PDG Realty Empreend e Participacoes : 2Q17 Release

2Q17 and 1H17

Earnings Results

São Paulo, August 14th, 2017: PDG Realty S.A. (PDGR3) - Under Court-supervised Reorganization - announces today its results for the second quarter and first half of 2017. Founded in 2003, PDG develops projects for different segments and publics, operating in the development, construction and sale of residential and commercial units, as well as land plots.

(+ 55 11) 2110-4400

www.pdg.com.br/ir ri@pdg.com.br

Conference Call

Date:

Tuesday, August 15th, 2017

• Portuguese

  11:00 a.m. (Brasília)

  10:00 a.m. (NY)

  Tel.: (+ 55 11) 3193-1001

  (+ 55 11) 2820-4001

  Replay:

  (+ 55 11) 3193-1012

  Password: 2916849#

• English

(Simultaneous translation)

10:00 a.m. (NY)

11:00 a.m. (Brasília)

Tel.: +1 (888) 700-0802

+1 (786) 924-6977

Replay:

(+ 55 11) 3193-1012

Password: 7224191#

1H16 with 1H17, the increase was 13%. (page 19)

In this quarter, net loss decreased 28% over 2Q16. The semester net loss fell by 30% over 1H16. (page 21)

During 2Q17, we obtained occupancy permits for 2 projects (managed by PDG) totaling 613 units and a PSV of R$222 million. In the first half of the year, occupancy permits for 5 projects managed by PDG were achieved, with an PSV of R$390 million and 1,274 units in total, reducing the Company's operational and financial risk. (page 13)

On August 4, the Company disclosed a Material Fact informing of its alignment with its main creditors regarding some aspects of the Reorganization. The alignment includes the treatment to be given to the segregated properties under the Group and PDG Securitization companies, the allocation of the results of assets encumbered to the Banks and not tied to the segregated properties, and PDG Group's estimate of remuneration for managing the assets. (page 3)

2Q17 and 1H17 Earnings Results 1

Message from Management 3

Operating and Financial Indicators 6

Operating Performance - Launches 7

Operating Performance - Sales 7

Operating Performance - Cancellations and Resale 8

Operating Performance - Sales Speed (VSO) 10

Operating Performance - Inventory 11

Operating Performance - Land bank 13

Operating Performance - De-risking Panel 14

Operating Performance - Title Individualizations 14

Operating Performance - Historical Data 15

Operating Performance - Mortgage Transfers 15

Financial Performance 16

Balance Sheet and Income Statement 21

In 2Q17, we made efforts, together with our advisors, to detail and discuss PDG Group's Court Reorganization with the main creditors. Altogether, in June 6, 38 Court Reorganization plans were prepared and delivered, including PDG Realty and its subsidiaries.

The main Plan aims to encompass all of PDG Group's rights and obligations, except for the designated properties. The other 37 plans were submitted individually in order to include the rights and obligations related to each of the Designated Properties, ensuring that their respective creditors were granted full priority over the assets, in compliance with the Law. These Plans address the means of reorganization through which we believe it will be possible to sort out the current cash flow mismatch, maintain operational normality, and allow stalled works to resume.

The means of reorganization include: (i) PDG Group's business resizing; (ii) debt restructuring subject to the Court Reorganization; and (iii) raising new funds.

In the strategic-operational sphere, we initiated studies aiming to identify and possibly seize opportunities for future launches, allowing for the continuity of the Company's recovery process, as set out in the Reorganization Plan.

After delivering the Plans, we intensified the agenda of talks with creditors and other stakeholders to present and discuss any adjustments to the Plan, until the general meeting of creditors.

In this regard, on August 4, the Company disclosed a Material Fact informing of the alignment of some aspects of the Reorganization with three of its main creditors. Such alignment includes the treatment to be given to the designated properties of the Group companies and securitization companies, the allocation of the results of the assets encumbered to the Banks and not tied to the designated properties, and PDG Group's estimate of remuneration for managing the assets. It is important to note that the alignment is not binding on the Parties.

In addition, on August 4, a joint petition was filed, highlighting that the alignment points mentioned above must be detailed and negotiated between the Parties, and that their acceptance is subject to obtaining the applicable approvals, as well as to drawing up a new court reorganization plan to be assessed in a general meeting of creditors.

In the operational scope, we continue to work hard to maintain PDG's structure aligned with the needs of its operation, putting in constant efforts to reduce expenses and preserve cash.

With reference to cash preservation, this quarter an important change was made to the sales strategy, whereby we started to prioritize the sale of unencumbered units, that is, units that allowed cash to be generated immediately, in addition to prioritizing the sale of units whose resources could be used to pay expenses of the SPE itself.

As a consequence, due to the sales strategy adopted, gross sales amounted to R$63 million in 2Q17, down 22% on 1Q17 and 82% below the amount recorded in 2Q16. Of the R$63 million sold as a result of this new strategy, R$40.3 million relate to the sales of units whose resources can be used to pay the SPE's expenses, and R$22.7 million refer to the sales of units that generated free cash for the Company.

During 2Q17, the amount of cancelled contracts was R$113 million, 20% lower than that recorded in 1Q17 and 58% lower than in 2Q16. Even with the volume of cancelled contracts below that recorded in the last quarters, we continued to prioritize the cancelation of contracts of liquid and unencumbered units, which will generate free cash at the time of resale.

Therefore, due to the low volume of gross sales and contract cancellations in 2Q17, net sales

were R$50 million negative in the period.

The Company continues to make efforts to deliver the ongoing projects, seeking to minimize the impact on clients. Therefore, during 2Q17, 2 projects were delivered, totaling 613 units and approximately R$222 million in Potential Sales Value - PSV (PDG %). Hence, we started 3Q17 with only 19 projects in progress.

This quarter, 337 units were transferred, corresponding to a PSV of R$65 million. This decreased volume of transferred units resulted mainly from lower deliveries in the period, caused by the decreased pace of ongoing works, added by the smaller sales volume recorded during the quarter.

General and administrative expenses dropped 46% in 2Q17 over 2Q16. In 1H17, expenses reduced by 31%, in line with the Company's goal of readjusting its operating structure.

Selling expenses decreased 90% in 2Q17 over 2Q16 and 80% when compared to the 1H16. This reduction arose mainly from the lack of launches and sales campaigns, in addition to the reduced sales volume.