Strong Foundations: Leadership & Growth

Arcos Bosques Marco II
25th, Bosques de las Lomas
C.P. 05120, Mexico City, Mexico
consorcioara.com.mx ara.com.mx AN
CORPORATE GOVERNANCE
VERTICAL INTEGRATION
FINANCIAL STRENGTH
Independent Auditor Galaz, Yamazaki, Ruiz Urquiza, S.C. Member of Deloitte Touche Tohmatsu Limited
FOUNDING MEMBER OF
VIVIENDA Y ENTORNO
38 309 8
years of experience
segments: Progresiva, affordable entry level, middle income and residential
consecutive years with the best credit ratings in the sector
of the titled houses in 2014 were vertical
of 11 Board Members are independent
plants to produce our own ready- mixed concrete
thousand houses sold in our history, inhabited by 1.24 million Mexicans
] 2 [ ANNUAL AND SUSTAINABILITY REPORT 2014
| 3 | Corporate profile | 5 | Financial highlights | 6 | Strong foundations | 8 | Land bank | 10 | Message to our investors | 14 | Housing sector in Mexico | 18 | Housing products | 21 | Shopping Malls | 24 | Financial strength | 28 | Integration and value chain | 30 | Sustainability | 38 | ARA Foundation | 46 | Corporate Governance | 50 | Board of Directors | 51 | Management Team
Contents
] 3 [ STRONG FOUNDATIONS: LEADERSHIP & GROWTH
We are a Company that engages in the construction and marketing of progresiva, affordable entry level, middle income and residential housing. Beyond this, Consorcio ARA creates communities by carrying out the infrastructure, urbanization and equip- ping of our housing projects, as well as building and operating six shopping centers as the ideal complement to our developments.
In our more than 38 years of experience, we have built 309 thousand homes where 1.24 million Mexicans live. Since we began, we have become known for our diverse product range, long-term vision, healthy financial structure and moderate debt level.
For nine consecutive years we have maintained the highest credit ratings in the Mexican housing sector: “mxA” by Standard & Poor’s and “A2.mx” by Moody’s.
Since 1996, we have been listed on the Mexican Stock Exchange under the symbol ARA*. We currently have presence in 16 states with 44 housing developments.
Mission To develop homes and communities for Mexican lifestyles, where people can be proud to live.
Vision To be the most reliable, profitable and innovative real estate developer in Latin America.
Values • Honesty • Commitment • Responsibility • Quality
Corporate Profile
PARAISO COUNTRY CLUB Morelos segment: Residential
Financial highlights Millions of pesos
2014 2013
Gross profit 1,644.8 1,550.3
Financial (Income) Expense - Net -11.7 8.1
Net Income 490.0 464.3
Gross Margin 26.5% 27.0%
Operating Margin 9.8% 9.2%
Net Margin 7.9% 8.1%
EBITDA Margin 14.6% 15.6%
Total Current Assets 14,284.8 13,602.9
Total Assets 16,300.6 15,716.5
Total Liabilities 5,568.1 5,489.3
Retained Earnings 9,643.0 9,154.6
Stockholders’ Equity 10,732.5 10,227.1
Capital Expenditures 17.0 22.5
Net Debt 1,071.4 1,787.6
/ EBITDA (12m) 2.38 2.71
Interest Coverage 5.91 4.37
1.36 1.38
6 ,2
0 6
Strong foundations
FUENTES DE TIZAYUCA Hidalgo segment: Affordable entry level
Leadership In 2014, Consorcio ARA consolidated its leadership in the Mexican housing sector.
Elements such as our vertical integration, product innovation and solid sustainability practices, all based on an excellent human team and strong corporate governance, make the future look promising for our Company.
Growth In 2014, Consorcio ARA got back on the growth track with a solid 8.2% expansion in revenues. With this performance, the Company far exceeded the behavior of the Mexican economy.
With a strategic land bank, diversified range of housing products, the added value of its shopping centers and characteristic financial soundness, Consorcio ARA is ready to leverage the momentum of today’s housing market in the medium and long term.
Progresiva Affordable entry level Middle income Residential Other projects
Infonavit Fovissste SHF, banks and without credit
7.8
26.0
66.2
Titled homes by type of financing
2014 2013
Infonavit total and Cofinavit 967 9.0 1,230 11.3
Subtotal 7,125 66.2 7,167 66.0
Fovissste 2,799 26.0 2,648 24.4
SHF, banks and without credit 841 7.8 1,047 9.6
Total titled homes 10,765 100 10,862 100
2014 2013
PRICE [1] REVENUE [2] %
Progresiva 3,138 301.4 945.9 15.2 3,110 282.0 877.0 15.3
Affordable entry level 3,477 370.1 1,286.9 20.8 4,297 361.4 1,552.7 27.1
Middle income 3,521 766.9 2,700.3 43.5 2,779 719.5 1,999.4 34.8
Residential 629 1,809.0 1,137.9 18.3 676 1,724.1 1,165.5 20.3
Total housing 10,765 563.9 6,070.9 97.8 10,862 515.1 5,594.5 97.5
Other real estate projects 135.3 2.2 141.2 2.5
Total 10,765 6,206.1 100 10,862 5,735.7 100
[1] Figures in thousands of pesos [2] Figures in millions of pesos
2014
2014
One of our priority strategies is to have a strong land bank both in surface area and location. As of December 31, 2014, Consorcio ARA’s land bank amounted to 38.4 million m2 in nineteen states, enough area to build 155,576 master plan homes. Of this area, 2.8 million m2 are classified for real estate projects like commercial developments, tourism centers and industrial zones.
The book value of our land bank at the close of last year was $4,747.8 million. It should be noted that this figure relates to the cost of acquisition, as required by the International Financial Reporting Standards (IFRS).
As well as being located in states and zones of economic and demographic growth, our land bank is suitable for housing development in accordance with the current housing policy, a competitive advantage that set us apart during the crisis facing the public housing sector in 2013.
The core of our long-term vision is selectivity in our land purchases; today we are looking for more compact projects with more efficient densification. In 2015, we will continue our strategy of buying in places which require the continuity of our operations, given the current and potential demand, and in favorable locations in light of the housing policy.
Land Bank G4-5, G4-6, G4-8
Land bank by housing type % by revenues [1]
[1] Percentage obtained from multiplying units per 2014 average price.
Operating in:
16 states
18 cities
34 municipalities
44 developments
Quintana Roo 37,232 23.9
Nuevo León 9,717 6.2
Baja California 8,727 5.6
States in which we operate
States with land bank
In 2014, Consorcio ARA’s strategy to build strong foundations with a long-term vision proved to be the right one, allowing us to return to a path of healthy growth and thus consolidate our leadership in the Mexican housing sector.
Economic Environment and Housing Sector
During 2014, the Mexican economy grew by 2.1%, which was lower than expected. How- ever, legislative progress was made in the approval of the secondary laws of the structural reforms. This suggests a better outlook for the coming years.
Although the increase in national economic activity was less than expected, the housing sector was able to reverse the negative trend it presented since the end of 2012. The construction industry expanded, driven by a rebound in the building subsector1 of 10.1%, which reaffirmed it as a vital factor for economic growth, social development and job generation.
It is important to highlight Consorcio ARA’s performance in this environment; growth of 8.2% in revenues far exceeded the behavior of the economy, as well as meeting the goal we announced at the beginning of the year.
Message to our Shareholders
8.2% growth in revenues
The housing policy is focused on a sustainable ur-
ban development model and has contributed to
the upturn in our field. Consorcio ARA has had
the institutional strength and flexibility, both op-
erationally and financially, to adapt to the policy
to the benefit of ever more Mexican people.
This year was a remarkable example of how gov-
ernment authorities, through entities like the
Ministry of Agricultural, Territorial and Urban
Development (SEDATU), the National Housing
Commission (CONAVI), INFONAVIT, FOVISSSTE
forces with the private sector to give housing a
decisive boost.
contribution to the recovery. The program was re-
sponsible for the allocation of $11,495 million, a
47.1% growth over 2013, of which $7,931 million,
69%, went to the acquisition of new housing.
Clear rules, increased assignment of resources
and a higher number of workers eligible to re-
ceive a subsidy were factors that enabled us to
leverage the program so that 18% of our revenue
was related to subsidized housing, compared to
7% in the previous year. For 2015, a budget of
$8,435 million has been allocated to the subsidy
program.
a diverse mix of products (progresiva, affordable
entry level, middle income and residential hous-
ing) aimed at different market segments and
through different mortgage sources, allowing us
to meet the needs of an ever growing number of
families. It is worth mentioning that middle in-
come housing revenues represented 43.5% of our
total revenues (their biggest contribution in the
last five years) and grew 35%, confirmation that
our diversification strategy has been on track.
Consorcio ARA has always been distinguished by
quality, location, environment, sustainability and
the architectural and urban design of our devel-
opments. We maximize the value proposal for our
35% growth in middle income housing revenues
customers through sports installations, green ar-
eas, swimming pools, schools and even lagoons
and golf courses. We also equip our homes with
green technologies that in addition to their envi-
ronmental benefits, support the family budget by
reducing water and energy consumption. In 2014,
Consorcio ARA applied a total of 7,125 green
mortgages.
the new market requirements, at the end of 2014
we began the implementation of the BIM (Build-
ing Information Modeling) system. This technol-
ogy tool will increase our productivity, quality and
efficiency by facilitating communication between
the different areas of the construction process,
since it enables us to view the different stages in
3D and simulate the performance of materials in
real processes.
gross leasable area (GLA) of 157,000m2. In 2015,
we began the second phase of the Paseo Ven-
tura construction, our seventh shopping cen-
ter, which will add 24,000m2 to our total GLA.
It should be noted that in 2014, our Shopping
Malls Division reported a growth of 6%, in line
with the Group’s results.
We are working to make sustainability an inte-
gral part of the way we operate because of our
conviction that this is the best way to achieve
our long-term permanence. In addition, sustain-
ability is a fundamental element of the current
housing policy.
ing our sustainability behavior under the standards
of the Global Reporting Initiative (GRI), with the
aim of measuring progress, defining strengths
and recognizing areas of opportunity. It should
be mentioned that for the ninth consecutive time,
6% growth
DREAM LAGOON Veracruz segment: Residential
Ing. Germán Ahumada Russek Ing. Luis Felipe Ahumada Russek CHIEF EXECUTIVE OFFICER CHIEF EXECUTIVE OFFICER Housing Division Shopping Malls Division
Consorcio ARA was distinguished as a Socially Re-
sponsible Company by the Mexican Philanthropy
Center, in recognition of our achievements in 2014.
Also in the social aspect, we must highlight the
work of the ARA Foundation and its strategic
partners, whose more than 521 thousand actions
in 2014 benefitted a total of 1.6 million Mexicans.
Financially, we made significant achievements. We
increased our revenues by 8.2% and generated a
record $863 million in free cash flow for the firm,
doubling the $400 million originally predicted; we
reduced our net debt by 40%, and improved our
leverage ratios compared to the last three years,
particularly net debt to EBITDA, which reached 1.19
times against 1.99 times in 2013. It should be em-
phasized that the free cash flow came in a year in
which 39% of the units we sold were vertical.
The above, in addition to the prudent manage-
ment of our finances, helped us to maintain the
industry’s highest credit rating for the ninth con-
secutive year: “mxA” by Standard & Poor’s and
“A2.mx” by Moody´s.
ported was reflected in the annual yield of the ARA
share* in 2014, which reached 27%, well above the
1% of the IPC in the same period. The cumula-
tive yield of the ARA share* since 2013, when the
housing companies listed in the Mexican Stock Ex-
change suffered a liquidity crisis, is 57%, against
-1.3% of the IPC during the same period.
Our achievements in 2014 left us satisfied, but
not content. The challenges remain to build an
ever broader customer base, to serve the non-
salaried workers market, and consolidate new
credit schemes. The market changes, the industry
evolves and we must continue to show the flex-
ibility to adapt, with the unwavering commitment
to always offer housing that is a pride to live in.
The results of Consorcio ARA would not be pos-
sible without the participation of our employ-
ees, whose professionalism and commitment
have been central to overcoming difficult times
and leveraging the opportunities of this new
environment. With this letter, we express our
deepest gratitude.
shareholders, customers and suppliers, which has
been crucial throughout the Company’s life.
We will continue to build strong foundations so
that our leadership and growth remain.
27% profit of the ARA* share
BOSQUE SANCTORUM, Puebla segment: Middle income
Housing Sector in Mexico
During 2014, Mexico saw an economic growth of 2.1%, above the 1.1% of the previous year but still below original expectations.
According to data from INEGI, the construction industry grew by 6.8%, while the building subsector expanded by 10.1%, driven mainly by housing construction, whose development made it the branch with the second highest growth, behind the automotive industry.
Total investment in the housing sector in 2014, including construction financing, was $350 billion. The subsidy program was central to the sector’s rebound in 2014, allocating a total of $11,495 million (47.1% more than in 2013), of which 69% was for new housing. It should be noted that in 2014, 18% of our revenues came from subsidized housing, against 7% the previous year.
The current housing policy promotes the ordered and sustainable development of our sector; the leadership of SEDATU and the work of CONA- VI, INFONAVIT, FOVISSSTE and SHF have been key to its recovery. Among
PASEO DE LOS SAUCES Puebla segment: Progresiva
the most significant actions that were pushed were
the following adjustments and/or enhancements to
loan schemes to boost demand:
- Subsidies: i) Broadening the base of people eligi-
ble for subsidy by increasing the wage range from
2.6 to 5 times the minimum wage for a worker
to gain access. ii) Promotion of housing subsi-
dies through eighteen state conferences entitled
“México, la Casa de Todos.”
- Raising the maximum amount of INFONAVIT
credit, from $483 thousand to $850 thousand, an
increase of 76%.
PASEOS DEL BOSQUE Puebla segment: Residential
COLINAS DE LA PIEDAD Querétaro segment: Affordable entry level
69.0
10.0
10.3
Subsidies by type, 2014 (amount %)
- Release of the housing sub-account as collateral
for improvement and expansion loans.
Furthermore, other measures were announced in 2014
and are expected to be consolidated during 2015:
- INFONAVIT loan denominated in pesos, at a fixed
rate and up to 30 years, and the elimination of
titling costs for borrowers with an income of less
than 2.6 minimum wages.
- New FOVISSSTE in pesos, allowing the worker to
obtain a higher loan by adding guaranteed com-
pensations to the basic wage, for up to 25 years at
a fixed rate, in co-financing with SHF or banking
institutions.
CITARA State of Mexico segment: Affordable entry level
and municipal government employees, whose po-
tential demand is estimated at 2.5 million loans.
In 2014, INFONAVIT allocated 389,627 mortgage
loans (66.2% of which were for new housing) with
a total investment of $110 billion. FOVISSSTE, mean-
while, granted 63,693 loans (66.4% for new housing)
with a total investment of $38.5 billion.
The estimated investment for the sector in 2015 is
$370 billion for the construction of 500 thousand
houses. The goal for INFONAVIT is 350 thousand mort-
gage loans with an investment of $116 billion, while
FOVISSSTE hopes to place 70 thousand loans with an
investment of $38.2 billion.
The outlook for the housing sector for 2015 is bright.
Although the economic environment is challenging,
we believe housing will continue to be a key driver of
economic activity due to the sector’s solid founda-
tions, the country’s still attractive demographic bonus
and the availability of mortgage loans.
Satellite Housing Account in Mexico
The INEGI recently announced the Satellite Housing Ac-
count 2008-2012. Among the main results is the eco-
nomic importance of housing, which involves 78 class-
es of economic activity (8 main classes and 70 related).
Thus, the results of the account indicate that hous-
ing contributed 5.9% of GDP in 2012 and, if the at-
tributed rental value of homes inhabited by their
owners is included, the figures rise to 14.1%.
78 classes of economic activity participate in the housing sector
Consorcio ARA maintains a mix of housing products to satisfy the needs of the country’s different socio-economic segments, a feature that distinguishes us from the rest of the sector. Our institutional flexibility allows us to offer innovative products and participate with different mortgage providers, including INFONAVIT, FOVISSSTE, SHF and commercial banks.
As of December 31, 2014 we had 44 progresiva, affordable entry level, middle income and residential housing developments in 16 Mexican states.
Housing Products
Progresiva Product:
Price range:
TMMS***: 2 to 4
TMMS***: 4 to 10
Socioeconomic level: D+ / C-
The middle income and residential segments are an important part of our product portfolio since they serve a demographic group with good growth expectations. Rev- enues from middle-income housing, in particular, grew 35% and represented 43.5% or our total revenues in 2014, the highest percentage in the last ten years.
Middle income Residential Product:
TMMS***: 10 to 20
TMMS***: More than 20
* Includes every financing scheme: Infonavit Total, Cofinavit, Apoyo Infonavit and Infonavit Second Mortgage. ** Includes every financing scheme: Alia2 Plus, Respalda2, Conjugal, Pensiona2 and New Fovissste in Pesos. ***Times the Minimum Monthly Salary, equal to $2,131.03 in 2015.
Revenue mix
33.9 21.5
Product diversification
Residential areas
Projects with lagoon
Progresiva Affordable entry level Middle income Residential Other projects
SHOPPING MALLS
In addition to complementing our housing developments, shopping malls diversify ARA’s value range.
The Shopping Malls Division currently operates six
malls located in high demographic growth regions,
and which received more than 36 million visitors in
2014. This confirms that our shopping centers are lei-
sure stops and meet the needs of the population and
markets they serve.
In 2014, this business unit reported a 6.0% increase in
total revenues compared to the previous year, which,
like the Real Estate Division, surpassed the growth of
the Mexican economy. We also achieved a Net Oper-
ating Income (NOI) of $280.6 million, 6.2% more than
in 2013. We maintain a 50% share in four of the six
shopping malls, which are therefore not consolidated
into the Group’s financial statements.
At the close of 2014, our shopping centers included a
gross leasable area (GLA) of 155,532m2, in addition to
7,428m2 in unicenters and minicenters, bringing the
total GLA to 162,960m2. These malls reached a 94.2%
occupancy rate in the year.
One of the Shopping Malls Division’s strategies is to
create projects that follow new industry trends: de-
sign detail, visitor comfort and an attractive, diverse
commercial mix.
cause of the strategic location of the centers. Two of
them have the potential to expand their GLA in the
medium term. The Las Americas Shopping Center, for
example, which is inside the area of influence of the
Mexico City New International Airport project.
In 2015, we will begin the second phase of construc-
tion of our seventh shopping center, Paseo Ventura,
located in the attractive commercial zone of Ecate-
pec, State of Mexico. Paseo Ventura will comple-
ment the Las Americas Shopping Mall and add
24,000m2 to the total gross leasable area, bringing
it to 180,000m2. The new shopping center will of-
fer entertainment, recreation and food areas, among
other lines.
Shopping Malls
Centro San Miguel Centro Las Américas Centro San Buenaventura Plaza Oasis Plaza Carey Plaza Centella Operadora
de Unicentros
Municipality or City Cuautitlán Izcalli Ecatepec Ixtapaluca Tijuana Veracruz Cuautitlán Cuautitlán, Acolman and Coacalco
State State of Mexico State of Mexico State of Mexico Baja California Veracruz State of Mexico State of Mexico
Type Community Center
Fashion Mall Power Mall
Anchors Mega Comercial Mexicana Liverpool, Sears Walmart, SAM´S Bodega Aurrera Mega Comercial Mexicana Mega Comercial Mexicana Mega Comercial Mexicana Coppel, Bodega Aurrera Express
Sub-anchors C&A, Coppel
Sanborn's, Suburbia, C&A
Office Max, Martí, Sport City, FAMSA N/A FAMSA, Solo un Precio,
Peter Piper Pizza N/A Martí, Parisina, McDonald’s, D’Europe N/A
Cinema (# of Screens) Cinépolis (10) Cinépolis (14) N/A N/A Cinemex (9) N/A Cinepolis (10) N/A
Gross Leasable Area (GLA) All the complex (m2) 25,453 75,929 43,765 10,271 26,182 17,533 25,996 7,428
Gross Leasable Area (GLA) Propiedad ARA/Partner (m2) 25,453 47,524 14,089 10,271 26,182 17,533 14,479 7,428
Year of construction 2001 2005 2006 2007 2008 2011 2000-2010
% ARA 50% * 50% * 50% * 50% * 100% 100% 100%
* ONAPP = O’Connor North America Property Partners owns remaining 50%
LAS AMERICAS Shopping Mall State of Mexico
Centro San Miguel Centro Las Américas Centro San Buenaventura Plaza Oasis Plaza Carey Plaza Centella Operadora
de Unicentros
Municipality or City Cuautitlán Izcalli Ecatepec Ixtapaluca Tijuana Veracruz Cuautitlán Cuautitlán, Acolman and Coacalco
State State of Mexico State of Mexico State of Mexico Baja California Veracruz State of Mexico State of Mexico
Type Community Center
Fashion Mall Power Mall
Anchors Mega Comercial Mexicana Liverpool, Sears Walmart, SAM´S Bodega Aurrera Mega Comercial Mexicana Mega Comercial Mexicana Mega Comercial Mexicana Coppel, Bodega Aurrera Express
Sub-anchors C&A, Coppel
Sanborn's, Suburbia, C&A
Office Max, Martí, Sport City, FAMSA N/A FAMSA, Solo un Precio,
Peter Piper Pizza N/A Martí, Parisina, McDonald’s, D’Europe N/A
Cinema (# of Screens) Cinépolis (10) Cinépolis (14) N/A N/A Cinemex (9) N/A Cinepolis (10) N/A
Gross Leasable Area (GLA) All the complex (m2) 25,453 75,929 43,765 10,271 26,182 17,533 25,996 7,428
Gross Leasable Area (GLA) Propiedad ARA/Partner (m2) 25,453 47,524 14,089 10,271 26,182 17,533 14,479 7,428
Year of construction 2001 2005 2006 2007 2008 2011 2000-2010
% ARA 50% * 50% * 50% * 50% * 100% 100% 100%
PARAÍSO COUNTRY CLUB, Morelos segment: Residential
Financial Strength
A fundamental trait of ARA is its financial prudence, which has seen us through difficult times and set us apart during the liquidity crisis facing the public housing sector in 2013. Year after year, our strategy of being a company of high value and responsible finance has proved to be on track.
As an example of this, debt levels remain moderate and with an optimum maturity profile. Our net debt at December 31, 2014 was $1,071 million, 40% lower than that reported at the close of 2013, while cost-bearing debt was $2,147 million, 11.7% less than the previous year. Regarding the maturity profile of cost-bearing debt, 19.2% is short term and 80.8% long term, and denominated in pesos, en- abling us to avoid exchange rate losses as a result of the dollar appreciation.
Bridging loans have been a source of quick and effective financing, particularly the $1,000 million credit line with the Federal Mortgage Society (SHF), and another for $500 million with a banking institution. To date, projects have been signed for $558 million. The balance of bridging loans at the close of 2014 was $311.7 million, against only $11 million in 2013.
COLINAS DE ALTAR, Morelos segment: Middle income
IPC
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
els, even below those reported in the last three years.
The net debt to EBITDA ratio stood at 1.19 times,
against 1.99 times in 2013. The cost-bearing debt to
EBITDA was 2.38 times, an annual decrease of 0.33
times, while interest coverage went from 4.37 times
in 2013 to 5.91 times in 2014.
Thus, for the ninth consecutive year the Company has
maintained the highest credit ratings for the Mexican
housing sector, “mxA” by Standard & Poor’s and “A2.
mx” by Moody´s.
generation of a record $863 million in free cash flow
for the firm, more than twice the original goal of
$400 million. It should be said that this cash flow
was achieved in a year in which 39% of our hous-
ing revenues were vertical. Cash position and cash
equivalents, meanwhile, amounted to $1,076 mil-
lion, 67.3% more than the previous year.
All of the above contributed to the 27% annual yield
per ARA* share in 2014, a particularly strong figure
when compared to the 1% of the IPC in the same
period. Cumulative yield per ARA* share since 2013,
when the housing sector’s liquidity crisis occurred,
is 57%, while the IPC in the same period has been
-1.3%.
We generated free cash flow for the firm in the amount of $863 million, a record figure
for Consorcio ARA.
FORESTA State of Mexico segment: Residential
Integration, technology and value chain
PARQUE LA GLORIA Querétaro segment: Residential
Being a vertically integrated company affords advantages both in operating efficiency and scale economy, benefitting ARA and its customers. COMACI (Con- crete, Machinery and Formwork) operates 17 ready-mixed concrete plants just outside or even inside ongoing developments, to supply ready-mixed concrete in a timely manner.
COMACI also increases quality, improves delivery times and helps sustainability, since it reduces CO2 emissions by optimizing transport.
Furthermore, in Consorcio ARA we have begun the implementation of the BIM (Building Information Modeling) System, technology that will increase our productivity, efficiency and quality. BIM enhances inter-area communication, enables 3D visualization of the different construction phases and simulates the performance of inputs, all with the aim of adhering to international standards and meeting the newest market requirements.
G4-12
Titling processing
SustainabilitySustainability
Stakeholder Groups
groups: employees, customers, suppliers, sharehold-
ers, community and authorities in the different lev-
els of government. These relationships are based on
respect, transparency and the behavior established in
our Code of Conduct and Ethics at Work.
G4-26 We use a number of mechanisms to inter-
act with our stakeholders, such as the contact line
(01800 0220581) and the customer services line
LineARA (01800 5463272), quarterly telephone con-
ferences with our shareholders and internal e-mail,
among others. We also have profiles on Facebook and
Youtube.
G4-EC1 Housing is a key driver of development in
the Mexican economy, as its contribution of 5.9% to
GDP in 20121 shows. Consorcio ARA is one of the sec-
tor’s leading players and the economic value it gener-
ated and distributed in 2014 can be seen in the Con-
solidated Financial Statements.
G4-EC4 G4-SO6, G4-SO7, G4-SO8 Consorcio
ARA made no contributions to political parties or re-
ceived any financial help from the government. The
Company did not receive any complaints of monopo-
listic or anti-competitive practices, or incur any pen-
alties for breach of regulations.
G4-EC6, G4-EC7, G4-EC9 Most of our suppliers
are domestic and we make our purchases centrally. In
the plants. In the same way, all our senior executives
are Mexican and as far as possible have experience in
the locations where they work.
Environmental Dimension
is a priority. We work to ensure that our production
processes are eco-friendly and comply with the ap-
plicable environmental legislation.
FONAVIT Green Mortgage program seeks to promote
sustainability in housing developments. The scheme
grants eligible borrowers an additional amount to pur-
Sustainability in Consorcio ARA consists of aligning environmental performance, community quality of life and employee wellbeing to the financial and operating performance of the Company.
chase housing with eco-techniques, which optimize
water and energy consumption and reduce CO2 emis-
sions. ARA applied a total of 7,125 green mortgages
during 2014, which yielded savings of 5,486 ton of CO2.
Description 2014 2013 Solar heaters 805 1,627
Water heaters 8,872 9,225
Energy-saving bulbs 77,537 79,072
Water purifiers 6,557 6,887
Water-saving showers 14,677 4,301
generate savings of between $100 and $400[2] by re-
ducing water and energy consumption.
To further enhance the quality of life of our home-
owners, we afford our housing developments the in-
frastructure and utilities that increase the value of
their homes, including:
School classrooms 29
Community gardens 9,026m2
Sports area 16,821m2
G4-EN1, G4-EN2 In 2014, we consumed around
445,000m3 of concrete, 12,429 tons of steel, and 3
million m2 of electrowelded wire mesh, which are
the materials most used in housing construction.
We do not use recycled materials in our building
processes.
vulnerability of water, we have launched specific ac-
tions to protect it, such as the eco-techniques and
treatment plants we provide in our developments,
which are located so as not to affect any primary
water source.
such as treatment plants, water purification plants,
pumping sumps and elevated tanks, among others.
G4-EN11 Our developments, shopping centers and
entire land bank are located outside protected or high
biodiversity areas.
26, G4-EN29 In 2014, no waste was transported or
managed nor were there any sewage spills. We did
not incur any significant environmental fines or pen-
alties.
used by 164 employees and which covered more than
50,000 km in 2014. Similarly, the COMACI plants are
located close to our developments to further reduce
environmental impact from transportation.
investment of $54 million into environmental tech-
nologies (like eco-techniques).
SO9 Although Consorcio ARA has not investigated
the environmental, labor, social or human rights
practices of its suppliers, we strive to incorporate our
vision of sustainability throughout our value chain.
Social Dimension
of providing excellent working conditions for our em-
ployees on the inside, and contributing to the well-
being of the communities we come into contact with
on the outside.
CITARA, State of Mexico
COLINAS DE ALTAR, Morelos
Human Capital
personal and professional growth in a respectful and
safe environment that allows them to develop their
potential to the full.
though we recognize and respect the right of every
worker to belong to the union of his or her choice,
none of our workforce is unionized or attached to
collective bargaining agreements. We ended 2014
with 802 employees in the Housing Division, distrib-
uted as follows:
its workers at least four times the current minimum
wage and provides allowances and benefits above the
requirements of the law:
- Thirty days’ annual bonus
counts
period of notice prior to organizational changes.
G4-LA3 During the year, fifteen of our 306 employ-
ees enjoyed a total of 983 days’ maternity leave, and
all were given the opportunity to return to work at
the end of their leave. In addition, one employee exer-
cised his right to paternity leave, at the end of which
he returned to his activities.
As part of our efforts to provide a collaborative,
pleasant working environment, we launched the
Quiniel-ARA competitions and the bowling tourna-
ment, activities that helped to create harmony in the
work centers and which drew the participation of 142
employees.
ceived in 2014, of which nine were admissible.
By Age
By Gender
By service time
Under 18 0 From 18.1 to 25 years 24 From 26 to 30 years 125 From 31 to 40 years 342 From 41 to 50 years 229 From 51 to 60 years 66 Over 61 years 16
Total 802
Under 1 188 From 1 to 3 163 From 3.1 to 5 122 From 5.1 to 10 175 From 10.1 to 20 134 More than 20.1 20
Total 802
Training
of our employees to ensure they have the skills they
need to properly perform their activities. For this rea-
son we implement training programs across all levels
of the Company.
G4-LA9, G4-LA10 In this way, as part of the broad
range of professional training we offer, both in-per-
son and distance, our employees received a total of
14,629 man-hours of training on topics including:
- Induction: new intakes and sales consultants.
- Housing loans.
- Situational Leadership Fundamentals
It should be noted that 124 sales consultants met the
performance criteria in housing loans and were certi-
fied under the ECO458 standard.
G4-52, G4-LA11 We are certain that measuring
the performance of our personnel helps to ensure the
ongoing improvement of their duties. Thus, in 2014,
we performed a total of 3,120 quarterly evaluations
on our employees across all areas.
Diversity and Equal Opportunities
enforces gender equality across-the-board, including
wages, hiring, training, development and promotions.
Female personnel occupy 23% of all managerial and
executive positions.
the year and 33 others received salary adjustments.
Health and Safety
sponsibility between the Company and employees, and
so we promote a safety culture focused on prevention.
G4-LA5 A vital piece of this approach is the ARA
Brigade, which is made up of 45 brigade members
whose aim is to disseminate self-protection mea-
sures, encourage personnel to participate in accident
prevention and occupational risk management, and
respond in a timely manner to any event that threat-
ens the continuity of the business. The ARA Brigade
organized a building evacuation course in which 28
employees participated.
Briefings were held which were attended by 235
employees, a desk drill with 205 participants and
a mock evacuation with 213 employees.
G4-LA5, We have disease prevention and
healthcare programs for our employees. Our en-
tire workforce is registered with the Mexican So-
cial Security Institute (IMSS).
ported during the year, six of which were on the
way to work. However, we achieved another year
without fatalities in our operations.
Human Rights
who are under-age and none of our employees
works with us against their will. There were no re-
ports of incidents or grievances related to discrim-
ination or violation of human rights or indigenous
rights during the year.
current regulations in terms of urban develop-
ment and housing both in design and construc-
tion. During 2014, there were no incidents of
non-compliance with advertising or marketing
regulations.
personal data of its customers in accordance with
the Federal Law on the Protection of Personal
Data Held by Private Parties, and no significant
complaints were received in this regard.
Customer Service
relationships with our customers and so their
satisfaction is our priority. Our Customer Service
team provides information and attention to en-
sure that new residents get to know the ameni-
ties and services and become familiar with the
development where they will live, so they can
enjoy it to the full.
In 2014, we created “LineARA” (01 800 5463272),
a telephone service through which homeowners
can inquire about the delivery of their home,
Customer Service
make a report to validate its warranty, ask about
neighborhood events and in general, use it for
suggestions, questions or complaints. Also, to
maintain proximity to current and potential
customers, we directed significant efforts to our
Facebook page: www.facebook.com/ARAContigo,
important factors for homeowners is the proper
functioning of the development and its contribu-
tion to the urban image. “ARA Community” is an
area whose aim is to promote good neighborhood
organization to enhance the value and quality of
life of every home in our developments.
To this end, thirty of our fifty-eight Customer
Service executives have been trained and certi-
fied as “Neighborhood Promoters” by the Com-
petency Standardization and Certification Coun-
cil (CONOCER), under the competency standard
“Consulting for Neighborhood Organization in
Housing Areas.”
events that generated 65,980 positive impacts for
families within our housing developments:
Actions Description Positive Impacts (people benefitted)
Cultural and Integration
23 integration events nationwide, such as the Day of Kings, Children’s Day, Mother’s Day, Mexican nights, Day of the Dead and Christmas posadas, among others.
4,600
Sports Karate and Zumba classes and a Mini Marathon. 600
Security Proximity Policing Program, with workshops on theft prevention and security. 200
Health Five conferences on health and vaccination. 1,000
Environment and Rescue of Spaces
- Four clean-up days. - Painting and Maintenance events. - Two Fumigations. - “Water Care” workshop
50,888
Reforestations - Reforestation of 1,000 White Cedar trees. - Planting of 150 trees: 40 Acacia, 40 Pirul and 40 Palm, 20 Olneya and 10 Mesquite.
8,692
65,980
were held and we delivered 140 condominiums.
We these actions we generate communities that
learn to self-manage and to manage the tools
that help them to improve their environment and
quality of life.
ARA Foundation
The balance between good operational and economic performance and equally solid environmental and social practices is one of Consorticio ARA’s great strengths.
G4-15 So, for the ninth consecutive year, the Mexican Philanthropy Center (CEMEFI) awarded Consorcio ARA the distinction of Socially Responsible Company, under more rigorous standards and with the delivery of more detailed information, while for the second year in a row PRONA- TURA México A.C. recognized our efforts towards nature conservation.
G4-16 The ARA Foundation (the Foundation) helps the country’s most vulnerable sectors and contributes to the care of the environment through projects to mitigate or offset its environmental footprint.
G4-SO1 In 2014, the Foundation and its allies carried out more than 521,852 actions to benefit more than 1.6 million people. Through strategic partnerships we strengthened ties with companies, foundations, associations, governments and society to raise the quality of life of Mexicans with construction, urban improvement, educational, health, environmental and volunteer projects.
Mission: To provide development opportunities to raise the quality of life of Mexicans.
Vision: For Consorcio ARA, through its Foundation, to be recognized as the construction company doing the most social work.
Values: • Respect • Service • Transparency • Integrity • Loyalty
In addition, we work to achieve our objectives to:
i) be a Foundation of partnerships, with our em-
ployees and our society; ii) be a Foundation with
clear and transparent financial operations; iii),
deliver quality homes, contributing to the con-
servation of the environment and the life of the
community; iv) support communities through
programs that provide vision aids, training and
development, scholarships and improvements to
urban, housing and educational infrastructure,
and v) support families affected by natural di-
sasters.
Every family in Mexico has the right to a decent
home. The Foundation and its partners have cre-
ated quality projects to generate lasting proper-
ties to benefit ever more Mexican families.
a. Partnerships That Build
more than 19,100 people, with an invest-
ment of $865 million. In particular, during
the year homes were delivered to victims of
Hurricane Manuel in Guerrero in collabora-
tion with the DIF Nacional, the Anahuac Uni-
versity and the United for Them (Unidos por
Ellos) partnership.
to 23,477 benefitting 117,380 people over the
course of nine years.
ship trained more than 3,600 people in trades
such as painter, weather proofer and plas-
terers. With a total investment of $360 mil-
lion, we painted 72,004 façades altogether in
twenty-one states and Mexico City.
With PEMEX’s involvement in Urban Heart
since 2014, we have been able to extend the
benefit to the country’s oil states and zones.
2. EducARA For a Better Future
The high rate of children who abandon school
because of lack of resources leads to delinquen-
cy and hinders the country’s progress. To fight
3,824 homes built, PROVIVAH
19 thousand people
this phenomenon we created partnerships that
support education, and have joined the National
Program for the Social Prevention of Violence
and Crime to further the development of Mexi-
can children.
For the fourth consecutive year our partner-
ship with HSBC México and Fundación Lazos
achieved its goal to reach 34 schools and 26
states. In these four years some 5,593 chil-
dren have benefitted, with the contribution of
11,334 voluntary man-hours and an invest-
ment of $64.9 million.
With this program we have been able to
change the future of twenty-five children ev-
ery half hour, by delivering 438,329 pairs of
eyeglasses in partnership with the See Well to
Learn Better Trust Fund.
Interior, Education and Health and the Inte-
grated Family Development (DIF) system in
the framework of the PreVer program (part of
the National Program for the Social Preven-
tion of Violence and Crime) have joined the
effort to provide free eyewear to all elemen-
tary school children who need them.
With the participation of 131 municipalities
and 5 delegations in 31 states and Mexico City,
during the 2013-2014 school season a team
of optometrists tested more than 1.2 million
children with an investment of $657.4 million.
c. Ethical and Sustainable Leaders to
Antarctica
eral Administration of Educational Services
in Mexico City (AFSEDF) and the Karla Whee-
lock Foundation launched the Fourth Invita-
tion to public high school students in Mexico
City to participate in the contest “Ethical and
Sustainable Leaders to Antarctica,” consist-
ing of the development and operation of
sustainable projects.
438,329 glasses given
to 1.2 million children evaluated under the See Well to Learn Better program
34 schools in 26 states
5,593 children sponsored
the ARA Foundation consisted of a $163,000
grant for one of the winners.
d. Virtual Vaccine
$240,000 was contributed to the develop-
ment of the “Virtual Vaccine” project, a digi-
tal application aimed at children from six to
twelve years that will be a friendly, didactic
tool to help prevent addictions.
3. ARA Community We want a great fu-
ture for all.
a. I Volunteer
of Consorcio ARA personnel, more than 1,740
toys were collected for children in twelve pe-
diatric hospitals in Mexico City.
A partnership with the Government of the
Interior and VIRAL as part of the National
Program for the Prevention of Violence and
Crime seeks to integrate communities and
rescue public spaces in the Tepito neighbor-
hood to improve the family life and quality of
life of its residents.
children and more than 210 volunteers, in
addition to in-kind donations from compa-
nies partnered with our Foundation. Con-
sorcio ARA personnel made their donation
to the annual national Telethon collection
through the “ARA Foundation Digital Piggy-
bank.”
family day race and CONFE held the “Run for
You and Walk with Me” race, with the partici-
pation of people with different abilities.
d. Area Rehabilitation Project
private areas through paint donations. In
2014, the following institutions were helped:
- Instituto José David A.C. in Chihuahua.
- The Tres Piedritas shelter, together with
the Checo Pérez Foundation in Zapopan,
Jalisco.
ters for abandoned children in Mexico City.
- DIF Huehuetoca for the rehabilitation of
the Women’s Clinic.
Amistad para Niños con Cáncer.
e. Sale of Products with a Cause
The ARA Boutique sold more than 1,700 Prod-
ucts with a Cause among our employees, in col-
laboration with the Friendship Home for Chil-
dren with Cancer, CONFE, KADIMA, Chunches
and the Checo Pérez Foundation. The resources
obtained are used to provide employment to
young people with different abilities, treatment
for children with cancer and care for aban-
doned children in shelters in Jalisco.
4. SustentARA for our world.
The partnership between the ARA Foundation and
PRONATURA is vital to our objective of achieving
optimal environmental development in our op-
erations. Our key lines of action are:
- Improved process efficiency.
natural resources.
400 children
and over
210 volunteers
activities
- Prevention, control and mitigation of emis-
sions and waste.
rehabilitation of mangroves with the non-profit
organization Flora, Fauna y Cultura de México; the
natural resources conservation project of the Izta
Popo national park; and the recycling program of
Consorcio ARA’s corporate offices. These efforts
have the following objectives:
bility that allows us to reduce greenhouse gas
emissions.
• WATER
the use of water through technology.
• BIODIVERSITY
tions; recycle and utilize waste; promote pro-
grams to conserve our natural and cultural
heritage; and conserve our ecosystem.
a. Corporate Sustainability Standard
was performed in conjunction with PRONA-
TURA to identify improvement opportunities
to offset negative impacts on nature and
reduce energy and water consumption and
waste generation.
“Green Purchasing Manual” with which we
are able to quantify the technologies, savings
and benefits of the inputs we use.
G4-15 From the results of this diagnosis,
PRONATURA granted Consorcio ARA the Cor-
porate Sustainability Standard of “Satisfac-
tory” for the second consecutive year.
CITARA, State of Mexico
over 6 civil organizations beneffited
b. Mangrove rehabilitation
es given by the Foundation and its allies to the
Mangrove Rehabilitation Program of the Flora,
Fauna y Cultura de México civil association,
resulted in the rehabilitation of 64.48 hectares
of mangrove with 360,000 red and botoncillo
mangroves in Quintana Roo, the elimination of
the invading species casuarina equisetifolia in
2,403 trees, and the training and employment
of over 30 people, among other actions.
c. Conservation of natural resources in
the Izta Popo National Park
In partnership with PRONATURA, the Founda-
tion aims to preserve 10 damaged hectares,
monitor the development of the plantings
made, estimate the potential capture of CO2
from those hectares and estimate the volume
of surface water they provide. This will help to
preserve the biodiversity of native and en-
demic species of the volcano region.
d. Recycling campaign
offices of Consorcio ARA, in conjunction with
Recupera recycling centers. We advocate recy-
cling to reduce the use of natural resources and
generate alternative energies to mitigate eco-
logical harm. In 2014 we managed to collect:
- 2,653 kilos of different types of paper
- 141 kilos of PET
- 362 kilos of cardboard
Action Total Comment / Conversion
44 Trees from being felled to make new paper.
65,754 Liters of water that would be used to make new paper; the equivalent of leaving a shower running for almost 56 hours.
7 Kilos of aluminum, enough to keep a 60 watt bulb lit for 2.3 months.
349 Kilos of plastic PET bottles, enough to manufacture 3,629 extra-large textile fiber shirts.
2,529 Kilos of paper and cardboard that contributed to not using 10,368.9 kw to manufacture virgin fiber paper, enough to supply electricity to an average home for 2.42 years.
We would like to thank our partners:
Companies 3e de México, Alltournative, ANTAD, CANADEVI, Cementos Moctezuma, CEMEX, Cinépolis, COMEX, Costco de México, FTP, Galia Moss, HSBC México, Office Depot, Universidad Anáhuac,
Vitromex de Norte América Construcción, Volaris, Walmart de México, Kenworth Metropolitanos, Grupo Industrial de Poliestireno, Protección Anticorrosiva de Cuautitlán, Shunko Technology,
Cocinas Ferreti, Industrias Ridolfi.
NGOs Bécalos, Casa de la Amistad para niños con Cáncer, Centro Mexicano para la Filantropía, CENACED, Chunches, Comité de Ayuda en casos de Emergencias Nacionales, Consejo de la
Comunicación, Corazón Urbano, Cruz Roja de México, Fideicomiso PROVIVAH, Fideicomiso Ver Bien para Aprender Mejor, Flora, Fauna y Cultura de México, Fundación Audios, Fundación
Chedraui, Fundación Chrysler, Fundación COMEX, Fundación Gonzalo Río Arronte, Fundacion Karla Wheelock, Fundación Lazos, Fundación Telefónica, Fundación TELETÓN, Fundación Te-
levisa, Fundación Vizcarra, Inclúyeme, KADIMA, Nacional Monte de Piedad, PRONATURA, Recupera Centros de Reciclaje, UNICEF, UNIRED, CONFE, Instituto José David, Fundación Checo
Pérez, Asociación Nuestro Hogar ANAR.
Government CONAVI, Iztacalco delegation, DIF of the State of Mexico, FONHAPO, the State Governments of Baja California Norte, Baja California Sur, Chiapas, Chihuahua, Coahuila, Colima, Distrito
Federal, State of Mexico, Guanajuato, Guerrero, Hidalgo, Jalisco, Michoacán, Morelos, Puebla, Quintana Roo, Sonora, Tabasco, Tamaulipas, Yucatán, the municipalities of Cozumel, Ecatepec,
El Marqués, Huehuetoca, Naucalpan, Pachuca, Tlajomulco de Zúñiga, Zapopan, Office of the First Lady of Mexico, Ministry of Public Education and its State Delegations, Ministry of Health of
the Federal Government, Ministry of Health of the Government of Mexico City, National System for Integrated Family Development (DIF Nacional), Ministry of the Interior, Under-Ministry of
Prevention and Citizen Engagement of SEGOB, PEMEX.
64 restored
mangrove plants
] 45 [ strong foundations: leadership & growth
EX-HACIENDA SANTA INÉS, State of Mexico
PASEO DE LOS SAUCES, Puebla
Corporate Governance CorporateCorporate Governance Corporate Governance Corporate
COLINAS DE ALTAR Morelos segment: Middle income
Solid Corporate Governance practices are a pillar of Consorcio ARA’s leadership.
G4-34 The Board of Directors of Consorcio ARA meets four times a year, in accordance with the provi-
sions of the Securities Market Law (LMV for its Spanish acronym) and the Company’s bylaws. In 2014,
the attendance at those meetings was 95%.
G4-39 The Chairman of the Board is also the CEO of the Housing Division.
G4-38 The Board has eleven members, all men (one woman acts as an alternate). Eight of the mem-
bers are independent, well above that established by the LMV. The length of service of Board members
is given below:
Length of Service in Years As of Dec 31, 2014
Germán Ahumada Russek 26 Chairman
Luis Felipe Ahumada Russek 26 Vice Chairman
Germán Ahumada Alduncin 11 Vice Chairman
Pedro Alonso Angulo 11 Board Member
Luis Ramón Carazo Preciado 11 Board Member
Roberto Danel Díaz 11 Board Member
Félix Gavito Marco 19 Board Member
Francisco Javier Lomelín Anaya 7 Board Member
Andrés Massieu Berlanga 16 Board Member
Ricardo Paullada Nevarez 1 Board Member
Raúl Robledo Tovi 8 months Board Member
G4-40, G4-41, G4-51 To select its independent mem-
bers, the Board of Directors considers experience, capa-
bility, professional prestige and absence of conflicts of
interest in the performance of their duties. The appoint-
ment and endorsement of the members is subject to the
approval of the Meeting of Shareholders, and their remu-
neration is described in the Company’s Financial State-
ments. All the Board Members have a proven track record
and expertise in strategic topics for Consorcio ARA, such
as housing, finance and corporate governance.
G4-34, G4-42 The Board has an Audit Committee and
a Corporate Practices Committee, presided over by Félix
Gavito Marco and Roberto Danel Díaz, both of whom are
independent Board Members.
cuss the Company’s financial statements; monitor the
internal control system; evaluate the performance of
external auditors; report on internal audit functions;
inform the Board of any irregularities of which it be-
comes aware; receive and analyze the comments and
observations made by the shareholders, Board members
and executive officers; and other powers under the Se-
curities Market Law.
Practices Committee are to deliver an opinion on the
policies and guidelines for the use of Company assets by
related parties, and the evaluation and compensation of
the CEO and senior officers.
G4-46 It should be mentioned that from 2014, the ac-
tivities of the Planning and Finance Committee were ab-
sorbed by the Corporate Practices Committee, which to-
day also oversees the policies and practices of Consorcio
ARA in matters of finance, provides a strategic overview
to ensure its stability and permanence and is responsible
for risk management.
manages impacts and evaluates the economic oppor-
tunities for the Company through the Annual Report
that is presented in accordance with the general pro-
visions applicable to Securities Issuers and other Se-
curities Market participants, for the fiscal year ending
December 31, 2014.
ment team interacts with the committees at least once a
quarter to review issues relevant to the Company.
G4-15 Since 2003, Consorcio ARA has adhered to the
Code of Best Corporate Practices issued by the Business
Coordinating Council, and reports its compliance annu-
ally to the Mexican Stock Exchange through the Best Cor-
porate Practices Questionnaire.
G4-SO8 In 2014, Consorcio ARA did not incur any pen-
alties or significant fines resulting from non-compliance
with laws and regulations.
G4-56, G4-SO4 The Code of Conduct and Ethics fol-
lows our values of Honesty, Commitment, Responsibility
and Quality, and regulates the ethical behavior that en-
sures integrity and transparency in all our actions. It can
be seen at: www.consorcioara.com.mx
and corporate life.
Advisory and Reporting System includes the ARA Con-
fidential Hotline which is available to our stakeholder
groups to report any violation of the Code of Ethics:
- Metropolitan area: 5251 7489
- E-mail [email protected]
and dealt with were as follows:
Year Num. of Grievances 2014 25
2013 37
2012 34
ported to the Board of Directors. Of the 25 grievances
received in 2014, 20 were investigated, and their resolu-
tion ranged from reprimands to final dismissal (in the
case of corruption).
G4-SO11 During the year, no complaints were received
on environmental issues, discrimination, human rights
violations or claims about social impacts.
Board of Directors The members of the Board of Directors and the presidents of the auxiliar
committees for 2015, will be appointed or ratified at the Ordinary
Shareholders’ Meeting on April 27, 2015
• Independent Board member Related Board member Owner Board member
COMMITTEE NAME POSITION ALTERNATE
Luis Felipe Ahumada Russek vice chairman Guillermo Alberto Riveroll López
Germán Ahumada Alduncin vice chairman J. Sacramento Soto Solís
P Pedro Alonso Angulo• board member María Cristina Hernández Trejo•
P Luis Ramón Carazo Preciado• board member Eugenio Riveroll Picazo•
A y P Roberto Danel Díaz• board member Manuel Gutiérrez García•
A y P Ricardo Paullada Nevárez• board member Alfredo Sánchez Torrado•
A Félix Gavito Marco• board member Lorenzo Lucas Sánchez•
Francisco Javier Lomelín Anaya• board member Carlos Hernández Magallanes•
A Y P Andrés Massieu Berlanga• board member Alejandro C. Álvarez Certucha•
P Raúl Robledo Tovi• board member José Alberto Flores Athié•
Ricardo Maldonado Yáñez secretary
A: Audit P: Corporate Practices
Corporate Directors
Luis Felipe Ahumada Russek | CHIEF EXECUTIVE OFFICER, SHOPPING MALLS DIVISION
Housing Division
Alicia Enriquez Pimentel | INVESTOR RELATIONS DIRECTOR
Martín Guevara Hernández | BUSINESS DEVELOPMENT DIRECTOR
Carlos López Pérez | INTERNAL AUDIT DIRECTOR
Miguel Lozano Pardinas | OPERATIONS DIRECTOR
Edgar Martínez Chavolla | PROJECT DIRECTOR
J. Sacramento Soto Solís | FINANCIAL AND HUMAN RESOURCES DIRECTOR
Rodolfo Trujillo Mondragón | LEGAL DIRECTOR
Regional Commercial Directors | Housing Division
Carlos Ávila Viveros | STATE OF MEXICO | BAJÍO
State of Mexico, Guanajuato, Hidalgo, Querétaro
Fernando Calderón Nava | MEXICO CITY
Carlos Falcón Pimienta | EAST Puebla, Veracruz
Ricardo Martínez Hernández | CENTER | SOUTH Guerrero, Morelos, Quintana Roo
Eduardo Ordaz de la Fuente | RIALTA | NORTH | WEST Baja California, Chihuahua, State of Mexico, Jalisco, Morelos, Nayarit, Nuevo León,
Sinaloa, Sonora, Tamaulipas
About this Report
G4-28, G4-29, G4-30, G4-32 This is our third annual sustainability report; it was prepared in accordance with the G4 guidelines of the Global Reporting Initia- tive (GRI), in its essential core and covers the 2014 fiscal year. For more information about our Company, its operative and financial performance, and previous annual reports in electronic formats, please refer to: www.consorcioara.com.mx
G4-17, G4-20 This report covers all the operations of Consorcio ARA and those subsidiaries under our control or over which we exercise significant influence, and communicates in an open, objective and transparent manner the major developments, challenges and areas of opportunity in sustainability issues which we con- sider priorities.
G4-18, G4-19 The material issues for Consorcio ARA were defined through an analysis of the key sustainability issues facing the sector in which we participate, as detailed in the preceding chapters.
G4-48 The Investor Relations Department is the area responsible for reviewing and approving this financial and sustainability report.
G4-22, G4-23 The information presented on sustainability has not been reformu- lated, nor has its coverage and scope changed compared to previous reports.
G4-31, G4-33 This sustainability report has not been audited by an independent third party. Any comment related to this report should be directed to [email protected] ara.com.mx.
The Company does not have information available regarding the G4 indicators that are not answered in this Report.
GRI Index
Indicator Page
G4-EN6 31
G4-EN7 31
G4-EN9 32
G4-EN10 32
G4-EN11 32
G4-LA1 34
G4-LA2 34
G4-LA3 34
G4-LA4 34
PARAÍSO COUNTRY CLUB, Morelos
] 57 [ strong foundations: leadership & growth
| 58 | Informe de los auditores independientes | 60 | Estados consolidados de posición fi nanciera | 61 | Estados consolidados de resultados y otros resultados integrales | 62 | Estados consolidados de cambios en el capital contable | 64 | Estados consolidados de fl ujos de efectivo | 66 | Notas a los estados fi nancieros consolidados
Contents
Consorcio ARA, S. A. B. de C. V. and Subsidiaries
Consolidated Financial Statements for the Years Ended December 31, 2014 and 2013, and Independent Auditors’ Report
Dated March 27, 2015
To the Board of Directors and Stockholders
of Consorcio ARA, S. A. B. de C. V.
We have audited the accompanying consolidated fi nancial statements of Consorcio ARA, S. A. B. de C.
V. and subsidiaries (the Entity), which comprise the consolidated statements of fi nancial position as of
December 31, 2014 and 2013, and the consolidated statements of profi t or loss and other comprehen-
sive income, consolidated statement of changes in stockholders’ equity and consolidated statements
of cash fl ows for the years then ended, and a summary of signifi cant accounting policies and other
explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated fi nancial
statements in accordance with International Financial Reporting Standards, as issued by the Internatio-
nal Accounting Standards Board, and for such internal control as management determines is necessary
to enable the preparation of consolidated fi nancial statements that are free from material misstate-
ment, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated fi nancial statements based on our au-
dits. We conducted our audits in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the consolidated fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated fi nancial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated fi nancial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the Entity’s preparation and fair presentation of the consolidated fi nancial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose
Independent Auditors’ Report
of expressing an opinion on the effectiveness of the Entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting esti-
mates made by management, as well as evaluating the overall presentation of the consolidated fi nancial
statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the consolidated fi nancial statements present fairly, in all material respects, the fi nan-
cial position of Consorcio ARA, S. A. B. de C. V. and subsidiaries as of December 31, 2014 and 2013 and
their fi nancial performance and their cash fl ows for the years then ended, in accordance with Inter-
national Financial Reporting Standards, as issued by the International Accounting Standards Board.
The accompanying consolidated fi nancial statements have been translated into English for the con-
venience of readers.
Paseo de la Reforma 489, piso 6
Colonia Cuauhtémoc, C.P. 06500
March 27, 2015
March 27, 2015
Consolidated Statement of Financial Position As of December 31, 2014 and 2013
(In thousands of Mexican pesos)
NOTES 2014 2013
ASSETS
Current assets: Cash and cash equivalents 6 $ 1,032,228 $ 599,598 Trade accounts receivable - Net 7 843,741 740,283 Due from equity method investees 10,561 8,608 Inventories 8 11,664,675 11,494,249 Golf club memberships available for sale 203,480 205,064 Other current assets 10 530,095 555,077
Total current assets 14,284,780 13,602,879
Investment property 9 453,446 451,796 Restricted cash 6 43,369 43,369 Long-term land held for development 8 1,247,305 1,247,305 Investments in equity method investees 11 27,992 57,716 Employee benefi ts 18 1,554 2,142 Property, machinery and equipment - Net 12 242,158 311,269
Total long-term assets 2,015,824 2,113,597 Total assets $ 16,300,604 $ 15,716,476
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities: Current portion of long-term debt 14 $ 409,568 $ 377,668 Current portion of capital lease obligations 17 3,676 6,128 Trade accounts payable 676,906 358,781 Other liabilities and taxes, other than income taxes 15 748,476 698,630 Advances from customers 119,767 123,448
Total current liabilities 1,958,393 1,564,655
Long-term debt 14 1,728,808 2,045,555 Capital lease obligations 17 4,935 1,261 Other long-term liabilities 52,377 57,683 Deferred income tax 16 1,823,541 1,820,182
Total long-term liabilities 3,609,661 3,924,681 Total liabilities 5,568,054 5,489,336
Stockholders’ equity: Common stock 21 $ 646,580 $ 645,746 Additional paid-in capital 348,856 347,146 Reserve for acquisition of own stock 57,111 44,822 Retained earnings 21 9,642,972 9,154,626
Controlling interest 10,695,519 10,192,340 Noncontrolling interest 37,031 34,800
Total stockholders’ equity 10,732,550 10,227,140 Total stockholders’ equity and liabilities $ 16,300,604 $ 15,716,476
See accompanying notes to consolidated fi nancial statements.
Consolidated Statements of Profi t or Loss and other Comprehensive Income For the years ended December 31, 2014 and 2013
(In thousands of Mexican pesos, except common share and earnings per share amounts)
NOTES 2014 2013 Revenues 23 $ 6,206,146 $ 5,735,727
Costs 23 4,561,329 4,185,396
General and administrative expenses 1,040,236 1,033,572 Other income - Net (3,542) (11,636)
Income from operations 608,123 528,395
Financial (income) expense: Interest expense 28,259 25,123 Interest income (32,787) (39,403) Loss on derivative fi nancial instruments 20 - 21,350 Exchange (gain) loss - Net (7,165) 1,078
(11,693) 8,148 Equity in earnings of equity method investees 11 76,012 124,240
Income before income taxes 695,828 644,487
Income taxes 16 205,783 180,183
Consolidated income for the year $ 490,045 $ 464,304
Other comprehensive income Remeasurement of employee benefi ts obligations - 3,219
Total comprehensive income for the year $ 490,045 $ 467,523
Controlling interest $ 488,346 $ 462,908 Noncontrolling interest 1,699 1,396
Consolidated income for the year $ 490,045 $ 464,304
Basic earnings per common share $ 0.37 $ 0.35
Weighted average number of shares outstanding 1,312,185,111 1,304,482,889
Consolidated Statements of Changes in Stockholders’ Equity For the years ended December 31, 2014 and 2013
Common stock
equity
Balance as of January 1, 2013 $ 641,854 $ 328,854 $ 2,528 $ 8,687,103 $ 53,087 $ 9,713,426
Repurchase of own stock 3,892 18,292 42,294 - - 64,478
Comprehensive income for the year - - - 467,523 (18,287) 449,236
Balances as of December 31, 2013 $ 645,746 $ 347,146 $ 44,822 $ 9,154,626 $ 34,800 $ 10,227,140
Repurchase of own stock 834 1,710 12,289 - - 14,833
Comprehensive income for the year - - - 488,346 2,231 490,577
Common stock
equity
Balance as of January 1, 2013 $ 641,854 $ 328,854 $ 2,528 $ 8,687,103 $ 53,087 $ 9,713,426
Repurchase of own stock 3,892 18,292 42,294 - - 64,478
Comprehensive income for the year - - - 467,523 (18,287) 449,236
Repurchase of own stock 834 1,710 12,289 - - 14,833
Comprehensive income for the year - - - 488,346 2,231 490,577
See accompanying notes to consolidated financial statements.
Consolidated statements of cash fl ows For the years ended December 31, 2014 and 2013
2014 2013
OPERATING ACTIVITIES:
Items related to investing activities: Depreciation and amortization 85,437 88,241 Interest income (32,787) (39,403) Derivative fi nancial instrument (Equity swap) - 782 Equity in earnings of equity method investees (76,012) (124,240)
Items related to fi nancing activities: Interest expense 163,717 260,939
836,183 830,806 Movements in working capital: (Increase) decrease in:
Trade accounts receivable – Net (103,459) (36,466) Due from equity method investees (1,953) 53,847 Shopping mall available for sale (8,826) (35,802) Inventories and long-term land held for development (170,426) (343,207) Other current assets 25,365 (86,140) Golf club memberships available for sale 1,584 1,980
Increase (decrease) in: Trade accounts payable 318,126 32,173 Accrued expenses and taxes, other than income taxes (5,673) (497,262) Advances from customers (3,681) 57,006 Income taxes paid (141,419) (203,334) Employee benefi ts 588 2,016 Other long-term liabilities (11) 43,531
Net cash fl ows from operating activities 746,398 (180,852)
INVESTING ACTIVITIES:
Purchase of machinery and equipment (16,972) (22,506) Collection of interest 32,787 39,403 Investments in equity method investees 18,430 (27,021) Dividends received from equity method investees 82,000 140,132
Net cash fl ows from investing activities 116,245 130,008
Cash to be applied (to be obtain from) fi nancing activities 862,643 (50,844)
(Continued)
2014 2013
FINANCING ACTIVITIES:
Proceeds from long-term debt and lines of credit 804,078 2,538,921 Payments of long-term debt (73,764) (84,647) Payments of long-term debt and lines of credit (1,015,161) (3,185,558) Interest paid (169,203) (254,897) Premium for acquisition of own stock 1,710 18,292 Sale of own stock 120,299 212,892 Purchase of own stock (108,010) (170,598) Relocation by purchase of own shares 834 3,892 Other financing arrangements 9,204 (927)
Net cash from financing activities (430,013) (922,630)
Net increase (decrease) in cash and cash equivalents 432,630 (973,474)
Cash and cash equivalents at beginning of year 642,967 1,616,441
Cash and cash equivalents at end of year (including restricted cash of $43,369) $ 1,075,597 $ 642,967
(Concluded)
1. Nature of business
Consorcio ARA, S. A. B. de C. V. and subsidiaries (collectively, the “Entity”) buys and sells land; designs, develops,
constructs and markets affordable entry-level and middle-income residential housing developments; and markets
commercial and industrial developments. In addition, the Entity rents mini-supermarkets under operating leases in
México.
The Entity hires the services of subcontractors in order to construct its housing developments. The terms of such ar-
rangements include the subcontractors’ obligations to fulfi ll, using their own resources or with the assistance of third
parties, the construction commitments in accordance with technical requirements set by the Entity.
The Entity has a duration of 99 years and the principal place of business is Arcos Bosques Marco II, Paseo de Tama-
rindos No. 90, Tower I, 25th Floor, Bosques de las Lomas, CP 05120, Mexico, D.F.
2. Basis of presentation
Explanations for translation into English - The accompanying consolidated fi nancial statements have been translated
from Spanish into English for use outside of Mexico.
a. New and revised IFRSs affecting amounts reported and/or disclosures in the fi nancial statements
In the current year, the Entity has applied a number of new and revised IFRSs issued by the International Ac-
counting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after
January 1, 2014.
Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities
The Group has applied the amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities for the fi rst time in the
current year. The amendments to IFRS 10 defi ne an investment entity and require a reporting entity that meets
the defi nitions of an investment entity not to consolidate its subsidiaries but instead to measure its subsidiaries
at fair value through profi t or loss in its consolidated and separate fi nancial statements.
To qualify as an investment entity, a reporting entity is required to:
• Obtain funds from one or more investors for the purpose of providing them with investment management
services.
• Commit to its investor(s) that its business purpose is to invest funds solely for returns from capital apprecia-
tion, investment income, or both; and
Notes to Consolidated Financial Statements For the years ended December 31, 2014 and 2013
(In thousands of Mexican pesos, except share amounts)
• Measure and evaluate performance of substantially all of its investments on a fair value basis.
Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure requirements for
investment entities
As the Entity is not an investment entity (assessed based on the criteria set out in IFRS 10 as of January 1, 2014),
the application of the amendments has had no impact on the disclosure or the amounts recognized in the Entity
consolidated financial statements.
Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
The Group has applied the amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities for the first
time in the current year. The amendments to IAS 32 clarify the requirements relating to the offset of financial
assets and financial liabilities. Specifically, the amendments clarify the meaning of ‘currently has a legally enforce-
able right of set-off’ and ‘simultaneous realization and settlement’.
As the Entity does not have any financial assets and financial liabilities that qualify for offset, the application
of the amendments did not have a significant impact on these disclosures or on the amounts recognized in the
Group’s consolidated financial statements.
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
The amendments to IAS 19 clarify how an entity should account for contributions made by employees or third
parties to defined benefit plans, based on whether those contributions are dependent on the number of years of
service provided by the employee.
For contributions that are independent of the number of years of service, the entity may either recognize the
contributions as a reduction in the service cost in the period in which the related service is rendered, or to
attribute them to the employees’ periods of service using the projected unit credit method; whereas for con-
tributions that are dependent on the number of years of service, the entity is required to attribute them to the
employees’ periods of service.
The Entity’s management does not anticipate that the application of these amendments to IAS 19 will have a
significant impact on the Group’s consolidated financial statements.
Annual Improvements to IFRSs 2010-2012 Cycle
The Annual Improvements to IFRSs 2010-2012 Cycle include a number of amendments to various IFRSs, which are
summarized below.
The amendments to IAS 16 and IAS 38 remove perceived inconsistencies in the accounting for accumulated
depreciation/amortization when an item of property, plant and equipment or an intangible asset is revalued. The
amended standards clarify that the gross carrying amount is adjusted in a manner consistent with the revaluation
of the carrying amount of the asset and that accumulated depreciation/amortization is the difference between
the gross carrying amount and the carrying amount after taking into account accumulated impairment losses.
The amendments to IAS 24 clarify that a management entity providing key management personnel services to
a reporting entity is a related party of the reporting entity. Consequently, the reporting entity should disclose as
related party transactions the amounts incurred for the service paid or payable to the management entity for the
provision of key management personnel services. However, disclosure of the components of such compensation
is not required.
The application of these amendments did not have a significant impact on the Group’s consolidated financial
statements.
Annual Improvements to IFRSs 2011-2013 Cycle
The Annual Improvements to IFRSs 2011-2013 Cycle include a number of amendments to various IFRSs, which are
summarized below.
The amendments to IFRS 13 clarify that the scope of the portfolio exception for measuring the fair value of a
group of financial assets and financial liabilities on a net basis includes all contracts that are within the scope of,
and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of
financial assets or financial liabilities within IAS 32.
The amendments to IAS 40 clarify that IAS 40 and IFRS 3 are not mutually exclusive and application of both
standards may be required. Consequently, an entity acquiring investment property must determine whether:
a) The property meets the definition of investment property in terms of IAS 40; and
b) The transaction meets the definition of a business combination under IFRS 3.
The application of these amendments did not have a significant impact on the Group’s consolidated financial
statements.
b. New and revised IFRSs in issue but not yet effective
The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:
IFRS 9 Financial Instruments3
IFRS 15 Revenue from Contracts with Customers2
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation1
2 Effective for annual periods beginning on or after January 1, 2016, with earlier application permitted.
IFRS 9 Financial Instruments
IFRS 9 issued in November 2009 introduced new requirements for the classification and measurement of finan-
cial assets. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and
measurement of financial liabilities and for derecognition and in November 2013 to include the new requirements
for general hedge accounting. Another revised version of IFRS 9 was issued in July 2014 mainly to include a)
impairment requirements for financial assets and b) limited amendments to the classification and measurement
requirements by introducing a ‘fair value through other comprehensive income’ (FVTOCI) measurement category
for certain simple debt instruments.
Key requirements of IFRS 9:
• All recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and
Measurement are required to be subsequently measured at amortized cost or fair value. Specifically, debt
investments that are held within a business model whose objective is to collect the contractual cash flows,
and that have contractual cash flows that are solely payments of principal and interest on the principal out-
standing are generally measured at amortized cost at the end of subsequent accounting periods. Debt instru-
ments that are held within a business model whose objective is achieved both by collecting contractual cash
flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount outstanding, are measured
at FVTOCI. All other debt investments and equity investments are measured at their fair value at the end of
subsequent accounting periods:
• With regard to the measurement of financial liabilities designated as of fair value through profit or loss, IFRS
9 requires that the amount of change in the fair value of the financial liability that is attributable to changes
in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the
effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an ac-
counting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are
not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value
of the financial liability designated as fair value through profit or loss is presented in profit or loss.
• In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to
an incurred credit loss model under IAS 39.
The Entity’s manag

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