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Br properties company presentation


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Br properties company presentation

  1. 1. 1Company Presentation
  2. 2. 2Disclaimer► The material that follows is a presentation of general background information about BR Properties S.A. and its subsidiaries (“BRProperties” 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 potentialinvestors. Information contained in this material has not been independently verified. Certain information has been obtained frompublic sources. Information not obtained from public sources and contained herein was prepared solely based on informationprovided by the Company. No representation or warranty, either express or implied, is made concerning, and no reliance should beplaced on, the accuracy, fairness, or completeness of the information presented herein. This material has been prepared solely forinformational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities and should not be treatedas giving investment advice. It is not targeted to the specific investment objectives, financial situation or particular needs of anyrecipient. It is not intended to provide the basis for any third party evaluation of any securities or any offering of them and should notbe 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 reasonablybased on information currently available to BRP’s management, BR Properties cannot guarantee future results or events. BRProperties 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 subscribefor or purchase any securities. The information contained herein is subject to change without notice and neither the Company pastperformance is not indicative of future results. Neither this presentation nor anything contained herein shall form the basis of anycontract or commitment whatsoever.► No person is authorized to give any information or to make any representation not contained in and not consistent with this materialand, if given or made, such information or representation must not be relied upon as having been authorized by or on behalf of theCompany.► These materials are strictly confidential and are being submitted to selected recipients only. They may not be reproduced (in wholeor in part), distributed or transmitted to any other person without the prior written consent of the Company. These materials are notintended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would becontrary to local law or regulation.
  3. 3. 3Company OverviewThe largest and most complete commercial properties company in BrazilCompany Profile Segments of Activity► Largest public commercial properties company inBrazil;► BR Properties was founded in Dec/06 by anexperienced team of executives, aiming at acquiring,managing, developing and leasing high qualitycommercial properties in Brazil;► Company’s portfolio currently holds 93 properties,with 1.15 million sqm of GLA and estimated marketvalue of approximately R$ 4.8 billion;► 5 greenfield projects, with approximately 191.5thousand 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;► Market recognition: proven ability to source dealsand execute transactions makes BR Properties thepartner of choice for co-development and built-to-suitoperations;► Fully owned Property Management Company.OfficeIndustrialRetail► Portfolio of Retail Properties► Ed. Sta. Catarina► DP Louveira► Ventura Towers ► Ed. Manchete► DP Araucária
  4. 4. 4Impressive success of post-IPO delivery of acquisitions planBR Properties has invested over R$ 1.7 bn after its IPO held in March/10, exceeding in 18% the totaltarget of acquisitions for 2010GLA Evolution and Capital Invested (R$ mn)Strong execution track record1801.70918194157260340 19477CBOPJacarandáDPLouveira3,4,5,6RB 115 DPLouveira8,9Ed.MancheteVentura II BBPTopázioFIIComercialProgressivoTotal1,159,756 sqmEquity Research Coverage730,402 sqmStock Liquidity► Ability to source deals at attractive prices► 11 acquisitions and 5 sales finalized in 2010► Currently covered by 10 equity research analysts from themain top banks and brokerage firmsMar-10 Jun-10 Sep-10 Dec-10BudgetActual+18%-246810121416182013,0014,0015,0016,0017,0018,0019,00Sep-10 Oct-10 Nov-10 Dec-10Volume(R$mn)StockPriceMoving Avg. (30d)Stock Price► Significant increase in stock liquidity within few monthsafter IPO
  5. 5. 5GLA by Property Type (sqm)Portfolio: Breakdown and Tenant BaseMarket Value of the Portfolio (R$ mn)A top-notch portfolio comprised of office buildings, warehouses, and retail properties located inthe most dynamic regions of BrazilBR Properties tenant base entails some of the best known Companiesin the country, spanning wide industry diversification► Over 180 high quality tenantsMain Tenants Tenant Breakdown by IndustryConsumerGoodsLogisticsFinancialServicesTechnologyIndustrialEnergyOtherConsultingPublishing Telecom57%34%9%OfficeWarehouseRetail25%66%9%OfficeWarehouseRetail
  6. 6. 6Approximately 1.15 million sqm of gross leasable area acquired in 4 years4Q07 Today2007 2008 2009Market ValueGLA1,150,799 sqm20103Q072Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10IPOPrivatePlacementPrivatePlacementMarch, 2011 Stabilized Vacancy: 1.5% Delinquency: 0.0%InitialFunding4Q10Portfolio: Fast growth with low vacancy levelPerpetualBond82R$ 4.7 bi511339 105 91 14 - -22-600295865340 492+1.072
  7. 7. 7Portfolio: 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 Ventura Towers II Location: Rio de Janeiro / RJ GLA: 21,493 sqm CAPEX: R$ 340 mn Owned: 41% Edifício Manchete Location: Rio de Janeiro / RJ GLA: 26,439 sqm CAPEX: R$ 260 mn Owned: 100% Comercial Progressivo II Real EstateInvestment Fund Location: Diverse - 13 States GLA: 122,146 sqm CAPEX: R$ 477 mn Owned: 100%
  8. 8. 8Portfolio: Geographic PresenceBR Properties’ portfolio is present in 13 states, covering all 5 regions of BrazilOfficeWarehouseBRPRRetail N° of existing properties: 93 Office: 38 Warehouse: 25 Retail: 30 Total GLA of the properties: 1,150,799 sqm Office: 289,045 sqm Warehouse: 760,868 sqm Retail: 100,886 sqmStates Total GLA %São Paulo 883,812 76.8%Rio de Janeiro 146,264 12.7%Paraná 63,120 5.5%Minas Gerais 18,630 1.6%Bahia 7,607 0.7%Pernambuco 6,238 0.5%Alagoas 4,678 0.4%Maranhão 4,663 0.4%Espírito Santo 3,989 0.3%Pará 3,418 0.3%Distrito Federal 2,989 0.3%Goiás 2,814 0.2%Ceará 2,577 0.2%TOTAL 1,150,799 100%
  9. 9. 9Portfolio: DevelopmentsThe Company currently holds 5 greenfield projects, that once finalized, will add 191 thousand sqm ofGLA to the portfolioCidade Jardim Panamérica Park II Type: Office AAA Location: São Paulo / SP Delivery Date: Jun / 2012 GLA: 6,792 sqm Estimated Rent (R$/sqm): R$ 125.00 Owned: 50%Pre-certified Building Type: Office Location: São Paulo / SP Delivery Date: Dec / 2012 GLA: 14,502 sqm Estimated Rent (R$/sqm): R$ 48.00 Owned: 50%Pre-certified BuildingSouza Aranha Type: Office Location: São Paulo / SP Delivery Date: Dec / 2012 GLA: 2,019 sqm Estimated Rent (R$/sqm): R$ 57.00 Owned: 50%Pre-certifiedBuildingTech Park SJC Type: Warehouse Location: São José dos Campos / SP Delivery Date: N / D GLA: 125,000 sqm Estimated Rent (R$/sqm): R$ 13.00 Owned: 100% Type: Warehouse Location: Louveira / SP Delivery Date: Mar / 2012 GLA: 43,138 sqm Estimated Rent (R$/sqm): R$ 18.50 Owned: 100%DP Louveira 7
  10. 10. 10A unique vehicle, exposed exclusively to Brazilian commercial real estate, extremely wellpositioned to benefit from the bullish fundamentals of the sector in Brazil12345FavorableMacro-EconomicScenarioAttractive SectorDynamicsUnique Business ModelBroad Growth Potential:Natural IndustryConsolidatorWorld-ClassSponsorshipand Tier 1Management TeamInvestment Case
  11. 11. 11NTN-B (% aa.)Real GDP Growth (%)► Lower interest Rates► Increased credit availability► Increasing demand for industrial and distribution spaceUnemployment Rate (%)¹Favorable Macro-Economic ConditionsIndustrial Production Growth (%)¹1Growing industrial production and GDP, declining unemployment rates and single-digit interestrates are fueling sectors exposed to domestic marketSource: Santander and Brazilian Central BankNote:1 Adjusted Seasonally► Emerging middle class► Pent-up demand for commercial properties2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E5.95%5%6%7%8%9%10%11%12%2007 2008 2009 20102,7%0,1%8,3%3,1% 2,8%5,9%2,9%-7,2%10,5%4,2%2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E2,7%1,1%5,7%3,2%4,0%6,1%5,1%-0,2%7,5%4,5%2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E11,7%12,3%11,5%9,9%10,0%9,3%7,9%8,1%6,7%7,1%
  12. 12. 12Effects of the NominalInterest Rate Increase(SELIC vs. TR)Expected Positive Effects of the Growthof Inflation Indexes(TR vs. IPCA vs. BRPR Inflation basket)Source: Santander research and Central BankFavorable Macro-Economic Conditions1► The potential increase in the nominal interest rate until the end of the year would result in a slight increase in theTR, 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 that100% 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), whichwould cause an increase in our financial revenues with the forecast increase in the SELIC rate0,69%1,69%5,90%6,31%8,30%0,0%2,0%4,0%6,0%8,0%10,0%12,0%2010 2011eTRIPCA (CPI)Avg. BasketInflation passthrough 201110,75%12,50%0,69%1,69%0,0%2,0%4,0%6,0%8,0%10,0%12,0%14,0%2010 2011eForecast SELICTR
  13. 13. 13Low vacancy combined with steady demand and short supply in the near term allow for solidgrowth potential in the commercial properties sectorAttractive Sector Dynamics2Source: CBRE and BRPRNet Absorption (in ´000 sqm) in SP + RJ New Inventory (in ´000 sqm) in SP + RJRental Rate (in R$/sqm/month) in SP + RJ Vacancy Rate (in %) in SP + RJ1201300204060801001201402005 2006 2007 2008 2009 2010São Paulo Rio de Janeiro3,92,00246810121416182005 2006 2007 2008 2009 2010São Paulo Rio de Janeiro117880501001502002502005 2006 2007 2008 2009 2010São Paulo Rio de Janeiro2671290501001502002503003504004502005 2006 2007 2008 2009 2010São Paulo Rio de Janeiro
  14. 14. 14BR Properties benefits from its strong expertise to add value throughout the whole Real Estateinvestment chain…Unique Business Model3Pro-activeDeal SourcingValue CreationSelectiveDevelopmentsDivestmentLease / PropertyManagementRetrofitConservativeUse of Leverage
  15. 15. 15Lease Contract CharacteristicsLease contracts in place allow for stable, predictable cash flows, while creating a very low vacancyrisk scenario and considerable upside potential in revenuesExpiration Schedule (% revenues) Market Re-alignment Schedule (% revenues)► Annual Inflation Readjustments► 100% of lease contracts are indexed to inflation► Triple Net Contracts► Tenant is responsible for all operating property costs► Costs include: taxes, insurance, and maintenance expenses► 3 Year Market Re-alignment► Lessor can mark the leases to market every 3rd year of thecontract, independent of lease term► Bank Guarantees on Leases► Standard practice in Brazil► Protects against delinquencies from smaller tenants► Tenant Delinquency► Delinquency exceeding 30 days, lessor has right to breakthe contract and remove the tenant► Average office lease term: 3-5 years► Average warehouse lease term: 5-10 yearsInflation Readjustment IndicesMain Characteristics373%24%3%IGP-MIPCAOther3%7% 25%65%2011 2012 2013 >201351%16%27%6%2011 2012 2013 >2013
  16. 16. 163 Unique Business Model: Portfolio RecyclingSalesEd. AthenasAcquisition Value R$ 27.0 mnAcquisition Date Aug/07Sale Value R$ 34.5 mnSale Date Jan/11Holding Period 40 monthsIRR 20%ROE 70%Ed. Isabella Plaza (units 31 and 32)Acquisition Value R$ 3.13 mnAcquisition Date Aug/2007Sale Value R$ 4,20 mnSale Date Dec/2010Holding Period 39 monthsIRR 25.9%Ed. Number One (unit 121)Acquisition Value R$ 466,775Acquisition Date Aug/2007Sale Value R$ 650,000Sale Date Dec/2010Holding Period 39 monthsIRR 33.5%Ed. Joaquim FlorianoAcquisition Value R$ 17.4 mnAcquisition Date Aug/07Sale Value R$ 22.4 mnSale Date Mar/11Holding Period 42 monthsIRR 19%ROE 73%4Q101Q11
  17. 17. 17Fragmented Industry (in terms of GLA – sqm) Acquisition Pipeline (R$ mn)Ample market fragmentation and lack of professional competitors creates a unique environmentfor market consolidatorsBroad Growth Potential: Natural Industry Consolidator4Total Acquisition Pipeline R$2,566R$4,783Current PortfolioOrganizedCompanies9%Addressable Market * : 36.3 MM sqmNon – OrganizedMarket91%BRProperties10 OrganizedCompanies34%66%* Does not include retail properties1.1812211.4028013631.164- - -1.9825842.566In Negotiation Under Analysis TotalOffice Industrial Retail Total
  18. 18. 18Ownership Structure and Share PerformanceBR Properties current ownership structure is highly fragmented, with no controlling shareholder,no shareholders agreement, and over 99% of its shares in free float5GP Investments7,3% WellingtonManagement5,4%BlackRock5,1%Laugar S.A.4,2%Silverpeak1,3%Management0,9%Other75,9%39,31%(7,00%)-30%-20%-10%0%10%20%30%40%50%60%BRPR3Ibovespa* As of May 11th, 2011 Number of shares: 139,753,919 Market Value: R$ 2.5 billion Average Daily Vol. (30d): R$ 12.2 million
  19. 19. 19Management Team BiographyClaudio BruniCEOMr. Bruni’s whole career was dedicated to real estate development and management. From 1979 to 1989, Mr. Bruni worked forMultiplan, Brazil’s largest real estate developer, where he was in charge of market research, construction management, commercialand residential planning, and development. From 1983 to 1985, Mr. Bruni was the Managing Director of Renasce, Brazil’s firstshopping 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 residentialhousing, 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 untilDecember 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 YearsMartin JacoCIOMr. Jaco started his career in Andrade Gutierrez and Metodo Engenharia and joined CB Richard Ellis in 1996 with the objective ofdeveloping the investment consultancy operations of the company in Brazil. Mr. Jaco had direct responsibility and involvement in allinvestment 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, MBAfrom the College of Estate Management, Reading University, UK and a Postgraduate Diploma in Project Management from theRoyal Institute of Chartered Surveyors, UK. Industry Experience: 17 YearsMarco AntônioCordeiroCOOMr. Cordeiro was in charge of construction and project management at Schahin Cury and Metodo Engenharia (general contractors)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 hasassisted pension funds in over US$350 million of real estate transactions in the last 2 years.Marco Cordeiro is a civil engineer, with a graduate degree from the Polytechnic School of Engineering at the University of SãoPaulo and specialization at the Business School of Fundação Getúlio Vargas. Industry Experience: 30 YearsPedro DaltroCFOMr. Daltro started his career in Banco Marka as a Corporate Finance Manager and a Deputy Director. Later, he worked as a VP inthe Credit Risk Management department of Citigroup and Treasurer and Financial Manager in Gafisa, the second largest real estatedeveloper in Brazil. After Gafisa, he went back to Citigroup as Director of the Public Sector, Infrastructure and Real Estate division.Pedro Daltro has a bachelor´s degree in Business Administration from Unifacs, Brazil, and MBA from the Owen Graduate School ofManagement, Vanderbilt University, U.S. Industry Experience: 16 YearsBR Properties is managed by a team of seasoned professionals, highly motivated and fully alignedwith stockholders through long term stock options plans5
  20. 20. 201Q11 Financial HighlightsEBITDA (R$ mn) and EBITDA Margin (%)Net Revenues (R$ mn)1Q10 1Q1135.26777.777121%1Q10 1Q1129.51569.861137%84%90%
  21. 21. 211Q11 Net Debt (R$ mn)Solid Balance Sheet1Q11 Debt Profile (Index)1Q11 Debt Service Schedule (R$ mn)1402.1141.668261.948 446ST Debt Obligations forAcquisitionsLT Debt Total Debt Cash Net Debt75%2%23%TRIGPMCDI118 144 131 118 103 87 64 38 24 182 068128 128 157 161 178331156154 14126 142011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022PrincipalInterest
  22. 22. 22Strategy Going Forward► 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► Maintain our strategy of market consolidation, buying higher quality existing properties and taking advantage of a highlyfragmented sector
  23. 23. 23Appendix: São Paulo Office MarketSource: CBRE 4Q10 Market View ReportTotal StockSubmarkets Vacancy RateAsking Lease RateRange (Class A)(%) (R$/ sq m/ month)Downtown 2.7% R$ 14.00 - R$ 35.00*Paulista 3.5% R$ 75.00 - R$ 120.00Jardins 3.0% R$ 85.00 - R$ 160.00Marginal 6.1% R$ 45.00 - R$ 110.00Other 1.6% R$ 50.00 - R$ 70.00Total Market 3.9% R$ 45.00 - R$ 160.00Alphaville 17.9% R$ 30.00 - R$ 60.00* There are no class A buildings in this submarket. Leaserates apply to the best buildings in the areaMarginal35%Other20%Paulista16%Jardins16%Alphaville7%Downtown6%
  24. 24. 24Appendix: Rio de Janeiro Office MarketSource: CBRE 4Q10 Market View ReportTotal StockDowntown64%Botafogo13%BarradaTijuca11%Other5%South Zone5%Flamengo2%Submarkets Vacancy RateAsking Lease RateRange (Class A)(%) (R$/ sq m/ month)Downtown 2.0% R$ 100.00 - R$ 180.00Botafogo 0.9% R$ 110.00 - R$ 150.00Flamengo 0.0% R$ 90.00 - R$ 130.00Barra da Tijuca 1.8% R$ 80.00 - R$ 115.00South Zone 3.2% R$ 120.00 - R$ 180.00Other 5.5% R$ 60.00 - R$ 90.00Total Market 2.0% R$ 60.00 - R$ 180.00
  25. 25. 25Appendix: São Paulo Industrial MarketTotal StockSource: CBRE 4Q10 Market View ReportSubmarkets Vacancy RateAsking Lease RateRange (Class A)(%) (R$/ sq m/ month)ABCD * 0.0% R$ 12.00 - R$ 18.00Atibaia * 1.8% R$ 18.00 - R$ 20.00Barueri 6.0% R$ 21.00 - R$ 25.00Cajamar * 1.1% R$ 17.00 - R$ 20.00Cotia/ Embu * 0.0% R$ 18.00 - R$ 22.00Greater Campinas 4.3% R$ 15.00 - R$ 25.00Guarulhos * 1.8% R$ 18.00 - R$ 24.00Jundiaí * 8.1% R$ 13.00 - R$ 19.00São Paulo 1.4% R$ 18.00 - R$ 25.00Sorocaba * 40.2% R$ 16.00 - R$ 20.00Vale do Paraíba * 22.8% R$ 14.00 - R$ 17.00Total Market 5.6% R$ 12.00 - R$ 25.00* The eight submarkets that comprised the "Others" regionin previous reportsGreaterCampinas34%São Paulo11%Barueri10%Cajamar10%Jundiaí10%Cotia/ Embu7%Vale doParaíba6%Guarulhos3%ABCD3%Atibaia3%Sorocaba3%
  26. 26. 26ContactInvestor RelationsPedro DaltroChief Financial and Investor Relations OfficerLeonardo FernandesInvestor Relations ManagerMarcos HaertelInvestor Relations AnalystPhone: (55 11) 3201-1000Email: