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30 09-2011 - 3 q11 earnings release

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  • 1. 3Q11 Earnings Release SONAE SIERRA BRASIL ANNOUNCESInvestorsRelations ADJUSTED EBITDA OF R$41.1 MILLION IN 3Q11, AN INCREASE OFCarlos Alberto Correa 22.9% OVER 3Q10Investors Relations Officer São Paulo, November 8, 2011 – Sonae Sierra Brasil S.A.Murilo Hyai (BM&FBovespa: SSBR3), a leading Brazilian shopping mall developer, owner and manager, announces today its resultsInvestors Relations Manager for the third quarter of 2011 (3Q11).Eduardo Pinotti de OliveiraInvestor Relations Analyst HighlightsWebsite:  The Company’s Net Revenue increased 21.2% towww.sonaesierrabrasil.com.br/ri R$54.8 million in 3Q11 compared to R$45.2 million in 3Q10.Email:ribrasil@sonaesierra.com  Adjusted EBITDA totaled R$41.1 million in 3Q11, an increase of 22.9% over the same period of last year.Phone: Adjusted EBITDA margin reached 75.1% in 3Q11.+55 (11) 3371-4188  Adjusted FFO totaled R$43.2 million, an 81.1% increase over 3Q10. Adjusted FFO margin reached 78.9% in3Q11 CONFERENCE CALLS 3Q11.  Same-store rent (SSR) reached, once again, a strongPortuguese double-digit growth of 13.0% in 3Q11 and Same-storeNovember 9, 2011 sales (SSS) increased by 7.3%.07:00 am (New York time)  Total Net Income attributable to shareholders reached10:00 am (Brasilia Time) R$58.5 million in 3Q11, from R$27.3 million in 3Q10, aPhone: (55 11) 2188-0155 114.1% increase.Code: Sonae Sierra Brasil  In September, the Company started the construction of Passeio das Águas Shopping in Goiânia, which isEnglish scheduled to open in the second half of 2013.November 9, 2011  Also in September, Sonae Sierra Brasil successfully08:00 am (New York time) opened the expansion of Shopping Campo Limpo,11:00 am (Brasilia Time) adding 2.5 thousand sqm of GLA and bringing 18 newPhone: (1 412) 317-6776 stores to the mall.Code: Sonae Sierra Brasil 1
  • 2. 3Q11 Earnings ReleaseFinancial Indicators(R$ million) 3Q11 3Q10 Var. % 9M11 9M10 Var. %Net Revenue 54.8 45.2 21.2% 157.7 132.9 18.7%EBITDA 40.6 33.0 23.2% 119.3 97.6 22.3%EBITDA Margin 74.2% 73.0% +123 bps 75.7% 73.4% +223 bpsAdjusted EBITDA 41.1 33.5 22.9% 119.8 100.1 19.7%Adjusted EBITDA Margin 75.1% 74.1% +103 bps 76.0% 75.3% +65 bpsFunds From Operations (FFO) 42.7 23.4 82.9% 121.5 85.4 42.3%FFO Margin 78.0% 51.7% +2,632 bps 77.1% 64.3% +1,280 bpsAdjusted FFO 43.2 23.9 81.1% 122.0 87.9 38.8%Adjusted FFO Margin 78.9% 52.8% +2,613 bps 77.4% 66.2% +1,124 bpsNet Operating Income (NOI) 51.7 41.1 25.9% 150.3 124.2 21.0%NOI Margin 94.4% 90.9% +356 bps 95.3% 93.5% +182 bpsOperating Indicators 3Q11 3Q10 Var. % 9M11 9M10 Var. %Total GLA (000 sqm) 353.0 343.4 2.8% 353.0 343.4 2.8%Owned GLA (000 sqm) 204.6 200.2 2.2% 204.6 200.2 2.2%Number of shopping malls 10 10 0.0% 10 10 0.0%Sales (R$ million) 936.9 851.2 10.1% 2,711.7 2,426.2 11.8%Sales/sqm (monthly average) 942.5 871.1 8.2% 905.8 828.6 9.3%Occupancy rate 97.4% 98.4% -100 bps 97.4% 98.4% -100 bpsCost of occupancy (% of sales) 9.5% 9.1% +36 bps 9.4% 9.4% +7 bpsSSS/sqm 949.0 884.1 7.3% 927.5 853.1 8.7% SSS/sqm - Satellite stores 1,465.2 1,346.8 8.8% 1,415.6 1,280.1 10.6% SSS/sqm - Anchor stores 739.4 699.7 5.7% 727.6 684.0 6.4% SSS/sqm - Leisure 234.4 226.9 3.3% 216.5 199.5 8.5%SSR/sqm 54.7 48.4 13.0% 52.7 46.9 12.4% SSR/sqm - Satellite stores 106.1 94.0 12.9% 103.1 91.5 12.7% SSR/sqm - Anchor stores 21.8 19.3 13.0% 21.0 18.9 11.1% SSR/sqm - Leisure 22.4 19.8 13.1% 20.3 18.0 12.8%Overdue Payments (25 days) 2.9% 2.6% +28 bps 2.5% 2.9% -35 bps 2
  • 3. 3Q11 Earnings ReleaseMANAGEMENT’S COMMENTSSonae Sierra Brasil continued to achieve solid operating and financial indicators in the3Q11.Our same store rent (SSR), once again reached a strong double digit growth at 13.0%over the same period last year, driven by rising inflation adjustments and strongleasing spreads in contract renewals. Same store sales (SSS) growth reached 7.3% in3Q11 and sales in our shopping centers totaled R$936.9 million, a 10.1% increaseover the same period last year.The Company’s consolidated net revenues totaled R$54.8 million in 3Q11, a 21.2%increase over 3Q10, while Consolidated Adjusted EBITDA increased by 22.9% over thesame period last year, totaling R$41.1, million with Adjusted EBITDA margin reaching75.1% in 3Q11, compared to 74.1% in 3Q10. Consolidated Adjusted FFO totaledR$43.2 million in 3Q11, a significant increase of 81.1% over 3Q10. The Adjusted FFOmargin reached 78.9% in the quarter, compared to 52.8% in 3Q10. We continue tobenefit from the strong performance of our portfolio with low levels of vacancy andincreasing rents, as well as the maturation of our malls, particularly ManauaraShopping in Manaus and from growing parking and key money revenues. The netincome attributable to shareholders reached R$58.5 million in 3Q11, from R$27.3million in 3Q10. This increase results mainly from the positive performance of theportfolio and to the valuation gains on investment properties in 3Q11.The Company continues to execute the plans previously announced regardingdevelopment projects and expansions, with the construction of Uberlândia Shopping inUberlândia (MG), Boulevard Londrina Shopping in Londrina (PR), as well as theexpansion of Shopping Metrópole in São Bernardo do Campo (SP), which is scheduledto open in November 2011. In September, Sonae Sierra Brasil started theconstruction of Passeio da Águas Shopping in Goiânia (GO), which should be openedby the second half of 2013. Also in September, we successfully opened the expansionof Shopping Campo Limpo in São Paulo (SP).Sonae Sierra Brasil will continue to seek opportunities that create value to theshareholders and enhance the quality of the portfolio, focusing on developmentopportunities in markets with an inherent mismatch between supply and demand forretail space and targeting the middle class customer segment. We are committed tomaking our malls the most dominant in their respective markets. We remain confidentin our strategy and prospects for growth opportunities.The Management 3
  • 4. 3Q11 Earnings ReleaseFINANCIAL HIGHLIGHTSConsolidated Statutory AccountsThe consolidated financial and operating information outlined below is based onaccounts prepared in accordance with accounting policies adopted in Brazil and inaccordance with the International Financial Reporting Standards (IFRS) issued by theInternational Accounting Standards Board - IASB, and correspond to the comparisonof the results obtained in the 3Q11 with the same period of the previous year, alsoadjusted to the new accounting standards. Therefore, the consolidated financialinformation includes 100% of the results of Parque D. Pedro Shopping (even thoughthe Company holds a 51% ownership interest in the mall).Gross RevenueSonae Sierra Brasil’s gross revenue totaled R$59.2 million in 3Q11, an increase of20.4% over 3Q10. The increase in revenue was driven by growth in rental revenuewhich totaled R$45.5 million in 3Q11, a 22.4% increase over 3Q10 given thecombination of strong leasing spreads, inflation adjustments and low vacancy that ispushing up the rental revenue in 2011. Another highlight was the significant increasein revenue from parking, which totaled R$5.7 million in 3Q11, 14.0% higher than3Q10. Service revenue increased to R$4.1 million in 3Q11 from R$3.7 million in 3Q10,an 11.2% increase primarily driven by higher revenues from leasing and managementfees. Key money revenue has also registered a significant increase, from R$1.9 millionin 3Q10 to R$2.6 million in 3Q11, a 37.6% increase, driven by higher activities mostlyrelated to the expansions opened during the period. Gross Revenue Breakdown 3Q10 3Q11 1% 4% Rent 4% 10% 10% Rent contract straight-lining 8% 7% 1% Service revenue 3% Parking revenue 75% 77% Key Money Other revenue 4
  • 5. 3Q11 Earnings Release Gross Revenue (R$ 000) 3Q11 3Q10 Var. % 9M11 9M10 Var. % Rent 45,456 37,149 22.4% 130,490 109,044 19.7% Rent contract straight-lining 910 1,374 -33.8% 2,903 3,791 -23.4% Service revenue 4,146 3,728 11.2% 12,236 10,706 14.3% Parking revenue 5,688 4,988 14.0% 17,180 12,684 35.4% Key Money 2,561 1,862 37.5% 7,482 7,680 -2.6% Other revenue 470 77 510.4% 915 384 138.2% Total 59,231 49,178 20.4% 171,206 144,289 18.7%Costs and ExpensesCosts and Expenses totaled R$15.4 million in 3Q11, a 20.1% increase over 3Q10.Costs and expenses were mainly impacted by higher costs with external services,namely with parking and auditing of tenants’ sales. Non-recurring legal fees have alsoincreased in this quarterTotal Costs and Expenses were also impacted by the variances in provisions fordoubtful accounts, which resulted in a negative net amount of provision of R$1.0million in 3Q11, from a revenue (reversal) of R$197 thousand in 3Q10.Pre-operating marketing expenses and costs associated with the search for newprojects also contributed to higher costs and expenses in 3Q11.Conversely, we continued to see lower occupancy and contractual agreement costs,which decreased by 17.6% in 3Q11. Costs and Expenses (R$ 000) 3Q11 3Q10 Var. % 9M11 9M10 Var. % Depreciation and amortization 343 350 -2.0% 1,105 885 24.9% Personnel 6,359 6,687 -4.9% 19,245 16,568 16.2% External services 3,668 1,851 98.2% 7,826 10,008 -21.8% Occupancy cost (vacant stores) 915 971 -5.8% 2,740 3,214 -14.7% Cost of contractual agreements with tenants 532 784 -32.1% 1,143 1,359 -15.9% Provision (reversal) of the allowance for doubtful 1,010 (197) N/A 1,342 (430) N/A accounts Rent 715 778 -8.1% 2,056 2,047 0.4% Travel 430 328 31.1% 1,043 921 13.2% Other 1,429 1,266 12.9% 4,333 3,656 18.5% Total 15,401 12,818 20.1% 40,833 38,228 6.8% Classified as: Cost of rentals and services 9,753 11,079 -12.0% 27,956 25,936 7.8% Operating expenses 5,647 1,739 224.7% 12,877 12,292 4.8% Total 15,401 12,818 20.1% 40,833 38,228 6.8% Note: For comparative purposes some expenses with external services were reclassified from other expenses in 3Q10. 5
  • 6. 3Q11 Earnings ReleaseChanges in Fair Value of Investment PropertiesSonae Sierra Brasil adopted IFRS accounting standards, under which, the Companyvalues its investment properties at fair market value. Thus, the gains and lossesresulting from changes in fair market value of the properties are recorded in theChange in Fair Value of Investment Properties account, which totaled R$65.3 millionin 3Q11 compared to R$28.1 million in 3Q10. The increase reflects the improvedvaluation of the portfolio, given the NOI growth and the positive performance ofoperating metrics and redevelopment / expansion GLA among online malls. OnSeptember 30th, 2011, the Value of Investment Properties totaled R$2.6 billion.Net Financial ResultThe consolidated net financial result in 3Q11 was a net financial income of R$7.3million, compared to a net financial expense of R$6.9 million in 3Q10. This variance ismainly explained by much higher interest income on financial investments in 3Q11given the net cash position and by exchange rate variations, which representedincome in 3Q11 compared to an expense in 3Q10.Net Financial Result(R$ thousand) 3Q11 3Q10 Var. % 9M11 9M10 Var. %Financial Income (Expenses):Interest on financial investments 11,533 670 1621.4% 28,964 3,089 837.7%Interest on intercompany loans - (1,277) -100.0% (400) (2,881) -86.1%Interest on receivables 246 770 -68.1% 803 1,138 -29.4%Monetary and exchange rate 19 (3,406) N/A (2,015) 6,331 N/AvariationsInterest on loans and financing (4,573) (4,035) 13.3% (13,337) (12,728) 4.8%Other 115 295 -61.1% 999 343 191.2%Total Financial Result - Net 7,340 (6,983) N/A 15,014 (4,708) N/ANet IncomeNet Income totaled R$92.7 million in 3Q11, a 132.1% increase over 3Q10, largelydriven by the Change in Fair Value of Investment Properties which resulted from theimproved performance of the whole portfolio. 6
  • 7. 3Q11 Earnings ReleaseNet Operating Income (NOI)Consolidated NOI totaled R$51.7 million in 3Q11, a 25.9% increase over 3Q10,reflecting, as mentioned above, the overall positive performance of the portfolio. Net Operating Income - NOI (R$ million) 3Q11 3Q10 Chg. % 9M11 9M10 Chg. %Rent 46.8 38.6 21.3% 134.3 113.2 18.6%Key Money 2.6 1.9 37.6% 7.5 7.7 -2.6%Parking 5.7 5.0 14.0% 17.2 12.7 35.4%Total Revenues 55.1 45.5 21.2% 159.0 133.6 19.0%(-) Malls Operating Expenses (3.4) (4.4) -22.7% (8.7) (9.4) -7.0%NOI 51.7 41.1 25.9% 150.3 124.2 21.0%Adjusted EBITDAAdjusted EBITDA totaled R$41.1 million in 3Q11, a 22.9% increase over 3Q10.Adjusted EBITDA margin reached 75.1% in 3Q11. Adjusted EBITDA (R$ million) 19.7% 22.9% 119.8 100.1 33.5 41.1 3Q10 3Q11 9M10 9M11Adjusted Funds from Operations (FFO)Adjusted FFO totaled R$43.2 million in 3Q11, an increase of 81.1% over the sameperiod last year. Adjusted FFO margin reached 78.9%. 7
  • 8. 3Q11 Earnings Release FFO Adjusted (R$ million) 38.8% 81.1% 122.0 87.9 43.2 23.9 3Q10 3Q11 9M10 9M11The reconciliation of the operating income before financial results with the EBITDA,adjusted EBITDA, FFO, and Adjusted FFO is shown below: Adjusted EBITDA and Adjusted FFO Reconciliation (R$ million) 3Q11 3Q10 Var. % 9M11 9M10 Var. % Net Revenue 54.8 45.2 21.2% 157.7 132.9 18.7% Operating income before financial result 109.4 61.0 79.3% 332.4 165.0 101.4%Depreciation and amortization 0.3 0.4 -1.9% 1.1 0.9 24.9%Gain in fair value of investment properties (69.2) (28.4) 143.2% (214.2) (68.3) 213.4% EBITDA 40.6 33.0 23.2% 119.3 97.6 22.3%Non-recurring expenses 0.5 0.5 - 0.5 2.5 - Adjusted EBITDA 41.1 33.5 22.9% 119.8 100.1 19.7% EBITDA Margin 74.2% 73.0% +123 bps 75.7% 73.4% +223 bps Adjusted EBITDA Margin 75.1% 74.1% +103 bps 76.0% 75.3% +65 bps EBITDA 40.6 33.0 23.2% 119.3 97.6 22.3%Net financial result 7.3 (7.0) N/A 15.0 (4.7) N/ACurrent income and social contribution taxes (5.2) (2.6) 99.6% (12.8) (7.5) 71.0% - - FFO 42.7 23.4 82.9% 121.5 85.4 42.3%Non-recurring expenses 0.5 0.5 - 0.5 2.5 - Adjusted FFO 43.2 23.9 29.4% 122.0 87.9 38.8% FFO Margin 78.0% 51.7% +2,632 bps 77.1% 64.3% +1,280 bps Adjusted FFO Margin 78.9% 52.8% +2,613 bps 77.4% 66.2% +1,124 bpsManagement AccountsIn accordance with accounting policies adopted in Brazil and IFRS, the Companyconsolidates 100% of Parque D. Pedro Shopping despite owning only 51% of this mall.However, considering the relevance of this mall to the Company’s results, weprepared pro-forma management accounts with the proportional consolidation of 8
  • 9. 3Q11 Earnings ReleaseParque D. Pedro. The key operating results under this methodology are presentedbelow: EBITDA and FFO Reconciliation (Considering 51% of PDP) (R$ million) 3Q11 3Q10 Var. % 9M11 9M10 Var. % Net Revenue 42.8 35.4 21.0% 123.7 103.4 19.6% Operating income before financial result 75.5 48.5 55.5% 243.5 122.0 99.7%Depreciation and amortization 0.3 0.4 -1.9% 1.1 0.9 24.9%Gain in fair value of investment properties (45.5) (24.5) 85.4% (154.9) (51.3) 201.9% EBITDA 30.4 24.4 24.6% 89.8 71.6 25.4%Non-recurring expenses 0.5 0.5 0.0% 0.5 2.5 -80.0% Adjusted EBITDA 30.9 24.9 24.1% 90.3 74.1 21.9% EBITDA Margin 70.9% 68.8% +204 bps 72.6% 69.2% +339 bps Adjusted EBTIDA Margin 72.0% 70.3% +180 bps 73.0% 71.6% +138 bps EBITDA 30.4 24.4 24.6% 89.8 71.6 25.4%Net financial result 7.1 (7.1) N/A 14.3 (5.0) N/ACurrent income and social contribution taxes (5.2) (2.6) 99.6% (12.8) (7.5) 71.0% FFO 32.2 14.6 119.9% 91.3 59.0 54.6%Non-recurring expenses 0.5 0.5 0.0% 0.5 2.5 -80.0% Adjusted FFO 32.7 15.1 115.9% 91.8 61.5 49.1% FFO Margin 75.1% 41.3% +3,376 bps 73.8% 57.1% +1,670 bps Adjusted FFO Margin 76.3% 42.8% +3,352 bps 74.2% 59.5% +1,469 bpsCash, Cash Equivalents and DebtCash and cash equivalents, which is comprised of cash, bank deposits and financialinvestments, decreased by R$17.9 million, from R$458.0 million on June 30, 2011 toR$440.1 million on September 30, 2011, mainly as a result of investments in theCompany’s projects. The Company’s total debt, considering amounts alreadywithdrawn reached R$332.3 million in 3Q11, and the respective amortization scheduleis as follows: Debt Amortization (R$ million) 185.9 42.3 42.3 41.9 19.8 Up to 2012 2013 2014 2015 2016 and beyond 9
  • 10. 3Q11 Earnings Release Net Cash Position (R$ million) 332.3 440.1 107.8 Cash and cash Debt Net Cash equivalentsConsidering our cash position, the long-term profile of our debt and our operatingcash flow, we believe that we are well positioned in terms of the capital required tofund our investment plan.A total of R$128.5 million, which corresponds to approximately 39% of the Company’stotal debt, is fixed at a 8.5% p.a. interest rate (10.0% p.a. with a 15% discount) onthe loan from the Banco da Amazônia (BASA) for the construction of ManauaraShopping, with a final maturity of 12 years. The base rate debt profile, consideringresources already withdrawn at the end of 3Q11 was as follows: Debt Profile Fixed 39% TR 48% CDI 13%Sonae Sierra Brasil’s leverage strategy is to finance the greenfield projects andexpansions with an average property-level debt of approximately 50% of the totalproject costs. Financing for Uberlândia Shopping, Boulevard Londrina Shopping andPasseio das Águas Shopping has already been contracted. 10
  • 11. 3Q11 Earnings ReleaseConsidering all the loans contracted by the Company, including amounts yet to bedrawn down, total contracted debt was R$613.5 million with an average cost of 11.7%by the end of the quarter. Contracted Debt Financing Committed Balance as of Term Amount (R$ Interest Rate 09/30/11 (years) MM) (R$ million) Working Capital 20 5 CDI + 2.85% 19 Working Capital 27 6 CDI + 3.30% 26 Manauara Shopping 112 12 8.50% 128 Metrópole Shopping - Expansion I 53 8 TR + 10.30% 53 Uberlândia Shopping 81 15 TR + 11.30% 59 Boulevard Londrina Shopping 120 15 TR + 10.90% 47 Passeio das Águas Shopping 200 12 TR + 11.00% 0 Total 614 332 Average 12.1 11.70% *Co nsidering LTM TR at 1 % p.a. and CDI at 1 .88% p.a. as o f September 30, 201 .21 1 1SHOPPING CENTERS’ SALES PERFORMANCETotal sales in the ten existing and operating malls in Sonae Sierra Brasil’s portfoliototaled R$936.9 million in 3Q11, a 10.1% increase over 3Q10. Considering theCompany’s ownership interest in each of the ten malls (including 20% of CampoLimpo Shopping and 51% of Parque D. Pedro Shopping), sales reached R$546.1million in 3Q11, a 11.7% increase over 3Q10.The best performing malls in 3Q11 in terms of sales growth were Manauara Shopping,Franca Shopping and Tivoli Shopping, with sales increases of 19.6%, 17.0% and15.3%, respectively. The robust growth recorded by Manauara Shopping can bemainly attributed to the accelerated maturation of the mall, while Franca Shoppingand Tivoli Shopping were a result of higher sales, particularly in some anchor storesand movie theaters of these shopping malls.OPERATING HIGHLIGHTSThe operating indicators of Sonae Sierra Brasil in 3Q11 confirm the continued growthof the Company. The overall occupancy rate in our malls was 97.4% of GLA in 3Q11,while Same-store rent (SSR) reached, once again, double-digit growth with a strong13.0% increase over 3Q10, driven by rising inflation adjustments and strong leasing 11
  • 12. 3Q11 Earnings Releasespreads in lease contract renewals. Same-store sales (SSS) posted a 7.3% increase in3Q11 compared to the same period last year.Occupancy Rate Occupancy (% GLA) 98.3% 98.5% 98.4% 98.0% 97.7% 97.5% 97.3% 97.2% 97.4% 97.0% 96.3% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11Same Store Sales and Same Store Rent (in R$) SSS/sqm 7.3% 8.7% 949 928 884 853 3Q10 3Q11 9M10 9M11 12
  • 13. 3Q11 Earnings Release SSR/sqm 13.0% 12.4% 55 53 48 47 3Q10 3Q11 9M10 9M11DESCRIPTION OF BUSINESSSonae Sierra Brasil S.A. is a company specialized in the shopping center business andis led by the expertise of its management team and its international controllingshareholders: the European group Sonae Sierra and the U.S. REIT DDR Corp. (NYSE:DDR), both companies that have deep experience in the development, ownership andmanagement of shopping centers.We are one of the leading real estate developers, owners, and operators of shoppingmalls in Brazil. Through our integrated business model, we work with all phases of thebusiness, including development management, property management, leasing, assetmanagement, and marketing services.We hold a controlling interest in the majority of the shopping malls in our portfolio andmanage all of them. On September 30, 2011, we had a weighted average ownershipinterest of 57.9% in the ten operating shopping malls in our portfolio, representing204.6 thousand sqm of owned GLA and ownership control of six of the ten shoppingmalls.OUR PORTFOLIOOur portfolio is comprised of ten shopping malls in operation. Additionally, we are inthe process of developing three new shopping malls in three major cities in Brazil: (i)Uberlândia, the second most populous city in the state of Minas Gerais; (ii) Londrina,the second largest city in the state of Paraná; and (iii) Goiânia, the state capital of theState of Goiás. These three cities are important centers for the agribusiness andservices sectors which have experienced strong demographic and economic growth.The selection of these cities for developing new shopping malls fits into our primary 13
  • 14. 3Q11 Earnings Releasestrategy of growth through potentially market dominant shopping malls, in tradeareas with income per capita and population density that meet our requirements. Weestimate that the combined GLA from these three shopping malls is approximately171.8 thousand sqm.The map below shows the location of our malls. All figures related to GLA and theCompany’s interests are as at the end of September 2011, except where otherwiseindicated: 10 7 4 13 11 5 1 8 3 9 12 2 6 Shopping Centers in GLA Owned GLA Actual occupancy Operation City State Stores (000 sqm) Ownership (000 sqm) index by area (%) 1 Parque D. Pedro Campinas SP 402 121.1 51.0% 61.8 94.9% 2 Boavista Shopping São Paulo SP 148 16.0 100.0% 16.0 97.1% 3 Penha Shopping São Paulo SP 196 29.6 73.2% 21.7 98.5% 4 Franca Shopping Franca SP 103 18.1 67.4% 12.2 99.8% Santa Barbara 5 Tivoli Shopping SP 146 22.1 30.0% 6.6 97.5% dOeste São Bernardo do 6 Metrópole Shopping* SP 151 25.1 100.0% 25.1 99.5% Campo 7 Pátio Brasil Brasília DF 234 28.8 10.4% 3.0 98.1% 8 Plaza Sul Shopping São Paulo SP 217 23.0 30.0% 6.9 100.0% 9 Campo Limpo Shopping São Paulo SP 144 22.4 20.0% 4.5 99.5%10 Manauara Shopping Manaus AM 232 46.8 100.0% 46.8 99.0% Total 1,973 353.0 57.9% 204.6 97.4% * Including an area of 5,161 sqm, currently reserved for expansion of the shopping mall Projects under Development GLA City State (000 sqm) Ownership Projected Opening11 Uberlândia Shopping Uberlândia MG 45.3 100.0% 1Q1212 Boulevard Londrina Shopping** Londrina PR 47.8 84.5% 2H1213 Passeio das Águas Shopping Goiânia GO 78.1 100.0% 2H13 Total 171.2 95.7% ** Ownership considering partner will fully exercise its rights in the project 14
  • 15. 3Q11 Earnings ReleaseOUR STRATEGYOur strategy focuses on profitably increasing our portfolio and maintaining ourposition as one of the leading developers, owners, and managers of shopping malls inBrazil, seeking to provide superior returns to our shareholders in a sustainable andresponsible way. We intend to achieve our goals by continuing to pursue the followingstrategies:Focus on creating value through organic growth. Our growth strategy is basedon two main sources: (i) developing new market dominant shopping malls that areable to establish and maintain a solid competitive position based on certain factorssuch as population density, purchasing power of the potential customers, andunderserved consumer demand; and (ii) expanding and/or remodeling of existingshopping malls by including new tenants, features and attributes in order to increasetheir market share.Acquisition of additional stakes in properties. We plan on analyzing opportunisticacquisitions at reasonable prices of additional ownership interests in the shoppingmalls already part of our portfolio. In parallel, and whenever opportunities arise thatfit our strategy, we will analyze potential acquisitions at attractive pricing ofcontrolling interests in shopping malls that are not part of our portfolio, or at least astrategic interest to possibly allow us to eventually acquire control and to ensure thatwe control the management of the property.ONGOING PROJECTSSonae Sierra Brasil currently has seven ongoing projects, comprised of threegreenfield projects and four expansions, which should increase our owned GLA byapproximately 93% to 392 thousand sqm by 2013. It is worth noting that thissubstantial growth includes only those projects already in our pipeline and excludesfuture projects yet to be announced. 15
  • 16. 3Q11 Earnings Release Owned GLA Growth (000 sqm) Goiânia Greenfields Expansion Uberlândia Londrina 78 16 86 Metrópole (II) Tívoli 9 PDP (II) 392 Metrópole (I) Campo Limpo 203 +93% 2010 2011 2012 2013 TotalNEW PROJECTS (GREENFIELDS)Sonae Sierra Brasil’s strategy is to develop greenfield projects that have the potentialto become the leading malls in their trade areas. Based on this strategy, we havethree such projects in our portfolio. Construction on two of these – UberlândiaShopping and Boulevard Londrina Shopping – is already under way. Construction ofthe third mall, Passeio das Águas Shopping (in Goiânia) began in September, 2011.Uberlândia Shopping: Construction of Uberlândia Shopping continues to moveahead on schedule and will be opened in 1Q12. We revised the GLA upwards, from43.6 thousand sqm to 45.3 thousand sqm in 3Q11, in order to attend specific tenantsdemands. Approximately 89% of total GLA was already committed to tenants as ofSeptember 30, 2011.In October, Uberlândia Shopping received two certificates simultaneously, the ISO14001 - the green certificate - and the OHSAS 18001 (Occupational Health and SafetyAssessment Series). Uberlândia Shopping was the second shopping mall in the world,and the first one within the Americas to receive the two certificates at the same time. 16
  • 17. 3Q11 Earnings Release Uberlândia Shopping City Uberlândia State MG Expected Opening 1Q12 GLA (‘000 sqm) 45.3 SSB’s ownership interest 100% Committed GLA 89% Gross Capex Incurred (R$ million) 151.3 Uberlândia Shopping Construction Site Uberlândia Shopping Construction SiteBoulevard Londrina Shopping: Construction of Boulevard Londrina is on schedule,with expected opening in 2H12. The mall’s GLA was 65% committed to tenants as ofSeptember 30, 2011. Pre-leasing was impacted by the decision of a home furnitureanchor store to halt its global strategy plan, cancelling previously announced newstores, including one in Boulevard Londrina. The store previously representedapproximately 8% of the GLA of the project. 17
  • 18. 3Q11 Earnings Release Boulevard Londrina Shopping City Londrina State PR Expected Opening 2H12 GLA (‘000 sqm) 47.8 SSB’s ownership interest* 84.5% Committed GLA 65% Gross Capex Incurred (R$ million) 100.2 * Ownership co nsidering partner will fully exercise its rights in the pro ject Boulevard Londrina Construction Site Boulevard Londrina Project IllustrationPasseio das Águas Shopping: Construction of Passeio das Águas Shopping, locatedin Goiânia, the capital and most important city of the State of Goiás, started inSeptember 2011 with expected opening at the end of 2013. Passeio das Águas Shopping City Goiânia State GO Expected Opening 2013 GLA (‘000 sqm) 78.1 SSB’s ownership interest 100% Committed GLA 36% Gross Capex Incurred (R$ million) 50.8 Capex Incurred 18.2% IRR3 ) 15.7% Passeio das Águas Project Illustration 18
  • 19. 3Q11 Earnings ReleaseEXPANSIONSExpansion and renovation of Shopping Metrópole – Phase IThe renovation and first expansion of Shopping Metrópole is on schedule and expectedto be inaugurated on November 2011. However, some stores in the expansion areasuch as Outback Steakhouse have already opened. Expansion comprisesapproximately 8.7 thousand sqm of additional GLA, which was 100% committed totenants as of September 30, 2011, increasing the mall’s total GLA to approximately27.4 thousand sqm. Metrópole Expansion Area Metrópole New FaçadeCampo Limpo ExpansionIn September, Sonae Sierra Brasil opened the expansion of Shopping Campo Limpo.The expansion added 2.5 thousand sqm of GLA, bringing 18 new stores to the mall.The occupancy rate of the expansion at the end of 3Q11 was 96% of its GLA,corresponding to only one store that was eventually leased in October 2011. Campo Limpo Expansion 19
  • 20. 3Q11 Earnings ReleaseSHARE PERFORMANCESonae Sierra Brasil’s shares (BM&FBovespa: SSBR3) closed 3Q11 at R$22.23, an8.5% decrease from June 30, 2011. Over the same period, the Ibovespa Indexdecreased by 16.2%. Since the IPO in February 2011, the share price increased by11.2%, compared to a decrease of 21.5% of the Ibovespa Index. 140 4,000 SSBR3: +11.2% 135 Ibovespa: -21.5% 3,500 130 125 3,000 Volume (in thousands) Stock Performance 120 115 2,500 110 105 2,000 100 95 1,500 90 1,000 85 80 500 75 70 - Ibovespa SSBR3 Ownership Breakdown Free Float Sonae 33.35% Sierra DDR SGPS 50% 50% Sierra Brazil 1 BV 66.65% 20
  • 21. 3Q11 Earnings ReleaseGLOSSARYGLA (Gross Leasable Area): Equivalent to the sum total of all the areas available forleasing in the shopping malls.ABRASCE: Brazilian Shopping Mall Association.BM&FBOVESPA: BM&FBovespa S.A. - Securities, Commodities and Futures Exchange.CSLL: Social contribution tax on net income.EBITDA: Operating income before financial result + depreciation and amortization - gainfrom fair value of investment propertiesAdjusted EBITDA: EBITDA adjusted for the effects of non-recurring expenses effectFFO (Funds from Operations): EBITDA +/- Net financial result – current income andsocial contribution taxesAdjusted FFO: FFO adjusted for the effects of non-recurring expenses.IFRS: International Financial Reporting Standards.IGP-M: General Market Price Index, published by the FGV.IPCA: Consumer Price Index, published by the IBGE.Anchor Store or Large Anchors: Well-known stores with special marketing andstructural features that serve to attract consumers, assuring continuous visitor flows anduniform traffic in all areas of the mall.Satellite Stores or Satellites: Small stores without special marketing or structuralfeatures located around the anchor stores and aimed at general commerce.NOI (Net Operating Income): Gross revenue from malls (excluding service revenue) +parking revenue – mall operating expenses – provisions for doubtful accounts.Novo Mercado: A special listing segment of the BM&FBOVESPA with special corporategovernance rules determined by the Novo Mercado Regulations.SSR (same-store rent): Relation between invoiced rent for the same operation in thecurrent period compared to previous period.SSS (same-store sales): Relation between sales for the same tenant in the currentperiod compared to the previous period.Occupancy Rate: Ratio between leased area and total GLA of each mall at the end ofeach period. 21
  • 22. 3Q11 Earnings ReleaseAPPENDICESConsolidated Balance Sheet(R$ thousand) 3Q11 2Q11 Var. %ASSETSCURRENTCash and cash equivalents 440,065 458,016 -3.9%Accounts receivable, net 17,507 17,631 -0.7%Taxes recoverable 17,002 13,871 22.6%Prepaid expenses 583 338 72.5%Other credits 5,559 3,879 43.3%Total current assets 480,716 493,735 -2.6%NON-CURRENTLong-term receivables:Restricted financial investments 1,745 1,325 31.7%Accounts receivable, net 12,394 11,516 7.6%Loans to condominiums 406 607 -33.1%Deferred income and social contribution taxes 11,080 13,638 -18.8%Juducial deposits 3,681 3,560 3.4%Other credits 843 759 11.1%Total long-term assets 30,149 31,405 -4.0%Investments 25,267 20,987 20.4%Investment properties 2,601,349 2,451,388 6.1%Fixed Assets 5,808 5,578 4.1%Intangible Assets 990 912 8.6%Total non-current assets 2,663,563 2,510,270 6.1%TOTAL ASSETS 3,144,279 3,004,005 4.7% 22
  • 23. 3Q11 Earnings ReleaseConsolidated Balance Sheet(R$ thousand) 3Q11 2Q11 Var. %LIABILITIES AND SHAREHOLDERS EQUITYCURRENTLoans and financing 11,855 11,111 6.7%Accounts payable 13,628 12,289 10.9%Taxes payable 7,010 5,771 21.5%Salaries, wages and benefits 8,890 6,911 28.6%Deferred revenue 5,537 5,536 0.0%Related parties 12,920 12,598 2.6%Other obligations 15,522 13,955 11.2%Total current liabilities 75,362 68,171 10.5%NON-CURRENTLoans and financing 320,404 288,056 11.2%Deferred revenue 19,080 17,083 11.7%Accounts payable - land purchases 25,000 25,000 0.0%Deferred income and social contribution taxes 333,272 316,327 5.4%Provision for civil, tax, labor and pension risks 9,950 10,111 -1.6%Provisions for variable compensation 142 486 -70.8%Total non-current liabilities 707,848 657,063 7.7%SHAREHOLDERS EQUITYCapital stock 997,866 997,866 0.0%Capital reserve 80,115 80,249 -0.2%Retained earnings 180,188 121,720 48.0%Profit reserve 648,344 648,344 0.0%Equity attributable to shareholders 1,906,513 1,848,179 3.2%Advance for future capital increase - - -Equity attributable to owners of the parent company 1,906,513 1,848,179 3.2%and advance for future capital increaseMinority interests 454,556 430,592 5.6%Total Shareholders Equity 2,361,069 2,278,771 3.6%TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 3,144,279 3,004,005 4.7% 23
  • 24. 3Q11 Earnings ReleaseConsolidated Income Statement(R$ thousand, except earnings per share) 3Q11 3Q10 Var. % 9M11 9M10 Var. %NET OPERATING REVENUE FROM RENT, SERVICES 54,752 45,191 21.2% 157,661 132,864 18.7%AND OTHERCOST OF RENT AND SERVICES - 9,753 - 11,079 -12.0% - 27,956 - 25,936 7.8%GROSS PROFIT 44,999 34,112 31.9% 129,705 106,928 21.3%OPERATING REVENUE (EXPENSES)General and administrative - 5,647 - 1,739 224.7% - 12,877 - 12,292 4.8% External Services - 2,638 - 808 226.5% - 5,366 - 7,184 -25.3% Provisions for doubtful accounts - 426 197 N/A - 613 430 N/A Other administrative expenses - 2,242 - 778 188.2% - 5,793 - 4,653 24.5% Depreciation and amortization - 341 - 350 -2.6% - 1,105 - 885 24.9%Taxes - 355 - 816 -56.5% - 918 - 1,754 -47.7%Equity income 4,280 345 1140.6% 6,484 2,032 219.1%Change in fair value of investment properties 65,353 28,084 132.7% 208,185 66,307 214.0%Other operating revenue (expenses), net 797 1,060 -24.8% 1,783 3,813 -53.2%Total operating revenue (expenses), net 64,428 26,934 139.2% 202,657 58,106 248.8%OPERATING INCOME BEFORE FINANCIAL RESULT 109,427 61,046 79.3% 332,362 165,034 101.4%NET FINANCIAL RESULT 7,339 - 6,983 N/A 15,014 - 4,708 N/AINCOME BEFORE INCOME AND SOCIAL 116,766 54,063 116.0% 347,376 160,326 116.7%CONTRIBUTION TAXESINCOME AND SOCIAL CONTRIBUTION TAXESCurrent - 5,250 - 2,630 99.6% - 12,798 - 7,482 71.1%Deferred - 18,841 - 11,510 63.7% - 64,848 - 29,213 122.0%Total - 24,091 - 14,140 70.4% - 77,646 - 36,695 111.6%NET INCOME 92,675 39,923 132.1% 269,730 123,631 118.2%INCOME ATTRIBUTABLE TO:Shareholders 58,468 27,309 114.1% 180,188 80,235 124.6%Minority interests 34,207 12,614 171.2% 89,542 43,396 106.3%EARNINGS PER SHARE 0.77 0.51 51.0% 2.47 1.51 63.6% 24
  • 25. 3Q11 Earnings Release For the nine months period Cash Flow Statement ended on (R$ thousand) 09/03/2011 09/30/2010 CASH FLOW FROM OPERATING ACTIVITIES Net income for the year 269,730 123,631 Adjustments to reconcile net income to net cash from (used in) operating activities: Depreciation and amortization 1,105 885 Residual cost of written-off fixed assets - 55 Unbilled revenue from rentals (2,903) (3,461) Provisions for doubtful accounts 1,342 (430) Provisions (reversal of) for civil, tax, labor and pension risks (956) (1,096) Acrrual for variable compensation 417 1,547 Deferred income and social contribution taxes 64,848 29,213 Financial charges on loans and financing 13,337 12,728 Interests, exchange rate changes on intercompany loans 2,661 (3,450) Changes in fair value of investment property (208,185) (66,307) Equity income (6,484) (2,032) (Increase) decrease in operating assets: Restricted investments (1,188) 114 Accounts receivable 2,892 8,596 Loans to condominiums 155 (139) Taxes recoverable (7,343) (2,278) Advances to suppliers 183 55 Prepaid expenses (408) (26) Judicial deposits (97) (326) Other 1,860 (3,571) Increase (decrease) in operating liabilities: Brazilian suppliers (5,942) (3,094) Taxes payable 408 (931) Salaries, wages and benefits 1,455 (750) Technical structure 7,369 296 Other obligations 4,152 641 Cash provided by (used in) operating activities 138,408 89,870 Interest paid (14,009) (16,029) Net cash from (used in) operating activities 124,399 73,841 CASH FLOW FROM INVESTMENT ACTIVITIES Acquisition or construction of investment property (199,381) (81,282) Acquisition of fixed assets (1,482) (1,734) Increase in intangible assets (288) (226) Dividends received 250 338 Net cash used in investment activities (200,901) (82,904) CASH FLOW FROM FINANCING ACTIVITIES Capital increase 465,021 - Loans and financing raised 125,593 25,279 Loans and financings paid - principal (3,118) (34,000) Advance received for future capital increase - 3,556 Earnings distributed by real estate funds - minority shareholders (28,131) (20,552) Dividends payed (2,939) - Share issuance costs (24,368) - Related parties (77,057) (2,191) Net cash from financing activities 455,001 (27,908) NET INCREASE (DECREASE) IN BALANCE OF CASH AND CASH EQUIVALENTS 378,499 (36,971) CASH AND CASH EQUIVALENTS At end of year 440,065 49,281 At beginning of year 61,566 86,252 NET INCREASE (DECREASE) IN BALANCE OF CASH AND CASH EQUIVALENTS 378,499 (36,971) 25

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