Restructuring Overview

Restructuring Overview November 2015 Disclaimer GENERAL: This "Presenta5on" is the property of Corporación GEO, S.A. de C.V. and/or its subsidiaries (“GEO” or the “Company”) and may not be reproduced in whole or in part or distributed to the press or any other en55es or persons without the prior wriMen consent of GEO. This Presenta5on does not cons5tute an offer, invita5on or inducement to acquire or sell any shares or other securi5es in any jurisdic5on and no offer, invita5on or inducement to acquire or sell any shares or other securi5es is being made by or in connec5on with this Presenta5on in any jurisdic5on. 2 FORWARD-­‐LOOKING STATEMENTS: All statements other than statements of historical facts included in any and all sec5ons of this Presenta5on, including, without limita5on, those regarding GEO’s financial posi5on, business strategy, plans and objec5ves, are forward-­‐looking statements or projec5ons based on knowledge and informa5on available to GEO at the date of prepara5on of this Presenta5on and that are significant assump5ons and subjec5ve judgments concerning an5cipated results, which are inherently subject to risks, variability and con5ngencies, many of which are beyond Company’s control. Actual results may differ materially from such projec5ons and neither GEO nor any of its representa5ves should be held liable for failure to achieve any such projec5ons. Such forward-­‐looking statements are subject to certain risks, uncertain5es and assump5ons. These assump5ons and judgments may or may not prove to be correct and there can be no assurance that any projected results are aMainable or will be realized. The Company disclaims any and all liability for any loss or damage (whether foreseeable or not) suffered or incurred by any person or en5ty as a result of anything contained or omiMed from this Presenta5on and such liability is expressly disclaimed. Many factors could cause the actual results, performance or achievements of GEO to be materially different from those expressed or implied in the Presenta5on, including, among others, changes in general economic, poli5cal, governmental and business condi5ons globally and in Mexico, the availability of funding to GEO on acceptable terms, internal approvals and/or government authoriza5ons to be obtained by Plan Sponsors, GEO’s ability to comply with the terms and obliga5ons of any debt agreements to be entered into with major creditors, GEO’s ability to exit from concurso mercan+l (“Concurso Mercan5l” or “Concurso”) proceedings on terms substan5ally similar to those contained in the Restructuring Term Sheet aMached to GEO’s press release of March 20, 2014, the level and nature of claims ul5mately determined in GEO’s Concurso Mercan5l proceedings, GEO’s ability to achieve cost savings, changes in interest rates, changes in infla5on rates, changes in exchange rates, the level of home construc5on generally, changes in new home construc5on demand and prices, changes in raw material and energy prices, changes in business strategy, changes in the prevailing regulatory framework, including regula5ons and government-­‐sponsored funding programs related to the housing sector, natural disasters and other unforeseen events and various other factors. Should one or more of these risks or uncertain5es materialize, or should underlying assump5ons prove incorrect, actual results may vary materially from those described herein. The Company does not assume any responsibility to update or revise any informa5on contained in this Presenta5on or to inform the recipient of any maMers of which any of them becomes aware of which may affect any maMer referred to in this Presenta5on (including, but not limited to, circumstances, developments or events occurring acer the date hereof or any error or omission herein which may become apparent acer this Presenta5on has been prepared.) These statements speak as of the date indicated and are not guarantees of future performance. Actual results or developments may differ materially from the expecta5ons expressed or implied in the forward-­‐looking statements, and the Company undertakes no obliga5on to update any such statements whether as a result of new informa5on, future events or otherwise. The projec5ons, while presented with numerical specificity, are necessarily based on a variety of es5mates and assump5ons which, though considered reasonable by the Company, may not be realized and are inherently subject to significant business, economic, compe55ve, industry, regulatory, market and financial uncertain5es and con5ngencies, many of which are and will be beyond the Company’s control. The Company cau5ons that no representa5ons can be made or are made as to the accuracy of the historical financial informa5on or the projec5ons or to the Company’s ability to achieve the projected results. Some assump5ons may prove to be inaccurate. The Company does not make any representa5on or warranty (expressed or implied) as to the accuracy or completeness of the informa5on contained in this Presenta5on, and expressly disclaims any and all liability based on or rela5ng to any representa5ons or warran5es (expressed or implied) contained in, or errors or omissions from, this Presenta5on or based on or rela5ng to the recipient's use of this Presenta5on or any other wriMen or oral communica5ons transmiMed to the recipient. No reliance should be placed on, the fairness, accuracy, completeness or correctness of the informa5on or the opinions contained herein. The informa5on has been reasonably prepared in good faith on bases reflec5ng the best currently available es5mates and judgments of management of the Company. The Company assumes no responsibility for and express no view as to such statements, forecasts or assump5ons on which they are based. Statements, projec5ons and es5mates about the future, including financial projec5ons and any other informa5on contained in the Informa5on, should not be considered, in whole or in part, by the recipients of such informa5on as a subs5tute for the exercise of personal judgment and assessment. Any opinion, judgment, es5mate or valua5on expressed in this document is subject to change without no5ce and GEO has no obliga5on to update the opinions, judgments, es5mates, assessments and/or projec5ons provided herein. GEO and its affiliates, agents, officers, directors and employees do not assume any responsibility for any loss or damage of any kind arising from the use of such informa5on, either in whole or in part. The projec5ons included herein were not prepared in compliance with guidelines issued by the SEC or the Interna5onal Federa5on of Accountants regarding projec5ons or forecasts and are based on numerous assump5ons concerning factors that are beyond GEO’s control and which may or may not materialize. The financial informa5on reflected in the Presenta5on does not purport to present GEO’s financial condi5on in accordance with accoun5ng principles generally accepted in the United States, Mexico or any other country. GEO’s independent accountants have not audited or performed any review procedures on the Presenta5on (except insofar as certain historical financial informa5on may have been derived in part from GEO’s historical annual financial statements). The informa5on contained in this Presenta5on does not purport to be all of the informa5on an interested party may require in order to inves5gate the affairs of the Company. The recipient should make its own independent inves5ga5ons and analyses of the Company and its own assessment of all informa5on and material provided, or made available, by the Company. The Presenta5on does not cons5tute a profit forecast or an offer or invita5on to purchase or subscribe for any shares or other securi5es of the Company and neither any part of this document nor any informa5on or statement contained therein shall form the basis of or be relied upon in connec5on with any contract or commitment whatsoever. By receiving the Presenta5on, you agree to be bound by the foregoing limita5ons. 1. 
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3 Introduc5on Key Company Highlights Industry Overview Business Overview Financial Projec5ons Restructuring Overview Introduc<on 1 Geo as a restructured and well capitalized company §  GEO, historically one of the largest homebuilders in Mexico, has undergone a major restructuring that has significantly solidified its balance sheet and will allow it to retake its leading market posi5on and growth 2 Transac<on is led by a proven Mexican real estate fund and Sólida, an affiliate of one of Mexico’s premiere financial ins<tu<ons (“Plan Sponsors”) §  Sólida, an affiliate of Grupo Financiero Banorte, one of the largest Financial Group in Mexico, with a net loan porlolio of P$501bn and P$1,171bn in assets §  Capital Inmobiliario (“CI”), a real estate fund based in Mexico City, focused on low income housing with P$1,646m in investments in Mexico 3 Total new equity investment of P$3,500m (the “New Equity Investment”) will strengthen GEO’s capital structure and provide significant liquidity for the Company to execute its business plan §  Backstopped by the Plan Sponsors, subject to the condi5ons established in the Backstop Commitment LeMer issued on May 6, 2015 4 Introduc<on 4 A comprehensive financial and opera<ng restructuring process is being implemented, major milestones have been achieved §  Significant liability reduc5on of P$29bn through the successful implementa5on of a Concurso Mercan5l plan of restructuring §  Unprofitable projects will not be part of GEO going forward (will be paid in kind to exis5ng lenders) §  New management with reten5on of key previous managers §  Plan Sponsors are in the final stages of a thorough due diligence process §  Shareholders’ mee5ng to allow for capital increase to take place November 19th 5 New Equity Investment1 comes in at an equity value of P$4,175m (the “Discounted Plan Value”) which is equivalent to approximately 0.53x of an es<mated Pro-­‐Forma book value2 5 1  Subject to condi5on in the Backstop Commitment LeMer issued on May 2015 2  Pro-­‐Forma Book Value is subject to the implementa5on of all restructuring agreements with banks and other creditors 1. 
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6 Introduc5on Key Company Highlights Industry Overview Business Overview Financial Projec5ons Restructuring Overview Key Company Highlights Overview 7 1
Strong market fundamentals
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Access to financing
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Experienced and capable team
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Strategic Plan Sponsors
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Strong growth platform
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Flexibility on investment
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Clear long-term strategy
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Restructured operations / return to profitable growth
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Strong balance sheet
Key Company Highlights 1
Growing and predictable housing demand driven by Mexico’s favorable demographics and economic growth prospects: §  Mexico's exis5ng demographics present a large percentage of the popula5on between the ages of 15 to 45; as a result, housing demand is expected to average approximately one million houses per year §  Growing purchasing power and middle class; in 2010 39% of Mexico’s overall popula5on was considered middle class compared to only 19% in 1990 §  Demand will be further strengthened as individuals in the informal economy transit to the formal economy gaining access to mortgages (Infonavit, Fovissste or banks) Strong market fundamentals Posi<ve Mexican macroeconomic fundamentals: §  Low and stable infla5on and interest rates, with infla5on close to 2-­‐3% and government short-­‐
term peso interest rates below 3% in 2015 §  Government’s net debt and budget deficit (as a % of GDP) have remained at low levels (38% and 2.3% vs. OECD average 69% and 4.6% respec5vely, as of 2015) Strong Mexican government support to the housing industry: §  The rela5vely new Na5onal Housing Policy aims to bring long-­‐term sustainability to the sector §  Significant mortgage financing availability from both public and private financial ins5tu5ons §  Significant availability of subsidies in 2016 with P$10.6bn expected to be approved §  Main government en55es, Infonavit and Fovissste, have healthy balance sheets Fragmented supply: §  Many local/regional homebuilders and very few na5onal players §  The largest homebuilder had less than 5% market share as of June 2015 8 Sources: Infonavit, Fovissste, CONAVI, SHF, SEDATU, and ABM (Mexican Banks Associa5on), World Bank, INEGI (Mexican Sta5s5cs Ins5tute) Key Company Highlights 2
Access to financing 3
Secured access to financing1: §  Construc5on loans in place with Mexican banks to restart key projects through the ini5al months of the business plan §  Support and access to government financing with SHF and Infonavit2. New facili5es for a total of P$473MM (less than P$100MM has been drawn from SHF facility) to finance working capital and infrastructure were approved acer Concurso §  New and undrawn revolving credit facility for P$1,000m will be available by Banorte for Sólida land bank (Sólida land bank represents 45% of total land reserves) §  Senior guaranteed liquidity facility of P$100m for general corporate purposes has been approved 40-­‐year opera<ng experience: §  Since 1973 GEO has built and sold more than 650,000 homes for 2.4 million people §  Between 2008 and 2012 GEO built +50,000 homes per year, making it one of the most ac5ve homebuilders worldwide Experienced and capable team Strong rela<onship with housing agencies and local government: §  GEO has strong and well established rela5onships with all the Mexican housing agencies and local governments GEO’s opera<ng team is considered to be amongst the most qualified in the market. The Company has retained key talent necessary to execute the Business Plan Addi<onally, the Plan Sponsors will bring on board experts for specific key senior execu<ve posi<ons 9 1 Subject to final approval from banks and execu5on of final restructuring documents / 2 Infonavit Facility is subject to execu5on of final documenta5on Sources: Infonavit, Fovissste, CONAVI, SHF, SEDATU, and ABM (Mexican Banks Associa5on), World Bank, INEGI (Mexican Sta5s5cs Ins5tute) Key Company Highlights 4
Plan Sponsors, will lead Company’s Turnaround: §  Unparalleled combina5on of Sólida’s financial and real estate exper5se with CI’s knowledge of the Mexican housing market Strategic Plan Sponsors Established rela<onship and excellent reputa<on with the financial sector: §  Broad access to top-­‐management of the main financial ins5tu5ons of the country Leading brand recogni<on and best product in the market: §  GEO has been the undisputed industry leader for over 20-­‐years (leading brand and product) −  In 2011 (before market turmoil), GEO had a market share of ~10% (based on Infonavit mortgages issued) vs. ~4.5% for its closest compe5tor §  GEO’s value proposi5on is to offer high quality of life housing in master planned communi5es with full ameni5es at compe55ve prices 5
Strong growth pladorm 10 Na<onwide presence and unparalleled local know-­‐how: §  Although the Company has experience throughout Mexico, as part of GEO’s market strategy going forward, the Company is planning to focus only on the most profitable projects and regions Opera<onal pladorm already in place: §  More than 250 units of opera5ng equipment available for construc5on and 54 points of sales and 15 regional administra5ve offices in opera5on §  1,591 ac5ve employees and more than 745 construc5on workers in ac5ve projects. §  Robust opera5ng system with detailed informa5on by project (Oracle) Key Company Highlights 6
Exclusive access to land bank §  GEO has exclusive access to a land bank to develop ~160,000 homes in 77 strategic projects in 16 states and 22 markets with 31 projects expected to be opera5ng by the end of 2Q16 §  Land for another ~123,000 units was classified as non-­‐strategic because of low profitability or poor loca5on and will be u5lized to pay down debt from banks who have it as collateral Flexibility on investment Reduced land share and more favorable investment terms1: §  Geo has nego5ated a significant reduc5on in land share payments with Grupo Financiero Banorte Real Estate Financing Branch (“Sólida”) and Pruden5al Real Estate Investors (“PREI”) §  All of the land put op5ons against GEO will be canceled Due to the extensive land reserve that the Company already has, there is a minimal requirement for addi<onal land acquisi<ons in the medium-­‐term 7
Clear long term strategy 11 Clear vision and strategy consistent with the industry’s and GEO’s new reality: §  GEO is implemen5ng a new business strategy with the main objec5ve of maximizing profitability while providing superior quality of life to its customers Key components of GEO’s strategy: §  Long term targeted volume of 25,000 units per year §  Focus on profitability metrics at project, regional and consolidated levels §  Strong capitaliza5on with majority of debt at project level §  Flat structure with strict control and centralized services §  New land acquisi5ons funded with resources generated by opera5ons. No “Mega” projects and diversifica5on to higher income segments of the market with higher margins §  Highest corporate governance standards 1 Subject to Sólida and PREI’s internal approvals and execu5on of final agreements Key Company Highlights 8
Restructured opera<ons to return to profitable growth Important reorganiza<on of GEO’s corporate structure: §  Significant headcount reduc5ons from more than 10,013 total employees in 2012 to 1,591 at Q315 §  Effec5ve planning to reduce project size with land closer to urban areas and focus on most successful product designs §  Standardiza5on of products (fewer unit types with reduc5on from 140 to 12 home models) and construc5on processes §  Leveraging of IT plalorms to beMer monitor projects and programs §  Centraliza5on of key func5ons such as finance, purchasing, design, IT and marke5ng Significant cash and investment controls have been implemented: §  All major payments are carried out by the central office §  All project level payments are authorized by corporate and project level personnel through an IT plalorm Focus on projects that meet the following criteria: §  (i) available financing source, (ii) posi5ve cash flow genera5on, (iii) compliance with government policy and (iv) good commercial track record and presence in the corresponding local market 9
12 Significantly de-­‐levered go-­‐forward capital structure1: §  Ini5al cash balance of approximately P$1,865m post capitaliza5on of Plan Sponsors §  Total liability reduc5on of P$29bn Strong balance sheet −  Major financial debt reduc5on from P$18,512m to P$4,078m2 −  Acer restructuring, most debt will be at project level §  Low leverage: Total Liabili5es/Total Pro-­‐Forma Equity Book value3 es5mated at 0.96x 1 For more detail please see page 24 2 Subject to final execu5on and implementa5on of restructuring agreements with banks and other creditors 3 Pro-­‐Forma Book Value is subject to the implementa5on of all restructuring agreements with banks and other creditors 1. 
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13 Introduc5on Key Company Highlights Industry Overview Business Overview Financial Projec5ons Restructuring Overview Industry Outlook 1 The Mexican housing industry has undergone a major structural change §  Due to regulatory changes, increasing high levels of leverage and an inefficient na5onal development model, the Mexican housing industry experienced a severe downturn in 2013 with various housing companies undergoing financial distress §  Despite the temporary headwinds, the macroeconomic and demographic landscape has con5nued to shape Mexico’s housing demand and supply, providing GEO with a unique opportunity −  Overall poten5al demand for houses of eligible workers affiliated to Infonavit remains strong while housing supply has been decreasing 2 Star<ng in 2014 the Mexican government implemented a new Na<onal Housing Policy which aims to bring long-­‐term sustainability to the sector §  Shic towards ver5cal housing, increased regula5on in mortgage origina5on and new scoring that demands higher investment in infrastructure and ameni5es in order to be eligible for government subsidies §  GEO builds, sells, and delivers houses in conformance with the new public policy guidelines. GEO is posi5oned for and is at the forefront in developing new ver5cal housing construc5on and in the crea5on of sustainable communi5es, in-­‐line with the new housing rules established by Sedatu 3 Today, Mexico’s low income housing sector is characterized by: §  Strong demand fundamentals. Predictable demand supported by healthy macroeconomic figures §  A fragmented supply fueled by government support through subsides and mortgages 14 Industry Outlook 4 Sales volumes in Mexico of new homes has decreased compared to the peak reached in 2008; the main reasons are: §  Higher mortgage volumes in the used homes market vs. new homes §  Higher mortgage volumes for home improvement and remodeling vs. previous years §  Lower demand in certain regions that is star5ng to recover 5 Subsidies are expected to be available; however, they may be subject to changes in the federal budget §  S5ll, Infonavit’s projec5ons include stable sales volume going forward 15 Industry Outlook Long-­‐term posi<ve demand dynamics Growing housing demand Number of mortgages by type1 §  Housing demand is expected to increase in the future as a result of favorable demographic dynamics and economic ac5vity 1,000,000 Mortgages 900,000 −  Mexico's exis5ng demographics result in a large percentage of the popula5on between the ages 15 to 45 (~50% of total popula5on) 800,000 700,000 600,000 −  Mexico has a growing middle class with increasing purchasing power. In 2010, 39% of the country's overall popula5on was considered middle class compared to only 19% in 1990 500,000 400,000 NEW 300,000 USED 200,000 100,000 §  Mexico’s annual housing demand is expected to be approximately one million homes of which up to 40% will be new homes PHYSICAL IMPROVEMENT 0 2015 eE 2007 2008 2009 2010 2011 2012 2013 2014 2015 Significant mortgage financing availability: Federal subsidies for acquisi<on of new and used homes $12,000 §  Infonavit increased its maximum mortgage amount from P$453,000 to P$884,000 in 2014 P$m $10,000 $8,000 Significant availability of subsidies: §  Mexican government 2016 subsidy budget of P$10.6 billion $6,000 §  In 2014, Conavi increased the upper limit for subsidy eligibility from 2.6x to 5.0x the minimum wage, resul5ng in 1.7m addi5onal eligible workers $4,000 $2,000 2010 16 §  Public and private financial ins5tu5ons have a goal of delivering ~1 million mortgages (including home improvement loans) in 2015 2011 2012 2013 2014 2015 2016 E Sources: Infonavit, Conavi 1 2014 breakdown and rela5ve weight assumed to remain constant in all of the projec5on period Industry Outlook Medium-­‐term supply shordall and exis<ng fragmented supply Annual registered housing inventory (thousands of homes) 700 §  Industry data shows that registered housing inventory in 2012 and 2013 was below previous years 630 600 Units 494 444 500 Declining housing inventory 413 412 400 341 305 §  Star5ng in May 2014, registered housing supply showed signs of recovery, reflec5ng stronger demand and a reduc5on of excess inventory in certain regions §  Es5mated units 5tled in the medium-­‐term is expected to be in line with 2014 levels. In the long run, growth drivers will be demographics, economy growth and strengthening of the formal economy vs. informal economy 300 200 100 – 2008 2009 2010 2011 2012 2013 2014 Fragmented supply : Units Es<mated units <tled (‘000)1 500 450 400 350 300 250 200 150 100 50 0 114 114 118 266 266 267 274 276 50 50 50 50 50 2014 2015E 2016E 2017E 2018E New Fovissste 17 118 114 Sources: Infonavit, Conavi 1 Includes Infonavit and Fovissste figures only New §  As of December 2014, the housing industry is highly fragmented with the largest player having less than 5% market share §  Most players have a local/regional presence, with only very few having na5onal presence Used §  For those smaller players, growth and market share is limited by lack of capital and scale Industry Outlook I Infonavit market poten5al The Infonavit market con<nues to have strong poten<al going forward, as the number of affiliates con<nues to grow and satura<on indexes con<nue to be low Infonavit affiliates by minimum wage level (‘000) Infonavit mortgages by minimum wage level (‘000) 485.5 10% increase
500,000
4,667 24% redu
ction
5,145 485,556
469,284
441,161
445,504
368.2 421,926
380,638
400,000
339,890
300,000
200,000
100,000
0
2008 2009 2010 2011 2008
2012 2013 Lower than 2.00
2009
2014 2010
2015-­‐1Sem 2011
From 2.00 to 3.99
2008 2012
2009 From 4.00 to 10.99
2013
2010 2011 2014
2012 2013 2014 2015 est. Larger or equal to 11.00
Satura<on Index (Infonavit mortgages / Infonavit affiliates) Segments: Minimum wage brackets 2008 2009 2010 2011 2012 2013 2014 2015 Larger or equal to 11.00 8% 4% 9% 13% 14% 12% 12% 13% From 4.00 to 10.99 13% 14% 13% 10% 10% 7% 8% 6% From 2.00 to 3.99 13% 13% 12% 12% 12% 10% 9% 5% Lower than 2.00 6% 5% 6% 6% 6% 6% 6% 8% Total 10% 10% 10% 9% 10% 8% 8% 7% The three segments where GEO participates (less than 11.00 minimum wages), have experienced a decrease
in the saturation index, implying opportunity for growth for Geo
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19 Introduc5on Key Company Highlights Industry Overview Business Overview Financial Projec5ons Restructuring Overview Business Overview I GEO’s history GEO 1973 -­‐ 1983 1983 -­‐ 1994 1994 -­‐ 2000 2000 -­‐ 2009 § 
Founded as a small, industrial, commercial, and residen5al construc5on Company § 
Crea5on of Infonavit and Fovissste § 
Focus on housing § 
Infonavit changes from construc5on to financing only § 
Na5onal expansion to 18 states § 
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Crea5on of SOFOLES (Mexican non-­‐bank banks) Focus on low income segment § 
Growth with focus on the base of the pyramid (low income housing) Strategic alliances with Pruden5al and Sólida (Banorte) Mega city projects begin: Zumpango, Valle de las Palmas, Campo Verde § 
Significant industry growth, 2007 Infonavit commitment: 1 million new homes per year Housing development models focus on the periphery of ci5es GEO built ~650,000 units since 1973 Change from horizontal to ver5cal housing Sustainable communi5es developed with required 10 welfare benefits Alpha created to build prefabricated housing components and accelerate construc5on process Implementa5on of Oracle-­‐based opera5ng system § 
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2012 -­‐ Present 20 GEO went through a court supervised restructuring process § 
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7 SOFOLES run into liquidity problems: Crédito y Casa, Metrofinanciera, Su Casita, Crédito Inmobiliario, Fincasa, GE Money y Vér5ce Ongoing regulatory changes: shic toward ver5cal housing, increased regula5on in mortgage origina5on and new Conavi scoring that demands higher investment in infrastructure and ameni5es in order to be eligible for government subsidies Several large players undergo financial distress New Housing policy by President Enrique Peña Nieto is declared and SEDATU is created Urbi and Homex also entered a court supervised approval restructuring processes Despite the headwinds GEO has faced, it has continued selling homes in all
regions and has successfully implemented significant operating restructuring
initiatives
Business Overview I GEO’s product Company’s value proposi<on is to offer clients high quality of life in master planned communi<es with full ameni<es at compe<<ve prices § 
These 10 welfare ameni5es are present in GEO’s developments: −  Allow GEO to meet public policy requirements Community life § 
Security Housing Supply Transporta5on Educa5on Basic Services Public spaces and green areas Jobs Many GEO communi5es have a professional manager who oversees maintenance and the image of the projects to ensure value preserva5on and poten5al capital apprecia5on for Mexican families who have chosen to live in GEO homes Highest quality product in the market and best-­‐known brand 21 Health Business Overview I Land Reserve GEO has exclusive access to a geographically diverse land bank to develop ~160,000 homes, which will require less cash flow for land acquisi<ons going forward Es<mated Land reserve going forward 250,000 225,000 7.00 6.12 5.64 200,000 175,000 150,000 110,985 75,000 140,903 3.84 126,053 95,988 102,320 91,430 -­‐ 4.00 112,193 79,674 50,000 25,000 5.00 4.49 153,085 125,000 100,000 6.00 5.04 67,343 3.00 2.00 1.00 42,100 38,583 34,623 32,519 28,644 2016 2017 2018 2019 2020 Geo Units Land Bank Units 0.00 Land Reserve in Years for 25,000 units §  Current land reserve (+6 years of 25,000 units) will allow GEO to build ~160,000 homes in the next 8 years with no need for land § 
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22 acquisi<ons for at least 4 years −  Land reserves between 2 to 3 years are adequate in the low income housing industry 28% of the current land reserve belongs to GEO and 72% to third par<es (land bank) −  Land bank belongs to Sólida (45%), PREI, the Banks and other private land contributors GEO has renego<ated a reduc<on in land share payments with Sólida and PREI (subject to Sólida and/or PREI internal approvals and execu5on of legal documenta5on) Es<mates subject to the disclaimer in slide 2 of this presenta<on Business Overview I Market strategy GEO considers that pursuing strict investment control is key to a successful market strategy GEO’s market presence 2013 Opera<ons in 46 markets (82 projects) 2016 Opera<ons in 22 markets (31 projects) Number of ac<ve projects (excluding new projects)1 98 82 59 48 48 39 31 19 2012 23 2013 2014 2015 1 Subject to final agreements with banks 2016 2017 2018 2019 Market prioriza<on §  Focus only on projects in top markets, priori5zing cash flow genera5on; and therefore ceasing opera5ons in ci5es that have been less profitable §  GEO is consolida5ng from 46 markets in opera5on in 2013 to 22 markets in 16 States in 2016, allowing for regional offices and personnel reduc5ons Product-­‐mix op<miza<on §  Focus on higher value ver5cal housing with less dependence on subsidies (higher margin product). Shic in product mix is expected to further improve the Company’s profitability going forward −  Total Sales from 73% lower end homes to 59% in the long-­‐
term §  As a result of market prioriza<on and product mix op<miza<on GEO will now only operate developments that meet the following criteria: (i) available financing, (ii) posi5ve near term cash flow, (iii) compliance with public policy and (iv) established presence in the corresponding local market with a good commercial track record §  Based on these criteria GEO has defined 77 strategic projects, distributed in 16 States §  The “Pacific” region is the largest in number of homes as it includes 14 projects to develop ~45,000 units in Morelos and Guerrero. “Zumpango” is the 2nd largest with 44 thousand units in the State of Mexico §  37 projects have been defined as non-­‐strategic, which represent ~123,000 units and 32% of the pordolio, due to low profitability or poor loca<on. These projects will be sold or transferred to banks who have it as collateral to reduce debt1 Business Overview I Financial strategy GEO has executed a court supervised restructuring process that has allowed the Company to significantly reduce its liabili<es and strengthen its capital structure Low leverage and simplified and well capitalized capital structure Appropriate financing structure by project Centralized cash management 24 §  As a result of the restructuring process that GEO has concluded, the Company was able to reduce its liabili5es by P$29bn leaving it with only P$4.1bn of financial debt1 −  Low leverage: Total Liabili5es / Total Equity (Pro-­‐Forma Book Value2) < .96x §  The Company has a simplified capital structure comprised primarily of3: a)  Project level debt; b)  GeoMaq Note; and c)  Bursa Note Financial debt (P$m)1 Prior to Pro-­‐Forma ater Adj. capitaliza<on capitaliza<on Project level secured debt $4,098 ($2,165) $1,963 -­‐ 907 907 New GEOMaq Secured Note 522 (361) 161 Other secured debt 13,892 (13,892) -­‐ Unsecured debt -­‐ 1,047 1,047 New Bursa Note $18,512 ($14,434) $4,078 Total debt §  Pro-­‐Forma for the P$3,500m New Equity Investment, the Company will have P$1,865 of liquidity §  Projects will be financed mainly through reac5va5on of project level loans (mostly provided by local banks) §  Financing through land partnerships (with Sólida and PREI) and minority partnerships will con5nue on exis5ng projects but land partnerships are not expected to be significant on new projects 1. 
2. 
3. 
4. 
Centraliza5on of treasury and administra5ve opera5ons Implementa5on of best prac5ces in cash flow administra5on Improvement in IT systems control Individual management per project 1 Pro-­‐ Forma Book Value is subject to the implementa5on of all restructuring agreements with banks and other creditors 2 Subject to implementa5on with banks / 3 Subject to final approval and implementa5on Business Overview I Opera5ng structure Streamlined G&A expense 1
Corporate and
local
management
structure
2
§ 
§ 
§ 
§ 
Management structure reduc<on from 13 to 6 repor<ng layers Reduc<on in the number of Business Units, genera<ng cost efficiencies Right-­‐sized local management structure Implemented faster decision processes with regional decisions now centralized at corporate headquarters § 
GEO has made significant reduc<ons in headcount during 2013 and 2014 with non-­‐project level headcount of 463 vs. 1,452 at the beginning of 2013 -­‐  From 10,013 total employees in 2012 to 1,591 by 3Q 2015 Workers can be ramped-­‐up rapidly depending on the Company’s needs Headcount
§ 
3
§ 
G&A initiatives
2015 monthly general and administra<ve costs reflect ini<a<ves implemented in 2013 and 2014 as well as addi<onal items in 2015 -­‐  Reduc5on per month from P$71m in 2013 to P$33m as of September 2015 Head Count (Corporate and Subsidiaries) Average Monthly G&A composi<on 2013 -­‐ 2016 (P$m) 1,591 1,334 $80 $71 745 552 432 354 $37 463 330 $55 29 20 Opera5ve 25 Sales Administra5ve Management Oct-­‐15 2Q16 Total FY 2012 $33 $32 $41 FY 2013 $33 $39 FY 2014 FY 2015 E Salaries and Wages $19 FY 2016 E General and Administra5ve Business Overview I Corporate governance Improved corporate governance 1 New Board of Directors §  Comprised of 8 to 12 members to be allocated as follows: -­‐  Execu5ve Chairman of the Board (Juan Carlos Braniff) to be appointed by the new shareholders -­‐  Two thirds will be independent Directors and the new shareholders will appoint 50% plus 1 of the Directors §  Candidates for the Board are high profile execu5ves and business managers with diverse backgrounds and important industry context 2 Experienced, capable and well organized management §  CEO (Juan Carlos Braniff) and CFO to be appointed by the new shareholders. Other members of senior management to be appointed by the Board §  Clearly defined senior management responsibili5es §  Changes in management organiza5on to remove unnecessary repor5ng layers -­‐  Regions opera5ng less as standalone en55es with more support and oversight from corporate headquarters §  Strict cash management controls -­‐  Centraliza5on of bank accounts and cash management -­‐  Discipline in the management of cash through new procedures and policies -­‐  Corporate monitoring of and centraliza5on of key roles and procedures 26 Business Overview I Corporate governance 3 Lis<ng on the Mexican Stock Exchange §  GEO’s shares expected to be re-­‐listed on the Mexican Stock Exchange upon New Equity Investment 4 Bever ins<tu<onal corporate prac<ces and agreements §  With the objec5ve of having beMer prac5ces, various commiMees will be implemented; such as a conflicts commiMee and an independent audit commiMee 27 1. 
2. 
3. 
4. 
5. 
6. 
28 Introduc5on Key Company Highlights Industry Overview Business Overview Financial Projec5ons Restructuring Overview Financial Projec<ons1 Geo Financial Projec<ons (P$m) 2016 E 2017 E 2018 E 2019 E 2020 E Units Titled Net Sales Cost of sales Capitalized interest Gross profit Gross margin (%) SG&A Other 4,905 2,290 (1,595) (91) 604 26.4% (586) 11 12,873 5,558 (3,955) (226) 1,378 24.8% (928) 26 17,656 8,491 (5,930) (338) 2,223 26.2% (1,264) 40 19,860 10,217 (7,067) (403) 2,747 26.9% (1,420) 47 23,697 12,706 (8,695) (496) 3,515 27.7% (1,718) 58 EBITDA EBITDA margin (%) 120 5.2% 702 12.6% 1,336 15.7% 1,777 17.4% 2,352 18.5% Income Taxes Changes in working capital Capex Machinery sale (40) (1,296) (77) 165 (39) (173) (121) -­‐ (146) (406) (75) -­‐ UFCF (1,128) 369 710 1,328 2,995 Total interest expenses Opera<ng cash flows (193) (1,321) (336) 33 (428) 282 (450) 878 (473) 2,523 491 (207) 260 (265) 956 (181) 554 (235) (912) (226) (1,037) 27 1,057 1,197 1,385 285 312 1,369 2,566 3,950 Total Inventory Total Assets 11,317 13,865 11,696 14,177 12,122 15,597 12,313 16,918 11,384 17,491 Total Financial Debt 4,694 4,954 5,909 6,463 5,551 Total Liabili<es 6,862 7,445 8,625 9,390 8,906 Total change in debt Other Total change in cash flow Ending cash balance 1 Does not include subsidiaries out of Concurso Mercan5l 29 Financial Projec<ons subject to the disclaimer in slide 2 of this presenta<on (262) (87) (100) -­‐ (422) 1,196 (130) -­‐ Financial Projec<ons I Sources and uses Estimated sources and uses (P$m)
Cash Sources
Rights O ffering / New Equity
Release of Restricted Cash
Total cash sources
§ 
§ 
§ 
Cash Uses 1
Pesos
3,500.0
16.0
$3,516.0
Going forward
Financial l iabilities
329.8
225.6
Taxes
412.2
456.9
Labor
270.7
680.8
Restructuring fees
263.8
319.8
Operating l iabilities
249.5
580.9
Transaction Expenses
125.0
0.0
Cash on balance s heet
1,865.0
Total cash uses
$3,516.0
$2,264.0
Plan Sponsors have backstopped New Equity Investment of P$3,500m2 P$1,651m will be used to pay past due and other transac5ons related payments at exit −  Pro-­‐Forma3 for these payments the Company will be lec with P$1,865 of liquidity/cash on the balance sheet An addi5onal P$2,264m of past due expenses will be paid going forward (next 36-­‐months) 1 Figures as of October 30, 2015. Preliminary figures, subject to changes 2 Subject to Condi5ons Established In The Backstop Commitment LeMer 3 Pro-­‐Forma figures are subject to the implementa5on of all restructuring agreements with banks and other creditors 30 At Exit
Subject to the disclaimer in slide 2 of this presenta<on 1. 
2. 
3. 
4. 
5. 
6. 
31 Introduc5on Key Company Highlights Industry Overview Business Overview Financial Projec5ons Restructuring Overview Restructuring Overview 32 1 As a result of industry challenges and high leverage levels, GEO filed for a pre-­‐packaged Concurso Mercan<l (“Concurso” or “CM”) process in April 2014 §  To enter into Concurso, GEO signed a Plan Support Agreement (“PSA”) with a group of banks and holders of US Notes. The PSA contemplated the equi5za5on of unsecured claims §  During Concurso, the Company implemented a number of important opera5ng restructuring ini5a5ves: −  Significant headcount reduc5on through the centraliza5on of numerous processes and opera5onal func5ons −  Management structure simplifica5on across en5re corporate structure −  Improved internal controls §  In May 2015 the Company received a P$3,500m capital injec5on proposal from Plan Sponsors, subject to certain condi5ons. 2 GEO exited Concurso on June 29th, 2015, officially becoming the first Company to file for bankruptcy protec<on under the new Concurso Mercan<l law and successfully exit from it §  Nego5a5on with banks, land partners and other secured creditors being finalized (internal approvals and execu5on of final documents pending) §  New financing credit lines have been nego5ated since exi5ng Concurso −  P$123m SHF credit line for working capital with non-­‐strategic land as guarantee has been approved −  P$350m Infonavit credit line for infrastructure with a 5 year term is subject to final execu5on of documenta5on §  Upcoming shareholder mee5ng to approve capitaliza5on of P$3,500m Restructuring Overview 3 33 As a result of its restructuring process the Company was able to restructure its balance sheet and solidify its liquidity posi<on §  Large reduc5on of liabili5es (~P$29bn) §  Simplified capital structure with total financial debt of P$4.1bn1 §  Large capital injec5on of P$3,500m (New Equity Investment) to support the re-­‐start/ramp-­‐up of the Company’s opera5ons to be approved in upcoming shareholder mee5ng §  Land bank restructurings expected to give the Company more liquidity going forward through land share payment reduc5on 1 Subject to final approvals and implementa5on Transac<on Terms I Warrants 1 2 3 4 34 Unsecured Creditors (who supported the Plan) §  Ves5ng/barrier Warrant for 9.70% of the New Equity (fully diluted) −  Ves5ng share price: P$35.92 −  Strike price P$9.75 −  5-­‐year ves5ng period and a 7-­‐year op5on period Previous Management §  Plain vanilla warrant for 3.0% of the New Equity (fully diluted): −  Strike price: P$38.33 −  12 year tenor New Management §  Ves5ng/barrier Warrant for 1.75% of the New Equity (fully diluted) −  Ves5ng share price: P$19.74 −  Strike price P$9.75 −  5-­‐year ves5ng period and a 7-­‐year op5on period New Money (Plan Sponsors) §  Will receive a back-­‐stop fee comprised of warrants for 17.46% of fully diluted shares structured as follows: Tranche 1: −  1.25% fully diluted equity ownership −  Ves5ng share price: P$25.86 −  Strike price P$9.75 −  5-­‐year ves5ng period and a 7-­‐year op5on period Tranche 2: −  7.48% fully diluted equity ownership −  Ves5ng share price: P$29.60 −  Strike price P$9.75 −  5-­‐year ves5ng period and a 7-­‐year op5on period Tranche 3: −  8.73% fully diluted equity ownership −  Ves5ng share price: P$32.22 −  Strike price P$9.75 −  5-­‐year ves5ng period and a 7-­‐year op5on period Restructuring Overview I Shareholder structure New shareholder structure §  Capitaliza5on of unsecured creditors in exchange for 88% of total shares outstanding, with previous shareholders and previous management receiving 8% and 4% respec5vely (pre-­‐dilu5on of New Equity Investment) §  New Equity Investment of P$3,500m in exchange for approximately 84% of the Company’s shares post-­‐dilu5on (pre-­‐dilu5on of warrants) Shareholder Structure Pre New
Equity Investment
Current Shareholder Structure
%
Unsecured Creditors
# shares
%
# shares
%
# shares
91.7%
61,040,386
88.0%
61,040,386
14.2%
61,040,386
Previous Shareholders
8.3%
5,549,126
8.0%
5,549,126
1.3%
5,549,126
Previous Management
0.0%
--
4.0%
2,774,563
0.6%
2,774,563
New Equity Investment
0.0%
--
0.0%
--
83.8%
359,739,686
100.0%
66,589,512
100.0%
69,364,075
100.0%
429,103,761
1 Pre-­‐dilu5on of warrants 2 Includes shares reserved for unresolved creditor appeals as per Concurso Mercan5l 35 Shareholder Structure Post New
Equity Investment1
2