Sao Carlos Empreendimentos e Participacoes SA

BOVESPA:SCAR3

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Gustavo Mascarenhas, executive]

Good morning, everyone. Thank you for joining us. It's a pleasure to be here with you to present São Carlos' results.

I would like to start with the main highlights. Regarding capital allocation, during the quarter, we executed the sale of the GO building for BRL 125 million (sic) [ BRL 121 million ], and we signed the purchase and sale agreement for the sale of 30 retail assets for BRL 486 million.

As a subsequent event, we completed the sales of 2 street stores for BRL 17 million, and we signed the purchase and sale agreement for additional 6 stores for BRL 75 million.

In terms of profitability, the highlights were the improvement in our occupancy metrics. New leases totaled 11,400 square meters, the highest leasing volume since the pandemic. Our recurring EBITDA grew by 34% on the same asset base. On the capture structure front, our leverage level stands at 16.5% of our portfolio value.

During the quarter, we made BRL 100 million dividend payment, and we continue to maintain a comfortable cash position, allowing us to focus on our priorities.

On the next slide, providing more details on asset sales. During the quarter, we executed the sale of the GO building for BRL 121 million, 9.6% below NAV, with a cap rate of 7.7%.

In the same period, we also signed the purchase and sale agreement for a portfolio of 30 assets from Best Center for BRL 486 million, 10% below NAV. The buyer is a real estate investment fund, and São Carlos will act as the real estate adviser for the fund. We will continue to keep a close eye on the market and business opportunities.

On the next slide, about subsequent events of the quarter. We completed the sale of 2 street stores for BRL 17 million, 6% above NAV, with a consolidated sale cap rate of 7%.

Additionally, we signed the purchasing sale agreement for 6 more stores for BRL 75 million, in line with the NAV. We have seen strong demand for the sale of these stores, and with the conclusion of the already announced transactions, only 6 street stores will remain in our portfolio out of the 41 acquired in October of '21.

Now I will hand it over to Fernanda to continue the presentation, providing more details on our results.

[Fernanda Naveiro, executive]

Hello, everyone. Thanks for hearing São Carlos' Second Quarter 2024 Results. I will start by going into a little more detail about the results. But before I begin, I'd like to clarify that for comparative purposes, we are analyzing the results on the same asset basis. This is because in 2023, the company sold a significant volume of assets.

On Slide 6 of the presentation, starting with the Office segment. The company had another very positive quarter in terms of leasing volume, just as the first quarter had been. We signed 14 new contracts equivalent to almost 11,000 square meters, our best quarter since pre-pandemic levels.

EZ Towers and our building on Paulista were the main highlights. We signed 4 contracts in EZ Towers, and the property returned to the 80% occupancy level. And in Paulista building, this is practically 100% occupied.

Rio de Janeiro was another highlight. We have observed an improvement in the demand, with emphasis on our buildings located in Praia de Botafogo. Another highlight was City Tower in the center of Rio de Janeiro, where we have signed some leasing contracts.

As a result, the vacancy rate in the Office segment, considering the same property basis, fell by 9 percentage points when compared to the second quarter of 2023. It is worth noting here that our FlexOffice format has proven to be very attractive to our clients. Out of the 14 contracts signed in the quarter, 7 were in the FlexOffice segment.

Now moving on to Slide 7. Let's look at Best Center results. I would like to highlight that the vacancy rate in this segment, only considering convenience centers, reached the lowest level since the creation of Best Center, 9.9%.

Remember that in the second quarter of last year, the vacancy rate was at 14%. If we consider convenience centers and the street stores that are 100% leased, the consolidated vacancy of the portfolio is around 8%, as shown in the graph on the slide.

Out of our 46 convenience centers in operation, more than 60% have occupancy rates above 90%. This reflects the consolidation of the operation, which attracts more relevant brands and segments that are increasingly important for our convenience and consumers.

Another highlight in the quarter was the sales of our tenants, which grew by 7% on a same-store basis when compared to last year, very positive results that demonstrate the attractiveness of our clients' operations in our convenience centers.

Moving now to Slide 8, let's look at our financial performance. We are presenting the main metrics, again, on a same-asset basis, given the volume of assets sold in the last year. The company made very positive progress in the quarter.

As a result, all results here are positive. They presented a very interesting growth when we look at revenue, EBITDA, NOI and FFO. Revenues, for example, grew by 7%. EBITDA grew by 34%. It's worth mentioning that EBITDA was impacted by the revenue line, but also expenses, which fell by 18% in the quarter.

Regarding FFO, the improvement comes from the operational front, but also from the better financial result as a consequence of the deleveraging process carried out by the company.

Now moving to the last slide. Let's look at our capital structure. The company today has a very positive and comfortable position, both from the point of view of leverage and debt profile.

Remember that in the second quarter, we paid around BRL 100 million in dividends. And also, we amortized BRL 50 million of one of our debts. Even given the 2 big payments, we ended the quarter with a very solid cash position of almost BRL 200 million.

Our debt has an average cost close to CDI, which is very competitive, in an average term of 7 years. Our leverage, measured by the ratio of our debt in relation to the portfolio value, fell from 26% last year to 16.5% in one year, which gives us tranquility to focus on our pillars that are: combat vacancy, improve margins and seek new structures and models that result in a lower discount on our share price.

Thanks, everybody, for hearing that.