SYN prop e tech S A : Transcrição da Teleconferência 3T22

Conference Call Transcript 3Q22 Results SYN prop & tech

November 11, 2022

Operator:

Good morning, ladies and gentlemen, and welcome to the video conference of SYN for the communication of the 3Q results 2022.

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 downloaded. We would like to inform that all the participants will be listening to this conference, and then we are going to open up the floor for Q&A, and then we will give further instructions.

Before resuming, I would like to reinforce that these declarations are based on 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 would like to pass the floor to Mr. Thiago Vieira Muramatsu to start this presentation. Please, Mr. Thiago, go ahead.

Thiago Muramatsu:

Thank you so much, and good morning, everybody. Thank you so for your attendance, for the participation on this call of results.

Starting up with 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.

Aligned with capital allocation, we prepaid the 11th debenture that we prepaid in September this year, and it was an amortization of R$200 million, the total of the remaining value, and R$100 million, it was 2023, and R$100 million in 2024. When we see our amortization flow throughout the 24 months ahead, we have no amortization left. And because of the cost of money, it is very important to have this type of movement.

And also in this quarter, we had two awards. We were awarded, and I think that the first one is Valor 1000. We were recognized as Best Company in the Sector of Real Estate Entrepreneurship. We are for the second time here in Valor 1000, the first time we are awarded first place.

And the third time in a row, in 2021 and 2022, we were awarded here a 100 Open Start-Ups, acknowledging SYN as one of the 10 Most Innovative Companies 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 4,100 m² in the quarter, and the net absorption, 2,800. And during this quarter, we had 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 in shop renting, it 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

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Conference Call Transcript 3Q22 Results SYN prop & tech

November 11, 2022

is always room for improvement. We are growing quarter after quarter, month after month. We are occupying well our spaces. Triple As 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, which is really representative of more than half of vacancy that we have in development.

The characteristics here are very specific based on the location outside commercial centers. So it is difficult to treat this development, but we are always aware, and we are open for conversation to maximizing the value of this development.

Moving ahead, on the next slide, we break down the 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 shopping malls, we finalized the quarter with sales of R$673 million. That is compared to the 3Q21, and 3Q21, we had another mall, Estação BH mall, so a comparable base is even bigger than what we did this year.

Parking lot, we have a growth even with one less mall, almost 2 million vehicles on the 3Q22. And the same-store sales, there is a meaningful growth, almost 20%.

And now talking about corporate buildings. We have this financial occupation of almost 73% when we compare a year ago. We won almost 90% because the occupation was not finished, and we had a portfolio of TRIPLE A that was 100% leased.

The relevance impacted our portfolio today on TRIPLE A here in São Paulo, it is 100% ready, so we have this open, development after development, affecting here. The Triple A occupation is the CEO Rio de Janeiro, in Barra, which 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%, lead down by the CEO in Brasílio Machado.

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

Hector Leitão:

Let us see operational results of the development, our malls and buildings. So we had a drop, expressive drop, compared to the last year and 2019, 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 3Q, it was R$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 the sales increasing, as we see openings; and the malls, we can execute more events and occupying these malls with more interesting things.

9M accumulated accrual, we have a growth compared to 2019, 25.8% and almost 70% compared to 2021. And I believe that this fundament is health, and we are keeping high levels of growth.

On the next slide, we are breaking down the segments on the shopping malls. We reached R$36 million of growth in NOI this quarter compared to 2019, expressive growth, 35%. And the big difference this quarter and the others, our default operation was superior to 2019, PDD has a difference of almost 10% in 2019 compared to now. So it is disconnected from the other quarters, a

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Conference Call Transcript 3Q22 Results SYN prop & tech

November 11, 2022

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. We had a growth of 27% compared to the last year. There are two main effects: the leasing spread is positive in Triple A buildings that we have in São Paulo, and higher occupation of Birmann 10, that is a retrofit Class A that we started in 2019 bringing loss of results with this 100% occupation in the end of last year.

Compared to 2019, we see expressive growth. In the accrual of 9M, 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 fundaments are really well equated. So our challenge is the occupation in Class As, especially ITM, as Thiago commented.

On the next slide, we see adjusted EBITDA, and we are breaking it down, the impact of the sales last year, and we see a drop over 40% compared to 2021 and 30% compared to 2019. But if we remove this effect, we have a growth close to 10% compared to these two years. So the assets are performing better, and the DNA is controlled.

Observing 9M22, we also see the same impact, a little bit more expressive, 2021 with growth of almost 25%, removing the sales effect aligned with 2019. FFO adjusted, we add the impact of financial expenses, the result in this year. Since last year, we had an expressive increase of interest rate, with a strong impact on FFO, closing the quarter with 6 positive, 71% lower than 2021 and 33% compared to 2019.

And just to let you know the comparison, the financial result, the impact of interest rate was R$17 million this year compared to 2021. So we would be 10% over 2021 adjusting the impact that we cannot control on interest rate increase, and if we add 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 of R$-7 million, with the same explanations, compared to R$59 million last year, R$33 million in 2019.

Moving ahead with the debt, we closed the quarter with cash almost of R$400 million, gross debt, R$1,11 billion, and net debt, R$700 million, leverage of 0.5x. Adjusting the EBITDA, removing the effect of all the sales that we performed in the last 12 months, we would reach 5x. It is comfortable in 7x, the debt on EBITDA. We are comfortable on this leverage.

Financial expenses this quarter, a special impact of deflation of IPCA in 2 months, August, helping in the result, that we have a debt of R$400 million, indexed to IPCA. So there is a relief here on the IPCA, and in the next quarters, we see improvement because of the prepayments we made.

Following up to talk about the amortization timeline. All this anticipation, almost R$300 million, plus R$200 million, that was the flow of payments for amortization. We have two years of advantage on cash relief, amortizations that are irrelevant in the next two years, and the rationale of their depreciation was the differential in interest rate.

The cost of the debt, the higher the CDI, we increase this cost of the debt. So the strategy here was to be more asset light, capital light, to optimize the capital allocation. And 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 of

1.5 on CDI, 6.5 on IPCA. This debt is compatible and it is a good level compared to the floors and our weight.

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

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Conference Call Transcript 3Q22 Results SYN prop & tech

November 11, 2022

Operator:

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

Thiago Muramatsu:

I believe that this quarter was a quarter that we were evolving. It is reflected in our EBITDA. Removing the effects, as Hector said, we have operational growth that is nice, with a negative impact, and all the companies are impacted.

But the takeaway message is what we can control. It is capital allocation, improving more and more our operation. I believe we are excited. We are looking forward for the next months. This 1.5 months of the final quarter is positive as well.

I would 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 of SYN is closed. We would like to thank you so much for your attendance. Have you all a great day.

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