Transcript Brazilian American Chamber of Commerce, Inc.

Is Brazil the next Real Estate Frontier?
Brazilian American Chamber of Commerce
September 15th, 2009
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
2
Summary
Brazil: Strong Economic Fundamentals
Brazilian Real Estate Fundamentals
MaxCap Vision & Strategy
MaxHaus: An Investment Case
Conclusion
3
Strong Economic Fundamentals
Brazil is the 2nd Largest Economy of the Americas and the 8th
Largest of the World…
GDP Per Capita - US$ vs. Unemployment
16%
$ 10,000
8,311
$ 8,000
12%
7,107
5,869
$ 6,000
8%
4,808
3,664
$ 4,000
2,870
3,090
2002
2003
4%
0%
$ 2,000
2004
2005
GDP Per Capita
2006
2007
2008
Unemployment %
… as a result of a solid and consistent growth, which tripled its
per capita income in the last 6 years
4
Source: Ipeadata, FGV, IBGE, MaxCap
Strong Economic Fundamentals
…bringing 68% of its population to the upper and middle classes
12%
AB
15%
130 M Inhabitants
45%
C
53%
DE
32%
43%
Dec 2004
60 M Inhabitants
Jul 2009
5
Source: FGV, JLLS
Strong Economic Fundamentals
This trend is expected to continue supported by declining interest
rates and controlled inflation
Interest Rates vs. Inflation
30%
20%
10%
0%
2002
2003
2004
2005
2006
2007
Inflation - IGP-M Index
2008 2009E 2010E 2011E 2012E
EOP Interest Rate - SELIC
Source: BACEN, Global Insight/JLLS
6
Strong Economic Fundamentals
Brazil was also hardly hit by the recent global crisis
♦ Due to its globalized and market driven economy
GDP - Quarterly Change
1.2%
1%
1.8%
1.7%
2%
1.1%
1.7%
1.4%
1.9%
1.6%
1.9%
1.4%
1.0%
0.6%
0%
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
-1%
-0.8%
-2%
-3%
-3.7%
-4%
… however, it is one of the first countries to recover from it
7
Source: Ipeadata, FGV, IBGE, Maxcap
Brazilian Real Estate Fundamentals
The Country has been a target consensual destiny for Global
Direct Investment Capital …
FDI - US$ Billion
45.1
34.6
18.8
18.1
16.6
15.1
10.1
2002
2003
2004
2005
8
2006
2007
2008
Source: Ipeadata, Maxcap
Brazilian Real Estate Fundamentals
… 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
9
Source: WFE (World Federation of Exchanges), 9 mo 2008
Brazilian Real Estate Fundamentals
A healthy and sustainable Mortgage System is back [after 20
years]…
Units Financed (000s) by Mortgage System
300
Mortgage Collapse
261 267 259
196
182
132
10
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1993
1991
1990
1989
1988
1987
1995
54 61
54 61 47
38 36 39 35 37 36 29 36
41
1994
65
1992
68 75
62
1986
1985
1984
1983
1982
1981
1980
45 43 35
114
Source: BACEN, ABECIP, MaxCap
Brazilian Real Estate Fundamentals
…indicating an enormous potential growth for the next
decades…
♦ Past decade Brazil produced 14 M new 25 M
Brazilian New Households per Decade
households , virtually without mortgages
20 M
♦ Next decade new homes are expected to 15 M
grow at an average of 2.1 M per year.
21 M
10 M
♦ Roughly 20% of new homes in the
current decade should be financed by a
mortgage
5M
14 M
17 M
0M
1990's
2000's
2010's
Source: IBGE, MaxCap
… extra fueled by the recent “Minha Casa, Minha Vida” program
sponsored by the government for the economic segment
11
Source: IBGE, MaxCap
Brazilian Real Estate Fundamentals
… however, despite its sharp growth, the mortgage penetration
is still very timid compared to other economies
Percentage of GDP Attributable to Mortgages 2006
Denmark
Holand
UK
USA
Spain
Sweden
Germany
Belgium
France
Austria
Italy
Chile
Mexico
Brazil
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%
0%
20%
40%
12
60%
80%
100%ABECIP
Source:
120%
Brazilian Real Estate Fundamentals
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…
Annual Shopping Mall Sales (R$B)
70
60
50
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008
13
Source: ABRASCE
Brazilian Real Estate Fundamentals
Boosted by its robust economy, the office sector is also
showing an impressive resilience, even during the current
global crisis
Lease Rates (2Q/08 = 100)
125
100
75
50
25
2Q/08
3Q/08
4Q/08
1Q/09
2Q/09
Beijing
Mumbai
Moscow
São Paulo
São Paulo is probably the only metro area in the globe where
prices went up significantly in the last 12 months
14
Source: JLLS, OESP
Brazilian Real Estate Fundamentals
However office prices are still cheap when compared to other
cities
CBRE Global 50 Index
Ranked by Occupancy Cost (US$ / sqf / year)
15
Brazilian Real Estate Fundamentals
Global Public Investors have been paying huge premium to take
part of this game…
Market Cap Real Estate Public Co (R$ Bn)
80
40
60
30
Market Cap.
40
20
20
10
0
0
2004
2005
2006
2007
2008
Number of
Companies
2009
YTD
…however Brazilian Real Estate has been still ignored by global
private investment community
16
Source: BOVESPA, MaxCap
Our Strategy
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.
FIRST MOVERS
WINNERS
♦ Highly Diversified Operations
♦ Focus
♦ No Focus
♦ Specialized Portfolio
♦ Taylor Made Products
♦ Volume / Scale / Process
♦ Family owned
♦ Disciplined Management
♦ Highly Opportunistic
♦ Operational efficiency
♦ Capital: competitive advantage
♦ Capital: just a consequence
17
Our Strategy
MaxCap invests in efficient and focused developers in a very
creative capital structure (MaxCap Platform Strategy)
FOUNDING
PARTNERS
MAXCAP
< or = 50%
OTHER
INVESTORS
> or = 50%
OPERATING CO
80% to 99%
80% to 99%
1% to 20%
(Full Control)
1
2
1% to 20%
N
x
REAL ESTATE PROJECTS
18
If MaxCap declines RFR
y
Our Strategy
MaxCap successfully invested in 3 focused operating
companies, through its Platform Strategy Structure
MAXCASA
♦
Residential Middle Income
♦
Environmentally Oriented
♦
Residential Urban Middle
Income
♦
The Only Pure Office
Developer in Brazil
♦
Design, Technology,
Lifestile Oriented
♦
A Leading Player in the
Segment
19
1
An Investment Case
MaxCasa is probably the most focused
apartment developer in the globe
It
only produces
apartments…
MaxHaus
70
sqm
♦ 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.
20
An Investment Case
21
2
An Investment Case
MaxHaus has 9 projects in SP in different
neighborhoods (4 to be launched this year)
kinds
of
Premium neighborhoods
Upcoming neighborhoods
Peripheral regions
MaxHaus is a blockbuster
everywhere it goes
São Paulo
22
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
Sales Absorption - VSO %
57.8%
34.5%
12.8%
11.5%
2H08
1H09
São Paulo Market
23
Maxcasa
Source: Companies Financial Reports, MaxCap
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
24
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
2008 Performance Public Companies vs. Maxcasa
18.1%
10.4%
9.0%
3.5%
Net Margin
G&A
Public Companies
25
Maxcasa
Source: Companies Financial Reports, MaxCap
An Investment Case
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%).
12%
AB
15%
20% of Population
Household Growth next Decade: 2.1M /year
45%
C
53%
MaxHaus Potential Market: 420,000 homes
If MaxHaus Penetration = 1.5%
MaxHaus will produce 6,200 homes / year
43%
DE
32%
This is a R$ 1.6 B business
26
Source: IBGE, FGV, MaxCap
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?
27
Thank you!
José Paim de Andrade Jr.
[email protected]