30 09-2011 - 3 q11 earnings release

1

3Q11 Earnings Release

SONAE SIERRA BRASIL ANNOUNCES

ADJUSTED EBITDA OF R$41.1

MILLION IN 3Q11, AN INCREASE OF

22.9% OVER 3Q10

São Paulo, November 8, 2011 – Sonae Sierra Brasil S.A.

(BM&FBovespa: SSBR3), a leading Brazilian shopping mall

developer, owner and manager, announces today its results

for the third quarter of 2011 (3Q11).

Highlights

The Company’s Net Revenue increased 21.2% to

R$54.8 million in 3Q11 compared to R$45.2 million in

3Q10.

Adjusted EBITDA totaled R$41.1 million in 3Q11, an

increase of 22.9% over the same period of last year.

Adjusted EBITDA margin reached 75.1% in 3Q11.

Adjusted FFO totaled R$43.2 million, an 81.1% increase

over 3Q10. Adjusted FFO margin reached 78.9% in

3Q11.

Same-store rent (SSR) reached, once again, a strong

double-digit growth of 13.0% in 3Q11 and Same-store

sales (SSS) increased by 7.3%.

Total Net Income attributable to shareholders reached

R$58.5 million in 3Q11, from R$27.3 million in 3Q10, a

114.1% increase.

In September, the Company started the construction of

Passeio das Águas Shopping in Goiânia, which is

scheduled to open in the second half of 2013.

Also in September, Sonae Sierra Brasil successfully

opened the expansion of Shopping Campo Limpo,

adding 2.5 thousand sqm of GLA and bringing 18 new

stores to the mall.

Investors

Relations

Carlos Alberto Correa

Investors Relations Officer

Murilo Hyai

Investors Relations Manager

Eduardo Pinotti de Oliveira

Investor Relations Analyst

Website:

www.sonaesierrabrasil.com.br/ri

Email:

[email protected]

Phone:

+55 (11) 3371-4188

3Q11 CONFERENCE CALLS

Portuguese

November 9, 2011

07:00 am (New York time)

10:00 am (Brasilia Time)

Phone: (55 11) 2188-0155

Code: Sonae Sierra Brasil

English

November 9, 2011

08:00 am (New York time)

11:00 am (Brasilia Time)

Phone: (1 412) 317-6776

Code: Sonae Sierra Brasil

2


Financial Indicators

(R$ million) 3Q11 3Q10 Var. % 9M11 9M10 Var. %

Net Revenue 54.8 45.2 21.2% 157.7 132.9 18.7%

EBITDA 40.6 33.0 23.2% 119.3 97.6 22.3%

EBITDA Margin 74.2% 73.0% +123 bps 75.7% 73.4% +223 bps

Adjusted EBITDA 41.1 33.5 22.9% 119.8 100.1 19.7%

Adjusted EBITDA Margin 75.1% 74.1% +103 bps 76.0% 75.3% +65 bps

Funds From Operations (FFO) 42.7 23.4 82.9% 121.5 85.4 42.3%

FFO Margin 78.0% 51.7% +2,632 bps 77.1% 64.3% +1,280 bps

Adjusted FFO 43.2 23.9 81.1% 122.0 87.9 38.8%

Adjusted FFO Margin 78.9% 52.8% +2,613 bps 77.4% 66.2% +1,124 bps

Net Operating Income (NOI) 51.7 41.1 25.9% 150.3 124.2 21.0%

NOI Margin 94.4% 90.9% +356 bps 95.3% 93.5% +182 bps

Operating Indicators

3Q11 3Q10 Var. % 9M11 9M10 Var. %

Total GLA ('000 sqm) 353.0 343.4 2.8% 353.0 343.4 2.8%

Owned GLA ('000 sqm) 204.6 200.2 2.2% 204.6 200.2 2.2%

Number of shopping malls 10 10 0.0% 10 10 0.0%

Sales (R$ million) 936.9 851.2 10.1% 2,711.7 2,426.2 11.8%

Sales/sqm (monthly average) 942.5 871.1 8.2% 905.8 828.6 9.3%

Occupancy rate 97.4% 98.4% -100 bps 97.4% 98.4% -100 bps

Cost of occupancy (% of sales) 9.5% 9.1% +36 bps 9.4% 9.4% +7 bps

SSS/sqm 949.0 884.1 7.3% 927.5 853.1 8.7%

SSS/sqm - Satellite stores 1,465.2 1,346.8 8.8% 1,415.6 1,280.1 10.6%

SSS/sqm - Anchor stores 739.4 699.7 5.7% 727.6 684.0 6.4%

SSS/sqm - Leisure 234.4 226.9 3.3% 216.5 199.5 8.5%

SSR/sqm 54.7 48.4 13.0% 52.7 46.9 12.4%

SSR/sqm - Satellite stores 106.1 94.0 12.9% 103.1 91.5 12.7%

SSR/sqm - Anchor stores 21.8 19.3 13.0% 21.0 18.9 11.1%

SSR/sqm - Leisure 22.4 19.8 13.1% 20.3 18.0 12.8%

Overdue Payments (25 days) 2.9% 2.6% +28 bps 2.5% 2.9% -35 bps

3


MANAGEMENT’S COMMENTS

Sonae Sierra Brasil continued to achieve solid operating and financial indicators in the

3Q11.

Our same store rent (SSR), once again reached a strong double digit growth at 13.0%

over the same period last year, driven by rising inflation adjustments and strong

leasing spreads in contract renewals. Same store sales (SSS) growth reached 7.3% in

3Q11 and sales in our shopping centers totaled R$936.9 million, a 10.1% increase

over the same period last year.

The Company’s consolidated net revenues totaled R$54.8 million in 3Q11, a 21.2%

increase over 3Q10, while Consolidated Adjusted EBITDA increased by 22.9% over the

same period last year, totaling R$41.1, million with Adjusted EBITDA margin reaching

75.1% in 3Q11, compared to 74.1% in 3Q10. Consolidated Adjusted FFO totaled

R$43.2 million in 3Q11, a significant increase of 81.1% over 3Q10. The Adjusted FFO

margin reached 78.9% in the quarter, compared to 52.8% in 3Q10. We continue to

benefit from the strong performance of our portfolio with low levels of vacancy and

increasing rents, as well as the maturation of our malls, particularly Manauara

Shopping in Manaus and from growing parking and key money revenues. The net

income attributable to shareholders reached R$58.5 million in 3Q11, from R$27.3

million in 3Q10. This increase results mainly from the positive performance of the

portfolio and to the valuation gains on investment properties in 3Q11.

The Company continues to execute the plans previously announced regarding

development projects and expansions, with the construction of Uberlândia Shopping in

Uberlândia (MG), Boulevard Londrina Shopping in Londrina (PR), as well as the

expansion of Shopping Metrópole in São Bernardo do Campo (SP), which is scheduled

to open in November 2011. In September, Sonae Sierra Brasil started the

construction of Passeio da Águas Shopping in Goiânia (GO), which should be opened

by the second half of 2013. Also in September, we successfully opened the expansion

of Shopping Campo Limpo in São Paulo (SP).

Sonae Sierra Brasil will continue to seek opportunities that create value to the

shareholders and enhance the quality of the portfolio, focusing on development

opportunities in markets with an inherent mismatch between supply and demand for

retail space and targeting the middle class customer segment. We are committed to

making our malls the most dominant in their respective markets. We remain confident

in our strategy and prospects for growth opportunities.

The Management

4


FINANCIAL HIGHLIGHTS

Consolidated Statutory Accounts

The consolidated financial and operating information outlined below is based on

accounts prepared in accordance with accounting policies adopted in Brazil and in

accordance with the International Financial Reporting Standards (IFRS) issued by the

International Accounting Standards Board - IASB, and correspond to the comparison

of the results obtained in the 3Q11 with the same period of the previous year, also

adjusted to the new accounting standards. Therefore, the consolidated financial

information includes 100% of the results of Parque D. Pedro Shopping (even though

the Company holds a 51% ownership interest in the mall).

Gross Revenue

Sonae Sierra Brasil’s gross revenue totaled R$59.2 million in 3Q11, an increase of

20.4% over 3Q10. The increase in revenue was driven by growth in rental revenue

which totaled R$45.5 million in 3Q11, a 22.4% increase over 3Q10 given the

combination of strong leasing spreads, inflation adjustments and low vacancy that is

pushing up the rental revenue in 2011. Another highlight was the significant increase

in revenue from parking, which totaled R$5.7 million in 3Q11, 14.0% higher than

3Q10. Service revenue increased to R$4.1 million in 3Q11 from R$3.7 million in 3Q10,

an 11.2% increase primarily driven by higher revenues from leasing and management

fees. Key money revenue has also registered a significant increase, from R$1.9 million

in 3Q10 to R$2.6 million in 3Q11, a 37.6% increase, driven by higher activities mostly

related to the expansions opened during the period.

75%

3%

8%

10%4%

3Q10

77%

1%7%

10%

4%

1%

3Q11

Rent

Rent contract straight-lining

Service revenue

Parking revenue

Key Money

Other revenue

Gross Revenue Breakdown

5


Costs and Expenses

Costs and Expenses totaled R$15.4 million in 3Q11, a 20.1% increase over 3Q10.

Costs and expenses were mainly impacted by higher costs with external services,

namely with parking and auditing of tenants’ sales. Non-recurring legal fees have also

increased in this quarter

Total Costs and Expenses were also impacted by the variances in provisions for

doubtful accounts, which resulted in a negative net amount of provision of R$1.0

million in 3Q11, from a revenue (reversal) of R$197 thousand in 3Q10.

Pre-operating marketing expenses and costs associated with the search for new

projects also contributed to higher costs and expenses in 3Q11.

Conversely, we continued to see lower occupancy and contractual agreement costs,

which decreased by 17.6% in 3Q11.

Gross Revenue (R$ '000)

3Q11 3Q10 Var. % 9M11 9M10 Var. %

Rent 45,456 37,149 22.4% 130,490 109,044 19.7%

Rent contract straight-lining 910 1,374 -33.8% 2,903 3,791 -23.4%

Service revenue 4,146 3,728 11.2% 12,236 10,706 14.3%

Parking revenue 5,688 4,988 14.0% 17,180 12,684 35.4%

Key Money 2,561 1,862 37.5% 7,482 7,680 -2.6%

Other revenue 470 77 510.4% 915 384 138.2%

Total 59,231 49,178 20.4% 171,206 144,289 18.7%

Costs and Expenses (R$ '000)

3Q11 3Q10 Var. % 9M11 9M10 Var. %

Depreciation and amortization 343 350 -2.0% 1,105 885 24.9%

Personnel 6,359 6,687 -4.9% 19,245 16,568 16.2%

External services 3,668 1,851 98.2% 7,826 10,008 -21.8%

Occupancy cost (vacant stores) 915 971 -5.8% 2,740 3,214 -14.7%

Cost of contractual agreements with tenants 532 784 -32.1% 1,143 1,359 -15.9%

Provision (reversal) of the allowance for doubtful

accounts1,010 (197) N/A 1,342 (430) N/A

Rent 715 778 -8.1% 2,056 2,047 0.4%

Travel 430 328 31.1% 1,043 921 13.2%

Other 1,429 1,266 12.9% 4,333 3,656 18.5%

Total 15,401 12,818 20.1% 40,833 38,228 6.8%

Classified as:

Cost of rentals and services 9,753 11,079 -12.0% 27,956 25,936 7.8%

Operating expenses 5,647 1,739 224.7% 12,877 12,292 4.8%

Total 15,401 12,818 20.1% 40,833 38,228 6.8%

Note: For comparative purposes some expenses with external services were reclassified from other expenses in 3Q10.

6


Changes in Fair Value of Investment Properties

Sonae Sierra Brasil adopted IFRS accounting standards, under which, the Company

values its investment properties at fair market value. Thus, the gains and losses

resulting from changes in fair market value of the properties are recorded in the

Change in Fair Value of Investment Properties account, which totaled R$65.3 million

in 3Q11 compared to R$28.1 million in 3Q10. The increase reflects the improved

valuation of the portfolio, given the NOI growth and the positive performance of

operating metrics and redevelopment / expansion GLA among online malls. On

September 30th, 2011, the Value of Investment Properties totaled R$2.6 billion.

Net Financial Result

The consolidated net financial result in 3Q11 was a net financial income of R$7.3

million, compared to a net financial expense of R$6.9 million in 3Q10. This variance is

mainly explained by much higher interest income on financial investments in 3Q11

given the net cash position and by exchange rate variations, which represented

income in 3Q11 compared to an expense in 3Q10.

Net Income

Net Income totaled R$92.7 million in 3Q11, a 132.1% increase over 3Q10, largely

driven by the Change in Fair Value of Investment Properties which resulted from the

improved performance of the whole portfolio.

Net Financial Result

(R$ thousand) 3Q11 3Q10 Var. % 9M11 9M10 Var. %

Financial Income (Expenses):

Interest on financial investments 11,533 670 1621.4% 28,964 3,089 837.7%

Interest on intercompany loans - (1,277) -100.0% (400) (2,881) -86.1%

Interest on receivables 246 770 -68.1% 803 1,138 -29.4%

Monetary and exchange rate

variations19 (3,406) N/A (2,015) 6,331 N/A

Interest on loans and financing (4,573) (4,035) 13.3% (13,337) (12,728) 4.8%

Other 115 295 -61.1% 999 343 191.2%

Total Financial Result - Net 7,340 (6,983) N/A 15,014 (4,708) N/A

7


Net Operating Income (NOI)

Consolidated NOI totaled R$51.7 million in 3Q11, a 25.9% increase over 3Q10,

reflecting, as mentioned above, the overall positive performance of the portfolio.

Adjusted EBITDA

Adjusted EBITDA totaled R$41.1 million in 3Q11, a 22.9% increase over 3Q10.

Adjusted EBITDA margin reached 75.1% in 3Q11.

Adjusted Funds from Operations (FFO)

Adjusted FFO totaled R$43.2 million in 3Q11, an increase of 81.1% over the same

period last year. Adjusted FFO margin reached 78.9%.

3Q11 3Q10 Chg. % 9M11 9M10 Chg. %

Rent 46.8 38.6 21.3% 134.3 113.2 18.6%

Key Money 2.6 1.9 37.6% 7.5 7.7 -2.6%

Parking 5.7 5.0 14.0% 17.2 12.7 35.4%

Total Revenues 55.1 45.5 21.2% 159.0 133.6 19.0%

(-) Malls' Operating Expenses (3.4) (4.4) -22.7% (8.7) (9.4) -7.0%

NOI 51.7 41.1 25.9% 150.3 124.2 21.0%

Net Operating Income -

NOI (R$ million)

33.5 41.1

100.1119.8

3Q10 3Q11 9M10 9M11

Adjusted EBITDA (R$ million)

22.9%

19.7%

8


The reconciliation of the operating income before financial results with the EBITDA,

adjusted EBITDA, FFO, and Adjusted FFO is shown below:

Management Accounts

In accordance with accounting policies adopted in Brazil and IFRS, the Company

consolidates 100% of Parque D. Pedro Shopping despite owning only 51% of this mall.

However, considering the relevance of this mall to the Company’s results, we

prepared pro-forma management accounts with the proportional consolidation of

23.943.2

87.9

122.0

3Q10 3Q11 9M10 9M11

FFO Adjusted (R$ million)

81.1%

38.8%

(R$ million) 3Q11 3Q10 Var. % 9M11 9M10 Var. %

Net Revenue 54.8 45.2 21.2% 157.7 132.9 18.7%

Operating income before financial result 109.4 61.0 79.3% 332.4 165.0 101.4%

Depreciation and amortization 0.3 0.4 -1.9% 1.1 0.9 24.9%

Gain in fair value of investment properties (69.2) (28.4) 143.2% (214.2) (68.3) 213.4%

EBITDA 40.6 33.0 23.2% 119.3 97.6 22.3%

Non-recurring expenses 0.5 0.5 - 0.5 2.5 -

Adjusted EBITDA 41.1 33.5 22.9% 119.8 100.1 19.7%


Adjusted EBITDA Margin 75.1% 74.1% +103 bps 76.0% 75.3% +65 bps

EBITDA 40.6 33.0 23.2% 119.3 97.6 22.3%

Net financial result 7.3 (7.0) N/A 15.0 (4.7) N/A

Current income and social contribution taxes (5.2) (2.6) 99.6% (12.8) (7.5) 71.0% - -

FFO 42.7 23.4 82.9% 121.5 85.4 42.3%

Non-recurring expenses 0.5 0.5 - 0.5 2.5 -

Adjusted FFO 43.2 23.9 29.4% 122.0 87.9 38.8%



Adjusted EBITDA and Adjusted FFO Reconciliation

9


Parque D. Pedro. The key operating results under this methodology are presented

below:

Cash, Cash Equivalents and Debt

Cash and cash equivalents, which is comprised of cash, bank deposits and financial

investments, decreased by R$17.9 million, from R$458.0 million on June 30, 2011 to

R$440.1 million on September 30, 2011, mainly as a result of investments in the

Company’s projects. The Company’s total debt, considering amounts already

withdrawn reached R$332.3 million in 3Q11, and the respective amortization schedule

is as follows:

EBITDA and FFO Reconciliation

(Considering 51% of PDP) (R$ million) 3Q11 3Q10 Var. % 9M11 9M10 Var. %

Net Revenue 42.8 35.4 21.0% 123.7 103.4 19.6%

Operating income before financial result 75.5 48.5 55.5% 243.5 122.0 99.7%

Depreciation and amortization 0.3 0.4 -1.9% 1.1 0.9 24.9%

Gain in fair value of investment properties (45.5) (24.5) 85.4% (154.9) (51.3) 201.9%

EBITDA 30.4 24.4 24.6% 89.8 71.6 25.4%

Non-recurring expenses 0.5 0.5 0.0% 0.5 2.5 -80.0%

Adjusted EBITDA 30.9 24.9 24.1% 90.3 74.1 21.9%


Adjusted EBTIDA Margin 72.0% 70.3% +180 bps 73.0% 71.6% +138 bps

EBITDA 30.4 24.4 24.6% 89.8 71.6 25.4%

Net financial result 7.1 (7.1) N/A 14.3 (5.0) N/A

Current income and social contribution taxes (5.2) (2.6) 99.6% (12.8) (7.5) 71.0%

FFO 32.2 14.6 119.9% 91.3 59.0 54.6%

Non-recurring expenses 0.5 0.5 0.0% 0.5 2.5 -80.0%

Adjusted FFO 32.7 15.1 115.9% 91.8 61.5 49.1%



19.8 42.3 42.3 41.9

185.9

Up to 2012 2013 2014 2015 2016 and beyond

Debt Amortization (R$ million)

10


Considering our cash position, the long-term profile of our debt and our operating

cash flow, we believe that we are well positioned in terms of the capital required to

fund our investment plan.

A total of R$128.5 million, which corresponds to approximately 39% of the Company’s

total debt, is fixed at a 8.5% p.a. interest rate (10.0% p.a. with a 15% discount) on

the loan from the Banco da Amazônia (BASA) for the construction of Manauara

Shopping, with a final maturity of 12 years. The base rate debt profile, considering

resources already withdrawn at the end of 3Q11 was as follows:

Sonae Sierra Brasil’s leverage strategy is to finance the greenfield projects and

expansions with an average property-level debt of approximately 50% of the total

project costs. Financing for Uberlândia Shopping, Boulevard Londrina Shopping and

Passeio das Águas Shopping has already been contracted.

440.1

107.8

332.3

Cash and cash

equivalents

Debt Net Cash

Net Cash Position (R$ million)

Fixed39%

CDI13%

TR48%

Debt Profile

11


Considering all the loans contracted by the Company, including amounts yet to be

drawn down, total contracted debt was R$613.5 million with an average cost of 11.7%

by the end of the quarter.

SHOPPING CENTERS’ SALES PERFORMANCE

Total sales in the ten existing and operating malls in Sonae Sierra Brasil’s portfolio

totaled R$936.9 million in 3Q11, a 10.1% increase over 3Q10. Considering the

Company’s ownership interest in each of the ten malls (including 20% of Campo

Limpo Shopping and 51% of Parque D. Pedro Shopping), sales reached R$546.1

million in 3Q11, a 11.7% increase over 3Q10.

The best performing malls in 3Q11 in terms of sales growth were Manauara Shopping,

Franca Shopping and Tivoli Shopping, with sales increases of 19.6%, 17.0% and

15.3%, respectively. The robust growth recorded by Manauara Shopping can be

mainly attributed to the accelerated maturation of the mall, while Franca Shopping

and Tivoli Shopping were a result of higher sales, particularly in some anchor stores

and movie theaters of these shopping malls.

OPERATING HIGHLIGHTS

The operating indicators of Sonae Sierra Brasil in 3Q11 confirm the continued growth

of the Company. The overall occupancy rate in our malls was 97.4% of GLA in 3Q11,

while Same-store rent (SSR) reached, once again, double-digit growth with a strong

13.0% increase over 3Q10, driven by rising inflation adjustments and strong leasing

Contracted Debt Financing

Committed

Amount (R$

MM)

Term

(years)Interest Rate

Balance as of

09/30/11

(R$ million)

Working Capital 20 5 CDI + 2.85% 19

Working Capital 27 6 CDI + 3.30% 26

Manauara Shopping 112 12 8.50% 128

Metrópole Shopping - Expansion I 53 8 TR + 10.30% 53

Uberlândia Shopping 81 15 TR + 11.30% 59

Boulevard Londrina Shopping 120 15 TR + 10.90% 47

Passeio das Águas Shopping 200 12 TR + 11.00% 0

Total 614 332

Average 12.1 11.70%

*Considering LTM TR at 1.21% p.a. and CDI at 11.88% p.a. as of September 30, 2011

12


spreads in lease contract renewals. Same-store sales (SSS) posted a 7.3% increase in

3Q11 compared to the same period last year.

Occupancy Rate

Same Store Sales and Same Store Rent (in R$)

97.3%

96.3%

97.0%97.2%

98.3% 98.5% 98.4%98.0%

97.7% 97.5% 97.4%

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

Occupancy (% GLA)

884

949

853

928

3Q10 3Q11 9M10 9M11

SSS/sqm

7.3%8.7%

13


DESCRIPTION OF BUSINESS

Sonae Sierra Brasil S.A. is a company specialized in the shopping center business and

is led by the expertise of its management team and its international controlling

shareholders: the European group Sonae Sierra and the U.S. REIT DDR Corp. (NYSE:

DDR), both companies that have deep experience in the development, ownership and

management of shopping centers.

We are one of the leading real estate developers, owners, and operators of shopping

malls in Brazil. Through our integrated business model, we work with all phases of the

business, including development management, property management, leasing, asset

management, and marketing services.

We hold a controlling interest in the majority of the shopping malls in our portfolio and

manage all of them. On September 30, 2011, we had a weighted average ownership

interest of 57.9% in the ten operating shopping malls in our portfolio, representing

204.6 thousand sqm of owned GLA and ownership control of six of the ten shopping

malls.

OUR PORTFOLIO

Our portfolio is comprised of ten shopping malls in operation. Additionally, we are in

the process of developing three new shopping malls in three major cities in Brazil: (i)

Uberlândia, the second most populous city in the state of Minas Gerais; (ii) Londrina,

the second largest city in the state of Paraná; and (iii) Goiânia, the state capital of the

State of Goiás. These three cities are important centers for the agribusiness and

services sectors which have experienced strong demographic and economic growth.

The selection of these cities for developing new shopping malls fits into our primary

48

55

47

53

3Q10 3Q11 9M10 9M11

SSR/sqm

13.0% 12.4%

14


strategy of growth through potentially market dominant shopping malls, in trade

areas with income per capita and population density that meet our requirements. We

estimate that the combined GLA from these three shopping malls is approximately

171.8 thousand sqm.

The map below shows the location of our malls. All figures related to GLA and the

Company’s interests are as at the end of September 2011, except where otherwise

indicated:

11

12

13

7

10

4

51

8

93

26

City State Stores Ownership

1 Parque D. Pedro Campinas SP 402 121.1 51.0% 61.8 94.9%

2 Boavista Shopping São Paulo SP 148 16.0 100.0% 16.0 97.1%

3 Penha Shopping São Paulo SP 196 29.6 73.2% 21.7 98.5%

4 Franca Shopping Franca SP 103 18.1 67.4% 12.2 99.8%

5 Tivoli ShoppingSanta Barbara

d'OesteSP 146 22.1 30.0% 6.6 97.5%

6 Metrópole Shopping*São Bernardo do

CampoSP 151 25.1 100.0% 25.1 99.5%

7 Pátio Brasil Brasília DF 234 28.8 10.4% 3.0 98.1%

8 Plaza Sul Shopping São Paulo SP 217 23.0 30.0% 6.9 100.0%

9 Campo Limpo Shopping São Paulo SP 144 22.4 20.0% 4.5 99.5%

10 Manauara Shopping Manaus AM 232 46.8 100.0% 46.8 99.0%

Total 1,973 353.0 57.9% 204.6 97.4%

Projects under Development

City State

11 Uberlândia Shopping Uberlândia MG 45.3

12 Boulevard Londrina Shopping** Londrina PR 47.8

13 Passeio das Águas Shopping Goiânia GO 78.1

Total 171.2

** Ownership considering partner will fully exercise its rights in the project

95.7%

100.0% 2H13

GLA

('000 sqm)Owned GLA

('000 sqm)

Actual occupancy

index by area (%)

Ownership Projected Opening

Shopping Centers in

Operation

100.0% 1Q12

84.5% 2H12

GLA

('000 sqm)

* Including an area of 5,161 sqm, currently reserved for expansion of the shopping mall

15


OUR STRATEGY

Our strategy focuses on profitably increasing our portfolio and maintaining our

position as one of the leading developers, owners, and managers of shopping malls in

Brazil, seeking to provide superior returns to our shareholders in a sustainable and

responsible way. We intend to achieve our goals by continuing to pursue the following

strategies:

Focus on creating value through organic growth. Our growth strategy is based

on two main sources: (i) developing new market dominant shopping malls that are

able to establish and maintain a solid competitive position based on certain factors

such as population density, purchasing power of the potential customers, and

underserved consumer demand; and (ii) expanding and/or remodeling of existing

shopping malls by including new tenants, features and attributes in order to increase

their market share.

Acquisition of additional stakes in properties. We plan on analyzing opportunistic

acquisitions at reasonable prices of additional ownership interests in the shopping

malls already part of our portfolio. In parallel, and whenever opportunities arise that

fit our strategy, we will analyze potential acquisitions at attractive pricing of

controlling interests in shopping malls that are not part of our portfolio, or at least a

strategic interest to possibly allow us to eventually acquire control and to ensure that

we control the management of the property.

ONGOING PROJECTS

Sonae Sierra Brasil currently has seven ongoing projects, comprised of three

greenfield projects and four expansions, which should increase our owned GLA by

approximately 93% to 392 thousand sqm by 2013. It is worth noting that this

substantial growth includes only those projects already in our pipeline and excludes

future projects yet to be announced.

16


NEW PROJECTS (GREENFIELDS)

Sonae Sierra Brasil’s strategy is to develop greenfield projects that have the potential

to become the leading malls in their trade areas. Based on this strategy, we have

three such projects in our portfolio. Construction on two of these – Uberlândia

Shopping and Boulevard Londrina Shopping – is already under way. Construction of

the third mall, Passeio das Águas Shopping (in Goiânia) began in September, 2011.

Uberlândia Shopping: Construction of Uberlândia Shopping continues to move

ahead on schedule and will be opened in 1Q12. We revised the GLA upwards, from

43.6 thousand sqm to 45.3 thousand sqm in 3Q11, in order to attend specific tenants

demands. Approximately 89% of total GLA was already committed to tenants as of

September 30, 2011.

In October, Uberlândia Shopping received two certificates simultaneously, the ISO

14001 - the green certificate - and the OHSAS 18001 (Occupational Health and Safety

Assessment Series). Uberlândia Shopping was the second shopping mall in the world,

and the first one within the Americas to receive the two certificates at the same time.

203

3929

16

86

78

2010 2011 2012 2013 Total

Owned GLA Growth ('000 sqm)

Greenfields ExpansionUberlândia

Londrina

Goiânia

Metrópole (I)

PDP (II)

Metrópole (II)

Tívoli

+93%

Campo Limpo

17


Uberlândia Shopping Construction Site

Uberlândia Shopping Construction Site

Boulevard Londrina Shopping: Construction of Boulevard Londrina is on schedule,

with expected opening in 2H12. The mall’s GLA was 65% committed to tenants as of

September 30, 2011. Pre-leasing was impacted by the decision of a home furniture

anchor store to halt its global strategy plan, cancelling previously announced new

stores, including one in Boulevard Londrina. The store previously represented

approximately 8% of the GLA of the project.

City Uberlândia

State MG

Expected Opening 1Q12

GLA (‘000 sqm) 45.3

SSB’s ownership interest 100%

Committed GLA 89%

Gross Capex Incurred (R$ million) 151.3

Uberlândia Shopping

18


Boulevard Londrina Construction Site

Boulevard Londrina Project Illustration

Passeio das Águas Shopping: Construction of Passeio das Águas Shopping, located

in Goiânia, the capital and most important city of the State of Goiás, started in

September 2011 with expected opening at the end of 2013.

Passeio das Águas Project Illustration

City Londrina

State PR

Expected Opening 2H12

GLA (‘000 sqm) 47.8

SSB’s ownership interest* 84.5%

Committed GLA 65%


Boulevard Londrina Shopping

* Ownership considering partner will fully exercise its rights in the pro ject

City Goiânia

State GO

Expected Opening 2013

GLA (‘000 sqm) 78.1

SSB’s ownership interest 100%

Committed GLA 36%


Capex Incurred 18.2%

IRR3) 15.7%

Passeio das Águas Shopping

19


EXPANSIONS

Expansion and renovation of Shopping Metrópole – Phase I

The renovation and first expansion of Shopping Metrópole is on schedule and expected

to be inaugurated on November 2011. However, some stores in the expansion area

such as Outback Steakhouse have already opened. Expansion comprises

approximately 8.7 thousand sqm of additional GLA, which was 100% committed to

tenants as of September 30, 2011, increasing the mall’s total GLA to approximately

27.4 thousand sqm.

Metrópole Expansion Area Metrópole New Façade

Campo Limpo Expansion

In September, Sonae Sierra Brasil opened the expansion of Shopping Campo Limpo.

The expansion added 2.5 thousand sqm of GLA, bringing 18 new stores to the mall.

The occupancy rate of the expansion at the end of 3Q11 was 96% of its GLA,

corresponding to only one store that was eventually leased in October 2011.

Campo Limpo Expansion

20


SHARE PERFORMANCE

Sonae Sierra Brasil’s shares (BM&FBovespa: SSBR3) closed 3Q11 at R$22.23, an

8.5% decrease from June 30, 2011. Over the same period, the Ibovespa Index

decreased by 16.2%. Since the IPO in February 2011, the share price increased by

11.2%, compared to a decrease of 21.5% of the Ibovespa Index.

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

70

75

80

85

90

95

100

105

110

115

120

125

130

135

140

Vo

lum

e (in

tho

usa

nd

s)

Sto

ck P

erf

orm

an

ce

Ibovespa SSBR3

SSBR3: +11.2%

Ibovespa: -21.5%

Ownership Breakdown

Sierra Brazil 1 BV

66.65%

Free Float

33.35%Sonae

Sierra SGPS50%

DDR

50%

21


GLOSSARY

GLA (Gross Leasable Area): Equivalent to the sum total of all the areas available for leasing in the shopping malls.

ABRASCE: Brazilian Shopping Mall Association.

BM&FBOVESPA: BM&FBovespa S.A. - Securities, Commodities and Futures Exchange.

CSLL: Social contribution tax on net income.

EBITDA: Operating income before financial result + depreciation and amortization - gain from fair value of investment properties

Adjusted EBITDA: EBITDA adjusted for the effects of non-recurring expenses effect

FFO (Funds from Operations): EBITDA +/- Net financial result – current income and social contribution taxes

Adjusted FFO: FFO adjusted for the effects of non-recurring expenses.

IFRS: International Financial Reporting Standards.

IGP-M: General Market Price Index, published by the FGV.

IPCA: Consumer Price Index, published by the IBGE.

Anchor Store or Large Anchors: Well-known stores with special marketing and

structural features that serve to attract consumers, assuring continuous visitor flows and uniform traffic in all areas of the mall.

Satellite Stores or Satellites: Small stores without special marketing or structural features located around the anchor stores and aimed at general commerce.

NOI (Net Operating Income): Gross revenue from malls (excluding service revenue) + parking revenue – mall operating expenses – provisions for doubtful accounts.

Novo Mercado: A special listing segment of the BM&FBOVESPA with special corporate governance rules determined by the Novo Mercado Regulations.

SSR (same-store rent): Relation between invoiced rent for the same operation in the current period compared to previous period.

SSS (same-store sales): Relation between sales for the same tenant in the current period compared to the previous period.

Occupancy Rate: Ratio between leased area and total GLA of each mall at the end of each period.

22


APPENDICES

Consolidated Balance Sheet

(R$ thousand) 3Q11 2Q11 Var. %

ASSETS

CURRENT

Cash and cash equivalents 440,065 458,016 -3.9%

Accounts receivable, net 17,507 17,631 -0.7%

Taxes recoverable 17,002 13,871 22.6%

Prepaid expenses 583 338 72.5%

Other credits 5,559 3,879 43.3%

Total current assets 480,716 493,735 -2.6%

NON-CURRENT

Long-term receivables:

Restricted financial investments 1,745 1,325 31.7%

Accounts receivable, net 12,394 11,516 7.6%

Loans to condominiums 406 607 -33.1%

Deferred income and social contribution taxes 11,080 13,638 -18.8%

Juducial deposits 3,681 3,560 3.4%

Other credits 843 759 11.1%

Total long-term assets 30,149 31,405 -4.0%

Investments 25,267 20,987 20.4%

Investment properties 2,601,349 2,451,388 6.1%

Fixed Assets 5,808 5,578 4.1%

Intangible Assets 990 912 8.6%

Total non-current assets 2,663,563 2,510,270 6.1%

TOTAL ASSETS 3,144,279 3,004,005 4.7%

23


Consolidated Balance Sheet

(R$ thousand) 3Q11 2Q11 Var. %

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT

Loans and financing 11,855 11,111 6.7%

Accounts payable 13,628 12,289 10.9%

Taxes payable 7,010 5,771 21.5%

Salaries, wages and benefits 8,890 6,911 28.6%

Deferred revenue 5,537 5,536 0.0%

Related parties 12,920 12,598 2.6%

Other obligations 15,522 13,955 11.2%

Total current liabilities 75,362 68,171 10.5%

NON-CURRENT

Loans and financing 320,404 288,056 11.2%

Deferred revenue 19,080 17,083 11.7%

Accounts payable - land purchases 25,000 25,000 0.0%

Deferred income and social contribution taxes 333,272 316,327 5.4%

Provision for civil, tax, labor and pension risks 9,950 10,111 -1.6%

Provisions for variable compensation 142 486 -70.8%

Total non-current liabilities 707,848 657,063 7.7%

SHAREHOLDERS' EQUITY

Capital stock 997,866 997,866 0.0%

Capital reserve 80,115 80,249 -0.2%

Retained earnings 180,188 121,720 48.0%

Profit reserve 648,344 648,344 0.0%

Equity attributable to shareholders 1,906,513 1,848,179 3.2%

Advance for future capital increase - - -

Equity attributable to owners of the parent company

and advance for future capital increase1,906,513 1,848,179 3.2%

Minority interests 454,556 430,592 5.6%

Total Shareholders' Equity 2,361,069 2,278,771 3.6%

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,144,279 3,004,005 4.7%

24


Consolidated Income Statement

(R$ thousand, except earnings per share) 3Q11 3Q10 Var. % 9M11 9M10 Var. %NET OPERATING REVENUE FROM RENT, SERVICES

AND OTHER54,752 45,191 21.2% 157,661 132,864 18.7%

COST OF RENT AND SERVICES 9,753- 11,079- -12.0% 27,956- 25,936- 7.8%

GROSS PROFIT 44,999 34,112 31.9% 129,705 106,928 21.3%

OPERATING REVENUE (EXPENSES)

General and administrative 5,647- 1,739- 224.7% 12,877- 12,292- 4.8%

External Services 2,638- 808- 226.5% 5,366- 7,184- -25.3%

Provisions for doubtful accounts 426- 197 N/A 613- 430 N/A

Other administrative expenses 2,242- 778- 188.2% 5,793- 4,653- 24.5%

Depreciation and amortization 341- 350- -2.6% 1,105- 885- 24.9%

Taxes 355- 816- -56.5% 918- 1,754- -47.7%

Equity income 4,280 345 1140.6% 6,484 2,032 219.1%

Change in fair value of investment properties 65,353 28,084 132.7% 208,185 66,307 214.0%

Other operating revenue (expenses), net 797 1,060 -24.8% 1,783 3,813 -53.2%

Total operating revenue (expenses), net 64,428 26,934 139.2% 202,657 58,106 248.8%

OPERATING INCOME BEFORE FINANCIAL RESULT 109,427 61,046 79.3% 332,362 165,034 101.4%

NET FINANCIAL RESULT 7,339 6,983- N/A 15,014 4,708- N/A

INCOME BEFORE INCOME AND SOCIAL

CONTRIBUTION TAXES116,766 54,063 116.0% 347,376 160,326 116.7%

INCOME AND SOCIAL CONTRIBUTION TAXES

Current 5,250- 2,630- 99.6% 12,798- 7,482- 71.1%

Deferred 18,841- 11,510- 63.7% 64,848- 29,213- 122.0%

Total 24,091- 14,140- 70.4% 77,646- 36,695- 111.6%

NET INCOME 92,675 39,923 132.1% 269,730 123,631 118.2%

INCOME ATTRIBUTABLE TO:

Shareholders 58,468 27,309 114.1% 180,188 80,235 124.6%

Minority interests 34,207 12,614 171.2% 89,542 43,396 106.3%

EARNINGS PER SHARE 0.77 0.51 51.0% 2.47 1.51 63.6%

25


Cash Flow Statement

(R$ thousand) 09/03/2011 09/30/2010

CASH FLOW FROM OPERATING ACTIVITIES

Net income for the year 269,730 123,631

Adjustments to reconcile net income to

net cash from (used in) operating activities:

Depreciation and amortization 1,105 885

Residual cost of written-off fixed assets - 55

Unbilled revenue from rentals (2,903) (3,461)

Provisions for doubtful accounts 1,342 (430)

Provisions (reversal of) for civil, tax, labor and pension risks (956) (1,096)

Acrrual for variable compensation 417 1,547

Deferred income and social contribution taxes 64,848 29,213

Financial charges on loans and financing 13,337 12,728

Interests, exchange rate changes on intercompany loans 2,661 (3,450)

Changes in fair value of investment property (208,185) (66,307)

Equity income (6,484) (2,032)

(Increase) decrease in operating assets:

Restricted investments (1,188) 114

Accounts receivable 2,892 8,596

Loans to condominiums 155 (139)

Taxes recoverable (7,343) (2,278)

Advances to suppliers 183 55

Prepaid expenses (408) (26)

Judicial deposits (97) (326)

Other 1,860 (3,571)

Increase (decrease) in operating liabilities:

Brazilian suppliers (5,942) (3,094)

Taxes payable 408 (931)

Salaries, wages and benefits 1,455 (750)

Technical structure 7,369 296

Other obligations 4,152 641

Cash provided by (used in) operating activities 138,408 89,870

Interest paid (14,009) (16,029)

Net cash from (used in) operating activities 124,399 73,841

CASH FLOW FROM INVESTMENT ACTIVITIES

Acquisition or construction of investment property (199,381) (81,282)

Acquisition of fixed assets (1,482) (1,734)

Increase in intangible assets (288) (226)

Dividends received 250 338

Net cash used in investment activities (200,901) (82,904)

CASH FLOW FROM FINANCING ACTIVITIES

Capital increase 465,021 -

Loans and financing raised 125,593 25,279

Loans and financings paid - principal (3,118) (34,000)

Advance received for future capital increase - 3,556

Earnings distributed by real estate funds - minority shareholders (28,131) (20,552)

Dividends payed (2,939) -

Share issuance costs (24,368) -

Related parties (77,057) (2,191)

Net cash from financing activities 455,001 (27,908)

NET INCREASE (DECREASE) IN BALANCE OF CASH AND CASH EQUIVALENTS 378,499 (36,971)

CASH AND CASH EQUIVALENTS

At end of year 440,065 49,281

At beginning of year 61,566 86,252

NET INCREASE (DECREASE) IN BALANCE OF CASH AND CASH EQUIVALENTS 378,499 (36,971)

For the nine months period

ended on

30 09-2011 - 3 q11 earnings release

Documents

accounting

3q11 earnings

sonae sierra

gross capex

rising inflation

social contribution

rent contract

consolidated