SYN prop e tech SA

BOVESPA:SYNE3

Earnings Call Transcript 2022-Q3

[Operator]

Good morning, ladies and gentlemen, and welcome to the video conference, SYN, for the communication of the third quarter results 2022. And this video conference is recorded, and the replay can be accessed at the company's site, ri.syn.com.br. The presentation is going to be available to be download. [Operator Instructions]

Before resuming, I'd like to reinforce that this collaboration has - [indiscernible] the beliefs and suppositions of the Board of SYN and the current information for the company. And this declaration may involve risks and uncertainties considering they consider future events. So they do depend on unforeseen circumstances. Investors, analysts and journalists should consider that events about the macroeconomic scenario and other factors may change these results from what expected on the perspective declarations.

We have in this video conference, Mr. Thiago Vieira Muramatsu, President, CEO of SYN; and Mr. Hector Leitao, Financial Director and Investor Relations with the company. I'd like to pass the floor to Mr. Thiago Vieira Muramatsu to start this presentation. Please, Mr. Thiago, go ahead.

[Thiago Muramatsu, executive]

Thank you so much, and good morning, everybody. Thank you so much for your attendance for the participation on this call of results. Starting up the main fulfillment of this quarter, we have had some good news, interesting news, in this quarter. And the first one, we had rating elevation raising since 2017. The rating is A+. And after 5 years, we could raise this rating to AA. And this was an increase, reflecting the hard work throughout the years. Referring to our cash control balance position, that is very strong.

I think aligned with capital allocation, we prepaid the 11th debenture that we prepaid in September this year. And it was an amortization of BRL 200 million. The total of the remaining value and BRL 100 million, it was '23 and BRL 100 million in '24. When we see our amortization flow throughout the 24 months ahead, we have no amortization left and because of the cost of money it's very important to have this type of movement.

And also, in this quarter, we had 2 awards we were awarded. And I think that the first one is Valor 1000. We were recognized as a company, Best Company in the Sector of Real Estate Entrepreneurship. We are the second time here in Valor 1000. The first time we are awarded first place and the third time in a row in 2021. In '22, we were awarded here a 100 Open Start-ups acknowledging SYN as one of the 10 most innovative company in construction and real estate. Last year, we were in third, 2020, we were in fifth.

And we had a movement that was positive in shopping malls. Allocation and absorption in the last 36 months record for 4.1 thousand meters in the quarter, and the net absorption 2.8 thousand meters. And during this quarter, we left occupation near 92%, reaching almost 95% considering just the stores. And I believe this is part of what we are trying to do, being pragmatic in the occupation. And shop renting is a goal to finalize the year over 95% occupation for the malls.

Moving ahead with this presentation, operational performance, and what we have been talking about, occupation. We had an occupation that is really healthy at the malls. We can improve -- there is always room for improvement. We are growing quarter after quarter, month after month. We are occupying well our spaces. AAAs as well, we keep occupational rate that is high. When we see general occupation of the portfolio, we have 86% financial occupation and 82% physical occupation. The penalty here on occupation is ITM that is really representative more than half of vacancy that we have in development. The characteristics here are very specific based on the location outside commercial center. So it's difficult to [ trade ] this development. But we are always aware and we are open for conversation to maxing the value of this development.

Moving ahead, next slide, we break down the occupation, physical and financial occupation of the mall. Reflecting upon what I said, the quarter finalized with 94.9%. Grand Plaza building has never been occupied by stores and never will. It generates sales and renting for retail purpose.

Moving ahead, next slide, talking about the malls, shopping malls, we finalized the quarter with sales of BRL 673 million. That is compared to the third quarter '21. And third quarter '21, we had another mall, [ Cidade São Paulo ] mall, so a comparable base. This is even bigger than what we did this year. Parking lot, we have a growth even with 1 less mall. Almost 2 million vehicles on the third quarter this year. And the same-store sales, there is a growth -- meaningful growth, almost 20%.

And now talking about corporate buildings. We had this financial occupation almost 73% when we compare a year ago. We won almost 90% because the occupation was not finished. And we had a portfolio of AAA that was 100% leased. The relevance impacted our portfolio today on AAA here in São Paulo is 100% rented. So we have this open development. After development affecting here, the triple occupation is the [ COO ], [indiscernible] [ Barra ], that is more challenging to trade that building. When we see physical occupation of the buildings within CBDs, São Paulo and Rio de Janeiro, we see an occupation of 85%. And led down by the [ CEO ] in Brasílio Machado.

To continue this presentation, let's talk about the performance. I pass the microphone to Hector.

[Hector Bruno de Carvalho Leitao, executive]

Let's see operational results of the development, our malls and buildings. We had a drop, expressive drop, compared to the last year in '19 because of the portfolio. And breaking down just to analyze in a more assertive way our performance in our assets. On the right-hand side, we can see NOI of the same property. So we can realize the third quarter it was BRL 44 million in our participation with a growth above 40% in 2021, and also 2019 highlighting all the fundaments that are important on these assets.

Revenue growth, default that is under control. Discounts that we can gradually remove this granting of the accounts with healthy occupation and sales increasing as we see an opening in the malls. We can execute more events and occupying these malls with more interesting things.

Nine months accumulated accrual, we have a growth compared to '19, 25.8% and almost 70% compared to '21. And I believe that this fundamental helps, and we are keeping high levels of growth.

Next slide, we are breaking down the segment on the shopping malls. We reached over BRL 36 million of growth in NOIs this quarter compared to '19, expressive growth, 35%. And the big difference this quarter and the others, our default operation was superior to '19. PDD has a difference almost 10% in '19 compared to now. So it's disconnected from the other quarters, a better quarter.

2021, the growth is almost 47%. When we see the accrual of the year, we are doubling the result compared to the last year, growing almost 15% compared to 2019. Buildings segment, this market is more stable. So we had a growth of 27% compared to the last year. These are 2 main effects. The leasing spread is positive in AAA building that we have in São Paulo and higher occupation of Birmann 10 that is a retrofit Class A that we started in 2019, did really loss of results with this 100% occupation in the end of last year.

Compared to '19, we see expressive growth. In the accrual of 9 months, we reached 25%, almost 26% NOI. And we doubled the result in 2019. So we have this growth that is less robust in buildings. But I believe the fundamentals are really well equated. So our challenge is the occupation in Class As, especially ITM, as Thiago commented.

The next slide, we see adjusted EBITDA, and we are breaking it down. The impact of the sales last year, and you see a drop over 40% compared to '21 and 30% compared to '19. But if we remove this effect, we have a growth close to 10% compared to these 2 years.

So the assets are performing better and the DNA is controlled. Observing 9 months of the year, we also see the same impact, a little bit more expressive, [ '21 ] with growth almost 25%, removing the sales effect aligned with 2019. FFO adjusted, we had the impact of financial expenses, the result in this year.

Since last year, we had an increase -- expressive increase of interest rate with a strong impact on FFO, closing the quarter with BRL 6 million positive, 71% lower than '21 and 33% compared to '19. And just to let you know the comparison, the financial result, the impact of interest rate was BRL [ 17 ] million this year compared to '21. So we would be 10% over '21. Adjusted [ the bank ] that we cannot control, an interest rate increase, and if we had here the result of the assets that we sold, we could have a more expressive result.

And in the accrual there, we closed with FFO negative, BRL 7 million, with the same explanations compared to BRL 59 million last year, BRL 33 million in '19.

Moving ahead with the debt. We closed the quarter with cash almost BRL 400 million. Gross debt would be BRL 110 million and net debt, BRL 700 million. Leveraging have [ 5% ] adjusted EBITDA, removing the effect of all the sales that we performed in the last 12 months, we would reach 5x [ base comfortable ] in 7x the debt on EBITDA. We are comfortable on this leverage.

Financial expenses this quarter. A special impact of deflation IPC in 2 months, August, helping in the result that we have a debt of [ BRL 400 million ] index to IPCA. So there is a relief here. On the IPCA, in the next quarters, we see improvement because of the prepayments we made. Following up to talk about the amortization time line, all this anticipation, almost BRL 300 million, plus BRL 200 million, that was the flow of payments for amortization.

We have 2 years of advantage on cash relief, amortizations that are irrelevant in the next 2 years. And their rationale of [ their depreciation ] was the differential in interest rate. The cost of the debt, the higher the CDI will increase this cost of the debt. So the strategy here was to be more asset like, capital like, to optimize the capital allocation. Here we have an expressive amortization in 2025, the profile of the debt, the index. We have 1/3 in IPCA and the rest is CDI. And average spread 1.5% on CDI, 6.5% on IPCA. This debt is compatible and it's a good level compared to the floors in our weight.

Next, we are opening the floor to Q&A.

[Operator]

[Operator Instructions] The Q&A session is closed. We would like to pass the microphone to Mr. Thiago for his final considerations.

[Thiago Muramatsu, executive]

I believe that this quarter was a quarter that we were evolving. It's reflected in our EBITDA. Removing the effects, as Hector said, we have operational growth that's nice with a negative impact and all the companies are impacted. But the takeaway message is what we can control is capital allocation, improving more and more our operation. I believe we are excited. We're looking forward for the next months. This 1.5 months of the final quarter is positive as well. I'd like to thank you so much for your attendance. And if you have questions, you can contact us on RI or Hector and I. Thank you so much.

[Operator]

This video call, SYN, is closed. We would like to thank you so much for your attendance. Have you all a great day.

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