Gafisa : Notice to Market - Preview of Operational Results 4Q16

PREVIEW OF

OPERATIONAL RESULTS

4Q16 & 2016

FOR IMMEDIATE RELEASE - São Paulo, January 19, 2017 - Gafisa S.A. (Bovespa: GFSA3; NYSE: GFA),

one of Brazil's leading diversified homebuilders focused on the residential market, today announced operational results of the quarter and the year ended on December 31, 2016. These operating results are preliminary, unaudited, and still subject to audit review.

Consolidated Launches

Fourth quarter launches totaled R$673.3 million, stable compared to 4Q15, and 8.6% lower compared to 3Q16. Launched volume for the year reached R$2.3 billion.

In the quarter, 14 projects/phases were launched in the states of São Paulo, Rio de Janeiro, Pernambuco, Bahia and Rio Grande do Sul. The Gafisa segment accounted for 44.5% of this quarter launches, while the Tenda segment accounted for the remaining 55.5%.

2,085

2,263

683 736673

303 325 374

380 411 299

1.0891.342

996 921

4Q15 3Q16 4Q16 2015 2016

Gafisa Segment Tenda Segment

Tablel 1. Gafisa Group Launches (R$ thousand)

Net consolidated pre-sales totaled R$667.5 million in 4Q16, up 38.3% y-o-y and 34.3% when compared to 3Q16. Sales from launches represented 73.5% of total sales, while inventory sales comprised the remaining 26.5%.

In the year, net consolidated pre-sales reached R$2.0 billion, an increase of 1.1% compared to 4Q15. In the year, total sales from launches accounted for 51.2% in the year.

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PREVIEW OF

OPERATIONAL RESULTS

4Q16 & 2016

In the 4Q16, the Gafisa segment accounted for 53.3% of net pre-sales, while the Tenda segment accounted for the remaining 46.7%.

1,931 1,952

483 497 667

237 239 312

245 258 356

1,016 1,142

915 810

26.5%

73.5%

4Q15 3Q16 4Q16 2015 2016

Gafisa Segment Tenda Segment

Launches Inventory

Table 2. Gafisa Group Pre-Sales (R$ thousand)

Consolidated sales over supply reached 19.0% in 4Q16, up 14.1% y-o-y and 14.2% compared to 3Q16.

The consolidated speed of sales for 4Q16 launches reached 37.4%, while in the year SoS reached 40.7%.

Table 3. Gafisa Group Sales over Supply (SoS)

During the fourth quarter of 2016, the Company delivered 14 projects/phases comprised of 3,084 units and representing a total of R$663.9 million in PSV. Delivery date is based on the date of the "Delivery Meeting" formalization, rather than physical completion, which occurs prior to the Delivery Meeting.

In 2016, 50 projects/phases were delivered, accounting for 10,585 units and representing a total of R$2.7 billion in PSV.

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PREVIEW OF

OPERATIONAL RESULTS

4Q16 & 2016

In 4Q16, the market value of consolidated inventory decreased 5.4% compared to 3Q16, totaling R$2.8 billion. In regards to 4Q16 sales, 26.5% related to remaining units, being R$72.5 million from the Tenda segment and R$104.6 million from the Gafisa segment.

The market value of Gafisa inventory, which represents 61.9% of total inventory, was R$1.8 billion at the end of 4Q16, a decrease of 11.1% q-o-q and 13.3% y-o-y. Tenda's inventory was valued at R$1.1 billion at the end of 4Q16, compared to R$1.0 billion at the end of 3Q16, up by 5.5%.

Table 4. Inventory at Market Value 4Q16 x 3Q16 (R$ thousand)

¹Adjustments of the period reflect updates related to the project's scope, date of launch and prices.

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PREVIEW OF

OPERATIONAL RESULTS

4Q16 & 2016

GAFISA SEGMENT

Focus on residential projects in the Middle, Medium-High and High income segments, with average unit sales price exceeding R$250,000.

Fourth quarter launches totaled R$299.4 million and consisted of 2 projects/phases in São Paulo City and 1 Project in Santos City. The sales speed of these launches reached 67.3%, the highest launches sales level over the past years. In 2016, the Gafisa segment launches reached R$920.8 million or 40.7% of consolidated launches.

Fourth quarter gross sales in the Gafisa segment totaled R$455.7 million. Dissolutions in 4Q16 were R$99.9 million, yielding total net pre-sales of R$355.8 million, up 37.7% q-o-q and 45.1% y-o-y. This performance was especially due to the good performance of projects launched in the last quarter of the year, which accounted for 56.7% of net pre-sales in the period. Year-to-date, net pre-sales totaled R$810.5 million. Out of R$355.8 million in net pre-sales in the quarter, 56.7% referred to sales of launches in 2016, hence with lower work progress.

The Gafisa segment's SoS for the last twelve months reached 31.5%, compared to 31.1% in the past 12- month period. In the 4Q16, SoS recorded its highest level since 4Q13, reaching 16.8% compared to 11.5% in the previous quarter and 10.9% in 4Q15.

Despite the still challenging political and economic environment, and its continued effects on the inventory products pricing, in 4Q16 the segment outperformed previous quarters results, due to good sales performance of launches in the fourth quarter. In addition to the strongest sales performance, with gross sales increasing 25.0% to R$455.7 million from 3Q16, the volume of dissolutions declined in 4Q16.

Gafisa continues to prioritize sales of remaining units, which achieved 29.4% of net sales for the quarter, considering projects launched before 2016. Dissolutions, in turn, were concentrated in projects launched until 2014, with higher work evolution, and accordingly, higher contribution from revenue recognition and margin structure.

Out of the 929 Gafisa segment units cancelled and returned to inventory during the year, 57.7%, or 536 units were resold during the same period.

In 4Q16, 3 projects/phases were delivered, accounting for 416 units and representing a total of R$292.7 million in PSV. In the year, 16 projects/phases were delivered, accounting for 3,747 units and representing a total of R$1.7 billion in PSV.

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