31 03-2011 - 1 q11 earnings release

1

1Q11 Earnings Release

SONAE SIERRA BRASIL ANNOUNCES

ADJUSTED EBITDA OF R$38.0

MILLION IN 1Q11, AN INCREASE OF

18.3% OVER 1Q10

São Paulo, May 13, 2011 – Sonae Sierra Brasil S.A.

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

developer, owner and manager, announces today its results

for the first quarter of 2011 (1Q11).

Highlights

Sonae Sierra Brasil’s primary IPO was successfully

concluded in 1Q11, raising a total of R$ 465.0 million.

The Company’s Net Revenue increased 17.6%

compared to 1Q10, to R$ 49.7 million.

Adjusted EBITDA totaled R$ 38.0 million in 1Q11, a

18.3% increase over 1Q10 and the Adjusted EBITDA

Margin reached 76.3%.

Adjusted FFO totaled R$ 34.4 million, a 15.2% increase

over 1Q10.

NOI grew 21.4% in 1Q11, reaching R$ 47.1 million.

NOI margin reached 94.8% in the same period.

Same-store rent (SSR) reached double-digit growth at

11.1% in 1Q11 and Same-store sales (SSS) increased

by 9.8%.

Total Net Income attributable to the Shareholders

reached R$ 62.6 million in the quarter, from R$ 21.3

million in the same period of 2010.

Investors

Relations

Carlos Alberto Correa

Investors Relations Officer

Murilo Hyai

Investors Relations Manager

Email:

[email protected]

Phone:

+55 (11) 3371-4188

1Q11 CONFERENCE CALLS

Portuguese

May 16, 2011

1 pm (New York time)

2 pm (Brasilia Time)

Phone: (55 11) 2188-0155

Code: Sonae Sierra Brasil

English

May 16, 2011

2.30 pm (New York time)

3.30 pm (Brasilia Time)

Phone: (1 412) 317-6776

Code: Sonae Sierra Brasil

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Financial Indicators

(R$ million) 1Q11 1Q10 Var. %

Net Revenue 49.7 42.3 17.6%

EBITDA 38.0 31.7 19.8%

EBITDA Margin 76.3% 75.0% +139 bps

Adjusted EBITDA 38.0 32.1 18.3%

Adjusted EBITDA Margin 76.3% 75.9% +44 bps

Funds From Operations (FFO) 34.4 29.5 16.7%

FFO Margin 69.2% 69.7% -53 bps

Adjusted FFO 34.4 29.9 15.2%

Adjusted FFO Margin 69.2% 70.7% -147 bps

Net Operating Income (NOI) 47.1 38.8 21.4%

NOI Margin 94.8% 91.9% +291 bps

Operating Indicators

1Q11 1Q10 Var. %

Total GLA ('000 sqm) 349.1 342.4 2.0%

Owned GLA ('000 sqm) 202.6 199.4 1.6%

Number of shopping malls 10 10 0.0%

Sales (R$ million) 840.7 743.8 13.0%

Sales/sqm (monthly average) 847.7 764.7 10.9%

Occupancy rate 97.6% 98.3% -68 bps

Cost of occupancy (% of sales) 9.9% 9.9% 0.0%

SSS/sqm 860.6 783.9 9.8%

SSS/sqm - Satellite stores 1,276.2 1,140.5 11.9%

SSS/sqm - Anchor stores 615.5 573.7 7.3%

SSR/sqm 51.0 45.9 11.1%

SSR/sqm - Satellite stores 96.1 86.1 11.6%

SSR/sqm - Anchor stores 20.1 18.4 9.6%

Overdue Payments (25 days) 2.3% 3.5% -120 bps

3


MANAGEMENT’S COMMENTS

In the first quarter of 2011, we successfully completed our primary IPO, raising a total

of R$ 465.0 million by listing our shares in BM&FBovespa. This transaction

significantly broadened our shareholder base and provided financial resources to fund

our growth strategy.

Despite macro economic conditions including higher inflation and interest rates in

1Q11, Sonae Sierra Brasil maintained a strong trajectory of growth as our same-store

rent reached double-digit growth at 11.1% and same-store sales reached 9.8%

growth in 1Q11.

Consolidated net revenues totaled R$ 49.7 million, a 17.6% increase over 1Q10.

Consolidated Adjusted EBITDA in 1Q11 had a more significant increase of 18.3% over

the same period last year, totaling R$ 38.0 million, while the Adjusted EBITDA margin

reached 76.3%. The consolidated Adjusted FFO totaled R$ 34.4 million in 1Q11 with a

margin of 69.2% on net revenue. We continue to benefit from the maturation of our

malls, particularly Manauara Shopping in Manaus, which was opened in April 2009 and

from the growing parking revenues. The net income attributable to shareholders

reached R$ 62.6 million in 1Q11, from R$ 21.3 million in the same period last year.

This increase is mainly due to the positive performance of the portfolio and to the

valuation gains on investment properties in 1Q11.

In terms of new developments and expansions, the Company continues to follow the

plans previously announced, 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). In addition, in

1Q11 we also initiated the construction of the expansion of Shopping Campo Limpo.

Located in the city of São Paulo, Shopping Campo Limpo has benefited remarkably

from the growth in consumption of the lower middle income class.

Pre-letting in Uberlândia Shopping and Boulevard Londrina remained strong at 86%

and 70% of the GLA, respectively, as at the end of 1Q11. In the expansions of

Metrópole and Campo Limpo, pre-letting reached 99% and 90%, respectively, at the

end of this quarter.

We remain confident in our strategy to develop market dominant malls, focused on

the middle class segment.

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 1Q11 with the same period of the previous year, also

adjusted to the new accounting standards. The consolidated financial information

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

holds a 51% ownership stake in the mall).

Gross Revenue

Sonae Sierra Brasil’s gross revenue totaled R$ 54.7 million in 1Q11, an increase of

18.1% over the same period of the previous year. The increase in revenue was driven

by growth in rental revenue which totaled R$ 41.3 million in 1Q11, an 18.4% increase

over 1Q10 given the combination of strong leasing spreads, inflation adjustments and

low vacancy. Another factor that contributed to the growth in revenue in 2011 was the

significant increase in revenue from parking, which totaled R$ 5.6 million in 1Q11, an

impressive 102.2% increase over the same period last year. It is also important to

highlight that parking revenue represented 10% of gross revenues in 1Q11 compared

to 6% in 1Q10.

76%

2%

7%

10%

4%

1%

1Q11

75%

3%

10%

6%6%

1Q10Rent

Rent contract straight-lining

Service revenue

Parking revenue

Key Money

Other revenue

Gross Revenue Breakdown

5


Costs and Expenses

Costs and Expenses totaled R$ 12.6 million in 1Q11, a 14.7% increase over 1Q10.

Approximately 44.6% of Cost and Expenses in 1Q11 were represented by Personnel

costs, which totaled R$ 5.6 million, a 11.9% increase over the same period last year.

The increase in Personnel expenses stems from regular annual union increases and

pre-operating expenses, mainly commissions to brokers in the amount of R$ 569

thousand (R$ 220 thousand in 1Q10), given the leasing activities for the developing

projects of Uberlândia Shopping, Boulevard Londrina Shopping and the expansions of

Shopping Metrópole and Shopping Campo Limpo.

Total Costs and Expenses were also adversely impacted by the variances with

provisions for doubtful accounts, which were back to a regular expense in 1Q11 in the

amount of R$ 580 thousand, from a net income of R$ 382 thousand in 1Q10.

Excluding the provisions for doubtful accounts, total Costs and Expenses would have

increased by 5.8% only.

Conversely, we continued to see lower Occupancy Costs related to vacant stores. In

1Q11, Occupancy Costs totaled R$ 865 thousand, a 24.9% decrease compared to

1Q10.

Gross Revenue (R$ '000)

1Q11 1Q10 Var. %

Rent 41,342 34,912 18.4%

Rent contract straight-lining 949 1,401 -32.3%

Service revenue 4,033 4,453 -9.4%

Parking revenue 5,610 2,774 102.2%

Key Money 2,398 2,722 -11.9%

Other revenue 325 32 915.6%

Total 54,657 46,294 18.1%

6


Changes in Fair Value of Investment Properties

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

Company opted to value 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$ 71.1 million in 1Q11 compared to R$ 14.5 million in 1Q10. The increase reflects

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

performance of operating metrics.

Net Financial Result

The consolidated net financial result in 1Q11 was a net financial cost of R$ 116

thousand, 68.2% lower than 1Q10. Interest income on financial investments had a

substantial increase of 366.9% to R$ 5.9 million in 1Q11, primarily due to the interest

income on the invested net cash proceeds of the IPO. Conversely, the exchange rate

variation on the Company’s euro denominated inter-company loan changed from

income of R$ 3.4 million in 1Q10 to a cost of R$ 2.0 million in 1Q11. This inter-

company loan was fully repaid in 1Q11.

Costs and Expenses (R$ '000)

1Q11 1Q10 Var. %

Depreciation and amortization 403 275 46.5%

Personnel 5,623 5,027 11.9%

Outsourced services 2,132 2,575 -17.2%

Occupancy cost (vacant stores) 865 1,152 -24.9%

Cost of contractual agreements with tenants 336 438 -23.3%

Provision (reversal) of the allowance for doubtful

accounts580 (382) -251.8%

Rent 625 570 9.6%

Travel 224 257 -12.8%

Other 1,824 1,082 68.6%

Total 12,612 10,994 14.7%

Classified as:

Cost of rentals and services 8,556 7,761 10.2%

Operating expenses 4,056 3,233 25.5%

12,612 10,994 14.7%

7


Net Income

Net Income totaled R$ 86.2 million in 1Q11, a 134.2% increase over 1Q10. It is worth

noting, however, that the Net Income is largely influenced by the Change in Fair Value

of Investment Properties, which totaled R$ 71.1 million in 1Q11, 388.8% higher than

1Q10. The increase in Change in Fair Value of Investment Properties was led

particularly by improved valuation of our malls, given the strong performance of the

portfolio.

Net Operating Income (NOI)

Consolidated NOI totaled R$ 47.1 million in 1Q11, a 21.4% increase over 1Q10,

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

Net Financial Result

(R$ thousand) 1Q11 1Q10 Var. %

Financial income:

Interest on financial investments 5,911 1,266 366.9%

Interest receivable 166 215 -22.8%

Monetary and exchange variations - 3,439 -100.0%

Other 581 565 2.8%

Total 6,658 5,485 21.4%

Financial Expenses:

Interest on loans and financing (4,286) (4,467) -4.1%

Interest on intercompany loans (400) (1,232) -67.5%

Monetary and exchange variations (2,088) - n/a

Other - (151) -100.0%

Total (6,774) (5,850) 15.8%

Total Financial Result - Net (116) (365) -68.2%

Net Operating Income - NOI (R$ million)

1Q11 1Q10 Var. %

Rent 42.6 36.3 17.3%

Key Money 2.4 2.7 -11.9%

Parking 5.6 2.8 102.2%

Total Revenues 50.6 41.8 21.0%

(-) Malls' Operating Expenses (3.5) (3.0) 16.3%

NOI 47.1 38.8 21.4%

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Adjusted EBITDA

Adjusted EBITDA increased by 18.3% in 1Q11 to R$ 38.0 million, while the adjusted

EBITDA margin reached 76.3% in the same period.

Adjusted Funds From Operations (FFO)

Adjusted FFO totaled R$ 34.4 million in 1Q11, an increase of 15.2% over 1Q10 with a

margin of 69.2% over net revenue.

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

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

32.1

38.0

1Q10 1Q11

Adjusted EBITDA (R$ million)

18.3%

29.9

34.4

1Q10 1Q11

FFO Adjusted (R$ million)

15.2%

9


Management Accounts

In accordance with accounting policies adopted in Brazil and the 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

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

below:

Adjusted EBITDA and Adjusted FFO

Reconciliation

(R$ million) 1Q11 1Q10 Var. %

Net Revenue 49.7 42.3 17.6%

Operating income before financial result 109.5 46.6 134.8%

Depreciation and amortization 0.4 0.3 46.0%

Gain from fair value of investment properties (72.0) (15.2) 372.3%

EBITDA 38.0 31.7 19.8%

Non-recurring expenses - 0.4 -100.0%

Adjusted EBITDA 38.0 32.1 18.3%


Adjusted EBITDA Margin 76.3% 75.9% +44 bps

EBITDA 38.0 31.7 19.8%

Net financial result (0.1) (0.4) -68.2%

Current income and social contribution taxes (3.4) (1.9) 86.0%

- - FFO 34.4 29.5 16.7%

Non-recurring expenses - 0.4 -100%

Adjusted FFO 34.4 29.9 15.2%



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Cash, Cash Equivalents and Debt

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

investments, increased by R$ 352.0 million, from R$ 61.6 million on December 31,

2010 to R$ 413.6 million on March 31, 2011 as a result of the net proceeds from the

Company’s IPO.

In 1Q11, the Company used part of the proceeds from the IPO to settle the debtor

loan agreement with the parent company, Sierra Brazil 1 BV, amounting to R$ 76.2

million. The repayment of this loan was already planned as part of the disposition of

resources from the Company's initial public offering as described in the Final Public

Offering Memorandum dated February 01, 2011.

The Company’s total debt reached R$ 212.3 million in 1Q11, and the respective

amortization schedule is as follows:

(Considering 51% of PDP) (R$ million) 1Q11 1Q10 Var. %

Net Revenue 38.9 32.4 20.2%

- - Operating income before financial result 86.1 31.2 175.5%

Depreciation and amortization 0.4 0.3 46.1%

Gain from fair value of investment properties (58.0) (8.5) 583.4%

EBITDA 28.5 23.0 23.7%

Non-recurring expenses - 0.4 -100.0%

EBITDA ajustado 28.5 23.4 21.6%


EBTIDA ajustado Margem 73.2% 72.4% +86 bps

EBITDA 28.5 23.0 23.7%

Net financial result (0.3) (0.5) -31.7%

Current income and social contribution taxes (3.4) (1.9) 86.0%

FFO 24.7 20.7 19.4%

Non-recurring expenses - 0.4 -100%

FFO ajustado 24.7 21.1 17.1%



Adjusted EBITDA and Adjusted FFO Reconciliation

11


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$ 125.4 million, which corresponds to approximately 59% 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 at

the end of 1Q11 was as follows:

The Company’s leverage strategy is to finance the greenfield projects and expansions

with property-level debt up to 50% of total project costs. Financing for Uberlândia

7.7 9.9 28.0 28.0 27.3

111.4

2011 2012 2013 2014 2015 2016 and beyond

Debt Amortization (R$ million)

Fixed 59%

CDI22%

TR19%

Debt Profile

12


Shopping and Boulevard Londrina Shopping has already been contracted, while

financing for Passeio das Águas Shopping (Goiânia) is currently under negotiation.

In 1Q11, the Company contracted a R$ 53 million loan with Banco Itau Unibanco S.A.

to finance the refurbishment and expansion of Shopping Metrópole. This is a 8-year

term loan, including a 2-year grace period, with an interest rate of TR + 10.3% p.a.,

which will be drawn down mostly this year.

SHOPPING CENTERS’ SALES PERFORMANCE

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

totaled R$ 840.7 million in 1Q11, a 13.1% increase over the same period last year.

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

of Campo Limpo Shopping and 100% of Parque D. Pedro Shopping), sales reached R$

622.0 million in 1Q11, a 14.4% increase from 1Q10.

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

Shopping, Shopping Penha and Shopping Metrópole, with sales increases of 36.5%,

35.8%, 17.1% and 14.2%, respectively. The robust growth recorded by Manauara

Shopping can be mainly attributed to the continuing maturation of the mall, while the

strong performance of Franca Shopping and Shopping Penha reflected the reduction in

their vacancy rates over the previous quarters.

OPERATING HIGHLIGHTS

The operating indicators of Sonae Sierra Brasil in 1Q11 maintained the growth trend

experienced in the previous year. Same-store rent (SSR) reached double-digit growth

with an impressive 11.1% increase over 1Q10, while same-store sales (SSS) had a

solid 9.8% increase in 1Q11 compared to the same period last year.

13


Occupancy Rate

Same Store Sales and Same Store Rent

DESCRIPTION OF BUSINESS

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

counts on the expertise of its management team and its international controlling

shareholders: the European group Sonae Sierra and the U.S. REIT Developers

97.3%

96.3%

97.0%97.2%

98.3% 98.5% 98.4%98.0%

97.6%

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

Occupancy (% GLA)

45.9

51.0

1Q10 1Q11

SSR/sqm

11.1%

783.9

860.6

1Q10 1Q11

SSS/sqm

9.8%

14


Diversified Realty (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 March 31, 2011, we had a weighted average ownership

interest of 58.0% in the ten operating shopping malls in our portfolio, representing

202.6 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

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 preferred

strategy of growth through potentially market dominant shopping malls, with income

per capita and population density that meet our requirements. We estimate that the

combined GLA from these three shopping malls is approximately 170.0 thousand sqm.

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

and the Company’s interests are as at the end of March, 2011, except where

otherwise indicated:

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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:

11

12

13

7

10

4

51

8

93

26

Shopping Centers in Operation

City State Stores Ownership

1 Parque D. Pedro Campinas SP 407 121.0 51.0% 61.7 95.1%

2 Boavista Shopping São Paulo SP 148 16.0 100.0% 16.0 98.0%

3 Penha Shopping São Paulo SP 198 29.6 73.2% 21.7 98.0%

4 Franca Shopping Franca SP 101 18.1 67.4% 12.2 98.4%

5 Tivoli Shopping Santa Barbara d'Oeste SP 147 22.1 30.0% 6.6 100.0%

6 Metrópole Shopping São Bernardo do Campo SP 148 23.9 * 100.0% 23.9 100.0%

7 Pátio Brasil Brasília DF 234 28.8 10.4% 3.0 98.7%

8 Plaza Sul Shopping São Paulo SP 220 23.1 30.0% 6.9 99.7%

9 Campo Limpo Shopping São Paulo SP 127 19.9 20.0% 4.0 99.3%

10 Manauara Shopping Manaus AM 232 46.7 100.0% 46.7 99.2%

Total 1,962 349.1 58.0% 202.6 97.7%

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

Projects under Development

City State Ownership

11 Uberlândia Shopping Uberlândia MG 100.0%

12 Boulevard Londrina Shopping Londrina PR 84.5%

13 Passeio das Águas Shopping Goiânia GO 100.0%

Total 95.6% 162.1

Owned GLAGLA

('000 sqm)

43.6

47.8

78.1

169.5

GLA

('000 sqm)

Owned GLA

('000 sqm)

Occupancy

Rate

(% GLA)

('000 sqm)

43.6

40.4

78.1

16


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 shall analyze potential acquisitions at attractive pricing of

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

strategic shareholding 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 eight ongoing projects, comprised of three greenfield

projects and five expansions, which should increase our owned GLA by approximately

92% to 392.0 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.

204

39210

3

13

44

40

78

2010 2011 2012 2013 Total

Owned GLA Growth ('000 sqm)

Greenfields Expansion

Uberlândia

Londrina

Goiânia

Metrópole (I)

PDP (II)

Metrópole (II)

Tívoli

Campo Limpo

+92%

17


NEW PROJECTS (GREENFIELD)

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

to become the leading malls in their regions. 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 and a high percentage of leasing

contracts have already been committed (86% and 70% of GLA, respectively).

Construction of the third mall, Passeio das Águas Shopping (in Goiânia), is scheduled

to begin in mid 2011.

Uberlândia Shopping: Construction of this mall, located in Uberlândia, Minas Gerais,

began in February 2010. Approximately 86% of GLA was committed to tenants as of

March 31, 2011.

Uberlândia Shopping Construction Site

Uberlândia Shopping Project Illustration

City Uberlândia

State MG

Expected Opening 4Q11/1Q12

GLA (‘000 sqm) 43.6

SSB’s ownership interest 100%

Committed GLA 86%

Capex Incurred (R$ million) 100.7

Uberlândia Shopping

18


Boulevard Londrina Shopping: Located in Londrina, the second largest city in the

state of Paraná, Boulevard Londrina Shopping began construction in September 2010.

The mall’s GLA was 70% committed to tenants as of March 30, 2011.

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 Goiás state, is scheduled to begin in

2011.

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 70%


Boulevard Londrina Shopping

City Goiânia

State GO

Expected Opening 2013

GLA (‘000 sqm) 78.1

SSB’s ownership interest 100%

Committed GLA 20%


Passeio das Águas Shopping

19


EXPANSIONS

Expansion and renovation of Shopping Metrópole – Phase I

We are currently renovating and expanding Metrópole Shopping, given the growing

numbers of visitors, which we expect to increase even further with the addition of

several high-end commercial and residential towers adjacent to the mall being

developed by other companies. The new area, which corresponds to approximately

8.7 thousand sqm of GLA was already 99% committed to tenants as of March

31,2011.

Metrópole Project Illustration Metrópole Renovation and Expansion

Campo Limpo Expansion

In early 2011, the Company also started the construction of the expansion of

Shopping Campo Limpo. The strong performance of this mall has mainly been fueled

by increased consumption of the lower income groups. The mall had an occupancy

rate of 99.3% as of March 31, 2011. The expansion will add 2.5 thousand sqm of GLA,

of which approximately 90% was already committed to tenants at the end of 1Q11.

Campo Limpo Expansion Construction Site

20


SHARE PERFORMANCE

On February 02, 2011, Sonae Sierra Brasil raised R$ 465.0 million in a primary initial

public offering on BM&FBovespa of 23.3 million shares (including the green shoe) at a

R$ 20.00 price per share.

Sonae Sierra Brasil’s shares (BM&FBovespa: SSBR3) closed 1Q11 at R$ 23.20, a

16.0% gain from the launching price. Over the same period, the Ibovespa Index

increased by 2.9%.

Ownership Breakdown

Sonae

Sierra SGPS

50%

DDR

50%Sierra

Brazil 1 BV

66.65%

Enplanta

Shopping2.93%

Free

Float30.42%

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.

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

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APPENDICES

Consolidated Balance Sheet


ASSETS

CURRENT

Cash and cash equivalents 413,621 61,566 571.8%

Accounts receivable, net 15,965 21,650 -26.3%

Taxes recoverable 11,391 9,659 17.9%

Advances to suppliers - 183 -100.0%

Prepaid expenses 201 175 14.9%

Other credits 5,193 5,801 -10.5%

Total current assets 446,371 99,034 350.7%

NON-CURRENT

Long-term receivables:

Restricted financial investments 944 557 69.5%

Accounts receivable, net 10,505 9,582 9.6%

Loans to condominiums 668 561 19.1%

Deferred income and social contribution taxes 20,738 13,590 52.6%

Juducial deposits 3,506 3,584 -2.2%

Other credits 2,255 2,461 -8.4%

Total long-term assets 38,616 30,335 27.3%

Investments 20,128 19,033 5.8%

Investment properties 2,309,821 2,181,412 5.9%

Fixed Assets 4,941 4,532 9.0%

Intangible Assets 954 873 9.3%

Total non-current assets 2,374,460 2,236,185 6.2%

TOTAL ASSETS 2,820,831 2,335,219 20.8%

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Consolidated Balance Sheet


LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT

Loans and financing 7,736 7,171 7.9%

Brazilian suppliers 15,959 15,807 1.0%

Taxes payable 5,133 6,602 -22.3%

Salaries, wages and benefits 6,429 6,733 -4.5%

Technical structure 5,420 5,410 0.2%

Related parties 12,005 85,599 -86.0%

Dividends payable 2,939 2,939 0.0%

Other obligations 13,324 11,370 17.2%

Total current liabilities 68,945 141,631 -51.3%

NON-CURRENT

Loans and financing 204,569 194,677 5.1%

Key Money 14,824 11,838 25.2%

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

Deferred income and social contribution taxes 297,861 278,943 6.8%

Provision for civil, tax, labor and pension risks 10,706 10,906 -1.8%

Provisions for variable compensation 527 427 23.4%

Total non-current liabilities 553,487 521,791 6.1%

SHAREHOLDERS' EQUITY

Capital stock 997,866 532,845 87.3%

Capital reserve 80,730 96,198 -16.1%

Retained earnings 62,559 - -

Profit reserve 648,344 648,344 0.0%

Equity attributable to controlling shareholders 1,789,499 1,277,387 40.1%

Minority interest 408,900 394,410 3.7%

Total Shareholders' Equity 2,198,399 1,671,797 31.5%

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,820,831 2,335,219 20.8%

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Consolidated Income Statement

(R$ thousand, except earnings per share) 1Q11 1Q10 Var. %

NET OPERATING REVENUE FROM RENT, SERVICES

AND OTHER49,713 42,262 17.6%

COST OF RENT AND SERVICES (8,556) (7,761) 10.2%

GROSS PROFIT 41,157 34,501 19.3%

OPERATING REVENUE (EXPENSES)

General and administrative (4,056) (3,233) 25.5%

Outsourced services (1,331) (1,162) 14.5%

Legal fees (268) (257) 4.3%

Provisions for doubtful accounts (580) 359 -261.6%

Other administrative expenses (1,474) (1,898) -22.3%

Depreciation and amortization (403) (275) 0.0%

Taxes (255) (394) -35.3%

Equity income 1,345 803 67.5%

Change in fair value of investment properties 71,087 14,542 388.8%

Other operating revenue (expenses), net 256 423 -39.5%

Total operating revenue (expenses), net 68,377 12,141 463.2%

OPERATING INCOME BEFORE FINANCIAL RESULT 109,534 46,642 134.8%

NET FINANCIAL RESULT (116) (365) -68.2%

INCOME BEFORE INCOME AND SOCIAL

CONTRIBUTION TAXES109,418 46,277 136.4%

INCOME AND SOCIAL CONTRIBUTION TAXES

Current (3,442) (1,851) 86.0%

Deferred (19,738) (7,611) 159.3%

Total (23,180) (9,462) 145.0%

NET INCOME 86,238 36,815 134.2%

INCOME ATTRIBUTABLE TO:

Controlling Shareholders 62,559 21,307 193.6%

Minority interests 23,679 15,508 52.7%

EARNINGS PER SHARE 0.95 0.40 137.5%

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Cash Flow Statement

(R$ thousand) 1Q11 1Q10

CASH FLOW FROM OPERATING ACTIVITIES

Net income for the year 86,238 36,815

Adjustments to reconcile net income to

net cash from (used in) operating activities:

Depreciation and amortization 403 275

Residual cost of written-off fixed assets - (59)

Unbilled revenue from rentals (923) (1,198)

Provisions for doubtful accounts 580 (382)

Provisions (reversal of) for civil, tax, labor and pension risks (200) (368)

Acrrual for variable compensation 312 332

Deferred income and social contribution taxes 19,738 7,611

Financial charges on loans and financing 4,286 4,467

Interests, exchange rate changes on intercompany loans 2,488 (2,207)

Changes in fair value of investment property (71,087) (14,542)

Equity income (1,345) (803)

(Increase) decrease in operating assets: - -

Restricted investments (387) 418

Accounts receivable 5,105 2,024

Loans to condominiums (107) 190

Taxes recoverable (1,732) (1,835)

Advances to suppliers 183 6

Prepaid expenses (26) (218)

Judicial deposits 78 (194)

Other 814 (1,172)

Increase (decrease) in operating liabilities:

Salaries, wages and benefits (784) (2,216)

Brazilian suppliers (2,492) (535)

Taxes payable (1,469) (590)

Technical structure 2,996 382

Other obligations 1,954 77

Cash provided by (used in) operating activities 44,623 26,278

interest paid (4,959) (8,913)

Net cash from (used in) operating activities 39,664 17,365

CASH FLOW FROM INVESTMENT ACTIVITIES

Acquisition or construction of investment property (52,448) (17,611)

Acquisition of fixed assets (410) (205)

Increase in intangible assets (137) -

Dividends received 250 -

Net cash used in investment activities (52,745) (17,816)

CASH FLOW FROM FINANCING ACTIVITIES

Capital increase 465,021 -

Loans and financing raised 8,900 -

Loans and financings paid - principal - (4,500)

Earnings distributed by real estate funds - minority shareholders (9,291) (9,579)

Costs of fundraising (23,437) -

Related parties (76,057) (603)

Net cash from financing activities 365,136 (14,682)

NET INCREASE (DECREASE) IN BALANCE OF CASH AND CASH

EQUIVALENTS352,055 (15,133)

CASH AND CASH EQUIVALENTS

At end of year 413,621 71,119

At beginning of year 61,566 86,252

NET INCREASE (DECREASE) IN BALANCE OF CASH AND CASH

EQUIVALENTS352,055 (15,133)

31 03-2011 - 1 q11 earnings release

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