Good day, everyone, and thank you for standing by. Welcome to Mallp laza Second 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, and you will 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, it's my pleasure to turn the call to Derek Tang. Please go ahead.
Greetings and welcome to Mallp laza 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 Cristián Somarriva, our Peruvian division manager, and the investor relations team represented by Rodrigo Sirhan and Matías Ueda. We're pleased to introduce the company's earnings results for the second 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, and as usual, we'll end with a Q&A session.
The second quarter of 2024 was marked by solid operational results with increases in the number of visitors, tenant sales, and occupancy of our 26 urban centers, which contributed to continued growth in revenues, EBITDA, and FFO. As seen in page three of the presentation, footfall to our urban centers reached 73 million visitors during the second quarter, an increase of 7% compared to the second quarter of 2023, posting an increase in the three countries in which we operate. This increase was mainly explained by a solid commercial proposal boosted by the opening of Mallp laza Cali in Colombia during the first quarter of this year, the opening of two IKEA stores in Mallp laza NQS and Mallp laza Cali, and eight H&M stores at a regional level.
In terms of tenant sales, we reached CLP 1.3 trillion during the quarter, an increase of 8.8% year-over-year, in line with the improved conditions for consumption in the region. This growth was mainly driven by the good performance of retail, food and beverage, entertainment, and convenience, which was offset by a lower growth in the Auto plaza format. Same-store sales posted an increase of 3.2% during the second quarter. Occupancy rate reached 95.5% during the second quarter, an increase of one percentage point compared to the second quarter of 2023. In this sense, it is important to highlight the 94.2% occupancy reached in the urban centers in Peru, with an increase of 2.3 percentage points.
This increase was mainly explained by a higher occupancy rate in Mallp laza Trujillo and especially in Mallp laza Comas, an urban center that continues to ramp up since its opening in 2020. Turning to page four, revenues during the quarter reached CLP 120.4 billion, increasing 17% year-over-year, mainly explained by higher lease revenues due to a higher occupancy rate, readjustment of lease contracts, and higher parking revenues. Same-store rent for the quarter increased 7.1% year-over-year.
Cost of sales during the second quarter reached CLP 15.5 billion, a 15.9% increase year-over-year, mainly due to the inauguration of Mallp laza Cali in Colombia, the currency exchange effect, and higher security and parking management expenses. In terms of administrative expenses, it increased 20.6% during the second quarter of 2024, reaching CLP 13.7 billion.
This increase was mainly explained by higher expense in personnel and the currency exchange effect in Colombia. All in all, EBITDA increased 16.3% year-over-year during the second quarter of 2024, totaling CLP 91.7 billion, reaching an EBITDA margin of 76.1%, in line with the efficiency showed by the company in the recent periods. Turning to page five, net income reached CLP 121 billion during the second quarter, decreasing 27.6% year-over-year, mainly explained by a lower variation in the fair value of investment properties, which is explained by a lower compression in the discount rate in the second quarter of 2024 versus second quarter of 2022, and lower inflation compared to the second quarter of 2023. Higher tax expenses, higher loss in participation in associates using the equity method, and lower financial income due to lower rates.
This was offset by sale of asset held for sale and higher revenues due to additional square meters leased, readjustment of lease contracts, and higher parking revenues. In terms of adjusted FFO, it reached CLP 71 billion during the second quarter, increasing 9.7% year-over-year, representing an adjusted FFO margin of 57.4% during the quarter. Lastly, I would like to highlight the progress we have made in terms of financing the acquisition that we are carrying out in Peru for the purchase of Falabella Perú . As we announced in previous quarters, this acquisition will be financed with a mix of debt, equity, and the company's available cash.
In terms of debt, Plaza issued bonds in the local market for UF 3 million in two series of UF 1.5 million each, with a 4.5 and a 9-year term, respectively, with an oversubscription of 3.1x , which reflects the interest of the market in this issuance. In addition, as a subsequent event, during the month of August, we successfully completed a capital raise with the issuance of 230 million shares, highlighting the great interest on the Subasta de Libro de Órdenes, which had an oversubscription of 3.5x , in addition to being 40% allocated to international investors. Now, I turn the table to Fernando, who will share some strategic remarks from the quarter.
Thank you, Derek. Mallp laza continues to consolidate its leadership in this region with a 2 million sq m platform of 26 urban centers, with a dominant position in the respective market in strategic locations, serving markets with high growth potential of more than 100 million inhabitants. Our large-scale platform, answered by our 10 tier A assets, malls with a dominant position in big-size markets with a high potential of growth, combined with our experienced, focused business model, allows us to be the partners of choice of high-value global brands, resulting in a high-diversified tenant mix. H&M and IKEA are only some examples of this, with the first one with 17 stores in operation out of the 19 stores in the expected expansion plan.
We expect to continue to offer this powerful platform of assets to new-to-market brands that have consolidated operations in developed markets and are interested in entering the underserved market. We will continue to focus on the opening of new tenants, combined with good performance of existing tenants, in addition to reconversion of different spaces with new and innovative proposals. In this sense, during this quarter, we concluded the reconversion of Paris stores in Mallp laza Los Dominicos.
That was closed last year with the entrance of an H&M, a Chinese convenience store, with a diversified offer of products and a new gastronomic market with seven different proposals, allowing this urban center to increase its annual lease revenue by 18% and its lease revenue per square meter by 9%, in addition to reducing 500 square meters of vacancy.
In terms of new openings, during the second quarter, we opened 68 new stores in Chile, highlighting the entrance of a new 2,300 sq m H&M store in Mallp laza Mirador, new sports and urban retail proposals with the opening of The Line, Levi's, and Skechers in Mallp laza Los Dominicos, Puma and Levi's in Mallplaza Egaña, and Skechers in Mallp laza La Serena, and an opening of a new gym in Mallp laza Vespucio with the entrance of Smart Fit. In Colombia, we highlight the opening for Adidas, Sunglass Hut, New Era, and Blush-Bar in Mallp laza Barranquilla, and Reebok and Blush-Bar in Mallp laza NQS.
This, in addition to the new opening of Mallp laza Cali, our new Greenfield project, and our fifth urban center in Colombia, with the opening of a second IKEA store in Colombia with 15,000 sq m and a complete portfolio of Inditex brands with Zara, Bershka, Pull & Bear, Stradivarius, and American Eagle, Seven Seven , Tommy Hilfiger, and Pandora, among others. We expect Mallp laza Cali to continue its ramp-up phase during the quarters.
Growth continues to be an important pillar in the company's strategy, both organic with emphasis on our tier A malls and inorganic via M&A. It is important to mention that specifically in our tier A assets, organic growth will involve less CapEx since these are assets already in operation with construction potential, which offers low risk, allowing higher returns.
In Chile, we continue with our brownfield development plan consisting of more than 135,000 sq m of GLA, considering growth plan in Mallp laza Vespucio, Mallp laza Trébol, Mallp laza Oeste, Mallp laza Norte, Mallp laza Antofagasta, Mallp laza La Serena, Mallp laza Iquique, and Mallp laza Biobío. In this line, we continue with the development of the lifestyle project in Mallp laza Vespucio, expecting to open in the end of 2024.
This new proposal of mixed fashion and convenience offering that is already 100% leased aims to capture the large number of visitors that would be generated by the two nearby metro stations, consolidating its leadership position in its market, turning Vespucio the biggest mall in Chile with 190,000 sq m of GLA. Now, I leave you with Cristián, who will share strategic remarks regarding our Peruvian operation.
Thank you, Fernando. The progress in the acquisition of Falabella Perú by Plaza continues taking shape, an operation that will not only allow us to consolidate a portfolio of 15 high-quality assets in Peru, but which will also allow us to become the second largest operator of shopping centers in the country in terms of square meter of GLA, in addition to reinforce a position of the main platform of commercial real estate in the Andes region. In the event that this transaction materializes, we allow Plaza to increase its geographic diversification in terms of EBITDA and GLA, with a distribution of gross lease of square meters of 62% in Chile, 27% in Peru, and 11% in Colombia, and a participation in EBITDA by countries of approximately 75% in Chile, 18% in Peru, and 7% in Colombia.
Organic growth comes hand in hand with the operation, with a plan that considers adding 100,000 sq m of GLA in a period of about five years. It strengthens the commercial offer and incorporates new proposals to current and future assets in the country. In terms of the timing of the acquisition and as next step, we hope to launch a tender offer in Peru for Falabella Perú in the coming months, expecting to consolidate the operation during the last quarter of this year.
In this sense, as part of its master plan, Mallp laza Trujillo, our Tier A mall in Peru, is preparing the opening of a new retail corridor that will host various brands, including Invicta, Camila Viali, Crepier, Kitchen Center, Caffarena, Mifarma Beauty, and Starbucks. This expansion will not only amplify the commercial offer of this urban center, but will reinforce the position of Mallp laza Trujillo as a relevant urban center in the northern region. Now, I will pass it to Derek for some final remarks.
Thank you, Cristián. Just to conclude, I want to highlight some of our omnichannel initiatives that continue to take shape, improving our consumers' experience and attracting digital flow to our urban centers. Our click-and-collect operations continue delivering important results, reaching a 170% increase in terms of visitors year-over-year.
In addition, we continue adding new brands to this service, reaching 24 new brands during 2024, among which are Tricot, Blue Express, and Mercado Libre, which have enabled our click-and-collect as pickup collection points for marketplace customers, drop-off deliveries for sellers, and return points, looking to benefit not only our visitors but also our business partners. Finally, we have implemented the parking functionality in alliance with the Copec app. With this, more than 500,000 clients per month can enjoy the benefits of a free-flow experience in the Mallp laza parking lots. With this, I conclude the general remarks of the quarter, and we are now ready for questions and will start the Q&A session.
Thank you. As a reminder to our tele-audience, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To withdraw the question, press star 11 again. One moment for our first question. It comes from the line of Jorel Guilloty with Goldman Sachs. Please proceed.
Good morning, everyone. I have two questions. The first one is on Chile. If I look at the year-on-year monthly sales per square meter for the Chile portfolio, you average 4.1%. It came in at 4.1%, but there is wide variability between the malls. Some grew as much as 10%, and there were quite a few that saw negative sales growth or were flattish.
I wanted to understand a bit more about these sales trends in particular because a competitor of yours had mentioned that they saw an impact of tourism impacting sales for the portfolio, and I was just also wondering if you have seen that within your portfolio as well. The second question is on Peru. We saw that sales per square meter and revenues per square meter were actually negative for the portfolio, and I was just wondering about that trend and if you see a reversal of that trend in the near future. Thank you.
Hi, Jorel. I'll go with the first question, and then I kind of lost you on the second question. I'll ask you to repeat the question on Peru afterwards. Starting off with the first one, just commenting a bit on the sales in Chile and the overall environment that we're seeing in our Chilean malls. I think it's worthwhile to highlight the pickup in terms of visitor flow that we've seen, with 4.7% growth in Chile specifically, whereas tenant sales grew by 7%, a big increase in terms of same-store sales. Now, to your point, and then also occupancy reaching 95.7%, which was a 0.7 percentage point increase sort of year- over- year.
Now, to your point, when talking about the productivity, this also has to do with the fact that we've been changing significantly the mix, and there's some stores that are still on the opening phase during that, so that eventually brings by a temporary impact, but we do expect that these overall changes will contribute to the productivity of the malls, not only in Chile but what we've been doing in all three countries.
I think it's also worthwhile to highlight that from an occupancy, overall occupancy standpoint, considering three countries, we ended the quarter at 95.5%, which is the highest level in a couple of quarters. Specifically, in the second quarter, we signed 134 contracts at the regional level, which was an increase of 28% compared to last year. As you may recall, in the prior years, we were signing about 600 contracts per year.
In the first half, we're up to 331 contracts. I think this is some level of improvement there. I think also comes in line with the fact that we have a portfolio consistent of 10 tier A assets with an interesting value proposition for retailers in general. Now, to your second question, sorry, could you please repeat what was the question on Peru?
Yeah, sure. If I look at the portfolio sales per square meter and revenue per square meter growth year on year, local currency was down 7% for sales, down 4% for revenues. I wanted to get a better sense of the driver for those year-on-year declines and if you expect, if and when you expect a reversal of these trends in the near future.
Great. Thank you. Regarding Peru, I think also interesting here to highlight that when you look between the three countries, it is the country that has increased the most, the occupancy rate. End of the quarter, 94.2%. That was a 235 basis points increase year-over-year, even though still lower than that of the other countries. In terms of occupancy costs, at 8.4%, it is also the lowest between the three countries in which we operate.
We do expect there to be continued room to increase occupancy and also improve leasing conditions. There are some specific factors to Peru that we also highlighted in the earnings release, which is mainly in Mallp laza Bellavista, which has been undergoing road detours for the construction of a subway station. This was also mentioned in the previous quarter. Now, even though this brings by a temporary impact, negative impact, on the long term, we think that this will be positive to the extent that the mall will be better connected to the city, and this will generate greater traffic to the mall.
As a reminder, that is star one one if you do have a question. One moment for our next question. It comes from Felipe Valleb ona with Santander. Please proceed.
Hi, everyone. Can you hear me well?
Yes, we can hear you. Thank you.
Great. Thanks for your call. I only have one question. During the quarter, revenue per square meter rose 11.5% year-over-year, above same-store rent of about 7%. What would you say are the main reasons behind this unique revenue increase? Was it due to easy comps because of NQS GLA addition in the second quarter of last year, or was it more driven by ancillary revenue growth, such as parking revenue, or I do not know, maybe there were other reasons? Thanks.
Great, Felipe. Thank you for your question. I think this comes also somewhat in line with the last answer from the previous question, which is, I mean, we've been putting a lot of effort into transforming our tenant mix and really seeking a high-quality tenant mix and drive this additional revenue and productivity to our malls. Now, when you compare between the countries, specifically Chile, had a significant increase in terms of revenue per square meter with an increase of 10.5%. This has a lot to do with this change in the tenant mix and also looking for other revenue lines that can contribute to the overall productivity of the mall.
Understood. That's very helpful. Thank you, Derek.
Thank you. As I see no further questions in the queue, I will conclude today's Q&A and conference for today. Thank you all who participated. You may now disconnect.