27 06-2011 - jp morgan - latam smid conference

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LatAm SMid Conference London, June 20 – 21, 2011

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Page 1: 27 06-2011 - JP Morgan - LatAm SMid Conference

LatAm SMid Conference

London, June 20 – 21, 2011

Page 2: 27 06-2011 - JP Morgan - LatAm SMid Conference

2

Disclaimer

► The material that follows is a presentation of general background information about Sonae Sierra Brasil S.A. and its subsidiaries

(the “Company”) as of the date of the presentation. It is information in summary form and does not purport to be complete. It is not

intended to be relied upon as advice to potential investors and does not form the basis for an informed investment decision. This

presentation is strictly confidential and may not be disclosed to any other person. No representation or warranty, express or

implied, is made concerning, and no reliance should be placed on, the accuracy, fairness or completeness of the information

presented herein.

► This presentation may contain statements that are forward-looking within the meaning of Section 27A of the U.S. Securities Act of

1933, as amended (the “Securities Act”) and Section 21E of the U.S. Securities Exchange Act of 1934. Such forward-looking

statements are only predictions and are not guarantees of future performance. Investors are cautioned that any such forward-

looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations

and business environments of the Company and its subsidiaries that may cause the actual results of the Company to be materially

different from any future results expressed or implied in such forward-looking statements. No person has any responsibility to

update any such information.

► This presentation does not constitute an offer, or invitation, or solicitation or an offer, to subscribe for or purchase any securities.

Neither this presentation nor anything contained herein shall form the basis of any contract or commitment.

Page 3: 27 06-2011 - JP Morgan - LatAm SMid Conference

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One of the leading developers, owners and operators of top quality and regionally dominant shopping centers in Brazil

Sonae Sierra Brasil at a glance

► Fully integrated business model with proven local track record– Property management– Development and re-development– Leasing

► 62.4% of our owned GLA developed by us► Adjusted EBITDA Growth (09-10): 42.1%► Adjusted FFO Growth (09-10): 60.2%

► Largest secured growth in the sector: 3 greenfields, 1 expansion recently concluded and 2 expansions at advanced stage, almost doubling our owned GLA

► 3 other expansions already defined

► 10 shopping centers owned and managed► Occupancy rate of 97.6%

Note: (1) As of March 31, 2011(2) Referres to shopping center’s GLA only.

.

► Leverage on the expertise, tenant relationships and market recognition of our shareholders: Sonae Sierra SGPS and Developers Diversified Realty (NYSE: DDR)

► Best-in-class controlling shareholders with significant experience in the sector and significant capital at risk

BusinessModel

Outstanding Growth Track Record

Secured Growth

Operating Expertise

Strong Sponsorship

Expansion / Greenfield

Announced GLA growth (2010 – 2013)(1)

(‘000 sq. m)(2)

+26.9%71

+65.0%136

+24.0%144

+43.1%160

+92.1%188

Owned GLA Growth (%)

Page 4: 27 06-2011 - JP Morgan - LatAm SMid Conference

111

44

Ownership Structure

Post-IPO Ownership Breakdown

Sierra Brazil 1 BV66.65%

Enplanta Shopping

2.93%

Free Float30.42%

Sonae Sierra SGPS50%

DDR50%

Controlling Shareholders

► Over 21 years of history

► One of the largest developers and operators of shopping centers in Europe

► Over 2.0 mm sq m in total GLA

► 50/50 joint-venture between Sonae and Grosvenor

► Over 45 years of history

► One of the largest developers and operators of shopping centers in the world

► 12.4 mm sq m in total GLA

► NYSE listed, SOx Compliant

► Equity value of US$3.5 billion(1)

Sierra Brazil 1 BV

Note: (1) as of June 16, 2011

Sonae Sierra Brasil benefits from best-in-class corporate governance and globally recognized sector expertise, arising from a solid and engaged controlling shareholders

Page 5: 27 06-2011 - JP Morgan - LatAm SMid Conference

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Investment thesis

Competitive edges

► Attractive industry fundamentals

► Strategy focused on dominant malls in underserved medium and large cities targeting to the fast growing middle class

► Leverage on the know-how, strengths and long term commitment of our sponsors

► Sound track record of developments and turnaround cases

► Experienced and committed management team

Page 6: 27 06-2011 - JP Morgan - LatAm SMid Conference

6

26.1 28.8 31.7 35.941.6 45.5 50.0

58.064.6

71.1

87.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E

Attractive shopping center industry fundamentalsDespite the strong growth observed in the last years, decreasing vacancy rates and low penetration vis-à-vis developed markets, indicate significant room for new shopping centers in Brazil

Shopping centers industry sales

Retail sales in shopping centers

(R$ bn)

Nominal retail sales growth

Source: IBGE.Source: ABRASCE.

Low shopping center market penetration

Source: ABRASCE and IBGE.

Total GLA (m²) / 1,000 inhabitants (2010)

66%

51% 50%

28%

18%

Canada USA Mexico France Brazil

(% 2010)

(1)

Note: (1) 2010 data.Source: ABRASCE.

4%

9%11%

19%

8%

5%

14%

10%12% 13%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E

2,180

USA Canada

1,290

SP

91

PR

53

MG

31

GO

34

AM

42

DF

143

Other BR states

34

Average: 49

Mexico

81

Page 7: 27 06-2011 - JP Morgan - LatAm SMid Conference

7

Fast growing middle class

Around 30 million people have moved upwards into the middle class, while middle class disposable income has increased by 67%

Middle class: disposable income(1) (R$/month)

Note: (1) Income available for spending and savingSource: Cetelem “O Observador 2009”, IBGE and Itau Securities

122

204

2005 2009

+67%

Approximately R$ 10 billion increase in monthly disposable income

Total credit to individuals outstanding (R$ bn)

Source: Cetelem “O Observador 2010”

Increasing middle class

51% 35%

34%49%

16%15%

2005 2009

Population: 182 mm Population: 190 mm

+4 mm people

+30 mm people

-26 mm people

A+B

C

D+E

Upp

er c

lass

Mid

dle

clas

sLo

wer

cla

ss

Sonae Sierra Brazil is strategically positioned to capture the middle class consumption growth, as it entails over 80% of its target audience

6.8x

-

200

400

600

Jan-01 May-02 Sep-03 Jan-05 May-06 Sep-07 Jan-09 May-10

Page 8: 27 06-2011 - JP Morgan - LatAm SMid Conference

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Opening of Boavista Shopping

Acquisition of additional stakes in

Metrópole, Plaza Sul and Tivoli

Opening of PDP Shopping

Sound track record

Sonae Sierra Brasil’s historical evolution | Owned GLA (‘000 sq m)

CAGR(01-10): 26.2%

DDR becomes a shareholder with

50% stake

2001 2002 2003 2004 2005 2006 2007 2008 2009

Acquisition of a 20% stake in Plaza Sul

Opening of Manauara Shopping

25.1

79.9 80.8

102.7

108.5

128.4150.0 148.5

200.0 203.7

2010

Total GLA (‘000 sq m)

111.7 219.0 220.9 242.1 273.8 297.8 298.8 296.8 343.5 350.1

1999…

Owned GLA as % of total GLA

111.7

36.5% 36.6% 42.4% 39.6% 43.1% 50.2% 50.0% 58.2% 58.2%22.5%

Acquisition

Development

Acquisition of additional stake in

Metrópole

Opening of Campo Limpo

Page 9: 27 06-2011 - JP Morgan - LatAm SMid Conference

9

Controlling interests in most of shopping centersSonae Sierra Brasil average stake is 58% in its 10 operating properties. It will reach 70% when all three greenfield developments are completed

RationalePercentage of the Company’s interestShopping Center Stake Management

Parque D. Pedro(1) 51.0% Penha 73.2% Metrópole 100.0% Tivoli 30.0% Pátio Brasil 10.4% Boavista 100.0% Franca 67.4% Plaza Sul 30.0% Campo Limpo 20.0% Manauara 100.0% Weighted Average 58.2%

Uberlândia 100.0% Londrina 84.5% Goiânia 100.0% Weighted Average 70.3%

Note: (1) Sonae Sierra and DDR hold an additional 25.9% indirect ownership in Parque D. Pedro through another vehicle.

Ability to expand and adapt to market trends

Control the management services of 100% of the malls

Strategic control of the malls

Page 10: 27 06-2011 - JP Morgan - LatAm SMid Conference

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Parque D. Pedro: Greenfield case study

(1) Sonae Sierra SGPS and Developers Diversified Realty hold an additional 25.9% indirect owneship in Parque D. Pedro througgh another vehicle

Project Details

Opening October 2002

Sonae Sierra Brasil’s stake(1) 51.0%

GLA (‘000 sqm) 121.0

Occupancy Rate (%) 95.2%

Parking (#) 8,000

Traffic (# of visitors) 20.1 million

Internal View Aerial perspective

Focus on value creation through organic growth

Food Court

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Strategy focused on dominant malls on underserved medium and large cities Sonae Sierra Brasil has an established footprint in the State of São Paulo and its growth strategy is based on offering high quality, market dominant developments in underserved regions

Core portfolio: 9 properties Development strategy: 1 opened and 3 greenfields

Core Portfolio of Assets

Strong track record in Brazil’s most dynamic region Growth strategy focused on underserved regions

Parque D. Pedro► Campinas (SP)► Population: 1,065k► GLA: 121k sq m► Occupancy rate: 95.2%► Over 20 mm visits in 2010

Total GLA: 343k sq m

Owned GLA: 203k sq m

Greenfield

Manauara Shopping► Manaus (AM)► Population: 1,739k► GLA: 47k sq m► 99.7% leased

# of competitors in area of influence

Parque D. Pedro 2

Boavista 2

Penha 2

Franca 1

Tivoli 1

Metrópole 2

Pátio Brasil 2

Plaza Sul 1

Campo Limpo 2

Total GLA 2013: 513k sq m

Owned GLA 2013: 391k sq m

# of cities with more than 300kinhabitants in Brazil

+ 81

41.6%58.4%

São Paulo Other states

Owned GLA concentration

Shopping centers

Recently opened mall

Shopping centers

Manaus

Goiânia

Uberlândia

Londrina

Page 12: 27 06-2011 - JP Morgan - LatAm SMid Conference

12

Secured Growth

Owned GLA growth (000 sq m)

Uberlândia

Londrina

Goiânia

+92%

Metrópole (I) PDP (II)

Metrópole (II)

Tívoli

84

204

3923

13

78

2010 2011 2012 2013 Total

Expansion Greenfields

10

Campo Limpo

Sonae Sierra Brasil has a solid pipeline of new developments and expansions underway that will almost double the Company’s GLA within 3 years

Page 13: 27 06-2011 - JP Morgan - LatAm SMid Conference

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Greenfield Projects

Uberlândia Shopping

Uberlândia

MG

1Q12

Work in progress

43.6 sqm

100%

86%

Boulevard Londrina Shopping

Londrina

PR

2H2012

Work in progress

47.8 sqm

84.5%

70%

Shopping Passeio das Águas

Goiânia

GO

2013

Approved licences

78.1 sqm

100%

20%

Opening :

Total GLA (‘000 sq m):

Company’s stake:

% of GLA already committed*:

Status:

Sonae Sierra Brasil’s strategy is to develop greenfield projects which have the potential to become the market dominant malls in their regions

City:

State:

* As of March 31, 2011

Page 14: 27 06-2011 - JP Morgan - LatAm SMid Conference

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Expansions

Future expansions

TivoliMetrópole(Expansion II)

Parque D. Pedro(Expansion II)

Campo Limpo

Concludedexpansion

Parque D. Pedro(Expansion I)

On-going expansions

Metrópole(Expansion I)

Location São Bernardo(SP)

Sta. Bárbara D’Oeste (SP)Campinas (SP)São Paulo (SP)Campinas (SP) São Bernardo

(SP)

Sonae Sierra Brasil Stake 100% 30%51%20%51% 100%

Additional Total GLA (‘000 sq m) 12.0 7.05.03.05.0 9.0

ExpectedOpening 2013 201320122H2011November 2010 2H2011

ConstructionStart Date 1H20121H2011 1H2012 1H20121H2010 1H2010

% of GLA already committed*:

100% 99% 90% n.a. n.a. n.a.

* As of March 31, 2011

Page 15: 27 06-2011 - JP Morgan - LatAm SMid Conference

111

1515

Operating Indicators

Occupancy Rate

111

Sales (R$ million)

111

SSS/m²

111

SSR/m²

97.3%

96.3%97.0% 97.2%

98.3% 98.5% 98.4%98.0%

97.7%

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

743.8 840.7

3,041 3,545

1Q10 1Q11 2009 2010

16.6%

13.0%

784

861 824

902

1Q10 1Q11 2009 2010

9.8% 9.5%

45.9

51.0

45

49

1Q10 1Q11 2009 2010

11.1%

8.0%

Page 16: 27 06-2011 - JP Morgan - LatAm SMid Conference

Financial and operating performance

16

Gross Revenue (R$ '000) 1Q11 1Q10 % 2010 2009 %

Rent 41,342 34,912 18.4% 158,246 132,370 19.5%

Rent contract straight-lining 949 1,401 -32.3% 1,811 5,886 -69.2%

Service revenue 4,033 4,453 -9.4% 15,530 18,390 -15.6%

Parking revenue 5,610 2,774 102.2% 16,629 6,645 150.2%

Key money 2,398 2,722 -11.9% 10,399 9,232 12.6%

Other revenue 325 32 915.6% 808 2,186 -63.0%

Total 54,657 46,294 18.1% 201,612 168,823 19.4%

111

Gross Revenue (R$ million)

111

Gross Revenue Breakdown

46.3 54.7

168.8 201.6

1Q10 1Q11 2009 2010

18.1%

19.4%

75%

3%10%

6%6%0%

1Q10

76%

2% 7%10%

4% 1%

1Q11

RentRent contract straight-liningService revenueParking revenueKey MoneyOther revenue

Page 17: 27 06-2011 - JP Morgan - LatAm SMid Conference

111

1717

Financial and operating performance (cont.)

Adjusted EBITDA and Margin (R$ million)

111

Net Revenues (R$ million)

111

Adjusted FFO and Margin (R$ million)

111

Net Operating Income - NOI (R$ million)

32.1 38.0

99.5

141.4

1Q10 1Q11 2009 2010

18.3%

42.1%

29.9 34.4

77.8

124.6

1Q10 1Q11 2009 2010

15.2%

60.2%

75.9%76.3%

64.6%76.4%

70.7% 69.2%

50.5%

67.3%

38.8 47.1

128.3

167.4

1Q10 1Q11 2009 2010

30.5%

21.4%

42.3 49.7

154.1 185.0

1Q10 1Q11 2009 2010

20.0%

17.6%

Page 18: 27 06-2011 - JP Morgan - LatAm SMid Conference

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Cash Position and Leverage

Fixed 59%

CDI22%

TR19%

Net Cash Position (R$ million) Debt Profile

Debt Amortization Schedule (R$ million)

7.7 9.9 28.0 28.0 27.3

111.4

2011 2012 2013 2014 2015 2016 and beyond

Information as of March 31, 2011

Page 19: 27 06-2011 - JP Morgan - LatAm SMid Conference

90

95

100

105

110

115

120

125

130

135

2-Feb 14-Feb 24-Feb 10-Mar 22-Mar 1-Apr 13-Apr 27-Apr 9-May 19-May 31-May 10-Jun

Stoc

k Pe

rform

ance

Ibovespa SSBR3

1919

Stock Performance

Stock Performance Since IPO versus Ibovespa

Performance – Feb 02 to June 10, 2011

SSBR3: + 27.2%Ibovespa: - 6.0%

Since the IPO in February 2011, Sonae Sierra Brasil’s shares have had a solid performance when compared to the Ibovespa

Page 20: 27 06-2011 - JP Morgan - LatAm SMid Conference

Thank You

Questions & answers

Investors Relations Carlos Alberto CorreaInvestors Relations Officer

Murilo HyaiInvestors Relations Manager

Email:[email protected]

Phone: +55 (11) 3371-4188