brazilian real estate office market overview 2009
TRANSCRIPT
BRAZILIAN REAL ESTATE OFFICE MARKET OVERVIEW
2009
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
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
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.
Sample Projects
CORPORATE BUILDING
Company Business
RETROFIT PROJECTSCONDOS 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
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.
2003 - 2008 HIGH LIQUIDITY (FUELED BY IPOs AND
FOREIGN DIRECT INVESTMENT)
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
Main Office MarketsTotal Stock 20 MM sqm.70% in Sao Paulo and Rio de Janeiro18%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
Corporate Office Market 2nd Quarter 2009 São Paulo Class A and AA9,6 MM sqm Total Stock2,4 MM sqm Class A and AA 7.4% Vacancy Rate
Thousand m²
Source: Jones Lang LaSalle; BN CORP
NET ABSORTION FROM 2009 /2011
- 500 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
Market Overview – São Paulo 2nd 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 Class A Class
Primary Regions
Secondary Regions
Alternative Regions
R$/sm/month
Condo/Suites Office Market São Paulo - 2nd. Semester 2009 and forecast4,600 Units US$900 million Sales Value
Source: BN CORP
80%
80%
90%
100%
100%
Market Overview - Brazil
CONSTRUCTION FINANCING
EMERGING SECURITIZATION
MARKET FOR RECEIVABLES
SALES VALUE - 25%
CULTURAL ENVIRONMENT
60% OF BUYERS ARE
INDIVIDUAL INVESTORS
60% OF SOLD UNITS - 50sqm.
REDUCED DEVELOPMENT
CYCLE
SMOOTH APPROVAL PROCESS
AND CLEAR EXIT OF PROJECT
WITHIN THREE YEARS
Investment Case
Alpha Tower
São Paulo
Company Project
Alpha Tower – São Paulo
Assumptions
Type of Project Corporate
Total Private Area 6,900 SQM
Number of Floors 12
Private Area per Floor 570 SQM
Construction Aug/2009 until Mar/2011
Corporate Office Market – 1st Semester 2009Rio de Janeiro – Class A and AATotal Stock 4,5 MM sqm. Class A and AA - 876 Thousand sqm. 3.76% Vacancy Rate
SECOND PRIME MARKET IN
BRAZIL
“RETROFIT”
GOVERNMENT COMPANIES
PENSION FUNDS, OIL AND
GAS COMPANIES
SERVICING
Source: Jones Lang LaSalle; BN CORP
Thousand Sqm
Market Overview - Brazil
Prices – AA and A Class Buildings
Centro
Orla
Barra
AA Class A Class
CLASS A AVERAGE
R$ 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 2nd Quarter 2009
R$/
sqm
Market Overview - Brazil
INVESTMENT CASE
Rio Branco 115
Rio de Janeiro
Rio Branco 115 – Rio de Janeiro
Assumptions
Type of Project Corporate (Retrofit)
Total Private Area 12,200 SQM
Number of Floors 20
Private Area per Floor 610 SQM
Construction Oct/2008 until Aug/2010
Company Project
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
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
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
Challenges Opportunities
