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Cityscape Latin AmericaBayard Lima, CEO Brascan Shopping Centers
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I. Market Overview
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I. Market Overview
6%
8%
10%
12%
14%
2007 2008
7%
12%
Cap Rates in Shopping Center Transactions
There were 14 Shopping Center transactions through August/08 versus 29 in sameperiod of 2007 Only 1 major transaction
Top US companies dealing with home problems no growth expected for near future Major local companies are on the sidelines, focus on other organic growth initiatives
Opportunity to participate in quality shopping center development projects, which haveapprovals in place, but no funding
Shopping Center M&A Activities
Source: Brascan estimates
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I. Market Overview
Development
Twenty new projects are to be inaugurated in 2009
Only seven in 2010 will come to market 13 announced projects on hold
Main local shopping center players have funding to continue the announcedprojects
Major cancelations by medium-sized companies search for private investors
Major retailers reassessing expansion plans: cherry picking developers
Two foreign companies freezing all new developments in Brazil
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Funding: capital has become scarce
I. Market Overview
Public equity market currently unavailable stocks trading at 57% below IPO
Private equity investors evaluating the best timing
Foreign debt capital either too expensive or not available
Local debt capital still available to major companies; more expensive; shorter
tenor
BNDES: shopping centers are not a priority
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I. Market Overview
Retail Sales Trends
Holiday sales expected to be 15% higher compared to 07
Expect some impact on consumer spending behavior
Consumer credit under tighter control and higher interest rates, may causereduction in retail sales in Q109
Mall sales will continue to perform better than overall retail (300-400 bpshigher) expecting year end growth of 11% in 08 y-o-y;
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Brazil has very low supply of shopping center space 4 sqm per 100 people
Even in the top 15 markets, GLA per 100 people averages only 8.5 sqm
Brazils supply of shopping center space is estimated to be 30% below equilibrium (1)
Only 376 shopping centers with 8.1 million square meters of GLA
I. Market Overview
Fundamentals remain in place: underserved market
187
113
59
30 2321 20 14 13 8 4 3
United
States
Canada
Australia
Japan
United
Kingdom
France
Spain
Germany
Italy
Mexico
Brazil
Argentina
Comparative Country Shopping Center GLA
(sqm per 100 persons)
(1) Santander Investments, December 2007
Source: BNDES, ABRASCE
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Less than 30% of the shopping center GLA isowned by the 11 largest companies
An estimated 2.5 4 million square meters ofshopping center space may be placed in themarket for sale(1)
Consolidation of some shopping centercompanies appears likely
Domestic pension funds might reduce realestate holdings
Trend toward acquisitions of minority interests
following acquisition of controlling interest
I. Market Overview
Other Companies /
Individuals: 33.8%
Other 7 Largest Owners:
14.1%
Pension Funds:
37.0%
4 Listed
Companies +
Brascan: 15.1%
GLA of Shopping Center Market (1)
(December 2007)
Source: Santander Investments (BNDES, ABRASCE, ValorEconmico, Abrapp)
(1) Excludes properties under development
Fundamentals remain in place: fragmented ownership
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I. Market Overview
50% of Brazils population is under 25 yearsold
2.6% household growth forecasted (vs.0.9% for the U.S.)
More women are entering the workforce
2008 Brazil looks much like the U.S. in1975 as Baby Boomers entered the
workforce Source: IPDM (Brazil - IBGE, Australia Bureau of Statistics, USACensus Bureaus, Statistics Canada, United Nations StatisticsDivision, Demographic and Social Statistics, StatisticalProducts and Databases, Social Indicators 2007)
Population and Household Growth ForecastSelected Countries
Source: IPDM
Fundamentals remain in place: powerful demographics
AUSTRALIA
BRAZIL
CANADA
CHINA
INDIAMEXICO
US
0.0%
0.5%1.0%
1.5%
2.0%
2.5%
3.0%
0.0% 0.4% 0.8% 1.2% 1.6% 2.0%
CAGR of Population (2007-2017)
CAGRofHo
useholdFormatio
(2007-2017)
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Relative affluence growth across alldemographic groups - nation wide
4 million more households moving into upperincome bracket (15 million persons) in the next10 years
8 million more households moving into themiddle income bracket (26 million persons) inthe next 10 years
Outsized sales growth across a broad retailspectrum
Apparel and Shoes sales YTD +15.5%(1)
Hyper and Supermarket sales YTD +17.7%(1)
Home Furniture and Home Appliances salesYTD +13.3%(1)
AT Kearney June 2008 annual survey ratedBrazil as the best growth market for apparelretailers
I. Market Overview
Source: IPDM
30%
29%28%27%
44%41%
37%
35%
38%
27%
30%35%
10%
20%
30%
40%
50%
2000 2007 2012E 2017E
Upper Income Middle Income Lower Income
Percent of Households(30 largest markets)
Source: IPDM, IBGE
Fundamentals remain in place: growth in affluence
(1) As of August, 2008
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I. Market Overview
Shopping centers currently account for an estimated 20% of Brazilian retail sales, upfrom 13% in 2002. U.S. is 70% and the E.U. is 40%
Expect to reach 40% by 2017
80
100
120
140
160
180
200
220
240
2000 2001 2002 2003 2004 2005 2006 2007
Shopping Center Nominal Sales Total Retail Nominal Sales Shopping Center Same Store Sales
Shopping Center Sales vs Total Retail Sales Growth: 2000-2007
(Y2000 = 100)
CAGR: 12.1%Market
Share Gain
CAGR: 9.7%
Source: IPDM, Abrasce, IBGE
CAGR: 7.6%
Fundamentals remain in place: low penetration of total retail sales
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II. Company Profile
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MG
RJ
PR
SP
Operating Property
New Development Project
MG
RJ
PR
SP
Operating Property
New Development Project
Operating Property
New Development Project
Brazilian Retail Experience & Platform
25 year investor in Brazilian shoppingcenters
Acquired portfolio of approximatelyR$3 billion
Portfolio of 17 retail properties
14 operating properties 3 greenfield projects
6 expansion projects
6 redevelopment projects
395.3 thousand m of GLA
78% of the acquired portfolio is Tier I &II quality
II. Company Profile
Geographic Distribution
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III. Case Study
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III. Case Study
Shopping Ptio Mogi: Green Project
Parking Lot View
Food Court
First green building retail project in Brazil
Working towards obtaining a core and shell LEEDcertificate, granted by the US Green Building Council
Actions include:
build open air spaces
re-use water for lavatories and irrigation
local vegetation utilized in landscaping
bicycle parking make use of certified construction materials
lease to environmentally conscious tenants
More efficient management of resources, despite 5%maximum increase in initial investment
30% energy savings
35% reduction in CO emission
30%-50% reduction in use of water
50%-90% reduction in residual waste
40% CAM and maintenance costs reduction, possible
increase in rental revenues
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Shopping Ptio Mogi: Green Project
Mall ambiance
Sidewalk perspective
The mall is located between the cities of Mogi Mirim,Mogi Guau and Itapira, currently unserved
GDP 30% higher than national average
Trade area population of 280,000 inhabitants
77% of households are B/C classes
Household growth rate of 4% per year
Strong industrial region, including:
AMBEV, Alpargatas, Rainha, Tenneco Automotive,auto parts maker Monroe, Masterfoods, etc
Expected 12% cash-on-cash return first year stabilized,
14% second year stabilized
III. Case Study
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III. Case Study
Main entrance
Side entrance
Property Description
City Mogi Mirim - SP
Inauguration Date (Expected) November 2010
Land Area (m) 84,700GLA (m) 19,920
Number of Stores: 166
Anchor Stores 4
Parking Spaces 1,115
Shopping Ptio Mogi: Green Project
Mogi Mirim, Mogi Guau and Itapira
Total Population 286,479
Urbanization rate 91.9%
GDP, total (2005) R$ 4,52 billion
GDP, per capita (2005) R$ 15,115
GDP, per capita Brazil (2005) R$ 11,622
Active Companies (2006) 6,198
Growth of Active Companies vs 2005 2.45%
Shopping Center in-place None
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Cityscape Latin AmericaBayard Lima, CEO Brascan Shopping Centers