Plaza S.A. (MALLPLAZA) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Mallplaza's Second Quarter 2026 Results Conference Call. Today with us are Pablo Pulido, CEO; Derek Tang, CFO; and Rodrigo Sirhan, Finance Manager. This presentation and the second quarter 2026 earnings release are available on our Investor Relations website and will also be available for download in the chat. [Operator Instructions] I will now turn the call over to Rodrigo Sirhan. Please go ahead, sir.

Good morning, everyone, and welcome to Mallplaza's Second Quarter 2026 Earnings Conference Call. I am Pablo Pulido, Chief Executive Officer. Joining me today on the call are Rodrigo Sirhan, our Director of Finance and Investor Relations; Felipe Ramirez, our incoming Chief Financial Officer; and Derek Tang, who recently stepped down as CFO after taking on new strategic leadership challenges within the Falabella Group. Before we walk through our numbers, I'm delighted to formally introduce Felipe to our investor community. Felipe brings over more than 20 years of international executive experience, spanning financial management, corporate strategy, real estate development and retail real estate across Latin America. We are thrilled to welcome Felipe to the Mallplaza leadership team as we continue driving our regional expansion and long-term value creation. On behalf of our Executive Committee and the entire Mallplaza organization, I want to express our gratitude to Derek for his leadership over the past years as CFO. His strategic vision was key in driving our regional expansion and growth across our markets, while solidifying our investment-grade profile and optimizing our capital structure. Derek, thank you for your contribution over these past years and we wish you the very best in your new role within the Falabella Group. In line with that strategic growth and before we walk through our quarterly operational and financial performance, I would like to highlight a transformational milestone in our regional expansion, the agreement to acquire eight shopping centers operating under the Grand Plaza brand in Colombia. This acquisition expands our footprint in core urban centers like Bogotá while reaching five new cities, bringing our Colombian platform to 13 assets and over 460,000 square meters of GLA. With that, I will hand over to Rodrigo, who will outline today's agenda and share the key highlights of the quarter.

Thanks, Pablo, and good morning, everyone. Before we discuss our second quarter 2026 results, please note that the management may make or refer to forward-looking statements during this presentation relating to our company, its results, operations, expenses, strategy, potential restructurings and other similar matters. Such statements are based on assumptions and expectations of future events that are uncertain and contain risks. For further information on this, please refer to the disclaimer displayed on the screen. Today's presentation will follow the following structure. First, we'll review our financial and operational performance during the second quarter. Next, we'll share key strategic milestones and progress on value creation initiatives. And lastly, we'll open the floor to Q&A. During the second quarter, Mallplaza advanced in the execution of its growth strategy, highlighting the advancement in our brownfield investment plan, which currently totals more than USD 600 million and the optimization of our tenant mix towards high productivity formats. Currently, operating 2.36 million square meters of consolidated GLA, our management focus remains on elevating the value proposition of our urban centers and increasing our share of TRA assets across the Andean regions to ensure long-term value generation. With that, I will now turn it over to Derek, who will walk us through the details of the quarterly results.

Thank you very much. It has been a privilege to lead Mallplaza's financial team and work alongside our colleagues and investors. During the second quarter, financial and operational results were driven by commercial management footfall and occupancy rates in Tier A urban centers. We also continued our portfolio's renovation expansion projects. Turning to our operational performance on Slide 5. Footfall across our urban centers reached 95.8 million visits, representing a 3.2% increase year-over-year. This footfall growth was supported by the value proposition of our tenant mix and the performance of specific assets. Mallplaza Premium Outlets Concepción and Mallplaza Iquique, both in Chile grew by 24.1% and 16.1%, respectively. Meanwhile, Mallplaza Bellavista in Peru and Mallplaza Buenavista in Colombia grew by 11.3% and 10.4%, respectively. This traffic generated a 6.7% increase in tenant sales year-over-year, totaling CLP 1.69 trillion for the quarter. This result was supported by a 3.7% growth in same-store sales, reflecting performance across our portfolio in a more stabilized consumption environment than the previous quarter. At the asset level, top-performing urban centers included Mallplaza Premium Outlets Concepción with a 26.9% increase in tenant sales, Mallplaza Antofagasta at 21.5% and Mallplaza Toconce at 15.7%, reflecting healthy market dynamics across all three countries with particularly strong performance in Colombia. Additionally, our consolidated same-store rent increased by 5.4% during the quarter, outperforming regional inflation, supporting our operating margins and revenue generation. We recorded these metrics while maintaining a consolidated occupancy rate of 95.6% as we advanced with our portfolio transformation and expansion projects. Furthermore, occupancy costs for our tenants remained at a healthy 9.6%. Moving to our financial performance on Page 6. Net revenue for the second quarter totaled CLP 174.1 billion, an 8.7% increase year-over-year. Our average remaining duration of lease contracts is 7.1 years, with 57% of those contracts extending beyond five years. Furthermore, 93% of our rent is fixed. Commercial activity included 472 lease agreements negotiated during the quarter, a 9.3% increase compared to the first quarter and the physical opening of more than 156 new stores, representing over 24,000 square meters of operational GLA. In the second quarter of 2026, total cost and expenses reached CLP 35.8 billion, representing an 8.8% increase compared to the same period in 2025, driven by higher employee benefits, allowances for doubtful accounts and expenses in adjacent businesses. EBITDA for the quarter reached CLP 140.3 billion, increasing 9.6% year-over-year, closing the quarter with a reported EBITDA margin of 80.6%. This represents a 0.6 percentage point expansion compared to the 80% recorded in the second quarter of 2025, reflecting the operational performance of our assets. On Page 7, net income attributable to the controlling interest, excluding fair value adjustments, reached CLP 78.6 billion, primarily influenced by an increased expense from inflation indexation units of 137.8% year-over-year due to the indexation of our U.S.-denominated debt liabilities. Adjusted FFO per share grew 8.8%, preserving our adjusted FFO margin. This performance was supported by operational execution and financial management, which enabled us to reduce financial expenses by 8.7%. Additionally, financial income rose by 110.3% due to a higher average balance of cash and equivalents and higher yields on investment funds. Regarding capital markets, Mallplaza recorded an increase in stock liquidity and valuations during the quarter. Our 180-day average daily trading volume reached $10.36 million, representing a 72.4% increase year-over-year. Furthermore, our market cap grew by 84.9%, ending the quarter at $9 billion. This trading activity was accompanied by our increased visibility in international indices, such as the MSCI Mid-Large Cap Index and the FTSE Large Cap Index. These developments contributed to expanding our investor base and stock liquidity, reflecting Mallplaza's presence among active and passive institutional investors. On Page 9, we outline our financial position. We closed the quarter with cash and equivalents of CLP 347.6 billion and a financial debt of CLP 1.63 trillion. Our net financial debt-to-EBITDA ratio stands at 2.4x with a loan-to-value ratio of 16%. Our debt maturity profile is long term with 95% of our maturities exceeding one year and 22% exceeding a term of 10 years or more. Furthermore, financial debt is denominated in the same currency as the cash flows associated with its repayment with 79% denominated in USD. The structure is backed by our investment-grade ratings, Baa2 from Moody's, BBB from Fitch and AA+ from Feller Rate and Humphreys. This financial position and credit ratings provide us with a framework to execute our growth plan. With that, I will hand it over to Pablo, who will guide you through our strategic road map.

Thank you, Derek. This quarter was defined by our ability to execute our growth road map with the speed and impact, grounded in our conviction that Salir es vivir, the guiding principle that positions Mallplaza as a true social catalyst in our communities. During the second quarter, we continue to advance initiatives that positively impact our visitors' daily lives. Our growth road map is structured around three main verticals: driving solid growth backed by our portfolio of dominant urban centers, continually transforming our value proposition to remain attractive to our clients and leveraging the strength of our urban centers to generate adjacent business. Central to this strategy is the execution of our brownfield investment plan, which totals more than USD 600 million through 2028 to expand and transform over 1 million square meters of GLA. The objective of this capital allocation is to elevate the value proposition of our urban centers, ensuring they adapt to evolving consumer needs while increasing our share of TRA assets to 70% of our portfolio. Regarding organic growth, our focus remains on executing this expansion pipeline. Currently, more than 50% of this commitment capital is allocated to strategic assets where construction has already begun, such as Mallplaza Trébol, Mallplaza Oeste, Mallplaza La Serena, Mallplaza Norte, Mallplaza Trujillo and Mallplaza Piura. These new square meters will enhance our tenant mix, specifically incorporating categories such as food and beverage, entertainment and specialty retail. This execution aims to strengthen the value proposition of each asset while improving the overall productivity of our portfolio. In terms of value creation, our current assets, we are making progress in the transformation of [large services]. These projects include renovating the food court and services at Mallplaza Oeste, along with retail and F&B transformation at Mallplaza Norte. Aligned with our focus on experiential offering, we enabled over 3,000 square meters dedicated strictly to entertainment this quarter, reinforcing community gathering as a key driver of footfall. Furthermore, at Mallplaza Los Dominicos, which is currently under transformation to enhance its value proposition, the center will welcome the first PriceSmart in Chile, a milestone highlighting the confidence top international brands have in our platform to drive traffic and generate value. At a regional level, we have introduced new dining options and terraces at Mallplaza Arequipa and Mallplaza Huancayo as well as new entertainment areas at Mallplaza Buenavista. Regarding our new business verticals, the Premium Outlet format continued to show positive results. During the quarter, Mallplaza Premium Outlets Concepción grew by 26.9% in tenant sales and 19.1% in net revenue. On Page 13, we detail the performance of our adjacent business. Revenue from this vertical, primarily advertising and parking grew by 23.7% over the last 12 months. During the same period, consolidated parking revenues reached CLP 72.9 billion, increasing its contribution to the total revenues from 5.6% to 10.8% over the last five years. This steady growth is driven by an ongoing rollout of our digital parking platform, ParkFlou. Finally, on Page 14, we outlined our ESG progress and recent milestones. Mallplaza was honored with the ASG 2025 Award for excellence in environmental, social and governance management. Additionally, we were named Chile's most valued Mall brand. In line with our social commitment, we launched a dedicated community initiative at Mallplaza Egaña, making its first center in Chile certified as a senior-friendly environment. Diving into the transaction of Gran Plaza in Colombia and as I mentioned at the beginning, this strategic acquisition incorporates eight high-quality assets, adding 180,000 square meters of GLA across five new growth markets by expanding our performance from 5 to 10 cities in Colombia with 13 consolidated assets. Mallplaza decisively scales it acquisition nearly doubles our national market share in Colombia from 4% to 7%, establish a market-leading position in Bogotá and increases Colombia's weight in our portfolio from 12% to 18% of GLA. Beyond immediate scale diversification, these assets bring clear avenues for future growth, including more than 15,000 square meters of potential brownfield expansion and space transformation. This will allow us to capture synergies, enhance our commercial value proposition and increase overall productivity per square meter across our platform. With that, I will hand you back to Derek.

Thank you, Pablo. Turning to the financial milestones of the transaction. The acquisition was agreed at an estimated firm value, EV of COP 1.178 trillion, equivalent to approximately $376 million with an equity value of COP 786 billion, equivalent to USD 251 million, representing a cap rate of 9.4%. The transaction structure considers a combination of cash and debt assumption, which preserves our balance sheet flexibility. In terms of execution, following the signing of the share purchase agreement on July 31, we are finalizing due diligence this August while progressing with regulatory antitrust approval. We expect to finalize transaction closing during the fourth quarter of 2026. With that, I'll turn the call back over to Pablo for his final remarks.

Thank you, Derek. To conclude, Mallplaza closed the second quarter of 2026, demonstrating operational stability and financial discipline, achieving an EBITDA of CLP 140.3 billion, expanding by 9.6% year-over-year, while maintaining an EBITDA margin of 80.6%, all while actively execution of our portfolio transformation. We continue to advance with the execution of our $600 million investment plan focused on a strategic expansion and transformation that will elevate urban centers and increase our share of TRA assets. Furthermore, our transformational acquisition in Colombia marks a decisive milestone in our growth road map, enhancing our geographical diversification across the Andean region while reinforcing our financial flexibility and cash flow resilience. Throughout 2026, we will maintain our focus on growth, tenant mix transformation, regional integration and operational efficiency. I want to thank our team for their dedication, our investors for their continued trust in our vision.

[Operator Instructions] Thank you. Our first question comes from Mario Simplicio from Morgan Stanley.

Derek, on your new role. Thanks for the partnership in the last years, and welcome, Felipe. So my question is on the Colombian transactions. I wanted to know what are your plans about maybe retrofitting some of the assets you're acquiring to better suit the Mallplaza value proposition? And if you guys already have any CapEx expectation for these retrofits? And perhaps if you can -- give more color on expected synergies identifying the transaction.

Thank you, Mario, for your question. We are -- first of all, we are really happy with this transaction. This is -- we are acquiring this platform, which was really well managed by [ Parktea ] team. So we are -- we have a very good occupation and a very good proposal that we are buying. We expect to have a synergies also in commercial and in expenses in the near term as it happens with the portfolio we acquired in Peru, which we could improve the results of the assets. We have also worked on -- to grow via brownfield because we believe they have some proposition that we can improve as the value proposal. We can improve the value proposal of F&B, entertainment and also specialty retail. We believe there is a lot of room to improve the tenant mix that we are acquiring. So we expect this to have value. We have a very good cap rate of acquisition. We expect to have value also in synergies, a commercial and in expenses. And also, we expect to have value growing our assets, mainly the assets we acquired in Bogotá, which are the ones that we believe we can get more value in the future.