MRV Engenharia e Participações S.A. (MRVE3) Earnings Call Transcript & Summary

I would like to adhere on something, everybody wears masks and maintaining distance. So those who want to make the presentation cannot wear mask for better audio. [Operator Instructions] And we have agreed that you can enter the hot side of the event and send your questions through the hot side. And I'll select the questions and every 2 or 3 blocks of presentation, I'll read the questions that have not been answered during the presentation. So the questions and through YouTube won't be read. We're not receiving those questions. So if you want to send a question, please feel free. We count on your presentation to make this event even better. This is the agenda for today. First, we'll have an introduction, a summary of 2020 that I'll make. Then we'll go through growth strategy, AHS residential, Urba, Luggo, then the launch of the new brand, Sensia Incorporadora, innovation, information technology, we'll talk about the differentials of our sales area, project development, ESG and then the closing. And I'll answer the questions as we receive them. Okay. So 2020 has certainly been a different year, very different from what everyone expected. And we have obtained some very significant results. Let's start with the net sales chart. Since 2015, we have grown this -- all the data of last 12 months at the end of the third quarter of each year. So we show recurring, sustainable growth in profits and sales. Since 2015, the net sales have grown by 75%. Then the client financing, there has been a growth. This chart has a different behavior with some variation, even so with growth as you may see. Now on the right chart, we see launches. There has been growth in launches from 2015 up to 2019, 58% in launched PSV. Then there is a decrease in growth in 2020 due to COVID. And we have had some delays in permits and real estate registries to get the construction permits and registration. So next year, we'll certainly go back to growth again. In terms of built units, we have a similar dynamics in terms of -- similar to launches. We have been growing since 2017 to 2019. And we chose to be conservative in the second quarter of the year to hold a bit the beginning of new construction and this was changed in the third and fourth quarter. So certainly, in 2021, we have a higher production. And the indicator of the -- total indicator for the year will be higher than what it is now. Now let's look at the financial information. Also growth, there has been a growth in net revenues with production walking sideways caused our SG&A and ROI to grow. We have had a 35% growth in net revenues and a consistent growth. This would be even higher if we had not held the production this year. SG&A over ROL and the SG&A over net revenues. At the time, we had 17.5%, and we said that our figure would be 15.5%. And this is the figure we've been able to deliver. So SG&A over net revenues has been decreasing. We have potential to decrease that even further. The growth, we have, for the future, will decrease this indicator even further. Gross profit was growing consistently since '15 to '19 but it has not grown as much as our gross revenue. This -- because of the gross margin, we gave some greater discounts. We have discussed this with you throughout the year. And this has impacted in lower net income than 2019. So the sequence of growth of our net income has also been interrupted. But our plans for next year, we will grow gross profit and gross -- net income when compared to 2020. And indicated that we are not so used to discussing lately and now has become a discussion in March and April is indebtedness, duration of debt and net debt. With the cash generation that we have this year, we're able to decrease the net debt over shareholders' equity. It's back to 13%, very comfortable, although 19% was also comfortable because with the cost of debt of 4.2%, we have reached. Now we are comfortable in having a little -- a bit more leverage than we had before. And we are at 34 months duration, which is a comfortable figure for us. Now Rafael will talk about the next topic.

Thank you. Good morning. Thank you for attending our MRV Day. It's the pleasure to be at MRV Day. As Ricardo said, we've been 2 years without making this day. And today, there's good news. We announced the launch of our brand yesterday. But the main topic of this conversation is about the investment we've made in recent years in people, technology, processes and in the geographic dispersion of the company. As you all know, we operate throughout the country of Brazil. We are present in more than 160 cities. Many of those cities and towns, we've been operating for many years. We have a resilient mature operation with talented people, with a very well-structured back office. And today, we feel very comfortable in increasing our portfolio, broadening it, causing the company that in looking at the future to be much bigger than it was in 2020. So the MRV that you know is a company of a good priced housing that makes apartments for a income level of BRL 3,000 to BRL 4,000 per month. And what we plan to do now is also to deliver lower-priced products within FGTS and Eco and Garden. These are the products that goes from BRL 140,000 to BRL 180,000. And 2 years ago, we started launching the premium line that financed by SBPE. It's a new funding source in our business. More recently, Urba started with a much more aggressive growth strategy. Erika will talk about it. Luggo, another subsidiary we have that's been doing an outstanding job with vacancy close to 0. I would say that it's the only company in Brazil that makes the products for rental, delivering such a wide range of services that is so differentiated with a very democratic rental price. So it's a unique case, the business case that we believe this company has a brilliant future ahead of it. And we also have AHS, which is the company we bought in the beginning of this year, in a huge market. The U.S. market is a young market, 330 million inhabitants. And curiously, housing is a major headache in the U.S. market. So AHS has kept the tradition of MRV to verticalize the company with a high execution capacity. So I'm absolutely sure that this subsidiary will be key for -- in our future portfolio. The company 3 years ago was a company that produced 40,000 apartments per year with a single funding from FGPS and only one economic program that somehow depends on public policies, and now a recent law, green and yellow houses passed in Congress. And now we are in a very solid way, broadening and diversifying the company. This will cause MRV to grow a lot in the future, and the company will become much more flexible and resilient to operate in the Brazilian real estate market. And with well-behaved interest rate, I am sure that the market will double in size. And no other companies is, well, as well prepared as MRV to serve this new wave. So talking about the multi-funding platform, our land bank of 67%, is within My House, My Life near Casa Minha Vida, but we already have BRL 20 billion outside that market. In launches, we have considered stabilized market products of AHS that are already in the sales process. So in the last 12 months, 40% of launches have been made outside Minha Casa Minha Vida market. And presales, Kaka has talked about our significant growth in sales. In the first 9 months of this year, we have grown 40% when compared to last year, and 16% outside Minha Casa Minha Vida. And why this difference between launches and sales, because we have not yet sold the AHS portfolio. It is for sale, and we expect to complete the sale of this portfolio until the first quarter or the latest, the second quarter -- beginning of the second quarter of 2021. So what will be this multi-funding company in the future? We attain to have 80,000 project, 40,000 units in our main car business, FGTS funding. The SBPE line that encompasses premium MRV, Sensia and Luggo, that is 20,000 units per year with the VGV -- with a PSV of BRL 5.3 billion. Urba, it's BRL 0.6 billion. And AHS, considering that we will launch, build and sell in 2025, this is what we expect for the company with an average ticket of $220,000. So we're talking about a company that's about $1 billion a year, so BRL 5.2 billion per year. So the company of 2025 will be a company that will produce 80,000 units per year, BRL 17 billion in PSV, and so approximately 40% of our operations in PSV will be in this market. So repeating what I said before, I am absolutely sure that in the current economic cycle, with low interest rate, with this new economic cycle in the real estate company. MRV will be the company that will serve very well this wave because there's a reduction in risk, we can operate with funding from SPBE, FGTS, real estate funds in Brazil, financing for plots, which is a reality, it's already happening, and in -- also in a company that has -- in a country of the USA, which is much simpler than ours, with a cheap real estate financing. So with this diversification of products and geography, made by a company that has a high execution capacity, that is -- has proven. Post-IPO, we've been a listed company for 13 years, always with consistent results, long-term projects, very high-quality teams in terms of deliveries, I'm very optimistic that the company will continue to deliver very good results, different from the real estate industry in general. And with this broader operation that will prepare the company to serve and be very successful in the coming years. I now will hand the floor over to Ernesto.

Good morning, everyone. It's a great pleasure to be here. We will be talking about AHS, which is the new company now joining the MRV Group. I'm sure we'll have a brilliant future ahead of us. In 2020, we had a very difficult year for the entire world, and for AHS, it was not different. COVID impacted our business, both in production as well as the launch of new workspace buying land. But quickly, just to give you a description. From the beginning of the third quarter, things started going into the new normal. We found a way of heading over 2 new projects, even despite the pandemic, and we also managed to start renting. The fourth -- in the fourth quarter, it ramped up with rent prices above the expected levels. And, of course, the 2020 results have been impacted by the pandemic. It's a short-term impact, which will affect especially 2020 and a bit of the first quarter 2021. There are some issues here with delinquency, which obviously is higher than what it was traditionally, but far lower than what we expected. The average price hike for rents is 7% this quarter, higher than it was during the pre-COVID times. So that's an essential issue because AHS is putting itself into market niche where the downward pressure is greater than the ability of payers to not pay rents. So we expect 25% of current residents in AHS will leave AHS because, unfortunately, they will be unable to afford the rent. But this is a figure that is offset significantly by a different -- a downward pressure, people who are downsizing and don't have products for them. So I think our big challenge now is especially for properties that are stable with more than 95% occupations. We'll need to be clear so that we can rent them for higher price. So the impact has been reasonable but on the long term, this entire situation will improve AHS' performance on the long term. So I'm going to give you some figures on the third quarter, today's figures are a bit different. If we can go back, please? Okay, so our land bank includes 13 properties, [ 5,300 ] apartments and USD 290 million in VGV. We have 2 units in Florida, one in Georgia and one in Texas. Under construction, we have 10 enterprises but which would be higher if we didn't have these delays. And the total PSV will be $306 million. So we have 1,550 apartments and a PSV of $306 million as I said. Rafael mentioned that we are far along in the process of selling one piece of property and we also have an ongoing process to sell the rest of this portfolio. Looking at the stable properties, we have 3 that are completely stable with more than 95% occupation rate. The third quarter figures reflect 86% occupation rate in one of them, but it has already reached 95%. And the others are in a different process and a different stage of occupation but they are doing very well and -- especially in the last quarter. Next slide, please. So this is a bit of our collection. Our collection was 98% before COVID. So 98% of our residents paid on time. But now, the trend is 89% of people paying their rent during the month, and this goes up slightly with -- between key residents who are paying with delays partially or totally over the month. But this is in line with what we see in the rest of the market according to research. There was an expectation that we would see more than this, depending on the kind of inhabitant and depending on what niche AHS is in. So our expectation was that our inhabitants would have -- would be less able to move afford rent than the rest of the market. But what we found out is that was not the case. So we are close to what the entire market is doing. So on this point, AHS is within a normal level. And on the next graph, we see the impact of 2020, which was about 5 bps in the year-long cost. But we see a fast recovery for 2021 and 2022. This reflects that rents will be higher as we expected. Next slide. So just to provide you an update with the Plan 5,000. In sales expectations, obviously, COVID had an impact and the market stopped completely, and AHS also took some more time to set a new property into the mix. But if we add 2022 and 2021, we'll be very close to our goal, which we had for the Plan 5,000. So in terms of sales, from 2022, we will reach out what was set in Plan 5,000. In terms of land bank, we are already above the target set by Plan 5,000, although there was a delay in purchasing lands due to COVID. Now, during the last few months, we've been able to bring this back to what was -- what had been planned. In construction, this was also an area that was affected by 2020, not so much the ongoing construction but new launches had to get their approvals and as we know, government agencies were not functioning during most of the pandemic. This is now going back to normal. We see a second wave now, which is starting again to affect us negatively. But we expect that by the end of 2021, this entire issue will be solved and our [indiscernible] from 2022 will be above what have been laid out in Plan 5,000. So we had an impact in 2020, another impact in 2021, but we'll see strong acceleration by 2022, and we should reach 5,000 units, 2 years ahead of the original plan. In term of sales, the same applies. We expected to sell this year's portfolio, but that was not possible, the market was completely stopped. But despite all the challenges, we are far along in this process, and we should sell one piece of property that has already been contracted, which is in due diligence, and it should be closed before the end of this month. And we are already far along the negotiations to sell the rest of our portfolio, which include 7 properties in operation right now. In 2022, our estimated sales are lower due to delays in new launches. But from 2023 and 2024, we will gain what we lost. And by 2025, we expect a PSV above USD 1 billion and the 5,000 units that we can deliver in this constant delivery schedule. So $1.2 billion to $1.3 billion in PSV every year. And the next slide shows that we should reach with that a margin of -- well, an estimated gross margin above 28% and net margin between 17% and 19%. So these are the figures we have for AHS. And it was a great pleasure to show them because I think AHS has a market niche with great potential ahead of it. I'd also like to say that this entire situation with the pandemic and the recession is very favorable for AHS in the market it works in. So our long expectations are very optimistic. That's all I have and I'm now open to answer any questions you may have.

Well, we have 3 questions here, everyone. So first, there's a question, if, a, MRV will continue to have products in the MRV brand? Yes, we have the MRV premium line, which is for a family income of 4 to 7 minimum wages in Brazil, and our funding will be SBPE, but we will use the MRV brand. What's important is that as interest rates go below 7%, which is what we're seeing in SBPE, for the first time, many of the clients in the Minha Casa Minha Vida program are using SBPE funding to buy real estate. We know that at the third level, income reaches 8% plus TR. And with SBPE, the same clients with an income of about BRL 4,000 monthly, they can get an even better credit line with SBPE than they can get with the Minha Casa Minha Vida government program. So this is an important point because we have other funding solutions for the Minha Casa Minha Vida product. That's very important. So I think that answers that question. The second question Ernesto is this. Just what is the sales price for this property that will be finished by the end of this year? And what's the impact on net income and cash generation?

Okay. So sale is made by $57 million at the gross margin of 28.5%. The impact in cash generation is small because the property has recently been stabilized. It has a net generation of BRL 2,900,000, but this is still offset by the new properties that became operational. So this is the impact. If don't know if I have answered your question fully, but these are the figures.

Yes, just to complete. If we do not consider cash generation as a settlement of the debt, then it's close to $18 million. Just we showed a slide that had some figures from AHS from net income, the net income is a different -- context is before taxes. So later, we can talk to you and tell what the net income after taxes is. The next question is about dividends. So MRV will continue to have a payout of 50%, paying dividends of 50% of the net income of last year. This year, we didn't have any extraordinary dividend payment because of the pandemic. But maybe next year, we could do a new payment of dividends when the macroeconomic conditions improve. Now Erika will talk about Urba.

Okay. Good morning. I'm very happy to speak about Urba. This is a company of the group that's dedicated to the development of neighborhoods. And we -- so plots of land that from 125 to 200 square meters for the same economic group that is served by MRV. So the idea is to present our business, our growth plan and why Urba is a differentiated business in the real estate market. And the plans we have to be one more product in housing solutions of MRV. Urba, we developed neighborhoods and plots of land. We have -- we're born based on MRV, we're sponsored by MRV. So we start with a learning curve that's very advanced. We have the ESG way of behaving. We have developed neighborhoods with smart city concepts. We have a success history. We were born 8 years ago, not yesterday. So we have delivered more than 6,700 units. And the margin in real estate is very differentiated, around 45% to 50% gross margin. Net margin's around 30%. And these are margins that we have been having in recent years. We have a land bank of around 3 million, which increases a lot, our sales capacity, and our products are very successful in sales. And we are benefiting from the MRV platform, these 40 years of knowledge to make Urba start very well. Our -- we plan to reach 15,000 units per year with a PSV of $1.2 million. So it's important to say that this is a new business in the real estate market because there are so many barriers. First, in terms of funding for construction and funding for customers. So what happened recently is that Caixa Econômica launched a plan to finance our customers, real estate funding, financing credit for customers so that this new funding of Caixa reaches more people. MRV is -- also allows us to build MRV houses in the plots of land we sell, which makes it easier to advance the cash flow, which is very long in the land development projects. So Urba has all the conditions to benefit from all these conditions. In terms of growth potential, Urba is part of the best group for this growth to be possible. MRV is a success case present in more than 160 cities. Urba is already in 16 cities, so we have a great potential to grow geographically. Based on the knowledge of MRV, all the pains it has expect -- has suffered and learned from the lessons of MRV. So when we talk about the next cycle of Urba, we are operating strongly in São Paulo. More than 70% of our land bank is at the interior of the São Paulo state. We're also going to the Northeast, north of Paraná and Midwest area of Brazil. So we expect to reach 15,000 plots of land. And talking about the success history. We have delivered projects with margins around 45% to 50%. The pandemic has accelerated our sales. We -- in June, in the middle of the pandemic, we have launched some projects in São Paulo, 95% of sales on the day of the launch, products with a gross margin over 50%. So we are consolidating the way we operate, our knowledge in this business, and we are delivering excellent results for the company. Synergy. Synergy is very important. Urba develops neighborhoods. So when we have a project of plots of land that allow to develop different products, we consolidate Urba in bringing back to the group, the possibility of developing several products of MRV in our projects. So these are towns we already have projects in partnership with MRV and the next launch we have for the beginning of 2021 is in Ribeirão Preto. On the right of the screen, you can see the number of products that we have in the same single project. We can offer to our customers, residential lots, houses of MRV in such lots, apartments. Luggo for -- may have a building to be leased in addition to industrial lots. So it's a mini MRV town that's brought to the customers, consolidating housing solutions. It's important to say that our products have this ESG side because we are consolidated in doing that. And our projects have the pillars of a smart city with a balanced density, commercial plots of land, there is a sales manager that helps customers understand, we have a smart place with apps, our neighborhoods have mobility and accessibility features, waste management, energy efficiency. So we believe that we democratized the quality of living for our customers. This -- there's no other player in the market that would be able to speak the way we do. No one delivers the products the way we do. This is a major differentiation in the development market, especially for the audience we speak to. In the next slide, I'll show you that we have already delivered projects with this margins and quality. These are 3 projects we have delivered recently where customers are building their houses already. You may see that the margins, on average, are 45% the gross margin on average. These are very good margins. And the next launches or the less launches. Amparo is a business case, we showed 100% of this project in 30 hours. Amidst the pandemic, we sold 95% of the plots of land at the launch event, with margins around 50% in terms of gross margin. This is just a business case to show that when we say that Urba gives back to the group the possibility of having more products. In this project, Reserva Macaúba and Ribeirão Preto, in interior of São Paulo, we had 300 plots of land that were separated to build MRV houses. This was 100% sowed, both the plots of land and the homes, the houses. MRV is delivering the keys of the houses now. So it's a very successful project in developing a neighborhood that allows for several products of the group to be present. So we add value to the group. No other player can have this synergy we have with MRV, which is the largest construction company in Latin America. Urba has 3 main points of synergy with the group. Recently, we signed an operational agreement, in which we use the prospecting capacity of MRV. Lands -- plots of land that were not used that were not urbanized or above $100,000, were not considered, now come to Urba. So Urba provides the possibility of the group to work with this land. So it's a win-win agreement. Therefore, we can now bring a lot more plots of land to Urba. In the sales part, the MRV platform, we can capture the leads and the access that MRV has to customers. Sometimes, people give up because they cannot find a plot of land or they cannot find a home. Now we can use the sales force of MRV for Urba, and we're able to capture the needs of these customers to develop better products, that's another upside of this synergy. And obviously, we don't have to worry about the back office because a company that has 40 years of experience and invests a lot in management, IT, CRM, the human resources department, we don't have to worry about all that back office because we can be dedicated to our business and, with operating agreements, we pay an amount for operation. But there is a back-office ready that we can use and Urba can focus on its core business, which is to develop neighborhoods. So this is a very scattered, not structured market, and we have a huge opportunity to exploit here. The only company that could allow the rise of companies such as Urba with all the efficiency of MRV is Urba. So Urba will fly using all these knowledge and success of MRV. So from now on, we will try to even improve the margins that are already very high. We can use all the back-office structure and so the brand can leverage even more. So this is it. Thank you.

Good morning, everyone. I'll be here for the next 20 minutes talking about Luggo, Sensia and innovation culture. I am wearing a mask because I had a cold and so in respect of others, I will keep this extra protection. So as Rafael has already said, Luggo brings to the Brazilian market a solution that's absolutely innovative in the rental market. It is a [ PropTech ], property manager company, and we focus on providing a totally new idea to the rental market. The market in Brazil is absolutely mature in terms of rentals. We are bringing to Brazil a solution that exists abroad, but it's new to Brazil. This rental market will grow twice as faster as the purchase and sale market. It is expected to reach a growth of 43% in the next 20 years, which is twice as fast as the size of the sale market in terms of real estate, and our purpose is to create a unique living experience based on 3 pillars: Save money, providing shared economy solutions, maximize the time of people by providing a digital rental and lease experience since the leasing, until the rental agreement as well as the experience of living, convenience and amenities. And I'll play a video because no one better than our customers to speak about these amenities that we provide. [Presentation]

So as you've seen, we've been able to provide a very different experience and this is a market that will grow significantly in the next years. Luggo is our purpose to tackle this market. So this is a constant goal for us, our NPS. It currently stands at 48, which is a very good score. It's a level of excellence, and we're focusing on improving it whenever we can. The first launches have been very successful. We have 3 properties that have been stabilized and one that is at the end-stage of stability. And we're currently in 3 cities: Belo Horizonte, we have 2 in Curitiba and now we are arriving in the city of Campinas. This new launch in Campinas was just opened in September. It was an absolute success, and it should stabilize before we had planned. This is our pipeline. As I said, we are -- we have 4 properties, which have 472 units. And the next launches will represent 3,900 units, and we have among projects approved and land, but we already have additional 2,354 units. So we will probably go into a new state soon in Bahia and Rio Grande do Sul. Now let's talk about a new announcement that we're bringing to the market. It's a new brand that will tackle a segment that is growing in Brazil. As Rafael said, in the beginning, the reduction of the Selic rate will boost this market segment significantly in Brazil. So Sensia will tackle this market, which represents 2.8 million families. It's what we call the B class in Brazil. It's a segment that grows by 78,000 new homes every year. They use SBPE funding and the interest rates are below the top-tier with the Minha Casa Minha Vida program, which is now called Casa [indiscernible] Morelia. So now we can offer interest rates at 7% a year. So Sensia aims to tackle this average market in Brazil. This was a project developed 2 years ago, and we have been looking into this market segment ever since, along with our brand consultancy, Interbrand. We detected an opportunity to launch a medium-tier brand. We did a lot of research in the last years, and we also hired offices specialized in architecture to develop assertive blueprints and products for this target audience. Now I just want to present the Sensia brand video, which reflects our brand position and how our brand intends to provide an innovative solution for clients. Let's take a look. [Presentation]

Now let's talk a bit about who these clients are. They have a monthly income ranging from BRL 7,000 to BRL 11,000. They see real estate as a lifetime investment, and they want to personalize it in their way. Our goal is to offer a consultancy service so that they can do that. Of course, you're looking for better locations. So usually, Sensia lands are exclusive. They've already achieved life's first milestones, and they want to have an apartment or a house that looks like them. Well, as I said, our locations stand apart. There are neighborhoods that have already been consolidated. So we're still forming this land bank. And this process will be accelerated now in 2021. There are middle class areas with a concentration of monthly income of about BRL 7,000 and upwards. These areas already have services stores and, of course, they're easy access. Sensia products have a lot of synergy with MRV operations. So we use all of our technology bases for construction. We're going to use a concrete wall model with internal personalization for blueprints in drywall. So we have designed exteriors, towers will have 250 units and upwards. And this is a kind of client that wants premium living areas. And this will be equipped and decorated. Layouts will vary from 55 to 70 square meters. They're significantly bigger than MRV blueprints, products have gourmet balconies and suites. We should have 2 or 3 -- excuse me, 2 suites or 3 rooms. And we will also have sustainable technology and resources in these developments. Something different about this brand is that they'll have personalized consulting, which we will offer to our clients. So according to the study we had, we saw that clients want this kind of service. They want to be able to choose the finish they want. So this is what we will offer in our boots. Clients will be able to select the kind of flooring, the kind of sinks and metals, technology package. So they will get the apartment looking like they chose. This is an example of what this will look like in each unit. [Presentation]

[Technical Difficulty] Sorry, we've had a small technical issue. We're going to skip over the video and just going to move forward and then we'll edit the video in. So this is an example from our first launch, showing what the layout looks like. It will be in Campinas early next year. And this is our pipeline, our strategy, which is to reach 3,000 units per year by 2023. Our average price will be BRL 344,000 per unit, and we hope to reach that $1 billion VGV level or PSV level in 2023. And these are the cities we would like to launch this product in. The main cities of Brazil, basically. By 2021, we'll be able to roll out to 6 cities with a PSV of over BRL 500 million. Any questions?

Okay. So we have a couple of questions here. One of them refers to AHS. People are asking what is MRV's investment plan in AHS and how much capital will be needed for it to grow? The answer is that within the plan of reaching 5,000 units that we presented, we actually need that investment from MRV, which had been mentioned by MRV, but what may happen is to have an opportunity of accelerating it further, and that would require more capital. In this case, it can be MRV capital, we can go to the capital market, and this is a 3-year horizon, okay? Then we have 2 questions for -- about Urba. The first question about Urba is they asked us to tell a bit more about funding from Caixa.

Okay. I can explain that. We can -- after delivering the shovel and not the key, that is when we finish the land plot sale. And when we get a permit to occupy, then we can stop the financing plan with Caixa. Interest rates will be 1.5% plus TR, meaning that clients will pay a very low rate, 120 to 140 months after they receive the keys. So this seems to be a good credit line that will reach more people, that will be affordable for more people.

Great. And the second question about Urba is this, people are asking what will be the size of Urba next year? And what it will be when the operation is stable? So next year, 2021 and when it is stable.

Okay. Next year, we will have about 4,000 units in our launch, PSV of BRL 400 million. And by 2025, we intend to reach 15,000 units, so about $1.2 billion in PSV or a bit more for the entire group at the end of the day. That's the idea. And we hope to stabilize by 2025 to reach those levels.

Perfect. And we have also a question about the Sensia line. People are wondering, first about customizing the apartment. Are we charging more for that? Do people need to go to the booth to buy it? Or can they do it over a website? What will that model be like? That's a good question, and that's a big competitive advantage that we have. All of our finishings are on demand. So we're going to offer several options. Clients will go to the booth and select their finishings. And we have enough technology to connect to the production area so that we can personalize this unit by unit. We're also going to offer closets and wardrobes. We have a partnership with a major closet supplier, and we have a technology package for them to make their homes more technological and automated. Okay, the second question is this. This reduced interest rate we've seen with SBPE has made this market have a bit of an overlap. So the start with SBPE and the end with the FGTS. So this is a statement that they're making, and then they're asking, is there an estimate of how much this will improve the client's purchasing power? I can answer that. For every 1% drop in interest rates, we have about 12% to 15% more, depending on the client's income level. So if we consider interest rates at SBPE, the top of Minha Casa Minha Vida, 8.6%. If we're getting 6.5%, it's a client that needs 20% less income than they needed before. But for clients in the Sensia brand, what this means is, this is a client that before would have an 11% interest rate and can now get 7%. So the 4 percentage difference is a reduction of 30% to 40% of their minimum income. So this opens it up for a greater number of people to buy apartments. And they're also asking if this is a competitive advantage, if this means that MRV will have a greater appetite with the brand. And we believe that it is. This market has been pressured for the last years. So it will certainly be a great incentive for MRV to launch this new brand and go into this new market segment. Okay. Those are the questions we had had, and please continue sending us your questions, and we'll continue to answer them. And now, I'd like to invite Resende.

Okay. I will talk a bit about innovation culture. All these innovation projects that we're looking at, new business is only possible because MRV has an innovation culture and research and development culture that's highly implemented and widespread in all levels of the company. Our motto today is to transform the experience of customers, improve operational efficiency through -- in product quality, through search and implementation of new technologies, products, processes and businesses, connecting several innovation ecosystems. MRV has a mindset of construtech. In the last 5 years, we have invested BRL 500 million in innovative projects. We have the most advanced technologies worldwide in all steps of construction, process and property management. These BRL 500 million were invested in digital transformation, people, processes that operate in the whole company. This is a very interesting chart or illustration showing that MRV is not only a hardware producer, so to speak. We're not only a construction company, we also deliver software and services. So in the core, we have, in the center, the unique living experience that we want to offer. In the other level, we have our business model that are growing. And then the next layer is the software and services that Reinaldo will speak about -- in a minute about these nice projects we have and to offer a unique living experience to our customers. We also believe that innovation doesn't happen only inside-out. It must also happen from the outside. So our mantra is that innovation and collaboration walk hand-in-hand. This is the illustration that shows several players, entities, supply chain partners, innovation hubs that are all over the country that every day help in our processes. They are also inside MRV, working with us to accelerate innovation. Recently, we opened our research and development center. This R&D center is located here in Belo Horizonte in a partnership with Sinai. This center will test several products and layouts. We have several suppliers with us to help us develop these customers to test perception of innovative finishes and layouts. We hope this can significantly contribute to improve our construction model, our hardware. I would like to call Fischer to talk about the evolution of our construction methods.

Good morning, everyone. I think the slide that Rodrigo is showing talks about our history. Innovation in MRV, we talk about customer journey, digital innovation, how we can capture on this journey that starts in sales up to after keys delivery. We have invested a lot in that, but it doesn't show how much we invest in technology. To take care of the hardware part, this picture shows the different initiatives we had with time. Our structure of masonry, that was the first evolution that lasted 35 years. Then we have concrete walls that is widely widespread, especially in our segment. We have been using it for 6 or 7 years. And now we're taking an important step that is the third-generation in the production process. I'm speaking about it because it is so important that these innovation areas reports directly to us. So MRV is a construction company. So everything we show today is the capacity of MRV to generate different businesses but also to build them in an efficient and profitable manner. So it is a third-generation in construction process that was created in-house. It's an innovative process that mixes a different plastic ceiling. So it goes up as the structure grows, along with internal drywall divisions or walls of the houses. So we intend to roll-out this in the entire platform. MRV has always been way advanced in terms of construction technology. The offsite, we've had 2 or 3 projects with offsite technologies. We believe that it's still not adequate to Brazil, given the various difficulties to develop and build in Brazil. The cycle of the business starts at the buying the land, which is local, approving the project, which is local. A major part of the construction process happens locally. And the offsite part is very low, and there is this post-construction to manage. So you look at the entire cycle of the business, we believe that this third-generation of construction technology that's being rolled out now is very significant in this evolvement. And talking about this brand that we're very excited about, it all started in the drawing lines and this is a segment that we see a void in this industrialized construction technology. There has been a huge opportunity, but we see major growth with the drop of interest rates and more families being able to buy their houses and homes, but it will happen with scale and a standardized, industrialized construction process. This is the basic assumption for Sensia. So in terms of standardization of construction processes of MRV, this is present in all the projects that you see here, including AHS in the United States that uses the same construction process we use here. So investing in technology or hardware as Rodrigo said, is part of the company, and it's been with us since our -- we started as a company. They are part of our lab, and hardware is a major part of this evolution. So I'm very comfortable to say that MRV in the vanguard of construction process, and we're taking efficient steps to continue to be there. Thank you.

Now to finish. Inova project aims at fostering new ideas in all levels of the company. This is part of our project of an innovation culture. And through this project, we see the innovation throughout the company. We have more than 2,000 employees that are participating in the project. 1,400 ideas submitted and 400 employees awarded. And the -- everything is aligned with the strategic pillars of the company. We motivate our associates to participate in our evolution process. Speaking of software and the development of our digital experience, I'll call Reinaldo who will continue with the presentation.

We have 2 questions. One from -- about the point of view of MRV in terms of cash flow received during the execution of the construction. Is there a difference in -- according to the funding method? Is there any -- the answer is the flow is the same. We make products from SBPE both for Sensia and premium line, which are the products that we work with SBPE funding. We receive the funds from financing according to the percentage of construction execution. There's no difference in terms of those 2 points. The other question is what is the main competitive advantage of these third-generation of construction technology? Can you say anything about in terms of gains or productivity, efficiency and brand? Well, it's still early to talk about margin gains. Efficiency gains, I'll give you a ball figure. We can increase productivity about 15%. That's what we had in the first construction unit. The efficiency is a significant figure that would give us a gain in gross margin, although I won't mention the exact amount. And it is more productive in terms of technology, is allow -- it allows us to build -- finish the building 2 months earlier, which is a lot for us. The prospects are great. If we, indeed, are able to develop it even further, it will be implemented in the company much faster. The first products are being finished now, but the results are very promising. We have 2 more questions. First, about Luggo. What is the revenue and the gross and net margin expected for Luggo projects? Luggo, we look at the net margin a lot. So the net margin of the project is around 15%. Expected revenue for 2021, we expect to sell BRL 200 million, more or less, and that's it. Plans for the future? If you could comment on that, pipeline of growth? Well, we have more than BRL 700 million in land bank for Luggo, and we'll roll out this land bank. We increased acquisitions. We expect to buy another 6,000 fractions for our land bank next year. And we hope to attain that level of at least 4,500 to 5,000 units per year being sold for real estate funds every year. Sensia. How do you see the payoff between higher standardization and differentiation of products? Well, actually, the product is standardized in its structure. So the layouts are standardized all over the country. We will deliver a product, as Fischer said, that's highly industrialized, that uses all the technology of construction we have. And the customization happens inside the units. And this customization is made by software. We have highly invested recently to prepare this chain. So customization happens in the finishes and using business partners for closets and technology. And since the Sensia apartments are larger than the minimum apartment in -- we have a few types that would apply to all the country that happens to make it standard. Okay. Let's go Reinaldo now.

Okay. So let's talk a bit about the software. You you saw that MRV has a mindset technology that is very strong. And in the last years, this technology mindset, which used to be focused on building methods, migrated to digital. The company in the last 10 years has invested significantly and consistently in technology, in digital technology specifically, always thinking about the customers' experience. I usually say that no one goes out on a Friday, thinking about digital transformation and comes back on Monday with a process made. You need fundamentals. And the fundamentals was something that MRV got after a great effort. So that entry barrier for people who are just starting with digital transformation is an important point. So this is something that we stand out for. In the last 3 years, we've invested over BRL 300 million in digital fundamentals. And they are like Lego's. What we mean are APIs. With them, we can build new business scenarios quickly and dynamically. Of course, that in order to make this happen, we need people. We need to train people. We need to be agile. And throughout the last 10 years, we've done it through over 300 employees who are specialists and organized quickly into squads. Now we have over 40 squads which can, based on the fundamentals, build strategies, but strategies have to do with digital vocation. In 2015 or 2016, we went through a significant change. I remember Rafael and Fischer said that if anyone is going to become the Uber of our industry, it should be us, and that's where Luggo got started and several other initiatives that you saw today throughout our presentations, and we'll see in the next slide. So back then, we started working on this. I mean we already worked on this before, but it was important to look deeply into the customer's journey after sales. We understand that clients, after they get the keys, they will spend over 50% of their time, and now with the pandemic, over 70% of their time in our product. So investing in this experience means a lot. You'll see that this experience, when it's successful, brings new sales. 20% of our sales come from referrals. So this extended experience is what we call the MRV way of life, which we'll describe soon. But that wasn't it. Digital vocation far before the pandemic, started with our digital sales. And during the pandemic, that was very evident. People asked what that would be like. One thing is to buy a book online. But COVID showed that really selling apartments is possible online and digital sales are possible in any segment. So we went from a pilot project to 98% of our sales being digital very quickly. And as you saw, MRV is changing the number of products that we have. And we need a platform to orchestrate all of them. This might be the biggest goal behind all of this. At the end of the day, we hope clients will come in through Luggo, then will evolve to an MRV or a Sensia and continue going up. Now housing platform. The housing platform came to make our digital vocation real. We started the client's journey as a game, and this game has led into stages. And as we move forward in stages, we get new functions, and it becomes a super app or it becomes a website, it becomes an app. And people really like these terms, but actually, the platform is the location. It's just the software that operates your hardware. You can use it to buy. You get to know different products. And one of the challenges we had in the pandemic in July was to have the dream agent, Agente dos Sonhos. Because we have the fundamentals and we have digital agility, so building the dream broker in such a short amount of time mirrors our speed in implementing new digital locations. So I'm not going to talk about each of these points. We're going to have an event later on to talk about digital, specifically. If you've seen my presentation, you know that I could be here talking about this for an hour. But the important thing here is to extend this journey, the aftersales experience, creating a digital community to coexist. So the consumers now have a different way of thinking. They work from home, they buy at home, and they need to have new sources of income. So this change in their habits can be supported by the software. That's why we believe in coexisting. And that's why we have it. We hope that, for example, an English teacher can offer classes in this platform in their condominium if they need to. And finally, integrating all of the offers. Of course, doing all of this without generating results is not the way forward. Here at MRV, we work on results strategy. And here, we have some of our results, some of them. But it's important to mention that 75% of our sales are born digital with bot. If you go to mrv.com.br and if you want to test it, and then if you'd like to buy an apartment, please feel free. You'll be supported by BIA, who is IBM's Watson working for us and servicing clients 24/7. We've reached 30,000 digital contracts. 98% of them are digital. In the lead generation process, we have had a 50% cost reduction. We've generated over 1 million leads annually. We've had credit approvals in 20 minutes. We reduced the time for proposal generations. Renegotiations are now digital. I'm going to play a video that shows our digital vocation and what we believe in as digital and how digital can really help transform our business. [Presentation]

That's it. Now I'd like to invite Thiago.

Well, good morning, everyone. I'm very happy to be here with you. I have Rafael Pires from real estate development, and we saw a lot of good things in our journey over the last 2 hours. We saw a lot of innovation, new business units, but it's always important and very relevant to also look at the core of our business, which is what MRV does and what we have been building in the last 40 years. And we're at a very positive moment, and we'd like to share that with you. So to discuss our presentation, let's see if we can get it put on the screen. 2020 -- to tell you a bit about 2020, 2020 is not over yet, but we're very happy to share with all of you that this was a year where we broke many records. Rafael, Eduardo and Ricardo have been saying this in their conversations with you, but this just reinforces our mission, and it represents our entire team. MRV did very well this year. We also added to our PSV an important level of growth, not only of units sold but also a very positive mix of regions or different products that provide growth even above units sold. And as a consequence, our productivity or our SOS has broken a very important record. So in the last months, we had a 45% SOS, which is very important when we compare it to our historical data. But besides that, another interesting thing to share with you is that, for the first time, we're going to show our market share. And we have 2 very interesting conclusions to draw from it. First, everything in the entire country but also in the cities that MRV are, 160 cities, gained 2 points. So we gained 2 points in market share in 2020 at these 2 levels we're looking at. We can look at the glass half full. We're happy that this is working out, that our strategy is doing well. What we've been implementing is being successful, and we're proud of everything we did in the last 4 years. But if we were to look at the glass half empty, we also have some potential growth ahead of us because of our geographic footprint, our product platform that Rafael has already mentioned, and Rafael will mention it again in this presentation. We have a lot of space to grow in, in the future, and that is giving us a lot of drive and adrenaline for what we're building for the next years, okay? But how did we do it in such a difficult year? We talked about the pandemic, but what aspects of it have been relevant? So first, I'll tell you this beautiful story. First, in the beginning of the pandemic in March, we understood that we were going to face a difficult moment. And we quickly understood that to generate trust in clients to generate the demand and the motivation for clients to find this change at home was very important. That's what we had to communicate to our clients. So we put out a very positive strategy with our online communications. Of course, being online is very important right now. And with the assertiveness and all the intelligence that we had behind our work for the right investment, we were able to drive our clients to buy an apartment and to make their dreams come true. And in 2020, or by the end of September, at least, we've reached to -- we reached nearly 1.3 million people accessing our website. So that's a very important lead for our business. So of course, you can only have the client if you don't have the right inventory and products. And thanks to the effort that we've made, and you saw that -- Ricardo told you that we had many launches last year. Our inventory was more democratic, which made it very important across most states of Brazil, meaning that we were able to meet the demand that came in quickly. So in March, April and May, we had very important moments in which we were able to connect the demand that we were having from our clients to the availability of products that we have at the right place for how much they could afford. The third very important point that helped us were our people. During a pandemic, when everyone was at home, we were able to foster virtual work and working from home safely for our team. But everyone was very engaged, and that reinforced our commercial journey and made sure that our team and the autonomous brokers around the country found MRV as a way to generate business and income in such an important moment when people were losing their jobs. So one of the most important pieces of data that we see is the growing business that the brokers generated for MRV. And we reached record-breaking figures at that. And the most important thing is doing business. And our productivity is growing. We don't want to expand our costs, but we want to grow in the right way, meeting our customers' demand but especially increasing our productivity. And this has been very important. Finally, I cannot leave out the MRV brand. During the pandemic, we have constantly looked at it with our marketing team, and we did excellent work. We mapped not only the perception on the MRV brand, and you see this in the data down here. Our top of mind and spontaneous knowledge went up significantly in this study, which was carried out during the pandemic. But the most important thing was our digital presence. And then the investment strategy paid off. We were able to have a massive presence in comparison to the rest of the market. So we're not here by chance. It wasn't by luck. We had to make a big effort. We've got a very positive result. So the client -- we have the clients, we have the products and the footprint so that our brand was used. This was in 2020. But how can we repeat it for 2021, '22 and '23? And here, we have 3 fundamental pillars, which are very important in order to consolidate for the future. First, our portfolio. MRV is not only a single product. We're going to be talking about this in detail. It is more complex now, but the most important thing is, for every demand that the client has, different income levels, different clients and different areas of the country, we have the right product for this kind of client. And we're sure that this will provide very good results for the future. Technology. We just saw Rodrigo's presentation, and Reinaldo was also discussing this. It's a reality already, and it will become more and more relevant both in the transformation of our company, our way of making MRV work but also by generating efficiency. And finally, I don't need to say this again. We always talk about this, but we have the customer at the heart of the decision. We want to hear clients actively, meeting their satisfaction and also when they are not satisfied. This is essential so that we can build an even stronger MRV. With that being said, I'll pass it on to Rafael. Over to you, Rafael. Hello, Rafael.

It's great to be here with MRV Day. I'm going to talk about our portfolio of our products but now talking about operations to, say -- from the strategy to everyday operations and transforming that in products for our customers. So all the MRV Days that I took part in, in the past, I always talk about the importance of the business development team that's in all the cities of Brazil. It's a local team that live in the city, that they know the laws of that city by heart, that they know the culture of the city. So when we decided that we would grow with a new line of products and [ take on ] new markets, we know where to go. Of course, we made a major investment in the team during the year, bringing people from the market, people who know SBPE very well, to have these varied teams. And we have now a very interesting mix of people and talent. And this is the main reason why we reached the end of the third quarter with 10% already made for SBPE for the land bank, 67% for the traditional Minha Casa, Minha Vida in our ESSENTIAL LINE, because we had to remake the product, create new products. But the capacity to implement, to roll out that in the field is already at home -- in-house. So we looked for ideas and alternatives to reduce complexity in the other end. And now I introduce to you a new project of verticalization. Along the lines of Rodrigo and Eduardo's talk, developing technology and hardware, we created this slim tower. It's a compact tower that works on both ends in the entire educational or housing platform of Minha Casa, Minha Vida. So it adapts to this audience. And it allows for verticalization of up to 20 floors. So with that, we can use the land better and put more people in the building. In one of the ends, the top end of Minha Casa, Minha Vida allowed us to enter areas we were not able to enter before, have more complete amenities. The pandemic said that people who can afford it are paying more for a balcony. They want to have a larger swimming pool and more amenities, more options in terms of entertainment in the building. On the other hand, it allowed us to enter the essential products that this is a product that has a lower cost to serve a customer that was not able to buy the traditional products that we offered. Talking about ESSENTIAL, these ESSENTIAL LINES. What is SBPE? The low -- interest rates are low. This market was not developing. It's a huge opportunity. In -- recently, the property prices have gone up, but the income of people did not go up, on the contrary. So we noticed that 25% of prospects had an income range between 2 and 2.8 minimum wages. And they were not able to -- they could not afford our product. They wanted to live in our buildings, but they cannot afford them, and they ended up buying from our competitors. So along the lines of our purpose to make dreams come true, we decided to develop a product that's a bit lower in terms of cost but that delivers the same quality. And this, we had the technology of putting more people in the building and reducing a bit the -- making a facade that's about small or a bit simpler, but the quality and the experience of living in an MRV product, it will be maintained with a product that's a bit more affordable for these customers. How this becomes true in the everyday strategy to operation. Of course, we enlarged our portfolio. The product was pretty much in the same region. So we had to expand. We -- there's technology behind that. All the investment we made recently in technology, land bank prospecting with the tools that we mentioned, MRV Terrenos, that on the palm of our hands, we can -- we have the whole city mapped and divided in subregions. I know what are the regions that I have products that are not -- that are empty, where I have to focus and by type of product. I can see my competitors on the palm of our hand. So this technological support for decision-makers, making -- allowed us to analyze and find the right product for the right place and right customer. Technology supports that. But of course, there is still a craftsmanship in that -- because the feeling of the developer is very important. And we have a trained team, a team that knows about the business, and we apply that with focus in all income levels. So we're always prospecting new land, looking at the strategy of that city to meet all income levels with all product types and making decisions on what land to buy, always paying attention to income, which is the main goal, to provide democratic access to properties for the -- all income levels and, very importantly, paying attention to our competitors. Are we -- we have 40 years of success, but we cannot underestimate the competition. So we have the software that we can see in the palm of our hand what are the competitors in the region, how much -- how many square meters they have, what's the average price. And within the portfolio of products we have, we can implement the right product in the right place. So this strategy that we're now disclosing to you in more detail, because it's not still yet reflected fully in our portfolio of products, but we can now show you that the launches for next year, if we have on shelf, Eco and Bio, 82%. For next year, we -- that will change. We'll have 26% in the ESSENTIAL LINE. So 1/4 of the customers that could not buy Eco, Bio, now they can buy. SBPE now accounts for 12% of our business. And what is the reflects of that? That we needed to be present in more regions of the cities with more product options, with the verticalization that started to happen even more. And when we look at 2021 expected launches, we hope to end the year with 237 microregions present. And so this was growing every year and now starts to grow even faster because we have more options available. So when we say that -- when Thiago said that 2020 was a record in sales, 2021 would be even better. Right, Thiago? Would you like to say something about the technology in sales?

I think Rafael makes us more excited every day with the potential growth we have and with all the sophistication we are now embedding at the company. This is the horizon for the future, our prospects for 2021. And we are sure that, with the product and processes we have implemented, we can continue to grow at the same speed of 2020. But more than that, it's important to say what complements this journey. We've talked about technology, which is the reality. It's present in our everyday lives, so we'll go over that quickly, but we don't stop there. Many of the questions we ask is about pricing. We have heavily invested squads. We have 40 squads open in our technology process and, two, to manage the customer base and also how we add sophistication toward pricing. These are squads that will deliver results next year and will gain more efficiency in the future. And one that started this year. We talked about this being a dream agent that, how to become -- make the sale of an apartment even more democratic. In 87 days, we -- since the creation until implementation, we had a project up and running. Today, we have a significant amount of people enrolled, either brokers -- real estate brokers or independent people who are in other jobs who are interested or who have someone interested in buying apartment, that they know and take part in that process. This is a major leverage in our strategy, and it will become even more relevant in 2021 because we'll make that grow and cause more people -- will reach more people in the entire country. In addition, we continue with the journey in other areas of the company. The financial journey has become much easier by reduction of calls in our call center and a much quicker speed through artificial intelligence, MIA, helping our customers after the delivery to reach the same level of satisfaction with our product. We are very excited not only about sales and construction but also how we deal with post delivery to our customers after sales. So everything reflects in our results, and the best indicator that shows this in our company is the NPS. When we see the NPS in the beginning of 2019, 38 points, and reaching the third quarter 2020 at 55% of approval between 9 and 10 in the NPS score, we see that we have more and more ambassadors of our products, press and brands. We are on the right track. Are we pleased? Yes, but we haven't gotten there yet. There's still many gaps to be bridged. And we are treating them seriously as a priority, and we're sure that the NPS will reach the levels of 70, 75, which we believe is the right score for our customers. And there's a series of steps we're taking. But just to highlight, during the pandemic, many of our customers wanted to understand how the construction process was going. We created virtual mechanisms with our teams, our engineers showing their units, the building process, and they were highly pleased. And customers were very engaged with this initiative implemented during the pandemic, and that's here to stay. And to conclude, speaking about the expectations for next year. Rafael mentioned we believe that, the planning and the execution of our launches for next year, we start the year much better prepared and with an assertiveness that would be very positive for 2021. Our production will grow rapidly next year because, in the beginning of the presentation, we said that we'll deliver the growth in production with a strong implementation of technology projects, generating efficiency, lead the demand attractiveness because customers must understand that MRV must be their first option when thinking about buying a property. And now, with MRV and other business units, if they don't fit MRV, we can expand the availability of products to customers. And finally, all of that has to deliver excellent net sales next year. [ Okay. ] Questions?

We have a few questions here. I'll ask them, and several people are able to answer. What is the gross margin of ESSENTIAL product? Gross margin, around 30%, 31%, slightly below the core business and level 2. And within margins, another question. What is the net and gross margin expected for Sensia product? Gross margin, 33%, 34%, slightly above, [ just ] trying to offset what we have been attaining so far in terms of new sales margins, and a net margin of 15% to 16%. There's a question that's asked, well, since the company intends to grow into several subsegments that is still needed to create a land bank, how much do you expect to spend in buying land next year? And what would you -- will be the leverage from now on?

Well, as we have shown, this strategy is already being implemented in terms of buying land for some time now. When you look at the land for next year, we don't expect to change the line of buying land in terms of what it was 2020 because we have building our land bank during 2020. So I don't see a major difference in that line year-on-year. In terms of leverage, we have 13% net debt over shareholders' equity. The figures depend of a lot -- to many things. If we have a continuing low interest rate, we could have 30% net debt over shareholders' equity. When we talk about indebtedness -- this is Brazil, okay? Because when you think about U.S., the debt -- there are other types of debt to finance construction. So that outside Brazil are different. So we are comfortable at the level we are now, and we could reach up to 30%, and we'll still be comfortable in terms of net debt over shareholders' equity.

And the other question, what has been the development of prices of land? Is there any market where those prices are increasing more than others? And now, I'll hand over to Eduardo. In terms of cost, do you see any pressure in terms of manpower or difficulty in finding labor?

Okay, the camera is on me now. The most important point is geographic dispersion. MRV is the only company that operates in more than 160 cities. So most of the markets we operate in, we have local competitors. Of course, in São Paulo, there are more competitors. Or since we operate in a very widespread geographic area, we can be more selective in choosing the best deals. And it's also important to understand that our land bank was built in the last 4 to 5 years, mostly. So this BRL 4 billion to BRL 5 billion land bank has been bought 5 -- 4 or 5 years ago, that was bought in very good terms, very good conditions. Of course, we have to continue buying land. And I say that we mostly buy land in areas that have low competition. Also important is that some land -- some plots of land that are very specific or that are more expensive, the number of people competing for this land is very small because few companies have the -- our balance sheet to buy plots of land in Rio de Janeiro at BRL 100 million, for example. So we're very comfortable, especially with this broad portfolio of products. We'll make good business, good deals in most purchases. So I don't see pressure on the margin coming from land bank. If MRV operated 80% in the metropolitan area of São Paulo, I would certainly be a lot more worried, but this is not the case because the metropolitan area of São Paulo accounts for 10% of our operations. So it is a huge market? Yes, it is, but it's a highly competitive market. So our operational flexibility brings difficulties. We need to have robust investments in technology, have to know the market, have to have a good team, but that's in the past. We did that already. With all this infrastructure we created, this is a given. This has happened. So only MRV has this robust foundation to make 40,000 units a year, which we already do, and to aim at reaching 80,000 units per year.

Eduardo, [ cost ], labor?

Okay. We're having difficulty -- we see -- do we see -- well, we have zero difficulty in labor, especially now. Despite the fact that our industry didn't suffer so much during the pandemic, because in the country where you have unemployment rate of 14%, labor is not an issue. We have several initiatives to increase productivity in our construction, especially those that I mentioned. So pressure on labor is very low. This is not a problem. What has happened indeed in -- lately is the pressure in the cost of materials, especially concrete, PVC or plastic byproducts, cables and steel. What we are able to do is that, when the pandemic started, we made a major effort to renegotiate the prices of materials. So back then, we created a task force to renegotiate and lengthen payment periods, and we're able to make new business. Now the prices are going up again, we're flat at that. So in the first half of next year, I believe this trend will decrease, and we are able to implement other initiatives that offset high price increases, especially in concrete and fuel. So we have great advantage there. For example, we implemented sophisticated auction tools that we implemented this year, so our supply area has been able to offset recent price increases. So overall, the costs during 2020 has behaved well. And I believe that this pressure on cost will dissipate throughout the first half of 2021.

What is the pace of sales during -- at the fourth quarter? Well, it could be a bit more general in your answer. Don't mention any specific figures.

Well, we continue with a good trend. We continue with a good trend that has been observed in the second and third quarters. People continue to seek apartments in October. November and December, we have competition of retail due to Black Friday and Christmas offers, but we have been able to offset that with a good management of things we had in-store from previous periods.

Another question about -- is do -- does our competitiveness increase with these products in the city of São Paulo? And someone asked me to mention what is the 50%...

Well, it's very specific, right? I can get that one. São Paulo. São Paulo is a huge market, as Rafael said. But if you add up everyone, it doesn't solve the demand of the city and the demand of the metropolitan area in terms of suppliers. So we have several products developed, and that places us in a privileged position to navigate better in the special environment of the São Paulo metropolitan area. Because looking at our platform, I have different possibilities to fit different plots of land, now with Sensia, even better in order to purchase such land. So I don't see any difficulty. In 2020, it became even easier, I would say, given this new portfolio of products because now it became available. And especially in the city of São Paulo, 2020 was a very good year. We didn't have so much pressure in the increases in the land prices due to the pandemic, and this new portfolio gave us different options to tackle such lands going to Sensia, Essencial and SBPE or taller towers. And this project, it's an internal reflection of ours. We are the market leader in Brazil, but we're not the leader in São Paulo City. So we are the fifth company in São Paulo -- well, we used to be when this project started. So our challenge is to come from fifth rank to the first, to be the leader. So this [ 51 project ]. We want to be the market leader in the city of São Paulo. I think it leaked. Well, this is the mindset of the company. Wherever we are not the leaders, how can we develop our product portfolio to become the leaders? We are evolving other cities as well.

Perfect.

Good afternoon. We -- there are 400 -- 500 people watching us. It's great to be here with you. I'm the last one but not least important. And so I'll talk about our ESG and sustainability initiatives. We saw many figures, lots of capacity to produce, sell and create a housing platform that is very different. And behind all that, there are people, people with a purpose, people that want to leave a legacy to the community, to their families, their children, and all that leads us to believe that all these people together make things happen. We -- MRV is -- has focused on maintaining this culture of respecting the environment, social issues, always based on ethics and transparency. I will talk about some initiatives that are important to us and make a difference to the MRV team. In the environmental area we can talk about, we are able to neutralize the greenhouse effect gases either by buying carbon at the market and as well as by a strong work we did in scope 3 with our suppliers that account for more than 90% of our emissions in our entire production structure. Waste management is also very important. We have less -- 46% waste reduced in our construction sites. We are now -- have our own generation. This is -- we have inaugurated our first energy plant in Uberaba. We are producing energy enough. We plan to build another 2 or 3 energy plants, power plants next year. This diversifies our energy matrix. And we can also reduce our energy cost. In the social area, we have MRV Institute that was created in 2014 that organizes our social initiatives in the company. This institute has received BRL 23 million in funds that come from 1% of the net income of the company. That's been approved by the Board of Directors. And we can transform the lives of people. We have a purpose, which is transforming through education. We support several educational actions in Brazil, also in-house initiatives, and it's a very successful initiative. We have a volunteer program that has more than 2,000 volunteers. It's a full army of people dedicated to transforming society through education. Another important initiative is Escola Nota 10. It's [ a grade school ]. More than 5,700 (sic) [ 4,700 ] students that have been -- learned to read and right during their work time. So they come to work, and they sit down in a classroom to learn to read and write as well as to use computers. And through this transformation -- it's worth watching a film online -- that's available online: Instituto MRV Raimundo. It's a very important video. We did this more than 180 schools. In terms of governance, we have a code of conduct that's been revised this year, bringing innovations, new behaviors, always thinking that integrity is very important in the company. ESG goals are part of that and as well as Directors and CEOs. We have more than 7,000 employees that have been trained according to our code of conduct. 272 terms of commitment have been signed with the public authorities. We have a close interaction with those authorities. All these terms of commitment are analyzed by our legal department, and we comply with local laws, and based on ethics and transparency. 23% of women are now in top leadership positions at MRV. MRV is a pioneer company in this industry. Women are the leaders of many areas in the company, and they bring diversity and the women's sensitivity, which is also very important. Now ESG and sustainability culture has started since the beginning of the company. As you may see, in the last decade, we have been reducing GHG emissions since 2010. In 2016, we signed the UN Global Compact. And we are much more objective because we can now talk about sustainability. There's a life cycle analysis of our products that allows us to identify where we can have gains in providing more sustainable products to company. And for the future, we have the 2030 vision that was published last year, where we set our goals in terms of the weather. We are now starting 2021 with a major challenge that -- to adhere the science-based target. So we're bringing in science, and with that, we're going to take to our suppliers what goals we have to reduce the temperature or at least not to increase temperature in the world. And that's going to provide great improvements in our productive process. And of course, that's connected to productivity, innovation, and it benefits all of society. It's a long effort. It's a huge commitment that we're making, and it's been providing many results, not only on the community perception of our clients but also productivity gains because sustainability includes innovation at its core. We have received some awards, such as the ISE award for the fifth consecutive year. It was just published about 10 days ago. And it brings a new challenge for the company. We are the only company that has received this award from ISE in the real estate development industry. We've also been acknowledged in the U.K. as responsible development leaders. This has been recognized through our publications and results. We have the gold seal from GHG Protocol, which is an organization that controls GHG gas emissions. And many of these awards include innovation. So the market is in our company as an innovative company that can provide sustainable innovation. So we are very proud of these international awards. We've been invited by the UN 4 times to talk about what we do in the company. So we went to the 73rd year UN general assembly, to talk about AHS. During the Climate Week, we launched our 2030 vision and our commitment to the future. We were invited to COP25 in Madrid where we also talked about our interventions with weather issues. And last year, we were invited to the UN World Human Rights Conference where we talked about corruption and how it influences society. Three very important events and appreciations that we received. So that's it. I'm now open for question. And I'd like to wish you all a merry Christmas and a very healthy 2021. Hopefully, this pandemic will be over soon. Thank you.

Rafael, I have one question. Throughout the 5 years, we've been with ISE, if any other real estate developers are there or only MRV?

No. We're the only real estate developer that is in the ISE list for 5 years. It's a challenge to be there. They're very rigorous. We get audited every year. They come in for other studies, and they check on site what we're doing in practice about sustainability.

Morning, everyone. It's Eduardo Fischer back again, and we're going to conclude. We have some important takeaway messages to tell you about. First, this year is wrapping up. We had a completely atypical year. It was a year where we saw many challenges, and we're finishing on a good note. We had a very unexpected reaction after our fears, but this was created in the company. We are able to capture everything that happened as homes became more important because of the pandemic. So as we're organizing this event, our idea was this: we wanted to show everyone our strategy and how we see the real estate market, not only in Brazil but also in the U.S., what actions we thought of and how we're going to handle them. So bringing in the leaders for each business unit to show you in detail what's going on in our minds and how we're going to capture the market was our goal, and I think it's been met. Everyone knows that we are an ambitious company. The real estate market invest's a lot in Brazil, and it has a lot of potential. We see many opportunities and many gaps that we can capture. And we are starting to design the strategy on how to do it. But more importantly than having the strategy designed is that MRV built over its 41-year history the capacity to capture what we see very quickly and efficiently. We have a very solid track record. So when we design all these opportunities that Erika mentioned, Urba that's going to grow; Ernesto, in the U.S.; and even in our core operations here under Rafael and Thiago, Luggo and Sensia starting now. We look at all of this, and we see a lot of opportunity. But before that, we have a company that is not only innovative, a word that we repeated many times today, but also, it is consistent in its operations. And that allows us to have consistent strategies that are efficient and that present results in the end. This is what we've been designing over the last years. You have the opportunity of seeing our leaders. We have very skilled executives here who are also entrepreneurs. They're able to deliver on what we design and what we think. So we feel very confident about our potential and also the capacity that we have of delivering on it. So this is our message. If you look at our portfolio -- I forgot to remove my mask. If you look at our product portfolio, you'll see that, in the Brazilian income pyramid, we tried to capture 95% of it. It starts at BRL 2,000 to BRL 11,000, BRL 12,000 monthly income. So it's a great potential, and we can do it consistently. So I think 2020 has taught us a lot. Our market share has grown. We are ready to capture that growth. Our challenge today is to consolidate our results at this level. So we talked about 2021. We're concluding our design for the next years, but we have very ambitious goals. Everything that we've told you today with Erika, with Ernesto, with Thiago and Rafael, when we talked about Sensia and Urba, have already started. They're already doing well in 2020, and they will continue to grow in 2021. So the living platform from MRV and co is consolidated. It's taking shape, and 2021 will be a very important year. So we're very confident. Everything you've seen today, everything we've shown you shows the path that we've designed to capture all the potential that we have in the market. MRV today is very different, and it will be very different from what it will be in 2025 and 2028 in terms of size, complexity, efficiency. We're moving in the direction of a world where our scale will make more and more sense in our business. It didn't a short while ago. So gaining scale in construction was marginal, and it will become greater and greater. So with all of that context, we feel very excited, and we're looking at the next years with a lot of ambitious -- and we're very anxious, too. Everything we've designed in 2020 will make MRV a company that is much greater, more profitable and more efficient in the next years. And we will definitely be leaders in the housing market in Brazil and in Latin America and maybe even in the U.S. So that's our message for you. It was a 2.5-hour conversation. So thank you very much. I think we'll have other opportunities to interact in 2021 and talk about the challenges we faced here. But again, I don't think there's another company in Brazil that is more capable than MRV of designing this and also capturing the market consistently. Thank you, and have a great new year and a happy holidays. We'll see you in 2021. [Statements in English on this transcript were spoken by an interpreter present on the live call.]