Is Brazil the next Real Estate Frontier?

Is Brazil the next Real Estate Frontier?

Brazilian American Chamber of Commerce

September 15th, 2009

2

MaxCap

Focused in Opportunistic Real Estate Investments targeting aggressive returns

Over $ 400M in equity investments in:

♦ 3 Operating Companies (Developers)

♦ 33 Real Estate Projects located in 11 cities across Brazil

5 Senior Partners, with:

♦ Average of 17 years experience in Real Estate Investments in Brazil and Mexico

♦ Over $ 3B investment track record

JV Partners of Merrill Lynch / BofA for real estate investments in the region

3

Summary

Brazil: Strong Economic Fundamentals

Brazilian Real Estate Fundamentals

MaxCap Vision & Strategy

MaxHaus: An Investment Case

Conclusion

4

Strong Economic Fundamentals

Brazil is the 2nd Largest Economy of the Americas and the 8th Largest of the World…

… as a result of a solid and consistent growth, which tripled its per capita income in the last 6 years

2002 2003 2004 2005 2006 2007 2008$ 2,000

$ 4,000

$ 6,000

$ 8,000

$ 10,000

0%

4%

8%

12%

16%

GDP Per Capita - US$ vs. Unemployment

GDP Per Capita Unemployment %

CAGR: 16.4%

Source: Ipeadata, FGV, IBGE, MaxCap

5


43%32%

45%53%

12% 15%AB

C

DE

Dec 2004 Jul 2009

Source: FGV, JLLS

…bringing 68% of its population to the upper and middle classes

130 M Inhabitants

60 M Inhabitants

6


2002 2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E0%

10%

20%

30%Interest Rates vs. Inflation

Inflation - IGP-M Index EOP Interest Rate - SELIC

This trend is expected to continue supported by declining interest rates and controlled inflation

Source: BACEN, Global Insight/JLLS

7


1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

-4%

-3%

-2%

-1%

0%

1%

2%

1.2%

0.6%

1.7%

1.1%

1.8%1.4%

1.0%

1.7% 1.9%1.6%

1.4%

-3.7%

-0.8%

1.9%

GDP - Quarterly Change

Brazil was also hardly hit by the recent global crisis♦ Due to its globalized and market driven economy

… however, it is one of the first countries to recover from itSource: Ipeadata, FGV, IBGE, Maxcap

8


2002 2003 2004 2005 2006 2007 2008

16.6

10.1

18.115.1

18.8

34.6

45.1FDI - US$ Billion

CAGR: 18%

The Country has been a target consensual destiny for Global Direct Investment Capital …

Source: Ipeadata, Maxcap

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… and has also a dominant position within the public market investments

The Sao Paulo Stock Exchange responds for:

♦ 56% of LatAm Market Cap

♦ 80% of LatAm Daily Volume

♦ 89% of LatAm New Offerings

Source: WFE (World Federation of Exchanges), 9 mo 2008


10

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

261 267 259

45 43 3562

132

182

68 75

4165 54 61

47 38 36 39 35 37 36 29 3654 61

114

196

300

Units Financed (000s) by Mortgage System

NEW M

ORTGAGE

SYST

EMMortgage Collapse

A healthy and sustainable Mortgage System is back [after 20 years]…

Source: BACEN, ABECIP, MaxCap

11


1990's 2000's 2010's0 M

5 M

10 M

15 M

20 M

25 M

14 M17 M

21 M

Brazilian New Households per Decade

Source: IBGE, MaxCap

♦ Past decade Brazil produced 14 M new households , virtually without mortgages

♦ Next decade new homes are expected to grow at an average of 2.1 M per year.

♦ Roughly 20% of new homes in the current decade should be financed by a mortgage

…indicating an enormous potential growth for the next decades…

… extra fueled by the recent “Minha Casa, Minha Vida” program sponsored by the government for the economic segment

Source: IBGE, MaxCap

12


DenmarkHoland

UKUSA

SpainSweden

GermanyBelgium

FranceAustria

ItalyChile

MexicoBrazil

0% 20% 40% 60% 80% 100% 120%

100.8%98.4%

83.1%74.5%

58.6%56.7%

51.3%36.3%

32.2%23.5%

18.7%18.0%

9.0%1.5%

Percentage of GDP Attributable to Mortgages 2006

… however, despite its sharp growth, the mortgage penetration is still very timid compared to other economies

Source: ABECIP

13


2000 2001 2002 2003 2004 2005 2006 2007 20080

10

20

30

40

50

60

70Annual Shopping Mall Sales (R$B)

As consequence of its economic strength and the emergence of its middle class, shopping mall sales have been increasing at 12% per year in the current decade…

Source: ABRASCE

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2Q/08 3Q/08 4Q/08 1Q/09 2Q/09 25

50

75

100

125 Lease Rates (2Q/08 = 100)

Beijing Mumbai Moscow São Paulo

Boosted by its robust economy, the office sector is also showing an impressive resilience, even during the current global crisis

São Paulo is probably the only metro area in the globe where prices went up significantly in the last 12 months

Source: JLLS, OESP

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However office prices are still cheap when compared to other cities

CBRE Global 50 Index Ranked by Occupancy Cost (US$ / sqf / year)

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2004 2005 2006 2007 2008 2009 YTD

0

20

40

60

80

0

10

20

30

40Market Cap Real Estate Public Co (R$ Bn)

Market Cap.

Number of Companies

Global Public Investors have been paying huge premium to take part of this game…

…however Brazilian Real Estate has been still ignored by global private investment community

Source: BOVESPA, MaxCap

Our Strategy

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FIRST MOVERS ♦ Highly Diversified Operations

♦ No Focus

♦ Taylor Made Products

♦ Family owned

♦ Highly Opportunistic

♦ Capital: competitive advantage

WINNERS♦ Focus

♦ Specialized Portfolio

♦ Volume / Scale / Process

♦ Disciplined Management

♦ Operational efficiency

♦ Capital: just a consequence

MaxCap has had a contrarian view about the real estate investment opportunities in the Brazilian market

♦ We believe the current market status is a reflection its initial institutionalization phase. Capital hasn’t played its disciplinary role yet.

Our Strategy

REAL ESTATE PROJECTS

1 2 N x y

OPERATING CO

MAXCAP FOUNDING PARTNERS

OTHER INVESTORS

80% to 99% (Full Control)

1% to 20%

80% to 99%If MaxCap declines RFR

< or = 50% > or = 50%

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MaxCap invests in efficient and focused developers in a very creative capital structure (MaxCap Platform Strategy)

1% to 20%

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Our Strategy

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♦ Residential Middle Income

♦ Environmentally Oriented

♦ Residential Urban Middle Income

♦ Design, Technology, Lifestile Oriented

♦ The Only Pure Office Developer in Brazil

♦ A Leading Player in the Segment

MAXCASA

MaxCap successfully invested in 3 focused operating companies, through its Platform Strategy Structure

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An Investment Case

MaxCasa is probably the most focused apartment developer in the globe

It only produces MaxHaus 70 sqm apartments…

♦ Open spaces, with no standard walls

♦ Highly customizable

♦ Cutting Edge Technology & Design

♦ Units can be combined horizontally or vertically into 140, 210, 280…sqm

…faster and cheaper than their ordinary comparables, due its high level of scale and standardization.

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An Investment Case

21

22

An Investment Case

Premium neighborhoods

Upcoming neighborhoods

Peripheral regions

São Paulo

'

MaxHaus has 9 projects in SP in different kinds of neighborhoods (4 to be launched this year)

MaxHaus is a blockbuster everywhere it goes

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An Investment Case

MaxCasa currently sells faster than any other real estate developer in Brazil

♦ Out of 1,024 units launched since mid 2008, just before the global crisis, MaxCasa only 10% remains in stock

2H08 1H09

11.5% 12.8%

34.5%

57.8%

Sales Absorption - VSO %

São Paulo Market Maxcasa

Source: Companies Financial Reports, MaxCap

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An Investment Case

MaxHaus Vila Leopoldina (3 towers comprising 318 apartments) was launched August 15th, 2009…

♦ It was fully sold in a single weekend!

♦ 1,340 people packed its show room, trying to buy a MaxHaus!

♦ 150 brokers couldn’t handle the demand!

♦ Only a single advertising was published in the 2 main SP newspapers

…demonstrating that the MaxHaus concept and the brand is a home-run in the country

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An Investment Case

MaxCasa also generates more profits than generic companies, due its operational and marketing efficiency

♦ MaxHaus margins are 75% higher than the average public real estate company

♦ Investment cycle is typically half of a comparable diversified company’s investment cycle

Net Margin G & A

10.4% 9.0%

18.1%

3.5%

2008 Performance Public Companies vs. Maxcasa

Public Companies MaxcasaSource: Companies Financial Reports, MaxCap

An Investment Case

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43%32%

45%53%

12% 15% 20% of Population

Household Growth next Decade: 2.1M /year

MaxHaus Potential Market: 420,000 homes

If MaxHaus Penetration = 1.5%

MaxHaus will produce 6,200 homes / year

This is a R$ 1.6 B business

The industry see MaxHaus as a niche player ♦ Even though MaxHaus sales conversion (visitors x contracts) is 20%,

the highest in the market (average of 7.5%).

AB

C

DE

Source: IBGE, FGV, MaxCap

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Is Brazil the next Real Estate Frontier?

There isn’t any other sizable economy with similar positive fundamentals:

♦ Robust per capita income growth

♦ Gigantic Emerging Middle Class

♦ Declining interest rates

♦ Pent up demand derived from 20 years with no mortgage system

♦ Politically stable country, with centennial legal and institutional framework

MaxCap estimates that over U$ 30 B will be invested in this sector in the country within the next 5 years.

Where will you be in this timeline?

Thank you!

José Paim de Andrade Jr.

[email protected]

Documents

Is Brazil the next Real Estate Frontier?