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Edited Transcript of PARAUCO.SN earnings conference call or presentation 8-Nov-19 2:00pm GMT

Q3 2019 Parque Arauco SA Earnings Call

Santiago Nov 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Parque Arauco SA earnings conference call or presentation Friday, November 8, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Claudio Humberto Chamorro Carrizo

Parque Arauco S.A. - Corporate Manager of Administration & Finance

* Francisco Moyano

Parque Arauco S.A. - Corporate Finance Manager

* Tori Creighton

Parque Arauco S.A. - Head of IR

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Conference Call Participants

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* Emilio Acevedo Caro

Santander Investment Securities Inc., Research Division - Equity Research Analyst

* Jorel Guilloty

Morgan Stanley, Research Division - Equity Analyst

* Marcelo Garaldi Motta

JP Morgan Chase & Co, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning, and welcome to the Parque Arauco Third Quarter Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Tori Creighton, Head of Investor Relations. Please go ahead.

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Tori Creighton, Parque Arauco S.A. - Head of IR [2]

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Good morning, everyone, and thank you for taking the time to connect to the Parque Arauco Third Quarter 2019 Conference Call. Presenting on our call today will be Claudio Chamorro, CFO; and Francisco Moyano, Corporate Finance Manager.

To start off today's conversation, I'm going to pass the call over to Claudio.

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Claudio Humberto Chamorro Carrizo, Parque Arauco S.A. - Corporate Manager of Administration & Finance [3]

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Thank you, Tori, and good morning, everyone. Instead of beginning with the analysis of our third quarter results, I would first like to take a moment to address the events that have been occurring in the last few weeks in Chile.

During this time, there have been ongoing marches and protests in Santiago and other cities throughout Chile, which have significantly affected our country and its people.

Our main priority has been and continues to be the safety and security of our people, those that work in our shopping centers on behalf of our tenant and also on behalf of us; and the people that visit our malls and the local community that we serve. For that reason, all of our shopping centers remained close on Sunday, October 20 and Monday, October 21.

Since then, every day, we have analyzed and [contact] surrounding each of our malls to make decision regarding their operation and operating hours. As we have currently opened the malls, we have given full flexibility to our tenant to modify their operating in hours as they see fit to rest assured the safety of their team. Additionally, we will not be charging our tenant fixed rent for the days that the malls were closed.

In Chile, we have 30 malls, outlets and [a suite] center, including the [reserving] operation of part of Puerto Nuevo Antofagasta, and today, all are currently operational. During the days that our malls were closed, which ranged from 2 to 10 days, several were affected to varying degrees of damage to the property, vandalism and store looting. Those that were most affected were Arauco Quilicura and Arauco Coronel. Arauco Coronel was broken into and looted more than once during the day -- the 10 days it was closed. And it was Arauco Coronel, which was closed for 6 days.

We know that in some cases, like Arauco El Bosque, Arauco Estacion, Arauco Coronel, our malls are where people from their neighborhood go to purchase their groceries, among other items, or to spend some time with friends and families in a safe area. And we have been working hard to make this possible again.

Regarding our other malls, Parque Arauco Kennedy was closed for 4 days, and it has not suffered damage. Arauco (inaudible) was closed for 6 days, and it also has not suffered damage. Given that this is an ongoing situation, we are unable to estimate the economic impact on -- that this project for possible regulatory changes have on our future results, though it's important to mention that we have insurance policies for all of our malls that will help to offset these economic effects.

Now I want to get back to the third quarter results. This was a quarter in which we saw growth in our portfolio due to the incorporation of new assets in Chile and better occupancy levels, sales and revenues, increases coming from our operation, mainly from operation into Peru and Colombia.

As a result, revenues grew 7.9% and EBITDA by 10% -- 10.1%, actually, compared to the third quarter of 2018. In line with this, our consolidated EBITDA margin improved 145 basis points, reaching 73.8%. The adjusted FFO attributable to the shareholders amounted to CLP 26,832 million, an improvement of 20.5% year-on-year. This is in line with the revenue and EBITDA growth as well as an increase in our controlling stake in MegaPlaza mall (inaudible). It's important to note that as of July, we have 100% control of all MegaPlaza operations when we received that we won for the (inaudible) the remaining shares from the [Agosto] conversion.

This quarter, we incorporated 6,500 square meter of commercial GLA related to Puerto Nuevo Antofagasta. This is a mix use project in Chile and we have 4 towers with a total of 9,500 square meters of commercial space at its based that is being acquired by Parque Arauco upon completion of construction of each tower.

In the last 12 months, we have also added Arauco Express El Peñón, Arauco Express Coquimbo, Arauco El Bosque to the overall portfolio, boosting our consolidated GLA for -- to 1,069,000 square meter. This is a 3.7% increase from the last year.

And finally, on behalf of our entire team, I'm pleased to announce that for this fourth consecutive year, Parque Arauco was included in the Dow Jones Sustainability Index for Chile, NILA and emerging markets. We continue to be the only Chilean company in our industry included in the Dow Jones Sustainability Index for emerging markets, which recognize those companies with the best sustainability practices from Asia -- Africa, Asia and Latin America.

This concludes the overview portion of our presentation. So I will pass the call over to Francisco, who will review our result in more detail.

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Francisco Moyano, Parque Arauco S.A. - Corporate Finance Manager [4]

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Thank you, Claudio. So following with a review of our earnings report, now passing to Page 5. I would like to highlight first, the EBITDA margin. The EBITDA margin is increasing 145 points this quarter although this increase is more related with the effect of IFRS 16 in this time.

Also, I would like to highlight the GLA in our company. As of today, we have more than 1 million square meters in consolidated GLA, but also in owned GLA. With the incorporation of 100% of MegaPlaza assets, our owned GLA also grew from 900 million to above 1 million square meters. So with that, also, I would like to highlight the tenant sales. Tenant sales in this quarter increased 5.9%. It's increasing in all 3 markets, but more in Colombia, with an increase of 15.5%.

Passing to Page 6, regarding same store sales and same store rent. Starting with Chile, we are still seeing the same trend that we saw in the previous quarters. The environment is still challenging. And from the report that we have been reading from economists, as of the third quarter of this year, we haven't seen much change. There's a lack of growth in wages and consumer confidence, and that probably is resulting in a lack of consumption levels.

Although we have same-store sales is negative this quarter, we have a positive same store rent in Chile of 3.1%. That is due mainly for -- to some contract adjustments in this -- that happened in this country. And with that, we are experiencing the same trend that we have seen in the previous quarter.

Regarding Peru. In Peru, we are -- we see flat trends around inflation. In this quarter, we have same store and same store rent positive, around 2% to 3%. The political turmoil that is happening in that country, in some ways, have not affected the regular businesses. So today, we are seeing this market as flat around inflation, as I said, and today, we are focusing more our effort on the integration of MegaPlaza assets with the rest of the assets that we have in that country.

We have -- in Colombia, we are seeing very positive figures. Same store sales of 9.5% and same store rent, 5.8%. Those figures are pushed forward by La Colina mainly, where sales grew 20% and revenues, 10%. And also, I'd like to highlight the outlets that we have in Sopó that continue improving -- is continually improving in its process of maturation.

Passing to Page 7, we have the occupancy cost. We can see that in the occupancy cost in Chile, it's flat, is at a level of 11.4%. So the figures that we saw in the previous page of negative same store sales have not affected this ratio. So we are confident that our operation is sound and in reasonable levels.

In Peru, we have a lower occupancy cost of 7.9% this quarter. This -- as a reminder, this is due to a higher participation of anchor stores in this country when you compare Peru with Chile or Colombia.

And in Colombia, with the increase in sales that are coming mainly from La Colina, we have a decrease in occupancy cost to 11.9%.

Passing to Page 8, regarding the revenues. We see an increase of 7.9% this quarter. This positive effect in revenues is due, in part, of the appreciation of some -- of currencies, we have the Colombian peso depreciating 5.6%, but the Peruvian peso -- the Peruvian sol, appreciated 5%.

And we also added a new GLA. We have the incorporation of 2 of 3 centers in Chile, Arauco Express El Peñón and Arauco Express Coquimbo, and we also added Arauco El Bosque. And some part of the project that we are working on and Puerto Nuevo Antofagasta. Besides that, the Colombia, as I said, grew 10% in revenues. So that is a very important boost in our revenues.

Regarding the operational result. Our diversification, first, is very stable when comparing 2019 with the 2018. In Chile, this is still representing 60% -- around 60% of our EBITDA, but [Peru] and Colombia is also very stable. And even when all countries' operation are increasing and growing, the diversification is still stable.

The EBITDA grew 10% when comparing 2019 with 2018. And this increase in EBITDA is mainly because of inflation and currency appreciation, about -- around 50% of this difference comes from that reason. Other 45% of that increase is due to new assets and IFRS 16. And only 5% of this increase is due to higher occupancies or increases in efficiencies. Although in Colombia, Colombia is increasing their participation in the EBITDA. The EBITDA margin, that is increasing in all 3 countries. As I said, it's mainly due to the IFRS effects on our financial statements.

Regarding the nonoperational result, we see our financial income increasing from CLP 1.7 billion to CLP 3.2 billion. This is due to higher levels of cash. When you compare 2018 with 2019, the rate of return of our investments are mainly flat and has not changed much from year-over-year. So this increase in international income, it's only because of more cash that is coming from the sales plus the interest that we did at the beginning of this year.

The financial expenses is increasing 32%, in part, because we have more debt in -- when comparing the 2 years, although this quarter also have a bond prepayment cost that we did in Peru with a bond of MegaPlaza that affected our financial statement in CLP 1.5 billion.

The share profit of associated accounted is increasing because of Marina -- of the Marina operation, that has also incurred a -- having the cooperation of the expansion in Mall Marina in Viña del Mar.

The income from indexed assets and liability is flat in this quarter. That figure comes mainly because of the inflation in Chile, and that is the adjustment of our debt that we have in U.S. in our financial statements.

With all, our net profit is increasing 3.4%, reaching CLP 16.4 billion.

In the next page, our investment from the equity method investments mainly are in Inmobiliaria Viña del Mar which is Marina, and also Desarrollos Panamericana. Desarrollos Panamericana is a company that is grouping all the projects and lands that we have in MegaPlaza. Those are projects that we still have in participation with the Grupo (inaudible) with a 50%/50% participation in each parque.

When reviewing the financial statements of Inmobiliaria Viña del Mar, we see the EBITDA growing 42%, as I said, mainly because of the incorporation of the expansion that we had in Mall Marina in Viña del Mar of 13,000 square meters. The debt of Inmobiliaria Viña del Mar is also equivalent to CLP 150 billion. That debt increase was -- it is due to the purchase of Mall del Centro Concepción which we financed mainly with this debt.

On the next page, we have the consolidated income statement. As I've said, the revenues are increasing 7.9%. And with that, the gross profit is 10%. We see the effects of IFRS 16. When comparing the 2 periods, the cost of sales are decreasing a little bit, 1.5%, although in this year, we don't have the cost of -- the rental cost of some of our properties. That cost is passed to the administrative expenses that incorporates also the depreciation that is coming from the right-of-use of those pieces of land.

In all losses by function, we have our cost of the projects that we are performing currently. I also have the -- some costs are coming from the integration process that we are doing with MegaPlaza in Peru.

If you see the lower part of the table, we have our EBITDA, that is growing 10% in 2019 compared with 2018. That 10%, as I said, is coming from currency appreciations and also IFRS 16 and some -- and the incorporation of the new malls.

In that table, you can also review the amortization and depreciation that is growing from CLP 700 million to CLP 1.2 billion. That increase is where you can find the effect of IFRS 16 and also some new software amortization in this period.

In the next page, we have the NOI and adjusted FFO. And FFO, here, I would like to highlight the adjusted FFO that is growing 13.5%, beginning from an EBITDA that is growing 10%. We can see that the financial income increased, is compensated by the financial expenses that are increasing, mainly due to this prepayment cost that we had in Peru, but also have a higher income coming from Marina in the associated accounted adjusted FFO. And with that, we have the adjusted FFO growing 13.5%, although when you review the controlling part of that figure, we see that the adjusted FFO for the equity holders of the company is growing 20%.

As Claudio mentioned, this increase, it's also due because we are -- we here have more participation on the MegaPlaza and the MegaPlaza assets. All the compensation compensated a little bit from the sales of minority interest that will be at the beginning of this year.

Now passing to Page 17, I'd like to highlight that our net debt-to-EBITDA is currently 5.11x, decreasing from 5.19x in 2018. And our leverage ratio, net financial debt-to-equity is 0.71% -- it's 0.71x, much lower from our covenant limit that is 1.5%.

And with that, I would like to pass the call to Tori, that is going to review the results by asset level.

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Tori Creighton, Parque Arauco S.A. - Head of IR [5]

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Thank you, Francisco. Moving on to Page 19, we show an overview of our portfolio. I'd like to highlight a few of the changes this quarter, some of which have been mentioned already by Francisco and Claudio.

In our Chilean portfolio, we have added Puerto Nuevo Antofagasta. Again, as Claudio mentioned, this is a mixed-use 4-tower development. Two of the towers have been completed, and we are now operating commercial space at the base of those 2 and the part of the boulevard that connects between all 4 towers, which amounts to a total of 6,500 square meters. We incorporated this towards the end of the quarter in September and should start to see increases from revenue and sales in the following quarters, although it was too early for this third quarter.

Another incorporation in our third quarter was the -- our participation in Grupo Marina, which acquired Mall del Centro Concepción, a 36,500 square meter mall in the south of Chile. As a result of these 2 new incorporations, in addition to Arauco El Bosque, Arauco Express Coquimbo and Arauco Express El Peñón in the last 12 months, we see our owned GLA increased 12%.

Moving on to Page 20 and 21, where we have an overview of our quarterly results on a mall-by-mall level, I'd like to highlight a few of the more relevant cases. In Chile, our Parque Arauco Kennedy, the results are stable with flat tenant sales of negative 0.1%, but positively, revenues increased 4.8%, boosted, in part, by the additional revenues from the food hall concept, Bazar Gourmet, that we opened late last year. Occupancy levels remain very high at 99%.

At Arauco Chillan, revenues increased 5%, driven by an increase in fixed rent and NOI by 10%, resulting from the increase in revenues and compensated by a decrease in costs associated with IFRS 16.

The Arauco Express Strip Centers continue to be a small but growing part of our business with the incorporation of 2 strip centers at Arauco Express El Peñón and Arauco Express Coquimbo in the last year. We have increases in GLA, tenant sales, revenues and NOI.

And finally, in Chile, in our outlets, across the board, all 4 of outlets improved their occupancy levels bringing the group to a solid 97% and as such, sales increased by 5%, revenues by 3.7% and annualized by 14% partially compensated by a decrease in costs at 2 of the properties -- 2 of the outlets that we have in Chile.

Moving on to Peru. Here we see at MegaPlaza Norte, one of our most important assets in Peru, the GLA increases as we incorporate an entertainment concept, called [Coniactiv], as well as a Smart Fit gym which both helped to increase sales this quarter. Revenues decreased due to the onetime temporary kid's -- children's concept that was active in the third quarter of 2018, but did not occur again in 2019. So that's why we see a bit of the decrease in revenues this year.

At Larcomar, occupancy levels increased as we incorporate a Smart Fit gym to the mall, and we see tenant sales and revenues increased at stable level.

Finally, at El Quinde Cajamarca, we have widespread growth in sales and revenues, in line with increases in occupancy levels and positive results in many of the specialized smaller retail stores that we have at El Quinde.

Finally, to end in Colombia, which has been and will continue to be one of the strong drivers of growth for our operations, we have Parque La Colina -- across the board, we had improvements in Colombia, but overall, Parque La Colina again, noted double-digit growth in terms of tenant sales and recorded solid revenues and NOI growth of 9.7% and 6.6%, respectively.

One of the recent incorporations this quarter was in August, when Parque La Colina welcomed the first Huawei Experience store in Colombia. There were more than 1,000 people in -- waiting in line that morning to enter the store, which was also raffling off some of the Huawei products.

If we move on to some of the relevant updates for this quarter. Passing through, we have on Page 24, our future developments. Then we maintained the same future developments in the pipeline that we have in the past quarters.

We have Parque Alegra and La Molina in terms of new construction. And again, just to mention here, we have Puerto Nuevo Antofagasta, which continues to be in the pipeline just because we are still waiting for other parts of that project to be finished and completed in its production in the next coming years.

Skipping ahead to Page 28, where we have the quarterly updates across Chile, Peru and Colombia. In terms of relevant news, this happened -- the first piece of news that I would like to mention happened right after the quarter end, actually, at the beginning of October, but we would like to highlight the partnership that we signed between Parque Arauco Colombia and Rappi Colombia, which is piloting first at Parque La Colina and then hopefully, in other malls across the country.

We have designated there a part of our parking area at La Colina for Rappi, who has a mini store front, with parking -- designated parking for the Rappitenderos and will use it as a logistical hub for their operation with a full-time Rappi employee who will act as an intermediary to pick up orders from the mall via serviced hallways and deliver them to the Rappitenderos, thus improving overall logistics for Rappi and the mall experience for visitors who are no longer faced with hoards of Rappitenderos in the mall.

This is the first alliance of its kind in Colombia, and we see it as a perfect place for Parque Arauco to embrace the changes happening in the retail industry and promote additional sales for our tenant base. We will be starting with just food and beverage offerings, which represent about 15% to 20% of the mall, but hope to incorporate other tenants and goods like clothing or home appliances, home goods, for example, in the very near future.

And on Page 29, we designated the entire page to giving more detail on our sustainability agenda and our recognition via the Dow Jones Sustainability Index for the fourth consecutive year. This was a very exciting announcement for us as we saw our total score increase by 11 points out of 100 from last year, which places us in the 85th percentile of the real estate industry globally. And of course, we were included in the Chile index, MILA and emerging markets. But above all, I want to highlight our participation in the emerging markets index which is quite competitive, 45 companies from our industry were invited to participate, of which only 7 were included. And Parque Arauco is the only Chilean company out of those 7.

So we will continue to work -- we will continue to incorporate sustainability practices in terms of environmental, social and corporate governance. That is a key part of our business model.

And with that, I wrap up the presentation part of our call today. I would like to open up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question will come from [Alan Macias] with Bank of America.

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Unidentified Analyst, [2]

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Just 1 quick question on your insurance coverage. Does this cover the repair of damaged property but also lost rent also?

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Claudio Humberto Chamorro Carrizo, Parque Arauco S.A. - Corporate Manager of Administration & Finance [3]

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Thanks, [Alan], for your questions. We have full coverage insurance policies for all of our assets that cover damage to the properties along with a loss for income. Also the policies have some deductibles that have be considered. And as I mentioned at the beginning, we kind of made the impact still.

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Operator [4]

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The next question will come from Emilio Acevedo with Santander.

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Emilio Acevedo Caro, Santander Investment Securities Inc., Research Division - Equity Research Analyst [5]

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I have 2 questions. The first one is considering the closing of the malls, I would like to know or have more color on how your revenue structure works. I mean, do you maintain charging the fixed content? Well, what I mean with this is, in this case, a mall should not be affected considerably in term of revenue. This is my first question.

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Claudio Humberto Chamorro Carrizo, Parque Arauco S.A. - Corporate Manager of Administration & Finance [6]

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As I mentioned in the introduction, we are not charging the fixed rent for the tenant during the day that the months were closed. That, we already communicate that even for -- to our tenants. So this is this is already done.

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Emilio Acevedo Caro, Santander Investment Securities Inc., Research Division - Equity Research Analyst [7]

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Okay. So in this case, the mall will be affected in term of revenues?

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Claudio Humberto Chamorro Carrizo, Parque Arauco S.A. - Corporate Manager of Administration & Finance [8]

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Yes.

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Tori Creighton, Parque Arauco S.A. - Head of IR [9]

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It will depend -- honestly, it will depend on each mall, just because we have a wide variety, as Claudio mentioned before, in which we had malls that were closed for only 2 days and others that were closed for longer, so up to 10 days. So it will all depend on a mall-by-mall basis.

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Emilio Acevedo Caro, Santander Investment Securities Inc., Research Division - Equity Research Analyst [10]

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Perfect. The second question is regarding the last transactions on real estate. The last transaction has been between 5 and 5.25 kind of cap rate levels. What is your vision on cap rate levels for the assets? I mean this new structure in Chile, do you think there are pressure for cap rates going upwards due to the new scenario observed in Chile? What is your vision on that front?

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Claudio Humberto Chamorro Carrizo, Parque Arauco S.A. - Corporate Manager of Administration & Finance [11]

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Okay, Emilio, thank you for your question. I think it's hard to answer that question. We -- now I'm going to repeat what I read from other companies reporting; that they are expecting some deceleration of the economy and in that scenario, on one side, I'm not seeing -- or we are not seeing an increase in interest rate, which could affect the valuation of the shopping center, which is good in regarding to this situation. But on the other side, the question is what happened with the flows in [reconciliating] this scenario. So it's hard to try to know in terms of figures which side of the [pictures] will affect more this business. So for me, I don't have an accurate answer.

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Emilio Acevedo Caro, Santander Investment Securities Inc., Research Division - Equity Research Analyst [12]

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Got it. So you see a pressure on the market valuation of the Chilean assets, of the general, not only for Parque Arauco, I mean, in general, as a whole?

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Claudio Humberto Chamorro Carrizo, Parque Arauco S.A. - Corporate Manager of Administration & Finance [13]

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No. Yes. Yes. But still, I think it's my analysis is the same as for real estate assets in retail or in family. I think there are 2 big forces on valuation, and I don't know which one is the -- which has the larger impact to understand what's going to happen with the valuation.

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Operator [14]

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Our next question will be from Jorel Guilloty with Morgan Stanley.

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Jorel Guilloty, Morgan Stanley, Research Division - Equity Analyst [15]

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I have 2 questions. So the first one is, I was wondering if you can provide some color on the return to foot traffic on your malls. Have you seen a difference in like foot traffic in terms of location or type of mall and how that's been going?

And then my second question was on the Rappi deal. So I wanted to better understand how much of this deal, understanding it's a pilot, but could you comment on how information is being shared between you and Rappi around clients?

And also, if you can comment on some of the economics of the deal. So I mean, do you essentially share take rates? Or do you just take a bit -- you just take your regular occupancy cost, considering that, that sale is done in the mall. So those are my 2 questions.

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Claudio Humberto Chamorro Carrizo, Parque Arauco S.A. - Corporate Manager of Administration & Finance [16]

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Okay, Jorel. Thank you for your questions. Regarding your first question about the foot traffic, it's still -- we -- in this day, we are gathering the information what really happens in October. So I still have some information to get to try to answer clearly your questions.

And as I mentioned, it's on one side, we have been trying to keep operational our assets, but also, it's been in an scenario with a high flexibility with our tenants. So in some points, maybe there were people on the shopping center, but some tenant decided to close the door because they believed that their people, the people that work with them, required some extra effort to get home.

Again, I think there are a lack of information for now. So hopefully, we will be having a clearer answer for that in the next weeks. And regarding Rappi, maybe you?

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Tori Creighton, Parque Arauco S.A. - Head of IR [17]

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And then regarding Rappi, I'll take that question. So as far as any data-sharing goals between us and Rappi, we do have a partial agreement with them for some, but it's quite limited. So obviously, Rappi has an enormous amount of data that they're able to collect from their users. And obviously, we're not entitled to the full extent of that. But yes, we have an agreement with them for some overall more general trend, more high-level information and data sharing with them.

And then I just wanted to ask if you would mind repeating a bit of your second point of occupancy cost?

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Jorel Guilloty, Morgan Stanley, Research Division - Equity Analyst [18]

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Yes. So basically, I was asking about the economics of the deal. So if there's like any revenue sharing between you and Rappi, or if the only thing you are getting is charging regular (inaudible). So if somebody makes more on -- like a restaurant sells more, you're charging a percentage of that sale. So if your economics is limited to that?

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Tori Creighton, Parque Arauco S.A. - Head of IR [19]

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Okay. So I mean, the main driver here for us really is just being able to participate in the business; to realize that this is a change to the retail industry and to figure out how we can take advantage of it as small as that part may be.

So partially, we're using this as a way to boost sales for our tenants, because all of the sales or orders that are processed via Rappi at Parque La Colina or in the eventuality that we unroll this in other malls, it would be whenever that is purchased and ordered to our mall, that is sales that's registered so it might have an impact on incremental sales revenue.

And then, yes, we also do have an agreement with Rappi to -- for a portion of what they charge the stores or the tenants to purchase at Rappi. So Rappi, they take a percentage of the order, and we will take a small percentage of what Rappi takes.

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Operator [20]

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(Operator Instructions) The next question comes from Marcelo Motta with JP Morgan.

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Marcelo Garaldi Motta, JP Morgan Chase & Co, Research Division - Research Analyst [21]

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I joined a little bit later in the call, so if you guys have already answered that, please feel free to follow-up off-line. But just regarding the fact that the malls were closed, and you mentioned in one of the answers that you are not charging rent, the fixed rent when the -- the days the malls were closed. And it looks like the insurance company covers you damage and loss of rental on the properties. So the question is, will the insurance cover the action? And will you guys ask for this -- for the insurance to cover those days that the malls were closed? Or they only pay if the mall has some type of damage, and then it cannot be opened because of [an instance of] damage? And like, are you guys paying all the insurance, cleaning and those expenses the day malls were closed? Meaning that probably your margins in the fourth quarter will have some impact related to that? So just trying to understand those moving parts on your P&L regarding the sites that the malls were closed a couple of days.

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Claudio Humberto Chamorro Carrizo, Parque Arauco S.A. - Corporate Manager of Administration & Finance [22]

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Marcelo, thank you for your questions. And I understand that this is -- you are trying to discuss an important thing about when the policies are active or when the insurance company is going to pay or not. I think there is a discussion today because when you keep the mall closed is a situation where you are acting as -- in an insurance company's language, as a good father. So if you have to do this in order to -- you cannot take risk larger than the usual operation.

So in that regard, right now, probably, in some cases, the discussion is you keep the mall closed because you were a good father. And so in that regard, there is no damage. So probably the insurance is not going to work. But at the same time -- and this is more regarding to the day that the mall was closed and regarding to the replacement of the income of those days. And this is why -- but at the same time, as I mentioned during the call, there is a situation by situation, mall for mall. There is no, I think, a general answer here. The situation in each mall is different.

It's different in the day that the tenant did close, it's different because the labor pool is different because the situation in each shopping center is still different.

So we were assessing -- in the last 2 weeks, we have been assessing this situation every day and trying to move according to what is our view day by day. Yes. And therefore, again, I think still it's an ongoing situation. It's difficult to try to try to determine, never mind the impact they're really -- the economic impact in our results in the fourth quarter.

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Operator [23]

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Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Tori Creighton for any closing remarks.

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Tori Creighton, Parque Arauco S.A. - Head of IR [24]

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We just want to thank everyone for taking the time to attend our conference call today and wish everyone a good Friday. Thank you very much.

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Operator [25]

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And thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.