Agenda

Industry

Company

Alternatives

Recommendations

Suppliers

Industry Analysis Threats of Entry

Buyers

Threats of Substitutions Industry Analysis

Low-income housing Market Analysis

50,000homes

Sold in one year

Growing market that is far from saturation

Expected growth @ XX% per year

Real Estate Industry in Colombia

7.6 millionpeople

2.2 millionhomes

2005

*** millionpeople

2.6 millionhomes

2015

Exp

andi

ng

Increasing -people & homes-

Real Estate Industry in Colombia

people

homes

6.5 million

1.6 million

30,000 - homes created every year- shortage of homes in low and mid income segment- low and middle income: US$ 400 – US$ 1,400

Target -low income segment-

homes

people

homes

Low-income housing Market Analysis

• qualification of Grants / Price Sensitivity • quality: buyer wants the best value for flats

Suppliers

Industry Analysis Threats of Entry

Buyers

Threats of Substitutions Buyer

Suppliers

Industry Analysis Threats of Entry

Buyers

Threats of Substitutions

Low-income housing Market Analysis

Supplier

land

Sub-contractors

Const material

Monopoly- concrete- bricks- steel

Strong power

lack of land

Strong power – government administration

Bottle neck

manysubcontractors low power

Suppliers

Industry Analysis Threats of Entry

Buyers

Threats of Substitutions

Low-income housing Market Analysis

• capital requirement• economies of scale when building• good project administration

Threat of Entry

Suppliers

Industry Analysis Threats of Entry

Buyers

Threats of Substitutions

Low-income housing Market Analysis

Threat of Substitution

Bogota

Buy a new home

or

stay in the same home

leave to suburbs

Industry Trends

• Economic Cycles

• Government Subsidies

• Land Availability

FASE CRECIMIENTO1-2 years

Demand > SupplyMejora de la confianza del consumidor

FASE EQUILIBRIO1-3 years FASE CONTRACCION

2-4 years

Supply > Demand → Precios Sector financiero pesimista → dificultad para financiación → mayor costoLimita generación de nuevos proyectos

Market Summary – Opportunities & Threats

Mild Competition

Good growth potential

Land availability

Political Pressure

Opportunities Threats

What do you think?

So, is this a dream or a nightmare?

TRÍADA Company

Bolivar

Pordes

a

Triada

Colsubsi

dio

Ingeu

rbe

Prom

otora

Viv

endiu

m

Constru

ctora

Colp

atria

5,703

1,482 1,126 802 755 718 713

Sales Volume

Key Competitors – Low-Income Market

TRÍADA Company

WHO

• Low and mid income Families who buy their first house with Government Subsidy

WHAT

• Low and mid income apartments - Standard built - Good quality - Competitive price

HOW

• Good cost benefit equation (good quality with competitive price)

• Lower costs vs. other competitors due to lean implementation across processes

• Higher margin vs. other competitor

Tríada’s key Resources & Capabilities

• First company to implement Lean methodology across its business processes

• Control tools for product quality and productivity

Operating Efficiency

• Standard designs that achieves the market needs while optimizing the construction process by reducing timing and waste

Superior Design

• Key subcontractors integration with into its process• Triada is able to typically pay to its subcontractors less than the market

average for the comparable amount of work performed, the marginsof the subcontractors were higher than the market average due to improved efficiency

Relationship with

suppliers

Tríada’s key Weaknesses

• Limiting the number of projects that the company is taking • Threat for potential transferability of key capabilities.

Shortage of Management

Talent

• Overreliance on a limited number of subcontractorsLimited #

Contractors

• Despite the good customer satisfaction and the high experience of the company, overall the client awareness of the company is relatively low.

Brand Awareness

Triada’s SWOT

Weakenesses Strengths

Opportunities

- Access to Macro- Projects- Strategic alliances- Brand awareness

- Sales team capabilities to increase sales closure Rate- Shortage of management talent- Projects processes coordination- Brand awareness

Threats

- Land availability- Increasing trend of land and supplies costs- Lack of subsidies- Customers low purchase power- Low or non market entry barriers- Limited number of subcontractors

- In – house design department - Construction- Paperwork- Finance - Good reputation

Alternative 1 – Geographical diversification

Places where the cost advantage can be replicated

Location and land availability driven

Access to additional knowledge and new markets

Features

Alternative 1 – Pros &Cons

Economic risk mitigation; Mitigation of political risks; Keep building brand awareness across the country; Leverage on existing agreements with suppliers and banks.

Increase operating costs; Finding the right human capital; Finding and training the subcontractors in order to keep

productions efficiencies and quality Lack of knowledge of the new markets.

Alternative 2 – Services differentiation

Offer of value added services – i.e. financial services

Complimentary products – finishing, furniture

Same areas of operation

Features

Alternative 2 – Pros &Cons

Improved access to potential customers; Increased awareness of the company; Improved perception of the company by financial sector; Eventual increased sales in finished projects and pre-order

books for planned; Improved economies of scale due to new projects starting.

Increased marketing costs; Increased administrative costs; Further increase of business and political risks due to

concentration on one market.

Alternative 3 – Product diversification strategy

JV with a construction company, specializing in business real estate

AA, A and B+ class office buildings

Primarily in areas of Triada’s presence – Bogota and Cali

Features

Alternative 3 – Pros &Cons

Economic risk mitigation; Mitigation of political; Taking advantage of the current economic growth of the

country; More flexibility in the use of available land for development; Access to additional project management talent; Additional stable revenue sources.

☒ Additional construction expertise required;☒ Fewer project financing options available;☒ Different client profile, with different financing.

Alternative 3 – New Who, What & How

WHO

• Small and medium businesses• Investors

WHAT

• AA, A, B+ office buildings • Complimentary infrastructure

HOW

• JV with an existing player• Lower costs vs. other competitors

due to lean implementation across processes

• Low resource costs

Conclusion – there can be only one!

Of the identified development options we believe that the product diversification option has the most advantages for the Vélez family and for the Triada company. The diversification option allows to mitigate some of the key risks that the company is facing, gain additional knowledge and expertise while still being able to capitalize on the key capabilities of the company.

The option gives more flexibility in response to the changes in the economic climate by shifting the production focus. In addition to that it allows increased splitting opportunities and additional revenue streams which are independent from the main construction business.

What do you think?