LOG Commercial Properties e Participações S.A. (LOGG3) Earnings Call Transcript & Summary

Good morning. Thank you for being here. I know okay. It's a pleasure having you here in São Paulo. The last meeting we had was long ago, it was virtual. We did that from Belo Horizonte. It's a privilege to have you here, sharing -- hearing the moment what we're living now at LOG, our strategy, where we're going, information we're going to share, many interesting aspects of what we are doing. We are here at -- with Sérgio, Marcio, our Executive Director; Rodrigo, Executive Director of Real Estate. And I would like to give the floor to Sérgio for him to talk the schedule and the dynamic we're going to share here in this few hours.

Thanks. It's a pleasure to have you guys here. We're going to have a very interesting talk in the next 2 hours to talk about this great period they're leaving the company, what they're doing this year, what are we going to do short term and talk a little bit about long term what -- about our vision on the next years. The dynamic today, we have LOG Properties, talk about our operational portfolio. Guilherme is going to give some details about it about real estate vacancy on real estate. We're going to talk assets direction, we're going to focus on our unit business, where we do the management of assets and then we're going to go LOG's development, talk about our development strategy, real estate banking approvals, project and then we're going to talk about construction. And then we're going to talk a little bit about what we expect for the plan in 2024, what we are going to deliver, where we are going to deliver and the return from our assets. And then we're going to talk about the summary about the growing plan that launched in 2021. We're going to talk about ESG. And then we're going to talk about the next growing cycle. In the plan, everybody for 1, what we're going to do from 2025 to 2021, that's our scheduling in 2 hours or 1.5 hour, we're going to finish, and then we go to our next event. We would like to start to talk about LOG Properties. I would like to give the floor to Guilherme our Commercial Director. He's going to talk about our initiatives.

Good morning. As Sérgio just talked, we're going to talk about what we did from 2022 -- 2020 until now and talk about the future or about this accountability. We're going to talk about what is the model of our commercial operation. Everybody knows, we have regionalized operations. We are based in Belo Horizonte, but we have -- and it's necessary to understand in detail what we do and how we do and see if we have an office with its own company that take care of the operation in Northeast and North, Belo Horizonte. We have our own team, where we have executive -- we have our headquarters in Berga, and they have our own teams when they think about the originally. In São Paulo have another team that do the home management from São Paulo, Rio and the South of Brazil. On the new business sales, we have also in São Paulo, where we work the institutional agenda, the big negotiations that generate business for the other offices, for the other managers, for the other geographies. All that is our own intelligence market knowledge that map, the market in Brazil, not only on logistics real estate, but also isolated points, which are the biggest growth area from our company. When we look at Brazil, the quantity of corporate clients. This moves our intelligence, our management to look for information in the market with our 240 active clients that bring intelligence for us that this generates assertivity to bring asset for new geographies. When we talk about 2020, when we launched this plan, in 2019, we started this plan, the company generated 2 million of square meters of absorption from January 2020, 2.5 million of square meters. We can talk about the proximity, 30% that was done by our own log commercial team that we have on our operations. This generates a closeness to our clients which feed us with assertivity in our growth plan on different sectors where the economy is growing and where everything is going to -- this generates more presence in the market. We generate 1.6% reducing vacancy. The vacancy is around 10% to 11% and LOG works with vacancy on the 2% and more important than that is the price. For 2020 to today, we raised 34% our average ticket for leasing. We see in our opinion that we are growing, the price is national. There's a national federal political price. We're talking about BRL 6 per square meter. And today, we cannot talk on the BRL 20 per square meter of leasing. We see a difference, a big difference, a smaller difference from the leasing price from the big cities to the country and we are having here similar prices and as part of development from to keep this level to have like the same price around the whole country. When we talk about the movement where Brazil is going, and we look at our territory, we bring the numbers -- close numbers from the third quarter this year. This market intelligence being close to the client. I don't get tired talking about it because that's what we do. We know the market. This generates our renovation of our -- 30% of our -- it's hard for some clients not stay with us, not renew their contracts with -- we understand their pains, their demands, but we like to look at the reality of the contract in the real estate in the region, focusing on price and a low vacancy rate. This generates this fifth quarter that we are giving back 1.5% more than inflation. And how this works. This works as a renewal of contract, not only with level of EPCAR of 1.5%. We had a low vacancy give us the possibility to change a client when the price is not satisfactory. At the moment, this can generate a gain a fifth quarter with 1.5% of dividends above the inflation. This generates this year a force of the big absorption of commercial real estate in Brazil. We have the second biggest absorption of real estate, corporate real estate. This is it, André. And just to show the power, the selling power and the profile of our operation. Again, we're bringing sureness that with D&A, when we were gross that being present in whole regions of Brazil to grow and Brazil would have a market presence that bring big results. This slide shows that. These numbers that we have here are the demand, the gross absorption that we're talking about 2020 to 2022, not talking about that what we produce from 2020 to date. From the beginning of the pandemic, we are talking with the biggest driver from the knowledge and what we are doing, we see the e-commerce is still growing, and we see that we're looking ahead when we see the growth we are talking about the expansion that Sérgio is going to talk about. And here, the yellow bars from and other companies to grow a lot. This is an important segment. This was always an important segment for us. This growth for the last 3, 4 years is the biggest sector that demands area in whole Brazil. This shows that how assertive we are in our operations. Our modular project, is spread in Brazil that we have this demand not keeping in mind the knowing, how important the vacancy and the presence and absorption. That's one of the biggest pillars of growing in our company. This is closed with this knowledge of market that we have our way of working that feed again demand information development, on real estate, construction, financing and this generate new business where we can present in the future and growth for Brazil. Thank you, André. Before we go to -- we give the floor to Marcio to talk about management with our assets. [Presentation]

Good morning, everybody. Thank you for being here. I'm going to talk a little bit about LOG ADM that our property, real estate management, you guys know that. That's an area that what we are investing in the last years a lot in innovation that bring new revenue lines for us. That is area that we have 1.5 million of square meters under administration were 600 million square meters on the management of third parties. This with a margin of 50% that represent income of -- in the last years, we did not -- a bigger investment on technology on a digital platform that we call LOG Plus. This connect all the clients, all our clients and bring a lot of business to our clients. We are taking access this platform and they can connect to many business opportunities. And we launched now LOG Swap, which is our last news this quarter where they can contract services, rent of equipment with a new aspect on what we're doing, where we can receive. We can rent a machine for retail and where we can have a big return on these kind of transactions. On Log ADM, we mind and we worry about sustainability, not only on LOG ADM, when we talk about construction, it's a very important point for us. On LOG ADM, we do energy management, very efficient. 100% of our energy is from renewable sources set by institutions. And we are 100% on the energy market that generates a saving of 20% from our partners, bring a huge gain for our clients and bring our differentiation for us, bringing value to us different to our competitors. When we talk about solutions for the clients, we have back office, a very robust in Belo Horizonte. We can attend more than 5.5 OBS it is certified since 2001 that it's supported by our great service. We're launching operational control center. We're integrating the 2 new cameras that we have on the parks. We are present. We are bringing more safe to draw clients to improve the safety. It's fundamental for all of us. All of that, we are always focused on the journey of the client. We have a high degree of quality and we look always to find new ways of improve the relationship of the client. We have a relationship department. We have -- sometimes necessarily some agile support and brings a very big return where we can bring on the commercial side where we have many clients on LOGs and where they have gone around spear when we have like supervisor there on the spear directly with the client. That makes a big difference because we want to be as close as possible to decline in LOG Plus supervision, our supervision makes a big difference for us. Anything else, André? This represents LOG Properties as well. This rate raise on the ticket, average ticket and this innovation connected to the LOG ADM. Let's talk about LOG development. And then I'm going to give to Sérgio for him to talk about our strategy.

Everybody knows, but it's part to remember that, that's the power of our business. We can talk about the tripod. This is our DNA that we are in 15 years. We are working like that. And that makes the difference for us to grow with difference -- grow with return and have our real estate 100% occupied. As Marcio said before, they can produce everything from buying the real estate, bringing projects in internal office for construction lease as LOG ADM that bring to us a big agility to have a bigger return above the market and keep 100% of our real estate occupied. That show our vacancy rate on our real estate in the last years. I'm going to talk about geographies, with 15 years, we are talking about that. Brazil has a demand where logistical, we are in 16 states. Condos went -- corporate condos where we had like 10 operations around Brazil. There is a big demand for that. And that's our thesis and this our secret of -- we have 5 regions of Brazil. They are connected with more -- a very high rate of consumption when they -- with Class A condos for corporate business. We have to talk about the demand. He is also very important all about the modularity and the flexible. It's hard to -- we have some place -- some assuming you -- you're not talking about a big box, when we talk about these big sheds for corporate sales, we have to talk about the feed the kind of demand, the size of the module. Do we have big projects, very assertive to absorb those -- this deficit for corporate sales and big operations for distribution. This success, we have no absorption of our real estate. This tripod is very important. We'd like to emphasize this, but this is the secret of our success. The next one? Well, following our business cycle, we have this real estate development. We'll talk about this, our...

Good morning, everyone. Thank you for being here. Let me talk to you about our real estate development cycle that begins with the acquisition of land. And there was the development of projects to the obtaining of all licenses to start the works. And let's look back at the previous 4 years, we managed to acquired in this period, more than 1.5 million square meters. And we have approved more than 1,400 square meters of warehouse area that spread throughout the entire country. In relation to the geographical specification we just mentioned in a record time of 9 months only, between the development of projects and the final delivery of completed works. In this, I believe, is the result or the reason, let's say we have a study performed by our internal LOG team. Since the geographic diversification, analysis and also project development and engineering works. We have what we call our project office. We have more than 25 professionals, engineers, architects that are focused on the development of projects, that are more and more adequate to the operations of the enterprises, adequate to commercial needs. I believe that this has been a competitive edge, which allows us to reach this record absorption that Guilherme just mentioned. This, I believe, is a very positive aspect about our real estate development area. Some figures for you. In the past years, we have developed more than 6.6 million square meters of projects and our project development processes. They use -- we use BIM for them. I'm not sure if you know this, tool, but it really helps when it comes to develop these projects and avoid what we call certain occurrences, interferences during the works. So this project cycle that is more and more standardized, we will allow more efficient works with less reworking hiring and construction process that is more and more efficient. I believe these are the highlights here. And LEAN also helps us in the project development processes, optimizing these processes as well, avoiding the need for reworking in saving time for us. I think these are the highlights at our real estate development area.

Yes. I like to say that the first main strategic decision, Rodrigo, right, is where we intend to purchase to acquire land, sometimes even the side of the highway of the road makes the difference and these things will reflect on several aspects regarding construction vacancy. So this is the very important point of the start of this process. Let me give the floor to Marcio and he'll talk to us about construction and works. Marcio it's your turn. We have a short video to play to you about our works. [Presentation]

Okay. I think you had seen some of our current works. We haven't shown you all of them, but you could see some of them now in 2023, we are going to reach 1 million square meters of built area and now we will also deliver with 13.2% of YoC. We have seen a very strong constructive trend, 2022 was a record year for us in terms of delivery. We delivered 415,000 square meters of ABL. And these were BTS projects that are not our -- these are not our modular projects that we are more familiar with. These are customized projects that demand much more effort from our engineering and real estate teams. And also, our production grew. So I believe that we are very well prepared for robust levels of delivery. We have a staff of around 2,000 people who are very ready for this growth. Talking about constructive efficiency and power, we have a colleague that is dedicated to this area, but could not come, but we have several coordinators and engineers who are trained in-house around 2,000 employees around the country and a constructive cycle in the past 15 years that has been very well polished at LOG. We have always tried to reach greater levels of efficiency. We have reached peak of 14 ongoing projects in parallel, which is definitely not easy. We were working on a construction work in billing and then also in Rabat, south of the country. And without this staff, we would not be able to overcome these challenges. So we can really demonstrate our constructive power that we really have. I can say with certainty that we have the lowest cost for building warehouses in Brazil. This is a very interesting graph that shows you. In the past 8 years, we have been below the average curve of the industry and we could avoid to follow certain levels of inflation. And during the pandemic, the costs increased, and that didn't happen to LOG only but to the entire market. We were deeply impacted by the increase in metallic structures prices, but we have reached a certain stability of costs, which gives us a certain tranquility for the following years. We are not following -- we're not feeling the price pressure from the past 3 years. So we see a very promising future for us to keep on our growth plan without any hiccups or problems on the way. Very good. Let me talk to you about and I can also share the floor with you, Sérgio. Regarding the sales of assets. This shows the strength of our asset portfolio. Since the beginning of our growth cycle we've been talking about here, we reached BRL 2.1 billion of sales with an average margin of 34%. We began this growth in 2020 with the partial sales of 5 assets that made BRL 256 million. In 2022, we sold 2 assets. And throughout the past 12 months, we have reached BRL 1.6 billion of sales. This goes to show the strength we have in our strategy regardless of the macroeconomic scenario we find in our country with the cycle of an increase in interest rates. This shows the strength we have in execution of our strategy. We are consistently delivering and executing regardless of the macroeconomic scenario that can affect the country or not. When we talk about this movement, during this period, there were 14 assets involved in 4 distinct regions and 4 different purchases, either real estate funds or private investors. Here, we would like to show you the attractiveness and liquidity of our portfolio. When we have an event of attraction here in São Paulo, we also see the same happening in the State of Paraná or in the Northeast. Our assets, they have an attractiveness that has national repercussion. The margin of 34% in average, we can see here the recurring value generation in recycling with stabilized levels in a -- as Guilherme said, we also have a more positive trend in terms of prices. So our yield tends to have an interesting trend. And also very important, there is a trend of cap compression. The attraction we have for assets will result a compression of cap for the next transactions, we intend to execute throughout the remaining part of this growth cycle. These are complex transactions. They require time and they are restructured operations. But we show here that we have an internal staff that is extremely well prepared to execute these transactions as we have been doing so far. Usually, a strategic decision that we make is our yield. The current yields that we have, around 13%. These are things that dictates that guide us when we are going to make decisions. But there is also the internal ROI. Within our growth cycle, we usually present. Rodrigo said today that there was actually, usually work cycles they last around 12 months. And our assets, usually, they are being delivered, 100% already leased. So the maturing or the maturity period has been becoming shorter and shorter. So as we have in the slide, the yields and caps, when we see sterilization within 12 months, we see an internal ROI around 32%. This is an impressive return. I find it very relevant. And this 32.5% is tax-free. So our projects. I believe they have management and attraction that are extremely relevant when we present the yield, the caps and also the internal ROI. Let me give the floor to Sérgio and we will share the floor to talk about our planning for 2024. What we intend to do within this last quarter of this year and 2024.

All right. I think that the first key message for our day. What do we plan to do up to the end of this year -- actually to the end of 2024, there are many works ongoing that will be delivered next year. These works will require BRL 850 million of total CapEx and we intend to deliver more than 700,000 square meters of build areas. This is an expressive record for our company. It is also good to mention that 37% of these works have already been leased. These deliveries when they are not fully leased when we deliver, they are almost fully leased, and that is really interesting. So that was going to be a record-breaking year for us. And what do we intend to do here? What is your planning? We are going to sell. We will keep on selling. Recycling will serve as funding for 2024 CapEx. So we want to make a match between the invested CapEx around BRL 850 million and the estimated sales of 2024. So we intend to sell a volume that is close to that amount to keep a good balance, and André is going to talk more about that later on. What we've seen with growing yields, there is 13% of yield for this year. And this complete plan for the end of 2024. We are going to report an yield around 12.8%. And we are very comfortable when -- we're confident about this figure because most of the works are on their way to be completed, and we have a very interesting rate of pre-leasing. When what have we been doing in terms of recycling, all the recent recycling we had around BRL 1.6 billion in the past 12 months. They reached caps around 8%. We have felt an increase in liquidity and an increase in search for these investments, there are domestic investors looking for LOG assets. We have been approached more and more by these players for the purchase because we have, after all, being very incisive and emphatic in our approach for sales. And we are really confident that we're going to deliver a cap close to what we reached last year. So now the new yield reality and a stable cap with this compression change, we will likely reach 40% of gross margin. I'm not sure if we have a slide with a list of the works, perhaps the next one. Okay. At the right time, we will talk about it.

So as Sergio said, the growth will happen because of this investment, around BRL 850 million around that figure. This will have a funding related to recycling. We see this movement as a recurring thing throughout the remaining part of the growth cycle. And there's an assumption behind it. We want to keep the ceiling of our debt around BRL 700 million up to that figure. I think it's very, very important and it goes to show the work we have been doing in the past 12 years. We can show that even that we had a reduction of 24% in regards to the build area, we had a significant decrease of our net debt and gives -- that gives us a very solid balance so that we can carry on with our growth cycle, executing our strategy. Going back to the planning for 2024, what do we intend to achieve? A net growth of build area. This delivery I mentioned earlier, more than 700,000 square meters. And after the sales of around 250,000, we will get 32% net growth in build area, very relevant. We are growing the company in a very relevant and robust manner. And these projects are reaching a new level in terms of ticket. So our revenue is going to increase even more. These are works that are very well advanced and with very good leasing rates. And again, projects are approved, works have been contracted, pre-release, there are no surprises and no alliances here. With that, talking about the accountability of the blends we launched within 2020. We initially began with a plan that's called translating to English, All for One. Marcio said that we reached that figure by the end of this year. And we are planning to reach a little bit more than 1.5 million square meters. Like we said previously, we are feeling comfortable, we're feeling confident that we managed to do that because of the recycling activities so that we can keep on generating value. So once we show the delivery of the plan by the end of the next year, let me give you a perspective, what are the main financial highlights when we talk about the beginning and the end of this plan. Regarding the results, lease revenue and EBITDA. When we see the stabilized portfolio, we will present an EBITDA growth rate of 100%. Back in 2020, we said that the execution of this plan will allow us to double the revenue. And this is exactly what we are delivering once this portfolio has stabilized. When we look at the balance, the asset balance of the company. PL and PPI indexes once the portfolio is stabilized, there is a trend to reach 50% here and find it very relevant considering the position regarding our portfolio that we have. Well, when we talk about our main initiatives on ESG, as Marcio said, about energy, we are 100% based on renewable energy. Our practice or about the new market, we follow the new practice and leadership, but I would like to emphasize the social aspect of our fronts of our initiatives LOG social, LOG social. It bring us back to tell that our operations, they are installed, metropolitan regions with problems net regions on the city. We look for these regions to identify the necessities, the social necessities of the clients that operate with us. And on this neighbor communities for us to bring back -- bring the opportunity professionalizing courses and initiatives to train people to bring them to the work market. We have space in our operations courses from -- in our operations of some equipment and basic education, Math, Excel program, we present along this time, 70,000 hours of education for this population -- for this needy population with more than 100 certified students. 70% from our work set up working our real estate or condos that are really close to these needy regions that -- there's poor regions that, where we have operations and the team that look to identify what we can do, what -- how can we support this population for our clients. This generates keeping this client, improving the environment. This -- a sense of being part of something. We have the -- we bring opportunity for this excluded communities. The neighbor communities also come to the work market through us. We were talking about the diversity, the type of people that are providing this kind of education and how these people -- they feel included in the society through us. Social LOG, got an award as the best social project by GAI award, we have been recognizing. We treat these projects with a lot of care. We have a vision that the main indicator for us is that we're going to get there when you have like this training, these hours of training, these lessons for this excluded communities, we can be close sufficient for the ABL that we want to reach. The social aspect of our projects has a dedication, a very big dedication where we can see the participation of the community and we have seen this front of benefits on the ESG aspect. I'm going to give the floor now to Sérgio for us to talk about this new site of growing people.

The big message from us today here finishing this plan. We're going to finish the plan to the next year. We're thinking about the next growth cycle. We're talking about this growth cycle in between 2025 to 2028, we want to deliver 2 million of square meters of LOG on these 3 years, how did we model this growth? As Guilherme talked before, LOG has a demand in many regions geographies in Brazil have a big portfolio of clients. We know where they want to grow. We know where they are installed. We are operating on these places. Our idea is to improve the quality of the service for the client. Quality is going to be a big aspect on growth. We're going to have e-commerce as well. We see demand for e-commerce for the Southeast region of Brazil, this platform organize themselves to have more efficiency in delivering big regions in Brazil. This tripod that we're talking about before a key aspect to deliver that this plan, we're not able to do this volume of ABL we were not present in so many cities. We're going to deliver on these opportunities around the country and the diversifier -- total diversification, the gross absorption of the company in the last years. E-commerce is stronger now. It's where we have more lease. Pharma is also renting a lot. These bring to us a bigger base of clients with the modulation aspects of our projects, and we can have more demand captive. This is the background on our plan. As I said before, this plan, we're going to invest in 22 regions in Brazil. Very important to emphasize that we have a project in all of them. We know how they work, the type of modularity type of sector, we are absorbing the volume of absorption by year when we modeled this project. We did consider what can we deliver in every geography and the volume and the speed of delivery. We have talked about the consumption cost of those places, these geographies, the level of consumption they have there as big demands. They at least deliver 1/3 of this project in the southeast of Brazil, 1/3 of Northeast and the rest in the other regions. Please go back 1 slide. This 2 million square meters, we have already with us on the acquisition of land. We have already the ABL portfolio. We're going to be the first presence we're going to deliver 2, we went to the market to buy more, already doing this work. We have mapped many areas on where we are negotiating. We're going to do this work on this year to come. The funding strategy that we have here, we are executing this strategy on this cycle of growth, we're talking about 5.5% of investment that is going to come from a recycling 2.8 million billions and to talk about a yield of 12.7%. This data, we want to deliver with consistency on this data. We're talking about growth in function of emission of ESG&A. With that, have this recycling plan, the fund is planned. We see a potential of net growth is 70% along those years, getting to 2.8 million some -- we are talking about the comfort that we have here. We have the capacity to deliver that along this period on 2028 -- 2024. We see a very positive bias on this long-term plan with things can change, but we see that in the very complicated scenario that we have in the last 12 months, we were able to have a capital of 8%. We are able to bring some -- that's how we can keep this 70% growth in ABL. Now from the point of view of having this presentation, showing accountability of our growth model for the next years and also thinking about information about what's yet to come, what we're going to do after 2024. Now we're open for questions that you might have, please.

We remember that these questions can be done online. We're going to answer the online questions. And now we are here available for any questions you might have.

I have 2 questions. for the same thing when we talk about the debt in this market, are we talking about liquidity here. This accelerated sales strategy, you were able to sell good and quick. And for ahead, we should keep the same level of liquidity, dealing a year. This is the limit or can we get BRL 2 billion, BRL 3 billion. How do you see the depth of -- you're talking about recycling?

Well, what we planned is to bring CapEx to have this ABL net growth to marriage CapEx with recycling is not reading in stone if you have a sector that would have lower look into more. We are in a level -- a level of low interest, we can look for this place where there is a lower rate interest. We have -- where we see places where we can have a higher liquidity, higher yield, we're going to go there. We have 2 vehicles on the real estate investment fund where we are in place to buy some assets. We can do movements on moving on desires. What we wanted to do on planning this plan is to keep stable balance to have a stable growth, marrying putting together CapEx with the recycling, but nothing stop us to do a more intensive robust recycling depending on the market and liquidity and cap.

Great. Another question is when we think about the head of the company and the leasing of capital. If you have a window for capital in scenario.

The idea would be raise -- grow the expansion plan or having the possibility to cap more resources, you would reduce the assets that we are selling for do the same plan. We're not working in a scenario that have equities on the level we have today. We did not own our table. That's not what we're going to do short term. We are planning with the funds we have available to us. That is recycling. For sure, eventually, if this scenario changed a very positive way along this plan, we can have the opportunity to do the debt that you said, that's not our plan. We want to keep our growth through recycling.

Another question. André Mazini here. When we talk about this graph about the cost. Through the pandemic, you have good results. Please talk a little bit about how were you able to do it. We have disadvantage in cost, the company has since the beginning when we were talking about MRV, we were able to have this lower cost under the inflation. And now -- what are the new factors, which can -- possible you make this -- talking about scale here, about midterm, what would be the cost of -- construction cost, in million reals for square meter without land.

Well, let's go -- thank you for your question. why we were so efficient. We can talk about what Rodrigo said, we have a standard projects. It's the same project everywhere in Brazil, the same team doing this construction. The supply chain is a very strong supply chain. We have a very wonderful supply chain. That's very important. The same lights were put in, Belo we're putting in the south of Brazil. We talk -- we buy big volumes. So that is the DNA. The company was born on the biggest cost controller in Brazil. This helped us a lot, process and the focus in construction along this year, the growth or scale more standard, more standardization, we were able to reach that more stability on the cost. We were able to have great cost ahead, we don't see pressure on this aspect. We believe they're going to keep a very stable cost, maybe going under the NSCC we were around 500 per square meter. When you talk about ticketing, that's how we reach our yield above 3%.

I have 2 questions. First, when we talk about our competitors, who else is doing a warehouse, real estate. We see during the pandemic, a very high competition in the São Paulo market. But you are very diversified where you build. When you talk about the buy of land, looking ahead, if you want to buy with cash, swap, how they want to do this acquisition of land.

Thank you, Fanny, for being here. Thank you for your question. When we plan, 2/3 is per month permutation and buy. This has impacted in the -- our cost about our leases that want to do better transactions. What is going to define that if we want to buy the condition of project, installments, this all goes in the consideration. We can buy or in go on exchange. Why we're buying this 2 million of square meters. We have already 1,600 in -- we have already here, we're going to acquire that with exchange and buy. Well, some places, Belo Horizonte, for example, we have free 30 high per square meters. When this happens, we have some people going after Berga, some competitors going there. trying to insert themselves in this market, looking for opportunities of investment. We -- that's only plan to, only very strong places where we have more other bigger players looking at it. That's not happening in Brazil in a national level, nobody is doing it. Proposing the same type of growth in more than 20 relevant places in Brazil. We understand, when we talk about our competitors is the warehouse Class B they are our competitors. And we don't -- it's not about market growth, just take a bad installed client to a better warehouse. That's what we do. to improve the cost to having a more efficiency in the business with a better warehouse. We understand that this movement of improvement for the market on real estate investment funds, we're moving this direction. We see this happening in other places, other investment funds doing their own investment. And this -- what -- we don't worry about that because we have more. Nobody has what we have, this machine that is able to build warehouses that nobody can build a better warehouse so cheap like us. When we add everything, this commercial market is decline knowing us. Knowing what we're going to deliver as a product. How is going to be the relationship with us. This makes a big difference. This added to this, what André said, Social LOG. This can be scalable. We see any best comment on the client, on the capacitation we do the training with all the collaborators, the employees. We see this growth close to 100% and give more price to the client. Nobody can do the way we do. We invest on Social LOG and we are making profit there, investing in people, having an online platform where we give more service, more than anyone else, we can retain, keeps clients there's a big issue when the clients look at on our competitors, for sure, we map everything our competitors are doing, but that point today, we will not worry about it.

Okay. Just to add a comment, Sérgio, regarding the competition I believe there are some aspects that show that we are not facing such a competition outside the southeastern region. It's not necessarily cheap to obtain funds for this kind of activity, especially in places where other companies don't know yet how to do it. So I find it an important aspect. Secondly, as we showed you, we built for less. We are less expensive. So that enables us to advance further. Meanwhile, intrinsically, we show that our client portfolio, the portfolio we have in our condos is perhaps the greatest obstacle for the entry of competition because 70% of our expansion movement come from our client base. So these are important aspects that somehow end up affecting the competition and considering the low quality infrastructure throughout the country for logistics. We see and believe that there's a lot of room for growth. And I don't think that competition would prevent us to deliver what we have been delivering so far.

I'd like to contribute a little bit. I am slightly obsessed about intelligence and information market. When we go around the country, people understand how we sometimes stop at a region and go to 3 or 4 cities around it to see if projects that was being design has finally started its construction phase. If there are plots of land taken and this generates the obstacle that André just mentioned for the entry of the competition, clients themselves. Clients they anticipate themselves and give this information to LOG. So we see a movement by the competition look for new areas, then they are going to go to some land that Berga has already mapped. They are going to reach a client that has already demanded operation from us and our commercial team is working with. So it's really hard. It's not impossible, as we said. We are seeing some potential activities by the competition, but it's really difficult outside the Rio and São Paulo region to find something that someone at LOG doesn't know at all. This is something that is really important that favors us and the work that we do in market intelligence, goes to show just that. When we go to all the locations again, we find the competition going to certain regions, but they don't really start. We see the results of what we do differently and the fact that most of the assets are delivered almost fully leased and they are delivered under record-breaking periods. So this goes to show the work that the commercial team does going after the information at all the ends and contributing to what André just said in his answer to your question.