quarterly information (itr) br properties s.a. · traded in the novo mercado environment on the...

Quarterly Information (ITR)

BR Properties S.A. March 31, 2018 with Review Report on Quarterly Information

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MANAGEMENT REPORT Dear Shareholders, In compliance with the legal and statutory provisions in force, Management of BR Properties S.A. (“Company” or “BR Properties”) hereby presents its comments and results referring to the quarter ended March 31, 2018. Amounts are expressed in R$ thousand, unless otherwise indicated, and in accordance with the provisions contained in the Brazilian Corporation Law and standards established by the Brazilian Securities and Exchange Commission (CVM). Management comments are an integral part of the individual and consolidated financial statements and should be read in conjunction with the respective Notes. BUSINESS DESCRIPTION BR Properties is one of the leading commercial real estate investment companies in Brazil, focused on the acquisition, lease, management, development and sale of commercial real estate, including office buildings and industrial and logistic warehouses located in the main metropolitan regions of Brazil. BR Properties adopts a dynamic approach to monitoring the Brazilian commercial real estate market to anticipate supply and demand trends in the various regions where it operates to evaluate the best opportunities for buying or selling, to maximize the profitability of its investments. The Company ended the year with 47 commercial properties in its portfolio, totaling a gross leasable area (GLA) of 716 thousand square meters, representing a market value of approximately R$7,650,104. The Company has five land plots and one property under development, which today correspond to 89 thousand square meters of GLA. Of the 47 properties held in portfolio by the Company at the end of the 1Q18: ▪ 38 or 567 thousand square meters are office buildings; ▪ 2 or 55 thousand square meters are industrial and logistic warehouses; ▪ 1 or 6 thousand square meters are real estate intended for retail; ▪ 1 or 14 thousand square meters refer to project under development; ▪ 5 or 74 thousand square meters refer to land plots.

MESSAGE FROM MANAGEMENT Continuing the gradual resumption of the Brazilian real estate market observed mainly in the second semester last year, the beginning of 2018 was marked by the increase in the demand for corporate offices areas in the central regions of São Paulo and Rio de Janeiro. According to the main real estate consultancies, net absorption presented positive figures for both cities in the first quarter of the year. In the city of São Paulo, recovery of the industry and economy, combined with the low volume of new supply expected in the coming years, already reflects lower vacancy levels and positively pressured lease prices in certain types of assets and regions.

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In Rio de Janeiro, recovery takes place more slowly and cautiously. With the delayed market cycle in relation to São Paulo, we expect to see an intensification of the flight to quality movement throughout the year, just as we observed in São Paulo over the past 3 years. While real growth of this market is not expected in 2018, resumption of the Oil & Gas industry, driven by a greater participation of foreign companies, can be a positive surprise for the city’s economy, and especially for the real estate market.

We believe that the BR Properties portfolio stands out for quality and location, which generates a competitive advantage in capturing potential tenants and has the Company benefit from the flight to quality movement that should strengthen over the year.

Given this scenario, all of the Company’s efforts are focused on reducing vacancy. In addition, the Company continues to carry out important transactions to recycle its portfolio and manage its liabilities. MAIN OPERATING EVENTS IN 1T18 Management of liabilities In February, BR Properties raised R$50,000 through its 9th Issue of Debentures. The issue has a single series, with 5-year maturity and cost of CDI + 0.70% per year. The proceeds from the debentures were used in the acquisition of Edifício Tucano. Acquisition of assets In March, the Company completed the acquisition of Galpão Tucano in the city of Jarinu. The property represents a leasable area of 31,719 m² and was acquired for R$71,000. This acquisition is part of the Company’s repositioning strategy in the industrial and logistics warehouse market. SUBSEQUENT EVENTS Sale of assets In April, BR Properties completed the sale of the Edifício Celebration for R$57,000. The sale is part of the Company’s strategy of recycling part of its portfolio, selling real estate that may have already reached its maturity and potential value creation in its cycle within the Company. RESULTS In terms of profit or loss, consolidated gross revenue totaled R$130,202 in 1Q18, a 4% increase compared to the same quarter of last year. The Company's gross revenue in 1Q18 was divided between lease revenue and property management revenues, in the following proportion:

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▪ Lease Revenues: lease revenues totaled R$125,720, a 4% increase compared to 1Q17, representing 97% of consolidated gross revenue;

▪ Revenues from Property Administration: Real estate administration revenues totaled R$ 4,482, a 2% increase compared to 1Q17, representing 3% of consolidated gross revenue.

Net revenue for the quarter totaled R$107,448, which corresponds to a reduction by 6% compared to the same quarter of prior year. Adjusted EBITDA, net of non-cash results, such as the stock option plan and revaluation of the property values, reached R$82,069, 8% decrease compared to 1Q17, and adjusted EBITDA margin of 76%, one of the highest in this industry. EBITDA in 1Q18 using the methodology determined by CVM Ruling No. 527/12 totaled R$81,972 for the year, eaching an EBITDA margin of 76%, as follows:

1Q2018

Net Income (loss) for the quarter (11,584)

Depreciation 104

Deferred taxes 21,39

Provision for IR and CSLL 2,375

Finance income (costs) 69,686

EBITDA 81,972

EBITDA margin 76%

Other operating income (expenses) (21) Gain (loss) on fair value of investment properties -

Gain (loss) on investment properties sale (1,557)

Provision for ILP / Stock Option 1,674

Adjusted EBITDA 82,069

Adjusted EBITDA margin 76%

Adjusted FFO, a non-accounting measure used in the real estate industry to measure the Company’s net cash generation, totaled R$ 21,145, an increase of 3% in relation to 1Q17, with a margin of 20%. As a result of the non-cash effects of accounting for foreign exchange difference on the Perpetual Bonds denominated in dollars and variations in derivative instruments, in addition to the impact of deferred taxes, BR Properties recorded net loss of R$11,584 in 1Q18.

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HUMAN RESOURCES Headcount at the end of 1Q18 was 84 employees, 50 employees at the Company's address in the city of São Paulo, and 34 employees in the properties administered by the Company. SHAREHOLDERS’ RIGHTS AND MARKET DATA At the end of 1Q18, BR Properties´ equity value, which is calculated by dividing the Company’s Equity by the total number of shares issued at the time, totaled R$ 14.37/share. The Company’s shares are traded in the Novo Mercado environment on the São Paulo Stock Exchange (Bovespa), whose quotation at the closing of the trading session on March 31, 2018 was R$ 9.04/share. PROSPECTS AND PLANS FOR THE CURRENT YEAR AND THE FUTURE/CONCLUSION We intend to maintain the same strategy that has made us one of the largest companies in this industry, focusing on the best and most disputed regions of the country and on top quality real estate in the asset classes we have exposure to: offices and industrial and logistic warehouses. We pursue the strategy of market consolidation, focusing on the acquisition of large properties, adding value by using modern management techniques, consistent strategies, rationalization of operating costs, retrofit, quality improvements and portfolio recycling. RELATIONSHIP WITH THE INDEPENDENT AUDITOR Pursuant to CVM Rule No. 381 of January 14, 2003, the Company informs that its policy of engaging services not related to external auditing is based on principles that preserve the independence of the auditor. These principles are based on the fact that the independent auditor should not audit his own work, cannot exercise managerial duties, should not advocate for their client or provide any other services that are considered prohibited by current regulations, thus maintaining independence in the work performed. EXECUTIVE BOARD REPRESENTATION Under the terms of CVM Ruling No. 480/09, the Company’s Executive Board represents that it has reviewed, discussed and agreed with the independent auditor’s report on the financial statements for the year ended March 31, 2018.

São Paulo Corporate Towers Av. Presidente Juscelino Kubitschek, 1.909 Vila Nova Conceição 04543-011 - São Paulo – SP - Brasil Tel: +55 11 2573-3000 ey.com.br

Uma empresa-membro da Ernst & Young Global Limited

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Independent auditor’s review report on quarterly information To the Shareholders, Board of Directors and Officers of BR Properties S.A. São Paulo - SP We have reviewed the individual and consolidated interim financial information contained in the Quarterly Information Form (ITR) of BR Properties S.A. (the "Company") for the quarter ended March 31, 2018, which comprises the balance sheet as of March 31, 2018, and the related statements of income, comprehensive income, change in equity and cash flows for the three-month period then ended, including explanatory notes. Management is responsible for the preparation of these individual and consolidated interim financial information in accordance with the Technical Pronouncement CPC 21 (R1) – Demonstração Intermediária (“CPC 21”) and International Financial Reporting Standard IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB) (“IAS 34”), as well as for the presentation of this information in conformity with the standards issued by the Brazilian Securities Commission ("CVM"), applicable to the preparation of Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Review Engagements (NBC TR 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the individual and consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the individual and consolidated interim financial information included in the quarterly information referred above is not fairly presented, in all material respects, in accordance with CPC 21 ( R1) and IAS 34 applicable to the preparation of Quarterly Information Form (ITR), and presented consistently with the standards issued by the CVM.

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Other matters Statements of value added We have also reviewed the individual and consolidated statements of value added for the three-month period ended March 31, 2018, prepared under the responsibility of the Company's Management, whose presentation in the interim financial information is required by the standards issued by CVM, applicable to preparation of Quarterly Information Form (ITR), and considered supplementary information under IFRS, whereby no statements of value added presentation is required. These statements were submitted to the same review procedures previously described above and, based on our review, were are not aware of any fact that would make us believe that they were not prepared, in all material respects, in accordance with the overall individual and consolidated interim financial information taken as a whole. São Paulo, April 30, 2018. ERNST & YOUNG Auditores Independentes S.S. CRC-2SP034519/O-6 Marcos Alexandre S. Pupo Accountant CRC-1SP221749/O-0

ITR - Quarterly Information - 03/31/2018 - BR PROPERTIES S.A. Version: 1

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Individual financial statements / statement of financial position - assets

(In thousands of reais) Current quarter Prior year Account code Account description 03/31/2018 12/31/2017

1 Total assets 9,481,660 9,427,947 1.01 Current assets 1,137,953 1,152,277 1.01.01 Cash and cash equivalents 84,656 86,422 1.01.02 Marketable securities 938,712 939,950 1.01.02.01 Marketable valued at fair value 938,712 939,950 1.01.02.01.03 Marketable securities 938,712 939,950 1.01.03 Accounts receivable 39,612 31,837 1.01.03.01 Trade accounts receivable 39,612 31,837 1.01.06 Recoverable taxes 36,637 35,249 1.01.06.01 Current recoverable taxes 36,637 35,249 1.01.07 Prepaid expenses 3,860 3,867 1.01.08 Other current assets 34,476 54,952 1.01.08.03 Other 34,476 54,952 1.01.08.03.04 Other current assets 24,451 32,853 1.01.08.03.05 Financial instruments 5,544 11,752 1.01.08.03.06 Dividend Interest on Capital receivable 4,481 10,347 1.02 Noncurrent assets 8,343,707 8,275,670 1.02.01 Long-term receivables 319,276 332,322 1.02.01.09 Other noncurrent assets 319,276 332,322 1.02.01.09.04 Other noncurrent assets 46,636 49,448 1.02.01.09.05 Taxes recoverable 219,885 219,885 1.02.01.09.06 Trade accounts receivable 52,755 62,989 1.02.02 Investments 7,459,381 7,378,395 1.02.02.01 Equity interests 582,715 583,203 1.02.02.01.02 Investments in Subsidiaries 582,715 583,203 1.02.02.02 Investment properties 6,876,666 6,795,192 1.02.03 Property and equipment 10,208 10,111 1.02.04 Intangible assets 554,842 554,842


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Individual financial statements / statement of financial position - liabilities

(In thousands of reais) Account Current quarter Previous Year code Account description 03/31/2018 12/31/2017

2 Total liabilities 9,481,660 9,427,947 2.01 Current liabilities 631,036 657,831 2.01.01 Social and labor liabilities 1,694 1,431 2.01.01.02 Labor Obligations 1,694 1,431 2.01.01.02.01 Salaries and social charges payable 1,694 1,431 2.01.02 Trade accounts payable 4,783 5,337 2.01.02.01 Trade accounts payable - domestic 4,783 5,337 2.01.03 Tax liabilities 2,123 3,146 2.01.03.01 Federal tax liabilities 2,123 3,146 2.01.03.01.01 Income and social contribution taxes payable 248 145 2.01.03.01.02 Taxes payable 1,875 3,001 2.01.04 Loans and financing 510,207 543,353 2.01.04.01 Loans and financing 510,207 543,353 2.01.05 Other liabilities 100,548 95,360 2.01.05.02 Other 100,548 95,360 2.01.05.02.01 Dividend and interest on equity payable 65,792 65,792 2.01.05.02.06 Other current liabilities 34,756 29,568 2.01.06 Provisions 11,681 9,204 2.01.06.01 Provisions for labor and civil security tax 11,681 9,204 2.01.06.01.05 Provision for compensation to employees and directors 11,681 9,204 2.02 Noncurrent liabilities 3,000,466 2,894,026 2.02.01 Loans and financing 2,161,141 2,079,607 2.02.01.01 Loans and financing 2,161,141 2,079,607 2.02.02 Other liabilities 438,157 432,872 2.02.02.02 Other 438,157 432,872 2.02.02.02.05 Other noncurrent liabilities 438,157 432,872 2.02.03 Deferred taxes 380,509 360,888 2.02.03.01 Deferred income and social contribution taxes 380,509 360,888 2.02.04 Provisions 20,659 20,659 2.02.04.01 Provisions for labor and civil security tax 20,659 20,659 2.02.04.01.05 Tax, labor and civil security tax 20,659 20,659 2.03 Equity 5,850,158 5,876,090 2.03.01 Paid-in capital 3,252,701 3,252,701 2.03.01.01 Capital 3,314,457 3,314,457 2.03.01.02 Share issue costs (61,756) (61,756) 2.03.02 Capital reserves 2,310,565 2,324,912 2.03.04 Income reserves 298,476 298,477 2.03.05 Retained earnings/accumulated losses (11,584) -


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Individual Financial Statements / Statement of profit or loss

(In thousands of reais)

Account code Account description

Current quarter -01/01/2018 to

03/31/2018

YTD - current year 01/01/2017 to

03/31/2017

3.01 Revenue from sale of goods and/or services 86,803 88,484 3.01.01 Net revenue from sale of goods and/or services 86,803 88,484 3.03 Gross profit 86,803 88,484 3.04 Operating income (expenses) (15,971) 16,218 3.04.02 General and administrative expenses (24,004) (54,857) 3.04.02.01 General and administrative expenses (21,199) (51,451) 3.04.02.02 Management Fees (1,131) (1,123) 3.04.02.04 Stock option plan (1,674) (2,283) 3.04.04 Other operating income 1,573 18,219 3.04.04.01 Other operating income 16 18,219 3.04.04.02 Gains on fair value of investment 1,557 - Properties 3.04.06 Equity pick-up 6,460 52,856 3.05 Income before finance income (costs) and taxes 70,832 104,702 3.06 Finance income (costs) (62,564) (502) 3.06.01 Finance income 26,045 111,251 3.06.02 Finance costs (88,609) (111,753) 3.07 Income before income taxes 8,268 104,200 3.08 Income and social contribution taxes (19,852) 78,569 3.08.01 Current (232) (7,643) 3.08.02 Deferred (19,620) 86,212 3.09 Net income from continuing operations (11,584) 182,769 3.11 Net income/loss for the period (11,584) 182,769 3.99 Earnings per share (reais / shares) 3.99.01 Basic earnings per share 3.99.01.01 ON (0.02845) 0.62285 3.99.02 Diluted earnings per share 3.99.02.01 ON 0.00000 0.62228


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Individual financial statements / statement of comprehensive income



Current quarter Exercício

01/01/2018 a 03/31/2018

YTD – current Year

01/01/2017 a 03/31/2017 4.01 Net income for the period (11,584) 182,769 4.03 Comprehensive income for the period (11,584) 182,769


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Individual financial statements / statement of cash flows - indirect method



YTD - current year

01/01/2018 a 03/31/2018

YTD prior year

01/01/2017 a 03/31/2017

6.01 Net cash from operating activities 82,622 78,541 6.01.01 Cash from operations 70,822 50,760 6.01.01.01 Income before income and social contribution 8,268 104,199 Taxes 6.01.01.02 Depreciation of property and equipment 104 107 6.01.01.03 Fair value of investment properties (1,557) - 6.01.01.04 Revenues - straight-line method 1,873 (10,134) 6.01.01.05 Interest and monetary restatement of loans 75,104 102,628 6.01.01.06 Foreign exchange differences, net 3,135 (16,906) 6.01.01.07 Income (loss) from derivative financial instruments (5,553) 4,614 6.01.01.08 MTM - interest of perpetual bonds 802 935 6.01.01.09 MTM Swap 7,200 (6,159 6.01.01.10 Amortization of capitalized cost 1,759 3,553 6.01.01.11 Stock option plan 1,674 2,283 6.01.01.12 Provision for compensation to employees and Directors 2,477 2,301 6.01.01.14 Allowance for doubtful accounts 420 2,057 6.01.01.15 Monetary restatement (3,846) (56,562) 6.01.01.16 Results obtained in transactions with investments and - (18,142) Property 6.01.01.17 Other provisions 229 264 6.01.01.19 Income from marketable securities (14,808) (11,422) 6.01.01.20 Equity pick-up (6,459) (52,856) 6.01.02 Changes in assets and liabilities 11,800 27,781 6.01.02.01 Trade accounts receivable 165 17,945 6.01.02.02 Taxes recoverable 2,863 9,351 6.01.02.05 Other assets 10,959 9,110 6.01.02.06 Accounts payable (555) 3,566 6.01.02.08 Taxes and contributions (1,256) (3,853) 6.01.02.11 Salaries and social charges payable 264 2,956 6.01.02.12 Provision for compensation to employees and directors - (6,041) 6.01.02.14 Other liabilities (640) (5,253) 6.02 Net cash - investing activities (55,452) 11,824 6.02.01 Investments in subsidiaries (5,000) (9,800) 6.02.02 Disposals on investments in subsidiaries - 240,249 6.02.03 Receipt of dividends and interest on equity of subsidiaries 17,814 575 6.02.05 Acquisition of property and equipment (201) (119) 6.02.07 Acquisition of/ investment in investment (83,951) (4,558) Properties 6.02.11 Investment in marketable securities 15,886 (214,523) 6.03 Net cash - financing activities (28,936) (89,388) 6.03.04 Repayment of loans and financing (15,640) (83,110) 6.03.06 Gains on financial instruments 4,562 - 6.03.07 Payment of losses on financial instruments - (5,286) 6.03.08 Repurchase of shares (16,022) - 6.03.09 Borrowing costs (1,836) (992) 6.05 Increase (decrease) in cash and cash equivalents (1,766) 977


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Individual financial statements / statement of cash flows - indirect method



YTD - current year

01/01/2018 à 03/31/2018

YTD prior year

01/01/2017 à 03/31/2017

6.05.01 Cash and cash equivalents at beginning of period 86,422 663,148

6.05.02 Cash and cash equivalents at end of period 84,656 664,125


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Individual financial statements / statement of changes in equity / SCE - 01/01/2018 a 03/31/2018



Paid-in capital

Capital reserves, options granted and

treasury shares Income

reserves

Retained earnings (accumulated

losses)

Other comprehensive

income Equity

5.01 Opening balances 3,252,701 2,324,912 298,477 - - 5,876,090 5.03 Adjusted opening balances 3,252,701 2,324,912 298,477 - - 5,876,090 5.04 Capital transactions with owners - (14,348) - - - (14,348 5.04.03 Recognition of options granted - 1,674 - - - 1,674 5.04.04 Treasury shares acquired - (16,022) - - - (16,022) 5.05 Total comprehensive income - - - (11,584) - (11,584) 5.05.01 Net income for the period - - - (11,584) - (11,584) 5.07 Closing balances 3,252,701 2,310,564 298,477 (11,584) - 5,850,158


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Individual financial statements / statement of changes in equity / SCE - 01/01/2017 à 03/31/2017



Paid-in capital



reserves Retained earnings

(accumulated losses)

Other comprehensive

income Equity

5.01 Opening balances 2,314,234 2,414,909 - - - 4,729,143 5.03 Adjusted opening balances 2,314,234 2,414,909 - - - 4,729,143 5.04 Capital transactions with owners - 2,283 - - - 2,283 5.04.03 Recognition of options granted - 2,283 - - - 2,283 5.05 Total comprehensive income - - - 182,769 - 182,769 5.05.01 Net income for the period - - - 182,769 - 182,769 5.07 Closing balances 2,314,234 2,417,192 - 182,769 - 4,914,195


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Individual financial statements / statement of value added



YTD - current year

01/01/2018 a 03/31/2018

YTD prior year

01/01/2017 a 03/31/2017

7.01 Revenues 106,515 114,115 7.01.01 Sales of goods, products and services 105,360 97,953 7.01.02 Other revenues 1,155 16,162 7.01.02.01 Other revenues 18 18,219 7.01.02.04 Reversal / (constitution) of allowance for doubtful (420) (2,057) Accounts 7.01.02.05 Gain on fair value of investment properties 1,557 - 7.02 Inputs from third parties (26,451) (14,068) 7.02.04 Other (26,451) (14,068) 7.03 Gross value added 80,064 100,047 7.04 Retentions (104) (107) 7.05 Added value netproduced 79,960 99,940 7.06 Value added received in transfer 32,505 164,107 7.06.01 Equity pick-up 6,460 52,856 7.06.02 Finance income 26,045 111,251 7.07 Total added value to distribute 112,465 264,047 7.08 Distribution of added value 112,465 264,047 7.08.01 Personnel 7,802 7,963 7.08.01.01 Direct compensation 7,224 7,459 7.08.01.02 Benefits 395 344 7.08.01.03 Unemployment Compensation Fund (FGTS) 183 160 7.08.02 Taxes, charges and contributions 27,638 (38,437) 7.08.02.01 Federal 27,638 (68,187) 7.08.02.03 Local - 29,750 7.08.03 Debt remuneration 88,609 111,752 7.08.03.01 Interest 75,104 102,628 7.08.03.03 Other 13,505 9,124 7.08.04 Equity remuneration (11,584) 182,769 7.08.04.03 Retained profits/losses for the period (11,584) 182,769


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Consolidated financial statements / statement of financial position – assets

(In thousands of reais) Account Current quarter Prior year Code Account description 03/31/2018 12/31/2017

1 Total assets 9,826,663 9,797,952 1.01 Current assets 1,182,793 1,221,036 1.01.01 Cash and cash equivalents 110,731 125,015 1.01.02 Marketable securities 938,788 939,988 1.01.02.01 Marketable securities valued at fair value 938,788 939,988 1.01.02.01.03 Marketable securities 938,788 939,988 1.01.03 Accounts receivable 54,795 65,720 1.01.03.01 Trade accounts receivable 54,795 65,720 1.01.06 Taxes recoverable 44,106 41,277 1.01.06.01 Current taxes recoverable 44,106 41,277 1.01.07 Prepaid expenses 4,008 4,042 1.01.08 Other current assets 30,365 44,994 1.01.08.03 Other 30,365 44,994 1.01.08.03.04 Other current assets 24,821 33,242 1.01.08.03.05 Financial instruments 5,544 11,752 1.02 Noncurrent assets 8,643,870 8,576,916 1.02.01 Long-term receivables 346,727 361,395 1.02.01.06 Deferred taxes 8,560 8,564 1.02.01.06.01 Deferred income and social contribution taxes 8,560 8,564 1.02.01.09 Other noncurrent assets 338,167 352,831 1.02.01.09.04 Other noncurrent assets 59,224 62,098 1.02.01.09.05 Taxes recoverable 223,297 223,297 1.02.01.09.06 Accounts receivable 55,646 67,436 1.02.02 Investments 7,731,629 7,650,104 1.02.02.02 Investment properties 7,731,629 7,650,104 1.02.03 Property and equipment 10,672 10,575 1.02.04 Intangible assets 554,842 554,842


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Consolidated financial statements / statement of financial position - liabilities

(In thousands of reais) Account Current quarter Prior year Code Account description 03/31/2018 12/31/2017

2 Total liabilities 9,826,663 9,797,952 2.01 Current liabilities 677,445 704,597 2.01.01 Social and labor liabilities 2,374 2,182 2.01.01.02 Labor obligations 2,374 2,182 2.01.01.02.01 Salaries and social charges payable 2,374 2,182 2.01.02 Trade accounts payable 4,973 8,592 2.01.02.01 Trade accounts payable - domestic suppliers 4,973 8,592 2.01.03 Tax liabilities 4,642 3,735 2.01.03.01 Federal tax liabilities 4,642 3,735 2.01.03.01.01 Income and social contribution taxes payable 2,468 380 2.01.03.01.02 Taxes payable 2,174 3,355 2.01.04 Loans and financing 552,730 584,910 2.01.04.01 Loans and financing 552,730 584,910 2.01.05 Other liabilities 101,045 95,974 2.01.05.02 Other 101,045 95,974 2.01.05.02.01 Dividends and interest on equity payable 65,792 65,792 2.01.05.02.06 Other current liabilities 35,253 30,182 2.01.06 Provisions 11,681 9,204 2.01.06.01 Provisions for labor and civil security tax 11,681 9,204 2.01.06.01.05 Provision for compensation to employees and directors 11,681 9,204 2.02 Noncurrent liabilities 3,299,060 3,217,265 2.02.01 Loans and financing 2,325,633 2,270,510 2.02.01.01 Loans and financing 2,325,633 2,270,510 2.02.02 Other liabilities 438,157 432,872 2.02.02.02 Other 438,157 432,872 2.02.02.02.03 Other noncurrent liabilities 438,157 432,872 2.02.03 Deferred taxes 513,538 492,151 2.02.03.01 Deferred income and social contribution taxes 513,538 492,151 2.02.04 Provisions 21,732 21,732 2.02.04.01 Provisions for labor and civil security tax 21,732 21,732 2.03 Equity – consolidated 5,850,158 5,876,090 2.03.01 Paid-in capital 3,252,701 3,252,701 2.03.01.01 Capital 3,314,457 3,314,457 2.03.01.02 Share issue costs (61,756) (61,756) 2.03.02 Capital reserves 2,310,565 2,324,912 2.03.04 Income reserves 298,476 298,477 2.03.05 Retained earnings/accumulated losses (11,584) -


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Consolidated financial statements / statement of profit or loss



Current quarter Exercício

01/01/2018 a 03/31/2018

YTD - current year

01/01/2017 a 03/31/2017

3.01 Revenue from sale of goods and/or services 107,448 114,030 3.01.01 Net revenue from sale of goods and/or services 107,448 114,030 3.03 Gross profit 107,448 114,030 3.04 Operating income (expenses) (25,582) 24,580 3.04.02 General and administrative expenses (27,157) (59,087) 3.04.02.01 General and administrative expenses (24,352) (55,681) 3.04.02.02 Management fees (1,131) (1,123) 3.04.02.04 Stock option plan (1,674) (2,283) 3.04.04 Other operating income 1,575 83,667 3.04.04.01 Other operating income 18 18,244 3.04.04.02 Gain (loss) on disposal of 1,557 65,423 investment property 3.05 Income before finance income (costs) and taxes 81,866 138,610 3.06 Finance income (costs) (69,685) (8,306) 3.06.01 Finance income 26,733 112,832 3.06.02 Finance costs (96,418) (121,138) 3.07 Income before income taxes 12,181 130,304 3.08 Income and social contribution taxes (23,765) 52,465 3.08.01 Current (2,375) (11,076) 3.08.02 Deferred (21,390) 63,541 3.09 Net income from continuing operations (11,584) 182,769 3.11 Consolidated income (loss) for the period (11,584) 182,769 3.11.01 Attributed to shareholders of parent company (11,584) 182,769 3.99 Earnings per share (reais / shares) 3.99.01 Basic earnings per share 3.99.01.01 ON (0.02845) 0.61285 3.99.02 Diluted earnings per share 3.99.02.01 ON 0.00000 0.61285


19

Consolidated financial statements / statement of comprehensive income



Current quarter 01/01/2018 a 03/31/2018

YTD - current year 01/01/2017 a 03/31/2017

4.01 Consolidated net income for the period (11,584) 182,769 4.03 Consolidated comprehensive income or the period (11,584) 182,769 4.03.01 Attributed to shareholders of parent company (11,584) 182,769


20

Consolidated financial statements / statement of cash flows - indirect method



YTD - current year

01/01/2018 a 03/31/2018

YTD prior year

01/01/2017 a 03/31/2017

6.01 Net cash from operating activities 116,119 109,219 6.01.01 Cash from operations 88,400 71,069 6.01.01.01 Income before income and social contribution 12,181 130,303 Taxes 6.01.01.02 epreciation of property and equipment 104 107 6.01.01.03 Fair value of investment properties (1,557) (65,423) 6.01.01.04 Revenues - straight-line method 1,392 (12,038) 6.01.01.05 Interest and monetary restatement of loans 82,735 111,790 6.01.01.06 Foreign exchange differences, net 3,135 (16,906) 6.01.01.07 Losses (gains) on derivative financial instruments (5,553) 4,614 6.01.01.08 MTM – interest of perpetual bonds 802 935 6.01.01.09 MTM of swap 7,200 (6,159) 6.01.01.10 Amortization of capitalized cost 1,882 3,770 6.01.01.11 Stock option plan 1,674 2,283 6.01.01.12 Provision for compensation to employees and directors 2,477 2,301 6.01.01.14 Allowance for doubtful accounts 420 2,068 6.01.01.15 Monetary restatement (3,981) (56,712) 6.01.01.16 Other provisions 297 335 6.01.01.19 Results obtained in transactions with investments and - (18,777) Property 6.01.01.20 Gain (loss) on marketable securities (14,808) (11,422) 6.01.02 Changes in assets and liabilities 27,719 38,150 6.01.02.01 Trade accounts receivable 20,903 34,798 6.01.02.02 Taxes recoverable 1,556 7,528 6.01.02.05 Other assets 10,975 5,764 6.01.02.06 Accounts payable (3,618) 4,053 6.01.02.08 Taxes and contributions (1,468) (4,463) 6.01.02.11 Salaries and social charges payable 192 2,881 6.01.02.12 Provision for compesantion to employees and directos - (6,440) 6.01.02.14 Other liabilities (821) (5,971) 6.02 Net cash from investing activities (68,317) 19,303 6.02.05 Acquisition of property and equipment (201) (122) 6.02.07 Acquisition of/ investment in investment properties (84,002) (6,301) 6.02.08 Proceeds from sale of interests in subsidiaries - 240,249 6.02.10 Investment in marketable securities 15,886 (214,523) 6.03 Net cash - financing activities (62,086) (124,240) 6.03.03 Share issue costs (1,836) (992) 6.03.04 Repayment of loans and financing 50,000 - 6.03.05 Payment of loans and financing (98,790) (117,962) 6.03.06 Gains on financial instruments 4,562 - 6.03.07 Payment of losses on financial instruments - (5,286) 6.03.08 Repurchase of shares (16,022) - 6.05 Increase (decrease) in cash and cash equivalents (14,284) 4,282 6.05.01 Cash and cash equivalents at beginning of period 125,015 707,405 6.05.02 Cash and cash equivalents at end of period 110,731 711,687

ITR - Informações Trimestrais - 31/03/2018 - BR PROPERTIES S.A. Versão: 1

21

Consolidated financial statements / statement of changes in equity / SCE - 01/01/2018 a 03/31/2018



Paid-in capital



reserves


losses)

Other comprehensive

income Equity Noncontrolling

interests Equity

Consolidated

5.01 Opening balances 3,252,701 2,324,912 298,477 - - 5,876,090 - 5,876,090 5.03 Adjusted opening balances 3,252,701 2,324,912 298,477 - - 5,876,090 - 5,876,090 5.04 Capital transactions with owners - (14,348) - - - (14,348) - (14,348) 5.04.03 Recognition of options granted - 1,674 - - - 1,674 - 1,674 5.04.04 Treasury shares acquired - (16,022) - - - (16,022) - (16,022) 5.05 Total comprehensive income - - - (11,584) - (11,584) - (11,584) 5.05.01 Net income for the period - - - (11,584) - (11,584) - (11,584) 5.07 Closing balances 3,252,701 2,310,564 298,477 (11,584) - 5,850,158 - 5,850,158


22

Consolidated financial statements / statement of changes in equity / SCE - 01/01/2017 a 03/31/2017



Paid-in capital



reserves


losses)

Other comprehensive

income Equity Noncontrolling

interests Equity

Consolidated

5.01 Opening balances 2,314,234 2,414,909 - - - 4,729,143 - 4,729,143 5.03 Adjusted opening balances 2,314,234 2,414,909 - - - 4,729,143 - 4,729,143 5.04 Capital transactions with owners - 2,283 - - - 2,283 - 2,283 5.04.03 Recognition of options granted - 2,283 - - - 2,283 - 2,283 5.05 Total comprehensive income - - - 182,769 - 182,769 - 182,769 5.05.01 Net income for the period - - - 182,769 - 182,769 - 182,769 5.07 Closing balances 2,314,234 2,417,192 - 182,769 - 4,914,195 - 4,914,195


23

Consolidated financial statements / statement of value added



YTD - current year

01/01/2018 a 03/31/2018

YTD prior year

01/01/2017 a 03/31/2017

7.01 Revenues 129,966 207,262 7.01.01 Sales of goods, products and services 128,810 125,663 7.01.02 Other revenues 1,156 81,599 7.01.02.01 Other revenues 19 18,244 7.01.02.04 Reversal / (constitution) of allowance for doubtful (420) (2,068) Accounts 7.01.02.05 Fair value adjustment of investment properties 1,557 65,423 7.02 Inputs acquired from third parties (29,765) (17,790) 7.02.04 Other (29,765) (17,790) 7.02.04.01 Inputs acquired from third parties (29,765) (17,790) 7.03 Gross value added 100,201 189,472 7.04 Retentions (104) (107) 7.04.01 Depreciation, amortization and depletion (104) (107) 7.05 Added value net produced 100,097 189,365 7.06 Value added received in transfer 26,733 112,832 7.06.02 Finance income 26,733 112,832 7.07 Total added value to distributed 126,830 302,197 7.08 Distribution of added value 126,830 302,197 7.08.01 Personnel 9,164 8,965 7.08.01.01 Direct compensation 8,200 8,161 7.08.01.02 Benefits 671 585 7.08.01.03 Unemployment Compensation Fund (FGTS) 293 219 7.08.02 Taxes, charges and contributions 32,833 (10,673) 7.08.02.01 Federal 32,833 (40,428) 7.08.02.03 Local - 29,755 7.08.03 Debt remuneration 96,417 121,136 7.08.03.01 Interest 82,735 111,790 7.08.03.03 Other 13,682 9,346 7.08.04 Equity remuneration (11,584) 182,769 7.08.04.03 Retained profits/losses for the period (11,584) 182,769

BR Properties S.A.

Notes to the interim consolidated financial statements

Three-months ending 31 March 2018

24

Notes to quarterly information


1 Operations Incorporated as a stock corporation domiciled in Brazil, the Company’s shares are traded on B3 under ticker symbol “BRPR3”. Its main place of business is located at Avenida das Nações Unidas, 12.495 - 18º. Andar - city and state of São Paulo, Brazil. The Company’s individual and consolidated quarterly information for the period ended March 31, 2018 comprises the Company, its subsidiaries and jointly-controlled subsidiaries (collectively referred to as “the Group” and individually as “Group entities”). BR Properties S.A. and its subsidiaries (hereinafter referred to as the “Company”) are mainly engaged in the acquisition, administration, lease and sale of commercial properties in Brazil, particularly office and commercial building and floors, retail stores and warehouses, provided that they are existing or built-to-suit assets. The Company also develops and engages third parties to build new properties, which will be added to its portfolio for lease purposes.

On March 12, 2018, the Company entered into a Public Deed with BRE Ponte Participações S.A. (“Seller”), investment vehicle of the Blackstone Group, for the purchase and sale of a property used for industrial purposes, consisting of units 28, 29, 30 and 31 of Edifício Tucano (“Properties”), located in Centro Empresarial Espaço Gaia Ar, at Rodovia (SP-65) Dom Pedro I, Km 90, Gleba A-1, Bairro do Pinhal, city of Jarinu, Judicial District of Atibaia, state of São Paulo, with Gross Leasable Area (GLA) of 31,719 m², for R$ 71,000 (Note 7.a.i).

2 Summary of significant accounting practices The individual and consolidated quarterly information was prepared consistently with the accounting practices described in Note 2 to the annual individual and consolidated financial statements for the year ended December 31, 2017, and remain valid, except for the new standards that became effective on January 1, 2018, as follows:

Pronouncement Description

CPC 48 – Financial

instruments

Correlation with International Financial Accounting Standards – IFRS 9 – Financial

Instruments: classification, measurement, impairment and hedge accounting.

CPC 47 – Revenue from

contracts with customers

Correlation with International Financial Accounting Standards – IFRS 15 – on recognition of

revenue from contracts with customers.

IFRS 10 – Consolidated

financial statements and IAS

28 – Investment in affiliate

Amendments that address the conflict in the treatment of sale or contribution of assets between

an investor and its affiliate or its joint venture.

The Company believes that these amendments had no significant impact on its individual and consolidated financial statements.

BR Properties S.A.

Review report on quarterly information

Period ended March 31, 2018

25

Therefore, this quarterly information does not include all notes and disclosures required by standards for annual individual and consolidated financial statements, and, as a result, the respective information should be read together with the referred to annual individual and consolidated financial statements. Based on the judgment and assumptions adopted by management on the materiality and changes that should be disclosed in the notes, this quarterly information includes selected notes and does not include all the notes presented in the annual financial statements, as allowed by Circular No. 03/2011, issued by the Brazilian Securities and Exchange Commission (“CVM”). The Company’s individual and consolidated quarterly information, contained in the Quarterly Information Form (ITR) for the period ended March 31, 2018, was prepared in accordance with CPC 21 (R1) and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standard Board (IASB), and is presented in accordance with the rules issued by the CVM, applicable to the preparation of Quarterly Information (ITR). Preparation of quarterly information requires the use of certain critical accounting estimates and Company management judgment in the process to apply the accounting practices. Accounting estimates and assumptions are assessed on an ongoing basis, and are based on past experience and other factors, including expected future events considered reasonable for the circumstances. These estimates and assumptions may be different from effective results. The quarterly information is presented in thousands of reais (R$) and all amounts are rounded off to the nearest thousand, unless otherwise stated. In certain circumstances, this may lead to immaterial differences between total figures and subtotals stated in the tables. This individual and consolidated quarterly information of BR Properties S.A. (“Company”) for the period ended March 31, 2018, was completed and approved by the Company’s Executive Board on April 30, 2018, to be authorized for issue as per Board of Directors’ resolution on May 8, 2018.

2.1 New standards, amendments and interpretations to standards The Company elected not to early adopt any other standard, interpretation or amendment that has been issued, but is not yet effective. The nature and effectiveness of each of the new standards and amendments are set out below: Standard Description Effectiveness

CPC 06 (R2) – Lease Correlation with IFRS 16. Refers to the definition of

and guidance on leases provided in IAS17.

Annual periods beginning

on or after January 1,

2019.

The Company intends to adopt the new standards and/or amendments on the effective date required, based on the method applicable to each pronouncement. Presentation may retroactive or prospective. According to the Company’s preliminary assessment, these amendments are not expected to have a significant impact on its individual and consolidated financial statements.

BR Properties S.A.



26

3 Cash, cash equivalents and marketable securities Parent Company Consolidated

03/31/2018 12/31/2017 03/31/2018 12/31/2017

Cash and banks 75 154 136 269

Cash equivalents (i) 84,581 86,268 110,595 124,746

Cash and cash equivalentes 84,656 86,422 110,731 125,015

Investment fund (ii) 938,712 939,950 938,788 939,988

Marketable securities 938,712 939,950 938,788 939,988

1,023,368 1,026,372 1,049,519 1,065,003

Cash and cash equivalents are held in order to meet short-term cash commitments, rather than for investment or other purposes. The Company considers as cash equivalents investments immediately redeemable at a known cash amount and that are exposed to an insignificant risk of change in value. Accordingly, an investment normally qualifies as cash equivalent when it is redeemable in the short term, for example, within three months from the investment date, or for which there are no fines or any other restrictions in connection with immediate redemption. (i) Cash equivalents correspond to Certificado de Depósitos Bancários (CDBs) held with first-tier local and foreign financial institutions. These transactions are mostly remunerated based on the Certificado de Depósitos Interbancários (CDI) index variation, under normal market conditions and rates. (ii) Boutique investment fund administered by Bank J.P. Morgan, which invests in fixed income, federal government securities (Selic Treasury (LTF)and Treasury Fixed Rate (LTN)) and Financial Bills (LF) of first-tier banks. The statement of the fund’s portfolio is as follows: Parent Company Consolidated

Investment Funds 03/31/2018 12/31/2017 03/31/2018 12/31/2017

Financial Treasury Bills - floating rate 712,612 601,710 712,612 601,710

Financial Bills - floating rate 69,087 67,987 69,087 67,987

National Treasury Bills - fixed rate - 270,291 - 270,291

National Treasury Notes – fixed rate 157,090 - 157,090 -

Other assets and liabilities (76) (37) - -

938,712 939,950 938,788 939,988

The Company adopts financial investment policies determining that investments should be concentrated on low-risk marketable securities and investments in first-tier financial institutions, bearing interest ranging from 70% to 103,8% (70% to 101,2% in 2017) of the CDI.

BR Properties S.A.



27

4 Accounts receivable Parent Company Consolidated

03/31/2018 12/31/2017 03/31/2018 12/31/2017

Rents receivable 101,620 103,659 119,694 141,989

Allowance for doubtful accounts (9,253) (8,833) (9,253) (8,833)

92,367 94,826 110,441 133,156

Current 39,612 31,837 54,795 65,720

Noncurrent 52,755 62,989 55,646 67,436

Under typical contracts with customers, rent is usually received until the tenth business day of the subsequent month, in addition to annual payments. Current lease agreements are monthly restated substantially by reference to the Índice Geral de Preços do Mercado (“IGP-M”), and contain no contingent receipt clauses, as said agreements were not executed with payments based on variables, such as percentage of future sales, futures price indexes and other. The allowance for doubtful accounts was set up considering the history of losses, an analysis of overdue accounts receivable, and the current individual credit situation of each customer and guarantees given thereby. Management understands that the risk related to trade accounts receivable is mitigated as the Company’s customer portfolio is diversified. Changes in allowance for doubtful accounts are as follows: Parent Company Consolidated

03/31/2018 12/31/2017 03/31/2018 12/31/2017

Balance at beginning of period/year (8,833) (7,297) (8,833) (7,314)

Allowance supplement for the period/year (420) (1,536) (420) (1,519)

Balance at end of period/year (9,253) (8,833) (9,253) (8,833)

BR Properties S.A.



28

5 Taxes recoverable

Parent Company Consolidated

03/31/2018 12/31/2017 03/31/2018 12/31/2017

Tax credits 3,775 - 5,870 -

IRPJ and CSLL prepayments 73 - 1,038 -

Pis and Cofins 1,344 1,413 2,496 2,531

IRPJ and CSLL tax credits 251,330 253,721 257,999 262,043

Total taxes recoverable 256,522 255,134 267,403 264,574

Income and social contribution payable 247 145 2,468 380

Taxes on revenue - Pis and Cofins 1,641 2,643 1,843 2,855

Withholding taxes 234 358 258 500

Other taxes payable - - 73 -

Total taxes payable 2,122 3,146 4,642 3,735

Total net 254,400 251,988 262,761 260,839

Current assets 36,637 35,249 44,106 41,277

Noncurrent assets 219,885 219,885 223,297 223,297

Current liabilities (2,123) (3,146) (4,642) (3,735)

Total net 254,399 251,988 262,761 260,839

6 Investments

Parent Company

03/31/2018 12/31/2017

Participation in subsidiaries 582,715 583,203

a. Information on subsidiaries

Interest held in subsidiaries, valued under the equity method, was determined in accordance with the statements of financial position as of March 31, 2018 and December 31, 2017. The investment book value as of March 31, 2018 and December 31, 2017 and equity pickup for the quarters ended March 31, 2018 and 2017 are as follows:

03/31/2018 12/31/2017 03/31/2017

shares/units

of interest

Shareholder’s

Equity

Income

(Loss)

Book value of

investments

Equity Income

(Loss)

Book value of

the investments

Equity Income

(Loss)

Direct subsidiaries BRPR II Empreendimentos e Participações Ltda. 42,015,999 69,546 652 69,539 652 68,888 (228)

BRPR VII Empreendimentos e Participações Ltda. 75,799,399 96,696 (1,289) 96,686 (1,288) 92,975 (738)

BRPR 39 Empreendimentos e Participações Ltda. 2,459,463 10,407 8 10,407 8 10,400 14



BRPR 45 Empreendimentos e Participações S.A. 772,005 696 (52) 696 (52) 748 (44)

BRPR 55 Empreendimentos e Participações S.A. 5,031,024 19,775 455 19,775 455 19,320 453

BRPR 56 Empreendimentos e Participações S.A. 7,912,610 134,372 2,697 134,372 2,697 131,675 3,503

BRPR 57 Empreendimentos e Participações S.A. 565,560 65,681 1,113 65,681 1,113 64,568 1,651

SPE 61 Empreendimentos e Participações S.A. 62,699,238 114,283 783 114,283 783 113,500 1,524



BRPR A Adm. de Ativos Imob. Ltda. 400,999 2,292 1,891 2,292 1,891 12,348 1,883

BRPR Participações S.A. 701,000 640 6 640 6 634 37

Investees sold of in 2017 - - - - - - 44,069

Real estate investment funds Desenvolvimento 2 FII - JK D/E (BRPR 68 FII) 559,141 5,613 57 5,613 57 5,557 105

582,715 6,460 583,203 52,856

BR Properties S.A.



29

b. Information on the main groups of assets, liabilities and Results of subsidiaries at March 31, 2018.

Assets Liabilities

Current Noncurrent Total Current Noncurrent

Shareholder’s

Equity Total

Direct subsidiaries BRPR II Empreendimentos e Participações Ltda. 3,312 109,426 112,738 (4,993) (38,198) (69,546) (112,738)

BRPR VII Empreendimentos e Participações Ltda. 5,892 146,414 152,306 (5,460) (50,150) (96,696) (152,306)

BRPR 39 Empreendimentos e Participações Ltda. 732 13,696 14,428 (3) (4,019) (10,407) (14,428)

BRPR 40 Empreendimentos e Participações Ltda. 7,047 67,564 74,611 (4,508) (41,024) (29,079) (74,611)

BRPR 43 Empreendimentos e Participações Ltda. 1,136 5,856 6,992 (5) - (6,987) (6,992)

BRPR 45 Empreendimentos e Participações S.A. 759 - 759 (63) (1) (696) (759)

BRPR 55 Empreendimentos e Participações S.A. 2,516 37,401 39,917 (4,855) (15,287) (19,775) (39,917)



SPE 61 Empreendimentos e Participações S.A. 6,452 129,457 135,910 (743) (20,883) (114,283) (135,910)

BRPR 62 Empreendimentos e Participações Ltda. 354 10,589 10,943 (6) (1,106) (9,831) (10,943)

BRPR 66 Empreendimentos e Participações Ltda. 1,068 15,912 16,980 (146) - (16,834) (16,980)

BRPR A Adm. de Ativos Imob. Ltda. 3,239 417 3,655 (1,372) 8 (2,292) (3,655)

BRPR Participações S.A. 561 88 649 (3) (6) (640) (649)

Real estate investment funds Desenvolvimento 2 FII - JK D/E (BRPR 68 FII) 5,624 - 5,624 (11) - (5,613) (5,624)

Statement of Income (Loss)

Gross revenue

from rentals and

services

Taxes, rebates and

costs of rented

properties

Operating

income/

(expenses)

Income tax and

social contribution

P&L for the

period

Direct subsidiaries BRPR II Empreendimentos e Participações Ltda. 2,111 (286) (847) (327) 652

BRPR VII Empreendimentos e Participações Ltda. 1,934 (685) (1,972) (565) (1,289)

BRPR 39 Empreendimentos e Participações Ltda. - - 10 (3) 8

BRPR 40 Empreendimentos e Participações Ltda. 1,824 (169) (1,405) (161) 90


BRPR 45 Empreendimentos e Participações S.A. - - (52) - (52)

BRPR 55 Empreendimentos e Participações S.A. 1,279 (59) (568) (196) 455

BRPR 56 Empreendimentos e Participações S.A. 8,132 (378) (3,708) (1,349) 2,697

BRPR 57 Empreendimentos e Participações S.A. 2,032 (380) 26 (564) 1,113

SPE 61 Empreendimentos e Participações S.A. 1,783 (471) (311) (217) 783



BRPR A Adm. de Ativos Imob. Ltda. 4,356 (377) (1,577) (512) 1,891

BRPR Participações S.A. 1 (0) 7 (2) 5

Real estate investment funds Desenvolvimento 2 FII - JK D/E (BRPR 68 FII) - - 57 - 57

c. Changes in investments

03/31/2018 12/31/2017

Opening balance 583,203 718,937

(+)Additions (i) 5,000 12,493

(-)Disposals (ii) - (171,008)

(-)Dividends and interest on equity received (11,948) (575)

(+/-)Equity pick-up 6,460 52,856

Ending balance 582,715 612,703

i) Additions in 2018 refer to contributions, as in 2017, period in which the most representative contribution was in subsidiary BRPR II, as a result of Ed. Henrique Schaumann debt settlement.

(ii) In 1Q2017, the Company completed the transaction set forth in the agreement for purchase and sale of assets and shares entered into with the GLP (Global Logistic Properties Limited) Group, whose subject matter was the disposal of all shares held by the Company in BRPR 46 Securitizadora de Créditos Imobiliários S.A., which owns the industrial warehouse located in São Bernardo do Campo, for the total amount of R$240,249. Such transaction was pending completion due to an arbitration dispute.

BR Properties S.A.



30

7 Investment properties

a. Information on the movements of in investment properties

Parent Company Consolidated 03/31/2018 03/31/2017 03/31/2018 03/31/2017

Opening balance 6,795,192 6,093,699 7,650,104 7,210,370 (+)Acquisitions (i) 73,011 - 73,011 - (+)Retrofit costs 6,906 4,559 6,957 6,301 (+/-)Market value adjustment 1,557 - 1,557 65,423 (-)Disposals (ii) - - - (240,249) Closing balance 6,876,666 6,098,258 7,731,629 7,041,845

i) As mentioned in Note 1, in 2018, we acquired warehouse Ed. Tucano, located in the countryside of São Paulo for R$71,000. The acquisition was recorded as an acquisition of an asset.

ii) On February 1, 2017, we completed the sale to GLP of BRPR 46 Securitizadora de Créditos Imobiliários S.A.

BR Properties S.A.



31

8 Loans and financing


Financial charges Balance Balance Balance Balance

Real Estate Index Spread

(% p.a). 03/31/2018 12/31/2017 03/31/2018 12/31/2017

Bank Credit Bill (CCB) 172,838 173,290 244,276 244,281

TR 11.25 172,838 173,290 244,276 244,281

Notes Real Estate Credit – CCI 574,510 593,072 617,852 634,901

TR 9.29 - 11.5 182,289 195,589 182,289 195,589

IPCA 10.8 - - 43,343 41,830

CDI 1.45 - 1.65 392,220 397,483 392,220 397,483

Certificate of Real Estate Receivable

-

-

93,059

120,538

CRI

IGPM 7.6 - 13.0 - - 93,059 120,538

Assignment of Receivable – CDC 143,031 146,681 143,031 146,681

TR 9.37 - 11.5 143,031 146,681 143,031 146,681

Debentures payable (b) 1,165,553 1,098,125 1,165,553 1,098,125

CDI 0.7 - 1.6 172,206 123,260 172,206 123,260

CDI 117 - 121.5 499,215 489,839 499,215 489,839

IPCA 5.85 - 7.23 494,131 485,027 494,131 485,027

Perpetual bonds (a) 629,257 625,290 629,257 625,290

USD 9.0 629,257 625,290 629,257 625,290

Total 2,685,188 2,636,459 2,893,029 2,869,817

Charges to be amortized (13,840) - (13,498) - (14,666) - (14,397)

Total loans with charges 2,671,348 2,622,960 2,878,362 2,855,420

Short-term realizable balance 510,207 543,353 552,730 584,910

Long-term realizable balance 2,161,141 2,079,607 2,325,633 2,270,510

(a) In 3Q16, the Company entered into a contract with Banco Votorantim related to derivatives for payment of quarterly interest only, on previously established dates (October 7, 2016, January 9, 2017, April 7, 2017, July 7, 2017, October 9, 2017, January 8, 2018, and April 9, 2018) in the form of “cash flow swap”.. In 1Q18, the Company entered into a contract with Banco Santander related to a new derivative operation for payment of quarterly interest only, on previously established dates (July 9, 2018, October 8, 2018, January 7, 2019, April 8, 2019, July 8, 2019, October 7, 2019, January 7, 2020, and April 7, 2020) in the form of “cash flow swap”. Accordingly, the debt remains denominated in US dollars, but with interest on the following maturities pegged to the CDI variation. On December 7, 2016, the Company entered into a “Private Instrument for the Public Issue of Simple, Debentures, Non-convertible into Shares, with Security Interest, of the Sixth Issue” amounting to R$ 550,000, for a term of 90 months, remunerated at 107% of the CDI, and settled on September 27, 2011. On July 14, 2017, the 7th issue of simple debentures, non-convertible into shares, in up to 3 (three) series, of the unsecured type, amounting up to R$275,000, as follows: i) 1st series with maturity in 12 years and entitled to payment of interest equivalent to 100% of the accumulated variation of the DI Rate, plus a surcharge of 1.55% per year, and ii) 2nd and 3rd series with maturity in 15 years, monthly restated by reference to the IPCA and with remuneration of 7.23% p.a. On December 20, 2017, we had the 8th issue of simple unsecured debentures, non-convertible into shares, in a single series amounting up to R$250,000 with maturity in 48 months, entitled to the payment of remuneration interest equivalent to 121.50% of the accumulated variation of the DI Rate. On February 20, 2017, we had the 9th issue of simple unsecured debentures, non-convertible into shares, in a single series amounting up to R$50,000 with maturity in 60 months, entitled to the payment of remuneration interest equivalent to 100% of the accumulated variation of the DI Rate, plus surcharge of 0.7% per year.

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32

Guarantees, collateral and mortgage granted to creditors Real properties acquired (investment properties) was given as chattel mortgage and main guarantee of financing. In addition, guarantees were given, represented by the chattel mortgage of the subsidiaries’ units of interest, borrowers of funds, and chattel mortgage of credit rights from the lease agreements entered with the lessees of the real properties.

Maturities The aging list of long-term payments is as follows:

03/31/2018


From Mar/2019 onwards 336,618 346,962

2020 270,160 314,767

2021 232,270 278,287

2022 171,228 189,714

2023 139,283 162,718

From 2024 onwards 1,011,582 1,033,185

Total 2,161,141 2,325,633

Covenants At March 31, 2018, the Company and its subsidiaries were compliant with all their covenants.

9 Income tax and social contribution

Parent

Company Consol idate

03/31/2018 03/31/2017 03/31/2018 03/31/2017

Profit before income tax and social contribution 8,270 104,200 12,182 130,304 Income and social contribution taxes at statutory rates (34%) (2,812) (35,428) (4,142) (44,303)

Adjustments to determine effective tax rate: Equity pick-up 2,196 17,971 - - Tax credits from income and social contribution tax losses (17,749) 116,094 (18,650) 116,094

Permanent exclusions/(additions), net Foreign exchange differences, net (67) (111) (67) (111) Payment / reversal of provisions (966) 2,699 (929) 3,048 Gain (loss) on divestiture - (21,373) - (21,373) Other (454) (1,283) 23 (890)

Income (loss) from income and social contribution taxes (19,852) 78,569 (23,765) 52,465

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33

At March 31, 2018, income tax expenses are broken down as follows: Parent Company Consolidated

03/31/2018 03/31/2017 03/31/2018 03/31/2017

Current (232) (7,643) (2,375) (11,076)

Deferred (19,620) 86,212 (21,390) 63,541

Total (19,852) 78,569 (23,765) 52,465

Deferred income and social contribution taxes are recorded to reflect future tax effects attributable to temporary differences between the tax base of assets and liabilities and their respective book value. At March 31, 2018 and December 31, 2017, the net balance of deferred income and social contribution tax liabilities is broken down as follows: Parent Company Consolidated

03/31/2018 12/31/2017 03/31/2018 12/31/2017

Fair value of investment properties 638,717 638,188 763,314 762,785

Temporary differences (tax depreciation) 219,475 205,874 262,735 247,855

Straight Line Rent 22,667 23,304 24,090 24,563

Added Value of assets (i) 23,051 21,859 23,051 21,859 Other 7,760 10,190 8,208 10,685

Deferred taxes – liabilities 911,670 899,415 1,081,398 1,067,747

Exchange variation the principal amount of the perpetual bond (184,662) (183,668) (184,662) (183,668)

Net Operation losses carry forwards (ii) (182,651) (182,651) (227,910) (228,284)

Tax credit arising from goodwill on merger (iii) (163,848) (172,208) (163,848) (172,208)

Deferred taxes – assets (531,161) (538,527) (576,420) (584,160)

Deferred taxes, net 380,509 360,888 504,978 483,587

Deferred taxes – statement of financial position – assets - - (8,560) (8,564)

Deferred taxes – statement of financial position – liabilities 380,509 360,888 513,538 492,151

Deferred taxes, net 380,509 360,888 504,978 483,587

Deferred tax liabilities

(i) Due to the application of CPC 28 (investment properties), the assets and their respective appreciation will be recorded as investments in the financial statements, not subject to depreciation. However, in tax accounting, assets will continue to be depreciated, the appreciation arising from the application of CPC 28 does not exist and the goodwill based on the market value of the assets integrates the value of the asset, subject to depreciation. Therefore, the amortization of goodwill based on the appreciation of assets, due to the depreciation of assets, will be achieved through an exclusion in the calculation of the taxable income and Social Contribution Tax on Net Profit (CSLL) base in accordance with current tax legislation.

Deferred tax assets

Tax asset recoverability (R$576.420) is based on projections of taxable income considering various financial and business assumptions projected by the Company for the coming years. Consequently, such estimates may fail, considering the uncertainties inherent to them.

Considering the results presented through March 31, 2018, Company management expects that tax credits arising from tax losses and tax credits on temporary differences will be realized in ten years.

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34

(ii) In the last quarter of 2016, the Company completed the corporate restructuring with the merger of some of its subsidiaries and the redemption of boutique investment fund shares aimed at operational optimization, corroborating the expected future realization of deferred tax assets. In the first quarter of 2017, Company management completed and approved its technical feasibility study on the realization of deferred tax assets based on the taxable base projection for the coming years, in accordance with the requirements of applicable legislation. (iii) The tax credit arising from goodwill on the merger comes from One Properties S.A (a company merged by the Company on March 29, 2012). This credit was recorded in One Properties on March 29, 2012, date on which Saíra Diamante Empreendimento Imobiliário S.A. (controlling shareholder of One Properties at the time) was merged. The tax credit amount was calculated considering the 34% tax rate on goodwill (resulting from payment of assets in One Properties), and amounted to R$983,502. The Company recognized the taxes based on accounting pronouncements ICPC 09 and CPC 32.

At March 31, 2018, the tax credit balance and costs arising from goodwill and future capital gains on acquisitions or mergers, which could be deductible through amortization, were as follows:

Consolidated

03/31/2018 12/31/2017

Tax credit - incorporation of ONEP 334,390 334,390

Deductibility of appreciation of assets - tax effect 119,230 119,230

Amortization (193,594) (145,833)

260,026 307,787

10 Other current and non-current liabilities Parent Company Consolidated

03/31/2018 12/31/2017 03/31/2018 12/31/2017

Customer advance 2,397 2,752 2,396 2,751

Obligations for acquisition of real estate 469,224 458,342 469,224 458,342

Provision of audit services and publications 864 832 1,006 1,092

Provision for maintenance on properties 428 514 784 869

472,913 462,440 473,410 463,054

Current 34,756 29,568 35,253 30,182

Non-Current 438,157 432,872 438,157 432,872

(a) Of this amount, R$428,585 refers to the obligation for acquisition of Edifício Passeio building on December 15, 2016.

Payment will be made as follows: R$28,000 through a promissory note, and the balance of R$385,250 in 120 successive monthly installments amounting to R$5,043 each, plus interest of 7% per annum with maturity of the first installment on December 15, 2018.

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35

11 Contingencies The Company and its subsidiaries are parties to labor, civil and tax proceedings at various court levels. The provisions for contingencies to cover losses arising from proceedings pending judgment are set up and restated based on management’s assessment, based on the opinion of its legal advisors. A summary of provisions set up and judicial deposits made is as follows: Probable loss Parent Company Consolidated

03/31/2018 12/31/2017 03/31/2018 12/31/2017

Taxes 26,147 26,147 27,253 27,253

Total 26,147 26,147 27,253 27,253

Judicial deposits (5,488) (5,488) (5,521) (5,521)

Total 20,659 20,659 21,732 21,732

The principal amount of R$27,253 refers to the provision based on the opinion of our legal advisors, regarding the classification of intercompany loan agreements as a credit transaction and, consequently, levy of taxes on this type of transaction. The Company is party to other tax, labor and civil proceedings arising from the normal course of its business, whose likelihood of an unfavorable outcome was rated as possible by management and its legal advisors. As a result, no provision was set up to cover possible unfavorable outcomes therefor. At March 31, 2018 these proceedings amounted to: Parent Company Consolidated

03/31/2018 12/31/2017 03/31/2018 12/31/2017

Labor 241 265 241 265

Taxes 206,946 202,689 206,946 202,689

Civil 150,498 142,169 150,700 142,366

357,685 345,123 357,887 345,320

At March 31, 2018, main contingencies classified as possible losses are as follows: Tax – Tax notice issued on December 12, 2017 requiring payment of Corporate income tax (IRPJ) and Social contribution tax on net profit (CSLL) for calendar years 2012, 2013 and 2014, given the challenged tax use, referring to the deductibility of expenses with amortization of goodwill arising from the acquisition of One Properties pela Saíra Diamante shares. Possible loss amounts to R$196,383. Civil – Collection Suit filed by the seller in an acquisition made by the Company, referring to the payment of an alleged premium set forth in the document called “Agreement of Understanding and Bases for Acquisition of Property”. Possible loss amounts to R$106,123.

BR Properties S.A.



36

At March 31, 2018, lawsuits involving One Properties S.A., merged into the Company, classified as possible losses amount to R$462,013. In case of a possible loss, the payment obligation is contractually the responsibility of the predecessors, as provided in the Merger Agreement and Other Covenants entered into on January 14, 2012, between the Company and third parties.

12 Equity

a. Capital At March 31, 2018 and December 31, 2017, paid-in capital amounted to R$ 3,314,457 (less issuance expenses amounting to R$ 61.756) and comprised 407,135,283 common book-entry shares, with no par value. On that same date, the authorized capital limit is 650,000,000 common shares.

b. Treasury shares On March 31, 2018, treasury shares amounted to R$24,832, divided into 2,665,739 common, book-entry shares with no par value, purchased at market price on the respective buyback date, at the average price of R$9.32 per share. The shares repurchased under the Buyback Program will be held in treasury and may be delivered to the beneficiaries of the Stock Option Plan or the Restricted Stock Option Plan, both approved at the General Shareholders' Meeting, in accordance with the Articles of Incorporation, upon exercise of the stock option or when the criteria established in the Restricted Stock Option Plan are met by the Beneficiaries. On October 16, 2017, the Board of Directors' Meeting approved purchase of Company shares for maintenance in treasury, cancelation and/or delivery to the beneficiaries of the Stock Option Plan or the Restricted Stock Option Plan, in the maximum number of 2,904,727 common shares outstanding at B3. The maximum term for the purchase of shares issued by the Company under the Share Buyback Program is April 16, 2019. The purchase will take place at the market price of the Company shares. In the 1Q2018, the Company repurchased 1,730,000 common shares for R$ 9.25 each, totaling R$ 16,022.

c. Capital reserves

Reserve for recognized options granted The reserve for recognized options granted records the matching entry of stock option plan expenses, in accordance with CPC 10 (R1) - Share-based Payment.

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Merger reserve Represented by the goodwill reserve on the subscription of new shares issued by the Company due to the shareholders' contribution of resources and assets. The realization of this reserve will occur in accordance with article 200 of the Brazilian Corporation Law, conditional upon approval of shareholders at a Special General Meeting.

d. Legal reserve This reserve is set up at the rate of 5% of the net income calculated in each fiscal year, in accordance with article 193 of Law No. 6404/76, up to a limit of 20% of capital, or set up in the year when the balance of such reserve, plus the amount of capital reserves described in paragraph 1 of article 193, exceeds 30% of capital.

e. Unrealized income reserve As provided for in the Company's Articles of Incorporation, in the year when the amount of the mandatory minimum dividend, the calculation of which is shown below, is greater than the realized portion of net income for the year, the excess portion must be recorded in unrealized income reserve. The net income realized in the period is represented by the portion that exceeds the sum of (i) net income from equity pickup, (ii) fair value gain on investment properties, (iii) fair value adjustment of financial instruments, and (iv) dividends received from subsidiaries, net of taxes.

f. Dividends

Management adopts the policy of analyzing the possibility of proposing the highest possible value exceeding mandatory minimum dividends and, for such, considers any investment needs and business continuity plans. Under the Company´s Articles of Incorporation, shareholders are entitled to mandatory minimum dividends of 25% of net income for the year, adjusted pursuant to article 202 of Law No. 6404/76.

g. Stock option plans The Special Shareholders' Meeting held on October 31, 2016 approved the new Stock Option Plan and the new Restricted Stock Option Plan, under which the Board of Directors may grant stock options to management members and employees. When the Beneficiary joins this new Option Plan, partially or fully, he/she cannot exercise any stock options relating to previously approved Plans and Programs, thus the options granted to the Beneficiary relating to the Option Plans from 2008 to 2015 become void. The Stock Options will represent the maximum limit of 6,014,562 (six million, fourteen thousand, five hundred and sixty-two) Company shares, corresponding to 1.97% of total shares issued by the Company, on a fully diluted basis on the date of approval of this Plan. The options strike price will be equivalent to market value, i.e. the amount equivalent to the average price of the last 30 (thirty) trading sessions prior to the date when the proposal for the creation of such Plan was approved, adjusted by the inflation index (IGPM/FGV). The table below shows the changes in the stock option grants, the option value and the market value of the share on that date:

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38

In thousands of stock options 3rd Grant 4th Grant 5th Grant 6th Grant 7th Grant 8th Grant Total

Total stock options issued 890 162 1,602 5,657 9,250 2,635 20,196

(-) Stock options cancelled (720) (96) (574) (4,478) (7,330) (45) (13,242)

(-) Stock options exercised (38) (66) (826) (40) - (179) (1,149) (-) Stock options suspended (132) - (203) (1,139) (1,920) - (3,393)

(=) Current number of stock options at March 31, 2018 - - - - - 2,411 2,411

Strike price at March 31, 2018 - in R$ 21.80 20.48 14.24 21.52 15.38 8.67

Share market price at March 31, 2018 - in R$ 9.04 9.04 9.04 9.04 9.04 9.04

Strike price for suspension at March 31, 2018 - in R$ 20.36 0.00 13.15 20.10 14.56

In determining the fair value of stock options, the following economic assumptions were used: 3rd Grant 4th Grant 5th Grant 6th Grant 7th Grant 8th Grant

Grant date 05/30/2008 08/29/2008 02/12/2010 03/17/2011 11/28/2014 02/03/2017

Share price volatility 3.01% 3.01% 3.01% 27.88% 29.09% 32.18% Risk-free interest rate 4.24% 4.24% 4.24% 10.73% 11.98% 10.85%

Vesting period VESTED VESTED VESTED VESTED 1.66 years 3.00 years

Number of options 890 162 1,602 5,657 9,250 2,635 Fair value (R$MM) on grant date 0 0 0 10,804 9,098 4,158

Strike price at March 31, 2018 – in R$ 21.80 20.48 14.24 21.52 15.38 8.67

Restricted Shares may be granted under the Plan not exceeding 1,632,320 (one million, six hundred and thirty-two thousand, three hundred and twenty) shares representing the Company's capital, corresponding to 0.53% of the Company's capital, on a fully diluted basis on the date of approval of this Plan. The table below shows the changes in the restricted stock option grants, the option value and the market value of the share on that date:

In thousands of shares Restricted

shares

Total shares to be issued 1.010 (-) Canceled restricted shares - (-)Delivered shares - (=)current balance of restricted shares in 03/31/2018 1.010

Market value of the share in 03/31/2018 - R$ 9,04 In determining the fair value of restricted shares, the following economic assumptions were used: Restricted shares

Grant date 09/03/2017 Stock price volatility 32,07% Risk-free interest rate 10,32% "Vesting period" 2,80 anos Number of shares 1.010 Fair value (R$MM) on grant date 8.878 Market value of shares on grant date - R$ 9,27

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39

The following chart presents the number of, weighted average of the strike price of, and changes in stock options and restrictive shares for the period: 03/31/2018 12/31/2017

Weighted average year Weighted average year

Number price Number price

Opening balance 3,466 R$ 9.14 3,618 R$ 16.44 Granted during the year - R$ 0.00 3,645 R$ 8.37

Exercised during the year - R$ 0.00 (179) R$ 8.42

Cancelled during the year (45) R$ 8.54 (225) R$ 16.24 Suspended during the year - R$ 0.00 (3,393) R$ 16.56

Final balance 3,421 R$ 8.78 3,466 R$ 9.14

Exercisable 830 348

The expense recorded corresponds to the fair value of the respective financial instruments, calculated on the grant date, based on the Black&Scholes model, recorded on a “pro rata temporis” basis, during the service rendering period, from the grant date until the vesting date. In profit or loss for the quarter ended March 31, 2018, the Company recognized expenses amounting to R$ 1,674 (R$2,283 at March 31, 2017).

13 Net operating revenue Parent Company Consolidated

03/31/2018 03/31/2017 03/31/2018 03/31/2017

Rent Revenue 107,188 97,713 125,720 120,980

Service revenue 45 240 4,482 4,683

Total gross revenue 107,233 97,953 130,202 125,663

Straight-line method and rebates (11,471) (1,560) (12,325) (1,813)

Taxes on revenue (8,959) (7,909) (10,429) (9,820)

Total net revenue 86,803 88,484 107,448 114,030

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14 General and administrative expenses Parent Company Consolidated

03/31/2018 03/31/2017 03/31/2018 03/31/2017

Personnel expenses (5,744) (5,250) (7,346) (6,436)

Condominium/vacancy expenses (11,471) (5,824) (13,113) (8,821)

Expenses with lawyers and consultants (1,596) (2,868) (1,672) (2,949)

Tax Expenses 1,921 (31,530) 2,349 (31,095)

General and Administrative Expenses (a) (4,309) (5,979) (4,570) (6,380)

Total (21,199) (51,451) (24,352) (55,681)

(a) General and Administrative Expenses refer substantially to expenses with property maintenance, registry, publications, condominium

fees, lease commissions, and provisions.

15 Finance income (costs), net Parent Company Consolidated

03/31/2018 03/31/2017 03/31/2018 03/31/2017

Financial investments 16,186 31,257 16,730 32,681

Swap income 5,553 - 5,553 -

MTM - Swap Perpetual Bonds - 6,160 - 6,160

Monetary Corrections 4,091 56,624 4,229 56,774

Foreign exchange gains - 16,906 - 16,906

Other finance income 215 304 221 311

Total finance income 26,045 111,251 26,733 112,832

Financial interest on loans (59,465) (87,809) (67,097) (96,970)

Interest on perpetual bonds (15,639) (14,820) (15,639) (14,820)

Financial charges on loans (2,121) (3,469) (2,297) (3,691)

Swap expenses - (4,614) - (4,614)

MTM - Interest on perpetual bonds (802) (935) (802) (935)

MTM – perpetual bond Swap (7,200) - (7,200) -

Passive exchange variation (3,134) - (3,134) -

Other (248) (106) (249) (108)

Total finance expenses (88,609) (111,753) (96,418) (121,138)

Total net finance income and costs, net (62,564) (502) (69,685) (8,306)

16 Related parties (Company) The major asset and liability balances, as well as related-party transactions that impacted P&L for the year, arise from transactions between the Company and its subsidiaries, affiliates, joint ventures and other related parties.

At March 31, 2018 and December 31, 2017, there were no other transactions other than interest on equity receivable from subsidiaries amounting to R$4,481 (R$10,347 in 2017). Management compensation

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Key management personnel compensation is broken down as follows:

Parent Company

03/31/2018 03/31/2017

Salary or management fees 1,089 1,071

Direct and indirect benefits 42 52

Total 1,131 1,123

Stock option plan 1,089 2,283

Total administration fee 2,220 3,406

Guarantees on loans and financing The Company offered guarantees for certain loans and financing, which are represented by chattel mortgage of units of interest representing the capital of subsidiaries that borrowed funds, and assignment in trust of the credit rights of the lease agreements entered into with the tenants of the properties. In addition, the Company issued perpetual bonds of which some of its subsidiaries are guarantors. The value of the perpetual bonds is increased by interest of 9% per year.

17 Financial instruments and risk management The Company and its subsidiaries are parties to transactions involving financial instruments intended to finance their activities or to invest their available financial resources. The management of such risks is performed by defining conservative strategies, aiming at liquidity, profitability and safety. The Company restricts its exposure to credit risk associated with banks and short-term investments by investing with top-tier financial institutions and in short-term securities. Credit risk is minimized, as the lease agreements have been entered into with top-tier customers. In the three-month period ended March 31, 2018 and in the year ended December 31, 2017, the Company's 10 largest tenants represent approximately 65.7% and 69% of total gross revenue. The main financial risks are the following:

Interest rate risk The Company's revenues and expenses are affected by changes in interest rates due to the mismatch between interest on its debt instruments (most of which were taken out at variable rates) and its lease revenues, adjusted mainly by the General Market Price Index (IGP-M). The Company seeks to mitigate these risks by maintaining all its financial resources invested at variable rates and by carefully monitoring the prospective evolution of the indexes applied to its assets and revenues (mainly CDI and IGP-M), compared to those applicable to its liabilities (mainly CDI and TR).

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Currency risk The Company's finance costs are affected by changes in the exchange rate between the Brazilian real and the US dollar, due to loans in foreign currency. The Company seeks to mitigate this risk by contracting exchange hedging derivatives, as described below. In the ordinary course of its fund-raising activities, BR Properties S.A. issued perpetual bonds (without final maturity) denominated in US dollars, at a fixed interest rate of nine percent (9.00%) per annum, on a quarterly basis, on the 7th of January, April, July and October, in the amount of USD185,000,000. These securities have, as an additional feature, a redemption option (total or partial), exclusively at the issuer's discretion, from the end of the fifth year of effectiveness, at one hundred percent (100%) of the face value. As from the fifth year of their issue, there are several alternatives, including the redemption of the entire issue and its replacement by another, under terms that are more advantageous to BR Properties. In considering these possibilities, as well as the risks arising from exposure to fluctuation in the R$/USD exchange rate for the Company’s P&L and cash flow, BR Properties management decided that it would evaluate the hedging of quarterly interest payments on any additional amount on a quarterly basis. Since the bonds are perpetual, i.e. the possible impacts of exchange rate fluctuation do not cause cash risks relating to payment of principal, management has decided not to take out, at least initially, hedging for the principal amount, and it is willing to accept any possible volatility in the Company's P&L arising from exchange rate effects on the principal amount, when expressed in Brazilian reais. The derivative financial instruments and their association with the hedged object (perpetual bonds) are presented as follows:

Perpetual bonds Reference value Interests Curve value

(in R$)

Adjustment to the

market of the flow of

interest

Account balance

(in R$)

Liabilities - US$ Thousand 185,000 9% p.a (629,133) (123) (629,256)

Swap Notional value Interests Curve value

(in R$)

Adjustment to the

market of the flow of

interest

Account balance

(in R$)

Receivable - US$ Thousand 185,000

10.29% p.a 105,885 1,490 107,375

Payable – R$ thousand 662,578 CDI – 95.95% (100,908) (924) (101,832)

Book balance 4,978 566 5,544

Sensitivity analysis of financial instruments CVM Instruction 475, of December 17, 2008, determines that publicly-held companies must disclose a table showing the sensitivity analysis for each type of market risk considered significant by management, arising from financial instruments to which the entity is exposed at the closing date of each reporting period, including all transactions involving derivative financial instruments.

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The table below shows the Company management's sensitivity analysis and the effect of the outstanding transactions at March 31, 2018:

Index

Scenario involving

gain decrease of

50%

Decrease of

25%

Probable

scenario

Scenario involving

loss

Increase of

25%

Increase of

50%

Selic 3.20% 4.80% 6.40% 8.00% 9.60% CDI 3.20% 4.79% 6.39% 7.99% 9.59% US dólar R$ 1.66 R$ 2.49 R$ 3.32 R$ 4.15 R$ 4.99 IGP-M 0.10% 0.15% 0.20% 0.25% 0.30% INCC 1.85% 2.77% 3.69% 4.62% 5.54% IPCA 1.34% 2.01% 2.68% 3.35% 4.02% TR 0.00% 0.00% 0.00% 0.00% 0.00%

Net assets (liabilities) Net balance

03/31/18

Expected

result with

probable index

Efeito de ganho (perda) adicional em

cenário adverso

Increase of

25%

Increase of

50%

Selic 712,612 45,607 11,402 22,804 CDI (878,416) (56,131) (14,033) (28,065)

US dólar (629,256) - (37,864) (63,106)

IGP-M (486,597) (969) (242) (485) IPCA (537,474) (14,409) (3,602) (7,204)

INCC (17,891) (661) (165) (330)

TR (569,597) - - -

Total (2,406,618) (26,562) (44,504) (76,387)

Saldo em Sem Indexador /

03/31/2018 CDI USD IGP-M IPCA INCC TR SELIC Pré-Fixado

Assets

Cash, cash equivalents and marketable

securities 1,049,519 179,682 - - - - - 712,612 157,225

Cash and banks 136 - - - - - - - 136

Short-term investments 110,595 110,595 - - - - - - -

Títulos e Valores

Marketable securities 938,788 69,087 - - - - - 712,612 157,089

Derivative financial instruments 5,544 5,544 - - - - - - -

Accounts receivable 54,795 - - 54,795 - - - - -

Rentals receivable 54,795 - - 54,795 - - - - -

Total assets with financial risks 1,109,858 185,226 - 54,795 - - - 712,612 157,225

Liabilities

Loans and financing (2,884,315) (1,063,642) (629,256) (93,059) (537,474) - (569,597) - 8,712

Loans and financing (2,263,771) (1,063,642) - (93,059) (537,474) - (569,597) - -

Perpetual bonds (629,256) - (629,256) - - - - - -

Transaction costs 8,712 - - - - - - - 8,712

Derivative financial instruments - - - - - - - - -

Obligation due to acquisition of properties (469,224) - - (448,333) - (17,891) - - (3,000)

Advance from customers (2,397) - - - - - - - (2,397)

Total liabilities with financial risks (3,355,936) (1,063,642) (629,256) (541,392) (537,474) (17,891) (569,597) - 3,315

Net assets and liabilities (2,246,078) (878,416) (629,256) (486,597) (537,474) (17,891) (569,597) 712,612 160,540

BR Properties S.A.



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Liquidity risk The Company's finance costs could be negatively affected by the need for emergency loans or financing required to cover commitments not adequately contemplated in the planning of its operations, or by any mismatches between the terms of receipt of its contracted revenues and payment of its operational commitments. The Company liquidity risk management is based on cash flow, in order to maintain a sound capital structure and minimize risk arising from unforeseen or untimely cash outflows. In addition, any mismatches between assets and liabilities are constantly monitored.

Fair value measurement Below is a comparison, by class, of the book value and the fair value of the financial instruments presented in the quarterly information: Book value Fair value

Parent Company Consolidated Parent Company Consolidated

03/31/2018 12/31/2017 03/31/2018 12/31/2017 03/31/2018 12/31/2017 03/31/2018 12/31/2017

Financial assets

Cash, cash equivalents and marketable securities 1,023,368 1,026,372 1,049,519 1,065,003 1,023,368 1,026,372 1,049,519 1,065,003

Derivative financial instruments 5,544 11,752 5,544 11,752 5,544 11,752 5,544 11,752 Accounts receivable 39,612 31,837 54,795 65,720 39,612 31,837 54,795 65,720

Total 1,068,524 1,069,961 1,109,858 1,142,475 1,068,524 1,069,961 1,109,858 1,142,475

Financial liabilities

Loans and financing (2,671,347) (2,622,960) (2,878,362) (2,855,420) (2,832,953) (2,696,235) (3,078,985) (2,973,984)

Derivative financial instruments - - - - - - - - Accounts payable (474,007) (463,679) (474,197) (466,934) (474,007) (463,679) (474,197) (466,934)

Total (3,145,354) (3,086,639) (3,352,559) (3,322,354) (3,306,960) (3,159,914) (3,553,182) (3,440,918)

The Company discloses its financial assets and liabilities at fair value, based on the relevant accounting pronouncements that define fair value, which refer to valuation concepts and fair value disclosure requirements. Specifically regarding disclosure, the Company applies the hierarchy requirements, which involves the following aspects: Parent Company Consolidated

Description Nível 03/31/2018 12/31/2017 03/31/2018 12/31/2017

Financial assets Cash, cash equivalents and marketable

securities 2

1,023,368 1,026,372 1,049,519 1,065,003

Derivative financial instruments 2 5,544 11,752 5,544 11,752 Accounts receivable - 39,612 31,837 54,795 65,720

Financial liabilities

Loans and financing 3 2,200,550 2,075,075 2,446,146 2,352,824

Perpetual bonds 3 624,127 621,160 624,127 621,160

Derivative financial instruments 2 - - - -

Accounts payable - 474,007 463,679 474,197 466,934

Definition of fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

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Level 3 measurements of fair value is based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following fair value hierarchy: Level 1 - Quoted prices for identical instruments in active markets;

Level 2 - Prices quoted in active markets for similar instruments, quoted prices for identical or similar instruments in markets that are not active, and valuation models for which inputs are observable; and

Level 3 - Instruments whose significant inputs are not observable.

Below are the Company's financial assets broken down as per the general classification of these instruments, in accordance with the valuation hierarchy.

Fair value of financial assets and liabilities is included in the value for which the instrument could be exchanged in a current transaction between willing parties, rather than in a forced sale or settlement. The following methods and assumptions were used to estimate fair value:

Cash and cash equivalents, marketable securities, accounts receivable, taxes recoverable, trade accounts payable and taxes payable - Approximate their realizable values largely due to the short-term maturity of these instruments. Loans and financing - The agreed rates substantially reflect the usual market conditions at March 31, 2018 and December 31, 2017.

Capital management The primary objective of the Company management is to ensure that it maintains a strong credit rating and a problem-free capital ratio in order to support its business and maximize shareholders’ value. The Company manages its capital structure and makes adjustments considering changes in economic conditions. There were no changes in the objectives, policies or processes in the period and year ended March 31, 2018 and December 31, 2017, respectively. Parent Company Consolidated

03/31/2018 12/31/2017 03/31/2018 12/31/2017

Loans and financing 2,671,347 2,622,960 2,878,362 2,855,420

(-) Cash and cash equivalentes (84,656) (86,422) (110,731) (125,015)

(-) Marketable securities (938,712) (939,950) (938,788) (939,988)

Net debt (net cash from debt) 1,647,979 1,596,588 1,828,843 1,790,417

Equity 5,850,158 5,876,090 5,850,158 5,876,090

Equity and net debt 7,498,137 7,472,678 7,679,001 7,666,507

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18 Earnings per share In accordance with CPC 41 (IAS 33) approved by No. 636 – Earnings per Share, the Company presents the following information about earnings per share for the period ended March 31, 2018.

a. Basic Basic earnings per share are calculated by dividing net income for the year, attributed to holders of common shares, by the weighted average number of common shares available in the period.

b. Diluted Diluted earnings per share are calculated by adjusting the weighted average number of outstanding common shares, assuming the conversion of all potentially dilutive common shares. Potentially dilutive common shares are related to stock options. The tables below shows P&L data used to calculate basic and diluted earnings per share: Earnings (loss) per share basic

03/31/2018 03/31/2017

Numerator:

Net income for the year (11,584) 182,769

Denominator:

Weighted average number of shares 407,135,283 298,228,434

Basic loss (earnings) per share - R$ (0.02845) 0.61285

Diluted earnings (loss) per share

43,190 42,825

Numerator:

Net income for the year - 182,769

Denominator:

Weighted average number of shares - 298,228,434

Adjustment to stock options - 275,455

Weighted average number of shares (diluted) - 298,503,889

Diluted earnings per share - R$ - 0.612283

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19 Insurance coverage As of March 31, 2018, insurance for investment properties is taken out by the respective tenants, and the Company is the beneficiary. The amounts of insurance taken out directly by the Company are considered sufficient according to the opinion of insurance specialists, and are summarized below:

03/31/2018

Type Insurance coverage

Fire / theft 713,654 Loss of profits 395,315 Civil liability 100,000

20 Operating lease agreements The Company entered into commercial property lease agreements for its investment property portfolio. These non-cancelable leases have remaining terms of five to fifteen years. All leases include a clause that allows a review of rentals according to market conditions. Future minimum lease receivables under non-cancellable operating leases as of March 31, 2018 are as follows: 03/31/2018 12/31/2017

Within one year 467,680 475,051

More than one year, but less than five years 1,138,715 1,175,724

More than five years 664,688 640,392

2,271,084 2,291,166

21 Operating segments Due to the concentration of its activities in the lease and administration of commercial real estate properties, the Company is organized under a single business unit. The Company's properties, although intended to tenants of various business segments, are not controlled and managed by management as independent segments, and Company’s P&L are followed, monitored and measured on an integrated basis. Due to the reasons above, the Company considers that no further disclosure is required.

22 Subsequent events On April 16, BR Properties S.A. completed the sale of its entire commercial property called “Edifício Celebration”, located at Rua Caso do Ator, 1155, in the city and state of São Paulo, to the Fundo de Investimento Imobiliário RBR Properties - FII, through the execution of the competent Public Deed of Purchase and Sale. The total amount of the referred to disposal was R$57,000, of which R$11,400 paid on that date, and the remaining portion to be paid as per the Deed of Purchase and Sale.

quarterly information (itr) br properties s.a. · traded in the novo mercado environment on the...

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