Ladies and gentlemen, good morning. Thank you for waiting, and welcome to the LOG Commercial Properties conference call on the first quarter results of 2021. Hosting the event today are Mr. Sérgio Fischer, LOG's CEO, and Mr. André Vitória, CFO and Investor Relations Officer. We inform you that this event is being recorded and translated simultaneously. All participants will be in the listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer section when further instructions will be given. Should any participant need assistance during this call, please press star zero and reach the operator. Before proceeding, we would like to clarify that any statements made during this conference call concerning the business outlook of the company, forecasts, and operating and financial targets, represent the opinions and assumptions of the company's management, which may or may not occur.
Investors must understand that political and macroeconomic conditions and other operating factors may affect the company's future and lead to results that differ materially from those expressed in such forward-looking statements. To start the first quarter of 2021 teleconference, I turn it over to Mr. Sérgio Fischer, LOG's CEO.
Good morning, everyone, and thank you for participating in the conference call of LOG's results of the first quarter. We had a record of absorption. We leased 212,000 sq m of total GLA, which represent almost 50% of the entire year of 2020, and twice the previous monthly record that had been set in the second half of the year. Reflecting the heated demand from e-commerce, two-thirds of this absorption was related to customers in the segment and 90% outside Rio and São Paulo. LOG's internal team was responsible for 90% of the GLA lease.
We reached record levels in occupancy with only 2.5% of stabilized vacancy rate. It's important to emphasize that we have an extremely high volume of pre-leasings in our ongoing projects, and our existing customer base continues to be the largest space taker, making us increasingly a one-stop shop solution for clients seeking expansion. e-commerce reached a historical sales mark in 2020, and we believe that this robust growth will continue strong in the coming years. 47% of the portfolio is composed of clients directly or indirectly exposed to the growth of e-commerce, and this representation will increase in the coming quarters with the delivery of our projects.
In this quarter, we closed a new BTS project for a relevant play in the e-commerce market in the region of Extrema, Minas Gerais, with the potential of 78,000 sq m of total GLA to be built in stages, and the construction is expected to start in the second quarter. We added three new plots of land with 110,000 sq m of potential GLA to the first quarter land bank, reaching one million square meters of total GLA. We continue to have good negotiations for land with no direct competition and important consumption letter, most of it negotiated via barter, and 70% of the land for the completion of Todos por 1.4 is already in place. We are following our geographic diversification strategy. We currently have nine construction sites in all five regions of the country.
We are forecasting a record year of construction activities with more than 400,000 sq m of GLA produced and remain committed to the delivery of the Todos por 1.4 plan, have several funding activities at our disposal and a robust cash flow generation. We will follow this asset recycling strategy as the main funding alternative. From this year, we will increase the recycling volume. In the implementation of the Todos por 1.4 program, we are already seeing results. Now, I turn it over to André.
Thank you, Sérgio Fischer. Our results were very impressive. The indicators remain solid. I would like to start by addressing the most important aspect of our business, LOG as a greenfield asset developer. There were BRL 150 million of positive impact on the operating results due to the value generated in new assets.
This recurring value generation throughout the Todos por 1.4 growth plan will bring a significant return to shareholders. By 2024, it will be more than BRL 1.5 billion recorded in our financial statements through business activities and equity, and consequently, dividends. It is expected that as we develop new assets, we will recycle mature assets in similar proportions, maintaining value and cash generation strategy throughout the growth cycle. Always with the expectation of margins higher than 40% by the spread that exists between the yield on cost and development of assets and exit cap rates. I reinforce what Sérgio has already mentioned. We will recycle more assets and faster. In our portfolio, we have about BRL 1.5 billion in assets with high consolidated performance ready to be sold, either to institutional investors or to the LGCP11 fund.
In this quarter, we reached an EBITDA of BRL 144 million and a net income of BRL 122 million, seven times higher than the same period last year. Those are extraordinarily strong numbers. The positive results have been recurrent over the last years, which shows a resilience of our business model. Besides being very well prepared operationally to continue our growth cycle, we present a very solid financial position in our balance sheet. Our cash, for example, ended the first three months of the year at BRL 931 million, and our default rate remains at historic lows, close to zero, reflecting the excellent quality of our customer portfolio. We have different funding alternatives at our disposal, whether through the asset recycling strategy or equity, which will always be balanced against our capital needs.
In the sense, in the first quarter of 2021, we raised BRL 250 million in debt through an operation that did not require collateral. Our cost of debt is low, CDI plus 1.4%. The net debt is only BRL 90 million, which represents only 2.8% of P&L. That is growing revenue and EBITDA, solid liquidity and low leverage, different funding alternatives. These indicators put us in a comfortable position to carry out our relevant growth plan, Todos por 1.4. We end our presentation here. Now we move to the Q&A session. Thank you.
Thank you. We will now start the Q&A session. If you have any questions, please press star one, or you can also send your question via the webcast chat. Our first question is from Alex Ferraz from Itaú BBA.
Good morning, Sérgio and André . Thank you for your presentation. I have two questions.
The first relates to the BTS announcement that you mentioned that you signed a project for a 78,000 sq m warehouse. I would like you to give us more information about that. What is the yield on cost you mentioned? Your discussion related to build-to-suit always said that it should be more attractive. We would like to understand what is the yield on cost of this project, also related to the tenants. Is it just for e-commerce, or is it for retailers? Any specific segment? My second question has to do with absorption. We see the vacancy of your portfolio is low, probably there is absorption. You probably have pre-leases. Is that what is going on? Is it what you're delivering? Probably when you deliver a project, it's already leased, right?
Good morning. Thank you for your questions.
Let me start by talking about absorption. Yes, 75% of the figures achieved in the first quarter were pre-leases. These are ongoing construction projects. They are very close to completion, almost 100% leased throughout the construction period, and that's national, it's domestic. We've been able to do that nationwide, from north to south. We have construction sites in all five regions of the country with very high levels of leasing. We've seen this trend. It's an increasing trend, especially involving e-commerce. Two-thirds of these leases are for e-commerce platforms exclusively, and those customers prepare in advance, and they are willing to pay pre-leases sometimes even when the construction site is just beginning or about to begin. Related to BTS, I cannot say the name of the client, but it is an exclusive e-commerce platform. It only operates e-commerce. About the yield on cost, it's about 8.1.
We are checking BTS. We are going to focus on that. There are some large BTS projects in negotiation in addition to this one we are about to complete in the second quarter. The yield should be close to 12. This is our threshold so that we can continue with our investment. We expect to reach 12.1 of yield on cost on this project, and the construction project will start in May. This is quick. It's a large project, but it is quickly constructed, and in the first or the second half of the year, it should be delivered of next year.
Thank you, Sérgio. Next question is from Elvis Credendio with BTG Pactual.
Good morning, Sérgio and André Vitória. I have two questions on our side. First, related to competition. We see that there is heated demand, especially outside São Paulo and Rio.
Given this gross absorption that is a little bit stronger now, the company has always said that we didn't see professional competitors in these regions. Do you think that competition could be higher because of the increasing demand in these regions? My second question has to do with the yield on cost, specifically on the warehouses. We see an increase in the prices of steel. I know it's hard to compare, but do you think that there is room to increase the leases for speculative warehouses? How do you feel the negotiations with your tenants related to this?
Thank you for your questions. This is Sérgio. Regarding yield, that's exactly that. We're being surprised with this impact. Our industry is exposed to the cost of steel, and steel prices have increased. We still expect more increases throughout the year. Yes, this has impacted our construction sites.
We thought that this would only last in 2020. That's not true. We started this year with a strong pressure on prices as well. The fact that the yield is positive, prices have followed up this cost even a little bit higher than that. People were positive in terms of the yield on cost of the ongoing projects. I think that IGPM 20%-30% in the past months, of course, we cannot just use the same rate. This has affected the industry as a whole, and it has a positive impact for us. We've been able to keep and even improve the yield on cost in our ongoing projects. Regarding competition, we don't see any organized player moving towards doing what we do. What we see sometimes a player in one specific city to implement a project, but not nationwide as we do.
Maybe this will happen in the future. If, of course, this is an industry with a high demand. We see that we've been able to deliver good quality and have good return and absorption. Eventually, we might have a higher competition scenario. We feel comfortable because we have some barriers here at LOG. First one is our customer portfolio. We have the largest customer portfolio in this industry. This client that has helped us become a nationwide solution makes our clients even more loyal to us. This is competitive advantage to us. Also because of the capacity we have, no player in this business are able to have a verticalized company as we do. Because of that, we can deliver good, high-quality products and with very competitive prices.
We can improve our pricing because we have the yield on cost and these rates that I've mentioned. We feel comfortable with that, and I believe that competition is expected to increase, but nothing that will get in our way, quite the opposite. I think that we have some barriers to be able to profit from this scenario in Brazil.
Thank you.
Next question is from Nicole Inui from Bank of America.
Good morning. Thank you for this call, and congratulations on your results. I have a question related to development. In terms of your land bank and also looking for new plots of land, do you see increase in prices of land in some regions? In the beginning of the year or end of last year, you mentioned that now approvals are taking place faster. Is that the case still? Those are my questions. Thank you.
Hello, Nicole. This is Sérgio. About the approvals, overall, we've been able to deliver our projects earlier than planned. Alone 2021, we got projects approved within six months, which is a major accomplishment for us. In the first quarter, we saw impact in some local administrations because of the second wave of the COVID-19 pandemic. It's isolated. It's just in one local administration. The reason why we're able to improve our growth plan, Todos por 1.4, was related to our ability of swiftly getting the approval of our projects. The problems we've seen are one-off, and they do not have relevant impact. Regarding the prices of land, we don't see competition. Of course, in São Paulo, there is a major competition for logistic lands and also in Rio.
Except for that, it's difficult to see this type of competition or to face competition with players over the same land, same plot. We've been able to make very good purchases, especially through barter, and then our cash exposure is lower. We accept to purchase all the land bank for Todos por 1.4 this year because we see this ability of having favorable conditions without affecting our cash.
Thank you, Sérgio.
Next question is from Andre Mazzini with Citibank.
Good morning, Sérgio and André. Thank you for this call. You have 50% of this project. Here in particular, this was a partner that have brought you know-how and capital. One of your typical projects, you have a higher stake, and then you send that to a real estate fund and you are a majority shareholder. Does that make sense? Will we see more shared projects in the future?
How do you expect to see these build-to-suit projects as of now?
This is Sérgio. Mazzini, this was a one-off case. We're talking about a partner who brought a very interesting opportunity to us in a very complicated region in terms of land bank, that's Extrema in the state of Minas Gerais, and this is why we had this 50% share in this business. The other BTS we have negotiated today, usually LOG has close or 100% of its shares, and I believe we will continue to operate like that.
Thank you. Next question is from Bruno Mendonça with Bradesco BBI.
Hello, good morning. I have a question about capital structure. After your decision of not moving on with the follow-on, how do you see this evolution on the decision of what projects you are going to take or not?
Does that change this decision, the fact that you don't have the follow-on? How do you see the capital structure evolution? Should we expect a maximum leverage? In terms of recycling, have you seen any changes in the cap rates that are negotiated? Any changes in the expected cap rates related to the asset recycling expected for this year?
Hello, Bruno. This is Sérgio. Related to capital structure, we are very comfortable to deliver our plan. Today, we have very low debt, very robust cash position. We will just continue operations and focusing on recycling. Now, moving to your second part of your question. We don't see a lot of variation at this point. Of course, that real estate funds are not easy as they were last year. We believe that this is momentary.
Because of the political noise, tax, and pandemic noise, I think that probably things will go back to normal. I don't think that there will be a lot of variation in the cap rates that we negotiate. We feel comfortable because we have a very strong margin. In the past 16 months, we recycled close to BRL 300 million, and this was done with margins above 50%. If we see this trend of increased cap rates, we are still going to deliver what André mentioned in his speech. We're still going to deliver above 40% of gross margin, which puts in a comfortable position, and we will keep on with our plan, and we plan to match the value of generation in the development we have with recycling so that we can have cash return. We will keep on.
We still have some pillars at our disposal, equity, recycling, and the debt, and of course, they have different costs involved. The advantage is that we have a position that allows us to make decisions according to the situation.
I would like to ask another question. About the operating results of the new assets that were very strong in this quarter, how do you see the evolution of that until the end of the year? Do you believe that this rate will be continued? What can we expect from that?
This was so very relevant in the results of this quarter. Bruno, I think that now we have reached a different level. Last year, we saw this trend, and I believe that we will keep at the same levels we had in the first quarter. We have a lot of ongoing projects.
We are going to produce more than 400,000, close to 500,000 of GLA this year. This is going to have a very significant impact on value generation. It's a different level when compared to last year. In the next quarter, we expect to reach the same levels.
Thank you. Next question is from Lucas Hoon with XP Investments.
Good morning. I would like to understand a few determining factors, whether selling assets to a third party, a real estate fund or your own fund. Is this decision based on price, speed, payment conditions?
We have a very strong responsibility for being responsible for this real estate fund. It's a long-term vision. We want to generate value to the quota holders of this fund. We don't want to do anything crazy about that in terms of price, for example.
If the market is paying a price that we believe is positive. We find it too strong to be included in LGCP11. We can do elsewhere because we have this long-term perspective, and we want to protect our shareholders.
Thank you.
Ladies and gentlemen, once again, I'd like to remind you that to ask question, you should press star one. Next question is from webcasting, from Matheus Barcelos with Queluz Asset. How do you see the possibility of LGCP11 fund not being able to collect resources for LOGCP assets? Is there a possibility of selling assets to other FIIs?
Matheus, this is André, thank you for your question. I will address it in two ways. One, related to a situation when we might not have the resources through recycling and LGCP11. We have other funding alternatives, as we highlighted in our speech.
We also have a perspective that LOG assets are attractive to the market. They are Class A assets with great performance. The market is more sensitive. I believe we'll be successful in maintaining this recycling level with important margins, whether it is for LGCP11 or for institutional investors, for other types of investments in the market. We believe we'll be successful because we have other alternatives.
Next question from webcast, from Renan Urick with Infinity Investment Club. What is the deadline of administrative expenses that you believe is feasible in the medium and long term?
André again. Thank you for your question. The company, it is at a different stage when we compare year- over- year, our growth is opening new work streams. We believe that in the upcoming year, we'll have marginal growth in these expenses.
We expect to increase our expenses a little bit, but we believe that in the next years, it's really going to be a marginal increase when compared to our revenue.
Ladies and gentlemen, once again, I would like to remind you that to ask question, please press star one. Next question from webcast from Leandro Alves de Freitas, who asks: Good morning. I would like to know, what is the approximate percentage of IGPM that you are transferring to your clients or charging your clients? Regarding changing the IGPM rate and replacing that with IPCA, is there anything that happened in 2020 or 2021? If that's so, how many times was this exchanged or changed?
Regarding those contract indices, half of our contracts use IGPM and the other half IPCA.
Regarding IGPM, during the renegotiation of contracts, sometimes this contract rate is changed from one type to another, from IGPM to IPCA. About 80% of this rate is applicable at renewal. Regarding IPCA, we've been able to charge it entirely 100%.
Ladies and gentlemen, if you have any questions, please press star one or send your question using the chat in the webcast. We conclude the Q&A session. I would like to turn over to Mr. Fischer and Mr. Vitória for their final remarks.
This is Sérgio. Thank you for your participation. Just to wrap up, I would like to say that we have other BTS that are being negotiated. We hope to close that in the second half. That's ex-plan, so it will be an additional, an inclusion to the Todos por 1.4 plan.
As soon as we have good news, we will share them with you. The other point has to do when I replied Bruno's question. The company has reached now a new level in terms of value generation in greenfield projects. Now, the plan has gotten more traction. We have record levels of production, and this value is going to be increasingly relevant. You will see this recurring amount of value that is generated by greenfield projects in the future. This is what I had to share with you. Thank you very much and have a good day.