MELK3: quote, dividends and indicators for Melnick

Melnick is a real estate developer and construction company focused on the state of Rio Grande do Sul, especially in Porto Alegre, with common shares traded on B3 under the ticker MELK3 and listed on the Novo Mercado segment. Its origins date back to 1970, with the founding of Melco Construções e Incorporações Ltda., initially dedicated to renovations and small-scale works. Throughout the 1970s and 1980s, this operation became established as a reference real estate construction company in the region. In 1992, after the departure of the original partner, Melnick Construções Ltda. was created, with the ambition of scaling up the business while maintaining a focus on quality. From the 2000s onward, the company prepared its first strategic plan, aiming for leadership in high-end developments in Rio Grande do Sul, obtained ISO 9001 certification and, in 2003, reached the position of largest volume of high-end construction in the state, which led to the creation of EixoM – Engenharia Ltda., dedicated to executing diversified buildings such as shopping malls, distribution centers, universities and hospitals.

As the operation matured, Melnick developed its own sales structure, which gave rise to HousIn, an internal broker responsible for a relevant share of sales of developments in Porto Alegre. In 2001, it introduced the Personal System, a fixed-price unit customization system that integrated into the business model the offering of alternative layouts, installations and finishes, executed under the company’s direct responsibility. In 2008, the company formalized a strategic partnership with Even, starting to operate under the name Melnick Even Incorporações e Construções S.A., which marked a new level of scale and professionalization, with results audited by external audit firms from the beginning of the consolidated operation. From that phase on, the portfolio ceased to be concentrated only in high-end residential properties, also incorporating commercial and mixed-use developments and products aimed at the middle class, in addition to geographic expansion to municipalities in the metropolitan region of Porto Alegre, such as Canoas and Eldorado do Sul. In 2020, Melnick completed its IPO process, obtained category A public company registration with the CVM and began trading MELK3 shares on B3’s Novo Mercado segment. In 2024, the corporate separation from Even was concluded, marking the start of a new cycle as an independent and capitalized company, with a prominent market share position in the Porto Alegre market.

Melnick’s main activities are focused on real estate development and urbanization projects, with development accounting for almost all consolidated net revenue. The business model is vertically integrated and covers the entire chain: identification, analysis and acquisition of land; architectural design; technical and financial planning; obtaining permits and licenses; construction; sales; and client relations before, during and after unit delivery. The company operates mainly in medium and high-end residential and commercial developments in Porto Alegre and surrounding cities, delivering dozens of projects focused on club-style condominiums and convenience solutions such as leisure areas, sports courts, swimming pools, gourmet spaces, kids’ rooms and facilities dedicated to services and deliveries. There is no relevant revenue concentration in individual clients, as billing is distributed among real estate unit buyers, with no single client accounting for more than 10% of net revenue.

Melnick’s operating structure is organized into four business segments. The Development segment is the core of the business and represents the largest share of launched volume and revenue, focused on medium and high-end residential and commercial projects in Porto Alegre and the metropolitan region. The Urban Development segment, carried out in partnership with Arcadia Urbanismo, is dedicated to the development of subdivisions and master-planned neighborhoods in several cities in Rio Grande do Sul, with a track record of more than a dozen launches and a relevant landbank specifically allocated to this type of project. The Open brand represents the arm focused on the affordable housing segment, with projects eligible for the Casa Verde e Amarela program, successor to Minha Casa Minha Vida, operating in the development of housing complexes with basic leisure infrastructure such as sports courts, walking tracks and pet areas. Complementarily, the Melnick Partners & Consulting unit was created to expand the company’s presence in other markets through co-development, feasibility consulting for projects and partnership structuring, in addition to fundraising and capital solutions for the real estate market, including securitization, financing for land acquisition and construction, in partnership with developers and investors in different states such as Santa Catarina, Paraná and São Paulo.

Melnick’s production process combines in-house development, contracting of renowned architecture firms and extensive use of specialized subcontractors. Land selection takes into account market analysis, technical characteristics, financial feasibility and regulatory aspects, with decisions approved by an investment committee. Acquisition may occur through cash payment, payment in installments, swap for future units, swap for project revenues, payment in kind or combinations of these models. Architectural projects are developed jointly by in-house engineering, development and sales professionals together with external firms, defining layouts, finish standards and price ranges. In construction, the company adopts standardized techniques, computerized control systems and centralized procurement to capture economies of scale, maintaining long-term agreements with material and equipment suppliers. Melnick holds ISO 9000 and PBPQ-Level A certifications, which reinforce quality control and productivity practices. Physical execution of works is predominantly carried out by subcontractors hired at a fixed price, in a fragmented and competitive market, while the company assumes operational management, planning, cost control and civil liability for the projects, including the use of in-house teams specialized in technologies such as structural masonry in the affordable and emerging segments.

Melnick’s real estate activities are subject to a complex regulatory environment involving federal, state and municipal rules. The company depends on obtaining urban and environmental permits, project approvals, and construction and operating licenses to start works, sell units and deliver projects. At the federal level, operations are subject to legislation on real estate development, land subdivision, condominium regimes, the Civil Code and the Consumer Defense Code, in addition to the rules of housing programs such as Minha Casa Minha Vida and Casa Verde e Amarela. At the state and municipal levels, master plans, land use and zoning laws, building codes, infrastructure requirements and urban counterpart obligations directly influence the economic feasibility and schedule of projects, especially in Porto Alegre, where recent changes and proposed amendments to the master plan and land use law may redefine construction parameters. Melnick also operates under specific regulatory frameworks for subdivisions and lot condominiums, which require approvals, registry with notary offices and infrastructure execution, and uses, when applicable, the “patrimônio de afetação” regime, which segregates assets and liabilities of certain projects while allowing the option for the Special Taxation Regime (RET).

In terms of governance and compliance, Melnick states that it maintains institutional relations with the public sector limited to meeting legal requirements, adopting internal integrity and transparency standards. The company is subject to the General Data Protection Law (LGPD) in handling information on clients, employees and partners, which requires investment in data governance and information security. In the environmental field, its activities require licensing at different levels, with the issuance of preliminary, installation and operating licenses when applicable, in addition to compliance with the National Solid Waste Policy. The company indicates that it is in a continuous process of improving its environmental management, aware of the impact that potential delays or licensing conditions may have on project costs and timelines. Melnick’s revenue is generated entirely in Brazil, with no operations or relevant regulation in foreign jurisdictions, so its regulatory exposure is concentrated in the Brazilian environment.

Regarding environmental, social and governance (ESG) practices, Melnick published a Sustainability Report for 2023, prepared based on GRI Standards and sectoral references from GRI and SASB for construction, engineering and development, also considering principles of the UN Global Compact and the Sustainable Development Goals. This report was developed with the support of an external consulting firm, but without specific independent assurance, and indicates a process of defining material topics based on benchmarking with peers, analysis of market standards, sector studies and consultation with different stakeholder groups. From this process, the company highlighted topics such as strategy and economic performance, community relations, governance and integrity, sustainable construction, occupational health and safety, diversity, equity and inclusion, customer relations and satisfaction, product quality and risk management, as well as correlation with SDGs such as decent work and economic growth, sustainable cities and communities, responsible consumption and production, and strong institutions. The company does not prepare an inventory of greenhouse gas emissions, but indicates that it is in transition to align its disclosures with IFRS S1 and IFRS S2 standards and to assess in the future the recommendations of international climate risk disclosure frameworks, which tends to influence how it presents to the market sustainability information relevant for analyzing MELK3 shares.