16th ANNUAL ERES CONFERENCE STOCKHOLM th ANNUAL ERES CONFERENCE STOCKHOLM PROPERTY DEVELOPMENT FIRM IPOs IN BRAZIL: WAS THERE OVERPRICING OR NOT? PROPERTY DEVELOPMENT FIRM IPOs IN BRAZIL: WAS THERE OVERPRICING OR NOT? Prof. João da Rocha Lima Jr. Prof. Claudio Tavares de Alencar Prof. João da Rocha Lima Jr. Prof. Claudio Tavares de Alencar Real Estate Research Group University of São Paulo june 2009

THE BRAZILIAN REAL ESTATE INDEX RERG-USP

THE BRAZILIAN REAL ESTATE INDEX RERG-USP SubPrime Investment grade Investment grade

RERG-USP SubPrime EVIDENCE of sub-prime impact  all indexes were negatively affected, but the IRE-R50- was the worst one  all indexes were negatively affected, but the IRE-R50- was the worst one  o IRE-R50+ recovered faster and stronger  o IRE-R50+ recovered faster and stronger  the IRE-R50- and IRE-BI recovering is brief and little sustainable. They detached from the Ibovespa, in the beggining of 2008 they’ve already been lower than they were in august 2007 (sub-prime month)  the IRE-R50- and IRE-BI recovering is brief and little sustainable. They detached from the Ibovespa, in the beggining of 2008 they’ve already been lower than they were in august 2007 (sub-prime month) WHAT IS INVESTORS RISK AVERSION AND WHAT IS PROBLEM WITH THE COMPANIES STRATEGY AND FUNDAMENTALS? WHAT IS INVESTORS RISK AVERSION AND WHAT IS PROBLEM WITH THE COMPANIES STRATEGY AND FUNDAMENTALS? THE BRAZILIAN REAL ESTATE INDEX

RERG-USP EVIDENCE of investment grade impact  in may all indexes get higher, while in april they had the worst performance of the year so far  in may all indexes get higher, while in april they had the worst performance of the year so far  in june and july, when the euphoria had finished, all indexes falling sharply, even bellow than the april level  in june and july, when the euphoria had finished, all indexes falling sharply, even bellow than the april level  until july, only the Ibovespa index reaches the same level of the beginning of de 2008, the real estate indexes have losses of 31% for the IRE-R50+, 32% for the IRE-BI and 43% for the IRE-R50-  until july, only the Ibovespa index reaches the same level of the beginning of de 2008, the real estate indexes have losses of 31% for the IRE-R50+, 32% for the IRE-BI and 43% for the IRE-R50- WHAT IS INVESTORS IRRATIONAL EXUBERANCE AND WHAT IS MISUNDERSTANDING IN ANALYSING COMPANIES FUNDAMENTALS? WHAT IS INVESTORS IRRATIONAL EXUBERANCE AND WHAT IS MISUNDERSTANDING IN ANALYSING COMPANIES FUNDAMENTALS? Investment grade Investment grade THE BRAZILIAN REAL ESTATE INDEX

THE IRE, THE BLUE CHIPS AND THE SMALL CAPS RERG-USP  THE REAL ESTATE BLUE CHIPS are 6 residential development companies and 1 real estate investment company which transactions at bovespa are superior than R$ 80 millions a month  THE REAL ESTATE BLUE CHIPS are 6 residential development companies and 1 real estate investment company which transactions at bovespa are superior than R$ 80 millions a month  THE REAL ESTATE SMALL CAPS are 15 residential development companies and 5 real estate investment companies which transactions at bovespa are lower than R$ 80 millions a month  THE REAL ESTATE SMALL CAPS are 15 residential development companies and 5 real estate investment companies which transactions at bovespa are lower than R$ 80 millions a month

RERG-USP THE IRE, THE BLUE CHIPS AND THE SMALL CAPS EVIDENCES of BC e SC performance  the blue chips have better performance than the global IRE  the blue chips have better performance than the global IRE  separating the stocks by transaction volume at bovespa show that the SC has worse performance than the others (in 08/08, ISC = 45,75 against IRE-R50-=67,84 e IRE-BI=83,45  separating the stocks by transaction volume at bovespa show that the SC has worse performance than the others (in 08/08, ISC = 45,75 against IRE-R50-=67,84 e IRE-BI=83,45  volatility, losses in the sub-prime and gains in the investment grade, is not significantly different between blue chips and small caps (WHAT REVEALS A CERTAIN IRRATIONALITY)  volatility, losses in the sub-prime and gains in the investment grade, is not significantly different between blue chips and small caps (WHAT REVEALS A CERTAIN IRRATIONALITY)

BEST AND BIGGEST BLUE CHIP IN THE MARKET RERG-USP BIASED READING OF THE FUNDAMENTALS? BIASED READING OF THE FUNDAMENTALS? LEARNING CURVE IN READING THE FUNDAMENTALS? LEARNING CURVE IN READING THE FUNDAMENTALS? The two blue chips have Better fundamentals and strategies than the small cap have The two blue chips have Better fundamentals and strategies than the small cap have

16th ANNUAL ERES CONFERENCE STOCKHOLM th ANNUAL ERES CONFERENCE STOCKHOLM PROPERTY DEVELOPMENT FIRM IPOs IN BRAZIL: WAS THERE OVERPRICING OR NOT? PROPERTY DEVELOPMENT FIRM IPOs IN BRAZIL: WAS THERE OVERPRICING OR NOT? Prof. João da Rocha Lima Jr. Prof. Claudio Tavares de Alencar Prof. João da Rocha Lima Jr. Prof. Claudio Tavares de Alencar Real Estate Research Group University of São Paulo june 2009