Gafisa S.A.

Alceu Duilio Calciolari - Chief Executive Officer, Member of Executive Board, Coordinator of Finance Executive Committee and Coordinator of Investment Executive Committee Andre Bergstein - Chief Financial Officer, Investor Relations Officer, Chairman of Ethics Executive Committee, Member of Finance Executive Committee and Member of Investment Executive Committee Rodrigo Ferreira Coimbra Pádua - Operational Executive Officer and Member of Ethics Executive Committee

David Lawant - Itaú Corretora de Valores S.A., Research Division Rafael C. Pinho - Morgan Stanley, Research Division Marcello Milman - Banco BTG Pactual S.A., Research Division Eduardo Silveira - Espirito Santo Investment Bank, Research Division Luiz Mauricio Garcia - Bradesco S.A.

Corretora de Títulos e Valores Mobiliários, Research Division Nicole Hirakawa - Crédit Suisse AG, Research Division

Thank you for joining us today. Initially, I wanted to talk a little about the main operating points of the quarter and then comment on the progress of our turnaround.

The volume of launches totaled BRL 498 million in the quarter, a slight increase over the previous quarter and a growth of 10.3% year-on-year. This brought the year-to-date volume to BRL 1.3 billion, a 13% decrease when compared to the same period last year.

There were delays in obtaining certain licenses and project approvals in the Gafisa segment, particularly in the City of São Paulo and to the offices segment, resulting in some launches being moved to the fourth quarter. As a result, the last 3 months of the year are expected to contain a higher concentration of launches, with BRL 430 million launched in the month of October.

Third quarter sales volumes were similar to the previous quarter, keeping pace with launch activity. Now the volume of cancellations in turn have declined through the year, as expected.

In the third quarter, the volume held 23% on a sequential basis. Looking ahead, the preliminary fourth quarter operating results will be a positive, with sales of approximately BRL 370 billion in October.

We delivered 3,106 units in the third quarter. In the final quarter of the year, we expect delivery volumes to be more concentrated in Tenda and Alphaville segments.

In the first 9 months of the year, 7,779 units were delivered across the group, representing 50% of the mid-range of full-year delivery guidance. In the third quarter of '13, we reported net income of BRL 15.8 million, reversing a net loss of BRL 14.5 million recorded in second quarter 2013.

Despite the reduction in the company's revenue, net income benefited from increased positive INCC variation on receivables portfolio and no operating costs and expenses. Gross margin totaled 27.6% in the quarter, up 5 percentage points on a sequential basis.

The recovery in gross margin reflects the decline in contribution of legacy projects from Tenda and from Gafisa noncore markets on the company's results. During the quarter, we also settled the purchase of the outstanding 20% stake in Alphaville to claim BRL 367 million.

The total disbursement was made in July and resulted in a temporary increase in the company's leverage. Accordingly, net debt over equity ratio for the quarter totaled 126%, compared to 96% in the previous quarter.

I would like to highlight that taking into account the classification of Alphaville as available-for-sale and the exclusion of disbursement related to the acquisition, we had a cash generation return to positive levels, reaching BRL 32.1 million in the third quarter, compared to cash burn of BRL 27.0 billion in the previous quarter. However, we expect this debt over equity ratio to be around 65% following the completion of the sale of Alphaville.

We have been focusing on achieving a turnaround in our businesses and we see the purchase coming to an end in early 2014. The Gafisa segment remains concentrated on the core markets in São Paulo, Rio de Janeiro, which are strategic regions for the company.

The ongoing recovery of the gross margin reflects the reduced negative contribution of legacy projects developed outside the core markets in Gafisa's results. As of September 30, Gafisa had 4 projects in a noncore market still under development, totaling 1,216 units to be delivered.

The cost of construction to be incurred for these projects at the end of the quarter was BRL 77 million, compared to BRL 274 million at the end of 2012. An increase of deliveries in the second half of 2012 resulted in a higher volume of the sales cancellations, which then normalized in the third quarter '13.

In the first 9 months of the year, the volume of sales terminations was BRL 402 million, of which 38% referred to completed units and 35% to units in noncore markets. Of the canceled units, around 38% were resold in the same period.

São Paulo, 45%; Rio, 50%; and other markets, 31% resold. At Tenda, we are verifying a significant reduction in the complexity of the operation as we are finishing old projects.

Today, we have about 10,000 units yet to be delivered. This compares to the 31,000 units existing in December 2011.

The cost of the construction to be incurred on those projects at the end of the quarter were BRL 170 million, compared to BRL 470 million at the end of 2012. In the first 9 months of the year, we resold 79.1% of the 3,540 canceled units.

In the financial cycle, the average time between sale, transfer and registration dropped from 14 months in the first 9 months of 2012 to 7 months today. For the projects launched this year, the financial cycle has been furthered to 4 -- shortened to 4 months.

With the prospect of finalizing our turnaround process in early 2014, we recently initiated the development of our new 5-year plan, and computate [ph] the period from 2014 to '18. In this planning processes, we are taking into account important assumptions and guidelines for the development of projects in the coming years, including the expected slag of Gafisa and Tenda's operations, the capital to be allocated for each operation, the leverage level and return expected for each business.

This is all being evaluated against the backdrop of our commitment to discipline on capital use and generation of value for our shareholders. Thank you for your attention.

And we'll now go on to the Q&A session.

I missed the beginning of the presentation, so I apologize if I ask a question which has already been commented on. I have 2 questions.

The first is on the gross margin of Gafisa. There was a reasonable improvement in the quarter.

You say in your release that there were 2 impacts, which were the variation of the INCC, the National Construction Cost Index, and the sale of lands that Gafisa has lost. Could you go into detail about this?

How much each one of these components added to the gross margin? That's my first question.

The second is about land and the situation of the Land Bank. It improved in the first 9 months to BRL 0.6 million of PSV, if I'm not wrong.

And so could you say what is the strategy from now on? Is it to maintain the purchase of land at this level or perhaps reduce this, considering the amount of launches which you have been carrying out?

Regarding your first question, in fact, the gross margin improved as we had said regarding the -- because of the old noncore projects in Tenda and Gafisa were less, and we had this 2 impact. First, the variation of the INCC, the National Construction Cost Index, in May, which had an impact in June, a stronger variation.

And second, sale of land in Gafisa. The strongest regarding these 2 impacts was the variation of the INCC.

Regarding the question of land, there was a sale of land and we had a profit of BRL 10 million. And putting the 2 aspects together, INCC plus land variation, I would imagine that this had a reflection of 2.5 percentage points vis-à-vis the gross margin.

So this then was the most important consequence, and part of this has led to an improvement, and as we concentrate on our core markets in São Paulo and Rio and leaving the legacy tender projects behind.

David, now this is Calciolari. Talking about the land purchase that you mentioned, the acquisition project is in -- within our plans that we have laid out for the year.

We are keeping with what we had planned. In Gafisa, we have acquired the equivalent of BRL 400 million of PSV.

You can see that on table 16 of our release. And Tenda, BRL 189 million.

And basically, the strategy is, in the case of Gafisa, we are building up our Land Bank again, as we have left those noncore markets and we've sold those land in those regions. And we are rebuilding the land portfolio in São Paulo and Rio.

You remember that last year -- you must remember that last year, Gafisa launched BRL 1.6 billion, BRL 1.7 billion. This year, we have a guidance of BRL 1.2 billion, BRL 1.3 billion.

The ideal size of Gafisa is not BRL 1.2 billion or BRL 1.3 billion, it's bigger, it's larger. So we are going to rebuild this Land Bank to have 2.5x, 3x more for the facility to launches.

And as 2013 was impacted by the nonpurchase of land in 2012, this is where we dropped to BRL 1.2 billion, BRL 1.3 billion. We think that in 2014, we will come back to similar levels to that which we had in 2012, BRL 1.7 billion, BRL 1.8 billion.

So it is within what we have imagined regarding acquisition in Gafisa. In Tenda, it's no different.

In Tenda, it also -- there we have reevaluated the Land Bank, and they captured land, which was not in line in the new Tenda plan and reviewing -- remaking the Land Bank for the next few years. So from the size point of view of acquisition, it is also in line with our plan.

There is no excess acquisition or below what we have imagined. And what we have bought, 22%, was in swap.

So we had 78% in cash and 22% in swap. I think that's it.

In fact, I would like you to elaborate regarding the reduction of the gross margin of Alphaville down to 38% -- from 48% to 59%. Was it something circumstantial?

And speak a little bit about the concluded units in inventory and the increase in the last quarter, 23% of the total. So will there be a possible discount on the sale price of these units?

Well, Freddie, starting here with the Alphaville margin. This is a project mix.

The project mix of sold units in the third quarter had a slight margin reduction. There is no different indicator to whether project mix of the quarter.

We launched very little in the quarter. The sales were not relevant, and this led to a small -- led to a small drop of the gross margin.

Regarding the size of the inventory, yes, you are right. It is high.

We have a total inventory of 20% of the total inventory, that's high. We do not expect anything significant in terms of discount, price discount.

The company will slow down a bit and we will hit the right point of liquidity. The stock will be reduced, it's a question of time.

And as we replace these inventories with new inventories, we will reduce this to 5% or 6%. In this quarter, there should be no EBIT liquidating inventory in Gafisa and Tenda.

Perhaps, a little bit in Alphaville. We are going into a strong campaign in Alphaville, and this should mean some realization or some sales image.

But I don't think this will change the trend of the margin. There will be no effect of the consolidated margin or -- in Alphaville.

But there's nothing relevant here. Don't expect anything for this quarter.

Perhaps next year, depending on the market.

Duilio, all my questions have been answered, so we may go on to the next question.

My question is about Tenda. When we look at the sales and inventory of older or new projects, we see that we have a gross margin like, same number as the sales terminations of this market.

And there have been some transfers. We have only BRL 500 million in inventory for the legacy and the net sale is almost BRL 200 million.

So do you see any problems to try and resell this inventory of low income brackets? And how feasible will the sales be in this inventory?

Well, this is a good question. Half of it is outside the Minha Casa, Minha Vida.

Well, I think you know, at the time, we developed some products in Tenda, and part of them was developed outside of Minha Casa, Minha Vida, a product of about BRL 200,000. Therefore, the price is almost in keeping with the market, but the absorption is slower because they are end markets, which we believe have a little bit of supply.

So the speed of inventories are BRL 300 million in sales was much slower than the -- near the Minha Casa, Minha Vida market. That's a problem that only happened in 2015, the liquidation of these inventories.

These inventories are mainly in the north of Brazil, and they are concluded units or almost finished, where we see a -- real slow in sales. But this will come to an end.

Tenda is not going to launch anymore products outside the Minha Casa, Minha Vida. And today, we have BRL 300 million in inventory in Minha Casa, Minha Vida.

So the Tenda products that fit into the Minha Casa, Minha Vida, products are coming to an end. They are the old ones, the legacy.

Now will come our new products. We have products of BRL 150 million that will be put, again, into this new model.

So that's what it is.

And just one more question in -- regarding transfers. You have the cash with Brazil, you have accessed them and you have managed to use the Tabela price, the price register or the price table of these banks as a tender.

Could you talk a little bit about the transfers?

Rodrigo is here with us. I think it will be interesting if he could tell us a little bit about these points.

Marcello, a substantial amount of our projects -- we had some projects with the Banco do Brasil and the speed of transfer was very similar with the 2. I'm not sure whether, in some places of the presentation, you may notice that we have a level of terminations of -- and launches.

It was slightly above what we wanted. This was the result of the Tabela price, which came in and out.

And once it exited, we lost some plans and we had to terminate these contracts. But from now on, what is going to happen, the Tabela price, the table price, it exists but it's less important than it was in the third quarter.

So today, it's slightly better but almost equivalent to, what they call, the Tabela de frete [ph] . So it should not have a very positive impact on sales.

In other words, we will keep the level of SOS.

I have 2 questions. The first has to do with Alphaville.

The value contracted, what type of financial arrangements will you have? And second, would you elaborate on what you -- what you're going to do with these resources to reduce debt, the purchase of land for Tenda?

So how will you use the resources -- the proceeds from these operations?

Eduardo, regarding the first question, the amount will be corrected, adjusted by the CDI from -- until the closing date. Regarding our second question, the use of the resources.

As we have been saying, the sale of the 70% stake of Alphaville is to adjust the capital structure of the company, to deleverage the company and reduce our debt. So we are doing up a plan, as have been mentioned at the beginning of the presentation, for the next 5 years, where this will be one of the main focuses to deleverage the company and result of the sale of the 70% stake, where we will enter a net debt over equity of 55% ratio.

And so this will be the use of the proceeds, deleverage and debt reduction, and consequently adjusting the capital structure of the company. So we are developing this plan.

We hope to finish this by the end of the year. Other resources will come in, too.

We will be able to deliver this in a more detailed fashion to you, but this is our -- what is guiding us. Regarding also the purchase of land, we have not changed our program at all.

We had drawn this at the beginning of the year before any Alphaville operation. So there has already been a question about land purchase.

So we continue at the pase [ph], which we think is a good one. Regarding Gafisa's volume, which we launched last year, what we expect for the next 3 years, and also, the Tenda trend.

As new launches come up and sales -- and we are planning what will be the pipeline from now on. So summarizing, the use of the proceeds and the resources will be for deleveraging to have a more healthy capital structure.

Andre, I'm not sure whether you could say that. You're talking about deleveraging and the reduce of the debt.

So will it be the reduce of the -- reduction of the corporate debt? Will you be negotiating the debt or prepay this?

Or what will you be doing?

Yes, Eduardo. We -- the debt will be coming due in 2014, 2015.

We have cash with the Alphaville operations and we will restructure, reducing our debt, paying our debt, with this new structure. Risk perception will improve and also, we will be following a cost reduction plan.

This is our plan.

Duilio and André, I have 2 questions. You talked about the fourth quarter when you're present the guidance for the year and quite aggressive with launches and perhaps, sales as well.

So what do you think will be the sales -- so what will be the dynamics of this quarter regarding the market?

Things have been delayed in Alphaville. The month of October has already been an interesting month, which I also talked about.

We launched BRL 430 million, and we had net sales of BRL 370 million. In other words, we had a good month of October.

The approvals are ongoing. We have 16 launches -- 116 launches for Gafisa and Alphaville from now until the end of the year.

More than half, we have already gotten approvals and in -- we are in the final phase for approval. Out of these launches, what is more important for us is what we are observing regarding sales, the heat -- warm-up has started.

We are seeing some launches well heated up, and we will continue with these volumes of sales as we confirm that this warming up of the market is general and will lead to a satisfactory conversion for us. What is satisfaction?

30% or 40% at the start-up, the first month of sales. If we do not observe this, we will not launch.

We are also observing the market, especially in speaking of São Paulo now, which is very busy at the end of the year, with many companies launching units. If we observe the competition, the consumer has many alternatives, we can then evaluate this and change the project.

But this one, specifically, you're talking about Gafisa. In the case of Alphaville, things are more spread out, it's not a classic competition.

We are much more concerned with the questions of obtaining our licenses, which were delayed, and the moment of sales of Alphaville, well, it's spill out for Brazil. Some major projects that we have are in different regions of Brazil.

And Tenda, we should still have one launch, which one now for -- planned for November. And on a sales program, which is different from Gafisa and Alphaville, to sell everything in the first few weeks.

We built Tenda much more slowly, the Tenda projects, avoiding interruptions. Well, the structurally important thing for Tenda is to make products available.

We don't have a -- products in the Minha Casa, Minha Vida. This financing will start in Rio de Janeiro in November.

So, Thomas, we will only launch what we are certain we will sell.

And I have a question with Gafisa, the turning point of the margin. Gafisa, you have made an adjustment, a significant adjustment.

[I'm sorry, the sound is very difficult.] So what is -- you're doing now?

Has the company reduced its expectations? Has there any been reduction regarding sales?

So what about for next year? What will be happening?

And SG&A over sales -- and how is this going to converge in the future? [I'm very sorry.

The sound was inaudible.]

Well, Thomas, what happened was the following. In these last 2 years, the company was extremely concerned in organizing its capital structure to bring capital back again, to stabilize alterations from the point of view of efficiencies.

And the G&A results were very, very necessary to keep the company stable, to be able to carry out these plans that we have drawn up the last 3 years. So what's happening now?

If you take the 2 brands, we have Gafisa stabilizing to size, which makes sense for its operations, which is not the current size. It's -- this BRL 1.3 billion does not -- is not in keeping with the structure.

So we have to increase this BRL 1.3 billion. The company should be BRL 1.7 billion, BRL 1.8 billion, more or less, and which is more in keeping with the structure and its execution capacity.

On the other hand, the processes are very stabilized. We have not created any interruptions in these last years that have been brought about losses of the process.

We have had gains. So we have stabilized the operations.

And efficiencies will start appearing as of next year. So this means that we believe we will have gains.

We are seeking this. So we have 2 leverages: one in volume and then efficiency.

And this will be both for Tenda and Gafisa. The question of the legacy, which you also observed, the management of this legacy is very costly.

And this is coming to an end. So when we come to the end or close to the end of this process, we will be able to have a much more efficient process, and much more productive one.

And we will be able to see much more clearly in 2014, seeking a 6% or 7% over launches. This is our guidance.

You look at the competitors who are in a more normal situation, and they are operating more or less around this number.

But when you speak of efficiency, in the case of Tenda, do you expect this will tender, too?

Yes, you have a nominal drop. We are managing to see this and we have an increase in volume.

Tenda has not -- well, it's not an operation which will produce the margin that we've seen in this new model, 24%, 28% of gross margin with an adequate volume, which is not what we have this year. But if this is confirmed with the -- what we have done this year, the results will come 28%, 29%.

We would slightly increase the volume of Tenda and reduce the level of G&A. Why?

Because there will be more efficiency.

Well, I'm sorry if I'm taking too much time. But what about the new tender without the legacy?

How will this be?

This is in line with what you have planned.

Thomas, this is Rodrigo. So you want to know about the new Tenda, right?

[I'm sorry, the sound is inaudible.] He's asking out -- about Tenda.

Well, if you look on Page 10 of the presentation, we have all the new budgets up to now. 6 projects launched, and the performance of these 6 have been very positive.

And where did the variation come from?

We are managing to gain some price regarding our profitability parameter. We are selling like, in some case, not horizontally faster than we thought originally.

And we have a transfer of speed in keeping with our expectations. In the new projects, we imagine that the transfer will look 3 months after the sale because this is a bureaucracy.

And this is the time it takes. If you look at Page 10, the detachment between the percentage sold and the percentage transferred is about 10% to 20%.

I think that the main negative highlight here is [indiscernible]. But because of the high speed of sales at the start-up, so we didn't have much time for the transfer.

But all of them have a transfer 3 months after the sale. The other variable would be the work.

Today, we have 2 projects that are being built. And the new launches have performed better than we expected originally.

The expectation, which validated the profitability of the launch. So what is the challenge?

We are talking today about a very low universe of project, a universe which we can control in the retail. And for the company to be profitable, we have to have a minimum scale, which is much greater.

So the challenge here is to maintain this performance level at a different operation scale, the message we are working in at the moment. But the first signs are positive.

Just adding to some points. Regarding the sale termination, I'd like to know about trends.

I think as we mentioned already of past numbers and the legacy of Tenda has had a total termination of BRL 2.2 billion. This is very close to what we originated in the second quarter of 2011.

But I'd like to know what we can expect from now on if these legacy numbers will drop quickly now in the fourth quarter. And will be -- was there no more comfortable space or not?

Can we still expect 30% or 40%, 50% of the sales? And the other point about the adjustment, like the adjustments in Alphaville, Page 21 of the release.

While there was price adjustments, et cetera, does this have to do with the cancellation of 40% of gross sales in Alphaville? Because this Alphaville has important components, which is the correction of the portfolio 2012 [ph].

I want to know whether that cancellation is one of the reasons of this negative adjustment which we have seen here and what we can expect from Alphaville, which is a segment where we don't expect a very high number of cancellations.

Well, Mauricio, this is André. Regarding your first question of the cancellation.

We have put in a chart regarding -- and we put in a special section of cancellations in our report to show a trend. We -- to show you that as we clean up Tenda's legacy terminating sales for -- and reselling and transferring to the Caixa or Banco do Brasil, we will reduce the volume, and this is actually what has happened.

And in the last quarter 2011, we had about BRL 400 million in terminations. Now in the third quarter, we had BRL 133 million.

This is the trend. It's not going to finish from one quarter to the other.

But it will reduce the next year, it will reduce even more as the inventory reduces and units are canceled and resold. And in this due process, the terminations are limited to 5% to 8% of units, which are not approved within a term of 60 days at Caixa or the Banco do Brasil.

So the trend then is the continuity of this. It will come to an end from one day to the next.

But it is reducing until we are left finally with this minimal number, just for those tax who are not approved in 60, maximum 90 days. So this, from a Tenda point of view.

Gafisa, we had a first half of the year, which was a little heavier in sales terminations, and now has come in -- now is normal. Regarding Alphaville, we have -- following a sequence, which should be maintained, all sales terminations of BRL 50 million per quarter.

So Alphaville, we had a growth of sales in the last few years. So what we see is a delinquency, which has stabilized and in-house, which is something we worked hard on, not let the volume of delinquent clients.

We realized we are not going to be able to pay -- terminate them, so that we can tune up the portfolio and resell. So we are okay regarding this volume.

There was an increase in the last couple of years, maybe, but this came because of the growth of Alphaville. And now we see the situation is normal.

And what about this negative adjustment of the Alphaville inventory table?

What do you mean? Which table?

35.

I'm sorry, Mauricio. 36, page 21.

BRL 26 million?

Yes, yes. That's it.

Well, these are price adjustments and other components. Sometimes, you have a table of remaining items we adjust.

So this is the normal day-by-day operation, some sale, which was slightly below price at the table. You carry all the campaigns for the remaining units or you implemented some kind of special conditions.

So it's not a trend. It's just day-by-day things, nothing to be concerned about regarding Alphaville pricing.

Two questions. The first, we take the -- not many to be delivered to [indiscernible] for them to close the transaction.

If you could talk a little bit about what are the difficulties that you have found and why is this process taking longer than we expected initially. And the other question, you mentioned the land sale.

Could you break down and give us the impact on cash of this on the sales in previous periods?

This is Duilio. The second question.

The impact of low, impact of BRL 10 million of gross profits, the sale of one of Gafisa's plot. So nothing relevant, and we just think that it's just good to highlight.

Gafisa practically has already terminated the old Land Bank, when we decided that we were going to just focus on São Paulo and Rio. And the sales were somehow about BRL 122 million of land, the amount of sale, but do not fit in to the new Tenda model, and which we are selling off in time.

At the beginning of the year, it was BRL 140 million. So these are plots, and we imagine by the end of next year, we will probably have sold off for BRL 9 million also, that this number is also adjusted to fair market price.

Now regarding Alphaville, which was your first question. We are preparing to close a transaction by December and normalizing all the legal questions and everything which has to do with this.

Everything is well underway. And the certificates that we consider everything complied with.

So it's just a question of legal procedures, what the next steps will be. So by the end of the year, we will close this process.

So everything is in line with what we imagined and what we have been talking about recently.

And what is the cash impact of the land in this quarter? Do you include this?

Just so I can understand if this is nonrecurring.

Well, Nicole, this sale that I have mentioned of BRL 10 million gross profit was a cost of BRL 5 million and sale of BRL 15 million, but part is coming to cash and part is still coming. So the impact was BRL 5 million of cash, so it's not relevant.

I wish to thank you, all, on behalf of Gafisa's top management. Thank you very much, and I hope to see you, all, soon.