Quarterly Information (ITR) BR Properties S.A. March 31, 2018 with Review Report on Quarterly Information

Transcription

1 Quarterly Information (ITR) BR Properties S.A. March 31, 2018 with Review Report on Quarterly Information

2 MANAGEMENT REPORT Dear Shareholders, In compliance with the legal and statutory provisions in force, Management of BR Properties S.A. ( Company or BR Properties ) hereby presents its comments and results referring to the quarter ended March 31, Amounts are expressed in R$ thousand, unless otherwise indicated, and in accordance with the provisions contained in the Brazilian Corporation Law and standards established by the Brazilian Securities and Exchange Commission (CVM). Management comments are an integral part of the individual and consolidated financial statements and should be read in conjunction with the respective Notes. BUSINESS DESCRIPTION BR Properties is one of the leading commercial real estate investment companies in Brazil, focused on the acquisition, lease, management, development and sale of commercial real estate, including office buildings and industrial and logistic warehouses located in the main metropolitan regions of Brazil. BR Properties adopts a dynamic approach to monitoring the Brazilian commercial real estate market to anticipate supply and demand trends in the various regions where it operates to evaluate the best opportunities for buying or selling, to maximize the profitability of its investments. The Company ended the year with 47 commercial properties in its portfolio, totaling a gross leasable area (GLA) of 716 thousand square meters, representing a market value of approximately R$7,650,104. The Company has five land plots and one property under development, which today correspond to 89 thousand square meters of GLA. Of the 47 properties held in portfolio by the Company at the end of the 1Q18: 38 or 567 thousand square meters are office buildings; 2 or 55 thousand square meters are industrial and logistic warehouses; 1 or 6 thousand square meters are real estate intended for retail; 1 or 14 thousand square meters refer to project under development; 5 or 74 thousand square meters refer to land plots. MESSAGE FROM MANAGEMENT Continuing the gradual resumption of the Brazilian real estate market observed mainly in the second semester last year, the beginning of 2018 was marked by the increase in the demand for corporate offices areas in the central regions of São Paulo and Rio de Janeiro. According to the main real estate consultancies, net absorption presented positive figures for both cities in the first quarter of the year. In the city of São Paulo, recovery of the industry and economy, combined with the low volume of new supply expected in the coming years, already reflects lower vacancy levels and positively pressured lease prices in certain types of assets and regions. 1

3 In Rio de Janeiro, recovery takes place more slowly and cautiously. With the delayed market cycle in relation to São Paulo, we expect to see an intensification of the flight to quality movement throughout the year, just as we observed in São Paulo over the past 3 years. While real growth of this market is not expected in 2018, resumption of the Oil & Gas industry, driven by a greater participation of foreign companies, can be a positive surprise for the city s economy, and especially for the real estate market. We believe that the BR Properties portfolio stands out for quality and location, which generates a competitive advantage in capturing potential tenants and has the Company benefit from the flight to quality movement that should strengthen over the year. Given this scenario, all of the Company s efforts are focused on reducing vacancy. In addition, the Company continues to carry out important transactions to recycle its portfolio and manage its liabilities. MAIN OPERATING EVENTS IN 1T18 Management of liabilities In February, BR Properties raised R$50,000 through its 9 th Issue of Debentures. The issue has a single series, with 5-year maturity and cost of CDI % per year. The proceeds from the debentures were used in the acquisition of Edifício Tucano. Acquisition of assets In March, the Company completed the acquisition of Galpão Tucano in the city of Jarinu. The property represents a leasable area of 31,719 m² and was acquired for R$71,000. This acquisition is part of the Company s repositioning strategy in the industrial and logistics warehouse market. SUBSEQUENT EVENTS Sale of assets In April, BR Properties completed the sale of the Edifício Celebration for R$57,000. The sale is part of the Company s strategy of recycling part of its portfolio, selling real estate that may have already reached its maturity and potential value creation in its cycle within the Company. RESULTS In terms of profit or loss, consolidated gross revenue totaled R$130,202 in 1Q18, a 4% increase compared to the same quarter of last year. The Company's gross revenue in 1Q18 was divided between lease revenue and property management revenues, in the following proportion: 2

4 Lease Revenues: lease revenues totaled R$125,720, a 4% increase compared to 1Q17, representing 97% of consolidated gross revenue; Revenues from Property Administration: Real estate administration revenues totaled R$ 4,482, a 2% increase compared to 1Q17, representing 3% of consolidated gross revenue. Net revenue for the quarter totaled R$107,448, which corresponds to a reduction by 6% compared to the same quarter of prior year. Adjusted EBITDA, net of non-cash results, such as the stock option plan and revaluation of the property values, reached R$82,069, 8% decrease compared to 1Q17, and adjusted EBITDA margin of 76%, one of the highest in this industry. EBITDA in 1Q18 using the methodology determined by CVM Ruling No. 527/12 totaled R$81,972 for the year, eaching an EBITDA margin of 76%, as follows: 1Q2018 Net Income (loss) for the quarter (11,584) Depreciation 104 Deferred taxes 21,39 Provision for IR and CSLL 2,375 Finance income (costs) 69,686 EBITDA 81,972 EBITDA margin 76% Other operating income (expenses) (21) Gain (loss) on fair value of investment properties - Gain (loss) on investment properties sale (1,557) Provision for ILP / Stock Option 1,674 Adjusted EBITDA 82,069 Adjusted EBITDA margin 76% Adjusted FFO, a non-accounting measure used in the real estate industry to measure the Company s net cash generation, totaled R$ 21,145, an increase of 3% in relation to 1Q17, with a margin of 20%. As a result of the non-cash effects of accounting for foreign exchange difference on the Perpetual Bonds denominated in dollars and variations in derivative instruments, in addition to the impact of deferred taxes, BR Properties recorded net loss of R$11,584 in 1Q18. 3

5 HUMAN RESOURCES Headcount at the end of 1Q18 was 84 employees, 50 employees at the Company's address in the city of São Paulo, and 34 employees in the properties administered by the Company. SHAREHOLDERS RIGHTS AND MARKET DATA At the end of 1Q18, BR Properties equity value, which is calculated by dividing the Company s Equity by the total number of shares issued at the time, totaled R$ 14.37/share. The Company s shares are traded in the Novo Mercado environment on the São Paulo Stock Exchange (Bovespa), whose quotation at the closing of the trading session on March 31, 2018 was R$ 9.04/share. PROSPECTS AND PLANS FOR THE CURRENT YEAR AND THE FUTURE/CONCLUSION We intend to maintain the same strategy that has made us one of the largest companies in this industry, focusing on the best and most disputed regions of the country and on top quality real estate in the asset classes we have exposure to: offices and industrial and logistic warehouses. We pursue the strategy of market consolidation, focusing on the acquisition of large properties, adding value by using modern management techniques, consistent strategies, rationalization of operating costs, retrofit, quality improvements and portfolio recycling. RELATIONSHIP WITH THE INDEPENDENT AUDITOR Pursuant to CVM Rule No. 381 of January 14, 2003, the Company informs that its policy of engaging services not related to external auditing is based on principles that preserve the independence of the auditor. These principles are based on the fact that the independent auditor should not audit his own work, cannot exercise managerial duties, should not advocate for their client or provide any other services that are considered prohibited by current regulations, thus maintaining independence in the work performed. EXECUTIVE BOARD REPRESENTATION Under the terms of CVM Ruling No. 480/09, the Company s Executive Board represents that it has reviewed, discussed and agreed with the independent auditor s report on the financial statements for the year ended March 31,

6 São Paulo Corporate Towers Av. Presidente Juscelino Kubitschek, Vila Nova Conceição São Paulo SP - Brasil Tel: ey.com.br Independent auditor s review report on quarterly information To the Shareholders, Board of Directors and Officers of BR Properties S.A. São Paulo - SP We have reviewed the individual and consolidated interim financial information contained in the Quarterly Information Form (ITR) of BR Properties S.A. (the "Company") for the quarter ended March 31, 2018, which comprises the balance sheet as of March 31, 2018, and the related statements of income, comprehensive income, change in equity and cash flows for the three-month period then ended, including explanatory notes. Management is responsible for the preparation of these individual and consolidated interim financial information in accordance with the Technical Pronouncement CPC 21 (R1) Demonstração Intermediária ( CPC 21 ) and International Financial Reporting Standard IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB) ( IAS 34 ), as well as for the presentation of this information in conformity with the standards issued by the Brazilian Securities Commission ("CVM"), applicable to the preparation of Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Review Engagements (NBC TR Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the individual and consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the individual and consolidated interim financial information included in the quarterly information referred above is not fairly presented, in all material respects, in accordance with CPC 21 ( R1) and IAS 34 applicable to the preparation of Quarterly Information Form (ITR), and presented consistently with the standards issued by the CVM. 5 Uma empresa-membro da Ernst & Young Global Limited

7 Other matters Statements of value added We have also reviewed the individual and consolidated statements of value added for the three-month period ended March 31, 2018, prepared under the responsibility of the Company's Management, whose presentation in the interim financial information is required by the standards issued by CVM, applicable to preparation of Quarterly Information Form (ITR), and considered supplementary information under IFRS, whereby no statements of value added presentation is required. These statements were submitted to the same review procedures previously described above and, based on our review, were are not aware of any fact that would make us believe that they were not prepared, in all material respects, in accordance with the overall individual and consolidated interim financial information taken as a whole. São Paulo, April 30, ERNST & YOUNG Auditores Independentes S.S. CRC-2SP034519/O-6 Marcos Alexandre S. Pupo Accountant CRC-1SP221749/O-0 6

8 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Individual financial statements / statement of financial position - assets (In thousands of reais) Current quarter Prior year Account code Account description 03/31/ /31/ Total assets 9,481,660 9,427, Current assets 1,137,953 1,152, Cash and cash equivalents 84,656 86, Marketable securities 938, , Marketable valued at fair value 938, , Marketable securities 938, , Accounts receivable 39,612 31, Trade accounts receivable 39,612 31, Recoverable taxes 36,637 35, Current recoverable taxes 36,637 35, Prepaid expenses 3,860 3, Other current assets 34,476 54, Other 34,476 54, Other current assets 24,451 32, Financial instruments 5,544 11, Dividend Interest on Capital receivable 4,481 10, Noncurrent assets 8,343,707 8,275, Long-term receivables 319, , Other noncurrent assets 319, , Other noncurrent assets 46,636 49, Taxes recoverable 219, , Trade accounts receivable 52,755 62, Investments 7,459,381 7,378, Equity interests 582, , Investments in Subsidiaries 582, , Investment properties 6,876,666 6,795, Property and equipment 10,208 10, Intangible assets 554, ,842 7

9 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Individual financial statements / statement of financial position - liabilities (In thousands of reais) Account Current quarter Previous Year code Account description 03/31/ /31/ Total liabilities 9,481,660 9,427, Current liabilities 631, , Social and labor liabilities 1,694 1, Labor Obligations 1,694 1, Salaries and social charges payable 1,694 1, Trade accounts payable 4,783 5, Trade accounts payable - domestic 4,783 5, Tax liabilities 2,123 3, Federal tax liabilities 2,123 3, Income and social contribution taxes payable Taxes payable 1,875 3, Loans and financing 510, , Loans and financing 510, , Other liabilities 100,548 95, Other 100,548 95, Dividend and interest on equity payable 65,792 65, Other current liabilities 34,756 29, Provisions 11,681 9, Provisions for labor and civil security tax 11,681 9, Provision for compensation to employees and directors 11,681 9, Noncurrent liabilities 3,000,466 2,894, Loans and financing 2,161,141 2,079, Loans and financing 2,161,141 2,079, Other liabilities 438, , Other 438, , Other noncurrent liabilities 438, , Deferred taxes 380, , Deferred income and social contribution taxes 380, , Provisions 20,659 20, Provisions for labor and civil security tax 20,659 20, Tax, labor and civil security tax 20,659 20, Equity 5,850,158 5,876, Paid-in capital 3,252,701 3,252, Capital 3,314,457 3,314, Share issue costs (61,756) (61,756) Capital reserves 2,310,565 2,324, Income reserves 298, , Retained earnings/accumulated losses (11,584) - 8

10 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Individual Financial Statements / Statement of profit or loss (In thousands of reais) Account code Account description Current quarter - 01/01/2018 to 03/31/2018 YTD - current year 01/01/2017 to 03/31/ Revenue from sale of goods and/or services 86,803 88, Net revenue from sale of goods and/or services 86,803 88, Gross profit 86,803 88, Operating income (expenses) (15,971) 16, General and administrative expenses (24,004) (54,857) General and administrative expenses (21,199) (51,451) Management Fees (1,131) (1,123) Stock option plan (1,674) (2,283) Other operating income 1,573 18, Other operating income 16 18, Gains on fair value of investment 1,557 - Properties Equity pick-up 6,460 52, Income before finance income (costs) and taxes 70, , Finance income (costs) (62,564) (502) Finance income 26, , Finance costs (88,609) (111,753) 3.07 Income before income taxes 8, , Income and social contribution taxes (19,852) 78, Current (232) (7,643) Deferred (19,620) 86, Net income from continuing operations (11,584) 182, Net income/loss for the period (11,584) 182, Earnings per share (reais / shares) Basic earnings per share ON ( ) Diluted earnings per share ON

11 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Individual financial statements / statement of comprehensive income (In thousands of reais) Account code Account description Current quarter Exercício 01/01/2018 a 03/31/2018 YTD current Year 01/01/2017 a 03/31/ Net income for the period (11,584) 182, Comprehensive income for the period (11,584) 182,769 10

12 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Individual financial statements / statement of cash flows - indirect method (In thousands of reais) Account code Account description YTD - current year 01/01/2018 a 03/31/2018 YTD prior year 01/01/2017 a 03/31/ Net cash from operating activities 82,622 78, Cash from operations 70,822 50, Income before income and social contribution 8, ,199 Taxes Depreciation of property and equipment Fair value of investment properties (1,557) Revenues - straight-line method 1,873 (10,134) Interest and monetary restatement of loans 75, , Foreign exchange differences, net 3,135 (16,906) Income (loss) from derivative financial instruments (5,553) 4, MTM - interest of perpetual bonds MTM Swap 7,200 (6, Amortization of capitalized cost 1,759 3, Stock option plan 1,674 2, Provision for compensation to employees and Directors 2,477 2, Allowance for doubtful accounts 420 2, Monetary restatement (3,846) (56,562) Results obtained in transactions with investments and - (18,142) Property Other provisions Income from marketable securities (14,808) (11,422) Equity pick-up (6,459) (52,856) Changes in assets and liabilities 11,800 27, Trade accounts receivable , Taxes recoverable 2,863 9, Other assets 10,959 9, Accounts payable (555) 3, Taxes and contributions (1,256) (3,853) Salaries and social charges payable 264 2, Provision for compensation to employees and directors - (6,041) Other liabilities (640) (5,253) 6.02 Net cash - investing activities (55,452) 11, Investments in subsidiaries (5,000) (9,800) Disposals on investments in subsidiaries - 240, Receipt of dividends and interest on equity of subsidiaries 17, Acquisition of property and equipment (201) (119) Acquisition of/ investment in investment (83,951) (4,558) Properties Investment in marketable securities 15,886 (214,523) 6.03 Net cash - financing activities (28,936) (89,388) Repayment of loans and financing (15,640) (83,110) Gains on financial instruments 4, Payment of losses on financial instruments - (5,286) Repurchase of shares (16,022) Borrowing costs (1,836) (992) 6.05 Increase (decrease) in cash and cash equivalents (1,766)

13 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Individual financial statements / statement of cash flows - indirect method (In thousands of reais) Account code Account description YTD - current year 01/01/2018 à 03/31/2018 YTD prior year 01/01/2017 à 03/31/2017 Cash and cash equivalents at beginning of period 86, , Cash and cash equivalents at end of period 84, ,125 12

14 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Individual financial statements / statement of changes in equity / SCE - 01/01/2018 a 03/31/2018 (In thousands of reais) Account code Account description Paid-in capital Capital reserves, options granted and treasury shares Income reserves Retained earnings (accumulated losses) Other comprehensive income Equity 5.01 Opening balances 3,252,701 2,324, , ,876, Adjusted opening balances 3,252,701 2,324, , ,876, Capital transactions with owners - (14,348) (14, Recognition of options granted - 1, , Treasury shares acquired - (16,022) (16,022) 5.05 Total comprehensive income (11,584) - (11,584) Net income for the period (11,584) - (11,584) 5.07 Closing balances 3,252,701 2,310, ,477 (11,584) - 5,850,158 13

15 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Individual financial statements / statement of changes in equity / SCE - 01/01/2017 à 03/31/2017 (In thousands of reais) Account code Account description Paid-in capital Capital reserves, options granted and treasury shares Income reserves Retained earnings (accumulated losses) Other comprehensive income Equity 5.01 Opening balances 2,314,234 2,414, ,729, Adjusted opening balances 2,314,234 2,414, ,729, Capital transactions with owners - 2, , Recognition of options granted - 2, , Total comprehensive income , , Net income for the period , , Closing balances 2,314,234 2,417, ,769-4,914,195 14

16 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Individual financial statements / statement of value added (In thousands of reais) Account code Account description YTD - current year YTD 01/01/2018 a prior year 03/31/2018 1/01/2017 a 03/31/ Revenues 106, , Sales of goods, products and services 105,360 97, Other revenues 1,155 16, Other revenues 18 18, Reversal / (constitution) of allowance for doubtful (420) (2,057) Accounts Gain on fair value of investment properties 1, Inputs from third parties (26,451) (14,068) Other (26,451) (14,068) 7.03 Gross value added 80, , Retentions (104) (107) 7.05 Added value netproduced 79,960 99, Value added received in transfer 32, , Equity pick-up 6,460 52, Finance income 26, , Total added value to distribute 112, , Distribution of added value 112, , Personnel 7,802 7, Direct compensation 7,224 7, Benefits Unemployment Compensation Fund (FGTS) Taxes, charges and contributions 27,638 (38,437) Federal 27,638 (68,187) Local - 29, Debt remuneration 88, , Interest 75, , Other 13,505 9, Equity remuneration (11,584) 182, Retained profits/losses for the period (11,584) 182,769 15

17 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Consolidated financial statements / statement of financial position assets (In thousands of reais) Account Current quarter Prior year Code Account description 03/31/ /31/ Total assets 9,826,663 9,797, Current assets 1,182,793 1,221, Cash and cash equivalents 110, , Marketable securities 938, , Marketable securities valued at fair value 938, , Marketable securities 938, , Accounts receivable 54,795 65, Trade accounts receivable 54,795 65, Taxes recoverable 44,106 41, Current taxes recoverable 44,106 41, Prepaid expenses 4,008 4, Other current assets 30,365 44, Other 30,365 44, Other current assets 24,821 33, Financial instruments 5,544 11, Noncurrent assets 8,643,870 8,576, Long-term receivables 346, , Deferred taxes 8,560 8, Deferred income and social contribution taxes 8,560 8, Other noncurrent assets 338, , Other noncurrent assets 59,224 62, Taxes recoverable 223, , Accounts receivable 55,646 67, Investments 7,731,629 7,650, Investment properties 7,731,629 7,650, Property and equipment 10,672 10, Intangible assets 554, ,842 16

18 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Consolidated financial statements / statement of financial position - liabilities (In thousands of reais) Account Current quarter Prior year Code Account description 03/31/ /31/ Total liabilities 9,826,663 9,797, Current liabilities 677, , Social and labor liabilities 2,374 2, Labor obligations 2,374 2, Salaries and social charges payable 2,374 2, Trade accounts payable 4,973 8, Trade accounts payable - domestic suppliers 4,973 8, Tax liabilities 4,642 3, Federal tax liabilities 4,642 3, Income and social contribution taxes payable 2, Taxes payable 2,174 3, Loans and financing 552, , Loans and financing 552, , Other liabilities 101,045 95, Other 101,045 95, Dividends and interest on equity payable 65,792 65, Other current liabilities 35,253 30, Provisions 11,681 9, Provisions for labor and civil security tax 11,681 9, Provision for compensation to employees and directors 11,681 9, Noncurrent liabilities 3,299,060 3,217, Loans and financing 2,325,633 2,270, Loans and financing 2,325,633 2,270, Other liabilities 438, , Other 438, , Other noncurrent liabilities 438, , Deferred taxes 513, , Deferred income and social contribution taxes 513, , Provisions 21,732 21, Provisions for labor and civil security tax 21,732 21, Equity consolidated 5,850,158 5,876, Paid-in capital 3,252,701 3,252, Capital 3,314,457 3,314, Share issue costs (61,756) (61,756) Capital reserves 2,310,565 2,324, Income reserves 298, , Retained earnings/accumulated losses (11,584) - 17

19 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Consolidated financial statements / statement of profit or loss (In thousands of reais) Account code Account description Current quarter Exercício 01/01/2018 a 03/31/2018 YTD - current year 01/01/2017 a 03/31/ Revenue from sale of goods and/or services 107, , Net revenue from sale of goods and/or services 107, , Gross profit 107, , Operating income (expenses) (25,582) 24, General and administrative expenses (27,157) (59,087) General and administrative expenses (24,352) (55,681) Management fees (1,131) (1,123) Stock option plan (1,674) (2,283) Other operating income 1,575 83, Other operating income 18 18, Gain (loss) on disposal of 1,557 65,423 investment property 3.05 Income before finance income (costs) and taxes 81, , Finance income (costs) (69,685) (8,306) Finance income 26, , Finance costs (96,418) (121,138) 3.07 Income before income taxes 12, , Income and social contribution taxes (23,765) 52, Current (2,375) (11,076) Deferred (21,390) 63, Net income from continuing operations (11,584) 182, Consolidated income (loss) for the period (11,584) 182, Attributed to shareholders of parent company (11,584) 182, Earnings per share (reais / shares) Basic earnings per share ON ( ) Diluted earnings per share ON

20 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Consolidated financial statements / statement of comprehensive income (In thousands of reais) Account code Account description Current quarter 01/01/2018 a 03/31/2018 YTD - current year 01/01/2017 a 03/31/ Consolidated net income for the period (11,584) 182, Consolidated comprehensive income or the period (11,584) 182, Attributed to shareholders of parent company (11,584) 182,769 19

21 ITR - Quarterly Information - 03/31/ BR PROPERTIES S.A. Version: 1 Consolidated financial statements / statement of cash flows - indirect method (In thousands of reais) Account code Account description YTD - current year 01/01/2018 a 03/31/2018 YTD prior year 01/01/2017 a 03/31/ Net cash from operating activities 116, , Cash from operations 88,400 71, Income before income and social contribution 12, ,303 Taxes epreciation of property and equipment Fair value of investment properties (1,557) (65,423) Revenues - straight-line method 1,392 (12,038) Interest and monetary restatement of loans 82, , Foreign exchange differences, net 3,135 (16,906) Losses (gains) on derivative financial instruments (5,553) 4, MTM interest of perpetual bonds MTM of swap 7,200 (6,159) Amortization of capitalized cost 1,882 3, Stock option plan 1,674 2, Provision for compensation to employees and directors 2,477 2, Allowance for doubtful accounts 420 2, Monetary restatement (3,981) (56,712) Other provisions Results obtained in transactions with investments and - (18,777) Property Gain (loss) on marketable securities (14,808) (11,422) Changes in assets and liabilities 27,719 38, Trade accounts receivable 20,903 34, Taxes recoverable 1,556 7, Other assets 10,975 5, Accounts payable (3,618) 4, Taxes and contributions (1,468) (4,463) Salaries and social charges payable 192 2, Provision for compesantion to employees and directos - (6,440) Other liabilities (821) (5,971) 6.02 Net cash from investing activities (68,317) 19, Acquisition of property and equipment (201) (122) Acquisition of/ investment in investment properties (84,002) (6,301) Proceeds from sale of interests in subsidiaries - 240, Investment in marketable securities 15,886 (214,523) 6.03 Net cash - financing activities (62,086) (124,240) Share issue costs (1,836) (992) Repayment of loans and financing 50, Payment of loans and financing (98,790) (117,962) Gains on financial instruments 4, Payment of losses on financial instruments - (5,286) Repurchase of shares (16,022) Increase (decrease) in cash and cash equivalents (14,284) 4, Cash and cash equivalents at beginning of period 125, , Cash and cash equivalents at end of period 110, ,687 20

22 ITR - Informações Trimestrais - 31/03/ BR PROPERTIES S.A. Versão: 1 Consolidated financial statements / statement of changes in equity / SCE - 01/01/2018 a 03/31/2018 (In thousands of reais) Account code Account description Paid-in capital Capital reserves, options granted and treasury shares Income reserves Retained earnings (accumulated losses) Other comprehensive income Equity Noncontrolling interests Equity Consolidated 5.01 Opening balances 3,252,701 2,324, , ,876,090-5,876, Adjusted opening balances 3,252,701 2,324, , ,876,090-5,876, Capital transactions with owners - (14,348) (14,348) - (14,348) Recognition of options granted - 1, ,674-1, Treasury shares acquired - (16,022) (16,022) - (16,022) 5.05 Total comprehensive income (11,584) - (11,584) - (11,584) Net income for the period (11,584) - (11,584) - (11,584) 5.07 Closing balances 3,252,701 2,310, ,477 (11,584) - 5,850,158-5,850,158 21

23 ITR - Informações Trimestrais - 31/03/ BR PROPERTIES S.A. Versão: 1 Consolidated financial statements / statement of changes in equity / SCE - 01/01/2017 a 03/31/2017 (In thousands of reais) Account code Account description Paid-in capital Capital reserves, options granted and treasury shares Income reserves Retained earnings (accumulated losses) Other comprehensive income Equity Noncontrolling interests Equity Consolidated 5.01 Opening balances 2,314,234 2,414, ,729,143-4,729, Adjusted opening balances 2,314,234 2,414, ,729,143-4,729, Capital transactions with owners - 2, ,283-2, Recognition of options granted - 2, ,283-2, Total comprehensive income , , , Net income for the period , , , Closing balances 2,314,234 2,417, ,769-4,914,195-4,914,195 22

24 ITR - Informações Trimestrais - 31/03/ BR PROPERTIES S.A. Versão: 1 Consolidated financial statements / statement of value added (In thousands of reais) Account code Account description YTD - current year 01/01/2018 a 03/31/2018 YTD prior year 01/01/2017 a 03/31/ Revenues 129, , Sales of goods, products and services 128, , Other revenues 1,156 81, Other revenues 19 18, Reversal / (constitution) of allowance for doubtful (420) (2,068) Accounts Fair value adjustment of investment properties 1,557 65, Inputs acquired from third parties (29,765) (17,790) Other (29,765) (17,790) Inputs acquired from third parties (29,765) (17,790) 7.03 Gross value added 100, , Retentions (104) (107) Depreciation, amortization and depletion (104) (107) 7.05 Added value net produced 100, , Value added received in transfer 26, , Finance income 26, , Total added value to distributed 126, , Distribution of added value 126, , Personnel 9,164 8, Direct compensation 8,200 8, Benefits Unemployment Compensation Fund (FGTS) Taxes, charges and contributions 32,833 (10,673) Federal 32,833 (40,428) Local - 29, Debt remuneration 96, , Interest 82, , Other 13,682 9, Equity remuneration (11,584) 182, Retained profits/losses for the period (11,584) 182,769 23

25 Notes to quarterly information BR Properties S.A. Notes to the interim consolidated financial statements Three-months ending 31 March 2018 (In thousands of reais) 1 Operations Incorporated as a stock corporation domiciled in Brazil, the Company s shares are traded on B3 under ticker symbol BRPR3. Its main place of business is located at Avenida das Nações Unidas, º. Andar - city and state of São Paulo, Brazil. The Company s individual and consolidated quarterly information for the period ended March 31, 2018 comprises the Company, its subsidiaries and jointly-controlled subsidiaries (collectively referred to as the Group and individually as Group entities ). BR Properties S.A. and its subsidiaries (hereinafter referred to as the Company ) are mainly engaged in the acquisition, administration, lease and sale of commercial properties in Brazil, particularly office and commercial building and floors, retail stores and warehouses, provided that they are existing or built-to-suit assets. The Company also develops and engages third parties to build new properties, which will be added to its portfolio for lease purposes. On March 12, 2018, the Company entered into a Public Deed with BRE Ponte Participações S.A. ( Seller ), investment vehicle of the Blackstone Group, for the purchase and sale of a property used for industrial purposes, consisting of units 28, 29, 30 and 31 of Edifício Tucano ( Properties ), located in Centro Empresarial Espaço Gaia Ar, at Rodovia (SP-65) Dom Pedro I, Km 90, Gleba A-1, Bairro do Pinhal, city of Jarinu, Judicial District of Atibaia, state of São Paulo, with Gross Leasable Area (GLA) of 31,719 m², for R$ 71,000 (Note 7.a.i). 2 Summary of significant accounting practices The individual and consolidated quarterly information was prepared consistently with the accounting practices described in Note 2 to the annual individual and consolidated financial statements for the year ended December 31, 2017, and remain valid, except for the new standards that became effective on January 1, 2018, as follows: Pronouncement CPC 48 Financial instruments CPC 47 Revenue from contracts with customers IFRS 10 Consolidated financial statements and IAS 28 Investment in affiliate Description Correlation with International Financial Accounting Standards IFRS 9 Financial Instruments: classification, measurement, impairment and hedge accounting. Correlation with International Financial Accounting Standards IFRS 15 on recognition of revenue from contracts with customers. Amendments that address the conflict in the treatment of sale or contribution of assets between an investor and its affiliate or its joint venture. The Company believes that these amendments had no significant impact on its individual and consolidated financial statements. 24

26 BR Properties S.A. Review report on quarterly information Period ended March 31, 2018 Therefore, this quarterly information does not include all notes and disclosures required by standards for annual individual and consolidated financial statements, and, as a result, the respective information should be read together with the referred to annual individual and consolidated financial statements. Based on the judgment and assumptions adopted by management on the materiality and changes that should be disclosed in the notes, this quarterly information includes selected notes and does not include all the notes presented in the annual financial statements, as allowed by Circular No. 03/2011, issued by the Brazilian Securities and Exchange Commission ( CVM ). The Company s individual and consolidated quarterly information, contained in the Quarterly Information Form (ITR) for the period ended March 31, 2018, was prepared in accordance with CPC 21 (R1) and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standard Board (IASB), and is presented in accordance with the rules issued by the CVM, applicable to the preparation of Quarterly Information (ITR). Preparation of quarterly information requires the use of certain critical accounting estimates and Company management judgment in the process to apply the accounting practices. Accounting estimates and assumptions are assessed on an ongoing basis, and are based on past experience and other factors, including expected future events considered reasonable for the circumstances. These estimates and assumptions may be different from effective results. The quarterly information is presented in thousands of reais (R$) and all amounts are rounded off to the nearest thousand, unless otherwise stated. In certain circumstances, this may lead to immaterial differences between total figures and subtotals stated in the tables. This individual and consolidated quarterly information of BR Properties S.A. ( Company ) for the period ended March 31, 2018, was completed and approved by the Company s Executive Board on April 30, 2018, to be authorized for issue as per Board of Directors resolution on May 8, New standards, amendments and interpretations to standards The Company elected not to early adopt any other standard, interpretation or amendment that has been issued, but is not yet effective. The nature and effectiveness of each of the new standards and amendments are set out below: Standard Description Effectiveness CPC 06 (R2) Lease Correlation with IFRS 16. Refers to the definition of and guidance on leases provided in IAS17. Annual periods beginning on or after January 1, The Company intends to adopt the new standards and/or amendments on the effective date required, based on the method applicable to each pronouncement. Presentation may retroactive or prospective. According to the Company s preliminary assessment, these amendments are not expected to have a significant impact on its individual and consolidated financial statements. 25

27 3 Cash, cash equivalents and marketable securities BR Properties S.A. Review report on quarterly information Period ended March 31, 2018 Parent Company Consolidated 03/31/ /31/ /31/ /31/2017 Cash and banks Cash equivalents (i) 84,581 86, , ,746 Cash and cash equivalentes 84,656 86, , ,015 Investment fund (ii) 938, , , ,988 Marketable securities 938, , , ,988 1,023,368 1,026,372 1,049,519 1,065,003 Cash and cash equivalents are held in order to meet short-term cash commitments, rather than for investment or other purposes. The Company considers as cash equivalents investments immediately redeemable at a known cash amount and that are exposed to an insignificant risk of change in value. Accordingly, an investment normally qualifies as cash equivalent when it is redeemable in the short term, for example, within three months from the investment date, or for which there are no fines or any other restrictions in connection with immediate redemption. (i) Cash equivalents correspond to Certificado de Depósitos Bancários (CDBs) held with first-tier local and foreign financial institutions. These transactions are mostly remunerated based on the Certificado de Depósitos Interbancários (CDI) index variation, under normal market conditions and rates. (ii) Boutique investment fund administered by Bank J.P. Morgan, which invests in fixed income, federal government securities (Selic Treasury (LTF)and Treasury Fixed Rate (LTN)) and Financial Bills (LF) of first-tier banks. The statement of the fund s portfolio is as follows: Parent Company Consolidated Investment Funds 03/31/ /31/ /31/ /31/2017 Financial Treasury Bills - floating rate 712, , , ,710 Financial Bills - floating rate 69,087 67,987 69,087 67,987 National Treasury Bills - fixed rate - 270, ,291 National Treasury Notes fixed rate 157, ,090 - Other assets and liabilities (76) (37) , , , ,988 The Company adopts financial investment policies determining that investments should be concentrated on low-risk marketable securities and investments in first-tier financial institutions, bearing interest ranging from 70% to 103,8% (70% to 101,2% in 2017) of the CDI. 26

28 4 Accounts receivable BR Properties S.A. Review report on quarterly information Period ended March 31, 2018 Parent Company Consolidated 03/31/ /31/ /31/ /31/2017 Rents receivable 101, , , ,989 Allowance for doubtful accounts (9,253) (8,833) (9,253) (8,833) 92,367 94, , ,156 Current 39,612 31,837 54,795 65,720 Noncurrent 52,755 62,989 55,646 67,436 Under typical contracts with customers, rent is usually received until the tenth business day of the subsequent month, in addition to annual payments. Current lease agreements are monthly restated substantially by reference to the Índice Geral de Preços do Mercado ( IGP-M ), and contain no contingent receipt clauses, as said agreements were not executed with payments based on variables, such as percentage of future sales, futures price indexes and other. The allowance for doubtful accounts was set up considering the history of losses, an analysis of overdue accounts receivable, and the current individual credit situation of each customer and guarantees given thereby. Management understands that the risk related to trade accounts receivable is mitigated as the Company s customer portfolio is diversified. Changes in allowance for doubtful accounts are as follows: Parent Company Consolidated 03/31/ /31/ /31/ /31/2017 Balance at beginning of period/year (8,833) (7,297) (8,833) (7,314) Allowance supplement for the period/year (420) (1,536) (420) (1,519) Balance at end of period/year (9,253) (8,833) (9,253) (8,833) 27

29 5 Taxes recoverable BR Properties S.A. Review report on quarterly information Period ended March 31, 2018 Parent Company Consolidated 03/31/ /31/ /31/ /31/2017 Tax credits 3,775-5,870 - IRPJ and CSLL prepayments 73-1,038 - Pis and Cofins 1,344 1,413 2,496 2,531 IRPJ and CSLL tax credits 251, , , ,043 Total taxes recoverable 256, , , ,574 Income and social contribution payable , Taxes on revenue - Pis and Cofins 1,641 2,643 1,843 2,855 Withholding taxes Other taxes payable Total taxes payable 2,122 3,146 4,642 3,735 Total net 254, , , ,839 Current assets 36,637 35,249 44,106 41,277 Noncurrent assets 219, , , ,297 Current liabilities (2,123) (3,146) (4,642) (3,735) Total net 254, , , ,839 6 Investments Parent Company 03/31/ /31/2017 Participation in subsidiaries 582, ,203 a. Information on subsidiaries Interest held in subsidiaries, valued under the equity method, was determined in accordance with the statements of financial position as of March 31, 2018 and December 31, The investment book value as of March 31, 2018 and December 31, 2017 and equity pickup for the quarters ended March 31, 2018 and 2017 are as follows: shares/units of interest Shareholder s Equity Income (Loss) 03/31/ /31/ /31/2017 Book value of Equity Income Book value of Equity Income investments (Loss) the investments (Loss) Direct subsidiaries BRPR II Empreendimentos e Participações Ltda. 42,015,999 69, , ,888 (228) BRPR VII Empreendimentos e Participações Ltda. 75,799,399 96,696 (1,289) 96,686 (1,288) 92,975 (738) BRPR 39 Empreendimentos e Participações Ltda. 2,459,463 10, , , BRPR 40 Empreendimentos e Participações Ltda. 29,625,241 29, , , BRPR 43 Empreendimentos e Participações Ltda. 25,927,013 6, , , BRPR 45 Empreendimentos e Participações S.A. 772, (52) 696 (52) 748 (44) BRPR 55 Empreendimentos e Participações S.A. 5,031,024 19, , , BRPR 56 Empreendimentos e Participações S.A. 7,912, ,372 2, ,372 2, ,675 3,503 BRPR 57 Empreendimentos e Participações S.A. 565,560 65,681 1,113 65,681 1,113 64,568 1,651 SPE 61 Empreendimentos e Participações S.A. 62,699, , , ,500 1,524 BRPR 62 Empreendimentos e Participações Ltda. 58,099,924 9, , , BRPR 66 Empreendimentos e Participações Ltda. 15,799,464 16, , , BRPR A Adm. de Ativos Imob. Ltda. 400,999 2,292 1,891 2,292 1,891 12,348 1,883 BRPR Participações S.A. 701, Investees sold of in ,069 Real estate investment funds Desenvolvimento 2 FII - JK D/E (BRPR 68 FII) 559,141 5, , , ,715 6, ,203 52,856 28

30 BR Properties S.A. Review report on quarterly information Period ended March 31, 2018 b. Information on the main groups of assets, liabilities and Results of subsidiaries at March 31, Assets Liabilities Current Noncurrent Total Current Noncurrent Shareholder s Equity Total Direct subsidiaries BRPR II Empreendimentos e Participações Ltda. 3, , ,738 (4,993) (38,198) (69,546) (112,738) BRPR VII Empreendimentos e Participações Ltda. 5, , ,306 (5,460) (50,150) (96,696) (152,306) BRPR 39 Empreendimentos e Participações Ltda ,696 14,428 (3) (4,019) (10,407) (14,428) BRPR 40 Empreendimentos e Participações Ltda. 7,047 67,564 74,611 (4,508) (41,024) (29,079) (74,611) BRPR 43 Empreendimentos e Participações Ltda. 1,136 5,856 6,992 (5) - (6,987) (6,992) BRPR 45 Empreendimentos e Participações S.A (63) (1) (696) (759) BRPR 55 Empreendimentos e Participações S.A. 2,516 37,401 39,917 (4,855) (15,287) (19,775) (39,917) BRPR 56 Empreendimentos e Participações S.A. 7, , ,266 (38,296) (107,797) (125,172) (271,266) BRPR 57 Empreendimentos e Participações S.A. 2,989 83,393 86,382 (1,254) (20,141) (64,987) (86,382) SPE 61 Empreendimentos e Participações S.A. 6, , ,910 (743) (20,883) (114,283) (135,910) BRPR 62 Empreendimentos e Participações Ltda ,589 10,943 (6) (1,106) (9,831) (10,943) BRPR 66 Empreendimentos e Participações Ltda. 1,068 15,912 16,980 (146) - (16,834) (16,980) BRPR A Adm. de Ativos Imob. Ltda. 3, ,655 (1,372) 8 (2,292) (3,655) BRPR Participações S.A (3) (6) (640) (649) Real estate investment funds Desenvolvimento 2 FII - JK D/E (BRPR 68 FII) 5,624-5,624 (11) - (5,613) (5,624) Gross revenue from rentals and services Taxes, rebates and costs of rented properties Statement of Income (Loss) Operating income/ (expenses) Income tax and social contribution P&L for the period Direct subsidiaries BRPR II Empreendimentos e Participações Ltda. 2,111 (286) (847) (327) 652 BRPR VII Empreendimentos e Participações Ltda. 1,934 (685) (1,972) (565) (1,289) BRPR 39 Empreendimentos e Participações Ltda (3) 8 BRPR 40 Empreendimentos e Participações Ltda. 1,824 (169) (1,405) (161) 90 BRPR 43 Empreendimentos e Participações Ltda (4) 14 BRPR 45 Empreendimentos e Participações S.A. - - (52) - (52) BRPR 55 Empreendimentos e Participações S.A. 1,279 (59) (568) (196) 455 BRPR 56 Empreendimentos e Participações S.A. 8,132 (378) (3,708) (1,349) 2,697 BRPR 57 Empreendimentos e Participações S.A. 2,032 (380) 26 (564) 1,113 SPE 61 Empreendimentos e Participações S.A. 1,783 (471) (311) (217) 783 BRPR 62 Empreendimentos e Participações Ltda (9) 23 BRPR 66 Empreendimentos e Participações Ltda (3) 13 BRPR A Adm. de Ativos Imob. Ltda. 4,356 (377) (1,577) (512) 1,891 BRPR Participações S.A. 1 (0) 7 (2) 5 Real estate investment funds Desenvolvimento 2 FII - JK D/E (BRPR 68 FII) c. Changes in investments 03/31/ /31/2017 Opening balance 583, ,937 (+)Additions (i) 5,000 12,493 (-)Disposals (ii) - (171,008) (-)Dividends and interest on equity received (11,948) (575) (+/-)Equity pick-up 6,460 52,856 Ending balance 582, ,703 i) Additions in 2018 refer to contributions, as in 2017, period in which the most representative contribution was in subsidiary BRPR II, as a result of Ed. Henrique Schaumann debt settlement. (ii) In 1Q2017, the Company completed the transaction set forth in the agreement for purchase and sale of assets and shares entered into with the GLP (Global Logistic Properties Limited) Group, whose subject matter was the disposal of all shares held by the Company in BRPR 46 Securitizadora de Créditos Imobiliários S.A., which owns the industrial warehouse located in São Bernardo do Campo, for the total amount of R$240,249. Such transaction was pending completion due to an arbitration dispute. 29