PDG Realty increases its stake in Goldfarb to 80% and acquires an option to purchase the remaining 20%, reaching full ownership. Key points of the deal include PDG Realty exercising an option to acquire an additional 5% of Goldfarb for $100 million. PDG Realty also entered an agreement with Goldfarb shareholders for annual options to purchase the remaining shares in 5% increments each year from 2009 onward. This positions PDG Realty as a leader in the low-income real estate segment in Brazil, with over 70% of its land bank and 42,000 units concentrated in properties valued under $250,000.
PDG Realty Increases Stake in Goldfarb to 80%, Acquires Option for Additional 20
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
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.
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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.
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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%).
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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
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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
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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$350)
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9. PDG Realty advances in the low
income segment
Our current Landbank reflects PDG Realty’s great exposure to the low income segment (units up to R$
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$3.5 billion and 42,486 units.
Most our activity in the low income segment goes through Goldfarb, due to our large stake in the
company and also the co-incorporation in most projects. Moreover, we have projects of co incorporation
co incorporation projects Moreover co-incorporation
with some other partners that also develop for this segment.
Landbank Segmentation by Partner in the Economic
Landbank Segmentation ‐ pro rata PSV
Segment ‐ pro rata PSV
High ; 1,0%
Land Parceling;
Mid High; 3,3% Co ‐ Dev; 6,0%
7,2% CHL; 5,2%
Mid ; 8,3%
Comercial; 7,9%
Goldfarb; 88,8%
Low Income;
72,4%
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10. Corporate Structure
PDG R lt h
Realty has b
been managing t create new b i
i to t businesses b
based on th private equity model and
d the it it dl d
establish new successful partnerships with companies with proven track record.
Notes:
1 25% directly and 11.9% indirectly through Lindencorp
2 Subject to further changes after new acquisitions
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11. Business Model
Exposure to the Low Income Flexibilidade pararata PSV in the Landbank amounts to R$ 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
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