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Institutional Presentation
February 2009
Disclaimer
This presentation does not constitute an offer, or invitation, or solicitation of an offer to subscribe for or
purchase any securities neither does this presentation nor anything contained herein form the basis to any
contract or commitment whatsoever.
The material that follows contains general business information about LPS Brasil – Consultoria de Imóveis
S.A (“Lopes”) as of the 31st of December 2008. It is not intended to be relied upon as advice to potential
investors. The information does not purport to be complete and is in summary form. No reliance should be
placed on the accuracy, fairness, or completeness of the information presented herein and no
representation or warranty, express or implied, is made concerning the accuracy, fairness, or completeness
of the information presented herein.
This presentation contains statements that are forward-looking and are only predictions, not guarantees of
future performance. Investors are warned that these forward-looking statements are and will be subject to
many risks, uncertainties, and factors related to the operations and business environments of Lopes and its
subsidiaries such as competitive pressures, the performance of the Brazilian economy and the industry,
changes on market conditions, among other factors disclosed in Lopes filed disclosure documents. Such
risks may cause the actual results of the companies to be materially different from any future results
expressed or implied in such forward-looking statements.
Lopes believes that based on information currently available to Lopes management, the expectations and
assumptions reflected in the forward-looking statements are reasonable. Lastly, Lopes expressly refuses
any duty to update any of the forward-looking statements contained herein.
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Investment Highlights
3
Simple and Focused Value
Added Business Model
Simple and Focused Value
Added Business Model
Main Distribution Channel in the Industry with a
National Footprint
Main Distribution Channel in the Industry with a
National Footprint
Low Risk Business with a
Diversified Client Base : Cash Generator Company
Low Risk Business with a
Diversified Client Base : Cash Generator Company
Already scaled down to face new
market conditions in
2009
Already scaled down to face new
market conditions in
2009
UnmatchedScale and Reach
UnmatchedScale and Reach
Experienced Management
Team and Outstanding Track Record
Experienced Management
Team and Outstanding Track Record
Investment Highlights
4
Mr. Francisco Lopes initiates its activities intermediating properties
193540´s
50´s60´s
70´s
80´s
90´s
00´s
Launch one of the first buildings under the condominium concept
First TV advertisement for a real estate development
Start of long term partnership with Gomes de Almeida Fernandez (Gafisa)
Launch and sell of 14 office buildings at Av. Paulista
Launch and sell of 11 office buildings at the Faria Lima region
Creation of the launching system with sales stands and marketing materials, attracting customers specially during weekends
Identification of Marginal Pinheiros as an attractive area and launch one of the first buildings in the region
Start up of sales of hotel condominium (Flats)
Partner of Grupo Espírito Santo in selling one of the largest launching in Lisboa: Parque dos Príncipes
Introduction of the concept of condominium clubs
First “Top Imobiliário” award, in 1993 – Largest Brokerage Company
Lopes becomes an important player at the segment of gated communities
Triples in size in a decade, strengthening its leadership
Wins its 15th consecutive “Top Imobiliário”
Lopes’ IPO Lopes starts its
geographic expansion process
Lopes’ website become leader on real state market
The company’s first logo
Becomes reference in real estate launchings and presents its new logo
Brokerage Market Has No Other Company With The History and Track Record of Lopes
5
1st Lopes R$ 5 bnMarket Share: 25%
5th Habitcasa R$ 1 bnMarket Share: 6%
31%
3th Fernandes
Mera
6%
1st Lopes/
Habitcasa
4th Coelho da Fonseca
5%
13%
5th Del Forte
(BR Brokers)
4%
2nd Abyara
6th IPrice(BR
Brokers)
4%
9%
7th Itaplan
2%
10th Exclusiva
3%
23%
11th to 167th Other
9th Klabin Segal
Market Share
R$ (MM) ¹
8th Avance
(BR Brokers)
2%
142%
Launched GVS¹ (R$) and Market Share 2008 – RMSP
¹ Nominal FiguresSource: Lopes Market Intelligence and Embraesp
6
Lopes is exclusively focused on providing value-added real estate brokerage services to its client-developers, with a permanent concern of avoiding conflicts of interest
Formal relationship through exclusivity agreements
Over 160 Clients
– 46,393 effective buyers1
– 80,000 prospects included in our data base in 2007
Client-DevelopersClient-Developers Client-BuyersClient-Buyers
How
do w
e
How
do w
e
do b
usin
ess?
do b
usin
ess?
How
do w
e m
ake m
on
ey?
How
do w
e m
ake m
on
ey?2
, 3
2,
3
$ 0.53$ 0.12
$ 2.45
$ 100
$ 10
Total Price per Unit
Down-payment
GrossCommission
$ 0.73
$ 0.12
$ 1.05
Agents +Managers
Reven
ue R
ecog
nitio
nR
even
ue R
ecog
nitio
n
$ 5
Developer
1 Over the last 5 years in Sao Paulo2 Figures only for example, not related to financials3 Considering Sao Paulo market
$ 1.90
$ 3.10
Net Commission PremiumContract Advisory Fee
Simple and Focused Business Model…
7
Lopes Net Commission
SP GVS / Consolidated GVS 100% 95% 80% 50%
Net Commission São Paulo
Net Commission Brazil
8
Lopes’ business is clearly fundamental to the profitability and returns of its clients…
Working Capital
Is Fundamental Pre Sales
Speed of Sales Concentrated in
the Launch Period
Reliance on Sales Force Scale and EfficiencyReliance on Sales Force Scale and Efficiency
Speed of Sales is the Key
for Profitability
With a Key Role in the Real Estate Value-Chain
Almost 6.000 brokers
Real Estate DevelopmentReal Estate DevelopmentBrazilian Market DynamicsBrazilian Market Dynamics
…and its scale and reach – nearly impossible to replicate – enhance this importance
9
Lopes is focused on providing its clients with a full range of consulting services, from land procurement advisory to product formatting, development and sale
Value-Added Services Across the Development Cycle
Determines Determines the Site’s the Site’s Vocation Vocation
Determines Determines the Site’s the Site’s Vocation Vocation
Masters Masters Market Market
ResearchResearch
Masters Masters Market Market
ResearchResearch
Formats Formats ProductProductMeeting Meeting Buyers’Buyers’
““Wants and Wants and Needs”Needs”
Formats Formats ProductProductMeeting Meeting Buyers’Buyers’
““Wants and Wants and Needs”Needs”
Develops Develops Marketing Marketing CampaignCampaign
Develops Develops Marketing Marketing CampaignCampaign
Optimizes Optimizes Media Media
NegotiationsNegotiations
Optimizes Optimizes Media Media
NegotiationsNegotiations
Coordinates Product Launching
Events
Coordinates Product Launching
Events
Individual Individual Sales Sales
Strategy Strategy Created to Created to
Each Each Product Product
Individual Individual Sales Sales
Strategy Strategy Created to Created to
Each Each Product Product
Coordinates Coordinates Product Product
Launching Launching EventsEvents
Coordinates Coordinates Product Product
Launching Launching EventsEvents
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Institutional Website
Evolution of visits to Lopes’ Website
Source: Google Analytics11
Notes: Managerial Reports.
Absorption calculated over available units
Granja Viana / SPGranja Viana / SP
153/197/230 m2153/197/230 m2
Reserva Santa Maria – Sep/ 07
177 units177 units
LocationLocation
Usable AreaUsable Area
SalesSales
Cachambi / RJCachambi / RJ
48 to 65 m248 to 65 m2
Norte Village – Jun / 07
850 un. – R$ 113,000,000
850 un. – R$ 113,000,000
LocationLocation
Usable AreaUsable Area
SalesSales
Paralela / BAParalela / BA
112 to 243 m2112 to 243 m2
Le Parc Residential Resort – Nov / 07
258 un. – R$ 121,000,000
258 un. – R$ 121,000,000
LocationLocation
Usable AreaUsable Area
SalesSales
Barra da Tijuca / RJBarra da Tijuca / RJ
203 to 260 m2203 to 260 m2
Santa Mônica Jardins – Nov / 06
142 un. – R$ 20,700,000
142 un. – R$ 20,700,000
LocationLocation
Usable AreaUsable Area
SalesSales
Barra da Tijuca / RJBarra da Tijuca / RJ
262 to 278 m2262 to 278 m2
Itaúna Gold
30 units – R$ 45.000.000
30 units – R$ 45.000.000
LocationLocation
Usable AreaUsable Area
SalesSales
100% sold within 3 weeks
Developer: Scopel and Desim
CASE
90% sold within 5 months.Developer: Living / Brascan
CASE
58% sold within 11 days.Developers: Cyrella /
Andrade Mendonça / Jotagê
CASE
70% sold within 1 year.Developer: Brascan
CASE
80% sold within 30 daysDeveloper: Brascan
CASEHIGH
MEDIUM-HIGH
MEDIUM
ECONOMIC
GATED COMMUNITIES
Sales Expertise in all Market Segments
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HABITCASA: Focused on the Economic Segment
• Business Unit Exclusively Focused on the Economic Segment
• Units ranging up to R$180 thousand
• Focused in all Brazilian real state market
• Own units in São Paulo, Rio de Janeiro and São Paulo’s countryside
• The other markets work with the brandThe economic segment will be one of the most important drivers for the long term growth of the real estate industry, due to the Brazilian housing deficit of 8 million homes1.
1 According to Fundação Getúlio Vargas – FGV1 According to Fundação Getúlio Vargas – FGV
13
14
193%
37%R$ 2.9 BN
R$ 4.0 BN
Lopes Positioning in the Low Income Segment
With the expansion of the low income segment in São Paulo’s market, the Habitcasa’s initiative was essential to protect the Lopes’ market share of launchings.
Data of the Metropolitan Region of São Paulo – Source: EMBRAESP and Lopes managerial data.
Geographic Expansion
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Lopes is Growing Nationwide
SOUTHEAST REGIONSão Paulo – Beginning of operations in 1935. Acquisition of 60% of Capucci &Bauer, in October 2007, for R$9 million (7.1x P/E 2008) and an earn-out payment.
Rio de Janeiro – Entry by greenfield operation, with beginning of operations in July 2006, with LCI-RJ.
Espírito Santo – Acquisition of 60% of Actual, in July 2007, for R$5.76 million (7.0x P/E 2008) and an earn-out payment.
Minas Gerais – Entry by greenfield operation with beginning of operations in February 2008.
SOUTHERN REGIONStates of Rio Grande do Sul, Santa Catarina and Paraná – Acquisition of 75% of Dirani, in May 2007, for R$15.1 million (7.5x P/E 2008) and two ear-out payments. In July 2008, Lopes acquired the 25% left by the call/put mechanism.
MIDDLE WEST REGIONFederal District – Acquisition of 51% of Royal, in November 2007, for R$12 million (9.0x P/E 2008) and an earn-out payment.
Goiás - Greenfield operation with beginning of operations in August 2008.
NORTHEAST REGIONBahia - Greenfield operation with beginning of operations in October 2007.
Pernambuco – Acquisition of 60% of Sérgio Miranda, in August 2007, for R$ 3 million (10.0x P/E 2008) and an earn-out payment.
Ceará – Acquisition of 60% of Immobilis, in January 2008, for R$2.4 million (10.0x P/E 2008) and an earn-out payment.
Lopes tracks developers’ regional movements, consolidates its position as the largest consulting and
sales player
PR
RJ
BA
SP
RS
ES
SC
PE
MG
DF
CE
GO
16
Lopes in the Secondary Market
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The Secondary Market
Source: ITBI, Gafisa prospectus, Cushman Wakefield report, team analysis
118
Primary
Secondary
100%
(Total in R$ billion, % of total potential sales value)
Real estate market by segment
In the city of São Paulo, the difference is as high as 30% ~ 50%
Difference (in %) between the average price per m² in new development vs.
used properties
18
=
At the same time that a property sale generates a “derived” demand for financing, it broadens the base of buyers, creating a virtuous circle that supports liquidity in the secondary real estate market. Pronto! and Credipronto! (JV with Itaú) will mutually strengthen this virtuous circle, offering a unique service in the real estate market
Synergies Between Credipronto! and Pronto! – Competitive Advantage
With Lopes’ leadership and financing from Itaú (Brazil’s largest bank), Pronto! and Credipronto!, acting together, will create a competitive advantage that is hard to replicate
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CrediPronto!
20
Strengthening of mortgage origination and other related services.
Leadership position in their
respective markets
Management Excellence
High Value Brands
Joint Venture Lopes Itaú
Establishment of a Promotion Sales Company (non-financing company) to promote and offer financial products and services – mortgage and other related – with emphasis on the
secondary market and with exclusivity to Lopes’ clients
Direct and exclusive access to its customer database
Seamlessly integrated operation with Lopes’ sales process, including an incentive compensation plan
Lopes media exposure
Service excellence Competitive financing terms and
conditions Speed and quality of processing Experienced credit analysis Successful exposure to the
lending business and in joint ventures
21
Innovative Real State Financing Process
The deadlines mentioned are linked to the complete delivery of the documentation and they can change in case of any restrictions.
CrediPronto!
22
Brazilian Real Estate Market
23
Social Economic Scenario and Housing Shortage
5,4
6,7
1991 20062000
7,9
Source: Fundação João Pinheiro e Ministério das Cidades
Source: Credit Suisse
47 million homes
19%A/B > 10 minimum wages- US$ 1.90052%
5 – 10 minimum wages-
US$ 950 - US$ 1.900
30%C 28%
< 5 minimum wages - US$
95051%D/E 20%
Source: Losango
* Qualitative Housing Shortage is the number of times that a family moves to different houses in life
Age Pyramid in Brazil Segments by Income in Brazil
Quantitative Housing Shortage(millions of homes)
Qualitative Housing Shortage
Source: IBGE
24
AAA
AAA
AA
A+A+
A
A-
BBB+
BBB- BBB
-
BBB+
Mortgage Market as a % of GDP
Mortgage Market and the Investment Grade
Source: Lopes, FMI, S&P and Santander
X Rating S&P
25
Number of Launches - RMSP
GVS¹ Launched (R$ bn) - RMSP
Units Launched (‘000) - RMSP
¹ Launched values adjusted by the INCC until December/08.
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
+14%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
+37%
1996 1997 2006 2007 2008
Nominal GVS launched in 2008 was the same amount as 2007: R$ 20 bn.
Launches RMSP – Historic data (1996 - 2008)
Source: Lopes’ Market Intelligence*2009E – 1996 + GDP growth or similar amount of 2006 (GDP growth – CAGR with data from IBGE, GDP of 2008 was annualized).
2009E*
26
R$/m2
SPMR Real Estate Market Overview – Prices
Source: EMBRAESP
Nominal
INCC Adjusted
Evolution of Average Launches’ Prices in the SPMR
R$/m2
27
Real Estate Funding
87%
50%
FGTS and Savings Accounts 1H07 x 1H08
FGTS and Savings Accounts Funding
Source: CEF and Abecip 28
Macroeconomic Scenario
Source: IPEA Source: Central Bank and ABN Real
Source: IBGE Source: BEA e Bloomberg
5.9
Brazil GDP Growth(%)US GDP Growth (%)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
1.4
6.0
4.0
2.0
-
22.0%
20.0%
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
Savings Accounts Related Resources Real Estate Financing
400.0
350.0
300.0
250.0
200.0
150.0
100.0
50.0
-
GDP Brazil GDP US
Brazil: Savings Accounts and Investments
(% GDP)Savings Accounts and SHF
29
Lopes’ Confidence Index
30
Lopes’ Confidence Index (LCI) Janeiro/09
Lopes’ Confidence
Index
Present Situation
Index
Expectation Index
+44%
(base: dec/2008=100)Source: Lopes Market Intelligence
Lopes’ Confidence Index (LCI) - Janeiro/09
Lopes’ Confidence Index intend to measure clients
confidence, so Lopes can follow and anticipate, in the
short term, housing purchase tendency.
The sample has 586 interviews, with Grande São Paulo
resident clients, which contacted Lopes in the last 3
months and are interested in purchasing a new home.
120,0
Lopes is the first company to create a Real Estate Consumer Confidence Index.
31
The scenario is positive when compared the present purchase intention with the purchase intention for the
next 6 months, specially in the Low Income and Medium-High Segment.
Among the questions made in the research, the family economic situation was the most stable one.
For 34% of the interviewed the family economic situation is good, while 61% considered it regular.
or the nest 6 months, 28% believe that it will be better, while 69% believe it will be as it is.
Lopes’ Confidence Index (LCI) – January/09
32
Lopes’ Confidence
Index
Present Situation Index
Expectation Index
Low Income
Medium-High
35%
High
44%53%
124.3
(base: dec/2008=100)Source: Lopes Market Intelligence
Operational Highlights 4Q08
33
Contracted Sales’ Historical*
* Unaudited managerial information.
Total GVS – Primary Market
(in R$ million)
CAGR: 36%
34
Contracted Sales
(R$ MM)
Contracted Sales
-26%
35
93%1.6
2.2
5.2
10.1
4Q07 4Q08
Units Sold per Region and per Income Segment
Sales per Segment(in units)
Sales per Region(in units)
36
Lopes stands out as the brokerage company with the best performance per sales agent. The highest contracted GVS per sales agent ratio is an appeal and a retention factor for
the best brokers of the market.
(R$ MM)
Source: Lopes Market Intelligence
Contracted Sales per Agent - SP
37
Financial Highlights 4Q08
38
Cash Position Before and After Patrimóvel’s Renegotiation
125
(85)
08 Cash Position Future Payments*
Final Cash Position
Cash Position With Patrimóvel(R$MM)
(210)125
60
(65)
08 Cash Position Future Payments*
Final Cash Position
Cash Position Without Patrimóvel(R$MM)
*Future Payments:
R$ 145 millions - Patrimóvel
R$30 millions – Acquisitions Payments
R$35 millions – Estimated Acquisitions’ Earn-out Payments
* Future Payments:
R$30 millions – Acquisitions Payments
R$35 millions – Estimated Acquisitions’ Earn-out Payments
39
Non Recorrent Effects
Patrimóvel
Patrimóvel’s Goodwill (R$ 75.4 MM)
Total Patrimóvel’s Payable Accounts
R$ 14.6 MM
Impact on Results (R$ 60.8 MM)
New Accounting Practices
CPC 04 – Pre-Operational CostsR$10 MM
CPC 10 – Stock OptionR$6.3 MM
Estimated Cost Reduction
Reduction One-Time Costs
3Q08 R$ 41 MM/year R$ 3.1 MM
4Q08 R$ 26 MM/year R$ 2.3 MM
Total R$ 67 MM/year R$ 5.4 MM
40
Adjusted EBITDA Pro Forma*
*Adjusted EBITDA is a non-accounting measure created by Lopes, consisting of net income before the participation of minority interests, income tax and social contribution tax, net financial result (financial revenues and expenses), depreciation, amortization and non-operating income. The calculation of the Adjusted EBITDA does not correspond to any generally accepted accounting practice in Brazil, nor does it represent cash flow for the periods presented, and should not be considered a substitute for net income or a substitute for cash flow as an indicator of liquidity. Adjusted EBITDA Pro Forma does not considers the effects of Patrimóvel’s goodwill lost, changes on accounting practices and the cost reduction.
28,5
(4,4)
72,2 74,0
Adjusted EBITDA Pro Forma
-115%
50%
-12%
EBITDA MarginEBITDA Margin
3%51% 32%
4Q07 4Q08 2007 2008
(R$ MM)
74 (75)
(10)(6)
(5)
(23)
Adjusted EBITDA Pro Forma
Patrimóvel s Goodwill New Accounting Practices
Stock Option Recognition
Cost Reduction Impact Adjusted EBITDA
Adjusted EBITDA Pro Forma 2008(R$ MM)
41
Lopes 2008 EBITDA’s Analyze
3Q08 ∆ 4Q08
Sales R$2.9 Billions -45% R$1.6 Billion
Net Commission 2.5% 4% 2.6%
Net Revenue R$65.3 Millions -46% R$35.5 Millions
Operational Expenses R$44.9 Millions -14% R$38.7 Millions
Pronto!’s Operational Costs*
- - R$2.8 Millions
23 34 20 (4)
74
1Q08 2Q08 3Q08 4Q08 2008
EBITDA 2008(R$MM)
42% 45%31% -12%
32%
*This value is not an indicative of Pronto!’s operational costs, it should not be used as base to on going expenses, because of the accounting practices changes.
42
Adjusted Net Income Pro Forma*
Adjusted Net Income Pro Forma(R$ MM)
-166%
35%
-37%
Adjusted Net MarginAdjusted Net Margin
-39%
37%14%
4Q07 4Q08 2007 2008
(61)32
(10)(6)
(5)
(50)
Adjusted Net Income Pro Forma
Patrimóvel Net Effect New Accounting Practices
Stock Option Recognition
Cost Reduction Impact
Adjusted Net Income
Adjusted Net Income Pro Forma 2008(R$ MM)
* The adjusted net income is the accounted net income, excluding the amortization of the goodwill. Adjusted Net Income Pro Forma does not considers the effects of Patrimóvel’s goodwill lost, changes on accounting practices and the cost reduction.
43
Cost Reduction Quarterly Effect
*About the impact of this reduction annualized, the Company will also incur in:
-Pronto! expenses (with its own revenue guidance)
-Already granted Stock Options expenses (R$3.3 million in 2009)
From a R$165MM year base, the on going
costs reached an estimated
amount of 67MM.
Pronto!’s Costs in 4Q08
44
Guidance for 2009
45
Sales’ Guidance for 2009 – Primary Market
9%
(R$ MM)
* The General Value of contracted sales (Contracted GVS) projected in this release may change due to many variables. This material fact includes forward looking statements related to business perspectives, results estimates and, also, the growth outlook for Lopes. Such forward looking statements may be substantially affected by changes in market conditions, government decisions, stronger competition, industry performance as well as Brazilian economy performance, in addition to those risks presented in the documents released and filed by Lopes, consequently, they are subject to changes without previous notice. 46
Additional Information
47
Two seasonality components:
• Natural variation in sales related to holidays or vacation periods over the year. The first quarter is more significantly affected by summer vacations and the week of Carnival celebrations.
• Variations in sales stemming from the sales pipeline in the real estate development market, in which projects launched are subject to licensing and permit requirements, which account for significant distortions in a quarter-over-quarter comparison.
Lopes’ Contracted Sales Seasonality
Unstable sales behavior in each quarter accounts for variations in yearly sales
48
Ownership Structure
Total of 49,448,033 common shares
Ownership Structure Post-IPO
49
Institution Analyst Contact
Agora Cristiane Viana (+55 21) 2529-3393 [email protected]
Banco Espírito Santo
TBD -
Credit Suisse Marcelo Telles (+52 55) 5283-8933 [email protected]
Itaú Tomas Awad (+55 11) 5029-4517 [email protected]
Link Celso Boin Jr. (+55 11) 4505-6701 [email protected]
Planner Ricardo Martins (+55 11) 2172-2600 [email protected]
UBS Pactual Rodrigo Monteiro (+55 21) 3262-9208 [email protected]
Coin Valores Marco Barbosa(+55 11) 3035-4141
Analysts Coverage
50
