EARNINGS RELEASE INVESTOR RELATIONS CONFERENCE CALLS. Carlos Alberto Correa CFO and Investor Relations Officer. English

Transcription

1 EARNINGS RELEASE 2Q15 INVESTOR RELATIONS Carlos Alberto Correa CFO and Investor Relations Officer Murilo Hyai Investor Relations Manager Eduardo Oliveira Investor Relations Analyst Website: ir.sonaesierra.com.br Phone: +55 (11) CONFERENCE CALLS English August 6 th, :00 am (BR) 10:00 am (US ET) 2:00 pm (GMT) Phone (New York): +1 (646) Phone (London): +44 (203) Phone (São Paulo): +55 (11) Replay: +55 (11) Portuguese August 6 th, :00 am (BR) 9:00 am (US ET) 1:00 pm (GMT) Phone: +55 (11) Replay: +55 (11)

2 SONAE SIERRA BRASIL REPORTS 2Q15 RESULTS São Paulo, August 5 th, 2015 Sonae Sierra Brasil S.A. (BM&FBovespa: SSBR3), a leading Brazilian shopping mall developer, owner and manager, announces its results for the second quarter of 2015 (2Q15). HIGHLIGHTS Net Income grew by 65.9% over the same period of last year, reaching R$ 69.5 million. Total sales at the Company s malls in 2Q15 totaled R$ 1.1 billion, a 5.5% increase over 2Q14. Occupancy in our mature portfolio at 98.0% in 2Q15 versus 98.9% in 2Q14. Occupancy rates in our younger malls increased significantly in the last twelve months, mainly in Boulevard Londrina (370 bps to 93.4%) and Passeio das Águas (860 bps to 89.7%). Net revenue totaled R$ 80.0 million in 2Q15, a 3.7% increase over 2Q14, led by organic revenue growth and lower discounts in rental contracts. NOI reached R$ 75.9 million in 2Q15, an increase of 2.3% compared to 2Q14. Leasing spreads in some of our mature malls together with the ramp-up of our newer assets helped the NOI. Adjusted EBITDA was R$ 56.4 million in 2Q15, 2.2% above 2Q14. Adjusted FFO totaled R$ 35.2 million in 2Q15, a 1.8% increase from 2Q14. Same-store rent (SSR) continued to report compelling growth in 2Q15 at 8.4% compared to 2Q14, led by the combination of high leasing spreads in our mature malls, high inflation adjustments of lease contracts and the ramp-up of our newer shopping centers. Same-store sales (SSS) increased by 2.1% in 2Q15 compared to 2Q14, impacted by the adverse Brazilian economic scenario. Excluding electronics stores, which had a struggling performance in the quarter, SSS was 5.0%. 1

3 FINANCIAL AND OPERATIONAL PERFORMANCE Financial Indicators (R$ million) Net Revenue 2Q Q % 1H H % Adjusted EBITDA % % Adjusted EBITDA Margin 70.5% 71.6% -106 bps 70.8% 69.8% 105 bps Adjusted FFO % % Adjusted FFO Margin 44.0% 44.8% -83 bps 44.4% 42.5% 189 bps Net Income % % Net Operating Income (NOI) % % NOI Margin 88.6% 88.6% -3 bps 89.0% 88.2% 80 bps Operating Indicators 2Q15 2Q14 1H15 1H14 Total GLA ('000 sqm) % % Owned GLA ('000 sqm) % % Number of Shopping Malls % % Sales (R$ million) 1, , % 2, , % Sales/sqm (monthly average) % % Occupancy Rate 95.7% 94.5% 121 bps 95.7% 94.5% 121 bps Occupancy Rate for Mature Malls 98.0% 98.9% -84 bps 98.0% 98.9% -84 bps Occupancy Cost (% of sales) 9.5% 9.4% 7 bps 9.5% 9.4% 7 bps Same Store Sales (SSS) % % Same Store Rents (SSR) % % Late Payment (25 days) 4.2% 3.2% 104 bps 4.2% 3.2% 93 bps Key Financial Indicators (R$ million) Net Revenue NOI Adjusted EBITDA Adjusted FFO +3.7% +2.3% +2.2% +1.8% Q11 2Q12 2Q13 2Q14 2Q15 2Q11 2Q12 2Q13 2Q14 2Q15 2Q11 2Q12 2Q13 2Q14 2Q15 2Q11 2Q12 2Q13 2Q14 2Q15 2

4 Parque D. Pedro Shopping Boulevard Londrina Shopping Passeio das Águas Shopping 3

5 MANAGEMENT COMMENTS Performance and Positioning The challenging macro scenario had a wide-ranging impact in retail and consequently in the mall sectors. Sonae Sierra Brasil was not impervious to the headwinds, as its strong growth trend over previous quarters could not be replicated in 2Q15. Nevertheless, the Company continued to show resilience as attested by some key operating and financial drivers. Same Store Rent continued stalwart at 8.4%.Tenant sales in our malls reached R$1.15 billion, a 5.5% increase compared to the same period last year, spearheaded by the strong sales growth of almost 60% in Passeio das Águas Shopping and more than 18% in Boulevard Londrina. Occupancy in mature malls continue high, at 98.0%. Net income totaled R$69.5 million in 2Q15, a 65.9% increase over the same period last year, led by higher valuation gains in our younger malls, namely Uberlândia Shopping, Boulevard Londrina and Passeio das Águas Shopping. Gross rental revenues increased by 6.1% to R$73.7 million and parking revenues increased by 12% to R$8.6 million. Net revenue totaled R$80.0 million in the quarter, up 3.7% compared to 2Q14, while Adjusted EBITDA increased by 2.2% reaching R$56.4 million. Furthermore, our balance sheet continues very solid. The Company ended the quarter with R$243.8 million in cash and a net debt of R$652.1 million, or 2.8 times trailing twelve months consolidated EBITDA. 4

6 Outlook In our view, the turbulent political scenario, the uncertainties regarding the fiscal reform and the weaker economic activity should continue to put pressure on the Brazilian economy in the short-term. As a result, we still think the macro scenario will be challenging for the retail sector and for the mall industry as a whole. However, we remain confident in our business model and overall strategy. We also believe we are in a good position to take advantage of growth opportunities that may arise in this more uncertain scenario. While we keep monitoring potential growth opportunities, we continue to explore our internal growth potential by constantly improving operations in our malls, updating tenant mix and performing refurbishment and expansions when possible. Management 5

7 2Q15 PORTFOLIO At the end of 2Q15, our portfolio was comprised of ten operating shopping malls, totaling thousand sqm of total GLA and thousand sqm of owned GLA. Together with the two third party malls we manage, total assets under management totaled thousand sqm of GLA. Parque D. Pedro s GLA increased by 1.6 thousand sqm after the opening of Forever 21 in May. As a result, Sonae Sierra Brasil s own GLA had a 0.8 thousand sqm growth. Operating Shopping Centers Shopping Metrópole City São Bernardo do Campo (SP) Stores Total GLA ('000 sqm) Ownership Owned GLA ('000 sqm) Occupancy (% GLA) % % Franca Shopping Franca (SP) % % Parque D. Pedro Shopping Campinas (SP) % % Boavista Shopping São Paulo (SP) % % Shopping Plaza Sul São Paulo (SP) % % Shopping Campo Limpo São Paulo (SP) % % Manauara Shopping Manaus (AM) % % Uberlândia Shopping Uberlândia (MG) % % Boulevard Londrina Shopping Londrina (PR) % % Passeio das Águas Shopping Goiânia (GO) % % Total 2, % % Total excluding New Malls* 98.0% Managed Third-party Shopping Centers City Stores Total GLA ('000 sqm) Occupancy (% GLA) Penha Shopping São Paulo (SP) % Tivoli Shopping Santa Barbara d'oeste (SP) % Total % Total Assets Under Management 2, *Uberlândia, Boulevard Londrina and Passeio das Águas shopping centers 6

8 OPERATING PERFORMANCE Shopping Centers Tenants Sales Total tenant sales in Sonae Sierra Brasil s operating malls totaled R$1.1 billion in 2Q15, a 5.5% increase over 2Q14. Considering the Company s ownership interest in each of those malls, sales reached R$848 million in the quarter, a 6.1% increase in the same period. Shopping Center Tenant Sales (R$ million) +5.5% 1,088 1,147 Total sales continued to be positively impacted by the ramp up process of our younger malls, 2Q14 2Q15 Uberlândia Shopping, Boulevard Londrina and Passeio das Águas. Parque D. Pedro also reported solid sales performance, mainly due to changes in tenant mix and the inauguration of a new anchor store. However, tenants sales in our mature portfolio in general were negatively impacted by the current weak retail environment. Shopping Center Tenant Sales (R$ thousand) 2Q15 2Q14 1H15 1H14 Shopping Metrópole 88,247 88, % 166, , % Franca Shopping 52,004 52, % 102,928 98, % Parque D. Pedro Shopping 337, , % 664, , % Boavista Shopping 65,433 66, % 127, , % Shopping Plaza Sul 103, , % 198, , % Shopping Campo Limpo 91,422 88, % 172, , % Manauara Shopping 186, , % 368, , % Uberlândia Shopping 70,435 65, % 141, , % Boulevard Londrina Shopping 61,178 51, % 123,820 98, % Passeio das Águas Shopping 90,439 57, % 169, , % Total 1,147,190 1,087, % 2,235,243 2,081, % Sales Growth Breakdown (R$ million) +57.8% -0.7% +4.9% +8.2% +18.1% 1,147 1,088 2Q14 Parque D. Pedro Uberlândia Boulevard Londrina Passeio das Águas Other Assets 2Q15 7

9 In May, Forever 21 opened the first two stores in Sonae Sierra Brasil s malls - Parque D. Pedro and Passeio das Águas. At 1.9 thousand sqm in Parque D. Pedro and 1.1 thousand sqm in Passeio das Águas, they are two of the largest stores of the US retailer in Brazil. Since their openings, sales have been strong in both stores, which also helped to boost overall footfall and sales in the two malls as a whole. In their grand opening days, the Parque D. Pedro s store and the Passeio das Águas store drew 8,000 and 6,500 visits, respectively. Same-Store Sales (SSS) Same-store sales (SSS) figures were not an exception and they were highly impacted by the consumption slowdown. As a result, SSS increased by 2.1% in 2Q15 compared to 2Q14, totaling R$937/sqm per month. 2.1% Same-Store Sales (SSS) % 940 The increase was mainly led by our 892 younger malls, namely Passeio das Águas, Boulevard Londrina and 2Q14 2Q15 1H14 1H15 Uberlândia shopping centers. Among our mature portfolio, Parque D. Pedro was, once again, the highlight, supported by strong satellite and leisure stores sales performance. Similarly to the previous quarter, a strong movie season positively impacted leisure tickets sales, resulting in a SSS for this segment of over 13%. 918 Fashion and electronics tenants were the most affected by the adverse economic scenario in Brazil, negatively affecting the anchor stores as a whole. Electronic tenants sales performance were also skewed in 2Q15 by higher TV sales in 2Q14 due to the 2014 FIFA World Cup. If we exclude electronics tenants from the SSS calculation, the index would be at 5.0% in 2Q15 when compared to 2Q14. Same-Store Sales (SSS) 2Q15 2Q14 1H15 1H14 Satellite 1, , % 1, , % Anchor % % Leisure % % Total % % 8

10 Same-Store Rent (SSR) In spite of the slowdown in tenant sales, SSR continues to be resilient, totaling R$58/sqm per month in 2Q15, representing a strong increase of 8.4% compared to the same period last year. 8.4% Same-Store Rents (SSR) % 58.3 SSR continued to benefit from the combination of high occupancy rates in mature malls and higher inflation 2Q14 2Q15 1H14 1H15 adjustments on lease contracts. In addition, same-store rents were supported by the continuous ramp-up in our newer malls and among them we highlight Passeio das Águas figures, with SSR of nearly 17%. Also on the positive side, leasing spreads continue to be strong, at 13% in the quarter Same-Store Rents (SSR) 2Q15 2Q14 1H15 1H14 Satellite % % Anchor % % Leisure % % Total % % Occupancy rate Occupancy rate of the mature portfolio remained high at 98.0% of GLA at the end of 2Q15. Three of our seven mature malls reported occupancy rates above 99% by the end of the quarter, namely Parque D. Pedro, Campo Limpo and Franca, which attests the resilience of our mature portfolio even Occupancy Rate (%) 94.5% 95.1% 95.8% 96.1% 95.7% 98.0% 2Q14 3Q14 4Q14 1Q15 2Q15 2Q15 w/o New Malls* * Uberlândia, Boulevard Londrina and Passeio das Águas shopping centers during a challenging macro scenario. Including the younger malls, overall occupancy rate was 95.7% in the quarter, improving 120 bps from 2Q14 and slightly decreasing 40 bps from 1Q15. 9

11 Occupancy cost Occupancy costs remained at 9.5% of sales in Sonae Sierra Brasil s malls in 2Q15, in line with the two previous quarters. This still represents one of the lowest occupancy cost ratios among listed mall companies in Brazil and we target to keep occupancy costs at low levels, by persistently introducing innovation and cost savings initiatives. Occupancy Cost (%) 9.4% 9.4% 9.5% 9.5% 9.5% 2Q14 3Q14 4Q14 1Q15 2Q15 Late Payment (25-days late payments) Excluding the three younger malls, which are still in lease-up phases, the late payment rate was 3.64% in 2Q15. The overall late payment rate in 2Q15 was 4.20%, a slight increase of 9 bps compared to the previous quarter. Late Payment (%) 3.15% 3.42% 3.18% 4.11% 4.20% 3.64% 2Q14 3Q14 4Q14 1Q15 2Q15 2Q15 w/o New Malls* * Uberlândia, Boulevard Londrina and Passeio das Águas shopping centers 10

12 FINANCIAL PERFORMANCE Statutory Accounts The consolidated financial and operating information outlined below is based on accounts prepared in accordance with accounting policies adopted in Brazil as well as the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board IASB and present a comparison of results obtained in 2Q15 with the same period of the previous year. Therefore, the consolidated financial information includes 100% of the results of Parque D. Pedro Shopping. Revenues The Company s gross revenue totaled R$92.2 million in 2Q15, a 3.0% increase over 2Q14. Revenues (R$ million) 2Q15 2Q14 1H15 1H14 Rent % % Rent contract straight-lining % % Service revenue % % Parking revenue % % Key Money % % Other revenue % % Total Gross Revenue % % Taxes over rent and services (4.6) (4.6) 0.2% (9.4) (9.0) 5.0% Discounts and cancellations (7.6) (7.8) -2.8% (13.4) (14.5) -7.1% Our rental revenue growth (6.1%) was a result of strong fixed rental revenue increases in our mature assets, mainly in Manauara and Parque D. Pedro shopping centers, and the ramp-up process of our younger assets, which was partially offset by lower turnover rents in most of the malls, mainly in anchor stores. Manauara Shopping continued to report good leasing spreads, still benefiting from the mall s fifth anniversary, thus reflecting on strong rental increases in 2Q15 when compared to the same period of last year. Service revenue increased 12.8%, as a result of higher income from management fees at our assets and third-party malls managed by SSB, mainly in Tivoli Shopping, which recently opened an expansion. Parking revenue totaled R$8.6 million in 2Q15 compared to R$7.7 million in 2Q14, a 12.0% increase, led by higher car traffic and higher parking fees. Key money revenue totaled R$2.3 million in the quarter, leading to a 43.4% decrease over 2Q14. This reduction is mainly related to Manauara Shopping, as the mall 11

13 reached its fifth anniversary in 2014 and key money s linear yearly income allocation is now over. In 2Q14 the other revenues was heavily influenced by a fee charged to a home goods anchor store who cancelled the contract in Passeio das Águas, which boosted this line s result in that quarter and thus leading to the 79.8% relative decrease in 2Q15. Excluding key money and other revenues, which are not directly related to our recurring operating results, our gross revenues reported a 6.0% growth in the 2Q15. Gross Revenue (R$ million) +3.0% +5.1% % +12.8% -43.4% -79.8% Rent + Straight lining Parking revenue Service revenue Key Money Other revenue Total Gross Revenue 2Q14 2Q15 Gross Revenue Breakdown in the Quarter 3% 0% Rent Parking revenue Service revenue Key Money Other revenue 9% 7% 81% 7% 7% Fixed Rent Revenue 86% Turnover Rent Revenue Kiosks and Merchandising 12

14 Costs and Expenses Costs and Expenses totaled R$26.4 million in 2Q15, 8.3% higher than 2Q14. Higher costs with personnel and with external services were partially offset by lower costs with vacant stores. The increase in personnel is mainly attributed to annual wage increases. Costs and expenses with external services increase is mainly explained by nonrecurring legal fees and fees related to new projects prospection, compared to the same period of last year. On the other hand, costs related to vacant stores maintained its downtrend, reporting a significant decrease of 9.7% in 2Q15 over 2Q14, led by higher occupancy rate in younger assets, namely Passeio das Águas and Boulevard Londrina shopping centers. The increase in the other costs and expenses in 2Q15 when compared to the same period of 2014 is due to higher utilities and telecommunications prices, as well as information technology expenses. Costs and Expenses (R$ million) 2Q15 2Q14 1H15 1H14 Depreciation and amortization % % Personnel % % External services % % Occupancy expense (vacant stores) % % Cost of contractual agreements with tenants % % Provision for bad debts % % Other % % Total % % Classified as: Cost of rentals and services % % Personnel % % External services % % Occupancy expense (vacant stores) % % Cost of contractual agreements with tenants % % Other % % Operating expenses % % Personnel % % Depreciation and amortization % % External services % % Provision for bad debts % % Other % % Total % % 13

15 Changes in Fair Value of Investment Properties Sonae Sierra Brasil uses IFRS accounting standards, under which an independent entity (Cushman & Wakefield) values our investment properties at fair market value. The appraisals are performed biannually (2Q and 4Q). In 2Q15, the recorded valuation gain totaled R$ 99.7 million, 46.2% higher than the valuation gain recorded in 2Q14. The increase reflects mainly a higher valuation of our young generation of malls, given their rump up process. Net Financial Result The consolidated net financial result in 2Q15 translates into a net financial expense of R$16.5 million, compared to R$14.6 million in 2Q14. Financial income was R$11.4 million in the quarter, increasing 6.5% from 2Q14. The recent interest rates hikes had a positive impact on our financial income, once all of our cash is invested in low risk CDI-linked securities. Financial expenses registered an increase of 10.3%, also led by higher interest rates and higher inflation, as the SELIC rate and last-twelve months IPCA index ended June at 13.75% p.a. and 8.89% p.a., respectively. Net Financial Result (R$ million) 2Q15 2Q14 1H15 1H14 Financial Income % % Financial Expenses (27.9) (25.3) 10.3% (58.0) (52.8) 9.8% Total Financial Result - Net (16.5) (14.6) 13.2% (34.9) (29.0) 20.3% Net Income Net income attributed to shareholders totaled R$69.5 million in 2Q15, a 65.9% increase compared to 2Q14, led mainly by better performance and higher valuation gains in our younger malls, namely Uberlândia Shopping, Boulevard Londrina and Passeio das Águas Shopping. 14

16 Net Operating Income (NOI) NOI totaled R$75.9 million in 2Q15, representing a 2.3% increase over 2Q14. Leasing spreads in Parque D. Pedro and Manauara together with the ramp-up of our newer malls helped the increase on rental revenues. Manauara has been reporting strong leasing spreads in the last couple of quarters, benefiting from the mall s fifth anniversary, reflecting on strong rental increases in the period. On the other hand, this also brings a negative impact on key money, once the linear yearly income allocation related to this asset is now over. NOI (R$ million) 2Q15 2Q14 1H15 1H14 Operating Revenues Rent % % Key money % % Parking revenue % % Other revenue % % Total Revenues % % Operating Costs External services (0.7) (0.6) 19.0% (1.2) (1.1) 10.7% Occupancy expense (vacant stores) (5.2) (5.7) -9.7% (10.2) (11.6) -11.8% Cost of contractual agreements with tenants (3.2) (2.9) 10.1% (5.8) (5.3) 10.1% Other (0.8) (0.4) 101.6% (1.6) (1.3) 20.5% (-) Total Operating Costs (9.8) (9.5) 2.6% (18.8) (19.2) -2.4% NOI % % NOI Margin 88.6% 88.6% -3 bps 89.0% 88.2% 81 bps 15

17 EBITDA and FFO In 2Q15, Adjusted EBITDA increased by 2.2% compared to 2Q14, to R$56.4 million, and EBITDA margin was 70.5%. Lower key money has negatively affected the revenue growth in 2Q15. Meanwhile, on the costs and expenses side, some temporary costs with vacant stores continued to decline with the maturing process of our new generation of malls and should keep this pace in the coming quarters. Adjusted FFO totaled R$35.2 million in 2Q15, an increase of 1.8% from 2Q14. Adjusted FFO margin in the quarter was 44.0%. The reconciliation of operating income before financial results with Adjusted EBITDA and Adjusted FFO is presented as follows: Adjusted EBITDA (R$ million) +8.0% +2.2% Q14 2Q15 1H14 1H15 Adjusted FFO (R$ million) +11.2% +1.8% Q14 2Q15 1H14 1H15 Adjusted EBITDA and Adjusted FFO Reconciliation (R$ million) Net Revenue 2Q Q % 1H H % Operating income before financial result % % Depreciation and amortization % % EBITDA % % Gains in fair value of invest. properties (100.5) (69.4) 44.7% (100.5) (69.4) 44.7% Non-recurring expenses/(income) - - N/A % Adjusted EBITDA % % Adjusted EBITDA Margin 70.5% 71.6% -106 bps 70.8% 69.8% 105 bps EBITDA % % Net financial result (16.5) (14.6) 13.2% (34.9) (29.0) 20.3% Current income and social contribution taxes (4.7) (6.1) -22.1% (7.8) (12.3) -37.1% FFO % % Gains in fair value of invest. properties (100.5) (69.4) 44.7% (100.5) (69.4) 44.7% Non-recurring expenses/(income) - - N/A % Adjusted FFO % % Adjusted FFO Margin 44.0% 44.8% -83 bps 44.4% 42.5% 189 bps 16

18 Cash and Financial Debt The Company s cash totaled R$243.8 million at the end of 2Q15, a 16.4% decrease from 1Q15, mostly as a result of the payment of the debt service and dividends in the quarter. The cash balance is available for investments in strategic growth opportunities and has been invested, in the interim, in low risk, short-term, investment grade bank securities, at an average interest rate of 102.2% of CDI. The Company s total financial debt totaled R$895.9 million at the end of the quarter; the corresponding amortization schedule is as follows: Financial Debt Amortization (R$ million) and beyond Net Financial Debt (R$ million) Short term Long term Total Debt Cash Net Debt 17

19 The R$652.1 million in net debt represents 2.8 times the last-twelve months consolidated EBITDA (or 3.6 times considering the proportional consolidation). Debt Profile CDI 11% Fixed 11% 60% of the Company s debt is fixed or linked to the TR (Taxa Referencial) and 29% to inflation (IPCA). The remaining 11% is CDI-indexed. IPCA 29% TR 49% Cost of Debt The Company s average cost of debt reached 11.99% in 2Q15, a slight increase over the previous quarter due to higher IPCA and CDI interest rate. Interest rate hikes have a limited impact in our average cost of debt, given our debt profile linkages, as referred above. Contracted Debt Financing Balance as of Remaining Term (years) Interest Rate(1) 06/30/15 (R$ million) Working Capital 0.3 CDI % 1.5 Manauara Shopping % 94.0 Metrópole Shopping - Expansion I 2.9 TR % 36.5 Uberlândia Shopping 10.3 TR % 64.7 Boulevard Londrina Shopping 10.3 TR % Passeio das Águas Shopping 8.0 TR % Debentures - 1st series 1.6 CDI % 99.0 Debentures - 2nd series (2) 3.6 IPCA % Total Weighted Average % (1) Considering TR at 1.15% p.a., CDI at 13.64% p.a. and IPCA 2015E at 8.77% (2) The Company contracted in August 2013 a derivative instrument (swap) of R$ 54.5 million at a rate of CDI % 18

20 Management Accounts In accordance with accounting standards and policies adopted in Brazil and IFRS, the Company consolidates 100% of Parque D. Pedro Shopping, despite owning 51% of this mall and, on the other hand, it does not consolidate our Campo Limpo 20% stake. However, considering the relevance of those malls to the Company s results, we prepared pro-forma management accounts with the proportional consolidation of our assets (please refer to page 26). The operating results under this methodology are presented below: NOI (R$ million) 2Q15 2Q14 1H15 1H14 Operating Revenues Rent % % Key money % % Parking revenue % % Other revenue % % Total Revenues % % Operating Costs External services (0.6) (0.4) 34.2% (1.0) (0.8) 20.2% Occupancy expense (vacant stores) (4.9) (5.7) -14.3% (9.7) (11.5) -16.0% Cost of contractual agreements with tenants (3.1) (2.8) 11.2% (5.8) (5.2) 10.6% Other (1.6) (0.2) 795.3% (2.2) (0.9) 146.3% (-) Total Operating Costs (10.2) (9.1) 11.8% (18.6) (18.5) 0.8% NOI % % NOI Margin 85.7% 86.9% -125 bps 86.9% 86.4% 49 bps Adjusted EBITDA and Adjusted FFO Reconciliation (R$ million) 2Q15 2Q14 1H15 1H14 Net Revenue % % Operating income before financial result % % Depreciation and amortization % % EBITDA % % Gains in fair value of invest. properties (83.0) (44.2) 87.8% (83.0) (44.2) 87.8% Non-recurring expenses/(income) - - N/A - - N/A Adjusted EBITDA % % Adjusted EBITDA Margin 63.9% 65.9% -199 bps 65.2% 63.2% 199 bps EBITDA % % Net financial result (17.2) (14.9) 15.6% (36.0) (29.5) 21.8% Current income and social contribution taxes (4.9) (6.2) -21.3% (8.0) (12.6) -36.1% FFO % % Gains in fair value of invest. properties (83.0) (44.2) 87.8% (83.0) (44.2) 87.8% Non-recurring expenses/(income) - - N/A - - N/A Adjusted FFO % % Adjusted FFO Margin 31.3% 33.4% -212 bps 32.7% 30.2% 254 bps 19

21 FUTURE EXPANSIONS AND RENOVATIONS Sonae Sierra Brasil has three ongoing expansion or renovation projects, in Uberlândia, Franca and Parque D. Pedro shopping centers. Project Franca Shopping Expansion Parque D. Pedro Shopping Refurbishment Uberlândia Shopping Expansion Location Franca (SP) Campinas (SP) Uberlândia (MG) Description Expansion and refurbishment of current mall Mall refurbishment and new restaurant area Expansion dedicated to new anchor stores Sonae Sierra Brasil Stake Additional GLA ('000 sqm) 100% 51% 100% Expected Opening / /2016 Gross CAPEX (R$ million)* *Represent SSB stake on total project CAPEX

22 GLOSSARY Adjusted EBITDA: EBITDA adjusted for the gain from fair value of investment properties and effects of non-recurring revenues or expenses. Adjusted FFO: FFO adjusted for gain from fair value of investment properties and the effects of non-recurring revenues or expenses. Anchor Store or Large Anchors: Well-known stores with special marketing and structural features that serve to attract consumers, assuring continuous visitor flows and uniform traffic in all areas of the mall. BM&FBOVESPA: BM&FBovespa S.A. Securities, Commodities and Futures Exchange. EBITDA: Operating income before financial result + depreciation and amortization. FFO (Funds from Operations): EBITDA +/- Net financial result current income and social contribution taxes. GLA (Gross Leasable Area): Equivalent to the sum total of all the areas available for leasing in the shopping malls. IFRS: International Financial Reporting Standards. IPCA: Consumer Price Index, published by the IBGE. Late Payment: The total financial amount of rents past due for more than 25 days, divided by the total financial amount of rents in the same period. NOI (Net Operating Income): Gross revenue from malls (excluding service revenue) + parking revenue mall operating expenses provisions for doubtful accounts. Occupancy Cost: Ratio (of the last twelve months) between total rent plus common charges and promotion fund paid by the tenants and total sales. Occupancy Rate: Ratio between leased area and total GLA of each mall at the end of each period. SSR (same-store rent): Relation between invoiced rent for the same tenant in the current period compared to previous period. SSS (same-store sales): Relation between sales for the same tenant in the current period compared to the previous period. Satellite Stores or Satellites: Small stores without special marketing or structural features located around the anchor stores and aimed at general commerce. Non-accounting information has not been reviewed by the external auditors. 21

23 APPENDICES Balance Sheet (R$ thousand) ASSETS 6/30/15 3/31/15 CURRENT Cash and cash equivalents 243, , % Accounts receivable, net 30,342 37, % Taxes recoverable 13,820 12, % Prepaid expenses % Other credits 45,533 25, % Total current assets 333, , % NON-CURRENT Long-term receivables Restricted financial investments 9,862 9, % Accounts receivable, net 18,434 17, % Taxes recoverable 18,391 18, % Loans to condominiums 26,556 25, % Deferred income and social contribution taxes 3,362 5, % Juducial deposits 12,186 12, % Other credits 7,504 7, % Total long-term assets 96,295 96, % Investments 37,512 36, % Investment properties 4,351,018 4,227, % Fixed Assets 3,040 3, % Intangible Assets 4,890 5, % Total non-current assets 4,492,755 4,369, % TOTAL ASSETS 4,826,448 4,735, % 22

24 Balance Sheet (R$ thousand) LIABILITIES 6/30/15 3/31/15 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT Loans and financing 71,852 66, % Debentures 57,091 2, % Domestic trade accounts payable 16,322 10, % Taxes payable 4,405 3, % Personnel, payroll taxes, benefits, and rewards 9,796 9, % Key money 7,049 7, % Dividends payable - 34, % Earnings payable 2,209 2, % Accounts payable - asset acquisition - 6, % Other payables 6,378 7, % Total current liabilities 175, , % NON-CURRENT Loans and financing 462, , % Debentures 304, , % Deferred revenue 6,314 7, % Deferred income and social contribution taxes 576, , % Provision for civil, tax, labor and pension risks 7,636 7, % Provisions for variable compensation 1,562 2, % Total non-current liabilities 1,358,636 1,389, % SHAREHOLDERS' EQUITY Capital stock 1,397,866 1,397, % Capital reserve 80,115 80, % Profit reserve 874, , % Retained earnings 88,810 19, % Equity attributable to shareholders 2,441,618 2,372, % Minority interests 851, , % Total Shareholders' Equity 3,292,710 3,196, % TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 4,826,448 4,735, % 23

25 Income Statement (R$ thousand, except earnings per share) 2Q15 2Q14 1H15 1H14 NET OPERATING REVENUE FROM RENT, SERVICES AND OTHER 79,970 77, % 161, , % COST OF RENT AND SERVICES (19,810) (18,549) 6.8% (38,078) (36,932) 3.1% GROSS PROFIT 60,160 58, % 123, , % OPERATING REVENUE (EXPENSES) General and administrative (6,633) (5,865) 13.1% (14,122) (12,664) 11.5% Personnel (165) (128) 28.9% (328) (128) 156.3% External services (1,838) (1,183) 55.4% (3,792) (3,355) 13.0% Provisions for bad debts (1,752) (1,944) -9.9% (4,076) (3,672) 11.0% Other administrative expenses (2,208) (1,997) 10.6% (4,583) (4,233) 8.3% Depreciation and amortization (670) (613) 9.3% (1,343) (1,276) 5.3% Taxes (290) (86) 237.2% (629) (1,481) -57.5% Equity income 1,801 2, % 2,595 2, % Change in fair value of investment properties 99,714 68, % 99,714 68, % Other operating revenue (expenses), net 1,484 1, % 2,692 1, % Total operating revenue (expenses), net 96,076 65, % 90,250 58, % OPERATING INCOME BEFORE FINANCIAL RESULT 156, , % 213, , % Net financial result (16,489) (14,571) 13.2% (34,873) (28,996) 20.3% INCOME BEFORE INCOME AND SOCIAL CONTRIBUTION TAXES 139, , % 178, , % INCOME AND SOCIAL CONTRIBUTION TAXES Current (4,720) (6,058) -22.1% (7,755) (12,334) -37.1% Deferred (33,519) (22,556) 48.6% (36,600) (23,513) 55.7% Total (38,239) (28,614) 33.6% (44,355) (35,847) 23.7% NET INCOME 101,508 80, % 134, , % INCOME ATTRIBUTABLE TO: Shareholders 69,484 41, % 88,810 57, % Minority interests 32,024 38, % 45,332 51, % Earnings per share % % 24

26 Cash Flow Six-month period ending on R$ thousand 6/30/2015 6/30/2014 CASH FLOW FROM OPERATING ACTIVITIES Net income for the period 134, ,296 Adjustments to reconcile net income to net cash from (used in) operating activities: Depreciation and amortization 1,343 1,276 Result value of property and equipment sold and/or written off and others Loss (gain) with derivatives, net (1,479) 403 Unbilled revenue from rentals (1,986) (2,981) Allowance for doubtful accounts 4,076 3,672 Reserve of civil, tax, labor, and social security risks (354) 84 Monetary adjustment of reserve for civil, tax, labor, and social security risks Accrual for variable compensation 1,330 1,219 Deferred income tax and social contribution 36,600 23,513 Income tax and social contribution 7,755 12,334 Financial charges on loans and financing 57,662 51,581 Changes in fair value of investment properties (99,714) (68,184) Equity in investees (2,595) (2,762) (Increase) decrease in operating assets: Trade receivables 14,340 2,382 Loans to condominiums (2,810) (10,341) Recoverable taxes (5,217) (6,349) Prepaid expenses (135) (59) Escrow deposits (389) (368) Other (23,006) (5,928) Increase (decrease) in operating liabilities: Domestic trade payables (3,403) (22,043) Taxes payable (2,202) (6,938) Personnel, payroll taxes, benefits, and rewards (2,842) (1,191) Key money (1,793) (3,328) Payments of contingencies (355) (13) Other payables (2,090) (1,291) Cash provided by operating activities 107,536 73,500 Interest paid (47,741) (39,373) Income tax and social contribution paid (9,039) (6,014) Net cash provided by (used in) operating activities 50,756 28,113 CASH FLOW FROM INVESTING ACTIVITIES Restricted investments (533) (948) Acquisition or construction of investment property (39,266) (27,189) Purchase of property and equipment (470) (1,241) Increase in intangible assets (227) (118) Dividends received 1,800 1,720 Net cash used in investing activities (38,696) (27,776) CASH FLOW FROM FINANCING ACTIVITIES Loans and financing raised 0 23,995 Loans and financing paid - principal (29,017) (16,964) Trade accounts payable - acquisition of assets (9,132) (9,132) Distributed earnings of real estate funds - noncontrolling interests (11,243) (20,831) Dividends paid (34,773) (34,772) Net cash from financing activities (84,165) (57,704) NET INCREASE (DECREASE) IN BALANCE OF CASH AND CASH EQUIVALENTS (72,105) (57,367) CASH AND CASH EQUIVALENTS At end of period 243, ,064 At beginning of period 315, ,431 NET INCREASE (DECREASE) IN BALANCE OF CASH AND CASH EQUIVALENTS (72,105) (57,367) 25

27 Pro-forma consolidated income statement considering the proportional consolidation of our malls (R$ thousand) 2Q15 SSB Adjustments* (100% PDP) SSB Management NET OPERATING REVENUE FROM RENT, SERVICES AND OTHER 79,970 12,426 67,544 64, % 135, , % COST OF RENT AND SERVICES (19,810) 402 (20,212) (18,004) 12.3% (37,922) (35,996) 5.3% GROSS PROFIT 60,160 12,828 47,332 46, % 97,414 91, % OPERATING REVENUE (EXPENSES) General and administrative (6,633) (467) (6,166) (5,818) 6.0% (12,759) (12,434) 2.6% Personnel (165) 0 (165) (128) 29.2% (328) (128) 156.6% External services (1,838) (48) (1,790) (1,140) 57.0% (3,642) (3,276) 11.2% Provisions for bad debts (1,752) 146 (1,898) (1,954) -2.9% (3,961) (3,545) 11.7% Other administrative expenses (2,208) (565) (1,643) (1,983) -17.2% (3,485) (4,209) -17.2% Depreciation and amortization (670) (0) (670) (613) 9.3% (1,343) (1,276) 5.2% Taxes (290) 1 (291) (87) 232.7% (631) (1,493) -57.7% Equity income 1,801 1, N/A - - N/A Change in fair value of investment properties 99,714 16,759 82,955 44, % 82,952 44, % Other operating revenue (expenses), net 1,484 (155) 1,639 1, % 2,890 1, % Total operating revenue (expenses), net 96,076 17,938 78,138 39, % 72,452 32, % OPERATING INCOME BEFORE FINANCIAL RESULT 156,236 30, ,470 86, % 169, , % Net financial result (16,489) 691 (17,180) (14,862) 15.6% (35,965) (29,524) 21.8% INCOME BEFORE INCOME AND SOCIAL CONTRIBUTION TAXES 139,747 31, ,290 71, % 133,901 93, % INCOME AND SOCIAL CONTRIBUTION TAXES Current (4,720) 152 (4,872) (6,189) -21.3% (8,038) (12,582) -36.1% Deferred (33,519) 415 (33,934) (23,293) 45.7% (37,054) (24,284) 52.6% Total (38,239) 567 (38,806) (29,481) 31.6% (45,092) (36,866) 22.3% NET INCOME 101,508 32,024 69,484 41, % 88,809 57, % *Adjustments represent the exclusion of 49% of PDP's NOI, the inclusion of 20% of Campo Limpo and all consolidation effects 2Q14 Δ 1H15 1H14 Δ Pro-forma consolidated gross revenue breakdown Considering the proportional consolidation of our malls (R$ million) 2Q15 2Q14 1H15 1H14 Rent % % Rent contract straight-lining % % Service revenue % % Parking revenue % % Key Money % % Other revenue % % Total Gross Revenue % % 26

28 Pro-forma Proportional Balance Sheet (R$ thousand) ASSETS 6/30/15 3/31/15 CURRENT Cash and cash equivalents 237, , % Accounts receivable, net 40,327 32, % Taxes recoverable 13,624 12, % Prepaid expenses % Other credits 19,310 16, % Total current assets 310, , % NON-CURRENT Long-term receivables Restricted financial investments 9,862 9, % Accounts receivable, net 15,191 14, % Taxes recoverable 18,557 18, % Loans to condominiums 26,556 25, % Deferred income and social contribution taxes 3,331 5, % Juducial deposits 12,254 12, % Other credits 7,504 7, % Total long-term assets 93,255 93, % Investments % Investment properties 3,571,254 3,470, % Fixed Assets 3,040 3, % Intangible Assets 4,890 5, % Total non-current assets 3,672,438 3,572, % TOTAL ASSETS 3,983,429 3,919, % Pro-forma Proportional Balance Sheet (R$ thousand) LIABILITIES 6/30/15 3/31/15 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT Loans and financing 71,852 66, % Debentures 57,091 2, % Domestic trade accounts payable 12,929 8, % Taxes payable 4,376 3, % Personnel, payroll taxes, benefits, and rewards 9,796 9, % Key money 6,914 6, % Related parties % Dividends payable - 34, % Accounts payable - asset acquisition - 6, % Other payables 6,414 7, % Total current liabilities 169, , % NON-CURRENT Loans and financing 462, , % Debentures 304, , % Deferred revenue 6,287 7, % Deferred income and social contribution taxes 590, , % Provision for civil, tax, labor and pension risks 7,523 7, % Provisions for variable compensation 1,562 2, % Total non-current liabilities 1,372,415 1,402, % SHAREHOLDERS' EQUITY Capital stock 1,397,866 1,397, % Capital reserve 80,115 80, % Profit reserve 874, , % Retained earnings 88,810 19, % Total Shareholders' Equity 2,441,618 2,372, % TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,983,429 3,919, % 27

29 (Convenience Translation into English from the Original Previously Issued in Portuguese) Sonae Sierra Brasil S.A. and Subsidiaries Interim Financial Information - ITR for the Second Quarter of 2015 and Report on Review of Interim Financial Information Deloitte Touche Tohmatsu Auditores Independentes

30

31

32 (Convenience Translation into English from the Original Previously Issued in Portuguese) SONAE SIERRA BRASIL S.A. AND SUBSIDIARIES BALANCE SHEETS AS OF JUNE 30, 2015 AND DECEMBER 31, 2014 (In thousands of Brazilian reais - R$) Company Company ASSETS Note 06/30/15 12/31/14 06/30/15 12/31/14 LIABILITIES AND EQUITY Note 06/30/15 12/31/14 06/30/15 12/31/14 CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents 4 165, , , ,936 Loans and financing ,852 72,241 Trade receivables, net ,342 48,666 Debentures 13 57,091 16,298 57,091 16,298 Recoverable taxes ,820 11,079 Domestic trade accounts payable ,322 15,953 Prepaid expenses Taxes payable ,405 7,891 Other receivables ,533 22,131 Personnel, payroll taxes, benefits, and rewards ,796 10,921 Total current assets 165, , , ,844 Key money ,049 6,746 Dividends payable 17-34,773-34,773 NONCURRENT ASSETS Earnings payable - - 2,209 2,573 Restricted investments ,862 9,329 Trade accounts payable - acquisition of assets ,763 Trade receivables, net ,434 16,540 Other payables ,378 8,468 Recoverable taxes 6 18,391 15,915 18,391 15,915 Total current liabilities 57,369 51, , ,627 Loans to condominiums ,556 23,746 Deferred income tax and social contribution ,362 5,496 NONCURRENT LIABILITIES Escrow deposits 15 2,273 2,188 12,186 11,797 Loans and financing , ,375 Other receivables ,504 7,900 Debentures , , , ,919 Investments 8 2,618,956 2,517,934 37,512 36,717 Key money ,314 8,410 Investment properties ,351,018 4,208,266 Deferred income tax and social contribution , ,712 Property, plant and equipment ,040 3,357 Reserve for civil, tax, labor and social security risks 15 2,257 2,188 7,636 7,894 Intangible assets ,890 5,426 Accrual for variable compensation ,562 1,949 Total noncurrent assets 2,639,620 2,536,037 4,492,755 4,344,489 Total noncurrent liabilities 306, ,107 1,358,636 1,385,259 EQUITY 17 Capital 1,397,866 1,397,866 1,397,866 1,397,866 Capital reserves 80,115 80,115 80,115 80,115 Earnings reserves 874, , , ,827 Retained earnings 88,810-88,810 - Equity attributable to owners of the Company 2,441,618 2,352,808 2,441,618 2,352,808 Noncontrolling interests , ,639 Total equity 2,441,618 2,352,808 3,292,710 3,169,447 TOTAL ASSETS 2,805,325 2,741,158 4,826,448 4,742,333 TOTAL LIABILITIES AND EQUITY 2,805,325 2,741,158 4,826,448 4,742,333 The accompanying notes are an integral part of these interim financial information. 3

33 (Convenience Translation into English from the Original Previously Issued in Portuguese) SONAE SIERRA BRASIL S.A. AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 2015 AND 2014 (In thousands of Brazilian reais - R$, except earnings per share) Period from Period from Period from Period from Period from Period from Period from Period from 04/01/15 to 01/01/15 to 04/01/14 to 01/01/14 to 04/01/15 to 01/01/15 to 04/01/14 to 01/01/14 to Note 06/30/15 06/30/15 06/30/14 06/30/14 06/30/15 06/30/15 06/30/14 06/30/14 NET OPERATING REVENUE FROM RENTALS, SERVICES, AND OTHER , ,198 77, ,449 COST OF RENTALS AND SERVICES (19,810) (38,078) (18,549) (36,932) Company GROSS PROFIT , ,120 58, ,517 OPERATING (EXPENSES) INCOME General and administrative expenses 19 (499) (1,277) (462) (1,218) (6,633) (14,122) (5,865) (12,664) Tax expenses (8) (93) (4) (183) (290) (629) (86) (1,481) Equity in investees 8 77, ,942 47,391 67,540 1,801 2,595 2,009 2,762 Changes in fair value of investment properties ,714 99,714 68,184 68,184 Other operating income, net - - (3) (3) 1,484 2,692 1,240 1,821 Total income from operations, net 77, ,572 46,922 66,136 96,076 90,250 65,482 58,622 OPERATING INCOME BEFORE FINANCIAL INCOME (EXPENSES) 77, ,572 46,922 66, , , , ,139 FINANCIAL RESULT, NET 20 (7,602) (16,762) (5,024) (9,086) (16,489) (34,873) (14,571) (28,996) INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION 69,484 88,810 41,898 57, , , , ,143 INCOME TAX AND SOCIAL CONTRIBUTION Current (4,720) (7,755) (6,058) (12,334) Deferred (26) (33,519) (36,600) (22,556) (23,513) Total (26) (38,239) (44,355) (28,614) (35,847) NET INCOME FOR THE PERIOD 69,484 88,810 41,898 57, , ,142 80, ,296 NET INCOME ATTRIBUTABLE TO Owners of the Company 69,484 88,810 41,898 57,024 Noncontrolling interests 8 32,024 45,332 38,959 51,272 BASIC AND DILUTED EARNINGS PER SHARE - R$ The accompanying notes are an integral part of these interim financial information. 4

34 (Convenience Translation into English from the Original Previously Issued in Portuguese) SONAE SIERRA BRASIL S.A. AND SUBSIDIARIES STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 2015 AND 2014 (In thousands of Brazilian reais - R$) Company Period from 04/01/15 to 06/30/15 Period from 01/01/15 to 06/30/15 Period from 04/01/14 to 06/30/14 Period from 01/01/14 to 06/30/14 Period from 04/01/15 to 06/30/15 Period from 01/01/15 to 06/30/15 Period from 04/01/14 to 06/30/14 Period from 01/01/14 to 06/30/14 NET INCOME FOR THE PERIOD 69,484 88,810 41,898 57, , ,142 80, ,296 Other comprehensive income TOTAL OF COMPREHENSIVE INCOME 69,484 88,810 41,898 57, , ,142 80, ,296 NET INCOME ATTRIBUTABLE TO Owners of the Company 69,484 88,810 41,898 57,024 Noncontrolling interests 32,024 45,332 38,959 51,272 The accompanying notes are an integral part of these interim financial information. 5

35 (Convenience Translation into English from the Original Previously Issued in Portuguese) SONAE SIERRA BRASIL S.A. AND SUBSIDIARIES STATEMENTS OF CHANGES IN EQUITY (COMPANY AND CONSOLIDATED) FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2014 AND 2013 (In thousands of Brazilian reais - R$) Capital reserves Earnings reserve Total equity Share Share Earnings attributable Total issuance subscription Legal retention Unrealized Retained to owners of Noncontrolling consolidated Capital costs premium reserve reserve earnings earnings the Company interests equity BALANCES AS OF DECEMBER 31, ,866 (16,083) 96,198 41,591 1,003, ,225-2,230, ,948 2,964,559 Net income for the period ,024 57,024 51, ,296 Capital increase 400, (400,000) Dividends applied in the operation of Fundo de Investimento Imobiliário Shopping Parque D. Pedro and Fundo de Investimento Parque D. Pedro Shopping Center (19,275) (19,275) BALANCES AS OF JUNE 30, ,397,866 (16,083) 96,198 41, , ,225 57,024 2,287, ,945 3,053,580 BALANCES AS OF DECEMBER 31, ,397,866 (16,083) 96,198 49, , ,732-2,352, ,639 3,169,447 Net income for the period ,810 88,810 45, ,142 Dividends applied in operation of Fundo de Investimento Imobiliário Shopping Parque D. Pedro and Fundo de Investimento Parque D. Pedro Shopping Center (10,879) (10,879) BALANCES AS OF JUNE 30, ,397,866 (16,083) 96,198 49, , ,732 88,810 2,441, ,092 3,292,710 The accompanying notes are an integral part of these interim financial information. 6

36 (Convenience Translation into English from the Original Previously Issued in Portuguese) SONAE SIERRA BRASIL S.A. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2015 AND 2014 (In thousands of Brazilian reais - R$) Company 06/30/15 06/30/14 06/30/15 06/30/14 CASH FLOW FROM OPERATING ACTIVITIES Net income for the period 88,810 57, , ,296 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization - - 1,343 1,276 Residual value of property and equipment sold (Gain) Loss from derivatives transaction, net (1,479) 403 (1,479) 403 Unbilled revenue from rentals - - (1,986) (2,981) Allowance for doubtful accounts - - 4,076 3,672 (Reversion) constitution of reserve for civil, tax, labor, and social security risks - - (354) 84 Monetary adjustment of reserve for civil, tax, labor and social security risks Accrual for variable compensation - - 1,330 1,219 Deferred income tax and social contribution ,600 23,513 Income tax and social contribution - - 7,755 12,334 Interest on borrowings, financing, debentures and acquisition of assets 29,642 22,501 57,662 51,581 Changes in fair value of investment properties - - (99,714) (68,184) Equity in investees (106,942) (67,540) (2,595) (2,762) (Increase) decrease in operating assets: Trade receivables - - (193) 2,382 Loans to condominiums - - (2,810) (10,341) Recoverable taxes (2,511) (4,684) (5,217) (6,349) Prepaid expenses (60) (41) (135) (59) Escrow deposits (85) (31) (389) (368) Other - (90) (8,473) (5,928) Increase (decrease) in operating liabilities: Domestic trade accounts payable (10) (49) (3,403) (22,043) Taxes payable - - (2,202) (6,938) Personnel, payroll taxes, benefits and rewards - 10 (2,842) (1,191) Key money - - (1,793) (3,328) Payments of contingencies - - (355) (13) Other payables (2,090) (1,291) Cash provided by operating activities 7,550 7, ,536 73,500 Interest paid (18,208) (19,474) (47,741) (39,373) Income tax and social contribution paid - - (9,039) (6,014) Net cash (used in) provided by operating activities (10,658) (11,873) 50,756 28,113 CASH FLOW FROM INVESTING ACTIVITIES Restricted investments - - (533) (948) Acquisition or construction of investment property - - (39,266) (27,189) Purchase of property and equipment - - (470) (1,241) Increase in intangible assets - - (227) (118) Capital increase in investees - (58,600) - - Proceeds from the sale of investment properties - - Dividends received 5,920 2,600 1,800 1,720 Net cash provided by (used in) investing activities 5,920 (56,000) (38,696) (27,776) CASH FLOW FROM FINANCING ACTIVITIES Loans and financing raised ,995 Loans and financing paid - principal - - (29,017) (16,964) Trade accounts payable - acquisition of assets - - (9,132) (9,132) Distributed earnings of real estate funds Parque D. Pedro I e II - - (11,243) (20,831) Dividends paid (34,773) (34,772) (34,773) (34,772) Related parties - 20, Net cash used in financing activities (34,773) (14,643) (84,165) (57,704) DECREASE IN CASH AND CASH EQUIVALENTS, NET (39,511) (82,516) (72,105) (57,367) CASH AND CASH EQUIVALENTS At end of period 165, , , ,064 At beginning of period 204, , , ,431 DECREASE IN CASH AND CASH EQUIVALENTS, NET (39,511) (82,516) (72,105) (57,367) The accompanying notes are an integral part of these interim financial information. 7