2q10_shoppingptiosavassi

8/4/2019 2Q10_ShoppingPtioSavassi

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CASE STUDY

Shopping Pátio Savassi



Case Study

MULT3

Shopping Pátio Savassi

Owning 96.5% of a mall…

On July 22, 2010, Multiplan exercised an option to acquire an additional 16.5% stake in PátioSavassi, resulting in a total ownership of 96.5%. The option was signed with MKEmpreendimentos e Participações Ltda. The company paid R$51.8 million for this stake andanother R$4.2 million for assets and land for future expansions in the surrounding area. Theacquisition of this stake will further increase Multiplan’s control over the shopping center and

benefit from its expected future growth.

..with three expansions to come

Multiplan plans to develop three expansions in the mall. The first of the three should open byNovember 2010, adding 1,109m² of total GLA to the shopping center`s third floor, and is alreadyunder construction. Furthermore, the company expects to develop two expansions in theacquired land plots, adding another 3,000 m² of GLA and bringing a 25% increase to the

shopping center´s current GLA.

View of Future Expansion

Growing the pie

As already reported in the past, the operation had notonly a financial purpose, but also a strategic one forMultiplan. With the acquisition of the mall, the companyowns three shopping centers in the south part of BeloHorizonte, Minas Gerais, which are three of the bestmalls in the city. Each shopping center has a distinctconsumer segment target in the region, and thecombined tenant sales increased by 60.6% over the lastthree years. This also had an impact in Pátio Savassi’s

results, which lead to exceeding the company’s

expected first year cap rate.

Exceeding expectations year after year

While acquiring its first two stakes in the mall in 2007,the company expected a first year cap-rate of 6.9%.However, due to the company’s effort to review its

tenant mix, the shopping center has outperformed thisfigure leading to a first year cap-rate of 7.6%.

In 2010, using the same price for the last 12 monthsperformance, Pátio Savassi’s cap rate would have been

10.5%, as a result of its strong 66.5% increase in NOI,

the result of the successful segmentation strategyapplied to it in the last 3 years. It is worth mentioning

Increase in sales of the shopping centers in thestate of Minas Gerais in the last 3 Years

Development of the Cap-rate for the first twoacquisitions over initial expectation

468.5 M

156.0 M206.9 M

679.0 M

268.5 M

387.8 M

BHS PSS DMM

Sales jun/07 (12M) Sales jun/10 (12M)

+44.9%CAGR: 13.2%

+87.4%CAGR: 23.3%+72.1%

CAGR: 19.8%

6.9%7.6%

9.8%10.5%

Expected 1stYr Cap Rate

jun/08 (12M) jun/09 (12M) jun/10 (12M)

+52.3%

CAGR: +15.1%



Case Study

MULT3

that its GLA has not suffered any meaningful changethroughout this period.

IRR boosted by expansion

The current expected IRR is nearly 300 b.p. higher than

initially planned, reaching 16.8%. If future expansionsare considered, the return is expected to reach 17.6%.

Good perspectives to continue to grow

Even with all this growth, the two Multiplan shoppingcenters in the region, BH Shopping and DiamondMall,still had a base rent/m² of 43.8% and 23.5%respectively, higher than Pátio Savassi in the last 12months, given that the company has not yet completedits strategy to align rental contracts at this shoppingcenter. Two ratios that show the potential for future

growth in Shopping Pátio Savassi are:1. Base Rent/Sales; lower than in BH Shopping and

DiamondMall.2. Overage/Base Rent; higher than the other two

Multiplan malls in Belo Horizonte, which indicatesthat a percentage of the overage rent could betransferred to base rent in future contracts.

The region also shows a potential upside, due topossible infrastructure investments in the surroundingareas of the mall. This could benefit even further theshopping center’s power of attraction and support itsstrong growth, and exceed Multiplan current

expectations.

Real and unleveraged IRR for Pátio Savassi

acquisitions

Percentage of overage over base rent and baseRent/sales in the LTM since June 2010

14.0%

16.8% 17.6%

Initial expectedreturn (2007)

Current IRR forthe acquisitions

Considering thefuture

expansions

+280 b.p.

+358 b.p.

+79 b.p.

3.4%

17.0%

8.7%

7.2%

5.6%6.3%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

BHS PSS DMM

Over age rent Bas e r en t/Sal es

1,322 R$/m²

920 R$/m²

1,136 R$/m²

BHS PSS DMM

+43,8% +23,5%

Annual base rent/m² in the LTM since

2q10_shoppingptiosavassi

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