Retail MarketBrazil

Tim Gifford, FRICS, S.V.P. Capital Markets CBRE

January 2012

PART IThe Drivers

Country Overview - BrazilArea 8,514,877 square kilometers

Population 194,932,685

Major Cities (6)

Sao Paulo - 20 million (Metro area)Rio de Janeiro - 12 million (Metro area)Brasilia (Capital) - 3.8 million

Salvador - 3 million Fortaleza - 2.8 million Belo Horizonte - 2.5 million

Other Major Cities -population1million and above (8)

Manaus - 2.1 million Curitiba - 2 millionRecife - 2 millionPorto Alegre -1.8 million

Belém - 1.7 million Goiania - 1.3 million Sao Luis - 1.2 millionMaceió -1 million

Government Federal RepublicPresident: Dilma Rousseff (next elections – October 2014)

Currency Brazilian Real (BRL)USD 1 = BRL ~ 1.82 (January 2012)

Country Risk/ Rating 189 EMBI/ BBB - Stable (S&P 11/2011) Achieved investment grade at the beginning of 2010

Key Economic Indicators 2011 2001

GDP - 4%Nominal GDP - USD 2.17 trillionGDP/Capita - USD 11,071Inflation - 6.3%Unemployment - 6.0%

GDP - 1.3%Nominal GDP - USD 553 billionGDP/Capita - USD 3,130Inflation - 6.8%Unemployment - 9.3%

Souces: IBGE, CIA World Factbook, World Bank, IMF

2001 2002 2003 2004 2005 2006 2007 2008 20090

100

200

300

400

500

600

700

800

Average Monhtly Income in Metropolitan Areas (R$)Average Monhtly Income in Metropolitan Areas (USD)

Macroeconomic Overview - Brazil

Souce: IBGE, World Bank

While emerging economies can generally be characterized by a skewed distribution of income, Brazil’s growth is pulling a significant percentage of the population out of poverty and into the middle class, a situation in which increased levels of discretionary income fuel large increases in retail consumption. This increased economic activity, in turn, creates new jobs and distributes additional income among the population.

2005 2006 2007 2008 2009 2010 2011(e)0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

0

2

4

6

8

10

12

GDP Per Capita Unemployment (%)

Souce: World Bank

1. http://www.edhec-risk.com/latest_news/featured_analysis/RISKArticle.2011-12-20.41282. http://oglobo.globo.com/economia/novo-salario-minimo-vai-injetar-47-bilhoes-na-economia-35194663. http://www.correiobraziliense.com.br/app/noticia/economia/2011/12/27/internas_economia,284258/aumento-

do-salario-minimo-vai-injetar-r-47-bilhoes-na-economia.shtml4. http://online.wsj.com/article/BT-CO-20111125-703320.html

“More than 50% of the Brazilian population of over 190 million have become middle class, earning between approximately $800 and $3,300 per household per month. The rich are much better off, profiting from the stock market and commodities boom.” 1

“Brazil's main consumer confidence index picked up in November for the second consecutive month, as inflation continued to show signs of slowing down […] Consumer Confidence Index, or ICC, rose to 119 points in November from 115.2 points in October.” 4

“New minimum wage will inject R$47 billion (USD 25.8 billion) into the economy.” 2, 3

Macroeconomic Overview - Brazil

2005 2006 2007 2008 2009 2010 2011(e)

0

500,000,000,000

1,000,000,000,000

1,500,000,000,000

2,000,000,000,000

2,500,000,000,000

0

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

50,000,000,000

60,000,000,000

70,000,000,000

80,000,000,000

90,000,000,000

100,000,000,000

GDP in USD FDI in USDSouce: World Bank

“Brazil experienced the strongest investment activity of the Latin

American markets and is one of the preferred

global destinations for foreign capital.” 1

Effects of the Economic crisis of 2008/ 2009 were observed worldwide, but improved policies and a solid macroeconomic landscape enabled Brazil to recover quickly and effectively, as evidenced by an impressive GDP growth of 7.5% and record levels of Foreign Direct Investment in 2010.1. CBRE Global Capital MarketView Q3 2011

PART IIThe Market

Comparative GLA Distribution WorldwideSquare meters per 100 inhabitants

Side Note: In Brazil, even in the top 15 markets, average GLA per 100 inhabitants is equivalent to 8.5/Sqm; According to ABRASCE, Brazil´s supply of shopping center space is estimated to be 30% below

equilibrium.

Brazil has low supply of Shopping Center Space (4Sqm of GLA per 100

inhabitants)

187

113

59

3023 21 20

14 138

4 3

0

20

40

60

80

100

120

140

160

180

200

United States Canada Australia Japan UK France Spain Germany Italy Mexico Brazil Argentina

Shopping Center Real Estate Market- Brazil

Source: CBRE Brazil

North3%

Northeast15%

Midwest9%

South15%

São Paulo38%

Rio de Janeiro13%

Mians Gerais and Espirito Santo

7%

Southeast58%

Total Stock in Brazil by RegionHighlight: Southeast Region

Shopping Center Real Estate Market- Brazil

430 Shopping Centers with over 9.5 billion m2

Source: CBRE Brazil

Class A17%

Class B29%Class C

34%

Class D20%

Total Stock Quality: Southeast Region

230 Shopping Centers with 5,796,000 m² of GLA

Shopping Center Real Estate Market- Brazil

Source: CBRE Brazil

Source: ABRASCE

Since 2005, gross leasable retail area in shopping centers has grown 46% from 6.5 to 9.5 million m2, while earnings have jumped 90% from R$ 45.5 billion to R$ 87 billion.

The figures are even more impressive when exchange rates are taken into account, with earnings jumping from USD 18.7 billion to USD 49.5 billion.

What it means: growth in earning potential has outpaced growth in leasable area, driving investor demand for development and acquisition.

Shopping Center Real Estate Market- Brazil

Retail activity in Brazil in 2010 came close to USD 900 billion, or nearly R$ 1.6 trillion.

Malls account for 18% of all retail activity in Brazil, and their sales correspond to around 2% of GDP. 1

Current and Projected Construction

Number of New Malls Total Number of Malls

Gross Leasable Area Increase (m2)

2011 22 430 561,346Scheduled for delivery in

2012 44 474 1,354,637Scheduled for delivery in

2013 27 501 739,008

Total 93 501 2,654,991

There are currently 71 malls accounting for over 2,000,000 m2 scheduled to be delivered in Brazil before the end of 2013.

Brazil’s economic growth, increased quality of living, and currently observed upward social mobility will continue to support and drive retail sales and the demand for retail space for the foreseeable future.

1. ABRASCE

Shopping Center New Stock Forecast - Brazil

0

300.000

600.000

900.000

1.200.000

1.500.000

1.800.000

2.100.000

2012 2013 2014

North Northeast Midwest Southeast South

Total 2012 - 1,870,600 Sqm

Total 2013 - 1,331,600 Sqm

GLA Sqm

Total 2014 - 361,500 Sqm

New Stock Forecast - Brazil

Source: CBRE Brazil

0

200.000

400.000

600.000

800.000

BR

MA

LLS

MU

LTIP

LAN

ALI

AN

SCE

JCPM

IGU

ATE

MI

PREV

I

SON

AE

GEN

ERA

L

AN

CA

R

BR

OO

KFI

ELD

Property Companies Pension Funds Foreign Investors

6.8%

3.5%

2,8% 2.3%2.2% 2.1% 2.1% 1.9% 1.9% 1.8%

Market Share (%)GLA Sqm

Major Retail Players- Brazil

Source: CBRE Brazil

Major Cross-Border Investment Players- Brazil

Group Number of Properties Gross Leasable Area Type Public Net Earnings 3Q11 Total Assets 3Q11

Equity International/ BR MALLS 45 1.43 million m² JV Foreign/

Local BRML3 USD 110,332,780 USD 6,996,796,670

Brookfield/ Brascan 12 N/A Wholly-owned Subsidiary BISA3 USD 139,838,333 USD 5,039,057,778

Cadillac Fairview/ Multiplan 13 551,368 m2 JV Foreign/

Local MULT3 USD 110,072,778 USD 2,349,734,444

Aliansce (GGP/ Iguatemi) 15 494,906 m2 JV Foreign/

Local ALSC3 USD 40,715,000 USD 1,271,967,780

Ivanhoé Cambridge/ Ancar Ivanhoe 11 426,212 m2 JV Foreign/

Local N/A N/A N/A

DDR/ Sonae Sierra 10 353,000 m2 International JV SSBR3 USD 149,850,000 USD 1,746,821,667

Kimco/ REP 23 N/A JV Foreign/ Local N/A N/A N/A

Source: BOVESPA

Major Cross-Border Investment Players- Brazil

MULTIPLAN EMPREENDIMENTOS IMOBILIÁRIOS S.A. is one of the leading developers, owners, and operators of Shopping Centers in Brazil. The Company manages its own Shopping Centers in which it holds equity interest. Multiplan manages 13 owned shopping centers, comprising 551,368 m2 of gross leasable area and close to 3.604 stores. Multiplan has majority control of 11 of the 13 Shopping Centers that they manage.1

BR MALLS PARTICIPAÇÕES S.A is the largest integrated shopping centers company in Brazil, with participation in 45 shopping centers totaling 1.428 million m² of gross leasable area, and ownership of 794,500 m². EQUITY INVESTMENTS owns a stake in BR Malls.

IVANHOÉ CAMBRIDGE owns an interest in several Brazilian shopping centres, development projects, and in one shopping centre management company, through a partnership with ANCAR IVANHOE, the country’s 5th largest real estate company. The company is involved with 11 shopping centers, totaling 426,212 m2.

ALIANSCE SHOPPING CENTERS, owned by GENERAL GROWTH PROPERTIES (US) and the local company IGUATEMI EMPRESA DE SHOPPING CENTERS S.A., owns shares in 15 shopping centers and manages an additional 9. Its operations total 494,906 m² of gross leasable area distributed among over 2.500 stores.

SONAE SIERRA BRASIL is controlled by the European SONAE SIERRA and the American DDR CORP. The company is one of the leading developers, owners, and operators of shopping centers in Brazil. The company owns and manages 10 shopping centers, totaling 353,000 m2 of gross leasable area and 1,973 stores.

REP – REAL ESTATE PARTNERS specializes in the development and management of small to medium commercial centers. The company has successfully developed over 40 projects and currently owns/ manages 23 centers. REP is KIMCO REALTY CORPORATION’s JV partner in Brazil. Kimco started out with a single mall in the south of Florida, and now owns over 16.7 million m2 of gross leasable area and over 1,500 properties across the world.

BROOKFIELD INCORPORAÇOES BRASIL , formerly known as BRASCAN, is a wholly-owned subsidiary of the global company BROOKFIELD ASSET MANAGEMENT INC. In Brazil, the company owns 12 shopping centers with an additional 2 under development, as well as 2 corporate centers.

Source: Respective companies’ websites.

0

50

100

150

200

250

300

350

400

-

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

Sudeste Sul Nordeste Norte Centro-Oeste

Lease R$/GLA Sqm /month

Sale R$/GLA Sqm/ month

Southeast South Northeast North Midwest0

300.000

600.000

900.000

1.200.000

1.500.000

1.800.000

2.100.000

2012 2013 2014

Lease Sale

Total 2012 - 1,870,600 Sqm

Total 2013 - 1,331,600 Sqm

GLA Sqm

Total 2014 - 361,500 Sqm

Retail Sales Value x Lease Rates – Brazil

Source: CBRE Brazil

703,000 Sqm of leased office space; 375,000 Sqm of commercialized office in sale transactions; 336,000 Sqm in transactions involving land acquisition for

logistic/industrial purpose; 150,000 Sqm of leased industrial or logistic properties; 1.1 MM Sqm in property management; 997,000 MM Sqm (GLA) of appraised malls; 1.9 MM Sqm regarding feasibility/development studies;

2010 Performance - Highlights

CBRE started operations in 1979; 380 employees (May, 2011); Offices in SP and RJ; Nationwide operation.

Brazil – Main HighlightsCBRE in Brazil