Company presentation btg conference


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Company presentation btg conference

  1. 1. Company Presentation
  2. 2. Company OverviewThe largest and most complete commercial property company in BrazilSegments of ActivityOfficeIndustrialRetailPortfolio of Retail PropertiesTorre Nações UnidasDP LouveiraEd. Ventura II Ed. MancheteDP AraucáriaCompany Profile2 Largest public commercial property companyin Brazil Diversified portfolio (53% office, 33% warehouse, 8%retail, 6% development) currently holds 93 properties,with 1.17 million m² of gross leasable area (GLA) andestimated market value of approximately R$5.1 billion Diversified tenant base Regional footprint 5 greenfield projects, with approximately 178thousand m² of GLA Fully integrated and experienced in-house teams:acquisitions, financing, legal and engineering Pro active, value added investment strategy, “hands-on” approach Market recognition: proven ability to source deals andexecute transactions makes BR Properties the partnerof choice for co-development and built-to-suitoperations Fully owned Property Management Company
  3. 3. Promised and Delivered3Commitment to over-delivering results to its shareholdersIPO(March 2010)Current(December 2011)Growth(Current / IPO)613,499 1,166,389 1.9x150,473 178,434 1.2x7.4% 0.9% Reduction of 88%93.9(2009)339.7(3Q11 Annualized)3.6x45.0(2009)169.9(3Q11 Annualized)3.8xPortfolio GLA(m²)Under DevelopmentGLA(m²)Physical VacancyAdjusted EBITDA(R$ mm)Adjusted FFO(R$ mm)83.3%(2009)92.5%(3Q11 Annualized)Most Profitable Player in theSectorEBITDA Margin1,719(2009)5,129 3.0xTotal Portfolio(R$ mm)
  4. 4. Highest Growth in the Sector…Impressive growth rate, much higher than the average of its comparables…GLA CAGR 2008 - 2010 Net Revenues CAGR 2008 - 2010FFO CAGR 2008 - 2010 EBITDA CAGR 2008 – 20104¹¹¹¹222Source: CompaniesNotes:1 Considers BR Malls, Multiplan, Iguatemi and Alliansce2 Considers São Carlos and CCP53.6%24.8%7.9%Shopping Malls Average Properties Average64.4%9.8%-4.3%Shopping Malls Average Properties Average156.3%50.7%28.9%Shopping Malls Average Properties Average65.4%29.4%8.7%Shopping Malls Average Properties Average2
  5. 5. Ample market fragmentation and little professional competition create a unique environment formarket consolidationSignificant Opportunities to Expand Current PortfolioAddressable Market1: 36.3 mm m²BRProperties10 OrganizedCompaniesSource: BR Properties EstimatesNote:1 Does not include retail propertiesOrganizedCompanies9%Non-OrganizedMarket91%35%65%Fragmented Industry (in terms of GLA – m²) Acquisition Pipeline - In Negotiation (R$ mm)54.8429.4543.220762450180CurrentExistingPortfolioOffice Build-to-Suit Retail Industrial Total
  6. 6. Portfolio OverviewSECTION 1
  7. 7. BR Properties tenant base entails some of the best known Companiesin the country, spanning wide industry diversificationA top-notch portfolio comprised of office buildings, industrial, and retail properties located in themost dynamic regions of BrazilPortfolio: Breakdown and Tenant BaseMarket Value of the Portfolio(R$ mm)GLA by Property Type(m²)Tenant Breakdown(by Industry)Main TenantsOver 180 highquality tenants7Total: R$5.1 bn Total: 1,344 k m²Logistics20%ConsumerGoods19%FinancialServices13%Industry10%Technology7%Others26%Energy5%53%33%8%6%OfficeWarehouseRetailGreenfield22%57%8%13%OfficeWarehouseRetailGreenfield
  8. 8. Portfolio FootprintOfficeWarehouseBRPRRetail Number of existing properties: 88— Office: 34— Warehouse: 25— Retail: 29 Total GLA of the properties: 1,166,389 m²— Office: 298,411 m²— Warehouse: 767,093 m²— Retail: 100,885 m²States Total GLA %São Paulo 890,913 76.4%Rio de Janeiro 154,385 13.2%Paraná 63,120 5.4%Minas Gerais 18,998 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 1,166,389 100%BR Properties’ portfolio is present in 13 states, covering all 5 regions of Brazil8
  9. 9.  Average office lease term: 3-5 years Average warehouse lease term: 5-10 yearsExpiration Schedule(% revenues)Market Alignment Schedule(% revenues)Inflation Adjustment IndicesPortfolio: Lease Contract CharacteristicsLease contracts in place allow for stable, predictable cash flows, while creating a very lowvacancy risk scenario and considerable upside potential in revenues9 Annual Inflation Adjustments— 100% of lease contracts are indexed to inflation— 72% IGP-M, 24% IPCA and 3% other Triple Net Contracts— Tenant is responsible for all operating property costs— Costs include: taxes, insurance, and maintenanceexpenses Next 3 Years— 74% market alignment— 32% expiration Bank Guarantees on Leases— Standard practice in Brazil— Protects against delinquencies from smaller tenants Tenant Delinquency̶ Delinquency exceeding 30 days, lessor has right tobreak the contract and remove the tenantMain Characteristics2011 2012 2013 >20133%5% 20%73%2011 2012 2013 >201328%14%27%31%73%24%3%IGP-MIPCAOther
  10. 10. Effects of the Nominal Interest Rate Increase(SELIC vs. TR)Source: Santander research and Central BankPortfolio: Resilient Business DynamicsPositive Effects of the Growth of Inflation Indices(TR vs. IPCA vs. BRPR Inflation basket) Variations in the nominal interest rate do not exert asignificant impact on the Referential Rate (TR), main indexthat readjusts our financing contracts, which results in anoverall cost of debt that is nearly fixed Inflation increases, on the other hand, wouldhave 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 notesindexed to the Brazilian inter-bank rate (CDI)10Main Highlights11,00%9,50%1,21%0,91%0,0%2,0%4,0%6,0%8,0%10,0%12,0%2011 2012eForecast SELICTR1,21%0,91%6,50%5,50%5,27%0,0%2,0%4,0%6,0%8,0%10,0%12,0%2011 2012eTRIPCA (CPI)Avg. BasketInflation passthrough 2011 All of our debt is pre-payable at par, and can be refinancedin a scenario of decreasing interest rates
  11. 11. Growth DriversSECTION 2
  12. 12. Acquired PropertiesTotal CAPEX(R$ billion)1033.4Equity Raised(R$ billion)2.3Growth Drivers: AcquisitionsGLA Growth (‘000 m²) 2Average IRR onDivestments (%)¹28%Notes:1 Considers all the divestments since Company’s inception, and it is gross and leveraged2 Does not consider greenfield projectsSince 2007, BR Properties acquired stakes in 103 different properties with a total CAPEX of R$3.4billion12Market Value of CurrentPortfolio(R$ billion)5.12941.167143203531(3)2007 2008 2009 2010 2011 Current
  13. 13. RB 115 (Delivered in Dec/2010)Growth Drivers: Performance Improvement13Long-TermValueTriggerHenrique Schaumann (Acquired in 2007) Presidente Vargas (Acquired in 2007)+770 bps+650 bpsCap Rate Cap RateShort-TermValueTriggerCap Rate13.8%Outstanding management leads to very fast operating improvements and impressive increases inthe long runTNU (Acquired in Mar/2010)Cap Rate10.5%Ventura (Acquired in Aug/2010)Cap Rate11.8%10.3%+330 bps13.8%+150 bps +150 bps12.3%Initial 3Q11 Initial 3Q11 Initial 3Q11Initial 3Q1111,1%18,8%Initial 3Q1113,9%20,4%
  14. 14. Growth Drivers: Performance Improvement (cont’d)14Leasing Spreads – New LeasesCompany has been building a successful track record on increasing spreads in both contractrenegotiation and new leasesLeasing Spreads – RenegotiationsCase Study: Retail TenantDate of Acquisition Dec/2010GLA 97.431 m²Revenues @ Acquisition R$30.7 mmCap Rate @ Acquisition 10.2%Current RevenuesR$41.4 mm (post-renegotiation)Current Cap Rate13.4% (11 months afteracquisition)15,5%14,3%12,0%11,1%28,3%0,0%n/a n/a n/a1Q11 2Q11 3Q11Office Industrial Retail21,5%24,5% 24,1%22,6%n/a n/an/a15,7%17,1%1Q11 2Q11 3Q11Office Industrial Retail
  15. 15. Growth Drivers: Developments / Retrofit Type: Office A Location: São Paulo / SP Delivery Date: 4Q12 GLA: 2,019 m² Owned: 50% Type: Warehouse Location: Louveira / SP Delivery Date: 2Q12 GLA: 30,122 m² Owned: 100%SouzaAranhaDPLouveira7The Company currently holds 5 greenfield projects, that once finalized, will add 178 thousand m²of GLA to the portfolio, along with Ed. Manchete, which is now in retrofit15CidadeJardimPanaméricaGreenPark Type: Office AAA Location: São Paulo / SP Delivery Date: 2Q12 GLA: 6,792 m² Owned: 50%Pre-certified Building Type: Office A Location: São Paulo / SP Delivery Date: 1Q13 GLA: 14,502 m² Owned: 50%Pre-certified BuildingOngoingOngoingManchete Type: Office Location: Rio de Janeiro / RJ Delivered in: 4Q11 GLA: 27,658 m² Owned: 100%Under ApprovalRetrofit - Delivered in 4Q11 Type: Warehouse Location: São José dos Campos / SP Delivery Date: n/a GLA: 125,000 m² Owned: 100%TechParkSJC
  16. 16. Financial HighlightsSECTION 3
  17. 17. Financial Highlights17Net Revenues(R$ mm)Adjusted EBITDA and Margin(R$ mm and %)Adjusted FFO and Margin(R$ mm and %)53,791,8132,4253,23Q10 3Q11 9M10 9M1145,484,9111,2229,43Q10 3Q11 9M10 9M1184%93%84%91%22%46%35%27%11,642,546,068,33Q10 3Q11 9M10 9M11
  18. 18. Solid Balance SheetNet Debt* (R$ mm) Debt Profile (Index)Debt Service Schedule (R$ mm)18ST Debt ObligationsforAcquisitionsLT Debt Total Debt Cash Net Debt1722.1681.096151.982 1.07371%2%27%TRIGPMCDI2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 202248179 166 152 134 117 95 68 54 39 32 2924129 129 159 162 180333157 155128 26 14PrincipalInterest
  19. 19. APPENDIX – Commercial Property Market
  20. 20. -10.000.00020.000.00030.000.00040.000.00050.000.00060.000.00070.000.00080.000.00090.000.000100.000.000Tokyo London Manhattan Paris Munich Toronto Madrid São Paulo Rio de JaneiroTotal Stock PopulationOffice: Main Business Centers in the World20Source: CB Richard Ellis BrazilDespite its accelerated growth in recent years, the office market remains underpenetrated inBrazil compared with other major global markets
  21. 21. Office: Total Stock – São Paulo21AAA6% A11%Other w/ CAC*39%W/out CAC*44%15% 22%41%7%23%50% 40%44%40%77%35% 38%15%53%Downtown Paulista Jardins Marginal OtherA + AAA Other w/ CAC Other w/out CACQuality Weight GLA m² GLA sfAAA 6% 689.274 7.419.284A 11% 1.263.669 13.602.020Other w/ CAC* 39% 4.480.281 48.225.343W/out CAC* 44% 5.054.676 54.408.080Good Quality Properties 17% 1.952.943 21.021.303* Central Air conditioningQuality by RegionSource: CB Richard Ellis BrazilSão Paulo’s stock lacks good quality properties, with the highest technical specifications, despitebeing one of the most important business centers in the globe
  22. 22. 22Quality by Region54% 60%89%40%68%80%46% 40%11%60%32%20%Downtown Flamengo Botafogo South Zone Barra da Tijuca OtherWith CAC Without CACQuality Weight GLA m² GLA sfAAA 2% 119.506 1.286.352A 14% 836.542 9.004.463B 13% 776.789 8.361.287Other w/ CAC* 28% 1.673.084 18.008.926W/out CAC* 43% 2.569.379 27.656.565Good Quality Properties 16% 956.048 10.290.815* Central Air conditioningAAA2%A14%B13%Other w/CAC*28%W/out CAC*43%Office: Total Stock – Rio de JaneiroSource: CB Richard Ellis BrazilRio de Janeiro remains a tight market, driven by the oil and gas industry boom, scarcity of goodquality space, geographic barriers to entry and lack of adequate mass transportationinfrastructure
  23. 23. Office: Total Stock – São Paulo and Rio de Janeiro23Source: CB Richard Ellis BrazilOver the last 5 years, total stock in both markets has grown at approximately the same pace(3% annually), constrained by the lack of infrastructure5.110.8005.291.4005.530.9005.681.3005.853.1006.022.6002.460.100 2.517.300 2.609.300 2.711.700 2.780.400 2.892.500-1.000.0002.000.0003.000.0004.000.0005.000.0006.000.0007.000.0002006 2007 2008 2009 2010 3Q11São Paulo Rio de Janeiro
  24. 24. 24Office: Vacancy Rates – São Paulo and Rio de JaneiroSource: CB Richard Ellis BrazilGrowing demand for quality space and restrictions in new supply have led to historically lowvacancy rates, with better quality properties presenting better performance in both bull and bearmarkets3,1% 3,1%N/A N/A0,8%0,0%2,0%4,0%6,0%8,0%10,0%12,0%14,0%2006 2007 2008 2009 2010 3Q11São Paulo Rio de Janeiro BRPR (SP &RJ)
  25. 25. 25Office: Average Rent/ m²/ Month - A and AAA PropertiesSource: Jones Lang La Salle Brazil and Cushman & WakefieldAverage price/m² has increased since the mid 2000’s after many years of stagnant growth, whichhas brought Brazilian prices closer to those of the developed world6977 738495758390107120N/A N/A201247266N/A N/A115 117 120N/A N/A N/A52 57-501001502002503002007 2008 2009 2010 3Q11São Paulo Rio de Janeiro West End - London Midtown Manhattan BR Properties
  26. 26. Industrial: São Paulo Inland26Source: CB Richard Ellis BrazilVacancy RatesTotal StockThe industrial market remains strong, driven by faster consumption growth and increaseddemand for distribution facilities3.377.100 3.511.000 3.724.900 3.848.3004.120.900 4.167.300 4.290.7004.528.6004.817.300-1.000.0002.000.0003.000.0004.000.0005.000.0006.000.0003Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11Stock6,2%0,1%0,0%2,0%4,0%6,0%8,0%10,0%12,0%3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11Vacancy BRPR
  27. 27. Industrial: São Paulo Inland27Average Asking Rents in São Paulo Inland (R$/ m²/ month)Average Asking Rents in Other Markets (R$/ m²/ month – 2Q11)Source: CB Richard Ellis Global and Jones Lang La Salle USA.36322420 1910Tokyo London Singapore São Paulo Inland Sydney Los AngelesLease prices have stabilized, and are expected to remain at these levels because of the difficultiesin obtaining environmental approvals. Sluggish economic growth is not expected to affect leaseprices in the mid-term1719 19 20 19 19 19 2023-5101520253Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11Asking Rents
  28. 28. Fragmented Industry28Addressable Market1: 36.3 mm m²BRProperties10 OrganizedCompaniesOrganizedCompanies9%Non-OrganizedMarket91%35%65%Fragmented Industry (in terms of GLA – m²) Brazil: Owned vs Leased – Large CompaniesUSA: Owned vs Leased – Large CompaniesThe large majority of the companies in Brazil still own their real estateIn the USA, only 20% of the companies own their real estate assetsOwnBuildings20%Leased80%OwnBuildings80%Leased20%Source: Internal Estimates and Itaú SecuritiesHighly fragmented and non-institutionalized market creates an attractive environment for theindustry in the coming years
  29. 29. Market Highlights29 Industry dynamics still present very attractive growth opportunities; Infrastructure constraints will keep both office and warehouse markets tight in the mid-term; In the short run, slower economic growth may have a slight impact in vacancy rates, leading tostabilization of lease prices; Players with better quality portfolio’s and below-market lease prices should be more resilient thandevelopers; Lower interest rate environment with greater access to credit and urban redevelopment of existingareas (i.e.: Porto Maravilha project in RJ) will drive the industry’s growth in the long run.
  30. 30. ContactInvestor Relations30Pedro DaltroChief Financial and Investor Relations OfficerLeonardo FernandesHead of Investor RelationsMarcos HaertelInvestor RelationsPhone: (55 11) 3201-1000Email: