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Lopes goes ahead with expansion plan by acquiring 60% of the Largest Real Estate
Broker in Espírito Santo*
*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 Actual Negócios Imobiliários Ltda. EPP (“Actual”).
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. ACTUAL: Leading Company in the Espirito Santo Real Estate
Market
III.Markets – Espirito Santo and Vitoria
IV.Acquisition Structure
V. Closing Remarks
Expansion Opportunity
Opportunity for Expansion
LOPES acquires 60% of ACTUAL, leading company in the Espirito Santo real state brokerage market.
Attractive acquisition model in relation to Lopes P/E, estimated between 7.0 and 8.0 times the 2008’s earnings.
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 with respective caps of R$ 13.8/ R$ 5.8 millions.
This opportunity enables LOPES to begin it’s operations in a consolidated manner in one of the most promising growth markets of the Southeast region.
LOPES consolidates its positioning as the largest player in the Brazilian real estate brokerage industry, now in 6 states, advancing on it’s geographic expansion strategy, initiated in July of 2006.
ACTUAL: Leading Company in Real Estate Brokerage in Espirito Santo*
**in sales volume
Actual
Present in the real estate market of Espirito Santo for 13 years, rendering consulting and brokerage services in the primary and secondary market.
Biggest sales force of the region with over 60 brokers.
Managers widely recognized and inserted in the state market.
Launchings pipeline estimated in R$200 million by December 2007.
Consolidated operation in Espirito Santo state, with expressive growth in 2005/2006 with more growth expectancies for the next few years.
106%
492
1012
2005 2007E
1 Source: SINDICON – Sindicato da indústria da Construção Civil do Estado do Espírito Santo2 Management number3 Intermediate GSV estimated by Actual for 2007 and 2008.
1503
2503
67%
49%
2008E2006
Sales Contracted
Developer-clients with national reach and well recognized in the local markets.
Actual
CHÁCARA VON SCHILGEN
• GSV: R$100 millions.• Developer: Inpar• Year: 2005 (1st phase) / 2007 (2nd phase)• Actual was responsible for the coordination and the
sales of 55% of the project.
Cases
VICTORIA BAY
• GSV: R$ 95 millions.• Developer: Rossi Residencial• Year: 2007• 269 units sold in 45 days, greatest case in Espirito Santo, where
Actual was responsible for the planning, coordination and sales for the project.
SPLENDORE
• GSV: approx. R$18 millions.• Developer: Rossi Residencial• Year: 2006• Actual participated of all stages of the project, being responsible
for 78% of the units sales in only 15 days.
Markets – Espirito Santo and Vitoria
Espírito Santo’s Real Estate Market
Vitoria is the 3rd capital of Brazil in terms of the HDI - Human Development Index, which indicates an expressive potential market for new launchings.
Presence of national players (Cyrela, Gafisa, Inpar e Rossi) and continuous movement of new players into this market.
Espirito Santo’s market has presented an expressive growth in launched units, as 3.352 units were launched between November/06 and May/07, which represents a 94% growth2 compared to the period between October/05 and May/06.
The region was the target in 2006 of investments in infrastructure, transportation and industries totaling the unprecedented amount of R$ 45 billion1.
1 Source: Jornal A Gazeta e Instituto JSN2 Source: SINDICON – Sindicato da indústria da Construção Civil do Estado do Espírito Santo
Acquisition Structure
Multiples
ACTUAL ValuationACTUAL Valuation
Earn out mechanism aligned to the company interests that places the acquisition into an accretive valuation range.
8,0x P/E 2008
7,0x P/E 2008
Acquisition P/E
Transaction ValuesTransaction Values
Initial fixed installment of R$ 4,32 millions and one more installment of R$ 1,44 million after 6 months.
Remaining amount to be paid in variable installment in September of 2010 tied to the net income for the operation in the 36 months with a cap of R$ 15 millions.
Estimated value for the transaction – Base Case Scenario - R$ 14,4 millions1
Possibility to acquire the 40% remaining after first 3 years through a “call” (40% x 8x last 12 months gain)/”put” (40% x 3x last 12 months gain) mechanism.
In case the “call” or “put” are exercised, Actual partners are tied to non-compete agreement for 8 years.
1Considerating the 60% owned, based upon cash flow projections with no guarantee of future performance
Closing Remarks
Closing Remarks
Local expertise
Espirito Santo market
Leading management and sales force
Relationship with local and some nationwide developers
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 historical.
+ =
Leading company to serve nationwide real estate developers in South and Southeast regions of Brazil
High growth potential due to market fragmentation.
Operation paves way to full consolidation in the Southeast Region.
