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17 01-2011-company presentation

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17 01-2011-company presentation

  1. 1. Company Presentation 1
  2. 2. Disclaimer► The material that follows is a presentation of general background information about BR Properties S.A. and its subsidiaries (“BR Properties” or “BRP” or the “Company”) prepared as of the date of the presentation by BR Properties.► This information is in summary form and does not purport to be complete. It is not intended to be relied upon as advice to potential investors. Information contained in this material has not been independently verified. Certain information has been obtained from public sources. Information not obtained from public sources and contained herein was prepared solely based on information provided by the Company. No representation or warranty, either express or implied, is made concerning, and no reliance should be placed on, the accuracy, fairness, or completeness of the information presented herein. This material has been prepared solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities and should not be treated as giving investment advice. It is not targeted to the specific investment objectives, financial situation or particular needs of any recipient. It is not intended to provide the basis for any third party evaluation of any securities or any offering of them and should not be considered as a recommendation that any investor should subscribe for or purchase any securities► Although BR Properties believes that the expectations and assumptions reflected in the forward-looking statements are reasonably based on information currently available to BRP’s management, BR Properties cannot guarantee future results or events. BR Properties expressly disclaims a duty to update any of the forward-looking statement.► Neither this material nor its content shall be deemed to constitute an offer of or an invitation, or solicitation of an offer to subscribe for or purchase any securities. The information contained herein is subject to change without notice and neither the Company past performance is not indicative of future results. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever.► No person is authorized to give any information or to make any representation not contained in and not consistent with this material and, if given or made, such information or representation must not be relied upon as having been authorized by or on behalf of the Company.► These materials are strictly confidential and are being submitted to selected recipients only. They may not be reproduced (in whole or in part), distributed or transmitted to any other person without the prior written consent of the Company. These materials are not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. 2
  3. 3. Company OverviewThe largest and most complete commercial properties company in BrazilCompany Profile Segments of Activity► Largest public commercial properties company in Office Brazil► BR Properties was founded in Dec/06 by an experienced team of executives, aiming at acquiring, managing, developing and leasing high quality commercial properties in Brazil► Company’s portfolio currently holds 95 properties, with 1.16 million sqm of GLA and estimated market value of over R$ 4 billion ► Ventura Towers ► Ed. Sta. Catarina ► Ed. Manchete Industrial► 4 greenfield projects, with approximately 148.3 thousand sqm of gross leasable area (GLA)► Fully integrated and experienced in-house teams: acquisitions, financing, legal and engineering► Pro active, value added investment strategy, “hands- on” approach ► DP Louveira ► DP Araucária Retail► Market recognition: proven ability to source deals and execute transactions makes BR Properties the partner of choice for co-development and built-to-suit operations► Fully owned Property Management Company ► Portfolio of Retail Properties 3
  4. 4. Portfolio Overview: Breakdown and Tenant BaseA top-notch portfolio comprised of office buildings, warehouses, and retail properties located inthe most dynamic regions of BrazilMarket Value of the Portfolio (R$ MM) GLA by Property Type (sqm) 9% 9% 26% Of f ice Of f ice Warehouse Warehouse 35% Retail Retail 56% 65% Main Tenants Tenant Breakdown by Industry Storage Media ► Over 180 high quality tenants Construction Other Consumer Energy Goods Industrial Technology Logistics Financial Services BR Properties tenant base entails some of the best known Companies 4 in the country, spanning wide industry diversification
  5. 5. Impressive success of post-IPO delivery of acquisitions plan BR Properties has invested over R$ 1.7 bn after its IPO held in March/10, exceeding in 18% the total target of acquisitions for 2010 Strong execution track record Equity research coverage ► Ability to source deals at attractive prices ► Currently covered by 10 equity research analysts from the ► 11 acquisitions and 5 sales finalized in 2010 main top banks and brokerage firms +18% Budget Actual Mar-10 Jun-10 Sep-10 Dec-10 Stock Liquidity GLA Evolution and Capital Invested (R$ MM) ► Significant increase in stock liquidity within few months after IPO 1.159.756 sqm 20 Moving Avg. (30d) 477 1.709 19,00 18 Stock Price 18,00 16 340 19 Volume (R$ MM) 14Stock Price 17,00 12 730.402 sqm 260 10 16,00 157 8 94 15,00 6 181 180 4 14,00 2 CBOP DP RB 115 DP Ed. Ventura II BBP FII Total 13,00 - Jacarandá Louveira Louveira Manchete Topázio Comercial Sep-10 Oct-10 Nov-10 Dec-10 3,4,5,6 8,9 Progressivo 5
  6. 6. Portfolio Overview: Recent AcquisitionsOur recent acquisitions were in line with our strategy to acquire properties of exceptional quality,leased to large tenants, and located in the main economic regions of Brazil  Comercial Progressivo II Real Estate Investment Fund  Location: Diverse - 13 States  GLA: 122,146 sqm  CAPEX: R$ 477 MM  Owned: 100%  Edifício Manchete  Ventura Towers II  Location: Rio de Janeiro / RJ  Location: Rio de Janeiro / RJ  GLA: 26,439 sqm  GLA: 21,493 sqm  CAPEX: R$ 260 MM  CAPEX: R$ 340 MM  Owned: 100%  Owned: 41% 6
  7. 7. Portfolio Overview: Geographic PresenceBR Properties’ portfolio is present in 13 states of Brazil, covering the southern, southeastern, mid-western, northern and northeastern regions  N° of existing properties: 95  Office: 40  Warehouse: 25  Retail: 30  Total GLA of the properties: 1,159,756 sqm  Office: 298,003 sqm  Warehouse: 753,684 sqm  Retail: 108,069 sqm States Total GLA % São Paulo 892,769 77.0% Rio de Janeiro 146,264 12.6% Paraná 63,120 5.4% Minas Gerais 18,630 1.6% Bahia 7,607 0.7% Pernambuco 6,238 0.5% Alagoas 4,678 0.4% BRPR Maranhão 4.663 0.4% Espírito Santo 3,989 0.3% Office Pará 3,418 0.3% Distrito Federal 2,989 0.3% Warehouse Goiás 2,814 0.2% Ceará 2,577 0.2% Retail TOTAL 1,159,756 100% 7
  8. 8. Portfolio Overview: DevelopmentsThe Company currently holds 4 greenfield projects, of which 3 are office buildings and one is anindustrial condominium, that once finalized, will add 148 thousand sqm of GLA to the portfolio Cidade Jardim  Type: Office AAA  Location: São Paulo / SP  Delivery Date: Jun/2012  GLA: 6,792 sqm  Forecast Rent (R$/sqm): R$ 125.00  Owned: 50% Pre-certified Building Panamérica Park II  Type: Office  Location: São Paulo / SP  Delivery Date: Dec/2011  GLA: 14,502 sqm  Forecast Rent (R$/sqm): R$ 48.00  Owned: 50% Pre-certified Building 8
  9. 9. Portfolio Overview: DevelopmentsBR Properties will invest approximately R$ 59.0 MM in these projects in 2011 Souza Aranha  Type: Office  Location: São Paulo / SP  Delivery Date: Dec/2012  GLA: 2,019 sqm  Forecast Rent (R$/sqm): R$ 57.00  Owned: 50% Tech Park SJC  Type: Industrial  Location: São José dos Campos / SP  Delivery Date: n/a*  GLA: 125,000 sqm  Forecast Rent (R$/sqm): R$ 13.00 * Delivery in several phases 9
  10. 10. Investment CaseA unique vehicle, exposed exclusively to Brazilian commercial real estate, extremely wellpositioned to benefit from the bullish fundamentals of the sector in Brazil Favorable Macro-Economic Scenario World-Class 1 Sponsorship Attractive Sector and Tier 1 Dynamics 5 2 Management Team 4 3 Broad Growth Potential: Natural Industry Unique Business Model Consolidator 10
  11. 11. 1 Favorable Macro-Economic ConditionsGrowing industrial production and GDP, declining unemployment rates and single-digit interestrates are fueling sectors exposed to domestic market Real GDP Growth (%) Unemployment Rate (%)¹ ► Pent-up demand for commercial properties ► Emerging middle class 7,5% 6,1% 12,3% 5,7% 11,5% 5,1% 11,7% 10,0% 4,5% 9,3% 4,0% 9,9% 8,1% 3,2% 2,7% 7,1% 7,9% 1,1% 6,7% -0,2% 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E Industrial Production Growth (%)¹ NTN-B (% aa.) ► Increasing demand for industrial and distribution space ► Lower interest Rates ► Increased credit availability 11,1% 12% 8,3% 11% 5,9% 4,2% 10% 2,7% 3,1% 2,8% 2,9% 0,1% 9% 8% 7% -7,2% 6% 5.95% 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 5%Source: Santander and Brazilian Central Bank 2007 2008 2009 2010Note:1 Adjusted Seasonally 11
  12. 12. 1 Favorable Macro-Economic Conditions ► The potential increase in the nominal interest rate until the end of the year would result in a slight increase in the TR, main index that readjusts our financing contracts ► The inflation increase, on the other hand, would have a positive effect on the Company’s results, given that 100% of our lease contracts are indexed to inflation rates ► Our cash reserves are invested exclusively in bank notes indexed to the Brazilian inter-bank rate (CDI), which would cause an increase in our financial revenues with the forecast increase in the SELIC rate Effects of the Nominal Expected Positive Effects of the Growth Interest Rate Increase of Inflation Indexes (SELIC vs. TR) (TR vs. IPCA vs. BRPR Inflation basket)14,0% 12,0% TR12,0% 10,75% 12,25% 10,0%10,0% 7,85% IPCA (CPI) 8,0%8,0% Avg. Basket Forecast SELIC 5,90% 6,0% Inflation pass6,0% TR through 2011 5,32% 4,0%4,0% 1,74% 1,74%2,0% 2,0% 0,69% 0,69%0,0% 0,0% 2010 2011e 2010 2011eSource: Santander research and Central Bank 12
  13. 13. 2 Attractive Sector Dynamics Low vacancy combined with steady demand and short supply in the near term allow for solid growth potential in the commercial properties sector Rental Rate (in R$/sqm/month) in SP + RJ Vacancy Rate (in %) in SP + RJ140 130 130 18120 16100 14 12 80 10 60 8 40 6 4,9 4 3,1 20 2 0 0 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 São Paulo Rio de Janeiro São Paulo Rio de Janeiro Net Absorption (in ´000 sqm) in SP + RJ New Inventory (in ´000 sqm) in SP + RJ450 250400 200350300 150250200 100 100 75150 90 85100 50 50 0 0 2005 2006 2007 2008 2009 3Q2010 2005 2006 2007 2008 2009 3Q2010Source: CBRE São Paulo Rio de Janeiro São Paulo Rio de Janeiro 13
  14. 14. 3 Unique Business ModelBR Properties benefits from its strong expertise to add value throughout the whole Real Estateinvestment chain… Value Creation Pro-active Lease / Property Deal Sourcing Management Selective Retrofit Developments Conservative Divestment Use of Leverage 14
  15. 15. 3 Fast Portfolio Growth with low vacancy levelApproximately 1.16 million sqm of gross leasable area acquired in less than 4 years 2007 2008 2009 2010 GLA 1,159,756 sqm IPO Private Placement Market Value Private 492 3,842 MM Placement 340 Initial 865Funding 295 736 - 105 91 14 337 507 - - 22 82 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Today Dec/10  Stabilized Vacancy: 0.8%  Delinquency: 0.0% 15
  16. 16. 3 Lease Contract CharacteristicsLease contracts in place allow for stable, predictable cash flows, while creating a very low vacancyrisk scenario and considerable upside potential in revenues Main Characteristics Inflation Readjustment Indices ► Annual Inflation Readjustments ► 100% of lease contracts are indexed to inflation ► Triple Net Contracts ► Tenant is responsible for all operating property costs 5% ► Costs include: taxes, insurance, and maintenance expenses ► 3 Year Market Re-alignment 28% IGP-M ► Lessor can mark the leases to market every 3rd year of the IPCA contract, independent of lease term Other ► Bank Guarantees on Leases 67% ► Standard practice in Brazil ► Protects against delinquencies from smaller tenants ► Tenant Delinquency ► Delinquency exceeding 30 days, lessor has right to break the contract and remove the tenant Expiration Schedule (% revenues) Market Re-alignment Schedule (% revenues) ► Average office lease term: 3-5 years ► Average warehouse lease term: 5-10 years 21% 15% 28% 14% 21% 36% 2% 6% 2011 2012 2013 2014 2011 2012 2013 2014 16
  17. 17. 3 Unique Business Model: Successful Cases Sale Value Addition Ed. Generali Henrique Schaumann Acquisition Value R$ 16.6 MM Acquisition Value R$ 41.0 MM Acquisition Date Aug/07 Acquisition Date Nov/07 Sale Value R$ 21.5 MM R$ 6.5 MM / year (42% Re-tenanting increase on rental income) Sale Date Jan/10 Holding Period 29 months Retrofit Elevators/ Façade/Parking IRR 36% 2009 Appraised Value R$ 78.0 MM 90,0 38.10 42,00 ROE*: 147% 80,0 37,00 26.97 32,00 70,0 27,00 60,0 22,00 50,0 21.5 78.0 17,00 40,0 12,00 16.6 30,0 7,00 41.0 20,0 2,00 10,0 -3,00 Acquisiton Value Sale Value At Acquisition Current * Before taxes Property Value Lease/sq mNote:1 CBRE’s independent appraisal, as of December 31st, 2009 17
  18. 18. 4 Broad Growth Potential: Natural Industry ConsolidatorAmple market fragmentation and lack of professional competitors creates a unique environmentfor market consolidatorsFragmented Industry (in terms of GLA – sqm) Acquisition Pipeline (R$ MM) Addressable Market * : 36.3 MM sqm Current Portfolio R$3,842 Total Acquisition Pipeline R$2,566 Non – Organized Market 91% 2.566 1.982 1.402 Organized 1.181 1.164 Companies 801 9% 584 363 221 - - - In Negotiation Under Analysis Total Of f ice Industrial Retail Total 34% BRProperties 66% 10 Organized Companies * Does not include retail properties 18
  19. 19. 5 Ownership Structure and Share Performance BR Properties current ownership structure is highly fragmented, with no controlling shareholder, no shareholders agreement, and over 99% of its shares in free float GP Investments 50% 11,5% 40% 39,69% BRPR3 Wellington Management 30% Ibovespa 5,8% 20% BlackRock 10% 5,1% 0% 0,55% Laugar S.A. 4,6% -10% Silverpeak -20% 2,6% -30%Other70,3%  Total Shares: 139,511,953  Market Cap: R$ 2.5 billion  ADTV (30d): R$ 14,3 million * As of December 30th, 2010 19
  20. 20. 5 Management Team BiographyBR Properties is managed by a team of seasoned professionals, highly motivated and fully alignedwith stockholders through long term stock options plans Mr. Bruni’s whole career was dedicated to real estate development and management. From 1979 to 1989, Mr. Bruni worked forClaudio Bruni Multiplan, Brazil’s largest real estate developer, where he was in charge of market research, construction management, commercialCEO and residential planning, and development. From 1983 to 1985, Mr. Bruni was the Managing Director of Renasce, Brazil’s first shopping center management company, a joint venture of Multiplan and Brazilian investment bank Bozano, Simonsen. From 1986 to 1994 Mr. Bruni co-partnered in Visor, a real estate development company dedicated to low income residential housing, where he helped develop 4,000 residential units, generating revenues of US$128 million. In 1988, Mr. Bruni founded Deico, Brazil´s largest independent real estate services company, where he was the CEO until December of 2006. Mr. Bruni served as Executive Vice-President of ABRASCE, Brazil’s shopping center association for 3 years. Mr. Bruni served as a member of the Retail and Commercial Development Council of the Urban Land Institute. Claudio Bruni is a civil engineer, with a graduate degree from The Polytechnic School of Engineering at the University of São Paulo (class of 1978). Industry Experience: 31 Years Mr. Jaco started his career in Andrade Gutierrez and Metodo Engenharia and joined CB Richard Ellis in 1996 with the objective ofMartin Jaco developing the investment consultancy operations of the company in Brazil. Mr. Jaco had direct responsibility and involvement in allCIO investment activities of the company in the country in the last 10 years, especially in advising investments for institutional investors, pension funds, property companies and foreign institutions. Martin Jaco graduated as a civil engineer from the Polytechnic School of Engineering at the University of São Paulo, Brazil, MBA from the College of Estate Management, Reading University, UK and a Postgraduate Diploma in Project Management from the Royal Institute of Chartered Surveyors, UK. Industry Experience: 17 Years Mr. Cordeiro was in charge of construction and project management at Schahin Cury and Metodo Engenharia (general contractors)Marco AntônioCordeiro for 15 years. While at Deico, Mr. Cordeiro was in charge of planning, market studies, feasibility analysis and appraisals. Mr. Cordeiro has also been in charge of the consulting division, advising the vast majority of Brazilian pension funds. Mr. Cordeiro hasCOO assisted pension funds in over US$350 million of real estate transactions in the last 2 years. Marco Cordeiro is a civil engineer, with a graduate degree from the Polytechnic School of Engineering at the University of São Paulo and specialization at the Business School of Fundação Getúlio Vargas. Industry Experience: 30 Years Mr. Daltro started his career in Banco Marka as a Corporate Finance Manager and a Deputy Director. Later, he worked as a VP inPedro Daltro the Credit Risk Management department of Citigroup and Treasurer and Financial Manager in Gafisa, the second largest real estateCFO developer in Brazil. After Gafisa, he went back to Citigroup as Director of the Public Sector, Infrastructure and Real Estate division. Pedro Daltro has a bachelor´s degree in Business Administration from Unifacs, Brazil, and MBA from the Owen Graduate School of Management, Vanderbilt University, U.S. Industry Experience: 16 Years 20
  21. 21. Financial Highlights 3Q10 Net Revenues (R$ MM) 111% 108% 31% 183.613 61% 140.177 7% 86.886 53.688 57.336 27.616 94% 3Q09 3Q10 3Q10 Pro Forma 9M09 9M10 9M10 Pro Forma EBITDA (R$ MM) and EBITDA Margin (%) 93% 92% 85% 85% 88% 84% 85% 82% 130% 5% 135% 37% 162.430 169.831 61% 118.995 8% 8% 73.995 45.356 49.004 53.087 22.580 101% 3Q09 3Q10 3Q10 3Q10 Pro-Forma 9M09 9M10 9M10 9M10 Pro- Pro Forma (ex-vacancy) Pro Forma Forma (ex-vacancy) Adjusted EBITDA Margin 21
  22. 22. Solid Balance SheetNet Debt 3Q10* (R$ MM) Debt Profile 3Q10* (Index) 974 1.429 539 20% 890 3% TR IGPM 362 93 CDI 78%ST Debt Obligations LT Debt Total Debt Cash Net Debt for Acquisitions * Not including the perpetual bondDebt Service Schedule 3Q10* (R$ MM) 306.114 13% 183.179 186.917 171.337 170.668 174.804 176.497 Interest 106.285 59% 38% 32% i - 18% 90.399 Principal 49% 87% 50% p - 82% i - 14% 59% p - 86% 50.159 i - 10% 24.752 68% p - 90% i - 8% 14.051 39.049 41% 62% i - 25% 51% 50% p - 92% 56% 41% p - 75% 44% * Excluding the R$ 240 MM short- 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 term debt fully amortized in Nov/10 22
  23. 23. Strategy Going Forward► Maintain our strategy of market consolidation, buying higher quality existing properties and taking advantage of a highly fragmented sector► Maintain Loan to Value of roughly 50%► Maintain diversification levels of our current portfolio► Keep development at a level equal to or below 15% of our portfolio► Maintain focus on key regions of the country 23
  24. 24. Appendix: São Paulo Office Market Asking Lease Rate Submarkets Vacancy Rate Range (Class A) (%) (R$/ sq m/ month)Downtown 4.0% R$ 14.00 - R$ 27.00*Paulista 3.8% R$ 75.00 - R$ 110.00Jardins 3.9% R$ 85.00 - R$ 160.00Marginal 7.5% R$ 45.00 - R$ 110.00Other 2.3% R$ 50.00 - R$ 70.00Total Market 4.9% R$ 45.00 - R$ 160.00Alphaville 21.9% R$ 30.00 - R$ 60.00* There are no class A buildings in this submarket. Lease rates apply to the best buildings in the area Total Stock Alphaville Downtown 6% 6% Paulista Other 17% 20% Jardins 15% Source: CBRE 3Q10 Market View Report Marginal 36% 24
  25. 25. Appendix: Rio de Janeiro Office Market Asking Lease Rate Submarkets Vacancy Rate Range (Class A) (%) (R$/ sq m/ month)Downtown 2.4% R$ 100.00 - R$ 180.00Botafogo 1.2% R$ 110.00 - R$ 150.00Flamengo 0.9% R$ 90.00 - R$ 130.00Barra da Tijuca 6.4% R$ 80.00 - R$ 115.00South Zone 6.4% R$ 120.00 - R$ 180.00Other 5.5% R$ 60.00 - R$ 90.00Total Market 3.1% R$ 60.00 - R$ 180.00 Total Stock South Zone Flamengo Others 2% 5% 0%Barra da Tijuca 12% Botafogo 14% Downtown 67% Source: CBRE 3Q10 Market View Report 25
  26. 26. Appendix: São Paulo Industrial Market Asking Lease Rate Submarkets Vacancy Rate Range (Class A) (%) (R$/ sq m/ month) ABCD * 0.0% R$ 12.00 - R$ 18.00 Atibaia * 24.4% R$ 18.00 - R$ 20.00 Barueri 8.5% R$ 21.00 - R$ 25.00 Cajamar * 3.1% R$ 17.00 - R$ 20.00 Cotia/ Embu * 0.0% R$ 18.00 - R$ 22.00 Greater Campinas 3.7% R$ 15.00 - R$ 25.00 Guarulhos * 2.2% R$ 18.00 - R$ 24.00 Jundiaí * 10.9% R$ 13.00 - R$ 18.00 São Paulo 1.6% R$ 18.00 - R$ 25.00 Sorocaba * 43.0% R$ 16.00 - R$ 20.00 Vale do Paraíba * 13.2% R$ 14.00 - R$ 17.00 Total Market 6.3% R$ 12.00 - R$ 25.00 * The eight submarkets that comprised the "Others" region in previous reports Total Stock ABCD Atibaia Sorocaba Guarulhos 3% 3% 3% 3% Vale do Paraíba Greater 6% Campinas 33%Cotia/ Embu 7% Source: CBRE 3Q10 Market View Report Jundiaí 10% Cajamar São Paulo 10% Barueri 11% 11% 26
  27. 27. Contact Investor Relations Pedro Daltro Chief Financial and Investor Relations Officer Leonardo Fernandes Investor Relations Manager Marcos Haertel Investor Relations Analyst Phone: (55 11) 3201-1000 Email: ri@brpr.com.br www.brpr.com.br/ri 27

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