Multiplan Empreendimentos Imobiliarios SA

BOVESPA:MULT3

Earnings Call Transcript 2022-Q2

[Operator]

Good morning, ladies and gentlemen. I'm Mark, and welcome to Multiplan's Second Quarter Earnings Conference Call. Today, we have with us Jose Isaac Peres, CEO; Mr. Armando d’Almeida Neto, CFO and IRO; Mr. Marcello Barnes, CIO; Mr. Hans Melchers, Planning and Investor Relations Director; and Mr. Richard Svartman, Digital Strategy Director.

We would like to tell you that today's event is available for download at the website, ir.multiplan.com.br. [Operator Instructions]

And before proceeding, let us mention that forward-looking statements that are based on the beliefs and assumptions of Multiplan management and on information currently available to the company. Well, these forward-looking statements are not guarantees of performance, and they involve uncertainties and risks that are related to future events. Therefore, they depend on circumstances that may or may not occur. Investors should understand that industry macroeconomic conditions may affect the results and may lead to results that are materially different from those expressed in the forward-looking statements. The earnings call should last about 60 minutes. Thereafter, the Investor Relations team will be available should you have any questions.

Now I'd like to give the floor to Mr. Jose Isaac Peres, CEO. He will start with the presentation. Mr. Peres, the floor is yours, sir.

[Jose Peres, executive]

Hello. Thank you. Ladies and gentlemen, it is a great pleasure to be here. A renewed pleasure actually to be here for our earnings call. I think that we have great things to talk about today.

In the second quarter of 2022, Multiplan actually achieved new records. And we leveraged many of our results here from our management team. And it's great to see that the sales are increasing with a growing number of people walking by our shopping malls. This is visible, even more movement than we had before the pandemic. And it's great to see that the customers are in a family environment, a happy environment, an environment that sparks joy because the shopping malls in Brazil are [indiscernible].

That combination of a growing quarter and the rate of occupancy that has grown a lot many of the stores as well with a low index of people that are having issues, economic issues, and now we have stability. We don't have that many defaults. And our tenants, as I've told you, are growing at an accelerated pace. We are talking about BRL 4.9 billion in this quarter, reaching a new record in sales for the second quarter.

Always, the end of the year is the strongest quarter but we have a total revenue of sales that we should get to BRL 20 billion for this company. We never actually got to that number before. And that shows, that highlights actually. This result is 64% higher to the same period in 2021. And if you compare it to 2019, a year that we had a growth in the economy, we didn't have the pandemic, we had a growth of almost 29% in comparison to 2019. So we've had a growth in sales in our shopping malls above 25% in comparison to the first quarter of 2021, and 14 of them actually grew on double digits.

In regards to the same period of 2019, and I'd like to actually mention a few exceptional cases. It's important to mention them. ParkShopping Canoas, it's a mall that is completing its 5-year birthday, let's just say, spectacular sales. We actually got a growth in sales to the same period of 2018, right? 2018? Yes. Well, a growth of 86% since the second quarter of 2018. It is something fantastic. I mean, it's as if you are doubling the size of your shopping mall, you're doubling the sales. It's great.

Also, we have to talk about the VillageMall. And we have to highlight that in the second quarter of 2022, we have sales that surpassed 59% in the same period of 2019. If you compare to 2021, even higher, higher percentage of growth.

The flow of vehicles has also grown. And we are basically at the same level of 2019, which is a great news. So the -- we have the different transport systems with Uber or the regular, privately owned cars. That has grown, and that's very good. We have to highlight that most of our tenants they -- they're -- they have e-commerce. And it doesn't hinder the services provided for the shopping mall by the tenants. It actually complements. But remember, nothing actually surpasses the on-site sales. And I'd like to comment a little bit more on that.

Our net revenue got to -- our gross revenue actually got to BRL 473 million. That's a revenue by the company. And here, there is a relation, I should say, that I'd like to highlight. I always noticed that usually the gross revenue of the shopping center, shopping mall, is always 10% of the actual value of the mall. So if the gross revenue is BRL 2 billion, it's because probably we before got to BRL 20 billion in the value of the mall, maybe more. But the beginning of the year is also a bit slower than the end of the year. And this year we have the elections, I don't think that the behavior of our customers will actually change. The operational revenue was BRL 428 million, also a record for the second quarter, the highest in the history of Multiplan in that area. The result allowed us to get to BRL 300 million in EBITDA just on this quarter. And I think that these numbers that we are presenting to you, they are amongst the best, the most important numbers of the listed companies and the stock exchange here in Brazil.

And also, I would like to bring your attention to our point. We have had a better result. If we didn't actually denied, let's just say, we didn't -- we didn't get BRL 1.3 billion in revenue. And this is important because we relinquished that BRL 1.3 billion so we could actually allow some breathing room for our tenants, and that's the key issue here. They're our partners. So we wanted to solve the issue of vacancy. We reallocated many of our tenants. And many of these spaces, we actually implemented new technologies. And today, we are hearing a lot about what we said at the on-site commerce is over and everything was going to be remote, no. That's not the way. People are gregarious by nature. They want to be somewhere physically. They want to be on site purchasing. A shopping mall is a party. And it's -- people are simply, they don't want to just buy things. They want to get the whole experience of getting to meet each other on site. So we would like to always have a great experience, a fun experience.

As we have in Jacarepagua, for example, at the end of last year, the shopping mall is one of the most beautiful and intriguing shopping malls of the country. And we always have to raise the bar. We have to have a reference. We are the reference. Our challenge is always to deliver more than the threshold, more than people actually expect. Jacarepagua, if you can go there, you will see, I would say, the most unique shopping mall in the world, and not only internally but externally. We have the park for children, for pets, for dogs and for cats as well. I don't know if there is any other pets that you can actually bring to the shopping mall, but anyway, cats and dogs.

We actually pay a lot of attention to the human factor, the desire of people, the feeling of getting together, and I always mention that at our company. We have desire because humans are a machine moved by desire and feelings as well.

And it's on that -- with that thing in mind, in Ribeirao Preto, we implemented last year, the management center of emotions. So now we are servicing something that human beings actually are lacking sometimes. That's something that humans need. We have an innovation. The first one in the world. When we had, for example, the medical centers in the shopping malls 30 years ago, we were the first one, so if you remember. People thought that, that was not compatible, but now that's the norm, and we receive over 300,000 appointments, monthly, 300 medical appointments per month. That's a lot.

So the company will always go in the direction of what the client -- the consumer needs. We are always putting ourselves in the shoes of our customers, what would be good for our customer. And whatever is good for us is better, is the best actually for our customers. So we would always like to deliver more. And in that way, you give a wholesomeness sense and feeling to our clients, to our customers.

And maybe this is one of the best performances in shopping malls in the world that we had this year, not only in Brazil, in the world, because this year was exceptional. Growth in sales that is exceptional, growth in revenue growth and everything. I'm just going to stop with the philosophy, and I will continue. Otherwise, I'm going to take too much of your time.

Well, I've said that people are now exercising their right to freedom that we couldn't exercise during the pandemic. Now the collective will to live -- our leitmotif is what is behind the growth in the shopping malls. Remember, the human behavior is gregarious, and that's a key issue. And a poet said one -- once -- a poet said once that a monkey, it can never be a monkey by himself or by herself. We are -- they work in groups. And in the pandemic, we are advanced monkeys, and we like to live in our gregarious groups. Remember, and with that thing that people would like to get together, we've had over 170 events, 35 more than the second quarter in 2019, just this -- just the first quarter, right? Second? Okay, it was the second.

So we would like to highlight that one of the things that we did was the immersive show on Van Gogh, the Dutch painter. We have started actually in MorumbiShopping, and it surpassed all expectations. And we had a global record of sales for the franchise of 370,000 tickets. I'm talking about 370,000 tickets to see the show based on Van Gogh. And just on this, we are talking about 370,000 tickets. And MorumbiShopping had a growth that was exceptional as well. In the second quarter, we grew 40% and 28% in traffic -- car traffic in comparison to the same period in 2019. So we are surpassing all the numbers from 2019.

That project that is also in Rio de Janeiro and Brasilia, it just started in Brasilia. And that company continues with promotion marketing that is ever stronger. Adding new news that is fun, that bring comfort, that bring culture. And now we get to Rio de Janeiro with the 8-K technology that just made its debut here in BarraShopping, and we saw it in Sao Paulo. And also, I mentioned that actually, we have faced many adversities during the pandemic and ParkJacarepagua was one of the ones that we faced a lot of adversities as well.

Now we went through many, many crisis over these last 50 years since the inception of our company. And we've always learned. And this is not a Chinese invention that crisis generate opportunities. Now this is something that is in the DNA of any entrepreneur. You have to take the crisis and make it into an opportunity, lemons into lemonade. I remember that in 1963, when we had the political changes here in Brazil and my first big business here, and we continued with resilience ever since. And finally, Multiplan. So I started my life in -- as an entrepreneur in 1963. And I believe that in the next year, I will have 60 years of experience in the business. I am not, let's just say, crazy, and we continue to create many, many things that many entrepreneurs cannot do because we are visionaires. .

And for many of you that look at age as something bad, don't do that. Growing old is something that happens naturally. But you can choose to feel old. You can choose to feel old at 40 years old, but you can be young in your mind at whatever age you have. And I am very happy to do what I love, which is to create, to innovate, to provide happiness to people. And that has become -- that has brought a lot of good results for the company, and that's a feeling. You receive what you -- you reap what you sow. So we have to deliver more than what people expect. The reality -- we have to turn dreams into reality because when the reality is larger, then the dream is always good. And that's what we are pursuing to surprise people, to awe our clients and provide more comfort, more joy, sparking that joy in our clients. Because when you can actually work with health, work with the soul and work also with the desires with what you covet, then you have an environment that you can create a micro city. It's not a Disney World, but we could say that it's an oasis in our cities. That's the DNA of our company, to invest in the joy of our clients, of our customers.

I would like to highlight that the real estate DNA, well, we started as a real estate company. And now we have more projects. And remember, I would like to say that our project in Porto Alegre, Golden Lake in -- just by the side of BarraShopping, so right in front of Orla do Guaiba, it's still in expansion. And we just launched in October of last year our first core several condominiums. It's a big condominium that encompasses several condominiums. It's like a neighborhood. So we actually sold already 50% of the DTB, which is estimated, which is BRL 570 million.

Now we just -- regardless of the economic moment that is of uncertainty, in regards to politics, the election, the economy, the pandemic, the SARS-CoV-2, but we continue, we continue regardless, pushing forward regardless of the adversities. So I would like to say that Multiplan has 825,000 square meters in private area that is potential for future developments in real estate. And this is already paid. We already acquired these. Many of these real estate are around our malls, and they had an exceptional valuation. And 200,000 square meters of these 825,000 are expansions of our malls itself, which are projected, and we are just waiting for the most opportune moment to actually start the works.

Also, what I would like to highlight and we've been working, it's the investments in technology. We continue to advance in digital innovation. Our app named Multi has over 2.5 million accumulated downloads and has been used in this quarter alone by 700,000 different customers, over double what we actually got last year. There is inside of the company a potential for digital content, a huge potential. There is almost 1 Brazilian side of our -- of all of our malls, and we are still developing this potential to offer to our clients more sales, making purchasing easier, more awards, more points, more advantages. Therefore, inside of the company, we have this content. And those of you that go through our malls year-on-year, you can see that. Once again, we can use this app for several of our services that we already provide.

And I would like to highlight that we've been working for 15 years. Actually, it's been 15 years since we did our IPO. We take part on all the indexes of the Stock Exchange, IBrX-50, IBOV and there are several others. The secret to success is to do things right.

Just to give you a bit of context of what has happened over these 15 years. We actually multiplied the company since we did the IPO. This company already invested over -- well, it's pure value over. So more than BRL 20 billion when we had the revenue that was half of that. Today, we have doubled the revenue. And the idea that the wholesale commerce, the on-site commerce would be over with the remote commerce is -- that fallacy is over. With the post-pandemic, we can see that people go and they want to go to our malls, and they want to be there. Our customers, they're not simply satisfied standing in front of a computer and purchasing something and pressing a button, no. That on-site thing, seeing each other is something key of the human behavior.

Maybe I got a bit over the time, and I apologize that -- for that. So I will finish saying that what has happened over these last 15 years since the IPO for our shareholders, we have a revenue of BRL 368 million in 2007. And now we catapulted that to BRL 1.7 billion over the last 12 months. And I believe that we're going to get to close to BRL 2 billion or even surpass the BRL 2 billion mark. And that IPO, the revenue of the company is BRL 21 million in 2007. And now the revenue in the last 12 months, it's BRL 657 million, and I hope that this number is much better towards the end of the year.

And what I -- that's all that I have to say to you. Thank you for your trust. And now I apologize for taking too long. And now I give the floor to our colleagues. Thank you very much.

[Operator]

[Operator Instructions] Our first question is from Pedro Lobato, Bradesco BBI.

[Pedro Lobato Garcia Fernandes, analyst]

My first question has to do with capital allocation, specifically on your own capital. We saw the taxes for this quarter. We saw an impact due to the CPM. We wanted to understand a little bit more about those taxes for the second semester. Since we know that historically, usually, we have more taxes in the second semester, which is actually the fourth quarter, so we wanted to know more about that.

And we have another question. We're trying to understand the failure to pay rates. We see that the provision in DR has increased. So we wanted to understand a little bit more about that, too.

[Armando Neto, executive]

Pedro, this is Armando. Thank you for your question. About capital allocation, well, this is related to what we were saying in the previous quarter call. I mean, this year, we've been very selective in terms of using resources. And you've seen that there was a purchase of stock that is similar to the line, the level of CapEx that we had this first semester. So we're trying to make capital work for us since we have a higher interest rate right now as well.

And thinking about the future, well, we have announced that there's going to be a JV of BRL 150 million approximately. So we're leveraging, we're generating income, we're generating cash. So this allows us to understand the opportunities for growth a little bit better. We also have good return for shareholders, and we can also purchase more shares, just exactly what we have done in the past quarters. In terms of failure to pay, I'm going to turn it over to my colleague here.

[Unknown Executive]

Well, when it comes to failure to pay, ever since 2019 and actually in the previous quarter, we have tried a few things. There are a few factors that are pretty obvious here. Of course, there was an increase in income. So of course, we're going to have that issue as well. It's a consequence. We know that we're more conservative now. We're looking at this average of 5 years approximately to understand accounts receivables. So it is going to remain conservative. It is part of the audit analyses that we have right now. We are trying to be more conservative for the future. And we have to remember that this is still better than what we had historically.

For the first semester, I think we have to consider all these factors that lead to that. And about the first quarter, I think this is not determined for the increase of expenses at the shopping malls. So in Jacarepagua, for instance, we had great success in sales. We've seen a few other expenses that we have to consider as well, but that would be it.

[Operator]

Our next question is Juan from XP Investimentos.

[Unknown Analyst]

My first question has to do with the expectations in terms of sales. We've seen good sales in July. Good expectations. Do you think that's going to remain the same trend for the next quarters?

And also about the same-store rent, we've seen real growth. And we believe that this was something that was recurrent for you. So we wanted to understand how do you see those adjustments in terms of the inflation? Do you think that's going to continue to happen? Should we -- what kind of trend should we anticipate in the short-term especially?

[Armando Neto, executive]

This is Armando. Thank you for that question. Of course, it's difficult to explain what we're expecting in terms of sales for retail. What I do believe is that we had a worse scenario for Brazil that we were expecting, but it turned out to be better than we expected. And this has been confirmed with the results, with the numbers that we're looking at for this previous quarter.

Now thinking about the economy, we believe that we can be optimistic that there was a good review of the GDP, for instance. We're looking at different analyses in Brazil that shows that the Brazilian economy is recovering. But what's important here is not what I am saying about those -- that macro data. I'm sure there are more experts who can tell you about that. What I can do is tell you what we're doing at our shopping malls to have a better market share.

Peres was talking about events with almost 200 events happening at the malls, 170, approximately, and that increases the amount of people, the number of people coming to the malls and the number of cars as well vehicles. So we continue to have a very good program, a very good agenda for the next few quarters. We have a full program, a full list of activities programmed for our shopping malls in 2023. We understand that we're also working with the mix. We want to work with that.

Sometimes the market doesn't really notice how valuable it is to adjust the mix of stores to come with new operations, with new brands, and also that great list of activities and programs that we have, campaigns that we have. This is very positive for sales. And as a consequence, we see good numbers and also good rent results. So what I wanted to reinforce is that activity, that expectation actually, that we have. We are very positive that we're going to have an increase versus last year because we have changed the mix, and there's this great strategy of promotions and campaigns that was reestablished because shopping malls. [I'm sorry, I'm just adjusting my mic says as the speaker.]

So as I was saying, our malls are ready to continue to work like that and to have a better market share. As for SSR, the same-store rent, [Let me just adjust my mic as the speaker.]

So as I was saying about the same-store rent, when I look at the growth that we had in 2019, I see this crooked picture, I would say, in a way. Because ever since we -- I know -- I mean we have contracts that are long-term. So there is this change in inflation, and then we have to see what happened. Of course, what happened in 2020, what happened in 2021 had a very important impact. We have to see those 1-year periods of time. In 2020, we had a change of around 4%. In 2021, it was 7.9%. So if we only look at 2019, we're going to have the wrong expectations. That's not really going to reflect reality. But despite all that, we've seen a real growth of over 2% ever since 2019, around 2.5%. So we have to remember that it was 87%. The SSR was 87% negative in 2020. But despite all that, we were able to deal with all the expenses and still have a real growth of 2.5%.

So what I usually like to look at is the comparison against 2021. Because comparing against 2019 I mean, versus the last normal year, so to speak, I mean, this was just to understand what kind of sales we were looking at, et cetera. But it's completely different now. So 2021 was a good year already to compare against. It's already normal operations somehow. So the third quarter, for instance, had great results. If we look at the real growth against 2021, we're looking at around 20% -- it was 19-point something. So these are very good numbers. It shows our ability to manage. We're managing shopping malls in a very good way. So when you think about sales and same store, this is great. And what Luis is saying is also connected to all the shopping malls. That's the consequence. I hope I've answered your question.

[Operator]

Our next question is from Fanny Oreng from Santander.

[Fanny Oreng Avino, analyst]

I have 2 questions thinking about the long-term. I think one of you mentioned during the presentation that you like to create, right? So we see scenarios where there is a strong reduction in ABL for the next few years. And we know that Multiplan is one of the companies that have developed the most in Brazil. So how do you see that development for the future? I understand this is not the best scenario right now because of the interest rates and all that. But how do you see that opportunity for the development of more greenfield in the next 3 to 5 years approximately? Think about ABL, which is the leasable area.

We were also thinking about the amount of shopping malls with photovoltaic energy. I mean, what kind of impact is that going to have in occupancy and other elements using that kind of energy, using that kind of source, and does it make sense to continue the rollout?

[Jose Peres, executive]

Well, this is Jose Peres. I'm going to answer. Brazil has around 5,700 cities approximately. And I think only 200 of them have a mall. There are places, cities with 100,000 or 120,000 inhabitants. But when you're talking about 100,000, this is nothing in Brazil. But if you go to Europe, of course, you see that cities are considered already a large city with 50,000 sometimes. Same thing in the United States. The number of cities is -- I mean, the population is well distributed, I would say. But in our case, we're mostly in large urban centers. That's what I'm trying to say.

But these cities, they were embryos a few years ago, and they have grown so much. We know that in Brazil, I mean, Brazil still has a great potential for growth in every sense of the word. And now this is revealing also in agriculture. We understand that this has leveraged our development. We have green currency nowadays. I mean, it's not U.S. dollars, but it is green because of the agriculture. So I understand that in the future, malls are going to be developed with a lower cost, and they're going to be looking at very local needs in these places, in these cities.

We understand that retail nowadays, I mean, stores that are in 3,000 or 4,000 or 5,000 places, they don't really know where to go anymore. So in the future, I think we're going to look at these medium-sized cities to receive these new places. I mean we're going to have more adapted equipment, we're going to have this kind of analysis.

We continue to follow what people want. We're trying to service people's needs. When we started with malls around 50 years ago, I remember in the United States at the time, we were looking at different cities in the U.S. and Europe to try and understand what would be interesting because we didn't really have malls in Brazil. The first one was Ibirapuera in Sao Paulo, which was back in '73. It was built in '73. So I have to say that I was surprised with the idea of American people because the cinemas were not in the mall. And they said, well, that's because people who go to the movies, they don't really go to the mall. It's a different audience, they said.

I said, okay, okay, it's different audiences, but we are different here. So I decided to put all of the movies, the cinema within the shopping mall. I mean, here in Brazil, it's a real activity going to the movies. The first multiplex in Brazil was in Brasilia, the capital of Brazil. And people said at the time, that's crazy to create a multiplex. But I think around 30 years ago, people would say, well, Peres, that's not going to work. You're going to have to close after 1 year. And the first year of operations, we had over 1 million people going to the movies in Brasilia. And the closest competitor, which is no longer here, he said, okay, I bet you a box of Dom Perignon champagne that you are going to close within 1 year. So of course, I won the bet. But I never got a champagne.

But anyway, what I'm trying to say is we have this feeling here. We have this perception where we can interpret the wishes that people have. Our work here is really psychology anyway. That's why we have created the first collective psychoanalysis center because psychoanalysis is usually a very expensive thing. But here, we are working to make that people, all people are able to have that kind of service, and it's more affordable. I mean, instead of buying a shirt that is BRL 150, they can go to a therapist and get help for their mental health and spend the same amount, and they don't get divorced, let's just say, or something like that. So we're helping people in terms of mental health. That's very important. So we're trying to offer more comfort to people. It has to be not just a material thing, but also psychological. We're trying to offer more joy to people. That's a very important thing.

And if you look at this, I mean when people go to a mall and it's crowded, I think the atmosphere is very positive. People change their behavior. I usually say that the best urban antidepressive is a shopping mall. I usually say that because people feel better after they go to the mall. Well, this is all very subjective, of course, but this is also what brings us closer to our objective. We're trying to transform these wishes or needs or sensations or feelings. We're trying to offer that joy. We're trying to bring more comfort. I still haven't put a hotel within a mall, but maybe someday.

Well, I hope I have answered your question maybe it was a little bit abstract. I was a bit abstract in my answer. But when you ask me about Brazil, I have to say this is a place, a country where we really have most of the people centralized in these urban -- these large urban areas.

And now with COVID-19, there was kind of a change, of course. I think this happened in the United States as well. I mean I was recently in Miami, and I noticed that there is this migration, I mean, from New York, from California, from Los Angeles. After the pandemic and all that fear that was created with all the press, with all the news, et cetera, I think there was this kind of transition.

Well, just to complement on that, Fanny, just about the photovoltaic sources of energy. Yes, at VillageMall, we have that. We have that service. And I think it leads to a much lower cost for tenants in that place. But we are looking at Canoas. We are looking at ParkJacarepagua, which are newer buildings, and they have this great structure for having their own source of energy. Of course, it's not enough to cover the entire consumption of the mall, but it's around 12% to 15% approximately of the consumption of the mall. So this generates already an interesting reduction for the condominium charges. So that's a very good thing.

We're going to have better CapEx. So we're going to reuse water. We're going to have a better use of electric energy, et cetera. Actually, Marcello Barnes is going to tell us more about that.

[Marcello Barnes, executive]

It's not just the photovoltaic. It's our conditioning, it's synergies and the use of water, reuse of water, the intelligent staircases, elevators. We have technology being implemented. Lighting, for example, all the lighting is much more economic. So there are several things that we do that we invest in technology that we implement in new technologies to be more streamlined. The example, Jacarepagua, is the one -- the model has the lowest cost to run, let's just say, in the network. So everything that works there, we actually replicate to all the other malls.

And another point, still about the first part of the question to Dr. Peres to the new ABL. Well, we have the greenfield. And we have new areas also the areas around the malls, and we have expansions around those leasable areas. And we have the period of leveraging the high interest rates.

Though we have many malls that are asking for an expansion. This is a great moment. And not only that, we are considering new urban centers. And we have to consider where the hotels are located, where the hospitals are located. It's a new world where you can move very easily and you can solve many things.

On a trip, I remember that I used to go to BarraShopping every day. And then I saw a friend, and she told me, why do you come here every day? and I say, well, I get everything done here at the shopping mall, that's it. You just have to have comfort to run your day-to-day errands to solve your day-to-day business.

[Operator]

Next question comes from Pedro Hajnal, Credit Suisse.

[Pedro Hajnal, analyst]

I have 2 questions. First is in regards to the leases adjustment. We've have been using the pandemic, 2019, the comparison base from that here. And you said that we have the accumulated growth that surpasses those numbers. Is there any buffer for discount? Something that happened not necessarily in 2019, we had a few points for improvement. So how do you see that real gains in leases?

And the second question is Jacarepagua, the brands. As you've mentioned, the company invested in the shopping mall, and the expenses could actually hindered the marketing of the shopping malls. So are you going to implement that same plan in other malls in terms of marketing? And do you see that towards the -- well, down the line, would this be positive, promotion-wise?

[Unknown Executive]

Pedro, thank you for the questions. Okay. I'm going to summarize my answer. Should I do it?

[Unknown Executive]

No, you do it.

[Unknown Executive]

No, you can do it.

[Unknown Executive]

Okay. Pedro, here is the following. The point that you mentioned, which is the new shopping malls, that issue of marketing, before the shopping mall -- the -- after 3 Christmases, you are maturing. Now we need 5 to 6 Christmases. The takeoff. So to get the plane on in the sky, just at cruise level, it's not as quick as before. Before, we didn't have that many malls. It's a supply-and-demand issue. Before it was more exclusive. It was a privilege for the tenants to be in the shopping mall. Now Brazil has, I don't know the number, but 500, 600 malls, let's just say, here in Brazil altogether. So that's -- we have 20, and we have -- we have the 20 top malls and then there is the whole rest.

But anyway, that's how it is, the market. You cannot just take back the numbers of 40, 50 years ago. I remember that 40, 50 years ago, we got 50% revenue, and we would be paying the installments just for the financing of the real estate. And the interest rates were 12%, plus correcting by the economic indexes, which got you sometimes for 100%. So even though there was the revenue over 200%, we managed to receive 50% and basically, we had a line there in the cash flow of the company. So we will pay for the mall in 10 years.

Now it's different. And my partner -- so there was a partner and then it -- they stopped and I came to Multiplan and I was doing the malls for some time. Obviously, the development that we saw at that time, it was almost a privilege to actually have your store in the mall. Now we're working with more simpler numbers. And I can say the following. The real estate entrepreneur, I used to pray for the day that Brazil will have interest rates of 12% without correcting by any index, 12%. Because 300% correction, I remember the last month of Sarney's government, under we had 80%, 8-0 percent, inflation. I mean, 80% inflation, come on. And the supermarket would readjust the prices every day.

Fortunately, we're not in that situation of the late '80s anymore. The world has changed, and now we have a more civilized equation, more based on numbers. And today, we see countries in Europe, for example, that are working with an interest rate of 12% regardless of the inflation being much higher. But today, if you have a hike in the interest rates, you have a lot of people filing for bankruptcy. You see in the United States. If you grow higher, you're going to get bankruptcy. And I think that our Central Bank was very daring in having a strong hike and then a strong downturn in the interest rates. It was tough. But those of us that lived through the hyperinflation of the previous decades, we have records. We have -- we know how to deal with that. Those of us that took part of that, we know perfectly well how it is difficult to deal with 30 years of hyperinflation. Brazil, thanks to the institution of the -- the economic institutions has grown, and we've grown 10% per year even, regardless of inflation, regardless of the period.

[Unknown Executive]

So I would like to say that we are talking about. I think that I got a bit lost here with the question. No, no, I can continue. Pedro, here is the thing. Obviously, great deal of the discounts are going to be phased out since the fourth quarter of last year. Actually, third quarter of last year was something that was -- we had started this very specifically. Of course, we have discounts. We have specific situations. And all the shopping malls today, the investors, the entrepreneurs, they're going to have to invest money. And those funds, they have to be enough to make the plane fly at cruise level.

So -- and getting to the takeoff, it takes a long time. It takes 4, 5 years. In Jacarepagua, for example, we are climbing up. We're still climbing. We're still reaching those cruising levels with the plane. There, we're servicing a demand that it's not easy. It's not easy for you to imagine that you're going to make a mall, and it's a super mall and that in 3 years, it's going to be fine by itself. No. It's something that we are creating out of 0.

So Pedro, discounts. If you get the situation of ShoppingVilaOlimpia in Sao Paulo, there is still the influence -- higher influence of the offices than more than people are living around -- where they came -- when people coming back to the office there to growth in terms of the second quarter of this year and over 100% in regards to the previous year, 112%. These are opportunities of you reducing the discounts, but they are much lower than what we did last year.

And the marketing expenses, what Dr. Peres has commented and perfectly, well about Jacarepagua, it's what he said. The promotion fund is, like you say, a saving accounts that we have been doing for some time. And we just started with a very small amount of money, if you say. And now this is a moment for investment to get -- to get this plane to take off. And as you said -- as we say here and everywhere else, there's no free lunch. You do have to purchase your materials. And we have several other opportunities. We have ad campaigns, one from Multi, another influencers in the shopping malls. These are non-recurring one-off investments, and these are incentives to increase the traffic, the foot traffic. And then we have a consequence in -- reflected in higher sales. And whenever we see a good opportunity, we will invest in marketing, sure. But there is no -- there's nothing that is extremely planned. There is always opportunities that pop up. And we plan that in the budget of the mall.

[Operator]

Next question, Elvis Credendio, BTG Pactual.

[Elvis Credendio, analyst]

I have a few questions here. The first about sales. Your shopping malls, they were very strong in the last quarter, and the perspective is good, and Dr. -- as Armando has said. And if we see month-on-month, there is an accelerated growth comparing to 2019. I just wanted to understand. And no, if you've done a few studies, is it more connected to wholesale, schedule? What is the speed of acceleration?

And the second question is in regards to flow foot traffic. I mean, I want to understand what do you see in your end to explain this -- the standards comparing to 2019. And of course, we didn't have the pressures of last year. Maybe you have less foot traffic because we still don't have that many movies, or the customers, they're changing their habits to online. What can you tell us about that?

[Jose Peres, executive]

There's a saying that says, here, as long as we're paying for the -- well, I am happy and let's go back to March. Could you imagine that the sales would go 20%, 30%, 25%? No way. No. Let's look at this back -- we can look at backwards and saying, that this is deceleration that we grew first 30% and then 25%. No in comparison. This is still great growth month-on-month.

This is also vacation time. Remember, post-pandemic, that people want to leave, travel. So it's evident that the cities and more and more than that.

Let's look at another aspect. Let me give you a comparison here. I am looking at the occupancy cost, which is the question that you've been asking us day-to-day. And then I hope that today, many of these questions have been answered. But look at this, inflation. ITBM that just was published is below 11%. You're going to see effects on GTPI. The growth are growing 25%; inflation, 10%, 11%. It's much more sustainable, differently from what we saw last year -- in the previous years.

So I'm not saying growing 20%, 30% of deceleration. No, we're growing at a lower level, but it's exceptional growth. And we couldn't even foresee this. It's unimaginable. The number, 23%, we almost -- we got scared when we saw those numbers. They were so good. A good -- it's a good scary feeling of joy that -- that we're seeing that our strategy is generating results, and that allow us to have a result as we presented.

And before we got the pandemic and the whole thing, we saw growth. There was lower of the -- of the last vehicles first. First, we have to consider the Uber effect. Car sharing, that's a natural thing. And today, the malls are not isolated. They are part of a big -- of a mini city. And we have -- yes, they -- we have the multi-use integrated lifestyles. We're talking about 3 malls of ours that are by -- big buildings.

And there is a point that I would like to highlight. The main shopping malls that are elected as the best shopping malls in Brazil, they are with Multiplan. In Sao Paulo, it's Morumbi was elected the best shopping mall Sao Paulo. BarraShopping, always wins several years. Belo Horizonte, the same year. Ribeirao, there is no competition, and ParkShopping as well. So if you take a look at everything that we have, our workhorses are always racing and getting there first.

Are you unhappy with the results that we are providing today? I mean, wait for the end of the year, then you can see what we are doing. But the first time that I went to ParkShopping, there was only ParkShopping. And today, we are surrounded, Canoas, than we did 5 years ago, plus Jacarepagua. So all of that brings an impact that allows -- well, Morumbi, it's an icon that has been developed. And there is more and more to grow, to develop.

The vehicle traffic, it doesn't necessarily indicate a precise indicator of sales. Even vacancy is higher. With higher vacancy, we are still getting great growth. So we can see that the foot traffic and the vehicle traffic, my expectation, is not to see a growth in vehicle traffic. I don't see that happening because the malls are more central. We have public transport, and people even go there by walking. Sometimes you get your kids at school and then you go have some lunch in the mall on foot. And we have to be very objective.

Inflation, unfortunately, inflation has the market for the salesman. The lack of products created a market buy now because I don't know when I'm going to receive this. Since the world stopped with production for 2 years, we don't have any stocks. You don't have televisions on stock. You don't have products on stock in the warehouse. So when you go to a store and in the shopping mall, the salesmen say, buy this watch because I don't know when I'm going to get another one.

Then there is another factor. I don't know how much it will cost in the future. It's evident that this is not good. Inflation is not good. The lack of products is not good. But this is the reality of today's world. And I traveled to Italy recently. And I saw that everything was lacking. I mean, the products were not on the shelves. The world stopped producing. And just China grew. Everybody else took a beating.

So there is another point that I would like to highlight. There are some activities that we are growing. Well, we have -- movies are growing. We have a new launch -- new launches, but this is an upside. But I don't think that we are still looking at all the indicators. Again, inflation. Inflation is the reality at the moment. If you want to buy a car, we don't have the transistors. We don't have goods. You want to purchase a watch, you don't know when you're going to get the next one. Anything that is a bit more sophisticated, it's difficult to get your hands on it. And of course, the basic part of our lives, which is food. Of course, Brazil produces a lot a lot of raw materials and crops. And we, of course, are an agricultural -- have stronger agricultural industry here. And Brazil has everything, in a sense, to be a great world power. We just need more order and people understanding each other.

[Operator]

Next question is from Andre Mazini, Citibank.

[André Mazini, analyst]

A question about the real estate. You already talked about the marketing. The -- well, I think that the last part was the vacancy expenses. Of course, ABL leasable area is key, the acquisitions and higher vacancy than the pre-COVID time, but not so much. So if you can provide us with some color on how do you account for the vacancy in some of these malls? When the vacancy is 90, 95, 100, can you dilute that expense and the condominium charges and then the tenant pays for it. So the portfolio above 95. But some malls, I would say that is less than 80. So that's the math up until to 95. The condominium rates is Multi. The one that pays. So can you tell us about that?

[Unknown Executive]

Andre, in our malls, the vacancy charges are covered by the entrepreneur. So your question is that specifically, right? Or is there any other point?

[André Mazini, analyst]

No, that's it.

[Unknown Executive]

Thank you. So the shopping malls expenses reflect higher vacancy when compared to 2019, which is the base of use. And this is not an obligation and commitment of ours. To forgo the rent, the lease during the pandemic and receive half of the condominium charge, we didn't get -- we -- we are not making the tenants pay in a few years, but actually, we simply forgone that payment because we are partners with our tenants. And that's how we can get a better recovery.

The tenants that are with us, they're our partners. We are not the middleman. So to have a good tenant is a blessing. Of course, we have concessions according to their own business capacities. But we need to understand that this is a humane -- a human company. We understand what's going on in the market. And we thought that we stopped working during the pandemic. No, no. We continued diligently working.

And we have problems with numbers. So we have problems with unemployment. But we've grown with 8 million spots here of jobs -- formalized jobs in Brazil. So maybe this is one of the few countries that has -- that unemployment has decreased. So we have to celebrate that even inflation will drop. So when the fuel cost decreased, it was a party. And I remember that I heard people say, now it's BRL 8 and now BRL 6 a liter. So this is a point. I always look at the fuel prices.

A few mitigating proposals have been implemented. Some measures that also create jobs have been implemented. The infrastructure will generate a lot of business here, and will generate a lot of employment. Infrastructure has been -- investment in infrastructure has been key in paramount, and that will make Brazil move forward.

[Operator]

Our next question is from Rafael from Safra.

[Rafael Riekonski, analyst]

I wanted to know more about the turnover. I understand there was a change in the last few quarters. So if you could tell us more about the new tenants and how the negotiations were with the new contract? And also the contracts that are due now this month, this quarter, how are negotiations in that regard?

[Unknown Executive]

Rafael, thank you for your question. For the turnover, you will find more on Page 31 of the report. You can see the follow-up there, who is leaving, those who are starting now. So yes, we had different factors there. We had a loss of around 1,000 square meters, but I believe that we're expanding 752. And for apparel, we've had a very good growth in sales progressively. So as for the turnover volume, in the past 12 months, we've looked at around 60,000 square meters, especially in 2 malls. But we have to remember that Jacarepagua is not going to be considered in this math and this number because it's new. And I mean, this shows that retail has a lot of strength. And alongside with sales performance, it also reflects the great moment that it is right now for shopping malls with a better occupancy rate. I hope I've answered your question.

[Rafael Riekonski, analyst]

Yes, this is very clear. But I also wanted to know more about the contracts.

[Unknown Executive]

Yes, that's true. I forgot, sorry. So we are negotiating, I don't want to repeat myself, but I don't usually talk about spread because it's a very abstract concept. I mean we are looking at an average of the 5 past years, the first rent and the last rent. But here, we have to think about the rights and all that. And I don't really like that concept. New stores are being now negotiated for rent with a value per square meter that is higher than what we had last year. So the previous contracts.

Again, this is a very positive moment for malls. So you might ask, well, so they're already renting everything with a higher value. Well, we're progressively improving in that regard. We have more operations. We're going to generate more value in malls in the long run and the medium run, and we're going to have higher margins, higher numbers than what we had in the past.

[Operator]

Our next question is from Andre Dibe from Itau BBA.

[André Dibe, analyst]

I have 2 questions here about what Dr. Peres was saying in the beginning. He mentioned an expectation for sales of BRL 20 billion for 2022 with gross income. He mentioned the numbers for gross income. So I wanted to know more about sales. The sales number that you mentioned is -- that's going to represent around 20%, 23% growth in the second semester, which is aligned with what we had in -- you had in June and July. So I wanted to know, is that additional mix? Does that make sense? And how do you assess an upside risk for that number?

And the second question has to do with the -- with the gross income. Does that include just rent? Or does that include other elements as well? And also, does that include, I don't know, any other linear elements?

[Jose Peres, executive]

Andrea, it's a pleasure to answer that question, Andrea. Well, the second semester is usually better than the first traditionally. I mean, historically, that's what we have noticed. So if we think about if we do the math here, we're reaching BRL 5 billion approximately now for this quarter. So the next few months are going to be better for sure. It has always been like that, unless there is a catastrophe, I don't know. But that's not something that we are expecting, of course. So what I wanted to know -- what I wanted to say actually is that behavior, people is usually like that. I mean second semester, it's going to -- we're going to have Christmas. Usually, the last week before Christmas represents a whole month of sales in other months. So that's what we notice. And usually, people's behavior, it's usually the same. Historically, that's what we have measured.

So I cannot bet on this, of course, but...

We had a sound issue and we're back. So it could be more or less than that. It all depends on the factors that we're going to see in the next few months, especially with the elections. That's going to bring some uncertainty as well. But if everything happens according to plan, of course, in politics, we cannot really predict much, but anyway. I believe that Brazil is going to have good performance, I mean, despite all the things that we're looking at right now, the issues, but I'm positive. Thank you, Andrea, for that question.

[Operator]

Our next question is from Marcelo Motta from JPMorgan.

[Marcelo Motta, analyst]

Just a quick question. How do you see the -- how do you see Golden Lake, the project? It's a very good location, we understand. So when we think about the next stages of this project, what do you think we're going to have, I don't know, 80%, 90% sales in the first stage of sales? It -- does it depend on the macro scenario? I wanted to know more about that. If you feel there is going to be some additional pressure factors or anything?

[Jose Peres, executive]

Marcelo, this is Jose Isaac here. Well, I've been in real estate for almost 60 years. So let me explain 1 important thing here. In real estate, in the past, many years ago, there was no financing. You would have to sell around 80% before you started a project, but you had an interest rate of around 200% or 150% a year. So it was very difficult to get credit. Nowadays, with the lower interest rate, of course, you can obtain credit. You can get credit and then turn it to the buyer. So when you see, I don't know, 50% nowadays, we understand the infrastructure is very advanced. We understand that the fixed investments are very advanced. And I would say that 50% of revenue and already paid for the project. You don't even have to get a credit line or something like that to build. So I would say that we could have even launched a second condominium, so to speak, and we haven't. We haven't done so, so far because, of course, we are thinking or focusing mostly on selling of the first building.

But what we're looking at here is very, very good apartments, very, very good apartments. We're looking at 400 square meters. So it's not a common apartment, of course. It's a very good size. And this makes us confident that we are going to sell 100% by the end of this project. There is a demand now for apartments that have around 160, 180 square meters. This is something that we have in our projects. A lot of people have been asking for that. There's a huge demand for that, for that kind of size. And we will work on that, of course. I think this is one of the best projects that we have had so far in the country. It's really an icon. It's really a fantastic project. It's a region that we are rescuing with BarraShopping. So there were around 600 houses that were not truly houses. They were very poor, very simple. So we transferred 700 people that were there to a good neighborhood that we built to try and rescue, to try and recover really that region. And then we started with the building, with the project. So that's going to be great for the region.

And same thing happens in the south of Brazil. Everyone is very happy with this fantastic project. I don't know if we're going to ever have anything like that again in Brazil, honestly. But anyway, it's Multiplan, trying to do its best every time.

[Operator]

Our next question is from Natalia Pereida, Morgan Stanley.

[Natalia Pereida, analyst]

I have a quick question, focused on VilaOlimpia shopping mall. We know that the occupancy has been a bit lower than the usual portfolio, and we see that there was even a comment about that, if I'm not wrong, maybe people going back to the offices, that's going to be better in the future. But I wanted to know more about that mall. Is there -- do you plan to have a different impact in occupancy rate? Do you have any strategies for the future?

[Unknown Executive]

Thank you for the question, Natalia. VilaOlimpia had a very interesting growth in the semester. It was very good, and this is basically due to the return of offices, people working in the offices in that neighborhood, and we have more residential buildings around that mall as well. So I'm sure it's going to be a region that it's going to continue to grow as usual. We do have a strategy, but of course, we cannot give you many details because of competitors. There are many competitors around that region in that shopping -- specific shopping mall. But anyway, we do have a strategy. We understand that many people will suffer with the first impact that were noticed. But I'm sure that, that's going to be solved right now.

It is true. I agree. I think that with more people going back to offices now, this is going to have some momentum. We have around 70% or 80% of that number of people going back already. Not everything can be done via video calls. Of course, if you're talking about digital banking or something like that, you can do a lot of things online, but not every meeting can be held online. I mean there are many projects that have to be discussed around the table, looking at spreadsheets, looking at physical documents, et cetera, et cetera. So I think during the pandemic, there are many buildings that had around 10% or 15% of occupancy, and now it's back to 70% or 80%. And many of these people are actually the same that use those facilities before the pandemic. And again, VilaOlimpia is a very good center. It's a very good neighborhood for that. It's true. And it's very difficult to replicate that in Sao Paulo again because there's no neighborhood like that, and there is no other lots that -- where you can build another shopping center in VilaOlimpia.

[Operator]

Our next question is from Gerald [indiscernible] Goldman Sachs.

[Unknown Analyst]

I have maybe a theoretical question thinking about the future really, when we're looking at the mix and all that. We understand that it's back to the old levels, we're noticing that in rent, there is a reduction of 100x in condominiums. I understand that there was an impact by Multi, by I don't know, different factors. But my question is, structurally, is there going to be an increased reduction, maybe another 50x or something like that beyond the 100x? So basically, that's what I wanted to understand. The dynamics between the cost of condominium, the condominium charges and rent. What kind of trend do you see for the future?

[Unknown Executive]

Well, that question -- about that question, it is possible to reduce these charges even more. If the company invests in a different source of energy, such as photovoltaic, for instance, we can reduce that cost of energy, of electric energy in around 50%. So we usually purchase, we used to purchase electricity with a very good cost -- at a very good cost in the past. So it didn't make sense to have that kind of investment in the past. But just like what we did in VillageMall, we might want to implement that kind of initiative in other places as well. It is a way to reduce costs.

When it comes to location, when it comes to operations, besides looking at rent, we're also trying to have more efficient buildings, just like Jacarepagua for instance, which is going to be a very efficient condominium. It's going to have the best -- the lowest charges. It's around 20% less than the average of the other buildings in Rio de Janeiro. Isn't that right? Yes, I don't have the exact number here, but it's around 20% below average, below the average that we see in other malls.

So electricity is something that we've been discussing. Photovoltaic alternatives is -- are going to be very important in the future and some other alternatives. I think that the cost of electricity nowadays is probably 15% to 20% of the condominium charges. So that's something that we can reduce.

And also, other measures, safety measures. We understand that cities are usually safer around malls. We have really an army, I would say, of people to make sure that we have good safety in the premises of the mall. So we can think about all that. It is true.

I hope that we have answered your question. I just wanted to complement on what Andre from Itau was asking about sales, the BRL 20 million that Mr. Peres mentioned. If we do the math very quickly, if we think about the sales in the third quarter last year, it was around BRL 9.3 million. And the first semester now BRL 8.9 million. So BRL 1 million. So it was BRL 18.2 million approximately. If we get to BRL 20 million, we're looking at around 9%. So of course, we're doing the math very quickly here. But mathematically, I just wanted to show you our status right now.

[Operator]

Thank you very much for your questions. We have concluded our Q&A session right now. If you have any further questions, please talk to the Investor Relations department. I will turn it over to Mr. Peres for the last message. Thank you.

[Jose Peres, executive]

Thank you very much for your attention, for your patience and for all of your questions. It's very interesting for us to get your questions. We learn a lot as well, and you can remain sure that we are very satisfied. We're very positive. We've had good results this quarter. And hopefully, we're going to have even better results until the end of the year. Thank you very much.

[Operator]

Thank you, Mr. Peres. Thank you, everyone. This is the end of our call for this quarter. You may disconnect now. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]