Good day, everyone, and welcome to Mallplaza third quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star one one again. Please be advised that today's conference is being recorded. Now, I will pass the call over to Derek Tang. Please go ahead.
Greetings and welcome to Mallplaza earnings conference call. Thank you for joining us this morning. I'm here today with Fernando de Peña, our CEO and the only Latin American member of the Board of Trustees of the ICSC. Also with us is the investor relations team represented by Rodrigo Cejal and Matías Gueda. We are pleased to introduce the company's earnings results for the third quarter of 2024. First, we'll begin with a brief overview of the company's quarterly results. Second, we'll highlight some strategic remarks regarding the quarter. As usual, we will end with a Q&A session. The third quarter of 2024 was marked by exceptional results, which was demonstrated by an increase in the number of visitors, tenants, sales, and occupancy of our 26 urban centers, allowing us to reach the highest occupancy rate of the company in the last five years.
All of this contributed to the delivery of continued growth in revenues, EBITDA and FFO compared to the third quarter of 2023, in addition to an increase in the EBITDA margin compared to the first half of this year. As seen in page three of the presentation, footfall to urban centers reached 74 million visitors during the third quarter, an increase of 5.6% compared to the third quarter of 2023, posting an increase in the three countries in which we operate, especially in Colombia with a growth of 17.7% year over year. In terms of tenant sales, we reached CLP 1.2 billion during the quarter, an increase of 10.7% year over year, with growth in the three countries in which we operate, in line with the improved conditions for consumption in the region. This growth was mainly driven by the good performance of retail, convenience, retail payment, and out-of-plaza.
In this line, same-store sales posted an increase of 3.9% during the third quarter, which is an increase of 6.8 percentage points compared to the third quarter of 2023, in addition to a 9.9% occupancy cost for the quarter, in line with the structural levels of the company, which demonstrates the good health and performance of our business partners. Demand for spaces in our urban centers continued in great shape, reaching during the third quarter 132 new openings at a regional level and 463 openings during 2024, allowing us to reach an occupancy rate of 96.4% during the quarter, a 1.1 percentage point increase compared to 2023, and the highest level in five years. In this sense, it is important to highlight the 94.7% occupancy rate reached in the urban centers in Peru, with an increase of 2.5 percentage points, and in Chile reaching a 96.8% occupancy rate.
This increase in Peru was mainly explained by a higher occupancy rate in Mallplaza Arequipa, and especially in Mallplaza Comas, an urban center that continues to ramp up since its opening in 2020. In Chile, higher occupancy in Mallplaza Alameda, Los Domínicos, and Tobalaba, among others. Turning to page four, revenues during the quarter reached CLP 119.5 billion, increasing 8.3% year over year, mainly explained by higher lease revenues due to a higher occupancy rate, higher sales, readjustment of lease contracts, and higher parking revenues. It's worth mentioning that these results included a non-recurring effect due to the provision of a fine for the delay in store opening in Colombia during the third quarter of 2023. Without this factor, revenue growth would be in the range of 14% compared to the previous year. Same-store rent for the quarter increased 5.6% year over year.
Cost of sales during the third quarter reached CLP 13.2 billion, a 3.7% decrease year over year, mainly due to the recovery of real estate taxes, partially offset by higher expenses associated with the inauguration of Mallplaza Cali in Colombia and higher parking expenses. In terms of administrative expenses, it increased 37.5% during the third quarter of 2024, reaching CLP 13 billion. This increase was mainly explained by higher expense personnel, higher expense associated with provision for bad debt, legal expenses, the inauguration of Mallplaza Cali, and higher marketing expenses. All in all, EBITDA increased 7% year over year during the third quarter of 2024, totaling CLP 93.8 billion, with an increase of 7% year over year, mainly due to higher lease revenues due to a higher occupancy rate, higher sales, readjustment of lease contracts, and higher parking revenues.
Without the non-recurring accountable effect in the third quarter of 2023, which was mentioned before, growth would be closer to 14% year over year. In terms of EBITDA margin, we reached a 78.5% margin during this quarter, a 2.4 percentage point increase compared to the first part of the year, in line with the efficiency efforts carried out by the company to reach structural levels closer to 80%, which were the pre-pandemic levels.
Turning to page five, net income reached CLP 60 billion during the third quarter, increasing 1.2% year over year, mainly explained by higher lease revenues due to lease meters, higher sales, rate readjustment, and indexation of lease contracts to the inflation of each country, added to higher parking revenues, higher financial income due to higher available cash and bond issuance during April, and capital increase, which was completed in August, and also due to lower income tax expenses due to lower effective tax rate and the lower base.
This was offset by higher expense in readjustment units due to the variation of the UF of 0.9% in the third quarter of 2024 versus 0.3% in the third quarter of 2023, higher administrative expenses due to higher employee benefits, provision for bad debt, higher legal expenses, and higher expense and exchange differences due to higher cash available in foreign currency, with unfavorable effect in the exchange variation at the end of the third quarter of 2024. In terms of adjusted FFO, it reached CLP 80 billion during the quarter, increasing 14.5% year over year. This was mainly explained by a better performance of the operation and higher adjustment units during the third quarter of 2024 because of higher variation of the UF during the period.
In terms of margin, we reached an adjusted FFO margin of 65.1% during the quarter, an increase of 3.5 percentage points year over year. Lastly, and as a subsequent event, I would like to highlight that during October, Desarrollo Esperu SPA, subsidiary of Plaza, launched a tender offer to acquire Falabella Perú S.A.A., owner of 100% of Open Plaza Perú and 66.6% of Mallplaza Perú. This operation will allow us to consolidate a portfolio of 15 apps in Peru of high quality and become the second operator of shopping centers in that country in terms of GLA, in addition to reinforcing our presence as the main platform for urban centers in the Andes region. After concluding the legal period of the tender offer in Peru by the company Falabella Perú S.A.A., we will be able to consolidate the Peruvian operation.
Our capital structure and balance sheet remained solid, finishing the third quarter with a net financial debt to EBITDA ratio of 2.2x , and seeking to end 2024 with a structural level of leverage close to 3.5x after consolidating the purchase of Falabella Perú S.A.A. This financial position leaves us in a favorable condition to continue with our growth agenda and take advantage of the best opportunities that the market offers us without compromising the stability of the company. Now, I turn the table to Fernando, who will share some strategic remarks for the quarter.
Thank you, Derek. The solid operational and financial results mentioned are just a consequence of the success of our business strategy and the value of our varied and customer-focused proposal. With a premium portfolio of 26 urban centers that offer multiple visiting purposes and a variety of brands, services, and categories, our strategy will continue to drive our growth in the Andes region, a market with more than 100 million inhabitants. In this sense, growth is a fundamental part of Mallplaza's DNA, and we are focused on expanding both through organic projects and through acquisitions, with the aim to consolidate our position as the main asset platform in the Andes region. In terms of M&A, as Derek mentioned, we are on the final stage of our acquisition of Falabella Perú S.A.A., owner of 100% of the Open Plaza Perú and 66.6% of Mallplaza Perú.
This transaction will consolidate us as the second largest shopping center operator in Peru in terms of GLA square meters, reaching 619,000 square meters and expanding our presence in nine cities. With this operation, Mallplaza will reach 2.3 million square meters of GLA in the Andes region. This operation comes in hand with an organic growth plan of 100,000 square meters in the next five years via browsing projects, expanding our commercial, social, and entertainment proposal. This plan will focus on our Tier A urban center, Mallplaza Trujillo, and on assets with the potential to become Tier A in the future, such as Mallplaza Comas, Open Plaza Ganos, and Open Plaza Piura. This transformation will be a repeated story for the company, as during 2014, we successfully transformed Mallplaza de Quipa.
This asset, acquired as an Open Plaza Power Center, with 12,000 sq m of GLA, became, after a deep renovation and expansion, an urban center of 42,000 sq m, with a commercial and experiential offer and positioning as a leader in Arequipa. Chile, in the same line, will be positively impacted by an organic growth plan consisting of 125,000 sq m of GLA of projects in the next five years, a plan that will be mainly focused on our Tier A assets in order to continue boosting their leadership position in their respective markets. The first stage of the organic growth plan is taking place during the last part of this year, as we are expecting during the next few weeks the opening of Lifestyle Area in Mallplaza de Fusio, our fractional urban center.
This 21,000 sq m project will transform Mallplaza de Fusio into the largest urban center in terms of GLA, consolidating its leadership position in the respective market. The area, which has 100% of its spaces already leased, will include flagship formats such as the largest seller store in the Southern Core, with 4,300 sq m, H&M, Alfal, distributor of Apple products with the format of the largest store in Chile, GAP, DBS, and Libby, among other brands. In terms of convenience, we will have a Santi Saver supermarket, the second in this urban center, a casería store, and a service area that will take advantage of the high floor generated by two nearby metro stations.
Our large-scale platform, anchored by our 10 Tier A assets, malls with a dominant position in big-sized markets, with a high potential of growth, combined with our experience-focused business model, allows us to be the partners of choice of high-value global brands, resulting in a highly diversified tenant mix. In the same sense, during the third quarter, we continue to consolidate our strategic alliance with H&M, with two new openings in Mallplaza Sur and Mallplaza Iquique, reaching a total of 18 stores of this brand in our urban centers at a regional level. In Peru, we opened Loyoso in Mallplaza Villa Vista, with a highly diversified offer of household products. In addition, we opened American Eagle Outfitters in Mallplaza Trujillo and Mallplaza Arequipa, as well as Bath & Body Works and Cafarena stores in Mallplaza Trujillo.
Lastly, in Colombia, we highlight the opening of Fanjango in Mallplaza Enkilues, a 5,500 sq m inflatable park, the largest of this type in the world, boosting the entertainment proposal of this urban center. Now, I will pass to Derek for some final remarks.
Thank you, Fernando. Just to conclude, I want to highlight some of our omnichannel initiatives in order to improve our consumers' experience and attract a digital flow to our urban centers. In terms of our click-and-collect operations, during the third quarter, we established new alliances with relevant last-mile players, including Mercado Libre in Chile and Culinadora in Colombia, in addition to expanding pickup points at Blue Express in Chile. Also, we added new brands such as Picoa, Prüne, Gota, and Audio Música, reaching more than 90 active brands in total that enjoy this service. In addition, we continue to enhance the digital parking payment functionality with more than 650,000 customers per month enjoying the benefits of a free-flow experience in Mallplaza parking, reaching a penetration of 25% of users in Chile who are using this solution.
Finally, in terms of ESG, Mallplaza obtained the first place in the shopping centers category in the ranking of most innovative companies in Chile 2024. This ranking, carried out annually, is focused on evaluation of policies, innovation processes, as well as the impact generated by the initiatives promoted by these companies. Lastly, we're happy to announce that for the second consecutive year, Mallplaza obtained a double-A rating in MSCI's ESG rating, an evaluation that measures a company's management of financially relevant ESG risks and opportunities. With this, we conclude general remarks of the quarter, and we're now ready for questions, and we'll start the Q&A session. Thank you.
Thank you. As a reminder to our audience, to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. To remove yourself, press star one one again. Please stand by while we compile the Q&A roster. One moment for our first question that comes from the line of Jorel Guilloty with Goldman Sachs. Please proceed. Jorel, can you hear us?
Yes, I can hear you. Thanks for taking my question. I have two—the first one is we noticed that the same-store sales are still at healthy levels. I mean, we saw 5.6% year on year for the overall company, but it did mark a downshift from what we saw in 2Q, which is about 7%. If I look at it on a country basis, Peru was also somewhat similar, where we saw same-store sales at 2%, but it was 5.5% in 2024. I just wanted to get a sense of what this downshift in same-store sales might be. Is it temporary? Could it continue? What could it be due to?
I'm sorry if you mentioned this earlier, but I just wanted to get a sense of the process, if you could provide some color on the process of acquiring and any future thoughts on the integration of Falabella Perú's mall portfolio. Thank you.
Thank you, Jorel. Thank you for your question. First, starting off with same-store rents in terms of sort of the more recent trend that we've been observing. Also, to your point, it has also to do due to inflation, lower levels of inflation that we've been experiencing. However, going forward, and specifically on the case of Peru that you well mentioned, Peru is the country where we have currently the lowest occupancy costs among the three countries, actually a decrease by 60 basis points in this quarter to 9%. Also, it's the country where we have the lowest occupancy rate, but that increased the most by 2.5 percentage points. I'd say that as we highlighted in the earnings release, we are now at the highest occupancy rate level in the last five years at 96.4% at a regional level.
Also with occupancy costs, also on a regional level, decreasing 0.2 percentage points to 9.9%. The combination of these two factors contributes towards our ability to be able to continue to drive rents and be able to increase our same store rents going forward. I mean, this has been a relevant year in terms of new leases in our malls, and we expect this to continue going forward. Now, with regards to your second question as for the process and the acquisition in Peru, as mentioned, our understanding is that the board of the local regulators have met yesterday and with a favorable view towards the process, and we are most likely to resume shortly with the process of the OPA and expect to have this all concluded by the end of this year.
I mean, we are in the process of really assessing and evaluating what are the opportunities towards this acquisition, what are the advantages and improvements that can be made to the assets, and also the future expansion plan. As you well know, Mallplaza is very much focused on our future expansion plan and adding more GLA to our portfolio. In this sense, we have in Peru a total expansion plan of 100,000 sq m of GLA in up to five years, and in Chile, 125,000 sq m in up to five years. This goes well in line, and we are in the process of working towards delivering these expansions.
Thank you.
Thank you. As a reminder, that is star one one if you do have a question. Our next question is from Javier Toledo with Itaú Asset Management. Please proceed. Javier? All right. Please re-queue if you are—can you hear us now?
Yeah, can you hear me?
Oh, yes, I can hear you. Thank you. Please continue with your question.
Thank you. Hi, everyone, and thank you for taking my question and congrats on the results. I have two, actually. The first one is, can you please give us some more color on the one-off in Colombia during the first quarter of 2023? Also, regarding leverage, because this quarter, we are seeing a very low leverage given the high amount of tax that we have retained. After the transaction, we should see leverage levels returning to what we were seeing before, maybe the first half of this year. Thank you.
Yeah, thank you for your question. Starting off first with Colombia, as we noted in the earnings release in the third quarter of 2023, so it is the last year, there was effective a fine to a tenant in Colombia, which contributed towards the results of the third quarter. That was a one-off effect. Therefore, if we were to exclude this effect in the basic comparison, we would see our revenue, overall revenue in Colombia, increasing by 49%, and the overall EBITDA for Colombia increasing 67%. Now, this is in local currency, and it is a significant increase year over year. We do, as you well know, detail in our earnings release on a sort of mall by mall sort of what have been the improvements and the variations in the malls there. For example, in Mallplaza Buena Vista, there was an increase of 16.5%.
In Mallplaza Maristad, it's 16.4%, and in Mallplaza Cartagena 6.6%. Also in Colombia, we recently opened Mallplaza Cali, which, of course, is adding to the GLA and to your overall revenue and EBITDA for that market. Our plan, mentioning Colombia, is also to continue to seek growth opportunities in that market. It's a strategic market for Mallplaza, so we'll be seeking be it expansion or future M&A opportunities in Colombia. Now, with regards to your second question, in terms of leverage, our leverage right now is at about 2.2x . This has to do with the fact that we also did the equity raise recently. This is prior to the acquisition of the assets in Peru of Falabella Perú.
With this acquisition, we expect leverage to get back to around 3.5x that EBITDA, in line with the levels that historically Mallplaza has operated.
Got it. Thank you very much.
Thank you so much. As a reminder to our audience, that is s tar one one if you do have a question. That is star one one, ladies and gentlemen, if you do have a question. This concludes our Q&A session for today. I will turn it back to Derek for closing comments.
All right, everyone. Thank you for connecting in this earnings call for Mallplaza. As usual, we are available for any follow-up questions that you might have or if there is ever any interest to visiting our assets as well. Thank you and have a great day.
Thank you all for participating in today's program. You may now disconnect.