. And we have paid 600 million in debts, 700 plus interests. So we are talking about a good ratio. We lose 86 million EBITDA and we bring the return to the investors of 2 billion. So they are, was shy considering absolute numbers in cashflow generation of assets, but this is strategy. was considered and assertive considering December 21, even before the third quarter of 2022, we saw an acceleration of inflation and a probability of a strong reaction of central bank. All the strategy of 22 bringing benefits to 23 was thinking about the return of capital to the stockholders Also changing the profile of the debt that now is more concentrated in IPCA. And later I will show when the rates cross in the end of last year, in the beginning, the end of 21, the beginning of 22, we benefit from the total cost of the debt reduction. So we had a strategy that was really aware. And to me and all the team, the result was interesting. So from the NOI, total NOI of the quarter, we reached 45.8 million, a drop of 25.6 compared to 21, similar level to 29.8, 100 million in the total of the year, dropping almost 20%. and 26 compared to 21 and 26 in 19. So observing the same properties, how we worked, the productivity of what we have to compare to 2021. We grew almost 5%, quarter after quarter. And the growth was very robust, 23.6 compared to last year and 32 compared to 2019. Next slide, we are going to open up the business units on the left-hand side, shopping malls, same properties. We had a decrease of 1.6, basically because recovery of default in the fourth quarter last year. So the NOI was aligned to last year's and this year, this quarter 22, the final quarter we had The World Cup and election year bringing a huge impact on the mall's results. And these days of the World Cup and election days, the malls were empty and it was some days in a period of a month. So the impact is really relevant. In the accrual of the year, the growth was 37.7 malls. 145 million results and a growth of 23% compared to 19. Although the same store sale and the sale was in the same level of 19, we have been working hard. We have mentioned this before, but I'd like to highlight the team's work, maintaining the cost in nominal basis. We had a an actual gain over 40% in the last five, six years. And this brings a consequence that we can keep the occupational rate that is healthy for the retailer receiving more rent. So we can live with levels that are higher on occupational rate. NOI of buildings on the right hand side, the growth was 40% in the quarter, 60 compared to 19. And in the crew of the year, we reached 35 million in NOI of buildings and growth of 19 compared to 21 and 9% compared to 19. So this we see an impact of building that we conclude the rent, 100% of the rent in the end of 21. And we are picking up the effects now of the revenue and

The grace period in 2022 and 2023, we see an interesting impact.

Observing EBITDA, and here's an important point that we do not consider the impact, the effect of the linearization of discounts. EBITDA without this impact would be higher if we compared. We reached 31 million in the fourth quarter 2022, so when we compare The effect without the assets sold in the last year, 2021, we see a level close of a bid up. And when we see the accrual of the year, we reached 136 million on operational results. Excluding here the impact of selling the assets in 2021, we could see a growth near 20%. So briefing up, this is the operational aspect. We worked in a satisfactory manner this year, increasing productivity. FFO, it's a proxy of cash generation. The indicator that is close to that, we closed the quarter with 8 million FFO, a drop of 13 compared to 21 and 50 compared to 19. And in the accrual of the year, we concluded with a cash generation of 1.4 million and a decrease of 98% compared to 21 and 97 compared to 19. So the big impact was exactly selling the assets. And the interest rate coming from two in 21, they went for 4.5 CELIC. coming to 14% the average cost, superior to 12%. So we worked on the growth rate, on productivity here of these assets, and a strong work of debt management that we are going to deep dive later, bringing results, comparative results, comparing the same scenario of interest rate in the same scenario snapshot, December 22, but the financial result was so similar because of the increase three times the average cost of CPI a year. Next slide. We concluded the quarter with 317 million cash and gross debt 1 billion, net debt 769 million. So we can see a decrease on the gross debt compared to the previous quarter, almost 600 million. And we still have a cash that is comfortable to face possible investments, considering that we have a positive generation of cash of the assets. So the situation is comfortable. to have an experience of a period of lack of liquidity in the market and the credit is accelerated because of the recent events of political uncertainty and some news on private credit with the ratings that were worse. About covenants, we are also comfortable net debt on EBITDA in FRS closed in five times. And our limit is seven times. So we have a considerable gap of two EBITDAs. And another important covenant are the exonerated assets, the valuation of the assets that are not guaranteed, and the corporate debt. Our limit is 1.4, non-encumbered, and we have three times this indicator. If we compare the previous year, we improved this indicator because of the prepayment with a ratio that was clear, increasing the duration of the debt and decreased the encumbered property and improved the

value of the money for the capital.

In the final graph, we show the evolution of financial expenses and comparing line after line what happened with the CDI that I mentioned before. In the end of 21, we had the strategy of changing the debt to pay.

Debt has a descending curve. inversely proportional to the increase of CVI. The strategy is very assertive. Next slide.

We show the next two years. We have nothing of amortization. These values are not relevant. Adjusting 25, we have an amortization value that is important. This is one more factor. reinforcing our tranquility and financial robustness. On the right-hand side, we shared the debt. The share of IPCA is almost 35%. And a year, a year ago, a year and a half ago was almost 20. So this illustrates what I said before. And our average cost of the debt on CDI, 1.5%. IPCA, 6.5%. We have just one in IPCA. And this slide illustrates our work managing debt, prepayment of debt. And then we had 433 prepayment, amortizing more than the estimate originally in the debt contracts with the estimate of prepayment On the left-hand side, we see savings, cash generation with this action, almost $10 million in 2022, improving our financial result. In 2023, we improve in $5.4 million and 2024 to 2026, almost $30 million. And this calculation considers the expenses on interest that we do not have with this payment, but also the financial revenue that we do not receive burning cash, and I call this to decrease the gross debt. On the right-hand side, we see a table with savings in interest rate, but also improving the duration of debt. So if it did not prepay, we had an average duration of 3.2%. two years, but we conclude the years with a duration close to four, 3.9. And the gain, marginal gain of spread, but in the other variables, interest in earning, and in the final line of this table, average spread, we illustrate the impact of having exchanging IPCA to CDI that the average spread was 374 in the end of 21 because the IPCA accelerated a lot reaching in the last the accrual of 12 months almost more than 12% and then we had this exchange of index increasing the IPCA spread considering 1.5 in spread of CDI that plus IPCA the spread is 0.98 93 compared to CDI. And I conclude the financial session with this information. And then we start the Q&A session for investors and analysts. If you want to place a question, please press the button reaction and then click raise hand if your question is answered. you can leave the queue and lower your hand. If you want to ask in written, you can write your question in the Q&A box with your name and the company's name. The first question comes from Bruno Tomazeto, BTG Pactual. Thiago and Hector, good morning. I have two questions. The first, if you can talk more about the shopping mall's performance in the beginning of year, January, February, on the consumer side, sale, and also the retailers, if it's good or not. And if you see here from their side, extra difficulties, operation and financial difficulties, as we've seen in some industries. And the second. And if you can detail these retailers that you commented, Marisa, Americana, StockStock, this dialogue with these players to reduce their areas and the opportunities that you see to qualify the mix, improving their renting. Thank you so much.

Good morning. How are you?

These questions are very good. About the performance in the beginning of the year has the same trend of the fourth quarter with no event that is different as the World Cup and the election year. So we had a good performance in January, double digit growth compared to 2022.

That was accelerated and a strong growth in 19. It was a strong channel in the city of Sao Paulo.

We commented that it suffered a big impact during the pandemic because of home office, great part of the audience. They are executives who work at Paulista Avenue and this occupational rate increases. We do not have the level of flow into any but with a growth already that is robust in January, February, and the sales are higher because of price readjustments and average ticket that is higher of the consumers that go to the mall.

Sales performance and the operational results of the assets.

And the retailers, generally speaking, We are surprised in a positive way. They come for spaces. In January, the first 15 days were not so good because of vacation time. It's normal. But now in February, the beginning of March, even after Carnaval, we accelerated the rental of these spaces. We did not see as we normally see. loss of occupation that was strong in the first quarter that is seasonal. At the most, last year, we did not see this deterioration showing that the profile of the retailers that survived after the pandemic natural selection was done, the retailers that were robust in financial and management aspect. And the third question specifically about the retailers that we see bad news on the media, on the press. Americana specifically, that is a case that is in great concern for different stakeholders. They delayed just part of their rent in the previous management before the judicial recover request. And they are, they pay everything, all the malls pay their rent. And we believed that there is a great potential of loss and almost 1% if everything went wrong. And we see that the effect would be lower, irrelevant. And they have a small share in our portfolio. If we consider ABL total, it's less than 1.5% share occupation in the malls. Two of the malls, the occupation is 400 meters, the store, and another one, 500 meter store. Talk, talk, zero problem with them. And Marisa, that is dialogue of composition, good news, and they are proactive. They are seeking us, they are coming to us, and shopping malls manager to put up. an agreement, a segment of less productive stores bringing interesting solutions, but they do not omit and they anticipate the dialogue is a positive aspect. So the chances of having important impact is very low. Marisa does not represent a lot and why in our models, not in area, not even I do not see concern, generalized concern about these players. Exactly because on the other hand, we see the players, big players and small players coming to us to keep on occupying our malls. So we have a good indicator on the demand side for spaces that we do not have this concern about these players. Is there anything else that you would like to ask, Bruno? Bruno, do you have anything else? No, that's great.

Thank you so much. Thank you. Good morning.

Next question is from Carlos Ferreira, Condor Insider, and Diego Tocspino. Can you talk more about the trends that we should observe in the first quarter of 2023 and in the year in general? Should we see better results? If yes, what about the main drivers? Can you explain the advantages of restructuring this year Grand Plaza fund for Cine shareholders and the possible risks ahead. The net debt increased quarter after quarter. Is that any estimate to infer the strength selling an asset to decrease the debt? About the ITM, any estimate of destination, even if it's demolish everything and transform land for real estate development? And about the Grand Plaza fund, and with the merge, anything else that you would like to say about the quotas? Is it interesting to sell to reinforce cash flow rate? These questions are very extensive, but let me gather them both because the content is very similar. About the first quarter 23, Hector has given us a good overview on the result. We are already two months, the first quarter. And I can talk more about it when we conclude the quarter, I can answer this later. And about GranPlaza, before, let me answer the first part of the question, Diego's question. There was an increase in the net debt because we were reclassified on an investment with a fee that was classified in cash, but now it's properties for investment. So there was no debt increase that was opposite. Next quarter, what you are going to see is our debt rate dropping consistently. So we presented 5.2 now, and you want to conclude the year and the quarter after quarter, we are going to see the number dropping. And about the ITM, that was the question, Carlos' question and Diego's question.

What is the main advantage? Grand Plaza, Grand Plaza. There are two main advantages on this structure. The first, we address the fine that we receive in the fund from the tax authorities and the thesis is not sustainable.

We keep on disagreeing on the tax authorities calculation and we are using the legal objectives for that as we do not have a result on the fine by the tax authorities. We see the risk from this point on. This is the first achievement we had with this dialogue. And the second, that now we are investors, independent investors, before that we were just We had just quoted the fund, now we are directly in the asset bringing some gains on governance compared to being just a shareholder of the fund. The fund is managed by the administrator and we are holders, we do not have influence, just the agenda that is taken to be voted in the assembly. But now as the holder, shareholders of this fund, we can have more governance on this asset. And about the quote destination, we do not have plans. We keep on doing the things as usual. We do not change the profitability of the business from the last 13 years, 16 years, 16 years.

We do not change anything.

And we do not have any plans to sell part of this share. to raise cash because we have been trying to work with lower cash levels. All these movements that we had prepaid the debt in 2022, 700, but it was over 400. Everything was part of a strategy to put this cash more efficiently.

So not to have this elevated cash in the company.

And the debt cost that is CDI plus 1.5% is not efficient. And with all these movements that we had sales and improving the performance of our assets, optimizing our capital structure, we have a cash position that is comfortable. 300 million, that is very comfortable. So we're going to need to concern about needs of refinance or new finance, nothing like that, nothing of the sort in the following two years, considering the worst case scenario and also some risks of business. As Bruno mentioned, retailers, we are comfortable for the next two years, we have enough cash as we do have currently.

That is one more question about ITM.

ITM, if there is destination, we have been studying different alternatives.

One of them, then again, we do not have the power of decision.

We have part of this asset, but anyway. demolished to put another development in its place. The calculation is no good, even if we have an MPS, but we have been studying alternatives also to incorporate it.

In order to place a question, you raise your hand or you can place it in the Q&A box. Questions and answer is closed. We pass the floor to Mr. Muramatsu for his final considerations. Based on Diego's questions, what we have in perspective for 2023, I believe that the value of our assets is evident based on the performance that we have had in the last year, this beginning of the year,

We saw that there is a balance in the market on credit restriction and all the problems that we have for big players. But opposite to that, the market, it seems paradoxical, but we see good results in the operation in the first two months of the year. It was good.

And about the trading. of malls, especially in the last two weeks, we have seen big results and big demand on new spaces. And the shopping mall flow is still growing strongly.

The offices, we have great part of the offices rented, except these two developments, as I commented. So we are optimistic on Brasilio Machado representing 7% of vacancy because of the regulation troubleshooting those technical problems. So we believe that this, based on the location, we are going to have better liquidity for this year. And ITM, we have been working in different alternatives. We have seen some of them advancing well. And I believe that we start the year of 2023 with the house clean. We have very good perspectives on growth on the mall side and also estimate of growth that is very aggressive for the malls. And they are proven correctly. Building, we are so excited, especially when we observe the two biggest problems that we have. And we are addressing them all. And I believe that that's it. I thank you so much for your attendance, for your time. And if you have further questions, we are here available. Our team of RIs available to meet your demands. Thank you so much. Good morning. This video conference is closed. Thank you so much for your attendance. Have you all good afternoon.