Hello. Good morning, ladies and gentlemen. Welcome to the earnings release call of LOG Commercial Properties. They are referring to the results of the third quarter 2026. We have here with us today Sérgio Fischer, CEO, Rafael Saliba, CFO and Investor Relations Officer, and Henrique Schuffner, Finance and Investors Relations Director. We would like to let you know that the presentation is being recorded and translated simultaneously. The translation is available by clicking on "Interpretation." For those listening to the call in English, there is the option of muting your original audio. During the company presentation, all participants will be in listen-only mode. Next, we are going to start our question-and-answer session. To ask a question, please click on Q&A and type in your company's name and your name. Once your name is called, you are going to get a notification to unmute your mic.
We would like to clarify that forward-looking statements that may be made during this conference call with respect to LOG business prospect, forecast, operation, and financial goals of the company are all based on beliefs and assumptions of the executive board of the company, which may or may not occur. Investors should understand that political, macroeconomic, and operational factors may affect the future performance of the company and lead to results which may differ materially from those expressed in these forward-looking statements. To start, I would like to hand it over to Sérgio Fischer.
Good morning. Thank you for joining us for the earnings release calls of the third quarter 2026. Brazilian logistic market is in its best moment ever, supported by solid fundamentals, e-commerce, and looking for very modernized, well-located assets. It has increased the demand for these commercial sheds.
We have closed the third quarter with a record commercial performance. Gross absorption reached 495,000 sq m, largest volume ever at LOG. In the first nine months of year, accumulated absorption reached 789,000 sq m, reaching the best annual performance ever. The main highlight was pre-lease of 488,000 sq m of GLA distributed in different projects. Average ticket was BRL 28.63 per sq m, Yield on Cost of 13.8%, largest level ever. This performance reinforce our capacity to detect demand, select promising markets, and ensure pre-lease of our projects. In addition to providing better visibility of revenues, these pre-lease ensure return of projects. 100% of our pre-lease also include adjustments of the lease price. 100% of the contracts are correct by INCC, so it really provides visibility. 65.3 thousand sq m of GLA for Cariacica and the second phase of LOG Goiânia III. Both projects had 100% pre-lease.
year-to-date, we have delivered 212,000 sq m of GLA, all pre-lease, distributed in Espírito Santo, Goiás, Mato Grosso do Sul, Rio Grande do Sul, and São Paulo. The quality of operation can be observed by our indicators. Average ticket was BRL 26.36 per sq m, 17.5% growth over the same period last year. Stabilized vacancy was 1.14%, whereas Same Client Rent was 2.50% over inflation, 17th consecutive quarter of increase in rental or lease values. Average ticket, BRL 29.23 new contracts, showing 10% advantage over the average price of our portfolio. We keep on moving ahead with our LOG 2 Million. We have delivered 500,000 sq m of GLA. September was 915,000 sq m in construction up to present. We have acquired lands totaling 450,000 sq m of GLA, ensuring the necessary land bank for the execution of our project. Year- to- date, 450,000 sq m of GLA have been reached.
We have a national platform, robust pipeline, strong commercial capacity, new projects, the largest historical average ever. We are still focused on delivering high-quality assets strategically located with confirmed demand, consolidating the company's position, one of the main logistics platforms in Brazil. Thank you.
LOG has been placing its capital reallocation strategy. We have more capital focused on the development of new projects and also compensation of our shareholders. By speeding up monetization of mature assets and reducing our perform portfolio, we have achieved our goals. Third quarter, we have had BRL 319 million of CAPEX, 61% over the same period 2025. Year- to -date, nine months 2026, our CAPEX reached BRL 659.9 million, meaning 24.6% increase over the same period last year. We closed the quarter with 915,000 sq m under construction of GLA, showing the strong pace of our process. Recycling of assets is essential.
Selling mature assets provides we can realize our generated process and generate new cycles of development, maintaining our discipline over indebtedness. In this strategy, with an average GLA 28% below that of the previous year because of the volume of recycled assets, we had net profit of BRL 121.6 million in the quarter, 9.2% increase. Year- to- date, net profit reached BRL 314.3 million, or 10.4% increase. Cash generation also provides we can really share our dividends. We have approved BRL 86.6 million in dividends to be shared, or 75% of adjusted net profit of the period, BRL 0.99 per shares to be paid by November 30th. We have also been diversifying our model of business through our service platform. We have been expanding our work beyond development and lease of shed, changing the scale, relationship with customers, and generating new asset-light sources of revenue.
In the last months, we had 49% increase, or 70% of our SG&A just coming from these asset-light revenue. We have active capital management and expansion of revenues from services. We have been prioritizing opportunities of growth of NAV and cash distribution.
Thank you very much. The third quarter of 2026 showed solid financial results. Net revenue reached BRL 57.6 million, with 13.5% decrease over the same period last year. It is important to highlight that this result has been reached with an average GLA 28% below that of the previous year. It shows we have had strategic sales of assets in recent quarters. Year- to- date, our net revenue reached BRL 190 million, 3.4% increase despite average GLA 16% lower.
Our net revenue from services had a 49% increase, reaching BRL 9.1 million in the quarter and BRL 25 million year-to-date, 65% increase over the same period last year, showing the relevance of our recurrent revenues and asset-light revenue. Rental EBITDA reached BRL 48.6 million, 84.2% margin, very robust. Year-to-date, our rental EBITDA reached BRL 161.4 million. Development amounted to BRL 130.5 million. In other words, consolidated EBITDA reached BRL 179.1 million, and year-to-date, brl 443.9 million. Operational expenses reached BRL 15 million in the quarter, 3.2% decrease over the third quarter 2025. It shows our continuous discipline in cost control, even in a period where we have had more and more activity. The result is BRL 48.8 million negative, but it showed a 17.3% increase over the same period last year.
This is driven primarily by reduction in financial expenses and the lower cost of debt. Our consolidated effective cost closed the period in 1.05% over CDI, much better than what we had in the same period last year. We are still going towards reprofiling our debts with reduction of spread and extension of the process. Our face value was CDI plus 0.55. Effective cost showed a reduction as well, showing the results of our active management of our indebtedness levels. Net profit reached BRL 121.6 million in the quarter, 9.2% over the same period last year. Year-to-date, net profit reached BRL 314.3 million, 10.4% increase. The earnings per share was BRL 1.40, BRL 3.61 year-to-date, 9.2% and 10.4% respectively in terms of increase over the same period in 2025. We have a solid adjustment. Net debt was 1.5 x the EBITDA of the past 12 months.
Adjusted LTV based on receivables was 18.8%, maintaining a very conservative level. We closed the period with a robust position of BRL 866.5 million with cash equivalent, and securities. Therefore, we can move on with our pipeline of development. We will keep on working to have solid, efficient balance, combining the LOG 2 Million program, cost reduction, and compensation of our shareholders. With that, we close the presentation, and now we open for your questions. Thank you.
Thank you. We are going to start now our question- and- answer session. Let me remind you that to ask a question, you can take Q&A and type in your name and company's name. Once your name is called, you are going to get a notification. Unmute your mic and please ask your question. The first question, Herman Lee from Bradesco BBI.
Good morning. Thank you for taking my question.
I have two topics that I would like to address. First, about Yield on Cost, the average Yield on Cost of pre-lease reached 13.8%, and I would like to understand the breakdown. How much of that coming from higher lease cost or favorable construction cost, or was there some specific projects? Understand what is the Yield on Cost that you consider sustainable for 2027. My second question concern dividend and capital allocation. It was BRL 337 million of distribution in 2026, and how do you want to balance all of that, leverage, CAPEX, sharing of dividend, considering the uncertainty for the next year? Thank you.
This is Sérgio speaking. Thank you for the questions. I am going to answer the first, and then Rafael is going to answer the second one. 13.8% is a very strong figure, record, the average number of projects allocated in the quarter.
The historical record of pre-lease and gross absorption had been during the pandemic with half of the volume. So as you can see, the market is in a unique position. We have never seen it happening, and we are really benefiting from these good leases and good lease prices. The yield resulted from the commercial initiatives, the price increase that we have been able to obtain much more than improvement in construction cost. It is around INCC, and we believe that this is going to be the situation in the upcoming years. I do not expect anything to run over INCC, and we are very confident that the 13.8% yield will be sustained throughout 2027. Just to share more data with you, we are going to deliver by the end of next year 750,000 sq m of GLA.
8% of that is already pre-leased, and 80% of them are already hedged on the INCC, which means that we can really deliver the 13.8% in terms of performance, which is very relevant for the strategy of recycling of assets, which improves our gross margins even in a challenging macroeconomic scenario as we expect for next year. Rafael, please.
Good morning, Herman. Thank you for the question. Capital allocation. We are going to maintain the strategy that we have had so far and shared with you. The idea is to have dynamic capital allocation. Asset recycling is absolutely essential, and as we succeed in selling the assets, we reinvest in our own new projects and also share the dividends with shareholders or focused on leverage. We expect to have a leverage level of 1.5x maximum based on EBITDA, something around that.
Asset recycling is not necessarily precise in terms of periods, but we want to focus on this indebtedness level of 1.5x. Concerning liability management, we can manage that quite successfully because we have projects, funding of projects with new funding sources, and that will be portrayed in the probably data from last quarter and beginning of next year. New sources of capital to our company.
Great. Thank you.
The next question comes from Pedro Perone with Bank of America. Please unmute your mic.
Good morning. Thank you for taking my questions. The first question is kind of a macroeconomic question, trying to understand, considering all the positive highlights, that very strong pre-lease, can you share with us exactly at what point you had this pre-lease? How did you reach it?
In other words, trying to understand how the post-election status might change that good perspective that we had seen so far and have observed throughout previous periods. So understand when you had this pre-lease going on, and have you seen any changes in the weeks post-election? And what do you expect in terms of demand for lease and sales of assets? My second question concerns the payment of LOG Recife II. There was a BRL 15 million-BRL 16 million of impact on that price of the quotas to be paid. I want to know what's the outstanding balance and what we can expect on this line. These are my two points. Thank you.
Hello, Pedro. Thank you for the question. I'm going to answer the first one and then hand it over to Rafael. I think that the beauty of our business is our model.
The pre-lease that we showed you on the third quarter, there is a huge geographic diversity and a diversification of projects. There were 14 projects in four different regions of the country, and they were all throughout the quarter. There was no major concentration in a specific period. Objectively speaking, 80%-90% of the pre-lease were done through the e-commerce platform. E-commerce is requesting a lot. They really want quality of warehouse space. We tend to be one of the few companies available to support them. We haven't noticed any changes in terms of appetite post-election. Quite to the contrary, we've seen very good new initiatives. We've been able to increase prices. Nothing has changed. In terms of business model and our diversification, we are very confident that we can keep this pace and keep on working in pre-lease of these assets as we construct them.
Concerning sales of assets, we have some ongoing negotiations. We have a lot of high-quality real estate properties which attracts potential buyers. Well, after the elections, we have been observing some uncertainties, but I do not think that this is going to impact us into mid-term. We still have a very robust pipeline of sales for upcoming quarters. There are some ongoing transactions, and we expect to report them to you soon. Rafael, please.
Good morning, Pedro. Concerning the sales in Recife and the exposure to quotas, it was a conscious sales understanding about what our NAV was, and we had an exposure of BRL 75 million to the quotas of TRX fund. We had a market adjustment of price in the end of quarter, and now, once the quarter is over, there is a variation of the quotas.
It is a low amount considering all our availability of cash, and we are going to try to maximize the value concerning the sales. There is no lockup of those quotas anymore. So we are going to check the cap rate level provided by the quotas and the opportunities of sales, liquidity, and price of those quotas traded in the market. That is the plan.
Let me go back to your first question, Sérgio speaking. I would like to emphasize an important point. The new Yield on Cost reality, 15% over the history or the track record, makes us very comfortable to look for good transaction of recycling in the future. If the situation changes or if we are subject to a pressure of cap rate not observed so far, we still expect to operate within the NAV levels.
But if we have to have 50 basis points on the tables of cap rate, we can still deliver very relevant gross margin with the reality we currently have. A yield of 13.8% gives us some power to have relevant deliverables, so we are very comfortable with our strategy to move on like that.
That is very clear. Thank you very much for your answers.
Next question comes from André Mazini with Citi. Please unmute your mic .
Hello, Sérgio, Rafael. Thank you very much for the call and for taking my questions. I have a question about e-commerce, the industry that is increasing your demand, 8% absorption in the quarter as reported. How do you see the risk of concentration in this industry? What other industries have shown interest? Should we expect some decrease in the development of our economy during 2027?
So how do you expect the e-commerce to keep on performing? Will it gather more market than traditional retailers? Tell us what you anticipate.
Mazini, Sérgio speaking. Thank you for the questions. This industry has really surprised us. It had represented about 60% of our lease. Now it is close to 80%-90% of our lease. Despite the economic adjustments, decrease in GDP and consumption levels, we still expect the e-commerce to keep on growing. The penetration of the industry is small in Brazil, and it has been growing 10% year-over-year. The tax reform is helping us in this national demand, which is exactly where we are represented. Said that, we believe that this industry is here to stay for a long time. We are going to keep on having demands. This is what we have been anticipating from our customers.
And we will be able to maintain the same performance that we have been delivering. There are other industries. The beauty of our business is exactly that. Our project can meet demands of different industries, size of operations, with geographic diversification. We have access to a basis of customers, which is very broad, delivering 100% pre-leased assets, which is one thing that sets us apart. E-commerce has been representative. We are not concerned about concentration because of everything I have said. The fact that we have multi-tenant projects with different players leasing the space, and recycling is also a strategy to reduce concentration if we think this is necessary. Second quarter, we showed you the customer with greater concentration, but the numbers change in the third quarter, but the customers have changed as well because of recycling of assets.
And this is what we use this strategy for, to just get a reduction of concentration from some customers if required. We are comfortable. We see the sector with high demand, many things expanding. If you think about penetration of e-commerce in Brazil and other similar economies, you see there is still huge opportunity of growth. 40 million sq m of top-quality shed is not much. We have been showing this increase, this rental, leases, and good prices because of the really heated industry.
If I may build up on that, good morning, Mazini. This is Henrique speaking. In addition to everything that Sérgio has said, we have been observing that even larger retailers, which have been having some difficulties with high interest rate, and it impacts small retailers primarily. There is an increased risk aversion by banks, so small players do not have access to credit.
Therefore, the concentration of the business tends to be on e-commerce. There are some other industries that platform have been working on. Pharma, for example, pharmaceutical products. There has been a change of business going into e-commerce platforms. Therefore, it shows the consolidated increased demand that we have had in this area. This was my complementation. Thank you.
The next question comes from Igor Machado with GS. Please unmute your mic.
Good morning, Sérgio, Rafael. Thank you for taking my questions. I have two questions. First, to understand the company's plan in terms of current development in this scenario of uncertainty, what would make you, let's say, reduce the investments in development? Also understand the dynamics between regions. Any regions that you are planning to focus on, should there be the need to kind of take a step back? Second point, asset recycling.
We know that FIIs are the main buyers of the recent recycling strategies, but we would like to understand concerning the capture of these funds, FIIs, are you still understanding them as the main buyers of assets? Do you see any other potential buyers? Any information about that would be helpful.
Thank you, Igor. Sérgio speaking. Our development plan, Igor, is given. We are not going to change it because we have been seeing a very positive performance with a Yield on Cost, which is a record volume. So it is more challenging situation, true, but we have made a decision to maintain our plan as is because we have been delivering very good return on investments. In terms of regions, there is no prioritization because there is demand coming from all regions.
Some of them, such as the Northeast, which has higher demand, which will represent 40% of our pipeline in the midterm, still a lot to be done there. But in other regions of Brazil, the same situation can be observed. It is an industry with linear yield, no outliers. We are quite comfortable to maintain our plan. What we normally try to do in all our initiatives of asset recycling, as well as increasing services, for example, or approach foreign capital with large capital that we've been working on, maybe bring new partners for different projects to increase the returns on investments. These are all strategies, things that we consider internally, and we might end up following that in the near future. If it comes, we will share that with you. Concerning recycling, this is our FIIs, is our main buyer.
I don't think this is going to change, and we can see that. We can see conversations going on. We always try to combine sales with good levels, also to keep on providing services. But what really makes us very comfortable is the yield. If we provide a yield of nearly 14%, we are going to deliver margins even in complicated situations. The last transaction that we had was over 40% gross margin, and this is what we have in mind for the near future, still working with the infrastructure investment funds, FIIs.
Thank you, Sérgio. Great.
The next question comes from João Pedro Rodrigues with XP. Please unmute your mic.
Good morning. Thank you for the opportunity. I have one question.
I would like to understand, considering the current demand of the market, which is very favorable, and the vacancy rates, do you see the possibility of maintaining the same trajectory of having the lease amounts over inflation? Do you expect to gain even more leverage in the price of the rentals or the leases?
Thank you, João. We do believe that there is still room for improvement. We've been adjusting our prices on a monthly basis. It's a unique moment. It is a moment in which clients are willing to pay for good quality. There is a 10% gap between the market reality and our current prices. Looking ahead, it's been 17 consecutive quarters of increasing prices over inflation in our customers. I don't think it's going to change. I think we're going to maintain that same pace. Looking ahead, vacancy of 1%, vacancy rate of 1%.
It is a very positive moment. So, vacancy breaks 5% for LOG, and we really expect to benefit from that still for some time.
Thank you. Our next question comes from Elvis Credendio with Itaú BBA. Please unmute your mic.
Good morning, Sérgio, Saliba, and Ricky. I have two questions, just follow-up on questions asked before. First, yield on cost. You've said it's a combination of commercial initiatives and cost control, but how replicable is this yield on cost level feasible? If you can give us some more examples, that would be great. Do you think we can deal with new projects providing higher return rates? You've already said that you're going to maintain your growth plan, but it's important to understand your strategy. What would have to change for you to start thinking differently or revisiting your planning? Is it construction cost?
Is it reaching specific levels or cost of your own capital? What would be the turning point that would make you revisit your strategy?
Thank you, Elvis. Sérgio speaking. The reality we've seen is a Yield on Cost of 13.8% at this rate, and it was such a relevant volume, 500,000 sq m at an average of 13.8% Yield on Cost, amounting to 80% of deliverables in upcoming quarters. 2027 is guaranteed. You've talked about conditions. For two or three quarters since the beginning of the war, we've seen a potential increase in construction costs. We changed our commercial strategy, therefore, and tried to agree with our customers to have pre-lease rates based on INCC, which was the right move. The new working schedule, 6x1, might change.
We don't know exactly how much, but we are guaranteeing the deliveries of our Yield on Cost, because I don't think there is going to be a situation in which our cost of construction would go over INCC level. This is what we expect for 2027. New businesses that are being considered, that we are negotiating, are very close to these rates, which makes us very confident that we can deliver even more return by the end of 2028. About resilience, yes, cost of capital means a lot to us. We make lots of calculations, adjustments to our business model, focused on the asset-light and revenues from services, focusing on asset recycling, so that we could have good results, has proved to be effective because we've been delivering good results. To maintain this pipeline, we have to deal with all these alternatives.
We'll keep on maintaining the focus on that, and we do not anticipate any changes in the near future. We've made very robust sales, BRL 1.3 billion approximately, with higher interest rates. If we expect an interest rate at the same level as we currently have, I don't think this is going to change. If I may build up on that, Rafael Saliba speaking here, concerning sustainability of this Yield on Cost level, what we've been observing is that the absorption level is higher than the offer of assets, and it has got to do with capital cost. To some extent, it really maximizes our competitive advantages. We have access to capital sources, and we have a cost level below that of the average market.
Therefore, we can even deal with a higher cost of capital because we have access to capital and generating assets at lower cost, which impacts our Yield on Cost. We believe in the sustainability of Yield on Cost because if it's not at this level, there's not going to be any supply. There's going to be an imbalance between supply and demand. Therefore, we need higher levels where the interest rate is high as we have. Therefore, we'll probably keep on increasing our lease prices.
That's very clear. Thank you all very much.
The next question comes from Marcelo Motta with J.P. Morgan. Marcelo, please unmute your mic
Good morning. Two quick questions. First, can you tell us about receivables, BRL 384 million of sales of assets? What is your receivable plan? We can see long- term, but it also might include some other lines.
Please tell us about your schedule of receivables, six, 12, 18 months. Maybe Sérgio can tell us more about external fundings. You've talked about your plan. This is one of the options on the table. How would you see the hedge of that? Is there still opportunity in Brazil to have a dollar-based contract or currency, foreign exchange-based contracts? How could you operate with that without impacting that and really maintaining the asset and liability balance?
I'm going to start answering your question. What I meant by foreign capital is trying to find partners for this project. This is what I mean, always thinking about return on investment, IRR. We are open to that possibility. Looking for potential funds or partners for projects to leverage our return on investment. It's not an external kind of line of business.
Hi, Motta.
Concerning receivables, we've been reducing the volume of receivables, and it has been happening since December last year. We've been trying to have active liquidity of these assets, so we've been anticipating them as we had accredited rates. Our 12-month pipeline has a higher concentration of maturity of the BRL 384 million, and we also see some opportunities of anticipation of receivables to increase the cash generation of the company.
That's great. Thank you.
Our Q&A session is finished now. Would like to hand it back to Sérgio for his closing remarks.
Thank you all very much for your participation. I would like to emphasize what we've been observing throughout our operations, very strong drive. We believe it's here to stay. We have a pipeline of projects which is amazing. We have the land bank of our LOG 2 Million.
We've been observed very fast approvals of the use of land bank. Things that have even surprised us, things that can be approved over three or four months, which is wonderful. With a fast pipeline with very relevant yield, cost of construction is offset with the INCC of pre-lease based, very strong pre-lease with good Yield on Cost. Very confident in our strategy of selling assets. We've been observing what the market wants. We've been talking to the market, and we are going to announce shortly new transactions maintaining our strategy of asset recycling to fund our operations and to share dividends with shareholders. I would like to thank you all for your participation and see you next quarter. The earnings release calls of LOG is closed now. If you have any questions, please submit the questions to the investor relations team through the email ri@logcp.com.br.
Thank you very much for your participation. Have a great day.