Risk Factors

Risk factors which might influence investment decisions, especially those related to:

(a) The Company

Issuer Dependent on Registration as a Listed Company

The Company was established in 2008 in order to serve as a real estate credits securitization agent through issuing real estate receivables certificates. To do so, it must maintain its registration as a listed company with the CVM, together with the respective corporate authorizations. Should the Company fail to comply with the requirements laid down by the CVM for listed companies, its authorization may be suspended or even cancelled, thus affecting its issues of real estate receivables certificates.

Non-Realization of Assets

The Company is an issuer focused specifically on the acquisition and subsequent securitization of real estate credits, in compliance with Law No. 9,514/97 through the issue of real estate receivables certificates, with all the real estate receivables certificates already issued by the Company being subject to a trustee system administered separately by the Company. The separated assets set up for the Issues have real estate credits as their sole source of funding, in compliance with the terms set forth in the respective securitization indentures, thus, any delay or default by debtors may negatively affect the capacity of the Company to honor the payments owed to the holders of the CRIs.

Acquisition of Real Estate Credits

The Company is not endowed with the capacity to originate credits for securitization, with its issues conducted through credits acquired from Related Parties and third parties. Thus, successful identification and establishment of partnerships for the acquisition of credits is crucial for the development of its activities. The Company may have difficulties in identifying attractive opportunities, or may not be able to make the desired investments in economically favorable terms.


The capacity of the Company to maintain a competitive stance depends to a large extent on the services of its Senior Management. Along these lines, the Company cannot guarantee that it will be successful in attracting and keeping qualified staff to serve as its Senior Management. The loss of the services of any of the members of its Senior Management or its inability to attract and keep additional staff as part of such Management may cause significant adverse effects on the financial status and the operating earnings of the Issuer.

(b) Direct or Indirect Controllers of the Company or the Control Group

Conflicts of Interests between the Controlling Shareholders and other Shareholders or Investors.

Should the Company have other controlling shareholders that vote as a single block, such shareholders will have the power to determine the outcome of decisions requiring the approval of the shareholders gathered together at a General Meeting, such as payment of dividends, approval of corporate restructuring processes and the election of a majority of the Board Members. Thus, the interests of the controlling shareholders or the possible future successors thereof may differ from the interests of the other shareholders of the Company.

(c) Company Shareholders

Dilution of Stakes

It is possible that the Company may wish or need to raise funds on the capitals market through issuing shares and/or public or private placements of stock convertible papers. In this case, the shareholders might not exercise or might not have the opportunity to exercise the right of first refusal, which may result in the dilution of their stakes in the equity capital of the Company.

Dividends or Interest on Equity

The net profits of the Company may be capitalized, used to offset losses or be withheld, in compliance with the provisions set forth in the Joint Stock Corporations Act, and may thus not be available for the payment of dividends or interest on equity. The Company may also not pay out dividends to its shareholders in any financial year, should its Management issue a statement that such payment is incompatible with the financial status of the Company.

(d) Associated and Subsidiary Companies of the Company

Not applicable, as the Company has no associated or subsidiary companies.

(e) Suppliers of the Company

IDefault on Real Estate Credits

The capacity of the Company to honor its obligations arising from the issue of CRIs depends on the payment by its debtors of the respective real estate credits linked to the Issue. Such real estate credits correspond to the outstanding balances of purchase and sale contracts for real estate units that encompass monetary restatement and other possible remuneration rates, penalties and other legal or contractual charges, as well as the respective ancillary costs. The respective separated assets set aside in favor of the CRI holders are not backed by any guarantees or joint obligations of the Company. Thus, pursuant to the other guarantees assigned to each issue, the full and timely receipt by the CRI holders of the amounts due for each CR Issue depends on settlement of the above-mentioned real estate credits in good time, for paying out the amounts owed to the CRI holders. The occurrence of events adversely affecting the economic and financial status of the debtors may have negative effects on the capacity of the separated assets to honor the obligations established through such Issues.

Debtor Credit Risks May Adversely Affect the CRIs

As payment of the remuneration on the CRIs depends on full and timely payment by the debtors, of the respective real estate credits linked to the Issue, the payment capacity of the debtors may be adversely affected due to their economic and financial status, arising from internal and/or external factors that may adversely affect the flow of payments on the CRIs.

Risks Associated with Service Providers

The Company contracts outside service providers to perform activities, such as auditors, fiduciary agents, risk rating agencies and book-entry banks among others, which render a wide variety of services. Should some of these service providers enter into bankruptcy, increase their prices significantly or fail to render services with the quality and agility expected by the Company, it may necessary to replace the service provider, and should no other firm be available on the market that could serve as a satisfactory substitute, the Company must take direct steps to set up an in-house structure for this purpose.

(f) Company Customers (Investors)

Low Liquidity of the CRIs on the Secondary Market

At the moment, the liquidity of the secondary market for trading in real estate receivables certificates in Brazil is low, with no guarantee that there will be a market for trading the CRIs in the future that will allow their divestment by the subscribers to the securities, should they opt for divestment. Thus, the investor acquiring the CRIs may find difficulties in trading in them on the secondary market, and must necessarily be prepared to maintain such investments in the CRIs throughout the entire Issue period.

In addition to this factor, investors may encounter difficulties in divesting the CRIs due to their high unit value, which may adversely affect the liquidity on the secondary market.

Early Maturity, Extraordinary Amortization or Rescheduling of the CRIs

In the occurrence of any hypothesis, early maturity and extraordinary amortization and/or rescheduling of the CRIs issued by the Company, as set forth in the respective securitization indentures and should any of the guarantees put up prove insufficient, the Company may not have sufficient funds to undertake the early settlement of the CRIs. Should the Company be declared in default for the issue of such CRIs the respective Fiduciary Agent must take over custody and administration of the credits constituting the respective separated assets. Having gathered together at a General Meeting, the investors must decide on the new management rules for the separated assets, including for the purpose of receiving the real estate credits or opting for the liquidation of the separated assets, which might not be sufficient to settle the obligations of the Company to the investors.

(g) Economic Sectors in which the Company Operates

Recent Developments in Real Estate Securitization

The securitization of real estate credits is a recent transaction in Brazil, coming into effect in 1997 with the promulgation of Law Nº 9,514/97 which introduced real estate receivable certificates. However, larger volumes of real estate receivables certificates have been issued only in the past few years. Moreover, securitization is a more complex transaction than other securities issues, as it involves legal structures separating the risks of the assignors of the real estate credits from those of the Company.

No Case Law has been established on Securitization

The entire architecture of the financial, economic and legal model used for the Issues is grounded on a set of requirements and obligations between the parties, stipulated through public or private contracts, with guidelines based on Brazilian Law. However, owing to the limited maturity, lack of tradition and case law on the Brazilian capitals market for this type of financial tradition, in stress situations investors may be subject to losses due to the outlays of time and resources allocated to the efficacy of the contractual framework.

(h) Regulation of the Sectors in which the Company Operates

Tax Law Applicable to the CRIs

At the moment, the income brought in by individual residents in Brazil holding real estate receivables certificates is exempt from income tax and not declared in personal tax returns. However, this tax treatment is intended to buttress the real estate receivables certificates market, and may be altered over time. Possible future alterations in tax law, eliminating this exemption and introducing or stepping up the income tax brackets for real estate receivables certificates, or imposing new taxes on real estate receivables certificates may adversely affect the net income expected by investors from the CRIs.

Court decisions on Provisional Measure Nº 2,158-35/01 may adversely affect the fiduciary regime for real estate credits underpinning the CRIs

Article 76 of Provision Measure Nº 2,158-35/01, still in effect, establishes that “rules establishing the allocation or separation for any reason whatsoever of the assets of an individual person or corporate entity have no effects on tax, social security or labor debts, especially in terms of the guarantees and privileges assigned thereto. At the moment, its Sole Paragraph states that "thus, all the assets and incomes of the liable subject, bankrupt estate or the estates or deceased persons are held liable for such debts, including those subject to separation or allocation."

In view of the matters set forth above, real estate credits and the funds brought in thereby, including possible future guarantees, regardless of whether they constitute separated assets, may be seized by the tax, labor and social security creditors of the Company, and in some cases, by the labor and social security creditors of individual persons and corporate entities belonging to the same economic group of the Company, under the joint and subsidiary liability rules for companies belonging to the same economic group, for such cases. Should this occur, the holders of these credits will compete with the holders of the CRIs on privileged bases for the amounts brought in through the realization of such real estate credits in case of bankruptcy. In this hypothesis, it is possible that the real estate credits may not be sufficient to make full payment of the CRIs after compliance with the obligations of the Company to such creditors.

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