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Presentation – increase on Goldfarb’s stake

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Presentation – increase on Goldfarb’s stake

  1. 1. PDG Realty increases its stake in Goldfarb to 80%, and acquires an option to purchase an additional 20% reaching 100% Investors Relations: Michel Wurman Investors Relations Director João Mallet Investors Relations Manager Gustavo Janer IR Analyst Telephone: +55 (21) 3504-3800 E-mail: ri@pdgrealty.com.br 1 Website: www.pdgrealty.com.br/ir
  2. 2. Agenda Deal Rationale Increase of PDG Realty´s stake in Goldfarb PDG Realty Business Model Final Comments 2
  3. 3. Deal Rationale Consolidation of PDG Realty´s position as one of the leaders in operations within the low income segment. g Opportunity to accelerate investments in the market segment with the largest repressed demand on Brazilian real estate market. Investment in a company with proven execution capacity and great potential growth growth. Stake acquisition based on accretive valuation. Arbitrage opportunity on discounts between listed companies versus private equity investments. Reaffirm and reiterate the strategic alignment between the current shareholders of Goldfarb and PDG Realty. 3
  4. 4. Option Exercice of aditional 5% We exercised the option to acquire 5% of Goldfarb, reaching a stake of 80%. The operation will be take place as described below: – Considering the economic value of Goldfarb of R$900 million, we increased the capital in R$100 million, to be paid in 10 installments starting in 2008, as a consequence PDG Realty will hold a stake on Goldfarb of 77.5%. – The incorporation of a holding company that will hold a 2.5% interest in Goldfarb that was 100% controlled by other Goldfarb shareholders. – Increase of PDG Realty’s capital stock and issuance of 1 136 364 new common shares Realty s 1,136,364 delivered to Goldfarb’s partners. 75% of the new shares will be locked-up for a 9 months period, and at every quarter, starting at the issue, 25% of th th i f these shares will b f h ill be free f t di for trading. 4
  5. 5. New Purchase Option of 100% We entered into an agreement with the remaining shareholders of Goldfarb for a share purchase option for acquisition of up to 100% of Goldfarb’s shares by PDG Realty. The option may be exercised on an annual basis by any of the parties, in 4 tranches of 5% from 2009 on. The acquisition will be carried out through the issue of new shares by PDG Realty, pursuant to the proposal to be submitted t the shareholders. b itt d to th h h ld The economic value of Goldfarb for purposes of exercising the options will be determined by comparing the price earnings multiples, with a 35% discount relative to PDG Realty’s multiple. Goldfarb Net Income * 65% / PDG Realty Net Income The number of PDG Realty shares to be issued will be calculated as follows Number of PDGR3 = (GIC NI / PDG NI) * 65% * PDG Shares * % GIC Shares Where: number of PDGR3: number of PDG shares to be issued as a result of the respective incorporation; PDG NI: means the net income of PDG included in the balance sheet as of December 31 of the year immediately prior to the respective Option; GIC NI: GOLDFARB’s net income as of December 31 of the year immediately prior to y yp the respective Option; p p ; PDG shares: number of shares representing the capital stock of PDG as of December 31 of the year immediately prior to the exercise of the respective Option. % of GIC Shares: percentage of GOLDFARB sold in the tranche (5%). 5
  6. 6. Attractive Valuation Once again we were capable to consolidate an attractive investment with accretive valuation, leveraged on the arbitrage opportunity on discounts between listed companies versus private equity investments. Peers  Market Cap (R$ millions) ‐ as of Nov, 21st /07 Market Cap (R$ millions) as of Nov 21st /07 900 5.395 5 395 Estimated Earnings * 09´ (R$ millions) 140 430* P/E 09´ estimate 6,43 12,53 Goldfarb Acquisition Discount Goldfarb Acquisition Discount Discount to MRV multiple 49% *  MRV earnings estimate: ABN Amro / Bulltick / Merril Lynch / UBS Pactual * MRV earnings estimate ABN Amro / Bulltick / Merril Lynch / UBS Pactual 6
  7. 7. PDG Realty Towards the Low Income Segment Attractive Macroeconomic Environment is boosting mortgage availability and creating a adequate growth platform for the low income segment : Mortgage (% of GDP) Mortgage Expansion Mortgage reached R$9.3 billion 2003 2004 New Contracts per Month (R$ mm) until December 2006 70% 2005 2006 1,000 62% 2006 53% 51% 800 600 2005 35% r 400 2004 19% 16% 2003 10% 200 2% 0 0% Jan Feb Mar Apr Mai Jun Jul Aug Sep Oct Nov Dec Brazil B il Mexico Mi Chile Chil France G F Germany USA UK N Caixa vs. SFH Credit Growth Financing Conditions 14.2 Before Now The disbursement during the It was necessary to dispose up to 70% of During construction is between 10% and the unit’s value before the delivery of y 20%, 20% significantly more feasible to Construction C t ti the keys 8.7 8.7 rent payers Until five years ago, Caixa was 6.4 Private banks offer credit lines with a 5.4 practically the only real estate financer Deadline maximum of 25 years 4.6 which offered more than ten years 3.1 1.8 Contracts with TR+ 8% interest per Almost all of the contracts had TR+12% year and with fixed interest rates Interest interest per year (without TR) Developments were accounted for by Each development has its own 2003 2004 2005 2006 the incorporator. In the case of accounting , and separate from the bankruptcy during construction, the incorporators activities. In the case of Security SFH Caixa acquirer had no guarantees of bankruptcy, the property is not receiving the property considered a company asset 5
  8. 8. PDG Realty Towards the Low Income Segment Most of the housing deficit of the country is concentrated in the low income segment: Number of Residences (2006)1 Main Competitors’ Positioning Housing Deficit na 3% > 20 SM2 1.7 million 7% 4% 10 to 20 SM1 3.7 million 17% 8% 8.7 million 5 to10 SM2 88% 73% 37.4 million <5 SM2 Total Residences 51.6 million Source: IBGE, Diretoria de Pesquisas, Coordenação de Trabalho e Rendimento, Pesquisa Nacional por Amostra de Domicílios, Fundação João Pinheiro Note: 1 Minimum monthly wages (R$350) 6
  9. 9. PDG Realty advances in the low income segment Our current Landbank reflects PDG Realty’s great exposure to the low income segment (units up to R$ 250 thousand): PDG Realty PSV pro rata, shows that 72% is concentrated in this segment, representing a PSV pro rata in this segment of R$3.5 billion and 42,486 units. Most our activity in the low income segment goes through Goldfarb, due to our large stake in the company and also the co-incorporation in most projects. Moreover, we have projects of co incorporation co incorporation projects Moreover co-incorporation with some other partners that also develop for this segment. Landbank Segmentation by Partner in the Economic  Landbank Segmentation ‐ pro rata PSV Segment ‐ pro rata PSV High ; 1,0% Land Parceling;  Mid High; 3,3% Co ‐ Dev;  6,0% 7,2% CHL; 5,2% Mid ; 8,3% Comercial; 7,9% Goldfarb; 88,8% Low Income;  72,4% 9
  10. 10. Corporate Structure PDG R lt h Realty has b been managing t create new b i i to t businesses b based on th private equity model and d the it it dl d establish new successful partnerships with companies with proven track record. Notes: 1 25% directly and 11.9% indirectly through Lindencorp 2 Subject to further changes after new acquisitions 10
  11. 11. Business Model Exposure to the Low Income Flexibilidade pararata PSV in the Landbank amounts to R$ 3,5 billion Low Income Pro atuar em todos os segmentos do mercado Segment imobiliário42 k units with over Brasileiro Expertise and capacity to invest in: – Geographic regions Diversification – Market – Income class segments Abilidade “hire”agregar os melhores profissionais do mercado e on Ability to para the best management in the industry and leverage Leverage on Partnership their specific and local knowledge Philosophy alavancar suas abilidades em suas especificas áreas de atuação Potenciais ganhos de capital através dos seus investimentos de Additional capital gain Potential capital gains through its portfolio investments portfolio potential Management with strong real estate expertise, financial background g g p , g Gestão com grande culture to implement PDG Realty´s business and return oriented expertise no setor imobiliário e financeiro com Management expertise forte cultura de maximização de retornos strategy The right platform to accomplish a sustainable long term growth Unique business model in the Brazilian real estate market 11

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