INSTITUTIONAL PRESENTATION Dec/2013
IMPORTANT INFORMATION This document contains forward-looking information to take into account regarding the business prospects, operational and financial results estimates and the growth prospects for Brookfield Incorporações S.A.. These are only projections and, as such, are based purely on forecasts by the Board at Brookfield Incorporações S.A. in relation to the future of the business and its continued access to capital in order to finance Brookfield Incorporações S.A. s business plan. This forward-looking information depends, to a large extent, on changes in market conditions, government regulations, competitive pressures, development in the sector and the Brazilian economy, among other factors, as well as the risks presented in the disclosure documents archived by Brookfield Incorporações S.A. and are, therefore, subject to change without prior notice.
BUSINESS STRATEGY & ORGANIZATIONAL STRUCTURE
BUSINESS STRATEGY From an operational standpoint, BISA will continue its strategy focusing on 4 main pillars: Selective National Presence Focus on Middle Income Segment Leading presence in the metropolitan areas of São Paulo, Rio de Janeiro, Brasília, Goiânia, Campinas Target Geographic Distribution: São Paulo 40% - 50% Brasília and Goiania 20% - 30% Rio de Janeiro and Curitiba 20% - 30% Middle-income segment (units from R$170k to R$750k) should represent 50% of the business Large market segment with growth trend 80% of the mandatory funding allocated to the real estate sector must be used in this segment Balanced Portfolio Operate in all segments of the residential market and in the office development business Target business segment distribution: Affordable housing (units below R$170k): 15% - 20% Middle Income (R$170k to R$750k): 50% - 60% High (above R$750k): 10-15% Office (office suite & corporate): 10% - 20% Integrated Platform In-house construction Integrated and dedicated middle-office unit Integration process finalized 4
Goiânia Federal District Rio de Janeiro São Paulo SELECTIVE GEOGRAPHIC DISTRIBUTION Geographic Presence Market Share 2012 - Contracted Sales 75% 4º 7% 5% 5% 5% 4% th Brasília Peer 1 Peer 2 Peer 3 Brookfield Peer 5 Outros Other Goiânia São Paulo Rio de Janeiro rd 3 61% 14% 9% 6% 5% 5% Peer 1 Peer 2 Brookfield Peer 4 Peer 5 Outros Other Economic Rationale for Seeking Local Leadership rd 3 69% Acquisition of land 8% 7% 6% 6% 5% Approvals Peer 1 Peer 2 Brookfield Peer 4 Peer 5 Outros Other Marketing strength Brand Supply Chain st 1º 67% Attracting talent GO 8% 7% 7% 6% 5% Brookfield Peer 2 Peer 3 Peer 4 Peer 5 Outros Other 5
NEW STRUCTURE CEO NICHOLAS READE Compliance TBA Real Estate Business Investment & Institutional Relations Construction Finance Legal ALESSANDRO VEDROSSI LUIZ FERNANDO MOURA MARCELO BORBA SERGIO CAMPOS DENISE GOULART Investor Relations Human Resources LUCIANO GUAGLIARDI LYGIA VILLAR 6
UNIQUE SHAREHOLDERS BASE BAM: High standard of Corporate governance. Long-term approach and financial expertise Extensive free float Management team aligned with shareholders interests Asset Management Prestigious global asset manager approximately US$175 billion AUM US$ 100 billion in real estate 100% 1 Brasil Brazil Participações One of the largest investment platforms in Brazil R$ 32 billion AUM Signatories to Shareholders Agreement 44.96% 2 Free Float 7.33% 46.64% 3 SOX Compliant 1 Brookfield Asset Management s investment on Brookfield Brasil Participações is through other subsidiaries 2 Brookfield Brasil Participações ownership includes 34,576,070 shares (6.00%) owned by BRKB RE OPP FUND LLC, a subsidiary of BAM 3 Free float does not Include 5,903,740 or 1.03% shares in treasury (September 30, 2013) and shares hold by management 7
OPERATING PERFORMANCE
LAUNCHES Only one project, with a PSV of R$ 40 mm, was launched in the quarter Two projects (Caminhos da Lapa Vanguarda in São Paulo and Damai in Rio de Janeiro) with a total PSV of R$ 350 mm have already been launched in October (R$ million) 577 1,757-93.1% 242 388-89.7% 40 +11.4% 2,675 2,981 +31.8% -21.8% 3,930 3,071 671 3Q12 4Q12 1Q13 2Q13 2009 2010 2011 2012 9M13 Launches Unit Price 3Q12 9M13 9M12 (R$ million) Residential 40 100.0% 577 100.0% 422 63.0% 1,266 96.3% Affordable Up to R$ 170 thousand - 0.0% 104 18.1% - 0.0% 196 14.9% Middle R$ 170 to R$ 750 thousand - 0.0% 378 65.5% 288 42.9% 899 68.4% High Above R$ 750 thousand 40 100.0% 95 16.4% 134 20.0% 171 13.0% Office - 0.0% - 0.0% 248 37.0% 49 3.7% Office / Commercial* - 0.0% - 0.0% 248 37.0% 49 3.7% Total 40 100.0% 577 100.0% 671 100.0% 1,315 100.0% *Note: including Malls and Hotels 9
CONTRACTED SALES In the 9M13, sales totaled R$ 1.9 bn, reaching 64% of the low end of sales guidance For the third consecutive quarter, sales exceeded launches, resulting in a reduction in inventory (R$ million) 714 1,110-5.7% 596 656 +2.7% 673 +21.2% -23.5% +60.2% 4,387 3,621 3,356 2,260 1,925 3Q12 4Q12 1Q13 2Q13 2009 2010 2011 2012 9M13 Contracted Sales Unit Price 3Q12 9M13 9M12 (R$ million) Residential 465 69.0% 680 95.2% 1,565 81.3% 2,027 90.2% Affordable Up to R$ 170 thousand 96 14.3% 215 30.2% 316 16.4% 631 28.1% Middle R$ 170 to R$ 750 thousand 314 46.6% 359 50.3% 1,045 54.3% 1,118 49.8% High Above R$ 750 thousand 55 8.1% 105 14.7% 205 10.7% 278 12.4% Office 209 31.0% 34 4.8% 360 18.7% 220 9.8% Office / Commercial 209 31.0% 34 4.8% 360 18.7% 220 9.8% Total 673 100.0% 714 100.0% 1,925 100.0% 2,247 100.0% 10
SALES OVER SUPPLY (SoS) SoS increased to 20.2% from 17.6% in the 2Q13, reflecting strong sales volumes in a quarter containing low launch activity Sales Over Supply (SoS) 31.3% 27.5% 27.0% Sales over Supply 21.1% 16.3% 16.0% 21.0% 17.6% 20.3% 20.2% 24.0% Sales over Supply 20.2% Region São Paulo 38.0% Rio de Janeiro 14.6% Mid West 11.9% São Paulo Countryside 43.8% Curitiba 28.0% Stage Launches 6.4% Inventory 20.4% 1Q 2Q 3Q 4Q 2011 2012 2013 11
INVENTORY Inventory decreased 6% q-o-q to R$ 2.9 bn, due to the high volume of sales from inventory Equivalent to 11.3 months of LTM sales, a modest q-o-q reduction Completed units represented 11.9% of total inventory, compared with 10.7% in the 2Q13 Inventory at Market Value (R$ million) 3,383 3,179 2,815 3Q12 4Q12 1Q13 9.4 12.1 12.1-6.1% 3,055 2,870 341 348 2,180 2Q13 11.9 11.3 Inventory by Region Inventory PSV (R$ Million) Months of Sale* São Paulo 572 5.8 Rio de Janeiro 691 11.2 Mid-West 1,373 19.5 São Paulo Countryside 102 7.6 Curitiba 132 14.7 Total 2,870 11.3 *Considering LTM Months of sale Completed (11.9%) Launching (12.1%) Under construction (76.0%) 12
DELIVERIES, MORTGAGE TAKEOUTS AND TERMINATIONS 9,025 units delivered in the 9M13 with a PSV of R$ 2.0 bn 5,615 contracts or R$ 1.0 bn transferred in the 9M13 Of the units terminated in the 9M13, 41% were resold in the same period Increased terminations reflect higher delivery volumes, coupled with efforts to improve the quality of our portfolio of receivables PSV Delivered (R$ million) +28.1% 1,968 PSV Transferred (R$ million) +70.6% 1,035 PSV Terminated (R$ million) +51.6% 492 964-51.4% 468 1,536 352 +21.9% 429 606 160 +46.3% 235 324 2Q13 9M12 9M13 2Q13 9M12 9M13 2Q13 9M12 9M13 13
FINANCIAL PERFORMANCE
NET REVENUES, GROSS MARGIN AND BACKLOG Net Revenues (R$ million) Gross Margin +26.5% 26.8% 2.427,0 +25.4% +42.9% 1.918,9 18,6% 790,2 991,2 693,8 14,9% 2,1% 3Q12 2Q13 9M12 9M13 3Q12 2Q13 Results to be Recognized (R$ million) 34.0% 34.7% 32.1% Backlog margin -13.5% 1,144.7 1,179.0 1,020.3 Gross Margin impacted by: I. R$ 45.9 mm write-off arising from Sítio do Tunga land sale II. Gross Margin ex adjustments R$ 34.4 mm adjustment to the 1 st sale of Sigma Tower and Mall (Giroflex), regarding the difference between the construction cost adjusted by INCC and the contract amount fully received upfront, thus not adjusted by inflation 1Q13 2Q13 III. R$ 38.2 mm adjustment from the budget review 15
SG&A AND OTHER EXPENSES Sales Expenses (R$ million) G&A Expenses (R$ million) -7.6% -3.8% 121 112 126 121 +15.7% +28.2% +9.6% +11.7% 34 39 31 42 46 41 3Q12 2Q13 9M12 9M13 3Q12 2Q13 9M12 9M13 As a % of Net Revenues 4.3% 4.0% 4.4% 6.3% 4.6% 5.3% 4.6% 5.9% 6.6% 5.0% Other Expenses (R$ million) +368.3% +119.5% +83.0% Other Expenses primarily impacted by: -13,3-28,4 I. R$ 18.3 mm allowance for doubtful accounts for services related to construction contracts -62,4-59,8 II. R$ 8.7 mm write-off following the termination of partnerships -109,4 3Q12 2Q13 9M12 9M13 16
RECEIVABLES AND DEBT MATURITY 64% of total receivables to mature in 2013 and 2014 R$ billion 7.45 3Q12 6.72 4Q12 6.82 1Q13-3.7% 6.69 6.44 2Q13 Receivables R$ million Units Under Construction 2,674.6 Completed Units 1,167.4 Services 77.4 Adjusted Present Value (54.9) Provision for Losses (71.5) Total Receivables in Balance Sheet 3,793.0 Revenues to be Recognized 3,022.1 Advances from Customers (375.7) Total Receivables 6,439.4 Receivables vs. Debt Maturity (R$ million) 2,763 2,003 1,799 1,617 1,363 596 816 546 1,203 801 310 198 60 349 47 13 2013 2014 2015 After 2015 Corporate Debt Maturity in 2014: Working Capital: R$ 528 mm Debenture and other: R$ 273 mm Receivables Construction Loans (SFH) Corporate Debt 17
DEBT AND CASH CONSUMPTION Cash consumption was R$ 1.4 mm in the, a substantial q-o-q decline Increased contribution of SFH debt to 41% of total debt, up from 39% previously Net Debt to Equity ex-sfh of 55% Compliant with financial covenants Debt (R$ billion) Net Debt to Equity (%) 4.02 4.02 With SFH Without SFH 1.55 SFH 1.38 Current 0.95 3.07 121.4 97.7 106.8 116.0 118.3 2.48 Corporate 2.64 Long term 1.41 Without SFH 67.0 50.2 56.5 57.3 54.5 Gross Debt Maturity Cash and equivalents Net Debt 3Q12* 325.2 4Q12 1Q13 127.7 211.3 2Q13 71.5 1.4 * As previously disclosed. Not considering pro forma adjustments regarding JV deconsolidation. Cash Consumption from Operations 18
RECENT EVENTS & REMARKS
RECENT EVENTS Investigation from the Public Prosecutor of irregular practices by tax collectors related to the taxes on services ( ISS ) in the city of São Paulo The Company has been assisting the Public Prosecutor, providing all necessary information Based on the information gathered by the Company: There is evidence confirming that the invoices and related taxes on services were in compliance with applicable legislation These events do not constitute a material impact on the Company s financial position or assets. The investigation is being conducted on a confidential basis 20
REMARKS OUTLOOK Return to profitability is the main goal Confident in regional market strategy Continued focus on execution Ramp up in deliveries remains top priority Careful project selection 21
BRAZILIAN REAL ESTATE INDUSTRY
REAL ESTATE INDUSTRY - CREDIT Overall credit as % of GDP Mortgage as % of GDP 168% 129% 123% 111% 95% 76% 74% 39% Portugal United States Canada Korea Germany Chile South Africa Brazil Interest rates (SELIC % p.a.) 15.75 19.00 25.00 16.50 17.75 18.0 13.25 11.25 13.75 8.75 10.75 11.00 7.50 10.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 23 Source: Financial Access Survey (FAS), European Mortgage Foundation and Brazilian Central Bank
REAL ESTATE INDUSTRY - AFFORDABILITY Example of mortgage conditions Unit Value LTV Interest rate (p.a.) Loan term (months) Monthly installment (R$ thousand) Required income (R$ thousand) 2005 2012 180,000 180,000 70%-80% 80%-90% 12.0% 7.0% 120-180 240 360 1,987 1,365 6,624 4,553 Required income (minimum wages) 22 7 24 Assumptions: Considering constant amortization
REAL ESTATE INDUSTRY - MORTGAGE Units Financed (thousand) 627 541 465 280 231 401 241 329 228 223 511 468 399 352 300 321 282 282 670 621 967 970 868 775 77 86 107 60 100 109 58 61 107 63 80 s 90 s 2000-2013 FGTS SBPE 352 300 282 282 321 316 264 253 246 267 36 36 29 36 54 399 338 61 468 354 114 511 315 196 670 621 370 318 300 303 868 447 421 967 970 474 517 493 453 775 388 387 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 9M13 25 Source: ABECIP
REAL ESTATE INDUSTRY - MORTGAGE Amount Financed (R$ Billion) 114.9 121.0 109.8 83.2 41.1 50.3 1.7 1.9 2.1 5.1 4.8 3.9 5.7 4.9 5.6 6.0 6.9 10.2 16.2 25.0 1994-1999 2000-2013 FGTS SBPE 114.9 121.0 109.8 83.2 35.0 38.3 30.5 5.7 3.9 1.8 4.9 1.9 3.1 5.6 3.8 1.8 6.0 3.8 2.2 6.9 3.9 3.0 10.2 4.9 5.4 16.2 9.3 6.9 25.0 6.8 18.3 41.1 11.1 30.0 50.3 16.3 34.0 27.0 56.2 79.9 82.8 79.3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 9M13 26 Source: ABECIP
Thousand units per year REAL ESTATE INDUSTRY - DEMOGRAPHICS Household formation 2000 1500 1000 500 0 1993-94 1996-97 1999-00 2002-03 2005-06 2008-09 2011-12 2014-15 2017-18 2020-21 Housing deficit (in thousand of units) 5,995 5,800 5,808 5,751 2007 2008 2009 2010 27 Source: IBGE
REAL ESTATE INDUSTRY INCOME DISTRIBUTION Income Distribution per Household (2007-2030E) 20% 55% 24% Brazilian Population Distribution 2010 13% ( 193 million of inhabitants ) 80+ 70 60 50 40 30 20 10 0 5% A (Over R$ 8,000) B (Between R$ 4,000 and R$ 8,000) C (Between R$ 2,000 and R$ 4,000) D (Between R$ 1,000 and R$ 2.000) 2% 2007 2030 E (Income up to R$ 1,000 ) - 10,000,000-5,000,000 0 5,000,000 10,000,000 Women Men 35% between 20 and 40 years old 6.2% 12% 23% 29% 80 70 60 50 40 30 20 10 0 30% Source: Ernest Young. FGV and IBGE 41% 2030E (216 million inhabitants ) 37% between 20 and 40 years old - 10,000,000-5,000,000 0 5,000,000 10,000,000 Women Men 28 Source: IBGE - Projection of the Brazilian Population 1980/2050 - Revision 2008
REAL ESTATE FUNDING Mandatory* Minimum of 80% Regulated Interest Rates under the SFH (Housing Credit system) ** Real Estate Funding Savings Account Minimum of 65% Maximum of 35% Maximum of 20% Free Interest Rates can be charged by the Banks** Other Savings Account and Requirement (R$ Billion) 67.7% 69.5% 72.7% 73.1% 72.7% 72.6% 72.7% 72.6% 73.2% 73.7% 73.6% 73.5% 299.9 330.6 388.6 391.4 395.1 401.4 404.9 410.9 419.7 429.2 435.2 442.4 Requirement Savings Account 2010 2011 2012 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 * Mandatory: 65% of the lesser of the two: 1) Arithmetic average of the daily balance of savings account deposits of the month under reference or 2) the arithmetic average of the daily balances of savings account deposits in the twelve (12) months preceding the month under reference. ** 80% from the Resources of the Real Estate Funding, should be applied to regulated interest rates and up to 20% can be applied to free interest rates. 29 Source: ABECIP and BCB
Luciano Guagliardi Director Alexandre Freire Manager Guilherme F. Gonçalves Specialist ri@br.brookfield.com www.br.brookfield.com Telephone: +55 11 3127-9488 Magalhães de Castro Avenue, 4,800, Tower 3, 1st e 2nd floor São Paulo, SP, 05502-001, Brasil INVESTOR RELATIONS CONTACTS