Home Builders Conference San Pablo - Brazil October 2007
Investment Highlights Favorable economic environment in Chile Consistent growth Low interest rates and low inflation Government stability Largest residential real estate development company in Chile 42 years of experience and over 55,000 housing units built Substantial, attractive land bank Vertically-integrated business model Allows Socovesa to control all aspects of the development process Diversified portfolio Diversified in geographic scope throughout Chile, price point and product type Experienced management team Average of 19 years of industry experience Managed profitably throughout all points of the economic and real estate cycle Founders remain committed to Socovesa s continued success with 51.7% ownership, post-offering Strong brand recognition for both Socovesa and Almagro 2
Chile Market Overview Hacienda Urbana Larapinta 3
Chile A Leading Emerging Market Leading emerging market with strong economic fundamentals, a broad network of free trade deals and solid GDP growth prospects Highest credit rating in Latin America Rated A by Fitch, A2 by Moody s and A by S&P Most developed mortgage market in Latin America mortgage loans reached 15.5% penetration in 2005 Real estate price appreciation has significantly lagged financial asset appreciation Higher disposable income leads to increased demand for better quality housing 4
Favorable Economic Environment 10% 5% 0% -5% Note: June 07 represents last twelve months data Source: Banco Central de Chile GDP growth Mortgage loans as % of GDP (2005) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 June '07 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 USA 80.0 Europe -15 50.7 Chile 15.5 Source: IFC factsheet, 2006 Panama 12.2 12.2 11.3 Colombia El Salvador Mexico 8.1 Brazil 4.4 3.5 3.5 Peru Argentina 12% 11% 10% 9% 8% 7% 6% 5% 4% Jan-98 Source: Central Bank Unemployment levels Nov-98 Sep-99 Jul-00 May-01 Mar-02 Jan-03 Nov-03 Sep-04 Jul-05 May-06 Mar-07 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% Nov-02 May-03 Source: Central Bank Interest rate evolution (BCU-10) Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 5
Favorable Housing Market Environment GDP growth Strong economic outlook for housing market Low interest rates, inflation and unemployment Housing deficit Consistent growth in housing sector Region XI XII III II IV I IX VI VII X 2,594 3,003 8,937 21,104 21,180 21,459 25,317 28,482 32,097 33,232 Housing deficit V 47,016 VIII 56,150 RM 242,971 Total 543,542 0 100,000 200,000 300,000 400,000 500,000 600,000 Source: 2002 Census Limited land appreciation Mortgage loans in banking sector (Ch$ billion) 350 300 250 200 150 100 50 0 Ch$ billion 12,000 10,000 8,000 6,000 4,000 CAGR: 19.1% Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 2,000 IPSA Land price / M2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Mar- 07 Source: Trivelli y Assoc., BCS Source: SBIF 6
Chilean Real Estate Industry Analysis Supply Consolidation: Synergies (purchasing power) Financing capacity Regulatory requirements Post sale services Few large scale residential developers Demand As per capita income increases, so does demand for better quality housing Housing deficit Smaller households Population growth (1.08% 5 year average) Habitants per house Demand for high value units 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 4.1 3.5 3.0 1990 1999 2010 Income per capita (US$) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Pakistan Columbia R2=0.80 Korea Finland Chile Uruguay Cost a Rica Austria San Marino Puerto Rico Port ugal Norway Switzerland Belgium Cyprus United St at es Sweden Unit ed Kingdom Canada New Zealand 0 0.00 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25 Rooms per person per household Source: United Nations, INE 7
Company Overview Cascadas del Sur 8
Largest Real Estate Company in Chile Grupo Socovesa Grupo Socovesa (Socovesa S.A.) (Socovesa S.A.) Real Estate Real Estate Engineering Engineering Santiago Santiago Almagro S.A. Almagro S.A. Temuco Temuco Valdivia Valdivia Socoicsa Socoicsa Years of operation since inception 42 Homes built since inception 55,000+ Employees 10,000 2006 pro forma sales $368.6 million 2006 pro forma housing units sold 3,733 Projects for sale 76 13 cities in Chile, 16 districts in Santiago 9
Consistent and Profitable Growth Throughout Industry Cycles $442.8 Acquisition of Almagro S.A. $30.0 Sales ($ in millions) $369.0 $295.2 $221.4 $147.6 $73.8 $0.0 Socovesa is founded 1965 1983 1984 1985 1986 1987 1988 First project out of Temuco, in Valdivia Expansion of business to Santiago Entry into Osorno 1989 1990 1991 1992 Land purchased in Argentina 1993 Sales Entry into Puerto Montt 1994 1995 1996 1997 Net income Entry in Concepción First project in Chiloé 1998 1999 2000 2001 2002 2003 2004 2005 2006 2006pf Socoicsa is founded $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 Net Income ($ in millions) 10
Almagro Acquisition Socovesa completed its acquisition of Almagro on August 17, 2007 Acquisition price: $160 million Product type Geographic exposure Target income segment Predominantly single family homes Strong brand positioning in Santiago and the South Low and middle income segments Predominantly apartments Strong presence in Santiago and the North Middle and high income segments Post transaction, Socovesa will be more diversified with respect to: Product both apartments and single family homes Geography developments and land banks throughout Chile Price government subsidized to luxury housing With the acquisition of Almagro, the company now has 2 leading brands 11
Substantial, Attractive Land Bank Projects under development by regional subsidiary (Value) Santiago 19% Almagro 62% Temuco 9% Valdivia 10% Future developments 80 Properties 1,300 hectares + (3,200 acres) = $3.1 billion potential sales 12
Vertically Integrated Business Model Real Negocio estate Inmobiliario business 1 Market analysis 2 3 4 5 lisis de mercado y Desarrollo Project and business de Construction ón Commercial ón development decisions proyecto Stage After-sales Servicio service postventa Land bank strategy Market analysis Land identification Preliminary project development Purchase process Product definition Architecture design City planning design Engineering development Project approval by planning authorities Constructora Socovesa under lump-sum scheme Pilot houses or apartments to be sold in shell form Quality control Launch strategy Marketing and advertising Dedicated sales force for each project Coordination of customer financing Performance of consumer warranties Post sales services for housing maintenance 13
Vertically Integrated Business Model Financing approach Land Bank Construction Financed with Company s own capital and bank loans Purchase of large properties through associations with land owners or financial institutions Customers (down payments): 5-20% Bank credit lines (unsecured) Coordinated planning of different construction stages and expected sales period in order to optimize working capital use Sales and post-sales Commercial agreements with major mortgage providers Agreements with mortgage providers for prompt payment 14
Diverse Portfolio Geographic Scope Santiago Antofagasta Calama Regional diversification of projects on sale North 6% South 10% Lampa Quilicura Renca Huechuraba Colina Providencia Santiago Centro Ñuñoa Vitacura Lo Bamechea Las Condes La Serena Viña del Mar Santiago Santiago 74% South/ Central 10% Maipú Cerrillos San Bernardo San Miguel Macul Puente Alto Concepción Los Ángeles Villarrica Valdivia Osorno Puerto Varas Puerto Montt Castro Rancagua Talca Chillán Temuco Pucón Socovesa Almagro Socovesa and Almagro Puerto Natales Punta Arenas 15
Diverse Portfolio Price (Cost/unit in US$ thousands) Alerce X región $21 Larapinta $35 71 Ciudad Satélite Maipú $71 124 Huechuraba $106 142 Los Bravos $354 Los Monjes $531 708 $18 $1,062 Blanco Encalada $35 71 San Miguel $71 124 Nuñoa $106 142 Las Condes $142 212 Espoz $283 Kennedy $354 521 16
Diverse Portfolio Price (continued) Socovesa Over $369,000 17% $184,500- $369,000 1% Under $110,700 23% Almagro Over $369,000 22% $110,700- $184,500 11% Under $110,700 71% $110,700- $184,500 32% $184,500- $369,000 23% Total Over $369,000 19% Under $110,700 49% $184,500- $369,000 11% $110,700- $184,500 21% 17
Diverse Portfolio Product Socovesa Apartments 11% Houses 16% Almagro Houses 89% Apartments 84% Total Houses 53% Apartments 47% Note: Breakdown by number of projects 18
Strategic Focus Value creation Diversification Superior market knowledge Operational and Commercial efficiency Financial efficiency 19
May-07 Sep-06 Jun-07 Promising Market Conditions GDP growth Interest rate evolution (BCU-10) 10% 5.00% 4.50% 5% 4.00% 3.50% 0% 3.00% 2.50% 2.00% -5% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 June '07 1.50% Source: Banco Central de Chile Source: Central Bank Unemployment levels Real wage per hour index 12% 11% 10% 9% 8% 7% 6% 5% 4% Source: Central Bank Source: National Institute of Statistics 20 Nov-02 May-03 Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 Note: June 07 represents last twelve months data 110.00 105.00 100.00 95.00 90.00 85.00 80.00 Jan-98 Sep-98 May-99 Jan-00 Sep-00 May-01 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Jan-98 Sep-98 May-99 Jan-00 Sep-00 May-01 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06 Jun-07 Note: Base January 2006
National Product Reach Socovesa Combined Central South Concepción Temuco Valdivia Antofagasta Santiago Rancagua La Serena Punta Arenas Viña del Mar Santiago North Almagro Central Concepción Los Ángeles Villarrica Valdivia Osorno Puerto Varas Puerto Montt Castro Rancagua Talca Chillán Temuco Pucón Antofagasta Viña del Mar Santiago Puerto Natales Punta Arenas 21
Opportunities PILLARS OF GROWTH Acquisition opportunities in a fragmented industry Expansion of product offering Land stock appreciation Engineering and construction sector growth Improved access to low cost financing Short / medium term Purchase Actores regionales of large land de nicho properties Acquisition of niche regional players Socovesa: North Mid-High Almagro: South Mid-Low Today: 1,200 hectares of landbank across strategic sectors in Chile Consolidation of current team Fixed income market (EECC, bonds) Forward purchase agreements Medium / long term Office buildings Second homes International Potential acquisitions Infrastructure Concessions 22
Financial Management / Performance Los Cóndores 23
IPO Summary Pricing date October 18, 2007 Offering structure Initial Public Offering in Chile, with international sales efforts under Rule 144A / Reg S Offering size 265.2 million shares (100% primary) Over-allotment option Shares post-offering offering Exchange 39.8 million additional common shares (15%), up to 30 days after the offering 1,223,935,691 (assuming exercise of the over-allotment options) Santiago Stock Exchange Final Price $13.20/share (per ADS) Total capital raised: US$ 161 million General Info P/E 08: 16.1 P/B: 1.9 Mkt Cap: US$ 655 million Use of proceeds Pay down acquisition financing of Almagro ($100 million), finance identified land purchases 24
Conservative Accounting Accounting considerations Completed sales method Socovesa s accounting policies are conservative and comply with IFRS requirements Sales are recognized when title passes to the home buyer, as opposed to the percentage-ofcompletion method of accounting Less risk as failed closings will not result in a shortfall of actual revenue received Prior to the acquisition, Almagro followed the percentage-of-completion method, and there will be a negative adjustment as it converts to the completed sales method The adjustment due to the change in accounting policy totals $6 million 25
Historical Financial Performance Socovesa Historical revenue Historical operating income In US$ millions $400,0 $300,0 $200,0 $100,0 $0,0 369 266 178 262 160 77 114 2004 2005 2006 1H 06 1H 07 In US$ million $50,0 $40,0 $30,0 $20,0 $10,0 $0,0 ($10,0) 13,5% 45 10,7% 36 12,3% 10,9% 19 28 0-0,3% 10,8% 8,9% 17 10 2004 2005 2006 1H06 1H07 16% 12% 8% 4% 0% -4% Socovesa Pro forma Socovesa Margin Pro f orma Margin Historical EBITDA Historical net income (1) In US$ million $60,0 $50,0 $40,0 $30,0 $20,0 $10,0 $0,0 57 15,4% 18% 15,4% 13,0% 13,3% 15% 41 14,1% 12% 10,8% 23 9% 21 37 6% 2,0% 3% 2 12 0% 2004 2005 2006 1H06 1H07 In US$ million $30,0 $20,0 $10,0 $0,0 ($10,0) 8,3% 15 9,4% 25 25 15 6,7% 5,7% -7,1% -5 2004 2005 2006 1H06 1H07 4,7% 5% 2,2% 5 0% 3 10% -5% -10% Socovesa Margin Pro forma Margin Socovesa Margin Pro forma Margin (1) 1H 07 reflects extraordinary item due to adjustment in Almagro s revenue recognition policy to match that of Socovesa 26
Historical Financial Performance Socovesa (continued) Debt/shareholders equity 4.0x 3.0x 2.7x 2.0x 1.0x 0.5x 0.7x 1.8x 1.3x 1.3x 1.3x 1.0x 0.0x 2004 2005 2006 6-Jun 7-Jun Socovesa Pro f orma Pro forma post-ipo Note: Pro forma ratio post-ipo assumes $100 million in debt repayment 27
Pro Forma Capitalization at June 30, 2007 ($ in 000s) Short-term liabilities with banks and financial institutions Banks and financial institutions Other long-term liabilities Minority interests Total shareholders equity Total capitalization $308,695 68,857 150,684 11,576 194,624 734,437 28
Pro Forma Ownership Pre-IPO Pro forma (1) Employee ownership 14.0% Float 25.0% Negrón family 17.2% Gras family 68.8% Employee ownership 10.5% Negrón family 12.9% Gras family 51.6% (1) Pro forma shareholder base assumes over-allotment option is exercised. 29
Case Studies Barrio Privado Los Monjes 30
PUERTO MONTT 31
CONCEPCION 32
Case Study Socovesa Hacienda Urbana Larapinta City Santiago District Lampa Product type Single family homes Start up 2004 Property size 1,000 acres Units sold to date 2,290 Total units 8,500 Average sale price $52,103 Built area (m2) 163,000 Total projected sales $442.8 million 33
Case Study Socovesa Barrio Privado Los Monjes City Santiago District Lo Barnechea Product type Single family homes Start up 2001 Property size 70 acres Units sold to date 160 Total units 172 Average price $619,662 Built area (m2) 58,000 Total projected sales $106.6 million 34
Case Study Almagro Cascadas del Sur City Antofagasta Property size 14 acres Start up 2006 Units for sale 266 Total units 1,444 Total projected sales $171.2 million Building Program Size Range Mts 2 Price range Nº Buildings On sale Future stages Units Laja 2 Y 3 D 70 90 Mts 2 $84,900 $136,500 1 X 152 Petrohue 2, 3 Y 4 D 80 130 Mts 2 $95,900 $203,000 1 X 114 Future stages 2, 3 Y 4 D 70 130 Mts 2 $84,900 $203,000 9 X 1,178 Total Cascadas del Sur 11 1,444 35
Development Pipeline Socovesa El Montijo City Santiago District Renca Product type Single family homes Start up 2007 Property size Units sold to date 620 acres 0 Total units 7,000 Average price $80,000 Total projected sales $560 million 36
Development Pipeline Socovesa Los Cóndores City District Product type Santiago San Bernardo Single family homes Property size 410 acres Units sold to date 0 Total units Average sales price ($) 6,000 80,000 Total projected sales $480 million 37
Investment Highlights Favorable economic environment in Chile Consistent growth Low interest rates and low inflation Government stability Largest residential real estate development company in Chile 42 years of experience and over 55,000 housing units built Substantial, attractive land bank Vertically-integrated business model Allows Socovesa to control all aspects of the development process Diversified portfolio Diversified in geographic scope throughout Chile, price point and product type Experienced management team Average of 19 years of industry experience Managed profitably throughout all points of the economic and real estate cycle Founders remain committed to Socovesa s continued success with 51.7% ownership, post-offering Strong brand recognition for both Socovesa and Almagro 38