Gafisa’s trademark brand recently celebrated the completion of its thousandth development, Terraças Alto do Lapa, in São Paulo, a testament to the company’s experience, expertise, and execution capacity. It was fitting that this ceremony took place in the city where the company is headquartered, although as a national homebuilder Gafisa is present in 136 cities in 22 states plus the Federal District, offering a diverse range of housing to Brazilians of all socioeconomic levels. The previous decade has been transformative for both Gafisa and Brazil. The company, which was founded more than 50 years ago, has kept pace with the extraordinary growth of the Brazilian economy and seized the unprecedented opportunities that exist in the homebuilding sector. Today, Gafisa’s market capitalisation is approximately $2.8bn.
Gafisa has enjoyed many important accomplishments in the past decade, including its IPO on the Bovespa Novo Mercado in 2006, and a public offering on the New York Stock Exchange (NYSE) in 2007. The listing on the Novo Mercado segment of the market, Brazil’s most demanding in terms of corporate governance, signalled Gafisa’s commitment to all of its shareholders. Inclusion on the NYSE was also a defining moment for the company. Gafisa was the first, and remains the only, Brazilian real estate company with a listing on the Big Board in the US, which affords the company a strong reputation for operational and financial transparency through full compliance with Sarbanes-Oxley. It also established Gafisa as a professionally managed, world-class corporation in an industry commonly associated with family-run enterprises, and ensured exceptional access to capital. Moreover, having all of its shares publicly traded, without the presence of a controlling shareholder, today Gafisa is a fully public corporation, which is common in Europe and the United States but still not the convention in Brazil.
The listings on the Bovespa and NYSE combined, made Gafisa the most liquidly traded of Brazilian homebuilders, and lay part of the foundation for an aggressive growth plan based on geographic expansion and the assembly of a broad product portfolio. This expansion and diversification has leveraged Gafisa’s considerable experience and reputation for building high quality homes, a professional culture which has always prioritised the cultivation of talent within the company, and a commitment to bringing innovative, sustainable home products to Brazilian homebuyers.
Geographic expansion through land acquisition, the formation of local partnerships in high-growth markets and the acquisition of two important homebuilders – AlphaVille, the leader in community developments, and Tenda, a leading homebuilder for the lower entry level segment – has provided the company with the capacity to execute on a national scale. By extending the reach of Gafisa’s well regarded product portfolio to the inhabitants of 23 of Brazil’s 27 states and districts, and building a national sales infrastructure, the company has gained the flexibility to selectively develop its land bank based on local or regional market trends, thereby maximising returns to shareholders. Importantly, the geographic distribution of Gafisa’s land bank is reasonably in keeping with Brazilian GDP distribution.
As recently as December 2006, the Gafisa brand higher income products represented 100 percent of the company’s revenues, pre-sales and launches, but Gafisa enters 2011 with a streamlined corporate structure that features three leading businesses and brands, with Gafisa, AlphaVille, and Tenda each serving their respective market segments. The Gafisa segment represents close to 50 percent of development launches, with AlphaVille and Tenda making growing contributions to overall results.
AlphaVille offers innovative, residential community living to middle and high income homebuyers. The acquisition of this innovator in the Brazilian market positions Gafisa well to benefit as suburban living becomes more common in Brazil due to massive infrastructure investments and changing demographics. Tenda, which offers affordable and entry-level homes at some of the lowest price points in the industry, is helping to address the current housing deficit throughout Brazil.
Former president Luiz Inácio Lula da Silva’s government committed to provide financing for one million new homes for this sector by the end of 2010 through a programme called Minha Casa Minha Vida (My House, My Life). Brazil’s new government has demonstrated its commitment to continuing the federal programme in support of home purchasing through 2014 by adding an additional two million homes and allocating $40bn to the second phase of Minha Casa, Minha Vida, which aims to further reduce Brazil’s housing deficit. Tenda is strategically positioned to be a strong player in closing this gap.
Environmental, social & governance fundamentals
Professional management distinguishes Gafisa from many of its Brazilian counterparts, and the company is proud of a tradition of investing heavily in its human capital. Its management training programme is recognised as a leading one among Brazilian corporations from any sector, and the company has been successful in retaining top talent due to its meritocratic culture. With the expansion of Brazil’s homebuilding sector in recent years, the labour market has tightened considerably, and Gafisa’s cultivation of talent from within is likely to give it a competitive advantage into the future.
Supporting the sustainable and socially responsible development of the business in a way that benefits society as a whole is a priority for the company. Promoting proper waste management through reduced volume, the reuse of materials and recycling in all offices and also at all job-sites are examples of some of our important initiatives. AlphaVille’s standard practices of setting aside development land for conservation and using rainwater collection systems for non-household uses are other measures that reduce environmental impact and encourage the conscientious and rational use of natural resources.
No example better illustrates Gafisa’s environmental and societal objectives than the successful launch of the Eldorado Business Tower in 2007, which demonstrated an awareness that conservation and minimisation of environmental impact extend to the post-construction phase of the project. This was the first project in Latin America and the fourth in the world certified with the Leed (Leadership in Energy and Environmental Design) CS 2.0 Platinum seal from the US Green Building Council, as the use of new technologies allowed a significant reduction in the consumption of inputs like water and energy, both during construction and after its conclusion. Gafisa also procured 47 percent of the total inputs from local suppliers, thus helping to reduce pollution and supporting local businesses.
Gafisa has long enjoyed strong relationships with financial institutions and the capital markets, and during 2010, successful primary share and debt offerings in March and September respectively signalled investors’ continued recognition of the company’s leading market position and favourable growth prospects. Proceeds of the offerings – which totalled more than $800m – are being using for working capital, new developments, land acquisition, strategic joint ventures, and acquisitions; and will contribute to Gafisa’s execution of a robust business plan in 2011 and beyond.
Brazil continues to enjoy very favourable fundamentals that support economic prosperity, factors which combined with government programmes in support of the homebuilding sector bode very well for the industry. The expansion of real wages, record low unemployment rates (just 6.1 percent in January), strong consumer confidence and the availability of credit are stimulating growth. Brazil’s nominal and real interest rates also continue to be at historic lows. In addition, the availability of loan tenors of up to 30 years on mortgages is helping to make monthly payments much more financially viable for consumers.
Signs that demand for new homes in Brazil will remain strong continue to abound. The most recent study by the Fundação João Pinheiro measured the housing deficit in Brazil at 5.8 million homes, and a poll conducted by Data Popular in late 2010 pointed to the intended purchase of 9.1 million homes within the coming twelve month period, nearly double the figure projected at the end of 2008.
As one of Brazil’s leading nationwide homebuilders with a broad geographic reach and truly diversified product offerings for people of all income levels, today Gafisa is ideally positioned to capitalise on the expanding marketplace. The management team is excited about the tremendous opportunities that lie ahead and remain confident in their ability to execute the company’s long-term growth strategy. Thanks to the hard work and dedication of all of its employees, Gafisa continues to deliver high quality residences to all income segments of the population and is helping to build a bright future for the people of Brazil.
