Brookfield Incorporações S.A. Institutional Presentation 2012

Transcription

1 Brookfield Incorporações S.A. Institutional Presentation 2012

2 Important information This document contains forward-looking information to take into account regarding the business prospects, operational and financial results estimates and the growth prospects for Brookfield Incorporações S.A.. These are only projections and, as such, as based purely on forecasts by the Board at Brookfield Incorporações S.A. in relation to the future of the business and its continued access to capital in order to finance Brookfield Incorporações S.A. s business plan. This forward-looking information depends, to a large extent, on changes in market conditions, governmental regulations, competition pressures, development in the sector and the Brazilian economy, among other factors, as well as the risks presented in the disclosure documents archived by Brookfield Incorporações S.A. and are, therefore, subject to change without prior notice. It is also necessary to highlight that all data, except where mentioned, in relation to the years previous to 2008, is pro forma. 1 Brookfield Incorporações S.A.

3 Real Estate Industry

4 0,4 4,9 4,3 26,2 22,6 21,7 19,4 18,5 18,2 16,7 14,6 12,6 11,4 47,6 44,5 43,3 43,0 42,0 38,0 36,6 33,9 67,5 64,6 61,3 58,0 90,3 87,6 84,2 82,0 81,4 105,6 103,8 Mortgages as % of GDP Brookfield Incorporações S.A. Source: HFN e EMF Fact Book, 2009

5 Mortgage Affordability Unit Price R$ 130,000 Period 90's - 00's Today LTV 70% - 80% 80% - 90% Interest Rate (p.a.) 12% 8% - 11% Loan Term (months) Monthly Installments(R$) 1, Debt Payment (% of monthly income) Target Public Minimum Wages 20% - 25% % - 30% 8-11 Brookfield Incorporações S.A. Source: Itaú BBA and ABECIP

6 Brookfield Incorporações S.A. Units financed (thousands) , FGTS SBPE

7 000 Unidades 000 Units Household Formation in Brazil Brookfield Incorporações S.A. Source: CEDEPLAR

8 Income Distribution and Brazil Demographics Income Distribution per Household ( E) 20% 55% 24% 13% 5% % 6.2% A (Over R$ 8,000) B (Between R$ 4,000 and R$ 8,000) C (Between R$ 2,000 and R$ 4,000) D (Between R$ 1,000 and R$ 2,000) E (Income up to R$ 1,000 ) 12% 23% 29% 30% Source: Ernest Young, FGV and IBGE 41% Brazilian Population Distribution 2010 ( 193 million of inhabitants ) ,000,000-5,000, ,000,000 10,000,000 Women Men 35% between 20 and 40 years old 2030E (216 million inhabitants ) % between 20 and 40 years old - 10,000,000-5,000, ,000,000 10,000,000 Women Men 7 Brookfield Incorporações S.A. Source: IBGE - Projection of the Brazilian Population 1980/ Revision 2008

9 Brookfield Incorporações - Business Strategy

10 Proven track record in the real estate market Integrated Business Model in a Single Platform Contracted sales EBITDA History of strong growth (R$ million) 3.621,0 Merger with Company Focus on São Paulo All the residential and commercial real estate segments Brands brought together under the name Brookfield Single business platform Brascan Residential Focus on Rio de Janeiro Residential real and commercial real estate targeted at upper income segment IPO in 2006 Acquisition of MB Engenharia Focus on Central-West region 744,7 216,5 Traditional real estate and for middle income segment 86, Brookfield Incorporações S.A.

11 Our strategy is to consolidate the company as the National Middle Income Platform in Brazil Main focus on Middle Income Market volume in reais equivalent to Affordable income SFH Financing up to R$500 thousand Improvement in distribution of income Young population Selective National Presence 8 Metropolitan Regions Representative of the Brazilian economy and the real estate market 63% of GDP and 45% of the population Local leadership Geographic selectivity facilitates coordination and control Integrated Platform Prepared for Organic Growth Balanced Portfolio Middle office structured to serve incoming clients Integration of three Companies SAP In house construction of 100% of projects Vertical integration and control of operations Professional management model Flexibility to act in diverse economic environments Residential units and plots Commercial space for end users and corporate buildings for institutional investors 10 Brookfield Incorporações S.A.

12 Positioning and Pursuit of Leadership in the Main Target Market Business Units São Paulo Rio de Janeiro Central-West South and São Paulo Interior Affordable Segment Products Residential units and plots Commercial space for individual investors and corporate buildings for institutional investors Market segments Focus on middle class ~ 60% of business Middle class (between R$ 170,000 and R$ 500,000) 50% Middle High and High class 10% - 15% Commercial (Office Suites and corporate buildings) 15% - 20% Affordable(units under R$ 170,000) 15% - 20% Position Strong presence in metropolitan regions: São Paulo, Rio de Janeiro, Brasília and Goiânia Balanced portfolio: São Paulo -> 40% - Central-West -> 30% - Rio de Janeiro and South -> 30% Expansion for the São Paulo South and Interior region of Brazil in accordance with our growth targets 11 Brookfield Incorporações S.A.

13 Portfolio Overview Commercial: 20% Residential: 80% Corporate Buildings Faria Lima São Paulo (SP) Middle Income Blend Águas Claras (DF) High Income Office Suites Brookfield Place Rio de Janeiro (RJ) Affordable 12 Brookfield Incorporações S.A. Dom Bosco Cidade Ocidental (DF) Tamboré Penthouses Santana de Parnaíba (SP)

14 Brookfield Incorporações - Strategic Objectives

15 The company has been consistently increasing the return on capital for shareholders Return on Equity (%) Annualized 10% 14% 12% 14% 7% Q10 3Q11 14 Brookfield Incorporações S.A.

16 The strategy of increasing the company s ROE is based on four main pillars 1) Execution capacity, primary related to construction expertise, which can be measured by gross margin evolution and backlog margin stability. 2) Increased asset turnover through faster land bank turnover, shortening business cycle and higher revenue recognition. 3) Operational leverage and efficiency gains through SG&A expenses reduction as a percentage of revenues. 4) Reduction of cost of capital by increasing the proportion of construction financing on the debt mix and refinancing, at lower costs, of the debt contracted in Brookfield Incorporações S.A.

17 1) Execution Capacity 100% in-house construction Over 20 years of construction track record incorporated together with MB Engenharia and Company S.A. Selective diversification Strategy together with SAP system favors cost control Strategic reserve of semi-skilled labor force No. of construction sitesx units under construction No. of No. employees of employees involved involved production in production process line Construction sites 85 in progress 5,363 3,502 Units 26,779 units being developed 1,904 2,446 UN SP 26 Constuction sites 6,681 Units UN RJ 9 Constuction sites 2,077 Units UN CO 35 Constuction sites 12,376 Units UN ECON 12 Constuction sites 4,645 Units UN South 3 Constuction sites 1,000 Units Q11 16 Brookfield Incorporações S.A.

18 2) Increased Asset Turnover We have been reducing the development horizon of our land bank significantly Our sales speed has been improving significantly. Land Bank Turnover - PSV (R$ Billion) Quarterly Sales Speed (%) 32% % 28% 20% 22% % 15% 15% 15% 13% 9% 10% 16% 16% 9% Q11 2Q11 1Q 2Q 3Q 4Q PSV Launch Years Brookfield Incorporações S.A.

19 3) Operational leverage and efficiency gains. SG&A dilution reinforce efficiency gains which benefit Brookfield s margins Brookfield SG&A + Other Expenses / Net Revenues 17,7% 14,7% 11,0% 12,7% 11,2% 10,8% 11,7% 9,5% Q10 4Q10 1Q11 2Q11 3Q11 18 Brookfield Incorporações S.A.

20 4) Reduction of Cost of Capital Increase of Project Finance (SFH ) in the total debt mix in the next quarters Over R$3.5 billion of contracted SFH, as of September, out of which R$1.1 billion already disbursed to projects and the remaining R$2.4 billion to be released as projects progress. Represents future funding equivalent to 75% of future construction costs of projects launched Mortgage Backed Securities ( CRI ) of R$150 million issued in the third quarter of 2011 Sale of R$49 million of receivables R$387 million contracted of CRIs and sale of receivables in 9M11 Platform focused on low income Contribution of assets / low income projects 80% Capitalization of US$10 mi 20% In September of 2009, Brookfield established a JV with the IFC of the World Bank, creating a differentiated and capitalized platform to harness the high growth potential in the low income segment This platform is an exclusive vehicle for Brookfield s operations in the segment included in the government program Minha Casa, Minha Vida (My House, My Life) The operation included a seven-year revolving credit line to support working capital needs 19 Brookfield Incorporações S.A.

21 Brookfield Incorporações - Growth Baselines

22 São Paulo Goiânia Distrito Federal Rio de Janeiro Selective Geographic Diversification Strategy Leadership presence in the main chosen Metropolitan regions The regions in which we operate correspond to 60% of Brazilian GDP Geographic Geographic Presence Presence Leadership Position Contracted Sales 2010 (% Market Share) Leadership Position Contracted Sales 2010 (% Market Share) º 60,2% RJ 11,4% 10,8% 7,9% 5,0% 4,7% Peer 1 Peer 2 Peer 3 Peer 4 Others Outros Central West Region 1 11º 63,5% Paraná São Paulo Santa Catarina Rio de Janeiro DF 8,9% 7,3% 6,9% 6,7% 6,6% Economic Rationale for Seeking Local Economic Rationale for Seeking Local Leadership Leadership 11º 1 Peer 1 Peer 2 Peer 3 Peer 4 Others Outros 62,9% Purchase of land Approvals Marketing strength Brand GO 14,2% 9,5% 4,6% 4,6% 4,2% Peer 1 Peer 2 Peer 3 Peer 4 Others Outros 68,3% Supply Chain Attracting talent MT SP 13º 7,3% 7,1% 7,0% 5,7% 4,6% 1-Source: Business Intelligence Brookfield Incorporações 21 Brookfield Incorporações S.A. Peer 1 Peer 2 Peer 3 Peer 4 Outros

23 Management and Control SAP Implemented Go Live: July of 2010 Integrated and automated processes Control and Support for implementing training as regards the foundation for growing the company. Standardization of the company business processes, reducing manual procedures, facilitating the process of area management and access and control of information. Operational and financial measurements applied to variable remuneration Improving Quality of Information Flexibility in Decision-Making Fine-tuned Integration Processes Purchase of Land Incorporation Construction Commercialization Technical Assistance Information Technology Human Resources Finance and Accountancy Legal Marketing Logistics Customer Relations 22 Brookfield Incorporações S.A.

24 Audit Committee Business Unit Management and Corporate Governance Board Investment Committee Receivables Committee Strategic Committee Corporate Governance and HR Committee General Management 23 Brookfield Incorporações S.A.

25 Experienced and Professional Management Team Team of highly qualified professionals with a history of proven success In-depth knowledge of segment and regions Career development plan at all levels of the organization Meritocracy Stock options and bonus Nicholas Reade CEO São Paulo A. Vedrossi Rio de Janeiro Luiz F. Moura Central-West Fernando Maia Operations Marcelo Borba Construction Elias Calil CFO and IR C. Machado Legal Denise Goulart 24 Brookfield Incorporações S.A.

26 Unique Shareholders Base BAM: High standard of Corporate governance, long-term approach and financial expertise Extensive free float Management team whose economic incentives are aligned with shareholders interests Asset Management Prestigious global asset manager over US$150 billion AUM US$41 billion in real estate 100% 1 Brazil One of the largest investment platforms in Brazil R$20 billion AUM Lock up: 3 years Signatories to Shareholders Agreement 42.0% Free Float Post-Offering 2 8.7% 49.3% 2 1 Brookfield Asset Management s investment on Brookfield Brasil is through other subsidiaries 2 Includes 5,125,575 shares in treasury (Nov /2011) SOX Compliant 25 Brookfield Incorporações S.A.

27 Our balanced portfolio enables us to operate within different economic environments Historical launches per product (R$mi) Composition of residential segments: Launches 3Q11 17,541 2,229 2,981 2,675 23% 17% 3% 1% 5% 6% 14% 11% 1% 59% 59% 67% 1,033 58% 27% 10% 378 8% 16% 52% 31% 49% 21% 48% 9% 7% Econômico Affordable Média Middle Alta High Lotes Lots Escritórios Commercial 4T10 Banco 3Q11 de Land Terrenos Bank SFH Regulation: Real estate of up to R$ can be financed by the SFH (first property) 26 Brookfield Incorporações S.A.

28 Exposure to commercial segment makes us stand out in the sector Commercial buildings continue to be a good market opportunity with low vacancy rates in SP (4.2%) and RJ (3.0%) and high lease rates (SP: R$45 R$170/m 2 -month and RJ: R$60 R$250/m 2 -month)¹ Market outlook: average monthly net yield rate (R$/m 2 ) Brookfield s experience in the commercial building sector Successful delivery of around 500,000m 2 of leasable area in the last 14 years Sale of more than R$1.1 billion in commercial ventures in the last 18 months, aimed at individual and institutional investors São Paulo Rio de Janeiro Launch of more than R$1.5 bi in high quality commercial projects to be delivered in the next 12 to 36 months The current land bank exceeds R$1 billion Market outlook: vacancy rate (%) Favorable market outlook 20% 16% 12% Scenario: historically low levels of interest rates 8% 4% 0% Growing interest from individual and institutional investors Space for considerable increase in leverage Trend towards price increases São Paulo Rio de Janeiro 27 Brookfield Incorporações S.A. ¹ Source: CB Richard Ellis (market view report of Jun/2011)

29 Brookfield Incorporações - 3Q11 Financial Performance

30 Inventory at September 30, 2011 (PSV) Completed units represent only 7% of inventory Inventory per Stage of Development 3Q11 (Total) Inventory by State and Year of Launch 3Q11 Completed 7% Others Others Being launched 57% 37% Under construction 08% 26% São Paulo Inventory per Segment (R$ million) Units Price 3Q11 % Mid West 48% 18% Residential 2, % Affordable Up to R$170 thousand % Mid-Low R$170 to R$350 thousand 1, % Middle R$350 to R$500 thousand % Rio de Janeiro Mid-High R$500 to RS1 million % High Above R$1 million % Lots % Office % Corporate % Office Suites % Total 2, % 29 Brookfield Incorporações S.A.

31 Financial Performance Net Revenues (R$ million) Gross Profit (R$ million) and Gross Margin (%) 81% 58% 16% 23% 91% 3,284 2,809 2,289 1,812 1, M10 9M11-3Q10 3Q % 33.2% 27.6% 28.9% 42% % 25.3% M10 9M11-3Q10 3Q11 EBITDA (R$ million) and EBITDA Margin (%) Net Income (R$ million) and Net Margin (%) 100% 20% 80% -10% 20.4% % 22.7% % 21.9% % % M10 9M11-3Q10 3Q11 30 Brookfield Incorporações S.A % % 9.0% 11.1% 11.1% % 9.0% M109M11-3Q10 3Q11

32 Loans and Financing Loans and Financing (R$ Million) Effective Rate Sep - 11 Jun - 11 Construction Loans TR+ 8.3% to 13.0% Debentures 108% of CDI Debentures IPCA + 9.5% to 10.25% Debentures CDI + 1.6% to 2.0% Working Capital Loans CDI + 1.5% 1, ,146.5 Total Debt 3, ,956.7 Current Loans Loang Term Loans 2, ,333.9 Receivables and Total Debt Amortization Schedule (R$ million) > Inflow: Receivables Outflow: Debt Amortization 31 Brookfield Incorporações S.A.

33 Net Debt Variation Cash consumption from operations decreased to R$77.3 million in the third quarter from 2011 to R$167.8 in the second quarter. Liquidity (R$ million) 3Q11 2Q11 1Q11 Cash and Equivalents 1, Total Debt , ,541.6 Project Finance (SFH) Corporate Debt , ,846.5 Net Debt 2, , ,552.3 Net Debt Variation / Cash Consumption Operations Share repurchase Dividends MB Earnout Shareholder's Equity 3, , ,748.1 Net Debt / Equity 71% 68% 56% Net Debt ex-project Finance (SFH) / Equity 39% 37% 31% 32 Brookfield Incorporações S.A.

34 Brookfield Incorporações - 4Q11 Operating Performance

35 Launches Q Launches (R$ mm) +62% 1,805 Launches (R$ mm) 3, % 4, , ,711 1, ,001 2, , , ,098 1Q11 2Q11 3Q11 4Q10 4Q11 Residential Corporate Office Suites Residential Corporate Office Suites Launches (R$ million) 34 Brookfield Incorporações S.A. Unit Price 4Q11 4Q Residencial 1, % % 3, % 2, % Affordable Up to R$170 thousand % % % % Mid-Low R$170 to R$350 thousand % % % 1, % Middle R$350 to R$500 thousand % % % % Mid-High R$500 to R$1 million % % % % High Above R$1 million % - 0.0% % % Lots 2 0.1% % % % Office % % % % Corporate - 0.0% - 0.0% % % Office Suites % % % % Total 1, % 1, % 3, % 2, %

36 Contracted Sales Q Contracted Sales (R$ million) 1, % 1, , , , ,001 Contracted Sales (R$ million) +68% 3,621 2, ,763 2,316 4, ,098 1Q11 2Q11 3Q11 4Q10 4Q11 Residential Corporate Office Suites Residential Corporate Office Suites Contracted Sales (R$ million) Unit Price 4Q11 4Q Residencial 1, % % 3, % 2, % Affordable Up to R$170 thousand % % % % Mid-Low R$170 to R$350 thousand % % % % Middle R$350 to R$500 thousand % % % % Mid-High R$500 to R$1 million % % % % High Above R$1 million % % % % Lots 6 0.5% % % % Office % % 1, % 1, % Corporate % % % % Office Suites % % % % Total 1, % % 4, % 3, % 35 Brookfield Incorporações S.A.

37 IR Contact Contact Cristiano Gaspar Machado CFO and IR Officer Avenida das Nações Unidas, º andar Torre B São Paulo - SP, Brazil Cep: Telephone: ri@br.brookfield.com 36 Brookfield Incorporações S.A.