Strategies and Competitive Advantages

The Company’s business plan has, as its key elements, two components of the low-income market, which, properly combined, make up the core of our strategy: (i) product assertiveness and (ii) adequate and competitive prices.

Therefore, Pacaembu seeks the highest possible level of assertiveness, mapping the market to determine the most suitable product for its target audience. Currently, according to surveys carried out by the research firm Ideia Brasil, approximately 80% of respondents living in the countryside have a preference for open-plan projects, detached houses, with the possibility of expansion. Therefore, the Company will continue to focus on this type of product.

Regarding prices, the Company seeks to achieve the most competitive prices possible and, to do so, it should continue to invest in the improvement of production processes and the management model that allow economies of scale obtained only from large projects.

In order to establish long-term strategic planning, two years ago Pacaembu began a thorough study of approximately 60 Brazilian cities, whose sizes and demographic characteristics – household income, growth in the number of families, marriage, divorce, etc. – favor its development model. The Company is seeking cities that can absorb houses that will enable Pacaembu to remain in the region in the medium and long term – from five to ten years, at least.

Among the cities analyzed, some are located outside the state of São Paulo, more specifically in the states of Mato Grosso, Paraná and Minas Gerais. These regions appear to be favorable to the development of our projects, in terms of potential demand and availability of areas topographically suitable for the development of our typical product – large, flat areas for horizontal developments.

One of the Company’s goals is to improve our current business model and take advantage of the good opportunities currently offered by the market, investing in expansion with discipline, supported by thorough market and financial analyses.

The Company highlights the following aspects as its main competitive advantages:

• Specialized and highly experienced team in the development and execution of social interest housing projects, which can be confirmed by the more than 89 thousand units sold throughout its history.
• Most of Pacaembu’s sales are made by its own team, in stores located in the cities where it has projects under development. The Company believes that the use of its own sales force allows for specialized training and greater control over sales and transfer processes, in addition to the total focus on the commercialization of projects, resulting in lower sales costs.
• Quickly and efficiency in the construction cicle. We believe that high level of standard development of our products, associeted to well developed suplier chains and dedicated groups to the projects, allows rapidly and efficient construction cicle.
• Sales are recognized when the client’s mortgage is approved and the contract is signed with the financial institution, which helps reducing terminations. The sales team works together with employees of Caixa Econômica Federal, who are responsible for evaluating and approving the clients’ mortgage. The sale is only made after the client’s contract is signed with the financial institution.
• The existence of practical barriers to the entry of new players in the segment helps our Company’s business expansion. The complexity involved in the concept development process and the approval of land parceling in urban areas, a necessary process for the Company’s projects, combined with the time and energy needed to overcome bureaucratic, legal, environmental and technical obstacles faced by this type of product, translate into practical barriers to the entry of new players in the segment, making it difficult for new competitors to appear.