JPM Brazil Real Estate

Completed 04 Apr 2018 06:26 PM EDT
Disseminated 05 Apr 2018 12:15 AM EDT

Latin America Equity Research
05 April 2018
Brazil Real Estate 101 – 2018

J.P. Morgan Primer to Understand the Sector
Currently, the Real Estate sector in Brazil comprises 27 listed companies divided Latin American Cement /
among 15 Homebuilders, 7 Malls, 3 Commercial Properties and 2 Brokers, with a Construction / Real Estate
combined market cap of around US$20bn and average daily liquidity of Marcelo Motta
AC
approximately US$100mn, having a weight of 2.0% in the IBOV index vs a peak (55-11) 4950-6712
of 12% in 2012. This report is a guide for investors, familiar or not, with Real marcelo.g.motta@jpmorgan.com
Estate in Brazil and its subsectors, as it contains a compilation of the most Bloomberg JPMA MOTTA <GO>
important events in the sector, along with our primary analysis and conclusions. Banco J.P. Morgan S.A.
For the Housing sector, the most important data include recent trends on Guilherme Mendes
Mortgages and FGTS, as well as operational data including launches, presales, (55-11) 4950-4105
cancellations and price movements. For Shopping Malls, we include historical guilherme.g.mendes@jpmorgan.com
operational and financial data, detailed analysis on retail’s evolution and E- Banco J.P. Morgan S.A.
commerce figures. For Commercial Properties, there are data based on Colliers Adrian E Huerta
*
and Cushman & Wakefield reports regarding recent trends in prices and (52-81) 8152-8720
occupancy rate. For Brokers, we provide detailed analysis on historical adrian.huerta@jpmorgan.com
performance and valuation. J.P. Morgan Casa de Bolsa, S.A. de C.V.,
J.P. Morgan Grupo Financiero
Froylan Mendez
(52-55) 5540-9482
froylan.mendez@jpmorgan.com
J.P. Morgan Casa de Bolsa, S.A. de C.V.,
J.P. Morgan Grupo Financiero
* Registered/qualified as a research analyst under NYSE/FINRA rules.

See page 283 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
This document is being provided for the exclusive use of Marcio Yamachira at VOTORANTIM SIDERURGIA S.A..
Marcelo Motta Latin America Equity Research
(55-11) 4950-6712 05 April 2018
marcelo.g.motta@jpmorgan.com
Table of Contents
Top 5 Hot Topics for 2018........................................................5
10 Things to Know About Real Estate ....................................6
Our Views on Each Subsector.................................................7
Valuation ...................................................................................9
Performance ...........................................................................13
Macroeconomic data..............................................................21
Share on Indexes & Liquidity ................................................24
Shopping Malls .......................................................................30
5 Things to Know About Brazilian Malls...............................................................30
Sector’s Numbers Overview ..................................................................................32
Traffic Evolution...................................................................................................37
Opening for 2018 ..................................................................................................38
Liquidity and participation in IBOV ......................................................................39
Operational Data Performance...............................................................................40
Understanding the Calculation of Rental Variation Indexes....................................44
Consumption showing a positive trend...................................................................46
Competition – Which Cities Are Crowded? ...........................................................50
E-Commerce Overview .........................................................................................54
Fipe Buscapé: E-commerce price Index .................................................................59
Mix overview........................................................................................................60
Listed Companies Overview..................................................................................61
Asset Quality ........................................................................................................64
Geographical Diversification .................................................................................66
Leverage profile ....................................................................................................68
Companie’s Financials ..........................................................................................71
Companies’ provisions analysis .............................................................................75
Account Receivables breakdown ...........................................................................78
How management compensation grew in the past years?........................................79
Malls Valuation.....................................................................................................86
Listed Companies’ Portfolios, Expansions & Greenfields.......................................93
A View on Non-listed Players’ Portfolios ..............................................................98
M&A Historical Data .......................................................................................... 101
Companies Heatmap ........................................................................................... 107
Homebuilders........................................................................110
5 Things to Know About Brazilian Homebuilders................................................ 110
Sector Numbers Overview................................................................................... 111
Brazilian Market Data – ABRAINC-FIPE ........................................................... 111
Breakdown MCMV vs Mid and High income segment......................................... 114
São Paulo market – SECOVI Data....................................................................... 115
Rio de Janeiro market – ADEMI Data ................................................................. 120
2
(55-11) 4950-6712 05 April 2018
Market Size and Expected Growth....................................................................... 123

Demografic data.................................................................................................. 125
Interest Rates – Significant Impact on Mortgages and Sentiment.......................... 128
Housing Deficit: Limited Impact for Listed Companies........................................ 129
Housing Prices – Fipe Zap Data........................................................................... 133
Housing Prices – Central Bank Data .................................................................... 138
Residential Rental Prices – Fipe Zap Data............................................................ 138
Radar Fipe Abrainc ............................................................................................. 142
Homebuyer’s Profile ........................................................................................... 145
Affordability ....................................................................................................... 149
Sales Speed Evolution ......................................................................................... 152
Inventory Analysis .............................................................................................. 154
Margin Evolution ................................................................................................ 157
FCF Generation................................................................................................... 159
Leverage ............................................................................................................. 161
Corporate transactions: M&A, Spin-Offs and De-Listings.................................... 162
Understanding Land Banks figures ...................................................................... 164
HBs Market Share and Geographical Diversification ........................................... 166
Working Capital Cycle ........................................................................................ 169
How Do Developers Finance Their Projects? ....................................................... 171
Debt and Capital markets for Homebuilders......................................................... 171
Homebuilders impact on job markets................................................................... 175
Homebuilders Launches and Presales Performance .............................................. 176
Brazilian Homebuilders IS and BS evolution ....................................................... 178
EPS vs. Stock Performance ................................................................................. 184
NAV Analysis – It Needs to Include Companies’ Cycles ..................................... 186
Company’s shareholder structure......................................................................... 187
Understanding the Sector’s Accounting ............................................................... 187
Mortgage Market...................................................................192
Brazilian Mortgage Market Structure................................................................... 192
Saving Accounts Overview ................................................................................. 195
Mortgage Disbursements – SBPE & FGTS Figures.............................................. 197
Mortgage settings in Brazil.................................................................................. 201
Caixa Economica Federal (CEF) – Main Mortgage Lender .................................. 203
Private Banks – Appetite for Mortgages............................................................... 206
Understanding the FGTS..................................................................................... 210
FGTS – Income Statement and Balance Sheet...................................................... 213
FGTS Budget for Coming Years.......................................................................... 217
FGTS – Infrastructure Fund (FI).......................................................................... 218
Management Team – Board of Trustees............................................................... 218
Alternative Mortgage Instruments........................................................................ 219
Challenges to Long-Term Financing.................................................................... 221
Minha Casa Minha Vida (MCMV) Program ........................................................ 222
MCMV Overview on Execution since 2009......................................................... 225
(55-11) 4950-6712 05 April 2018
Real Estate Brokers..............................................................226

Brokers Valuation ............................................................................................... 229
Potential Market Size .......................................................................................... 232
Commission structure.......................................................................................... 235
Understanding Operating Leverage...................................................................... 238
Mortgage Agreements with Banks ....................................................................... 240
Historical M&A .................................................................................................. 242
Technology......................................................................................................... 244
Commercial Properties ........................................................245
São Paulo Market ................................................................................................ 245
Rio de Janeiro Market ......................................................................................... 248
Summary of FII by asset class ............................................................................. 257
Warehouses ..........................................................................259
Primers Around the World ...................................................264
Tables ....................................................................................266
Figures ..................................................................................272
Report priced as of April 2, 2018, unless otherwise specified.
Table 1: Coverage Summary

Mkt Cap Trading PT Current
Brazil – HBs Ticker Rating US$mn US$mn Dec-18 Price Upside
MRV Engenharia MRVE3 OW 2,151 15.4 20.00 16.04 25%
Tenda TEND3 OW 424 3.9 28.00 26.00 8%
Direcional DIRR3 OW 276 1.4 7.00 5.96 17%
Cyrela CYRE3 OW 1,849 9.8 17.00 15.32 11%
Eztec EZTC3 N 1,110 4.2 22.00 22.27 -1%
Even EVEN3 N 343 1.4 6.00 5.05 19%
Rodobens RDNI3 N 78 0.0 7.00 5.90 19%
Gafisa GFSA3 UW 135 5.4 10.00 10.00 0%
Rossi RSID3 UW 33 0.2 - 6.35 -
PDG Realty PDGR3 UW 28 0.6 - 1.86 -
Brazil – Brokers
Lopes Brasil LPSB3 N 183 0.4 - 4.83 -
BR Brokers BBRK3 UW 42 1.2 - 0.54 -
Brazil – Malls
BR Malls BRML3 OW 3,018 16.1 14.00 11.44 22%
Aliansce ALSC3 OW 1,122 3.1 23.00 18.32 26%
Sonae Sierra Brasil SSBR3 OW 554 1.1 28.00 24.00 17%
Iguatemi IGTA3 N 2,056 11.6 44.00 38.54 14%
Multiplan MULT3 N 4,132 16.5 78.00 68.32 14%
Brazil – Properties
BR Properties BRPR3 N 1,120 2.3 11.00 9.11 21%
Chile – Malls
Parque Arauco PARAUCO N 2,676 2.5 2,000 1,804 11%
Argentina – Malls
IRCP IRCP OW 1,401 0.1 82.00 44.49 84%
Source: J.P. Morgan estimates.
(55-11) 4950-6712 05 April 2018
Top 5 Hot Topics for 2018

1) Elections should generate volatility
Brazil will host presidential elections this year with the first round happening on Oct.
7th. In additional to president, Brazilians will vote for governors, senators and
deputies. Since at this point there is no clarity about who will be the presidential
candidates, there are a lot of uncertainties on who could be the candidates in the
second round (Oct. 28th). This should generate significant volatility in the equity
markets. The uncertainty regarding elections should have an impact mostly on
forward interest rate and expected GDP growth. Keep in mind that in 2014 elections
IBOV volatility (IBOVE 1M 50D VOL Index) reached its historical peak of 49.51 vs
around 20.00 currently. We believe Homebuilders, given their relatively higher
dependency on future growth, could be marginally more impacted than Malls by
expected volatility.
2) Economic recovery to increase confidence and multiples

Despite the possible negative impact from potential election-based volatility, J.P.
Morgan economists expect Brazilian GDP to grow 3.0% this year, after 3 years in
negative territory or with flattish figures. This recovery in GDP should help
companies’ valuation improve with multiples approaching historical highs, in our
view. In the case of Malls, P/FFO multiples could once again be back to 20-23x
(potential upside of ~20%) and Homebuilders could be trading once around at 1.5-
1.6x P/BV (potential upside of ~30%).
3) Mortgage disbursements should finally grow this year

After 3 years of contraction, down from R$160bn in 2014 to R$100bn in 2017, we
believe that this year mortgage disbursements (FGTS+SBPE) will grow again,
benefiting inflows to SBPE (Saving Accounts system), which ended 2017 with
inflows of R$14.7bn after 2 years of outflows. Moreover, the FGTS budget for low
income housing for this year is at R$62bn, slightly above 2017 disbursements of
R$57bn. Given the low interest rate level in Brazil, we also expect alternative
instruments like CRIs and LCIs to gain relevance in the mortgage market, helped by
the development of LIG (Letra Imobiliaria Garantida) that represents the Brazilian
covered bond.
4) Commercial properties’ gradual recovery should continue

As shown by the most recent data, the Triple A Office market is already recovering,
especially in São Paulo, where the vacancy rate was at 21% in 2017, down from 25%
in 2016. Moreover, the vacancy rate is already at equilibrium levels (10-15%) in SP,
with the main districts such as Faria Lima, Paulista, JK and Vila Olimpia. On the
other hand, the Rio de Janeiro market continues to lag, with the vacancy rate
increasing to 38% at the end of 2017 vs 32% in the previous year. Despite the
improvement in the vacancy rate, we don’t expect overall rental prices to increase
during 2018, since the overall vacancy rate is still above equilibrium level in most
areas.
5) Brokers should benefit from the recovery in launches

Although there is a big question mark regarding Brokers’ profitability and business
model sustainability, due to a more intensive use of new technologies from
homebuyers, we believe that the recovery in housing market with a higher number of
launches could create positive momentum for Lopes and BR Brokers. Moreover,
companies should generate positive FCF this year, after 3 consecutive years
consuming cash and demanding private capitalizations.
(55-11) 4950-6712 05 April 2018
10 Things to Know About Real Estate

1) Equity investors. Brazil’s Real Estate sector comprises 27 listed companies
in 4 subsectors, divided among 15 Homebuilders, 7 Malls, 3 Commercial
Properties and 2 Brokers, with a combined market cap of around US$22bn
and average daily liquidity of around US$125mn; although only 5
companies trade more than US$10mn daily.
2) Shareholders allocated more than R$43bn in Real Estate since 2005.
This amount was raised via 66 operations, R$37bn through primary money
and R$6bnby divestments. This amount represents more than 60% of the
real estate sector’s current market cap.
3) Most liquid names trade US$15-25mn daily. Most liquid names, based on
average daily liquidity, are: BR Malls (~US$24mn), Multiplan
(~US$24mn), Iguatemi (~US$22mn) and MRVE (~US$15mn), according
Bloomberg.
4) During the peak, the sector represented 12% of IBOV. After reaching a
share of up to 12% in the IBOV index in 2012, the sector lost share until the
beginning of 2016, reaching 1.7%, gaining share last year and reaching a
weight of 2.1% in Jan. 18. BR Malls is the real estate company with the
highest share in the index (0.8%).
5) Properties segment has the highest correlation with interest rates. Both
Mall and Commercial Property companies have an elevated correlation with
5-year forward interest rates of approximately 50%, when looking at data
since 2010. ALSC, MULT and BRML are the most correlated names.
6) Preferred metrics for each sector. Although we believe there is no perfect
metric to look at Homebuilders, our preferred one is P/BV, since the limited
earnings we see over the coming quarters diminishes the use of P/Es. For
Brokers, we look at P/E, as those companies are asset light and earnings
should become positive this year. For Malls and Properties, we use P/FFO
as we find it the best proxy for free cash flow.
7) Mortgage disbursements contracted once again in 2017. Mortgage
disbursements, including SBPE+FGTS, reached R$100bn last year, down
5% yoy for the 3rd year in a row and returning to the 2011 levels in nominal
terms. FGTS disbursements contracted 16% yoy to R$57.7bn, SBPE was
down 7% yoy to R$43bn.
8) Savings accounts (SBPE) had inflows of R$14.8bn in 2017. This inflow
in savings accounts should help to increase mortgage disbursements in the
mid- and high-income segments, benefiting companies such as Cyrela, Even
and Eztec. Keep in mind that in 2015 and 2016 outflows totaled R$81bn.
9) Housing prices flattish in real terms in 2018. After a contraction of 3.0%
in real terms 2017, we expect housing prices to be flattish in 2018, moving
in line with expected inflation of 3.6% as credit conditions should
marginally improve during the year.
10) We don’t believe E-Commerce is a relevant threat to Shopping.
Differently than in the US, in Brazil, most Shopping Malls are extremely
well located, as parking revenues represent around 15% of their revenues.
Moreover, assets are already focused on the consumer experience, having
several options of entertainment and services.
(55-11) 4950-6712 05 April 2018
Our Views on Each Subsector

Residential
We are positive on the low income segment (MRVE, TEND3 and DIRR3) as we
believe that the sector will continue to benefit from the MCMV program, which
should contract 650k units this year, up 30% vs 2017. According to government
guidance, Faixa 2 & 3, main market for low income players will have 400k units.
Moreover, we expect the segment to continue to report above average margins at 35-
40%, a consequence of the scalability of its business model and superior execution.
Given the improvement in macroeconomic data, lower interest rates and higher GDP
growth, we start 2018 with a more constructive view on the mid and high income
segments as we believe launches and presales will accelerate during 2018, benefiting
from higher homebuyer confidence and better affordability. Keep in mind that in
2017 SBPE had positive inflows of almost R$15bn, after 2 years in a row with
outflows. Our main concern in the mid and high income segment is the high level of
inventories that could continue to pressure gross margins. Even though P&L could
remain weak this year, FCF should be a positive consequence of the recent slowdown
in construction and a lower level of cancellations. Our top picks continue to be in the
lower income segment: MRVE3, TEND3 and DIRR3, in this order of preference. In
the mid and high income segments, our order of preference is EVEN3, CYRE3 and
EZTC3.
Shopping Malls
We continue to like the Shopping Mall segment as companies should continue to
benefit from lower interest rates in Brazil, which are at a record low of 6.5%, which
mean that multiples could return to historical highs of 20-23x P/FFO. Moreover, a
lower cost of debt and stronger balance sheet should result in an aggregated FFO
growth of 22% this year. Additionally the acceleration of GDP growth should
translate into higher retail sales, leading to better than expect top lines. Additionally,
EBITDA margins should improve during 2018 due to lower provisions, as higher
sales should help tenants in a weakened state honor their rents. Our favorite stocks
are: BRML3 and ASLC3 as we believe they should benefit more than peers from the
recovery in retail sales than IGTA3 and MULT3.
Commercial Properties
While we expect the São Paulo Triple A market to continue to show signs of
improvement, with declining vacancy rates and potential upside pressure on rental
prices, Rio de Janeiro continues to be a challenging market due to the state’s fiscal
condition and the downside suffered from the Oil & Gas industry in the past years.
As of December 2017, São Paulo Triple A market showed a vacancy rate of 21%,
down from 25% in the previous 2 years. Moreover, several districts are already
showing vacancy rates closer to the equilibrium level of 10-15%. Additionally, we
believe deliveries of new GLA are not a concern since they should total around 275k
m2 over the next 3 years, representing less than 10% of SP’s current GLA in the
Triple A segment. In Rio de Janeiro, the Triple A office market registered a
vacancy rate of 38% vs 32% in the previous year. On the positive side, deliveries of
new GLA should be very low in the next 3 years at around 45k m2, less than 5% of
current GLA inventory in the segment, which would limit the downside in occupancy
rate. In our view, rental prices could increase a bit in São Paulo as the vacancy rate
approaches 15%, while in Rio de Janeiro rental prices should continue to be weak as
vacancy should remain high.
(55-11) 4950-6712 05 April 2018
Brokers
In line with our view on the residential sector, we have a more constructive view on
Brokers for 2018 as we believe the potential recovery in the housing market,
especially launches, should help the segment to report positive bottom line once
again, after 3 years in negative territory. Despite the potential positive momentum for
the sector, we believe that valuations are expensive as even incorporating a 20-30%
recovery in intermediation stocks are already pricing in a recovery of around 20pp in
net margins (please click here to read our report), which, in our view, seems
exaggerated since at this point there is no indication that efficiency and profitability
could return to historical levels. Although technology has not yet impacted
intermediations in the primary market, we believe that in the midterm, this could be
disruptive to the Brokers’ model in the primary market, leading to a reduction in fees
and volumes. When looking at the secondary market a more intensive use of
technology and the development of in-house brokers had already impacted
companies’ share in this segment.
(55-11) 4950-6712 05 April 2018
Valuation
Table 2: BZ Real Estate sector vs. other LatAm sectors
# of Total Mkt Cap Avg. Mkt P/E EPS Growth (%) Div Yield EV/EBITDA
Sector Companies (US$ mn) Cap (US$ mn) 18e 19e 18e 19e 18e 18e 19e
BZ HB 10 6,534 653 20.2 11.5 84.9 92.4 4.3 9.7 10.1
BZ Malls 5 11,049 2,210 19.2 16.2 64.1 10.5 1.8 12.2 6.3
BZ Properties 1 1,114 1,114 19.7 17.4 -52.1 20.5 1.2 16.4 15.0
BZ Brokers 2 224 112 NM NM. 63.8 98.0 0.0 NM 15.3
Retail 35 188,082 5,374 18.2 15.9 17.6 15.5 1.8 8.5 7.6
Healthcare 13 23,150 1,781 23.0 19.7 28.0 14.8 2.6 10.0 10.3
Energy 15 229,348 15,290 16.1 14.1 152.8 12.4 3.0 6.4 6.2
Utilities 36 138,675 3,852 10.8 9.7 80.3 17.1 4.2 5.3 4.7
Agribusiness 6 17,063 2,844 22.4 17.2 19.1 33.8 0.7 10.9 8.7
Pulp 4 39,418 9,854 9.0 9.0 207.8 -2.5 1.0 3.3 3.0
Financials 46 559,720 12,168 12.1 10.9 21.4 10.8 3.5 NM NM
Foods 14 52,222 3,730 17.9 14.1 89.1 26.2 1.5 7.2 6.3
Beverage 7 180,845 25,835 23.2 20.3 52.2 14.0 3.9 9.9 8.4
Metals/Mining 17 196,553 11,562 12.0 11.1 89.2 16.8 4.6 5.9 5.2
TMT 21 155,569 7,408 17.3 15.4 56.2 25.6 1.9 3.7 3.4
Education 6 15,155 2,526 10.6 11.7 164.6 57.4 3.7 8.6 7.8
Transportation 29 94,861 3,271 15.5 15.7 175.6 26.6 3.0 9.7 8.6
Capital Goods 11 27,178 2,471 17.8 13.9 134.0 26.0 2.8 8.8 7.8
Latam Aggregated 278 1,936,760 6,967 15.1 13.5 69.7 16.0 3.2 5.0 4.5
Source: Company reports, Bloomberg and J.P. Morgan estimates. Priced as of April 2nd, 2018.
Table 3: BZ Real Estate sectors vs. others Brazilian sectors

# of Total Mkt Cap Avg. Mkt P/E EPS Growth (%) Div Yield EV/EBITDA
Sector Companies (US$ mn) Cap (US$ mn) 18e 19e 18e 19e 18e 18e 19e
BZ HB 10 6,534 653 20.2 11.5 84.9 92.4 4.3 9.7 10.1
BZ Malls 5 11,049 2,210 19.2 16.2 64.1 10.5 1.8 12.2 6.3
BZ Properties 1 1,114 1,114 19.7 17.4 -52.1 20.5 1.2 16.4 15.0
BZ Brokers 2 224 112 NM NM. 63.8 98.0 0.0 NM 15.3
Retail 17 65,374 3,846 24.5 20.5 60.0 33.7 1.5 10.7 9.2
Healthcare 11 20,054 1,823 24.9 20.9 33.1 16.3 2.2 11.0 11.4
Energy 5 114,626 22,925 12.2 11.0 183.8 183.8 2.8 6.0 5.2
Utilities 22 68,989 3,136 10.9 9.3 195.0 195.0 7.6 7.1 6.3
Agribusiness 4 3,275 819 9.8 9.9 65.5 39.1 2.4 3.2 2.8
Pulp 2 22,131 11,066 NA NA NA NA NA NA NA
Financials 14 331,868 23,705 11.5 10.4 21.3 21.3 4.7 12.6 11.0
Foods 7 22,255 3,179 16.3 12.4 162.8 30.8 1.2 8.3 7.2
Beverage 1 114,477 114,477 24.6 21.3 33.5 12.9 2.4 10.4 9.5
Metals/Mining 8 89,364 11,171 8.1 8.8 58.1 -8.5 7.7 5.0 5.1
TMT 3 36,279 12,093 17.0 15.2 19.5 11.4 5.4 5.8 5.4
Education 5 12,584 2,517 12.7 10.9 172.4 16.0 4.4 9.7 8.8
Transportation 12 29,885 2,490 9.8 16.4 220.3 49.0 4.2 8.5 7.1
Capital Goods 7 9,597 1,371 19.0 15.2 69.9 21.5 4.2 9.0 7.4
Brazil 136 959,680 7,056 14.2 12.8 73.4 50.8 4.2 9.4 8.3
Source: Company reports, Bloomberg and J.P. Morgan estimates. Priced as of April 2nd, 2018.
(55-11) 4950-6712 05 April 2018
Figure 1: BZ HB historical 12M forward P/E based on consensus

25.0x
P/E Avg 09-Now
20.0x
15.0x
10.0x
5.0x
0.0x
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15
Nov-15
Mar-16
Jul-16
Nov-16
Mar-17
Jul-17
Nov-17
Mar-18
Source: Company reports, Bloomberg and J.P. Morgan estimates. Including Eztec, Even, Direcional, Cyrela, Gafisa, and MRV. As of April-2nd 2018.
Figure 2: BZ HB historical P/BV

2.0x P/BV Avg 09-Now
1.5x
1.0x
0.5x
0.0x
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Source: Company reports, Bloomberg and J.P. Morgan estimates. Including Eztec, Even, Direcional, Cyrela, Gafisa, Rossi, PDG, MRV and Rodobens. As of April-2nd 2018.
Figure 3: BZ HB historical P/NAV

3.5x
P/NAV Avg 07-Now
3.0x
2.5x
2.0x
1.5x
1.0x
0.5x
0.0x
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q12
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: Company reports, Bloomberg and J.P. Morgan estimates. Including Eztec, Even, Direcional, Cyrela, Gafisa, and MRV. As of April-2nd 2018.
10
(55-11) 4950-6712 05 April 2018
Figure 4: ROE Regression based on 2018E ROE

20%
15% Tenda MRV
10% Direcional
5% Eztec Even Cyrela
0%
-5%
Rodobens
-10%
-15%
-20%
Gafisa
-25%
-30%
0.2x 0.4x 0.6x 0.8x 1.0x 1.2x 1.4x 1.6x
Source: J.P. Morgan estimates, Company data.
Figure 5: ROE Regression based on 2019E ROE

18%
16% Tenda
14% MRV
12%
10%
Even Cyrela
8% Direcional Eztec
6%
4% Rodobens
Gafisa
2%
0%
0.2x 0.4x 0.6x 0.8x 1.0x 1.2x 1.4x 1.6x
Figure 6: BZ Malls – 12-month forward P/FFO

25x
P/FFO Avg 10-Now
20x
15x
10x
5x
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Source: Company reports, Bloomberg and J.P. Morgan estimates. Including Aliansce, Sonae Sierra Brasil, BR Malls, Multiplan and Iguatemi. As of April-2nd 2018.
11
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Figure 7: BZ Malls – P/NAV

1.4x
1.2x P/NAV Avg 10-Now
1.0x
0.8x
0.6x
0.4x
0.2x
0.0x
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
Source: Company reports, Bloomberg and J.P. Morgan estimates. Including Aliansce, Sonae Sierra Brasil, BR Malls, Multiplan and Iguatemi. As of April-2nd 2018.
Figure 8: BZ Malls– 12-month forward cap rate

14%
Cap Rate Avg 10-Now
13%
12%
11%
10%
9%
8%
7%
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Source: Company reports, Bloomberg and J.P. Morgan. As of April-2nd 2018.
Figure 9: BR Properties – discount to NAV

0%
-10%
-20%
-30%
-40%
-50%
-60%
Today
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Source: Company reports, Bloomberg and J.P. Morgan. As of April-2nd 2018.
12
(55-11) 4950-6712 05 April 2018
Figure 10: BZ Brokers – P/BV

6.0x
P/BV Avg 11-Now
5.0x
4.0x
3.0x
2.0x
1.0x
0.0x
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Source: Company reports, Bloomberg and J.P. Morgan. Including Lopes and BR brokers. As of April-2nd 2018.
Performance
Table 4: Real Estate price performance
Market Cap Liq 1M Performance 52 Weeks
Company Rating Ticker Price USD mn USD mn 3M YTD 2017 2016 2015 2014 Low High
Homebuilders
MRV Engenharia OW MRVE3 R$16.04 2,151 7,076 6% 7% 40% 26% 26% -11% 29% -4%
Tenda OW TEND3 R$26.00 424 1,404 31% 30% NA NA NA NA 97% -1%
Direcional OW DIRR3 R$5.96 276 872 2% 5% 24% 30% -52% -32% 18% -10%
Cyrela OW CYRE3 R$15.32 1,849 6,124 15% 16% 30% 37% -26% -23% 52% -3%
Even N EVEN3 R$5.05 343 1,178 -13% -12% 55% -10% -18% -33% 36% -21%
EZ Tec N EZTC3 R$22.27 1,110 3,675 1% 3% 64% 29% -34% -25% 46% -13%
Rodobens N RDNI3 R$5.90 78 250 -4% -4% 13% 22% -53% -25% 24% -11%
Gafisa UW GFSA3 R$10.00 135 447 -50% -51% 31% -23% 17% -38% 14% -51%
Rossi UW RSID3 R$6.35 33 109 -13% -12% 166% -16% -81% -67% 13% -28%
PDG Realty UW PDGR3 R$1.86 28 91 -19% -18% 91% -27% -96% -52% 23% -33%
Trisul NC TRIS3 R$5.89 130 430 42% 44% 48% 4% -5% -24% 136% -5%
Tecnisa NC TCSA3 R$1.43 143 391 -32% -31% -4% -11% -24% -57% 0% -51%
Viver NC VIVR3 R$1.59 4 5 -1% 0% 15% -48% -70% -60% 1% -35%
Helbor NC HBOR3 R$1.44 199 371 -28% -27% 33% 1% -62% -39% 0% -47%
CR2 S.A. NC CRDE3 R$1.33 19 64 -8% -10% 6% 4% -25% -30% 13% -19%
Brokers
Lopes Brasil N LPSB3 R$4.83 183 604 -17% -14% 43% 74% -64% -55% 22% -38%
BR Brokers UW BBRK3 R$0.54 42 138 -47% -45% -33% 21% -46% -57% 8% -67%
Malls
BR Malls OW BRML3 R$11.44 3,018 9,960 -8% -10% 23% 40% -26% -4% 3% -25%
Aliansce OW ALSC3 R$18.32 1,122 3,704 1% 2% 25% 35% -28% -10% 39% -6%
Sonae Sierra Brasil OW SSBR3 R$24.00 554 1,834 -4% -5% 50% 6% 0% -9% 27% -16%
Iguatemi N IGTA3 R$38.54 2,056 6,807 -4% -2% 51% 41% -20% 10% 26% -11%
Multiplan N MULT3 R$68.32 4,132 13,681 -5% -4% 22% 56% -12% -5% 15% -13%
JHSF NC JHSF3 R$1.58 251 830 -12% -10% 24% 11% -43% -45% 2% -40%
General Shopping NC GSHP3 R$4.65 98 302 -12% -19% 43% 43% -62% -23% 8% -27%
Parque Arauco N PARAUCO Ch$1,804 2,676 1,605 -6% -5% 30% 35% -3% 23% 8% -11%
IRCP OW IRCP US $44.49 1,401 1,401 -20% -21% 30% 35% 61% 0% 6% -30%
Properties
BR Properties N BRPR3 R$9.11 1,120 3,709 -13% -14% 42% -11% 5% -45% 10% -24%
CCP NC CCPR3 R$11.00 398 1,316 18% 24% -10% 15% -27% -41% 60% -9%
São Carlos NC SCAR3 R$37.55 655 2,168 -13% -13% 75% 10% -29% -12% 31% -14%
Source: Company reports and J.P. Morgan estimates. Bloomberg consensus estimates for NC (not covered) companies. Prices as of April 2nd, 2018
13
(55-11) 4950-6712 05 April 2018
Figure 11: Brazilian Homebuilders market cap

R$ Billions
60
50
40
30
20
10
0
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Source: Company reports, Bloomberg, and J.P. Morgan. As of Mar-22nd 2018.
Figure 12: Shopping Malls market cap

R$ Billions
45
40
35
30
25
20
15
10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Figure 13: Properties market cap

R$ Billions
16
14
12
10
8
6
4 BRPR3 Merge with
One Properties
2
0
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
14
(55-11) 4950-6712 05 April 2018
Figure 14: Brokers market cap

R$ Billions
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Figure 15: Performance of Brazilian homebuilders, malls, properties and brokers since 2009 (Jan 11 = 100)
300
BZ Brokers BZ HB BZ Malls Properties
250
200
150
100
50
0
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Source: Bloomberg, and J.P. Morgan. Brokers include Lopes and BR Brokers. HBs include Eztec, Even, Direcional, Cyrela, Gafisa, MRV and Rodobens. Malls include BR Malls, Multiplan,
Iguatemi, Aliansce and Sonae Sierra Brasil. Properties include BR Properties, São Carlos and CCP. As of Mar 22nd 2018.
Figure 16: IBOV (Brazilian Equities Index) vs. IMOB (Brazilian Real Estate Index) – Since 2008
(Jan 08 = 100)
160
140
120
100
80
60
40
20
IBOV IMOB
0
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Source: Bloomberg and J.P. Morgan. As of Mar 22nd 2018.
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(55-11) 4950-6712 05 April 2018
Figure 17: Stock Performance since IPOs

500%
400%
300%
200%
100%
0%
-100%
VIVR3
PDGR3
BBRK3
CRDE3
GFSA3
TCSA3
RSID3
JHSF3
GSHP3
RDNI3
LPSB3
EVEN3
DIRR3
TRIS3
HBOR3
SSBR3
BRPR3
CCPR3
ALSC3
MRVE3
SCAR3
BRML3
MULT3
IGTA3
EZTC3
CYRE3
Source: Bloomberg and J.P. Morgan. As of March 22nd 2018.
Figure 18: Last 12 months performance

125%
100%
75%
50%
25%
0%
-25%
-50%
-75%
-100%
IMOBBV
IBOV
BBRK3
TCSA3
JHSF3
GFSA3
HBOR3
PDGR3
VIVR3
RSID3
GSHP3
BRML3
CCPR3
BRPR3
CRDE3
RDNI3
MULT3
SSBR3
DIRR3
MRVE3
EVEN3
LPSB3
CYRE3
EZTC3
IGTA3
ALSC3
SCAR3
TRIS3
Source: Bloomberg and J.P. Morgan. Performance based on last twelve months of trade as of. March 28st 2018.
Figure 19: 2017 Share Performance

200%
150%
100%
50%
0%
-50%
IBOV
IMOBBV
BBRK3
CCPR3
TCSA3
CRDE3
RDNI3
VIVR3
MULT3
BRML3
DIRR3
JHSF3
ALSC3
CYRE3
GFSA3
HBOR3
BRPR3
GSHP3
LPSB3
MRVE3
TRIS3
SSBR3
IGTA3
EVEN3
EZTC3
SCAR3
PDGR3
RSID3
Source: Bloomberg and J.P. Morgan.
16
(55-11) 4950-6712 05 April 2018

50%
30%
10%
-10%
-30%
-50%
-70%
IMOBBV
IBOV
VIVR3
PDGR3
GFSA3
RSID3
BRPR3
EVEN3
TCSA3
CRDE3
HBOR3
TRIS3
SSBR3
SCAR3
JHSF3
CCPR3
BBRK3
RDNI3
MRVE3
ALSC3
DIRR3
EZTC3
BRML3
CYRE3
GSHP3
IGTA3
MULT3
LPSB3

40%
20%
0%
-20%
-40%
-60%
-80%
IMOBBV
IBOV
PDGR3
RSID3
VIVR3
LPSB3
HBOR3
GSHP3
DIRR3
RDNI3
BBRK3
JHSF3
EZTC3
ALSC3
BRML3
CYRE3
SCAR3
CRDE3
TCSA3
IGTA3
EVEN3
MULT3
TRIS3
SSBR3
CCPR3
BRPR3
GFSA3
MRVE3
Figure 22: BZ Homebuilders performance (Top-5 liquidity) – Since 2010 (Jan 10 = 100)
600
CYRE3 MRVE3 EVEN3 EZTC3 DIRR3
500
400
300
200
100
0
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Source: J.P. Morgan and Bloomberg. As of Mar 22nd 2018.
17
(55-11) 4950-6712 05 April 2018
Figure 23: Shopping Malls performance – Since 2010 (Jan 10 = 100)

350
BRML3 MULT3 IGTA3 ALSC3 SSBR3
300
250
200
150
100
50
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Figure 24: Properties performance – Since 2010 (Mar 10 = 100)

350
BRPR CCPR SCAR
300
250
200
150
100
50
0
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Figure 25: Brokers performance – Since 2010 (Jan 10 = 100)

250
LPSB BBRK
200
150
100
50
0
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
18
(55-11) 4950-6712 05 April 2018
Heatmap – Homebuilders
Figure 26: BZ HB Heatmap
% yoy Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Last #
Presales Units ('000) 12M ('000)
SPRM - Secovi -15% -22% -26% -26% -28% -30% -27% -24% -24% -23% -26% -28% -28% -24% -16% -20% -20% -15% -13% -3% 12% 23% - - 31.4
RJ - ADEMI -6% -1% 2% 3% 0% 1% -1% -2% 10% 13% 14% 13% 4% 3% 1% -3% -4% 0% 3% - - - - - 9.7
SP - Secovi -1% -6% -12% -20% -22% -24% -17% -16% -18% -20% -22% -23% -21% -17% -6% -5% -1% 7% 5% 6% 23% 46% - - 23.6
ABRAINC -16% -16% -14% -15% -14% -14% -13% -11% -10% -8% -6% -5% -5% -3% -2% -1% -1% 1% 3% 5% 5% 6% - - 109.4
Launches Units ('000) 12M ('000)
SPMR - Secovi -32% -39% -45% -40% -42% -42% -39% -35% -30% -25% -28% -28% -23% -18% -7% -18% -15% -11% -8% 0% 14% 39% - - 36.6
RJ - ADEMI -57% -53% -48% -47% -47% -40% -43% -33% -25% 9% 5% 12% 14% 0% 10% 2% -3% -5% 10% - - - - - 7.0
SP - Secovi -30% -39% -43% -42% -41% -42% -31% -28% -20% -18% -24% -21% -15% -3% 10% 5% 4% 9% 3% 1% 19% 63% - - 28.7
ABRAINC -6% -8% 6% -1% 1% 4% -1% 1% 10% 9% 9% 7% 3% 8% 2% 3% 7% 5% 12% 16% 9% 18% - - 82.5
SoS (%) 12M (%)
SPRM - Secovi (1.6)pp (1.9)pp (2.0)pp (1.8)pp (1.9)pp (1.9)pp (1.5)pp (1.1)pp (0.8)pp (0.6)pp (0.8)pp (1.0)pp (0.8)pp (0.5)pp (0.1)pp (0.2)pp (0.0)pp 0.4pp 0.6pp 1.2pp 1.9pp 2.4pp - - 7.7
RJ - ADEMI (0.4)pp (0.1)pp 0.0pp 0.1pp (0.1)pp 0.0pp (0.1)pp (0.1)pp 0.5pp 0.6pp 0.7pp 0.7pp 0.4pp 0.3pp 0.4pp 0.2pp 0.2pp 0.5pp 0.8pp - - - - - 6.9
SP - Secovi (1.2)pp (1.2)pp (1.2)pp (1.1)pp (1.4)pp (1.5)pp (1.2)pp (0.6)pp (0.7)pp (0.7)pp (0.7)pp (0.7)pp (0.7)pp (0.6)pp 0.1pp 0.3pp 0.6pp 1.0pp 1.3pp 1.5pp 2.1pp 3.2pp - - 8.4
ABRAINC (1.3)pp (1.4)pp (1.2)pp (1.4)pp (1.4)pp (1.4)pp (1.4)pp (1.2)pp (1.2)pp (1.1)pp (0.9)pp (0.9)pp (0.8)pp (0.7)pp (0.6)pp (0.5)pp (0.5)pp (0.3)pp (0.1)pp 0.1pp 0.2pp 0.3pp - - 7.4
Inventory Supply (Months) #
SPMR - Secovi 8% 13% 18% 18% 22% 25% 20% 14% 12% 10% 15% 18% 18% 11% -1% -1% -2% -10% -13% -20% -32% -30% - - 11.8
RJ - ADEMI 2% 2% 2% 2% 1% 1% 1% 1% 2% 3% 2% 1% -1% -3% -4% -6% -8% -8% -9% - - - - - 11.7
SP - Secovi -6% -3% 1% 14% 18% 20% 13% 12% 16% 14% 12% 12% 13% 9% -4% -9% -15% -23% -23% -27% -34% -36% - - 11.8
ABRAINC 35% 34% 40% 38% 37% 40% 34% 27% 27% 18% 13% 11% 5% 2% -4% -8% -10% -17% -17% -18% -21% -17% - - 32.1
Prices Change
Home price - Broad 0.53% 0.21% 0.11% -0.02% -0.09% -0.03% 0.22% 0.33% 0.45% 0.57% 0.65% 0.84% 0.77% 0.69% 0.46% 0.31% 0.10% -0.07% -0.26% -0.37% -0.41% -0.53% -0.56% -0.72% 7,549
Home price - Capitals -0.18% -0.50% -0.62% -0.73% -0.75% -0.69% -0.49% -0.25% -0.05% 0.15% 0.28% 0.51% 0.53% 0.53% 0.36% 0.16% -0.09% -0.20% -0.36% -0.50% -0.54% -0.74% -0.82% -1.07% 8,178
Rents price -4.4% -4.8% -5.1% -5.2% -5.2% -4.9% -4.3% -3.8% -3.2% -3.2% -2.9% -2.8% -2.5% -2.2% -1.7% -1.0% -0.5% -0.5% -0.7% -0.8% -0.8% -0.7% -0.5% - 28.1
Rental yield (bps) (0.32)bps (0.25)bps (0.29)bps (0.28)bps (0.28)bps (0.26)bps (0.23)bps (0.21)bps (0.19)bps (0.20)bps (0.26)bps (0.27)bps (0.25)bps (0.25)bps (0.19)bps (0.15)bps (0.12)bps (0.11)bps (0.11)bps (0.11)bps (0.11)bps (0.09)bps 0.03bps - 0.36%
Funding #
Total Credit - R$bn 3.3% 2.6% 2.1% 0.9% 0.2% -0.7% -1.7% -2.0% -2.3% -3.5% -3.9% -3.5% -2.6% -2.2% -2.6% -1.7% -2.0% -2.0% -1.9% -1.2% -1.1% -0.5% -0.3% - 3,066
Saving Acc. Bal - R$bn (SBPE) -3.0% -3.2% -2.9% -2.1% -1.8% -1.1% -0.4% -0.2% 0.5% 1.3% 1.5% 2.8% 3.1% 4.2% 5.0% 6.5% 6.8% 7.7% 8.6% 8.5% 8.5% 9.3% 9.9% 9.7% 561
Mort. Disb. - Units ('000) -47% -52% -50% -50% -50% -50% -50% -48% -46% -42% -36% -34% -31% -24% -25% -25% -22% -18% -12% -10% -10% -12% -11% - 178
Mort. Disb. - R$bn (Abecip)* -44% -49% -49% -49% -49% -49% -49% -47% -44% -38% -33% -31% -27% -20% -18% -17% -12% -8% -3% -1% -2% -7% -5% - 44
Mort. Disb. - R$bn (Central Bank)** -31% -35% -34% -34% -34% -33% -33% -30% -28% -24% -18% -16% -12% -8% -6% -4% 0% 1% 4% 6% 5% -2% -2% - 82
Mort. Portfolio - R$bn 13% 11% 10% 10% 9% 9% 9% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 6% 6% 7% 7% 6% 5% - 566
Mortgages - NPL 16bps 19bps 25bps 2bps 3bps 5bps 11bps (3)bps (9)bps (22)bps (14)bps 47bps 22bps 16bps 53bps 33bps 31bps 25bps 24bps 15bps (9)bps - - - 2.5%
Mort. to Corp. - R$bn -31% -29% -26% -24% -23% -25% -24% -23% -24% -21% -16% -16% -21% -27% -32% -41% -46% -46% -50% -51% -51% -50% -52% 9
CRIs Portoflio - R$bn 9% 4% 3% 11% 11% 11% 12% 12% 12% 21% 20% 19% 19% 23% 18% 10% 10% 12% 11% 10% 10% 0% 0% -1% 72.1
LCI Portoflio - R$bn 13.5% 9.3% 5.2% 3.7% 4.6% 3.4% 3.4% 1.5% -0.6% -3.6% -5.5% -5.9% -6.3% -5.3% -3.5% -4.5% -5.6% -6.4% -5.8% 3.2% 3.5% 0.0% 1.4% -1.0% 179.8
Economic indexes #
Wage mass - R$bn 5.4% 4.3% 5.1% 3.4% 3.8% 4.8% 4.5% 4.7% 5.2% 5.9% 5.5% 5.7% 5.2% 5.4% 4.6% 5.6% 5.9% 5.4% 6.2% 6.5% 6.9% 6.1% 6.2% - 192.7
Affordability (index)* 5.5% 4.7% 4.4% 3.9% 3.4% 3.0% 2.7% 2.0% 1.0% 0.7% 0.4% -1.6% -3.0% -4.7% -6.2% -8.3% -10.2% -12.3% -14.4% -16.0% -18.0% -20.3% -22.3% - 0.62
Unemployment 2.8 pp 3.0 pp 3.2 pp 3.1 pp 3.0 pp 3.0 pp 3.1 pp 2.9 pp 2.9 pp 2.9 pp 3.0 pp 3.1 pp 3.0 pp 2.8 pp 2.4 pp 2.1 pp 1.7 pp 1.2 pp 0.8 pp 0.6 pp 0.4 pp 0.1 pp (0.2)pp - 12.2
INCC - Inflation 0.3 pp 0.1 pp 0.8 pp (0.2)pp 0.4 pp (0.9)pp (0.7)pp (0.9)pp (1.3)pp (0.9)pp (0.5)pp (0.5)pp (1.4)pp (1.7)pp (1.5)pp (1.3)pp (2.6)pp (1.9)pp (2.3)pp (2.2)pp (1.8)pp (2.3)pp (2.3)pp (2.7)pp 3.6
Consumer Confidence -11% -13% -7% -1% 9% 13% 22% 20% 16% 13% 19% 16% 25% 26% 20% 14% 8% 3% 5% 8% 12% 21% 12% 8% 87.4
Radar FIPE-ABRAINC** -38% -35% -30% -27% -23% -21% -21% -20% -19% -17% -17% -10% 0% 11% 22% 33% 43% 52% 59% 61% 64% 62% - - 4.4
Sector indexes #
Civil construction jobs (mn) -12.1% -12.6% -13.1% -13.4% -13.8% -14.0% -14.1% -14.1% -14.1% -14.1% -14.1% -14% -14% -14% -14% -14% -13% -13% -12% -12% -11% -11% - - 29.5
Cement Consumption (ton) -11.3% -11.2% -11.3% -12.3% -12.1% -12.5% -12.4% -12.8% -11.8% -11.3% -10.0% -10.9% -10.0% -10.6% -10.1% -9.9% -9.9% -8.8% -8.0% -6.4% -6.4% -6.4% -6.2% - 53.8
Const. Material sales (index) -0.4% 0.0% 0.1% -1.5% -3.3% -4.8% -6.0% -6.7% -5.5% -5.4% -6.1% -6.9% -7.3% -8.0% -8.4% -9.1% -9.8% -10.8% -11.4% -12.3% -13.9% -14.3% -14.1% - 70.1
Performance #
Stock Perf. (Mkt cap) - R$bn -3% -6% -4% 8% 35% 43% 45% 34% 23% 22% 50% 34% 17% 22% 12% 9% 2% 12% 22% 10% 23% 33% 14% 11% 20.1
EPS Cons. Cur. Year - R$ -31% -30% -32% -30% -36% -34% -30% -36% 7% 3% -7% -3% 7% -20% -30% -28% -35% -31% -37% -34% -34% -33% -30% -32% 0.80
Source: J.P. Morgan estimates, Company data, Brazil’s Central Bank, Secovi, Fipe Zap, SNIC, Sinduscon, ADEMI and ABRAINC. For EPS Consensus and Stock performance we are using data for the companies under our coverage. Housing
prices changes are nominal. *Represents the change in Monthly installment burden. **Radar FIPE-ABRAINC is composed by 12 indicators divided in 4 categories; Macro Economic, Mortgages, Demand and Sector data.
19
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Heatmap – Shopping Malls

Figure 27: BZ Malls Heatmap
Change yoy % or p.p. May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Last #
Retail sales
Aggregated - IBGE (index) -9.0% -4.9% -5.6% -5.5% -5.7% -8.1% -3.8% -4.9% -1.2% -3.7% -3.2% 1.7% 2.6% 2.9% 3.1% 3.6% 6.2% 2.6% 6.0% 3.9% 3.2% - 90.9
Supermarket (index) -5.4% -1.7% -1.1% -2.2% -2.4% -6.4% -1.7% -2.9% 0.3% -0.7% -7.0% 3.0% 0.0% 0.8% 0.3% 1.7% 5.7% 1.5% 5.6% 6.1% 3.1% - 97.4
Apparel (index) -13.6% -3.8% -14.1% -10.5% -10.2% -12.2% -9.8% -8.8% -0.8% 3.6% 11.6% 10.9% 5.1% 4.2% 15.0% 9.3% 12.5% 4.9% 8.9% 6.9% 0.3% - 72.2
Furniture and Elect. (index) -15.2% -10.6% -10.7% -9.4% -13.3% -13.5% -7.9% -8.8% 3.9% -6.0% 10.5% -0.1% 14.0% 12.2% 12.8% 16.6% 16.6% 10.0% 15.6% 8.4% 5.3% - 86.2
Office eq. (index) -14.4% -18.3% -13.4% -8.9% -12.1% -6.6% -8.9% -1.2% -6.7% -14.0% -12.3% 4.4% 12.9% 5.1% 11.3% -2.7% -3.0% 5.2% -6.9% -17.9% 4.2% - 78.7
Paper related (index) -24.4% -18.3% -17.0% -15.1% -18.0% -17.3% -11.5% -12.5% -9.6% -7.0% 5.2% -3.3% -0.8% 0.7% 0.2% -4.3% -6.5% -2.8% -2.2% -9.3% -7.3% - 113.6
Personnal itens (index) -15.5% -8.3% -11.5% -10.8% -8.9% -7.6% -0.4% -4.8% -3.1% -7.7% -5.3% 3.5% 3.0% 4.4% 4.2% 6.3% 10.7% 3.2% 7.9% -0.6% 10.4% - 92.0
Serasa retail sales (index) -5.5% -6.5% -7.2% -7.6% -7.9% -7.7% -7.2% -6.6% -6.1% -5.9% -5.3% -4.5% -3.8% -3.2% -2.6% -2.0% -1.2% -0.3% 0.4% 1.1% 1.9% 2.6% 85.2
Cielo Retail (index) -4.5% -3.3% -3.9% -5.1% -5.1% -5.1% -4.9% -5.6% -4.3% -1.1% -2.2% 0.3% -1.6% -0.6% 0.8% 1.1% 0.7% 0.7% 2.6% 1.7% 1.9% 1.5% -
Credit Demand
Total Credit Concession (R$bn) 2.1% 0.9% 0.2% -0.7% -1.7% -2.0% -2.3% -3.5% -3.9% -3.5% -2.6% -2.2% -2.6% -1.7% -2.0% -2.0% -1.9% -1.2% -1.1% -0.5% -0.3% - 3,066
Credit Concession to Indv. (R$bn) 0.0% -1.1% -4.0% 5.2% -1.9% 3.0% 4.1% 1.0% 10.7% -5.7% 14.2% 3.0% 13.7% 9.1% 11.2% 6.9% 9.6% 13.6% 11.6% 8.7% 15.4% - 154.3
Consumer - Serasa (index) 0.5% 0.3% -0.8% -0.5% 0.0% 1.6% 3.2% 3.7% 4.0% 3.1% 3.7% 2.7% 3.1% 3.1% 4.7% 5.4% 5.8% 5.3% 4.0% 4.9% 6.5% 7.8% 126.3
Income <R$500 (index) -2.7% -3.0% -4.3% -4.0% -3.4% -1.5% 0.3% 1.1% 1.7% 1.5% 2.6% 2.0% 2.8% 3.4% 5.9% 8.0% 10.3% 11.0% 11.8% 15.2% 18.8% 21.3% 171.7
Income R$0.5-1,0k (index) 0.2% -0.1% -1.4% -1.0% -0.4% 1.3% 3.1% 3.7% 4.0% 3.3% 4.0% 3.1% 3.6% 3.9% 5.7% 6.2% 6.3% 5.4% 3.9% 4.6% 6.0% 6.9% 125.7
Income R$1.0-2.0k (index) 1.3% 1.1% 0.0% 0.3% 0.8% 2.3% 3.8% 4.3% 4.5% 3.5% 3.8% 2.7% 3.0% 2.9% 4.2% 4.8% 5.0% 4.2% 2.7% 3.2% 4.5% 5.8% 120.9
Income R$2.0-5.0k (index) 1.5% 1.4% 0.4% 0.5% 0.9% 2.4% 3.7% 4.1% 4.2% 3.0% 3.2% 2.0% 2.3% 2.0% 3.2% 3.8% 4.0% 4.4% 3.0% 3.6% 4.9% 6.3% 116.9
Income R$5.0-10.0k (index) 1.5% 1.4% 0.4% 0.6% 1.0% 2.4% 3.6% 3.9% 4.0% 2.7% 2.9% 1.6% 1.8% 1.4% 2.5% 3.1% 3.3% 4.7% 3.4% 4.1% 5.5% 7.0% 117.8
Income >10.0k (index) 1.3% 1.2% 0.0% 0.3% 0.7% 2.1% 3.3% 3.6% 3.8% 2.6% 2.9% 1.7% 2.0% 1.7% 3.1% 3.6% 3.7% 4.9% 3.6% 4.4% 5.9% 7.5% 120.5
Economic indexes
Selic (%) 1.0 pp 0.5 pp 0.0 pp 0.0 pp 0.0 pp (0.3)pp (0.5)pp (0.5)pp (1.3)pp (2.0)pp (2.0)pp (3.0)pp (4.0)pp (4.0)pp (5.0)pp (5.0)pp (6.0)pp (6.5)pp (6.3)pp (6.8)pp (6.0)pp (5.5)pp 6.75%
12M Fwd. real int. rate (%) (0.0)pp (0.4)pp (0.0)pp (1.2)pp (2.6)pp (1.9)pp (1.6)pp (2.5)pp (1.7)pp (1.8)pp (1.7)pp (1.6)pp (2.0)pp (2.3)pp (3.3)pp (3.7)pp (3.3)pp (3.8)pp (3.9)pp (3.6)pp (3.2)pp (3.1)pp 2.5%
5Y Fwd. real int. rate (%) (0.1)pp (0.2)pp (0.4)pp (1.1)pp (1.5)pp (1.3)pp (1.3)pp (1.3)pp (1.2)pp (1.1)pp (1.3)pp (0.8)pp (0.7)pp (0.8)pp (1.4)pp (1.6)pp (1.5)pp (1.4)pp (1.3)pp (1.1)pp (1.3)pp (1.0)pp 4.5%
10Y Fwd. real int. rate (%) 0.0 pp (0.2)pp (0.6)pp (1.3)pp (1.6)pp (1.5)pp (1.3)pp (1.5)pp (1.6)pp (1.7)pp (1.4)pp (0.7)pp (0.6)pp (0.6)pp (0.9)pp (1.0)pp (1.0)pp (0.9)pp (0.9)pp (0.8)pp (1.0)pp (0.5)pp 4.8%
Country risk (points) 37% 15% 8% -9% -28% -24% -22% -37% -44% -43% -34% -32% -30% -17% -21% -12% -23% -22% -28% -27% -21% -17% 236
IPCA (%) 0.9 pp (0.1)pp (0.8)pp (0.6)pp (1.0)pp (2.1)pp (3.5)pp (4.4)pp (5.4)pp (5.6)pp (4.8)pp (5.2)pp (5.7)pp (5.8)pp (6.0)pp (6.5)pp (5.9)pp (5.2)pp (4.2)pp (3.3)pp (2.5)pp (1.9)pp 2.8%
IGPM (%) 7.0 pp 6.6 pp 4.7 pp 3.9 pp 2.3 pp (1.3)pp (3.6)pp (3.4)pp (4.3)pp (6.7)pp (6.7)pp (7.3)pp (9.5)pp (13.0)pp (13.3)pp (13.2)pp (12.1)pp (10.2)pp (8.0)pp (7.7)pp (7.1)pp (5.8)pp -0.4%
Wage mass (R$bn) 5.1% 3.4% 3.8% 4.8% 4.5% 4.7% 5.2% 5.9% 5.5% 5.7% 5.2% 5.4% 4.6% 5.6% 5.9% 5.4% 6.2% 6.5% 6.9% 6.1% 6.2% - 50.2
Unemployment (%) 3.1 pp 3.0 pp 3.0 pp 3.1 pp 2.9 pp 2.9 pp 2.9 pp 3.0 pp 3.1 pp 3.0 pp 2.8 pp 2.4 pp 2.1 pp 1.7 pp 1.2 pp 0.8 pp 0.6 pp 0.4 pp 0.1 pp (0.2)pp (0.4)pp - 12.2
Traffic
Visitors - IVSC index -6.8% -1.5% -2.2% -1.8% -2.8% -2.3% -1.2% -1.5% 0.3% 1.0% -0.5% 1.7% -1.9% 2.2% 2.6% 1.2% 1.6% 0.4% 5.8% 3.5% 2.4% 4.5% -
Visitors - IBOPE -1.0% 0.3% -2.5% -2.5% -3.5% -3.5% -0.2% -2.5% -0.7% -1.3% 0.6% 3.4% 0.1% 0.0% 1.6% 1.6% 4.4% 1.5% 3.0% 3.8% 3.8% 0.1% -
Other indexes
Late payments (15-90 days) 0.2 pp (0.1)pp (0.0)pp 0.0 pp 0.1 pp (0.4)pp (0.3)pp (0.6)pp (0.4)pp (0.6)pp (0.6)pp (0.4)pp (0.6)pp (0.6)pp (0.6)pp (0.8)pp (1.2)pp (0.9)pp (0.6)pp (0.3)pp (0.6)pp - 4.7
Late payments (>90 days) (0.2)pp 0.1 pp (0.2)pp (0.3)pp (0.0)pp (0.2)pp (0.7)pp (0.9)pp (0.8)pp (0.9)pp (0.8)pp (0.8)pp (0.7)pp (0.4)pp 0.1 pp (0.3)pp (0.6)pp (0.6)pp (0.2)pp (0.3)pp (0.0)pp - 2.3
Chapter 11 request (12M) 12.1% 11.2% 10.1% 6.4% 8.0% 6.6% 3.6% 3.9% 4.1% 2.1% 1.3% 1.4% 3.0% -2.3% -4.8% -3.4% -4.6% -3.7% -5.8% -7.8% -8.0% -10.9% 1,650
Bankrupcy request (12M) 90.2% 89.6% 79.6% 66.8% 66.9% 66.4% 57.0% 44.8% 41.3% 27.2% 18.0% 7.7% 1.6% -5.4% -10.2% -8.1% -20.6% -22.1% -22.5% -23.8% -24.2% -21.6% 1,418
Consumer confidence (index) -7.0% -1.4% 8.5% 12.6% 21.6% 20.2% 16.4% 12.6% 19.1% 16.5% 25.4% 25.9% 20.4% 13.6% 7.7% 3.3% 5.3% 7.5% 12.3% 20.9% 12.0% 8.3% 87.4
Performance
Stock Perf. (Mkt Cap) (R$bn) 0.1% 16.0% 31.8% 39.1% 47.9% 48.3% 28.3% 47.2% 54.5% 44.0% 33.1% 18.8% 31.7% 21.6% 25.1% 40.6% 39.0% 28.1% 36.0% 37.4% 27.1% 16.9% 36.9
Consensus EPS (R$) -16.3% -15.4% -14.0% -13.0% -14.2% -18.3% -15.9% -19.8% -1.1% 2.7% 10.9% 8.9% 6.8% 3.2% 5.0% 0.7% -0.6% 4.7% 1.3% 7.4% 26.3% 24.5% 1.10
Source: J.P. Morgan estimates, Company data, IBGE, Serasa Experience, Cielo, Brazil Central Bank, IVSC index, Abrasce and Bloomberg.
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(55-11) 4950-6712 05 April 2018
Macroeconomic data
Figure 28: Quarterly GDP Growth – YoY Change
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Source: Bloomberg.
Figure 29: Inflation Indexes – YoY Change

35%
INCC IPCA IGPM
30%
25%
20%
15%
10%
5%
0%
-5%
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Source: Bloomberg.
Figure 30: Target Selic Rate

In percentage (%)
40
35
30
25
20
15
10
5
Mar-99
Nov-99
Jul-00
Mar-01
Nov-01
Jul-02
Mar-03
Nov-03
Jul-04
Mar-05
Nov-05
Jul-06
Mar-07
Nov-07
Jul-08
Mar-09
Nov-09
Jul-10
Mar-11
Nov-11
Jul-12
Mar-13
Nov-13
Jul-14
Mar-15
Nov-15
Jul-16
Mar-17
Nov-17
Source: Bloomberg.
21
22
25
30
35
40
45
50
55
5%
7%
9%
11%
13%
15%
1,200
1,400
1,600
1,800
2,000
2,200
In Reais
Jan-06
Mar-12 Mar-12
May-06
As % of GDP
May-12
Marcelo Motta
May-12
Unemployment
Source: Bloomberg.
Sep-06
Jul-12
(55-11) 4950-6712
Jul-12
Jan-07
Sep-12 Sep-12
May-07

Nov-12 Nov-12
Sep-07
Figure 31: Brazil – Net debt
Jan-13 Jan-13
Jan-08
Mar-13 Mar-13
May-08
May-13 May-13
Sep-08
Wage mass (R$bn)

Jul-13
Jul-13
Jan-09
Sep-13
Sep-13
Nov-13 May-09
Figure 32: Wage Mass vs. Unemployment Rate

Nov-13
Jan-14 Sep-09
Source: IBGE. Considering new methodology which started in 2012.

Jan-14
Mar-14 Jan-10
Mar-14 May-10
05 April 2018
May-14
Figure 33: Monthly Average Income – Trailing 12 Months

May-14 Sep-10
Jul-14
Jul-14 Jan-11
Sep-14
Sep-14
Unemployment rate
Nov-14 May-11
Nov-14 Sep-11
Jan-15
Jan-15
Mar-15 Jan-12
Mar-15 May-12
May-15
May-15 Jul-15 Sep-12
Jul-15 Sep-15 Jan-13
Sep-15 Nov-15 May-13
Nov-15 Jan-16 Sep-13
Jan-16 Mar-16 Jan-14
Mar-16 May-16 May-14
Jan-17 Mar-17 Jan-16
Mar-17 May-17 May-16
Jan-18
Wage Mass R$ bn
Jan-18
120
130
140
150
160
170
180
190
200
(55-11) 4950-6712 05 April 2018
Figure 34: Quarterly Consumer Confidence – CNI

In points
125
120
115
110
105
100
95
90
85
Mar-99
Nov-99
Jul-00
Mar-01
Nov-01
Jul-02
Mar-03
Nov-03
Jul-04
Mar-05
Nov-05
Jul-06
Mar-07
Nov-07
Jul-08
Mar-09
Nov-09
Jul-10
Mar-11
Nov-11
Jul-12
Mar-13
Nov-13
Jul-14
Mar-15
Nov-15
Jul-16
Mar-17
Nov-17
Source: Bloomberg, and J.P. Morgan.
Figure 35: Selic vs TR and IPCA and TJLP

In percentage per year
16
IPCA Selic TR TJLP
14
12
10
8
6
4
2
0
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
Source: J.P. Morgan, company data.
Table 5: Brazil Macro Assumptions

1Q18 2Q18 3Q18 4Q18 2017 2018e 2019e
GDP – BZL 1.7% 2.4% 3.4% 4.4% 1.0% 3.0% 2.5%
Inflation – IPCA 2.8% 3.1% 3.5% 3.5% 3.0% 3.6% 4.2%
IGPM -0.1% 3.1% 5.2% 5.4% -0.5% 4.9% 4.5%
FX Rate – EOP 3.25 3.20 3.20 3.20 3.31 3.20 3.30
FX Rate – AVG 3.28 3.23 3.20 3.20 3.20 3.22 3.26
% devaluation (appreciation) – EOP -2% -2% 0% 0% 2% -3% 3%
% devaluation (appreciation) – AVG 1% -2% -1% 0% -7% 1% 1%
SELIC rate – EOP 6.50% 6.50% 6.50% 6.50% 7.00% 6.50% 8.25%
SELIC rate – AVG 6.75% 6.50% 6.50% 6.50% 9.90% 6.56% 7.75%
Source: J.P. Morgan estimates. As of Mar-2018.
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(55-11) 4950-6712 05 April 2018
Share on Indexes & Liquidity

Despite a small increase of 0.1pp in IBOV in 2018 vs 2017, helped by the inclusion
of Iguatemi in the index, the Real Estate market share on IBOV remains small at
2.1%, vs a peak of 11.7% in 2012. Currently, BR Malls, Multiplan, Iguatemi, MRV
and Cyrela are the only 5 companies in the index, with weights of 0.8%, 0.5%, 0.3%,
0.3% and 0.3%, respectively, ranked 30th, 42nd, 56th, 50th and 55th among the 61
companies in the IBOV.
Table 6: Real Estate weight in Bovespa Index since 2008

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Change 12-18
Real Estate 1.8% 2.8% 8.7% 11.7% 11.1% 5.9% 2.6% 1.7% 2.0% 2.1% -9.7pp
Cyrela 0.8% 1.2% 1.7% 2.0% 1.5% 0.7% 0.3% 0.3% 0.3% 0.3% -1.6pp
MRV - - 1.4% 1.8% 1.8% 0.7% 0.2% 0.3% 0.4% 0.3% -1.4pp
Gafisa 0.7% 1.0% 1.5% 1.9% 1.6% 0.6% 0.1% - - - NM
Rossi 0.3% 0.6% 1.0% 1.3% 1.1% 0.4% - - - - NM
PDG - - 2.4% 3.1% 3.1% 1.0% 0.1% - - - NM
Even - - - - - 0.3% 0.1% - - - NM
Brookfield - - 0.7% 0.8% 0.8% 0.2% - - - - NM
BR Malls - - - 1.0% 1.2% 1.1% 0.9% 0.7% 0.8% 0.8% -0.2pp
Multiplan - - - - - - 0.4% 0.4% 0.5% 0.5% NM
Iguatemi - - - - - - - - - 0.3% NM
BR Properties - - - - - 0.8% 0.4% - - - NM
Commodities 43.5% 50.7% 47.2% 40.8% 37.7% 33.0% 20.8% 19.8% 23.9% 28.0% -16.8pp
Utilities 16.6% 11.7% 10.2% 9.5% 12.7% 10.8% 9.7% 9.9% 9.3% 4.2% -0.2pp
Domestics 15.8% 14.3% 14.8% 17.9% 18.6% 23.4% 30.1% 33.5% 27.2% 29.1% 9.3pp
Financials 22.3% 20.5% 19.1% 20.2% 19.9% 27.0% 36.7% 35.1% 37.6% 36.6% 17.4pp
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Bloomberg and Ibovespa.
Figure 36: The sector has 5 companies in the IBOV with a total weight of 2.1% in Jan-2018 vs. a peak of 12% five years ago
9
Weight (%) # of companies 8
7 7
6
5
4 4
3 3 11.7 11.1
2
8.7
5.9
1.8 2.8 2.6 1.7 2.0 2.1
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14* Jan-15 Jan-16 Jan-17 Jan-18
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IMOB Index
The IMOB Index (IMOBBV Index on BBG) was created by BM&F BOVESPA to
measure the performance of the real estate sector in Brazil. It is composed of real
estate developers, property companies (both commercial and shopping) and
brokerage companies. As of Feb-18, BR Malls is the company with highest share in
IMOB at 19.4%, closely followed by Multiplan with a 19.2% stake.
Table 7: IMOB Index – Composition and stock weight

% Weight % Weight
Company Ticker in Ibovespa in the IMOB Index
BR Malls BRML3 0.8 19.4
Multiplan MULT3 0.5 19.2
MRV MRVE3 0.3 13.0
Cyrela CYRE3 0.3 11.0
Iguatemi IGTA3 0.3 10.7
Aliansce ALSC3 - 5.3
Ez Tec EZTC3 - 3.9
Even EVEN3 - 3.7
Tenda TEND3 - 3.6
BR Properties BRPR3 - 3.6
Gafisa GFSA3 - 2.3
Direcional DIRR3 - 1.4
Helbor HBOR3 - 1.1
Tecnisa TCSA3 - 1.0
JHSF JHSF3 - 0.7
Rossi RSID3 - 0.3
Total 2.1 100.0
Source: Bovespa and J.P. Morgan. Based on Feb-2018.
Liquidity started to improve in the past year

Homebuilders’ and Malls’ aggregate daily traded volume is close to US$40mn and
US$70mn, respectively, in the last 90 days, well below their peaks of almost
US$300mn during 2011 for Homebuilders and almost US$100mn for Malls. This
decline reflects the challenges faced by the sector over the past years. The most
liquid names are BRML, MULT, IGTA, MRVE and CYRE, trading ~US$10-25mn
per day. As can be seen in the chart below, most companies reported an increase in
average daily liquidity in 2017 vs 2016.
Figure 37: Annual average traded volume – Currently BR Malls, Multiplan, MRV and Cyrela are the most liquid names in the sector
US$ millions
70
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
60
50
40
30
20
10
0
BRML MULT CYRE MRVE IGTA EVEN GFSA* EZTC DIRR TEND RSID PDGR
Source: Bloomberg and J.P. Morgan. *Including ADRs.
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Figure 38: Homebuilders 90-day average liquidity – Small recovery in 2017

US$ millions
350
Sector Top 3*
300
250
200
150
100
50
0
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Source: Bloomberg and J.P. Morgan. *Top 3 most liquid names are Cyrela, MRV and Even.
Figure 39: Shopping Malls 90-day average liquidity – Sector Liquidity trending up
US$ millions
100
90
80
70
60
50
40
30
20
10
0
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Source: Bloomberg and J.P. Morgan. Including BR Malls, Multiplan, Iguatemi, Aliansce and Sonae Sierra Brasil.
Figure 40: Commercial Properties 90-day average liquidity – Figures were impacted by BRPR lower free float.
US$ millions
35
30
25
20
15
10
5
0
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Source: Bloomberg and J.P. Morgan. Including BR Properties, Cyrela Commercial Properties and São Carlos.
26
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Figure 41: Average daily volume traded / Free float

Percentage
4.3
3.4
2.6
1.2 1.2 1.2 1.1 1.1 1.0 0.9 0.9 0.9 0.8 0.7 0.7 0.7 0.6 0.6
0.3 0.2 0.1 0.1 0.0 0.0 0.0
PDGR
HBOR
DIRR
RSID
SSBR
EZTC
BRPR
ALSC
EVEN
SCAR
CCPR
JHSF
MULT
RDNI
GFSA
BBRK
CYRE
TCSA
MRVE
IGTA
TRIS
LPBS
GSHP
CRDE
BRML
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This Page Intentionally Left Blank
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Shopping Malls
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Shopping Malls
Sector overview: The sector is composed of 7 listed companies (BR Malls,
Multiplan, Iguatemi, Aliansce, Sonae Sierra Brasil, General Shopping and JHSF)
with a combined market cap of almost US$12bn and daily liquidity of US$70mn. BR
Malls, Multiplan and Iguatemi are the most liquid names, trading more than
US$20mn daily and having weights of 0.8%, 0.5% and 0.3% on the IBOV,
respectively, as of Jan. 2018. Moreover, the shopping sector represents more than
58% of the IMOB, with 5 companies in the index: Multiplan, BR Malls, Iguatemi,
Aliansce and JHSF, which have participations of 19.4%, 19.2%, 13.0%, 5.3% and
0.7%, respectively, as of Jan. 2018.
5 Things to Know About Brazilian Malls

1) Rent contract structure offers relative resilience and allows direct exposure to
consumption growth. In Brazil, retailers (both anchors and satellite stores) pay the
maximum of a fixed rent adjusted by inflation (IGPM or IPCA) or a percentage of
sales that ranges from 5% to 7%. Retailers also pay two months of rent in December,
given Christmas seasonality. Given its exposure to variable rents, malls benefit
directly from an increase in consumption when the economy is growing.
2) “Key money” and “step-up” clause. “Key money” represents an upfront

payment to open up a store in a greenfield or expansion that is typically paid by
satellite stores. This payment varies depending on the quality of the asset and on the
tenants and can represent up to 40% of contract value. Therefore, it reduces shopping
mall investment in the development as it can represent up to 10% of the total
construction capex (excluding land). Tenants can sell its “key money rights” to
newcomers, recovering the amount paid or even making a profit on it. Accounting
wise, these revenues are capitalized and recognized during the life of a tenant’s
contract, which is usually five years. On a less standardized base, a contract usually
includes a “step-up” clause that adjusts the minimum rent, usually in the 3rd and 5th
years or 2nd and 4th years, by a “real factor” of up to 10pp, since malls usually
provide discounts during the first years of operations. It is important to flag that
given the weakness in the Brazilian economy, the amount charged as key money has
been reduced in the past quarters.
3) Parking revenues are an important component of top line. Parking revenues

represent 15-20% of Shopping Malls’ consolidated revenues, growing almost 2.0x
over the past 5 years, while rental revenues grew 1.6x from 3Q12 to 3Q17. However,
when looking at the past 12 months as of 3Q17, parking revenues grew only 3% yoy,
in line with inflation, vs an expansion of 5% on rental revenues.
4) Operational performance trend still is the main question mark for investors.
Investors are closely monitoring companies’ SSS (Same Store Sales), SSR (Same
Store Rent), occupancy rates and delinquency rates, to monitor the impact of the
Brazilian economy’s acceleration in those metrics, which could lead to upward
revisions on the top line and earnings during this year. Even though operational
metrics were tepid during the past quarters, we expect a gradual recovery during
2018, as retail sales should continue to improve. In our view, companies like BR
Malls and Aliansce, which suffered more during the past crisis, should outperform
Iguatemi and Multiplan, which had more resilient SSS and SSR in the past quarters.
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(55-11) 4950-6712 05 April 2018
5) E-commerce is not a big threat. Even though E-Commerce penetration should

continue to increase in Brazil, given its small base of around 5%, we don’t believe it
will have a significant impact on listed shopping mall companies, given the premium
location of those assets. Keep in mind that in Brazil parking revenues represent
around 15% of companies' revenues, illustrating the assets’ premium locations.
Moreover, shopping malls in Brazil already are a destination center for consumers
given the relevant participation of services and entertainment in its mix.
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Sector’s Numbers Overview

In this section, we present the historical evolution of the sector’s numbers according
to ABRASCE data, including the evolution of the number of assets, total GLA, sales
growth, GLA/1,000 inhabitants among others.
Figure 42: Number of shopping malls in Brazil and total sales

# of Malls GLA (mn m 2 )
20
# of Malls GLA (mn m2) 16.3
650 15.2 15.6
14.7
13.8
12.9 15
550 11.4
9.5 10.3
8.3 8.6 9.1
7.5 10
450 6.2 6.5
5.1 5.2 5.5 5.6
350 5
250 0
2018e
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: J.P. Morgan and ABRASCE.
Figure 43: Total GLA YoY growth – Accelerating again in 2018

15.4%
13.3%
10.7% 10.7% 10.9%
8.4%
7.0%
5.8% 5.8% 6.0%
4.8% 4.4% 4.9%
3.6% 3.8%
2.0% 1.8% 2.3%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: J.P. Morgan and ABRASCE. 2018e
Figure 44: Sales growth – Shopping malls (ABRASCE) vs. traditional retail (IBGE)
Retail Shopping Malls
24%
17% 18%
16%
15%
13% 11%
10% 10% 10% 11% 11% 10%
9% 8% 9% 9% 8%
6% 6% 7% 6% 6%
5% 4% 4%
2% 2%
-1%
-4% -4% -6%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: IBGE and ABRASCE.
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(55-11) 4950-6712 05 April 2018
Figure 45: Malls has resilient sales during past crises

R$ Billions
158 168
152
142
129
120
108
87
74
65
58
46 50
36 42
29 32
18 23
10 12 14 16
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Mexican Crisis (94) & Russian Crisis (98) & 2002 Crisis Sub prime Crisis Bz Economic Recession
Asian Crisis (97) Real Depreciation (99) Lula Election (2008 and on) (2014-16)
Avg. GDP (95-97): 3.3% Avg. GDP (98-00): 1.5% Avg. GDP (03-05): 3.3% Avg. GDP (08-09): 2.4% Avg. GDP (14-16e): -2.2%
Avg. Inflation (95-97 ): 12.4% Avg. Inflation (98-00): 5.5% Avg. Inflation (03-05): 7.5% Avg. Inflation (08-09): 5.1% Avg. Inflation (14-16e): 7.8%
Avg. Int. rate (95-97): 34.5% Avg. Int. rate (98-00): 21.3% Avg. Int. rate (03-05): 17.4% Avg. Int. rate (08-09): 11.2% Avg. Int. rate (14-16): 12.9%
Sales growth (95-97): 18.3% Sales growth (98-00): 20.0% Sales growth (03-05): 12.0% Sales growth (08-09): 9.9% Sales growth (14-16): 6.9%
Source: BR Malls, ABRASCE and J.P. Morgan.
Figure 46: Shopping Mall penetration in the world

Total (GLA m 2 /1,000 inhabitants)
2,200
1,350
900
360
180 220
68 110
Brazil Mexico Germany France South Africa UK Canada USA
Source: Multiplan.
Figure 47: Evolution of Shopping Mall penetration in Brazil

Total GLA m 2 / 1,000 inhabitants
72 74 75
68
64
57
52
47 49
44 45
40
35
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: Multiplan and ABRASCE.
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(55-11) 4950-6712 05 April 2018
Figure 48: Southeast is the region with highest penetration in Brazil

Total GLA m 2 / 1,000 inhabitants, 2016
99
82
75
46 46
Northeast North South Mid West Southeast

Source: ABRASCE.
Figure 49: Shopping Malls sales as % of retail sales around the Globe
69%
62%
52% 53% 54%
28%
25%
Brazil France Australia Mexico USA South Africa Canada

Source: Multiplan and Parque Arauco.
Figure 50: Share of Brazilian Malls in retail sales
25%
23%
21%
18% 18% 18% 19%
17%
16%
14%
13%
11%
10%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Multiplan.
Top 5 players still represent less than 40% of total sales in 2017
The top 5 players in the sector are: BR Malls, Multiplan, Iguatemi, Aliansce and
Sonae Sierra Brasil, and as of 2017 they had market share in terms of total sales of
around 38%, a small reduction vs the peak of 42% in 2014.
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(55-11) 4950-6712 05 April 2018
Figure 51: Mall companies under our coverage have around 40% of revenue market
Covered Companies Others 158 168

152
142
129
119
108
91 61% 62%
58% 60%
74 58%
65 61%
63%
62%
61%
65%
42% 42% 40% 39% 38%
38% 37% 39%
35% 39%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: J.P. Morgan, Company data and ABRASCE as of Dec-2017.
Figure 52: Breakdown of GLA market share in Brazil for listed players as of 3Q17
6%
4% BRML
3%
3% MULT
2%
2% IGTA
ALSC
SSBR
GSHP
81% Others
Source: Companies data and ABRASCE.
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Geographical diversification – malls are where GDP is located

The South and Southeast regions hold roughly 70% of total GLA in Brazil, in line
with their 72% participation in the country’s GDP. The North has the lowest
representation in the sector, with only 5% of total GLA built in the country.
Figure 53: Total GLA per region Figure 54: GDP per region
5% 4%
14% 15%
14%
17%
10%
8%
55% 57%
North Northeast Mid West North Northeast Mid West

Southeast South Southeast South
Source: ABRASCE as of 2017. Source: IBGE as of 2015.
Table 8: Mall distribution per State Table 9: Mall distribution per Capital
States # Malls GLA % of total GLA Capitals # Malls GLA % of total GLA
São Paulo 182 5,384,249 34.6% São Paulo 54 1,997,769 24.3%
Rio de Janeiro 66 1,751,792 11.2% Rio de Janeiro 39 1,245,438 15.1%
Mnas Gerais 47 1,152,549 7.4% Belo Horizonte 20 469,437 5.7%
Rio Grande do Sul 39 870,758 5.6% Porto Alegre 15 433,107 5.3%
Parana 33 747,404 4.8% Curitiba 14 307,110 3.7%
Santa Catarina 26 617,196 4.0% Florianópolis 3 78,699 1.0%
Goias 26 573,578 3.7% Goiânia 13 321,064 3.9%
Bahia 22 556,271 3.6% Salvador 11 380,262 4.6%
Brasilia 20 425,066 2.7% Brasília 21 423,951 5.2%
Ceará 18 524,928 3.4% Fortaleza 14 453,343 5.5%
Pernambuco 15 544,660 3.5% Recife 6 291,465 3.5%
Amazonas 10 324,353 2.1% Manaus 10 324,353 3.9%
Espirito Santo 9 287,155 1.8% Vitória 2 45,956 0.6%
Pará 9 284,039 1.8% Belém 5 197,725 2.4%
Maranhão 9 239,281 1.5% Natal 6 144,847 1.8%
Rio Grande do Norte 7 166,635 1.1% Cuiabá 3 99,615 1.2%
Mato Grosso 6 169,214 1.1% São Luís 5 158,456 1.9%
Paraiba 5 205,586 1.3% João Pessoa 4 175,000 2.1%
Mato Grosso do Sul 4 132,171 0.8% Campo Grande 4 132,760 1.6%
Alagoas 4 150,819 1.0% Maceió 3 120,053 1.5%
Sergipe 3 130,599 0.8% Aracaju 2 89,321 1.1%
Piaui 3 124,060 0.8% Teresina 2 114,318 1.4%
Tocantins 2 39,842 0.3% Palmas 2 39,842 0.5%
Rondonia 2 55,844 0.4% Boas Vista 2 55,408 0.7%
Amapa 2 50,133 0.3% Macapá 2 50,133 0.6%
Roraima 1 44,000 0.3% Porto Velho 1 44,000 0.5%
Acre 1 28,195 0.2% Rio Branco 1 28,195 0.3%
Total 571 15,580,377 100% Total 264 8,221,627 100%
Source: ABRASCE. Source: ABRASCE.
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Figure 55: GLA expansion of shopping malls in Brazil by region in 2017 (GLA in mn m2)
Growth: +1% +9% - 0.4% +3% +9%
8.5 8.6 2016 2017
2.7 2.6
2.1 2.2
1.3 1.3
0.8 0.8
Southeast South Northeast Mid East North
Source: ABRASCE.
Traffic Evolution
IBOPE Inteligencia started in 2015 to calculate on a monthly basis the yoy variation
in shopping malls traffic data. Additionally, ABRASCE and FX Retail Analysis also
started in June 2015 to report data on shopping mall traffic, called IVSC (Index of
Shopping Malls Visitors).
Figure 56: IBOPE Inteligencia – Monthly mall traffic variation yoy

8%
6%
4%
2%
0%
-2%
-4%
-6%
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Source: J.P. Morgan, IBOPE Inteligencia.
Figure 57: IVSC – Monthly mall traffic variation yoy

10%
8%
5%
3%
0%
-3%
-5%
-8%
-10%
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Source: J.P. Morgan, IBOPE Inteligencia.
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Opening for 2018

According to ABRASCE, Brazil is expected to add a total of 766k m2 to its GLA in
2018. Listed companies should have a market share of 10% of the total openings
with 2 out of the 26 projects to be opened, I Fashion Outlet Santa Catarina, from
Iguatemi, and Estação Cuiabá, from BR Malls.
Table 10: ABRASCE expected openings for 2018

Shopping City State Total GLA (m2) Opening date
1 Guarapuava Garden Shopping Guarapuava PR 21,337 Jan-18
2 Guaranhus Garden Shopping Guaranhus PE 23,136 Jan-18
3 Republica Street Mall Goiânia GO 5,470 Mar-18
4 Boulevard Shopping Vitoria da Conquista Vitoria da Conquista BA 30,000 Mar-18
5 Passo Fundo Shopping Passo Fundo RS 30,000 Mar-18
6 Piauí Shopping Center Picos PI 25,000 Apr-18
7 Patteo Olinda Shopping Olinda PE 51,581 Apr-18
8 Shopping Cidade dos Lagos Guarapuava PR 21,600 Apr-18
9 Jockey Plaza Shopping Curitiba RS 60,000 Apr-18
10 Cosmopolitano Shopping São Paulo SP 44,108 Apr-18
11 Patos Shopping Patos PB 18,600 Apr-18
12 Camará Shopping Camaragibe PE 34,000 Apr-18
13 Praça Alvorada Shopping Center Alvorada RS 27,685 Apr-18
14 Shopping Dutra Mesquita RJ 50,000 Apr-18
15 Shopping Center Nações Três Lagoas Três Lagoas MS 16,000 Apr-18
16 Umuarama Shopping Umuarama PR 24,400 Jun-18
17 Praça Uberlândia Outlet Uberlândia MG 35,100 Aug-18
18 Paricá Shopping Paragominas PA 18,000 Sep-18
19 Shopping Modelo Castanhal PA 20,000 Sep-18
20 Praça Taquaral Shopping Piracicaba SP 29,735 Sep-18
21 Aracaju Parque Shopping Aracaju SE 25,900 Oct-18
22 Shopping Park Sul Volta Redonda RJ 33,000 Dec-18
23 Estação Jardim Shopping São Paulo SP 31,000 Dec-18
24 I Fashion Outlet Santa Catarina São José dos Pinhais PR 30,000 Dec-18
25 Estação Cuiabá Cuiabá MT 43,000 Dec-18
26 America Shopping Goiânia GO 18,000 Dec-18
Total 766,652
Source: ABRASCE as of Jan-2018, J.P. Morgan.
Figure 58: 2018 expected total openings by geography

5%
Southeast
11%
29%
South
Northeast
27%
Mid West
28% North
Source: ABRASCE and company data.
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Liquidity and participation in IBOV

BR Malls, Multiplan and Iguatemi are the only mall companies in the IBOV index,
with current weights in the index at 0.8%, 0.5%, and 0.3%, respectively, as of Jan-18.
However, we believe all companies could continue to gain share in IBOV as their
liquidity should continue to increase. Five of the seven listed mall companies are part
of the IMOBBV index (the Bovespa’s real estate index), with a combined weight of
~57%, with 19% for BR Malls, 19% for Multiplan, 11% for Iguatemi, 5% for
Aliansce and 0.7% for JHSF.
Table 11: Malls weight in Bovespa Index since 2012

Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
BR Malls 1.0% 1.2% 1.1% 0.9% 0.7% 0.8% 0.8%
Multiplan - - - 0.4% 0.4% 0.5% 0.5%
Iguatemi - - - - - - 0.3%
Source: Bloomberg and Ibovespa.
Figure 59: Aggregated avg. daily volume traded

US$ in millions
63
53
49
43
37 37
32
28
14 13
5
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Bloomberg and J.P. Morgan. Including BRML, MULT, IGTA, ALSC, SSBR, JHSF and GSHP.
Figure 60: Companies’ avg. daily liquidity in the last 90 days*

US$ in millions
21.6
16.4
13.3
2.1
0.0 0.3 0.5
GSHP SSBR JHSF ALSC IGTA MULT BRML

Source: Bloomberg and J.P. Morgan; *as of 31st Jan-18.
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Operational Data Performance

In this section, we summarize companies’ data regarding sales and rental
performance including Same Store Sales (SSS) and Same Area Sales (SAS), Same
Store Rent (SSR), Same Area Rent (SAR). Occupancy cost, which measures how
much rents represent tenants’’ sales and occupancy rate.
Figure 61: SSS and SSR more resilient than nominal GDP
15%
Real GDP IPCA SSR SSS
10%
5%
0%
-5%
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: J.P. Morgan and company data. For SSS and SSR, we use an average of listed mall companies, including SSBR, ALSC, BRML, MULT, IGTA.
Figure 62: SSS (Same-Store Sales) – Change yoy Figure 63: SAS (Same-Area Sales) – Change yoy
20% 20%
Min Mean Max Min Mean Max
15% 15%
10% 10%
5% 5%
0% 0%
-5% -5%
-10% -10%
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
Source: Company reports. Including Aliansce, BR Malls, Iguatemi, Multiplan, SSBR and JHSF. Source: Company reports. Including Aliansce, BR Malls, Iguatemi, Multiplan, SSBR and JHSF.
Figure 64: SSR (Same-Store Rent) – Change yoy Figure 65: SAR (Same-Area Rent) – Change yoy
20% 20%
Min Mean Max
Min Mean Max
15% 15%
10% 10%
5% 5%
0% 0%
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
Source: Company reports. Including Aliansce, BR Malls, Iguatemi, Multiplan, SSBR and JHSF. Source: Company reports. Including Aliansce, BR Malls, Iguatemi, Multiplan, SSBR and JHSF.
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Figure 66: Occupancy cost – Flattish over time despite the gap between SSS and SSR due to efficiency gains on Cond. Exp.
16%
14%
12%
10%
8%
6%
Max Mean Min
4%
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: Company reports; J.P Morgan.
Figure 67: Multiplan Occupancy cost per Malls – Positive correlated with sales/m2
10%
9%
8%
7%
6%
5%
4%
3%
0 500 1,000 1,500 2,000 2,500 3,000
Figure 68: Occupancy rate –Impacted by greenfield openings in 2012/13, but recovering since then
100%
98%
96%
94%
92%
Max Mean Min
90%
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: Company reports; J.P Morgan.
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Figure 69: On average, malls’ SSS have been more resilient than those of apparel retailers
20%
SSS Malls SSS Retailers
15%
10%
5%
0%
-5%
-10%
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: J.P. Morgan, company data. For retailers we are doing an average of: Renner, Hering, Marisa, Guararapes, Le Lis Blanc, Arezzo and Lojas Americanas. Retail segment is covered by
Joseph Giordano.
Figure 70: Main listed retailers’ SSS yoy

Lojas Renner Hering Marisa Guararapes Restoque Arezzo Lojas Americanas
25%
15%
5%
-5%
-15%
-25%
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: J.P. Morgan and company reports. Retail segment is covered by Joseph Giordano.
Figure 71: BR Malls’ annual SSS breakdown (%)

15.3
14.0
11.1
9.2 9.2
8.3
7.3 6.7 7.3 7.6 7.3 6.8 6.8
5.2 4.4 5.1 5.2 5.3
4.0 4.1
2.1 2.7
1.7 1.0
0.0 0.5
-0.8
-2.0
2011 2012 2013 2014 2015 2016 9M17
Anchor Megastores Satellites Leisure

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Figure 72: BR malls – SSS yoy breakdown

40%
Anchor Megastores Satellites Leisure Avg
30%
20%
10%
0%
-10%
-20%
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: J P. Morgan and BR Malls.
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Understanding the Calculation of Rental Variation Indexes

In this section, we analyze the main differences between the diverse metrics that
companies use to report rental performance, including SSR (Same Store Rent), SAR
(Same Area Rent), Leasing Spread and Rent/m2. Additionally, we provide numerical
examples of why those numbers sometimes have significant differences.
Same-Store Rent (SSR): Shows the change of rents on a yoy basis for stores with
more than 12 months of contract excluding greenfield assets and new tenants until
they complete 12 months. Therefore, this metric does not capture changes in tenant
mix. Since greenfield assets usually deliver above average growth due to its
maturation, a company with a young portfolio usually has higher SSR. Remember
that most greenfield assets also include step-up clauses at the end of the 2nd and 4th
years– which would bring SSR to higher levels.
Same Area Rent (SAR): Shows the percentage change of rents on a yoy basis for
areas with more than 12 months, although it also excludes greenfield assets until they
complete 12 months; this metric captures the changes in mix not captured by SSR.
We believe SAR should be used as a proxy for SSR, since changes in mix will be
captured by SSR after 12 months.
Leasing Spreads: It measures the change of specific contracts and could be

calculated for new contracts or for the renewal of contracts. Each company calculates
leasing spreads in a different way; therefore, this metric is not fully comparable
across companies. BR Malls, for example, considers for the calculation of leasing
spreads based on the average monthly rent of the new contract vs the last average
monthly rent paid by the previous tenant. Iguatemi, on the other hand, calculates it as
the last rent in the contract signed vs the first monthly rent of the new contract.
Rents/m2: This is the most generic metric that simply shows the total rental revenues
divided by the company’s own GLA. This metric is influenced by greenfield
openings since those rents start to impact a company’s rent/m2 on day one, usually
bringing this metric down, since greenfields usually have lower-than-average rent.
Table 12: Rental Metrics Calculation – hypothetical example

Year 0 Year 1
Mall A - Rental Revenues 10,000 10,500
GLA (m2) 100 100
Rent/m2 (Inflation adjustment 5% p.y.) 100 105
Mall B - Rental Revenues 10,000 11,500
GLA (m2) 100 100
Rent/m2 (Contract Renewal 15% spread) 100 115
New Greenfield - Mall C 3,050
New GLA (m2) 30
Rent/m2 (New Lease) 100
50
Total Rental Revenues (A + B + C)
GLA 20,000 25,050
Rent/m2 200 230
Source: J.P. Morgan.
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Figure 73: Difference in Rental Metrics from our hypothetical example
As can be seen in the example,

25.1%
the Leasing Spread is higher
2
than SAR, SSR and Rent/m as a
marginal contract would have a
price change superior to the one 15.0%
observed in the average of the
portfolio. 10.0%
8.8%
In this example, we assume one 5.0%
of the tenants was replaced –
reflected only in the SAR at the
start. Revenues Leasing Spread SAR Rent/m2 SSR
Differences in Operational Metrics

Shopping mall companies consider different assumptions in accounting operational
metrics. In the table below, we provide the accounting terms for the main operational
lines.
Table 13: Operational Metrics Breakdown

SSS & SAS BRML MULT IGTA ALSC SSBR JHSF
% of Tenants that inform Sales? 70% > 90% > 90% ~90% >90% 97%
100% of Sales or Weighted by Company's Stake? Stake Stake 100% Stake Stake 100%
Sales Based on Gross or Net Figures? Gross Gross Gross Gross Gross Gross
SSR & SAR
Net of Discounts? Yes Yes Yes Yes Yes Yes
Contract Renewals Accounting? (Linear or Cash) Cash Cash Cash Cash Cash Cash
Step-up Clauses Accounting? (Linear or Cash) Cash Cash Cash Cash Linear Cash
Vacancy Rate
Includes Kiosks? No No Yes No Yes No
Based on Number of Stores or GLA? GLA GLA GLA GLA GLA GLA
% of GLA Represented by Kiosks? Not Material Not Material Not Material Not Material 0.3% Not Material
End of Quarter or Average of 3 Months? Average Average Average End of Quarter End of Quarter Average
Based on Contracts or Opened Tenants? Opened Contracts Opened Contracts Contracts Contrats
Delinquency rate
Days of Delay? 30 Days 30 Days 1 Day 30 Days 25 Days NA
Discounts
Rental Rental Taxes and Rental Rental Rental
Booked on which P&L Line?
Revenues Revenues Discount Revenues Revenues Revenues
Occupancy cost
% Represented by Rents NA 58% NA 59% 70% 57%
% Represented by Condominium? NA 42% NA 41% 30% 35%
Includes Promotion Costs? Yes Yes Yes Yes Yes Yes / 8%
Source: Company Reports; J.P. Morgan.
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Consumption showing a positive trend

After 2 years of declining in 2013-15, consumption started to recover in 2016 as can
be observed in the chart below comparing the yoy performance of the main
consumption index in Brazil; IBGE, Cielo and shopping malls’ SSS.
Figure 74: Consumption indexes yoy change in nominal terms

20%
15%
10%
5%
0%
Avg. SSS IBGE Cielo Inflation
-5%
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Source: IBGE, Serasa, Companies’ reports and Cielo.
Figure 75: Retail sales volume for Brazil main States – While MG outperformed BA underperformed
2014 = 100
110
105
100
95
90
85
80
75
Brazil SP RJ BA RS MG
70
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jan-10
Apr-10
Oct-10
Jan-11
Apr-11
Oct-11
Jan-12
Apr-12
Oct-12
Jan-13
Apr-13
Oct-13
Jan-14
Apr-14
Oct-14
Jan-15
Apr-15
Oct-15
Jan-16
Apr-16
Oct-16
Jan-17
Apr-17
Oct-17
Source: IBGE.
Figure 76: Wage mass and unemployment as of Dec-2016 – Increase in unemployment rate impacted wage mass negatively
Unemployment rate Wage Mass growth yoy
16% 14%
Unemployment rate Wage mass grow yoy
14% 12%
12% 10%
10% 8%
8% 6%
6% 4%
4% 2%
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Source: IBGE.
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Figure 77: Retail sales volume – Growth yoy

20%
15%
10%
5%
0%
-5%
-10%
-15%
Jan-01
Aug-01
Mar-02
Oct-02
May-03
Dec-03
Jul-04
Feb-05
Sep-05
Apr-06
Nov-06
Jun-07
Jan-08
Aug-08
Mar-09
Oct-09
May-10
Dec-10
Jul-11
Feb-12
Sep-12
Apr-13
Nov-13
Jun-14
Jan-15
Aug-15
Mar-16
Oct-16
May-17
Dec-17
Source: Bloomberg and IBGE.
Figure 78: Total credit household and growth yoy – Significant deceleration in the past 12 months
R$ in billions YoY growth
3,500 40%
Total growth yoy
3,000
30%
2,500
2,000 20%
1,500 10%
1,000
0%
500
0 -10%
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
Dec-13
Apr-14
Aug-14
Dec-14
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Source: Central Bank.
Cielo Retail Index – An additional Metric to Follow Retail Trends

Cielo, one of the largest Brazilian acquirers, in 2014 started to release its Broad
Retail Index (ICVA), which follows on a monthly basis the evolution of Brazil’s
retail sales, based on information from more than 24 segments on more than 1.5mn
selling points.
Figure 79: Cielo retailers’ revenues performance per region – There is a clear deceleration across the board in the past 3 years
Real yoy change
2013 2014 2015 2016 2017

7.1 6.9 7.3
6.5
5.8 5.4 5.2 5.6
4.2 4.7 4.4
3.4
2.1 1.6
0.1
-0.3 -0.7 0.0 -0.1

-1.4 -1.8 -1.3 -1.3
-2.0
-3.5
-4.8 -4.9 -4.3 -4.3
-7.4
Brazil South Southeast Mid West Northeast North
Source: Cielo press release.
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Figure 80: Cielo retailers’ revenues – Monthly growth yoy – The reduction on inflation cause a convergence between nominal and real terms
20%
Nominal Calendar adj Deflated Deflated & Calendar adj
15%
10%
5%
0%
-5%
-10%
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Figure 81: Cielo Retailer sales in the North region Figure 82: Cielo Retailer sales in the Northeast region
20% 25%
Nominal Deflated Nominal Deflated
15% 20%
10% 15%
5% 10%
0% 5%
-5% 0%
-10% -5%
-15% -10%
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Jul-14
Jul-15
Jul-16
Jul-17
Jan-14
Apr-14
Oct-14
Jan-15
Apr-15
Oct-15
Jan-16
Apr-16
Oct-16
Jan-17
Apr-17
Oct-17
Jan-18
Source: Cielo press release. Source: Cielo press release.
Figure 83: Cielo Retailer sales in the Central West region Figure 84: Cielo Retailer sales in the Southeast region
20% 20%
Nominal Deflated Nominal Deflated
15% 15%
10% 10%
5% 5%
0% 0%
-5% -5%
-10% -10%
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Source: Cielo press release. Source: Cielo press release.
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Figure 85: Cielo Retailer sales in the South region

20%
Nominal Deflated
15%
10%
5%
0%
-5%
-10%
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
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Competition – Which Cities Are Crowded?

In order to measure and understand competition in the shopping mall segment, we
calculated GLA/1,000 inhabitants for the main cities of the country and compared
companies’ exposure to those cities. We classified cities in 3 tiers using average
GLA/1,000 inhabitants +/- 1 standard deviation.
-Tier 1 (low penetration), cities with GLA/1,000 inhabitants < 93;

-Tier 2 (avg. penetration), cities with GLA/1,000 inhabitants between 94 and 217;
-Tier 3 (high penetration), cities with GLA/1,000 inhabitants > 218
Figure 86: Percentage of Companies’ GLA per City Tier

6%
17%
31% 31%
63%
83%
82%
65% 69%
35%
11% 2% 4% 1%
Aliansce Iguatemi Sonae Sierra BR Malls Multiplan
Tier 1 Tier 2 Tier 3
Table 14: Own GLA (‘000 m2) per Tier City ranking
Aliansce BR Malls Multiplan Iguatemi Sonae Sierra Brasil
Tier 1 48 13 0 8 14
Tier 2 372 781 413 146 227
Tier 3 27 157 186 261 106
Total 448 951 599 415 347
Table 15: Number of Assets per Tier City ranking

Aliansce BR Malls Multiplan Iguatemi Sonae Sierra Brasil
Tier 1 2 1 0 1 1
Tier 2 16 38 14 9 6
Tier 3 2 5 4 8 2
Total 20 44 18 18 9
-Main Tier 1 cities: Sete Lagoas (MG), Novo Hamburgo (RS), Duque de Caxias
(RJ), Feira de Santana (BA), and Cascavel (PR).
-Main Tier 2 cities: Salvador (BA), São Paulo (SP), Rio de Janeiro (RJ), Brasilia
(DF) and Belém (PA).
-Main Tier 3 cities: Vila Velha (ES), Campinas (SP), Sorrocaba (SP), Porto Alegre
(RS) and Ribeirão Preto (SP).
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Figure 87: Summary of Shopping Malls Penetration by Country

x-axis: GLA / 1,000 inhabitants and y-axis: GDP per capita US$(‘000)
60
50 Germany
France
40
Spain
30 Chile Portugal
Mexico
20 Brazil 2011
Brazil 2017
10 Peru Colombia
Brazil 2005
0
0 50 100 150 200 250 300
Figure 88: Brazil Shopping Malls Penetration by City

x-axis: GLA / 1,000 inhabitants and y-axis: GDP per capita R$(‘000) as of 2015
120
100 Jundiaí
80
60
São Bernardo do Campo São Paulo Ribeirão Preto
Uberlândia Sorocaba
40 Contagem
Rio de Janeiro
Belo Horizonte Cuiabá Goiânia São José do Rio Preto Londrina
Guarujá Bauru
20 Maceió Belém Vila Velha
Cascavel
0
0 50 100 150 200 250 300 350 400
Breakdown of company’s portfolio per city tier

Table 16: Aliansce Assets per city tier as of 3Q17
GLA / 1,000 City Own GLA GDP per capita
Aliansce City inhabitants Tier (m2) (R$ ‘000)
Caxias Shopping Duque de Caxias 35 1 22,805 39.8
Boulevard Shopping Campos Campos dos Goytacazes 61 1 25,033 70.7
Parque Shopping Maceió Maceió 125 2 18,452 20.4
Boulevard Shopping Belo Horizonte Belo Horizonte 133 2 29,170 34.9
Shopping da Bahia Salvador 137 2 45,401 19.8
Boulevard Shopping Brasília Brasília 140 2 8,755 69.2
Shopping Taboão São Paulo 144 2 28,415 44.0
Shopping West Plaza São Paulo 144 2 8,417 44.0
Santana Parque Shopping São Paulo 144 2 8,831 44.0
Boulevard Shopping Nações Bauru Bauru 155 2 32,115 34.6
Boulevard Shopping Belém Belém 159 2 31,521 20.3
Parque Shopping Belém Belém 159 2 21,508 20.3
Shopping Parangaba Fortaleza 166 2 12,885 22.1
Shopping Leblon Rio de Janeiro 169 2 6,267 39.9
Via Parque Rio de Janeiro 169 2 22,283 39.9
Shopping Grande Rio Rio de Janeiro 169 2 9,562 39.9
Carioca Shopping Rio de Janeiro 169 2 31,252 39.9
Bangu Shopping Rio de Janeiro 169 2 57,642 39.9
Boulevard Shopping Vila Velha Vila Velha 283 3 18,680 23.5
Shopping Santa Úrsula Ribeirão Preto 287 3 8,635 41.7
Total / Avg. 156 447,629 35.6
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Table 17: Multiplan Assets per city tier as of 3Q17

Multiplan City
inhabitants Tier (m2) (R$ ‘000)
Parque Shopping Maceió Maceió 125 2 18,452 20.4
BH Shopping Belo Horizonte 133 2 37,735 34.9
Diamond Mall Belo Horizonte 133 2 19,246 34.9
Pátio Savassi* Belo Horizonte 133 2 18,581 34.9
Park Shopping Brasília 140 2 33,055 69.2
Morumbi Shopping São Paulo 144 2 41,365 44.0
Shopping Anália Franco São Paulo 144 2 15,477 44.0
Shopping Vila Olímpia São Paulo 144 2 17,022 44.0
Park Shopping Barigüi Curitiba 160 2 48,833 44.6
Barra Shopping Rio de Janeiro 169 2 51,446 39.9
New York City Center Rio de Janeiro 169 2 11,129 39.9
ParkShoppingCampoGrande Rio de Janeiro 169 2 39,379 39.9
VillageMall Rio de Janeiro 169 2 25,828 39.9
JundiaíShopping Jundiaí 175 2 35,063 98.8
ParkShopping São Caetano São Caetano do Sul 246 3 39,107 84.2
Barra Shopping Sul Porto Alegre 268 3 73,001 46.1
Ribeirão Shopping Ribeirão Preto 287 3 59,454 41.7
Shopping Santa Úrsula Ribeirão Preto 287 3 14,400 41.7
Total / Avg. 177 598,575 48.5
Table 18: Sonae Sierra Brasil Assets per city tier as of 3Q17
Sonae Sierra Brasil City
Franca Franca 53 1 14,300 24.7
Metropole São Bernardo do Campo 123 2 29,900 52.3
Manauara Manaus 140 2 47,300 32.6
Plaza Sul São Paulo 144 2 14,100 44.0
Campo Limpo São Paulo 144 2 4,400 44.0
Uberlândia Shopping Uberlândia 157 2 52,900 44.6
Passeio das Aguas Shopping Goiânia 217 2 77,900 32.7
Parque Dom Pedro Campinas 289 3 63,500 48.4
Boulevard Londrina Shopping Londrina 343 3 42,600 32.4
Total / Avg. 179 346,900 39.3
Table 19: Iguatemi Assets per city tier as of 3Q17

Iguatemi City
Premium Outlet RS Novo hamburgo 86 1 8,247 32.7
Iguatemi Caxias Caxias do Sul 140 2 2,547 43.5
Iguatemi JK São Paulo 144 2 22,372 44.0
Market Place São Paulo 144 2 26,940 44.0
Alphaville São Paulo 144 2 24,423 44.0
Iguatemi São Paulo São Paulo 144 2 27,655 44.0
Pátio Higienópolis São Paulo 144 2 3,819 44.0
Iguatemi São Carlos São Carlos 144 2 11,162 40.4
Iguatemi Brasilia Brasília 140 2 20,673 69.2
Iguatemi Florianopolis Florianópolis 159 2 6,357 39.7
Esplanada Sorocaba 220 3 35,636 47.4
Iguatemi Porto Alegre Porto Alegre 268 3 21,349 46.1
Praia de Belas Porto Alegre 268 3 17,843 46.1
Iguatemi Rio Preto São José do Rio Preto 279 3 38,411 33.8
Iguatemi Campinas Campinas 289 3 51,444 48.4
Boulevard Campinas 289 3 24,965 48.4
Galleria Campinas 289 3 33,146 48.4
Iguatemi Ribeirao Ribeirão Preto 287 3 38,410 41.7
Total / Avg. 199 415,399 45.4
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Table 20: BR Malls Assets per city tier as of 3Q17

BR Malls City
Shopping Sete Lagoas Sete Lagoas 76 1 12,560 33.1
São Luís Shopping Macaé 94 2 8,234 88.9
Plaza Macae Macaé 94 2 10,212 88.9
Shopping Piracicaba Piracicaba 109 2 16,026 55.3
Sao Bernardo Plaza Shopping São Bernardo do Campo 123 2 25,728 52.3
Maceió Shopping Maceió 125 2 18,830 20.4
Estacao BH Belo Horizonte 133 2 20,389 34.9
Minas Shopping Belo Horizonte 133 2 764 34.9
Shopping Del Rey Belo Horizonte 133 2 24,071 34.9
Shopping Paralela Salvador 137 2 20,299 19.8
Shopping Iguatemi Caxias do Sul Caxias do Sul 140 2 13,797 43.5
Amazonas Shopping Manaus 140 2 11,667 32.6
Jardim Sul São Paulo 144 2 18,480 44.0
Mooca Plaza Shopping São Paulo 144 2 25,178 44.0
Osasco Plaza Shopping São Paulo 144 2 5,482 44.0
Shopping ABC São Paulo 144 2 602 44.0
Shopping Granja Vianna São Paulo 144 2 23,312 44.0
Shopping Metrô Santa Cruz São Paulo 144 2 19,165 44.0
Shopping Tamboré São Paulo 144 2 49,835 44.0
Shopping Villa-Lobos São Paulo 144 2 15,660 44.0
Rio Anil São Luís 151 2 18,880 25.0
Natal Shopping Natal 152 2 13,492 24.0
Shopping Contagem Contagem 155 2 17,821 40.1
Center Shopping Uberlândia Uberlândia 157 2 26,870 44.6
Capim Dourado Palmas 158 2 36,575 27.1
Shopping Curitiba Curitiba 160 2 11,231 44.6
Shopping Estação Curitiba 160 2 54,716 44.6
Independência Shopping Juiz de Fora 160 2 19,967 26.0
Shopping Recife Recife 163 2 23,357 29.7
Shopping Campo Grande Campo Grande 165 2 27,808 28.3
Ilha Plaza Shopping Rio de Janeiro 169 2 11,026 39.9
Norteshopping Rio de Janeiro 169 2 58,041 39.9
Plaza Niterói Rio de Janeiro 169 2 44,049 39.9
Rio Plaza Shopping Rio de Janeiro 169 2 7,137 39.9
Shopping Tijuca Rio de Janeiro 169 2 35,565 39.9
Top Shopping Rio de Janeiro 169 2 10,159 39.9
Via Brasil Shopping Rio de Janeiro 169 2 15,033 39.9
Araguaia Shopping Goiânia 217 2 10,879 32.7
Goiânia Shopping Goiânia 217 2 10,770 32.7
Catuaí Shopping Maringá Maringá 250 3 22,631 38.9
Shopping Vila Velha Vila Velha 283 3 35,884 23.5
Campinas Shopping Campinas 289 3 34,566 48.4
Catuai Shopping Londrina Londrina 343 3 41,071 32.4
Londrina Norte Shopping Londrina 343 3 23,094 32.4
Total / Avg. 166 950,913 38.5
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E-Commerce Overview
In this section, we analyze E-Commerce data based on Ebit annual report, including
data on consumer profiles, transaction details and purchase details.
Figure 89: Evolution of one-time consumers in E-commerce in Brazil

R$ Billions
60 55
48 +15%
50
+22%
38 39
40 +3%
31
+21%
30
20
10
0
2013 2014 2015 2016 2017
Source: Ebit Informação.
Figure 90: E-Commerce sales in Brazil – New and Used Products

R$ Billions
73
Sales (R$bn) YoY
60
50
21% 22%
14%
2015 2016 2017
Source: Ebit Informação.
Figure 91: E-Commerce sales in Brazil – New Products

R$ Billions
54
Sales (R$bn) YoY
48
44
41
28% 24%
26%
20% 36
19 29 15%
12%
23
8% 7%
2011 2012 2013 2014 2015 2016 2017 2018e*
Source: Ebit Informação. *Estimate.
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Figure 92: Average ticket

R$
Average Ticket YoY 429 446

418
388
349 338 347
327
6% 12%
8%
3% 4%
-3% -3%
-6%
2011 2012 2013 2014 2015 2016 2017 2018*

Source: Ebit Informação. *Estimates by Ebit.
Figure 93: Volume of orders

Billions of orders
Orders YoY 120

111
34% 32% 103 107 106
24%
88 17%
54
67 8%
3% 5%
0%
2011 2012 2013 2014 2015 2016 2017 2018*
Source: Ebit Informação. *Estimates by Ebit.
Figure 94: Consumers breakdown per age Figure 95: Consumers breakdown per region
Avg Age: 9% 3%
42 Years 16% 11%
34% 7%
23%
35% 64%
< 24 25-34 35-49 > 50 North Northeast Middle-West Southeast South

Source: Ebit Informação. Source: Ebit Informação.
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Figure 96: Payment method breakdown Figure 97: Segment breakdown as a percentage of sales
4% 2%
2% Cell Phones
5% 21%
Household Appliances
32% Eletronics
6%
Computers
50% Housing Decoration
8% Apparel
Health/Perfumery
19% Auto Acessories

19%
9% Sports & Leasure
Foods & Beverages
Cash Sale 2-3 Installments 4-12 Installments or More 10%
Source: Ebit Informação. Source: Ebit Informação.
Table 21: E-Commerce Breakdown per Segment

Average Average Time of Participation of Mobile Devices Drop-out Percentage of Delivery fee
Ticket (R$) Nagivation Orders Users rate over Sale
Total 314.8 1 min 42 seconds 31% 56% 82% 10.6%
Household Appliances 257.2 3 min 13 seconds 23% 46% 82% 11.4%
Apparel 248.2 4 min 12 seconds 41% 62% 84% 7.6%
Footwear 255.8 3 min 40 seconds 35% 61% 79% 6.0%
Electronics 558.2 2 min 37 seconds 14% 34% 69% 9.9%
Toys 168.3 2 min 16 seconds 27% 52% 84% 9.4%
Foods&Beverages 148.1 2 min 15 seconds 25% 56% 80% 9.8%
Perfurmary 211.9 2 min 10 seconds 43% 62% 83% 10.0%
Construction Materials 165.2 1 min 56 seconds 16% 30% 72% 10.7%
Games 128.9 1 min 12 seconds 32% 66% 88% 10.2%
Auto Accessories 418.2 2 min 25 seconds 16% 50% 79% 8.1%
Books 100.3 3 min 09 seconds 20% 48% 88% 16.8%
Source: Atlas Radar; Based on 2017 data.
Table 22: Market Share per City

City Share of Orders Share of Website Visits
São Paulo 21.8% 19.6%
Rio de Janeiro 13.6% 7.5%
Belo Horizonte 3.7% 4.6%
Brasília 2.7% 2.8%
Curitiba 2.8% 2.4%
Porto Alegre 1.8% 1.6%
Campinas 1.5% 1.5%
Santo André 1.7% 0.9%
São Bernardo do Campo 1.5% 1.0%
Salvador 1.4% 1.7%
Total main cities 52.5% 43.6%
Source: Atlas Radar.
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Table 23: Conversion Rate per State

State Region Conversion Rate
Paraná South 1.3%
Rio Grande do Sul South 1.5%
Santa Catarina South 1.7%
São Paulo Southeast 1.4%
Rio de Janeiro Southeast 1.6%
Minas Gerais Southeast 1.2%
Espírito Santo Southeast 1.2%
Distrito Federal Mid West 1.4%
Goiás Mid West 1.0%
Mato Grosso Mid West 1.3%
Mato Grosso do Sul Mid West 1.5%
Bahia Northeast 1.0%
Pernambuco Northeast 0.7%
Ceará Northeast 0.8%
Maranhão Northeast 0.9%
Paraíba Northeast 0.7%
Rio Grande do Norte Northeast 0.9%
Alagoas Northeast 0.8%
Sergipe Northeast 0.9%
Piauí Northeast 0.9%
Pará North 0.8%
Amazonas North 0.8%
Tocantis North 1.0%
Rondônia North 1.1%
Acre North 0.9%
Roraima North 1.0%
Amapá North 0.9%
Brazil - 1.4%
Source: Atlas Radar.
Figure 98: Client Fidelization – Percentage of Recurring Visitors Figure 99: Number of Purchases per Client in 2017
77%
New Visitors
42%
Recurring
59% Visitors
11%
4% 2% 5%
1%
1 2 3 4 5 6+
Source: Atlas Radar. Source: Atlas Radar.
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International E-Commerce in Brazil

In this section, we analyze how much Brazilians spend on E-Commerce outside
Brazil, based on E-bit data.
Figure 100: One-time consumers on international websites Figure 101: International E-commerce sales and avg. ticket
Cross Border Sales (US$bn) Avg. Ticket (US$)
One-time consumers (mn) YoY
2.7
22 59 2.4
21
18 2.0
48% 1.7
42% 1.5
12 48
8
21% 35 36 37
6%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Source: Cross Border Ebit. Source: Cross Border Ebit.
Figure 102: Top 5 international retailers as a percentage of Brazilian purchases on international E-commerce
54%
50% 2013 2014 2015 2016 2017
46% 45%
42% 40%
25% 25% 26% 27% 28% 26% 26%

20% 19%
9% 9% 8% 10% 8%
Ali Express Amazon Ebay Apple Store
Source: Cross Border Ebit.
Figure 103: Payment methods on international websites Figure 104: Delivery time vs. percentage of deliveries on time
2 2 2 1
7 9 9
20 20 78% 79%
70% 72%
28 27 28 42
16 41
24 36 36
32
65%
63 62 62 64
54
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Credit Card Paypal Bank Slip Others Number of Days to Deliver % of Deliveries on Time
Source: Cross Border Ebit. Source: Cross Border Ebit.
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Fipe Buscapé: E-commerce price Index

The index created by Fipe together with Buscapé has data for E-commerce inflation
prices since 2011.
Figure 105: Fipe Buscapé Index – YoY variation

15%
10%
5%
0%
-5%
-10%
-15%
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Source: Fipe Buscapé.
Figure 106: Fipe Buscapé Index – MoM variation

5%
3%
1%
-1%
-3%
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Source: Fipe Buscapé.
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Mix overview
In our view, Brazilian listed companies already have a tenant mix adequate to deal
with a growing E-commerce environment, since there is already a significant
participation of the 3 F's in its Mix, Fun, Food and Films. As can be seen in the chart
below, Services, food (eating), spending free time, and movies represent almost 50%
of visitors’ reasons to visit a shopping mall in Brazil.
Figure 107: Main reasons to visit Shopping Malls
18% Shopping
28% Services
3% Eating
3% Spending free time
4% Meetings
Movies
14% 15% Paying bills
Others
15%
Source: Multiplan and ABRASCE data.
Figure 108: Multiplan changes in tenants mix over the past 10 years
2007 2017
39%
33%
30%
22% 21% 20%
10% 11%
7% 8%
Apparel Services Miscellaneuos Home & Office Food Court & Gourmet
area
Figure 109: Aliansce changes in tenant mix over the past 5 years
37% 36% 4Q11 3Q17
18% 18% 18%

15% 16%
14% 13% 14%
Apperal Leisure and Services Home & Office Miscellaneuos Food
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Listed Companies Overview

As mentioned before, the sector is composed of 7 listed companies with a combined
market cap of around US$11bn and daily liquidity of almost US$60mn, with only
BRML, IGTA and MULT trading more than US$10mn daily. On the following
pages we discuss in more detail the companies’ shareholder bases, capital structures,
asset quality and geographical diversification, among other topics.
Table 24: Shopping malls breakdown – Listed companies

Sonae Sierra General
BR Malls Multiplan Iguatemi Aliansce JHSF
Brasil Shopping
Ticker BRML3 MULT3 IGTA3 ALSC3 SSBR3 GSHP3 JHSF3
Rating OW N N OW OW NC NC
Price target (Dec-18) 14.00 78.00 44.00 23.00 28.00 - -
Current Market Cap (R$ mn) 10,134 13,563 7,068 3,799 1,843 293 866
Current Price* 11.64 67.73 40.02 18.79 24.11 4.50 1.65
3M -6% -3% 6% 7% -5% -3% -6%
YTD -9% -4% 2% 4% -5% -21% -6%
Free Float 100% 48% 49% 44% 28% 24% 25%
Avg. Liq. (last 30D in US$ mn) 17.4 17.2 12.1 3.0 1.2 0.0 0.6
# of shopping malls (current port.) 44 18 19 23 9 15 4
AL, AM, BA,
ES, GO, MA, BA, SP, RJ,
MG, SP, RJ, SP, SC, RS, SP, AM, MG, SP, RJ, BA,
Geographical presence MG, MS, PE, DF, PA, MG, SP, BA, AM
DF, PR, RS, AL DF PR, GO PR, RS, DF
PR, RJ, RN, ES, AL, CE
RS, SP, TO
Total GLA (as of 3Q17 - '000) 1,613 867 746 721 445 349 151
Owned GLA (as of 3Q17 - '000) 951 679 455 454 347 245 106
Avg. own GLA per Mall ('000 m2) 22 38 24 20 39 16 26
Average Stake 59.0% 78.3% 60.9% 63.0% 78.0% 70.1% 70.0%
Source: J.P. Morgan and company reports.* Price as of March 27th, 2018.
Shareholder Structure
In the table below, we detail shopping malls’ shareholders structure, showing the
breakdown of companies' top 5 shareholders.
Table 25: Listed companies’ top 5 shareholders

BRML % MULT % IGTA % ALSC % SSBR % GSHP % JHSF %
CPPIB 9.6 Peres 27.4 Jerreisati 50.7 CPPIB 51.6 Sonae Portugal 33.3 Veronezzi 69.5 JHSF Par 51.7
Dynamo 7.4 Ontario 27.4 Aberdeen 7.5 Rique 11.2 Alexander Otto 33.3 Teton 8.8 Jose Auriemo 18.5
Blackrock 5.4 Aberdeen 16.3 T.Rowe 2.2 GIC 9.0 Alaska 7.8 Explorer 3.7 BTG 7.1
Schroder 4.0 Blackrock 2.6 Blackrock 2.2 Jaguar 8.9 Deutsche Bank 6.4 M. Stanley 3.3 Boreal 6.8
Vanguard 3.9 Vanguard 2.2 Nucleo 1.9 ARX 4.9 Arosa 5.5 Alpine 1.3 Fabio Auriemo 4.6
Top-5 30.3 Top-5 75.9 Top-5 64.5 Top-5 85.7 Top-5 85.9 Top-5 86.6 Top-5 88.6
Source: Bloomberg and company’s webside and Bloomberg as of Mar-2018.
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Revenue breakdown
Shopping malls’ top lines consist of 3 main items: i) Rental revenues, which are
composed of the larger of a minimum rent adjusted by inflation (IGPM or IPCA) or a
percentage rent, usually 5-7% of sales; ii) Parking revenues; and iii) Other revenues,
which for some companies include key money and services. Remember that rental
revenues are composed of the minimum rent, variable rents and merchandising.
Figure 110: 3Q17 Total revenue breakdown Figure 111: 3Q16 Total revenue breakdown
10% 13% 12% 11% 9% 12% 10% 13% 14% 10% 10% 10%
12% 11%
19% 14% 18% 19% 20% 19% 15% 17% 18% 18%
71% 73% 71% 79% 72% 72% 79% 72%

70% 68% 71% 69%
BRML MULT IGTA ALSC SSBR GSHP BRML MULT IGTA ALSC SSBR GSHP
Rental Parking Others Rental Parking Others
Source: J.P. Morgan estimates, company data. Source: J.P. Morgan estimates, company data.
Figure 112: 3Q17 Rental revenues breakdown Figure 113: 3Q16 Rental revenues breakdown
14% 7% 7% 11% 8% 15% 7% 7% 11% 9%
3% 5% 6% 17% 3% 7% 5% 17%
6% 7% 6% 7%
10% 9%
90% 88% 82% 86% 90% 86% 87%

80% 73% 80% 81% 74%
Minimum Variable Merchandising Minimum Variable Merchandising
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Expansion Outlook
When looking at greenfield projects, Multiplan should add Park Shopping Canoas
(48 km2 in total GLA) after 3Q17; BR Malls should deliver Estação Cuiabá by 4Q18
with a total GLA of 43k m2 and Iguatemi is expected to deliver I Fashion Outlet
Santa Catarinaalso by 4Q18 with a total GLA of 30k m2. In addition, BR Malls and
Aliansce had already reduced its portfolio during 4Q17 through assets sales to
improve their balance sheets. BR Malls announced in December of 2017 the sale of
its full stake in Natal Shopping, Maceió Shopping, Shopping Granja Vianna and
Shopping Paralela, amounting to 76k m2 in own GLA, while Aliansce announced the
sale of a 24% stake in Caxias Shopping, representing a GLA of 26 km2.
Figure 114: Greenfield and expansion plans through 2018 Figure 115: Companies increased their GLA by 106% since 2008
Own GLA (‘000) m 2 Total GLA (‘000) m 2
-0.3% +16% +7% -0.7% +0% +0% +122% +106% +148% +101% +128% +35%
951
Own GLA ('000 m2)* Addition 2017-18 2008 3Q17
112
681
33
429 455 454
951
330 347
681 245
226
455 454 183 153 181
347
245
Source: J.P. Morgan and company data. Including multiuse projects and developments for sale. Source: J.P. Morgan and company data. Including acquisitions.
As of 3Q17 release.
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Asset Quality
Table 26: Summary of Company Portfolios – As of 3Q17
BRML* MULT** IGTA ALSC SSBR
Total GLA ('000 m2) – 3Q17 1,613 780 698 721 445
Own GLA ('000 m2) – 3Q17 951 599 415 454 347
Avg. stake – 3Q17 59% 77% 60% 63% 78%
# of assets – 3Q17 44 18 19 23 9
Occupancy as of 3Q17 95.2% 97.5% 93.3% 95.6% 93.6%
Top-5 Assets as % Sales*** 26% 52% 39% 38% 74%
# of Regions present 5 4 3 4 4
Main Region Southeast Southeast Southeast Southeast Southeast
% of GLA 61% 71% 82% 70% 52%
Main State SP SP SP RJ SP
% of GLA 25% 37% 82% 39% 36%
Total sales LTM (R$ mn) 22,304 14,442 13,153 9,204 4,831
Avg. sales / m2 / month** 1,147 1,393 1,469 1,064 905
Avg. revenues / m2 / month 119 143 127 105 85
Avg. rental rev / m2 / month 92 123 100 83 78
Avg. EBITDA / m2 / month 82 100 107 71 44
Avg. FFO / m2 / month 33 62 60 33 22
Source: Company reports.*BR Malls sold 4 assets during 4Q17, representing ~74k m2 in own GLA; **Figures for Multiplan exclude real
estate sales from revenues, EBITDA and FFO; ***In the case of Iguatemi and Aliansce this metric was based on an estimate of sales
breakdown according to GLA.
Table 27: Conversion of Sales into Revenues, EBITDA and FFO

BRML MULT IGTA ALSC SSBR
Total Rev. / Sales 10.4% 10.3% 8.6% 9.8% 9.4%
Rent Revs / Sales 8.0% 8.8% 6.8% 7.8% 8.6%
EBITDA / Sales 7.2% 7.2% 7.3% 6.7% 4.9%
FFO / Sales 2.9% 4.5% 4.1% 3.1% 2.4%
Figure 116: Sales/m2 per company

R$
1,600
1,400
1,200
1,000
800
600
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: J.P. Morgan and company estimates.
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Figure 117: Rents/m2 per company

R$/m2
120
100
80
60
40
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: J.P. Morgan and company estimates.
Although not all companies release sales and rents per m2 per shopping, based on the
information available in 3Q17 press releases, we ranked individual malls by sales/m2
and rents/m2, as shown in the figures below.
Figure 118: Rent/m2 – Top 15 Malls – Multiplan has the highest number of assets within this ranking
R$/m2
324 Multiplan Iguatemi Aliansce
255
225
187 178 172
148 158 144
139 126 135
116 102 95
Barra Shopping
Salvador
Campinas
Florianopolis
Pátio Savassi*
Iguatemi JK
Iguatemi São
Shopping
BH Shopping
Shopping Anália
Boulevard
Iguatemi Porto
Park Shopping
Diamond Mall
VillageMall
Iguatemi
Morumbi
Iguatemi
Belém
Iguatemi
Paulo
Alegre
Franco
Source: J.P. Morgan and company estimates; based on 3Q17. BR Malls and Sonae Sierra don`t release rents by asset.
Figure 119: Sales/m2 – Top 15 Malls – Multiplan has 8 names on the list followed by BR Malls with 6 names
R$/m2
2,506 Multiplan BR Malls Sonae Sierra

2,208 2,166 2,062 1,999 1,858 1,721 1,744 1,637 1,693 1,737
1,565 1,483 1,476 1,336
Shopping
Barra Shopping
Shopping Tijuca
BH Shopping
Park Shopping
Shopping Anália
Shopping Recife
Park Shopping
Norteshopping
Diamond Mall
Plaza Niterói
Shopping Villa-
Pátio Savassi
VillageMall
Plaza Sul
Morumbi
Barigüi
Lobos
Franco
Source: J.P. Morgan and company estimates; based on 3Q17. Iguatemi and Aliansce don’t release sales/m2 by asset.
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Figure 120: Portfolio age: on average, listed companies’ portfolios in Brazil are 18 years old
23
21
18
15
13
12
GSHP SSBR ALSC BRML MULT IGTA

Geographical Diversification
Table 28: Geographical diversification for listed companies as of 3Q17
BRML MULT IGTA ALSC SSBR GSHP
Total GLA ('000 m2) 951 600 419 454 347 245
States 15 7 4 9 5 6
# Malls per region
North 2 0 0 2 1 0
Northeast 6 1 0 4 0 1
Mid-West 3 1 1 1 1 1
South 6 2 5 0 1 2
Southeast 27 14 13 16 6 11
Total 44 18 19 23 9 15
% of total GLA
North 5% 0% 0% 12% 14% 0%
Northeast 11% 3% 0% 17% 0% 3%
Mid-West 5% 6% 5% 2% 22% 3%
South 18% 20% 13% 0% 12% 9%
Southeast 61% 71% 82% 70% 52% 85%
Source: J.P. Morgan, company data. As of 3Q17.
Figure 121: BR Malls: regional diversification Figure 122: Multiplan: regional diversification
5% 3%
6%
18% 11% 20%
5%
61% 71%
North Northeast Mid-West North Northeast Mid-West

Source: Company reports as of 3Q17. Source: Company reports as of 3Q17.
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Figure 123: Iguatemi: regional diversification Figure 124: Aliansce: regional diversification
0%
5% 12%
13%
17%
2%
70%
82%

Figure 125: SSBR: regional diversification Figure 126: GSHP: regional diversification
3%
12% 14% 0% 9% 3%
22%
52%
85%

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Leverage profile
In this section, we provide details on companies’ leverage ration (Net Debt to
EBITDA), debt breakdown as well as their amortization schedule
Figure 127: Companies’ net debt to annualized EBITDA

7.4x
3Q15 3Q16 3Q17
6.1x 6.1x
4.4x 4.6x
3.9x 3.9x
3.5x 3.6x
3.0x 3.1x
2.7x 2.6x 2.6x 2.7x 2.7x 2.6x
2.3x
BRML MULT IGTA ALSC SSBR GSHP

Source: Company reports and J.P. Morgan.
Figure 128: Companies’ leverage and financial burden as of 3Q17

Net Debt to EBITDA Financial expenses / Revenues
5.0x 50%
Net Debt / EBITDA Financial Results/Rev 3.9x
4.0x 3.1x 40%
2.7x 2.7x
3.0x 30%
2.3x
2.0x 20%
1.0x 10%
0.0x 0%
Figure 129: Companies’ debt breakdown as of 3Q17

In Percentage
CDI Inflation TR TJLP Others

44 2
1 3 1 6
13
34
55 37
62
79 39
28 64 9
26
17 18

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Figure 130: BR Malls amortization schedule (R$mn) Figure 131: Multiplan amortization schedule (R$mn)
603 508
496 438
404 409 413
357 376 319

326 313
320 310
253
202
157
100
2026+
2017
2018
2019
2020
2021
2022
2023
2024
2025
2017
2018
2019
2020
2021
2022
2023
2024
+
Source Company reports as of 3Q17; J.P Morgan. Source: Company reports as of 3Q17; J.P Morgan.
Figure 132: Iguatemi amortization schedule (R$mn) Figure 133: Aliansce amortization schedule (R$mn)
343 293
283 286 282
270
223
230
204
188
154
138 127 136
124
77 71 68
64
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026+
2017
2018
2019
2020
2021
2022
2023
2024
2025
+
Source: Company reports as of 3Q17; J.P Morgan. Source: Company reports as of 3Q17; J.P Morgan.
Figure 134: Sonae Sierra amortization schedule (R$mn) Figure 135: General Shopping amortization schedule (R$mn)
315 1,077
236 222
116
70
18 86 101 104 98 88
37 77 79 59
2022+
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
+
Source: Company reports as of 3Q17; J.P Morgan. Source: Company reports as of 3Q17; J.P Morgan.
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Sectors' Correlation to Forward Interest Rate

In the tables below, we show Brazilian Malls’ correlations with 1-, 2- and 5-year
forward interest rates. As expected the highest correlation is with 5 years bonds, no
matter which period of time we are looking at.
Table 29: Brazilian Malls Correlation with forward interest rates since 2012
1 year 2 years 5 years
BRML (0.06) (0.30) (0.28)
MULT (0.10) (0.38) (0.27)
IGTA (0.14) (0.41) (0.21)
ALSC (0.14) (0.36) (0.28)
SSBR (0.10) (0.23) (0.17)
Source: Bloomberg and J.P. Morgan. As of Mar-8th.
BRML (0.01) (0.28) (0.45)
MULT (0.05) (0.37) (0.50)
IGTA (0.12) (0.42) (0.51)
ALSC (0.10) (0.33) (0.45)
SSBR (0.01) (0.13) (0.19)
BRML (0.03) (0.23) (0.41)
MULT (0.06) (0.32) (0.47)
IGTA (0.21) (0.41) (0.51)
ALSC (0.13) (0.30) (0.43)
SSBR 0.01 (0.13) (0.21)
BRML 0.03 (0.15) (0.43)
MULT (0.07) (0.26) (0.48)
IGTA (0.17) (0.36) (0.53)
ALSC (0.08) (0.25) (0.43)
SSBR 0.13 (0.04) (0.23)
BRML (0.06) (0.41) (0.53)
MULT (0.19) (0.53) (0.57)
IGTA (0.23) (0.57) (0.64)
ALSC (0.01) (0.45) (0.53)
SSBR 0.02 (0.36) (0.45)
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Companies’ Financials
In this section, we compiled the financials of the Brazilian mall companies to
evaluate the main trends in the sector.
Table 34: Brazilian Malls – Income statement
R$mn 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 LTM*
Total GLA 4,346 4,381 4,386 4,421 4,388 4,387 4,374 3,837 4,152 4,396 4,374
growth yoy 0% 0% 1% 1% 1% 0% 0% 6% 8% 6% 0%
Own GLA 2,831 2,845 2,850 2,878 2,872 2,881 2,888 2,458 2,684 2,851 2,888
growth yoy -1% -1% 0% 1% 1% 1% 1% 8% 9% 6% 1%
% Average stake 65% 65% 65% 65% 65% 66% 66% 64% 65% 65% 66%
Capex 240 181 240 1,029 287 194 188 2,864 2,962 2,787 1,698
SSS -0.5% -1.0% 0.2% -0.6% 1.3% 5.7% 5.7% 11.2% 6.7% 5.4% 3.0%
SSR 6.4% 4.9% 5.9% 6.2% 6.9% 7.6% 5.7% 8.7% 10.7% 8.2% 6.6%
Occupancy rate 95.6% 95.4% 95.4% 95.7% 95.4% 94.9% 95.0% 97.2% 96.6% 96.5% 95.3%
Occupancy cost / revenues 12.1% 11.4% 11.8% 10.9% 12.0% 11.2% 11.4% 8.5% 8.9% 10.8% 11.4%
Revenues 986 967 971 1,126 996 1,005 1,007 3,088 3,442 3,803 4,134
growth qoq -11% -2% 0% 16% -11% 1% 0% NM NM NM NM
growth yoy 3% 0% -2% 1% 1% 4% 4% 21% 11% 11% 2%
Parking rev. 184 183 181 213 187 191 186 467 569 665 777
growth yoy -1% -1% 0% 1% 1% 1% 1% 30% 22% 17% 3%
Services rev. 89 82 79 77 79 79 80 275 300 324 315
growth yoy -1% -1% 0% 1% 1% 1% 1% 21% 9% 8% -5%
Others 45 46 48 48 33 29 47 157 155 182 158
growth yoy -29% -13% -24% -18% -27% -37% -1% 25% -1% 17% -20%
COGS (218) (226) (229) (233) (233) (234) (240) (804) (801) (868) (939)
Gross profit 768 741 742 893 764 771 767 2,283 2,641 2,935 3,194
SG&A (135) (149) (139) (124) (166) (151) (179) (357) (412) (464) (620)
Selling expenses (32) (40) (31) (37) (45) (41) (70) (50) (42) (53) (193)
G&A (103) (109) (107) (87) (121) (110) (109) (306) (369) (412) (427)
EBITDA 730 692 698 851 684 714 679 2,273 2,591 2,848 2,929
growth yoy 4% -5% -7% -3% -6% 3% -3% 26% 14% 10% -2%
Financial results (354) (298) (302) (288) (271) (257) (216) (594) (880) (1,066) (1,032)
Pre Income tax 423 495 296 -292 362 9 238 2,172 2,299 3,993 317
Taxes (134) (115) (121) 398 (125) 29 (32) (484) (597) (1,332) 270
Net income 172 233 200 292 230 285 301 1,185 1,113 1,053 1,107
growth yoy -35% -16% -46% -18% 34% 22% 51% 25% -6% -5% 15%
NOI 853 825 824 979 854 862 858 2,587 2,957 3,271 3,552
FFO adj. 246 306 274 409 294 369 380 1,361 1,352 1,356 1,452
growth yoy -26% -12% -18% -8% 20% 21% 39% 22% -1% 0% 14%
Source: J.P. Morgan, company data. Considers the following companies: BR Malls, Multiplan, Iguatemi, Aliansce and Sonae Sierra Brasil. *As of 3Q17.
Table 35: Brazilian Malls – Margins and ratios

Margins and ratios 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 LTM*
Gross margins 77.9% 76.6% 76.4% 79.3% 76.7% 76.7% 76.2% 73.9% 76.7% 77.2% 77.3%
change yoy (0.7)pp (2.2)pp (2.3)pp (1.2)pp (1.2)pp 0.1pp (0.3)pp 0.4pp 2.8pp 0.5pp (0.6)pp
EBITDA margins 74.0% 71.5% 71.9% 75.6% 68.7% 71.1% 67.5% 73.6% 75.3% 74.9% 70.8%
change yoy 0.9pp (3.9)pp (4.2)pp (3.4)pp (5.3)pp (0.5)pp (4.4)pp 3.1pp 1.7pp (0.4)pp (3.3)pp
Net margin 17.4% 24.1% 20.6% 25.9% 23.1% 28.3% 29.9% 38.4% 32.3% 27.7% 26.8%
change yoy (10.1)pp (4.4)pp (16.6)pp (6.3)pp 5.7pp 4.2pp 9.3pp 1.5pp (6.1)pp (4.6)pp 3.2pp
NOI margin 86.5% 85.3% 84.9% 86.9% 85.7% 85.7% 85.2% 83.8% 85.9% 86.0% 85.9%
change yoy (0.1)pp (1.5)pp (2.0)pp (1.1)pp (0.8)pp 0.4pp 0.4pp 0.0pp 0.0pp 0.0pp (0.2)pp
FFO margin 24.9% 31.6% 28.2% 36.3% 29.5% 36.7% 37.8% 44.1% 39.3% 35.6% 35.1%
change yoy (9.9)pp (4.1)pp (5.5)pp (3.7)pp 4.6pp 5.1pp 9.6pp 0.0pp (0.0)pp (0.0)pp 3.9pp
SG&A / Revenues -13.7% -15.4% -14.3% -11.0% -16.7% -15.0% -17.8% -11.5% -12.0% -12.2% -15.0%
Selling / Revenues -3.2% -4.1% -3.2% -3.3% -4.6% -4.1% -7.0% -1.6% -1.2% -1.4% -4.7%
G&A / Revenues -10.5% -11.3% -11.1% -7.7% -12.1% -11.0% -10.8% -9.9% -10.7% -10.8% -10.3%
Effective tax rate 31.6% 23.1% 41.0% 136.3% 34.4% -311.8% 13.4% 22.3% 26.0% 33.4% -85.3%
Effective tax rate (Cash) -22.5% -11.3% -29.6% 32.1% -25.6% -520.9% -23.3% -9.6% -10.7% -8.4% -134.4%
ROE* 4.8% 5.9% 5.2% 7.6% 5.4% 6.4% 6.4% 8.7% 8.0% 7.1% 6.4%
Net Debt / Equity 102% 100% 97% 103% 92% 67% 70% 113% 116% 110% 70%
Net Debt / EBITDA 3.3x 3.4x 3.3x 3.5x 3.2x 2.7x 2.7x 2.9x 3.2x 3.4x 2.7x
Source: J.P. Morgan, company data. *ROE based on adjusted FFO. Considers the following companies: BR Malls, Multiplan, Iguatemi, Aliansce and Sonae Sierra Brasil. *As of 3Q17.
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Per Company Data

Table 36: SSS per company
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 1.2% -1.7% -0.6% -0.6% 0.4% 5.3% 4.6% 6.5% 3.0% -0.5% 3.4%
Multiplan 1.6% 2.3% 2.8% 1.5% 3.2% 6.7% 7.3% 7.9% 1.8% 1.9% 5.7%
Iguatemi 1.8% 3.0% 1.0% 0.0% 1.7% 4.1% 5.9% 7.8% 5.5% 1.1% 3.9%
Aliansce -4.8% -7.0% -2.3% -4.3% -2.0% 4.0% 3.1% 7.2% -2.8% -4.6% 1.7%
SSBR -2.1% -1.7% 0.3% 0.5% 3.1% 8.3% 7.7% 7.8% 0.4% -1.2% 6.4%
Table 37: SSR per company

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 7.4% 2.2% 2.6% 5.3% 6.5% 7.5% 4.3% 7.9% 7.3% 4.4% 6.1%
Multiplan 5.8% 6.0% 8.4% 8.1% 8.7% 8.6% 6.7% 8.8% 7.4% 7.1% 8.0%
Iguatemi 6.5% 6.4% 7.4% 6.5% 7.3% 6.3% 5.8% 9.1% 6.8% 6.4% 6.5%
Aliansce 7.1% 5.7% 6.4% 6.3% 5.0% 6.5% 5.0% 7.6% 4.7% 6.4% 5.5%
SSBR 5.0% 4.4% 4.7% 5.0% 6.8% 9.1% 6.7% 10.2% 7.0% 5.0% 7.5%
Table 38: Occupancy per company

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 96.8% 95.8% 95.5% 96.2% 96.1% 94.7% 95.2% 97.4% 96.9% 96.0% 95.3%
Multiplan 97.9% 97.6% 97.4% 97.3% 97.4% 97.7% 97.5% 98.7% 98.3% 97.0% 97.5%
Iguatemi 94.0% 93.8% 93.3% 93.4% 93.0% 93.1% 93.3% 95.3% 94.6% 93.5% 93.1%
Aliansce 96.1% 96.2% 95.8% 96.0% 96.0% 95.7% 95.6% 97.5% 97.2% 96.0% 95.8%
SSBR 93.4% 93.6% 94.8% 95.4% 94.6% 93.4% 93.6% 95.8% 93.0% 95.4% 93.9%
Table 39: Occupancy Cost per company

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 12.1% 11.3% 11.7% 10.7% 11.8% 11.2% 11.2% 0.0% 0.0% 9.4% 11.4%
Multiplan 13.9% 13.1% 13.5% 12.1% 14.0% 12.8% 13.2% 12.7% 12.6% 13.1% 13.3%
Iguatemi 12.7% 11.7% 12.5% 11.5% 12.7% 11.5% 12.0% 11.6% 11.6% 12.0% 12.1%
Aliansce 11.4% 11.0% 11.0% 10.1% 11.7% 10.7% 10.7% 9.6% 10.2% 10.8% 11.0%
SSBR 10.2% 10.1% 10.1% 10.0% 10.0% 9.8% 9.7% 9.5% 10.0% 10.0% 9.8%
Table 40: Total GLA (‘000 m2)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 1,638 1,638 1,638 1,646 1,613 1,613 1,613 1,691 1,638 1,646 1,613
Multiplan 858 862 862 861 863 863 849 854 856 861 849
Iguatemi 715 746 746 746 746 746 746 661 715 746 746
Aliansce 690 690 695 722 721 721 721 675 687 722 721
SSBR 445 445 445 445 445 445 445 450 461 445 445
Table 41: Average participation on total GLA

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 58% 58% 58% 58% 59% 59% 59% 58% 58% 58% 59%
Multiplan 76% 76% 76% 78% 78% 78% 80% 76% 76% 78% 80%
Iguatemi 62% 61% 61% 61% 61% 61% 61% 64% 62% 61% 61%
Aliansce 63% 63% 63% 62% 62% 63% 63% 65% 63% 62% 63%
SSBR 78% 78% 78% 78% 78% 78% 78% 79% 79% 78% 78%
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Table 42: Own GLA (‘000 m2)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 958 958 958 962 951 951 951 987 958 962 951
Multiplan 649 652 653 668 675 674 681 647 648 668 681
Iguatemi 443 455 455 455 455 455 455 425 443 455 455
Aliansce 434 434 437 446 445 454 454 438 431 446 454
SSBR 347 347 347 347 347 347 347 354 364 347 347
Table 43: Revenues (R$mn)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 331 322 328 389 330 325 322 1,395 1,447 1,370 977
Multiplan 279 270 270 306 279 284 291 1,126 1,079 1,124 854
Iguatemi 160 163 161 184 167 169 170 590 636 668 506
Aliansce 132 131 128 155 135 140 136 507 534 545 411
SSBR 84 82 83 93 85 88 87 319 331 342 260
Table 44: NOI Margin

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 90.5% 89.7% 89.6% 90.8% 88.9% 88.2% 88.3% 91.8% 91.8% 90.2% 88.4%
Multiplan 87.7% 86.9% 85.1% 90.2% 89.5% 90.2% 87.1% 84.3% 89.0% 87.6% 88.9%
Iguatemi 86.3% 83.2% 85.9% 84.9% 84.5% 82.9% 85.2% 80.6% 81.0% 85.1% 84.2%
Aliansce 80.4% 80.3% 78.6% 79.2% 79.0% 80.4% 79.4% 85.4% 84.8% 79.6% 79.6%
SSBR 76.3% 74.9% 72.9% 77.1% 74.1% 76.1% 76.9% 76.3% 75.9% 75.4% 75.7%
Table 45: EBITDA (R$mn)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 246 230 243 297 223 211 209 1,111 1,161 1,017 643
Multiplan 199 195 184 238 187 212 181 792 788 816 581
Iguatemi 129 122 128 143 126 130 134 454 499 521 390
Aliansce 92 91 87 106 89 99 95 370 388 376 283
SSBR 64 53 55 67 59 62 59 228 234 240 181
Table 46: EBITDA margin

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 74.3% 71.6% 74.1% 76.4% 67.4% 64.9% 64.9% 79.6% 80.2% 74.2% 65.8%
Multiplan 71.3% 72.4% 68.3% 77.8% 67.2% 74.9% 62.2% 70.4% 73.0% 72.6% 68.0%
Iguatemi 80.4% 74.7% 79.4% 77.7% 75.2% 77.0% 78.9% 77.1% 78.4% 78.0% 77.0%
Aliansce 69.5% 70.0% 67.9% 68.7% 66.1% 70.9% 70.0% 73.0% 72.6% 69.0% 69.0%
SSBR 76.6% 64.5% 66.1% 72.4% 69.8% 70.3% 68.3% 71.6% 70.7% 70.0% 69.5%
Table 47: Financial results as % of revenues

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls -53% -41% -38% -29% -34% -34% -22% -34% -39% -35% -30%
Multiplan -18% -17% -20% -21% -21% -20% -17% -15% -17% -19% -19%
Iguatemi -32% -32% -33% -28% -26% -25% -25% -19% -25% -31% -25%
Aliansce -45% -40% -43% -29% -32% -26% -30% -40% -41% -39% -29%
SSBR -22% -18% -18% -15% -17% -14% -16% -17% -20% -18% -16%
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Table 48: FFO adj. (R$mn)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 33 69 80 118 80 63 114 463 435 299 258
Multiplan 115 140 96 132 93 160 121 552 530 483 374
Iguatemi 64 55 60 77 69 75 79 296 286 257 223
Aliansce 14 26 21 57 33 46 44 136 122 118 122
SSBR 20 16 17 25 19 25 22 93 86 78 66
Table 49: FFO margin

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 10.0% 21.3% 24.3% 30.3% 24.3% 19.6% 35.5% 33.2% 30.0% 21.8% 26.4%
Multiplan 41.1% 52.1% 35.5% 43.1% 33.2% 56.6% 41.5% 49.0% 49.1% 42.9% 43.8%
Iguatemi 40.1% 33.5% 37.4% 42.1% 41.1% 44.2% 46.7% 50.1% 45.0% 38.4% 44.0%
Aliansce 10.3% 19.8% 16.7% 37.0% 24.5% 32.7% 32.0% 26.8% 22.8% 21.6% 29.8%
SSBR 24.1% 19.9% 19.9% 26.8% 22.6% 27.8% 25.8% 29.1% 26.1% 22.8% 25.4%
Table 50: Total Cash (R$mn)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 733 511 406 383 438 2,211 1,033 674 616 383 1,033
Multiplan 455 325 671 467 1,117 1,016 1,081 326 372 467 1,081
Iguatemi 291 301 466 557 364 359 561 657 393 557 561
Aliansce 116 89 379 520 638 700 469 354 140 520 469
SSBR 249 230 235 256 206 175 435 325 265 256 435
Table 51: Net Debt to EBITDA

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 4.8x 4.9x 4.6x 3.7x 4.7x 2.9x 2.7x 4.0x 4.2x 4.4x 3.4x
Multiplan 2.3x 2.5x 2.6x 2.6x 2.6x 2.3x 2.7x 1.3x 1.3x 1.4x 2.5x
Iguatemi 3.4x 3.6x 3.5x 2.9x 3.3x 3.2x 3.1x 1.4x 1.3x 1.3x 3.2x
Aliansce 4.2x 4.3x 3.6x 3.2x 3.5x 3.3x 3.9x 1.0x 1.0x 0.9x 3.6x
SSBR 2.2x 2.8x 2.6x 2.1x 2.3x 2.3x 2.3x 2.6x 2.7x 2.3x 2.3x
Table 52: Total Debt (R$mn)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
BR Malls 5,458 5,038 4,927 4,820 4,634 4,652 3,298 5,165 5,535 4,820 3,298
Multiplan 2,274 2,244 2,573 2,923 3,047 2,989 3,005 2,169 2,266 2,923 3,005
Iguatemi 2,026 2,028 2,244 2,240 2,014 2,016 2,236 2,077 2,083 2,240 2,236
Aliansce 1,652 1,652 1,630 1,873 1,896 1,991 1,955 1,865 1,677 1,873 1,955
SSBR 825 823 818 814 743 735 977 914 891 814 977
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Companies’ provisions analysis

In this section, we dig deep into companies’ accounts receivables and provisions to
have a relative view of their provision levels and potential upside and downside. We
also address what would be the potential impacts from the IFRS 9 (measurement of
financial liabilities) adoption, expected for 1Q18.
Table 53: Summary of companies’ accounting receivables and coverage ratios as of 3Q17
BRML MULT* IGTA ALSC SSBR
Total Provisions (R$mn) (173) (46) (41) (73) (36)
Provisions % of total receivables (Ex-Real Estate) 30% 17% 27% 60% 49%
Coverage ratio (>90 days) 108% 84% 92% 105% 139%
Coverage ratio (>180 days) 121% 93% 95% 121% 168%
Net Delinquency rate 9.5% 2.8% 1.5% 2.8% 5.3%
Source: J.P. Morgan estimates, Company data. *Multiplan past due receivables are not adjusted by Real Estate receivables. **We are
assuming companies will follow Brazil Central Bank rules regarding consumers’ loans provisions.
Note on Multiplan receivables: The company’s past due receivables are not
adjusted by Real Estate past due receivables; therefore making its coverage ratio not
fully comparable with peers. Keep in mind that Real Estate receivables are not
included in provisions as the asset itself is the guarantee for the receivable.
Provisions evolution
In the charts below, we show the recent increase in companies’ provisions in absolute
terms as well as the evolution in relative terms (provisions as % of total receivables
ex-Real Estate). It is worth noting that BR Malls and Aliansce presented the
highest increases in provisions in absolute terms, as those were the companies
that suffered the most during the past economic crisis. From 1Q15 until 3Q17
BRML’s provisions increased by 260% to R$173mn, while ALSC’s provisions
increased 130% to R$73mn. When looking at relative terms (provisions as % of total
receivables Ex Real Estate), BRML, ALSC and SSBR had the highest increases as
well.
Figure 136: Provisions in absolute terms Figure 137: Provisions as % of receivables

R$mn
200 70%
BRML MULT IGTA BRML MULT IGTA
60%
ALSC SSBR ALSC SSBR
150 50%
40%
100
30%
50 20%
10%
0 0%
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: J.P. Morgan estimates, Company data. Source: J.P. Morgan estimates, Company data.
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Accounts receivables duration – Stable in the past quarters

Despite what we believe are investors’ concerns regarding a potential increase in the
duration of companies’ receivables due to leasing renegotiations, this number has
been flattish over the past 2 years. However, it is important to flag that there is are
relevant gaps among companies, as can be observed in the chart below. In our view,
these gaps indicate companies’ degrees of flexibility regarding contract
renegotiations. According to our conversation with BR Malls, its superior duration of
receivables at around 140 days is a consequence mostly of the company’s leasing
renegotiations over the past years. On the other hand, Iguatemi and Multiplan, which
have similar portfolios, have receivables duration at around 65 and 80 days,
respectively, while Aliansce and Sonae Sierra Brasil have the lowest days of
receivables in the sector, close to 40 days. Our calculation is based on receivables to
expire (ex-real estate, when this information is available), divided by rental revenues
as reported by companies.
Figure 138: Accounts Receivables duration Ex-Real Estate

200
BRML MULT IGTA ALSC SSBR Avg.
150
100
50
0
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Coverage ratio Evolution

The coverage ratio, total provisions divided by late payment by more than 90 days
and by late payments with more than 180 days, provides investors with a relative
view on how much cushion companies have to support small changes in
delinquencies without having to increase provisions, in our view.
Figure 139: Coverage Ratio ( > 90 Days) Figure 140: Coverage Ratio (> 180 days)
250% 300%
200% 250%
200%
150%
150%
100%
100%
50%
50%
BRML MULT IGTA ALSC SSBR BRML MULT IGTA ALSC SSBR
0% 0%
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
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IFRS 9: Minimal impact for listed names

Adoption: The adoption of IFRS 9, regarding the measurement of the value of
financial assets, should appear in 1Q18 results, which are expected to be released
during May this year.
What changes? According to IFRS 9, companies will have to calculate their

provisions based on forward looking estimates, regarding the potential recovery of
past due payments, which means that different companies could have different
provision criteria based on their expectation of potential recovery. In our
calculations, we assume companies would adopt Central Bank provision criteria for
Consumer loans as shown in the table below, which is, in our view, more
conservative than the IFRS 9 rules, since it will be implemented at the end of one of
the worst economic crises in Brazil.
Table 54: Central bank provision Criteria for Consumer loans, used as our worst case scenario
Class Days of delay Provision
AA - 0.0%
A 1-15 0.5%
B 15-30 1.0%
C 31-60 3.0%
D 61-90 10.0%
E 91-120 30.0%
F 121-150 50.0%
G 151-180 70.0%
H >180 100.0%
Source: Central Bank. Click here to access the regulation.
Potential impacts – JPM worst case scenario: According to our conversation with
one of the main auditing companies in the country, it is difficult to calculate the
potential impact from IFRS 9, as the impact will depend on company’s expectations
regarding the potential recovery of past due payments, considering the outlook for
the coming quarters. Additionally, the potential impact, either positive or negative,
will be booked directly in the company’s equity, not impacting the P&L. Based on
our calculations, the impact on the company's provisions should be small, companies
would have to increase their provisions by 2-10%.These increases in provisions
represent less than 0.3% of companies’ equity, excluding the impact for BRML 0.5%
of its equity. BR Malls would be the most impacted by IFRS 9, as its provisions are
based on late payments with more than 360 days vs 180 days for the other
companies.
Table 55: Potential impact from IFRS 9

Current Additional Current Equity
Provisions (R$mn) Provisions* (R$mn) Increase (R$mn) Impact
BRML 173 49.1 28% 11,181 0.4%
MULT 46 0.8 2% 5,139 0.0%
IGTA 41 0.7 2% 2,798 0.0%
ALSC 73 7.1 10% 2,509 0.3%
SSBR 36 3.4 10% 3,583 0.1%
Source: J.P. Morgan estimates, Company data. *Additional provisions were calculated assuming companies would have to apply the
same regulation Central Bank applies on consumer loans provisions. As of 3Q17.
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Account Receivables breakdown

Table 56: BR Malls accounting receivables aging
R$ in millions
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
To expire (Ex- Real Estate) 415.6 429.1 450.8 463.5 407.1 412.5 417.7 466.0 405.9 404.5 386.4
Real Estate Receivables - - - - - - - - - - -
Due to up to 30 days - - - - - - - - - - -
Due to up to 31-60 days 6.0 20.8 6.5 16.2 21.3 18.3 19.1 28.0 23.5 19.8 18.8
Due to up to 61-90 days 4.9 6.1 5.3 15.9 14.0 8.2 5.6 6.9 13.5 8.3 6.5
Due to up to 91-180 days 7.7 8.7 8.4 16.9 14.8 23.1 15.2 15.8 23.2 24.7 16.8
Due to up to 181-360 days 9.0 9.7 9.7 10.1 19.9 20.3 25.6 24.7 22.6 29.4 36.2
Due to up >360 days 42.2 45.1 45.8 47.5 53.6 62.5 67.8 71.3 85.6 94.8 106.5
Total 485.4 519.4 526.5 570.2 530.7 544.9 551.0 612.7 574.2 581.5 571.1
Table 57: Multiplan accounting receivables aging

R$ in millions
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
To expire (Ex-Real Estate) 188.0 189.1 195.7 234.4 189.7 208.1 214.6 251.5 192.4 204.3 206.0
Real Estate Receivables 164.3 161.5 159.3 150.2 151.7 147.2 136.2 133.2 128.8 113.3 103.5
Due to up to 30 days 3.4 3.1 3.9 5.7 6.2 7.2 5.8 8.5 6.4 5.0 7.5
Due to up to 31-60 days 2.5 2.3 2.9 2.7 5.5 3.5 3.8 3.2 4.0 3.0 3.1
Due to up to 61-90 days 3.1 1.7 1.8 2.6 6.0 3.9 2.6 4.6 4.8 3.4 2.1
Due to up to 91-120 days 2.3 1.0 1.1 2.1 3.0 2.9 3.2 3.1 3.6 2.8 1.5
Due to up to 121-180 days 2.7 5.2 2.0 2.5 3.5 3.4 4.9 4.9 6.3 6.9 4.1
Due to up >180 days 22.5 22.2 27.7 27.8 31.8 37.5 39.8 42.3 45.7 48.1 49.3
Total 388.9 386.1 394.5 428.1 397.3 413.6 410.8 451.3 392.0 386.9 377.1
Table 58: Iguatemi accounting receivables aging

R$ in millions
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Real Estate Receivables 97.2 94.3 116.2 130.1 133.4 133.9 126.2 112.0 99.7 97.9 112.0
Due to up to 30 days 3.4 3.7 4.4 4.2 4.7 3.3 4.0 4.5 3.8 4.6 4.0
Due to up to 31-60 days 18.0 19.0 20.4 20.5 1.0 0.8 2.1 2.9 3.3 2.4 2.4
Due to up to 61-90 days 2.4 1.8 1.9 2.0 6.2 7.6 0.9 1.4 3.9 2.0 1.3
Due to up to 91-120 days 11.0 9.2 7.4 7.1 0.8 1.5 1.3 1.4 1.7 1.2 1.6
Due to up to 120-360 days 2.1 0.8 1.5 1.6 7.5 9.7 12.7 11.5 11.3 11.5 11.6
Due to up >360 days 1.1 1.6 0.8 1.1 21.4 21.6 22.7 22.6 25.3 30.2 31.8
Total 236.2 227.8 256.7 285.3 271.5 279.7 276.7 273.1 241.0 251.6 263.7
Table 59: Aliansce accounting receivables aging

R$ in millions
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
To expire 34.4 37.6 29.6 52.6 32.9 34.5 35.1 60.6 40.9 41.7 43.2
Due to up to 30 days - - - - - - - - - - -
Due to up to 31-60 days - - - - - - - - - - -
Due to up 90 days 8.5 14.1 16.3 18.0 22.4 20.6 16.9 14.9 14.8 11.4 10.0
Due to up to 91-180 days 3.9 5.9 5.1 6.1 8.3 11.9 12.8 10.6 9.2 11.8 8.8
Due to up to 181-360 days 4.8 4.0 7.3 7.3 8.8 11.1 15.6 17.9 17.6 15.4 17.3
Due to up >360 days 34.1 27.8 21.0 22.9 26.9 30.8 33.2 32.0 33.8 38.9 43.4
Total 85.7 89.5 79.2 107.0 99.3 109.0 276.7 136.0 116.3 119.3 122.7
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Table 60: Sonae Sierra Brasil accounting receivables aging

R$ in millions
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Due to up to 30 days 2.7 2.7 2.4 2.6 3.0 3.1 3.0 2.4 3.4 3.4 4.0
Due to up to 31-60 days 1.9 1.7 1.6 1.7 2.2 2.4 2.0 1.6 2.0 2.3 2.2
Due to up to 61-90 days 1.1 1.5 1.4 1.4 2.1 1.7 1.6 1.6 3.0 1.6 1.7
Due to up to 91-180 days 2.6 3.4 3.2 3.0 3.1 3.3 3.8 4.3 3.0 5.0 4.5
Due to up >180 days 10.7 9.1 11.0 9.8 10.8 9.4 11.5 15.5 17.9 19.6 21.3
Total 54.7 49.7 53.8 60.9 54.5 62.2 276.7 72.4 66.6 71.2 72.6
How management compensation grew in the past years?

In this section, we analyze management compensation for the 5 companies under our
coverage, BRML, MULT, IGTA, ALSC and SSBR. Over the past 5 years, those
companies spent on average around 9% of their reported FFO with remuneration,
totaling R$655mn, being around 70% represented by variable compensation (bonuses
+ Stock Option).
When looking at compensation per executive, BR Malls had the highest total
compensation in the past years 5 years, with an annual average of R$11mn/year,
followed by Multiplan at R$5mn, while Sonae Sierra Brasil has the lowest at R$2mn.
Over the past 5 years, companies’ executive compensation grew 30% on aggregated
terms while market cap grew 28%, both below IPCA inflation of 40% in the period.
Table 61: Total Management Compensation Breakdown – Average 2012-16

R$ million
BRML MULT IGTA ALSC SSBR Total
Total Comp (2012-16) 340.1 128.8 68.4 87.4 30.5 655.2
Fixed Salary 6% 34% 57% 58% 64% 27%
Bonus 42% 46% 24% 30% 36% 39%
Stock Option 52% 20%* 19% 12% 0% 34%
% of Top Line 5% 2% 2% 4% 2% 4%
% of EBITDA 6% 4% 3% 5% 4% 5%
% of FFO 16% 5% 5% 14% 7% 9%
Annual avg. per Executive 11.0 5.2 2.4 2.9 1.9 4.7
Comp. per Executive 2017e 8.9 7.2 4.7 2.6 2.4 5.2
Growth YoY -24% 18% 34% -1% 7% -3%
EBITDA, FFO,
EBITDA, Long
Occupancy, EBITDA, Leasing NOI, EBITDA, Net
Term EBITDA, Net
Main Remuneration Metric Delinquency and Spread, Income, Occupancy -
Performance Income and NAV
Share Occupancy, Capex and Sales
Metrics
Performance
Source: Companies Reports, J.P. Morgan.; * Includes labor charges on stock options program.
Despite being above the sector’s average, we highlight BR Malls’ compensation

scheme based on variable remuneration, representing 94% of the company’s total
comp. in the past 5 years on average, 42pp coming from bonuses and 52pp from
stock options. It is worth mentioning that we adjusted BR Mall’s stock options
compensation based on the Black & Scholes model presented by the company in
order to make it comparable to peers, as the company publishes stock options
remuneration based on potential gains as of current prices. On the other hand, Sonae
Sierra Brasil has the highest exposure to fixed remuneration over recent years,
partially explained by the non-existence of a stock options plan.
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Figure 141: Management compensation breakdown – Avg. 2012-16
19% 12% 20%

36%
30% 52%
24%
46%
64% 57% 58% 42%

34%
6%
SSBR IGTA ALSC MULT BRML
Fix + Benefit Bonus Stock Option
Source: Companies Reports, J.P. Morgan.
On a relative analysis basis, BR Malls and Aliansce show the highest total
management compensation compared to net revenues, at 5.1% and 3.7%,
respectively, above the sector average of 3.5%, while Sonae Sierra Brasil has the
lowest level at 2.0%. When comparing executive remuneration as a % of reported
FFO, results are similar for Aliansce and BR Malls with the highest ratio, at 14% and
16%, respectively; in the case of Sonae Sierra Brasil, the name jumps to the third
largest comp vs the lowest when based on revenues.
Figure 142: Total Remuneration as % of Top Line and FFO – Avg. 2012-16
16.1%
13.6%
9.3%
6.6%
5.1% 5.3% 5.1%
3.7% 3.5%
2.0% 2.4% 2.5%
SSBR MULT IGTA ALSC BRML Avg

As % of Top Line As % of FFO
When comparing management total compensation vs companies’ market cap in the

period between 2011 and 2016, it is interesting to note that after clear growth in
executive remuneration between 2012 and 2015, this index jumped from 0.38% to
0.60% in 2015. In 2016, this index contracted to 0.5%, impacted by the Brazilian
economic crisis. For 2017, based on companies’ expected remuneration, this index
should be at 0.40%, back to 2012 levels. It is worth mentioning that BRML is
quickly converting to the sector average after a peak of 1.1% in 2015, which, in our
view, is a result of the recent changes in the company’s board.
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Figure 143: Management total remuneration divided by company’s market cap.

1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
ALSC BRML IGTA MULT SSBR Average
0.0%
2011 2012 2013 2014 2015 2016 2017E
Source: Bloomberg, Companies Reports, J.P. Morgan.
When looking at compensation variation over the years, Iguatemi showed the highest
growth in annual average management comp from 2012-16 as it was up 127% vs the
company’s market cap expansion of 71%, also the highest among peers. It is worth
mentioning that the company came from a lower base in 2012 vs peers with an
average remuneration of R$1.5mn vs the sector average of R$4.0mn. In the case of
BR Malls, the company posted a 10% contraction in market cap from its peak in
2012 until 2016, while its executives’ average annual compensation grew 4% in the
period. Is it worth mentioning that since companies have stock options plans, when
shares go up, total remuneration also goes up, which impacted the causality study
between remuneration and companies’ performance.
Figure 144: Market Cap Variation vs. Total. Comp. Average per Executive between 2012 and 2016
127%
Mkt Cap Comps
71% 65%
55% 57%
47%
28% 30%
4%
-7% -10%
-28%
IGTA MULT ALSC BRML SSBR Total
Source: Bloomberg, Companies Reports, J.P. Morgan.
Table 62: Average Annual Total Compensation per Executive

R$ million
2011 2012 2013 2014 2015 2016 2017e* Avg. 2012-16
BR Malls 9.6 11.2 10.9 11.3 9.9 11.7 9.2 11.0
Multiplan 3.7 4.0 4.7 5.2 5.8 6.2 7.2 5.2
Aliansce 2.1 2.9 2.4 3.3 3.3 2.7 2.6 2.9
Iguatemi 1.3 1.5 2.0 2.1 2.8 3.5 4.7 2.4
Sonae Sierra 1.3 1.4 1.7 1.9 2.2 2.3 2.4 1.9
Source: Company Reports; J.P. Morgan. *Companies estimates regarding 2017 compensation including bonus and stock option.
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Companies Long Term Compensation

Although stock option plans are the most common way to remunerate executives
over the past years, companies have recently migrated away from them or include
other types of remuneration schemes to incentivize its executives. Currently, both
Multiplan and BR Malls have alternative programs; Multiplan has a program based
on Phantom shares, while at BR Malls executive compensation will depend on how
much the company’s shares performed on a relative basis. In our view, the main
reason to use alternative programs is to reduce shareholders’ dilution and the legal
complexity of stock option plans given Brazil’s legislation.
Since their IPO, companies have approved 28 stock option programs in

approximately 10 years, 11 from BRML, 9 from MULT, 5 from ALSC and 3from
IGTA. On the other hand, SSBR never had a stock option plan. Its remuneration is
based on the change in asset’s NAV based on a 3rd party valuation.
Overall, stock options plans in Brazil have a 5 year vesting with the strike price
defined by the average price of the past 20-30 trading days in which a discount could
be applied. Moreover, this price is usually adjusted by inflation, either IPCA or
IGPM and dividends. It’s worth noting that in the case of Multiplan, the strike price
is not adjusted for dividends.
In the table below, we also show the potential gain to executives based on the options
granted (vested and non-vested), but not exercised and considering 1Q17 strike price.
Even though BR Malls’ remuneration was above average, its existing stock option
plan will generate the lowest potential gain among the listed companies at R$20mn
vs R$40mn for Multiplan, not including the potential gain from phantom shares of
around R$80mn, in case the program could be fully executed at current prices and
R$25mn for Iguatemi.
Table 63: Long Term Compensation Plan – Stock Options

BRML* MULT IGTA ALSC
Past 30 Trading Days; Past 20 Trading Days; Past 30 Trading days; Past 20 Trading Days;
Strike Price – Definition
20% Discount No Discount 10% discount No Discount
Strike Price – Adjustment IGP-M IPCA IPC-DI, Dividend IPCA, Dividend
First Vesting 1 Year (+ 6M Lock-up) 2 Years 1 Year 1 Year
Vesting per Year 20% 33.3% 20% 25%
Maximum Dilution 10% 7% 3% 7%
Expiration (Years) 5** 7 7 5
# of programs since IPO 11 9 3 5
# Programs Still Opened 3 3 1 1
Options to Be Exercised (mn) 2.9 4.1 1.5 0.380
% Shares Outstanding 0.34% 2.04% 0.85% 0.19%
Avg. Strike Price as 1Q17 (R$) 6.75 64.17 21.05 29.20
Current Price 13.55 73.99 37.80 17.01
Executives Potential Gain (R$mn) *** 20.0 40.1 25.1 0
% of Top Line 2017e 1.5% 3.2% 3.6% -
% of EBITDA 2017e 2.0% 4.4% 4.8% -
% of FFO 2017e 4.2% 6.5% 8.3% -
Source: Companies Reports, J.P. Morgan. *BRML will not have new stock option plans in the future de the approval of Performance share plan. **BRML first 6 program had a 10 years expiration.
***It doesn’t represent an accounting impact since companies are already doing to linearization of this impact.
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For both BRML and MULT management remuneration programs listed in the table
below will not involve new share issuance. MULT’s executives gain a spread
between share price at the moment the program was created and market price at the
termination of the program, while in the case of BRML executives gain more share
(acquired in the market) if BRML share outperform peers.
Table 64: Long Term Compensation Plan – Other Programs as of 1Q17

BRML MULT
Long Term Compensation Plan Share Performance Phantom Stocks
Price – Definition Current price on approval Past 20 Trading Days
Price – Adjustment Share performance, Dividend IPCA
First Vesting 2 Years 2 Years
Vesting per Year 25% 33.3%
Maximum Dilution NM NM
Expiration (Years) 5 4
# of programs since IPO 0* 2
# Programs Still Opened 0 2
Options to Be Exercised (mn) 11.5 5.0
% Shares Outstanding 1.61% NM
Avg. Strike Price as 1Q17 (R$) NA 57.38
Current Price 13.55 73.99
Potential Gain (R$mn) NA 82.8
% of Top Line 2017 - 6.7%
% of EBITDA 2017 - 9.1%
% of FFO 2017 - 13.4%
Source: Companies Reports, J.P. Morgan. *BR Malls have not approved yet any plan based on performance share.
Summary of companies’ long term remuneration plan

Aliansce
As at the end of 1Q17, Aliansce had 2 stock option plans in place called 4th program
and 5th program totaling 380k shares (4th Program 94k and 5th Program 285k) with
current strike prices at R$23.37 and R$31.14 respectively, meaning that both are out
of the money since Aliansce share is currently at R$17.0. The 4th program, was
issued in March 2013 with an exercise price of R$16.80 vs share price of R$17.48,
while the 5th program was issued on 2013 having a strike price of R$23.64 vs share
price of R$22.66 back them. Those programs have vesting of 4 years (25% per year)
with no vesting in the 1st year.
Table 65: Aliansce existing Stock Option Plan – As of 1Q17

Options Remaining Strike price Strike price as of Potential
Creation Exercised Price
issued options (Original) 1Q17 Gain
Program 4 2012 115,958 21,277 94,681 16.80 23.37 17.01 0
Program 5 2013 335,000 50,000 285,000 23.64 31.14 17.01 0
Total 450,958 71,277 379,681 29.20 0
BR Malls
Recently BR Malls approved a Share Performance plan, in which selective
executives will have long term compensation linked to stock performance vs the peer
group that includes the liquidity weight performance of Multiplan, Iguatemi,
Aliansce, Sonae Sierra Brasil and General Shopping. Executives will receive shares
with vesting of 5 years (25% per year starting in the 2nd year). As approved in April
2017, 11.5mn shares are available to be distributed. BR Malls will use held in
treasury shares, therefore will not dilute its shareholder base.
Although it is hard to measure how much the BRML management team can earn
based on performance share, we believe this remuneration could reach as much as
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R$240mn over the next 5 years, assuming the board will approve the maximum
amount of the plan or 11.5mn shares and that it will outperform peers by 8pp each
year. Our calculation assumes that the stock would be up 8% every year while peers
would have a flat performance. This compares with R$320mn paid in bonus and
stock options over the past 5 years.
Table 66: BR Malls Variable Remuneration Rules – As of 1Q17

BRML perf. vs peers Remuneration 1Y 2Y 3Y 4Y 5Y Total Shares (mn)
< -8% 0% 0 0.0 0.0 0.0 0.0 0.0
-8% to 0% 75% 0 2.2 2.2 2.2 2.2 8.6
0% to 8% 100% 0 2.9 2.9 2.9 2.9 11.5
> 8% 125% 0 3.6 3.6 3.6 3.6 14.4
Source: Company Reports, J.P. Morgan.
Even though BR Malls will not have new plans, the company currently has 3 stock
options plans opened. Considering that Program 11, approved in 2015, is only for
employees and not for management, the 2 other programs (7 and 10) total 2.9mn
options to be exercised and resulting in a potential gain of R$20mn based on an
average strike price of R$6.75/share.
Table 67: BR Malls existing Stock option program as of 1Q17

Options Remaining Strike price Strike price as Potential
issued options (Original) of 1Q17 Gain (R$mn)
Program 7 2012 8,151,000 8,073,000 78,000 15.98 6.75 13.55 0.5
Program 10 2014 7,150,000 4,290,000 2,860,000 14.94 6.75 13.55 19.4
Program 11* 2015 520,000 208,000 312,000 11.74 6.75 13.55 2.1
Total (ex-P11) 15,301,000 12,363,000 2,938,000 6.75 20.0
Total 15,821,000 12,571,000 3,250,000 6.75 22.1
Source: J.P. Morgan estimates, Company data; * Program 11, excluding management team. As of 3Q17.
Iguatemi
Currently, the company has only 1 stock option program opened which was approved
in 2012. This program had 3.3mn options to be exercised with an initial strike price
of R$18.00 based on the previous 30 days of trading, which compares with the
company’s average share price of R$19.43 during 2012. This program is divided in 5
lots of 20%, with the 1st vesting in 2013. Executives have 7 years to convert their
options, meaning that the program is valid until 2019. Currently there are 1.5mn
options under this program to be exercised with a strike price of R$21.15 as of 1Q17,
adjusted by IPCA and dividends implying a potential gain of up to R$25mn,
considering the current price. Given that this program is close to the end, we believe
Iguatemi could approve a new stock option plan in the coming quarters.
Table 68: Iguatemi existing Stock option program as of 1Q17

issued options (Original) of 1Q17 Gain (R$mn)
Program 3 2012 3,278,000 1,778,015 1,499,985 18.00 21.05 37.80 25.1
Total 3,278,000 1,778,015 1,499,985 21.05 25.1
Source: J.P. Morgan estimates, Company data. As of 3Q17.
Multiplan
Multiplan has 3 stock options plans still opened (Program 7, 8 and 9), the least recent
being approved in 2012. Together, the three plans have a total of 4.1mn shares to be
exercised until 2020. As of 1Q17, the average strike price of the programs is
R$64.17, implying a gain of R$40mn. All 3 programs are divided into 3 tranches,
equally divided and vesting period of 2 years, totaling 5 years each. As established
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(55-11) 4950-6712 05 April 2018
by the board, maximum dilution is at 7%. In addition to it, Multiplan has a phantom
stock program, which does not involve the issuance of new shares since executives
are paid in cash. The exercise price on both the stock option and phantom stock
programs is determined based on the past 20 days of trading session, adjusted by
IPCA, but not for dividends or interest on own capital.
Table 69: Multiplan existing Stock option program as of 1Q17

issued Options (Original) of 1Q17 Gain (R$mn)
Program 7 2012 1,307,980 804,488 503,492 39.60 64.17 73.99 4.9
Program 8 2013 1,545,000 0 1,545,000 56.24 64.17 73.99 15.2
Program 9 2014 2,135,000 98,278 2,036,722 48.03 64.17 73.99 20.0
Total 4,987,980 902,766 4,085,214 40.1
Source: J.P. Morgan estimates, Company data. As of 3Q17.
Table 70: Multiplan Phantom Share program

Creation Reference Value per share (R$) Shares Current price (R$) Potential Gain (R$mn)
Phantom 1 2015 52.12 2,484,983 73.99 54.3
Phantom 2 2016 62.60 2,500,750 73.99 28.5
Total 57.38 4,985,733 82.8
Source: Company reports and J.P. Morgan estimates. As of 3Q17.
Sonae Sierra Brasil

The company is the only one under our coverage without a stock option plan in
place. According to the company, this is part of its controlling shareholders’ policy,
as none of Sonae Portugal subsidiaries has a stock option program. Moreover the
board sees stock option plan as a short term remuneration. Variable compensation for
management is linked to fair value of assets, currently based on Cushman &
Wakefield’s estimates.
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Malls Valuation
Table 71: Shopping Malls – valuation summary
JPM Lead Price (LC) Mkt Cap P/BV EV/EBITDA P/FFO Avg. Vol
Country Rating Analyst 2-April-18 USD Curr 18e 19e 18e 19e US$ MM
Brazil
BR Malls Brazil OW Motta 11.44 3,008 1.0x 12.7x 11.1x 18.7x 15.1x 25.5
Aliansce Brazil OW Motta 18.32 1,137 1.5x 12.1x 11.3x 17.0x 14.0x 3.5
Multiplan Brazil N Motta 68.32 4,059 2.6x 16.9x 15.0x 17.6x 15.6x 20.5
Iguatemi Brazil N Motta 38.54 2,087 2.4x 15.0x 13.4x 17.8x 15.8x 21.2
Sonae Sierra Brasil Brazil OW Motta 24.00 556 0.7x 11.4x 10.0x 13.6x 10.3x 0.4
General Shopping Brazil 4.65 97 0.3x n/a n/a n/a n/a 0.0
Malls Avg. 1,587 1.9x 14.5x 12.9x 17.5x 14.9x 19.1
Chile
Parque Arauco Chile N Motta 1,804 2,651 2.1x 17.0x 15.5x 19.5x 17.2x 4.0
Chile avg. 2,651 2.1x 17.0x 15.5x 19.5x 17.2x 4.0
IRSA CP Argentina OW Motta 44.49 1,401 1.0x 9.2x 8.3x 12.3x 10.7x 0.4
Argentina avg 1,401 1.0x 9.2x 8.3x 12.3x 10.7x 0.4
U.S.
Simon Property Group U.S. OW Mueller 153.08 47,466 13.1x 17.3x 16.7x 12.2x 11.7x 257.2
Kimco Realty U.S. OW Mueller 13.99 5,944 1.4x 13.4x 13.0x 8.9x 8.5x 57.5
The Macerich Company U.S. OW Mueller 55.39 7,802 2.1x 17.1x 17.1x 13.5x 13.1x 91.1
Federal Realty U.S. OW Mueller 115.65 8,464 4.0x 19.7x 18.3x 18.6x 17.3x 58.6
Taubman Centers U.S. N Mueller 56.38 3,434 NM 21.1x 19.2x 14.7x 14.3x 20.1
Regency Centers U.S. OW Mueller 57.70 9,793 1.5x 17.2x 17.1x 14.9x 14.3x 92.4
CBL & Associates U.S. N Mueller 4.09 706 1.4x 7.7x 7.8x 2.0x 2.1x 14.8
U.S. avg. 11,944 8.3x 17.3x 16.7x 13.1x 12.5x 176.3
Asia
Fortune REIT Singapore OW 9.54 13,911 0.7x 20.0x 19.4x 16.3x 15.8x 0.0
CapitaMall Trust Singapore OW Lee 2.07 5,595 1.1x 21.8x 21.9x 14.3x 14.1x 10.8
Charter Hall Australia N 3.85 1,198 0.9x 14.4x 13.9x 9.5x 9.2x 4.4
CapitaRetail China Singapore OW Lee 1.56 1,153 1.0x 14.0x 13.4x 13.6x 12.6x 1.7
Asia avg. 10,612 2.4x 21.3x 19.8x 23.1x 21.3x 36.2
Europe
Eurocommercial Pr Netherlands OW Salz 33.56 2,047 0.8x 18.7x 18.4x 15.9x 15.2x 1.6
Vastned Retail Netherlands OW Salz 38.75 908 0.9x 22.8x 22.8x 19.5x 19.0x 0.5
Europe avg. 8,883 0.9x 20.5x 19.8x 17.9x 17.1x 48.5
Source: J.P. Morgan estimates, company data and Bloomberg consensus for not covered companies.
Figure 145: Brazil government linked bond vs. Selic and Shopping Malls yield – Since 2012
9 16
8 14
7
12
6
10
5
8
4
3 6
NTNB 5 Years NTNB 10 Years NTNB 15 Years Malls yield Selic
2 4
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Source: Bloomberg as of Mar 22nd 2018.
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Figure 146: Malls FFO yield vs. Real Interest rate – Since 2010
12%
Forward Real Interest Rate FFO yield
10%
8%
6%
4%
2%
0%
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15
Nov-15
Mar-16
Jul-16
Nov-16
Mar-17
Jul-17
Nov-17
Mar-18
Source: Bloomberg as of Mar 14th 2018.
Figure 147: Spread / Difference of Malls FFO yield vs. Real Interest rate – Since 2009
10.0%
Spread FFO Yield vs Real Int. Rate Forward Avg 09-Now
7.5%
5.0%
2.5%
0.0%
-2.5%
-5.0%
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15
Nov-15
Mar-16
Jul-16
Nov-16
Mar-17
Jul-17
Nov-17
Mar-18
Source: Bloomberg as of Mar 14th 2018. In this chart we are using the NTN-B due 2019.
Figure 148: Mall yields vs. NTN-B 10 years
FFO Yield 18 FFO Yield 19 NTN-B 10 years

8.4%
7.1% 6.8%
6.8%
6.2% 6.1%
5.9% 5.8%
5.5% 5.3%
5.0% 5.0%
SSBR3 ALSC BRML3 IGTA3 MULT3 BRPR3

Source: J.P. Morgan estimates, in this chart we are using the NTN-B due in 10 years. Priced as Mar-21st 2018.
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Figure 149: Malls have a negative correlation with the Selic

Malls Index Performance (Mar 10 = 100) Selic (%)
350 15.0
300 BZ Malls Selic
13.0
250
200 11.0
150 9.0
100
7.0
50
0 5.0
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Source: Bloomberg and J.P. Morgan as of Mar 14th 2018.
Figure 150:Malls had a positive performance over the past year helped by a significant decrease in inflation expectations
Malls Index Performance (Mar 10 = 100) Expected Inflation (%)
350 8.0
BZ Malls Exp. Inflation
300
7.0
250
200 6.0
150 5.0
100
4.0
50
0 3.0
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Source: Bloomberg and J.P. Morgan; As of Mar 14th 2018.
Figure 151: Malls vs. actual inflation

Malls Index Performance Inflation (%)
350 12.0
300 BZ Malls Inflation
10.0
250
8.0
200
6.0
150
4.0
100
50 2.0
0 0.0
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Source: Bloomberg and J.P. Morgan; As of Mar 14th 2018.
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Figure 152: Brasil Historical Inflation and Interest rate
29.0 Real rates Inflation Nominal rates
20.4
12.3 17.9
15.9 16.4 15.2
4.7 12.4 12.2 12.0 13.0
11.6 10.4 10.6 11.5
5.8 4.5 10.0
6.0 7.1 6.9 7.2
4.1 4.3 5.0 6.6 6.5
4.4 5.4 4.8
15.0 14.9 5.3 6.0
9.4 11.4 11.4 3.9 4.0
8.0 7.0 6.9 5.7 6.3 5.5 6.0 7.7 6.4
4.5 4.3 3.2 3.1
1.5
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018e
Source: Bloomberg and J.P. Morgan; As of Mar 21st 2018.
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Companies’ P/FFO and FFO Yield

Figure 153: Sector’s P/FFO – Since 2010 Figure 154: Sector’s FFO Yield – Since 2010
24x 10%
P/FFO Avg 10-Now FFO Yield Avg 10-Now
22x 9%
20x
8%
18x
7%
16x
14x 6%
12x 5%
10x 4%
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Source: Company reports, Bloomberg, and J.P. Morgan estimates. Source: Company reports, Bloomberg, and J.P. Morgan estimates.
Figure 155: BR Malls Historical P/FFO Figure 156: BR Malls Historical FFO Yield
30x 10%
25x 8%
20x 6%
15x 4%
10x 2%
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Source: Company reports, Bloomberg, and J.P. Morgan estimates.

Figure 157: Multiplan Historical P/FFO Figure 158: Multiplan Historical FFO Yield
30x 12%
25x 10%
20x 8%
15x 6%
10x 4%
5x 2%
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18

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Figure 159: Iguatemi Historical P/FFO Figure 160: Iguatemi Historical FFO Yield
25x 12%
20x 10%
15x 8%
10x 6%
5x
4%
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Figure 161: Aliansce Historical P/FFO Figure 162: Aliansce Historical FFO Yield
30x 14%
25x 12%
10%
20x
8%
15x
6%
10x 4%
5x 2%
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Figure 163: SSBR Historical P/FFO Figure 164: SSBR Historical FFO Yield
25x P/FFO Avg 10-Now 10%
FFO Yield Avg 10-Now
20x 8%
15x 6%
10x 4%
5x 2%
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Mar-16
Sep-16
Mar-17
Sep-17
Mar-18
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Mar-16
Sep-16
Mar-17
Sep-17
Mar-18

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EPS change
In the figures below, we show how Bloomberg consensus EPS estimates for 2017
and 2018 have changed during 2017 and how stocks performed in this period.
Figure 165: BR Malls – Consensus EPS Figure 166: Multiplan – Consensus EPS
Price Share EPS Price Share EPS
18 0.8 80 3.6
17 3.4
0.7 75
16
3.2
15 0.6 70
14 3.0
0.5 65
13 2.8
12 0.4 60
2.6
11
0.3 55 2.4
10 Price EPS 2017 EPS 2018 Price EPS 2017 EPS 2018
9 0.2 50 2.2
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Source: Bloomberg. Source: Bloomberg.
Figure 167: Iguatemi – Consensus EPS Figure 168: Aliansce – Consensus EPS
Price Share EPS Price Share EPS
45 Price EPS 2017 EPS 2018 2.1 20 1.4
43 2.0 19 1.3
41 1.9 1.2
18
39 1.8 1.1
37 17
1.7 1.0
35 16
1.6 0.9
33 15
31 1.5 0.8
29 1.4 14 0.7
27 1.3 13 Price EPS 2017 EPS 2018 0.6
25 1.2 12 0.5
Jul-17
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Source: Bloomberg. Source: Bloomberg. Feb-18
Figure 169: Sonae Sierra Brasil – Consensus EPS

Price Share EPS
30 2.5
2.0
25
1.5
20 1.0
0.5
15
0.0
Price EPS 2017 EPS 2018
10 -0.5
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Source: Bloomberg.
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Listed Companies’ Portfolios, Expansions & Greenfields

Table 72: Aliansce portfolio as of 3Q17
Location GLA (m2)
Shopping State Aliansce 100% Stake Opening
Lojas C&A BA 6,488 9,395 69% 1975
Caxias Shopping RJ 22,805 25,624 89% 1985
Shopping West Plaza SP 8,417 33,667 25% 1991
Shopping da Bahia BA 45,401 65,760 69% 1993
Via Parque RJ 22,283 57,240 39% 1995
Shopping Grande Rio RJ 9,562 38,248 25% 1999
Shopping Santa Úrsula SP 8,635 23,027 38% 1999
Boulevard Shopping Brasília DF 8,755 17,510 50% 2000
Boulevard Shopping Belém PA 31,521 39,406 80% 2004
Carioca Shopping RJ 31,252 31,252 100% 2005
Shopping Leblon RJ 6,267 24,969 25% 2006
Shopping Taboão SP 28,415 36,430 78% 2007
Bangu Shopping RJ 57,642 57,642 100% 2009
Santana Parque Shopping SP 8,831 26,492 33% 2009
Boulevard Shopping Belo Horizonte MG 29,170 41,672 70% 2010
Boulevard Shopping Campos RJ 25,033 25,033 100% 2011
Parque Shopping Belém PA 21,508 28,677 75% 2012
Boulevard Shopping Vila Velha ES 18,680 37,359 50% 2012
Boulevard Shopping Nações Bauru SP 32,115 32,115 100% 2012
Shopping Parangaba CE 12,885 32,212 40% 2013
Parque Shopping Maceió AL 18,452 36,905 50% 2013
Total Current 454,117 720,634 63.0%
Source: Company reports.
Table 73: Aliansce announced expansions as of 3Q17

Location GLA (m2)
Shopping State Aliansce 100% Stake Opening
Shopping West Plaza SP 800 3,200 25% 4Q17
Total Expansions 800 3,200 25%
Table 74: Aliansce Construction Potential as of 3Q17 – Co’s Stale

Location GLA (m2) ALSC
Shopping State Shopping Real Estate Stake
Carioca Shopping RJ 11,900 1,522 100%
Bangu Shopping RJ 7,000 25,000 100%
Shopping Grande Rio RJ 2,000 19,389 100%
Shopping Leblon RJ 0 440 100%
Shopping Taboão SP 26,600 27,250 100%
Shopping da Bahia BA 48,328 22,034 100%
Parque Shopping Maceió AL 91,500 2,426 100%
Boulevard Shopping Campos RJ 41,000 34,552 100%
Boulevard Shopping Vila Velha ES 15,000 12,000 100%
Boulevard Shopping Nações Bauru SP 28,000 15,000 100%
Caxias Shopping RJ 17,800 11,917 100%
Boulevard Shopping Belo Horizonte MG 7,000 7,879 100%
Parque Shopping Belém PA 0 19,792 100%
Shopping Parangaba CE 0 11,135 100%
Total Construction Potential 296,128 210,336 100%
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Table 75: Multiplan portfolio as of 3Q17

Location GLA (m2)
Shopping State Multiplan 100% Stake Opening
BH Shopping MG 37,735 47,169 80% 1979
Ribeirão Shopping SP 59,454 72,847 82% 1981
Barra Shopping RJ 51,446 78,152 66% 1981
Morumbi Shopping SP 41,365 56,102 74% 1982
Park Shopping DF 33,055 53,641 62% 1983
Diamond Mall MG 19,246 21,384 90% 1996
Shopping Anália Franco SP 15,477 51,590 30% 1999
New York City Center RJ 11,129 22,257 50% 1999
Shopping Santa Úrsula SP 14,400 23,041 63% 1999
Park Shopping Barigüi PR 48,833 52,323 93% 2003
Pátio Savassi MG 18,581 19,255 97% 2004
Barra Shopping Sul RS 73,001 73,001 100% 2008
Shopping Vila Olímpia SP 17,022 28,370 60% 2009
ParkShopping São Caetano SP 39,107 39,107 100% 2011
JundiaíShopping SP 35,063 35,063 100% 2012
ParkShoppingCampoGrande RJ 39,379 43,754 90% 2012
VillageMall RJ 25,828 25,828 100% 2012
Parque Shopping Maceió AL 18,452 36,905 50% 2013
Total Current 598,575 779,790 76.8%
Table 76: Multiplan commercial as of 3Q17

Location GLA (m2)
Park Shopping Corporate DF 6,680 13,360 50% 2012
Morumbi Corporate SP 74,198 74,198 100% 2013
Total Commercial 80,878 87,558 92%
Table 77: Multiplan expansions as of 3Q17

Location GLA (m2)
Pátio Savassi (phase 2) MG 2,300 2,300 100% 2017
VilageMall RJ 2,700 2,700 100% 2018
Total Expansions 5,000 5,000 100%
Table 78: Multiplan greenfields as of 3Q17

Location GLA (m2)
Park Shopping Canoas RS 38,400 48,000 80% 2017
Total Greenfields 38,400 48,000 80%
Table 79: Multiplan Construction Potential as of 3Q17

Location Area (m2) MULT
Shopping State Land Plot Selling Stake
Barra Shopping Sul RS 159,587 294,130 100%
Jundiai Shopping SP 4,500 11,616 100%
Park Shopping Barigui PR 28,214 26,185 94%
Park Shopping Campo Grande RJ 317,755 114,728 90%
Park Shopping Canoas RS 18,721 19,703 ND
Park Shopping São Caetano SP 36,948 103,850 100%
Parque Shopping Maceio AL 86,699 164,136 50%
Ribeirão Shopping SP 102,295 118,749 100%
Shopping Analia Franco SP 29,800 92,768 36%
Village Mall RJ 36,000 31,340 100%
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Table 80: Iguatemi portfolio as of 3Q17

Location GLA (m2)
Shopping State Iguatemi 100% Stake Opening
Iguatemi São Paulo SP 27,655 47,322 58% 1966
Iguatemi Campinas SP 51,444 73,492 70% 1980
Boulevard SP 24,965 32,422 77% 1980
Iguatemi Porto Alegre RS 21,349 59,302 36% 1983
Praia de Belas RS 17,843 47,205 38% 1991
Esplanada SP 35,636 64,360 55% 1991
Area proprietaria SP 3,678 3,678 100% 1991
Galleria SP 33,146 33,146 100% 1992
Market Place SP 26,940 26,940 100% 1995
Iguatemi Caxias RS 2,547 30,324 8% 1996
Iguatemi São Carlos SP 11,162 22,323 50% 1997
Pátio Higienópolis SP 3,819 34,100 11% 1999
Iguatemi Florianopolis SC 6,357 21,189 30% 2007
Iguatemi Brasilia DF 20,673 32,302 64% 2010
Alphaville SP 24,423 31,312 78% 2011
Iguatemi JK SP 22,372 34,957 64% 2012
Iguatemi Ribeirao SP 38,410 43,648 88% 2013
Premium Outlet RS RS 8,247 20,115 41% 2013
Iguatemi Rio Preto SP 38,411 43,649 88% 2014
Total Current 419,077 701,786 59.7%
Table 81: Iguatemi commercial as of 3Q17

Location GLA (m2)
Market Place Tower I SP 15,685 15,685 100% 1996
Market Place Tower II SP 13,395 13,395 100% 2000
Tower Iguatemi São Paulo SP 2,610 4,469 58% 2001
Tower Iguatemi Porto Alegre RS 3,849 10,692 36% 2016
Total Commercial 35,539 44,241 80%
Table 82: Iguatemi greenfields as of 3Q17

Location GLA (m2)
Fashion Outlet Santa Catarina SC 16,200 30,000 54% 2018
Fashion Outlet Nova Lima MG 16,362 30,300 54% 2019
Table 83: Iguatemi Construction Potential as of 3Q17 – 100%

Location GLA (m2) IGTA
Shopping State Shopping Real Estate Stake
Iguatemi São Paulo SP 5,000 0 58%
Iguatemi Campinas - Land Plot SP 0 501,000 50%
Iguatemi Campinas - Boulevard SP 0 19,638 77%
Iguatemi Porto Alegre RS 3,000 32,000 36%
Iguatemi Porto Alegre - Land Plot RS 22,000 29,022 24%
Esplanada SP 28,500 27,060 46%
Praia de Belas RS 5,000 0 38%
Galleria SP 22,429 44,300 100%
Market Place SP 600 0 100%
Iguatemi São Carlos SP 20,000 15,000 50%
Iguatemi Brasilia DF 10,000 0 64%
Alphaville SP 12,600 0 78%
Iguatemi Ribeirão Preto SP 20,500 35,000 88%
I Fashion Outlet Novo Hamburgo RS 12,500 6,500 41%
Iguatemi Rio Preto SP 21,500 0 88%
I Fashion Outlet Santa Catarina SC 15,034 8,000 54%
I Fashion Outlet Nova Lima MG 15,000 8,000 54%
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Table 84: BR Malls portfolio as of 3Q17

Location GLA (m2)
Shopping State BR Malls 100% Stake Opening
Maceió Shopping AL 18,830 34,742 54% 1986
Goiânia Shopping GO 10,770 22,252 48% 1986
Natal Shopping RN 13,492 26,984 50% 1987
Independência Shopping MG 19,967 23,941 83% 1989
Shopping Curitiba PR 11,231 22,920 49% 1989
Catuai Shopping Londrina PR 41,071 63,089 65% 1990
Jardim Sul SP 18,480 30,800 60% 1990
Shopping Del Rey MG 24,071 37,032 65% 1991
Shopping Sete Lagoas MG 12,560 17,942 70% 1991
Osasco Plaza Shopping SP 5,482 13,844 40% 1991
Plaza Niterói RJ 44,049 44,049 100% 1992
São Luís Shopping MA 8,234 54,890 15% 1992
Minas Shopping MG 764 35,894 2% 1992
Shopping Granja Vianna SP 23,312 29,971 78% 1993
Shopping Tamboré SP 49,835 49,835 100% 1994
Shopping Tijuca RJ 35,565 35,565 100% 1994
Center Shopping Uberlândia MG 26,870 52,686 51% 1994
Ilha Plaza Shopping RJ 11,026 21,619 51% 1994
Casa & Gourmet RJ 7,137 7,137 100% 1994
Shopping Villa-Lobos SP 15,660 26,806 58% 1995
Shopping Recife PE 23,357 75,213 31% 1996
Shopping Metrô Santa Cruz SP 19,165 19,165 100% 1997
Amazonas Shopping AM 11,667 34,214 34% 1997
Shopping Iguatemi Caxias do Sul RS 13,797 30,324 45% 1999
Norteshopping RJ 58,041 77,908 74% 2000
Shopping Campo Grande RJ 27,808 39,213 71% 2001
Araguaia Shopping GO 10,879 21,758 50% 2001
Shopping Piracicaba SP 16,026 43,431 37% 2001
Shopping ABC SP 602 46,285 1% 2004
Top Shopping RJ 10,159 25,768 39% 2005
Capim Dourado TO 36,575 36,575 100% 2007
Plaza Macae RJ 10,212 22,694 45% 2008
Shopping Paralela BA 20,299 39,802 51% 2009
Shopping Estação PR 54,716 54,716 100% 2010
Campinas Shopping SP 34,566 34,566 100% 2010
Catuaí Shopping Maringá PR 22,631 32,329 70% 2010
Rio Anil MA 18,880 37,760 50% 2010
Via Brasil Shopping RJ 15,033 30,680 49% 2011
Mooca Plaza Shopping SP 25,178 41,964 60% 2011
Estacao BH MG 20,389 33,982 60% 2012
Londrina Norte Shopping PR 23,094 32,992 70% 2012
Sao Bernardo Plaza Shopping SP 25,728 42,880 60% 2012
Shopping Contagem MG 17,821 34,942 51% 2014
Shopping Vila Velha ES 35,884 71,768 50% 2014
Total Current 950,913 1,612,927 59.0%
Table 85: BR Malls expansions as of 3Q17

Location GLA (m2)
Estação BH (phase 2) MG 850 1,416 60% 2019
NorteShopping RJ 17,197 17,197 100% TBD
Independência MG 8,822 10,573 83% TBD
Mooca Plaza Shopping (phase 1) SP 11,400 19,000 60% TBD
Mooca Plaza Shopping (phase 2) SP 6,000 10,000 60% TBD
Total Expansions 44,269 58,186 76%
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Table 86: BR Malls greenfields as of 3Q17

Location GLA (m2)
Cuiabá MT 35,193 46,924 75% 2018
Cascavel PR 20,670 29,978 69% TBD
Table 87: Sonae Sierra Brasil portfolio as of 3Q17

Location GLA (m2)
Shopping State Sonae 100% Stake Opening
Metropole SP 29,900 29,900 100% 1980
Franca SP 14,300 18,600 77% 1993
Plaza Sul SP 14,100 23,500 60% 1994
Parque Dom Pedro SP 63,500 124,600 51% 2002
Campo Limpo SP 4,400 22,200 20% 2005
Manauara AM 47,300 47,300 100% 2009
Uberlândia Shopping MG 52,900 52,900 100% 2012
Boulevard Londrina Shopping PR 42,600 48,100 89% 2013
Passeio das Aguas Shopping GO 77,900 77,900 100% 2014
Total Current 346,900 445,000 78.0%
Table 88: General Shopping portfolio as of 3Q17

Location GLA (m2)
Shopping State General 100% Stake Opening
Poli Shopping Guarulhos SP 2,264 4,527 50% 1989
Unimart Shopping Campinas SP 14,961 14,961 100% 1994
Internacional Shopping SP 69,372 77,080 90% 1998
Shopping do Vale RS 13,913 16,487 84% 1998
Suzano Shopping SP 19,583 19,583 100% 2001
Cascavel JL Shopping PR 7,590 8,877 86% 2004
Shopping Bonsucesso SP 15,517 24,437 63% 2006
Auto Shopping SP 11,477 11,477 100% 2006
Outlet Premium São Paulo SP 10,785 21,570 50% 2009
Parque Shopping Barueri SP 17,962 37,420 48% 2011
Outlet Premium Brasília DF 8,058 16,116 50% 2012
Parque Shopping Sulacap RJ 14,673 28,770 51% 2013
Outlet Premium Salvador BA 7,781 14,964 52% 2013
Parque Shopping Maia SP 20,136 31,711 63% 2015
Outlet Premium Rio de Janeiro RJ 10,468 20,936 50% 2015
Total Current 244,540 348,916 70.1%
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A View on Non-listed Players’ Portfolios

According to our estimates, smaller listed names and non-listed players mentioned
below control around 5.6 mn m2 in total GLA, representing ~35% of the total market,
slightly above the market share of the listed players, which control 5mn m2 in total
GLA. Among the non-listed players, Ancar and JCPM are the top players with more
than 700k m2 in total GLA each, similar to the level of Iguatemi and Aliansce total
GLA.
Table 89: Non-covered and non-listed companies portfolio

Company # of Malls Total GLA (‘000 m2) # of States States
Ancar 18 769 7 SP, RJ, RS, CE, RO, MT, DF
JCPM 13 735 5 SP, SE, PE, CE, BA
Tenco 15 423 10 SP, MG, AL, CE, AP, BA, PE, PR, RR, SC
Argo 14 410 8 SP, RJ, MG, MS, RS, PR, DF, SC
Savoy 5 407 1 SP
Saphyr 13 387 8 SP, RJ, MG, AM, AL, AC, RR, BA
CCP 8 288 5 SP, RJ, MG, PA, GO
5R 9 288 5 SP, MG, RS, AM, RN
Brookfield 9 271 2 SP, RJ
Sá Cavalcante 7 263 4 PA, MA, PI, ES
Terral 12 236 4 SP, GO, RJ, ES
Zaffari/Bourbon 8 231 2 SP, RS
Almeida Junior 6 228 1 SC
Gazit Brasil 8 219 2 SP, RS
Partage 7 208 6 RJ, MG, PA, RN, PB, RS
JHSF 4 148 3 SP, BA, AM
ECIA 4 126 1 RJ
Total 160 5,638
Source: Alshop, Abrasce, Companies Reports and J.P. Morgan.
Table 90: Ancar Portfolio

Shopping State City Total GLA (m2)
Shopping Conjunto Nacional Brasília DF Brasília 45,000
Pantanal Shopping MT Cuiabá 46,350
Shopping Porto Velho RO Porto Velho 44,187
North Shopping Fortaleza CE Fortaleza 52,000
North Shopping Jóquei CE Fortaleza 35,683
North Shopping Maracanaú CE Maracanaú 18,150
Via Sul Shopping CE Fortaleza 25,600
Iguatemi Porto Alegre RS Porto Alegre 59,302
Shopping Nova Iguaçu RJ Nova Iguaçu 45,000
Downtown RJ Rio de Janeiro 19,100
Shopping Nova América RJ Rio de Janeiro 77,000
Botafogo Praia Shopping RJ Rio de Janeiro 15,495
Boulevard Rio Shopping RJ Rio de Janeiro 28,320
CenterVale Shopping SP São José dos Campos 48,136
Shopping Parque das Bandeiras SP Campinas 39,415
Shopping Metrô Itaquera SP São Paulo 64,000
Golden Square Shopping SP São Bernardo do Campo 29,286
Shopping Eldorado SP São Paulo 76,545
Total 768,569
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Table 91: JCPM Portfolio

Salvador Shopping BA Salvador 84,300
Salvador Norte Shopping BA Salvador 36,547
RioMar Presidente Kennedy CE Fortaleza 54,865
RioMar Fortaleza CE Fortaleza 93,000
Shopping Tacaruna PE Recife 48,969
Shopping Guararapes PE Jaboatão Dos Guararapes 50,258
RioMar Shopping Recife PE Recife 101,000
Plaza Shopping Casa Forte PE Recife 15,994
RioMar Shopping Aracaju SE Aracaju 51,000
Shopping Jardins SE Aracaju 49,499
Shopping Recife PE Recife 90,792
Shopping Granja Vianna SP Cotia 29,971
Shopping VillaLobos SP São Paulo 28,660
Total 734,855
Table 92: Tenco Portfolio

Amapá Garden Shopping AP Macapá 30,500
Roraima Garden Shopping RR Boa Vista 26,296
Arapiraca Garden Shopping AL Arapiraca 30,723
Juá Garden Shopping BA Juazeiro 23,055
Cariri Garden Shopping CE Juazeiro do Norte 25,095
Lages Garden Shopping SC Lages 21,069
Via Café Garden MG Varginha 21,704
Via Vale Garden Shopping SP Taubaté 36,841
Itaquá Garden Shopping SP Itaquaquecetuba 29,529
Bragança Garden Shopping SP Bragança Paulista 23,054
Partage Shopping Betim MG Betim 54,133
Jaraguá do Sul Park Shopping SC Jaraguá do Sul 26,371
Anchieta Garden Shopping MG Belo Horizonte 12,252
Garanhuns Garden Shopping PE Garanhuns 20,862
Guarapuava Garden Shopping PR Guarapuava 41,186
Total 422,670
Table 93: Savoy Portfolio

Centro Comercial Aricanduva SP São Paulo 90,950
Shopping União de Osasco SP Osasco 97,000
Central Plaza Shopping SP São Paulo 72,426
Complexo Interlagos SP São Paulo 86,900
Novo Shopping Ribeirão Preto SP Ribeirão Preto 60,154
Total 407,430
Table 94: CCP Portfolio

Shopping Center D SP São Paulo 28,222
Grand Plaza Shopping SP Santo André 69,503
Parque Shopping Belém PA Belém 28,676
Shopping Estação BH MG Belo Horizonte 35,536
Shopping Metropolitano Barra RJ Rio de Janeiro 44,135
Tietê Plaza Shopping SP Sâo Paulo 37,395
Shopping Cidade São Paulo SP São Paulo 16,619
Shopping Cerrado GO Goiania 28,370
Total 288,456
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Table 95: Gazit Brasil Portfolio

Shopping Cidade Jardim SP São Paulo 39,015
Shopping Morumbi Town SP São Paulo 31,000
Shopping Light SP São Paulo 18,355
Shopping Eldorado SP São Paulo 76,774
Mais Shopping SP São Paulo 13,010
Shopping Top Center SP São Paulo 13,450
Shopping Prado Boulevard SP Campinas 9,726
Shopping San Pelegrino RS Caxias do Sul 17,200
Total 218,530
Table 96: Brookfield Portoflio

Mogi Shopping SP Mogi das Cruzes 34,095
Raposo Shopping SP São Paulo 27,664
Madureira Shopping Rio RJ Rio de Janeiro 37,239
Rio Sul RJ Rio de Janeiro 52,055
Pátio Paulista SP São Paulo 42,000
Pátio Higienópolis SP São Paulo 34,100
West Plaza SP São Paulo 33,917
BCP Green Valley SP São Paulo 6,560
Brascan Century Plaza - Itaim SP São Paulo 3,024
Total 2 270,654
Table 97: Almeida Junior Portfolio

Nações Shopping SC Criciúma 37,000
Garten Shopping SC Joinville 34,484
Balneário Camboriú Shopping SC Balneário Camboriú 43,497
Continente Shopping SC São José 44,923
Blumenau Norte Shopping SC Blumenau 34,037
Neumarkt Shopping SC Blumenau 34,000
Total 227,941
Table 98: JHSF Portfolio

Shopping Cidade Jardim SP São Paulo 37,574
Catarina Fashion Outlet SP São Paulo 24,060
Shopping Ponta Negra AM Manaus 35,180
Shopping Bela Vista BA Salvador 51,070
Total 147,884
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M&A Historical Data

Figure 170: M&A Capex per year for listed companies
R$ in million
1,640 1,559
1,405 203
101
722
963
255
1,426 175
1,304 491 53
382
305
659 351 163 656
70 290
187 68
138 48 84 92
2010 2011 2012 2013 2014 2015 2016 2017
Table 99: Property transactions

GLA total Stake Price Price/m2
Company Asset Date Cap rate Details:
(’000 m2) acquired (R$ mn) R$
Camargo
Ventura Tower Dec-09 40.1 100% 494 11.2% 12,313 Camargo Correa
Correa
Via Brasil Greenfield development, expected to be opened in
BR Malls May-10 29.0 49% 103 11.9% (stable) 7,241
Shopping April-11.
Independência Shopping was developed and inaugurated by
BR Malls Jun-10 23.5 75% 110 12.0% (stable) 6,208
Shopping BRMALLS in April-08.
BR Edicifio BR Properties reached 60% of its acquisition guidance
Jun-10 26.4 100% 260 14.6% 9,834
Properties Manchete of R$1.5bn with this acquisitions
11.7% (2011)
Aliansce Osasco Jul-10 17.6 2% 2 4,763
13.4% (stable)
Acquisition paid in 2 installments, first when the
Center Crystal 11.7% (2011)
BR Malls Sep-10 12.3 40% 60 12,195 transaction was closed and 2nd, 365 days after that
Plaza 13.2% (stable)
adjusted by the IGP-M.
Center Shopping 10.7% (2011)
BR Malls Sep-10 50.7 51% 204 7,890 Expansion opened in April-10 totaling 19.1k m2.
Uberlândia 13.1% (stable)
Additional 50.1% stake subject to shareholders
10.6% (2011)
BR Malls Tijuca Nov-10 35.4 100% 800 22,599 approval, includes 3 commercial towers totaling 10.7k
12.2% (2015)
m2.
Shopping 10.3% (1st year) Greenfield development, expected to be opened in
Aliansce Nov-10 19.0 50% 38 3,947
Campos 11.7% (3rd year) April-11.
Shopping Campo Occupancy rate of 100%. Expansion of 5.3k m2 to be
BR Malls Nov-10 33.8 4% 9 10.9% (2011) 7,401
Grande opened in 2011.
10.2% (2011) Cap rate not including a 3.6k m2 expansion to be
Aliansce Campo Grande Nov-10 17.4 6% 5 4,323
14.3% (stable) opened in 2011.
IRR unleveraged of 13.4%, R$4.4mn additional NOI
BR Malls Crystal Plaza Jan-11 12.3 30% 43 11.5% (2011) 11,653
for 2011
IRR unleveraged of 13.7%, R$3.4mn additional NOI
BR Malls Piracicaba Jan-11 27.8 19% 31 10.9% (2011) 5,838
for 2011
BR Malls Curitiba Jan-11 23.1 14% 35 11.1% (stable) 10,714 IRR unleveraged of 12.1%, Stable NOI of R$27.4mn
Shopping Center
Iguatemi Jan-11 11.8 3% 12 11.7% (2011) 29,326
Esplanada
Super Shopping
Aliansce Feb-11 17.6 3% 3 11.7% (2011) 5,499 Cap rate 2013e at 13.3% and IRR of 16.6%
Osasco
Shopping Barra Greenfield development, expected to be opened in
Aliansce Jun-11 50.0 50% 130 13/14% (stable) 5,200
Sol 4Q12, NOI of R$17mn Aliansce share
Shopping Greenfield development, expected to be opened in
Aliansce Jul-11 35.0 75% 146 12.8% (stable) 5,562
Nações 4Q12, NOI of R$17.5mn Aliansce share
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Company Asset Date Cap rate Details:
8.9% (1st year)
BR Malls Catuai Londrina Aug-11 63.1 65% 329 8,013
11.9% (stable)
8.9% (1st year)
BR Malls Catuai Maringa Aug-11 32.3 70% 181 8,021
11.9% (stable)
Greenfield development, expected to be opened in
BR Malls Londrina Norte Aug-11 32.6 70% 134 13.1% (stable) 5,876
4Q12, NOI of R$17mn
Greenfield development, expected to be opened in
BR Malls Catuai Cascavel Aug-11 31.1 68% 128 13.1% (stable) 6,057
4Q12, NOI of R$17mn
80.3k m2 existing Malls and 76.2k m2 of Greenfields
Westfield Almeida Junior Aug-11 156.5 50% 740 10.1% (1st year) 9,457
already under construction.
With this acquisition BR Malls reached a 36.9% stake
BR Malls Piracicaba Sep-11 27.2 3% 5 11.8% (1st year) 7,340
in Piracicaba
Shopping Center IRR real and unleveraged at 11.7%, Iguatemi reached
Iguatemi Sep-11 27.7 5% 16 10.2% (2012e) 11,835
Esplanada at 37.99% stake in this mall
Super Shopping IRR real and unleveraged at 18.3%, Aliansce reached
Aliansce Sep-11 17.5 1% 1 13.0% (1st year) 5,420
Osasco a 37.7% stake in the mall
Shoping Vila Greenfield development, expected to be opened in
BR Malls Sep-11 31.5 50% 156 - 9,946
Velha 2H13, IRR 22.6%, stabilized NOI R$26.5mn
Swap agreement with Cabral (MRV/BMG company);
Shopping
BR Malls Sep-11 31.5 70% - - - Greenfield development, expected to be opened
Contagem
4Q13, IRR 17.3%, stabilized NOI R$30mn
Existing Mall in São Paulo, acquisition of 100% stake
8.2% (1st year) from Camargo Correa controlling Family, BR Malls
BR Malls Jardim Sul Nov-11 30.8 100% 460 14,935
10.9% (stable) expects to list a Real Estate fund with around
R$200mn representing 40% of this Mall.
8.1% (current) Acquisition from IRB (Brazilian Re-insurance
Iguatemi Iguatemi SP Dec-11 42.6 7% 107 35,922
8.3% (2012e) company), action at BVMF
Iguatemi 8.8% (current) Acquisition from IRB (Brazilian Re-insurance
Iguatemi Dec-11 54.0 5% 35 12,956
Campinas 9.3% (2012e) company), action at BVMF
Additional stake acquired reaching 53% participation,
Iguatemi
Aliansce Dec-11 62.3 8% 81.4 9.3% (2012e) 16,602 from related party (Reinaldo Rique); Canada Pension
Salvador
Plan acquired part of the asset as well
Carioca
Jan-12 23.5 60%
Shopping
Shopping
Jan-12 35.6 40%
Taboão Acquisition of Pargim's portfolio (former partner),
Aliansce Campina Grande Jan-12 17.3 40% 574.5 9.2% (1st year) 9,678 obtaining control of all these assets; Expected IRR
Caxias Jan-12 25.6 49% real and unleveraged 14.3%
Campos Jan-12 19.0 50%
C&A Carioca
Jan-12 2.0 100%
Shopping
R$64mn in cash and R$39mn represented by a 17%
stake in Shopping Penha; Deal with CSHG real estate
SSBR Plaza Sul Jan-12 23.0 30% 103 9.4% (2012e) 14,928
fund; SSBR expects to obtain a 16.9% IRR (nominal
and deleveraged)
CSHG Shopping Penha Jan-12 29.6 17% 39 9.5% (2012e) 7,750
CSHG Shopping Penha Feb-12 29.6 5% 11.5 9.5% (2012e) 7,618
Morumbi 7.5-8.2%
Multiplan Feb-12 9.3 100% 165 17,742 Sold to Oracle
Business Tower (current)
Multiplan Vila Olímpia Feb-12 28.2 30% 175 9.1% (2012e) 20,686 13.1% IRR real and unleveraged
IRR (real and unleveraged o) of 14.2%; option to
BR Malls Itau Power Feb-12 32.7 33% 87.5 11.2% (1st year) 8,109 acquire 33% of the parking operation by R$2.3mn in
case parking begins to be charged.
Pantanal
BR Malls Mar-12 43.1 10% 45 7.1% (2011) 10,441
Shopping (Sale)
9.1% (current)
BR Malls Rio Anil Apr-12 26.2 50% 120 9,160 IRR of 13.1%
11.6% (stable)
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Shopping/ GLA total Stake Price Price/m2
Company Date Cap rate Details:
Asset (’000 m2) acquired (R$ mn) R$
BR Building rented to a major tenant, cap of 11.4%
Ventura Tower Apr-12 45.6 100% 746.3 11.4% (Current) 16,373
Properties considers R$155/m2/month.
Iguatemi Boulevard Rio May-12 28.1 65% 196.9 5.4% 10,761 2012 Cap rate
Shopping Villa 10.5% (current)
BR Malls Jun-12 26.8 19% 109.7 21,883 IRR of 13.0%
Lobos 11.6% (stable)
BR Malls Plaza Macae Jul-12 22.7 100% 47.0 13.2% (stable) 2,071 IRR (real and deleverage) of 13.1%
Boulevard
Aliansce Aug-12 16.9 50% 70.0 NA 8,269 Sales still pending given approval issues
Brasilia
General Shopping
Aug-12 24.4 100% 130.0 NA 5,320 IRR of 11.6%
Shopping BonSucesso
CSHG
Cremer Transaction between a Real Estate fund and a Public
(Logistic Oct-12 NA 100% 76.4 10.2% (current) NA
Properties company, focused on the industrial segment.
fund)
100% down payment, bought the stake from the land
SSBR Franca Shopping Oct-12 17.9 10% 9.5 9.5% (current) 5,588 owner that would have a 9.5% stake forever. (His
stake would never be diluted.)
ALSC West Plaza Oct-12 33.6 25% 65 10.0% (2013e) 7,738 IRR of 14.2% (real and unleveraged)
9.0% (current)
BR Malls Capim Santo Nov-12 29.1 100% 177.1 6,093 IRR of 13.1% (real and unleveraged)
11.9% (stable)
SSBR Shopping Penha Nov-12 29.7 51% 131.2 8.2% (current) 8,662 Sold to CSHG, 3 Malls less than 8% of NOI
SSBR Tivoli Shopping Nov-12 22.1 30% 45.6 8.4% (current) 6,878 Sold to CSHG, 3 Malls less than 8% of NOI
Bought by the Family Bacarat controller of the Mall, 3
SSBR Patio Brasil Nov-12 29.0 10% 36.1 9.6% (current) 11,969
Malls less than 8% of NOI
Tower located in Barra, sold to a FII "BM CEO", 9.5%
CEO Office
CCP Nov-12 40.8 25% 150.7 9.5% (current) 14,777 is based on company calculation with a rent of
Tower
R$117/m2
BR CD Anhanguera
Nov-12 45.2 100% 105.0 11.1% (2013) 2,321 17% IRR unleveraged
Properties Warehouse
14.0% (24
São Carlos Properties in Rio Dec-12 7.7 100% 72.4 9,405 Refrofit project for São Carlos
months)
Mall sold, as it was not part of Aliansce strategy, small
Aliansce Campina Grande Dec-12 17.3 77% 103.5 6.7% (current) 7,794
Mall for them (announced in Aug)
Salvador Stake acquired from Renato Rique's sister, 9.2% cap
Aliansce Dec-12 62.0 9% 110.0 8.3% (current) 20,106
Iguatemi 12 months forward
BR Malls Amazonas Dec-12 34.2 20% 47 14.8% (current) 6,869 IRR (real and unleveraged) 18.0%
BR Malls Maceio Dec-12 34.7 16% 46 11.1% (current) 8,275 IRR (real and unleveraged) 13.9%
Salvador Stake acquired from Renato Rique's sister, 13% IRR
Aliansce Dec-12 62.0 20% 245.0 9.5% (2013e) 20,175
Iguatemi real and unleveraged
Ez Tower
Eztec Jan-13 47.0 100% 564.0 11.5% (2014e) 12,000 Tower under construction on the acquisition date
Morumbi
10.1% (2014e)
Iguatemi São José Apr-13 20.1 41% 46.2 5,610 IRR (real and unleveraged) 17.1%
19.7% (3rd year)
Shopping 8.3% (1st year)
Aliansce Apr-13 31.9 40% 118 9,255 Buying from a local group named Marquise
Parangaba 10.4% (3rd year)
Eldorado
BC Fund Jun-13 65.8 13% 151 8.4% (current) 17,653 Financed in 6 years at TR+7.4%
Business Tower
BR 100% down payment, building was transferred to a FII
Pateo Malzoni Sep-13 17.5 100% 442 8.4% (current) 25,317
Properties before the sale
Galleria Includes a stake of 30% in a land plot with 14k m2
Iguatemi Oct-13 33.2 30% 83.6 8.4% (2013e) 8,384
Campinas adjacent to the Mall
5.0% 2013e
Deal included a swap of JHSF participation in its
(Airport at
Shopping airport valued at R$2bn (10% at R$200mn which
JHSF Oct-13 34.9 18% 350.0 market) 54,955
Higienopolis represents a cost of R$50mn). NOI 2013e R$87mn,
10.0% 2013e
NOI 2015e R$97mn.
(Airport at cost)
Brazilian BC Fund, reached a 100% stake in Brazilian Financial
São Carlos Oct-13 40.3 40% 250.0 9.1% (current) 15,521
Financial Center Center after this deal.
C&A Feira de Company will receive the money in 2 parts, R$1.2mn
Aliansce Nov-13 2.1 100% 8.8 7.6% (2013) 4,175
Santana down payment and R$7.6mn in April 2014.
Source: J.P. Morgan, Company data.
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Shopping/ GLA total Stake Price Price/m2
Company Date Cap rate Details:
Asset (’000 m2) acquired (R$ mn) R$
Financed at TR+10.8% resulting in a IRR real and
Aliansce Boulevard Bauru Nov-13 26.5 10% 23.0 9.9% (3rd year) 6,749
unleveraged 14.9%
WTorre was the seller and there is an earn-out to be
TIAA-CREF Iguatemi JK Feb-14 35.3 36% 457.9 7.1% (2014) 36,041
paid in 2016 depending on sales performance
WTorre was the seller and there is an earn-out to be
Iguatemi Iguatemi JK Feb-14 35.3 14% 178.1 7.1% (2014) 36,041
paid in 2016 depending on sales performance
Cap rate based on JPM estimate monthly rent of
Aliansce BH Tower Feb-14 20.5 100% 187.0 10.0% (2014) 9,122
R$75/m2
BR Warehouse Global Logistics Properties enter the deal after
Mar-14 1,382 100% 3,180 8.8% (2013) 2,301
Properties Portfolio WTgoodman gave up the transaction
BR Warehouse
Apr-14 31.7 100% 61 11.6% (1st year) 1,907 Warehouse in Jarinu-SP
Properties Portfolio
Ilha Plaza
BR Malls 1Q14 21.5 49% 121 ~8% (1st year) 11,456 IRR (real and unleveraged) 21.8%
Shopping
Shopping Patio
BR Malls 1Q14 20.6 13% 46 ~8% (1st year) 16,685 IRR (real and unleveraged) 12.8%
Belem
Shopping Metro
BR Malls 1Q14 32.9 3% 21 ~8% (1st year) 19,785 Not available
Tatuape
BR Malls Big Shopping Apr-14 17.2 13% 11 ~10% (1st year) 4,908 Sold after 1Q14 ended
C&A Retail
BR Deal includes 31 properties being 28 C&A retail
Portfolio+3 Com. Jul-14 112.5 100% 607 9.0% (2014) 5,392
Properties stores, and R$188mn was represent by debt
Buildings
Santana Parque Deal is subject to an earn out that could add R$5mn to
Aliansce Jul-14 26.5 17% 48 9.1% (2014) 10,905
Shopping Aliansce price resulting in a cap of 8.3%.
General Santana Parque CPPIB and GIC bought the stake from Aliansce and
Jul-14 26.5 50% 145 9.1% (2014) 10,900
Shopping Shopping GSHP
General
Top Center Aug-14 6.4 100% 146 NA 22,845 No details on Cap rate
Shopping
BC Fund Hicham I and II Aug-14 13.1 100% 75 10.9% (2014) 5,679 Office buildings in Campinas with more than 20 years
Brookfield
Itau BBA building Sep-14 46.0 100% 966 NA 21,000 With a rent of R$150/m2 cap rate would be at 8.6%
Fund
Cap rate of 10.5% based on market calculations,
Blackstone 4 buildings in RJ Nov-14 65.7 100% 700 10.5% (current) 10,650
buying from Opportunity, buildings in Rio
Shopping
BR Malls Nov-14 15.0 100% 175 8% 11,667 Cap rate based on company data including tax benefit.
Fashion Mall
BC Fund CENESP Mar-15 208.0 1% 15 11.0% 4,886
General
Shopping Light Apr-15 14.1 100% 141 8.0% 9,972 Cap rate around 8% according to our calculation
Shopping
Price ranging from R$132mn up to R$158mn, cap rate
Aliansce Via Parque Jul-15 58.0 35% 158 8.8% 7,783
would range from 8.8-10%
Shopping Parque Expensive cap rate as it was the entry point for IGTA
Iguatemi Jul-15 34.1 3% 52 5.4% 53,695
Higienopolis and gained right of first refusal for future stake sales
Shopping Parque
Iguatemi Oct-15 34.1 8% 125 6.6% 43,639 As a result IGTA owns a 11.2% stake in this asset.
Higienopolis
Center Shopping
BR Malls Oct-15 13.7 30% 41 ~8% 10,069 Cap rate based on company data including tax benefit.
Rio
BR Malls West Shopping Oct-15 39.6 30% 120 ~8% 10,069 Cap rate based on company data including tax benefit.
Shopping
BR Malls Oct-15 39.8 44% 157 ~8% 8,965 Cap rate based on company data including tax benefit.
Paralela
General Internacional
Oct-15 76.8 10% 97 NA 12,623 Not available
Shopping Guarulhos
CSHG Real Edificio Faria Only units 1101 and 1102. The Fund is still the owner
Nov-15 0.9 100% 10 NA 11,599
Estate Lima of 18.7% of this asset
BR BBP Fernando
Nov-15 28.0 100% 60 9.0% 2,141 Price is estimated by JPM
Properties Pessoa
BR
Gaia Tucano Nov-15 31.7 100% 50 9.0% 1,576 Price is estimated by JPM
Properties
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Company Shopping/ Asset Date Cap rate Details:
BR Retail Marginal
Nov-15 7.1 100% 55 9.0% 7,752 Price is estimated by JPM
Properties Tietê
BR
WTNU III Nov-15 14.9 100% 245 9.0% 16,478 Price is estimated by JPM
Properties
BR
Galpão Vinhedo Nov-15 112.5 100% 250 9.0% 2,222 Price is estimated by JPM
Properties
Veríssimo
Shopping Eldorado Dec-15 76.3 4% 74 NA 22,568 Not available
family
BR
Sylvio Fraga Dec-15 2.2 100% 41 8.0% 19,043 Price is estimated by JPM
Properties
BR Complexo JK -
Dec-15 34.6 100% 467 8.0% 13,504 Price is estimated by JPM
Properties Torres D&E
BR Centro Empresarial
Properties Senado
BR
MV9 Dec-15 14.6 100% 91 8.0% 6,245 Price is estimated by JPM
Properties
BR
Petrobras retail Dec-15 2.9 100% 17 8.0% 5,901 Price is estimated by JPM
Properties
BR Condomínio São
Properties José dos Campos
11% above NAV, sale Lease back deal, assets
3 Commercial
BC Fund Jan-16 41.3 100% 365 8.7% 8,842 acquired in 2012 by R$300mn from Oi (2 in RJ and 1
Buildings
DF)
Sonae Sierra
Boavista shopping Jan-16 15.9 100% 56 7.9% 3,522 Cap rate based on company's press release
Brasil
BR
Cidade Jardim Jan-16 6.8 100% 130 8.0% 19,140 Price is estimated by JPM
Properties
BR
Galpão Palmares Jan-16 29.9 100% 70 9.0% 2,344 Price is estimated by JPM
Properties
BR Varejo Barra da
Jan-16 8.2 100% 75 9.0% 9,096 Price is estimated by JPM
Properties Tijuca
9% cap rate with a R$90/m2 which seems high under
CCP Thera Corporate Mar-16 19.0 100% 236 9.0% 12,421
current environment
Top Center Office
Jul-16 13.5 100% 153 10% 11,335
São Carlos building According to Gazit there sinergy with company's Mall.
BR Last asset sold to Blackstone from the warehouse
Warehouse DF Jul-16 38.9 100% 97 10% 2,491
Properties portfolio
BR Greenfield Project, 0% occupancy, assuming a
Triple A in RJ Aug-16 81.4 100% 715 11% 8,780
Properties R$80/m2 rent cap rate was at 11%.
Company says 8.2% in the release but it includes
Shopping Leblon Sep-16 24.6 25.1% 310 6.5% 50,161
Aliansce R$5mn in adm fees.
Multiplan Barra Shopping Sep-16 78.2 10.3% 185 8.4% 22,931 Stake acquired from Sistel
Multiplan Morumbi Shopping Sep-16 56.1 8.0% 311 8.0% 69,340 Stake acquired from Sistel
Multiplan Barra Shopping Nov-16 78.2 4.5% 144 8.0% 40,921 Stake acquired from Carvalho Hosklen
JHSF Cidade Jardim Nov-16 39.0 33.0% 410 7.0% 31,857 According to Gazit this Cap rate was at 7.0%
JHSF Tucuruvi Dec-16 33.8 100.0% 418 14.0% 12,371
Multiplan previously had 84%; It was not disclosured
Multiplan ShoppingBarigui Jan-17 52.2 9.3% 91 7.9% 18,669
the seller
Parque Shopping Aliansce expects a 15.5% IRR on this transaction,
Aliansce Feb-17 30.0 25.0% 66 9.5% 8,807
Belem seller was the land owner
Aliansce expects a 15.5% IRR on this transaction,
Aliansce Boulevard Belem Feb-17 39.4 5.0% 17 9.5% 8,807
seller was the land owner
Asset Sale - Cap rate considering last 12 months NOI
BR Malls Itau Power Center Mar-17 32.7 33.0% 107 10.4% 9,902
and post-tax
BR
Warehouse Jarinu Apr-17 23.0 100.0% 49 12.0% 2,150 According to BRPR rent should be at R$20-22/m2
Properties
Mykonos (Class A Company mentioned this asset was sold above its fair
São Carlos May-17 8.5 57.0% 41 9.3% 8,500
office) value Cap rate at 9.0-9.5%
HSI Parque da Cidade Jul-17 32.0 100.0% 440 7.0% 13,750 GLA based on Market estimates info
105
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Company Shopping/ Asset Date Cap rate Details:
Even/Yuni Urbanity Sep-17 25.4 100.0% 205 NA 8,053 Development to be concluded only in Dec-17
Centro Empresarial
São Carlos Sep-17 33.6 100.0% 296 8%-9% 8,800
do Aço
Eztec EZ Tower B Sep-17 47.0 100.0% 650 7.0% 13,830
BR Malls Minas Shopping Dec-17 35.9 2.1% 11 9.8% 14,859 Cap Rate considers LTM NOI and net of taxes
Gazit Extra Itaim Dec-17 18.3 100.0% 350 NA 19,168
BR Malls Maceió Shopping Dec-17 34.7 54.2% 170 8.7% 9,039 Cap Rate considers LTM NOI and net of taxes
BR Malls Natal Shopping Dec-17 26.9 50.0% 166 8.7% 12,364 Cap Rate considers LTM NOI and net of taxes
Granja Vianna and
BR Malls Dec-17 69.7 62.5% 370 9.4% 8,489 Cap Rate considers LTM NOI and net of taxes
Paralela
Internacional
General According our estimate, 6% according to Brazil
Shopping Dec-17 77.1 70.0% 937 7.5% 17,366
Shopping Journal
Guarulhos
Aliansce Caxias Dec-17 25.6 24.0% 36 8.8-10.8% 5,787 Cap rate depends on performance metrics
Shopping
Iguatemi Feb-18 34.1 0.3% 5 7.9% 44,461 Cap rate of 7.9% on 2017 NOI of R$117mn
Higienopolis
Source: J.P. Morgan, Company data
106
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Companies Heatmap
Figure 171: Shopping Malls Companies Heatmap
Yoy change – 12M Trailing
Aliansce 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Last Figure
SSS (3.7)pp (9.4)pp (11.2)pp (13.6)pp (8.8)pp (6.6)pp 4.2pp 1.9pp 2.8pp 11.0pp 5.4pp 3.1%
SSR (2.8)pp (4.6)pp (1.4)pp (2.9)pp 1.2pp 1.7pp 2.1pp 1.7pp (2.1)pp 0.8pp (1.4)pp 5.0%
Occupancy rate 0.0pp 0.2pp (0.1)pp (0.3)pp (1.3)pp (1.1)pp (1.3)pp (1.2)pp (0.1)pp (0.5)pp (0.2)pp 95.6%
Occupancy cost 0.1pp 0.4pp 1.0pp 0.8pp 0.8pp 0.8pp 0.2pp 0.6pp 0.3pp (0.3)pp (0.4)pp 10.7%
Delinquency rate 1.2pp (0.2)pp 0.6pp 2.6pp 0.7pp 2.6pp 0.7pp (1.6)pp (0.7)pp (2.1)pp (1.9)pp 2.8%
Revenues (R$bn) 11% 7.9% 5.9% 5.2% 5.5% 5.4% 3.9% 2.1% 1.1% 2.1% 3.9% 565
EBITDA (R$bn) 12% 8.6% 6.3% 4.6% 5.6% 4.7% 0.9% -3.0% -5.6% -3.3% 1.4% 390
FFO (R$bn) 9% 10% -2% -10% -15% -13% -12% -3% 18% 36% 68% 179
NOI (R$bn) 15% 11% 7.7% 4.4% 3.2% 2.6% -0.9% -4.1% -4.4% -2.5% 1.6% 449
Capex (R$bn) -52% -47% -50% -36% -25% -34% -34% 125% 137% 182% 421% 570
Net Debt/EBITDA (x) (0.5)x (0.3)x (0.5)x (0.1)x (0.1)x (0.3)x (0.7)x (0.4)x (0.5)x (0.6)x 0.6x 3.8x
Market Cap (R$bn) -5% -17% -41% -32% -22% -3% 46% 65% 50% 33% 48% 3,757
BR Malls 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
SSS (1.7)pp (3.9)pp (2.1)pp (5.6)pp (4.7)pp (5.3)pp (2.9)pp (1.5)pp (0.8)pp 7.0pp 5.2pp 4.6%
SSR (1.1)pp (1.6)pp (0.4)pp (0.8)pp (0.2)pp (4.8)pp (4.8)pp (1.1)pp (0.9)pp 5.3pp 1.7pp 4.3%
Occupancy rate (0.4)pp (0.3)pp (0.3)pp (0.5)pp (0.4)pp (1.2)pp (1.3)pp (0.7)pp (0.7)pp (1.1)pp (0.3)pp 95.2%
Occupancy cost 0.3pp 0.6pp 0.7pp 0.6pp 0.7pp 0.3pp 0.3pp 0.4pp (0.3)pp (0.1)pp (0.5)pp 11.2%
Delinquency rate 2.9pp 3.7pp 3.0pp 1.5pp 1.0pp 1.3pp 2.8pp (0.1)pp (0.6)pp 1.9pp 0.2pp 9.5%
Revenues (R$bn) 5.7% 5.5% 5.8% 3.7% 1.8% -1.1% -4.2% -5.3% -4.8% -2.8% -1.4% 1,366
EBITDA (R$bn) 4% 4% 5% 4% 1% -4% -9% -12% -13% -11% -11% 939
FFO (R$bn) 3% 6% 1% -6% -29% -33% -32% -31% -1.9% 3.7% 20.7% 376
NOI (R$bn) 6.1% 5.6% 6.2% 3.7% 1.4% -1.8% -5.5% -6.9% -6.7% -4.7% -3.1% 1,217
Capex (R$bn) -15% -2% -10% -5% -9% -31% -37% -49% -50% -37% -25% 219
Net Debt/EBITDA (x) 0.4x 0.3x 0.1x 0.2x (0.0)x (0.1)x 0.0x 0.1x 0.1x (1.6)x (1.9)x 2.4x
Market Cap (R$bn) -13% -22% -46% -32% -13% 16% 54% 42% 32% 34% 64% 12,277
Iguatemi 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
SSS (0.2)pp (2.2)pp (2.3)pp (3.9)pp (5.4)pp (3.0)pp (3.6)pp (4.2)pp (0.1)pp 1.1pp 4.9pp 5.9%
SSR (1.1)pp (2.3)pp (3.1)pp (1.8)pp (1.6)pp (0.4)pp 1.9pp (0.4)pp 0.8pp (0.1)pp (1.6)pp 5.8%
Occupancy rate 1.0pp (0.2)pp (1.0)pp (1.3)pp (2.0)pp (1.2)pp (0.8)pp (0.6)pp (1.0)pp (0.7)pp 0.0pp 93.3%
Occupancy cost 0.4pp 0.0pp 0.2pp 0.0pp (0.1)pp 0.1pp 0.4pp 0.5pp 0.0pp (0.2)pp (0.5)pp 12.0%
Delinquency rate 0.6pp 0.0pp 1.4pp (0.7)pp 1.1pp 1.3pp (1.3)pp (0.9)pp 0.0pp (1.8)pp 0.4pp 1.5%
Revenues (R$bn) 23% 17% 12% 7.9% 6.8% 5.7% 4.0% 5.0% 4.1% 4.1% 5.2% 690
EBITDA (R$bn) 26% 21% 17% 10% 15% 11% 4.8% 4.5% -1.4% -0.4% 2.0% 533
FFO (R$bn) 16% 8% 6% -3% 0% -5% -14% -10% -9.4% 2.3% 17.7% 300
NOI (R$bn) 23% 17% 12% 8% 10% 10% 9% 10% 6.8% 5.6% 4.9% 582
Capex (R$bn) -32% -72% -58% -40% -31% 36% -20% -58% -73% -77% -70% 87
Net Debt/EBITDA (x) 0.4x (0.2)x 0.0x 0.3x 0.1x 0.1x 0.2x (0.2)x (0.1)x (0.1)x (0.3)x 3.1x
Market Cap (R$bn) 30% 10% -17% -23% -12% 15% 45% 41% 33% 17% 32% 6,934
107
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Figure 172: Shopping Malls Companies Heatmap

Yoy change – 12M Trailing
Multiplan 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
SSS (4.0)pp (8.2)pp (5.5)pp (5.8)pp (2.7)pp 1.1pp 2.2pp (0.6)pp 1.6pp 4.4pp 4.5pp 7.3%
SSR 2.7pp (3.1)pp (2.0)pp (3.0)pp (3.7)pp (1.0)pp 1.6pp 1.9pp 2.9pp 2.6pp (1.7)pp 6.7%
Occupancy rate 0.1pp 0.0pp (0.7)pp (1.0)pp (0.7)pp (0.8)pp (0.7)pp (0.7)pp (0.5)pp 0.1pp 0.1pp 97.5%
Occupancy cost (0.2)pp (0.1)pp (0.1)pp (0.1)pp 0.4pp 0.5pp 0.5pp 0.5pp 0.1pp (0.3)pp (0.3)pp 13.2%
Delinquency rate (0.1)pp (0.6)pp 0.7pp 0.2pp 2.7pp 2.5pp 0.7pp 0.5pp (1.5)pp (1.0)pp (0.3)pp 2.8%
Rev enues (R$bn) 12% 7.0% 2.6% -4.1% -3.5% -1.3% 0.8% 4.2% 2.8% 3.0% 4.2% 1,159
EBITDA (R$bn) 23% 18% 16% 5.6% 5.8% 5.2% 4.8% 3.4% 1.5% 2.6% 0.4% 811
FFO (R$bn) 19% 9% 8% -4% -2% 0% 1% -9% -13% -10% -4% 506
NOI (R$bn) 18% 12% 8.0% 1.2% 0.6% 0.6% 0.9% 2.5% 1.8% 3.7% 6.2% 1,034
Capex (R$bn) -63% -39% -8% -2% 35% -19% 7% 221% 229% 340% 218% 1,045
Net Debt/EBITDA (x) (0.7)x (0.3)x (0.2)x 0.1x 0.1x (0.0)x (0.0)x 0.6x 0.1x 0.0x (0.0)x 2.4x
Market Cap (R$bn) 16% -7% -15% -20% -4% 26% 49% 56% 30% 14% 22% 14,685
Sonae Sierra Brasil 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
SSS (1.5)pp (5.5)pp (8.1)pp (12.4)pp (8.5)pp (3.8)pp 1.9pp 2.7pp 5.2pp 10.0pp 7.4pp 7.7%
SSR 0.7pp (1.9)pp (3.3)pp (5.2)pp (5.8)pp (4.0)pp (1.7)pp (0.8)pp 1.8pp 4.7pp 2.0pp 6.7%
Occupancy rate 1.9pp 1.2pp (1.9)pp (2.8)pp (2.7)pp (2.1)pp 1.6pp 2.4pp 1.2pp (0.2)pp (1.2)pp 93.6%
Occupancy cost 0.0pp 0.1pp 0.4pp 0.5pp 0.8pp 0.6pp 0.3pp 0.0pp (0.2)pp (0.3)pp (0.4)pp 9.7%
Delinquency rate 0.8pp 1.1pp (0.1)pp 0.5pp 0.8pp 2.7pp 2.1pp 0.3pp (0.0)pp (1.4)pp (0.2)pp 5.3%
Rev enues (R$bn) 14% 11% 7% 4% 2% 2% 1% 3% 3% 4% 5% 353
EBITDA (R$bn) 16% 13% 9% 2% 1% -2% -4% 0% -6% 0% 4% 183
FFO (R$bn) 9% 11% 10% -7% -15% -20% -26% -10% -8% 8% 27% 91
NOI (R$bn) 14% 11% 8% 3% 1% 1% -1% 3% 2% 4% 7% 269
Capex (R$bn) -72% -48% 3% 47% 16% -19% -42% -73% -74% -64% -59% 21
Net Debt/EBITDA (x) 0.1x 0.1x 0.1x 0.1x (0.1)x (0.2)x (0.1)x (0.4)x (0.0)x (0.2)x (0.4)x 3.0x
Market Cap (R$bn) 1% 8% -21% -2% -16% -8% 28% 6% 40% 11% 55% 2,186
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Homebuilders
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Homebuilders
Sector overview: The sector is composed of 14 listed companies with a combined
market cap of more than US$7.0bn and daily liquidity of roughly US$40mn. MRV
and Cyrela are the most liquid names, trading more than US$10mn daily and having
both a weight of around 0.3% on the IBOV, as of Jan. 2018.
5 Things to Know About Brazilian Homebuilders

1) Revenue recognition – Percentage of completion. Unlike most homebuilders
around the world, Brazilian companies recognize their revenues based on a
percentage of completion, meaning that the pace of construction defines the amount
of revenues, cogs and gross fit recognized. Usually at the beginning of the projects,
companies set a budget for construction, including land price and start to recognize
revenues based on the evolution of this budget. In a simple example, if a project is
50% sold and had 50% of its budget executed, the company recognizes 25% of
projects’ potential sales value and 25% of its potential costs. Any deviations in
expected revenues or costs are recognized right away.
2) Balance Sheet is at cost. Companies recognize that their assets and liabilities are
cost, meaning that both inventories and land bank value are based on historical cost
and don’t reflect market value. Keep in mind that companies provide on their
releases the potential sales value of their land bank, which represents the potential
revenues to be generated from current land bank, without mentioning expected
margins or debt related to land acquisition. Additionally, companies also provide that
value of inventories at market price and the construction disbursement necessary for
the conclusion of projects.
3) Mortgage system in Brazil. As Brazil is a country with historically high interest
rates, mortgages were always subsidized. For low income families’ earnings up to 10
minimum wages, there is the FGTS financing, mostly done through the MCMV
program, which provides mortgages with annual rates between 5.0% and 8.0% per
year, depending on family income. In 2017, FGTS allocated R$58bn for low income
mortgages. In the mid and high income segment, mortgages came mostly from SBPE
(Sistema Brasileiro de Poupança e Empréstimos) at 8-12% per year. SBPE is backed
by savings account deposits, which have a cost of around 6% per year for banks.
4) MCMV program. The program is the main driver for the lower income segment,
which includes companies with exclusive focus on the segment such as MRV and
Tenda, and Direcional, which has most of its exposure to MCMV projects. The
program is divided into 3 brackets, with cash subsidies and interest rates varying
according to families’ income. The program will have a target to contract 650k units
in 2018, growth of 30% vs 2017, with 400k units under Faixa 2 & 3 main market for
low income companies. Today MRV is the largest company in the program with a
market share of around 10%.
5) Housing demand. Current housing demand is around 1.5mn new units per year,
based on family formation data for the period between 2003 and 2030, representing a
potential sales value, according to our calculation, of around R$280bn (US$85bn);
however, we believe that 50% of that demand is attended by self-construction or very
small companies located in cities that don’t have enough demand to justify the
presence of organized homebuilders. Moreover, we believe that around 90% of the
demand in number of units is for low income housing due to Brazil’s income
distribution; however, in terms of potential sales value the mid and high income
segment represents around 33% of demand, due to higher average selling pricing.
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Sector Numbers Overview

Brazilian Market Data – ABRAINC-FIPE
In 2015, ABRAINC (Brazilian Developers Association) together with FIPE started to
release on a monthly basis data for the real estate market in Brazil, the first
publication ABRAINC had the contribution of 16 companies, including both listed
and non-listed names. With a national reach today, the index has data from more than
30 companies. ABRAINC FIPE is a broader index than the ones provided by local
associations like Secovi-SP and ADEMI-RJ. There is information regarding
launches, presales, deliveries, dissolutions and inventories. ABRAINC-FIPE used to
release data regarding delinquencies; however, this series was discontinued for an
improvement in methodology. The data from FIPE-ABRAINC and FIPE-ZAP are
available at www.fipe.org.br.
Figure 173: Launches in Units – Trailing 12M Figure 174: Gross Presales Units – Trailing 12M
Units (‘000) Units (‘000)
85 140
80 130
75 120
70 110
65 100
60 90
55 80
50 70
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Source: Abrainc-Fipe. Source: Abrainc-Fipe.
Figure 175: Launches in PSV – Trailing 12M Figure 176: Gross Presales PSV – Trailing 12M
R$ in billion R$ in billion
24 34
22 32
20 30
18 28
16 26
14 24
12 22
10 20
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
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Figure 177: Launches Avg. price – Trailing 12M Figure 178: Gross Presales Avg. price – Trailing 12M
R$ (‘000) R$ ('000)
400 260
255
300 250
245
200 240
235
100 230
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Figure 179: Inventories in absolute and relative terms Figure 180: LTM verage Gross Sales Speed
Units ('000) Supply (months)
125 50
Units ('000) Inventory Supply 10%
120 40
115
30 8%
110
20
105
6%
100 10
95 0
4%
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Figure 181: Units delivered – Trailing 12M

Units ('000)
180
160
140
120
100
80
60
40
20
0
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Source: Abrainc-Fipe.
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Figure 182: Units Cancelled – Trailing 12M

Units ('000)
60
50
40
30
20
10
0
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Source: Abrainc-Fipe.
Figure 183: Dissolution as percentage of launches per quarter

27.7%
22.9%
20.7%
17.3%
13.6% 13.4%
10.6% 11.5% 10.9%
9.4% 9.0%
6.3%
5.0%
3.8%
1.3%
0.1%
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Source: FIPE-ABRAINC.
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Breakdown MCMV vs Mid and High income segment

In the charts below, we show a comparison of the lower income segment (MCMV
program) and the mid and high income numbers.
Figure 184: Launches– Trailing 12M Figure 185: Gross Presales – Trailing 12M
Units (‘000) Units ('000)
70 80
MCMV Mid/High Income MCMV Mid/High Income
60 70
50
60
40
50
30
40
20
10 30
0 20
Apr-16
Oct-16
Apr-17
Oct-17
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-16
Jun-16
Aug-16
Dec-16
Feb-17
Jun-17
Aug-17
Dec-17
Figure 186: MCMV Figures Figure 187: Mid and High Income segment
Units (‘000) Units ('000)
75 50
Gross Presales Launches Gross Presales Launches
70 45
65 40
60 35
30
55
25
50
20
45 15
40 10
35 5
30 0
Jul-16
Jul-17
Mar-16
May-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Sep-17
Nov-17
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Figure 188: Cancellation ratio Figure 189: Deliveires

Units cancelled / Gross presales Units ('000)
70% 80
Mid/High Income MCMV
60% MCMV Mid/High Income
70
50%
60
40%
50
30%
40
20%
10% 30
0% 20
Jul-16
Jul-17
Mar-16
May-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Sep-17
Nov-17
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
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São Paulo market – SECOVI Data

Secovi-SP (Housing syndicate of São Paulo state) tracks the market in São Paulo city
and metropolitan regions, disclosing monthly information regarding launches, sales
and sales speed on its website.
São Paulo City info

Figure 190: Unit launches in SP City – Trailing 12 months
Units (‘000) Growth yoy
50 Launches Growth yoy 80%
45 60%
40 40%
35 20%
30 0%
25 -20%
20 -40%
15 -60%
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Source: Secovi, Bloomberg, and J.P. Morgan estimates.
Figure 191: Units sold in SP – Trailing 12 months

45 Presales Growth yoy 60%
40 40%
35 20%
30 0%
25 -20%
20 -40%
15 -60%
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Figure 192: Sales over Supply

35%
Monthly SoS Avg 12M
30%
25%
20%
15%
10%
5%
0%
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
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Figure 193: Transaction volumes in SP – Avg. last 12 months

Units (‘000) Avg Price (`000)
45 Units Sold Avg price / Unit 600
40 550
500
35
450
30
400
25
350
20 300
15 250
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Figure 194: Launches mix in SP City

70%
1 Dorm 2 Dorms 3 Dorms > 3 Dorms
60%
50%
40%
30%
20%
10%
0%
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Figure 195: Inventory mix in SP City

60%
1 Dorm 2 Dorms 3 Dorms > 3 Dorms
50%
40%
30%
20%
10%
0%
Jul-09
Jul-16
Nov-04
Jun-05
Jan-06
Aug-06
Mar-07
Oct-07
May-08
Dec-08
Feb-10
Sep-10
Apr-11
Nov-11
Jun-12
Jan-13
Aug-13
Mar-14
Oct-14
May-15
Dec-15
Feb-17
Sep-17
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Figure 196: Unit launches in SP City – Quarterly figures

20 150%
Launches yoy
100%
15
50%
10
0%
5
-50%
0 -100%
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
2Q14
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
Figure 197: Units sold in SP – Quarterly figures

14 200%
Presales yoy
12 150%
10
100%
8
50%
6
0%
4
2 -50%
0 -100%
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
2Q14
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
Figure 198: Launches and presales – Annual figures

Units (‘000) Ratio
50 1.7
Launches Sales Launches/Sales
40 1.5
30 1.3
20 1.1
10 0.9
0 0.7
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
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Figure 199: Presales PSV – Annual figures

R$ in billions
23.3 24.3
23.1
20.2 20.0 19.5 18.7
16.6 18.5
14.6 14.1
10.9 11.4
8.9
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Figure 200: Sales over Supply – Monthly Average (São Paulo City)
23%
18%
16%
14% 14%
13%
12%
11%
9% 8%
8% 7%
6% 5%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Secovi.
Figure 201: Average price units sold

R$ (‘000)
723 697 730
643 689 693
654 637 653
616
559 542 549
483
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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São Paulo Metropolitan Region

Figure 202: Unit launches in SP Metropolitan Region – trailing 12 months
100 Launches Growth 150%
80 100%
60 50%
40 0%
20 -50%
0 -100%
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Figure 203: Units sold in SP Metropolitan Region – Trailing 12 months

Presales Growth 30%

70
20%
60
10%
50
0%
40 -10%
30 -20%
20 -30%
10 -40%
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Figure 204: SoS in SP Metropolitan Region – Trailing 12 months

30%
SoS Avg 12M
25%
20%
15%
10%
5%
0%
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
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Rio de Janeiro market – ADEMI Data

ADEMI RJ is the Association of Developer Business Leaders in the Real Estate
Market, which tracks the real estate market in Rio de Janeiro city, disclosing
quarterly information such as launches, presales and inventories and sales speed, on
the website http://www.ademi.org.br/. Launches and presales have different samples;
therefore, launches are constantly above sales. While launches incorporate around
90% of the market, sales depend on companies’ own disclosures.
Figure 205: Unit launches in Rio de Janeiro – Trailing 12 months

30 150%
Launches growth yoy
25 100%
20
50%
15
0%
10
5 -50%
0 -100%
Jun-04
Oct-04
Feb-05
Jun-05
Oct-05
Feb-06
Jun-06
Oct-06
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
Oct-14
Feb-15
Jun-15
Oct-15
Feb-16
Jun-16
Oct-16
Feb-17
Jun-17
Source: ADEMI-RJ, and J.P. Morgan estimates.
Figure 206: Units sold in Rio de Janeiro – Trailing 12 months

25 200%
Pre sales growth yoy
20 150%
15 100%
10 50%
5 0%
0 -50%
Jun-04
Oct-04
Feb-05
Jun-05
Oct-05
Feb-06
Jun-06
Oct-06
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
Oct-14
Feb-15
Jun-15
Oct-15
Feb-16
Jun-16
Oct-16
Feb-17
Jun-17
Source: ADEMI-RJ, and J.P. Morgan estimates.
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Figure 207: Inventory in Rio de Janeiro – 12-month average

Units (‘000)
20 100%
Inventory growth yoy 80%
15 60%
40%
10
20%
5 0%
-20%
0 -40%
Jun-04
Oct-04
Feb-05
Jun-05
Oct-05
Feb-06
Jun-06
Oct-06
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
Oct-14
Feb-15
Jun-15
Oct-15
Feb-16
Jun-16
Oct-16
Feb-17
Jun-17
Figure 208: Unit launches in Rio de Janeiro per year

Units (‘000)
25
21
19 19
17
14
13 12
9 9
6 7 7
4
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: ADEMI-RJ, *Annualized data based on figure from Jan-Sep
Figure 209: Units sold in Rio de Janeiro per year

Units (‘000)
18
15
14
13
10 10
8 9
8 7 7
5
4 3
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: ADEMI-RJ, *Annualized data based on figure from Jan-Sep
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Figure 210: Average Sales over Supply per year

In percentage
11.0
9.8
9.2 9.1
8.7 8.6
8.0
6.7 6.9 7.0 6.9
5.6 5.8 6.1
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: ADEMI-RJ, *Annualized data based on figure from Jan-Sep.
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Market Size and Expected Growth

We estimate that Brazil’s annual housing demand is around R$280bn (~US$87bn) in
potential sales based on potential demand of 1.5mn new homes per year, which is
based on 35mn new families during the 2007-30 period, or ~1.5mn families per year
in the period, based on data from IBGE and FGV. In 2017, publicly traded
companies should have presales of around R$15-17bn, slightly up vs 2016 as the
market started to show the first signs of improvement after 5 years of contraction
after the peak of R$39bn in 2011. It’s important to note that there are no precise
official estimates regarding the potential annual demand for housing in Brazil, given
the industry’s fragmented structure and lack of consistent and reliable data.
According to ABRAINC (Association of Developers) data, the sector had gross
presales of around R$28bn in 2017 (9% yoy) totaling 110k units.
We believe that to estimate the real market for large homebuilders (i.e., launches
above R$300mn per year), we need to exclude self-construction coming from the
informal market and demand from small cities (i.e., cities with fewer than 200k
inhabitants) as it is unlikely that large builders would have enough scale to enter
these markets. Thus, we estimate that the real potential market for the publicly traded
homebuilders is around 500-750k units worth R$90-140bn (US$30-44bn) in annual
sales. In 2017, new mortgages were down 4% to R$101bn (from FGTS and SBPE).
In terms of a segment breakdown, the total annual PSV for the lower-income
segment (0-10 minimum and homes with prices up to R$300k) is around R$175bn
and for the mid- and high-income segments it totals around R$105bn.
Table 105: Family formation likely will have increased by 35mn by 2030
Income Range 2007 2030e New families
In R$ In MW # of Families % of Total # of Families % of Total in the period
< 1,000 < 2mw 31.7 53% 29.1 31% -2.6
1,000-2,000 2-4mw 15.5 26% 27.6 29% 12.1
2,000-4,000 4-8mw 8.4 14% 21.8 23% 13.4
4,000-8,000 8-16mw 3.3 5% 11 12% 7.7
8,000-16,000 16-32mw 1.1 2% 4.3 5% 3.2
16,000-32,000 32-64mw 0.3 0% 1.3 1% 1
> 32,000 > 64mw 0.0 0% 0.3 0% 0.3
Total 60.3 100% 95.4 100% 35.1
Source: IBGE, FGV, and J.P. Morgan. Based on 2007 minimum wage.
Table 106: Housing market breakdown

# Minimum % of Total House Mkt Size
Wages Population Monthly Wage Price** Units R$ bn
<3 50% < R$ 2,862 < R$75k 750 56
3-5 21% R$ 2,862 – 4,770 R$75 - 175k 319 48
5 - 10 18% R$ 4,770 - 9,540 R$175 - 300k 274 69
10 - 20 8% R$ 9,540 - 19,080 R$300 - 750k 122 61
> 20 3% > R$ 19,080 > R$750k 46 46
Total 1,511 280
Source: J.P. Morgan. *Maximum installment a family could pay for a unit was defined as 10% of gross income per family for < 3 MW,
30% for the other segments. Minimum wage in Brazil at R$954 per month.
Small cities demand doesn’t justify a significant geographical diversification

In Brazil, according to IBGE, almost 60% of the population lives in cities with fewer
than 250k inhabitants, which means that the total population living in cities above
this threshold amounts to 87mn individuals (40% of population), spread among 110
cities. Having said that, if we exclude Brazilians who live in smaller cities from the
annual demand of 1.5mn new houses in Brazil, this indicates a potential market
excluding the very low income segment is at around 600k new houses per year;
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however, this number still includes some self-construction market, we believe could
represent 10-20% of the market – a category needed to be excluded from potential
demand for listed companies – leading us to a potential market in larger cities of
around 500-520k new houses per year, still large enough compared to listed
companies’ current launches of around 50-55k units per year.
What are companies' limits? 10k, 50k, 100k units per year?
Although geographic diversification is not the main driver for the sector anymore, as
companies are focusing on reducing inventories and increasing profitability, we
believe it’s worth pointing out what might be the maximum size of a real estate
company in Brazil. While, some believe that the maximum size is ~50-60k units per
year as this was the number reached by the Mexican HBs during the golden years
and the number of units launched by the biggest Chinese company in the market
(Vanke), we believe the limit is more related to market size, market share and a
company’s business model.
According to our calculations, under an optimistic scenario, homebuilder companies

in Brazil could reach around 100k units per year, assuming 15% market share in all
cities with a population above 250k, which, in our view, provides a minimum scale
of operation. Additionally, due to the lack of economies of scale in the sector, we
believe that any company y operating closer to this level would significantly depend
on JVs and partnerships.
In the table below we provide a sensitivity analysis on how many units a company
could launch per year based on the number of cities in which it operates and its
market share. Assuming this 15% market share in cities with more than 250k
inhabitants and an average price of R$180k per units, companies could be launching
around R$15-18bn in the best-case scenario, this compared with annual launches of
almost R$6.0bn for MRV, which is currently the largest company in the sector.
Table 107: HB in Brazil can launch up to 100k units per year or a PSV of up to R$20bn
Units (‘000)
Cities with pop. # of Total Market share
> x inhabitants Cities Pop. mn 5% 10% 15% 20% 25%
100k 310 117.2 47 94 141 188 234
150k 168 111.3 45 89 134 178 223
250k 111 86.9 35 70 104 139 174
500k 42 62.6 25 50 75 100 125
1,000k 17 45.5 18 36 55 73 91
Source: IBGE and J.P. Morgan estimates. Using 2010 Census.
Table 108: Annual launches based on an average price of R$180k per unit
PSV in R$bn
Cities with pop. # of Total Market share
> x inhabitants Cities Pop. mn 5% 10% 15% 20% 25%
100k 310 117.2 8.4 16.9 25.3 33.8 42.2
150k 168 111.3 8.0 16.0 24.0 32.0 40.1
250k 111 86.9 6.3 12.5 18.8 25.0 31.3
500k 42 62.6 4.5 9.0 13.5 18.0 22.5
1,000k 17 45.5 3.3 6.6 9.8 13.1 16.4
Source: IBGE and J.P. Morgan estimates. Using 2010 Census.
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Demographic data
Table 109: Brazil’s demographic statistics
Population 207,353,391
Population growth rate 0.73%
Sex ratio 0.97 male / female
0-14yrs: 22.3%
15-24yrs: 16.4%
Age structure: 24-54yrs: 43.9%
55-64yrs: 9.1%
>65yrs: 8.3%
Urban population 86.2%
Rate of Urbanization 0.99%
Median age 32.0 years
Life expectancy at birth 74.0 years
Birth rate 14.1 births / 1,000 pop.
Death rate 6.7 deaths / 1,000 pop.
Fertility rate 1.75 children / woman
Net migration rate -0.10 migrant(s)/1,000 pop.
Roman Catholic 64.6%
Protestant 22.2%
Religion: None 8.0%
Spiritism 2.2%
Other 3.0%
White 47.7%
Mulatto (mixed white and black) 43.1%
Ethnic groups:
Black 7.6%
Others (Japanese, Arab, Amerindian) 1.6%
Source: CIA World Factbook and IBGE as of Feb-2018.
Table 110: Demographic analysis by population

Population # of Cities % of Total Pop. Population (mn)
> 1mn 17 21.9% 45.5
500k-1mn 25 8.2% 17.1
250-500k 69 11.7% 24.3
100-250k 199 14.6% 30.3
50-100k 355 11.9% 24.7
< 50k 4,905 31.7% 65.8
Total 5,570 100.0% 207.7
Source: J.P. Morgan estimates and IBGE as of Jul-2016.
Table 111: Demographic analysis by region

Population # of Cities % of Total Pop. Population (mn)
South 1,191 14.3% 29.6
Southeast 1,668 41.9% 86.9
Central West 467 7.6% 15.9
Northeast 1,794 27.6% 57.3
North 450 8.6% 17.9
Total 5,570 100.0% 207.7
Source: J.P. Morgan estimates and IBGE as of Jul-2016.
Table 112: 10 Largest metropolitan regions

Metropolitan Regions State Population (mn) GDP (R$bn)
São Paulo SP 21.4 760
The 10 largest metropolitan Rio de Janeiro RJ 12.3 404
Belo Horizonte MG 5.9 149
cities represent ~40% of total
Distrito Federal DF, GO, MG 4.3 192
Brazil GDP and ~30% of its
Porto Alegre RS 4.3 95
population. Recife PE 4.0 99
Fortaleza CE 4.0 80
Salvador BA 4.0 89
Curitiba PR 3.5 135
Campinas SP 3.1 142
Total 66.9 2,146
Source: J.P. Morgan estimates and IBGE.
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Table 113: 20 Largest cities in Brazil by population

City State Population GDP per Capita R$
Five of the 20 largest cities São Paulo SP 12,038,175 39,122
belong to the metropolitan Rio de Janeiro RJ 6,498,837 38,262
regions of São Paulo or Rio Brasília DF 2,977,216 62,859
de Janeiro. Salvador BA 2,938,092 18,264
Fortaleza CE 2,609,716 19,494
Belo Horizonte MG 2,513,451 32,844
Manaus AM 2,094,391 32,301
Curitiba PR 1,893,997 42,934
Recife PE 1,625,583 29,037
Porto Alegre RS 1,481,019 39,092
Goiânia GO 1,448,639 29,034
Belém PA 1,446,042 18,074
Guarulhos SP 1,337,087 38,016
Campinas SP 1,173,370 44,851
São Luís MA 1,082,935 21,949
São Gonçalo RJ 1,044,058 13,715
Maceió AL 1,021,709 16,439
Duque de Caxias RJ 886,917 28,730
Natal RN 877,662 23,413
Campo Grande MS 863,982 5,782
Total / Avg. 48,200,285 37,650
Source: J.P. Morgan estimates and IBGE as of Feb-2018.
Figure 211: Population breakdown by age as of 2016

90+
80-84 Men Women
70-74
60-64
50-54
40-44
30-34
20-24
10-14
0-4
5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%
Source: IBGE.
Table 114: Family Size is shrinking – number of individuals per home

2007 2017 2030
Population (mn) 189 211 223
# Houses (mn) 56 72 93
Avg. Family Size 3.4 2.9 2.4
Source: MRV investor presentation as of Feb-2017.
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Figure 212: Brazil’s states and main cities
Boa Vista
Roraima Amapa
Macapá
Belém
Santarém São Luís Parnaíba Caucaia
Manaus
Amazonas Fortaleza
Para Teresina Mossoró Natal
Marabá Imperatriz Ceara
Rio Grande do Norte
Maranhao
Araguaína Paraiba João Pessoa
Piaui
Recife
Pernambuco
Acre Porto Velho Jaboatão
Arapiraca Maceió
Rio Branco Palmas
Rondonia Aracaju Alagoas
Tocantins Bahia Sergipe
Barreiras Feira de Santana
Mato Grosso
Distrito Federal
Vitória da Conquista
Cuiabá Anápolis Brasília
Rondonópolis Montes Claros
Goias
Goiânia Minas Gerais
Espirito Santo
Uberlândia Belo Horizonte
Serra
Mato Grosso do Sul Contagem
Campo Grande Vitória Vila Velha
Ribeirão Preto
Sao Paulo Juiz de Fora
Dourados Rio de Janeiro
Campinas São Gonçalo
Legend Maringá Sorocaba São Paulo
Rio de Janeiro
Londrina
Parana
Cities Curitiba
Joinville
Regions Santa Catarina Blumenau
Florianópolis
Country outline Criciúma
Caxias do Sul
Region names Santa Maria
Porto Alegre
Rio Grande do Sul
Pelotas
Source: J.P. Morgan.
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Interest Rates – Significant Impact on Mortgages and

Sentiment
While Homebuilders’ fundamentals remain relatively unchanged on the back of
changes in monetary policies, since most companies’ debt is not linked to Selic, there
is a significant impact on affordability for homebuyers and consequently on potential
demand assuming that there will be a pass-through of Selic changes to mortgage
rates. It is important to flag that mortgage rates for the low income segment are
subsidized; therefore; changes in Selic don’t impact direct demand for this segment.
When looking at sector performance vs Selic and IBOV there was a clear correlation
between IBOV and IMOB during the period of March 2008 until mid 2013, even
though the IMOB had higher beta. However, from 2H13 until now the sector had
underperformed IBOV despite the record low for Selic; in our view, this happened
due to sector execution and also the fact that mortgages in Brazil are not linked to
Selic, but rather issued at fix costs. Additionally, the decline in Selic over the past 12
months has not translated into cheaper funding for homebuyers as average rates in
Brazil remain at low double digit.
Figure 213: Sector performance versus Selic rates and the Bovespa
IMOB and IBOV (Jan 08 = 100) Selic rate (%)
160 16.0
IMOB IBOV Selic
140
14.0
120
100 12.0
80
60 10.0
40
8.0
20
0 6.0
Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15
Nov-15
Mar-16
Jul-16
Nov-16
Mar-17
Jul-17
Nov-17
Mar-18
Table 115: Performance and valuation during Selic cycles

Apr-2008 to Apr-2010 to Jan-2011 to Aug-2011 to Apr-2013 to Oct-2016 to
Sep-2008 Jul-2010 Jul-2011 Mar-2013 Sep-2016 Present
Selic rates – Beg. of the Cycle 11.25% 8.75% 10.75% 12.50% 7.25% 14.25%
Hike 250 bps 200 bps 175 bps 525 bps 700 bps 775 bps
Selic rates – pick 13.75% 10.75% 12.50% 7.25% 14.25% 6.50%
Cycle duration 5 months 3 months 7 months 18 months 41 months 17 months
Multiples at Peak Sep-08 Jul-10 Jul-11 Aug-11 Aug-16 Oct-16
P/BV 1.9x 1.5x 1.3x 1.3x 0.6x 0.6x
P/E 7.8x 6.5x 5.9x 5.7x 7.6x 13.2x
Multiples at Trough Apr-08 Apr-10 Jan-11 Mar-13 Apr-13 Mar-18
P/BV 2.4x 1.7x 1.8x 1.4x 1.3x 0.7x
P/E 11.1x 7.0x 7.5x 7.6x 7.0x 21.6x
Source: Company reports, Bloomberg, and J.P. Morgan estimates. Priced as March 19th.
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Housing Deficit: Limited Impact for Listed Companies

To understand the housing deficit and what it means for the formal market, we need
Figure 214: Composition of first to look at how it is calculated. According to Fundação João Pinheiro, the deficit
housing deficit – 2015
is calculated based on 4 items: 1) poor-quality homes, 2) co-living, 3) excessive rent
52%
(more than 30% of income), and 4) excessive density. The latest data available on
Brazil Housing deficit is from 2015.
28%  Excessive rent: When families spend more than 30% of their income on rent, this
is the main component of the housing deficit, representing 52% of the total as of
15% 2015.
5%
 Co-living: More than one family lives in one house. This item represented 28%
of 2015 housing deficit.
Co-Living
Quality
Excessive
Excessive
Poor
Density
 Poor-quality homes: Houses are considered poor-quality if they lack electric

rent
power and/or water and sewage infrastructure; these represented 15% of the total
deficit as of 2015.
Source: Fundação João Pinheiro, PNAD and IBGE.
 Excessive density: More than three people per bedroom, with all rooms of the
house used as bedrooms; this item represented 5% of the total deficit as of 2015.
Based on data for 2015, the housing deficit is at 6.2mn houses in Brazil, up from
6.1mn units in the previous year and at the highest level since the survey from
Fundação João Pinheiros started in 2007. This increase in housing deficit happens
despite government efforts to reduce the housing deficit through programs like the
Minha Casa Minha Vida. The main component of the deficit in Brazil is the
concentration of the excessive rent as more than 50% of the deficit is represented by
families that spend more than 30% of their income on rents.
Figure 215: Urban Housing Deficit evolution – breakdown by region

Millions houses
6.0 6.0 5.8 6.1 6.2
5.5 5.6
0.4 0.5 5.2 0.5 0.5
0.4 0.5 0.5 0.7
0.7 0.6 0.4 0.6 0.6
0.6 0.6 0.6
2.2 2.2 2.2 2.4 2.4
2.0 2.0 2.1
2.1 1.9 2.1 1.9 1.8 1.8 1.9 1.9
0.6 0.6 0.6 0.6 0.6 0.7 0.6 0.6

2007 2008 2009 2011 2012 2013 2014 2015
North Region Northeast Region Southeast Region South Region Middle West
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Figure 216: Housing Deficit – breakdown by category

6% 7% 6% 7% 7% 7% 6% 5%
30% 31% 32% 37% 43% 44% 48% 52%
42% 41% 43% 34%

34% 33% 32% 28%
22% 21% 18% 21% 16% 17% 14% 15%
2007 2008 2009 2011 2012 2013 2014 2015

Poor quality Co-Living Excessive rent Excessive density
Figure 217: Housing Deficit – breakdown by income segment

4% 4% 4% 3% 3% 2%
5% 1%
5%
10% 10% 10% 9% 9% 10%
10%
13% 14% 14% 12% 12%
73% 74% 83% 84%

71% 70% 71%
2% 2% 2% 3% 2%
2007 2008 2009 2011 2012 2013 2014

No income declared < 3 M.W. 3-5 M.W. 5-10 M.W. > 10 M.W.
Source: Fundação João Pinheiro, PNAD and IBGE. Data available only until 2014.
Table 116: Housing Deficit in relative terms

Units (‘000)
2007 2008 2009 2011 2012 2013 2014
Urban 47.5 49.1 50.0 53.2 54.4 55.9 58.8
Rural 8.4 8.6 8.6 8.3 8.5 9.3 8.3
Dwellings 55.9 57.7 58.7 61.5 63.0 65.2 67.2
Urban 4.8 4.5 4.9 4.7 4.7 5.0 6.1
Rural 1.0 1.0 1.0 0.9 0.8 0.8 0.8
Deficit 5.9 5.4 5.9 5.6 5.4 5.8 6.8
Urban 10.2% 9.1% 9.9% 8.8% 8.6% 9.0% 10.3%
Rural 12.2% 11.1% 11.0% 10.8% 9.0% 9.0% 9.0%
Total 10.5% 9.4% 10.1% 9.1% 8.6% 9.0% 10.2%
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Table 117: Housing Deficit – Breakdown by Region and Category

Units (‘000)
Region 2007 2008 2009 2011 2012 2013 2014 2015
North 610 555 635 613 565 653 632 627
Poor quality 162 161 166 216 121 176 152 157
Co-habitation 330 286 341 253 267 282 280 251
Excessive Rent 83 77 101 104 132 152 155 182
Excessive Density 35 31 27 40 45 43 44 38
Northeast 2,096 1,947 2,051 1,937 1,777 1,844 1,901 1,924
Poor quality 741 688 661 713 537 571 501 500
Co-habitation 873 776 865 642 628 615 652 616
Excessive Rent 405 420 441 495 536 587 671 750
Southeast 2,227 2,046 2,217 1,984 2,109 2,246 2,426 2,430
Poor quality 151 114 90 104 90 101 104 97
Co-habitation 798 748 829 641 657 659 654 608
Excessive Rent 1,086 992 1,085 1,026 1,162 1,258 1,476 1,531
South 657 581 602 584 551 628 645 698
Poor quality 150 134 97 112 100 109 73 119
Co-habitation 277 202 233 203 177 203 200 160
Excessive Rent 210 218 256 252 252 297 347 412
Middle West 399 417 494 464 429 474 464 507
Poor quality 37 41 49 44 37 40 32 51
Co-habitation 173 171 212 178 137 146 126 127
Excessive Rent 166 181 205 214 228 259 277 304
Brazil 5,989 5,546 5,999 5,582 5,431 5,846 6,068 6,169
Poor quality 1,241 1,139 1,064 1,188 884 997 863 924
Co-habitation 2,450 2,182 2,480 1,917 1,865 1,905 1,912 1,761
Excessive Rent 1,950 1,888 2,088 2,091 2,311 2,553 2,927 3,179
Source: Fundação João Pinheiro.
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Table 118: Housing Deficit – Breakdown by Income Level

Region 2007 2008 2009 2011 2012 2013 2014
North 100% 100% 100% 100% 100% 100% 100%
< 3 M.W. 90% 89% 89% 75% 81% 80% 80%
3-5 M.W. 6% 8% 8% 14% 12% 12% 12%
5-10 M.W. 3% 3% 3% 8% 6% 6% 7%
> 10 M.W. 1% 1% 0% 3% 2% 2% 2%
Northeast 90% 100% 100% 100% 100% 100% 100%
< 3 M.W. 86% 96% 95% 87% 88% 90% 88%
3-5 M.W. 3% 3% 4% 8% 7% 6% 7%
5-10 M.W. 1% 1% 1% 3% 3% 3% 4%
> 10 M.W. 0% 0% 0% 2% 1% 1% 1%
Southeast 100% 100% 100% 100% 100% 100% 100%
< 3 M.W. 87% 88% 88% 80% 81% 82% 84%
3-5 M.W. 8% 9% 9% 12% 11% 11% 10%
5-10 M.W. 4% 3% 3% 7% 6% 6% 5%
> 10 M.W. 1% 1% 1% 2% 2% 1% 1%
South 100% 100% 100% 100% 100% 100% 100%
< 3 M.W. 85% 83% 86% 77% 77% 77% 78%
3-5 M.W. 10% 11% 10% 12% 12% 14% 13%
5-10 M.W. 4% 5% 3% 9% 9% 7% 6%
> 10 M.W. 1% 1% 1% 3% 2% 2% 2%
Middle West 100% 100% 100% 100% 100% 100% 100%
< 3 M.W. 89% 90% 90% 80% 83% 84% 84%
3-5 M.W. 7% 5% 7% 12% 9% 8% 9%
5-10 M.W. 2% 3% 3% 5% 5% 6% 5%
> 10 M.W. 2% 1% 1% 3% 3% 3% 2%
Brazil 100% 100% 100% 100% 100% 100% 100%
< 3 M.W. 90% 90% 90% 81% 83% 83% 84%
3-5 M.W. 6% 7% 7% 11% 10% 10% 10%
5-10 M.W. 3% 3% 2% 6% 6% 5% 5%
> 10 M.W. 1% 1% 1% 2% 2% 2% 1%
Table 119: Absolute Housing Deficit – Evolution by Metropolitan Region

Units (‘000)
2007 2008 2009 2011 2012 2013 2014 2015
Belém 88 84 87 71 62 85 77 100
Fortaleza 121 104 125 108 123 113 124 142
Recife 129 125 140 108 104 101 129 131
Salvador 144 116 131 129 108 108 121 133
Belo Horizonte 131 116 148 103 137 141 157 153
Rio de Janeiro 354 320 282 270 292 289 307 351
São Paulo 607 510 609 508 582 630 626 624
Curitiba 84 65 77 60 72 84 84 70
Porto Alegre 128 97 98 87 77 88 91 94
Total 1,785 1,537 1,697 1,444 1,557 1,638 1,715 1,797
Table 120: Relative Housing Deficit as % of total Housing – Evolution by Metropolitan Region
% of total domiciles
2007 2008 2009 2011 2012 2013 2014 2015
Belém 16.2% 15.0% 15.1% 12.0% 10.0% 13.4% 12.0% 15.1%
Fortaleza 12.6% 10.4% 12.3% 9.8% 10.9% 9.9% 10.5% 12.3%
Recife 11.9% 11.2% 12.1% 9.0% 8.5% 8.0% 10.2% 10.3%
Salvador 13.3% 10.1% 11.1% 10.3% 8.3% 8.1% 8.7% 9.8%
Belo Horizonte 8.7% 7.3% 9.2% 6.4% 8.2% 8.3% 9.0% 9.0%
Rio de Janeiro 9.2% 8.2% 7.2% 6.4% 7.0% 6.7% 6.9% 8.0%
São Paulo 10.3% 8.2% 10.0% 7.7% 8.4% 9.3% 8.9% 8.9%
Curitiba 8.5% 6.3% 7.3% 5.6% 6.5% 7.3% 7.1% 6.0%
Porto Alegre 9.5% 7.0% 7.2% 6.0% 5.3% 5.9% 6.0% 6.2%
Total 10.6% 8.9% 9.9% 7.9% 8.1% 8.6% 8.6% 9.3%
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Housing Prices – Fipe Zap Data

Fipe-ZAP Methodology: Fipe (Economic Research Foundation of the University of
São Paulo), in association with ZAP Imóveis (one of the largest internet classified ad
sites in the country), publishes the changes in home prices and rents in different parts
of Brazil. The FipeZap index is calculated based on the nominal prices of secondary
home ads from the ZAP website. To calculate the index, FIPE considers the prices
for homes in each neighborhood and then creates a weighted index based on the
neighborhood’s contribution to the city’s total available income. Therefore, the
monthly variation of the index represents a proxy for the monthly variation of home
prices in certain cities in Brazil. We include a more detailed analysis of the data in
the following exhibits. This index is available at www.fipe.com.br or
www.zap.com.br. The index is based on a survey of 25 cities including: São Paulo,
Rio de Janeiro, Belo Horizonte, Distrito Federal (DF), Recife, Fortaleza, Salvador,
Santo André, São Bernardo do Campo, São Caetano do Sul, Niterói, Vitória, Vila
Velha, Porto Alegre, Curitiba, Florianópolis, Campinas, Osasco, Guarulhos, Santos,
Guarujá, São Vicente, Praia Grande, Goiânia and Contagem.
Figure 218: Home price increases in 2017 by city – Only 3 cities posted price increase in real terms
6%
4%
2%
0%
-2%
-4%
2017 IPCA
-6%
Vitória
Porto Alegre
Recife
Brazil (20 cities)
Salvador
Distrito Federal
Contagem
Florianópolis
Guarulhos
Campinas
Santos
Belo Horizonte
Praia Grande
São Paulo
Vila Velha
Curitiba
Goiania
S. Bernardo
Santo André
S. Caetano
Guaruja
São Vicente
Osasco
Fortaleza
Rio de Janeiro
Brazil (7 cities)
Niterói
Source: ZAP Imóveis and FIPE.
Figure 219: Home price performance in USD since 2008

250
Brazil SP Rio
200
150
100
50
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
May-13
Oct-13
Mar-14
Aug-14
Jan-15
Jun-15
Nov-15
Apr-16
Sep-16
Feb-17
Jul-17
Dec-17
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Table 121: Summary of home price increases according to FIPE ZAP

YoY MoM YoY
Region 2017 2016 2015 Dec-17 Avg. 2H Avg. 1H 1 Bdr 2 Bdr 3 Bdr 4 Bdr 1H17 2H17
Brazil (7 cities) -0.7% 0.1% 0.9% -0.04% -0.08% -0.04% -1.6% -0.9% -0.4% 1.4% -0.3% -0.5%
Brazil (20 cities) -0.5% 0.6% 1.3% 0.01% -0.05% -0.04% -1.5% -0.7% 0.0% 1.4% -0.1% -0.2%
Belo Horizonte 4.8% 4.7% 0.0% 0.18% 0.24% 0.54% 17.0% 2.9% 1.7% 1.9% 3.3% 1.4%
Florianópolis 4.3% 4.7% 8.4% 0.21% 0.52% 0.19% 8.6% 4.1% 2.6% -0.5% 1.1% 3.2%
Praia Grande 3.2% 1.6% 4.9% 0.03% 0.32% 0.20% 2.1% 4.2% 2.3% 11.7% 1.2% 1.9%
São Paulo 1.4% 0.4% 2.5% 0.10% 0.12% 0.11% 1.8% 0.6% 1.2% 4.4% 0.6% 0.7%
Vila Velha 1.4% 2.3% 4.5% 0.19% -0.06% 0.28% -0.1% 1.1% 1.3% 3.9% 1.7% -0.3%
Curitiba 1.3% 4.8% -0.2% 0.06% 0.22% -0.01% 0.4% 1.5% 1.6% 2.0% -0.1% 1.3%
Goiania 1.1% -2.7% 2.8% 0.46% 0.04% 0.14% -6.0% 1.5% 3.3% 2.6% 0.9% 0.2%
Guarulhos 0.4% 0.4% -2.3% 0.16% 0.06% 0.01% 0.0% 1.1% -0.8% -2.8% 0.0% 0.4%
Vitória 0.1% 3.2% 7.8% 0.61% 0.24% -0.22% -4.6% -0.2% 1.4% 4.5% -1.3% 1.5%
S. Bernardo 0.0% 0.4% 3.1% 0.12% -0.06% 0.06% 1.0% -0.1% -1.0% 1.6% 0.4% -0.4%
Porto Alegre -0.1% 3.2% 2.9% 0.18% 0.01% -0.02% -0.1% -1.1% 1.1% 3.4% -0.1% 0.0%
Campinas -0.4% 0.7% 3.5% 0.26% -0.02% -0.05% -4.3% 0.7% 2.0% 2.5% -0.3% -0.1%
Santo André -0.4% 2.1% 4.6% 0.19% -0.10% 0.03% -3.5% -0.6% 0.1% -1.0% 0.2% -0.6%
S. Caetano -0.7% 2.3% 3.6% 0.71% -0.06% 0.33% 2.6% -0.5% -0.4% -3.2% 2.0% -0.4%
Salvador -0.8% 2.5% 2.4% -0.15% -0.13% -0.01% -4.1% 1.6% -1.1% -0.7% 0.0% -0.8%
Guaruja -0.9% 2.5% 3.2% -0.12% -0.19% 0.04% -0.2% -1.6% -1.2% 2.4% 0.3% -1.1%
Santos -0.9% 1.0% 4.2% -0.22% -0.24% 0.09% -0.8% -0.8% -1.8% 1.5% 0.5% -1.4%
Contagem -1.1% 1.8% 3.7% -0.16% -0.02% -0.16% NA 0.3% -3.3% -0.2% -0.9% -0.1%
Recife -1.3% 0.8% 0.0% -0.09% 0.25% -0.46% -2.4% -1.8% -0.1% -1.3% -2.7% 1.5%
São Vicente -2.7% 2.0% 5.8% -0.86% -0.47% 0.02% -6.5% 0.8% 3.7% 2.3% 0.1% -2.8%
Distrito Federal -2.7% -1.1% -1.5% -0.21% -0.29% -0.17% -4.2% -2.6% -2.2% -0.7% -1.0% -1.7%
Osasco -2.8% 2.0% -1.8% -0.26% -0.21% -0.26% NA -3.1% -2.1% 1.3% -1.6% -1.2%
Fortaleza -3.3% 0.8% 6.0% -0.01% -0.15% -0.41% NA -3.5% -5.0% 2.7% -2.4% -0.9%
Niterói -3.4% -1.8% -3.0% -0.16% -0.17% -0.41% -6.2% -3.2% -1.3% -2.7% -2.4% -1.0%
Rio de Janeiro -4.4% -2.1% -1.4% -0.24% -0.45% -0.30% -7.8% -3.4% -2.2% -1.7% -1.8% -2.7%
Figure 220: Selling prices – MoM change

3.0%
Brazil (7 Cities) Brazil (20 Cities) Inflation
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
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Figure 221: Selling prices – YoY change

35%
Brazil (7 Cities) Brazil (20 Cities) Inflation
30%
25%
20%
15%
10%
5%
0%
-5%
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Figure 222: Percentage of cities with selling price increase above or below inflation based on MoM change
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Above Inflation Below Inflation
Figure 223: Large cities selling price yearly variation – There is a clear deceleration across the board in the past 3 years
10%
2014 2015 2016 2017
8%
6%
4%
2%
0%
-2%
-4%
-6%
Janeiro
Fortaleza
Paulo
Recife
Horizonte
Alegre
Curitiba
Salvador
Brazil
Rio de
Porto
São
Belo
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Figure 224: Selling price nominal increases –São Paulo prices more resilient than in Rio de Janeiro in the past 3 years (%)
YoY change in Percentage
35
São Paulo Rio de Janeiro Brazil
27 26
16 15 14 14 15 13
7 8 7
2.5 0.9 1.4
0.4 0.1
-1.4 -2.1 -0.7

-4.4
2011 2012 2013 2014 2015 2016 2017
Figure 225: Average selling price /m2 as of December 2017

(R$’000/m 2 )
9.8
8.7 8.3 8.3
7.7 7.2 6.8 6.5 6.0 5.9 5.9 5.7 5.7 5.7 5.6 5.4 5.3 5.3 5.0
Florianópolis
Campinas
Santos
Rio de Janeiro
São Paulo
Belo Horizonte
Fortaleza
Recife
Curitiba
Vitória
Porto Alegre
Osasco
Santo André
(20 Cities)
Brazil (7 Cities)
Salvador
Distrito Federal
Niteroi
S. Caetano Sul
Brazil
Figure 226: Volume of sales and prices in São Paulo – According to Secovi
Units ('000) Avg. price (R$’000)
50 Units Sold Avg Price / Unit 600
550
40
500
30 450
20 400
350
10
300
0 250
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Source: Secovi and J.P. Morgan.
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Figure 227: Top 25 most expensive housing prices

Price in US$/m 2
Top 25
Monaco 60,114
London 27,261
Hong Kong 26,325
Paris 17,277
New York 17,191
Tel Aviv 17,149
Tokyo 16,322
Moscow 16,021
Vienna 15,607
Mumbai 15,525
Geneva 15,495
Singapore 13,748
Rome 11,394
Sydney 10,711
Stockholm 9,439
Toronto 9,409
Amsterdam 9,319
Helsinki 8,923
Taipei 7,112
Auckland 7,082
Bermuda 7,056
Tortola 6,469
Luxembourg 6,218
Dubai 5918
Madrid 5,917
Sao Paulo 4,370

Buenos Aires
LatAm
3,327
Santiago 2,771
Lima 2,692
Montevideo 2,598
Bogota 2,379
San Jose 1,938
Mexico City 1,852
Quito 1,278
Source: Global Property Guide. Considering a 120m2 unit.
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Housing Prices – Central Bank Data

Even though Brazil’s central bank doesn’t measure changes in housing prices, we
infer that the change in mortgage collateral is a good proxy for the changes in
housing selling prices, since the amount of the collateral is highly correlated with
unit prices; however, it is important to flag that this value is impacted by the mix of
units financed by homebuyers.
Figure 228: Residential collateral value in real terms
600 30%
Collateral Level Growth yoy
500 25%
20%
400
15%
300
10%
200
5%
100 0%
0 -5%
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Residential Rental Prices – Fipe Zap Data

FIPE-ZAP data for residential rental prices in Brazil starts in 2008 and includes data
for 11 cities being released on a monthly basis.
Figure 229: Rental price growth on a yoy basis

40%
Brazil São Paulo Rio de Janeiro
30%
20%
10%
0%
-10%
Dec-09
Mar-10
Jun-10
Dec-10
Mar-11
Jun-11
Dec-11
Mar-12
Jun-12
Dec-12
Mar-13
Jun-13
Dec-13
Mar-14
Jun-14
Dec-14
Mar-15
Jun-15
Dec-15
Mar-16
Jun-16
Dec-16
Mar-17
Jun-17
Dec-17
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
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Figure 230: Annualized rental yield trending down since mid-2008

14%
Brazil São Paulo Rio de Janeiro Real Interest rate
12%
10%
8%
6%
4%
2%
0%
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Source: J.P. Morgan estimates, FIPE ZAP data.
Table 122: Rental prices yoy variation

City 2017 2016 2015
Brazil (11 Cities) -0.7% -3.2% -3.3%
Recife 5.0% -1.3% NA
Curitiba 4.0% -0.8% 0.0%
S. Bernardo 3.1% 0.8% 3.3%
Salvador 2.5% -4.5% 2.2%
Belo Horizonte 2.5% -3.5% NA
São Paulo 2.4% -1.8% -3.7%
Santos 2.4% 0.1% -1.5%
Brasília 1.2% -2.4% 0.7%
Porto Alegre -1.2% -3.8% 1.0%
Campinas -3.4% -4.7% 3.3%
Rio de Janeiro -8.5% -6.2% -8.3%
Table 123: Rental yield is above real interest rate

City 2016 2015 2014
Brazil (11 Cities) 4.29% 4.38% 4.57%
Real interest rates 2.84% 6.25% 8.62%
Santos 6.48% 6.33% 6.40%
Recife 4.98% 4.96% N/D
São Paulo 4.81% 4.76% 4.88%
Salvador 4.67% 4.84% 5.17%
S. Bernardo 4.62% 4.61% 4.62%
Porto Alegre 4.43% 4.49% 4.70%
Campinas 4.42% 4.61% 4.88%
Brasília 4.30% 4.23% 4.25%
Rio de Janeiro 3.69% 3.84% 4.04%
Curitiba 3.57% 3.55% 3.68%
Belo Horizonte 3.57% 3.63% N/D
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Figure 231: Residential rental price per city as of Dec-17

R$/m 2
35.8
31.9
28.2 29.6 28.8
24.5
22.3 21.0 20.9 20.6 20.0 19.8 18.8 17.0 16.1 15.1
Recife
Porto Alegre
Fortaleza
Brazil (11 Cities)
Salvador
Distrito Federal
Niteroi
Santos
Florianópolis
Campinas
São Paulo
Rio de Janeiro
Belo Horizonte
São Bernardo do
Curitiba
Goiânia
Campo
Source: J.P. Morgan estimates, FIPE ZAP.
Figure 232: MoM selling price vs. rents – Sao Paulo Figure 233: MoM selling price vs. rents – Rio de Janeiro
5%
5% Sales Price Rents Price
Sales Price Rents Price 4%
4%
3%
3%
2%
2% 1%
1% 0%
-1% -1%
-2% -2%
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Source: ZAP Imóveis and FIPE. Source: ZAP Imóveis and FIPE.
Figure 234: YoY selling prices vs. rents – Sao Paulo Figure 235: YoY selling prices vs. rents – Rio de Janeiro
250% 300%
Selling Price Rental Price Selling Price Rental Price
200% 250%
200%
150%
150%
100%
100%
50%
50%
0% 0%
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
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Figure 236: Monthly rental yield evolution – São Paulo Figure 237: Monthly rental yield evolution – Rio de Janeiro
0.8% 0.6%
0.7%
0.6% 0.5%
0.5%
0.4% 0.4%
0.3%
0.2% 0.3%
Nov-08
Apr-09
Sep-09
Feb-10
Jul-10
Dec-10
May-11
Oct-11
Mar-12
Aug-12
Jan-13
Jun-13
Nov-13
Apr-14
Sep-14
Feb-15
Jul-15
Dec-15
May-16
Oct-16
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Figure 238: Top 25 highest rental yields & Latam rental yields
Annual yield
Top 25
Chisinau 10.0%
Kingston 9.8%
Cairo 9.4%
Kiev 9.1%
Jakarta 8.6%
Dar es Salaam 8.6%
San Salvador 8.5%
Bahamas 8.2%
Amman 8.1%
Quito 8.0%
Managua 7.7%
Coastal Areas 7.5%
San Jose 7.5%
Bakval and… 7.3%
Grand Cayman 7.3%
Montevideo 7.2%
San Juan 7.1%
Trinidad 6.9%
Nairobi 6.7%
Tallinn 6.6%
Bogota 6.5%
Sophia 6.2%
Metro Manila 6.1%
Bucharest 6.1%
Panama City 5.8%
San Salvador 8.5% LatAm

San Jose 7.5%
Montevideo 7.2%
San Juan 7.1%
Trinidad 6.9%
Panama City 5.8%
Lima 4.9%
Buenos Aires 4.5%
Santiago 4.3%
Source: Global Property Guide. Considering a 120m2 unit.
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Radar Fipe Abrainc

Radar Fipe Abrainc is a monthly index released by Fipe and Abrainc, analyzing 12
indicators of the sector divided into 4 categories; i) Macro Economic, which
includes, Confidence, Activity, Interest Rate; ii) Mortgages, which includes,
Conditions, Volume, Affordability; iii) Demand, including, Jobs, Wages,
Affordability; and iv) Sector data, including, Labor, Launches, Prices. All numbers
are normalized on a scale of 0 to 10; therefore, every month the index is recalibrated.
This index is available at:
http://services.fipe.org.br/RadarImobiliario/radar_imobiliario.aspx
Table 124: Indicators considered on ABRAINC FIPE survey

Macro Mortgages Demand Sector data
Confidence Conditions Jobs Labor
Econ. Activity Volume Wages Launches
Interest rates Affordability Affordability Prices
Figure 239: Fipe Abrainc Radar index started to recover in 2017

8
7
6
5
4
3
2
1
0
Dec-04
Apr-05
Aug-05
Dec-05
Apr-06
Aug-06
Dec-06
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
Dec-13
Apr-14
Aug-14
Dec-14
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Figure 240: Breakdown of components shows that macro data already bottomed in Brazil
10
Macro Mortgages Demand Sector Data
8
0
Dec-04
Apr-05
Aug-05
Dec-05
Apr-06
Aug-06
Dec-06
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
Dec-13
Apr-14
Aug-14
Dec-14
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
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Figure 241: FIPE Abrainc Radar; Current level vs Peak and Bottom
Peak (Jul-13) Current (Dec-17) Peak (Oct-16)
9.0
8.0
7.5
6.8 6.4 6.8
4.4 4.4 4.1

3.8
2.7 2.7
2.3 2.3 2.1
Overall score Macro Mortgages Demand Sector Data

Figure 242: Breakdown Macroeconomic indexes

12 Confidence Econ . Activity Interest rates
10
8
6
4
2
0
Dec-04
Apr-05
Aug-05
Dec-05
Apr-06
Aug-06
Dec-06
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
Dec-13
Apr-14
Aug-14
Dec-14
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Figure 243: Breakdown Mortgage indexes

12
Conditions Volume Affordability
10
8
6
4
2
0
Dec-04
Apr-05
Aug-05
Dec-05
Apr-06
Aug-06
Dec-06
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
Dec-13
Apr-14
Aug-14
Dec-14
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
143
0
2
4
6
8
10
12
0
2
4
6
8
10
12
144
Dec-04 Dec-04
Apr-05 Apr-05
Marcelo Motta
Aug-05 Aug-05
(55-11) 4950-6712
Dec-05 Dec-05
Apr-06 Apr-06
Aug-06 Aug-06
Dec-06 Dec-06
Apr-07 Apr-07
Aug-07 Aug-07

Dec-07 Dec-07
Figure 244: Breakdown Demand indexes
Apr-08 Apr-08
Figure 245: Breakdown Sector Data indexes

Aug-08 Aug-08
Dec-08 Dec-08
Apr-09 Apr-09
Aug-09 Aug-09
Jobs
05 April 2018
Labor
Dec-09 Dec-09
Apr-10 Apr-10
Aug-10 Aug-10
Dec-10 Dec-10
Apr-11 Apr-11
Wages
Aug-11 Aug-11
Launches
Dec-11 Dec-11
Apr-12 Apr-12
Aug-12 Aug-12
Dec-12 Dec-12
Apr-13 Apr-13
Prices
Aug-13 Aug-13
Affordability
Dec-13 Dec-13
Apr-14 Apr-14
Aug-14 Aug-14
Dec-14 Dec-14
Apr-15 Apr-15
Aug-15 Aug-15
Dec-15 Dec-15
Apr-16 Apr-16
Aug-16 Aug-16
Dec-16 Dec-16
Apr-17 Apr-17
Aug-17 Aug-17
Dec-17 Dec-17
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Homebuyers’ Profiles
FIPE-ZAP started to publish homebuyer profiles on a quarterly basis in 2014, based
on a survey with Zap Imoveis website users.
Figure 246: Breakdown of properties acquired

Last 12 Months
59 56 58 55 58 60 59 61 60 58 56
63
41 44 42 45 42 40 41 39 40 42 44
37
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Primary Market Secondary Market
Source: FIPE-ZAP data.
Figure 247: Breakdown for homebuyers’ acquisition intentions

Last 3 Months
50 49 54 52 54 53 53 52 52 54 52 54
38 36 32 33 34 33 34 35 33 33 33
34
13 15 12 16 13 13 15 14 13 13 15 14
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Primary Secondary Indiferent
Figure 248: Breakdown of homebuyers’ reasons

50%
40%
30%
20%
10%
0%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Single House Re-Selling Rental New couple For someone else
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Figure 249: Discount Evolution on units sold

10%
Discount Average
9%
8%
7%
6%
5%
4%
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Figure 250: Percentage of transactions with discounts

76%
74%
72%
70%
68%
66%
64%
62% % of transations with Discount Average
60%
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Figure 251: Evolution of investment as the main reason for acquisition

46%
45%
44%
43%
42% 42% 42% 42% 42% 42%
41% 41% 41% 41% 41% 41%
40% 40%
38% 38%
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
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Figure 252: Price expectations – Next 10 years

40
35
30
25
20
15
10
5 = Inflation < Inflation > Inflation Doesn’t know
0
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Figure 253: Price expectations – Next 12 months

40
35
30
25
20
15
10
5
= Inflation < Inflation > Inflation Doesn’t know
0
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
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Home Ownership Is Near 75%

The information presented below is based on the last PNAD (Pesquisa Nacional por
Amostra de Domicilios – National household survey by sample), available from
2002 until 2015. There is no update to homeownership data since our last published
in April 2017.
Figure 254: House ownership and dwellings in Brazil

11% 11% 10% 10% 10% 9% 8% 9% 7.5% 7.1% 7.4% 7.4% 7.1%
15% 15% 15% 16% 16% 17% 17% 17% 17.3% 17.7% 17.9% 18.5% 17.9%
74% 74% 74% 73% 73% 74% 74% 74% 74.8% 74.8% 74.4% 73.7% 74.8%
2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015
Owned Rented Mult Family Others
Source: IBGE and J.P. Morgan estimates.
Figure 255: Around 90% of Brazilian residential units are represented by houses
10% 10% 10% 11% 11% 11% 11% 10% 11% 11% 11% 12% 11%
89% 89% 89% 89% 89% 89% 89% 89% 89% 88% 88% 88% 88%
2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015
Houses Apartment Condo
Source: IBGE and J.P. Morgan estimates.
Figure 256: Home ownership vs. other countries (%)

91 87 84 84
78 80 78 74 75 75 73 73
68 65 64 65 65 62
56 54 53
45
Italy
Germany
UK
US
Singapore
India
Russia
Poland
Mexico
Spain
Greece
Luxembourg
Canada
New Zealand
France
Japan
Austria
South Korea
Switzerland
Brazil
Portugal
Republic
Czech
Source: Wikipedia and J.P. Morgan estimates. Country figures ranging from 2008 to 2014.
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Affordability
In this section we address the changes in housing affordability in Brazil over the last
10 years, based on monthly mortgage payment vs average salary as well as average
housing price divided by individuals’ annual income.
Figure 257: Affordability index – monthly mortgage payment / monthly disposable income
50%
48%
46%
Less affordable
44%
42%
40%
38%
36%
34%
More affordable
32%
30%
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Figure 258: Household income multiple – housing price / annual income
5.5
5.0
4.5
Less affordable
4.0
3.5
3.0
2.5 More affordable
2.0
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Table 125: Change in affordability between 2014 and 2017

2014 2016 2017 Change 16-14 Change 17-16
Price 400,000 400,000 400,000 - -
Interest rate 9.0% 11.5% 9.5% +2.5pp -2.0pp
Tenor (years) 35 35 35 - -
Monthly Payment 3,068 3,678 3,126 20% -15%
Required income 12,273 14,715 12,505 20% -15%
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Figure 259: Families’ indebtedness and income commitment

Debt stock as % of annual wage Debt service as % of monthly wage
50.0 25
Indebteness (lhs) Income Commitment (rhs)
45.0
23
40.0
35.0 21
30.0 19
25.0
17
20.0
15.0 15
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Source: Central Bank. Including mortgage payments.
Figure 260: Median house price/income ratios in some of the world’s main countries – According to Demographia
19.4
8.8
6.6
4.9 4.8 4.8 4.6 4.3 4.2 3.8
Brazil
UK
US
China
New Zeland
Australia
Singapore
Ireland
Canada
Japan
Source: Demographia and J.P. Morgan estimates.
Figure 261: Mortgage burden – monthly mortgage installment/median household monthly income – According to Numbeo
379%
337%
264%
150%
122% 115% 106%
70% 58% 58%
27% 7%
Buenos Aires
Detroit
Beijing
São Paulo
London
Santiago
Toronto
Madrid
Berlin
Chicago
Mumbai
Paris
Source: Numbeo; *Mortgage as Percentage of Income is a the ratio of the actual monthly cost of the mortgage to take-home family income (lower is better). Average monthly salary is used to
estimate family income. It assumes 100% mortgage is taken on 20 years for the house(or apt) of 90 square meters which price per square meter is the average of price in city center and outside of
city center.
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Disclosures:
Looking at the monthly mortgage burden, it is important to flag some factors that can
impact the accuracy of this metric as we are using median numbers in this analysis,
including the following:
 In economies with significant income and wealth inequalities, the median
household income level will generally be understated relative to the median
homeowner. Home-owning households tend to be wealthier and have higher
incomes than the median household.
 Median household incomes in economies experiencing significant growth and
rapid development are likely to be growing at a rate slower than the country or
city.
 Official data in emerging economies may not take into account informal sources
of income or “gray” income.
 Housing demand by wealthy households from other parts of the country can also
affect the nature and the financial capacity of house buyers, especially in
financial and political capitals such as Beijing/Shanghai in China or
Delhi/Mumbai in India. Such higher-net-worth homebuyers likely skew the
average purchase prices in those key cities.
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Sales Speed Evolution
Figure 262: Sales over Supply – Sales speed of inventories have decelerated since 2010
50%
SoS Total SoS Launches SoS Inventories
40%
30%
20%
10%
0%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: Company reports and J.P. Morgan estimates. Calculated as Presales / (Inventories + Launches). Figures are based on covered companies by JPM.
Figure 263: Presales Breakdown – Inventories are gaining market share in total presales
100%
80%
60%
40%
20%
0%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Inventories Launches
Table 126: Total SoS per company

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Cyrela 21% 9% 10% 13% 11% 8% 8% 8% 14% 7% 10% 10%
MRV 19% 16% 17% 14% 15% 13% 15% 15% 15% 15% 16% 18%
Tenda 13% 23% 28% 23% 21% 24% 26% 19% 22% 24% 26% 24%
Eztec 13% 11% 9% 3% 7% 2% 2% -1% 3% 1% 3% 5%
Even 14% 8% 9% 10% 16% 13% 12% 9% 9% 8% 13% 14%
Direcional 12% 4% 11% 10% 9% 11% 6% 6% 12% 9% 16% 12%
Gafisa 7% 8% 10% 10% 10% 3% 6% 11% 16% 7% 8% 18%
Rodobens 19% 21% 15% 8% 5% 9% 2% 15% 12% 10% 12% 13%
Rossi 4% 3% 13% 7% 8% 2% 1% 2% 5% 8% 5% 1%
PDG 12% 8% 2% 6% 2% 3% 3% 0% 6% -3% -2% -2%
Total 15% 10% 11% 11% 11% 9% 9% 9% 12% 9% 12% 13%
Source: J.P. Morgan estimates, Company data. Negative Sales Speed due to dissolutions in the quarter. For Direcional we are excluding Faixa 1 of MCMV.
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Table 127: Inventory SoS per company

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Cyrela 13% 8% 6% 10% 8% 5% 5% 5% 7% 6% 8% 7%
MRV 22% 17% 19% 15% 17% 14% 16% 17% 15% 16% 18% 19%
Tenda 14% 24% 32% 11% 21% 27% 23% 8% 7% 26% 23% 11%
Eztec 9% 8% 6% 3% 6% 0% 0% -1% 2% 1% 1% 1%
Even 6% 8% 6% 8% 11% 11% 9% 5% 6% 5% 13% 5%
Direcional 9% 4% 7% 9% 6% 11% 6% 7% 10% 10% 17% 10%
Gafisa 7% 7% 9% 8% 8% 3% 5% 7% 8% 7% 8% 15%
Rodobens 22% 21% 17% 8% 5% 3% -2% 15% 12% 10% 12% 13%
Rossi 3% 3% 13% 7% 8% 2% 1% 2% 5% 8% 5% 1%
PDG 10% 7% 2% 6% 2% 3% 3% 0% 6% -3% -2% -2%
Total 12% 10% 10% 10% 10% 8% 8% 7% 9% 9% 11% 9%
Source: J.P. Morgan estimates, Company data. *Negative Sales Speed due to dissolutions in the quarter. For Direcional we are looking only at Development segment.
Table 128: Launches SoS per company

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Cyrela 45% 32% 36% 46% 37% 38% 42% 61% 50% 18% 31% 50%
MRV 8% 8% 5% 11% 5% 8% 7% 6% 13% 11% 11% 13%
Tenda 12% 19% 14% 51% 21% 10% 31% 51% 64% 18% 33% 53%
Eztec 45% 62% 46% NM 47% 47% 26% 0% 23% NM 52% 38%
Even 36% 0% 44% 45% 41% 75% 39% 28% 25% 21% 0% 48%
Direcional 17% 26% 29% 17% 25% 10% 1% 4% 20% 5% 14% 31%
Gafisa NM 19% 24% 25% 24% 10% 28% 31% 67% 0% 0% 29%
Rodobens 12% 0% 0% 0% 0% 69% 27% 16% 10% NM NM NM
Rossi 18% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
PDG 24% 70% NM NM NM NM NM NM NM NM NM NM
Total 30% 19% 23% 29% 20% 22% 22% 28% 37% 15% 20% 31%
Source: J.P. Morgan estimates, Company data. *No launches in the period. For Direcional we are looking only at Development segment.
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Inventory Analysis
Figure 264: Finished inventories as % of total inventories
80%
CYRE MRVE TEND EZTC
EVEN DIRR GFSA RDNI
60% RSID PDGR Total
40%
20%
0%
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: Company reports and J.P. Morgan estimates.
Table 129: Inventories – Main indexes

Inventories 3Q17 Inventory Supply * (months) Sales Speed SoS
(R$ mn) 2014 2015 2016 9M17 3Q16 2Q17 3Q17
MRVE3 5,560 10 13 13 12 18% 20% 21%
CYRE3 5,169 15 25 30 26 13% 10% 10%
TEND3 1,173 25 11 11 10 24% 29% 25%
EZTC3 1,203 19 33 362 120 1% 3% 3%
EVEN3 2,068 24 22 27 23 9% 16% 13%
DIRR3 1,275 6 34 35 21 14% 19% 13%
GFSA3 1,581 32 27 30 15 25% 7% 14%
RDNI3 316 15 19 26 17 14% 10% 9%
RSID3 814 18 14 19 13 14% 12% 12%
PDGR3 2,348 21 65 82 NM 5% -2% NM
TRIS3 523 28 16 16 14 13% 18% 28%
TCSA3 1,154 46 34 47 26 15% 6% 4%
CRDE3 10 36 13 34 11 13% 21% 7%
VIVR3 409 444 229 NM 419 2% 1% NM
HBOR3 3,140 29 38 32 48 8% 11% 9%
Total 26,743 26 30 45 31 13% 12% 12%
Source: Company reports and J.P. Morgan estimates. *Based on quarterly presales. Inventory supply is calculated as (Inventories at market value/(trailing 12M presales/12). Sales speed or sales
over supply is quarterly sales/(inventories in previous quarter + launches).
Table 130: Inventory Summary as of 3Q17

RDNI GFSA MRVE DIRR EVEN TEND RSID PDGR CYRE EZTC Avg.
Inventory Supply (Months) 17.5 19.9 14.8 24.2 22.6 9.9 40.5 NM 26.5 96.3 30.2
JPM View Pos. Pos. Pos. Pos. Pos. Pos. Neg. Neg. Pos. Neg.
Inventory expansion yoy -41% -20% -5% 7% -6% 14% -34% -14% -1% -5% -11%
JPM View Pos. Pos. Neg. Neg. Neg. Neg. Pos. Pos. Neg. Neg.
Concluded Inv. as % of total 29% 32% 2% 31% 34% 10% 75% 48% 51% 72% 35%
JPM View Pos. Pos. Pos. Pos. Pos. Pos. Neg. Neg. Neg. Neg.
Sales Speed - Avg 12M 12.5% 11.9% 19.9% 11.2% 10.4% 23.2% 4.4% -0.1% 9.2% 2.0% 11%
JPM View Pos. Pos. Pos. Neg. Neg. Pos. Neg. Neg. Neg. Neg.
Sales Speed - 3Q17 12.5% 18.2% 21.7% 11.7% 13.7% 1.4% 1.4% -1.7% 9.6% 4.9% 10%
JPM View Pos. Pos. Pos. Pos. Pos. Neg. Neg. Neg. Neg. Neg.
3Q17 Launches / Inv. 0% 29% 25% 0% 13% 42% 2% 0% 7% 66% 13%
JPM View Pos. Neg. Neg. Pos. Pos. Neg. Pos. Pos. Pos. Neg.
Positives 6 5 4 4 4 3 2 2 2 0
Negatives 0 1 2 2 2 3 4 4 4 6
Inventory Situation Good Good Good Neutral Neutral Neutral Bad Bad Bad Bad
Source: Company data, J.P. Morgan estimates. *Based on the last 12 months sales. For Direcional we are looking only at the Salle Speed of development segment, ex-MCMV program.
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Figure 265: Inventory supply – considering current presales and last 12M presales – Following lower SoS, inventories in months increased
Months
35
30 Considering Current Presales Considering 12M Presales
25
20
15
10
5
0
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: Company reports and J.P. Morgan estimates. Based on all listed companies.
Figure 266: Inventories at market value: Inventories have been increasing in absolute and relative amount
R$ in billions
40
Listed Players Covered Names
35
30
25
20
15
10
5
0
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: Company reports and J.P. Morgan estimates. Covered names includes: MRV, Cyrela, Tenda, Gafisa, Even, Direcional, Eztec, Rodobens, PDG and Rossi.
Figure 267: Launches over Presales ratio

2.5 Listed players Covered names
2.0
1.5
1.0
0.5
0.0
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
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Figure 268: Sector aggregate presales decreasing slightly since 4Q11

R$ in billions
14
12
10
8
6
4
2
0
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Figure 269: Inventory supply has been reducing over the past quarter to around 21 months of presales as of 3Q17
Months
30
25
20
15
10
5
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
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Margin Evolution
Figure 270: Historical Gross margins*

40%
Quarters Years
30%
20%
10%
0%
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
2008
2009
2010
2011
2012
2013
2014
2015
2016
9M17
Source: Company reports and J.P. Morgan estimates; * Excludes PDG and Rossi.
Figure 271: Historical EBITDA margins*

30%
25% Quarters Years
20%
15%
10%
5%
0%
-5%
-10%
-15%
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
2008
2009
2010
2011
2012
2013
2014
2015
2016
9M17
Source: Company reports and J.P. Morgan estimates.* Excludes PDG and Rossi.
Figure 272: Historical ROE*

25%
20% Quarters Years
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
2008
2009
2010
2011
2012
2013
2014
2015
2016
9M17
Source: Company reports and J.P. Morgan estimates. * Excludes PDG and Rossi.
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Margin conversion? We don’t believe so, construction is not a commodity

Eztec has the highest margins in the sector with a gross margin of around 50%,
followed by low income companies, which have margins closer to 40%. In our view,
gross margin reflects companies' business model, management’s capacity to control
costs, and its scale. In the case of Eztec, its superior margins are justified by its
integrated business model and focus in the São Paulo metropolitan region. Eztec has
been launching around R$1.0bn per year in the São Paulo Metropolitan region during
good years, helping to limit its execution risk. We don’t expect all companies to
reach Eztec’s or low income companies’ margins; rather, we expect companies to
operate with different margins given their different mix of products and potential
economies of scale, the reason why the low income segment has better margins on
average. We believe that the sector’s gross margins should be on a normalized level,
on average 25-30%, for companies to achieve an ROE above their cost of capital, or
around 15%.
Figure 273: Gross margins for selected players (excl. Int. Cost)
2014 2015 2016 9M17
56
53
50 50
39 39
36 38 36 35 36 35 35
31 33 31
33 32 31 32 32 33
27 26 26 24 25 25 25 26
19
16 16
5 6
MRVE CYRE TEND EZTC EVEN DIRR GFSA RDNI RSID* PDGR*
Source: Company reports and J.P. Morgan. * Not meaningful data for PDG and Rossi in 2016 and 9M17.
Figure 274: EBITDA margins for selected players (excl. Int. Cost)
2014 2015 2016 9M17
48 48
30
22 21 21 19
14 14 15 17 16 17 17 16 14 15
12 11 13
5 7 9 6 6
(2)
(12) (9)
(16)
(31)
MRVE CYRE TEND EZTC EVEN DIRR GFSA RDNI
Source: Company reports and J.P. Morgan. * Not meaningful data for Gafisa in 9M17.
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Figure 275: Total financial cost as % of rev. for selected players: PDG and Rossi have a huge burden to carry
2014 2015 2016 9M17
20
12
10
7 8
6 6 7
5 5
3 3 4 3 2 3 2 3
1 2 2
0 0 0
(1) (2) (1) (0)

(3) (3)
(8)
(11)
Source: Company reports and J.P. Morgan. * Not meaningful data for PDG and Rossi in 2016 and 9M17.
Figure 276: Net margins for selected players

2014 2015 2016 9M17
52 55
40
31
21 19
13 14 11 10 11 11 8 10
4 4 5 7 5 4 3
0 1
(1)
(8)
(13) (14)
(19) (20)
(34)
Source: Company reports and J.P. Morgan. *Gfaisa 2016 and 9M17 were out of scale
FCF Generation
In our view, the change in net debt, which we call cash burn, is the best proxy for
FCF, since Homebuilders have no relevant monetary or currency adjustments on
their balance sheets, making this calculation very accurate. Even though companies
like to show FCF numbers excluding disbursements with buybacks and dividends,
our numbers include those disbursements, given the impact on net debt variation.
Moreover, an increase in net debt due to dividends or buyback payment means
companies had to raise debt to pay those items.
The level of cash burn was high after companies’ IPOs, reaching almost 50% of their
equity in 2008, given their intensive growth. However, most of this cash burn was
funded by equity offerings. In 2009, cash burn was high again at ~20% of equity,
impacted by the slowdown in the economy after the 2008 crisis, slightly below the
30% reported in 2010, when the market accelerated again. After this period, cash
burn started to decelerate as companies started to collect back the cash from their
previous cycle, until it finally become positive in 2014, remaining in positive
territory during 2015, 2016 and 2017, helped by a contraction in launched and
inventory sales.
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Figure 277: Cash burn (negative) / cash generation (positive)…

R$ in billions Quarters Years
4.0 3.2
1.6 1.1 1.9 1.8
2.0 0.7 1.0 1.2 0.8
0.3 0.1 0.5 0.1 0.2 0.3 0.6 0.3 0.4 0.2 0.3 0.4
0.0
(0.2)(0.2)(0.0)(0.3)(0.3) (0.1)
-2.0 (1.0) (0.7) (0.8) (0.9)
(1.4) (1.4) (1.7)
(2.1)
-4.0 (2.7)
(3.2) (3.2) (3.2) (3.7)
-6.0
-8.0
(7.6)
-10.0
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
2008
2009
2010
2011
2012
2013
2014
2015
2016
9M17
Source: Company reports and J.P. Morgan. Based on the 9 companies under our coverage.
Figure 278: . . . and as a % of equity

% of Equity
Quarters Years
11 10
6 6
3 5 4 1 2 1 1 4
2 0 2 0 1 2 1 1 2
(3) (1) (1) (0) (1) (1) (3) (1)

(3)
(4) (6) (6) (7) (6)
(7) (8) (8)
(11) (12) (13)
(17) (18)
(37) (39)
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
2008
2009
2010
2011
2012
2013
2014
2015
2016
9M17
Source: Company reports and J.P. Morgan. Based on the 9 companies under our coverage.
Figure 279: Distribution from selected players

1,258
Dividends Buyback
893
759 773 622
706
258
550 393
122
161
17
276 759 773
550 584 636 635
510 499
276
2009 2010 2011 2012 2013 2014 2015 2016 9M17

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Leverage
Figure 280: Consolidated leverage is accelerated a in the past quarters – Net Debt/Equity
87%
80% 79% 79% 79%
74% 71% 73% 76% 77% 75% 71% 71% 71%
68% 66%
65% 62% 60% 61% 61% 62% 61% 66%
57% 58%
49% 50%
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: Company reports and J.P. Morgan estimates. Based on data from listed players.
Figure 281: Net debt/equity – Only 2 companies have a net cash position; Tenda and Eztec
100% 4Q13 4Q14 4Q15 4Q16 3Q17
80%
60%
40%
20%
0%
-20%
-40%
Eztec Cyrela Gafisa MRV Tenda Even Direcional Rodobens
Source: Company reports and J.P. Morgan estimates. *Rossi and PDG 3Q17’s leverage were out of scale.
Figure 282: Total Equity for selected names

R$bn
7 4Q13 4Q14 4Q15 4Q16 3Q17
6
0
Eztec Cyrela Gafisa MRV Tenda Even Direcional Rodobens Rossi PDG*
Source: Company reports and J.P. Morgan estimates.*PDG posted negative Equity in 3Q17 and 4Q16.
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Table 131: Leverage Breakdown by Company

R$ in millions
Equity Debt Breakdown Total Debt / Net Debt /
ST LT Debentures Debt Equity Equity
MRVE3 5,514 17% 83% 1,438 3,490 63% 11%
CYRE3 5,874 43% 57% 576 3,083 52% 23%
TEND3 1,225 45% 55% 0 131 11% 5%
EZTC3 3,036 95% 5% 0 298 10% 9%
EVEN3 1,992 41% 59% 189 1,626 82% 33%
DIRR3 1,515 48% 52% 65 958 63% 30%
GFSA3 1,217 49% 51% 282 1,219 100% 49%
RDNI3 660 67% 33% 52 375 57% 38%
RSID3 235 39% 61% 0 2,067 881% 344%
PDGR3 (4,479) 99% 1% 1,935 5,838 NM NM
TRIS3 510 47% 53% 0 222 44% 21%
JHSF3 2,149 20% 80% 563 1,316 61% 12%
TCSA3 1,224 45% 55% 0 730 60% 27%
VIVR3 (606) 98% 2% 402 1,002 NM NM
HBOR3 1,227 38% 62% 204 2,226 181% 70%
Total 4,505 50% 50% 1,168 5,497 122% 56%
Source: Company reports and J.P. Morgan. Based on 3Q17 data.
Corporate transactions: M&A, Spin-Offs and De-Listings

Consolidation in the industry led to 15 listed HBs versus 22 listed names in the
beginning of 2008. Keep in mind that since 2010 we had 3 de-listings – Camargo
Correa Negocios Imobiliarios (CCDI), Brookfield (BISA) and BHG (Brazil
Hospitality Group) and 4 relevant M&As in the sector; i) Agra with Abyara and
Klabin Segall to form AGRE; ii) Brascan with Company S.A. to form Brookfield; iii)
Tenda acquisition by Gafisa that was spun off in 2017 and; iv) PDG incorporation of
AGRE. We don’t expect additional M&A activity in the sector given the
heterogeneous mix of companies, cultures and the lack of economies of scale.
In the past, consolidation was driven by companies’ desire to gain exposure to new
income segments (e.g., Gafisa+Tenda and PDG+Agre), to add new territories, gain
size (e.g., Brascan and Company S.A), gain scale and strengthen balance sheets (e.g.,
the formation of AGRE). Some more recent transactions have involved listed players
and small private companies, creating partnerships and JVs with partners bringing
access to local knowledge and land deals. An example of this was the partnership
between Rossi and Norcon.
More details about M&A transactions: Key transactions over the past few years
were the merger of Brascan and Company S.A; the formation of AGRE, which
resulted from the merger of Abyara, Klabin Segall, and AGRA, which was later
acquired by PDG in 1Q10; and Gafisa’s acquisition of Tenda, which was concluded
in 2009 and spun off in 2017.
Going forward, we see low probabilities for large cap names to be involved in a large
M&A transaction, as companies are now focused on increasing profitability,
concentrating launches in areas where they have relevant expertise and avoiding
geographical diversification. Therefore, further consolidation is likely to come from
the participation of medium-sized and small developers, as we don’t see significant
gains in scale in the sector.
Spin-offs: Gafisa concluded in 2017 the spin off of its low-income segment, Tenda,
which was acquired in 2009. The deal was announced in December of 2016.
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Remember that Gafisa already sold 70% of its stake in Alphaville to Blackstone and
Patria, a private equity group.
We could see in the midterm more spin-offs in the sector, as companies are
downsizing their operations to increase control and profitability. It is noteworthy that
several companies, Rodobens, Rossi and MRV, for example, decided during 2014 to
internally divide their Property and Urban lots companies. Even though most of their
subsidiaries continue to be too small for a listing, they already have a separate land
bank and management team in many cases. The main highlight is LOG, which is
MRV’s subsidiary to act in warehouse segment, which already tried to IPO in the
past years.
De-listing: In 2012, we saw the first tender offer in the sector, a de-listing of
Camargo Correa Desenvolvimento Imobiliarios (CCDI) by its controlling
shareholder Camargo Correa S.A. The holding company successfully concluded the
tender in October 2012, paying R$5.52 per share, compared with the maximum price
of R$4.70 first announced in March of that year. This compares with CCIM’s IPO
price of R$14.50 back in January 2007. In terms of multiple, the company was de-
listed at 1.05x P/BV based on the book value reported in 1Q12.
The second delisting happened in 2014, when Brookfield was delisted by its
controlling shareholder, which offered a price of R$1.60, representing a P/BV
multiple of 0.35x based on 4Q13 BV. The tender price of R$1.60 per share compares
with the company’s IPO price of R$16 in 2006.
In May 2015, BHG (Brazil Hospitality Group) was delisted by GTIS and GP
investments. This process took almost one year, since it was first announced on
August 2014 at R$19 per share, which compares with an IPO price, adjusted by
dividends, of around R$21.60.
Although it was not a delisting, it is worth noting that during 2016 GP Investments
did a tender offer to acquiring BR Properties shares at R$11.00 and reaching a stake
of 58% in the company. Later in 2017, during BR Properties’ follow-on the fund
reached a 70% stake in the company, acquiring shares at R$8.75.
Reverse splits: In accordance with BM&F Bovespa’s regulations, if shares from any
listed company trades below R$1.00 per share for 30 consecutive trading days and its
management doesn’t take actions in 6 months to bring the price above R$1.00, its
shares could be suspended from trading on Bovespa and its registration may be
cancelled.
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Understanding Land Banks figures

There are two important concepts to understand with regard to the land banks owned
by Brazilian homebuilders. First, the number usually provided by companies, called
potential sales value (PSV, or VGV in Portuguese), represents the company’s
estimate of the potential sales value of the project to be developed on the land and
not the market value of the land. Moreover, the land report under inventory on the
balance sheet is based on historical cost. Second, most of the land in Brazil is
acquired with swaps. These are either physical or financial swaps and require only a
small investment from the homebuilder, which is usually no more than 5% of the
land value. On swap agreements, the land owner shares the project risks with the
developer and will receive a % of the units to be built (physical swap) or a % of the
receivables (financial swap).
These concepts are important to highlight, given that potential write-offs from land
investments are unlikely as land is booked at cost on a company’s balance sheet.
Also, net investment in land for the Brazilian homebuilders is relatively small. Large
developers, such as Cyrela and MRV, only have net investments of less than R$400-
1,000mn, which represents 10-25% of their market cap and 10-20% of annual
revenues.
We believe that companies need to have land sufficient for the next two to three
years in order to reduce land-related execution risks, like approvals of their medium-
term business plans. Overall, we believe the largest players in the sector have healthy
land banks of at least three to four years of future launches. On average, land costs
represent 10% of PSV for lower-income projects and 10-20% for mid- and high-
income projects, based on our calculations.
Table 132: Land bank summary as of 3Q17

R$ in millions
MRVE CYRE TEND EZTEC EVEN DIRR GFSA RDNI RSID PDGR
Net Investment in land 1,859 1,460 248 710 530 886 378 101 426 393
Landbank PSV 44,200 40,131 6,334 5,600 6,199 13,739 4,293 3,204 6,005 2,840
Launches Last 12M 5,027 2,403 1,611 279 1,102 845 1,137 9 14 0
Years of launches* 9 17 4 20 6 16 4 NM NM NM
Source: J.P. Morgan estimates, Company data. *Based on last 12 months launches.
Figure 283: Land bank vs. net investment in land – Aggregated data for all listed companies
Land bank (R$ bn) Net investment in land (R$ bn)
250 14
Land Bank Net Investments in Land
12
200
10
150 8
100 6
4
50
2
0 0
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
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Figure 284: Land bank duration as of 3Q17 based on last 12 months launches
Years
20
17 17 16
14
9
6
4 4
2
EZTC3
CYRE3
TCSA3
DIRR3
HBOR3
MRVE3
EVEN3
TEND3
GFSA3
TRIS3
Figure 285: Land bank potential sales value (PSV), company’s share as of 3Q17
R$ in billions
44
40
14
6 6 6 6 5 5 4 3 3 2 1
MRVE3
CYRE3
DIRR3
TEND3
EVEN3
RSID3
EZTC3
TCSA3
HBOR3
GFSA3
RDNI3
PDGR3
VIVR3
TRIS3
Source: Company reports and J.P. Morgan estimates. The value is the potential sales value of the project to be developed and not the land value.
Figure 286: Net investment in land as of 3Q17

R$ in millions
1,859
1,460
886
710
530
426 393 378
257 248 228 184 144 101 82
MRVE3
CYRE3
DIRR3
EZTC3
EVEN3
RSID3
PDGR3
GFSA3
TCSA3
TEND3
JHSF3
TRIS3
VIVR3
RDNI3
CRDE3
Source: Company reports and J.P. Morgan estimates. Excludes advance from clients related to land bank.
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HBs Market Share and Geographical Diversification

Given the sector’s low barriers to The real estate market in Brazil is highly fragmented and has low entry barriers,
entry and highly fragmented
especially regarding access to land; in our view, the main barrier is related to capital
market, the main advantage enjoyed
by listed companies is their access since larger companies typically have cheaper access to financing than smaller
to capital markets. companies. As a consequence, the companies under our coverage – Cyrela, MRV,
Tenda, Direcional, Even, Eztec, Rodobens, Gafisa – which are the largest ones in the
market, have better access to capital and financing and thus have more potential for
growth than market average, in our view. Additionally their brand helps landowners
and brokers to bring land deals to them. Given their balance sheet strength and access
to capital those companies have been gaining market share in the past years. We
recall that there is no consolidated data for Homebuilders’ launches and presales on a
country perspective, therefore we consider Abrainc Fipe data the best proxy for it,
which includes data for around 20 companies.
Regarding geographical diversification, the Southeast region, especially São Paulo

and Rio de Janeiro, continues to be the main market in the country. According to
Lopes and BR Brokers, those regions represented around 80% of total sales as of
3Q17 vs. 60% in 2009.
Figure 287: Launches Market Share – Covered vs. Non-Covered Figure 288: Presales Market Share – Covered vs. Non-Covered
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
Covered Companies Other Listed Companies Covered Companies Other Listed Companies
Source: Company reports and J.P. Morgan. Source: Company reports and J.P. Morgan.
Figure 289: Lopes – Selling mix Figure 290: BR Brokers – Selling mix
São Paulo Rio de Janeiro Other São Paulo Rio de Janeiro Other Markets Other Segments
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: Company reports and J.P. Morgan. Source: Company reports and J.P. Morgan. 4Q16 impacted by sale of Offices.
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A Project’s Cost Structure

A homebuilder’s cost structure is composed of land, construction cost and financial
expenses, related to construction finance, which are booked in COGS. The
participation of each component in PSV depends on the income segment, with land
increasing its participation as a percentage of total cost in the higher-income
segments. In the table below, we illustrate cost breakdown as aa percentage of PSV
and total cost.
Table 133: Cost breakdown

R$ in million
Percentage of PSV Percentage of Total Cost
Land ~15% ~20%
Construction (materials) ~16% ~28%
Construction (Labor) ~24% ~42%
Financial ~5% ~10%
Total 60% 100%
Table 134: Construction cost breakdown, lower income vs. middle and high income
R$ in million
Lower-Income Segment Middle and High Segment
Labor 39.2% 27.4%
Finishing 10.8% 10.5%
Concrete 8.1% 13.3%
Cement 4.6% 3.9%
Steel 3.0% 6.7%
Aluminum 2.7% 3.7%
Wood 1.3% 1.6%
Others 30.3% 32.9%
Total 100% 100%
Construction inflation remains above consumer inflation

INCC (National Construction Inflation Index) was above consumer inflation during
2017 at 4.0% vs IPCA of 3%, led by labor inflation that is running at 5.0%, while
material inflation was at 4.0%, one of the lowest levels since the 2009/10 crisis,
impacted by the slowdown in heavy construction in Brazil. Although we expect
construction inflation to accelerate during 2018, due to an acceleration in GDP, we
don’t expect it to be above 5.0-6.0% this year.
Figure 291: INCC – Labor continues to drive construction inflation

18%
Materials Labor INCC
13%
8%
3%
-2%
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
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Table 135: INCC – National Construction Cost Index breakdown*

INCC composition
Materials and equipment 49.69%
Materials for structure 25.66%
Metallic materials 8.39%
Wood 3.97%
Materials based on non-metallic mineral 13.30%
Cement 4.42%
Brick/Ceramic Tile 5.37%
Mortar 0.49%
Concrete mass 3.02%
Materials for installation 11.75%
PVC tubes 1.58%
Electric material 5.66%
Permits and others 4.51%
Materials for finishing 6.24%
Coatings, crockery and floors 1.28%
Frames and ironmongery 1.72%
Painting 1.06%
Wood finishing 0.93%
Ornamental stone for construction 1.25%
Services 6.04%
Rents and charges 2.79%
Project 3.25%
Labor 50.33%
Auxiliary 28.04%
Specialist 22.29%
Source: Fundação Getulio Vargas.*Data as of 2014.
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Working Capital Cycle

Homebuilders’ business model for the mid- and high-income segments is different
from the one for the low-income segment in terms of working capital and length of
the business cycle. The full cycle for the traditional segment, composed of the mid-
and high-income segments, could be as long as 36 months vs. around 24 months or
less for the low-income segment, with the construction phase taking 18-24 months in
the mid and high vs. 6-12 months for low-income projects, which have seen an
increase in the use of aluminium molds, which helped to speed up construction and
increase margins.
The pre-launch phase is also longer for the traditional segment, given the preparation
of the sales stand and model apartment “in local,” while in the lower-income segment
usually there is no model apartment nor “in local” sale stand. More and more low
income companies rely on physical stores with model apartments and on online sales.
Figure 292: Real estate project cycle

Traditional Cycle
The cycle for the high- and
middle-income segments is
longer vs. that for the lower- 6 6
income segment. This is due to a months 18-24 months
months
longer construction phase given
less standardization of processes
and more meticulous finishing.
Low Income Cycle
6 6
12 months
months months
Pre-Launches Launches Construction

Source: Company presentations and J.P. Morgan.
This difference in the construction cycles also has an impact on companies’ working
capital cycle. A traditional real estate project is characterized by strong cash outflows
during the construction phase, since construction (ex-land) represents around 40% of
the total project value, resulting in an increasingly negative cumulative cash flow, as
cash inflows during construction are less than 30% of the project sales value as can
be seen in the figures below. However, it is important to keep in mind that different
financing plans can reduce companies’ cash flow exposure – for example, the
“Credito Associativo” credit plan offered by CEF (Caixa Economica Federal) under
the MCMV program allows companies to receive up to 100% of PSV during
construction.
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Figure 293: Cash cycle – based on accumulated cash flow

Months
40%
Bank Financing CEF
30%
20%
10%
0%
-10%
-20%
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18
Land Launch Construction Construction Last

purchase Beginning end approvals
Source: MRV.
Figure 294: Project cash flow : Low income (Credito Associativo) vs Mid and High income
Source: Rossi.
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Figure 295: Project cash flow on the Mid and High income with and without construction loans
Source: Rossi.
How Do Developers Finance Their Projects?

Usually banks finance up to 80% of developers' construction costs. There are 3 main
sources of funding for developers to finance construction: Plano Piloto, Plano
Empresário and Credito Associativo, which we provide in detail in the table below.
Table 136: Financial Plans for Developers

Financial Scheme Pros Cons
From a cash flow perspective, The developer securitizes its receivables High cash exposure (all costs paid with
we think Credito Associativo is Plano Piloto
at the end of construction company's cash)
the best option for companies, Finances up to 80% of construction costs Company only receives the total PSV after
but it is only available for lower- Plano Empresario
Lower rates (SPBE resources) delivering the unit
income projects. Company receives 100% of PSV during Possible impact on margins as payments
Credito Associativo construction, mostly used for MCMV from CEF are not adjusted by INCC as is
projects the case with other financing plans
Source: Fundação Getulio Vargas.
Debt and Capital markets for Homebuilders

Table 137: Equity Offerings – After 2013 several offers happened through private subscriptions
Offering Size (R$mn)
Company Date Primary Secondary Total
PDG 2-Feb-18 77 0 77
Gafisa 24-Jan-18 300 0 300
Total 2018 77 0 377
BR Brokers 1-Aug-17 70 0 70
BR Properties 30-Jun-17 953 0 953
Tecnisa 23-Jun-17 150 0 150
BR Malls 23-May-17 1,730 0 1,730
Multiplan 9-Jan-17 600 0 600
Total 2017 3,503 0 3,503
Lopes 19-Oct-16 40 0 40
Helbor 20-Sep-16 120 0 120
Aliansce 8-Sep-16 600 0 600
Tecnisa 23-Jun-16 200 0 200
Total 2016 960 0 960
Source: CVM and Bloomberg.
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Table 138: Equity Offerings since 2007-13

Iguatemi 1-Jun-13 451 0 451
BHG 18-Apr-13 400 0 400
Multiplan 1-Apr-13 626 0 626
Rossi 8-Jan-13 600 0 600
Total 2013 2,077 0 2,077
Aliansce 12-Dec-12 448 0 448
Viver 10-Oct-12 50 0 50
Brookfield 17-Oct-12 400 0 400
PDG 28-Sep-12 799 0 799
Total 2012 1,697 0 1,697
BR Properties 28-Jun-11 690 0 690
BR Malls 10-May-11 731 0 731
BR Brokers 10-Apr-11 189 0 189
Direcional 11-Feb-11 275 79 354
Tecnisa 1-Feb-11 360 0 360
Sonae Sierra Brasil* 1-Feb-11 478 0 478
Total 2011 2,723 79 2,802
Lopes 25-Oct-10 207 0 207
BR Malls 14-Jul-10 0 437 437
Even 15-Apr-10 292 148 440
Mills Engenharia* 14-Apr-10 426 170 596
BR Properties* 4-Mar-10 748 187 934
Gafisa 25-Feb-10 1,060 0 1,060
PDG 4-Feb-10 0 1,619 1,619
Inpar 2-Feb-10 246 0 246
Aliansce* 29-Jan-10 450 194 644
Total 2010 3,429 2,754 6,183
Direcional* 18-Nov-09 241 0 241
Cyrela 27-Oct-09 1,166 0 1,166
Brookfield 26-Oct-09 476 102 578
Iguatemi 22-Oct-09 388 0 388
Ross 1-Oct-09 928 0 928
PDG 1-Oct-09 784 274 1,058
Multiplan 28-Sep-09 896 0 896
BR Malls 25-Jun-09 223 134 357
MRV 25-Jun-09 595 127 722
Brookfield 15-Jan-09 200 0 200
Total 2009 5,897 637 6,534
Rossi 6-Oct-08 150 0 150
Total 2008 150 0 150
Helbor* 25-Oct-07 252 0 252
PDG 23-Oct-07 575 0 575
BR Malls 19-Oct-07 665 0 665
Tenda* 15-Oct-07 603 0 603
Trisul* 15-Oct-07 330 0 330
Multiplan* 25-Jul-07 688 236 924
MRV* 20-Jul-07 1,005 56 1,061
EZTec* 20-Jun-07 542 0 542
Inpar* 5-Jun-07 767 0 767
Iguatemi* 2-May-07 549 0 549
Agra* 25-Apr-07 752 34 786
CR2* 20-Apr-07 308 0 308
JHSF* 11-Apr-07 432 0 432
Even* 30-Mar-07 460 0 460
Gafisa 16-Mar-07 516 572 1,087
BR Malls* 4-Feb-07 657 0 657
Tecnisa* 31-Jan-07 591 201 791
Camargo Correa* 30-Jan-07 479 44 522
Rodobens* 30-Jan-07 449 0 449
PDG* 25-Jan-07 515 210 725
Total 2007 11,133 1,352 12,484
Source: CVM and Bloomberg. *IPOs.
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Table 139: Equity Offerings before 2007

Brascan* 20-Oct-06 940 248 1,188
Klabin* 6-Oct-06 339 145 485
Abyara* 26-Jul-06 164 0 164
Cyrela 20-Jul-06 729 0 729
Company SA* 24-Feb-06 218 64 282
Gafisa* 17-Feb-06 853 74 927
Rossi ** 14-Feb-06 763 250 1,013
Total 2006 4,005 782 4,786
Cyrela* 21-Sep-05 629 273 902
Total 2005 629 273 902
Source: CVM and Bloomberg. **Rossi has been listed since Jul-97 but its original liquidity was very small.
Table 140: Debentures Issued since 2012

Date Volume (R$ mn) Interest
MRV Dec-17 750 CDI + 2.1% per year
Direcional Feb-17 135 CDI + 0.9%
Aliansce Jan-17 180 99% of CDI per year
Total 2017 1,065
BR Properties Dec-16 550 107% of CDI per year
Even Dec-16 100 130% of CDI per year
CCP Dec-16 200 CDI + 2.32% per year
CCP Sep-16 92 CDI + 1.2% per year
Total 2016 942
LOG Commercial Prop Nov-15 100 118% of CDI
You Inc Oct-15 100 CDI+5.00% per year
Helbor Feb-15 150 CDI+1.90% per year
Total 2015 350
Gafisa Dec-14 55 IPCA+8.22% per year
MRV Dec-14 300 CDI+1.60% per year
BR Properties Nov-14 500 112% of CDI per year
Multiplan Oct-14 400 CDI+0.87% per year
Gafisa Jul-14 130 CDI+1.90% per year
Aliansce Jul-14 90 IPCA+7.50% per year
CCP Jan-14 150 CDI+0.8% per year
Total 2014 1,625
BR Properties Dec-13 400 CDI+1.15% per year
JHSF Dec-13 800 CDI+2.70% per year
+OAS Jun-13 60 CDI+2.98% per year
OAS Jun-13 100 CDI+2.98% per year
Rodobens May-13 150 CDI+1.60% per year
Direcional Apr-13 200 CDI+1.0% per year
BR Malls Apr-13 400 CDI+0.62% per year
Brookfield Jan-13 300 CDI+1.6% & IPCA+6.1% per year
Iguatemi Jan-13 450 CDI+0.82% & IPCA+4.31% per year
Total 2013 2,860
MRV Dec-12 500 CDI+1.50% per year
BR Properties Jul-12 231 IPCA + 5.58% per year
BR Properties Jul-12 369 CDI + 1.08% per year
Even Oct-12 150 CDI+1.60% per year
JHSF Mar-12 350 CDI+1.75% per year
BR Malls Feb-12 239 IPCA+6.4% per year
BR Malls Feb-12 165 CDI+0.94% per year
SSBR Mar-12 96 CDI+0.96% per year
SSBR Mar-12 205 IPCA+6.25% per year
Aliansce Jan-12 185 CDI+2.0% per year
CCP Jan-12 204 CDI+1.22% per year
Iguatemi Jan-12 300 CDI+1.0% per year
Total 2012 2,993
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Table 141: Debentures Issued before 2012

Date Volume (R$ mn) Interest
Tecnisa Sep-11 110 CDI + 2.25% per year
Tecnisa Sep-11 106 CDI + 2.40% per year
Multiplan Sep-11 300 CDI+1.01% per year
MRV Jun-11 425 CDI+1.5% per year
Cyrela Jun-11 120 CDI+1.35% per year
Cyrela Jun-11 280 CDI+1.55% per year
Viver Jun-11 135 CDI+1.035% per year
Brookfield Jun-11 150 CDI+1.60% per year
Brookfield Jun-11 150 CDI+1.75% per year
Rodobens Mar-11 150 CDI+1.85% per year
Iguatemi Jan-11 330 CDI+1.35% per year
Even Jan-11 125 CDI+1.95% per year
Even Jan-11 125 CDI+2.2% per year
Total 2011 2,507
Inpar Dec-10 300 TR + 8.75-10.75% per year
MRV Nov-10 300 TR + 8.25-10.25% per year
CR2 Nov-10 60 CDI+2.5% per year
Helbor Oct-10 90 CDI+1.8% per year
JHSF Sep-10 270 IPCA+9% per year
Cyrela Sep-10 300 115% of CDI
Gafisa Sep-10 150 CDI+1.95% per year
Gafisa Sep-10 150 IPCA+1.95% per year
Tecnisa Sep-10 90 CDI+2.99% per year
Tecnisa Aug-10 150 IPCA+9.65% per year
Rodobens Jun-10 300 TR + 8.3% per year
Rossi Jun-10 500 TR + 6.5-10.5% per year
CCP Mar-10 300 CDI + 0.81% per year
MRV Mar-10 518 CDI + 1.6% per year
Brookfield Jan-10 285 CDI + 2.0% per year
Brookfield Jan-10 81 IPCA +9% per year
Trisul Jan-10 300 TR + 8.5-10.5% per year
Total 2010 4,144
Camargo Correa Dec-09 400 CDI +2.0% per year
Trisul Dec-09 30 CDI +2.0% per year
Gafisa Dec-09 600 TR + 8.25-10.25% per year
Even Nov-09 75 CDI +1.9% per year
Tecnisa Nov-09 200 IPCA + 10.42% per year
JHSF Nov-09 100 CDI +2.4% per year
Cyrela Sep-09 350 CDI + 0.81% per year
PDG Aug-09 300 TR+8.75% per year
Brookfield Aug-09 100 IPCA + 10.25% per year
Gafisa Aug-09 150 CDI + 2.0% per year
Gafisa Aug-09 100 CDI + 3.25% per year
Multiplan Jun-09 100 117% of CDI
PDG Mar-09 276 CDI + 2.0% per year
Total 2009 2,781
Tenda Nov-08 600 TR+8.0%
Rossi Sep-08 40 CDI + 3.5% per year
MRV Jul-08 300 CDI + 1.5% per year
Trisul Jul-08 200 CDI + 2.5% per year
Gafisa Jun-08 250 107.2% of CDI
Even Feb-08 100 IPCA + 8.75% per year
Even Jan-08 150 DI + 1.30% per year
Cyrela Jan-08 500 DI + 0.65% per year
Total 2008 2,140
174
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Homebuilders impact on job markets
Figure 296: Total civil construction employees

Millions
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Source: CBIC.
Figure 297: Job creation in civil construction segment in Brazil YoY

Jobs (‘000) last 12 months
600
500
400
300
200
100
0
(100)
(200)
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Source: CBIC.
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Homebuilders Launches and Presales Performance

Table 142: Growth in launches by company
R$ in millions (Co’s share)
Growth
2014 2015 2016 2017e 2014 2015 2016 2017e
CYRE3 4,854 2,358 2,201 2,151 4% -51% -7% -2%
MRVE3 4,336 4,701 3,988 5,627 23% 8% -15% 41%
TEND3 613 1,089 1,342 1,695 81% 78% 23% 26%
EZTC3 1,068 226 231 343 -21% -79% 2% 49%
EVEN3 2,079 803 1,132 1,091 -14% -61% 41% -4%
DIRR3 1,654 438 769 980 -36% -74% 75% 28%
GFSA3 1,088 996 921 750 -24% -8% -8% -19%
RDNI3 564 58 214 175 -24% -90% 269% -18%
RSID3 610 0 0 14 -27% -100% NM NM
PDGR3 1,360 23 0 0 -32% -98% -100% NM
Total 18,227 10,692 10,798 12,827 -1% -8% -41% 19%
Table 143: Growth in presales by each company

R$ in millions (Co’s share)
Growth
2014 2015 2016 2017e 2014 2015 2016 2017e
CYRE3 4,673 2,638 2,130 2,366 -8% -44% -19% 11%
MRVE3 6,006 5,488 5,259 6,055 18% -9% -4% 15%
TEND3 396 1,016 1,142 1,545 -19% 157% 12% 35%
EZTC3 881 412 76 210 -16% -53% -82% 176%
EVEN3 1,497 1,260 1,026 1,134 -29% -16% -19% 11%
DIRR3 1,635 345 448 807 -38% -79% 30% 80%
GFSA3 811 915 810 904 -44% 13% -11% 12%
RDNI3 550 298 219 267 -21% -46% -26% 22%
RSID3 1,835 1,428 803 735 -8% -22% -44% -9%
PDGR3 1,911 552 332 -170 -33% -71% -40% -151%
Total 20,195 14,352 12,246 13,853 6% -14% -29% 13%
Figure 298: Launches for listed companies

R$ in billions
42.1
40.4
28.9
27.2 26.5
24.2 25.2
20.7
11.2 12.2
9.1
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 9M17
176
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Figure 299: Units launched by listed companies

Thousands units
247
195
162 166
147
128 135
94
57 53
38
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 9M17
Figure 300: Liquid names gaining market share Figure 301: Launches market share in 9M17
R$ in billions
100% 0 HBOR3, 2% EZTC3, 2%
2 1 1
7 10 9 6 6 TRIS3, 5%
80% 11
11 GFSA3, 5%
DIRR3, 6%
60%
18 11 11 8
40% 33 21 21 EVEN3, 8% MRVE3, 43%
19 30
18
13
20% TEND3,
14%
0% CYRE3,
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 9M17 15%
Covered names Other listed names
Source: Company data and J.P. Morgan. Liquid names includes Cyrela, Gafisa, Rossi, MRV,
Tenda, PDG, Rodobens, Even, Eztec and Direcional.
Figure 302: Growth in launches

150%
Covered names Other listed names Total
100%
50%
0%
-50%
-100%
2011 2012 2013 2014 2015 2016 9M17
Source: Company reports and J.P. Morgan; Covered names include: Cyrela, Gafisa, Rossi, MRV, Tenda, PDG, Rodobens, Even, Eztec and Direcional.
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Brazilian Homebuilders IS and BS evolution
Table 144: Summary Income Statement – Coverage Companies (Ex-PDG and Rossi)
R$ in millions
Income Statement 2012 2013 2014 2015 2016 LTM* 2017e 2018e 2019e
Launches 19,982 18,980 16,257 10,669 10,798 12,690 12,123 14,412 15,532
growth yoy 0% -5% -14% -34% 1% 17% 12% 19% 8%
Presales 18,105 21,387 16,448 12,372 11,111 11,439 11,753 13,742 15,388
growth yoy 18% 18% -23% -25% -10% 19% 6% 17% 12%
Inventories at mkt value (R$mn) 16,320 17,089 19,850 19,488 20,044 18,509 18,076 19,406 20,242
SoS - Sales over Supply 14.6% 15.1% 12.3% 10.1% 9.2% 9.2% 9.1% 10.6% 11.0%
Inventory Supply (months) 10.8 9.6 14.5 18.9 21.6 19.4 18.5 16.9 15.8
Revenues 18,967 20,059 17,831 16,544 13,452 12,930 11,548 13,041 15,076
growth yoy 20% 6% -11% -7% -19% -9% -14% 13% 16%
COGS (11,416) (11,152) (11,754) (10,877) (9,182) (8,833) (7,795) (8,581) (9,596)
Capitalized Int expenses (605) (598) (746) (667) (829) (809) (754) (601) (579)
as % of revenues -3.2% -3.0% -4.2% -4.0% -6.2% -6.3% -6.5% -4.6% -3.8%
Gross profit 5,205 5,287 5,332 5,000 3,440 3,288 2,999 3,858 4,901
Gross profit - Incl interest Costs 5,810 5,885 6,078 5,667 4,269 4,098 3,753 4,460 5,480
SG&A (2,350) (2,400) (2,721) (2,718) (2,728) (2,768) (2,540) (2,597) (2,773)
Selling expenses (1,120) (1,140) (1,280) (1,394) (1,401) (1,448) (1,318) (1,369) (1,460)
G&A (1,230) (1,260) (1,441) (1,325) (1,328) (1,320) (1,222) (1,229) (1,312)
EBITDA 3,573 3,757 3,315 2,817 1,355 870 898 1,960 2,878
EBITDA - Incl. interest Costs 2,930 3,137 2,649 2,033 449 86 281 1,305 2,244
growth yoy 23% 5% -12% -15% -52% -55% -34% 118% 47%
Financial results (119) (26) 334 404 463 249 242 361 562
Pres Income tax 2,672 3,315 2,679 2,347 233 (327) 367 1,534 2,657
Taxes (317) (313) (348) (328) (383) (368) (257) (336) (416)
Net income 1,929 2,250 2,073 1,745 (311) (943) (157) 1,011 2,012
growth yoy -6% 17% -8% -16% -118% NM -50% -744% 99%
Source: Company reports and J.P. Morgan estimates. Including Cyrela, Gafisa, MRV, Direcional, Tenda, Eztec, Even and Rodobens. *As of 3Q17.
Table 145: Summary Balance Sheet – Covered Companies (Ex-PDG and Rossi)
R$ in millions
Balance Sheet 2012 2013 2014 2015 2016 LTM* 2017e 2018e 2019e
Cash 5,273 6,919 6,297 6,540 6,161 7,572 7,737 9,446 9,608
Receivables (ST+LT) 18,681 17,743 16,523 14,310 12,433 10,560 10,303 10,461 11,764
Collections in days 359 323 338 316 337 298 326 293 285
Inventories 11,211 13,061 16,805 18,509 20,247 20,829 19,794 19,650 20,170
Land bank 5,429 6,329 8,941 10,407 11,420 12,486 11,614 11,640 11,959
Real Estate & Construction 5,782 6,732 7,864 8,101 8,828 8,343 8,180 8,010 8,211
Total Debt 14,612 15,301 14,351 11,883 12,016 11,167 11,494 11,494 11,494
Debt ST 3,456 3,739 5,142 4,884 4,848 4,180 4,465 4,465 4,465
Debt LT 9,577 9,795 7,737 6,922 6,642 6,971 7,013 7,013 7,013
Total Accounts Payables 3,794 3,859 4,455 4,141 4,431 5,063 4,604 5,076 5,168
Accounts Payable ST 3,378 3,303 3,253 2,627 2,221 2,427 1,935 2,178 2,428
Accounts Payable LT 416 556 1,202 1,514 2,210 2,636 2,669 2,898 2,740
Net investment in land 2,661 3,930 4,270 5,271 5,186 5,871 5,401 5,447 5,746
Total Equity 18,250 20,760 22,671 23,756 22,976 22,096 20,551 21,592 23,201
Minority Interest 1,353 1,606 1,527 1,581 1,517 1,166 1,210 1,397 1,626
Majority Equity 16,898 19,154 21,144 22,175 21,458 20,930 19,341 20,195 21,575
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Table 146: Summary margins and ratios– Covered Companies (Ex-PDG and Rossi)
2012 2013 2014 2015 2016 LTM* 2017e 2018e 2019e
Gross margins 27.4% 26.4% 29.9% 30.2% 25.6% 25.4% 26.0% 29.6% 32.5%
change yoy (0.1)pp (1.1)pp 3.5pp 0.3pp (4.6)pp (2.4)pp 0.4pp 3.6pp 2.9pp
Gross margins - Incl interest Costs 30.6% 29.3% 34.1% 34.3% 31.7% 31.7% 32.5% 34.2% 36.4%
EBITDA margins 18.8% 18.7% 18.6% 17.0% 10.1% 6.7% 7.8% 15.0% 19.1%
change yoy 0.5pp (0.1)pp (0.1)pp (1.6)pp (7.0)pp (6.6)pp (2.3)pp 7.3pp 4.1pp
EBITDA margins – Incl. interest Costs 15.4% 15.6% 14.9% 12.3% 3.3% 0.7% 2.4% 10.0% 14.9%
Net margin 10.2% 11.2% 11.6% 10.5% -2.3% -7.3% -1.4% 7.8% 13.3%
change yoy (2.8)pp 1.0pp 0.4pp (1.1)pp (12.9)pp (13.8)pp 1.0pp 9.1pp 5.6pp
SG&A / Revenues -12.4% -12.0% -15.3% -16.4% -20.3% -21.4% -22.0% -19.9% -18.4%
Selling / Revenues -5.9% -5.7% -7.2% -8.4% -10.4% -11.2% -11.4% -10.5% -9.7%
G&A / Revenues -6.5% -6.3% -8.1% -8.0% -9.9% -10.2% -10.6% -9.4% -8.7%
Effective tax rate -8.9% -8.3% -10.5% -11.6% -28.3% -42.2% -28.6% -17.1% -14.5%
ROE 13.0% 12.5% 10.3% 8.1% -1.4% -4.5% -0.8% 5.1% 9.6%
Cash burn R$mn (2,095) (7) 29 1,315 (63) 1,955 1,577 1,709 162
as % of equity -11% 0% 0% 6% 0% 9% 8% 8% 1%
Net Debt / Equity 55% 44% 38% 24% 27% 17% 19% 10% 9%
Revenues to be recognized 16,343 17,200 15,772 11,592 7,924 7,439 7,634 9,214 10,672
as % of revenues 0.9x 0.9x 0.9x 0.7x 0.6x 0.6x 0.7x 0.7x 0.7x
Growth yoy 25% 5% -8% -26% -32% -25% -4% 21% 16%
In the tables below, we aggregate the information for all the listed Homebuilders
currently traded on Bovespa.
Table 147: Consolidated figures including all publicly traded companies (Ex-PDG and Rossi)
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
Gross margin* 26.6% 25.9% 25.0% 18.0% 24.0% 21.9% 28.0% 29.5% 29.5% 24.0% 24.9%
EBITDA margin* 11.8% 10.4% 5.5% -12.9% 1.6% 0.4% 10.6% 14.9% 13.7% -2.8% 5.6%
Net margin 5.4% 3.3% -2.2% -39.1% -2.2% -16.0% 8.3% 14.9% 11.7% -7.6% -2.5%
Backlog margin 36.0% 36.1% 35.8% 36.0% 35.3% 35.9% 36.2% 36.9% 36.3% 36.0% 36.2%
ROE 3.3% 1.9% -1.2% -21.9% -1.1% -8.3% 5.3% 12.3% 8.8% -4.5% -1.0%
Source: Company reports and J.P. Morgan. *includes interest costs on COGS.
Table 148: Net revenues (R$mn)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 990 1,097 1,096 1,067 1,014 1,129 1,245 4,186 4,774 4,250 3,388
Cyrela 811 641 825 919 692 575 598 5,818 4,341 3,195 1,865
Tenda 235 261 271 287 325 315 361 570 851 1,053 1,001
Gafisa 406 473 539 264 137 147 160 2,151 2,294 1,682 444
Even 513 473 363 394 310 382 488 2,206 2,205 1,743 1,180
Eztec 150 155 116 151 97 106 692 951 814 572 895
Direcional 406 383 315 255 199 182 201 1,836 1,570 1,358 582
Rodobens 89 75 146 76 75 69 73 715 557 386 217
Rossi 107 121 140 171 139 68 43 1,617 1,226 538 250
PDG 140 120 -84 72 118 158 15 4,257 1,824 247 291
JHSF 118 93 100 81 88 104 80 603 631 391 272
Tecnisa 158 101 5 65 100 125 12 1,560 1,240 329 238
Trisul 78 59 94 94 97 99 122 370 380 325 317
CR2 5 6 2 4 1 3 2 20 29 17 6
Viver 17 23 -54 -4 5 -3 0 158 112 -18 3
Helbor 291 269 143 199 189 120 89 1,846 1,307 902 398
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Table 149: EBITDA (R$mn)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 151 163 155 160 160 193 273 862 643 637 626
Cyrela 117 63 69 95 102 (60) 61 1,049 748 344 103
Tenda 23 22 39 47 32 31 49 (68) 60 131 111
Gafisa 15 22 15 (160) (47) (65) (44) 290 340 (107) (157)
Even 69 51 30 29 (18) (18) 41 378 284 178 5
Eztec 53 27 32 58 11 15 282 441 569 169 308
Direcional 58 53 20 (43) (1) (7) (4) 308 257 88 (13)
Rodobens 13 (13) (11) (43) (12) (20) (1) 107 229 (54) (34)
Rossi (88) (72) (102) (31) (61) (106) (120) (344) 287 (292) (287)
PDG (156) (508) (1,506) (2,251) (87) (335) (132) 465 287 (4,422) (555)
JHSF 37 123 34 (200) 43 75 18 207 447 (2) 136
Tecnisa (3) (92) (112) (249) (60) (113) (121) 0 287 (455) (294)
Trisul 3 3 10 8 7 9 17 42 45 24 33
CR2 (3) (2) (0) (27) (3) (2) (3) 0 0 0 (8)
Viver (44) (17) (45) (96) (17) (33) (14) (70) 287 (202) (64)
Helbor 12 24 (19) (77) (42) (52) (53) 338 331 331 (147)
Source: Company reports and J.P. Morgan. ROE calculation; Annualized quarterly net income divided by the last two quarters’ equity.
Table 150: Net income (R$mn)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 128 138 150 142 130 160 202 720 559 558 492
Cyrela 61 45 14 31 11 (141) (5) 661 448 151 (135)
Tenda 74 39 49 70 32 23 280 474 444 232 335
Gafisa (53) (38) (73) (1,000) (49) (180) (158) (43) 68 (1,164) (387)
Even 25 16 (13) (26) (40) (78) (26) 252 101 2 (144)
Eztec 74 39 49 70 32 23 280 474 444 232 335
Direcional 30 22 1 (65) (23) (30) (29) 206 131 (12) (82)
Rodobens 12 (17) (15) (60) (26) (35) (13) 68 7 (80) (74)
Rossi (142) (125) (160) (87) (163) (171) (156) (619) (556) (514) (490)
PDG (411) (740) (1,718) (2,374) (276) (532) (299) (529) (2,393) (5,242) (1,107)
JHSF (37) 48 (56) (205) (17) 4 (29) 42 217 (250) (43)
Tecnisa 2 (92) (108) (252) (63) (140) (142) 155 238 (449) (345)
Trisul 1 (2) 2 2 2 3 9 21 19 3 15
CR2 (4) (1) 0 (48) (4) (1) (2) (34) (38) (52) (7)
Viver (90) (74) (82) (103) (28) (86) 18 (234) (262) (348) (96)
Helbor 5 5 (30) (83) (49) (79) (75) 211 69 (103) (203)
Table 151: Gross margins – Including interest costs

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 33% 32% 32% 33% 34% 34% 34% 28% 30% 33% 34%
Cyrela 35% 40% 32% 29% 32% 27% 25% 32% 35% 33% 28%
Tenda 29% 26% 34% 33% 33% 33% 36% 22% 29% 31% 34%
Gafisa 18% 20% 17% NM -13% -10% -5% 25% 27% 7% -9%
Even 19% 17% 20% 21% 14% 9% 19% 28% 24% 19% 14%
Eztec 47% 43% 44% 54% 47% 47% 45% 53% 51% 47% 46%
Direcional 21% 19% 8% -10% 9% 11% 7% 23% 21% 12% 9%
Rodobens 20% 12% 16% -16% 1% -5% 10% 29% 30% 10% 2%
Rossi -5% 6% 0% 19% -2% -28% NM 13% 9% 6% -28%
PDG -11% -48% NM NM 2% 36% NM 19% -34% NM 15%
JHSF 43% 22% 45% 46% 41% 49% 37% 48% 43% 39% 43%
Tecnisa 12% -14% NM NM -14% -40% NM 29% 22% -24% -35%
Trisul 27% 26% 30% 30% 22% 27% 28% 34% 29% 29% 26%
CR2 30% 32% 11% -49% -27% 17% 21% 47% 33% 12% 10%
Viver NM NM 49% NM NM NM NM -48% NM NM NM
Helbor 15% 22% 13% -13% -2% -11% -12% 28% 23% 11% -7%
180
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Table 152: EBITDA margins – Including interest costs

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 15% 15% 14% 15% 16% 17% 22% 18% 11% 12% 18%
Cyrela 14% 10% 8% 10% 15% -10% 10% 18% 17% 11% 6%
Tenda 10% 8% 15% 17% 10% 10% 13% -12% 7% 11% 11%
Gafisa 4% 5% 3% NM -35% -44% -28% 3% 7% NM -35%
Even 13% 11% 8% 7% -6% -5% 8% 10% 5% -1% 0%
Eztec 35% 18% 27% 38% 11% 14% 41% 46% 49% 31% 34%
Direcional 14% 14% 6% -17% -1% -4% -2% 14% 13% 2% -2%
Rodobens 15% -17% -8% NM -16% -30% -2% 12% 29% -13% -16%
Rossi NM NM NM -18% -44% NM NM -21% -26% NM NM
PDG NM NM NM NM NM NM NM 5% NM NM NM
JHSF 32% NM 34% NM 49% 72% 22% 38% 78% -2% 50%
Tecnisa -2% NM NM NM NM NM NM 13% 3% NM NM
Trisul 3% 6% 11% 8% 8% 9% 14% 13% 4% -1% 11%
CR2 NM -25% -21% NM NM NM NM NM NM NM NM
Viver NM NM 83% NM NM NM NM NM NM NM NM
Helbor 4% 9% -13% -39% -22% -43% NM 18% 10% -7% -37%
Table 153: Net margins

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 13% 13% 14% 13% 13% 14% 16% 17% 12% 13% 15%
Cyrela 8% 7% 2% 3% 2% -25% -1% 11% 10% 5% -7%
Tenda 31% 15% 18% 25% 10% 7% 78% 50% 55% 22% 33%
Gafisa -13% -8% -13% NM -36% NM NM -2% 3% NM NM
Even 5% 3% -3% -7% -13% -21% -5% 11% 5% 0% -12%
Eztec 49% 25% 42% 47% 33% 21% 41% 50% 55% 41% 37%
Direcional 7% 6% 0% -25% -11% -16% -15% 11% 8% -1% -14%
Rodobens 14% -23% -11% NM -35% NM -18% 10% 1% -21% -34%
Rossi NM NM NM NM NM NM NM -38% NM NM NM
PDG NM NM NM NM NM NM NM -12% NM NM NM
JHSF -32% 52% NM NM -20% 3% -37% 5% 38% NM -16%
Tecnisa 2% NM NM NM NM NM NM 10% -8% NM NM
Trisul 1% -4% 2% 2% 2% 3% 8% 6% 5% 1% 5%
CR2 NM -21% 22% NM NM -31% NM NM NM NM NM
Viver NM NM NM NM NM NM NM NM NM NM NM
Helbor 2% 2% -21% -42% -26% NM NM 11% 5% -11% NM
Table 154: Backlog margins

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 41% 40% 40% 41% 41% 42% 42% 44% 43% 40% 42%
Cyrela 38% 37% 37% 37% 38% 39% 39% 37% 37% 37% 38%
Tenda 43% 43% 44% 47% 44% 49% 50% 31% 42% 44% 48%
Gafisa 39% 39% 39% 41% 36% 36% 35% 39% 40% 39% 36%
Even 34% 33% 33% 32% 31% 31% 32% 36% 36% 33% 31%
Eztec 57% 58% 60% 55% 54% 47% 45% 49% 56% 58% 49%
Direcional 26% 27% 27% 30% 29% 29% 30% 26% 26% 27% 29%
Rodobens 35% 34% 31% 32% 30% 30% 31% 32% 34% 33% 30%
Rossi 29% 29% 31% 28% 30% 29% 27% 36% 34% 29% 29%
PDG 32% 32% 40% 24% 20% 20% 21% 30% 30% 32% 20%
JHSF NA NA NA NA NA NA NA NA NA NA NA
Tecnisa 28% 23% 26% 23% 37% 25% 23% 44% 38% 25% 28%
Trisul 33% 32% 33% 33% 34% 35% 36% 39% 35% 32% 35%
CR2 NA NA NA NA NA NA NA NA NA NA NA
Viver 34% 37% 21% 18% 18% 16% 17% 32% 33% 28% 17%
Helbor 31% 31% 28% 28% 25% 31% 30% 35% 33% 30% 29%
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Table 155: ROE – Return on Equity

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 11% 11% 12% 11% 10% 12% 15% 16% 12% 11% 9%
Cyrela 4% 3% 1% 2% 1% -9% 0% 12% 8% 3% -2%
Tenda 27% 14% 17% 26% 12% 8% 93% 0% 0% 0% 0%
Gafisa -7% -5% -10% NM -12% -49% -49% -1% 2% NM -32%
Even 5% 3% -2% -5% -8% -15% -5% 12% 5% 0% -7%
Eztec 11% 6% 7% 10% 4% 3% 39% 20% 16% 8% 11%
Direcional 7% 5% 0% -16% -6% -8% -8% 13% 8% -1% -5%
Rodobens 6% -8% -8% -32% -14% -20% -8% 8% 1% -11% -11%
Rossi -49% -49% NM -46% NM NM NM -35% -45% NM NM
PDG NM NM NM NM 31% 54% 28% -13% NM NM 25%
JHSF -6% 7% -9% -35% -3% 1% -5% 2% 8% -11% -2%
Tecnisa 1% -23% -27% NM -18% -40% -44% 10% 14% -32% -28%
Trisul 1% -2% 2% 2% 2% 2% 8% 4% 4% 1% 3%
CR2 -6% -2% 1% NM -9% -2% -4% -10% -16% -28% -4%
Viver NM 95% 84% 88% 22% 59% -12% NM NM 68% 16%
Helbor 1% 1% -9% -24% -14% -24% -24% 16% 5% -7% -17%
Table 156: Cash burn () / Cash Generation (R$mn)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 165 (3) 48 (106) (83) 234 99 (543) 143 104 251
Cyrela (24) (124) (234) 165 136 (156) 276 157 920 (217) 256
Tenda (66) 128 7 33 22 63 83 56 (14) 103 168
Gafisa 30 (45) 13 56 34 238 49 660 923 54 321
Even (12) (68) 22 4 38 38 140 (486) (627) (53) 217
Eztec 69 (64) 48 (8) 31 52 541 (408) (86) 45 623
Direcional 5 61 (65) (3) (49) 28 (21) (172) (352) (2) (42)
Rodobens (43) (23) (29) (17) 37 65 37 354 273 (112) 139
Rossi (56) (113) (40) (53) (3) (23) (4) (806) (405) (262) (30)
PDG 126 284 16 76 7 (274) (179) (3,528) (2,403) 501 (446)
JHSF (44) 105 76 209 219 (63) (44) (2,093) (1,654) 346 112
Tecnisa (69) 719 164 (637) 94 910 10 (1,102) (1,130) 176 1,014
Trisul 38 30 24 11 13 11 (1) 481 546 103 22
CR2 (1) 3 4 (7) 1 3 (0) 156 206 (1) 4
Viver (16) (6) (9) 30 9 (35) 51 (254) (167) (1) 24
Helbor (117) (107) (132) 86 (46) (26) 5 (943) (1,303) (270) (67)
Source: Company reports and J.P. Morgan. Cash burn adjusted by follow-on offers, but not adjusted by dividends or buybacks.
Table 157: Total debt (R$mn)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 2,301 2,120 2,105 2,314 3,278 2,989 3,490 2,502 2,250 2,314 3,490
Cyrela 3,673 3,537 3,472 3,424 3,566 3,377 3,083 3,875 3,742 3,424 3,083
Tenda 293 266 199 135 174 179 131 439 248 135 131
Gafisa 2,201 2,072 2,050 1,638 1,587 1,327 1,219 2,587 2,151 1,638 1,219
Even 1,930 1,983 1,904 1,987 1,935 1,649 1,626 1,870 2,007 1,987 1,626
Eztec 224 279 315 353 348 345 298 507 228 353 298
Direcional 901 940 913 915 845 986 958 948 844 915 958
Rodobens 671 579 684 625 563 455 375 589 584 625 375
Rossi 1,930 2,014 2,026 2,042 2,102 2,075 2,067 2,427 1,925 2,042 2,067
PDG 5,914 5,528 5,477 5,367 5,377 5,677 5,838 7,653 6,271 5,367 5,838
JHSF 1,911 1,844 1,671 1,488 1,215 1,287 1,316 2,466 1,917 1,488 1,316
Tecnisa 2,053 1,332 1,152 1,790 1,629 763 730 2,369 2,067 1,790 730
Trisul 280 230 212 197 188 177 222 411 319 197 222
CR2 0 0 0 0 0 0 0 38 1 0 0
Viver 1,048 1,056 1,064 1,042 1,026 1,065 1,002 961 1,031 1,042 1,002
Helbor 2,033 2,157 2,262 2,171 2,216 2,228 2,226 1,454 1,968 2,171 2,226
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Table 158: Net debt (R$mn)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 489 492 444 550 633 398 299 1,285 654 550 299
Cyrela 1,532 1,656 1,890 1,725 1,589 1,745 1,469 2,121 1,508 1,725 1,469
Tenda 80 (48) (55) (89) (111) (174) (257) (56) 14 (89) (257)
Gafisa 1,409 1,453 1,440 1,384 1,350 1,112 1,063 1,429 1,438 1,384 1,063
Even 1,336 1,404 1,382 1,378 1,340 1,301 1,161 1,149 1,325 1,378 1,161
Eztec (235) (171) (219) (210) (241) (293) (834) 272 (166) (210) (834)
Direcional 340 280 345 347 397 369 390 283 345 347 390
Rodobens 333 355 384 402 364 299 262 196 290 402 262
Rossi 1,774 1,886 1,926 1,980 1,983 2,006 2,010 1,947 1,718 1,980 2,010
PDG 5,541 5,258 5,242 5,166 5,160 5,433 5,613 6,609 5,667 5,166 5,613
JHSF 1,770 1,665 1,589 1,380 1,161 1,224 1,268 2,096 1,726 1,380 1,268
Tecnisa 1,944 1,225 1,061 1,698 1,604 694 684 2,112 1,875 1,698 684
Trisul 238 208 184 173 161 150 151 276 277 173 151
CR2 (17) (21) (24) (17) (18) (21) (21) 6 (19) (17) (21)
Viver 1,024 1,030 1,039 1,009 1,000 1,035 985 931 1,008 1,009 985
Helbor 1,750 1,857 1,989 1,902 1,949 1,975 1,970 1,189 1,632 1,902 1,970
Table 159: Net debt to equity

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 9M17
MRV 10% 10% 9% 11% 12% 8% 5% 29% 14% 11% 5%
Cyrela 26% 28% 31% 29% 26% 30% 25% 37% 26% 29% 25%
Tenda 7% -4% -5% -8% -10% -15% -21% -5% 1% -8% -21%
Gafisa 46% 48% 49% 78% 87% 81% 87% 47% 46% 78% 87%
Even 62% 65% 64% 65% 64% 65% 58% 54% 61% 65% 58%
Eztec -8% -6% -8% -7% -8% -11% -27% 11% -6% -7% -27%
Direcional 20% 16% 21% 22% 25% 24% 26% 18% 21% 22% 26%
Rodobens 40% 44% 49% 55% 51% 44% 40% 24% 35% 55% 40%
Rossi 163% 196% 240% 277% 359% NM NM 110% 140% 277% NM
PDG 364% NM NM NM NM NM NM 158% 293% NM NM
JHSF 68% 66% 65% 63% 53% 56% 59% 92% 65% 63% 59%
Tecnisa 116% 77% 64% 120% 113% 51% 56% 142% 112% 120% 56%
Trisul 47% 42% 37% 34% 32% 30% 30% 54% 54% 34% 30%
CR2 -7% -9% -11% -9% -10% -11% -11% 2% -8% -9% -11%
Viver NM NM NM NM NM NM NM NM NM NM NM
Helbor 126% 133% 146% 136% 144% 155% 161% 90% 118% 136% 161%
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EPS vs. Stock Performance

Figure 303: Cyrela – Consensus EPS adj. Figure 304: MRV – Consensus EPS adj.
Share price EPS Share price EPS
17 Price EPS 2017 EPS 2018 1.0 17 Price EPS 2017 EPS 2018 1.9
0.8 1.8
15 15
0.6 1.7
13 0.4 13 1.6
11 0.2 11 1.5
0.0 1.4
9 9
(0.2) 1.3
7 (0.4) 7 1.2
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Figure 305: Eztec – Consensus EPS adj. Figure 306: Gafisa – Consensus EPS adj.
26 2.1 25 Price EPS 2017 EPS 2018 10
Price EPS 2017 EPS 2018
24 1.9 5
22 1.7 20
0
20 1.5
18 1.3 15 (5)
16 1.1 (10)
14 0.9 10
(15)
12 0.7
5 (20)
10 0.5
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Figure 307: Even – Consensus EPS adj. Figure 308: Direcional – Consensus EPS adj.
7.0 Price EPS 2017 EPS 2018 0.8 7.0 Price EPS 2017 EPS 2018 1.0
6.5 0.6 6.5 0.8
6.0 0.4 0.6
6.0
0.2 0.4
5.5 5.5
0.0 0.2
5.0 0.0
(0.2) 5.0
4.5 (0.2)
(0.4) 4.5
4.0 (0.6) (0.4)
4.0 (0.6)
3.5 (0.8)
3.0 (1.0) 3.5 (0.8)
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
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Figure 309: PDG – Consensus EPS adj. Figure 310: Rossi – Consensus EPS adj.
4.0 0 12 0
Price EPS 2017 EPS 2018 Price EPS 2017 EPS 2018
3.5 (5) (5)
10
(10)
3.0 (10) 8
(15)
2.5 (15) 6 (20)
2.0 (20) (25)
4
(30)
1.5 (25) 2
(35)
1.0 (30) 0 (40)
Jan-17
Mar-17
Apr-17
Jun-17
Jul-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-17
May-17
Aug-17
Sep-17
Feb-18
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Figure 311: Rodobens – Consensus EPS adj.

Share price EPS
8.0 Price EPS 2017 EPS 2018 2.0
7.0 1.0
6.0 0.0
5.0 (1.0)
4.0 (2.0)
3.0 (3.0)
Jul-17
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Source: Bloomberg.
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NAV Analysis – It Needs to Include Companies’ Cycles

The main assumptions behind our NAV analysis for Brazil’s HBs are: 1) 75% net
margin on receivables on the balance sheet to incorporate taxes on those receivables;
2) 10% discount on off balance sheet receivables as we believe there could be
downside risks to a company’s figures; 3) 70% margin on inventory at market value
representing potential discounts and taxes on those units; 4) 3 years of G&A and
financial expenses as given the sector’s long cycle, companies should take at least 3
years for companies to deliver units under construction.
Table 160: NAV analysis as of 3Q17

R$ in millions
3Q17 Information MRVE3 CYRE3 GFSA3 EVEN3 EZTC3 DIRR3 RDNI3 RSID3 PDGR3
Market cap (R$ mn) 6,979 6,192 522 1,316 4,216 922 230 108 89
Number of shares 441 400 45 225 165 146 42 17 49
Price 15.82 15.49 11.68 5.85 25.55 6.30 5.42 6.28 1.80
Receivables on the balance sheet 2,461 2,699 811 1,569 746 906 502 904 1,478
costs/discount pending to be incurred (369) (405) (122) (235) (112) (136) (75) (136) (222)
(=) Receivables on-balance NAV (a) 2,092 2,294 689 1,334 634 770 426 768 1,256
Receivables OFF balance sheet (Rev to recognize) 2,177 1,636 451 1,133 97 1,445 79 62 474
costs/discount pending to be incurred (1,252) (1,000) (290) (775) (53) (1,015) (55) (45) (376)
(=) Receivables OFF balance NAV (b) 707 472 116 245 34 285 16 11 51
(+) Receivables on and off balance (a+b) 2,799 2,767 805 1,578 669 1,055 443 779 1,307
Land at book value 4,494 2,023 738 844 721 1,751 173 552 526
Land payables (2,636) (237) (266) (314) (11) (865) (73) (125) (133)
(+) Net Investment in Land 1,859 1,786 472 530 710 886 101 426 393
Inventories at market value 5,560 5,169 1,476 2,068 1,203 1,275 316 814 2,348
costs/discount pending to be incurred (1,668) (1,551) (443) (620) (361) (383) (95) (244) (704)
(+) Net Inventories 3,892 3,618 1,033 1,448 842 893 221 570 1,644
(+) Cash 3,191 1,614 215 465 1,131 568 112 57 225
Total Assets 11,741 9,785 2,525 4,021 3,352 3,402 877 1,832 3,569
(-) NPV of G&A (3 years of G&A) (1,744) (1,436) (323) (616) (323) (351) (176) (180) (275)
(-) NPV of Interests (3 years of Financial expenses) (221) (216) (374) (251) 24 (108) (86) (520) (1,529)
(-) Debt (3,490) (3,083) (1,327) (1,626) (298) (958) (375) (2,067) (5,838)
(-) A/P (315) (204) (73) (45) (21) (65) (19) (54) (290)
(-) Minorities (254) (445) (4) (285) (12) (150) (10) (6) 7
(-) Advances from customers (537) (326) 0 (34) (13) (13) (10) (193) (133)
Total Liabilities (6,561) (5,710) (2,101) (2,857) (643) (1,645) (675) (3,019) (8,058)
NAV - Simple 5,180 4,075 424 1,164 2,710 1,757 202 (1,188) (4,489)
Equity 5,514 5,874 1,374 1,992 3,036 1,515 660 (4,479) (4,479)
NAV 11.74 10.19 9.49 5.17 16.42 12.01 4.77 (69.25) (91.26)
NAV as a % of equity 94% 69% 31% 58% 89% 116% 31% 27% 94%
NAV as a % of Market 74% 66% 81% 88% 64% 191% 88% NM NM
P/NAV 1.3x 1.5x 1.2x 1.1x 1.6x 0.5x 1.1x NM NM
P/BV – Current 1.2x 1.1x 0.5x 0.7x 1.6x 0.6x 0.3x 0.5x NM
Source: Company reports and J.P. Morgan. Priced as of March 12th.
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Company’s shareholder structure

Shareholder Structure
In the table below, we detail Shopping Malls’ shareholders structure, showing the
breakdown of companies' top 5 shareholders.
Table 161: Companies’ top 5 shareholders

MRV % TEND % DIRR % CYRE % EVEN % EZTC %
Rubens Menin 33.6 Polo 17.3 Family 45.8 Elie Horn 34.0 Nova Milano 45.2 Zarzur Family 64.9
Orbis 11.6 Pátria 7.4 Fidelity 9.9 Orbis 9.9 Wishbone 10.1 Invesco 4.4
Prudential 5.1 Oceana 6.2 Wishbone 5.2 Dynamo 9.8 Dimensional 4.5 Dimensional 1.8
Windacre 3.7 Itau 5.0 ARX 4.8 TIAA-CREF 3.0 SPX 4.2 Vanguard 1.0
Dimensional 3.1 Deutsche Bank 3.6 Dinensional 4.5 Dimensional 2.7 BTG 2.5 Banco do Brasil 0.8
Top-5 57.0 Top-5 39.6 Top-5 70.3 Top-5 59.6 Top-5 66.5 Top-5 72.9
Table 162: Companies’ top 5 shareholders

GFSA % PDGR % RSID % RDNI %
GWI 19.2 Vinci 38.8 Family 24.0 Family 61.2
Wishbone 15.6 Auerbach 15.3 Vinci 8.7 Kinea 12.6
River & Merc. 10.1 Orbis 15.3 Orbis 4.9 Kapitalo 6.4
Morgan Stanley 3.3 Morgan Stanley 4.9 Treasury 2.4 Una Capital 5.4
AZ Quest 2.9 Platinum 4.9 GIC 1.3 BTG 5.2
Top-5 51.0 Top-5 79.4 Top-5 41.4 Top-5 90.8
Understanding the Sector’s Accounting

In this section, we highlight the main lines of real estate companies’ income
statements and balance sheets.
Income Statement
Percentage-of-completion (PoC): This is the accounting method used by
Homebuilders, in which construction revenues and costs are booked in accordance
with the evolution of a project’s construction. For example, if a project is 20% built
and 20% sold, the company can recognize only 4% of the results. In the figure below
we show the details.
Table 163: Percentage of Completion (PoC)

Accumulative curves T0 T1 T2 T3 T4 T5
Sold 0% 20% 40% 60% 80% 100%
Construction 0% 20% 40% 60% 80% 100%
% of results recognized 0% 4% 16% 36% 64% 100%
Gross operational revenue: Composed mainly of the sale of real estate

developments, represented by both residential and commercial units and in some
cases by construction services and rents. Revenue is recognized in accordance with
the percentage of completion (PoC) method. Usually interest rates received during
construction are booked on revenues. Deductions to gross revenues are composed of
PIS and Cofins, which can vary from 3.65% to 9.25% depending on the tax regime
adopted by the company, “Lucro Real” or “Lucro Presumido” and discounts.
Gross revenue adjustments: Due to PoC accounting, homebuilders’ gross revenues

could be negative on different occasions: i) Cancellations of sales, since revenues are
recognized during construction. If a client doesn’t obtain a mortgage when the
contract is concluded and the sale is cancelled companies have to revert the revenues
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previously recognized; ii) Cost overrun, as revenues are based on construction

evolution, therefore in case of cost overruns, companies would have recognized a
higher percentage of revenues visa vis the evolution of construction causing potential
reversals on revenues.
Cost of Goods sales (COGS): Represented by the land and by construction costs,
the latter of which are composed of project expenses, foundations, structuring and
furnishing, materials (cement, steel, etc.), labor, building site administrative costs,
financial expenses related to construction finance in accordance with CVM
instruction 561and others. Companies recognize costs in accordance with their
disbursements.
Operational expenses = Commercial / Selling expenses + G&A + depreciation

and amortization: Commercial expenses are represented by advertising expenses,
including model apartments, sales stands, and brokerage fees. G&A is composed of
personnel expenses, fees related to legal expenses (municipal taxes linked to project
developments), auditing, consulting, other services, and stock option plans.
Depreciation and amortization include the depreciation of property and equipment
and amortization.
All marketing, advertising, promotion, and similar expenses are not considered part
of development costs, so they cannot be capitalized. The only exceptions are: sales
stands and model apartments, which can be considered, and fixed assets if the
depreciation period is longer than 12 months; but if less than 12 months, it must be
considered selling expenses. Most companies used to capitalize model apartments
and stands. Selling expenses capitalized before the beginning of 2008 (number
available in 2007 balance sheet under prepaid expenses) were fully recognized by
reducing companies’ equity.
Sales commissions are considered an anticipated payment and capitalized on the

balance sheet and recognized in selling expenses in accordance with PoC; however,
if a client canceled the purchase or if it is likely the client will not pay the remaining
installments, commissions’ expenses should be fully booked at once, thereby
impacting the EBITDA margin.
Financial results: Financial income is represented mainly by the return on cash

investments and interest from receivables after the delivery of units in case of
companies that have direct finance. Financial expenses are composed of interest paid
on loans, financing, and debentures.
Income tax: Independent of a company’s tax regime (either “Lucro Presumido” or

“Lucro Real”), the income tax is represented by income tax of 25% plus a social
contribution of 9%. Under “Lucro Presumido,” which is applicable to companies or
special purpose companies (SPCs) with revenues below R$78mn per year, the 34%
(25%+9%) income tax is charged against an assumed margin of 32% of companies’
gross revenue, resulting in a charge of 10.8% of revenues for most of the companies.
As real estate companies usually have one SPC for each development, most of them
use “Lucro Presumido.”
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Table 164: Summary of Tax Regimes in Brazil

RET 6% (until 2012) RET 4% (started in 2013) RET 1% Lucro Presumido Lucro Real
PIS/COFINS (taxes on revenues)
Gross revenue
Gross revenue Gross revenue received
Gross revenue received Gross revenue received from received from real
Base for Calculation received from real from real estate activities
from real estate activities real estate activities estate activities and
estate activities and other revenues
other revenues
Rate 3.13% 2.08% 0.53% 3.65% 9.25%
Income tax and Social Contribution
Adjusted net
Gross revenue
Gross revenue received Gross revenue received from Gross revenue received income. Gross profit
Base for Calculation received from real
from real estate activities real estate activities from real estate activities in the real estate is
estate activities
taxed as received.
Rate 2.87% 1.92% 0.47% 3.08% 34.0%
TOTAL 6.00% 4.00% 1.00% 6.73% >34.0%
Taxation of project subject to
"Patrimônio de Afetação".
Taxation of project Taxation of project subject Only units up to R$100k and
subject to "Patrimônio to "Patrimônio de eligible to MCMV are subject Possibility to
de Afetação" Afetação" to 1%. (Price increase from establish credit on
Additional Comments R$85k to R$100k in some costs. Credit
Other revenues are Other revenues are taxed December 2012) estimated at 3.75%
taxed by the tax regime by the tax regime of the of revenue received
of the developer developer Other revenues are taxed by
the tax regime of the
developer
Source: MRV Corporate Presentation as of March 2016.
Balance Sheet Lines

Receivables from clients: These are stated on the balance sheet at cost plus accrued
interest. During construction the installments are re-adjusted by INCC (construction
inflation index) and after construction by IGPM (general market price index).
Receivables are booked in accordance with the percentage-of-completion (PoC)
method, meaning that there are also off-balance-sheet receivables, which are
represented by units that were sold but didn’t flow through the income statement due
to its stage of construction.
Inventories: These are composed of 3 items – land, property under construction, and
finished units. Land is the sum of the land purchased by the company at cost plus
land swaps which are booked based on the fair value of the swapped units. This line
has its counterpart in advances from customers, not impacting companies’ net cash
invested in land. Property under construction constitutes all the land on which
construction has already started, plus the respective construction cost – materials,
outsourced labor and interest expenses related to construction finance. Finished units
are represented by delivered units at cost.
Obligation for purchase of land: Liabilities related to land acquisition, usually

divided on the balance sheet between short term and long term.
Advances from clients: Most of these are represented by the counterpart of land
acquired through swaps in which units will be used as part of the payment for land; it
also reflects the cash received by the company in advance of the construction stage of
the project.
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Other Relevant Accounting Details

Development costs: Expenses that represent development costs are capitalized on
the balance sheet under inventories and recognized in COGS according to the
percentage-of-completion (PoC) method. According to CVM, the components of
development costs include: i) land costs, ii) project-related costs, iii) construction
costs, and iv) financial costs directly related to projects, including financial cost of
loans for land acquisition or construction.
Financial expenses: Starting in 2008 all financial expenses related to real estate
projects had to be capitalized in inventories and recognized in COGS using PoC as
they are now considered part of “development costs,” as explained above. When we
analyze gross margins and EBITDA margins, we exclude interest costs to see the
unleveraged margins as companies have different leverage ratios/levels.
As defined by CVM Rule 561, all the interest expenses related to real estate
developments – for example, interest expenses on loans for land acquisition and/or
construction finance – are capitalized on the balance sheet under inventories and
recognized in COGS according to the PoC method. This change led to a reduction in
gross margins for companies that were previously recognizing these expenses in
financial results.
AVP (valuation of receivables by present value): Homebuilders use a discount rate

between 7% (Brazilian Treasury Bill) and 12% (average cost of borrowing) to value
receivables. The AVP adjustment impacted total revenues on the income statement as
companies’ total receivables are valued by their present value. This also impacted the
balance sheet, reducing total assets and liabilities as the total amount of receivables
and payables are booked at present value rather than in nominal terms.
Physical swaps: When companies’ land is acquired through physical swaps (for
example, exchanging future units for land)to reduce risk and cash exposure to the
project. In the case of physical swaps, developers have to recognize both revenues
and cogs from units during the PoC. Before 2008, those transactions didn’t appear in
companies’ results. According to our calculation this had an impact on gross margins
of around 4pp, causing a difference in gross margins between companies that have a
higher percentage of land acquired through swaps vs companies that acquire land in
cash.
Table 165: Physical Swap Impact on Margins

R$ in million
Before Rule 561 After Rule 561
PSV 100 100
Land cost (10% of PSV) 10 10
Net Revenue 90 90 + 10 = 100
COGS 50 50 + 10 = 60
Gross Profit 40 40
Margin 44.4% 40.0%
Consolidation Rules: As of January 2013, according to IFRS 10 and CPC 36, there
is only one basis of consolidation, depending on control, which is defined in 3 ways:
a) power over the investee, b) exposition and/or rights on the returns from the
investment, and c) capacity to impact returns of the projects or investee.
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Joint ventures, according to IFRS 11 and CPC 19, are only consolidated on a
proportional basis, when in the combined operation there is a clear division between
partners’ job descriptions and when assets and liabilities are segregated for each
partner; however, if the JV has shared control, it is consolidated based on the equity
income method. Summary of consolidation rules:
Figure 312: Summary of consolidation rules
Full Control
Yes No
Full Consolidation Joint Control?

Yes No
Determine the type of joint

Significant Influence?
arrangement in accordance
with CPC 19 (R2)
Yes No Yes No
Financial
Full Consolidation Equity Income
Instrument
Source: Cyrela Presentation.
Stock option plans: Stock option plans are expensed on an equal basis for each year
until reaching the full vesting period; for example, if 5-year options were granted
with a cost of R$100mn, the company will have to recognize R$20mn per year as
costs to be included on the G&A line.
Properties’ fair value: This measure had an impact mainly on shopping center and
commercial property companies. From now on, those companies will have to book
their properties by fair value rather than historical cost. First, there will be a one-time
adjustment in equity that will not impact results. However, in the next quarters the
variation of property values will be accounted for in the profit/loss of the period,
bringing volatility to quarterly reported earnings, although it is a non cash expense.
Acquisitions and goodwill: Acquisitions are evaluated by their “fair economic

value” (as per IFRS3). When control of a company is acquired, assets and liabilities
should be considered by their fair value (including intangible assets and contingent
liabilities acquired). In addition, goodwill is not amortized, but annually accounted
for by impairment.
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Mortgage Market
Brazilian Mortgage Market Structure
There are two main sources of funding for mortgages in Brazil, savings accounts, or
SBPEs (Sistema Brasileiro de Poupança e Emprestimo) and FGTS (Fundo de
Garantia do Tempo de Serviço), Brazilian employees’ mandatory savings accounts to
which Brazilian employers make mandatory contributions of 8% of their salary.
Figure 313: Brazilian mortgage workflow
Funding Financing Sources Unit price

3% per year + TR
Employers FGTS CEF

Savings accounts From 5% to
remuneration: 9.16% + TR
FGTS resources Individuals
Before 03/05/2012: From 9.2% to Units up to R$300k
6% per year + TR 11% + TR
SBPE resources Individuals
After 03/05/2012:
Selic > 8.5%; 6%
per year + TR Mortgages Lending Units from R$300k to
Selic <8.5%; 70% 65% R$950k**
of Selic + TR Starting at
20%
12.25% + TR
20% Market rates Individuals
Saving Accounts Reserves*
15% Units starting at

Free resources R$950k**
Market rates
Other resources Individuals
Source: J.P. Morgan; MRV. *linked to TR+6.17% or TR+7-% of Selic for deposits after May 4th, 2012 when Selic is below 8.5%; 5.5% Linked to Selic, *R$950k for DF, São Paulo, Minas Gerais and
Rio de Janeiro.
Figure 314: Mortgages disbursement diagram
Total Mortgages Breakdown Main sources of funds Main uses of funds

FGTS+SBPE in 2017
SBPE Saving Accounts New units R$34.0bn -5% yoy
R$43.2bn R$725bn in Dec-17 Construction R$9.2bn -14% yoy
-7% yoy +9% yoy
R$ 101bn
-13% yoy
FGTS FGTS Dec-16 New units R$25.8bn +8% yoy
R$57.7bn Assets: R$411bn +14% yoy Construction R$4.2bn - 45% yoy
-16% yoy Net Inc.: R$15bn +9% yoy Others R$27.7bn - 26% yoy
Source: Central Bank and J.P. Morgan.
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Saving accounts is one of the most popular investments in Brazil

What makes saving accounts so popular in Brazil are the following facts: i) No
minimum amount required to invest, ii) Daily liquidity, iii) No administration fees,
and iv) No taxes on gains; v) Fixed return of TR+6% per year or 70% of Selic when
Selic is below 8.5% per year.
Main laws
Law #8,245 of October 18, 1991: This law regulates the leasing of residential and
commercial areas, defining the rights and obligations for landlords and tenants.
Law #9.514, of November 20, 1997: This law created the Real Estate Financing
System (SFI), and also set the basis for real estate credit securitizations and chattel
mortgage.
Law 10.931, of August 2, 2004: Introduced the concept of detachable property

(“Patrimônio de Afetação”) for the purpose of protecting purchasers; the law also
established continued payment of amortization installments when there is no
disagreement in the event of legal disputes (the so-called undisputed amount).
Main institutions
SFH – Sistema Financeiro da Habitação (Housing Financial System): SHF was
created in 1964 to develop the mortgage market in Brazil. Its main sources of
funding are savings account deposits in the financial system, including deposits at
government-owned CEF, which is the main vehicle for directed mortgage lending in
the country, with a market share of ~70% as of 2017, as well as another 22 private
and public financial institutions. The participating banks comprise the Sistema
Brasileiro de Poupança e Emprestimo or SBPE (Brazilian Savings and Loans
System); the other source of funding for SFH represents employees’ payments called
FGTS.
SBPE (Sistema Brasileiro de Poupança e Emprestimo): Traditionally, the SBPE

has encompassed all public and private-sector banks except those focused on the
rural segment. In 2017, mortgages from SBPE amounted to R$43bn compared with a
peak of R$109bn in 2013.
Banks in the SBPE have to devote 65% of savings deposits to mortgages, 30% stay
as compulsory (regulatory reserves at the central bank) with 20pp remunerated at
TR+6.17% per year and 10pp at the Selic rate. When considering the 65% balance,
80% has to be lent at no more than TR + 12% per year for units with prices below
R$950k and the remaining 20% can be allocated to mortgages at market rates.
However, banks also are allowed to comply with this requirement through a variety
of regulatory facilities, loans for low income families would have a higher weight for
the calculation of banks’ regulatory allocation. If banks have a shortfall in their
directed lending requirement, they are penalized with a lower return on the shortfall
amount (TR+0% vs. the TR+6.17%).
FGTS (Fundo de Garantia por Tempo de Serviço): Provides funding through

compulsory savings from employees. Originally conceived as unemployment
insurance, it is now used for a variety of purposes, including providing support to
workers who are terminally ill, helping workers purchase a house, providing
financial assistance for employees who are laid off, and, more recently, infrastructure
investments. Employees contribute 8% of their salary (deposited at Caixa Economica
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Federal, which is the main user of the assets) to the fund every month. The money at
FGTS yields TR+3% a year.
Changes in FGTS: In 2009, there were several changes in how employees can use
their FGTS resources; one of the most relevant for the housing market was the
increase in the maximum price for a house that can be purchased by withdrawing
FGTS balance to R$500k from R$350k previously. Another positive change for the
housing market was the permission to use FGTS on consortium bids and mortgage
amortization.
In October 2013, the government announced an increase in the maximum price for a
house that can be purchased using FGTS balance to R$750k from R$500k previously
in São Paulo, Rio de Janeiro, Minas Gerais and Brasilia, while in the other states this
level was increased to R$650k.
In November 2016, the government increased once again the price cap for the
acquisition of units in SP, RJ, MG and DF to R$950k from R$750k and to R$800k in
the other states. As a way to improve market conditions during last year’s crisis, the
government promoted a temporary increase from February until December 2017, on
price limits to R$1.5mn in the cities that had a price of R$950k until the end of the
year. Currently, price caps for new house acquisitions on FGTS is at R$950k in SP,
RJ, MG and DF and R$800k in most of the other cities.
Table 166: Financing systems in Brazil

FGTS SBPE
Founding Employees' mandatory savings Savings accounts
Focus Units below R$240k under MCMV Units for R$240k-950k
Monthly installments Up to 30% of monthly income Up to 30% of monthly income
Amount to be financed Up to 100%, if paid in 240 months Up to 70-80%
Term Up to 360 months Up to 360 months
Interest rates Between 5%-9.16% + TR per year 9.2%-12% + TR per year
Income limit Until R$9,000 for MCMV No limit
Source: CEF.
Table 167: Financing conditions for homebuilders in Brazil

Unit Price Financing Cost
Above Financing from developer
Market rates
R$950k / commercial banks
From SBPE
Limited at TR + 11% per year
R$300-950k Saving accounts
Faixa 1 - none
Below FGTS Faixa 1.5 – TR + 5.0% per year
R$300k Minha Casa, Minha Vida Faixa 2 – TR + 5.5-7.0% per year
Faixa 3 – TR + 8.16-9.16% per year
Source: MRV.
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Saving Accounts Overview

Table 168: Total mortgages decreased dropped 13% in 2017, reaching R$101bn, below 2011 levels
R$ in billions
Amount 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
from FGTS 10.5 15.8 27.7 34.2 38.4 42.5 45.7 54.8 68.9 57.7
from SBPE 30.0 34.0 56.2 79.9 82.8 109.2 112.9 75.6 46.6 43.1
Total 40.6 49.9 83.9 114.1 121.2 151.7 158.5 130.4 115.5 100.8
Growth 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
from FGTS 52% 50% 75% 24% 12% 11% 7% 20% 26% -16%
from SBPE 64% 13% 65% 42% 4% 32% 3% -33% -38% -7%
Total 61% 23% 68% 36% 6% 25% 4% -18% -11% -13%
Figure 315: In 2016 and 2017 FGTS was the main source of funding in the sector
R$ in billions
25 41 50 84 114 121 152 159 130 116 101
100%
80% 47 43
76
18 30 34 56 80 83 109 113
60%
40%
69 58
20% 55
7 11 16 28 34 38 43 46
0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
FGTS SBPE
Figure 316: Saving accounts inflows per month: 2017 posted R$17bn in net inflows, recovery from R$95bn of outflows in 2015/16
25 15
R$bn Unemployment Rate
20
10
15
5
10
5 0
0
-5
-5
-10
-10
-15 -15
Dec-00
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
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Figure 317: Interest rate impact on saving accounts growth

Selic Target Saving Accounts growth yoy
35% 30%
Saving Accounts Selic
30%
25%
25%
20%
20%
15% 15%
10%
10%
5%
5%
0%
-5% 0%
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Figure 318: Saving Accounts breakdown

66%
59% % of Clients % of Amount
17%
11% 11%
6% 7% 9%
4% 3% 3%
0% 2% 2%
< R$100 R$100-1k R$1-5k R$5-10k R$10-20k R$20-30k > R$30k
Source: Central Bank and J.P. Morgan. As of June 2017.
Figure 319: Savings Accounts – Monthly balance

R$ billions Growth yoy
600 30%
R$bn Growth yoy
25%
500
20%
400 15%
10%
300 5%
0%
200
-5%
100 -10%
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
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Mortgage Disbursements – SBPE & FGTS Figures

Figure 320: Total mortgage disbursements value
R$ in billions
FGTS SBPE
152 159
130
114 121 116
101
84 109 113
76 47
80 83 43
50
41 56
25
10 16 34 69
6 5 6 6 7 30 46 55 58
18 34 38 43
56 9 16 28
4 3 4 4 34 7 7 11
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: CBIC, CEF, and J.P. Morgan estimates.
Figure 321: Total mortgage disbursements units

Units (‘000)
1,087 1,043 1,022 1,029
FGTS SBPE 969 974
855
421
699 493 342 675
453 530 538 200
575
522 529
303 176
399
353 321 114 196
300 282 283 300
61 666 655
36 54 550 633
36 29 36 515 492 491 499
338 408 333 396
316 264 253 246 268 276
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: CBIC, CEF, and J.P. Morgan estimates. Not including Minha Casa Minha Vida program.
Figure 322: Average Loan – Total mortgage disbursements

In R$ (’000)
300
FGTS SBPE
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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Figure 323: Mortgages for acquisition (old and new houses) value
R$ in billions
103
FGTS SBPE
95
77
68
58 60 60
81
43 77
55
29 55 36 34
45
20 32
13
5 8 20
2 3 3 3 3 14 22 23 24 26
5 9 11 14 13 18
1 1 1 1 2 2 6 8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Figure 324: Mortgages for acquisition (old and new houses) units
Units (‘000)
621
586
FGTS SBPE 532
490
467 466
408
375 236 150 355
326 365
268 266 285
220 136
215
186 164
128 137
108 91 101 90 100 68 107 340
296
26 221 246 219
18 21 19 20 29 162 189 201 181
90 102 118 108 131
71 83 70 71
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: CBIC, CEF and J.P. Morgan estimates.
Figure 325: Average Loan – Mortgages for acquisition (old and new houses)
R$ (’000)
300
FGTS SBPE
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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Figure 326: Mortgages for construction value

R$ in billions
FGTS SBPE 38 38 37
34
30
28
18 32 31 18
16 35 28 21
13
10 24
11
5 16 14 9
2 3
1 1 1 2 9 9
4 6 5 5 8
1 1 1 1 1 3 1 2 3 3 4
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Figure 327: Mortgages for construction units

Units (‘000)
FGTS SBPE 286

279
218 220 210

204 208
189
202 227
120 117
162 139 168 165 163 106
71 80
61 49 49
43 34 89
19 27 26 40
45 78 83
15 35 56 65 59 52 68
42 28 10 17 25 26 32 43 47 41
16 9 9 15
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Figure 328: Average Loan – For construction

R$ (’000)
250
FGTS SBPE
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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Figure 329: SFH – Past-due mortgage loans (90 days or more)

11.2%
9.7%
8.5%
6.3%
4.2%
3.1%
2.6%
2.1% 2.0% 1.8% 1.9% 1.8%
1.7% 1.4% 1.7%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Figure 330: SBPE – Loan to value evolution
65% 65%
63% 64%
62% 62%
61%
59% 59%
56% 56%
53%
48%
47%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Central Bank; ABECIP.
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Mortgage settings in Brazil

In this section, we summarize mortgage conditions in Brazil based on Central Bank
data which comprises mostly mortgages for the mid and high income segment, since
the low income is supported by the MCMV program and FGTS funding.
Figure 331: Mortgage Balance – Earnmarket for Individuals and Companies

R$ Billions
Figure 332: Mortgage Disbursements – Earmarked loans for Individuals and Companies
R$ Billions
Figure 333: Mortgage Average Rate – Earmarked for Individuals and Companies
Interest rates
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Figure 334: Mortgage Duration – Earnmarket for Individuals and Companies

Months
Figure 335: Mortgage Remaining Duration – Earnmarket for Individuals and Companies
Months
Figure 336: Mortgage NPL 15-90 days – Earnmarket for Individuals and Companies
Percentage
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Figure 337: Mortgage NPL more than 90 days – Earnmarket for Individuals and Companies
Percentage
Caixa Economica Federal (CEF) – Main Mortgage Lender

CEF is fully owned by the government and was founded in 1861; it is the fourth-
largest bank in Brazil and is responsible for the administration of the Minha Casa
Minha Vida (MCMV) program. As of 3Q17, the bank has total assets of R$1,270bn
and a loan portfolio of R$712bn with R$430bn in mortgages, implying a market
share of 69% in the housing segment.
The bank has been present in all 5,565 Brazilian municipalities since 1986, when it
assumed the operations of Housing National Bank (BNH – Banco Nacional da
Habitação). Given its widespread presence and its social bias, the bank controls
almost 40% of total savings account balance in Brazil represented by more than
73mn accounts.
Caixa is the official operator of FGTS’ proceeds to fund the housing segment under
the MCMV program, which means that it only manages the outflow of resources.
CEF financed 483k units in 2017 under the MCMV program, compared to 355k units
in 2016, and more than 725k in 2010.
Figure 338: Breakdown of Mortgage loans

402 406 413 421 429
51.8% 49.7% 48.6% 47.3% 46.2%
48.2% 50.3% 51.4% 52.7% 53.8%
3Q16 4Q16 1Q17 2Q17 3Q17

FGTS SBPE
Source: CEF.
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Figure 339: CEF’s market share in different segments as of 3Q17

3Q16 2Q17 3Q17
67 68 69
51
47 45
38 39 38
28
22 20 23 22 22 23
19 20
10 12 12 8 8 8
Savings Time deposits CDB LCI and LH LF Investment Funds Credit Housing
Source: CEF.
Figure 340: Breakdown of Loan portfolio

700 709 715 716 712
57.4% 57.3% 57.7% 58.9% 60.2%
27.7% 26.9% 26.5% 25.5% 24.0%
11.1% 11.1% 11.0% 11.2% 11.4%

3.8% 4.7% 4.7% 4.4% 4.3%
3Q16 4Q16 1Q17 2Q17 3Q17
Others Infra Commercial Housing
Source: CEF.
Figure 341: CEF historical PDL per credit segment – Mortgage is one of the lowest
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
3Q16 4Q16 1Q17 2Q17 3Q17
Total Housing Infra Commercial
Source: CEF.
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Figure 342: CEF Credit risk breakdown

100%
80%
60%
40%
20%
0%
3Q16 4Q16 1Q17 2Q17 3Q17
AA-C D E-H
Source: CEF.
Figure 343: CEF’s housing credit delinquency
2.4%
2.2%
2.0%
1.8%
1.6%
1.4%
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: CEF.
Figure 344: CEF Basel Index
14.4 15.2
13.5 13.5 13.6
11 10.5
79 83.2 84.7
76.7 77.7
3Q16 4Q16 1Q17 2Q17 3Q17

Equity (R$mn) Basel (%) Minimum Capital (%)
Source: CEF.
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Private Banks – Appetite for Mortgages

Even though CEF continues to have the largest market share in terms of mortgage
portfolio with almost 70% of the market, we have seen an increased appetite from
private banks to grow in the segment as mortgages prove to be an important way to
cross-sell products and services.
Figure 345: Mortgage growth vs. total loan growth

60%
Mortgages Total
50%
40%
30%
20%
10%
0%
-10%
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Source: Central Bank and J.P. Morgan Estimates.
Figure 346: Mortgage growth was stronger than that for other consumer segments
60%
Mortgages Auto Pay-roll Credit Card
50%
40%
30%
20%
10%
0%
-10%
-20%
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Figure 347: Nonperforming across loan portfolio

14.0
Mortgages Auto Pay-roll Credit Card
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Mar-11
May-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Sep-17
Nov-17
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Figure 348: Savings Account balance market share by bank Figure 349: SBPE Mortgage disbursements in 2017 by bank
5% 3%
6% CEF 6% CEF
BB
Itau
14% 38% 14%
Itau 38%
Bradesco
Bradesco
Santander
15% Santander
18% Banco do Brasil
Others Banks
Others Banks
22%
20%
Source: CEF. Source: CEF.
Figure 350: Mortgages as a % of total loans (%) – Data from 1Q17 to 4Q17
70%
60%
50%
40%
30%
20%
10%
0%
Itau Bradesco BB Santander CEF
Figure 351: Mortgage portfolio yoy growth (%)

100%
Itau Bradesco BB Santander CEF
80%
60%
40%
20%
0%
-20%
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Source: CEF, Central Bank and J.P. Morgan.
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Figure 352: Mortgages as % of GDP have been flat in the past 3 years…
10% 9.5% 9.7% 9.6%
8.6%
8% 7.3%
6.3%
6% 5.1%
4.0%
4% 3.0%
2.2%
1.8%
2%
0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: ABEPIC presentation. *2017 data as of May.
Figure 353: …therefore Brazil remains underpenetrate in this metric when compared with other economies
Mortgage as a % of GDP
123
100
88 90
79
66 66 71
59 61
53
42
21
10
Japan
South Korea
Brazil
Germany
UK
Chile
South Africa
China
Euro Area
Singapore
Hong Kong
Thaliand
Canada
Australia
Source: J.P. Morgan and Statista.com.
Figure 354: Domestic credit provided by banking sector as % of GDP as defined by World Bank
Percentage
362
211
169 170 177 183
154 160
111 120 128
99
62 77 79
45 48 56
35
Portugal
Uruguay
Paraguay
Korea, Rep.
Indonesia
Mexico
Albania
Bolivia
Ukraine
Iceland
Chile
Sweden
Thailand
Australia
Hong Kong
Japan
Brazil
Fiji
South Africa
Source: World Bank; As of 2016.
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Figure 355: Credit as % of GDP

Percentage
60
55
50
45
40
35
30
25
20
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
May-07
Sep-07
May-08
Sep-08
May-09
Sep-09
May-10
Sep-10
May-11
Sep-11
May-12
Sep-12
May-13
Sep-13
May-14
Sep-14
May-15
Sep-15
May-16
Sep-16
May-17
Sep-17
Figure 356: Avg. mortgage duration for individuals under SBPE

Years
11.5
11.0
10.5
10.0
9.5
9.0
8.5
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
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Understanding the FGTS

FGTS – Fundo de Garantia do Tempo de Serviços, or Guarantee Fund for Time of
Service – was created in 1966 during the military government of President Castelo
Branco to protect employees and to offset the end of the employment stability
regulation. FGTS’s main inflow is represented by an 8% mandatory contribution
from employees, paid by the employers. Moreover, FGTS’s regulation also penalizes
companies promoting layoffs, as they have to pay a 10% fee on employees’ deposits
plus a 40% fee also based on an employee’s FGTS balance. As of 2016, the fund had
more than 150mn accounts and almost R$380bn in deposits.
Currently FGTS’s main use is to finance the MCMV program. Given its cheap cost
of funding of TR+3% per year, below the Selic rate of 6.75% per year as of Mar-
2018, FGTS allowed low income families to have access to cheap mortgages. As of
2016, FGTS was one of the largest funds in Brazil with assets of around R$500bn,
ranking the fund as the 7th largest bank in the country in terms of assets and deposits.
Table 169: FGTS would be the 7th largest bank in the country in terms of assets
Rank Banks Total Assets (R$bn) Deposits (R$bn) Equity (R$bn)
1 Banco do Brasil 1,399 1,092 77
2 Itau 1,332 922 130
3 CEF 1,256 1,071 27
4 Bradesco 1,081 810 101
5 BNDES 868 500 55
6 Santander 705 470 60
7 FGTS 505 341 98
8 Safra 148 125 10
9 BTG Pactual 132 49 18
10 Votorantim 103 67 8
Source: J.P. Morgan estimates, FGTS and Central Bank. Data as of 4Q16.
Figure 357: FGTS Net inflow/outflow considering only workers’ deposits and withdrawals
R$ Billions
18.0 18.8 18.4
14.6 14.4
11.9
10.2
6.3 6.8 6.9

6.2 6.0
4.6
2.8 3.3
0.6
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: J.P. Morgan estimates and FGTS.
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Table 170: Summary of Total Inflows and Outflows

R$ Billions
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Inflows 35 40 43 52 58 65 75 84 93 106 122 136 160 199 183
Outflows 33 33 38 40 44 50 68 77 85 108 117 135 152 181 195
Net Inflow / Outflow 1.7 7.2 5.3 12.1 14.6 14.4 6.8 7.3 7.4 (2.4) 4.3 0.8 7.6 17.5 (11.5)
Accumulated since 2001 1.7 8.8 14.1 26.3 40.8 55.3 62.1 69.4 76.9 74.4 78.8 79.6 87.2 104.7 93.2
Table 171: Summary of FGTS Inflows

R$ Billions
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Deposits (8% salary / fees) 22.4 25.0 28.3 32.2 36.5 41.6 48.7 54.7 61.8 72.3 83.0 94.4 104.7 113.5 119.1
Credit operations 5.7 6.1 6.5 8.0 9.9 11.1 12.1 15.2 15.4 17.0 22.4 24.9 33.5 30.3 31.9
Net financial income 5.1 7.2 6.0 8.7 8.7 9.7 12.2 11.6 13.2 13.2 11.9 11.4 13.3 18.7 19.8
Others 1.6 2.0 2.2 2.8 3.2 2.2 2.2 2.8 2.5 3.1 4.2 5.3 4.4 31.2 7.4
Layoff fee (10% on Acc. Bal.) 1.6 1.9 2.2 2.5 2.9 1.9 2.0 2.4 2.4 2.8 3.2 3.7 4.1 5.0 5.2
Total 36.4 42.2 45.2 54.3 61.2 66.5 77.2 86.7 95.2 108.3 124.7 139.8 160.1 198.7 183.4
Figure 358: As expected, FGTS regular deposits have s strong correlation with wage mass*
FGTS regular deposits (R$bn) Wage mass (R$bn)
140 200
FGTS Regular Contribution Wage Mass
120
150
100
80
100
60
40
50
20
0 0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: FGTS, IBGE; Historical wage mass ata from IBGE starts in 2012.
Figure 359: The upward trend in unemployment should impact FGTS inflows
Average wage growth (yoy) Unemployment rate (%)
14.0 10
12.0
8
10.0
8.0 6
6.0 4
4.0
2
2.0
Unemployment rate Wage growth
0.0 0
2013 2014 2015 2016 2017
Source: IBGE; Historical wage mass ata from IBGE starts in 2012.
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Table 172: Summary of FGTS Outflows

R$ Billions
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Employees withdraws 19.6 20.4 22.1 26.0 29.7 38.4 42.7 47.8 49.9 57.6 65.0 75.7 86.3 99.1 108.9
Loans* 3.2 3.5 3.6 5.7 7.4 6.8 9.2 18.0 24.8 38.2 40.9 50.2 52.0 61.8 60.0
Fees 1.6 1.7 1.6 1.7 1.9 2.0 2.1 2.4 2.7 3.4 3.4 3.5 3.9 4.4 4.9
Others 8.7 7.5 10.4 6.3 4.7 3.1 14.4 8.7 8.1 8.7 7.9 5.9 10.2 15.9 21.2
Total 33.1 33.0 37.7 39.7 43.7 50.2 68.4 76.9 85.4 107.9 117.2 135.3 152.5 181.2 195.0
Source: J.P. Morgan estimates and FGTS. *Includes MCMV program.
Table 173: Breakdown of Employees’ Withdrawals

R$ Billions
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Layoff 13.2 13.9 14.5 17.1 20.0 23.2 26.5 31.0 30.9 35.6 41.2 48.7 54.3 65.1 68.2
Housing 2.7 1.6 2.0 2.2 4.3 6.7 5.6 5.7 7.0 7.6 8.5 9.8 11.8 12.1 15.7
Retirement 1.6 2.7 3.0 4.0 2.5 4.9 6.0 6.1 6.7 8.1 9.3 10.4 11.7 13.2 14.7
Account inactivity 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.8 0.9 0.9 0.9 1.1 1.4 1.7
Terminal diseases 0.1 0.2 0.2 0.3 0.3 0.3 0.3 0.4 0.4 0.5 0.5 0.6 0.7 0.8 1.0
Others 1.3 1.4 1.9 1.8 2.0 2.6 3.6 3.9 4.1 5.0 4.7 5.3 6.7 6.5 7.7
Total 19.6 20.4 22.1 26.0 29.7 38.4 42.7 47.8 49.9 57.6 65.1 75.7 86.3 99.1 108.9
Figure 360: Loan Disbursements breakdown

R$ Billions
5.9 5.8
Housing Infra structure*
3.4 4.2
2.3
2.0
1.5 56 54
1.7 47 48
36 39
0.8 0.8 1.4 23
0.3 0.1 0.3 0.6
0.0 16
3 3 5 7 6 8
3 3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: J.P. Morgan estimates, FGTS. * Includes water & sewage.
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FGTS – Income Statement and Balance Sheet

Table 174: Income Statement summary
R$ Billions
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Revenues 13.0 17.1 14.3 19.5 18.7 18.2 22.0 21.3 23.4 27.3 33.9 29.8 37.1 44.8 50.6
Market security 4.8 6.7 5.5 7.8 7.8 8.9 11.4 10.6 11.8 13.1 11.4 10.5 11.7 12.4 16.2
Credit operations 5.3 6.8 4.9 6.7 5.9 5.5 6.2 6.0 6.6 8.4 8.0 9.0 11.6 15.2 18.5
Fin. applications 0.2 0.6 0.5 1.0 0.8 0.8 0.8 1.0 1.2 1.5 2.7 3.7 4.4 6.3 7.8
Others 2.6 3.1 3.4 4.1 4.2 3.0 3.7 3.7 3.8 4.3 11.9 6.6 9.5 10.9 8.1
Expanses (11.8) (13.6) (11.2) (16.5) (16.9) (16.4) (17.0) (18.7) (18.0) (22.1) (19.5) (20.6) (24.2) (31.5) (36.0)
Deposit related (7.0) (8.5) (6.0) (7.8) (7.3) (7.3) (8.2) (7.1) (7.7) (9.8) (8.3) (8.9) (12.0) (16.5) (19.4)
Adm. Fee & G&A (1.9) (2.2) (2.1) (2.0) (2.1) (2.2) (2.3) (2.4) (2.7) (3.4) (3.4) (3.7) (4.1) (4.4) (4.9)
Others (2.9) (2.9) (3.1) (6.8) (7.5) (6.9) (6.5) (9.2) (7.7) (8.9) (7.9) (8.0) (8.1) (10.6) (11.8)
Net Income 1.3 3.5 3.1 3.0 1.8 1.8 5.0 2.6 5.4 5.1 14.4 9.2 13.0 13.3 14.6
Figure 361: FGTS showed healthy growth in equity and ROE

R$ Billions ROE
120 35%
Equity ROE
100 30%
25%
80
20%
60
15%
40
10%
20 5%
0 0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Table 175: Balance Sheet Summary

R$ Billions
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Cash 1 5 5 7 7 10 6 12 6 16 37 40 49 59 49
Market sec. ST+LT 29 33 38 49 64 76 96 110 131 128 119 123 129 145 162
Credit oper. ST+LT 65 68 71 75 78 79 92 98 110 137 156 183 206 244 282
Other 45 47 47 42 37 33 23 15 12 10 14 20 27 9 13
Total Assets 140 154 161 173 186 198 217 235 260 290 326 365 410 458 505
FGTS deposits 85 95 107 121 136 145 160 175 194 219 248 278 312 346 379
Others 44 45 36 32 29 30 30 30 30 30 23 22 21 21 28
Equity 10 14 17 20 21 23 28 30 36 41 55 65 78 91 98
Total Liab. + Equity 140 154 161 173 186 198 217 235 260 290 326 365 410 458 505
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Figure 362: Cash represents 13% of FGTS total deposits
17%
16%
15% 14%
13%
7% 7% 7%
6%
5% 5% 5%
4%
3%
2%
1%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: J.P. Morgan estimates, FGTS data.
Figure 363: FGTS Loan Portfolio growing in line with central bank data
Growth YoY
35%
Central Bank FGTS
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: J.P. Morgan estimates, FGTS and Central Bank.
Figure 364: Credit Portfolio growth accelerated after 2007

R$ Billions
350
Housing Sewage Infraestructure
300
250
200
150
100
50
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: J.P. Morgan estimates, FGTS. Housing segment includes MCMV segment.
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Figure 365: FGTS average Loan price and Tenor – While average interest rate continues to decline, tenor is still increasing
Duration Years
17.8 18.0 FGTS (%) Selic (%) Remaining term (years) 20
13.8 14.3 13.8

13.3 15
11.3 11.8
11.0 10.0
8.8 10.8
10
7.3
5.6 5.6 5.6 5.3 5.3 5.7 5.5 5.5 5.2 5.2 5.1 5.1 5.1
5
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: J.P. Morgan estimates, FGTS and Central Bank data.
Table 176: FGTS allocation to MCMV program

R$ Billions
Year Loans Subsidies Total Growth yoy
2009 4.5 1.3 5.8
2010 14.9 3.8 18.7 225%
2011 19.6 4.3 23.9 28%
2012 22.5 5.6 28.1 18%
2013 29.3 8.0 37.3 33%
2014 31.1 7.9 39.0 4%
2015 31.5 7.5 39.0 0%
2016 29.1 6.6 35.7 -9%
Total 182.4 45.0 227.4
Figure 366: MCMV program financed close to 2.4mn units since 2009
383 375 357

305 315 309
258
87
88 94
77 83
64 71
51 58
2009 2010 2011 2012 2013 2014 2015 2016

Avg. Loan R$('000) # of loans ('000)
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Figure 367: Breakdown of FGTS in 2016 – 0.2% of accounts have more than 25% of total resources
80%
Accounts Value
70%
60%
50%
40%
30%
20%
10%
0%
<1 M.W. 1-4 4-6 6-10 10-15 15-20 20-30 30-40 40-60 60-100 >100 M.W.
Source: J.P. Morgan estimates and FGTS. M.W. Minimum wage in 2015 = R$788 or US$325, based on 2015 FX.
Conditions for withdrawal of FGTS funds

Each regular employee in the country has an individual account in FGTS, in which
8% of an employee’s gross salary is deposited monthly, yielding TR+3% per year,
making it a cheap source of funding in a country with double-digit interest rates.
The contribution to the fund is mandatory and employees cannot withdraw their
deposits whenever they want, as there are specific conditions for withdrawal of the
proceeds – listed below:
-Layoff, in case the employee is let go without fair reason;

-End-of-employment contract due to force majeure;
-Contract termination given company bankruptcy or partial bankruptcy;
-Employee retirement;
-Natural disaster affecting employee’s residence (flood, earthquake, etc.);
-Employee dies (withdrawal made by the family);
-Employee reaches 70 years of age;
-Employee (or dependent) has HIV, cancer, or a terminal illness;
-3 years without making contributions;
-Acquisition of a residential unit with price up to R$750k;
-Amortization or housing debt or participation in consortium bids.
In 2016, outflows for the reasons listed above totaled ~R$110bn, or 55% of total
outflows, with layoffs being the main reason for withdrawals.
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Table 177: Breakdown of Workers’ Withdrawals from FGTS by amount

R$ Billions
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Layoff 13.2 13.9 14.5 17.1 20.0 23.2 26.5 31.0 30.9 35.6 41.2 48.7 54.3 65.1 68.2
Housing related 2.7 1.6 2.0 2.2 4.3 6.7 5.6 5.7 7.0 7.6 8.5 9.8 11.8 12.1 15.7
Retirement 1.6 2.7 3.0 4.0 2.5 4.9 6.0 6.1 6.7 8.1 9.3 10.4 11.7 13.2 14.7
Others 1.3 1.4 1.9 1.8 2.0 2.6 3.6 3.9 4.1 5.0 4.7 5.3 6.7 6.5 7.7
Total 19.6 20.4 22.1 26.0 29.7 38.4 42.7 47.8 49.9 57.6 65.1 75.7 86.3 99.1 108.9
Table 178: Breakdown of Workers withdraws from FGTS by number transactions

In millions of transactions
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Layoff 12.3 12.4 12.1 13.6 16.3 16.9 16.5 17.4 17.5 19.0 19.6 20.8 20.5 19.4 18.0
Housing related 0.6 0.4 0.4 0.5 0.6 0.6 2.9 3.6 4.2 5.1 5.9 6.6 7.7 7.9 8.5
Retirement 0.4 0.6 0.7 0.7 0.5 1.5 0.7 0.8 1.0 1.1 1.2 1.5 1.8 2.0 2.3
Others 3.4 3.4 3.8 4.2 5.2 6.2 7.5 6.9 7.3 0.8 7.3 7.5 8.1 7.1 6.5
Total 18.5 18.5 18.5 20.3 24.0 26.6 29.0 29.9 31.1 27.1 35.2 37.4 39.4 37.8 37.1
FGTS Budget for Coming Years

The Housing segment continues to be the main destination of CEF investments over
the next 4 years. As shown in the table below, the segment that includes MCMV
investment should represent more than 80% of FGTS’s total investments.
Table 179: FGTS budget for coming years

R$ in billions
2018 2019 2020 2021
Cash Available 98.1 76.4 61.7 49.9
Deposits 0.0 0.0 0.0 0.0
Financial Applications 0.0 0.0 0.0 0.0
Treasury 70.9 47.7 32.3 19.6
Funds with Liquidity 27.3 28.7 29.4 30.3
Inflows 176.6 182.7 189.6 196.9
Regular contribution 125.5 129.0 133.0 137.2
Credit Inflow 36.5 40.4 45.0 49.3
LC 110 4.2 3.8 3.3 2.9
Financial Income 7.7 7.3 6.3 5.5
Interests CVS 0.2 0.2 0.2 0.2
CRIs 2.5 2.1 1.8 1.8
Outflows 198.3 197.5 201.4 204.9
Housing 56.2 56.2 56.2 56.7
Sewage and Infra 7.1 7.1 7.1 7.1
Workers Withdraws 119.4 122.3 126.0 129.7
Layoff 77.3 79.2 81.2 83.1
Housing 16.2 16.3 16.9 17.5
Retirement 17.8 18.7 18.8 19.0
Others 8.2 8.1 9.0 10.0
Adm. Fees 5.0 5.2 5.5 5.8
G&A 0.1 0.1 0.1 0.1
Others 10.5 6.5 6.5 5.5
Source: FGTS.
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FGTS – Infrastructure Fund (FI)

FGTS-FI was created in 2007 and represents the FGTS investment vehicle that has
the objective to improve the country’s infrastructure through investments in large
projects like roads, railroads, watercourses, ports, airports, sewerage and energy with
a long term view. The fund is managed by Caixa Econômica Federal (CEF), and all
investments need to be approved by FGTS Board of Trustees.
Table 180: FGTS-FI investments (R$bn)
2008 2009 2010 2011 2012 2013 2014 2015 2016 Total
BNDES 7.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.0
Energy 0.4 3.4 1.2 0.6 1.5 0.0 0.0 0.0 0.0 7.0
Complementary Infra 0.0 0.0 0.6 0.1 0.0 0.0 0.0 0.0 0.0 0.7
Railroads 0.6 0.4 0.2 0.0 0.3 0.0 1.0 0.0 0.0 2.5
Watercourse 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.3
Ports 0.7 0.1 0.5 0.0 0.8 0.0 0.2 0.0 0.0 2.3
Roads 0.5 0.0 0.5 0.0 0.6 0.0 0.0 0.0 0.0 1.6
Sewage 0.1 0.7 0.5 0.0 0.3 0.0 0.0 0.0 0.0 1.5
Total 9.3 4.5 3.5 0.6 3.8 0.0 1.2 0.0 0.0 22.9
Accumulated 13.8 17.2 17.9 21.7 21.7 22.9 22.9 22.9 -
Management Team – Board of Trustees

The FGTS is managed by a combination of government, worker and employer
representatives totaling 24 members who are in charge of approving its budget as
well as any alterations of its uses. Those members are divided into 12 representatives
from the government, including 7 ministers and representatives of the chief of staff
team, president, secretary, CEF and Central Bank. The remaining 12 members are
equally divided between workers and employers. The president and vice president of
the board are represented by the Labor and City ministers, respectively.
Table 181: Composition of FGTS board of trustees
Government representatives Member Surrogate
Labor Minister Not defined - Present Helton Yomura
City Miniter Alexandre Baldy - Vice President -
Finance Minister Adriano Pereira de Paula Manoel Machado Filho
Industry Miniter Douglas Finardi Ferreira Adriana de Azevedo Silva
Development Minister Sérgio Ricardo Rosa Manoel Renato Machado Filho
Healthy Minister Daniel Pinheiro Lima Paulo Mayall Guilayn
Transport Minister Anderson Moreno Luz Adolfo Jorge de Almeida
CEF Valter Nunes Henrique José Santana
Central Bank - -
Presidency Secretary Josmar Teixeira de Resende João Henrique Almeida
Executive Assistant of FGTS Bolivar Tarragó Moura Neto Douglas Macedo Peres
Chief of staff Marcelo Pacheco dos Guaranys Fabiana Magalhães Almeida Rodopoulos
Employers Member Surrogate
National Industry Confederation André Lima Campos Giuseppe Ribeiro Lobo
National Financial Confederation José da Silva Aguiar Filipe Ferrez Pontual Machado
National Commerce Confederation Aberlardo Campoy Diaz Claudio Elias Conz
National Services Confederation Giuliano Giavina Bianchi Luigi Nese
National Health Confederation Antônio Borba Braz Vieira
National Transportation Confederation Harley Andrade Thiago Luiz Ticchetti
Workers Member Surrogate
Força Sindical Antonio Ramalho Júnior Rodolfo Peres Torelly
CUT Claudio da Silva Gomes Arilson Wunsch
União Geral dos Trabalhadores Antonio Maria Thaumaturgo Cortizo Paulo César Rossi
Central dos Trabalhadores Melquizedeque Flor Vicente Paulo Selistre
Central dos Sindicatos Brasileiros Raimundo Firmino dos Santos João Antônio Nunes
Nova Central dos Sindical de Trabalhadores Mauri Viana Pereira Paulo Cesar Ferreira de Carvalho
Source: FGTS as of Mar-2018.
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Alternative Mortgage Instruments

CRI – Certificado de Recebíveis Imobiliários: In addition to the SBPE and FGTS
funding, there has been increasing interest from companies and investors in MBS
(mortgage backed securities), also known as Real Estate Receivables (CRI), which
are usually composed of mortgage receivables, land bank receivables, and lease
receivables. Over the last years, many large-cap HB companies have been
securitizing part of their receivables from finished units in order to improve FCF
generation and reduce working capital. A key advantage for investors is that real
estate receivables in Brazil are exempt from income tax for individuals.
Figure 368: Accumulated amount of Real Estate Receivables (CRIs) under CETIP custody
R$ Billions Selic (%)
80 20%
CRI Selic
70
60 15%
50
40 10%
30
20 5%
10
0 0%
Mar-06
Jul-06
Nov-06
Mar-07
Jul-07
Nov-07
Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15
Nov-15
Mar-16
Jul-16
Nov-16
Mar-17
Jul-17
Nov-17
Mar-18
Source: CETIP and J.P. Morgan.
LCI – Letra de Crédito Imobiliário: Real Estate Credit Bill (LCI) has also gained
importance among mortgage alternative instruments. This instrument is represented
by a fixed income bond pegged to real estate loans guaranteed by the mortgage loan
itself or by the property’s deed of trust. It is issued by commercial banks, multiple
banks with real estate lending portfolios, real estate credit companies, Associações de
Poupança e Empréstimo (APE – Savings and Loan Associations), and mortgage
companies. As with CRIs, this investment is tax free for individuals.
The main difference between CRIs and LCIs is the issuance process as LCIs are
issued only by financial institutions, while CRIs can be issued by financial
institutions and securitization companies. Moreover, individual investments in LCIs
have a guarantee for losses of up to R$250k from Fundo Garantifor, while CRIs have
no guarantees.
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Figure 369: Accumulated amount of Real Estate Credit Bills (LCIs) under CETIP custody
R$ Billions Selic (%)
250 20%
LCI Selic
200
15%
150
10%
100
5%
50
0 0%
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Mar-06
Nov-06
Mar-07
Nov-07
Mar-08
Nov-08
Mar-09
Nov-09
Mar-10
Nov-10
Mar-11
Nov-11
Mar-12
Nov-12
Mar-13
Nov-13
Mar-14
Nov-14
Mar-15
Nov-15
Mar-16
Nov-16
Mar-17
Nov-17
Mar-18
Source: CETIP and J.P. Morgan.
It is worth noting that currently LCIs are tax free, as investors who buy those bonds
don’t have to pay income taxes on the returns, which allows this type of product to
have a lower cost of debt for issuers compared with other instruments, debentures
and working capital lines, for example. Although the government has indicated on
some occasions the possibility of starting to levy an income tax on this product, we
don’t believe it would be likely since adding taxes to LCIs would increase sector cost
of funding.
LIG – Letra Imobiliaria Garantida: In August 2017, the Brazilian Central Bank
approved resolution #4,598 regulating the issuance of LIG, also known as Brazilian
real estate covered bonds. One of the main appeals of LIG is the double guarantee,
since it is backed by both a real estate asset and the financial institution issuing it.
Until March 2018, there was not yet any issuance of bonds under this regulation. LIG
can be issued by multiple banks, commercial banks, investment banks, credit
societies, mortgage companies and savings associations. Their minimum maturity is
24 months. Moreover, the instrument will be tax free, as are CRIs and LCIs.
Table 182: Comparison among Alternative Funding Instruments

LIG LCI CRI
Covered in Real Estate Assets? Yes Yes Yes
Is Cover Separate? Yes No Yes
Guarantee by Financial Institution? Yes Yes No
Restrictions to any Index? No No No
Minimum Maturity? 2 Years 60 Days No
Minimum Renegotiation Terms? 2 Years No No
Yes; 0% taxes for individuals and
Yes; 0% taxes for individuals and
Tax Benefits? Yes; No taxes for individuals for non-residents in the case of
non-residents
infrastructure CRIs
Preference over fiscal, labor or social security liabilities? Yes No NA
Source: CEF; Central Bank.
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Challenges to Long-Term Financing

How to address the limits of SPBE?
We believe that the government has 3 main options to offset a potential exhaustion of
SBPE funding: i) Development of securitization markets, which included CRIs, LCIs
and LIGs – all mortgage-backed securities with different structures; ii) Decrease of
savings accounts compulsory/legal reserve limits, currently at 30% and; iii) More
intensive use of FGTS funds.
 Securitization markets: Mortgage-backed securities are the main source of

mortgages worldwide and could also have an important role in the Brazil
mortgage system. However, it would be necessary to see Selic staying at single-
digit rates for this market to develop. Moreover, another necessary factor for the
development of MBS in Brazil is an increase in liquidity in the secondary market
as currently investors don’t have the opportunity to trade their positions. It is
important to note that most Real Estate securitization instruments are tax free.
 Decrease in compulsory/legal reserve limits: Currently, commercial banks can
allocate up to 65% of savings account balances to mortgages, 80% for units with
a price below R$950k at rates up to TR+12% per year, and 20% at free rates for
units above R$950k. In our view, one possible way to allow for greater funding in
the short term would be to increase the percentage of savings accounts allocated
to mortgages, for example, to 75% or 80% from 65% currently, by reducing the
percentage used as compulsory. However, it would only be a short-term
resolution – according to our calculation, each 5% reduction in the compulsory
category would add around R$25bn to SBPE, or around 6 months.
 Broader use of FGTS: Another short-term measure to address potential funding
issues especially in the lower income segment could involve greater use of FGTS
resources. Although we don’t expect FGTS to be used for the mid and high
income segments the board of trustees could increase the allocation of FGTS
resources into mortgage reducing the allocation for infrastructure projects, which
represent disbursements of around R$7bn per year over the next 3 years vs
around R$56bn to be allocated for mortgages. The fund ended 2016 with more
than R$500bn in assets.
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Minha Casa Minha Vida (MCMV) Program

The Minha Casa Minha Vida (MCMV) program was announced by the government
on March 25, 2009, during Lula’s 2nd mandate with a target to build 1mn houses in a
period of 2 years, reducing the housing deficit that was around 6.0mn at the time. In
addition to its social appeal the program was also intended to be counter cyclical
since the economy was going through challenging times due to the worldwide
economic crisis. The program is currently on its 3rd phase, which had its last update
during Temer’s administration in 2017. Through the MCMV program, more than
4.5mn units were already contracted since 2009 (based on 2016 data).
Construction companies that want to operate under the program must have their
project approved by Caixa Econômica Federal (CEF) attending program quality
standards. If approved, CEF finances the unit acquirer with FGTS resources. In
addition to be the operator of FGTS resources CEF is also responsible for inspecting
those developments.
The program is currently divided into 4 segments (Faixas), according to client’s

monthly income – please refer to the table below for a detailed breakdown of each
phase of MCMV. Faixa 1 attends families with monthly income of up to R$1,800
which receiving subsidies of up to 90% value of the unit. Those subsidies are backed
by treasury resources and are facing a delicate situation due to central government
budget limitations; therefore currently there are no listed companies acting heavily
on this segment.
Table 183: Summary of MCMV Phases

MCMV I MCMV II MCMV III MCMV III (2017)
Units (mn) 1.00 2.75 + 0.35 2.00
Budget (R$bn) 34.0 72.6 41.2 41.2
Tenor 2 years 5 years 1 year 2 years
Announcement Mar-09 Jan-11 Jan-15 Feb-17
R$100k cities with < 250k R$170k cities with < 250k
inhabitants. inhabitants.
R$130k cities with > 250k
R$80k cities with < 250k R$180k in the North, Northeast R$180k in cities with < 250k
inhabitants and metropolitan
inhabitants. and Mid East regions inhabitants
Units regions.
Price caps R$100k cities with > 250k
R$170k cities with > 1mn R$200k in the South region and in R$190k in North and Northeast
inhabitants and metropolitan
inhabitants and capitals. ES and MG states regions
regions.
R$130k cities with > 1mn R$190k MR of Rio de Janeiro, R$225k in the MR of Rio de R$300k in DF, São Paulo and Rio
inhabitants and capitals. São Paulo and Brasília Janeiro, São Paulo and Brasília de Janeiro
R$1,325 (Faixa 1) R$1,600 (Faixa 1) R$1,800 (Faixa 1) R$1,800 (Faixa 1)
NA NA R$2,350 (Faixa 1.5) R$2,600 (Faixa 1.5)
Income level
40% - (400k) (Faixa 1) 60% - (1,600k) (Faixa 1) 7% - (55k) (Faixa 1) 14% - (170k) (Faixa 1)
Unit NA NA 0% - (0k) (Faixa 1.5) 6% - (80k) (Faixa 1.5)
breakdown 40% - (400k) (Faixa 2) 30% - (600k) (Faixa 2) 79% - (645k) (Faixa 2) 64% - (800k) (Faixa 2)
20% - (200k) (Faixa 3) 10% - (200k) (Faixa 3) 14% - (115k) (Faixa 3) 16% - (200k) (Faixa 3)
- 4% + TR (Faixa 1) TR (Faixa 1) TR (Faixa 1)
- - 5% + TR (Faixa 1.5) 5% + TR (Faixa 1.5)
Funding
- 5-6% + TR (Faixa 2) 5.5%-7% + TR (Faixa 2) 5.5%-7% + TR (Faixa 2)
- 7.16% + TR (Faixa 3) 8.16% + TR (Faixa 3) 8.16-9.16% + TR (Faixa 3)
Source: Brazilian Federal Government, MRV.
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MCMV I: The program started with a target of deliver 1mn unit. In this 1st phase,
the government allocated R$34bn for the program, R$16bn in cash subsidies (Central
Government money) for families earning less than 3 minimum wages (mw) and
R$2.5bn for families earning 3-6 mw. In our view, the most important aspects of this
program is the improvement in homebuyers affordability, as monthly payments
decreased considerably due below market interest rate as well as lower transaction
costs, like insurance and transfers related costs.
MCMV II: In the beginning of June 2010 the government announced the 2nd phase
of the MCMV program, adding another 2mn units to the program to be developed in
a period of 2 years (until 2014) – 60% for < 3mw, 30% for 3-6mw, and 10% for 6-
10mw, representing an increase in the participation of the lower end of the program
(Faixa 1) vs. the 1st phase of the program (40% < 3mw, 40% 3-6mw, and 20% 6-
10mw). Later on, in 2012, the government announced the expansion of the 2nd phase
of the MCMV program to 2.75mn (vs 2mn originally) adding units to the upper end
of the program. Lastly in mid-2014 the government announced an additional 350k
units to be launched through 2015. The 2nd phase demanded R$73bn in investments,
being R$62bn in cash subsidies (central government money) and R$10bn in
mortgages subsidies.
MCMV III: By the end of 2015, Dilma administration announced the 3rd phase of
MCMV, which the intention to build 2mn units, with an estimated budget of R$41bn.
Among the changes, of this new phase was an increase on units’ price caps and
family monthly income to up to R$6,500 under Faixa 3.
MCMV III Update: President Temer’s administration announced on February 2017

an update on MCMV III parameters, increasing units price cap, increasing family
monthly income cap and improving program’s budget. According to the government,
the rationale behind this decision was to continue to support the real estate segment is
its capacity to generate jobs, as it is a labor intensive sector.
Figure 370: Typical payment breakdown for a unit of MCMV Faixa 2

3%
6%
Mortgage
4%
11% Direct Finance*
FGTS
Cash Subsidity
76% Downpayment
Source: J.P. Morgan estimates, Company data. *Company direct finance.
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Table 184: MCMV III – Cash Subsidies

Subsidies Monthly Income up to SP, RJ and DF Other cities
Faixa 1 R$1,800
Faixa 1.5 R$2,350 R$47,500 < R$40,000
R$2,600 R$15,835 < R$12,675
R$2,350 R$29,000 < R$27,420
Faixa 2 R$2,790 R$14,765 < R$11,810
R$3,275 R$6,115 < R$4,895
R$4,000 R$2,585 < R$2,535
Faixa 3 R$7,000 - -
Faixa 3 Plus R$9,000 - -
Source: MRV Institutional Presentation.
Table 185: MCMV III – Price Caps Faixa 1.5

Price Cap DF, SP, RJ South, ES, MG CW NE and N
Capitals 144,000 133,000 128,000 128,000
Other Cities and MR 133,000 128,000 122,000 122,000
Cities < 250k inhab. 122,000 117,000 112,000 106,000
Cities > 50k < 100k inhab. 106,000 101,000 96,000 90,000
Cities > 20k < 50k inhab. 85,000 80,000 80,000 74,000
Others 74,000 74,000 74,000 74,000
Table 186: MCMV III – Price Caps Faixa 2 & 3

Capitals 240,000 215,000 190,000 190,000
Cities < 250k inhab. 180,000 170,000 165,000 160,000
Cities > 50k < 100k inhab. 145,000 140,000 135,000 130,000
Cities > 20k < 50k inhab. 110,000 105,000 105,000 100,000
Others 95,000 95,000 95,000 95,000
Table 187: MCMV III – Price Caps Faixa 3 Plus

Capitals 300,000 268,000 237,000 237,000
Cities < 250k inhab. 225,000 212,000 206,000 200,000
Cities > 50k < 100k inhab. 181,000 175,000 168,000 162,000
Cities > 20k < 50k inhab. 137,000 131,000 131,000 125,000
Others 118,000 118,000 118,000 118,000
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MCMV Overview on Execution since 2009

Figure 371: Contracted units
1,000 Faixa 1 Faixa 2 Faixa 3
94
800
98
103 282
600
307 37
277 52
78
400 41
331 68
44 297 537
200 99 385 350 438
339 277
200
104 37
0 17 4
2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: MRV Institutional Presentation as of January 2017 and Ministry of Cities; *Annualized figures from data until October 2017.
Figure 372: Delivered units

700
Faixa 1 Faixa 2 Faixa 3
600 37
57 29
500
249 267 251
400 45
28
300 29 58
23 267
200 91 264 47
299 298 287 262 221
100 189
97 76
0 5 20 0
2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: MRV Institutional Presentation as of January 2017 and Ministry of Cities; *Annualized figures from data until October 2017.
Figure 373: Main companies’ market share on MCMV program

11 3 7 8 7
11 18 13 5
3 7 8
16 3 16 18 23
23 21
22
18
69 63 68 63 65
56 53
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

MRVE TEND DIRR CYRE
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Real Estate Brokers

There are two publicly traded real estate brokers in Brazil – BR Brokers (UW) and
LPSB (N) – with a combined market cap of ~US$225mn, thus the smallest Real
Estate subsector on the Bovespa. The companies have limited liquidity, trading
around US$1.5mn daily combined, and therefore are not part of the IBOV or IMOB.
We have a cautious view on the sector as we believe companies will continue to have
hard time gaining back the market share lost in the past years; moreover, competition
with internet portals should also impact the speed of their recovery. Given the
challenging scenario ahead, we believe additional cuts in Costs and G&A would be
necessary to increase profitability under the current level of intermediations;
however, it is unclear whether or not additional cost cutting would cause a further
loss in intermediations. We believe this deceleration has been impacting the stock
performance since the beginning of 2013, with stocks down 70-85%.
Table 188: Valuation Summary Table 189: Valuation Summary

EV/EBITDA P/E
JPM Rating Target Price 18e 19e 18e 19e
LPSB3 N - LPSB3 n.m. 15.6x n.m. n.m.
BBRK3 UW - BBRK3 n.m. 14.2x n.m. n.m.
Source: J.P. Morgan estimates. Source: J.P. Morgan estimates.
Figure 374: Brokers’ relative performance since January 2009

800
Lopes BR Brokers
700
600
500
400
300
200
100
0
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Mar-16
Sep-16
Mar-17
Sep-17
Mar-18
Source: J.P. Morgan and Bloomberg. Priced as Mar-23rd 2018.
In Brazil, the brokerage business is fragmented, with over 1,000 companies and only
two listed names that have a combined market share of less than 20% of total
intermediations, according to our calculations.
In our view, one of the most attractive features of the brokerage business in Brazil is
that companies receive 100% of their commissions when the transaction is closed,
having no exposure to homebuyers’ credit risk or homebuilding execution risk.
Moreover, FCF is a simple function of EBITDA, since companies have what we
view as healthy balance sheets with a net cash position. These features allowed
companies to pay attractive payouts during years with strong FCF.
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Figure 375: Unleveraged sector – both companies have net cash positions
Net Debt (R$mn)
100
-100
-200
-300
Lopes BR Brokers
-400
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Historically, BR Brokers has had a higher payout ratio than Lopes, having distributed
more than 50% of its net income between 2012 and 2015, while Lopes distributed
around 30% of its net income in the same period. However, companies are currently
operating with negative bottom lines; therefore, there was no distribution over the
past years.
Table 190: Lopes Historical Payout

R$ Millions
LPSB 2012 2013 2014 2015 2016 2017
Net Income 118 157 4 (371) (37) (63)
Dividends 18 35 43 0 0 0
Payout 13% 30% 27% NM NM NM
Source: J.P. Morgan, Company Reports.
Table 191: BR Brokers Historical Payout

R$ Millions
BR Brokers 2012 2013 2014 2015 2016 2017
Net Income 83 81 (26) (91) (130) (30)
Dividends 71 74 156 15 0 0
Payout 67% 89% NM NM NM NM
Source: .P. Morgan, Company Reports.
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Table 192: Brazilian Brokers Snapshot

LPBS3 BBRK3
Rating N UW
Current Prices 4.84 0.51
Price Target (Dec-18) - -
Upside NA NA
Mkt cap (US$ mn) 181 39
Free Float 57% 96%
Liquidity (US$ mn) 0.3 1.2
Financial Info
Pre Sales 16 6,082 4,882
Pre Sales 17 6,262 3,933
Pre Sales 18e 7,514 4,448
Pre Sales 19e 9,548 4,869
CAGR 17-19e 23% 11%
Average Fee16 2.64% 2.69%
Average Fee17 2.30% 2.75%
Average Fee18e 2.45% 2.70%
Average Fee19e 2.45% 2.70%
Avg.
Revenues 16 149 109
Revenues 17 111 89
Revenues 18e 129 103
Revenues 19e 166 114
CAGR 17-19e 22% 13%
EBITDA 16 4 -107
EBITDA 17 -35 -88
EBITDA 18e -2 -31
EBITDA 19e 36 5
CAGR 17-19e NA NA
Net Income 16 -12 -130
Net Income 17 -53 -106
Net Income 18e -21 -37
Net Income 19e 8 -10
CAGR 17-19e NM NM
Margins, Leverage and Profitability
EBITDA margin 16 2.4% -98.8%
EBITDA margin 17 -31.3% -98.4%
EBITDA margin 18e -1.4% -29.5%
EBITDA margin 19e 22.0% 4.3%
Net margin 16 -7.9% -119.7%
Net margin 17 -48.1% -119.4%
Net margin 18e -16.5% -35.4%
Net margin 19e 5.0% -8.3%
ROE 16 -20.9% -36.4%
ROE 17 -56.6% -39.3%
ROE 18e -31.7% -15.7%
ROE 19e 13.7% -4.5%
Valuation
P/BV Curr 5.2x 0.4x
P/E 18e n.m. n.m.
P/E 19e n.m. n.m.
Source: Company data and J.P. Morgan estimates.; As of April 3rd 2018.
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Brokers Valuation
Bovespa has other asset-light companies like Brasil Insurance and Qualicorp
(covered by JPM LatAm Healthcare and Retailers analyst Joseph Giordano). Both
are broker companies, but are not ideal peers as they are focused on health insurance.
Even though BB Seguridades (covered by Domingos Falavina) has a brokerage arm
(insurance), it is not an asset-light company since the company also carries the
insurance arm.
In our view, of the companies listed below, Realogy (US), Foxtons (UK) and Savills
(UK) are the main peers to Lopes and BR Brokers as they have residential
brokerages as their main business while other peers have a broader portfolio of
services and brokerage is not their core business.
Table 193: Brokers Valuation Summary

JPM Price Mkt Cap P/BV EV/EBITDA P/E CAGR Avg. Vol. Div. Yield
Country Rating Analyst 3-Apr USD Curr 18e 19e 18e 19e 18-20e US$ MM 18e 19e
Lopes Brazil N Motta 4.84 181 7.8x NM 15.6x NM NM 22% 0.1 0.0% 0.0%
BR Brokers Brazil UW Motta 0.51 39 0.5x NM 14.2x NM NM 10% 0.4 0.0% 0.0%
Brazil avg. 110 4.1x NM 14.9x NM NM 16% 0.3 0.0% 0.0%
CBRE U.S. OW Paolone 46.83 15,910 4.0x 10.9x 9.6x 17.8x 14.3x -12% 120.9 NM NM
JLL Salle U.S. OW Paolone 171.19 7,774 2.4x 11.9x 9.7x 20.6x 16.0x -10% 94.1 0.5% 0.5%
Kennedy U.S. NC 17.75 2,681 2.0x 25.0x 19.2x 16.9x 73.0x NM 28.6 4.5% NM
HFF, Inc. U.S. NC 45.12 1,747 6.1x 12.8x 12.2x 18.5x 14.8x -3% 40.6 4.0% 4.1%
Colliers U.S. NC 69.80 2,640 NM 11.9x 9.2x 24.7x 23.8x NM 2.9 NM NM
Realogy U.S. UW Paolone 26.74 3,498 1.3x 9.6x 9.1x 16.8x 15.2x -5% 79.1 1.5% 1.3%
U.S. avg. 5,708 3.1x 13.7x 11.5x 19.7x 16.8x -8% 61.0 2.6% 2.0%
Savills London NC 9.83 2,745 3.2x 8.6x 7.7x 14.9x 12.7x -7% 3.3 3.7% 0.0%
Foxtons London NC 0.82 444 1.6x 13.5x 14.9x 30.0x 34.3x -1% 0.8 1.2% 1.2%
Others avg. 1,594 2.4x 11.1x 11.3x 22.5x 23.5x -4% 2.1 2.4% 0.6%
Insurance
BZ Insurance Brazil NC 13.43 9 0.4x NM NM NM NM NM 0.1 NM NM
Qualicorp Brazil OW Giordano 22.41 566 2.7x 6.8x 6.2x 11.5x 10.8x -7% 8.8 8.1% NM
Brazil avg. 288 3.3x 6.8x 6.2x 11.5x 10.8x -7% 4.4 8.1% NM
Aon Corp U.S. OW Dewitt 138.74 34,155 7.5x 15.5x 12.4x 20.0x 15.6x -8% 166.6 1.3% 1.4%
Brown & Brown U.S. N Dewitt 25.14 6,942 1.3x 12.5x 11.4x 25.6x 18.6x NM 34.5 1.3% 1.4%
Marsh & McL U.S. OW Dewitt 81.26 41,305 5.6x 13.4x 11.7x 20.9x 17.0x -8% 145.0 2.2% 2.4%
U.S. avg. 27,467 4.8x 13.8x 16.7x 22.2x 17.1x -8% 115.4 1.6% 1.7%
Source: J.P Morgan estimates and Bloomberg. As of April. 3rd 2018.
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Brokers comps
CBRE Group: This is one of the largest commercial real estate services firms with a
market cap of more than US$15bn. Services offered by the company are very broad
and include: services to owners, tenants, lenders and investors in real estate, which
includes office, retail and industrial assets, among others. (Covered by JPM REITs
analyst Anthony Paolone).
Jones Lang La Salle: The company is focused on real estate and investment
management services serving all types of clients from multinationals and
corporations to tenants and investors. Some of the services offered are: property
management, agency leasing and finance. Currently, the company has a market cap
of close to US$8.0bn. (Covered by JPM REITs analyst Anthony Paolone).
Kennedy Wilson: The company acts both as a real estate investment group and as a
service group. Its services vary from property and asset management to brokerage
and construction. Its shares are listed on the NYSE, and its current market cap is
around US$2.5bn. (Not covered).
HFF Inc: The company is focused on providing services to the real estate industry,
including capital markets services such as debt placement, structured finance and
advisory services. Current market cap is close to US$2.0bn. (Not covered).
Realogy: A holding company that provides through its subsidiaries real estate,
brokerage and franchising services. The company`s market cap is currently close to
US$3.6bn. In our view, it is one of the best peers for Lopes and BR Brokers.
(Covered by Anthony Paolone).
Savills: A consulting services and transactional advising company focused on
commercial, agricultural and residential properties. The company is based in London
and has a market cap of around US$2.75bn. (Not covered).
Foxtons: A London-based real estate broker company focused on the
commercialization of properties. Its market cap is around US$440mn. (Not covered).
Insurance peers
Brasil Insurance: The company is an insurance broker formed in 2010 through the
incorporation of 26 independent insurance brokers. Its current market cap is close to
US$10mn and trades less than US$0.5mn daily.
Qualicorp: The company offers insurance and benefits packages to corporations in
Brazil. The company’s main product is health insurance. It has a market cap of
US$575mn and trades around US$10mn daily.
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Figure 376: Lopes and BR Brokers P/BV – sector is trading above its historical average
6.0x
P/BV Avg 11-Now
5.0x
4.0x
3.0x
2.0x
1.0x
0.0x
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Source: Bloomberg and J.P. Morgan estimates. Bloomberg doesn't provide data after Jan 2016.
Figure 377: BBG consensus EPS evolution and LPSB3 performance Figure 378: BBG consensus EPS evolution and BBRK3 performance
10.0 0.4 3.0 0.3
EPS 2017 EPS 2018 EPS 2017 EPS 2018
8.0 0.3 2.5 0.2
0.1
6.0 0.2 2.0
0.0
4.0 0.1 1.5
-0.1
2.0 0.0 1.0 -0.2
0.0 -0.1 0.5 -0.3

Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
Source: Bloomberg consensus estimates. As of March-9th. Source: Bloomberg consensus estimates. As of March-9th.
Table 194: EPS 2017 revision since Dec-2016

% change in EPS Stock performance
EPS 2016 Dec-16 Dec-17 Mar-18 in 2017 YTD Total 2017 YTD
Lopes 0.21 (0.06) (0.03) nm -47% -114% 43% -5%
BR Brokers (0.04) (0.16) (0.18) 332% 13% 386% -33% -40%
Total 0.17 (0.22) (0.21) 332% -3% -221% 5% -23%
Source: Bloomberg consensus estimates. As of Mar-23rd.
Table 195: EPS 2018 revision since Dec-2016

% change in EPS Stock performance
EPS 2017 Dec-16 Dec-17 Mar-18 in 2017 YTD Total 2017 YTD
Lopes 0.28 0.19 0.19 -32% -1% -33% 43% -7%
BR Brokers 0.05 (0.09) (0.16) nm 78% -414% -33% -40%
Total 0.33 0.10 0.03 -32% -72% -92% 5% -24%
Source: Bloomberg consensus estimates. As of Mar-23rd.
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Potential Market Size

Although there is no precise figure regarding the size of the housing market in Brazil,
since there is no consolidated data on this front, we can try to estimate it in several
ways using as proxy: data for the São Paulo market, taxes from property transactions,
the central bank and FGTS data, Abrainc data, among others. In our view, one of the
best estimators are the figures from the Central Bank and FGTS, which show the
number and amount of units financed; it is a good proxy on the residential market
size since most of the units sold have mortgages attached to it.
According to central bank data for SBPE and FGTS data, the housing market in
Brazil totaled 675k units in 2017 – 176k units from SBPE and 499k from FGTS,
which represents mostly the MCMV program. Taking into consideration that
disbursements with mortgages totaled R$100bn in 2017 and assuming that mortgages
had an average LTV of 70% on both SBPE and FGTS, the total potential sales value
(PSV) of the market was R$140bn last year. It is worth highlighting the deterioration
of the housing market, which reached around R$230bn in 2014, according to our
estimates, assuming the same 70% in LTV.
Figure 379: Total Mortgage disbursements – Central Bank &FGTS Figure 380: Units Financed – Central & FGTS
1,087 1,043 1,022 1,029
FGTS SBPE FGTS SBPE
152 159 969 974
855
130 421
114 121 699 493 342 675
106 101
575 453 530 538 200
84 522 529
109 113 76 399 303 176
47 43 353 114 196 300
50 80 83 300 282 283 321
41 61 666 655
56 36 36 54 550 515 492 491 633
25 29 36 499
16 408 396
6 5 6 6 7 10 30 34 46 55 59 58 316 264 253 246 268 338 333 276
9 18 28 34 38 43
4 3 4 4 34 65 7 7 11 16
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: Central Bank and FGTS. Source: Central Bank and FGTS.
When looking at the total amount paid in property transfer taxes, which is called
ITBI (Imposto sobre Transferencia de Bens Imóveis), the total real estate market in
Brasil totals almost R$570bn when assuming an average tax of 3% of property
transactions and assuming that transfer price represents 65% of market price. It is
important to flag that this tax varies from municipality to municipality and that some
cities don’t use asset transaction value, but rather a value defined by the
municipality, which in most cases is below market value.
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Figure 381: Housing market based on Property Transfer taxes

R$ in billions ITBI payments (R$bn)
600 12.0
Market value R$bn ITBI (R$bn)
500 10.0
400 8.0
300 6.0
200 4.0
100 2.0
0 0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: J.P. Morgan estimates, company data.
LPS also calculated the size of the market in Brazil based on its internal department
team. However, the company stopped releasing this data in 2016. Based on the data
until 2015, transactions totaled R$52bn, represented by 133k units as can be seen in
the chart below.
Figure 382: Market size according to LPS intelligence data

214 VGV (R$bn) Units ('000)
196
183 175
133
86 80 90 80 52
2011 2012 2013 2014 2015

Source: Lopes data.
Figure 383: Brazil PSV launches in 2015 – LPS intelligence Figure 384: Brazil units launches in 2015 – LPS intelligence
R$ in Billions Units (‘000)
17.0 39.6
29.4
8.5
7.0
13.1
4.4 10.4 9.2
2.6 2.6 1.8 4.6 4.6 3.9 3.9 3.4 3.1 2.9
1.5 1.4 1.4 1.0 1.0 0.8 0.6 1.9 1.7 1.4
0.5
Campinas
Florianopolis
SPMA
RJMA
SP Country Side
Fortaleza
Belo Horizonte
P. Alegre
Curitiba
Vitoria
Londrina
Other
Salvador
Distrito Federal
Santos
Florianopolis
SPMA
RJMA
SP Country Side
P. Alegre
Fortaleza
Curitiba
Belo Horizonte
Vitoria
Londrina
Other
Salvador
Distrito Federal
Campinas
Santos
Source: LPSB; J.P. Morgan. Source: LPSB; J.P. Morgan.
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When looking at the figure above, which is based on data from Lopes, launches in
2015 totaled around R$52bn with São Paulo Metropolitan Region (SPMR)
representing around 30% of total launches, close to its representation in Brazil’s
GDP (33%).
Figure 385: 2013 PSV launched using SPMR as proxy Figure 386: Units launched using SPMR as proxy
R$ in Billions Units ('000)
SPMR Others Regions SPMR Others Regions
57 134
55 128
51 50 117
109
93
33 35 80
31 28 30 66 69 66
17 40
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015
Launches from Listed Homebuilders: Brokers don’t depend exclusively on listed

Homebuilders. According to data from LPS Brasil, listed companies represented 23%
of total sales in the past 3 years on average. Launches from non-listed companies
continue to be to the main contributor to brokers’ sales in the primary market,
gaining more relevance recently as in-house brokers of listed players increased their
operations and gained market share.
Figure 387: Listed Homebuilders representativeness on Brokers’ sales

10 3
19 21 14 14
26 22 29 25 27 22 29 24 22 22 22 20 25 24
27
23
26 24 16
32 25 27 25 14 16
30 27 30
31 28 31 33 36 28
67 70 63
60 61 61 60
47 49 49 53 49 51 53
44 43 44 40 42 44
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Non Listed HBs Listed HBs Secondary Market
Source: Lopes; J.P. Morgan.
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Figure 388: Total Presales: Listed HBs vs. listed Brokers

R$ in billions
37.1 37.0 38.0 36.3 36.2
Brokers Listed HB
29.8 30.3 30.3
27.1
25.3
23.5
20.3
16.0 16.1
13.8
10.3 10.9
6.3
2009 2010 2011 2012 2013 2014 2015 2016 9M17
Source: Company data and J.P. Morgan.
The primary market continues to be the main source of commissions for brokers, the
secondary market represents less 20% for both LPSB and BR Brokers. It is worth
noting that in the secondary market commissions are higher since the average sale
requires more hours and effort to be concluded.
Figure 389: Lopes: Presales Breakdown Figure 390: BR Brokers: Presales Breakdown
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
Primary Secondary + Franchise Primary Secondary Other
Commission structure
Lopes: According to the company, its average commission is divided into three
parts: i) brokerage commission, ii) premium commission; iii) franchises commission.
Brokerage commission is the main source of revenues and varies between 5% and
7% and is split between the broker firm and its broker agent. This split varies a lot,
but currently it is around 40-45% for brokers and 55-60% for broker agents.
Premium commission is a commission that homebuilders give to brokers and broker

agents to incentivize them to achieve certain goals. Usually, this rate is around 1.0%
of the unit value, and most of it goes to the broker agent. This premium is paid only
when the broker agent achieves the goals previously established.
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Commissions in the primary market vary from 2.3% to 2.7% on average, while in the
secondary market; they vary from 2.2% to 2.3%, as shown in the tables below.
Besides regular commissions on transactions, the company also gains a commission

on mortgage originations through its joint venture with Itaú, called “Credipronto!”
According to the agreement, Credipronto! charges a 1.0% commission for every
mortgage that is originated within the company and this amount is divided with Itau
Unibanco.
Franchise commission is the royalties from brokers operating under Lopes’s

systems mostly on the secondary and paying a 0.5% fee of the PSV sold. Since 2017,
the company has been transforming its secondary (and some of the primary) business
into franchises, in which former Lopes’ partners operate on their own.
Lopes commission structure

Table 196: Brokerage business commission Table 197: Premium commission
Brokerage business Premium
Commission rate 5.0% Commission rate 0.5%
% brokerage firm 45% % brokerage firm 20%
% brokerage agent 55% % brokerage agent 80%
Fee (from sale) 2.3% Fee (from sale) 0.1%
Source: Lopes. Source: Lopes.
Table 198: Commission breakdown

Total commission 2.3%
Total commission with Premium 2.4%
Source: Lopes.
BR Brokers: Commissions for BR Brokers are very similar to those for Lopes, as
the company works the same way. What differs in the companies’ net commissions is
how much each company passes through to its broker agents. In the primary market,
commissions are composed of brokerage and premium commissions, while in the
secondary market commissions come 100% from brokerage. According to the
company, its average brokerage commission in the primary market is around 3.5% of
PSV sold, which is divided between the company and its broker agents. Sixty percent
of the commission remains with BR Brokers, representing 2.1% of the total; the
remaining 40%, or roughly 1.0% of PSV, is for the broker agents. This commission
could also be increased by 1.0%, which is offered by homebuilders as a performance
premium.
This premium commission is usually up to 1.0% of the project’s PSV and is equally
divided between BR Brokers and its agents. In the case of Lopes, these commissions
are paid only if they achieve the goals that were previously established.
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BR Brokers commission structure

Table 199: Brokerage business commission Table 200: Premium Commission
Commission rate 3.5% Commission rate 1.0%

% brokerage firm 60% % brokerage firm 50%
Brokers participate actively in
% brokerage agent 40% % brokerage agent 50%
mortgage origination given
BBRK Fee (from sale) 2.1% BBRK Fee (from sale) 0.5%
their close relationship with Source: Company reports. Source: Company reports.
homebuyers and banks.
Table 201: Commission breakdown
Total commission 2.1%
Total commission with HB Premium 2.6%
Secondary market commissions

In the secondary market, commissions are higher at 5.0% since the sales process is
more complicated, demanding more hours and costing more. As happens in the
primary market, commissions are equally divided between the company and the
agent, 2.5% for each. However, the breakdown is more flexible than in the primary
market, allowing the company to give more incentives to speed up the sales of those
units.
Figure 391: Net commission evolution

3.20%
3.00%
2.80%
2.60%
2.40%
2.20%
Lopes BR Brokers
2.00%
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: Company data.
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Brokers’ Geographical Diversification

Figure 392: Lopes – geographical coverage Figure 393: BR Brokers – geographical coverage
Source: Company data. Source: Company data.
Understanding Operating Leverage

As part of an asset-light segment, broker companies typically offer strong operational
leverage given their relatively higher fixed costs. As consequence, in challenging
scenarios, brokers usually are not able to reduce their costs and expenses at the same
pace as the contraction in revenues. On the positive side, brokers need almost no
capex and working capital; thus, they are typically able to provide investors with an
elevated conversion of EBITDA into FCF, helped by a low level of leverage on their
balance sheets as both companies are net cash.
Figure 394: Lopes: Revenues vs. Cost + SG&A as % of Rev. Figure 395: BR Brokers: Revenues vs. Cost + SG&A as % of Rev.
Revenues (R$ mn) Costs + SG&A as % of Rev. Revenues (R$ mn) Costs + SG&A as % of Rev.
Revenues Costs + SG&A as % of Revenues 150 Revenues Costs + SG&A as % of Revenues
150 150%
150%
120 130% 120
130%
90 110% 90
110%
60 90% 60 90%
30 70% 30 70%
0 50% 0 50%
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
Source: J.P. Morgan estimates and Company data. Source: J.P. Morgan estimates and Company data.
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Figure 396: Lopes – Revenue vs. Cost + SG&A growth yoy Figure 397: BR Brokers – Revenue vs. Cost + SG&A growth yoy
Growth yoy Growth yoy
100% 100%
Revenues Costs + SG&A as % of Revenues Revenues Costs + SG&A as % of Revenues
80% 80%
60% 60%
40%
40%
20%
20%
0%
0%
-20%
-20% -40%
-40% -60%
-60% -80%
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
Source: J.P. Morgan estimates and Company data. Source: J.P. Morgan estimates and Company data.
Figure 398: Brokers historical Share Price vs. Presales

Net Income Share Price (1Q09 = 100)
500 1,000
LPS Presales BBRK Presales LPSB3 BBRK3
400 800
300 600
200 400
100 200
0 0
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
Source: J.P. Morgan estimates, Bloomberg and Company data.
Table 202: Sensitivity Analysis – How much R$1bn addition in intermediations could add to share price
LPSB BBRK
JPMe assumptions Bear Base Bull Bear Base Bull
Increase on Intermediations (R$mn) 1,000 1,000 1,000 1,000 1,000 1,000
Avg. commission 2.4% 2.6% 2.8% 2.4% 2.6% 2.8%
Net Margin 23% 28% 33% 20% 23% 26%
Historical P/E 11.0x 13.5x 16.0x 7.0x 9.0x 11.0x
Value Creation per + R$1bn (R$/sh) 0.50 0.80 1.20 0.10 0.20 0.30
% of current price 10% 17% 25% 19% 37% 56%
Source: J.P. Morgan Estimates; Companies Reports
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Mortgage Agreements with Banks

Lopes’s agreement with Itau
JV with Itaú to offer mortgages: In 2007, Lopes formed a joint venture with Itaú to
create a mortgage financer called CrediPronto! in which the company holds a 50%
stake. Even though this JV was created in 2007, it became operational only in
December 2008. Lopes received R$290mn from Itaú in 2008 for 20-year exclusivity.
Today, accumulated financed volume amounts to R$5.8bn. (Note: JPM Latin
American Financials analyst Domingos Falavina covers Itau Unibanco.)
Advantages for clients acquiring a home: According to the agreement, the credit
lines offered to homebuyers respect the same conditions offered by Itaú in its
branches, avoiding competition with Itaú outside the JV. However, CrediPronto!’s
mortgage approval occurs faster than normal, taking around 20-30 days vs. 30-40
days on average in a regular branch. This faster track to obtain a mortgage used to be
much longer as banks, mostly public banks, which used to have a much slower
system, took between 60 and 90 days to approve mortgages; however, it continues to
be a tool that facilitates and speeds up the home acquisitions for clients. In 2017,
CrediPronto! reached a portfolio of R$5.8bn and had an average finance rate of
10.5% + TR with average loan to value of 50%.
Results dependent on loan spread and are equally divided by companies: In

2017, Lopes recognized R$6mn on revenues from Itaú, which compares to R$10mn
in 2016 and R$17mn in 2015, corresponding to the non cash amortization of the
initial payment of R$290mn. Additionally, Lopes receives a commission of around
0.5% for every mortgage contract it signs. Results are appropriated on the equity
income line. Results from the JV are driven by the size of its loan book and the
spread the JV obtains on it; therefore, this business also offers strong operational
leverage as the mortgage book should continue to grow.
Earn-out rules: The deal foresees Lopes receiving further cash payments from Itaú,
amounting up to R$220mn, through earn-out schemes, which depend on the
achievement of certain goals previously established. In our model, we are not
including additional earn-outs as Credipronto!’s originations will not reach the
target stipulated when the contract was signed. According to Lopes’s agreement
with Itaú, earn-outs can be paid every two years for a total period of ten years, which
started from 2009. In 2011, Lopes received the first earn-out of R$31mn, while in
2013 it received the second earn-out of R$59mn. Given the deceleration in the
Brazilian economy and the reduction in originations we don’t expect LPSB to
received additional earnouts from this JV.
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Figure 399: CrediPronto! Mortgage portfolio evolution Figure 400: CrediPronto! Mortgage origination evolution
R$ in billion R$ in billion
6.0 5.9 5.8 0.5 0.6 0.5

5.7 5.8 5.9 5.9 5.7 5.7
5.4 0.5 0.4
5.2 0.4
4.7 4.9 0.4 0.4
4.3 4.5 0.4
4.0 4.1 0.3 0.3 0.3
3.7
3.3
3.0 0.3 0.3
0.2 0.2 0.2
0.1 0.1 0.1
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
BR Brokers’ agreement with Bradesco
In October 2010, BR Brokers signed a five-year partnership with HSBC (whose

operations in Brazil were acquired by Bradesco) to offer mortgages and additional
banking products to its clients. The contract was first extended in 2016 until the end
of 2017, and then extended until March 2018, when both parties should enter into an
agreement for further renewals. The agreement is valid only for the secondary
market, and BR Brokers gets a commission from Bradesco based on LTV of
mortgages approved for homebuyers and additional remuneration for other products.
This is not an exclusivity agreement but rather a priority agreement in which BR
Brokers offers Bradesco products and services before offering them to other banks –
which differs from Itaú and Lopes’s deal in that Itaú has an exclusivity agreement.
Initially, BR Brokers was receiving 4.5% of the value of the mortgage contract as
commissions; however, currently it is at 3.5% as pre-established in 2010 – as
superior scale would help to dilute specific costs. Based on 9M17 data, R$263mn
was financed due to the partnership, implying an average LTV of 60%, which
compares to R$165mn in 9M16 and an average LTV of 57%.
According to BR Brokers, the partnership started slowly as HSBC’s mortgage rates

were not competitive with the market and other banks’ rates. However, they
improved over time given internal changes at the bank, approaching market rates,
increasing the competitiveness of this line.
Table 203: Details from agreements with banks

Lopes BR Brokers
Agreement with Itaú Bradesco
Initiation date 2007 2010
Initial Duration 20 years 5 years
Extended Until - Mar-18
Days to approve a mortgage 2 days 30 days
Total mortgage portfolio (R$ bn) 5.8 NM
Net increase on mortgages in past 12M -5% NM
Revenues from the agreement in 2017 – R$mn 6 NA
As % of total revenues 3.7% NM
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Figure 401: Mortgage originations through brokers – still incipient in Brazil
63%
55%
45%
40%
31%
Canada UK Australia USA South Africa
Source: Lopes.
Historical M&A
Since 2012, the two companies have not made any acquisitions, and so far it appears
that there is no indication of an appetite for new transactions as companies are
focusing on reducing their organic operations and costs. Remember that since 2007,
the sector has gone through a very active M&A period with Lopes and BR Brokers
buying 25 and 19 companies, respectively, for a total investment of R$1.2bn.
Overall, the companies’ acquisition strategy was to acquire minority stakes in private
brokers, at ~8.0x P/E multiples, subject to earn-outs and also including call and put
rules regarding the purchase or sale of the remaining stakes.
Figure 402: Number of acquisitions since 2007 Figure 403: Amount paid per year on acquisitions since 2007
# of transactions R$ in millions
459
10 BR Brokers Lopes BR Brokers Lopes
8 8
226
5
4
3 3 118 100
2 70 68
1 52 40
19
0 0
2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
Source: J.P. Morgan estimates and Company Reports. Source: J.P. Morgan estimates and Company Reports.
According to Lopes, acquisitions represented around 60% of all intermediations done

in 2013. The amount invested in acquisitions by each company between 2007 and
2012 represents roughly ~1.6x the current market cap of both Lopes and BR Brokers.
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Table 204: Lopes’s acquisition track record

Company State Stake Acquisition date Capex (R$mn)
Dirani RS 100% May-07 41.0
Actual ES 60% Jul-07 11.3
Total 2007 52
Royal DF 51% Jan-08 60.5
Immobilis CE 60% Jan-08 8.1
Capucci & Bauer SP 100% Feb-08 49.5
Total 2008 118
VNC SP 51% Jun-10 7.1
Self RJ 73% Jun-10 2.6
Plus SP 51% Aug-10 11.7
Maber SP 51% Sep-10 17.3
Sergio Miranda PE 60% Oct-10 4.1
Patrimóvel RJ 51% Oct-10 142.2
Local SP 55% Dec-10 25.6
Ducati RS 51% Dec-10 15.5
Total 2010 226
Thá PR 60% Feb-11 20.9
Erwin Maack SP 60% Mar-11 8.4
AçãoDall'Oca DF 51% Apr-11 12.2
Pronto Condessa SP 51% Jul-11 4.9
Brisa Empreendimentos MG 51% Sep-11 5.5
Itaplan SP 51% Sep-11 13.8
Imóvel A SP 60% Oct-11 24.3
Eduardo Imóveis SP 51% Oct-11 10.2
Total 2011 100
Foco SC 51% Mar-12 15.0
Piccoloto SP 51% Mar-12 10.0
Cappucci SP 51% Mar-12 6.6
Raul Fulgêncio PR 51% Jul-12 36.7
Total 2012 68
Table 205: BR Brokers’ acquisition track record

Company State Stake Acquisition date Capex (R$mn)
Jairo Rocha PE 100% Jan-08 11.3
MK DF 100% Feb-08 18.8
JGM DF 100% Feb-08 26.3
Frema SP 100% Mar-08 30
Redentora SP 100% Mar-08 37.5
Pointer ES 100% Mar-08 22.5
Global North 100% Mar-08 45.0
Rede Morar MG 80% Mar-08 4.5
Triumphe BA 70% Aug-08 12.6
Abyara SP 51% Aug-08 250
Total 2008 459
Abyara SP 15% Aug-09 NM
Total 2009
Galvão PR 51% Dec-10 18.5
Total 2010 19
Home Hunters SP 55% Jul-11 8.8
Vera Bernardes RS 75% Aug-11 11.5
M. Garzon Eugênio GO, DF, MT, MS 60% Aug-11 35.7
Imóveis no Morumbi SP 70% Oct-11 13.7
Total 2011 70
Bamberg SP 45% Feb-12 25.5
Miranda DF 65% Feb-12 6.6
Libor SP 55% Aug-12 8
Total 2012 40
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Technology
As happened in other segments of the economy, technology is an important tool for
brokers as it could increase companies’ efficiency and lead to significant gains in
market share. Both LPBS and BBRK had invested a significant amount of money to
improve their systems and databases over the past years to improve consumers’
experience, increase efficiency and reduce searching time. Moreover, companies
expect to assign most of future FCF generation to investments in technology as,
according to LPBS, more than 90% of customers start to look for a new house on the
internet. Although there is no specific data regarding brokers’ market share vs
portals, we believe web portals have gained market share over the past year despite
their weaker service and poorer quality data bases. This trend is observed by the
merger announced by Fipe Zap and Vivareal.
Table 206: Brokers Internet Portal Data – 2017 figures

Technology # units on # website unique Internet Online marketing exp. Internet Leads Traditional Leads
Capex (R$mn) Website visitors (mn) Leads (k)* as % of total Conversion (%)* Conversion (%)*
LPSB3 1.8 122,000 6.0 152 11.6% 1.27% 0.65%
BBRK3 NA 42,000 1.2 175 12.0% NA NA
Source: Lopes and BR Brokers; * Lopes data based on annualized 1Q18 data.
Table 207: Brokers CRM Data – 2017 figures

Units Total Leads Emails opened Emails opened as %
# Clients (mn) Calls (mn) Emails sent (mn)
available (mn) (mn) of total
LPSB3 122,000 26.0 39.0 1.50 29.0 0.58 2.0%
BBRK3 42,000 5.2 36.0 1.45 15.3 0.35 2.3%
Source: Lopes.and BR Brokers.
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Commercial Properties
The commercial properties segment in Brazil is composed of three listed companies:
BR Properties (BRPR3), São Carlos (SCAR3) and CCP (CCPR3), with a total
market cap of ~US$2.1bn. J.P. Morgan covers only BR Properties, the most liquid
name in the sector, trading around US$3mn daily.
Table 208: Commercial Properties summary – Listed companies

Current Mkt Cap Performance High Low P/BV P/FFO Liquidity ROE
price US$mn 1M 3M YTD 2017 2016 52W 52W Cur 18e 19e US$ mn 16e
BR Properties R$9.11 1,120 1% -13% -14% 42% -11% 10% -24% 0.6x 20.5x 17.0x 2.3 3%
CCP R$11.00 398 -4% 18% 24% -10% 15% 60% -9% 1.2x - - 0.01 -
São Carlos R$37.55 655 -1% -13% -13% 75% 10% 31% -14% 1.6x 29.8x 10.3x 0.05 5%
Source: Bloomberg. Prices as of Mar-28th, 2017.
São Paulo Market

São Paulo is the largest commercial property market in Brazil, with a total supply of
almost 5mn m2 in GLA, considering Triple A and Class B developments. During
2017, São Paulo started to show the first signs of a recovery in the offices segment,
with net absorption of Triple A assets reaching more than 190k m2, the highest level
since 2013. The postponement of construction activities impacted the delivery of new
developments, which totaled 55k m2 in 2017 vs. 173k m2 in 2016. Chucri Zaidan
region was the outperformer in the city of São Paulo, with net absorption of 100 km2
in 2017, while Santo Amaro showed the weakest result, with a negative net
absorption of 22k m2.
Data from Cushman & Wakefield shows that the vacancy rate for Triple A
developments in SP ended 2017 at 24%, down 5.2pp from 2016 levels. In addition,
data from Colliers International shows that there is a discrepancy among regions,
with the Paulista Avenue having a vacancy rate of 8%, vs. Chacara Santo Antônio
with ~60%, impacted by the recent delivery of new projects.
In terms of prices, rents have been decreasing since 2014 in São Paulo, following the
delivery of new supply and the deterioration of demand due to the current the
economic crisis in Brazil. Based on data from Colliers International, the ask price for
Triple A developments in São Paulo ended 4Q17 at R$90/m2, compared to R$112/m2
by the end of 2014. Colliers International expects close to 275k m2 in new inventory
over the next three years, around 150k m2 in 2018, 75k m2 in 2019 and 50k m2 in
2020, which should bring relief in the mid-term.
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Table 209: São Paulo Commercial Offices Overview – As of 4Q17

Inventory Available Area Vacancy Net Absorption Under Asking Rent (All Asking Rent (Class
Submarket Projects
('000 m2) ('000 m2) Rate 2017 (m2) Construction (m2) Classes) (R$/m2) AA+) (R$/m2)
Paulista 15 246 35 14.3% 21,477 19,584 79.6 96.0
Pinheiros 18 265 36 13.6% 25,699 0 62.9 72.1
Faria Lima 25 433 81 18.8% 17,488 60,300 108.3 133.7
Itaim 4 73 1 2.0% 13,386 0 70.3 120.0
Vila Olimpia 15 204 36 17.8% 12,695 18,000 80.1 109.1
Berrini 10 294 85 29.0% 7,220 0 80.0 93.2
Ch. Santo Antonio 17 176 52 29.7% (4,515) 62,448 60.8 69.0
Marginal Pinheiros 20 172 58 34.0% 4,373 24,000 54.9 63.9
Chucri Zaidan 24 616 165 26.8% 100,436 43,495 87.0 96.3
JK 12 336 81 23.9% 17,085 0 113.9 132.5
Santo Amaro 8 114 74 65.4% (22,849) 0 47.9 58.1
Total / Average 168 2,927 706 24.1% 192,497 227,827 96.2
Source: Cushman & Wakefield.
Table 210: São Paulo – Triple A Inventory Under Construction Breakdown – As of 4Q17
Development GLA (m2) Expected Delivery Region
RM Square 24,833 1Q18 Chucri Zaidan
Alameda Vicente Pinzón 54 21,600 1Q18 Vila Olímpia
Edifício Grande Ufficiale Evaristo Comolatti 8,722 1Q18 Paulista
Parque da Cidade Corporate - Jequitibá 36,966 2Q18 Chucri Zaidan
Park Tower 22,340 3Q18 Jardins
HBR Lead Corporate 10,500 3Q18 Faria Lima
TEK - Nações Unidas 24,000 4Q18 Marginal Pinheiros
Brasília Offices Square - Torre 1 24,300 1Q19 Barra Funda
Brasília Offices Square - Torre 2 24,300 1Q19 Barra Funda
Porto União 16,584 1Q19 Berrini
Trianon 9,300 1Q19 Paulista
Birmann 32 51,500 1Q20 Faria Lima
Total 274,945
Source: Colliers; J.P. Morgan.
Figure 404: São Paulo – Ask Price Evolution Figure 405: São Paulo Net Absorption – Triple A
R$/m 2 (‘000) m 2
90
123
80
116 116
112 112 112 70
105 102 60
97 100 97 97 95 95
93 90 50
40
30
89 89 89 87 20
85 85 82
80 82 80 81 82 80 79 10
76 73
0
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
-10
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Triple A Class B
Source: Colliers International; J.P. Morgan. Source: Cushman & Wakefield.
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Figure 406: São Paulo Vacancy Level – Triple A Figure 407: São Paulo – Vacancy per Region as of 4Q17
000’ m 2 %
30% 700 70%
Inventory (000 m2) Vacancy
25% 600 60%
500 50%
20% 400 40%
300 30%
15%
200 20%
10% 100 10%
0 0%
5%
Marg. Pinheiros
Pinheiros
Chucri Zaidan
Faria Lima
JK
Ch. Sto Antônio
Barra Funda
Vila Olímpia
Paulista
Santo Amaro
Berrini
Itaim Bibi
0%
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Source: Cushman & Wakefield. Source: Colliers International; J.P. Morgan.
Figure 408: São Paulo – Triple A Inventory Under Construction Figure 409: São Paulo – Class B Inventory Under Construction
000’ m2 000’ m 2
74 52 104 35 9
149
2,989 3,063 2,098 2,202 2,237

2,840
2018 2019 2020 2018 2019 2020

Triple A - Expected Inventory Triple A - Under Construction Class B - Expected Inventory Class B - Under Construction
Source: Colliers International; J.P. Morgan. Source: Colliers International; J.P. Morgan.
Figure 410: Cap Rate for Triple A Developments in São Paulo – as of 2017
Offices Industrial
8.9% 9.2%
8.5% 8.2%
7.9%
6.5%
Average High Low

Source: SiiLa.
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Rio de Janeiro Market

The Rio de Janeiro market for commercial offices is less developed than São Paulo’s,
being highly dependent on government-related segments and on the Oil & Gas sector
with Petrobras being one of the main tenants in the city. The segment has been
severely impacted by the Brazilian crisis over the past few years, worsened by the
critical financial situation of the state government of RJ and the deterioration of oil
prices.
The combination of increasing deliveries and a shift in the occupancy trend resulted
in vacancy reaching its highest level in recent years at more than 40% in 2017, up
2pp vs 2016, and compared to 21% by the end of 2015. The region currently most
impacted by elevated vacancy is the Porto Maravilha, which, according to Colliers
International, reached a vacancy rate close to 80% in 4Q17. On the other hand, the
southern region of RJ has the lowest vacancy rate of the city at only 3%, while the
Downtown ended 2017 at 30%.
Prices in Rio de Janeiro have also decreased, reaching R$104/m2 in 4Q17, nearly flat
vs 2016 and 2015 and compared to R$121/m2 by the end of 2014. However, there is
a high variability in prices across regions, with the average asking price in the
Southern region at R$260/m2 vs. R$85/m2 in the Cidade Nova region.
Looking forward, there is limited supply coming to the market. According to Colliers
International, there is a total of 34k m2 of new deliveries over the next 3 years,
concentrated in 2018 (9k m2) and 2019 (34k m2). However, the city has almost 330k
m2 of GLA under study.
Table 211: Rio de Janeiro Commercial Offices Overview – As of 4Q17
Inventory Available Area Vacanc Net Absorption Under Asking Rent (All Asking Rent (Class
Submarket Projects
('000 m2) ('000 m2) y Rate 2017 (m2) Construction (m2) Classes) (R$/m2) AA+) (R$/m2)
Downtown 35 895 273 30.5% 15,368 0 91.0 117.0

Cidade Nova 7 240 107 44.7% (2) 0 92.5 94.1
Orla 13 181 60 33.1% (13,433) 0 117.9 117.7
South Region 5 24 9 39.0% 764 0 147.0 147.8
Porto 10 224 187 83.5% 17,517 98,149 82.6 87.7
Total 70 1,564 636 40.7% 20,213 98,149 93.7 107.6
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Figure 411: Rio de Janeiro – Ask Price Evolution Figure 412: Rio de Janeiro Net Absorption – Triple A
R$/m 2 (‘000) m 2
125 123 30
120 121 121 121
20
109 110 109 107 10
104 106 106 107 104
103
0
-10
-20
99 98 100 99 99
95 93 96 94 93 -30
89 88 88 -40
85 84
82
-50
-60
-70
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Triple A Class B
Source: Colliers International; J.P. Morgan. Source: Cushman & Wakefield.
Figure 413: RJ Vacancy Level – Triple A Figure 414: Rio de Janeiro – Vacancy per Region as of 4Q17
000’ m 2 %
30% 1,000 100%
Inventory (000 m2) Vacancy
25% 800 80%
20% 600 60%

400 40%
15%
200 20%
10%
0 0%
5%
Downtown
Orla
Cidade Nova
Porto Maravilha
Barra da Tijuca
Southern Region
0%
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Source: Cushman & Wakefield. Source: Colliers International; J.P. Morgan.
Figure 415: Rio de Janeiro – Triple A Inventory Under Construction Figure 416: Rio de Janeiro – Class B Inventory Under Construction
‘000 m2 000’ m2
9 34 0
12 0 0
1,671 1,680 1,714 982 982

970
2018 2019 2020 2018 2019 2020

Triple A - Expected Inventory Triple A - Under Construction Class B - Expected Inventory Class B - Under Construction
Source: Colliers International; J.P. Morgan. Source: Colliers International; J.P. Morgan.
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Figure 417: São Paulo Commercial Properties Map
Source: Colliers International.
Figure 418: Rio de Janeiro Commerical Properties Map
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Office Suite prices according to FIPE ZAP

Fipe Zap started releasing a monthly data base regarding the office suites market in
mid-2016, which is represented by offices with floor areas of up to 200m2, mostly
acquired by investors. The survey shows data on rental and selling prices per m2 as
well as rental yield and includes at this point 4 cities: São Paulo, Rio de Janeiro, Belo
Horizonte and Porto Alegre.
Selling prices: In the charts below, we show Fipe Zap details regarding the average
selling price for office suites, including actual prices/m2, MoM and YoY changes.
Figure 419: Fipe Zap office suite selling price – As of January of 2018
R$/m2
Rio de Janeiro R$10,593
São Paulo R$10,035
Porto Alegre R$7,872
Belo Horizonte R$7,587
FipeZap Index (Sale) R$9,683
Source: Fipe Zap.
Figure 420: Office suite selling price – MoM change

FipeZAP Office Suite São Paulo Rio de Janeiro Belo Horizonte Porto Alegre Inflation
3%
2%
1%
0%
-1%
-2%
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
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Figure 421: Office suite selling price – YoY change

FipeZAP Comercial São Paulo Rio de Janeiro Belo Horizonte Porto Alegre Inflation
25%
15%
5%
-5%
-15%
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Rental prices: In the figures below, we show Fipe Zap data regarding rental prices
for office suites including actual prices/m2, MoM change, YoY change as well as
yields for the 4 cities covered by Fipe Zap survey.
Figure 422: Fipe Zap office suite rental price – As of January of 2018
R$/m2
Rio de Janeiro R$43.28
São Paulo R$41.97
Porto Alegre R$31.28
Belo Horizonte R$30.60
FipeZap Index (rent) R$40.34
Source: Fipe Zap.
Figure 423: Office suite rental price MoM change

4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
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Figure 424: Office suite rental price YoY change
20%
10%
0%
-10%
-20%
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Figure 425: Office suite annualized yield – Yield trading down since the beginning of the series
12% FipeZAP Office Suite São Paulo Rio de Janeiro Belo Horizonte Porto Alegre Inflation
10%
8%
6%
4%
2%
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
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Brazilian Real Estate Funds – FII

Fundo de Investimento Imobiliario (FII) is the Brazilian version of the US REITs and
the Mexican Fibras. Those funds must be backed by real assets (properties) or
investments related to real estate assets like real estate receivables, CRIs, LCIs, LHs
or even other funds. As happened with US REITs and Fibras, distributions should
represent at least 95% of a fund’s income and capital gains and must be distributed at
least twice a year; however, Brazil funds usually distribute those gains monthly. FIIs
are also tax free, paying no income taxes on gains; additionally, individuals also
don’t pay taxes on the dividends received from those funds, as long as the fund has
50 holders and has a share below 10%.
The main advantages of FII when compared with the ownership of real estate assets
are: i) reduced investment ticket to be in the real estate industry, ii) tax benefit to
individuals and lower cost of administration and; iii) superior liquidity vs owning a
real estate asset.
In Brazil, there are over 200 listed funds; however, most of them have very limited
liquidity, even for individual investors, since most of them are single assets and have
a small market cap of less than US$75mn. Moreover, given its monthly distributions,
most of the quota holders are represented by individuals who use investments in FII
as an alternative to buying real estate assets, being in most cases long-term investors.
Figure 426: FII historical issuance – There was s significant pick up in FII issuance in the past 12 months
44
39 39 R$bn # Funds
14
33
26
24 23 10.5
9.8
7.7 16
12
5.8
4.7 5.2
0.6 2.9 10
2.1
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: J.P. Morgan estimates and Bloomberg.
Table 212: FII tax structure vs Company facing Lucro Real

Tax Distinction FII Company (Real Income)
PIS/COFINS (Rev. taxes) 0% 9.25% on Revenues
IR (Income tax) 0% 25% on Net Income
Investment Vehicle CSLL (Social contribution) 0% 9% on Net Income
Financial Assets linked to Real Estate 0% 15.0-22.5%
Other Financial investments 15.0-22.5% 15.0-22.5%
Individual Investor 0% 0%
Distributions/Dividends Local Investor (Fund) 0% 0%
Foreign Investor 15% 0%
Individual Investor 20% 15%
Capital Gain when selling shares Local Investor (Fund) 0% 0%
Foreign Investor 0% 0%
Source: BC Fund website.
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IFIX Index
IFIX index is the sector index, which is represented by 75 funds, totaling a market
cap of almost US$10.0bn and an aggregated daily liquidity of around US$13mn. The
top-5 main funds of the IFIX represent 35% of the index and have an average daily
liquidity of US$1.5 mn and an average dividend yield of 6.0%. As can be seen in the
chart below, the segment outperformed both the IBOV (Brazil Index) and the IMOB
(Real Estate index). The sector even outperformed the accumulated CDI since
January 2011, helped by its strong performance since the end of 2016.
Figure 427: IFIX performance vs IBOV, IMOB and CDI

250
IFIX IMOB IBOV CDI
200
150
100
50
0
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Table 213: IFIX Top 15 Members*

Price Market Cap Daily Liquidity Dividend
Funds Ticker % IFIX P/NAV
R$ (R$ mn) (US$ mn) (USD mn) Yield (%)
Kinea Rendimentos Imobiliarios FII KNCR11 9.84% 105 2,964 906 1.1 1.01 6.3
Kinea Renda Imobiliaria FII KNRI11 8.74% 169 2,624 802 0.8 1.18 5.8
BB Progressivo II FII BBPO11 7.82% 148 2,356 720 1.1 1.54 8.0
FII BTG Pactual Corporate Office Fund BRCR11 7.01% 104 1,999 611 2.0 n/a 4.0
CSHG Brasil Shopping Investimento Imobil HGBS11 4.37% 2,398 1,289 394 0.5 1.05 6.0
CSHG Real Estate FI Imobiliario HGRE11 3.70% 1,478 1,091 333 0.5 0.99 6.5
Kinea Indice de Precos FII KNIP11 3.68% 110 1,108 339 0.4 1.06 8.2
FII Grand Plaza Shopping ABCP11 3.34% 16 1,003 306 0.1 1.28 5.8
CSHG Logistica FI Imobiliario HGLG11 2.98% 1,550 527 161 0.3 1.36 6.7
FII TB Office TBOF11 2.64% 85 854 261 0.2 1.07 2.6
FI Imobiliario Parque Dom Pedro Shopping PQDP11 2.58% 3,249 775 237 0.0 1.22 4.3
Santander Agencias FII SAAG11 2.42% 135 763 233 0.3 1.54 7.5
JS Real Estate Multigestao FII JSRE11 2.20% 105 680 208 0.3 0.96 6.3
Shopping Patio Higienopolis SHPH11 2.02% 1,070 619 189 0.0 1.54 4.0
FII Agencias Caixa AGCX11 1.73% 1,230 498 152 0.1 1.15 7.0
Sum / Average 65.07% 19,150 5,852 7.7 1.21 5.93
Source: Bloomberg; *Based on February 2018.
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Top-5 Real Estate Funds in Brazil by Liquidity

Kinea Rendimentos Imobiliarios – FII (Ticker: KNCR11). The fund was created
in 2012 and belongs to Kinea, which is an Itau company. It is focused on acquiring
Real Estate Receivables – CRIs. It trades a little less than US$1mn daily and has a
dividend yield of around of 10%.
BB Progressivo II – FII (Ticker: BBPO11). The fund was created in 2012 to
perform a sale leaseback to Banco do Brasil; therefore, all the assets are represented
by Banco do Brasil branches and offices across the country that have 10-year leasing
agreements with BB annually adjusted by inflation. The fund currently has 64
properties. It has a dividend yield of 8.5%.
Kinea Renda Imobiliaria – FII (Ticker: KNRI11). Also from Kinea the fund was
created in 2010 and holds a portfolio of 16 properties including commercial offices
and warehouses. It seeks active management of its properties. The fund has a
dividend yield of 7.4%.
FII BTG Pactual Corporate Office Fund – FII (Ticker: BRCR11). The fund was
created in 2010 and belongs to BTG Pactual. It is focused on commercial offices and
has active management of its portfolio, having currently 10 properties in its portfolio.
It has one of the best corporate governances in Brazil, reporting its data monthly and
hosting quarterly conference calls and having a website for investors,
http://www.bcfund.com.br/. It currently has a dividend yield of 8.6%.
CSHG Brasil Shopping Investimento Imobiliario – FII (Ticker: HGBS11). The
fund belongs to Credit Suisse Hedging-Griffo and was created in 2006. It is focused
on the shopping mall segment, having an active management of its portfolio of
properties, which includes 8 assets in 7 cities. It is currently paying a 7.1% dividend
yield. HGBS11 also provides detailed information on corporate governance on its
website: https://www.cshg.com.br/site/publico/imob/imob2.seam#.
Figure 428: Top-5 IFIX members’ performance (Jan 13 = 100)

210
HGBS11 KNRI11 KNCR11 BRCR11 BBPO11 IBOV
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Figure 429: Top-5 IFIX members’ yield – 12 months yield based on dividend distribution
In percentage
25
HGBS11 KNRI11 KNCR11 BRCR11 BBPO11 Real Interest rate
20
15
10
0
Jan-13
Mar-13
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Mar-18
Summary of FII by asset class

In this section we analyze Real Estate Funds by asset class, dividing the main funds
into 3 categories: Offices, Malls and Industrials, to compare funds’ valuation. In the
table on the next page we show which funds were considered in our analysis.
Figure 430: FII – 12 months yield divided by asset class

In percentage
20
Offices Malls Ind Real Interest rate
15
10
0
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
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May-17
Jul-17
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Jan-18
Figure 431: FII – P/FFO 12 months forward by asset class vs Listed Shopping Malls
25
Offices Malls Ind Listed Malls
20
15
10
0
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Mar-14
May-14
Sep-14
Nov-14
Mar-15
May-15
Sep-15
Nov-15
Mar-16
May-16
Sep-16
Nov-16
Mar-17
May-17
Sep-17
Nov-17
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Table 214: Summary of FII used in our asset class analysis

Mkt Cap Trading Vol. Dividend P/FFO*
Tickers Fund US$mn Daily US$mn Yield 12M Estimate
KNRI11 BS Equity Kinea Renda Imobiliaria 797 0.8 6.4% 14.9
BRCR11 BS Equity BTG Pactual Corporate Office Fund 607 2.0 5.4% 17.6
HGRE11 BS Equity CSHG Real Estate 332 0.5 7.4% 12.8
TBOF11 BS Equity TB Office 262 0.2 2.8% 33.9
FFCI11 BS Equity Rio Bravo 117 0.1 7.4% 12.9
CNES11 BS Equity BM Cenesp 82 0.0 4.8% 19.9
RNGO11 BS Equity Rio Negro 76 0.1 6.9% 13.9
HGJH11 BS Equity CSHG JHSF Prime Offices 77 0.1 5.9% 16.2
FVBI11 BS Equity VBI FL 4440 66 0.1 4.7% 20.3
268 0.4 5.8% 16.3
HGBS11 BS Equity Brasil Shopping 390 0.5 6.0% 16.0
ABCP11 BS Equity Grand Plaza Shopping 304 0.1 5.9% 16.0
PQDP11 BS Equity Parque Dom Pedro Shopping 232 0.0 5.1% 18.7
SHPH11 BS Equity Patio Higienopolis 187 0.0 4.1% 23.1
FIGS11 BS Equity General Shopping Ativo e Renda 77 0.2 10.2% 9.3
JRDM11 BS Equity Jardim Sul 54 0.1 6.8% 13.9
VISC11 BS Equity Vinci Shopping Center 106 0.6 8.1% 11.8
XPML11 BS Equity XP Malls NA NA 12.1% 7.8
MALL11 BS Equity Malls Brasil Plural NA 0.2 11.1% 8.6
Avg. Malls 193 0.2 6.0% 15.9
HGLG11 BS Equity CSHG Logistica 160 0.3 6.6% 14.4
FIIB11 BS Equity Industrial do Brasil 86 0.2 6.8% 13.9
SDIL11 BS Equity SDI Logistica Rio 44 0.1 6.9% 13.7
Avg. Warehouses 96 0 6.7% 14.1
Source: Company reports and J.P. Morgan estimates. *Assuming funds distribute 95% of their FFO.
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Warehouses
The warehouse industry in Brazil is still a small market when compared with that in
other countries around the world such as the US and Mexico. Brazil’s ~17mn m2 of
warehouse condominiums and isolated warehouses are more than 30x smaller than
the US market and more than 5x smaller than the Mexican market. The Southeast
region has the largest inventory of existing warehouses in Brazil with 80% of the
total inventory, followed by the South region and Northeast region. Currently,
around 80% of warehouse inventory is self-owned by companies using them and
20% is rented, which is the opposite ratio of the US market. Thus, we believe there
could be a migration in the future for rental warehouses as opposed to privately
owned warehouses, which in turn could potentially benefit property companies.
Table 215: Brazil Industrial Warehouse Market Overview

Inventory Overall 2017 Leasing 2017 New Delivery 2017 Net Absorption Asking Rent (R$/m2/month)
Submarket
(‘000 m2) Vacancy Rate Activity ('000 m2) (‘000 m2) (‘000 m2) Min. Avg. Max.
Campinas 1,884 17.2% 61 10 29 8.2 16.0 30.0
Jundiaí 1,585 25.3% 91 0 -108 14.5 18.0 22.0
Cajamar 1,209 24.9% 17 0 -10 16.0 21.0 24.0
Guarulhos 1,251 25.8% 107 80 77 18.0 22.0 27.0
Barueri 1,292 25.9% 85 67 38 14.0 22.5 32.0
Embu 1,055 15.2% 93 0 56 13.0 20.0 26.0
São Paulo City 477 12.0% 22 0 5 8.2 19.0 32.0
Atibaia 493 13.5% 45 0 43 12.0 18.0 23.0
Vale do Paraíba 459 41.8% 9 0 -14 12.5 15.8 18.0
Sorocaba 547 40.9% 78 85 59 12.1 16.0 23.8
Grande ABC 356 28.7% 24 104 14 17.0 23.0 30.0
Ribeirão Preto 146 31.7% 5 0 4 10.0 15.0 18.0
Piracicaba 143 48.1% 6 0 -2 12.5 15.3 20.0
São Paulo 10,897 23.9% 643 345 192 8.2 19.1 32.0
Duque de Caxias 709 35.2% 79 0 -17 19.0 26.0 30.0
Pavuna 415 22.6% 22 0 5 17.0 23.8 30.0
Queimados/ Seropédica 205 48.9% 0 0 -24 18.5 20.0 22.0
Santa Cruz/ Campo Grande 164 0.0% 0 0 0 22.0 24.0 24.0
Belford Roxo/ Nova Iguaçu 111 24.2% 0 0 0 22.0 22.0 22.0
Vale do Paraíba Fluminense 211 0.0% 3 0 3 13.0 17.0 18.0
Campos 40 6.6% 0 0 0 14.0 14.5 15.0
Av. Brasil 35 1.7% 3 0 1 35.0 35.0 35.0
Rio de Janeiro 1,890 25.1% 107 0 -32 13.0 23.4 35.0
Amazonas 445 37.3% 31 0 14 17.0 22.0 22.0
Bahia 226 27.9% 1 29 1 9.0 16.0 28.3
Paraná 1,009 29.7% 45 103 27 8.0 15.0 21.6
Pernambuco 757 11.8% 26 0 -25 14.0 18.0 18.5
Rio Grande do Sul 468 12.7% 25 0 16 8.3 15.5 18.0
Minas Gerais 820 18.0% 50 0 18 16.0 22.0 27.0
Ceará 93 8.6% 2 0 2 14.0 15.0 17.0
Pará 54 61.8% 0 0 0 19.0 19.0 19.0
Santa Catarina 425 9.1% 62 0 50 8.0 13.0 22.0
Total Other regions 4,298 21.1% 242 132 104 8.0 17.5 28.3
Total Brazil 17,085 23.3% 991 477 263 8.0 18.5 35.0
Source: Cushman & Wakefield. As of 4Q17.
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The industrial warehouse segment suffered from the slowdown in the Brazilian
economy since 2014, stimulating market players to reduce the level of deliveries in
2017 to around 510k m2, compared to more than 1mn m2 over the past years. Data
from Cushman & Wakefield shows that SãoPaulo led the new supply in 2017, adding
345k m2, 100k m2 in the ABC region (metropolitan region of São Paulo). All in,
vacancy in Brasil warehouses accelerated last year, reaching 23.3% by year-end,
compared to 22.7% in 4Q16. Despite the deterioration in occupancy, the average ask
price remained stable over the past two years, at R$20/m2 in 4Q17, according to data
from Colliers International.
Figure 432: Brazil Average Warehouse Ask Price vs. Prices Adjusted by Inflation
R$/m 2
23.7 23.9 23.6

23.4 23.5 23.2 23.2
Asking Price Adjusted Price 22.8
22.1
21.4 21.6
20.9
20.2 20.5
20.1
20.2 20.3 20.5 20.5 20.3 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Table 216: Brazil Warehouse Market Overview

‘000 m 2
2013 2014 2015 2016 2017
Supply 7,596 9,735 10,849 12,714 13,226
Delivered Supply 1,667 1,242 1,114 1,095 512
Net Absorption 1,158 1,113 811 279 428
Vacancy Rate 18% 17% 18% 25% 25%
Average Price (R$/m2) 21.0 20.5 20.0 20.0 20.0
Table 217: São Paulo Warehouse Market Overview

‘000 m 2
2013 2014 2015 2016 2017
Supply 4,715 5,899 6,659 7,833 8,092
Delivered Supply 1,183 525 760 650 259
Net Absorption 698 582 518 192 420
Vacancy Rate 23% 20% 21% 27% 26%
Average Price (R$/m2) 21.0 20.5 20.0 19.0 19.0
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Table 218: Rio de Janeiro Warehouse Market Overview

000's m 2
2013 2014 2015 2016 2017
Supply 999 1,045 1,179 1,588 1,681
Delivered Supply 52 116 134 287 93
Net Absorption 78 26 98 176 -79
Vacancy Rate 6% 14% 15% 21% 30%
Average Price (R$/m2) 25.5 26.2 25.0 23.0 22.0
Figure 433: Brazil Warehouse industry: Privately owned vs. rented Figure 434: US Warehouse industry: Privately owned vs. rented
20% 20%
Self-owned
Self-owned
Rented
Rented
80% 80%
Source: MRV Presentation and Colliers International. Source: MRV Presentation and Colliers International.
Figure 435: Warehouse breakdown by size in m2 Figure 436: Warehouse inventory divided by population (m2)
Millions m2 Total warehouse GLA / Total population
48.8% 0.78
34.5%
0.48
9.7%
6.7%
0.05
0.3%
< 1,000 1,000 a 5,000 5,001 a 10,000 10,001 a 50,000 > 50,000 United States Mexico Brazil
Source: MRV Presentation and Colliers International. Source: MRV Presentation and Colliers International.
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Table 219: Warehouse deliveries

Logistic Park Opening Area (m2) Submarket State
TRX Guarulhos 1Q 83,084 Guarulhos SP
Bresco Viracopos 1Q 25,475 Campinas SP
Mega Centro Logístico 1Q 22,800 Curitiba PR
CLIR Imigrantes 2Q 104,069 Grande ABC SP
Portal do Porto 2Q 88,282 São José dos Pinhais PR
Golgi 2Q 60,000 Duque de Caxias RJ
Multi Modal 2Q 46,015 Campinas SP
GLP Irajá 2Q 22,882 Pavuna RJ
Parque Torino 2Q 14,000 Betim MG
LSP Business Park 2Q 10,109 Nova Iguaçu RJ
LOG 3Q 20,527 Goiânia GO
VBI Log 4Q 15,000 Extrema MG
Total 512,243
Source: J.P. Morgan estimates, Colliers.
Figure 437: São Paulo Industrial Submarkets Areas and Net absortion
Source: Colliers.
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Figure 438: Rio de Janeiro Industrial Submarket Areas and Net absortion in 2017
Source: Colliers.
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Primers Around the World

In this section we provide the links to differentiated reports from our JPM colleagues
across the globe. In our view, this is an excellent opportunity to understand more
about real estate in different countries and regions. These primers contain info on
several regions of the world, from Australia to Europe, passing through US REITs,
Japan and Russia.
Sector: US REITs
Report: 2018 Tenancy Handbook
Analyst: Anthony Paolone
Please click here for the report
Sector: US REITs
Report: 2018 REIT Outlook –A balanced view for 2018; the stocks are cheaper but
growth doesn't stack up
Analyst: Anthony Paolone
Sector: US REITs
Report: REITWorld Recap: 2018 Growth Setting up to be Skinny
Analysts: Anthony Paolone
Sector: European Property

Report: 2018 Outlook - Value in UK, Growth on the Continent. Rates to dominate
2018
Analysts: Neil Green
Sector: UK Housebuilders
Report: UK Housebuilding 2018 Outlook: New-Build Demand Stable; Look for
earnings momentum
Analysts: Emily Biddulph
Sector: European Building Materials

Report: 2018 Outlook: Look for pricing power in an inflationary Environment
Analysts: Elodie Rall
Sector: European Infrastructure and Construction

Report: 2018 Outlook: Still positive but harder comps
Analysts: Elodie Rall
Sector: Australian REITs

Report: 2018 Australian REIT Outlook Retail operating conditions to surprise on the
upside, highlights value in the sector
Analysts: Richard Jones
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Sector: China Property

Report: New era, a new perspective
Analysts: Ryan Li
Sector: Singapore Properties

Report: Residential Spearheads Brighter Outlook
Analysts: Brandon Lee
Please click here for the report.
Sector: Thai Property

Report: A short-lived rally, downgrade LPN to UW
Analysts: Anne Jirajariyavech
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Tables
Table 1: Coverage Summary ...................................................................................4
Table 2: BZ Real Estate sector vs. other LatAm sectors............................................9
Table 3: BZ Real Estate sectors vs. others Brazilian sectors .....................................9
Table 4: Real Estate price performance..................................................................13
Table 5: Brazil Macro Assumptions.......................................................................23
Table 6: Real Estate weight in Bovespa Index since 2008.......................................24
Table 7: IMOB Index – Composition and stock weight ..........................................25
Table 8: Mall distribution per State........................................................................36
Table 9: Mall distribution per Capital ....................................................................36
Table 10: ABRASCE expected openings for 2018 .................................................38
Table 11: Malls weight in Bovespa Index since 2012 .............................................39
Table 12: Rental Metrics Calculation – hypothetical example.................................44
Table 13: Operational Metrics Breakdown .............................................................45
Table 14: Own GLA (‘000 m2) per Tier City ranking .............................................50
Table 15: Number of Assets per Tier City ranking .................................................50
Table 16: Aliansce Assets per city tier as of 3Q17..................................................51
Table 17: Multiplan Assets per city tier as of 3Q17 ................................................52
Table 18: Sonae Sierra Brasil Assets per city tier as of 3Q17..................................52
Table 19: Iguatemi Assets per city tier as of 3Q17 .................................................52
Table 20: BR Malls Assets per city tier as of 3Q17 ................................................53
Table 21: E-Commerce Breakdown per Segment ..................................................56
Table 22: Market Share per City............................................................................56
Table 23: Convertion Rate per State.......................................................................57
Table 24: Shopping malls breakdown – Listed companies......................................61
Table 25: Listed companies’ top 5 shareholders .....................................................61
Table 26: Summary of Company Portfolios – As of 3Q17......................................64
Table 27: Conversion of Sales into Revenues, EBITDA and FFO...........................64
Table 28: Geographical diversification for listed companies as of 3Q17 .................66
Table 29: Brazilian Malls Correlation with forward interest rates since 2012..........70
Table 34: Brazilian Malls – Income statement........................................................71
Table 35: Brazilian Malls – Margins and ratios ......................................................71
Table 36: SSS per company...................................................................................72
Table 37: SSR per company ..................................................................................72
Table 38: Occupancy per company ........................................................................72
Table 39: Occupancy Cost per company ................................................................72
Table 40: Total GLA (‘000 m2) .............................................................................72
Table 41: Average participation on total GLA........................................................72
Table 42: Own GLA (‘000 m2) ..............................................................................73
Table 43: Revenues (R$mn) ..................................................................................73
Table 44: NOI Margin...........................................................................................73
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Table 45: EBITDA (R$mn) ...................................................................................73

Table 46: EBITDA margin ....................................................................................73
Table 47: Financial results as % of revenues ..........................................................73
Table 48: FFO adj. (R$mn)....................................................................................74
Table 49: FFO margin ...........................................................................................74
Table 50: Total Cash (R$mn) ................................................................................74
Table 51: Net Debt to EBITDA .............................................................................74
Table 52: Total Debt (R$mn).................................................................................74
Table 53: Summary of companies’ accounting receivables and coverage ratios as of
3Q17.....................................................................................................................75
Table 54: Central bank provision Criteria for Consumer loans, used as our worst case
scenario ................................................................................................................77
Table 55: Potential impact from IFRS 9.................................................................77
Table 56: BR Malls accounting receivables aging ..................................................78
Table 57: Multiplan accounting receivables aging..................................................78
Table 58: Iguatemi accounting receivables aging ...................................................78
Table 59: Aliansce accounting receivables aging....................................................78
Table 60: Sonae Sierra Brasil accounting receivables aging....................................79
Table 61: Total Management Compensation Breakdown – Average 2012-16..........79
Table 62: Average Annual Total Compensation per Executive ...............................81
Table 63: Long Term Compensation Plan – Stock Options.....................................82
Table 64: Long Term Compensation Plan – Other Programs as of 1Q17.................83
Table 65: Aliansce existing Stock Option Plan – As of 1Q17 .................................83
Table 66: BR Malls Variable Remuneration Rules – As of 1Q17............................84
Table 67: BR Malls existing Stock option program as of 1Q17...............................84
Table 68: Iguatemi existing Stock option program as of 1Q17................................84
Table 69: Multiplan existing Stock option program as of 1Q17 ..............................85
Table 70: Multiplan Phantom Share program .........................................................85
Table 71: Shopping Malls – valuation summary.....................................................86
Table 72: Aliansce portfolio as of 3Q17.................................................................93
Table 73: Aliansce announced expansions as of 3Q17............................................93
Table 74: Aliansce Construction Potential as of 3Q17 – Co’s Stale.........................93
Table 75: Multiplan portfolio as of 3Q17 ...............................................................94
Table 76: Multiplan commercial as of 3Q17 ..........................................................94
Table 77: Multiplan expansions as of 3Q17 ...........................................................94
Table 78: Multiplan greenfields as of 3Q17 ...........................................................94
Table 79: Multiplan Construction Potential as of 3Q17 ..........................................94
Table 80: Iguatemi portfolio as of 3Q17.................................................................95
Table 81: Iguatemi commercial as of 3Q17............................................................95
Table 82: Iguatemi greenfields as of 3Q17.............................................................95
Table 83: Iguatemi Construction Potential as of 3Q17 – 100% ...............................95
Table 84: BR Malls portfolio as of 3Q17 ...............................................................96
Table 85: BR Malls expansions as of 3Q17............................................................96
Table 86: BR Malls greenfields as of 3Q17............................................................97
Table 87: Sonae Sierra Brasil portfolio as of 3Q17.................................................97
Table 88: General Shopping portfolio as of 3Q17...................................................97
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Table 89: Non-covered and non-listed companies portfolio ....................................98

Table 90: Ancar Portfolio ......................................................................................98
Table 91: JCPM Portfolio......................................................................................99
Table 92: Tenco Portfolio......................................................................................99
Table 93: Savoy Portfolio......................................................................................99
Table 94: CCP Portfolio ........................................................................................99
Table 95: Gazit Brasil Portfolio ........................................................................... 100
Table 96: Brookfield Portoflio............................................................................. 100
Table 97: Almeida Junior Portfolio...................................................................... 100
Table 98: JHSF Portfolio..................................................................................... 100
Table 99: Property transactions............................................................................ 101
Table 100: Property transactions.......................................................................... 102
Table 105: Family formation likely will have increased by 35mn by 2030............ 123
Table 106: Housing market breakdown................................................................ 123
Table 107: HB in Brazil can launch up to 100k units per year or a PSV of up to
R$20bn ............................................................................................................... 124
Table 108: Annual launches based on an average price of R$180k per unit........... 124
Table 109: Brazil’s demographic statistics ........................................................... 125
Table 110: Demographic analysis by population .................................................. 125
Table 111: Demographic analysis by region......................................................... 125
Table 112: 10 Largest metropolitan regions ......................................................... 125
Table 113: 20 Largest cities in Brazil by population............................................. 126
Table 114: Family Size is shrinking – number of individuals per home................. 126
Table 115: Performance and valuation during Selic cycles ................................... 128
Table 116: Housing Deficit in relative terms........................................................ 130
Table 117: Housing Deficit – Breakdown by Region and Category ...................... 131
Table 118: Housing Deficit – Breakdown by Income Level.................................. 132
Table 119: Absolute Housing Deficit – Evoluation by Metropolitan Region ......... 132
Table 120: Relative Housing Deficit as % of total Housing – Evoluation by
Metropolitan Region ........................................................................................... 132
Table 121: Summary of home price increases according to FIPE ZAP.................. 134
Table 122: Rental prices yoy variation................................................................. 139
Table 123: Rental yield is above real interest rate................................................. 139
Table 124: Indicators considered on ABRAINC FIPE survey............................... 142
Table 125: Change in affordability between 2014 and 2017 ................................. 149
Table 126: Total SoS per company ...................................................................... 152
Table 127: Inventory SoS per company ............................................................... 153
Table 128: Launches SoS per company................................................................ 153
Table 129: Inventories – Main indexes................................................................. 154
Table 130: Inventory Summary as of 3Q17.......................................................... 154
Table 131: Leverage Breakdown by Company..................................................... 162
Table 132: Land bank summary as of 3Q17 ......................................................... 164
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Table 133: Cost breakdown ................................................................................. 167

Table 134: Construction cost breakdown, lower income vs. middle and high income
........................................................................................................................... 167
Table 135: INCC – National Construction Cost Index breakdown* ...................... 168
Table 136: Financial Plans for Developers ........................................................... 171
Table 137: Equity Offerings – After 2013 several offers happened through private
subscriptions ....................................................................................................... 171
Table 138: Equity Offerings since 2007-13.......................................................... 172
Table 139: Equity Offerings before 2007 ............................................................. 173
Table 140: Debentures Issued since 2012............................................................. 173
Table 141: Debentures Issued before 2012........................................................... 174
Table 142: Growth in launches by company......................................................... 176
Table 143: Growth in presales by each company.................................................. 176
Table 144: Summary Income Statement – companies under coverage (Ex-PDG and
Rossi) ................................................................................................................. 178
Table 145: Summary Balance Sheet – companies under coverage (Ex-PDG and
Rossi) ................................................................................................................. 178
Table 146: Summary margins and ratios– companies under coverage (Ex-PDG and
Rossi) ................................................................................................................. 179
Table 147: Consolidated figures including all publicly traded companies (Ex-PDG
and Rossi) ........................................................................................................... 179
Table 148: Net revenues (R$mn) ......................................................................... 179
Table 149: EBITDA (R$mn) ............................................................................... 180
Table 150: Net income (R$mn)............................................................................ 180
Table 151: Gross margins – including interest costs ............................................. 180
Table 152: EBITDA margins – including interest costs ........................................ 181
Table 153: Net margins ....................................................................................... 181
Table 154: Backlog margins ................................................................................ 181
Table 155: ROE – Return on Equity .........................Error! Bookmark not defined.
Table 156: Cash burn () / Cash Generation (R$mn).............................................. 182
Table 157: Total debt (R$mn).............................................................................. 182
Table 158: Net debt (R$mn) ................................................................................ 183
Table 159: Net debt to equity............................................................................... 183
Table 160: NAV analysis as of 3Q17................................................................... 186
Table 161: Companies’ top 5 shareholders........................................................... 187
Table 162: Companies’ top 5 shareholders........................................................... 187
Table 163: Percentage of Completion (PoC) ........................................................ 187
Table 164: Summary of Tax Regimes in Brazil.................................................... 189
Table 165: Physical Swap Impact on Margins...................................................... 190
Table 166: Financing systems in Brazil................................................................ 194
Table 167: Financing conditions for homebuilders in Brazil................................. 194
Table 168: Total mortgages decreased dropped 13% in 2017, reaching R$101bn,
below 2011 levels................................................................................................ 195
Table 169: FGTS would be the 7th largest bank in the country in terms of assets... 210
Table 170: Summary of Total Inflows and Outflows ............................................ 211
Table 171: Summary of FGTS Inflows ................................................................ 211
Table 172: Summary of FGTS Outflows.............................................................. 212
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Table 173: Breakdown of Employees’ Withdrawals............................................. 212

Table 174: Income Statement summary ............................................................... 213
Table 175: Balance Sheet Summary..................................................................... 213
Table 176: FGTS allocation to MCMV program .................................................. 215
Table 177: Breakdown of Workers’ Withdrawals from FGTS by amount ............. 217
Table 178: Breakdown of Workers withdraws from FGTS by number transactions
........................................................................................................................... 217
Table 179: FGTS budget for coming years........................................................... 217
Table 180: FGTS-FI investments (R$bn) ............................................................. 218
Table 181: Composition of FGTS board of trustees.............................................. 218
Table 182: Comparison among Alternative Funding Instruments.......................... 220
Table 183: Summary of MCMV Phases............................................................... 222
Table 184: MCMV III – Cash Subsidies .............................................................. 224
Table 185: MCMV III – Price Caps Faixa 1.5...................................................... 224
Table 186: MCMV III – Price Caps Faixa 2 and 3................................................ 224
Table 187: MCMV III – Price Caps Faixa 3 Plus ................................................. 224
Table 188: Valuation Summary ........................................................................... 226
Table 189: Valuation Summary ........................................................................... 226
Table 190: Lopes Historical Payout ..................................................................... 227
Table 191: BR Brokers Historical Payout............................................................. 227
Table 192: Brazilian Brokers Snapshot ................................................................ 228
Table 193: Brokers Valuation Summary .............................................................. 229
Table 194: EPS 2017 revision since Dec-2016 ..................................................... 231
Table 195: EPS 2018 revision since Dec-2016 ..................................................... 231
Table 196: Brokerage business commission ......................................................... 236
Table 197: Premium commission......................................................................... 236
Table 198: Commission breakdown ..................................................................... 236
Table 199: Brokerage business commission ......................................................... 237
Table 200: Premium Commission........................................................................ 237
Table 201: Commission breakdown ..................................................................... 237
Table 202: Sensibility Analysis – How much R$1bn addition on intermediations
could add on share price ...................................................................................... 239
Table 203: Details from agreements with banks ................................................... 241
Table 204: Lopes’s acquisition track record ......................................................... 243
Table 205: BR Brokers’ acquisition track record.................................................. 243
Table 206: Brokers Internet Portal Data – 2017 figures ........................................ 244
Table 207: Brokers CRM Data – 2017 figures...................................................... 244
Table 208: Commercial Properties summary – Listed companies ......................... 245
Table 209: São Paulo Commercial Offices Overview – As of 4Q17 ..................... 246
Table 210: São Paulo – Triple A Inventory Under Construction Breakdown – As of
4Q17................................................................................................................... 246
Table 211: Rio de Janeiro Commercial Offices Overview – As of 4Q17............... 248
Table 212: FII tax structure vs Company facing Lucro Real ................................. 254
Table 213: IFIX Top 15 Members*...................................................................... 255
Table 214: Summary of FII used in our asset class analysis .................................. 258
Table 215: Brazil Industrial Warehouse Market Overview ................................... 259
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Table 216: Brazil Warehouse Market Overview................................................... 260

Table 217: São Paulo Warehouse Market Overview............................................. 260
Table 218: Rio de Janeiro Warehouse Market Overview ...................................... 261
Table 219: Warehouse deliveries ......................................................................... 262
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Figures
Figure 1: BZ HB historical 12M forward P/E based on consensus ..........................10
Figure 2: BZ HB historical P/BV...........................................................................10
Figure 3: BZ HB historical P/NAV........................................................................10
Figure 4: ROE Regression based on 2018E ROE ...................................................11
Figure 5: ROE Regression based on 2019E ROE ...................................................11
Figure 6: BZ Malls – 12-month forward P/FFO .....................................................11
Figure 7: BZ Malls – P/NAV.................................................................................12
Figure 8: BZ Malls– 12-month forward cap rate.....................................................12
Figure 9: BR Properties – discount to NAV ...........................................................12
Figure 10: BZ Brokers – P/BV ..............................................................................13
Figure 11: Brazilian Homebuilders market cap.......................................................14
Figure 12: Shopping Malls market cap...................................................................14
Figure 13: Properties market cap ...........................................................................14
Figure 14: Brokers market cap...............................................................................15
Figure 15: Performance of Brazilian homebuilders, malls, properties and brokers
since 2009 (Jan 11 = 100)......................................................................................15
Figure 16: IBOV (Brazilian Equities Index) vs. IMOB (Brazilian Real Estate Index)
– since 2008..........................................................................................................15
Figure 17: Stock Performance since IPOs ..............................................................16
Figure 18: Last 12 months performance .................................................................16
Figure 19: 2017 Share Performance .......................................................................16
Figure 22: BZ Homebuilders performance (Top-5 liquidity) – since 2010 (Jan 10 =
100) ......................................................................................................................17
Figure 23: Shopping Malls performance – since 2010 (Jan 10 = 100) .....................18
Figure 24: Properties performance – since 2010 (Mar 10 = 100).............................18
Figure 25: Brokers performance – since 2010 (Jan 10 = 100) .................................18
Figure 26: BZ HB Heatmap...................................................................................19
Figure 27: BZ Malls Heatmap ...............................................................................20
Figure 28: Quarterly GDP Growth – YoY Change .................................................21
Figure 29: Inflation Indexes – YoY Change ...........................................................21
Figure 30: Target Selic Rate ..................................................................................21
Figure 31: Brazil – Net debt ..................................................................................22
Figure 32: Wage Mass vs. Unemployment Rate .....................................................22
Figure 33: Monthly Average Income – Trailing 12 Months ....................................22
Figure 34: Quarterly Consumer Confidence – CNI.................................................23
Figure 35: Selic vs TR and IPCA and TJLP ...........................................................23
Figure 36: The sector has 5 companies in the IBOV with a total weight of 2.1% in
Jan-2018 vs. a peak of 12% five years ago.............................................................24
Figure 37: Annual average traded volume – Currently BR Malls, Multiplan, MRV
and Cyrela are the most liquid names in the sector .................................................25
Figure 38: Homebuilders 90-day average liquidity – Small recovery in 2017..........26
Figure 39: Shopping Malls 90-day average liquidity – Sector Liquidity treding up .26
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Figure 40: Commercial Propereties 90-day average liquidity – Figures were impacted
by BRPR lower free float. .....................................................................................26
Figure 41: Average daily volume traded / Free float...............................................27
Figure 42: Number of shopping malls in Brazil and total sales ...............................32
Figure 43: Total GLA YoY growth – Accelerating again in 2018 ...........................32
Figure 44: Sales growth – Shopping malls (ABRASCE) vs. traditional retail (IBGE)
.............................................................................................................................32
Figure 45: Malls has resilient sales during past crises.............................................33
Figure 46: Shopping Mall penetration in the world.................................................33
Figure 47: Evolution of Shopping Mall penetration in Brazil..................................33
Figure 48: Southeast is the region with highest penetration in Brazil ......................34
Figure 49: Shopping Malls sales as % of retail sales around the Globe ...................34
Figure 50: Share of Brazilian Malls in retail sales ..................................................34
Figure 51: Mall companies under our coverage have around 40% of revenue market
.............................................................................................................................35
Figure 52: Breakdown of GLA market share in Brazil for listed players as of 3Q1735
Figure 53: Total GLA per region ...........................................................................36
Figure 54: GDP per region ....................................................................................36
Figure 55: GLA expansion of shopping malls in Brazil by region in 2017 (GLA in
mn m2)..................................................................................................................37
Figure 56: IBOPE Inteligencia – Monthly mall traffic variation yoy.......................37
Figure 57: IVSC – Monthly mall traffic variation yoy ............................................37
Figure 58: 2018 expected total openings by geography...........................................38
Figure 59: Aggregated avg. daily volume traded ....................................................39
Figure 60: Companies’ avg. daily liquidity in the last 90 days* ..............................39
Figure 61: SSS and SSR more resilient than nominal GDP.....................................40
Figure 62: SSS (Same-Store Sales) – Change yoy ..................................................40
Figure 63: SAS (Same-Area Sales) – Change yoy ..................................................40
Figure 64: SSR (Same-Store Rent) – Change yoy...................................................40
Figure 65: SAR (Same-Area Rent) – Change yoy...................................................40
Figure 66: Occupancy cost – Flattish over time despite the gap between SSS and
SSR due to efficiency gains on Cond. Exp. ............................................................41
Figure 67: Multiplan Occupancy cost per Malls – Positive correlated with sales/m2 41
Figure 68: Occupancy rate –Impacted by greenfield openings in 2012/13, but
recovering since then.............................................................................................41
Figure 69: On average, malls’ SSS have been more resilient than those of apparel
retailers.................................................................................................................42
Figure 70: Main listed retailers’ SSS yoy ...............................................................42
Figure 71: BR Malls’ annual SSS breakdown (%)..................................................42
Figure 72: BR malls – SSS yoy breakdown............................................................43
Figure 73: Difference in Rental Metrics from our hypothetical example .................45
Figure 74: Consumption indexes yoy change in nominal terms...............................46
Figure 75: Retail sales volume for Brazil main States – While MG outperformed BA
underperformed.....................................................................................................46
Figure 76: Wage mass and unemployment as of Dec-2016 – Increase in
unemployment rate impacted wage mass negatively...............................................46
Figure 77: Retail sales volume – Growth yoy.........................................................47
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Figure 78: Total credit household and growth yoy – Significant decelerantion in the
past 12 months ......................................................................................................47
Figure 79: Cielo retailers’ revenues performance per region – There is a clear
deceleration across the board in the past 3 years.....................................................47
Figure 80: Cielo retailers’ revenues – Monthly growth yoy – The reduction on
inflation cause a convergence between nominal and real terms...............................48
Figure 81: Cielo Retailer sales in the North region .................................................48
Figure 82: Cielo Retailer sales in the Northeast region ...........................................48
Figure 83: Cielo Retailer sales in the Central West region ......................................48
Figure 84: Cielo Retailer sales in the Southeast region ...........................................48
Figure 85: Cielo Retailer sales in the South region .................................................49
Figure 86: Percentage of Companies’ GLA per City Tier .......................................50
Figure 87: Summary of Shopping Malls Penetration by Country ............................51
Figure 88: Brazil Shopping Malls Penetration by City............................................51
Figure 89: Evolution of one-time consumers in E-commerce in Brazil....................54
Figure 90: E-Commerce sales in Brazil – New and Used Products..........................54
Figure 91: E-Commerce sales in Brazil – New Products.........................................54
Figure 92: Average ticket ......................................................................................55
Figure 93: Volume of orders..................................................................................55
Figure 94: Consumers breakdown per age..............................................................55
Figure 95: Consumers breakdown per region .........................................................55
Figure 96: Payment method breakdown .................................................................56
Figure 97: Segment breakdown as a percentage of sales .........................................56
Figure 98: Client Fidelization – Percentage of Recurring Visitors...........................57
Figure 99: Number of Purchases per Client in 2017 ...............................................57
Figure 100: One-time consumers on international websites ....................................58
Figure 101: International E-Ccommerce sales and avg. ticket.................................58
Figure 102: Top 5 international retailers as a percentage of Brazilian purchaseson
international E-commerce......................................................................................58
Figure 103: Payment methods on international websites.........................................58
Figure 104: Delivery time vs. percentage of deliveries on time...............................58
Figure 105: Fipe Buscapé Index – YoY variation...................................................59
Figure 106: Fipe Buscapé Index – MoM variation..................................................59
Figure 107: Main reasons to visit Shopping Malls..................................................60
Figure 108: Multiplan changes in tenants mix over the past 10 years ......................60
Figure 109: Aliansce changes in tenant mix over the past 5 years ...........................60
Figure 110: 3Q17 Total revenue breakdown...........................................................62
Figure 111: 3Q16 Total revenue breakdown...........................................................62
Figure 112: 3Q17 Rental revenues breakdown .......................................................62
Figure 113: 3Q16 Rental revenues breakdown .......................................................62
Figure 114: Greenfield and expansion plans through 2018 .....................................63
Figure 115: Companies increased their GLA by 106% since 2008..........................63
Figure 116: Sales/m2 per company.........................................................................64
Figure 117: Rents/m2 per company ........................................................................65
Figure 118: Rent/m2 – Top 15 Malls – Multiplan has the highest number of assets
within this ranking ................................................................................................65
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Figure 119: Sales/m2 – Top 15 Malls – Multiplan has 8 names on the list followed by
BR Malls with 6 names .........................................................................................65
Figure 120: Portfolio age: on average, listed companies’ portfolios in Brazil are 18
years old ...............................................................................................................66
Figure 121: BR Malls: regional diversification.......................................................66
Figure 122: Multiplan: regional diversification ......................................................66
Figure 123: Iguatemi: regional diversification........................................................67
Figure 124: Aliansce: regional diversification ........................................................67
Figure 125: SSBR: regional diversification ............................................................67
Figure 126: GSHP: regional diversification............................................................67
Figure 127: Companies’ net debt to annualized EBITDA .......................................68
Figure 128: Companies’ leverage and financial burden as of 3Q17.........................68
Figure 129: Companies’ debt breakdown as of 3Q17 .............................................68
Figure 130: BR Malls amortization schedule (R$mn).............................................69
Figure 131: Multiplan amortization schedule (R$mn).............................................69
Figure 132: Iguatemi amortization schedule (R$mn) ..............................................69
Figure 133: Aliansce amortization schedule (R$mn) ..............................................69
Figure 134: Sonae Sierra amortization schedule (R$mn) ........................................69
Figure 135: General Shopping amortization schedule (R$mn) ................................69
Figure 136: Provisions in absolute terms................................................................75
Figure 137: Provisions as % of receivables ............................................................75
Figure 138: Accounts Receivables duration Ex-Real Estate....................................76
Figure 139: Coverage Ratio ( > 90 Days) ...............................................................76
Figure 140: Coverage Ratio (> 180 days)...............................................................76
Figure 141: Management compensation breakdown – Avg. 2012-16 ......................80
Figure 142: Total Remuneration as % of Top Line and FFO – Avg. 2012-16..........80
Figure 143: Management total remuneration divided by company’s market cap......81
Figure 144: Market Cap Variation vs. Total. Comp. Average per Executive between
2012 and 2016.......................................................................................................81
Figure 145: Brazil government linked bond vs. Selic and Shopping Malls yield –
Since 2012 ............................................................................................................86
Figure 146: Malls FFO yield vs. Real Interest rate – Since 2010.............................87
Figure 147: Spread / Difference of Malls FFO yield vs. Real Interest rate – Since
2009......................................................................................................................87
Figure 148: Mall yields vs. NTN-B 10 years..........................................................87
Figure 149: Malls have a negative correlation with the Selic ..................................88
Figure 150:Malls had a positive performance over the past year helped by a
significant decrease in inflation expectations..........................................................88
Figure 151: Malls vs. actual inflation.....................................................................88
Figure 152: Brasil Historical Inflation and Interest rate ..........................................89
Figure 153: Sector’s P/FFO – Since 2010 ..............................................................90
Figure 154: Sector’s FFO Yield – Since 2010 ........................................................90
Figure 155: BR Malls Historical P/FFO .................................................................90
Figure 156: BR Malls Historical FFO Yield...........................................................90
Figure 157: Multiplan Historical P/FFO.................................................................90
Figure 158: Multiplan Historical FFO Yield...........................................................90
Figure 159: Iguatemi Historical P/FFO ..................................................................91
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Figure 160: Iguatemi Historical FFO Yield............................................................91

Figure 161: Aliansce Historical P/FFO ..................................................................91
Figure 162: Aliansce Historical FFO Yield ............................................................91
Figure 163: SSBR Historical P/FFO ......................................................................91
Figure 164: SSBR Historical FFO Yield ................................................................91
Figure 165: BR Malls – Consensus EPS ................................................................92
Figure 166: Multiplan – Consensus EPS ................................................................92
Figure 167: Iguatemi – Consensus EPS..................................................................92
Source: Bloomberg................................................................................................92
Figure 168: Aliansce – Consensus EPS..................................................................92
Figure 169: Sonae Sierra Brasil – Consensus EPS..................................................92
Figure 170: M&A Capex per year for listed companies ........................................ 101
Figure 171: Shopping Malls Companies Heatmap................................................ 107
Figure 172: Shopping Malls Companies Heatmap................................................ 108
Figure 173: Launches in Units – Trailing 12M..................................................... 111
Figure 174: Gross Presales Units – Trailing 12M ................................................. 111
Figure 175: Launches in PSV – Trailing 12M ...................................................... 111
Figure 176: Gross Presales PSV – Trailing 12M .................................................. 111
Figure 177: Launches Avg. price – Trailing 12M ................................................. 112
Figure 178: Gross Presales Avg. price – Trailing 12M ......................................... 112
Figure 179: Inventories in absolute and relative terms.......................................... 112
Figure 180: LTM verage Gross Sales Speed......................................................... 112
Figure 181: Units delivered – Trailing 12M ......................................................... 112
Figure 182: Units Cancelled – Trailing 12M ........................................................ 113
Figure 183: Dissolution as percentage of launches per quarter.............................. 113
Figure 184: Launches– Trailing 12M................................................................... 114
Figure 185: Gross Presales – Trailing 12M .......................................................... 114
Figure 186: MCMV Figures ................................................................................ 114
Figure 187: Mid and High Income segment ......................................................... 114
Figure 188: Cancellation ratio.............................................................................. 114
Figure 189: Deliveires ......................................................................................... 114
Figure 190: Unit launches in SP City – Trailing 12 months .................................. 115
Figure 191: Units sold in SP – Trailing 12 months ............................................... 115
Figure 192: Sales over Supply ............................................................................. 115
Figure 193: Transaction volumes in SP – Avg. last 12 months.............................. 116
Figure 194: Launches mix in SP City................................................................... 116
Figure 195: Inventory mix in SP City .................................................................. 116
Figure 196: Unit launches in SP City – Quarterly figures ..................................... 117
Figure 197: Units sold in SP – Quarterly figures .................................................. 117
Figure 198: Launches and presales – Annual figures ............................................ 117
Figure 199: Presales PSV – Annual figures.......................................................... 118
Figure 200: Sales over Supply – Monthly Average (São Paulo City) .................... 118
Figure 201: Average price units sold.................................................................... 118
Figure 202: Unit launches in SP Metropolitan Region – trailing 12 months .......... 119
Figure 203: Units sold in SP Metropolitan Region – Trailing 12 months............... 119
Figure 204: SoS in SP Metropolitan Region – Trailing 12 months........................ 119
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Figure 205: Unit launches in Rio de Janeiro – Trailing 12 months ........................ 120
Figure 206: Units sold in Rio de Janeiro – Trailing 12 months.............................. 120
Figure 207: Inventory in Rio de Janeiro – 12-month average................................ 121
Units (‘000) ........................................................................................................ 121
Figure 208: Unit launches in Rio de Janeiro per year............................................ 121
Figure 209: Units sold in Rio de Janeiro per year ................................................. 121
Figure 210: Average Sales over Supply per year .................................................. 122
Figure 211: Population breakdown by age as of 2016........................................... 126
Figure 212: Brazil’s states and main cities ........................................................... 127
Figure 213: Sector performance versus Selic rates and the Bovespa...................... 128
Figure 214: Composition of housing deficit – 2015.............................................. 129
Figure 215: Urban Housing Deficit evolution – breakdown by region................... 129
Figure 216: Housing Deficit – breakdown by category......................................... 130
Figure 217: Housing Deficit – breakdown by income segment ............................. 130
Figure 218: Home price increases in 2017 by city – Only 3 cities posted price
increase in real terms........................................................................................... 133
Figure 219: Home price performance in USD since 2008 ..................................... 133
Figure 220: Selling prices – MoM change............................................................ 134
Figure 221: Selling prices – YoY change ............................................................. 135
Figure 222: Percentage of cities with selling price increase above or below inflation
based on MoM change ........................................................................................ 135
Figure 223: Large cities selling price yearly variation – There is a clear deceleration
across the board in the past 3 years ...................................................................... 135
Figure 224: Selling price nominal increases –São Paulo prices more resilient than in
Rio de Janeiro in the past 3 years (%) .................................................................. 136
Figure 225: Average selling price /m2 as of December 2017................................. 136
Figure 226: Volume of sales and prices in São Paulo – According to Secovi........ 136
Figure 227: Top 25 most expensive housing prices .............................................. 137
Figure 228: Residential collateral value in real terms ........................................... 138
Figure 229: Rental price growth on a yoy basis .................................................... 138
Figure 230: Annualized rental yield trending down since mid-2008...................... 139
Figure 231: Residential rental price per city as of Dec-17..................................... 140
Figure 232: MoM selling price vs. rents – Sao Paulo............................................ 140
Figure 233: MoM selling price vs. rents – Rio de Janeiro ..................................... 140
Figure 234: YoY selling prices vs. rents – Sao Paulo............................................ 140
Figure 235: YoY selling prices vs. rents – Rio de Janeiro..................................... 140
Figure 236: Monthly rental yield evolution – São Paulo ....................................... 141
Figure 237: Monthly rental yield evolution – Rio de Janeiro................................. 141
Figure 238: Top 25 highest rental yields & Latam rental yields ............................ 141
Figure 239: Fipe Abrainc Radar index started to recover in 2017.......................... 142
Figure 240: Breakdown of components shows that macro data already bottomed in
Brazil.................................................................................................................. 142
Figure 241: FIPE Abrainc Radar; Current lelve vs Peak and Bottom .................... 143
Figure 242: Breakdown Macroeconomic indexes ................................................. 143
Figure 243: Breakdown Mortgage indexes........................................................... 143
Figure 244: Breakdown Demand indexes............................................................. 144
Figure 245: Breakdown Sector Data indexes........................................................ 144
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Figure 246: Breakdown of properties acquired..................................................... 145

Figure 247: Breakdown for homebuyers’ acquisition intentions............................ 145
Figure 248: Breakdown of homebuyers’ reasons.................................................. 145
Figure 249: Discount Evolution on units sold....................................................... 146
Figure 250: Percentage of transactions with discounts.......................................... 146
Figure 251: Evolution of investment as the main reason for acquisition ................ 146
Figure 252: Price expectations – Next 10 years .................................................... 147
Figure 253: Price expectations – Next 12 months................................................. 147
Figure 254: House ownership and dwellings in Brazil .......................................... 148
Figure 255: Around 90% of Brazilian residential units are represented by houses . 148
Figure 256: Home ownership vs. other countries (%) ........................................... 148
Figure 257: Affordability index – monthly mortgage payment / monthly disposable
income ................................................................................................................ 149
Figure 258: Household income multiple – housing price / annual income ............. 149
Figure 259: Families’ indebtedness and income commitment ............................... 150
Figure 260: Median house price/income ratios in some of the world’s main countries
– According to Demographia............................................................................... 150
Figure 261: Mortgage burden – monthly mortgage installment/median household
monthly income – According to Numbeo............................................................. 150
Figure 262: Sales over Supply – Sales speed of inventories have decelerated since
2010.................................................................................................................... 152
Figure 263: Presales Breakdown – Inventories are gaining market share in total
presales............................................................................................................... 152
Figure 264: Finished inventories as % of total inventories .................................... 154
Figure 265: Inventory supply – considering current presales and last 12M presales –
Following lower SoS, inventories in months increased......................................... 155
Figure 266: Inventories at market value: Inventories have been increasing in absolute
and relative amount............................................................................................. 155
Figure 267: Launches over Presales ratio ............................................................. 155
Figure 268: Sector aggregate presales decreasing slightly since 4Q11................... 156
Figure 269: Inventory supply has been reducing over the past quarter to around 21
months of presales as of 3Q17 ............................................................................. 156
Figure 270: Historical Gross margins*................................................................. 157
Figure 271: Historical EBITDA margins*............................................................ 157
Figure 272: Historical ROE* ............................................................................... 157
Figure 273: Gross margins for selected players (excl. Int. Cost) ........................... 158
Figure 274: EBITDA margins for selected players (excl. Int. Cost) ...................... 158
Figure 275: Total financial cost as % of rev. for selected players: PDG and Rossi
have a huge burden to carry................................................................................. 159
Figure 276: Net margins for selected players........................................................ 159
Figure 277: Cash burn (negative) / cash generation (positive)…........................... 160
Figure 278: . . . and as a % of equity .................................................................... 160
Figure 279: Distribution from selected players..................................................... 160
Figure 280: Consolidated leverage is accelerated a in the past quarters – Net
Debt/Equity......................................................................................................... 161
Figure 281: Net debt/equity – Only 2 companies have a net cash position; Tenda and
Eztec................................................................................................................... 161
Figure 282: Total Equity for selected names ........................................................ 161
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Figure 283: Land bank vs. net investment in land – Aggregated data for all listed
companies........................................................................................................... 164
Figure 284: Land bank duration as of 3Q17 based on last 12 months launches...... 165
Figure 285: Land bank potential sales value (PSV), company’s share as of 3Q17 . 165
Figure 286: Net investment in land as of 3Q17..................................................... 165
Figure 287: Launches Market Share – Covered vs. Non-Covered ......................... 166
Figure 288: Presales Market Share – Covered vs. Non-Covered ........................... 166
Figure 289: Lopes – Selling mix.......................................................................... 166
Figure 290: BR Brokers – Selling mix ................................................................. 166
Figure 291: INCC – Labor continues to drive construction inflation ..................... 167
Figure 292: Real estate project cycle.................................................................... 169
Figure 293: Cash cycle – based on accumulated cash flow ................................... 170
Figure 294: Project cash flow : Low income (Credito Associativo) vs Mid and High
income ................................................................................................................ 170
Figure 295: Project cash flow on the Mid and High income with and without
construction loans ............................................................................................... 171
Figure 296: Total civil construction employees .................................................... 175
Figure 297: Job creation in civil construction segment in Brazil YoY ................... 175
Figure 298: Launches for listed companies .......................................................... 176
Figure 299: Units launched by listed companies................................................... 177
Figure 300: Liquid names gaining market share ................................................... 177
Figure 301: Launches market share in 9M17........................................................ 177
Figure 302: Growth in launches........................................................................... 177
Figure 303: Cyrela – Consensus EPS adj. ............................................................ 184
Figure 304: MRV – Consensus EPS adj. .............................................................. 184
Figure 305: Eztec – Consensus EPS adj. .............................................................. 184
Figure 306: Gafisa – Consensus EPS adj.............................................................. 184
Figure 307: Even – Consensus EPS adj................................................................ 184
Figure 308: Direcional– Consensus EPS adj......................................................... 184
Figure 309: PDG – Consensus EPS adj. ............................................................... 185
Figure 310: Rossi– Consensus EPS adj. ............................................................... 185
Figure 311: Rodobens – Consensus EPS adj. ....................................................... 185
Figure 312: Summary of consolidation rules ........................................................ 191
Figure 313: Brazilian mortgage workflow............................................................ 192
Figure 314: Mortgages disbursement diagram...................................................... 192
Figure 315: In 2016 and 2017 FGTS was the main source of funding in the sector 195
Figure 316: Saving accounts inflows per month: 2017 posted R$17bn in net inflows,
recoverying from R$95bn of outflows in 2015/16 ................................................ 195
Figure 317: Interest rate impact on saving accounts growth.................................. 196
Figure 318: Saving Accounts breakdown ............................................................. 196
Figure 319: Savings Accounts – Monthly balance ................................................ 196
Figure 320: Total mortgage disbursements value.................................................. 197
Figure 321: Total mortgage disbursements units .................................................. 197
Figure 322: Average Loan – Total mortgage disbursements ................................. 197
Figure 323: Mortgages for acquisition (old and new houses) value ....................... 198
Figure 324: Mortgages for acquisition (old and new houses) units........................ 198
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Figure 325: Average Loan – Mortgages for acquisition (old and new houses)....... 198
Figure 326: Mortgages for construction value ...................................................... 199
Figure 327: Mortgages for construction units ....................................................... 199
Figure 328: Average Loan – For construction ...................................................... 199
Figure 329: SFH – Past-due mortgage loans (90 days or more)............................. 200
Figure 330: SBPE – Loan to value evolution........................................................ 200
Figure 331: Mortgage Balance – Earnmarket for Individuals and Companies........ 201
Figure 332: Mortgage Dibursements – Earnmarket loans for Individuals and
Companies .......................................................................................................... 201
Figure 333: Mortgage Average Rate – Earnmarket for Individuals and Companies201
Figure 334: Mortgage Duration – Earnmarket for Individuals and Companies ...... 202
Figure 335: Mortgage Remaining Duration – Earnmarket for Individuals and
Companies .......................................................................................................... 202
Figure 336: Mortgage NPL 15-90 days – Earnmarket for Individuals and Companies
........................................................................................................................... 202
Figure 337: Mortgage NPL more than 90 days – Earnmarket for Individuals and
Companies .......................................................................................................... 203
Figure 338: Breakdown of Mortgage loans .......................................................... 203
Figure 339: CEF’s market share in different segments as of 3Q17 ........................ 204
Figure 340: Breakdown of Loan portfolio ............................................................ 204
Figure 341: CEF historical PDL per credit segment – Mortgage is one of the lowest
........................................................................................................................... 204
Figure 342: CEF Credit risk breakdown............................................................... 205
Figure 343: CEF’s housing credit delinquency..................................................... 205
Figure 344: CEF Basel Index............................................................................... 205
Figure 345: Mortgage growth vs. total loan growth .............................................. 206
Figure 346: Mortgage growth was stronger than that for other consumer segments206
Figure 347: Nonperforming across loan portfolio................................................. 206
Figure 348: Savings Account balance market share by bank................................. 207
Figure 349: SBPE Mortgages disbursements in 2017 by fank............................... 207
Figure 351: Mortgage portfolio yoy growth (%)................................................... 207
Figure 352: Mortgages as % of GDP have been flat in the past 3 years… ............. 208
Figure 353: …therefore Brazil remains underpenetrate in this metric when compared
with other economies .......................................................................................... 208
Figure 354: Domestic credit provided by banking sector as % of GDP as defined by
World Bank ........................................................................................................ 208
Figure 355: Credit as % of GDP .......................................................................... 209
Figure 356: Avg. mortgage duration for individuals under SBPE.......................... 209
Figure 357: FGTS Net inflow/outflow considering only workers’ deposits and
withdrawals......................................................................................................... 210
Figure 358: As expected, FGTS regular deposits have s strong correlation with wage
mass*.................................................................................................................. 211
Figure 359: The upward trend in unemployment should impact FGTS inflows ..... 211
Figure 360: Loan Disbursements breakdown........................................................ 212
Figure 361: FGTS showed healthy growth in equity and ROE.............................. 213
Figure 362: Cash represents 13% of FGTS total deposits ..................................... 214
Figure 363: FGTS Loan Portfolio growing in line with central bank data.............. 214
280
(55-11) 4950-6712 05 April 2018
Figure 364: Credit Portfolio growth accelerated after 2007................................... 214

Figure 365: FGTS average Loan price and Tenor – While average interest rate
continues to decline, tenor is still increasing......................................................... 215
Figure 366: MCMV program financed close to 2.4mn units since 2009 ................ 215
Figure 367: Breakdown of FGTS in 2016 – 0.2% of accounts have more than 25% of
total resources ..................................................................................................... 216
Figure 368: Accumulated amount of Real Estate Receivables (CRIs) under CETIP
custody ............................................................................................................... 219
Figure 369: Accumulated amount of Real Estate Credit Bills (LCIs) under CETIP
custody ............................................................................................................... 220
Figure 370: Typical payment breakdown for a unit of MCMV Faixa 2 ................. 223
Figure 371: Constracted units .............................................................................. 225
Figure 372: Delivered units ................................................................................. 225
Figure 373: Main companies’ market share on MCMV program .......................... 225
Figure 374: Brokers’ relative performance since January 2009............................. 226
Figure 375: Unleveraged sector – both companies have net cash positions............ 227
Figure 376: Lopes and BR Brokers P/BV – sector is trading above its historical
average ............................................................................................................... 231
Figure 377: BBG consensus EPS evolution and LPSB3 performance ................... 231
Figure 378: BBG consensus EPS evolution and BBRK3 performance .................. 231
Figure 379: Total Mortgage disbursements – Central Bank &FGTS ..................... 232
Figure 380: Units Financed – Central & FGTS..................................................... 232
Figure 381: Housing market based on Property Transfer taxes.............................. 233
Figure 382: Market size according to LPS intelligence data.................................. 233
Figure 383: Brazil PSV launches in 2015 – LPS intelligence................................ 233
Figure 384: Brazil units launches in 2015 – LPS intelligence ............................... 233
Figure 385: 2013 PSV launched using SPMR as proxy ........................................ 234
Figure 386: Units launched using SPMR as proxy................................................ 234
Figure 387: Listed Homebuilders representativeness on Brokers’ sales................. 234
Figure 388: Total Presales: Listed HBs vs. listed Brokers..................................... 235
Figure 389: Lopes: Presales Breakdown............................................................... 235
Figure 390: BR Brokers: Presales Breakdown...................................................... 235
Figure 391: Net commission evolution................................................................. 237
Figure 392: Lopes – geographical coverage ......................................................... 238
Figure 393: BR Brokers – geographical coverage................................................. 238
Figure 394: Lopes: Revenues vs. Cost + SG&A as % of Rev................................ 238
Figure 395: BR Brokers: Revenues vs. Cost + SG&A as % of Rev. ...................... 238
Figure 396: Lopes – Revenue vs. Cost + SG&A growth yoy ................................ 239
Figure 397: BR Brokers – Revenue vs. Cost + SG&A growth yoy........................ 239
Figure 398: Brokers historical Share Price vs. Presales......................................... 239
Figure 399: CrediPronto! Mortgage portfolio evolution........................................ 241
Figure 400: CrediPronto! Mortgage origination evolution .................................... 241
Figure 401: Mortgage originations through brokers – still incipient in Brazil........ 242
Figure 402: Number of acquisitions since 2007.................................................... 242
Figure 403: Amount paid per year on acquisitions since 2007 .............................. 242
Figure 404: São Paulo – Ask Price Evolution....................................................... 246
Figure 405: São Paulo Net Absorption – Triple A ................................................ 246
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(55-11) 4950-6712 05 April 2018
Figure 406: São Paulo Vacancy Level – Triple A................................................. 247

Figure 407: São Paulo – Vacancy per Region as of 4Q17 ..................................... 247
Figure 408: São Paulo – Triple A Inventory Under Construction .......................... 247
Figure 409: São Paulo – Class B Inventory Under Construction ........................... 247
Figure 410: Cap Rate for Triple A Developments in São Paulo – as of 2017......... 247
Figure 411: Rio de Janeiro – Ask Price Evolution ................................................ 249
Figure 412: Rio de Janeiro Net Absorption – Triple A.......................................... 249
Figure 413: RJ Vacancy Level – Triple A ............................................................ 249
Figure 414: Rio de Janeiro – Vacancy per Region as of 4Q17 .............................. 249
Figure 415: Rio de Janeiro – Triple A Inventory Under Construction ................... 249
Figure 416: Rio de Janeiro – Class B Inventory Under Construction..................... 249
Figure 417: São Paulo Commerical Properties Map ............................................. 250
Figure 418: Rio de Janeiro Commerical Properties Map....................................... 250
Figure 419: Fipe Zap office suite selling price – As of January of 2018 ................ 251
Figure 420: Office suite selling price – MoM change ........................................... 251
Figure 421: Office suite selling price – YoY change ............................................ 252
Figure 422: Fipe Zap office suite rental price – As of January of 2018.................. 252
Figure 423: Office suite rental price MoM change ............................................... 252
Figure 424: Office suite rental price YoY change................................................. 253
Figure 425: Office suite annualized yield – Yield trading down since the beginning
of the series......................................................................................................... 253
Figure 426: FII historical issuance – There was s significant pick up in FII issuance
in the past 12 months........................................................................................... 254
Figure 427: IFIX performance vs IBOV, IMOB and CDI..................................... 255
Figure 428: Top-5 IFIX members’ performance (Jan 13 = 100)............................ 256
Figure 429: Top-5 IFIX members’ yield – 12 months yield based on dividend
distribution.......................................................................................................... 257
Figure 430: FII – 12 months yield divided by asset class ...................................... 257
Figure 431: FII – P/FFO 12 months forward by asset class vs Listed Shopping Malls
........................................................................................................................... 257
Figure 432: Brazil Average Warehouse Ask Price vs. Prices Adjusted by Inflation260
Figure 433: Brazil Warehouse industry: Privately owned vs. rented...................... 261
Figure 434: US Warehouse industry: Privately owned vs. rented .......................... 261
Figure 435: Warehouse breakdown by size in m2 ................................................. 261
Figure 436: Warehouse inventory divided by population (m2) .............................. 261
Figure 437: São Paulo Industrial Submarkets Areas and Net absortion ................. 262
Figure 438: Rio de Janeiro Industrial Submarket Areas and Net absortion in 2017 263
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Coverage Universe: Motta, Marcelo Garaldi: Aliansce (ALSC3.SA), BR Brokers (BBRK3.SA), BR Malls (BRML3.SA), BR
Properties (BRPR3.SA), Cyrela Brazil Realty (CYRE3.SA), Direcional (DIRR3.SA), EZ Tec (EZTC3.SA), Even (EVEN3.SA), Gafisa
(GFSA3.SA), IRSA Propiedades Comerciales S.A. (IRCP), Iguatemi (IGTA3.SA), LPS Brasil (LPSB3.SA), MRV (MRVE3.SA),
Multiplan (MULT3.SA), PDG Realty (PDGR3.SA), Parque Arauco (PAR.SN), RNI Negocios Imobiliarios SA (RDNI3.SA), Rossi
Residencial (RSID3.SA), Sonae Sierra Brasil (SSBR3.SA), Tenda (TEND3.SA)
J.P. Morgan Equity Research Ratings Distribution, as of April 02, 2018

Overweight Neutral Underweight
(buy) (hold) (sell)
J.P. Morgan Global Equity Research Coverage 46% 41% 13%
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283
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Brazil Real Estate 101 – 2018

* Registered/qualified as a research analyst under NYSE/FINRA rules.

Market Size and Expected Growth....................................................................... 123

Real Estate Brokers..............................................................226

Table 1: Coverage Summary

Top 5 Hot Topics for 2018

2) Economic recovery to increase confidence and multiples

3) Mortgage disbursements should finally grow this year

4) Commercial properties’ gradual recovery should continue

5) Brokers should benefit from the recovery in launches

10 Things to Know About Real Estate

Our Views on Each Subsector

Table 3: BZ Real Estate sectors vs. others Brazilian sectors

Figure 1: BZ HB historical 12M forward P/E based on consensus

Figure 2: BZ HB historical P/BV

Figure 3: BZ HB historical P/NAV

Figure 4: ROE Regression based on 2018E ROE

Source: J.P. Morgan estimates, Company data.

Figure 5: ROE Regression based on 2019E ROE

Figure 6: BZ Malls – 12-month forward P/FFO

Figure 7: BZ Malls – P/NAV

1.2x P/NAV Avg 10-Now

Figure 8: BZ Malls– 12-month forward cap rate

Figure 9: BR Properties – discount to NAV

Source: Company reports, Bloomberg and J.P. Morgan. As of April-2nd 2018.

Figure 10: BZ Brokers – P/BV

Figure 11: Brazilian Homebuilders market cap

Figure 12: Shopping Malls market cap

Figure 13: Properties market cap

Source: Company reports, Bloomberg, and J.P. Morgan. As of Mar-22nd 2018.

Figure 14: Brokers market cap

Source: Bloomberg and J.P. Morgan. As of Mar 22nd 2018.

Figure 17: Stock Performance since IPOs

Figure 18: Last 12 months performance

Figure 19: 2017 Share Performance

Source: Bloomberg and J.P. Morgan.

Figure 20: 2016 Share Performance

Figure 21: 2015 Share Performance

Source: J.P. Morgan and Bloomberg. As of Mar 22nd 2018.

Figure 23: Shopping Malls performance – Since 2010 (Jan 10 = 100)

Figure 24: Properties performance – Since 2010 (Mar 10 = 100)

Figure 25: Brokers performance – Since 2010 (Jan 10 = 100)

Source: Bloomberg and J.P. Morgan. As of Mar 22nd 2018.

Heatmap – Shopping Malls

Figure 29: Inflation Indexes – YoY Change

Figure 30: Target Selic Rate

Source: J.P. Morgan estimates.

Wage mass (R$bn)

Figure 32: Wage Mass vs. Unemployment Rate

Source: IBGE. Considering new methodology which started in 2012.

Figure 33: Monthly Average Income – Trailing 12 Months

Figure 34: Quarterly Consumer Confidence – CNI

Figure 35: Selic vs TR and IPCA and TJLP

Table 5: Brazil Macro Assumptions

Share on Indexes & Liquidity

Table 6: Real Estate weight in Bovespa Index since 2008

Source: Bloomberg and J.P. Morgan.