presentation – increase on goldfarb’s stake
TRANSCRIPT
PDG Realty increases its stake in Goldfarb toPDG Realty increases its stake in Goldfarb to80%, and acquires an option to purchase an
additional 20% reaching 100%additional 20% reaching 100%
Investors Relations:
Michel WurmanMichel Wurman Investors Relations Director
João MalletInvestors Relations Manager
Gustavo JanerIR Analyst
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Telephone: +55 (21) 3504-3800E-mail: [email protected]
Website: www.pdgrealty.com.br/ir
Agenda Agenda
Deal Rationale
Increase of PDG Realty´s stake in Goldfarb
PDG Realty Business Model
Final Comments
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DealDeal RationaleRationale
Consolidation of PDG Realty´s position as one of the leaders in operations within the low income segment.g
Opportunity to accelerate investments in the market segment with the largest repressed demand on Brazilian real estate market.
Investment in a company with proven execution capacity and great potential growthInvestment in a company with proven execution capacity and great potential growth.
Stake acquisition based on accretive valuation.
Arbitrage opportunity on discounts between listed companies versus private equity investments.
Reaffirm and reiterate the strategic alignment between the current shareholders of Goldfarb and PDG Realty.
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Option Exercice of aditional 5% Option Exercice of aditional 5%
We exercised the option to acquire 5% of Goldfarb, reaching a stake of 80%.
The operation will be take place as described below:
– Considering the economic value of Goldfarb of R$900 million, we increased the capital inR$100 million, to be paid in 10 installments starting in 2008, as a consequence PDG Realtywill hold a stake on Goldfarb of 77.5%.
– The incorporation of a holding company that will hold a 2.5% interest in Goldfarb that was 100%controlled by other Goldfarb shareholders.
– Increase of PDG Realty’s capital stock and issuance of 1 136 364 new common shares– Increase of PDG Realty s capital stock and issuance of 1,136,364 new common sharesdelivered to Goldfarb’s partners.
75% of the new shares will be locked-up for a 9 months period, and at every quarter, starting at
th i 25% f th h ill b f f t dithe issue, 25% of these shares will be free for trading.
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New Purchase Option of 100%New Purchase Option of 100%
We entered into an agreement with the remaining shareholders of Goldfarb for a share purchase option forWe entered into an agreement with the remaining shareholders of Goldfarb for a share purchase option for acquisition of up to 100% of Goldfarb’s shares by PDG Realty.
The option may be exercised on an annual basis by any of the parties, in 4 tranches of 5% from 2009 on.
The acquisition will be carried out through the issue of new shares by PDG Realty, pursuant to the proposal to be b itt d t th h h ldsubmitted to the shareholders.
The economic value of Goldfarb for purposes of exercising the options will be determined by comparing the price earnings multiples, with a 35% discount relative to PDG Realty’s multiple.
Goldfarb Net Income * 65% / PDG Realty Net Income
The number of PDG Realty shares to be issued will be calculated as followsNumber of PDGR3 = (GIC NI / PDG NI) * 65% * PDG Shares * % GIC Shares
Where:number of PDGR3: number of PDG shares to be issued as a result of the respective incorporation;PDG NI: means the net income of PDG included in the balance sheet as of December 31 of the year immediately prior to the respective Option; GIC NI: GOLDFARB’s net income as of December 31 of the year immediately prior to the respective Option;
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y y p p p ;PDG shares: number of shares representing the capital stock of PDG as of December 31 of the year immediately prior to the exercise of the respective Option.% of GIC Shares: percentage of GOLDFARB sold in the tranche (5%).
AttractiveAttractive ValuationValuation
Once again we were capable to consolidate an attractive investment with accretive valuation, leveraged on the arbitrage opportunity on discounts between listed companies versus private leveraged on the arbitrage opportunity on discounts between listed companies versus private equity investments.
Peers
Market Cap (R$ millions) as of Nov 21st /07 900 5 395Market Cap (R$ millions) ‐ as of Nov, 21st /07Estimated Earnings * 09´ (R$ millions)P/E 09´ estimate
Goldfarb Acquisition Discount
900 5.395140 430*6,43 12,53
Goldfarb Acquisition Discount
Discount to MRV multiple
* MRV earnings estimate ABN Amro / Bulltick / Merril Lynch / UBS Pactual
49%
* MRV earnings estimate: ABN Amro / Bulltick / Merril Lynch / UBS Pactual
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PDG Realty Towards the Low PDG Realty Towards the Low Income SegmentIncome Segment
Attractive Macroeconomic Environment is boosting mortgage availability and creating a adequate growth platform Attractive Macroeconomic Environment is boosting mortgage availability and creating a adequate growth platform for the low income segment :
Mortgage Expansion Mortgage (% of GDP)
Mortgage reached R$9.3 billion until December 2006
51% 53%
62%70%
2005
2006
600
800
1,000
r Mon
th (R
$ m
m) 2003
200520042006
2%10%
16% 19%
0%
35%
B il M i Chil F G USA UK
20032004
0
200
400
Jan Feb Mar Apr Mai Jun Jul Aug Sep Oct Nov DecNew
Con
tract
s per
Brazil Mexico Chile France Germany USA UKJan Feb Mar Apr Mai Jun Jul Aug Sep Oct Nov DecN
Caixa vs. SFH Credit Growth Financing ConditionsBefore Now
During C t ti
It was necessary to dispose up to 70% of the unit’s value before the delivery of
The disbursement during the construction is between 10% and 20% significantly more feasible to
14.2
Construction
Deadline
Interest
ythe keys 20%, significantly more feasible to
rent payers
Until five years ago, Caixa was practically the only real estate financer which offered more than ten years
Private banks offer credit lines with a maximum of 25 years
Almost all of the contracts had TR+12% interest per year
Contracts with TR+ 8% interest per year and with fixed interest rates (without TR)
1.83.1
4.6
8.7
5.46.4
8.7
5
Security
(without TR)
Developments were accounted for by the incorporator. In the case of bankruptcy during construction, the acquirer had no guarantees of receiving the property
Each development has its own accounting , and separate from the incorporators activities. In the case of bankruptcy, the property is not considered a company asset
2003 2004 2005 2006
SFH Caixa
PDG Realty Towards the Low PDG Realty Towards the Low Income SegmentIncome Segment
Most of the housing deficit of the country is concentrated in the low income segment:
Number of Residences (2006)1 Main Competitors’ Positioning
Housing Deficit
Most of the housing deficit of the country is concentrated in the low income segment:
3%
7%
1.7 million
3.7 million
> 20 SM2
10 to 20 SM1
Deficit
na
4%
17%8.7 million 5 to10 SM28%
73%37.4 million <5 SM288%
Total Residences
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51.6 millionSource: IBGE, Diretoria de Pesquisas, Coordenação de Trabalho e Rendimento, Pesquisa Nacional por Amostra de Domicílios, Fundação João PinheiroNote: 1 Minimum monthly wages (R$350)
PDG PDG RealtyRealty advancesadvances in in thethe lowlowincomeincome segmentsegment
Our current Landbank reflects PDG Realty’s great exposure to the low income segment (units up to R$ 250 thousand): PDG Realty PSV pro rata, shows that 72% is concentrated in this segment, representing a PSV pro rata in this segment of R$3.5 billion and 42,486 units.
Most our activity in the low income segment goes through Goldfarb, due to our large stake in the company and also the co-incorporation in most projects Moreover we have projects of co-incorporation company and also the co incorporation in most projects. Moreover, we have projects of co incorporation with some other partners that also develop for this segment.
Landbank Segmentation ‐ pro rata PSV Landbank Segmentation by Partner in the Economic High ; 1,0%
Mid High; 3,3%
Mid ; 8,3%
Land Parceling; 7,2% CHL; 5,2% Co ‐ Dev; 6,0%
Segment ‐ pro rata PSV
Comercial; 7,9%
Low Income; 72,4%
Goldfarb; 88,8%
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CorporateCorporate StructureStructure
PDG R lt h b i t t b i b d th i t it d l dPDG Realty has been managing to create new businesses based on the private equity model and
establish new successful partnerships with companies with proven track record.
Notes:1 25% directly and 11.9% indirectly through Lindencorp
2 Subject to further changes after new acquisitions
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Business ModelBusiness Model
Exposure to the Low Income Segment
Flexibilidade para atuar em todos os segmentos do mercado imobiliário Brasileiro
Expertise and capacity to invest in:
Low Income Pro rata PSV in the Landbank amounts to R$ 3,5 billion with over 42 k units
Diversification
Expertise and capacity to invest in:– Geographic regions – Market– Income class segments
Leverage on Partnership Philosophy
Abilidade para agregar os melhores profissionais do mercado e alavancar suas abilidades em suas especificas áreas de atuação
Ability to “hire” the best management in the industry and leverage on their specific and local knowledge
Additional capital gain potential
Potenciais ganhos de capital através dos seus investimentos de portfolio
Management with strong real estate expertise, financial background
Potential capital gains through its portfolio investments
Management expertise Gestão com grande expertise no setor imobiliário e financeiro com forte cultura de maximização de retornos
The right platform to accomplish a sustainable long term growth
g g p , gand return oriented culture to implement PDG Realty´s business strategy
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The right platform to accomplish a sustainable long term growth
Unique business model in the Brazilian real estate market