The document outlines assumptions and a workflow for modeling the financial projections of Brazilian homebuilder Gafisa. It includes assumptions for projecting launches, sales, construction pace, receivables, expenses, debt, and working capital. The modeling considers factors like segment growth rates, price inflation, sales speed, cost of goods sold, and taxes. Example calculations are provided for results recognition and the impact of project financing versus equity funding on nominal and NPV project results. The overall aim is to estimate financial metrics like revenues, expenses, cash flows, and margins for Gafisa under different scenarios.

1. Gafisa
How to model Brazilian
Homebuilders
1

2. Assumptions
Workflow
Topics Drivers Result
% Growth over Inflation % over Projected Potential
Launches Growth
historical sq.m. per sq.m. price per Launches VGV R$
Projections
segment YoY segment YoY per segment YoY
Sales Speed % over
Sales Growth Projected Sales VGV
launches per
Projections R$ per segment YoY
segment YoY
Pace of % of Budgeted PoC % over sold Projected Revenues,
Construction Construction Costs VGV and Budgeted Cost of Goods Sold
(Construction Cash over VGV per Construction Costs and Selling
Expenditures) segment per segment YoY expenses
Construction Cash
Expenditures R$
Receivables curve % Projected Cash
Cash Receivables per segment over Receivables R$ per
sales VGV YoY segment YoY
Debt position WK Evolution by AR Projected Revenues,
Historical G&A and
calculated by policy x AP and other Cost of Goods Sold
Other other operational
assumptions (e.g. items linear to Total and Selling
expenses
Debt/Equity Ratio) Assets expenses
2

3. Assumptions
Launches Growth Projection – % GAFISA
Topics Drivers Result
% Growth over Inflation % over Projected Potential
Launches Growth
historical sq.m. per sq.m. price per Launches VGV R$
Projections
segment YoY segment YoY per segment YoY
Sales Speed % over
Sales Growth Projected Sales VGV
launches per
Projections R$ per segment YoY
segment YoY
Pace of % of Budgeted PoC % over sold Projected Revenues,
Construction Construction Costs VGV and Budgeted Cost of Goods Sold
(Construction Cash over VGV per Construction Costs and Selling
Expenditures) segment per segment YoY expenses
Construction Cash
Expenditures R$
Receivables curve % Projected Cash
Cash Receivables per segment over Receivables R$ per
sales VGV YoY segment YoY
Debt position WK Evolution by AR Projected Revenues,
Historical G&A and
calculated by policy x AP and other Cost of Goods Sold
Other other operational
assumptions (e.g. items linear to Total and Selling
expenses
Debt/Equity Ratio) Assets expenses
3

4. Premissas
Launches Projection – % GAFISA
Launched sq.m.
x
Average launched price (R$/sq.m.)
=
Launched VGV (R$ million)
Projection Criteria
Per segement Price per sq.m.
High >R$3.600
Mid-high R$2.800<>R$3.600
Mid R$2.000<>R$2.800
Popular R$1.800<>R$2.000
Lots not fixed
4

5. Premissas
Launches Projection – % GAFISA
Estimating Growth % over usable area (sq.m.)
+
Estimating price inflation (%)
=
Launches projection (R$ million)
Projection Criteria
Per segement Price per sq.m.
High >R$3.600
Mid-high R$2.800<>R$3.600
Mid R$2.000<>R$2.800
Popular R$1.800<>R$2.000
Lots not fixed
5

6. Assumptions
Workflow
Topics Drivers Result
% Growth over Inflation % over Projected Potential
Launches Growth
historical sq.m. per sq.m. price per Launches VGV R$
Projections
segment YoY segment YoY per segment YoY
Sales Speed % over
Sales Growth Projected Sales VGV
launches per
Projections R$ per segment YoY
segment YoY
Pace of % of Budgeted PoC % over sold Projected Revenues,
Construction Construction Costs VGV and Budgeted Cost of Goods Sold
(Construction Cash over VGV per Construction Costs and Selling
Expenditures) segment per segment YoY expenses
Construction Cash
Expenditures R$
Receivables curve % Projected Cash
Cash Receivables per segment over Receivables R$ per
sales VGV YoY segment YoY
Debt position WK Evolution by AR Projected Revenues,
Historical G&A and
calculated by policy x AP and other Cost of Goods Sold
Other other operational
assumptions (e.g. items linear to Total and Selling
expenses
Debt/Equity Ratio) Assets expenses
6

7. Assumptions
Sales Speed
Land Legalization Construction Construction
Launch Delivery
Acquisition Period Initiation Period
-6 0 12 21 30
Approx. 6 months Approx. 12 months Approx. 18 months
Year 1 Year 2 Year 3 Note
Launch 60% (From Launch + 6 months after launching)
Construction 10% 10% (Period of construction - approx. 18 months)
Delivery 20% (Delivery period - 30 months after launching)
Total 70% 10% 20%
* VGV (Valor Geral de Vendas) means the potential revenues of each development launched.
7

8. Assumptions
Sales Speed
Modeling Examples
20% in the middle
of the year
10% in the middle
of the year
70% in the middle
of the year
Year 0 1 2 3
Or
Monthly average basis
(Better for quarter-o-quarter analysis)
Year 0 1 2 3
8

9. Assumptions
Workflow
Topics Drivers Result
% Growth over Inflation % over Projected Potential
Launches Growth
historical sq.m. per sq.m. price per Launches VGV R$
Projections
segment YoY segment YoY per segment YoY
Sales Speed % over
Sales Growth Projected Sales VGV
launches per
Projections R$ per segment YoY
segment YoY
Pace of % of Budgeted PoC % over sold Projected Revenues,
Construction Construction Costs VGV and Budgeted Cost of Goods Sold
(Construction Cash over VGV per Construction Costs and Selling
Expenditures) segment per segment YoY expenses
Construction Cash
Expenditures R$
Receivables curve % Projected Cash
Cash Receivables per segment over Receivables R$ per
sales VGV YoY segment YoY
Debt position WK Evolution by AR Projected Revenues,
Historical G&A and
calculated by policy x AP and other Cost of Goods Sold
Other other operational
assumptions (e.g. items linear to Total and Selling
expenses
Debt/Equity Ratio) Assets expenses
9

10. Assumptions
Result Recognition
Year 1 Year 2 Year 3
(A) Sales Speed 70,0% 10,0% 20,0%
(B) Pace of Construction
30,0% 45,0% 25,0%
(Construction + Land) (e.g.)
Project Result Recognition per Year
21,0% 39,0% 40,0%
(Income Statement) (A x B)
10

11. Assumptions
Workflow
Topics Drivers Result
% Growth over Inflation % over Projected Potential
Launches Growth
historical sq.m. per sq.m. price per Launches VGV R$
Projections
segment YoY segment YoY per segment YoY
Sales Speed % over
Sales Growth Projected Sales VGV
launches per
Projections R$ per segment YoY
segment YoY
Pace of % of Budgeted PoC % over sold Projected Revenues,
Construction Construction Costs VGV and Budgeted Cost of Goods Sold
(Construction Cash over VGV per Construction Costs and Selling
Expenditures) segment per segment YoY expenses
Construction Cash
Expenditures R$
Receivables curve % Projected Cash
Cash Receivables per segment over Receivables R$ per
sales VGV YoY segment YoY
Debt position WK Evolution by AR Projected Revenues,
Historical G&A and
calculated by policy x AP and other Cost of Goods Sold
Other other operational
assumptions (e.g. items linear to Total and Selling
expenses
Debt/Equity Ratio) Assets expenses
11

12. Assumptions
Client Receivables
Modeling A/R
Assets Liabilities
Receivables Client Anticipation
Increase by pace of construction Increase by cash received
Decrease by cash received Decrease by pace of construction
12

13. Assumptions
Workflow
Topics Drivers Result
% Growth over Inflation % over Projected Potential
Launches Growth
historical sq.m. per sq.m. price per Launches VGV R$
Projections
segment YoY segment YoY per segment YoY
Sales Speed % over
Sales Growth Projected Sales VGV
launches per
Projections R$ per segment YoY
segment YoY
Pace of % of Budgeted PoC % over sold Projected Revenues,
Construction Construction Costs VGV and Budgeted Cost of Goods Sold
(Construction Cash over VGV per Construction Costs and Selling
Expenditures) segment per segment YoY expenses
Construction Cash
Expenditures R$
Receivables curve % Projected Cash
Cash Receivables per segment over Receivables R$ per
sales VGV YoY segment YoY
Debt position WK Evolution by AR Projected Revenues,
Historical G&A and
calculated by policy x AP and other Cost of Goods Sold
Other other operational
assumptions (e.g. items linear to Total and Selling
expenses
Debt/Equity Ratio) Assets expenses
13

14. Assumptions
Other
Operational Expenses – Income Statement
2003 2004 2005 2003 2004 2005
% over Net % over Net % over Net
R$ ('000) R$ ('000) R$ ('000)
Oper. Rev. Oper. Rev. Oper. Rev.
Selling Expenses -24.261 -29.481 -35.566 -5,52% -6,33% -7,20%
G&A Expenses -38.871 -33.160 -42.339 -8,84% -7,12% -8,57%
Payroll, outsourced services, etc -33.538 -28.466 -39.754 -7,63% -6,11% -8,05%
Depreciation&Amortization -5.333 -4.694 -2.585 -1,21% -1,01% -0,52%
Financial Income 14.500 3.304 8.365 3,30% 0,71% 1,69%
Financial Expenses -31.595 -37.629 -36.337 -7,19% -8,08% -7,36%
Operating net expenses/income -278 -802 1.785 -0,06% -0,17% 0,36%
Non-operating net expenses/income 0 -1.450 -1.024 0,00% -0,31% -0,21%
Income tax rate (IRPJ/CSLL) -10.471 -5.576 -6.256 -2,38% -1,20% -1,27%
Specific treatment
Selling Expenses
% over Sold VGV allocated by PoC criteria
Financial Income
New Financial Income Projection for IPO Cash Proceeds
14

15. Assumptions
Other
Debt Position (e.g.)
Policy Assumption
(Net Debt/Equity Ratio)
Limited leverage as 50% of Equity position
Working Capital Evolution (e.g.)
Assets Liabilities (Construction payments from PoC)
Receivables from Sales Loans and Financing
As presented before Decrease by expected maturity date (see Official
Prospectus for additional information)
15

16. Providing Finance to clients x Return
Key assumptions
Discount rate 12% p.a.
1 hypothetical project with same sales speed and conditions
Nominal Project Results (e.g.)
Project Finance +
Project Finance 100% Equity Capital
Description Mortgage Lending
R$ '000 % R$ '000 % R$ '000 %
Homebuilding Gross Revenues - Principal 65.929 99% 65.929 94% 65.929 94%
Homebuilding Gross Revenues - Interest 3.335 5% 7.137 10% 7.137 10%
Gross Revenues 69.264 104% 73.067 104% 73.067 104%
(-) Taxes (PIS/COFINS) (2.528) -4% (2.653) -4% (2.653) -4%
Net Revenues 66.736 100% 70.413 100% 70.413 100%
Land Purchase Costs (5.140) -8% (5.140) -7% (5.140) -7%
Construction Costs (34.038) -51% (34.038) -48% (34.038) -48%
Financial expenses (SFH interest + fees) (3.853) -6% (3.853) -5% (36) 0%
(-) Total Cost of Goods Sold (43.032) -64% (43.032) -61% (39.214) -56%
Gross Profit 23.705 36% 27.382 39% 31.199 44%
(-) Selling Expenses (5.934) -9% (5.934) -8% (5.934) -8%
(-) Taxes Expenses (CPMF mainly) (278) 0% (291) 0% (291) 0%
(+/-) Other operating revenues/expenses (772) -1% (68) 0% (68) 0%
Project Result 16.722 25% 21.089 30% 24.907 35%
100% Equity Funding generates a higher nominal margin
16

17. Providing Finance to clients x Return (2)
NPV Project Results (e.g.)
Project Finance +
Project Finance 100% Equity Capital
Description Mortgage Lending
R$ '000 % R$ '000 % R$ '000 %
Homebuilding Gross Revenues - Principal 45.107 95% 45.107 95% 45.107 95%
Homebuilding Gross Revenues - Interest 4.262 9% 4.060 9% 4.060 9%
Gross Revenues 49.369 104% 49.167 104% 49.167 104%
(-) Taxes (PIS/COFINS) (1.762) -4% (1.725) -4% (1.770) -4%
Net Revenues 47.607 100% 47.442 100% 47.397 100%
Land Purchase Costs (5.072) -11% (5.072) -11% (5.072) -11%
Construction Costs (28.368) -60% (28.368) -60% (28.368) -60%
Financial expenses (SFH interest + fees) (490) -1% (490) -1% (31) 0%
(-) Total Cost of Goods Sold (33.930) -71% (33.930) -72% (33.471) -71%
Gross Profit 13.677 29% 13.512 28% 13.925 29%
(-) Selling Expenses (5.447) -11% (5.447) -11% (5.447) -11%
(-) Taxes Expenses (CPMF mainly) (194) 0% (194) 0% (194) 0%
(+/-) Other operating revenues/expenses (58) 0% (20) 0% (20) 0%
Project Result 7.978 17% 7.850 17% 8.264 17%
IRR 72,90% 46,54% 37,05%
NPV margin is quite similar to all formats
IRR is higher based in mortgage lending after project
delivery (maximizing investor ROIC) 17