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DESCRIPTION
Lopes4TRANSCRIPT
Lopes Goes Ahead With Expansion Plan By Acquiring 60% of One of the Leading Real Estate Brokers in
Pernambuco*
*in sales volume
Forward Looking Statements
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 Lopes – LPS Brasil Consultoria de Imóveis S.A and its subsidiaries (“Lopes”) related to the acquisition of Sergio Miranda Negócios Imobiliários Ltda. (“Sérgio Miranda Imobiliária”).
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, including future outlooks for Actual, 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 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.
Index
I. Expansion Opportunity
II. Sérgio Miranda Imobiliária: One of the Leading Companies in
the Pernambuco Real Estate Market
III.Markets – Pernambuco and Recife
IV.Acquisition Structure
V. Closing Remarks
Expansion Opportunity
Opportunity for Expansion
LOPES acquires 60% of Sérgio Miranda Imobiliária, one of the leading companies in the Pernambuco real state brokerage market, in sales volume.
Attractive acquisition model in relation to LOPES P/E ratio, estimated between 9.4 and 9.5 times the 2008’s earnings.
Approximately 60% of the price tied to performance through an “earn out” process in the first 3 years.
Possibility of acquisition of the remaining 40% through call/put options.
This opportunity enables LOPES to begin it’s operations in a consolidated manner in the state of Pernambuco, which posted the strongest industrial growth in Brazil from October 2005 to October 2006.
LOPES is progressing towards the consolidation of its operations in the Northeast Region of Brazil, having started its operations in the state of Bahia last July.
LOPES consolidates its positioning as the largest player in the Brazilian real estate brokerage industry, advancing on it’s geographic expansion strategy, initiated in July of 2006 and now operating in 7 Brazilian states: São Paulo, Rio de Janeiro, Rio Grande do Sul, Paraná, Bahia, Espírito Santo and Pernambuco.
Sérgio Miranda Imobiliária: One of the Leading Companies in Real Estate Brokerage in
Pernambuco*
*in sales volume
Sérgio Miranda Imobiliária
Operating in the real estate market of Pernambuco for 10 years, with wide experience in real estate consultancy and brokerage market.
Sales force with over 80 independent brokers.
Management members widely recognized and inserted in both the local and state market, with over 20 years of experience.
Launchings pipeline estimated at R$720 million for the next 12 months and sales estimated for 2008 in R$120 million.
Growth in launchings volume history and maintenance of upward trend for the next few years.
1 Managerial figures2 Intermediate GSV estimated by Sergio Miranda Imobiliária for 2007 and 2008. Launches Volume
38%
R$2001
R$2751
2005
R$4002
R$5502
36%
46%
2008E2006
R$(MM)
2007E
Developer-clients with national reach and well recognized in the local and national markets.
Sérgio Miranda Imobiliária
Markets – Pernambuco and Recife
Pernambuco’s and Recife’s Real Estate Market
Recife disputes with Salvador and Fortaleza the influence strategic space of the Northeast Region and is one of the three largest urban agglomeration in this region1.
Current real estate market scenario of Recife City is marked by the arrival of large companies, increased volume of financing and promising economic phase in which the state of Pernambuco is going through1.
In 2007, 652 units were launched and 1,022 units sold1.
The State of Pernambuco has the 2nd largest industrial production in the Northeast Region, behind the State of Bahia. From October 2005 to October 2006, the industrial growth posted by the State was the 2nd in the country (6.3%), more than twice the national average (2.3%)2.
1 Source: Technical Research Unit of FIEPE, supported by SINDUSCON/PE, SECOVI/PE and ADEMI/PE 2 Source: Folha de Pernambuco / IBGE
Acquisition Structure
Multiples
SÉRGIO MIRANDA IMOBILIÁRIA ValuationSÉRGIO MIRANDA IMOBILIÁRIA Valuation
Earn out mechanism aligned to the company interests that places the acquisition into an accretive valuation range.
9.5x P/E 2008
9.4x P/E 2008
Acquisition P/E
Transaction ValuesTransaction Values
Initial fixed amount of R$3.0 million to be paid R$0.546 million at sight and 9 monthly installments of R$0.273 million.
Remaining amount to be paid in variable installment after 36 months from the transaction closing date, tied to the net income accumulated in the 36 months after the transaction, with a cap of R$11.15 million.
Estimated value for the transaction on the base case scenario at R$9.1 million1
“Call” and “put” caps of R$9.0 million and R$3.2 million, respectively1Considerating the 60% owned, based upon cash flow projections with no guarantee of future performance
Closing Remarks
Closing Remarks
Local expertise
Pernambuco market
Management and sales force with high relevance in the State
Relationship with the main local players
Consolidated relationship with nationwide real estate developers
Proven product development capacity
Corporate Governance
IT Structure
Nationally relevant player with state-of-the-art practices.
Geographic expansion and consolidation history.
+ =
Leading company to serve nationwide real estate developers in South Southeast and Northeast regions of Brazil
High growth potential due to market fragmentation.
Operation leads to the full consolidation of the Northeast Region.
Lopes’s Map – Geographic Expansion
BA
RS
PR
SP RJ
ES
PE
Lopes consolidates it’s
national positioning as the
largest player in the
Brazilian real state
brokerage industry and now
is operating in 7 Brazilian
states with 274 sales points
and 2,240 brokers.