Strategy

The experience and knowledge we have gained over our long history has allowed us to develop our current operating strategy of concentrating on the most profitable areas and sectors.

Previously, we had adopted a strategy of diversifying geographically to various Brazilian cities and developing projects with higher GDV and a larger numbers of units, in the residential, commercial and hotel sectors. Our sales process was carried out using third party brokers, who generally focus more on selling newly launched developments, which is less efficient for selling completed developments. In addition, we had an indebtedness profile focused on housing finance connected to the SFH, with higher costs and shorter average tenors compared to our current indebtedness profile.

However, in response to the recent Brazilian macroeconomic and economic environment, we have begun to focus on residential projects with lower GDV, were our stake is between R$90 million and R$120 million. We continue to maintain our flexibility for customized launches, both in and outside the state of São Paulo, and to identify opportunities to generate high value and returns for our shareholders, such as our Wide and W Hotel projects. The municipality of São Paulo has become our main geographic focus, along with the Greater São Paulo metropolitan region, where we consider development opportunities as they arise and where we have a good track record of sales and partners with proven operational capabilities.

On the sales front, we created HB Brokers, our own brokerage company, which gives us the flexibility to sell completed developments and launch developments consistently with our strategic positioning.

The efficient management of our liabilities is demonstrated by our successful issuance of Certified Real Estate Receivables – CRIs, which has helped extend the average maturity, and reduced the average cost, of our debt.

Geographic Strategy – Focus on São Paulo

When our business model was more focused on geographical diversification, we experienced difficulty with local partners and overestimated demand. Our new strategy is to focus on the Greater São Paulo metropolitan area in cities where we have partners with a proven track records. In these regions we see higher demand, attractive prices and strong construction partners. In the image below, it is possible to identify the Company’s main focus in the city of São Paulo, through our landbank, where 92% corresponds to the city of São Paulo and the SP Metropolitan Region.

Product Strategy – Customized Products and Focus on Residential Units

When we changed our strategy to focus on São Paulo, we also changed the types of units we focused on building. Previously, we focused on developments with higher GDVs and a large number of units. This meant that, with Brazil’s recent economic crisis, cancellation of purchases by our customers was concentrated in large projects which adversely affected us. Our current strategy seeks to diversify GDV into smaller, multi-phase projects, focusing mostly on residential units, which is where we have a long and successful track record. However, we also maintain flexibility to invest in high-quality opportunistic investments, in areas with high added value and customized products, such as Wide and W Hotel.

Commercial Strategy – Creation of an Internal Brokerage with Helbor’s DNA

The sales of products used to be done through outsourced brokers, generally more focused on the sale of launches than on inventory, which proved to be not very efficient at the time of the contracts being terminated and the high inventory of units for sale. To solve this problem, Helbor created HB Brokers, an in-house brokerage firm trained with the company’s DNA and with greater flexibility to sell both inventory and launches, meeting the company’s demands.

Another measure related to the commercial strategy was the launching of the event “Só a Helbor tem”, an event developed in partnership with Banco Bradesco, with the objective of offering better credit conditions and several benefits to its customers.

Reduction of Company’s Legacy Finished Inventory 

Cashflow Generation Strategy and Liability Management

Our new strategy is also heavily focused on deleveraging. The main measure we have adopted to manage our liabilities and generate cashflow has been to securitize inventory and lease property. With this strategy, we have improved management of our inventory and generated revenue from leased property, which has reduced costs of, for example, maintenance. In addition, with the issuance of CRIs, we believe we have created the opportunity to generate revenue from potential sales of the properties linked to the CRIs. In general, we have achieved longer tenors and a lower cost of debt. These securitization transactions have permitted us to monetize our inventory, generate cashflow and reduce of carrying expenses for these units. We distinguish between old and new inventory. We classify old inventory as developments launched prior to November 2017 and new inventory as developments launched from December 2017. The graph below shows the reduction of our net debt, considering old and new inventory, as well as reductions in cost from maintaining these units and the extensions of maturities