How to Build a Financial Model for Multiplan?
- Rental Revenue
- Rent revenue from stores: represents the main source of revenue for the Company and derives from the leasing of stores in shopping centers. The leasing contracts usually have terms of five years and are indexed to the IGP-DI, with annual adjustments on the anniversary of the contract and have contractual increases over the five years. The rent amount is based on the higher of (i) a minimum amount based on market rates, or (ii) a percentage of tenants’ total sales. In December, according to the Tenantcy Law (“Lei do Inquilinato”), the minimum rent amount is due in double.
- Rental revenue from kiosks and merchandising: leasing of temporary spaces in the shopping centers, in general in their aisles and parking lots. This line includes revenues from kiosks, stands and placement of media and merchandising in common areas through posters, digital totems, pillars, doors and escalators, among others.
- Revenue from leasing of office towers: derived from leases of commercial spaces in the towers for lease of the Company, indexed to the IGP-M with annual adjustments on the anniversary of the agreement. The contracts have variable deadlines, but generally they are for five-year terms.
- Straight-line method: accounting method that aims to remove the volatility and seasonality of rental revenues. The accounting recognition of rental revenue, including seasonal rent and contractual adjustments when applicable, is based on the linearization of revenue over the term of the contract regardless of the term of receipt.
- Service Revenue
- Brokerage fees charged to owners, based on a percentage of the lease agreements and the agreed key money;
- Shopping Center management fees charged to other entrepreneurs, calculated as a percentage of the shopping center’s Net Operating Income (NOI)
- Shopping Center management fees charged to tenants, divided by the condominium fee and calculated as a percentage of total condominium expenses; and a promotion fund rate, which is calculated as a percentage of total marketing fund expenses;
- Transfer fees – whenever a tenant transfers its lease to another tenant, Multiplan receives a percentage of the total amount negotiated between the parties;
- Key Money revenues: the amount paid by a tenant to open a store in a shopping center. The key money revenue is accrued in linear installments, only upon the occasion of an opening, throughout the term of the leasing contract. The tenants induction is also recognized In this revenue line, representing incentives given mainly to companies that lease spaces in the commercial towers, but can also be awarded to strategic operations in certain shopping centers.
- Parking revenue: revenues from parking use, net from the amounts transferred to Multiplan’s partners in shopping malls and condominiums.
- Real Estate for sale revenue: arising from the sale of the commercial and residential units incorporated by the Company. The recognition of this revenue follows the PoC (Percentage of Completion) methodology, where the progress of the work of a particular asset is verified to determine the result of a sale.
- Headquarters expenses: includes expenses related to the Company’s headquarters, which are: personnel expenses (administrative, operational and development) of the holding company and its subsidiaries. Also includes third party expenses, corporate marketing and travel expenses.
- Share-based compensation expenses: refers to the variable remuneration granted to the Company’s executives, whose objective is to reward the achievement of specific goals. Further details on the current plans are available in the most recent financial statements in the “Share-based Payment” note.
Shopping Center expenses
Expenses associated with fees on vacant stores: contractors are responsible for maintaining the store when it is vacant, whose main costs are condominium fees and real estate taxes (IPTU);
Office tower for lease expenses: charges (condominium and IPTU) and other maintenance costs of vacant offices;
Brokerage fees: expenses with commissions paid to the Company’s rental brokers related to the leasing of stores and other areas in shopping centers and offices for lease;
Audit expenses: contractors are responsible for the expenses of internal audits of tenants’ sales and external audits of the condominium, marketing fund fees and operating results of the shopping centers;
Advertising and promotion fund: it is common for the project managers (Multiplan and its partners in ventures) to contribute sporadically to a percentage of the total promotion fund raised by the tenants to help offset marketing expenses and campaigns in their malls;
Delinquency provisions expenses: provision to cover possible losses on the accounts receivable from leasing of stores and key money based on the individual analysis of each tenant debtor, regardless of the maturity of the overdue balance;
- Land lease: In 1996, we leased from Clube Atlético Mineiro the land where Diamond Mall operates, for a period of 30 years, thus generating a monthly payment to the club, based on the shopping center’s operating result.
- Projects for lease expenses: pre-operating expenses, linked to greenfield projects and expansions, accounted for as expenses in the income statement, as established in CPC 04 in 2009.
- Projects for sale expenses: pre-operating expenses, generated by real estate for sale developments, accounted for as expenses in the income statement, in accordance with CPC 04 in 2009.
- Cost of properties sold: These are associated with its real estate development business and consist primarily of construction costs, land costs and general development expenses.
- Equity pickup: refers, mainly, to the Company’s interest in ShoppingSantaÚrsula (37.5%) and Parque Shopping Maceió (50.0%). For purposes of analysis in the financial statements, these holdings are consolidated in the Company’s managerial results.