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While the long term prospects for the Brazilian housing market has not changed, it has become clear over the last year that we will need to reexamine how we have approached the demand for high growth and diversification in the market in order to achieve sustainable, profitable returns for our shareholders going forward.  Demand has outstripped supply on all fronts, from units and availability of skilled labor, to reliable and experienced suppliers and building partners, to financing, and to the ability to rapidly issue permits and execute the requisite chain of approvals to deliver units under the Minha Casa Minha Vida program.  Over the last four months the entire management team of Gafisa together with a professional team of consultants from Bain & Co. , have dedicated countless hours to analyzing our profitability by project, region and brand. While we still have much to do, we are encouraged by the opportunities that lay in front of us and the clear progress identified in righting the “wrongs” from previous periods. We are entering the last quarter of the year with a clear vision of our short- and mid-term priorities.

In the near term, we will simplify our overall business and reinforce the fundamentals of each of our segments.  Initially, we will prioritize the geographic markets with the strongest prospects by brand and where we have the best supply chain, and focus our efforts there. Over the last few years, we have made strong progress in consolidating our back office and establishing shared operations between the three businesses, Gafisa, AlphaVille and Tenda. With the implementation of the SAP platform across all divisions, we have the right tools in place guiding us in making better decisions across the company.  That said, we now know that critical to our future success is the implementation of a new management structure that gives the brand manager P&L responsibility.  This along with several other immediate changes including focusing the Tenda team on the transfer of receivables (“repasse”), and an incentive structure that aligns the entire organization, down to individual engineers on a project, with the objective of delivering high quality projects on time and within budget, should reduce Gafisa’s cash burn and accelerate its return to sustainable growth.  We will expand on this new strategic plan in the following pages and on our conference call.

Our plan for operating profitability improvement is advancing, launches have been slowed to reduce cash burn particularly at Tenda and a sharper focus is in place on the business segments that provide the greatest return. The sequential gross margin improvement of 850 basis points to 29.5% reflects a higher concentration of AlphaVille developments in our product mix, a segment that we intend to continue to expand in the future. The same level of launches, R$1 billion, from the prior year period reflect our decision to slow the expansion of Tenda and focus on those developments that could immediately generate cash flow for the Company. In the third quarter, we delivered an adjusted EBITDA margin of 20.1% including expected provisions related to potential Tenda cancellations and Gafisa related project delays from outsourced construction projects. The changes we believe need to take place, particularly at Tenda, may require us to include additional provisions in the fourth quarter results, as we expect the number of cancellations to increase, given the higher volume of delivered units. Our contracted sales of launches, which are at higher margins, are continuing to track at an appropriate level to achieve the expected margin improvement. However, it is worth mentioning that  we continue to focus on finished inventory reduction, which may impact our margins.

We transferred 2,997 Tenda units to Caixa during the quarter and we are focused on the Tenda turn-around and monetization high quality receivables at Gafisa in the amount of R$ 221 million. Across the Company, we delivered slightly more than 8,700 units and our cash burn is down to R$56 million in the quarter as compared to R$ 148 million in 2Q11.

While the Brazilian economy has moved into a more rational growth phase, overall the fundamentals remain sound to support long term growth for the homebuilding industry.  We are confident that our strategic plan will allow us to focus on the strong pockets of opportunity for our brands and set the stage for continued market leadership in the future.

The key elements of our plan are to drive cash generation, improve margins and deleverage to facilitate rational, profitable growth going forward.  In order to achieve these goals, through 2012 we will need to slow the pace of growth and expect that launches for this year will be in the range of R$ 3.5 -  $4.0 billion. We will continue to launch Gafisa products as long as the sales environment is strong for each product. Tenda launches will be based on our ability to immediately transfer the units to CEF. Additionally, our focus at Tenda will be to deliver units in progress. We have some R$ 400 million yet to transfer to CEF from finished units around 5,000. We also intend to expand AlphaVille in our product mix and allocate the capital necessary to leverage the tremendous competitive advantages we have with this brand segment.  We fully understand that this strategy may impact the size of our firm for some years to come.  However, these are necessary actions and we believe will prove a highly successful trade-off in the longer term.

The identification of what must be changed and enhanced is a fundamental step in improving shareholder return.  We have now done this and are committed to putting in place the measures that need to be taken to continue to improve margins, generate cash flow and reduce our leverage in the near and medium term.

Duilio Calciolari, CEO -- Gafisa S.A.

Since July 2011, the Company management has focused on a deep evaluation of each of the Gafisa, AlphaVille and Tenda businesses from a strategic and capital allocation perspective.  The result is a modified strategy and a new plan of action moving forward. Following is an overview of key elements of this strategy focusing on the current period through 2014 including a new organizational structure, targeted geographic regions for expansion, a turn-around strategy for tenda, and an expansion of AlphaVille in the product mix.

New Organizational Structure

Establish P&L owners by brand to guarantee a focus on each line of business and deliver on the unique qualities of each of the brand segments.  The new business heads will be:

Gafisa: Sandro Gamba has been at Gafisa for over 15 years. He is currently the Real Estate Development Officer. He has served Gafisa in a number of senior roles in the São Paulo region, including head of business development for Gafisa and director and manager of prospecting land.

Tenda*:Rodrigo Osmo.  Rodrigo has successfully managed the P&L of AlphaVille since 2009 and has been with Gafisa for over five years.  He has spent the last months focused on the turn-around strategy for Tenda and will lead a highly experienced team in the development and sales of lower income housing.

AlphaVille:Marcelo Willer has been Alphaville’s Real Estate Development Officer since 2006 and served as Project Officer from 2000 to 2006.

*Currently, we are in the process of identifying a new Chief Financial Officer. During this transition period, Rodrigo Osmo will remain as CFO and Duilio Calciolari as IRO.

Near Term Growth in High Priority Regions

Through 2014, Gafisa will focus its expansion on highly targeted regions of the country with proven potential for profitable development for each of the brand segments.  We have identified the key geographic regions of focus for each of the brands based on market potential, existing competitiveness (local expertise and network, brand perception, etc) as well as reliable supplier relationships.

Gafisa– The medium to high income market in Brazil is concentrated in approximately 10% of the municipalities and accounts for approximately R$100 billion/year of potential sales value.  Thus, Gafisa will focus its near term growth on several key markets including strengthening its leadership position in Sao Paulo, where launches have proven to be most profitable, and shoring up management and operational capacity in Rio de Janeiro, where long term prospects are strong. Thus, the main focus should be Sao Paulo and Rio de Janeiro. We will deliver projects in progress in other regions of the country and continue to monitor markets in which we have a presence to opportunistically develop units with high potential.  The current land bank will be realigned in accordance with this strategy. Since approximately 41% of the land bank outside of SP & Rio wasacquired through swaps, minimal capital was deployed in these regions.

AlphaVille –  AlphaVille has increasingly become an important part of our overall product mix.  With high gross margins of approximately 50%, significant barriers to entry and our competitive advantages, we intend to fully develop the potential of this business opportunity.  We have already identified some 60 cities throughout the country where we can launch AlphaVille developments over the next 3-5 years.

Tenda Turn-Around Strategy

The plan for Tenda is based on two fundamental elements - conserving capital by only launching units that can immediately be transferred to CEF and developing a scale advantage to optimize the use of the innovative aluminum mold technology which facilitates a lower cost structure for building these types of units.  Our initial focus will be on four regions: Sao Paulo, Rio de Janeiro, Minas Gerais and Salvador, where we have already established a strong base to relaunch operations and CEF is well established. We are currently evaluating all developments in progress and launched but not yet in progress to determine which of these will not be brought to conclusion. We are also focused on complete the delivery of the higher cost legacy Tenda projects.

AlphaVille - Status of the Acquisition of the Remaning Shares

In October, we began the acquisition process of the remaining 20% stake from its controlling shareholders.  The valuation will be based on independent experts’ analysis and is expected to be concluded  by the end of the year.  However, we do not expect a disbursement to take place until the beginning of 2012.

9

Pre-sales for the quarter reached R$ 1.04 billion, an increase of 3%, compared to 3Q10. In the case of Tenda, the 71% decrease is a consequence of a 90% decrease in launches during 9M11, when compared to 9M10; as well as the concentration of products launched in the last month of the quarter, reducing the availability of products under the Tenda brand during this period.

In 3Q11, the Gafisa segment was responsible for 64% of total pre-sales, while Tenda and AlphaVille accounted for approximately 9% and 27%, respectively. Among Gafisa’s pre-sales, 75% corresponded to units priced below R$ 500 thousand, while 100% of Tenda’s pre-sales came from units priced under the MCMV program. The tables below illustrate a detailed breakdown of our pre-sales for 3Q11 and 9M11:

On a consolidated basis, the Company attained a sales velocity of 23.1% in 3Q11, compared to 25.7% in 3Q10. Sales velocity decreased over the previous period mainly due to a lower volume of launches at Tenda.  Sales velocity of launches reached 50%, compared to 42% in 2Q11, reflecting our strategy of selecting the appropriate tract of land, add the right product at the appropriate time/price to announce the launches.

By the end of 3Q11, the Company was present in 22 different states plus the Federal District, and had 197 projects under development. Around 437 engineers and architects were in the field, in addition to 587 intern engineers in training.

Since June we saw an acceleration of the number of units contracted by the CEF likely due to the internal improvements resulting from the start-up of a new area dedicated to working with the major homebuilders. In 3Q11 Tenda contracted 5,305 units with CEF, with 56% of them contracted in September alone. This improvement resulted in 13,998 units in  9M11.

Transferred units totaled 2,997 units in 3Q11 (7,955 in 9M11). In 4Q11, we expect to transfer more units than in 3Q11, allowing us to maintain the target of close to 12,000 units to be transferred for the full year.

During the third quarter, consolidated Gafisa delivered 44 projects with 8,700 units and an approximate PSV of R$ 1.1 billion.  The Gafisa segment delivered 12 projects, while Tenda and AlphaVille delivered the remaining 30 and 2 projects/phases, respectively. The delivery date is based on the “delivery meeting” that takes place with customers, and not upon the physical completion which is prior to the delivery meeting.

For 4Q11 we expect to deliver an additional 9,000 units for a total of 25,000, almost double the amount delivered during the full year of 2010, mainly due to the delivery of older Tenda units along with some of Gafisa’s leveraged 2007/2008 launches. The tables below list the products delivered in 3Q11 and first nine months of 2011:

The Company’s land bank of approximately R$ 21.1 billion is composed of 204 different projects in 19 states, equivalent to approximately one hundred thousand units. In line with our strategy, 39.5% of our land bank was acquired through swaps – which require no cash obligations.

During 3Q11 we recorded a gross increase of R$ 2.68 billion in land bank, reflecting acquisitions that offset the R$1.00 billion launches in the quarter. Regarding the breakdown of the acquisitions by brand: Gafisa accounted 43% of the new additions, Alphaville 30% and Tenda the remaining 28%. As to cash transactions, which represented 35% of the total, our strategy was focused in areas of high liquidity and profitability, such as the acquisition of the last module of Ceramica, located in Sao Caetano.

The table below shows a detailed breakdown of our current land bank:

Table 11 – Number of sites of projects under construction

On a consolidated basis, revenues for 3Q11 totaled R$ 1.0 billion from R$ 957 million in 3Q10, with Tenda contributing 33% of consolidated revenues.

This quarter, 36% of Tenda revenue came from projects from and prior to 2008, compared to 47% in 2Q11. We should see this consistently decreasing in the coming quarters due to the delivery of Tenda legacy units. The negative sales from 2008 units were due to Tenda’s effort to cancel sales from customers with low credit scores. These negative sales, which occurred at the end of the quarter, should be re-sold in 4Q11.

The table below presents detailed information about pre-sales and recognized revenues by launch year: