Risk Factors

A) OF THE COMPANY
Our partnership with Bradesco for mortgage origination may not be as successful as we hope.

In 2019, we renewed our agreement with Banco Bradesco S.A. for the provision of mortgage loan intermediation services for another ten (10) years. Through the Agreement for the Provision of Banking Correspondent Services in the Country (“New Agreement”), the Company will receive compensation as commission, which will depend on the monthly volume of new mortgage loans. We cannot guarantee that the partnership will be as successful as we hope, as it depends on factors such as the bank‘s approval of mortgage loans, competitive financing conditions and a favorable economic scenario. Revenue from this segment represents 31.4% of the Company’s total gross revenue.

We may not be able to maintain or improve our track record of growth.

We may not be able to increase or maintain growth levels similar to those achieved in the past, and our operating results in recent periods or fiscal years are not a guarantee of future performance. Our internal growth required, and we expect it will continue to require, considerable adjustments to our businesses, especially regarding internal controls and administrative, technical, operational and financial resources. We may need to further adapt our resources and substantially depend on our ability to implement and manage the expansion of these resources. If we do not manage to grow and maintain a satisfactory compound annual growth rate or even quickly and adequately respond to our expansion, our financial and operating results may be adversely affected.

We may be unable to manage our growth effectively.

Managing the growth of our operations depends on the improvement of existing systems or the implementation of new operational, financial, operation processing and control systems, as well as expansion , training and management of our employee base. This growth can result in the need to expand our financial, administrative and operational teams. There is no guarantee that our current employees, our planned and current system, proceedings and controls will satisfy the needs of our future operations. Also, we cannot guarantee that we will be able to hire, train, maintain, motivate and manage the necessary number of personnel or that our management will be able to successfully identify, manage and explore existing and potential market opportunities. If said adaptations are not effectively implemented, the business, provisions, financial conditions and our operations results may be materially adversely affected.

We may be subject to unfavorable results in legal or administrative proceedings that could adversely affect our results and financial condition.

The Company is a defendant in labor, tax and civil judicial and administrative proceedings and cannot assure their outcome will be favorable. The provisions made can be insufficient to cover the total cost of such proceedings. Additionally, the Company may be subject to contingencies for other reasons that may require it to spend significant amounts. Rulings unfavorable to the Company’s interests or that may prevent the conduct of business as initially planned may have an adverse effect on our business, financial condition and results of operations. For more information on proceedings involving the Company, see items 4.3 to 4.7 of this Reference Form.

Changes in the management of our subsidiaries or failure to attract and retain new executives can have an adverse effect on our Company.

We cannot guarantee that we will succeed in attracting and retaining qualified personnel to manage our subsidiaries. Any loss of our subsidiaries’ top executives and the inability to attract new professionals with the same competence may cause a significant adverse effect on our operating results.

We may be harmed due to inappropriate conduct on the part of associated independent brokers.

We do not have direct control over the actions of independent brokers who work with the Company and its subsidiaries, as they work with us on a non-exclusive and independent basis. As a result, it is possible that some of these brokers present a conduct not in line with the standards set by the Company and the Federal Council of Realtors (COFECI), such as providing inaccurate and imprecise information about the property being sold and future property appreciation and/or profitability estimates. Such conduct may damage our image and reputation in the market, may cause the Company to face administrative proceedings before the regional councils for real estate brokers (CRECI) and judicial proceedings and may cause us to be held liable for acts performed by associate independent brokers.

We may need additional capital in the future, through the issue of securities, which may result in a dilution of investors’ interest.

We may need additional funds and we can choose to get them through a public or private placement of debt securities or shares or other securities convertible into shares. However, if public or private financing is not available, said additional funds can be obtained through a capital increase, which may result in the dilution of investors’ interest.

We may not pay dividends or interest on equity to our shareholders.

Pursuant to the Company‘s Bylaws, we must pay 25% of our annual net income to shareholders as dividends or interest on equity, calculated and adjusted in accordance with Brazilian Corporate Law. Net income may not be available for the payment of dividends or interest on equity. In addition, Brazilian Corporate Law allows publicly held companies, like us, to suspend the mandatory distribution of dividends in a given fiscal year, if the Board of Directors informs the Annual Shareholders’ Meeting that such distribution would be incompatible with the Company’s financial situation. If any of these events occurs, our shareholders may not receive dividends or interest on equity.

The interests of our Management may become overly tied to the price of our shares, if the Company grants stock options under our Stock Option Plan.

On December 12, 2014, the Company’s shareholders approved a Stock Option Plan at an Extraordinary Shareholders’ Meeting. Until the date of this Reference Form, the Board of Directors has granted 968,410 options under the Stock Option Plan. There is no way to ensure that the granting of such options cannot cause an excessive interest in the price of our shares, which can negatively impact our businesses, if the interests of Management are not aligned with the Company’s long-term interests.

Our results strongly depend on real estate launches.

Currently, our work is focused on real estate launches. In 2018, 34% of our sales came from launches. The launch market is subject to the fluctuations in the real estate development business, as well as the approval of construction works by competent bodies and changes in building and zoning regulations. Any restrictions related to credit and the real estate development industry, as well as macroeconomic factors, such as higher unemployment rates, may also strongly impact property sales by developers and, consequently, by us. As a result, the occurrence of any of these factors may adversely and materially affect our performance in the real estate launch market and our financial situation.

B) OF THE COMPANY’S DIRECT OR INDIRECT CONTROLLING SHAREHOLDER OR CONTROL GROUP
The Company does not have direct or indirect controlling shareholders, or control group.

The lack of a single controlling shareholder or group of controlling shareholders may make the Company susceptible to new alliances of shareholders, conflicts between shareholders and other events resulting from the absence of a controlling shareholder or established group control.

C) OF THE COMPANY’S SHAREHOLDERS

The Company does not have risks related to shareholders.

D) OF THE COMPANY’S SUBSIDIARIES AND AFFILIATED COMPANIES

The risks related to our subsidiaries and affiliated companies are the same as those of the Company.

E) OF THE COMPANY’S SUPPLIERS

Due to the nature of our business, provision of real estate consulting and brokerage services, we did not identify any risks related to Company suppliers that may affect our business.

F) OF THE COMPANY’S CLIENTS

We have contracts signed with some of our developer-clients related to our real estate consulting and brokerage businesses which, in the event of a legal dispute, may adversely affect us.

In the real estate brokerage market, it is common to have unwritten contracts. In this sense, we may fail to enter into formal contracts with some of our developer-clients related to real estate brokerage and consulting businesses, as well as with our seller-clients. As a result, we may have difficulties in enforcing these contracts in court if said clients cannot or do not wish to continue working with us or fail, in any way, to comply with the contractual stipulations. This may result in loss of revenues associated with certain real estate launch projects and affect our reputation in the market. Said factors may adversely affect our operating results.

G) OF THE ECONOMIC SECTORS WHERE THE COMPANY OPERATES
The real estate brokerage activities are exposed to risks associated with the real estate development and construction market, which may have an adverse effect on our Company.

Real estate brokerage activities are directly related to the development and construction market. In addition to the risks that affect specifically the sales brokerage sector, our activities can be adversely affected by risks typical to the real estate development sector, such as:

  • changes in Brazil’s current economic scenario, which may jeopardize the growth of the real estate sector as a whole, due to, among other factors, the economic slowdown, scarcity of financing to developers and builders, and loans to buyers, higher interest rates, inflation, fluctuations of the Brazilian Real and political instability;
  • the degree of interest of buyers for a real estate launch or units’ sale price may be below expected and, therefore, result in a significant reduction in the overall sales volume of the real estate project launched, reducing the remuneration expected by our Company;
  • changes in the conditions of the local or regional real estate market, such as the reduction in the demand for properties, may reduce the average price of the units sold by us;
  • our inability to sell real estate launches of developer-clients for which we were hired;
  • delays in the approval of the works by competent authorities or due to changes in local legislation establishing new regulations related to buildings and zoning, the environment and protection of the historical, cultural, artistic, tourist and scenic heritage, as well as the reduction in the number of launches by our developer-clients may affect our image and reputation; and
  • the disruption in the material and construction equipment supply market or the significant increase in costs related thereto may paralyze the works and affect our image and reputation.
  • A severe decline in the Brazilian credit market, a fundamental condition to fund good construction works and transfer loans to the property’s final buyer, may have an adverse impact on our business.
The relative volatility and lack of liquidity of the Brazilian securities market may substantially limit the investors’ ability to sell their shares at the desired price and time.

Investing in emerging market securities, including Brazilian securities, involves higher risks compared to international developed markets. The Brazilian securities market is substantially smaller, less liquid, more concentrated and can be more volatile than the largest international securities markets. These market features may substantially limit our shareholders’ ability to sell their common shares at the desired price and time, thus representing an adverse impact on the market price of our shares.

We compete with independent real estate brokerage firms and those linked to developers.

The real estate brokerage sector in Brazil is highly competitive and dispersed, particularly in the resale market, and there is no major barriers restricting the entry of new competitors on the market. Some real estate developers are competing with us selling their projects, usually through brokers who belong to their economic group, with a sales structure of brokers focused exclusively on selling their projects. In addition, our employees, including some of our executive officers and other qualified professionals, may start new companies or work for existing companies which operate in the real estate brokerage market, or for developers that have or will have their own sales operations, therefore, competing with us. Other companies, including foreign companies, may begin to operate actively in the real estate brokerage market in Brazil in the coming years, further increasing competition.

As a result, if we are not able to successfully respond to said competition, we may suffer a material adverse impact on our financial situation and operating results.

Emergence of new e-commerce platforms.

We are exposed to the emergence of new e-commerce platforms for real estate brokerage and origination of mortgage loans . If we fail to upgrade our operations or lack funds to invest in e-commerce platforms, we may lose clients to the competition and our revenues may fall.

The lack of financing and/or higher interest rates may lower demand for residential or commercial properties, negatively affecting the real estate market and our business.

Our clients rely on loans to finance acquisitions.

Shortage of funding, the change in current mortgage policies and/or interest rate increases may adversely affect potential buyers’ intention or ability to acquire new units, thus indirectly impacting the purchase and sale of real estate properties and directly impacting the sale and distribution of our financial services.

Most mortgage loans taken out by consumers to buy properties are carried out via the Housing Finance System (“SFH”), which is in turn financed by funds from savings accounts’ deposits. In addition, the National Monetary Council (“CMN”) may change the amount of funds that banks should make available for mortgage loans. If the CMN limits the amount of funds available in the system destined for financing the purchase of properties, or in case of interest rate increases, demand for our real estate projects may fall, thus adversely and substantially affecting our activities, financial condition and operating results.

Economic recession and delinquency.

If the economy slides into recession, we can once again experience lower sales volumes and higher delinquency rates, which may have an adverse effect on the Company.

H) OF THE REGULATION OF THE SECTORS WHERE THE COMPANY OPERATES
The change in interpretation regarding the nature of the employment relationship of independent brokers may adversely affect our Company.

Our brokers are contracted as independent workers without employment relationships, i.e. associate brokers, as authorized by current legislation. Said independent relationship may be considered an employment relationship. Thus, this is a very sensitive topic and there is certain instability and insecurity regarding its future understanding. There may be a material adverse effect on our financial situation and operating results if the understanding that these are employment relationships prevails.

I) OF THE FOREIGN COUNTRIES WHERE THE COMPANY OPERATES:

The Company has no operations in other countries besides Brazil.

J) SOCIO-ENVIRONMENTAL ISSUES:

The Company does not have risks related to socio-environmental issues.

Last update: October 21, 2021