2. BR PROPERTIES S.A.
UNCONSOLIDATED AND CONSOLIDATED QUARTERLY FINANCIAL
INFORMATION
September 30, 2007
Contents
Special Review Report of Independent Auditors ................................................................ 1
Quarterly Financial Information
Balance Sheets..................................................................................................................... 2
Statements of Operations .................................................................................................... 4
Notes to the Quarterly Financial Information...................................................................... 5
Report Company’s Performance Consolidated ...................................................................24
3. 1
A free translation from Portuguese into English of Special Review Report of Independent Auditors on
quarterly financial information prepared in Brazilian currency in accordance with the accounting
practices adopted in Brazil .
SPECIAL REVIEW REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of
BR Properties S.A.
1. We have performed a special review of the accompanying unconsolidated and consolidated
Quarterly Information of BR Properties S.A. and BR Properties S.A. and its subsidiaries (“the
Company”) for the three and nine-month periods ended September 30, 2007, including, the
balance sheet, statements of operations, report on Company’s Performance and relevant
information, prepared in accordance with the accounting practices adopted in Brazil.
2. Our review was conducted in accordance with specific procedures determined by the Brazilian
Institute of Independent Auditors (IBRACON) in conjunction with the Brazilian Federal
Accounting Council (CFC), and consisted principally of: (a) inquiries of and discussions with
management responsible for the accounting, financial and operational areas of the Company and
its subsidiaries in respect to the main criteria adopted for preparing the Quarterly Information;
and (b) review of information and subsequent events which have, or could have, significant
effects on the financial position and operations of the Company.
3. Based on our special review, we are not aware of any material modification that should be made
to the Quarterly Information referred to above for it to comply with the accounting practices
adopted in Brazil, consistently with specific standards established by the Brazilian Securities
Commission (CVM), and specifically applicable to the preparation of the Quarterly
Information.
São Paulo, November 9, 2007
ERNST & YOUNG
Auditores Independentes S.S.
CRC-2SP015199/O-6
Antonio Humberto Barros dos Santos
Accountant CRC-1SP161745/O-3
4. 2
A free translation from Portuguese into English of quarterly financial information prepared in
Brazilian currency in accordance with the accounting practices adopted in Brazil.
BR PROPERTIES S.A.
BALANCE SHEETS
September 30, 2007 and June 30, 2007
(In thousands of reais)
Parent Company Consolidated
September 30,
2007
June 30,
2007
September 30,
2007
June 30,
2007
Assets
Current assets
Cash and banks (Note 4) 698 25,842 5,795 25,852
Short-term investments (Note 4) 50,628 52,656 59,358 52,746
Rental receivable - - 4,830 638
Advances (Note 6) 608 5,500 3,284 5,500
Recoverable taxes (Note 7) 1,561 537 1,606 544
Deferred income and social contribution
taxes (Note 12) 54 54 54 54
Prepaid expenses 18 26 358 26
Other accounts receivable 90 18 423 177
53,657 84,633 75,708 85,537
Noncurrent assets
Deferred income and social contribution
taxes (Note 12) 187 201 187 201
187 201 187 201
Permanent assets
Investments (Note 6) 226,915 21,233 - -
Goodwill 12,222 - 13,628 -
Property and equipment (Note 9) 499 467 581,951 83,876
239,636 21,700 595,579 83,876
Total assets 293,480 106,534 671,474 169,614
5. 3
Parent Company Consolidated
September 30,
2007
June 30,
2007
September 30,
2007
June 30,
2007
Liabilities and shareholders’ equity
Current liabilities
Loans and financing (Note 10) - - 37,276 6,369
Trade accounts payable 251 16 630 16
Salaries and social charges payable 217 103 312 103
Taxes payable 88 62 757 83
Provision for income and social
contribution taxes - 112 79 112
Payables for acquisition of real estate
(Note 11)
- - 9,081 -
Other accounts payable 1,289 78 956 78
1,932 371 49,091 6,761
Noncurrent liabilities
Loans and financing (Note 10) - - 330,835 56,690
- - 330,835 56,690
Shareholders’ equity
Capital:
Subscribed capital (Note 14) 300,921 203,745 300,921 203,745
Unpaid capital - (97,140) - (97,140)
300,921 106,605 300,921 106,605
Accumulated losses (9,373) (442) (9,373) (442)
291,548 106,163 291,548 106,163
Total liabilities and shareholders’ equity 293,480 106,534 671,474 169,614
See accompanying notes.
6. 4
BR PROPERTIES S.A.
STATEMENTS OF OPERATIONS
Three and nine-month periods ended September 30, 2007
(In thousands of reais)
Parent Company Consolidated
Three months
period ended
September 30,
2007
Nine months
period ended
September 30,
2007
Three months
period ended
September 30,
2007
Nine months
period ended
September 30,
2007
Gross Revenues:
Rental - - 8,340 9,388
Services rendered 35 35 35 35
Taxes on revenues (5) (5) (1,268) (1,365)
Net revenue from rental 30 30 7,107 8,058
Cost of rental - - (3,349) (3,851)
Gross profit 30 30 3,758 4,207
Operating income (expenses)
General and administrative expenses (2,435) (4,836)) (2,429) (5,116)
Financial income 1,928 4,680 2,006 4,744
Financial expenses (1,115) (1,369) (12,411) (13,330)
Equity pick-up in subsidiaries (7,617) (8,119) - -
Operating and pretax loss (9,209) (9,614) (9,076) (9,495)
Non operating income - - - 14
Income and social contribution
taxes (Note 9) 223 241 108 108
Loss for the period (8,986) (9,373) (8,968) (9,373)
See accompanying notes.
7. 5
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION
September 30, 2007
(In thousands of reais)
1. Operations
The Company was incorporated on May 26, 2004 as Itarema Participações S.A. On
December 22, 2006, its corporate name was changed to BR Properties S.A. (“BR
Properties” or the “Company”).
On December 22, 2006, the Company received contributions from the shareholders,
including the new shareholders, amounting to R$ 53,000. The major new shareholders
were Private Equity Partners LLC, Reic Brasil Holding LLC, Castlerigg Latin
American Investments LLC, Peter L. Malkin Family 2000 LLC, Talisman Special
Purpose Fund Ltd, Tudor Proprietary Trading LLC and Tudor Brazil Investments LLC.
The shareholders established the Company’s business plan and resolved that it would
operate as a holding, mainly engaged in the acquisition, management, leasing and sale
of commercial buildings in Brazil, especially commercial buildings and office space,
retail stores and warehouses, provided that they are existing or built to suit assets and
the subject matter of lease agreements already entered into.
The Company began its operations in April 2007, by establishing Specific Purpose
Companies (SPC) to acquire properties and have them rented under commercial lease
agreements.
By September 30, 2007, the Company had invested R$587,505 in the acquisition of the
following properties:
On April 16, 2007, the Company through its subsidiary BRPR I Empreendimentos e
Participações Ltda., acquired a building (Edf. Bonfiglioli) located at Rua Dr. Renato
Paes de Barros, nº 33, in the City of São Paulo, State of São Paulo.
On May 25, 2007, the Company through its subsidiary BRPR II Empreendimentos e
Participações Ltda., acquired a building (Edf. Plaza Centenário) located at Av. João
Gualberto, nº 717, in the city of Curitiba, State of Paraná.
On May 29, 2007, the Company through its subsidiary BRPR II Empreendimentos e
Participações Ltda., acquired a building (Condomínio Panamérica Park) located at Av.
Guido Caloi, nº 1000, Blocos 2, 3, 5 and 6, in the city of São Paulo, State of São Paulo.
On July 17, 2007, the Company through its subsidiary BRPR III Empreendimentos e
Participações Ltda., acquired a building (Centro Empresarial Cinelândia) located in
Praça Floriano, in the downtown area of the city of Rio de Janeiro.
BR PROPERTIES S.A.
8. 6
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
1. Operations - - continued
On July 31, 2007, the Company through its subsidiary BRPR I Empreendimentos e
Participações Ltda. acquired a portfolio of commercial buildings including an office
building, four industrial warehouses and an auto mall (Auto Shopping Piraporinha).
The office building is located in Barueri, Alphaville district, with a gross leasable area
of 8,424 m2. The portflio further includes four industrial warehouses, which altogether
have a gross leasable area of 122,380 m2. Auto Shopping Piraporinha comprises
several car stores rented to different individual tenants and is located in São Bernardo
do Campo, a gross leasable area of 5,600 m2.
On August 2, 2007, the Company through its subsidiary BRPR III Empreendimentos e
Participações Ltda. acquired the building Edifício Generali located on Rua Bráulio
Gomes, in the city of São Paulo. This building is rented to Banco Santander, Telesp
Celular and Amil Assistência Média.
On August 27, 2007, the Company through its subsidiary BRPR III Empreendimentos
e Participações Ltda. acquired two floors of the building Edifício Bolsa de Valores do
Rio de Janeiro, a gross leasable area of 3,190 m², being located in the city of Rio de
Janeiro.
On August 31, 2007, the Company through its subsidiary BRPR IV Empreendimentos
e Participações Ltda. acquired ten commercial buildings located in the city of São
Paulo.
On September 3, 2007, the Company through its subsidiary BRPR IV
Empreendimentos e Participações Ltda. acquired the Celebration building located at
Rua Casa do Ator, 1155 – Vila Olimpia, in the city of São Paulo, State of São Paulo.
On September 3, 2007, the Company through its subsidiary BRPR IX
Empreendimentos e Participações Ltda. acquired the Icomap III building, located at
Avenida Marechal Floriano, 99 in the downtown area of the city of Rio de Janeiro,
state of Rio de Janeiro.
On September 12, 2007, the Company through its subsidiary BRPR IV
Empreendimentos e Participações Ltda. acquired the Athenas building, located at Rua
Dr. Fernandes Coelho, 64 - Pinheiros, in the city of São Paulo, state of São Paulo.
9. 7
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
1. Operations - - continued
On September 28, 2007, the Company through its subsidiary BRPR VII
Empreendimentos e Participações Ltda. acquired the Avaya building, located at Rua
Verbo Divino, 1227 – Chácara Sto. Antonio, in the city of São Paulo, state of São
Paulo, and the Presidente Vargas building, located at Av Presidente Vargas, 824 and
844, in the downtown area of the city of Rio de Janeiro, state of Rio de Janeiro.
These properties have been leased for terms ranging from 4 to 8 years, and are
renewable for identical periods.
2. Basis of Preparation and Presentation of the Quarterly Financial Information
The quarterly financial information was prepared based on the accounting practices
adopted in Brazil and the accounting guidance provided by the Brazilian Corporation
Law and the rules and accounting procedures established by the Brazilian Securities
Commission (CVM).
The preparation of the quarterly financial information involves the use of accounting
estimates. Such estimates were based on objective and subjective aspects considering
management’s judgment to determine the adequate amount to be recorded in the
quarterly financial information. Significant items subject to these estimates and
assumptions include selection of useful lives and recoverability of property and
equipment and measurement of financial instruments and other assets and liabilities at
the date of the quarterly financial information.
Settlement of transactions involving these estimates may result in amounts
significantly different from those recorded in the quarterly financial information due to
the uncertainties related to the estimate process.
Income and social contribution taxes were computed based on applicable legislation at
the balance sheet date.
Assets and liabilities are classified as current whenever their realization or settlement is
likely to occur within the following twelve months. Otherwise they are classified as
noncurrent.
10. 8
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
2. Basis of Preparation and Presentation of the Quarterly Financial Information - -
continued
The consolidated financial statements include operations of the Company and the
following subsidiaries, in which its ownership interest at September 30, 2007 is as
follows:
The fiscal year of subsidiaries included in consolidation is the same as that of the
Company, also accounting policies were consistently applied by the consolidated
companies.
The main consolidation procedures are:
- Elimination of the balance of intercompany assets and liabilities;
- Elimination of participation in capital, reserves and retained earnings of
consolidated companies;
- Elimination of the balances of revenues and expenses resulting from intercompany
transactions.
Direct
Ownership
Interest
Consolidation
Criterion
BRPR I Empreendimentos e Participações Ltda. 99.99% Integral
BRPR II Empreendimentos e Participações Ltda. 99.99% Integral
BRPR III Empreendimentos e Participações Ltda. 99.99% Integral
BRPR IV Empreendimentos e Participações Ltda. 99.99% Integral
BRPR V Empreendimentos e Participações Ltda. 99.99% Integral
BRPR A Administradora de Ativos Imobiliários Ltda. 99.99% Integral
BRPR VII Empreendimentos e Participações Ltda. 99.99% Integral
BRPR VIII Empreendimentos e Participações Ltda. 99.99% Integral
BRPR IX Empreendimentos e Participações Ltda. 99.99% Integral
11. 9
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
3. Summary of Significant Accounting Practices
a) Determination of profit and loss: Revenues and expenses are recorded on the
accrual basis. Revenue is not recognized if there is significant uncertainty about
realization thereof.
b) Cash and cash equivalents: Include bank account balances and short-term
investments redeemable within 90 days from the balance sheet date. These are
stated at acquisition cost plus income earned to the balance sheet date.
c) Investments: Investments in subsidiaries are stated by the equity method.
d) Property and equipment: These are recorded at acquisition cost less accumulated
depreciation. Depreciation is calculated by the straight-line method at rates
mentioned in Note 9.
e) Goodwill: Goodwill on the acquisition of investments is based on expected future
profitability and is being amortized based on projected net income curve of each
such investment prepared by management, over a period no longer than 10 years.
The Company reviews projected future results and goodwill for any impairment
indicated every year.
f) Liabilities: Liabilities are recognized in the balance sheet when the Company has a
legal or constructive obligation arising from past events, the settlement of which is
expected to result in a cash outflow. Due to uncertainty with respect to the timing
and amount of the cash outflow required for settlement, certain liabilities are
estimated as incurred and recorded as a provision. Provisions are recorded
reflecting the best estimates of the risk involved.
g) Loans and financing: Loans and financings are subject to monetary variations and
include respective charges to the quarterly information date.
12. 10
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
3. Summary of Significant Accounting Practices - - continued
h) Taxation: Revenues from the lease of real estate are subject to the following taxes
and mandatory contributions at the following statutory tax rates:
Taxes and mandatory contributions Abbreviation Statutory tax rates
Social Contribution Tax on Gross Revenue for Social
Integration Program PIS 1.65%
Social Contribution Tax on Gross Revenue for Social
Security Financing COFINS 7.6%
These charges are shown as deductions from revenues from the lease of real estate
in the statement of operations. Non-cumulative Pis/Cofins credits are stated
deducting cost of leased properties and services rendered in the statement of
operations.
Income taxes comprise both income and social contribution taxes.
Income tax is calculated at a rate of 15%, plus a surtax of 10% on taxable income
exceeding R$ 240 over 12 months, whereas social contribution tax is computed at
a rate of 9% on taxable income, both recognized on an accrual basis; therefore
additions to book income deriving from temporarily non-deductible expenses or
exclusions from temporarily non-taxable income upon determination of current
taxable income generate deferred tax assets or liabilities.
4. Cash and Cash Equivalents
Parent Company Consolidated
09/30/2007 06/30/2007 09/30/2007 06/30/2007
Cash and banks 698 25,842 5,795 25,852
Short-term investments – Debentures (a) 50,628 52,656 59,358 52,746
51,326 78,498 65,153 78,598
(a) These mainly refer to highly-liquid investments (debentures) with major banks, which are
remunerated at rates between 100.3% and 101% of Interbank Deposit Certificate (CDI).
13. 11
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
5. Rental Receivable
Consolidated
09/30/2007
Rental receivable 4,692
Condominium quotas 138
4,830
At September 30, 2007, there were no amounts overdue in the balance of lease
receivable. Lease is usually received until the 10th
business day of the month following
that to which it refers. Company management does not expect losses on the realization
of accounts receivable at balance sheet date, reason why no allowance for doubtful
accounts has been recorded.
6. Advances
At September 30, 2007, the balance of R$ 3,284 (consolidated) is represented by
advances made by the Company to forwarders for the payment of taxes and expenses
related to the properties acquired.
7. Recoverable Taxes
Parent Company Consolidated
09/30/2007 06/30/2007 09/30/2007 06/30/2007
Income and social contribution tax
prepayments 1,462 537 1,506 536
PIS recoverable 18 - 18 2
COFINS recoverable 81 - 81 6
Withholding income tax - - 1 -
1,561 537 1,606 544
14. 12
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
8. Investments
a) Information on subsidiaries at September 30, 2007:
Investments in subsidiaries stated by the equity method were determined in
accordance with the balance sheets at September 30, 2007.
Parent Company
Companies
In Thousands
of Shares
/Units of
Interest Capital
Sharehold
ers’Equity
Net
income
(loss) for
the
period
Investmen
t book
value
Equity
Pickup
BRPR I Empreendimentos e Participações Ltda. 98,741,498 98,741 93,695 (5,047) 93,695 (5,047)
BRPR II Empreendimentos e Participações Ltda. 33,016,000 18,970 18,506 (464) 18,506 (464)
BRPR III Empreendimentos e Participações Ltda. 23,785,000 23,785 23,011 (774) 23,011 (774)
BRPR IV Empreendimentos e Participações Ltda. 66,663,997 66,167 64,735 (1,431) 64,735 (1,431)
BRPR V Empreendimentos e Participações Ltda. 1,000 1 (1) (1) (1) (1)
BRPR VII Empreendimentos e Participações
Ltda. 21,994,399 21,994 21,578 (415) 21,579 (415)
BRPR VIII Empreendimentos e Participações
Ltda. 1000 - (1) (1) (1) (1)
BRPR IX Empreendimentos e Participações Ltda. 5,583,771 5,584 5,391 14 5,391 14
226,915 (8,119)
Company’s interest in subsidiaries is described in Note 2.
15. 13
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
8. Investments - - continued
b) Information on the main asset, liability and profit & loss items for subsidiaries at
September 30, 2007:
Assets Liabilities
Current
Non-
current Permanent Total Current
Non-
current Equity Total
BRPR I Empreendimentos e Participações Ltda. 13,142 1,407 258,423 272,972 24,836 154,441 93,695 272,972
BRPR II Empreendimentos e Participações Ltda. 909 - 68,659 69,568 5,312 45,750 18,506 69,568
BRPR III Empreendimentos e Participações Ltda. 4,505 - 72,086 76,591 7,682 45,898 23,011 76,591
BRPR IV Empreendimentos e Participações Ltda. 2,797 - 129,305 132,102 6,875 60,492 64,735 132,102
BRPR V Empreendimentos e Participações Ltda. 1 - - 1 2 - (1) 1
BRPR VII Empreendimentos e Participações Ltda. 1,027 - 47,624 48,651 2,819 24,254 21,578 48,651
BRPR VIII Empreendimentos e Participações
Ltda. - - - - 1 - (1) -
BRPR IX Empreendimentos e Participações Ltda. 144 - 5,,354 5,498 107 - 5,391 5,498
Profit &Loss
Net
revenues Cost
Operating
expenses
Income and
social
contribution
taxes
Net income
(loss) for
the period
BRPR I Empreendimentos e Participações Ltda. 3,563 (1,863) (6,619) (128) (5,047)
BRPR II Empreendimentos e Participações Ltda. 2,400 (936) (1,928) - (464)
BRPR III Empreendimentos e Participações
Ltda. 1,253 (651) (1,375) - (774)
BRPR IV Empreendimentos e Participações
Ltda. 752 (444) (1,739) - (1,431)
BRPR V Empreendimentos e Participações Ltda. - - (1) - (1)
BRPR VII Empreendimentos e Participações
Ltda. - (19) (396) - (415)
BRPR VIII Empreendimentos e Participações
Ltda. - - (1) - (1)
BRPR IX Empreendimentos e Participações
Ltda. 59 (38) (2) (5) 14
16. 14
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
8. Investments - - continued
c) Goodwill
Consolidated
Goodwill on
acquisition
DVR V Empr. Imob. Ltda acquired in July 2007 1,407
ICOMAP Ind.Com Ltda acquired in September 2007 12,221
13,628
Goodwill amortization will be in proportion to projected net income curves
prepared by management for each company acquired, as under:
DVR V ICOMAP
2010 1% 4%
2011 3% 4%
2012 4% 6%
2013 7% 8%
From 2014 to 2017 85% 78%
100% 100%
Based on projected discounted cash flow for each company, Company management
did not identify any evidence of impairment of goodwill recorded at September 30,
2007.
17. 15
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
9. Property and Equipment
Parent Company
09/302007 06/30/2007
Average annual
depreciation rate Cost
Accumulated
Depreciation Net Net
Facilities 10% 86 (3) 83 73
Furniture and fixtures 10% 205 (8) 197 191
Data processing equipment 20% 241 (22) 219 203
532 (33) 499 467
Consolidated
09/30/2007 06/30/2007
Average annual
depreciation rate Cost
Accumulated
Depreciation Net Net
Land - 111,514 - 111,515 -
Buildings * 475,458 (5,521) 469,937 83,409
Facilities 10% 86 (3) 83 73
Furniture and fixtures 10% 205 (8) 197 191
Data processing equipment 20% 241 (22) 219 203
587,504 (5,554) 581,951 83,876
* Depreciation is calculated considering the period in which properties are expected to be used by the
Company, for periods ranging from 13 to 25 years.
18. 16
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
10. Loans and Financing
Consolidated Consolidated
Purpose
Financial
Charges Maturity 09/30/2007 06/30/2007
Acquisition - Condomínio Edifício
Bonfliglioli
IGPM
(General Market
Price Index)
+8.8436% p.a. 4/17/2017 11,808 11,836
Acquisition - Condomínio Panamérica Park
and Edifício Plaza Centenário TR+9.90% p.a. 5/25/2017 50,983 51,223
Aquisition of Condomínio Edifício Glória
(RJ), at Avenida Piraporinha TR+9.90% p.a. 8/17/2017 146,563 -
Acquisition of 2 warehouses in Jandira
CDI+1.278102%
p.a. 8/17/2017 38,048 -
Acquisition of Edifício Generalli(SP) and
Edifício Glória TR+9.90% p.a. 8/17/2017 26,453 -
Acquisition of offices in Edifício Paulista
Park, Edifício Berrini, Condomínio
Edifício Isabella Plaza, 3rd. floor of
Edifício Olimpic Tower, Edifício Joaquim
Floriano, Condomínio Edifício Midas,
Edifício Number One and office no. 31 in
Edifício Network Empresarial, Edifício
Athenas, Edifício Celebration and Paulista
Plaza TR+10.15% p.a. 8/17/2017 67,282 -
Buildings IBM Vargas and Avaya
T
RTR+10.15%p.a. 9/18/2007 26,974 -
Portion maturing over the next 12 months (37,276) (6,369)
Noncurrent liabilities 330,835 56,690
Properties acquired were used as a security (mortgage) for the repayment of the loans
from Banco Itaú BBA. In addition lien on units of interest of subsidiaries raising loans
was also provided as guarantee, as well as fiduciary assignment of credit rights from
lease agreements entered into with tenants.
19. 17
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
10. Loans and Financing - - continued
Long-term loans and financing mature as follows:
2008 20,076
2009 42,161
2010 38,985
2011 35,694
2012 to 2017 193,919
330,835
11. Liabilities for the Acquisition of Properties
At September 30, 2007, the balance of R$9,081 corresponds to amounts payable in
connection with the acquisition of commercial buildings, as under:
Consolidated
2007
Icomap 1,289
Industrial building in Jundiaí 3,000
Warehouse in Alphaville 1,050
Edifício Glória 2,001
Warehouse in Jandira 1,740
9,081
20. 18
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
12. Income and Social Contribution Taxes
a) Reconciliation of income and social contribution tax expense in the statement of
operations for the period is set out below:
Parent Company Consolidated
Nine-month period
ended 9/30/2007
Nine-month
period ended
9/30/2007
Income (loss) before income and social contribution
taxes (9,614) (9,482)
Exclusion of result from equity pickup 8,119 -
Calculation base (1,495) (9,482)
Income and social contribution tax credit at combined
statutory rate of 34% 508 3,224
Unrecorded tax credit (280) (3,129)
Permanent differences 13 13
Income and social contribution tax credit in the statement
of operations 241 108
At September 30, 2007, the subsidiaries recorded income and social losses
amounting to R$8,119. The Company did not establish any deferred income tax
assets in this amount, since there is not expectation of profitability from subsidiaries
since their operation began in April 2007.
b) Breakdown of deferred income and social contribution tax assets:
Parent Company and Consolidated
9/30/2007 6/30/2007
Temporary differences:
Deferred pre-operating expenses 241 255
Current portion (54) (54)
Noncurrent portion 187 201
21. 19
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
13. Contingencies
Considering the period covering operations concerned (as from April 2007), the
Company is not a party in judicial actions of any nature.
14. Shareholders’ Equity
a) Capital
On December 22, 2006, a capital increase was approved in the amount of
R$ 53,960, which was paid-up on January 8, 2007.
On April 16, 2007, a capital increase was approved and paid-up in the amount of
R$ 1,080, with the issue of 500,000 common shares at the issue price of R$ 2.15.
On May 10, 2007, a capital increase was approved in the amount of R$ 51,566 by
means of private subscription of shares. Relevant contribution took place on May
31, 2007.
On June 19, 2007, the Board of Directors approved a capital increase in the amount
of R$ 97,140. Relevant contribution took place on July 19, 2007.
On July 27, 2007, the Board of Directors approved a capital increase in the amount
of R$ 97,175. Relevant contribution took place in August 2007.
At September 30, 2007, subscribed capital amounting to R$ 300,921 comprises
139,569,346 common registered shares with no par value. Of total subscribed
capital, R$ 295,020 relates to shares held by foreign shareholders.
At September 30, 2007, authorized capital limit is of 200,000,000 common shares.
22. 20
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
14. Shareholders’ Equity - - continued
b) Subscription warrants
As approved by the Extraordinary General Meeting of December 22, 2006, the
General and Extraordinary Meetings of April 16, 2007, Board of Directors Meeting
of May 10, 2007, Board of Directors Meeting of June 19, 2007 and the
Extraordinary General Meeting of July 27, 2007, subscription warrants were issued,
with no issue price. The subscription warrants grant to shareholder GP Investments,
Ltd. the right to subscribe 13,956,935 common shares, equivalent to 10% of the
shares issued by the Company, as under:
Warrant Issue Date Quantity of Shares
12/22/2006 2,500,000
04/16/2007 50,000
05/10/2007 2,389,091
06/19/2007 4,500,527
07/27/2007 4,517,317
Total 13,956,935
Subscription warrants subscriber may exercise them at any moment as from their
date of issue. The warrants may be freely transferred by GP Investments, Ltd. to any
other company that is directly or indirectly a subsidiary, controlling company or
under the same control as that of GP Investments, Ltd.
The issue price for subscription warrants, if exercised by subscriber, will correspond
to the equivalent in national currency of US$ 1,00 (one US dollar) per share. The
issue price shall be restated by Libor for six-month deposits, as from warrant issue
date through to the warrant exercise date.
23. 21
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
14. Shareholders’ Equity - - continued
c) Stock option plan
According to the General and Extraordinary Meetings held on April 16, 2007, the
stock option plan is managed by the Board of Directors, which at its discretion may
periodically grant stock options to employees under approved stock purchase plans.
Stock options may be granted until the limit of 10% of Company capital. The terms
and conditions of each stock option program are also defined by the Board of
Directors.
On July 17, 2007 and August 31, 2007, the first and second Stock Option Plans
were approved, respectively for 2007, providing for the number of options granted,
price and other conditions for the exercise of the corresponding options. These plans
did no benefit any Board of Directors members or employees but only Company
Executive Board members.
15. Financial Income (Expenses)
2007
Parent Company Consolidated
Financial income:
Short-term investments 4,680 4,744
4,680 4,744
Financial expenses:
Interest and charges on loans (56) (7,028)
IOF - (4,116)
CPMF (1,313) (2,186)
Other
(1,369) (13,330)
In the first quarter of 2007, the Company earned financial income amounting to
R$ 1,400, which was partially used (R$ 788) to offset pre-operating expenses incurred
through March 31, 2007 and recorded under deferred charges. The remaining R$ 612
was posted directly to income, as established in CVM Guidance Opinion No. 17 of
February 15, 1989, because it was considered as a recurring realized gain and therefore
not attributable to the implementation of the operational phase.
24. 22
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
16. Financial Instruments and Risk Management
The Company and its subsidiaries engage in transactions involving financial
instruments with a view to financing its own activities or invest available funds.
Management of such instruments and related risks is performed through defining
conservative strategies aiming at liquidity, profitability and reliance.
The Company minimizes its exposure to credit risk by making short-term investments
with world-class institutions.
Credit risk is minimized since lease agreements are entered into with major customers.
At September 30, 2007, there was no significant concentration of credit risk with
customers.
The Company and its subsidiaries have no significant debts, liabilities or costs
denominated in foreign currency.
The Company has not engaged in financial transactions involving derivatives during
the period ended September 30, 2007. Management understands that the book value of
financial instruments at the balance sheet date comprises substantially short-term
investments (Note 4) and loans and financing (Note 16), which approximate estimated
market value.
The main financial risks are as follows:
Interest rate risk
The Company’s revenues and expenses are affected by changes in interest rates
because of the impact of such changes on interest expenses in connection with
instruments of indebtedness with variable rates and interest income on cash and short-
term investment balances.
Liquidity risk
Liquidity risk management is performed based on the Company’s cash flow, by
maintaining a robust capital structure and a low leverage level. Additionally, any
mismatching between assets and liabilities is consistently monitored.
25. 23
BR PROPERTIES S.A.
NOTES TO THE QUARTERLY FINANCIAL INFORMATION (Continued)
September 30, 2007
(In thousands of reais)
17. Insurance Coverage (unreviewed)
At September 30, 2007, insurance retained by lessees is considered to be sufficient by
Company management to cover any losses.
BR PROPERTIES S.A.
REPORT ON COMPANY’S PERFORMANCE (CONSOLIDATED)
26. 24
(Unaudited)
In the 3rd
quarter of 2007, BR Properties S/A acquired the following properties:
On July 31, 2007, the Company through its subsidiary BRPR I Empreendimentos e
Participações Ltda. acquired the building Business Park Jundiai located at Rua Kanebo,
175 –Distrito Industrial, in the city of Jundiai, state of São Paulo.
On July 31, 2007, the Company through its subsidiary BRPR I Empreendimentos e
Participações Ltda. acquired the building Edifício Visanet located at Alameda Grajau,
159/189/219 –Alphaville, in the city of Barueri, state of São Paulo (SP).
On July 31, 2007, the Company through its subsidiary BRPR I Empreendimentos e
Participações Ltda. acquired a warehouse located at Rua Portugal, 40, in the city of
Itapevi, state of São Paulo (SP).
On July 31, 2007, the Company through its subsidiary BRPR I Empreendimentos e
Participações Ltda. acquired a warehouse at Estrada Piraporinha, 1280, in the city of
São Bernardo do Campo, state of São Paulo (SP).
On July 17, 2007, the Company through its subsidiary BRPR III Empreendimentos e
Participações Ltda. acquired the Gloria building located at Praça Floriano, 31 –
Cinelândia, in the city of Rio de Janeiro, state of Rio de Janeiro.
On August 2, 2007, the Company through its subsidiary BRPR III Empreendimentos e
Participações Ltda. acquired the Generali building located at Rua Braulio Gomes, 36-
downtown area, in the city of São Paulo, state of São Paulo.
On August 27, 2007, the Company through its subsidiary BRPR III Empreendimentos e
Participações Ltda. acquired the Rio de Janeiro Stock Exchange building, located at
Praça XV de Novembro, 20, in the city of Rio de Janeiro, state of Rio de Janeiro.
On September 12, 2007, the Company through its subsidiary BRPR IV
Empreendimentos e Participações Ltda. acquired the Athenas building, located at Rua
Dr. Fernandes Coelho, 64 - Pinheiros, in the city of São Paulo, state of São Paulo.
On September 3, 2007, the Company through its subsidiary BRPR IV
Empreendimentos e Participações Ltda. acquired the Celebration building, located at
Rua Casa do Ator, 1155 – Vila Olímpia, in the city of São Paulo, state of São Paulo.
BR PROPERTIES S.A.
REPORT ON COMPANY’S PERFORMANCE (CONSOLIDATED) (Continued)
(Unaudited)
27. 25
On August 31, 2007, the Company through its subsidiary BRPR IV Empreendimentos e
Participações Ltda. acquired interest in the Olimpic Tower building, located at Rua Dr.
Cardoso de Mello, 1450 – Vila Olímpia, in the city of São Paulo, state of São Paulo.
On August 31, 2007, the Company through its subsidiary BRPR IV Empreendimentos e
Participações Ltda. acquired interest in Berrini 1681 building, located at Av. Eng. Luiz
Carlos Berrini, 1681, in the city of São Paulo, state of São Paulo.
On August 31, 2007, the Company through its subsidiary BRPR IV Empreendimentos e
Participações Ltda. acquired interest in George V Residence building, located at Praça
Roque Pinto, 9 Alto de Pinheiros, in the city of São Paulo, state of São Paulo.
On August 31, 2007, the Company through its subsidiary BRPR IV Empreendimentos e
Participações Ltda. acquired interest in Isabella Plaza building, located at Av. Pres.
Juscelino Kubistchek, 28 – Itaim Bibi, in the city of São Paulo, state of São Paulo.
On August 31, 2007, the Company through its subsidiary BRPR IV Empreendimentos e
Participações Ltda. acquired interest in Joaquim Floriano building, located at Rua
Joaquim Floriano, 913 – Itaim Bibi, in the city of São Paulo, state of São Paulo.
On August 31, 2007, the Company through its subsidiary BRPR IV Empreendimentos e
Participações Ltda. acquired interest in Midas building, located at Alameda Vicente
Pinzon, 173 – Vila Olímpia, in the city of São Paulo, state of São Paulo.
On August 31, 2007, the Company through its subsidiary BRPR IV Empreendimentos e
Participações Ltda. acquired interest in Network Empresarial building, located at Rua
Dr. Cardoso de Mello, 1340 - Vila Olímpia, in the city of São Paulo, state of São Paulo.
On August 31, 2007, the Company through its subsidiary BRPR IV Empreendimentos e
Participações Ltda. acquired interest in Number One building, located at Alameda
Vicente Pinzon, 144 – Vila Olímpia, in the city of São Paulo, state of São Paulo.
On August 31, 2007, the Company through its subsidiary BRPR IV Empreendimentos e
Participações Ltda. acquired interest in Paulista Park building, located at Rua Paraíso,
41 – Paraíso, in the city of São Paulo, state of São Paulo.
On August 31, 2007, the Company through its subsidiary BRPR IV Empreendimentos e
Participações Ltda. acquired interest in Paulista Plaza building, located at Rua Paraíso,
148 – Vila Mariana, in the city of São Paulo, state of São Paulo.
BR PROPERTIES S.A.
REPORT ON COMPANY’S PERFORMANCE (CONSOLIDATED) (Continued)
(Unaudited)
On September 28, 2007, the Company through its subsidiary BRPR VI
Empreendimentos e Participações Ltda. acquired the industrial property Business Park
28. 26
Jandira, located at João de Goes Road, 2300, in the city of Jandira, state of São Paulo.
On September 28, 2007, the Company through its subsidiary BRPR VII
Empreendimentos e Participações Ltda. acquired the Avaya building, located at Rua
Verbo Divino, 1227 – Chac. Sto Antonio, in the city of São Paulo, state of São Paulo.
On September 28, 2007, the Company through its subsidiary BRPR VII
Empreendimentos e Participações Ltda. acquired the Presidente Vargas building,
located at Av. Presidente Vargas, 844, in the city of Rio de Janeiro, state of Rio de
Janeiro.
On September 3, 2007, the Company through its subsidiary BRPR IX
Empreendimentos e Participações Ltda. acquired the Icomap III building, located at
Rua Marechal Floriano, 99 – downtown area, in the city of Rio de Janeiro, state of Rio
de Janeiro.
The properties acquired in the quarter generated accumulated gross revenue of R$ 5,930
thousand. Gross revenue in the quarter from the portfolio of properties amounted to R$
8,375 thousand, and year-to-date gross revenue of R$ 9,423 thousand.
In the quarter BR Properties S/A posted net loss of R$ 9,373 thousand, mainly due to
the recording of Tax on Financial Operations (IOF) and Tax on Financial Movement
(CPMF) totaling R$ 5,642 thousand on loans raised to acquire the aforementioned
properties, which do not represent recurrent cost.
