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BRAZILIAN REAL ESTATE OFFICE MARKET OVERVIEW 2009.

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Presentation on theme: "BRAZILIAN REAL ESTATE OFFICE MARKET OVERVIEW 2009."— Presentation transcript:

1 BRAZILIAN REAL ESTATE OFFICE MARKET OVERVIEW 2009

2 AGENDA * F/X Rate: 1,85  Company Overview  Brazilian Real Estate Market Evolution  Brazilian Real Estate Office - Market Overview  Investment Cases - Rio de Janeiro and São Paulo  Real Estate Market - Challenges and Opportunities

3 Bueno Netto  With over 30 years of experience,  Focused on urban transformation, homebuilding and development.  Over 25 projects in the pipeline and a construction portfolio adding up to approximately US$1,5 billion. Company Partners MaxCap/Bank of America Merrill Lynch (BAML)  MaxCap is a leading Brazilian real estate investment management company,  MaxCap has five partners, who together, acquiring or developing real estate investments totaling over US$3 billion.  BAML’s Global Real Estate Principal Investments group has invested US$8.2 billion in real estate and real estate related assets in North and South America since 2003 * F/X Rate: 1,85

4 BNCORP  Created in mid 2008, leveraging Bueno Netto´s track record in the sector  Combining with the strategic vision and financial management of MaxCap and Bank of America/Merrill Lynch,  A leading position in a segment with no dedicated players - FOCUS  Five projects “under development” with potential sales value of more than US$320 million, and  A development pipeline of corporate buildings, office suites and mixed-use projects of US$500 million.

5 Sample Projects CORPORATE BUILDING Company Business RETROFIT PROJECTS CONDOS OFFICE BUILDINGS  Several small units per floor starting with 35,0 sqm  Small companies and service providers  Sold to End Users/Tenants or Individual Property Investors  Minimum of 500 sqm per floor Class A and over to 800 sqm Class AA  Leased to Corporate Tenants  Sold to End Users/Tenants, Individual Property Investors or Institutional Investors  Acquisition of buildings in need of renovation  Bring to current market standards  Class AA requirements  Sold to End Users/Tenants, Individual Property Investors or Institutional Investors

6 Brazilian Real Estate Market Evolution UNTIL 2003  LACK OF AQUISITION AND CONSTRUCTION FINANCING – NO CAPITAL MARKETS  LACK OF GOVERNANCE  STRATIFIED PROPERTIES  BRAZILIAN PENSION FUNDS THE MAIN INSTITUTIONAL INVESTORS  LOCAL PLAYERS  DEVELOPERS AND CONSTRUCTION COMPANIES  PROPERTY COMPANIES  WEALTHY FAMILIES  RIO DE JANEIRO AND SAO PAULO 2,3 MM sqm. UNTIL 2003  LACK OF AQUISITION AND CONSTRUCTION FINANCING – NO CAPITAL MARKETS  LACK OF GOVERNANCE  STRATIFIED PROPERTIES  BRAZILIAN PENSION FUNDS THE MAIN INSTITUTIONAL INVESTORS  LOCAL PLAYERS  DEVELOPERS AND CONSTRUCTION COMPANIES  PROPERTY COMPANIES  WEALTHY FAMILIES  RIO DE JANEIRO AND SAO PAULO 2,3 MM sqm  HIGH LIQUIDITY (FUELED BY IPOs AND FOREIGN DIRECT INVESTMENT)IPOs  INVESTMENT GRADE IN 2008  STABLE POLITICAL ENVIRONMENT  INTERNATIONAL INVESTORS => PENSION FUNDS, DEVELOPERS, HEDGE FUNDS  LOCAL PLAYERS => REAL ESTATE FUNDS, PROPERTY COMPANIES, PRIVATE EQUITY FUNDS, WEALTHY FAMILIES, CONSTRUCTION AND DEVELOPMENT COMPANIES  BUILT TO SUIT –ATYPICAL LEASE  RIO DE JANEIRO AND SAO PAULO 3.2 MM sqm  HIGH LIQUIDITY (FUELED BY IPOs AND FOREIGN DIRECT INVESTMENT)IPOs  INVESTMENT GRADE IN 2008  STABLE POLITICAL ENVIRONMENT  INTERNATIONAL INVESTORS => PENSION FUNDS, DEVELOPERS, HEDGE FUNDS  LOCAL PLAYERS => REAL ESTATE FUNDS, PROPERTY COMPANIES, PRIVATE EQUITY FUNDS, WEALTHY FAMILIES, CONSTRUCTION AND DEVELOPMENT COMPANIES  BUILT TO SUIT –ATYPICAL LEASE  RIO DE JANEIRO AND SAO PAULO 3.2 MM sqm. Market Overview

7 Brazil – Real Estate Market IPOs and Follow On’s US$ 36.2 Billion Total IPO Market US$ 7,6 Billion Real Estate IPO Market  IN 2006 AND 2007, MANY RESIDENTIAL DEVELOPERS WENT PUBLIC  IN 2008 AND 2009, NO IPO RELATED TO THE REAL ESTATE MARKET WAS PERFORMED  ACTIVE JOINT VENTURE MARKET Source: CVM / BN CORP Market Overview - Brazil

8 Main Office Markets Total Stock 20 MM sqm. 70% in Sao Paulo and Rio de Janeiro 18%Class A/AA – 65% in Sao Paulo SÃO PAULO (SP) Total stock: 9.6 million sqm. Class A & AA Stock: 2.4 million sqm. Net absorption: 15.3 thous sqm. New stock: 29.0 thous sqm Vacancy rate: 7,44% Source: Jones Lang LaSalle; Cushman & Wakefield ; BN CORP RIO DE JANEIRO (RJ) Total stock: 4.5 million sqm. Class A & AA Stock: 876 thous sqm Net absorption: 36.2 thous sqm. New stock: 25.7 thous sqm. Vacancy rate: 3.76% BELO HORIZONTE (MG) Total stock: 2.0 million sqm. Class A & AA Stock: 38 thous sqm. Net absorption: 23 thous sqm. New stock: 97 thous sqm. Vacancy rate: 1.7% BRASÍLIA (DF) Total stock: 1.7 million sqm. Class A & AA Stock: 86 thous sqm. New stock: 50 thous sqm. Vacancy rate: 2.5% CURITIBA (PR) Total stock: 1.1 million sqm. Class A & AA Stock: 100 thous sqm New stock: 39 thous sqm. Vacancy rate: 6.7% PORTO ALEGRE (RS) Total stock: 800 thous sqm Class A & AA Stock: 150 thous sqm New stock: 47 thous sqm. Vacancy rate: 7.1% Market Overview

9 Corporate Office Market 2nd Quarter 2009 São Paulo Class A and AA 9,6 MM sqm Total Stock 2,4 MM sqm Class A and AA 7.4% Vacancy Rate Thousand m² Source: Jones Lang LaSalle; BN CORP NET ABSORTION FROM 2009 / thous sqm. HISTORICALLY LEASE RATES DO NOT DECREASE UNTIL VACANCY REACHES 16% 65% OF BRAZIL’S HIGH-END PROPERTIES ARE LOCATED IN SÃO PAULO Market Overview

10 Market Overview – São Paulo 2 nd Quarter 2009 Prices – AA and A Class Buildings RENTAL ASKING PRICES CLASS A – US$ 41.5/ sqf. /year R$ 64.0 / m2 / Month CLASS AA – US$ 54.4 / sqf. /Year R$ 84.0 m2 / Month Source: Jones Lang LaSalle; BN CORP Market Overview - Brazil AA ClassA Class Primary Regions Secondary Regions Alternative Regions R$/sm/month

11 Condo/Suites Office Market São Paulo - 2 nd. Semester 2009 and forecast 4,600 Units US$900 million Sales Value Source: BN CORP 80% 90% 100% Market Overview - Brazil  CONSTRUCTION FINANCING  EMERGING SECURITIZATION MARKET FOR RECEIVABLES  SALES VALUE - 25%  CULTURAL ENVIRONMENT  60% OF BUYERS ARE INDIVIDUAL INVESTORS  60% OF SOLD UNITS - 50sqm.  REDUCED DEVELOPMENT CYCLE  SMOOTH APPROVAL PROCESS AND CLEAR EXIT OF PROJECT WITHIN THREE YEARS

12 Investment Case Alpha Tower São Paulo

13 Company Project Alpha Tower – São Paulo Assumptions Type of Project Corporate Total Private Area 6,900 SQM Number of Floors12 Private Area per Floor570 SQM Construction Aug/2009 until Mar/2011

14 Corporate Office Market – 1st Semester 2009 Rio de Janeiro – Class A and AA Total Stock 4,5 MM sqm. Class A and AA Thousand sqm. 3.76% Vacancy Rate SECOND PRIME MARKET IN BRAZIL “RETROFIT”  GOVERNMENT COMPANIES PENSION FUNDS, OIL AND GAS COMPANIES SERVICING Source: Jones Lang LaSalle; BN CORP Thousand Sqm Market Overview - Brazil

15 Prices – AA and A Class Buildings Centro Orla Barra AA ClassA Class CLASS A AVERAGE R$ 83 / sqm/ Month US$ 53.8/sqf/Year CLASS AA AVERAGE R$ 84 / sqm / Month US$ 54.4/sqf/Year Source: Jones Lang LaSalle; BN CORP Market Overview - Rio de Janeiro 2 nd Quarter 2009 R$/sqm Market Overview - Brazil

16 INVESTMENT CASE Rio Branco 115 Rio de Janeiro

17 Rio Branco 115 – Rio de Janeiro Assumptions Type of ProjectCorporate (Retrofit) Total Private Area12,200 SQM Number of Floors20 Private Area per Floor610 SQM ConstructionOct/2008 until Aug/2010 Company Project

18 Cap Rate by Sector CORPORATE  BUYERS (12-14%)  SELLERS (11%)  REALIZED RATES 11.8% UP TO MID 12%  DOWNWARD PRESSURE ON THE RATES DUE TO THE LOWERING INTEREST RATE – TRENDS 10%  ASSET VALUE INCREASING  INDUSTRIAL  SUBSTANTIAL DECREASE IN CAP RATES IN THE PAST FIVE YEARS  STILL A INCIPIENT MARKET  LESS THAN 2 MILLION SQM AS PRIME STOCK  CONCENTRATED IN SAO PAULO AND RIO DE JANEIRO Source: Jones Lang LaSalle; Colliers International; BN CORP Market Overview

19 2008/2009Brazilian Real Estate Market Challenges and Opportunities São Paulo lease rate: +25% Moscow: -63% Mumbai: -44% Beijing: -16% Source: Jones Lang LaSalle; BN CORP Trend: Market Overview - Brazil Vacancy Rate Trend: Beijing Mumbai Moscow São Paulo Total Stock (high-end): 8,8 MM sqm 3,8 MM sqm 1,5 MM sqm 2,4 MM sqm BRIC - Real Estate Market

20 Market Overview  Funding options  Transaction Structuring  Foreign Investors should be Familiarized with the Market Dynamics.  The world is Global, Regional and Local  Risk Adjusted Opportunity Cost of Investing in Brazil Brazilian Real Estate Market Challenges and Opportunities  An emerging securitization market  Brazilian Pension Funds are investing  Real Estate Funds - the development phase  Prevalent stratified title and Pre-Sell floors  Capital needs and provide self liquidating.  Local developers are becoming more institutional  Local expertise with local partners  Underleveraged Market - the real estate market is not distressed and a strong bank system is present.  Cap rates will go down soon; Low interest rate trend, Rise asset value, With the yield compression ChallengesOpportunities

21 Sandra Ralston


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