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Company Presentation

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Company Presentation

  1. 1. 1 Company Presentation
  2. 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.
  3. 3. 3 Company Overview The largest and most complete commercial properties company in Brazil Office Industrial Developments ► Jacarandá Bldg.► Ventura Towers ► Manchete Build. ► Cidade Jardim Bldg. ► Panamérica Park II ► Souza Aranha Build. ► DP Louveira Industrial Complex ► DP Araucária Company Profile Segments of Activity ► Largest public commercial properties company in 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 62 properties, with more than 1 million sq m of GLA and estimated market value of R$ 3.33 billion ► 4 greenfield projects, with approximately 150.4 thousand sq m 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 deals and execute transactions makes BR Properties the partner of choice for co-development and built-to-suit operations ► Fully owned Property Management Company
  4. 4. 4 GLA by Property Type (sq m) Portfolio Overview: Breakdown and Tenant Base Market Value of the Portfolio (R$ mm) A top-notch portfolio comprised of office buildings and warehouses, located in the most dynamic regions of Brazil BR Properties tenant base entails some of the best known Companies in the country, spanning wide industry diversification ► Over 150 high quality tenants Main Tenants Tenant Breakdown by Industry Logistics Financial Services Industrial Technology Consumer Goods Energy Other Telecom Storage Consulting Construction Publishing Media 60% 40% Office Warehouse 27% 73% Office Warehouse
  5. 5. 5  Ventura Towers II  Location: Rio de Janeiro / RJ  GLA: 21,493 sqm  CAPEX: R$ 340 mm  Owned: 41% Portfolio Overview: Recent Acquisitions Our recent acquisitions were in accordance with our strategy to acquire properties of exceptional quality, leased to large tenants, and located in the main economic regions of Brazil  Manchete Building  Location: Rio de Janeiro / RJ  GLA: 26,439 sqm  CAPEX: R$ 260 mm  Owned: 100%  DP Louveira 1 - 9  Location: Louveira / SP  GLA: 339,548 sqm  CAPEX: R$ 539,5 mm  Owned: 100%
  6. 6. 6 Rio de Janeiro Portfolio Overview: Geographic Presence Our portfolio is based mainly in the southeastern and southern regions of Brazil, where the major productive regions, high concentration of the GDP, and the more liquid commercial property markets are located Together, the two regions represent approximately 73% of the GDP, and 57% of the country’s population. São Paulo Minas GeraisParaná Total GLA: 836,008 sqm Office: 155,583 sqm Warehouse: 680,425 sqm Source: IBGE Office Warehouse BRPR footprint Total GLA: 60,273 sqm Office: 3,366 sqm Warehouse: 56,907 sqm Total GLA: 111,188 sqm Office: 111,188 sqm Warehouse: - Total GLA: 7,166 sqm Office: 7,166 sqm Warehouse: - SP 82% RJ 11% PR 6% MG 1% SP 63% RJ 32% PR 4% MG 1% Lease Revenues GLA
  7. 7. 7 Portfolio Overview: Developments The Company currently holds 4 greenfield projects, of which 3 are office buildings and one is an industrial condominium, that once finalized, will add 150 thousand sqm of GLA to the portfolio Cidade Jardim Panamérica Park II  Type: Office AAA  Location: São Paulo / SP  Delivery Date: Jun/2012  GLA: 6,792 sqm  Forecast Rent (R$/sqm): R$ 125.00  Owned: 50%  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 Pre-certified Building
  8. 8. 8 Portfolio Overview: Developments BR Properties will have invested approximately R$ 8.7 mm in these projects by the end of 2010 Tech Park SJC  Type: Office  Location: São Paulo / SP  Delivery Date: Dec/2012  GLA: 4,037 sqm  Forecast Rent (R$/sqm): R$ 57.00  Owned: 50%  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 Souza Aranha
  9. 9. 9 A unique vehicle, exposed exclusively to Brazilian commercial real estate, extremely well positioned to benefit from the bullish fundamentals of the sector in Brazil 1 2 34 5 Favorable Macro-Economic Scenario Attractive Sector Dynamics Unique Business Model Broad Growth Potential: Natural Industry Consolidator World-Class Sponsorship and Tier 1 Management Team Investment Case
  10. 10. 10 NTN-B (% aa.) Real GDP Growth (%) ► Lower interest Rates ► Increased credit availability ► Increasing demand for industrial and distribution space Unemployment Rate (%)¹ Favorable Macro-Economic Conditions Industrial Production Growth (%)¹ 1 Growing industrial production and GDP, declining unemployment rates and single-digit interest rates are fueling sectors exposed to domestic market Source: Brazilian Central Bank Note: 1 Adjusted Seasonally ► Emerging middle class► Pent-up demand for commercial properties 2002 2003 2004 2005 2006 2007 2008 2009 2010E 11.9% 12.4% 11.0% 9.7% 9.7% 8.7% 7.9% 6.8% 6.5% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 1.3% 2.7% 1.1% 5.7% 3.2% 4.0% 5.7% 5.1% -0.2% 6.3% 4.5% 2005 2006 2007 2008 2009 2010E 3.8% 3.8% 6.2% -17.7% -5.5% 10.5% 5.6% 4% 5% 6% 7% 8% 9% 10% 11% 12% Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10
  11. 11. 11 Effects of the Nominal Interest Rate Increase (SELIC vs. TR) Expected Positive Effects of the Growth of Inflation Indexes (TR vs. IPCA vs. BRPR Inflation basket) Source: Santander research Favorable Macro-Economic Conditions1 0,00% 7,08% 0,82% 1,03% 4,31% 5,48% 0,0% 1,0% 2,0% 3,0% 4,0% 5,0% 6,0% 7,0% 8,0% 2009 2010e BRPR Basket of lease contract inflation readjustment indices TR IPCA (CPI) 8,75% 10,75% 0,82% 1,03% 0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 2009 2010e Forecast SELIC TR ► The potential increase in the nominal interest rate until the end of the year would result in a small 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
  12. 12. 12 Low vacancy combined with steady demand and short supply in the near term allow for solid growth potential in the commercial properties sector Attractive Sector Dynamics2 Source: CBRE 110 240 95 130 0 50 100 150 200 250 300 350 400 450 2004 2005 2006 2007 2008 2009 2010E 2011E New Inventory SP New Inventory RJ 288 288 138 101 0 50 100 150 200 250 300 350 400 450 2004 2005 2006 2007 2008 2009 2010E 2011E Net Absorption SP Net Absorption RJ Net Absorption (in 000 sqm) in SP + RJ New Inventory (in 000 sqm) in SP + RJ Rental Rate (in R$/sqm/month) in SP + RJ Vacancy Rate (in %) in SP + RJ 95 123 0 20 40 60 80 100 120 140 2005 2006 2007 2008 2009 2010 Rental Rate SP Rental Rate RJ 5.9 3.7 0 2 4 6 8 10 12 14 16 18 2005 2006 2007 2008 2009 2010 Vacancy Rate SP Vacancy Rate RJ
  13. 13. 13 BR Properties benefits from its strong expertise to add value throughout the whole Real Estate investment chain… Unique Business Model3 Pro-active Deal Sourcing Value Creation Selective Developments Divestment Lease / Property Management Retrofit Conservative Use of Leverage
  14. 14. 14 Fast Portfolio Growth with low vacancy level More than 1 million sqm of leasable area acquired in 3.5 years 4Q07 Today 2007 2008 2009 82 3,421 507 337 105 91 14 - - (22) - 807 295 865 340 Market Value GLA 1,014,636 sqm 2010 3Q072Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 3 IPO Private Placement Private Placement Oct/10  Stabilized Vacancy: 1,9%  Delinquency: 0,1% Initial Funding
  15. 15. 15 Lease Contract Characteristics Lease contracts in place allow for stable, predictable cash flows, while creating a very low vacancy risk scenario and considerable upside potential in revenues 20% 41% 24% 13% 1% 2010 2011 2012 2013 >2013 1% 7% 9% 34% 51% 2010 2011 2012 2013 >2013 Expiration 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 the contract, 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 break the contract and remove the tenant ► Average office lease term: 3-5 years ► Average warehouse lease term: 5-10 years Inflation Readjustment IndicesMain Characteristics 76% 22% 2% IGP-M IPCA Other 3
  16. 16. 16 3 Unique Business Model: Successful Cases Note: 1 CBRE’s independent appraisal, as of December 31st, 2009 ROE*: 147% Sale Value Addition Henrique Schaumann Acquisition Value R$ 41.0 mm Acquisition Date Nov/07 Re-tenanting R$ 6.5 mm / year (42% increase on rental income) Retrofit Elevators/ Façade/Parking 2009 Appraised Value R$ 78.0 mm Ed. Generali Acquisition Value R$ 16.6 mm Acquisition Date Aug/07 Sale Value R$ 21.5 mm Sale Date Jan/10 Holding Period 29 months IRR 36% * Before taxes 16.6 21.5 Acquisiton Value Sale Value 41.0 78.0 26.97 38.10 -3,00 2,00 7,00 12,00 17,00 22,00 27,00 32,00 37,00 42,00 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0 90,0 At Acquisition Current Property Value Lease/sq m
  17. 17. 17 Fragmented Industry (in terms of GLA – sq m) Acquisition Pipeline (R$ mm) Ample market fragmentation and lack of professional competitors creates a unique environment for market consolidators Broad Growth Potential: Natural Industry Consolidator4 Total Acquisition Pipeline R$2,573R$3,326Current Portfolio Organized Companies 8% Addressable Market: 36.3 mm sq m Non – Organized Market 92% BRProperties 22% 10 Organized Companies 78% 226 490 716 1.244 612 1.856 1.471 1.102 2.573 In Negotiation In Analysis Total Office Industrial Total
  18. 18. 18 Ownership Structure and Share Performance BR Properties current ownership structure is highly fragmented, with no controlling shareholder, no shareholders agreement, and over 77% of its shares in free float 5 GP Investments 14% Laugar S.A. 5% Silverpeak 4% Free Float 77%  Total Shares: 139,403,585  Market Capo: R$ 2.4 billion  ADTV (30d): R$ 9.6 million * As of October 31st, 2010 26,15% 3,06% -20% -10% 0% 10% 20% 30% mar-10 abr-10 mai-10 jun-10 jul-10 ago-10 set-10 out-10 BRPR3 Ibovespa
  19. 19. 19 Management Team Biography Claudio Bruni CEO Mr. Bruni’s whole career was dedicated to real estate development and management. From 1979 to 1989, Mr. Bruni worked for Multiplan, Brazil’s largest real estate developer, where he was in charge of market research, construction management, commercial 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 Martin Jaco CIO Mr. Jaco started his career in Andrade Gutierrez and Metodo Engenharia and joined CB Richard Ellis in 1996 with the objective of developing the investment consultancy operations of the company in Brazil. Mr. Jaco had direct responsibility and involvement in all 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 Marco Antônio Cordeiro COO Mr. 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 has assisted pension funds in over US$350 million of real estate transactions in the last 2 years. Marco Cordeiro is a civil engineer, with a graduate degree from the Polytechnic School of Engineering at the University of São Paulo and specialization at the Business School of Fundação Getúlio Vargas. Industry Experience: 30 Years Pedro Daltro CFO Mr. Daltro started his career in Banco Marka as a Corporate Finance Manager and a Deputy Director. Later, he worked as a VP in the Credit Risk Management department of Citigroup and Treasurer and Financial Manager in Gafisa, the second largest real estate developer in Brazil. After Gafisa, he went back to Citigroup as Director of the Public Sector, Infrastructure and Real Estate division. Pedro Daltro has a bachelor s degree in Business Administration from Unifacs, Brazil, and MBA from the Owen Graduate School of Management, Vanderbilt University, U.S. Industry Experience: 16 Years BR Properties is managed by a team of seasoned professionals, highly motivated and fully aligned with stockholders through long term stock options plans 5
  20. 20. 20 Financial Highlights 2Q10 EBITDA (R$ mm) and EBITDA Margin (%) Net Revenues (R$ mm) 26.735 38.202 46.536 50.995 73.639 97.851 2Q09 2Q10 2Q10 Pro Forma 6M09 6M10 6M10 Pro Forma 43% 22% 44% 33% 74% 92% 31.989 44.889 53.223 59.270 86.489 110.701 2Q09 2Q10 2Q10 Pro Forma 6M09 6M10 6M10 Pro Forma 40% 19% 66% 46% 28% 87% EBITDA Margin 84% 85% 87% 86% 85% 88%
  21. 21. 21 Net Debt 2Q10 (R$ mm) Solid Balance Sheet Debt Profile 2Q10 (Index) Debt Amortization Schedule 2Q10 (R$ mm) 41.886 59.665 75.989 70.399 93.016 89.560 99.408 242.290 59.921 48.411 14.632 1.027 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 92% 4% 4% TR IGPM CDI 112 955 558 59 784 396 ST Debt Obligations for Acquisitions LT Debt Total Debt Cash Net Debt
  22. 22. 22 Strategy 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 ► Deployment of the remaining IPO proceeds (R$ 240 million) and the perpetual bond proceeds (R$340 million) over the next 12 months
  23. 23. 23 Appendix: São Paulo Office Market Source: CBRE 3Q10 Market View Report Total Stock Downtown 6% Paulista 17% Jardins 15% Marginal 36% Other 20% Alphaville 6% Submarkets Vacancy Rate Asking Lease Rate Range (Class A) (%) (R$/ sq m/ month) Downtown 4.0% R$ 14.00 - R$ 27.00* Paulista 3.8% R$ 75.00 - R$ 110.00 Jardins 3.9% R$ 85.00 - R$ 160.00 Marginal 7.5% R$ 45.00 - R$ 110.00 Other 2.3% R$ 50.00 - R$ 70.00 Total Market 4.9% R$ 45.00 - R$ 160.00 Alphaville 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
  24. 24. 24 Appendix: Rio de Janeiro Office Market Source: CBRE 3Q10 Market View Report Total Stock Downtown 67% Botafogo 14% Barrada Tijuca 12% Others 0% South Zone 5% Flamengo 2% Submarkets Vacancy Rate Asking Lease Rate Range (Class A) (%) (R$/ sq m/ month) Downtown 2.4% R$ 100.00 - R$ 180.00 Botafogo 1.2% R$ 110.00 - R$ 150.00 Flamengo 0.9% R$ 90.00 - R$ 130.00 Barra da Tijuca 6.4% R$ 80.00 - R$ 115.00 South Zone 6.4% R$ 120.00 - R$ 180.00 Other 5.5% R$ 60.00 - R$ 90.00 Total Market 3.1% R$ 60.00 - R$ 180.00
  25. 25. 25 Appendix: São Paulo Industrial Market Total Stock Source: CBRE 3Q10 Market View Report Submarkets Vacancy Rate Asking Lease 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 Greater Campinas 33% São Paulo 11%Barueri 11% Cajamar 10% Jundiaí 10% Cotia/ Embu 7% Vale do Paraíba 6% Guarulhos 3% ABCD 3% Atibaia 3% Sorocaba 3%
  26. 26. 26 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

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