31 12-2010 - 4 q10 earnings release
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1
4Q10 Earnings Release
SONAE SIERRA BRASIL ANNOUNCES
ADJUSTED EBITDA OF R$141.4
MILLION IN 2010, AN INCREASE OF
42.1% OVER 2009
São Paulo, March 28, 2011 – Sonae Sierra Brasil S.A.
(BM&FBovespa: SSBR3), one of Brazil’s leading shopping
mall developers, owners and managers, announces today
its results for the fourth quarter (4Q10) and full year of
2010. The financial and operating information outlined
below are based on amounts consolidated in accordance
with accounting policies adopted in Brazil and in accordance
with the International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board -
IASB, and correspond to the comparison of the results
obtained in 2010 with the previous year, also adjusted to
the new accounting standard.
Highlights
The Company’s Net Revenue increased 7.7% in the
4Q10 and 20.0% in 2010, totaling R$ 185.0 million.
Adjusted EBITDA had a significant increase of 19.4% in
4Q10 and 42.1% in 2010, totaling R$ 141.4 million.
The adjusted EBITDA Margin reached an impressive
level of 76.4% in 2010 compared to 64.6% in 2009.
Adjusted FFO increased by 30.7% in 4Q10 and 60.2%
in 2010, reaching R$ 124.6 million.
The occupancy rate of our shopping malls reached
98.0% in 2010 compared to 97.2% in 2009.
Same-store sales (SSS) had a 9.5% growth in 2010.
Same-store rent (SSR) had a significant growth of
8.0% in 2010.
Investors
Relations
Carlos Alberto Correa
Investors Relations Officer
Murilo Hyai
Investors Relations Manager
Email:
Phone:
+55 (11) 3371-4188
4Q10 CONFERENCE CALLS
Portuguese
March 30, 2011
9 am (New York time)
10 am (Brasilia Time)
Phone: (55 11) 2188-0155
Code: Sonae Sierra Brasil
English
March 30, 2011
10.30 am (New York time)
11.30 am (Brasilia Time)
Phone: (1 412) 317-6776
Code: Sonae Sierra Brasil
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4Q10 Earnings Release
In November, we opened with great success the first expansion of Parque D. Pedro
Shopping, which represented an increase of approximately 5.4 thousand sqm of
GLA, bringing this shopping mall to a total of 121.0 thousand sqm of GLA, which
already was one of the largest shopping malls not only in Brazil but also in all of
Latin America.
In February 2010, we began construction of Uberlândia Shopping in the city of
Uberlândia (MG), and in September 2010 we started construction of Boulevard
Londrina Shopping in Londrina (PR). These two new shopping malls should add
approximately 91.4 thousand sqm of total GLA and 84.0 thousand sqm of owned
GLA to our portfolio.
In 2010 we also started the construction for the expansion of Shopping Metrópole.
Financial Indicators
(R$ million) 4Q10 4Q09 % 2010 2009 %
Net Revenue 52.1 48.4 7.7% 185.0 154.1 20.0%
EBITDA 41.1 32.9 25.1% 138.9 97.4 42.6%
EBITDA Margin 78.8% 67.8% +1.099 bps 75.1% 63.2% +1.188 bps
Adjusted EBITDA 41.2 34.5 19.4% 141.4 99.5 42.1%
Adjusted EBITDA Margin 79.0% 71.2% +780 bps 76.4% 64.6% +1.186 bps
Funds From Operations (FFO) 36.5 26.3 38.4% 122.1 75.7 61.3%
FFO Margin 69.9% 54.4% +1.555 bps 66.0% 49.1% +1.688 bps
Adjusted FFO 36.6 28.0 30.7% 124.6 77.8 60.2%
Adjusted FFO Margin 70.1% 57.8% +1.235 bps 67.3% 50.5% + 1.686 bps
Net Operating Income (NOI) 51.1 43.8 16.7% 167.4 128.3 30.5%
Operating Indicators
4Q10 4Q09 % 2010 2009 %
Total GLA ('000 sqm) 350.1 343.5 1.9% 350.1 343.5 1.9%
Owned GLA ('000 sqm) 203.7 200.0 1.8% 203.7 200.0 1.8%
Number of shopping malls 10 10 0.0% 10 10 0.0%
Sales (R$ million) 1,119 982 14.0% 3,545 3,041 16.6%
Sales/sqm (monthly average) 1,292 1,032 25.2% 904 832 8.7%
Occupancy rate (eop) 98.0% 97.2% +77 bps 98.0% 97.2% +77 bps
Cost of occupancy (% of sales) 8.1% 8.2% -0.1% 9.0% 9.0% 0.0%
SSS/sqm 1,122 1,028 9.1% 902 824 9.5%
SSS/sqm - Satellite stores 1,718 1,531 12.2% 1,447 1,303 11.1%
SSS/sqm - Anchor stores 760 720 5.5% 643 596 7.9%
SSR/sqm 61 55 9.5% 49 45 8.0%
SSR/sqm - Satellite stores 121 111 8.9% 100 93 8.1%
SSR/sqm - Anchor stores 23 21 11.4% 19 18 7.8%
Overdue Payments (25 days) 2.0% 3.6% -151 bps 2.5% 4.4% -185 bps
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4Q10 Earnings Release
MESSAGE FROM MANAGEMENT
In 2010 Sonae Sierra Brasil maintained a strong trajectory of growth: consolidated
net revenues for the year totaled R$ 185.0 million, which represents a 20.0% increase
over 2009. Our adjusted consolidated EBITDA presented a significant growth of 42.1%
in 2010 over 2009, reaching R$ 141.4 million, while the adjusted EBITDA margin
reached 76.4%. The adjusted consolidated FFO totaled R$ 124.6 million in 2010,
which was also a significant increase of 60.2% over 2009 with a margin of 67.4% on
net revenue. Our results in 2010 were largely a result of the performance of our
shopping malls especially with the contribution of the first full year of operations of
Manauara Shopping in Manaus. Opened in April 2009, this shopping mall with 47.0
thousand sqm of GLA, closed 2010 with 99.7% of its GLA occupied and it is already
one of the leading shopping malls of our portfolio. The net income attributed to the
shareholders reached R$ 139.2 million in 2010, from R$ 152.4 million in 2009. This
decrease is mainly attributed to lower gain in investment properties in 2010 due to
the extraordinary gain in 2009 from the opening of Manauara Shopping, following the
new accounting standards (IFRS) adopted by the Company. In fact, if we disregard
the net of taxes impact of fair market value of the investment properties, the growth
of net income would be significant.
In terms of new developments, the Company continues to follow the plans previously
announced. In February 2010 we started the construction of Uberlândia Shopping and
the construction of Boulevard Londrina Shopping started in September. Uberlândia
Shopping, which is scheduled to open in the second half of this year, already had 77%
of its GLA leased as of December 2010. Boulevard Londrina, with an opening date
scheduled for the second half of 2012, had already signed leases representing 64% of
its GLA by the end of 2010. When completed, these two new projects will add about
91.4 thousand sqm of total GLA and 84.0 thousand sqm of owned-GLA to our
portfolio. Also, in November 2010 we opened with great success the first expansion
of Parque D. Pedro Shopping Mall, which represented an increase of approximately 5.4
thousand sqm of GLA for this mall. It is noteworthy that this expansion opened with
100% of its stores leased, which increased the total GLA of Parque D. Pedro to 121.0
thousand sqm, reinforcing its position as one of the largest shopping malls not only in
Brazil but in all of Latin America. Finally, construction for the expansions of Metrópole
Shopping in the city of S. Bernardo do Campo in the greater metropolitan area of São
Paulo started in the fourth quarter of 2010.
According to the leverage strategy established for the development of new projects,
the Company negotiated bank loans for the projects of Uberlândia and Londrina. In
the first case a loan contract was signed with Banco Bradesco for R$ 81.2 million with
a 15 year term (2 year grace period). A separate loan was contracted with Banco
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4Q10 Earnings Release
Bradesco for the Boulevard Londrina Shopping of R$ 120.0 million also with a maturity
of 15 years (2 year grace period).
Also during this year the Company prepared for its IPO, which was successfully
concluded by the listing of our shares on BM&F BOVESPA in the first quarter of 2011,
raising a total of R$ 465.0 million. This transaction broadened our shareholder base
and provided the resources necessary to continue investing in our growth strategy.
We remain confident in our strategy to develop market dominant shopping malls
primarily focused on the middle class, which is a segment of population experiencing
strong growth and already represents the most significant portion of consumers in the
Company's current portfolio. To do so, we not only count on the experience gained by
our management team at different levels, but also on the important contribution in
terms of expertise of our controlling shareholders Sonae Sierra SGPS and Developers
Diversified Realty — two international specialists in the shopping mall industry with a
solid reputation in their respective markets.
Despite the outlook for the Brazilian economy pointing to a more modest scenario
than that seen in 2010, we remain optimistic in the Company's good performance in
2011. Besides the prospect of maintaining good performance from the current
operating properties, we also are forecasting the effects of the contribution resulting
from the maturation of Manauara Shopping and the first expansion of Parque D.
Pedro. Furthermore, we also will have the effects expected from the opening of
Uberlândia Shopping as well as the contribution of expansions underway at Shopping
Metrópole and Shopping Campo Limpo, all of which we expect to open during the
second half of the year.
We also expect that during the current year the construction of Shopping Passeio das
Águas will start in the city of Goiania. The planning and licensing phase of this project
has been completed and is now in the pre-leasing process. Its opening is planned for
the year 2013.
Finally, on behalf of the Management of Sonae Sierra Brasil we would like to thank all
of our shareholders, employees, tenants, suppliers, banks and other partners for their
collaboration and the trust shown in us.
The Management
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4Q10 Earnings Release
DESCRIPTION OF BUSINESS
Sonae Sierra Brasil S.A. is a company specialized in the shopping center business and
counts on the expertise of its management team and its international controlling
shareholders: the European group Sonae Sierra and the U.S. company Developers
Diversified Realty (NYSE: DDR), both companies that have deep experience in the
development, ownership and management of shopping centers.
We are one of the leading real estate developers, owners, and operators of shopping
malls in Brazil. Through our integrated business model, we work with all phases of the
business, including development (which covers all stages of the selection of sites, the
licensing process, design and control of construction) as well as with the management
and leasing of properties, asset management, and marketing services.
We hold a controlling interest in the majority of the shopping malls in our portfolio and
manage all of them. On December 31, 2010, we had a weighted average ownership
interest of 58.2% in the ten operating shopping malls in our portfolio, representing
203.7 thousand sqm of owned GLA and control in terms of ownership of six of the ten
shopping malls. We estimate approximately 100.9 million visits to our malls in 2010
and 92.6 million visits during the year of 2009.
OUR PORTFOLIO
Our portfolio is comprised of ten shopping malls in operation as follows: (i) eight
shopping malls located in the state of São Paulo, which is the most prosperous and
economically developed state of Brazil; (ii) one shopping mall located in Brasília,
Federal District; and (iii) one shopping mall located in the city of Manaus, the capital
of the state of Amazonas and the largest population density in the state and in the
north region of Brazil. Our portfolio includes some of the most prominent shopping
malls in operation in Brazil. For example, Parque D. Pedro Shopping, located in the
city of Campinas, has 121.0 thousand sqm of GLA and is one of the largest shopping
malls in Brazil in terms of GLA according to data provided by ABRASCE. Parque D.
Pedro had its area increased with the opening of its first expansion of 5.4 thousand
sqm of GLA in November 2010.
Additionally, we are in the process of building three new shopping malls in three
major cities in Brazil: (i) Uberlândia, the second most populous city in the state of
Minas Gerais; (ii) Londrina, the second largest city in the state of Paraná; and (iii)
Goiania, the state capital of Goiás. These three cities are important centers for the
agribusiness and services sectors which have experienced strong demographic and
economic growth. The selection of these cities for building new shopping malls fits into
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4Q10 Earnings Release
our preferred strategy of growth through potentially market dominant shopping malls,
and they meet our requirement in terms of per capita income and population density.
We estimate that the combined GLA from these three shopping malls is approximately
170.0 thousand sqm.
The map below shows the location of our Brazilian malls. All figures related to GLA
and the Company’s interests are based on positions at the close of 2010, except
where indicated otherwise:
11
12
13
7
10
4
51
8
93
26
Shopping Centers in Operation
City State Stores Ownership
1 Parque D. Pedro Campinas SP 406 121.0 51.0% 61.7 95.2%
2 Boavista Shopping São Paulo SP 148 16.0 100.0% 16.0 98.6%
3 Penha Shopping São Paulo SP 198 29.6 73.2% 21.7 99.5%
4 Franca Shopping Franca SP 101 18.1 67.4% 12.2 100.0%
5 Tivoli Shopping Santa Barbara d'Oeste SP 147 22.1 30.0% 6.6 100.0%
6 Metrópole Shopping São Bernardo do Campo SP 152 25.0 * 100.0% 25.0 99.3%
7 Pátio Brasil Brasília DF 235 28.8 10.4% 3.0 98.7%
8 Plaza Sul Shopping São Paulo SP 217 23.1 30.0% 6.9 99.9%
9 Campo Limpo Shopping São Paulo SP 127 19.9 20.0% 4.0 99.9%
10 Manauara Shopping Manaus AM 235 46.7 100.0% 46.7 99.7%
Total 1,966 350.1 58.2% 203.7 98.0%
* Including an area of 5,161 sqm, currently reserved for expansion of the shopping mall
Projects under Development
City State
11 Uberlândia Shopping Uberlândia MG 43.6
12 Boulevard Londrina Shopping Londrina PR 47.8
13 Passeio das Águas Shopping Goiânia GO 78.1
GLA
('000 sqm)
Owned GLA
('000 sqm)
Occupancy
Rate
(% GLA)
GLA
('000 sqm) Ownership Projected Opening
100.0% 2H11
84.5% 2H12
100.0% 2013
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4Q10 Earnings Release
CORPORATE STRUCTURE
The organizational chart below shows the simplified structure of our companies and
Shopping Malls on December 31, 2010:
OUR STRATEGY
Our strategy focuses on profitably increasing our portfolio and maintaining our
position as one of the leading developers, owners, and managers of shopping malls in
Brazil, seeking to provide superior returns to our shareholders in a sustainable and
responsible way. We intend to achieve our goals by implementing the following
strategies:
Passeio das Águas
(Goiânia)
Under development
FII Shopping
Parque D.
Pedro
Pátio
Boavista
Ltda.
Pátio Penha
Shopping
Ltda.
Sierra
Enplanta
Ltda.
Pátio São
Bernardo
Ltda.
Campo
Limpo Emp.
E Part. Ltda.
Pátio
Sertório Ltda.
Pátio
Londrina
Ltda.
Pátio
Uberlândia
Ltda.
Pátio Goiânia
Ltda.
Sierra
Investimentos
Brasil Ltda.
100,0%
100,0%
Unishopping
Administradora
Unishopping
Consultoria
85,0% 100,0% 100,0% 73,2% 10,4% 30,0% 67,4% 30,0% 100,0% 100,0% 84,5% 100,0% 100,0%
60,0% 100% 100% 100,0% 100,0% 20,0% 100,0% 100,0% 100,0% 100,0%
100%
Non operating as of the date of this document
Pátio
Campinas
Shopping
100,0%
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4Q10 Earnings Release
Focus on creating value through organic growth. Our growth strategy is based
on two main sources: (i) the first represents building new market dominant shopping
malls that are able to establish and maintain a solid competitive position based on
certain factors such as population density, purchasing power of the potential
customers, and unserved consumer demand; and (ii) the second is related to the
expansion and/or remodeling of existing shopping malls by including new tenants,
features and attributes in order to increase their market share.
Acquisition of additional stakes in the properties of our portfolio. We plan on
analyzing opportunistic acquisitions at reasonable prices of additional ownership
interests in the shopping malls already part of our portfolio. In parallel, and whenever
opportunities arise that fit our strategy, we will analyze potential acquisitions at
attractive pricing of controlling interests in shopping malls that are not part of our
portfolio, or at least a strategic shareholding to possibly allow us to eventually acquire
control and to ensure that we control the management of the property.
Parque D. Pedro Food Court Manauara Shopping
ECONOMIC SCENARIO
The macroeconomic scenario in 2010 provided very favorable conditions for the
growth of retailing in Brazil, as well as our Company.
Brazil's GDP increased significantly in 2010 with a growth of 7.5% over 2009 driven
largely by the growing consumption of the middle class. The volume of retail sales
showed a significant growth of 10.9% in 2010 while nominal sales increased by
14.5%. The sales recorded by retailers present in our malls grew even more, showing
an increase of 16.6% in 2010 over sales in 2009. The unemployment rate of the
economically active population measured by IBGE was 5.3% at the end of 2010, the
lowest level recorded since the beginning of this study's publication in March 2002,
while real average earnings for 2010 increased by 5.9% in comparison with 2009.
This growth, however, has placed pressure on consumer prices with inflation reaching
5.9% in 2010 against 4.3% in 2009, forcing the Central Bank to take a more
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4Q10 Earnings Release
restrictive stance and raise the SELIC interest rate from 8.75% to 10.75% at the end
of 2010.
We believe that, despite signs pointing to an increase in inflation, the economic
scenario should continue providing favorable conditions for the growth of national
retail sales, as well as our activities.
EFFECTS OF THE INITIAL ADOPTION OF IFRS
Sonae Sierra Brasil prepared its consolidated financial statements in accordance with
international financial reporting standards (IFRS) issued by the International
Accounting Standards Board - IASB. It should be pointed out that during the years
2009 and 2010, Comissão de Valores Mobiliários (CVM) approved several technical
pronouncements, interpretations, and technical orientations issued by the Comitê de
Pronuncimantos Contábies (CPC) that amended certain accounting policies previously
adopted in Brazil, effective beginning January 1, 2010 and retroactive to January 1,
2009 (transition date) for comparison purposes. The financial statements for the year
ended December 31, 2010 were prepared in accordance with the policies approved by
CVM and the financial statements for the year ended December 31, 2009 and opening
balances as at January 1, 2009 were adjusted and reclassified in order to consider the
application of these policies to provide a consistent comparative presentation.
The Company presents below the main effects and adjustments made in accordance
with the new accounting pronouncements affecting the Company’s financial
statements:
Investment Properties - CPC 28
Under CPC 28, properties held to earn rentals or for capital appreciation or both can
be recognized as investment property. Investment property was initially measured at
cost. The Company’s management decided to adopt the fair value method to reflect its
business.
The measurement of fair value of our properties is made on a quarterly basis, and is
reported in our quarterly financial statements.
The fair value of each investment property in operation and in development was
determined based on a discounted cash flow valuation prepared by an independent
external appraiser (Cushman & Wakefield).
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4Q10 Earnings Release
Some of the main assumptions for the valuation were:
10 year projection;
Perpetuity calculation at year 11;
10-year discount rate ranging from 12.75% to 14.00% (depending on the
asset);
Exit yield ranging from 8.25% to 9.50% (depending on the asset);
0.0% real growth rate assumed for perpetuity;
Based on this valuation analysis, the fair value of our investment properties totaled R$
2.2 billion as of December 31, 2010.
For further details, please refer to our 2010 Financial Statements, note 11.
Reversal of net deferred charges and prepaid commissions - CPC 37
In accordance with the instructions for the initial adoption of the IFRS the Company
eliminated deferred charges and the amortization of deferred charges from the income
statement. In addition, prepaid commission expenses, which were previously recorded
in the assets, were reverted and the full expense is now in the income statements in
the year the cost was incurred. For more details of the impacts of the IFRS
adjustments please see our 2010 Financial Statements, note 4.
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4Q10 Earnings Release
FINANCIAL HIGHLIGHTS
Gross Revenue
Sonae Sierra Brasil’s gross revenue totaled R$ 57.3 million in 4Q10, an increase of
8.7% over the same period of the previous year. In 2010, gross revenues for the year
reached R$201.6 million, 19.4% higher than 2009. The increase in revenue was
driven by growth in rental revenue mainly attributed to the first full year of operations
of Manauara Shopping, which was opened in April 2009, and by rental contract
adjustments for the other properties in our portfolio. Another factor that contributed
to the growth in revenue of 2010 was the significant increase in revenue from
parking, which totaled R$ 16.6 million in 2010, 150.2% more than 2009, mainly due
to the introduction of parking charges at Parque D. Pedro in September 2009 and at
Manauara in the middle of 2010.
78%
11%
4%
6% 1%
2009
79%
8%
8%
5%
2010
Rent
Service revenue
Parking revenue
Key Money
Other revenue
Gross Revenue Breakdown
Gross Revenue (R$ '000)
(R$ thousand) 4Q10 4Q09 % 2010 2009 %
Rent 45,411 41,484 9.5% 158,246 132,370 19.5%
Service revenue 2,996 4,576 -34.5% 15,530 18,390 -15.6%
Parking revenue 5,773 3,383 70.6% 16,629 6,645 150.2%
Key Money 2,719 2,289 18.8% 10,399 9,232 12.6%
Other revenue 424 1,005 -57.8% 808 2,186 -63.0%
Total 57,323 52,737 8.7% 201,612 168,823 19.4%
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4Q10 Earnings Release
Cost and Expenses
Costs and expenses totaled R$ 12.2 million in 4Q10, a 19.6% decrease from 4Q09. In
2010, Cost and Expenses for the year totaled R$ 50.7 million, 9.3% lower than 2009.
This reduction can be attributed mainly to a decrease in personnel costs, which totaled
R$ 16.1 million in 2010, 18.3% less than in 2009, as a result of lower commissions
paid to real estate brokers, in addition to non-recurring severance costs incurred in
2009 relating to former members of senior management.
It worth noting that occupancy costs (vacant stores) fell by R$1.8 million, or 30.2%,
to R$4.1 million in 2010, due to higher occupancy, particularly in Manauara, Penha,
Franca Boavista and Parque D. Pedro.
Changes in Fair Value of Investment Properties
In December 2010, Sonae Sierra Brasil adopted the IFRS, under which, the Company
opted to value its investment properties at fair value. Thus, the gains and losses
resulting from changes in fair market value of the properties are recorded in the
Change in Fair Value of Investment Properties account, which totaled R$ 68.7 million
in 4Q10 and R$ 142.7 million for the year 2010 compared to R$ 226.7 million in 2009.
The reduction in 2010 when compared to 2009 is due primarily to the extraordinary
gain recognized in 2009 with the opening of Manauara Shopping.
Expenses (R$ '000)
4Q10 4Q09 % 2010 2009 %
Depreciation and
amortization378 332 13.9% 1,210 1,206 0.3%
Personnel 4,554 7,226 -37.0% 16,075 19,676 -18.3%
Outsourced services 1,882 59 3089.8% 9,829 6,906 42.3%
Occupancy cost (vacant
stores)856 1,275 -32.9% 4,070 5,828 -30.2%
Cost of contractual
agreements with tenants514 587 -12.4% 1,873 2,340 -20.0%
Reversal of the allowance
for doubtful lease
receivables
(461) (234) 97.0% (2,171) (99) 2092.9%
Other 4,477 5,929 -24.5% 19,815 20,018 -1.0%
Total 12,200 15,174 -19.6% 50,701 55,875 -9.3%
Classified as:
Cost of rentals and services 7,643 11,491 -33.5% 34,738 41,761 -16.8%
Operating expenses 4,557 3,683 23.7% 15,963 14,114 13.1%
12,200 15,174 -19.6% 50,701 55,875 -9.3%
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4Q10 Earnings Release
Other Net Operating Revenue
Other net operating revenue totaled R$ 585.0 thousand in 4Q10 and R$ 4.2 million in
2010, which is largely a result of the receipt of R$ 2.5 million for the minimum yield
guaranty paid by the real estate investment fund, FII Parque D. Pedro Shopping
Center, to quota holders.
Net Financial Result
The consolidated financial result in 4Q10 was a net financial income of R$ 268.0
thousand and a net financial expense of R$ 4.4 million for the year 2010, a substantial
improvement over the R$ 11.9 million expense recorded in 2009, primarily driven by
positive exchange rate variations related to the loan with the parent company, Sierra
Brazil 1 BV.
Net Income
Net Income totaled R$ 46.1 million in 4Q10, a 6.3% increase over 4Q09 and R$ 139.2
million for the year 2010 versus R$ 152.4 million in 2009. It is worth noting, however,
that the Net Income is largely influenced by the Change in Fair Value of Investment
Properties and in 2009 there was the extraordinary gain related to the opening of
Manauara Shopping.
Net Operating Income (NOI)
Consolidated NOI, considering 100% of Parque D. Pedro’s NOI and weighted by Sonae
Sierra Brasil’s ownership in the other operating malls totaled R$ 51.1 million in 4Q10,
a 16.7% increase over 4Q09. In the year 2010, Consolidated NOI reached R$ 167.4
million in 2010, a 30.4% increase over 2009.
Net Operating Income - NOI (R$ million)
4Q10 4Q09 % 2010 2009 %
Rent 45.4 41.5 9.5% 158.2 132.4 19.5%
Key Money 2.7 2.3 17.4% 10.4 9.2 12.6%
Parking 5.7 3.3 72.7% 16.6 6.6 150.2%
Other Revenues 0.4 1.0 0.0% 0.8 2.2 -63.0%
Total Revenues 54.2 48.1 12.8% 186.1 150.4 23.7%
(-) Malls' Operating Expenses 3.1 4.3 -27.6% 18.7 22.1 -15.5%
NOI 51.1 43.8 16.7% 167.4 128.3 30.4%
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4Q10 Earnings Release
Adjusted EBITDA
Adjusted EBITDA (adjusted for non-recurring expenses) increased by 19.4% in 4Q10
to R$ 41.2 million and 42.1% for the year 2010 reaching R$ 141.4 million, while the
Adjusted EBITDA margin reached 76.4% in 2010, compared to 64.6% in 2009.
Adjusted Funds From Operations (FFO)
Adjusted FFO (adjusted for non-recurring expenses) totaled R$ 36.6 million in 4Q10
and R$ 124.6 million in 2010, an increase of 60.2% over 2009 with a margin of
67.4% over net revenue in 2010, compared to 50.5% in 2009.
The reconciliation of the operating income before financial results with the EBITDA,
adjusted EBITDA, FFO, and Adjusted FFO is shown below:
34.5 41.2
99.5
141.4
4Q09 4Q10 2009 2010
Adjusted EBITDA (R$ million)
19.4%
42.1%
28.0 36.6
77.8
124.6
4Q09 4Q10 2009 2010
Adjusted FFO (R$ million)
30.7%
60.2%
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4Q10 Earnings Release
Cash and Cash Equivalents and Debt
Cash and cash equivalents, which comprises cash, banks and financial investments,
declined by R$ 24.7 million, from R$ 86.3 million on December 31, 2009 to R$ 61.6
million on December 31, 2010. The main transactions impacting cash and cash
equivalents were (i) new loans totaling R$ 77.3 million and the settlement of R$59.0
million; and (ii) the cash investments in properties in the amount of R$118.0 million,
basically due to the construction and renovation of the Company’s malls. The
remaining net variations were chiefly related to operating results in 2010.
Adjusted EBITDA and
Adjusted FFO Reconciliation
(R$ million) 4Q10 4Q09 % 2010 2009 %
Net Revenue 52,1 48,4 7,7% 185,0 154,1 20,0%
Operating income before
financial result 109,7 99,0 10,8% 282,0 325,0 -13,2%
Depreciation and amortization 0,4 0,3 13,8% 1,2 1,2 0,0%
Gain from fair value of investment
properties (69,0) (66,5) 3,8% (144,3) (228,8) -36,9%
EBITDA 41,1 32,9 25,1% 138,9 97,4 42,6%
Non-recurring expenses 0,1 1,6 -93,5% 2,5 2,1 19,0%
Adjusted EBITDA 41,2 34,5 19,4% 141,4 99,5 42,1%
EBITDA Margim 78,8% 67,8% +1,099 bps 75,1% 63,2% +1.188 bps
Adjusted EBITDA Margin 79,0% 71,2% +780 bps 76,4% 64,6% +1.186 bps
EBITDA 41,1 32,9 25,1% 138,9 97,4 42,6%
Net financial result 0,3 (2,6) -110,4% (4,4) (11,9) -63,0%
Current income and social
contribution taxes (4,9) (3,9) 24,8% (12,4) (9,8) 26,5%
- - FFO 36,5 26,3 38,4% 122,1 75,7 61,3%
Non-recurring expenses 0,1 1,6 -94% 2,5 2,1 19,0%
Adjusted FFO 36,6 28,0 30,7% 124,6 77,8 60,2%
FFO Margin 69,9% 54,4% + 1.555 bps 66,0% 49,1% +1.688 bps
Adjusted FFO Margin 70,1% 57,8% +1.235 bps 67,4% 50,5% +1.686 bps
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4Q10 Earnings Release
Considering the profile of our debt, our cash flow, retained earnings, the proceeds
from the company's IPO in 2011, and our liquidity position, we believe that we are in
a comfortable situation in terms of capital resources that are sufficient to cover our
investment plan, expenses, debts, and other amounts to be paid in the coming years.
SHOPPING CENTERS’ SALES PERFORMANCE
Sales in the Company’s malls totaled R$ 1,119 million in 4Q10, a 14.0% increase over
the same period in 2009, and R$3,545 million for the year 2010, 16.6% higher than in
2009.
The best performing malls were Manauara Shopping, Franca Shopping, Boavista
Shopping and Penha Shopping, with respective sales growth of 97.5%, 22.5%, 18.1%
and 16.9%. The excellent growth recorded by the Manauara mall was partially due to
2010 being its first full year of operations, but also reflected its accelerated maturity,
while the strong performance of Franca Shopping, Boavista Shopping and Penha
Shopping reflected the reduction in their vacancy rates over the previous year.
OPERATING HIGHLIGHTS
The operating income of Sonae Sierra Brasil in 2010 reflects the growth trend of the
Company before a very favorable period for retail and the Brazilian shopping malls
sector. At the end of 2010, the occupancy rate in our shopping centers reached 98.0%
of the GLA, compared to 97.2% at the end of 2009. The same-store sales (SSS)
recorded a growth of 9.5% during the period, while the same-store rent (SSR)
recorded an increase of 8.0%.
7.2 9.7 27.1 27.1 26.4
104.3
2011 2012 2013 2014 2015 2016 and on
Bank Loans Debt Amortization Schedule (R$ million)
17
4Q10 Earnings Release
Occupancy Rate
Same Store Sales and Same Store Rent
ONGOING PROJECTS
Sonae Sierra Brasil currently has eight ongoing projects, comprised of three greenfield
projects and five expansions, which should increase owned GLA by approximately
92% to 392.0 thousand sqm by 2013. It is worth noting that this substantial growth
includes only those projects already in our pipeline and excludes future projects yet to
be announced.
97.3%
96.3%
97.0%97.2%
98.3% 98.5% 98.4%98.0%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Occupancy (% GLA)
1,028 1,122
824 902
4Q09 4Q10 2009 2010
SSS/sqm
9.1%
9.5%
55 61
45 49
4Q09 4Q10 2009 2010
SSR/sqm
9.5%
8.0%
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4Q10 Earnings Release
NEW PROJECTS (GREENFIELD)
Sonae Sierra Brasil’s strategy is to develop greenfield projects that have the potential
to become the leading malls in their regions. Based on this strategy, we have three
such projects in our portfolio. Construction on two of these – Uberlândia Shopping and
Boulevard Londrina Shopping – is already under way and a high percentage of leasing
contracts have already been signed (77% and 64% of GLA, respectively).
Construction of the third mall, Passeio das Águas Shopping (in Goiânia), is scheduled
to begin in 2011.
Uberlândia Shopping: Construction of this mall, located in Uberlândia, Minas Gerais,
began in February 2010 and opening is scheduled for the second half of 2011.
Approximately 77% of GLA was already leased as of December 31, 2010.
Uberlândia Shopping Project Illustration
204
39210
3
13
44
40
78
2010 2011 2012 2013 Total
Owned GLA Growth ('000 sqm)
Greenfields Expansion
Uberlândia
Londrina
Goiânia
Metrópole (I)
PDP (II)
Metrópole (II)
Tívoli
Campo Limpo
+92%
City Uberlândia
State MG
Expected Opening 2H11
GLA (‘000 sqm) 43.6
SSB’s ownership 100%
Contracted GLA 77%
Uberlândia Shopping
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4Q10 Earnings Release
Boulevard Londrina Shopping: Located in Londrina, the second largest city in the
state of Paraná, Boulevard Londrina Shopping began construction in September 2010,
and is scheduled to open in the second half of 2012. The mall’s GLA was already 64%
leased as of December 31, 2010.
Boulevard Londrina Project Illustration
Passeio das Águas Shopping: Construction of Passeio das Águas Shopping, located
in Goiânia, the capital and most important city of Goiás state, will begin in 2011, with
inauguration scheduled for 2013.
Passeio das Águas Project Illustration
City Londrina
State PR
Expected Opening 2H12
GLA (‘000 sqm) 47.8
SSB’s ownership 84.5%
Contracted GLA 64%
Boulevard Londrina Shopping
City Goiânia
State GO
Expected Opening 2013
GLA (‘000 sqm) 78.1
SSB’s ownership 100%
Contracted GLA 20%
Passeio das Águas Shopping
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4Q10 Earnings Release
EXPANSIONS
Expansion of Parque D. Pedro Shopping
Although we believe Parque D. Pedro Shopping to be Brazil’s largest mall in terms of
contiguous GLA, we decided to expand it to meet growing demand. The expansion
was planned in two phases in distinct areas of the mall, the first of which opened on
November 3, 2010 and the second is scheduled for inauguration at the end of 2012.
The first expansion added approximately 8.0 thousand sqm of built-up area and 5.4
thousand sqm of GLA, with 32 satellite stores and two anchor stores. The new space
was designed for stores focusing on fashion, further strengthening the mall’s store
mix with brands such as Nike, Adidas, L’Occitane, Siberian, Crawford, Ecko Unltd and
consumer electronic retailer Fast Shop. We believe the new mix will increase Parque
D. Pedro Shopping’s competitive advantages in the region, offering new purchasing
options and strengthening our image, especially with consumers in the upper and
upper-middle income groups.
The second phase should add 8.0 thousand sqm of built-up area and approximately
5.4 thousand sqm of GLA.
We have received all the necessary approvals for the Parque D. Pedro Shopping
expansions.
Internal view of Expansion Aerial View of Parque D. Pedro and Expansion
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4Q10 Earnings Release
Expansion and renovation of Shopping Metrópole – Phase I
We are currently renovating and expanding
Metrópole Shopping, given growing numbers
of visitors, which we expect to increase even
further with the addition of several high-end
commercial and residential towers adjacent
to the mall being developed by other
companies
Metrópole Project Illustration
Metrópole Expansion Construction Site
Campo Limpo Expansion
In early 2011, the Company also started the construction of the expansion of
Shopping Campo Limpo. The strong performance of this mall has mainly been fueled
by increased consumption of the lower income groups. The mall had an occupancy
rate of 99.9% as of December 31, 2010. The expansion, which is scheduled to open in
the second half of 2011, will add 2.5 thousand sqm of GLA.
Future Expansions
We plan to expand Tivoli Shopping due to its exceptionally healthy performance in
terms of revenue and occupancy. We therefore believe it is capable of supporting an
expansion of approximately 6.6 thousand sqm of GLA by the end of 2013.
In addition, we also plan to start construction for the second expansion of Parque D.
Pedro and for the second expansion in Metrópole in 2012. The second expansion of
Parque D. Pedro is expected to add 5.4 thousand sqm and should be opened by the
end of 2012 and the second expansion of Metrópole is expected to add 12.0 thousand
sqm and should be opened by the end of 2013.
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4Q10 Earnings Release
REINVESTMENT OF PROFITS AND DIVIDEND PAYMENT
POLICY
In accordance with Brazilian Corporate Law, it is the responsibility of our shareholders
to establish at the Annual General Meeting (AGM) the allocation of our net income for
the year end and the distribution of dividends from the preceding fiscal year.
According to the Company’s bylaws, shareholders are entitled to a minimum
compulsory dividend of 25% of net income, adjusted according to Brazilian
Corporation Law.
Retained Earnings
Retained earnings, which correspond to the profits remaining after the allocation of
the legal reserve and the reserve of unrealized profits and the distribution of
dividends, has as its main objective to meet capital investment plans for expansion,
modernization and maintenance of the shopping malls in operation and to develop our
shopping centers projects. For the year end December 31, 2010 the Board of
Directors will propose to the Annual General Meeting of Shareholders the amount of
R$ 99,175 thousand in retained earnings.
Dividend distribution
According to the Company’s bylaws, shareholders are entitled to a minimum
compulsory dividend of 25% of net income adjusted according to Brazilian Corporation
Law. These dividends were recorded on December 31, 2010, as shown below:
Dividend distribution
(R$ thousand)
Net income for the year (a) 139,194
Legal reserve (5%) (6,960)
Dividend Calculation Basis 132,234
Minimum compulsory dividends - 25% before the formation of Reserve of
Unrealized Profits (b) 33,059
Unrealized profits -
Equity in earnings (136,255)
Unearned income (c) (136,255)
Profit achieved in the year, corresponding to the compulsory minimum
dividends payable (a) - (c) = (d) 2,939
Formation of reserve of unrealized profits (b) - (d) 30,120
12/31/2010
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4Q10 Earnings Release
For year ended December 31, 2010, the compulsory minimum dividends totaled
R$ 2,939 thousand and the Board of Directors will propose to the Annual General
Meeting of Shareholders this amount to be distributed.
SERVICES OF INDEPENDENT AUDITORS - IN COMPLIANCE
WITH CVM INSTRUCTION No. 381/2003
The policies of the Company and its subsidiaries adopted in relation to hiring the
services of independent auditors have the purpose of ensuring that there is no conflict
of interest and/or loss of independence or objectivity of the auditors.
During the year ended December 31, 2010, the Company's independent auditors,
Deloitte Touche Tohmatsu, were hired for additional services to examine the financial
statements. These additional services relate to the process of the public offering and
distribution of the Company's primary shares and the respective fees totaled R$
453,000.
HUMAN RESOURCES
On December 31, 2010, our wholly owned subsidiaries, Unishopping Administradora
Ltda. Unishopping Consultoria Ltda., and Sierra Investimentos Ltda., had 146
employees (127 on December 31, 2009).
We grant the following benefits to all our employees: health insurance, life insurance,
and personal injury insurance. Beyond these benefits, managers and directors are
provided with benefits relating to auto and fuel costs. Benefits are granted based on
functional groups and are provided in accordance with our compensation policies.
We are registered in PAT (Worker’s Meal Program) and offer food vouchers for all our
employees.
We do not have an incentive compensation policy based on shares. However,
employees are eligible to receive short-term variable compensation based on
achieving individual KPIs. Executive officers are also entitled to long-term
compensation.
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4Q10 Earnings Release
ENVIRONMENTAL SUSTAINABILITY
Activities related to the shopping mall segment in Brazil are subject to regulations and
licensing requirements as well as federal, state, and city environmental control. The
procedure for obtaining environmental licensing is necessary both for the initial
development and construction stages of each property as well as for any expansion of
the shopping centers, and the licenses granted must be periodically renewed.
In this sense we can affirm that we maintain high standards of environmental and
corporate responsibility as part of our goal to maintain sustainable development. We
have adopted environmental policies and practices that benefit the environment more
than those required by existing regulations that apply to us.
It should be made clear that we have been pioneers in developing new concepts of
safety systems and environmental practices. The Company also has received the ISO
14001:2004 certification in recognition of its management of environmental issues in
all the shopping malls in operation in our portfolio. Additionally, Parque D. Pedro
Shopping and Shopping Penha received the OHSAS 18001:2007 certification in
occupational health and safety in October 2008 and December 2009 respectively.
Shopping Plaza Sul was also recommended for OHSAS 18001.
SUBSEQUENT EVENTS
Reverse split of shares
The Extraordinary General Meeting of shareholders held on January 11, 2011
approved the reverse split of the common shares issued by the Company in the
proportion of 10 shares for 1 share of its kind, reducing the number of common
shares from 531,727,887 to 53,172,788, which were distributed among shareholders
in the same proportion owned by each of them prior to the reverse split. The
Company's capital was maintained at R$ 532.8 million.
Capital increase
On February 7, 2011, the Company's Board of Directors approved the capital increase,
which is still within the limit of authorized capital, from R$ 532.8 million to R$ 967.6
million, which is an increase of R$ 434.8 million done by subscribing and paying
21,739,130 common shares issued by the Company still under the primary public
distribution of shares at a subscription price of R$ 20.00 (twenty reais) per share
according to the Final Public Offering Memorandum of Primary Distribution of Common
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4Q10 Earnings Release
Shares issued by Sonae Sierra Brasil S.A. ("Final Offering Memorandum"), as recorded
in the Brazilian Securities and Exchange Commission ("CVM").
On March 4, 2011, the Company's Board of Directors approved the capital increase,
which is still within the limit of authorized capital, from R$ 967.6 million to R$ 997.8
million, which is an increase of R$ 30.2 million done by subscribing and paying
1,511,913 common shares issued by the Company still under the primary public
distribution of shares due to the partial exercise of the Over-Allotment Option by the
Lead Manager in accordance with the provisions of the Underwriting Agreement,
Placement and Firm Guarantee Payment of Common Shares issued by Sonae Sierra
Brasil S.A. ("Underwriting Agreement") entered into on February 1, 2011 at the
subscription price of R$ 20.00 (twenty reais) per share.
Construction Loan
On January 15, 2011 the subsidiary Pátio Londrina Shopping Ltda. signed with Banco
Bradesco S.A. a contract to finance the construction of Shopping Londrina. This loan
of up to R$ 120 million has a fixed rate pegged to the Referential Rate - TR plus
10.90% per annum. The contract term is 15 years with a grace period of two years for
the portion of interest. After this period, the balance due is payable in up to 156
successive monthly installments. The loan is secured by a mortgage lien on the
shopping mall's property. The Company is the guarantor of this operation.
Settlement of the loan agreement with the associated company Sierra Brazil
1 BV
On February 8, 2011, the Company settled the debtor loan agreement with the
associated company Sierra Brazil 1 BV (the Company's majority shareholder),
amounting to R$ 76.2 million. The payment for this loan was already planned as part
of the disposition of resources from the Company's initial public offering as described
in the Final Public Offering Memorandum dated February 01, 2011.
26
4Q10 Earnings Release
GLOSSARY
GLA (Gross Leasable Area): Equivalent to the sum total of all the areas available for leasing in the shopping malls.
ABRASCE: Brazilian Shopping Mall Association.
BM&FBOVESPA: BM&FBovespa S.A. - Securities, Commodities and Futures Exchange.
CSLL: Social contribution tax on net income.
EBITDA: Operating income before financial result + depreciation and amortization - gain from fair value of investment properties
Adjusted EBITDA: EBITDA adjusted for the effects of non-recurring expenses effect
FFO (Funds from Operations): EBITDA +/- Net financial result – current income and social contribution taxes
Adjusted FFO: FFO adjusted for the effects of non-recurring expenses.
IFRS: International Financial Reporting Standards.
IGP-M: General Market Price Index, published by the FGV.
IPCA: Consumer Price Index, published by the IBGE.
Anchor Store or Large Anchors: Well-known stores with special marketing and structural features that serve to attract consumers, assuring continuous visitor flows
and uniform traffic in all areas of the mall.
Satellite Stores or Satellites: Small stores without special marketing or structural
features located around the anchor stores and aimed at general commerce.
NOI (Net Operating Income): Gross revenue from malls (excluding service
revenue) + parking revenue – mall operating expenses – provisions for doubtful accounts.
Novo Mercado: A special listing segment of the BM&FBOVESPA with special corporate governance rules determined by the Novo Mercado Regulations.
Shopping Mall: A shopping and entertainment center that unites businesses from a
diversified range of retail and service segments in a single site. Malls are subject to rigorous planning following careful studies of the consumption potential of the area they are intended to influence and serve.
SSR (same-store rent): Relation between invoiced rent for the same operation in
the current period compared to previous period.
27
4Q10 Earnings Release
SSS (same-store sales): Relation between sales for the same tenant in the current period compared to the previous period.
Occupancy Rate: Ratio between leased area and total GLA of each mall at the end of
each period.
28
4Q10 Earnings Release
APPENDICES
Consolidated Balance Sheet
(R$ thousand) 2010 2009 %
ASSETS
CURRENT
Cash and cash equivalents 61,566 86,252 -28.6%
Accounts receivable, net 21,650 18,003 20.3%
Taxes recoverable 9,659 7,367 31.1%
Advances to suppliers 183 188 -2.7%
Prepaid expenses 175 196 -10.7%
Other credits 5,801 3,139 84.8%
Total current assets 99,034 115,145 -14.0%
NON-CURRENT
Long-term receivables:
Restricted financial investments 557 418 33.3%
Accounts receivable, net 9,582 8,011 19.6%
Loans to condominiums 561 449 24.9%
Deferred income and social contribution taxes 13,590 16,829 -19.2%
Juducial deposits 3,584 2,877 24.6%
Other credits 2,461 1,563 57.5%
Related parties - 76 -100.0%
Investments 19,033 16,874 12.8%
Investment properties 2,181,412 1,889,175 15.5%
Fixed 4,532 3,468 30.7%
Intangible 873 299 192.0%
Total non-current assets 2,236,185 1,940,039 15.3%
TOTAL ASSETS 2,335,219 2,055,184 13.6%
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4Q10 Earnings Release
Consolidated Balance Sheet
(R$ thousand) 2010 2009 %
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Loans and financing 7,171 65,763 -89.1%
Brazilian suppliers 15,807 10,791 46.5%
Taxes payable 6,602 4,472 47.6%
Salaries, wages and benefits 6,733 7,661 -12.1%
Technical structure 5,410 5,362 0.9%
Related parties 85,599 85,281 0.4%
Dividends payable 2,939 6,239 -52.9%
Other obligations 11,370 9,127 24.6%
Total current liabilities 141,631 194,696 -27.3%
NON-CURRENT
Loans and financing 194,677 117,725 65.4%
Key Money 11,838 7,170 65.1%
Accounts payable - land purchases 25,000 - 100.0%
Deferred income and social contribution taxes 278,943 229,811 21.4%
Provisions for contingencies 10,906 12,368 -11.8%
Provisions for variable compensation 427 1,005 -57.5%
Total non-current liabilities 521,791 368,079 41.8%
SHAREHOLDERS' EQUITY
Capital stock 532,845 529,784 0.6%
Capital reserve 96,198 90,817 5.9%
Profit reserve 648,344 512,089 26.6%
Equity attributable to owners of the parent company 1,277,387 1,132,690 12.8%
Advance for future capital increase - 1,784 -100.0%
Equity attributable to owners of the parent company
and advance for future capital increase1,277,387 1,134,474 12.6%
Minority interest 394,410 357,935 10.2%
Total shareholders' equity 1,671,797 1,492,409 12.0%
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,335,219 2,055,184 13.6%
30
4Q10 Earnings Release
Consolidated Income Statement
(R$ thousand) 4Q10 4Q09 % 2010 2009 %NET OPERATING REVENUE FROM RENT,
SERVICES AND OTHER 52,145 48,435 7.7% 185,009 154,141 20.0%
COST OF RENT AND SERVICES (7,643) (11,491) -33.5% (34,738) (41,761) -16.8%
GROSS PROFIT 44,502 36,944 20.5% 150,271 112,380 33.7%
OPERATING REVENUE (EXPENSES)
General and administrative (4,557) (3,683) 23.7% (15,963) (14,114) 13.1%
Outsourced services (1,318) (3) 43833.3% (5,315) (3,468) 53.3%
Legal fees (525) (333) 57.7% (3,712) (2,020) 83.8%
Provisions for doubtful accounts 461 234 97.0% 2,171 99 2092.9%
Other administrative expenses (3,175) (3,581) -11.3% (9,107) (8,725) 4.4%
Taxes (171) (544) -68.6% (1,925) (2,916) -34.0%
Equity income 664 812 -18.3% 2,696 2,662 1.3%
Gain from fair value of investment properties 68,681 65,977 4.1% 142,726 226,651 -37.0%
Other operating revenue (expenses), net 585 (508) -215.2% 4,163 347 1099.7%
Total operating revenue (expenses), net 65,202 62,055 5.1% 131,697 212,630 -38.1%
OPERATING INCOME BEFORE FINANCIAL
RESULT109,704 98,999 10.8% 281,968 325,010 -13.2%
NET FINANCIAL RESULT 268 (2,584) -110.4% (4,440) (11,917) -62.7%
INCOME BEFORE INCOME AND - - 0.0% - - 0.0%
SOCIAL CONTRIBUTION TAXES 109,972 96,415 14.1% 277,528 313,093 -11.4%
INCOME AND SOCIAL CONTRIBUTION TAXES
Current (4,915) (3,939) 24.8% (12,397) (9,797) 26.5%
Deferred (23,159) (19,477) 18.9% (52,371) (60,423) -13.3%
Total (28,074) (23,416) 19.9% (64,768) (70,220) -7.8%
NET INCOME 81,898 72,999 12.2% 212,760 242,873 -12.4%
INCOME ATTRIBUTABLE TO:
Owners of the parent company 46,122 43,398 6.3% 139,194 152,381 -8.7%
Minority interests 35,776 29,601 20.9% 73,566 90,492 -18.7%
31
4Q10 Earnings Release
Consolidated Cash Flow Statement
(R$ thousand) 2010 2009CASH FLOW FROM OPERATING ACTIVITIES
Net income for the year 212,760 242,873
Adjustments to reconcile net income to
net cash from (used in) operating activities:
Depreciation and amortization 1,210 1,206
Amortization of goodwill - -
Residual cost of written-off fixed assets 71 181
Residual cost of land sold - -
Unbilled revenue from rentals (1,571) (5,599)
Provisions for doubtful accounts (2,171) (99)
Provisions (reversal of) for contingencies (1,462) 560
Acrrual for variable compensation 1,373 4,180
Deferred income and social contribution taxes 52,371 60,423
Financial charges 10,871 16,788
Minority interest - -
Changes in fair value of investment property (142,726) (226,651)
Equity income (2,696) (2,662)
(Increase) decrease in operating assets: - -
Restricted investments (139) (418)
Accounts receivable (753) (413)
Loans to condominiums (112) 879
Taxes recoverable (2,292) (3,910)
Advances to suppliers 5 (91)
Prepaid expenses 21 (196)
Judicial deposits (707) (769)
Other (3,560) (3,971)
Increase (decrease) in operating liabilities:
Salaries, wages and benefits (2,879) 1,326
Brazilian suppliers (1,878) (3,415)
Taxes payable 2,130 1,076
Technical structure 4,716 4,574
Other obligations 2,243 7,249
Cash provided by (used in) operating activities 124,825 93,121
interest paid (18,643) (7,861)
Net cash from (used in) operating activities 106,182 85,260
CASH FLOW FROM INVESTMENT ACTIVITIES
acquisition or construction of investment property (117,617) (221,009)
Acquisition of fixed assets (1,197) (1,132)
Increase in intangible assets (681) (225)
Increase in deferred charges - -
Increase in capital invested - -
Proceeds from the sale of land and other fixed assets - -
Dividends received 537 296
Net cash used in investment activities (118,958) (222,070)
CASH FLOW FROM FINANCING ACTIVITIES
Capital increase 3,555 108,431
Advance for future capital increase - 1,784
Loans and financing raised 77,333 96,985
Loans and financings paid - principal (59,000) (62,666)
Interest on loans and financing paid - -
Dividends paid (3,136) -
Income distributed (27,435) (24,922)
Related parties (3,227) 76,008
Net cash from financing activities (11,910) 195,620
NET INCREASE (DECREASE) IN BALANCE OF CASH AND
CASH EQUIVALENTS(24,686) 58,810
CASH AND CASH EQUIVALENTS
At end of year 61,566 86,252
At beginning of year 86,252 27,442
NET INCREASE (DECREASE) IN BALANCE OF CASH AND
CASH EQUIVALENTS(24,686) 58,810