A Major World Economic Power

BRAZIL
A Major World Economic Power
BRAZIL
Quick Facts
7th largest economy in the world
Stable Inflation
GDP of Brazil is US$2.22 trillion. São Paulo
accounts for 1/3 of Brazil’s total GDP.
Next largest economy in Latin America is Mexico,
which has a GDP of US$1.18 trillion.
Brazil suffered from high inflation in the 1980s
through the mid-1990s. Inflation has been stable in
the 5% to 7% range over the past decade.
Tremendous reserve
of natural resources
Growing population and
excellent demographic trends.
BRAZIL
Metrics
Brazil’s
Central Bank
Rate is 9.50%.
Loans for
Real Estate to
50% LTV are
11% to 14%.
Rents are
indexed to
inflation.
Cap rates for
institutional
quality real
estate in the
6% to 9% range
in São Paulo
and Rio.
IRRs range from
11% to 15% for
stable assets
and from
15% to 25% for
development
assets.
BRAZIL
Not all smooth sailing
Brazil has serious problems with:
•Socio-economic Stratification
•Education
•Worker Productivity
•Infrastructure
•Bureaucracy
•Corruption
BRAZIL
Problems bubble to the surface
If you are a foreign investor with a big bet on Brazil,
this is not something you want to see – or is it?
BRAZIL
Recent Sale Transaction: Office Building
Tower Bridge Marginal Pinheiros –
São Paulo
March 2013
55,079 square meters, completed in 2012
Sale Price: R$950 million
R$17,248 per m2 / US$763 per SF
Buyer: Fundo de Investimento Imobiliário FII TB Office
Seller: Tishman Speyer JV
Cap Rate: 7.60%
Fully leased, tenants include: Grupo Fleury, Banco
Toyota, TAM , and Zurich
TRANSACTION DATABASE
siila.com
BRAZIL
Recent Sale Transaction: Shopping Mall
Galleria Shopping Campinas –
São Paulo
October 2013
33,236 square meters, built in 1992
30% interest purchased
R$278.7 million (imputed 100% price)
R$8,385 per m2
US$346 per SF
Buyer: Iguatemi
Seller: Luis Roberto Coutinho
Cap Rate: 8.47%
Anchors: C&A, Le Lis Blanc, Cineflix
TRANSACTION DATABASE
siila.com
MEXICO
In Mexico it is “FIBRA Fever”
FIBRAS MARKET CAP
70.00
60.00
Market Cap
MX$ (in
billions)
50.00
40.00
30.00
20.00
10.00
0.00
Fibra Uno
Industrial
Retail
Hotel
Office
Macquarie
Mexico
Vesta
Fibra Hotel
Terrafina
Fibra Shop
Fibra Inn
SOURCE: THE SUPER SMART FOLKS AT BARNHART ASSET MANAGEMENT
MEXICO
Recent Transactions: Retail
6 properties
- one Retail
in Merida
PERIOD
BUYER
SELLER
NO. OF PROPERTIES
M2
SALE PRICE MX$ M
MX$ PER M2
PROFORMA CAP RATE
4Q13
Fibra Uno
N/A
6
26,850
$439.50
$16,369
8.16%
4Q13
Planigrupo
Kimco
4
102,193
$1,200
$11,743
n/a
3Q13
Fibra Uno
MRP/Apolo
49
~1,000,000
$23,155
-
7.60%
2Q13
Planigrupo
Kimco
9
241,548
$3,350
$13,869
n/a
Discount Rate
OAR Cap Rate
17.00%
14.00%
16.00%
13.00%
15.00%
12.00%
14.00%
11.00%
13.00%
10.00%
12.00%
9.00%
11.00%
10.00%
8.00%
4Q09
2Q10
4Q10
2Q11
TRANSACTION DATABASE
siila.com
4Q11
2Q12
4Q12
2Q13
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
MEXICO
Recent Sale Transactions: Retail
Coacalco & Tecamac Power Centers
November 2013
134,246 square meters (combined GLA)
Sale Price: US$158.4 million, US$1,180 per m2
Buyer: Fibra Macquarie
Seller: Fondo Comercial Mexicano
Cap Rate: 8.35%, 98.7% Occupied
Financing: US$71.9 million
(Banamex)
TRANSACTION DATABASE
siila.com
Tecamac Power Center
• Total GLA: 58,037 m2,
83 small shops, 14 kiosks
• Anchor: Suburbia; Other
large tenants: Walmart,
Sam’s, Cinepolis
Coacalco Power Center
• Total GLA: 76,209 m2,
99 small shops, 19 kiosks
• Anchor: Walmart; Other
large tenants: Sanborns,
Cinepolis, Suburbia,
Office Max
MEXICO
Recent Sale Transactions: Industrial
Jalisco,
Aguascalientes,
Guanajuato, SLP
PERIOD
BUYER
SELLER
NO. OF PROPERTIES
M2
SALE PRICE MX$ M
MX$ PER M2
PROFORMA CAP RATE
4Q13
Fibra Uno
N/A
5
1.28
$86.50
$67
8.10%
3Q13
Fibra Uno
N/A
7
0.19
$10.77
$55
8.75%
3Q13
Terrafina
Kimco / AI
87
11.00
$600.00
$55
8.70%
3Q13
Macquarie DCT Industrial
15
1.65
$82.70
$50
8.10%
4Q12
Fibra Uno
30
19.37
$1,415.38
$73
7.00%
G-30
Discount Rate
OAR Cap Rate
16.00%
14.00%
15.00%
13.00%
14.00%
12.00%
13.00%
11.00%
12.00%
10.00%
11.00%
9.00%
10.00%
9.00%
8.00%
4Q09
2Q10
4Q10
2Q11
TRANSACTION DATABASE
siila.com
4Q11
2Q12
4Q12
2Q13
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
MEXICO
Recent Hotel Acquisitions by Fibra Inn
Mexico Plaza Irapuato Hotel
Hilton Reforma – Mexico City
102 Rooms – Limited Service
458 Rooms – Full Service
SALE DATE:
3Q13
MX$93 million
± US$7.2 million
US$70,588/room
CAP RATE:
10.10%
TRANSACTION DATABASE
siila.com
SALE DATE:
4Q13
MX$1,163 million
±US$89.8 million
US$197,070/room
CAP RATE:
10.30%
COLOMBIA
Foreign Direct Investment
• Record high of US$15.8 billion in 2012, on track to
reach a new high in 2013
• Investment in local stocks and
debt doubled to US$4.1 billion
• Significant pent up demand for most types of
commercial real estate and housing
• Strong growth
• Business friendly government
• Limited partnership
opportunities for
foreign investors
Historical FDI US$B
18
16
14
12
10
8
6
4
2
2004
2005
2006
2007
2008
2009
2010
2011
2012
3Q13
COLOMBIA
Significant Retail Development: Underway
• 51 shopping centers
under development in
Colombia
• Changing ownership
structure away from
fractured interests
• 56% of new projects are
hold and lease
• Parque Arauco and
Planogrupo two major
foreign players
Villa Nueva Plaza - Cali
US$41.1 million
•66,000 square meters, 3 levels
•Anchors: Superinter and Cinemark
•260 small shops, 24 restaurants, 34
large spaces, 17 kiosks and 2 anchors.
•Delivery date: November 2015
Portal del Oriente - Cali
US$62.5 million
•2 levels
•Anchors: Exito, Flamingo and
Cine Colombia
•220 small shops, 24 restaurants,
7 banks and 3 anchors.
•Delivery date: 1Q 2015
Marcas Mall - Cali
US$88.6 million
•2 levels
•Anchor: Cine Colombia
•280 retail spaces and 1 anchors.
•Delivery date: 2Q 2015
OTHER LATIN AMERICAN MARKETS
Panama
Peru
•Canal expansion to be completed in 2015.
•Increased shipping traffic will strengthen
local economy
•US dollar currency gives the country a currency
stability advantage over other markets
•Growing middle class and increasing
economic growth
•Political /economic uncertainty is too great
for most foreign investors
Chile
Argentina
•Small market with high barriers to entry
•Most real estate owned by local investors
•Strong populist movement
•Volatile political and economic environment
•High government debt lack of capital for
new development
CONCLUDING THOUGHTS
Different selloff/leasing risk
Property rights that favor the tenant
Fractured interests
The Risks are Different
in Latin America
Currency/sovereign risk
Construction cost/timing risk for development assets