Brazilian American Chamber of Commerce, Inc.

Report
Retail Market
Brazil
Tim Gifford, FRICS,
S.V.P. Capital Markets CBRE
January 2012
PART I
The Drivers
Country Overview - Brazil
Area
8,514,877 square kilometers
Population
194,932,685
Major Cities
(6)
Sao Paulo
Rio de Janeiro
Brasilia (Capital)
- 20 million (Metro area)
- 12 million (Metro area)
- 3.8 million
Salvador
Fortaleza
Belo Horizonte
- 3 million
- 2.8 million
- 2.5 million
Other Major Cities population1million and
above (8)
Manaus
Curitiba
Recife
Porto Alegre
- 2.1 million
- 2 million
- 2 million
-1.8 million
Belém
Goiania
Sao Luis
Maceió
- 1.7 million
- 1.3 million
- 1.2 million
-1 million
Government
Federal Republic
President: 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
Nominal GDP
GDP/Capita
Inflation
Unemployment
- 4%
- USD 2.17 trillion
- USD 11,071
- 6.3%
- 6.0%
GDP
Nominal GDP
GDP/Capita
Inflation
Unemployment
- 1.3%
- USD 553 billion
- USD 3,130
- 6.8%
- 9.3%
Souces: IBGE, CIA World Factbook, World Bank,
IMF
Macroeconomic Overview - Brazil
800
12,000.00
12
10,000.00
10
8,000.00
8
6,000.00
6
4,000.00
4
2,000.00
2
700
600
500
400
300
200
100
0
2001 2002 2003 2004 2005 2006 2007 2008 2009
Average Monhtly Income in Metropolitan Areas (R$)
0.00
0
2005
2006
2007
GDP Per Capita
Average Monhtly Income in Metropolitan Areas (USD)
2008
2009
2010
2011(e)
Unemployment (%)
Souce: World Bank
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.
“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
“New minimum wage will inject R$47 billion (USD
25.8 billion) into the economy.” 2, 3
1.
2.
3.
4.
“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
http://www.edhec-risk.com/latest_news/featured_analysis/RISKArticle.2011-12-20.4128
http://oglobo.globo.com/economia/novo-salario-minimo-vai-injetar-47-bilhoes-na-economia-3519466
http://www.correiobraziliense.com.br/app/noticia/economia/2011/12/27/internas_economia,284258/aumento-do-salariominimo-vai-injetar-r-47-bilhoes-na-economia.shtml
http://online.wsj.com/article/BT-CO-20111125-703320.html
Macroeconomic Overview - Brazil
2,500,000,000,000
100,000,000,000
90,000,000,000
2,000,000,000,000
80,000,000,000
70,000,000,000
1,500,000,000,000
60,000,000,000
50,000,000,000
1,000,000,000,000
40,000,000,000
30,000,000,000
500,000,000,000
20,000,000,000
“Brazil experienced the
strongest investment activity
of the Latin American markets
and is one of the preferred
global destinations for foreign
capital.” 1
10,000,000,000
0
0
GDP in USD
FDI in USD
Souce: World Bank
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 II
The Market
Shopping Center Real Estate Market- Brazil
Comparative GLA Distribution Worldwide
Square meters per 100 inhabitants
200
187
180
160
140
120
Brazil has low supply of
Shopping Center Space
(4Sqm of GLA per 100
inhabitants)
113
100
80
59
60
40
30
23
21
20
20
14
13
8
4
3
Brazil
Argentina
0
United States
Canada
Australia
Japan
UK
France
Spain
Germany
Italy
Mexico
Source: CBRE
Side Note:
Brazil
 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.
Shopping Center Real Estate Market- Brazil
Total Stock in Brazil by Region
Highlight: Southeast Region
South
15%
São Paulo
38%
Midwest
9%
Southeast
58%
Rio de Janeiro
13%
Northeast
15%
Mians Gerais and
Espirito Santo
7%
North
3%
Source: CBRE
Brazil
430 Shopping Centers with over 9.5 billion m2
Shopping Center Real Estate Market- Brazil
Total Stock Quality: Southeast Region
Class D
20%
Class A
17%
Class B
29%
Class C
34%
230 Shopping Centers with 5,796,000 m² of GLA
Source: CBRE
Brazil
Shopping Center Real Estate Market- Brazil
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.
Source: ABRASCE
What it means: growth in earning
potential has outpaced growth in
leasable area, driving investor
demand for development and
acquisition.
Shopping Center New Stock Forecast - 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
561,346
Scheduled for delivery in 2012
44
474
1,354,637
Scheduled 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 m 2 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
New Stock Forecast - Brazil
GLA Sqm
2.100.000
Total 2012 - 1,870,600 Sqm
1.800.000
1.500.000
Total 2013 - 1,331,600 Sqm
1.200.000
900.000
600.000
Total 2014 - 361,500 Sqm
300.000
0
2012
2013
North
Northeast
Midwest
2014
Southeast
South
Source: CBRE
Brazil
Major Retail Players- Brazil
GLA Sqm
Market Share (%)
800.000
6.8%
600.000
3.5%
400.000
2,8%
2.3%
2.2%
2.1%
2.1%
1.9%
1.9%
1.8%
200.000
Source: CBRE
Brazil
Property Companies
Pension Funds
Foreign Investors
BROOKFIELD
ANCAR
GENERAL
SONAE
PREVI
IGUATEMI
JCPM
ALIANSCE
MULTIPLAN
BR MALLS
0
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
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.
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.
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
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.
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.
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.
Source: Respective companies’ websites.
Retail Sales Value x Lease Rates – Brazil
Lease
R$/GLA Sqm /month
Sale
R$/GLA Sqm/ month
GLA Sqm
4.000
400
2.100.000
Total 2012 - 1,870,600 Sqm
3.500
350
1.800.000
3.000
300
1.500.000
Total 2013 - 1,331,600 Sqm
2.500
250
1.200.000
2.000
200
900.000
1.500
150
1.000
600.000
100
Total 2014 - 361,500 Sqm
500
50
-
0
300.000
0
Sudeste
Southeast
Sul
South
Norte
North
Nordeste
Northeast
2012
2013
Lease
Centro-Oeste
Midwest
2014
Sale
Source: CBRE
Brazil
CBRE in Brazil
Brazil – Main Highlights
 CBRE started operations in 1979;
 380 employees (May, 2011);
 Offices in SP and RJ;
 Nationwide operation.
2010 Performance - Highlights

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;

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