Good day, and thank you for standing by. Welcome to the Mall Plaza First Quarter 2023 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 ask a question during the session, you will need to press star one, one on your telephone. You will then hear a message advising your hand is raised. To withdraw the question, please press star one, one again. Be advised that today's conference is being recorded. In today's program, we will have Derek Tang, economist from Michigan University and who concluded the program for leadership development at Harvard University. Derek assumed as Mall Plaza's CFO during April 2023. With more than 15- years of professional experience in real estate, Derek developed his career in corporate finance, investor relations, M&A, and capital markets.
Prior to joining Mall Plaza, Derek served as investment manager of real estate at JPJ and as a corporate finance procurement, M&A, and investor relations director at BR Mall. With that, it is my pleasure to welcome and to hand it over to Mr. Derek Tang. The floor is yours.
Greetings and welcome to Mall Plaza 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 Ramón López-Alba, Sebastián Maquiavelo, and Matías Guerra. We're pleased to introduce the company's earnings results for the first quarter of 2023. First, we will initiate the call with a brief overview of the company's results. Second, we will highlight strategic remarks regarding the quarter. As usual, at the end, we will open up for a Q&A session. We started the year with solid operational results anchored by the performance of our premium portfolio of 25 urban centers, an elevated visitor footfall, and resilient tenant sales despite a lesser dynamism in consumption, which led to high levels of EBITDA and FFO.
Operational indicators demonstrated a good performance in line with a renewed and attractive commercial proposition, which is boosted by the continued interest from business partners to be part of our commercial offer. This refreshed proposal is validated with a record 2022 in terms of openings with more than 600 new stores, including solid retail brands and an innovative entertainment and F&B offering, reinforcing our value proposal to our consumer. All of the mentioned above, in addition to our omnichannel initiatives, which generates additional footfall to our urban centers, allowed us to reach visitors' footfall of 69 million during the first quarter, with growing 11% compared to the first quarter of 2022, with growth in three countries. In terms of occupancy rate, we ended the first quarter with 95%, in line with historical levels of the company.
Sales of our tenants during the quarter grew 2% regionally, reaching CLP 1 billion and maintaining a healthy occupancy cost of close to historical levels. This demonstrates the resilience of our portfolio compared, for example, to the broader market in Chile, which showed a decrease in general retail sales of 16%, while Mall Plaza's country sales remained flat. Quarterly revenues increased by 11% year over year for the quarter, boosted by a reinforced and refreshed commercial proposal, an increment of lease meters, which increased our occupancy levels from 93% to 95%, renewals of lease contracts with a positive lease spread, and higher inflation regionally. All in all, revenues reached CLP 99.9 billion during the quarter, with FinStar Rent showing nominal growth of 15% for the quarter and 30% for the last 12 months.
Costs increased by 12% year- over- year, mainly because of higher expenses and contributions associated with the 2022 revaluation, cost of energy, and UF variation. Administrative expenses decreased by 1% year- over- year due to lower bad debt provisions, but offset by higher remunerations explained mainly by one-off severance payments in line with an optimization plan aiming for a simpler and more flexible structure, which will help us to continue to achieve more efficiencies in the upcoming quarters. EBITDA increased by 10% compared to the first quarter of 2022, mainly due to positive renewal spreads, higher income for better occupancy levels, and higher inflation. The EBITDA margin was 75%, close to our historical levels as a result of efficiencies achieved through innovation and incorporation of new technologies, processes, and infrastructure.
Net income increased 48% year- over- year for the quarter, and our adjusted FFO increased 16% compared to the first quarter of 2022, with an FFO margin for the quarter of 62%, in line with normal levels of operation. Now, I'm pleased to turn the table to Fernando, who will share important strategic remarks.
Thank you, Derek. At Mall Plaza, we continue to roll out our strategy of transforming and consolidation of our urban centers into true city centers, reinforcing our commercial offering for consumers with better retail partners and strongly pushing to include innovative entertainment and F&B proposals, with the goal of promoting our urban centers as places of preferred destination, socialization, and amusement. The good operational and financial results that Derek mentioned are just a consequence of the successful consolidation of this strategy. In that line, it is important to mention the consolidation of our assets into a high-quality portfolio in the region, as reflected by our top 10 leading urban centers, which are Tier A assets and represent approximately 64% of the company's EBITDA. These assets generate a higher return on investment and present a strong competitive position, a high flow of visit growth, and a high productivity of leasable area.
Examples of our Tier A assets are Mall Plaza Vespucio in Chile and Mall Plaza NQS in Colombia, which have had significant transformation in their commercial offering with solid results. The first one, one of our flagship urban centers with 167,000 sq m of GLA, has gone through a complete renewal, adding desired retail brands, innovative and unique entertainment proposals, high-value restaurant and mixed-use areas, which has allowed Vespucio to reach the highest footfall and being able to double its sales in entertainment and gastronomy. We will continue the transformation of this urban center during this year with more than 120 new F&B proposals, including the opening of El Mercado, the opening of the renovated and integrated Alto Plaza, and we will begin the construction of the first multi-family residential project.
In the case of NQS, we have developed a complete transformation since it was acquired in 2020, becoming a leading shopping center in Bogotá. This transformation has resulted, for example, in footfall increasing 3x in less than two years, exceeding 1 million visits per month. Sales of our tenants have also increased with significant results, such as the improved gastronomy proposal with an 81% sales growth during 2022, doubling the sales of the main brands in this category. In addition, improvements in the sports segment, where same-store sales in 2022 were up 28% compared to 2021, supported by a new brand of this segment. All of these allowed NQS to triple its tenant average sales per square meter during this last quarter.
New proposals will continue during 2023, with the opening of the first IKEA in Colombia, the expansion of the whole central store sector, in addition to the arrival of high-value offerings such as H&M and Arturo Calle. These are just a few examples of our ambitious growth and developing strategy for 2023, which is anchored by reinforcing with a great piece of opening and the addition of strong partnerships with the high-value brands. In that line, we continue the trend of 2022, seeing increasing interest from different brands to be part of our solid commercial offer. If during 2022 we had a record year in terms of new opening with 600 new stores, this year we have the ambitious plan of opening an additional 600 new stores. We started this first quarter in good shape, more than doubling the total number of stores opened during the same period in 2022.
In second place, we continue to work together with our business partners to adjust the size of some department stores. At the end of the first quarter, we have already reduced nearly 8,000 sq m of this category in the last three years, which represents 20% of the total sq m that department stores represent. These spaces that were occupied mainly by La Polar and Johnson in Chile, Paris in Peru, and La 14 in Colombia were reconverted and leased to attractive and important brands such as H&M, IKEA, retailers such as Casa Ideas and Tricot, in addition to new convenience daily- traffic and entertainment proposals. Now, I turn back to Derek for his final remarks.
Thank you, Fernando. I would like to share some key highlights of the Nuevos Desarrollos transaction. During the first quarter, Mall Plaza acquired 22.5% of Nuevos Desarrollos, increasing the ownership to a 100% stake in the company. This transaction goes in line with the company's strategy to lead assets in their respective markets that present growth potential. The acquired portfolio represents an attractive opportunity as it consists of assets that are still maturing. This provides us with the ability to strengthen the commercial offering of each urban center in the future and improve average rents. The transaction, which represented approximately 6% of the company's GLA, was concluded in a timely manner given the overall context of high rates in the market. In terms of returns, Nuevos Desarrollos currently possesses a combined land bank of approximately $100 million.
Taking this into account and the forward NOI of Nuevos Desarrollos assets, the transaction's cap rate was 7.9%. This concludes our presentation, and we're now ready for questions, and we'll start the Q&A session. Thank you.
Thank you. As a reminder, to ask a question, simply press star one, one on your telephone and wait for your name to be announced. To withdraw the question, simply press star one, one again. Please stand by while we compile the Q&A roster. That is star 11 to get in the queue. One moment for our first question, please. It comes from the line of Marcelo Motta with J.P. Morgan. Please proceed.
Hi, everyone. Thank you for taking my question. Welcome, Derek. Hi, Fernando. Basically, two quick questions. I mean, the first one is if the company could provide more details about the multi-family project. I mean, if I'm not mistaken, Arthur and Dominique mentioned during the presentation that there will be a multi-family in Vespucio, Mall Plaza Vespucio. Just wondering what type of details can you share with us? The second question is regarding the outlook for the rest of the year. I mean, we also have been seeing that Mall Plaza tenancy in Chile has been outperforming the overall retail in Chile, just wondering when we look at the evolution throughout the year, if you do expect this trend to continue. Thank you very much.
Hi, Motta. Thank you for your questions. Starting with the first one with regards to multi-family, and not only multi-family, but I guess mixed use in general. As you well know, Mall Plaza has a strong land bank and opportunities within certainly our malls, which can be used for a variety of uses, multi-family, of course, being one of them. There are other potential uses as well. We are constantly looking for opportunities to that extent, more likely teaming up with potential partners that can have the expertise and can go by and do the development. With regards to your second question in terms of the outlook for the rest of the year, as we showed on the earnings release, our sales, for example, in Chile, which is the largest market for Mall Plaza, has outpaced overall retail sales.
This does show the dominance of our portfolio, the quality of our tenant base, and it is something that we expected to continue to show this resiliency within our portfolio. We have a strong pipeline this year of new renewals and also new tenants that will come to our portfolio that will reinforce even further the quality of our portfolio. With this, we should expect to continue to post interesting retail sales as compared to the overall market in terms of retail sales.
That's very clear, Derek. Thank you very much.
Thank you. One moment for our next question. As a reminder, if you do have a question, simply press star one, one. Next question comes from Jorel Guilloty with Goldman Sachs. Please proceed.
Good morning. Thank you for taking my question and welcome, Derek. I wanted to talk a little bit about occupancy costs because there seems to be an interesting dynamic. On one hand, I mean, we are seeing sales decline in Chile and revenue going up. On the other hand, you, over the past, I guess, two, three years, have reduced exposure to department stores. I believe it was like 28% to 25%. There has been a fair degree of satirization. I was wondering, when we look at this occupancy cost that is 150 basis points up year- on- year, Q1 2023, how should we be thinking about it? Is this high almost all due to the fact that sales have been declining? Is it part perhaps that you have more satellites and these stores have higher occupancy costs?
Is this where occupancy costs should be or maybe even higher? It is a bit of a theoretical question, but I guess the point is, should we think about this higher occupancy cost as solely the result of seeing declining sales? Or is there a significant portion here where it is due to saturation and it can even increase more as you reduce department store exposure? That is my question. Thank you.
Great, Jorel. Thank you for your question. With regards to occupancy costs, as you well pointed out, we have been shifting our tenant mix. And with this, I mean, this brings in a new composition of stores which do carry out a different composition of occupancy costs in general. There is somewhat of a mismatch between same-store rent and same-store sales. Of course, as we have seen rents uptaking, this has brought by an increase in occupancy costs. Now, we're always looking for greater efficiencies as well within our malls to be able to normalize this level of occupancy cost. With this, in addition to eventual takeoff on sales, we should see a more comfortable level in terms of occupancy costs and with it and not putting any pressure on our tenant base.
Got it. Thank you.
Thank you. With that, ladies and gentlemen, we conclude our Q&A session and program for today. Thank you for participating, and you may now disconnect.