CAPITAL MARKETS - ACOBIR · CAPITAL MARKETS Latin America –Overview Tim Gifford - FRICS, CRE Managing Director ... Sao Paulo Rio de Janeiro Principal Sectors Office Retail ... Cap

CAPITAL MARKETS

Latin America – Overview

Tim Gifford - FRICS, CRE

Managing Director

CBRE Capital Advisors Latin America

Global Capital Markets Group

November 2016

Regional Market Levels

LEVEL I – PRIMARY INVESTMENT MARKETS

Significant Cross-border Activity

Highly Liquid Investment Markets

Brazil, Mexico, Chile

LEVEL II – EMERGING INVESTMENT MARKETS

Increasing Cross-border Activity

Strong GDP Growth

Colombia, Peru, Panama/Costa Rica,

Argentina

Restricted/Limited Cross-border activity

Limited Investment Activity

Limited Product Options

Venezuela, Ecuador, Bolivia, Guatemala,

Honduras, El Salvador

Real Estate Investment in Latin America November 2016

LEVEL III – NON-INVESTMENT MARKETS

• Brazil increasing inflation pressures

• Inflation pressures expected to show increase due to recent rapid currency devaluations.

• Pressure on Lending Rates

• End of Commodity Super Cycle

• Softening of Latam Region Macro-economic growth

• Weakening Brazilian Economy

GDP GROWTH AND INFLATION

(6.00)

(4.00)

(2.00)

-

2.00

4.00

6.00

8.00

10.00

12.00

2010 2011 2012 2013 2014 2015 2016 (f)

GDP GROWTH

Mexico Brazil Chile Argentina Peru Colombia

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2010 2011 2012 2013 2014 2015 2016 (f)

Mexico Brazil Chile Argentina Peru Colombia

INFLATION

Major Macro Trends


Sources: The World Bank, IMF


CURRENCY EXCHANGE

• Strengthening of USD

• Reversal of capital flows: South to North

• Risk Off Trade

Mexican Peso

5-Year Low: 11.98 / 5-Year Hi: 21.22

T 12 Low: 16.16 / T 12 Hi: 21.22 (31% change)

Brazilian Real

5-Year Low: 1.57 / 5-Year Hi: 4.16

T 12 Low: 3.12 / T 12 Hi: 4.16 (33% change)

Chilean Peso

5-Year Low: 460 / 5-Year Hi: 732

T 12 Low: 642 / T 12 Hi: 732 (14% change)

Peruvian Nuevo Sol

5-Year Low: 2.57 / 5-Year Hi: 3.53

T 12 Low: 3.24 / T 12 Hi: 3.53 (9% change)

Colombian Peso

5-Year Low: 1,772 / 5-Year Hi: 3,436

T 12 Low: 2,828 / T 12 Hi: 3,436 (21% change)

Argentine Peso

5-Year Low: 4.16 / 5-Year Hi: 15.80

T 12 Low: 9.65 / T 12 Hi: 15.80 (64% change)

Trends

Source: OTC Interbank

Major Macro Trends


MEXICAN PESO

CHILEAN PESO

BRAZILIAN REAL

ARGENTINE PESO

PERUVIAN NUEVO SOL

COLOMBIAN PESO

Investment Volume

volume in billions (USD)

INVESTMENT VOLUME 2012 – YTD 2016

• Mexico remains favored destination for international investors.

• Brazil is out of favor with contrarian and opportunistic funds leading the way.

• Volume off in Brazil

• Increased activity in Peru

Source: CBRE, Real Capital Analytics


Country 2012 2013 2014 2015 YTD 2016

Brazil 5.82 1.82 3.24 1.39 0.86

Chile 0.39 0.44 0.31 0.08 0.74

Mexico 1.29 7.38 4.64 2.24 1.60

Other 0.13 0.38 0.39 0.33 0.05

TOTAL 7.63 10.02 8.57 4.05 3.25

-

2.00

4.00

6.00

8.00

10.00

12.00

2012 2013 2014 2015 YTD 2016

INVESTMENT VOLUME

Brazil Chile Mexico Other

Investment Origin

45.8%

38.3%

6.6%

4.0%

3.1%1.8% 0.2% 0.1%

0.1%UnitedStatesCanada

Israel

Germany

UK

Chile

Brazil

France

• In the past 12 months, the majority ofsources came from the United States(46%) and Canada (38%).

• Investors consist of REOCs, pensionfunds, private equity funds, open-ended funds, sovereign wealth funds,and REITs.

• Active Funds in Region:• ADIA, Blackcreek, Blackstone,

Brookfield, CPPIP, DEKA, EquityInternational, GIC, GLL, IvanhoeCambridge, Gazit-Globe, PSP,PGIM, UIR, Parque Arauco, andWP Carey, amongst others

CROSS-BORDER CAPITAL - ORIGIN

Source: CBRE, Real Capital Analytics

Source: Real Capital Analytics


ORIGIN VOLUME (USD MILLION)

United States 1,349.40

Canada 1,128.20

Israel 194.70

Germany 117.00

UK 91.00

Chile 53.90

Brazil 5.20

France 4.20

Portugal 1.70

TOTAL 2,945.30

LEVEL I

Primary Investment Markets

Brazil

Chile

Mexico

Primary

Markets

Sao Paulo

Rio de Janeiro

Principal

Sectors

Office

Retail

Industrial

Characteristics

Highly institutionalized at domestic level

Pension Funds and Real Estate Funds

Difficult entry without local partner

Financing In Brazilian Real (BRL)

14.25% Interest Rate

Cap Rates /

Yield

Office 9.0% - 10%

Retail 8.5% - 9.5%

Industrial 10% - 12%

Advantages

High degree of domestic institutionalization

Strong growing economy.

Large and liquid market.

Disadvantages

Reference Currency BRL

High cost of Hedging/ Currency exchange

Excessive domestic dominance of market

Expensive non-viable financing

Highly competitive market

Increasing interest rates

Recent Trends

Local Pension Funds and investors continue

to pursue new real estate investments.

Best opportunities focused on projects under

development.

Slowing cross-border investment activity.

BRAZIL - Real Estate Investment Market

6%

8%

10%

12%

14%

16%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: CBRE

Cap Rate - Prime Office (in BRL)

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (f)

GDP Inflation (ave)


0%

5%

10%

15%

20%

25%

30%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Lease Rate USD Vacancy


Source: CBRE Research

BRAZIL – Class A Office

Submarket Stock (m2) Vacancy (m2) Vacancy Rate (%) Asking Rent

(BRL/m2/month)

Paulista 1,118,300 144,261 12.90 80-120

Jardins 1,466,100 214,051 14.60 95-175

Marginal 3,112,400 687,840 22.10 60-125

Others 1,555,000 108,850 7.00 50-80

7,251,800


(BRL/m2/month)

Downtown 1,869,000 229,887 12.30 120-160

Porto Maravilha 58,600 35,863 61.20 100-140

Cidade Nova 376,300 121,921 32.40 90-110

Flamengo 167,500 44,890 26.80 120-210

Botafogo 375,100 39,010 10.40 120-250

South Zone 158,600 8,089 5.10 150-280

Barra da Tijuca 508,700 127,684 25.10 90-120

Others 147,100 21,330 14.50 80-100

3,660,900

SAO PAULO

RIO DE JANEIRO

BRAZIL CORE OFFICE INVESTMENT MARKETS

• Core international investors are focused on Sao Paulo (Jardins, Marginal) and to a lesser extent Rio (Downtown)

• Domestic investors are active in all markets

• There is very limited Leverage in the market, as such, real estate assets are slow to re-price

• Public equity markets have been quicker to re-price

BRAZIL CAPITALIZATION RATES

Office• Sao Paulo 9-10%

• Rio 10-11%Retail• 9-10% Industrial• 9-11%

Yield rates have pushed out approximately 200 bps over the past 24 months with reduced trading activity.

Q3 2015


Q2 2015



BRAZIL - SWOT

STRENGTHS WEAKNESSES

• Class A Office Market Size: Sao Paulo (7.3mm m2 and

Rio total 3.7mm m2 (approx.)

• Liquid Market: Liquidity has constrained considerably in

Brazil with market trading activity off prior levels

• Quality Product: Sao Paulo and Rio have newer

developed office product

• Growing Middle-Class: Increasing demand for real

estate.

• Development Restrictions: Artificial municipal restrictions

to developing new office buildings restricts new product

in areas of Sao Paulo. In Rio natural land restrictions

reduces ability to deliver new product.

Hedging Costs: Exorbitant hedging costs, due to spread between

Brazilian and Euro interest rates.

Lack of Debt Financing: Cost of debt higher than the yield

generated on commercial real estate assets.

Lease Law Structure: 3 year automatic lease review (tenant and/or

Landlord option) makes for a more volatile market

Weak Macro-economic conditions: Brazil has underperformed GDP

growth expectations.

Market Pricing: Brazil is the most expensive market in the region

with rents and sale prices significantly higher than other Latam real

estate markets.

OPPORTUNITIES THREATS

• Portfolio Acquisitions: Brazil has become an institutional

market where investors can acquire large CRE portfolios.

• Reduced Competition: Brazil continues to remain out of

favor with international capital sources reducing

competition for assets.

• Development Pipeline: Brazil offers good opportunities to

develop new CRE product with local experienced

partners.

Presidential Issues: Brazil is currently going through an

impeachment process

Over supply Brazil is experiencing over supply of office product in

Sao Paulo and Rio, and is particularly acute in suburban

submarkets.

Barriers to Entry: Brazil has very high barriers to entry making a

local partner key to any successful market investment strategy.

Increasing Interest Rates: Brazil’s interbank rate increased by 300

bps from 11.25% to 14.25% between 2014 and August 2016.

CONCLUSION

• Brazil does not offer Core investors with direct investment opportunities due to high costs of Hedging and local debt

• Brazil is currently an opportunistic investment market with the majority of the investment opportunities via platform or partnership


4%

6%

8%

10%

12%

2005 2006 2007 2008 2009 2010 2011 2012 2015 Q3 2016

Source: CBRE

Cap Rate - Prime Office

Primary Market Santiago

Principal

Sectors

Office

Industrial (limited existing institutional stock)

Retail (highly consolidated – high barrier to

entry)

Characteristics

Clean modern stock

Very open and transparent market

Considerable condominium stock

Financing In UF

4.5% Interest Rate

Cap Rates /

Yield

Office 6.0% - 7.0% CORE, 7-8%

other

Industrial 8.0 % -9.0%

Retail 6.0 % -8.0%

Advantages

Highly Liquid market

The UF Currency

Transparent market, and efficient legal

system

Very modern Office stock

Disadvantages

Significant amount of new stock being

developed

Office Vacancy rates increasing

Recent Trends

Increase in Regional and Local institutional

investors. (new local funds raised, new

aggressive regional investors entering

market).

UF 0.00

UF 0.25

UF 0.50

UF 0.75

UF 1.00

0%

3%

6%

9%

12%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q32016

Class A Vacancy Class A Lease Rate

-3%

0%

3%

5%

8%

10%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (f)

GDP Inflation (ave)

CHILE - Real Estate Investment Market




CHILE – Class A Office

SANTIAGO

Q3 2016


CHILE CORE OFFICE INVESTMENT MARKETS

• Core international investors are focused on Las Condes with best assets and highest demand for El Golf followed by Nuevo Las Condes

• International investors have also been active in other submarkets, but ticket sizes are smaller

• Recent overbuilding and slow down in

leasing activity has reduced investment activity.

• Many Core international investors have reduced acquisitions due to increased Hedging expenses

MEXICO CAPITALIZATION RATES

Office• Santiao Core Office 6-7% • Santiago General Office Market 7-8% Retail• 6-7% (very consolidated market with

historically limited trading activity, market changing with more retail offering trading)

Industrial• 7-8% - smaller ticket sizes - no active Core

international investors



(UF/m2/month)

Las Condes 1,520,488 132,282 8.70 0.56

El Golf 932,322 64,330 6.90 0.60

Nueva Las Condes 378,025 15,499 4.10 0.55

Eje Apoquindo 210,141 52,535 25.00 0.52

Providencia 229,495 11,934 5.20 0.50

Santiago Centro 368,461 29,108 7.90 0.40

Vitacura 40,445 2,548 6.30 0.51

2,158,889


• Large Office Market Size: Santiago is the third largest

office market in Latin America.

• Institutional Market: Chile has a highly developed and

active capital market with numerous local institutional

property investors, enabling easy market exit.

• Quality Product: Las Condes Santiago Chile offers some

of the higher quality office product equivalent to the best

assets in Brazil and Mexico.

• Financing: Chile offers attractive financing terms (interest

only non-amortizing loan structures) Chile offers a very

attractive spread between cost of debt and property

yields (200+bps).

Increased Hedging Costs: Hedging costs have increased over the

past 24 months as Chile raised interest rates to slow inflationary

pressures. This tightening trend appears to be over with looser

monetary policy expected over the coming years.

Political Party: the current President entered power with a more

populist focus, impacting business perception.

High Barrier to Entry: Retail is a very consolidated asset class with

limited opportunity to acquire Core product.

Limited Supply: Industrial has a very limited existing stock of

institutional quality assets.


• Strategic Acquisitions: Chile offers an opportunity to

realize strategic or opportunistic acquisitions.

• Reduced Competition: Investment activity has slowed in

Chile over the past 12 months as Global capital sources

have focused their investment efforts on Mexico.

• Core Assets: The soften investment activity provides an

opportunity to build a significant Core office portfolio.

Over supply: the Santiago office market is experiencing a large

increase in Class A office stock and as such is experiencing an

increase in Vacancy Rates.

Commodities: Chile’s economy has a strong coloration to the price

of Cooper. If global Cooper prices soften this places downward

pressures on macro-economic growth.

CONCLUSION

• Chile provides an attractive market for CORE office product

• Opportunities in Retail are increasing and can offer investor scale

• Industrial opportunities remain limited with smaller ticket sizes

CHILE - SWOT


4%

6%

8%

10%

12%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q3

2016

Source: CBRE

Cap Rate - Prime Office

Primary Markets Mexico City, Guadalajara, Monterrey

Principal Sectors

Office (Mexico City prime market)

Retail (Mexican Peso only)

Industrial (Mexico City, El Baijo, Guadalajara,

Northern Border area)

Characteristics

Very large market

Liquidity is increasing very fast

Legal practices very similar to US

Market in evolution from Family office to

institutions

Financing Available in US$ and Pesos

5%-6% fixed rate

Cap Rates / Yield

Office - 6.5%-7.5% Core

Office - 7-8% Mexico City non Core submarkets

Office - 7.5-8.5% Monterrey/Guadalajara

Retail - 8.0%-9.0%

Industrial- 7.0%-8.0%

Advantages

USD is the reference currency

First market to begin trend of international

institutionalization

Legal and commercial practices very similar to US

Increasing transactional volume

Disadvantages

Market perception related to incidence of violent

crimes in region (perception improving)

Significant new stock being developed

Informal market participants.

Recent Trends

Launch of REIT (FIBRA) structures

Increase in allocation by pension funds to CRE

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q32016

Source: CBRE

Class A Vacancy

Class A Lease Rate

-8%

-5%

-3%

0%

3%

5%

8%

10%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (f)

Sources: World Bank, IMF

GDP

Inflation (ave)

MEXICO - Real Estate Investment Market


MEXICO – Class A Office

MEXICO CITY

MONTEREY

Q3 2016


MEXICO CORE OFFICE INVESTMENT MARKETS

• Core international investors are focused on Lomas Palmas, Reforma &

Polanco/Nuevo Polanco

• International investors have also been active in Santa Fe, Insurgentes and Bosques -

• Domestic investors are active in all markets (some submarkets have higher amounts of domestic and government tenants and higher exposure to Peso tenant rents – Periferico Sur)

MEXICO CAPITALIZATION RATES

Office• Mexico City Core Office 6-7% • Mexico City Office (other submarkets) 7-

8% • Monterrey/Guadalajara 7.5-8.5%Retail• 8-9% (local REITS underwrite to 8%)Industrial• 7-8% for Core – international investors

focused on el Bajio



(USD/m2/month)

Azcapotzalco 105,335 - - 19.50

Bosques 306,913 17,589 5.7 28.24

Insurgentes 680,748 61,975 9.1 25.50

Interlomas 75,397 5,005 6.6 22.17

Lomas Altas 86,464 14,627 16.9 24.14

Lomas Palmas 629,593 85,085 13.5 33.75

Periférico Sur 442,605 46,357 10.5 23.12

Perinorte 377,555 253,988 67.3 19.42

Polanco 935,605 97,964 10.5 30.17

Reforma Centro 700,692 132,193 18.9 31.53

Santa Fe 1,126,599 71,253 6.3 22.58

Other (Atizapan) 11,123 11,123 100.0 17.77

5,478,629


(USD/m2/month)

Contry 44,067 2,469 5.6 22.00

Margain-Gomez Morin 189,512 53,094 28.0 30.65

Monterrey Centro 159,790 27,550 17.2 21.75

San Jeronimo - Construccion 74,489 16,686 22.4 19.85

Santa Maria 116,276 27,458 23.6 21.26

Valle 46,643 13,972 30.0 23.52

Valle Oriente 404,062 66,716 16.5 22.62

1,034,839


• Large Office Market Size: Mexico City offers the largest

office market in the region.

• Institutional Market: Mexico is quickly transitioning into an

institutional investment market. Local REITS (FIBRAS)

are changing the investment landscape creating a highly

liquid market.

• Quality Product: Mexico City has excellent quality office

product.

• Highly Liquid: with the launch of FIBRAS Mexico has

surpassed Brazil as the market with the highest volume

of CRE investment transactions.

• Economic Reforms: Mexico is currently undertaking

extensive economic reforms including: education, fiscal,

oil & gas, and telecommunications.

• USD: Office and Industrial product leases are typically

paid in USD, reducing currency exchange risks/hedging

costs.

Highly Competitive: Mexico is currently the most active investment

market in the region. CRE investors have significant competition

with the launch of Mexican REITS (FIBRAS) who have been

successful in raising capital in the public markets.

Increasing Costs: Increased competition for assets in Mexico is

driving pricing upwards and has caused yields on Core office assets

to compress by over 100bps in the past 24 months. (Core office

assets are located in Mexico City (Lomas Palmas, Polanco,

Reforma)


• Core Product: Mexico City offers investors opportunity to

acquire Core office product in USD with similar risks to

North American gateway cities at a return premium.

• Scale: Mexico offers investors the ability to obtain scale.

Renewed Violence: An increase in drug related violence or an

increase in violence in Mexico City may impact international

investor market appetite.

Change in FIBRA regulations: Possible changes in Mexico’s new

REIT structures could negatively impact a major CRE market

participant.

CONCLUSION

• Mexico continues to remain as the region’s primary investment market of focus. A trend which is expected to continue for the

foreseeable future.

• Local REITS have significantly increased market liquidity over the past few years.

MEXICO - SWOT


LEVEL II

Emerging Investment Markets

Peru

Colombia

Argentina

Costa Rica - Panama

PERU - Real Estate Investment Market

Primary Market Lima

Principal

Sectors

Office (USD rents)

Retail (Limited existing non-condo product)

Industrial (USD rents)

Characteristics Large city, strong economic fundamentals

and much development going on.

Financing Limited

Tailor made solutions

Cap Rates /

Yield

8 - 10% office

9-10% industrial

Advantages

USD is the reference currency.

Legal and commercial practices are very

reasonable.

Liquid domestic players

Recent investment grade will increase

liquidity

Large population base (Greater Lima similar

in population to greater London)

Disadvantages

Market Size

Limited completed product

Extensive condominium ownership

Recent Trends

Institutional investors from Europe and the US

are increasingly focusing on this market. It will

probably be the next market to emerge as a

target for the institutional investors.

0%

3%

6%

9%

12%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (f)

GDP Inflation (ave)

250.7

334.1

414.9 448.5

506.3 571.0

641.4

838.7

960.6

0

200

400

600

800

1,000

1,200

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

2008 2009 2010 2011 2012 2013 2014 2015 Q2 2016

New Supply (000's m2) Net Absorption (000's m2) Inventory (000's m2)

0%

2%

4%

6%

8%

10%

12%

14%

0

5

10

15

20

25

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q32016

Class A Lease Rate USD Class A Vacancy




• Strong Economic Growth: Peru is the fastest growing

economy in South America.

• USD Leases: Office and Industrial property have leases

executed in USD, eliminating the need to hedge currency

exposure.

• Constrained Office Markets: Lima’s Core office markets

of San Isidro Financial and Corporativo have limited

ability to deliver significant amounts of new office product

creating a constraint on new supply in these submarkets.

Market Size: Peru has a relative small stock of Core Class A office

property and thus a limited amount of investable assets. (this is

rapidly changing).

Financing: While financing is available the local financing market is

limited and larger deals are often financed via club type structures.


• First Mover Advantage: Core investors are beginning to

enter market. GLL is the first active international Core

investor. Peru offers investors the ability to invest ahead

of the “curve” of broader international investment market

• Office and Industrial: Ability to acquire Core office and

Industrial properties.

Over supply: As Peru’s office market stock is limited new office

developments can increase the market size in large percentages

and may cause short-term impacts to market vacancy rates.

Commodities: Peru’s economy has benefited from mining and

demand from China, a softening in demand for minerals and

commodities could negatively impact Peru’s GDP growth.

CONCLUSION

• The Peru office market appears to be emulating the Chilean market evolution of the past 10 years. We expect Peru to become a

CRE investment market comparable in quality, size and conditions to Chile.

• Recent political changes provide an attractive opportunity

• Peru is the second fastest economy in the region

PERU - SWOT


COLOMBIA - Real Estate Investment Market

Primary

Markets

Bogota

Cartagena, Medellin, Cali

Principal

Sectors

Office

Retail

Industrial

Characteristics

Emerging investment market, although the

local real estate funds have been active for

some time.

Financing Case by case approach. Non-recourse

financing may be hard to find.

Cap Rates /

Yield 9 -10% office

Advantages

Colombia recently received Investment

Grade status

Large major cities

Disadvantages

Most commercial properties structured as

condominiums

Limited existing investment stock

High Cost of Debt / Limited availability

High Hedging Costs

Recent Trends

An increasing number of international

investors is beginning to look at this market for

potential development opportunities.

Significant amount of new funds flowing into

market.

0%

3%

5%

8%

10%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (f)

GDP Inflation (ave)



COLOMBIA - SWOT


• Growing Middle-Class: Increasing demand for real

estate.

• Global Interest: Colombia is attracting capital investment

from numerous global investors: Blackstone, CPPIP,

PSP, Equity International, amongst others. (Funds

investing indirectly via local operators/developers).

• New Product: Ability to develop and acquire new CRE

product.

• Lack of Supply: Due to years of civil unrest a

demand/supply imbalance exists in Colombia creating

development opportunities.

Hedging Costs: High costs associated with hedging currency

exposure reduce market viability for Core investors needed to

hedge their currency exposure.

High Price: Due to the current high level of capital searching for

limited CRE opportunities assets are fully priced in Colombia.

Limited Existing Stock: Colombia has a limited amount of Core

institutional product available to acquire.

Highly stratified market: majority of office and retail has been

developed via stratified condominium ownership structures.

Highly Competitive Landscape: Colombia has a highly competitive

market with numerous local capital sources competing for

assets/development sites.

Financing: Cost of debt is equivalent to yields on CRE.


• Forward Purchase/Development: Colombia offers good

JV platform and forward purchase development

opportunities.

Change in Zoning Laws: Possible changes in zoning laws could

impact ability to deliver new CRE product in Bogota.

Political Unrest: A resurgence in guerilla anti-government groups

could destabilize the economy.

CONCLUSION

• Colombia has limited current CORE investment stock

• Colombia presents a very attractive growth market, but requires investors to assume some type of development or forward risks


COSTA RICA -- PANAMA

Primary

Markets San Jose / Central Valley

Principal

Sectors

Office

Retail

Industrial

Hotel/Tourism

Characteristics

Emerging investment market, although the

the local real estate funds have been active

active for some time.

Financing Yes

Cap Rates /

Yield

Office: 8-10%

Industrial: 9 - 10%

Advantages

Liquid investment market

High credit multinational tenants

Market operates in USD

Educated workforce (office demand)

Disadvantages Small market in relative size

Recent Trends

New market entrants, influenced by the

signing of CAFTA (Free Trade Agreement)

Entrance of international institutional capital

capital

Deregulation of Telecomm and Insurance

industries

Primary Market Panama City

Principal

Sectors

Office

Retail

Industrial

Hotel/Tourism

Characteristics

Active economy. The office an industrial

stock does not reflect today the future

potential of the economy.

Financing Yes

Cap Rates /

Yield

Office: 8-9%

Industrial: 9-10%

Advantages

USD is the reference currency

Efficient and secure legal and commercial

commercial system.

Significant government infrastructure

spending.

Disadvantages Lack of product (small volume)

Tainted by the residential oversupply

Recent Trends

Recent influx of international investors and

developers with strong focus on residential

development.

Significant infrastructure government

spending.


COSTA RICA/PANAMA - SWOT


• High Credit Tenants: Office Costa Rica

• Institutional CRE Market: Costa Rica has local small

institutional property investment funds.

• Educated Work Force: Costa Rica has a highly educated

educated work force allowing for significant Near-shoring

shoring by US Multinationals. Office Demand Driver.

• Strong GDP Growth: Panama is the fastest growing

economy in the Western Hemisphere.

• USD Leases: Both Costa Rica and Panama use USD

leases, eliminating currency hedging expenses.

Stratified Ownership: Costa Rica Retail, Panama Office

Limited Stock: Both markets have a small existing stock of Core

Core product. (exception: Costa Rica has significant stock of

Institutional Office Business Parks).

Financing: Local financing markets are not extremely deep. Larger

Larger loans are often completed via club structures in Panama.

Panama. Costa Rica has 4 major active commercial bank lenders.

lenders. Longer term financing or interest only bullet loans are

exceptions as opposed to market norm.


• High Credit Leases: Costa Rica office could enable an

an investor to acquire strong corporate credit quality

quality leases for corporate campus style building (HP,

(HP, Intel, BoA, Merrill Lynch). Ticket sizes surpassing

$100mm available in the market. (mainly Office

buildings).

• Industrial Panama: demand for logistics centers in

Panama is increasing with the expansion of the Canal.

Canal.

• High Yield Markets: Costa Rica offers investors a delta

delta with high yields and low credit risks. Long term

corporate multinational credit guaranteed leases on

on property assets with yields 9% +.

Market Depth: An investor could easily become the largest

institutional owner in the market with the acquisition of a few major

major assets. The lack of market depth could complicate a potential

potential market exit.

CONCLUSION

• Costa Rica and Panama should be treated as one market due to size and legal structure similarities.

• Small market size with small transaction sizes. An investor would have complications allocated over $500 million to both markets.

markets.


THANK YOU


CBRE, Inc.

Licensed Real Estate

Broker© Copyright 2016 CBRE Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee,

warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the

material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist.

TIM GIFFORD

Managing Director

CBRE | Capital Advisors Latin America

+1 305 428 6341

[email protected]

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CAPITAL MARKETS - ACOBIR · CAPITAL MARKETS Latin America –Overview Tim Gifford - FRICS, CRE Managing Director ... Sao Paulo Rio de Janeiro Principal Sectors Office Retail ... Cap