Final Deal Book_Heyer

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Brazil
Porto Maravilha Reinventados
Incubation of Arts and Culture through Live-Work Redevelopment
D e a l B o o k | M i c h a e l H e y e r | C o l u m b i a U n i v e r s i t y | S p r i n g 2 0 1 6
S a o P a u l o
R i o d e J a n e i r o

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Executive Summary …….………………...3
Summary of Terms …………….………….4
Current Market Conditions ………………5
Outlook for Investment in Brazil
Risks & Mitigants
Fulfilling Unmet Demand
Overview Porto Maravilha ………………..8
Vision ……..………………………………..12
Overview – Porto Maravilha
Minha Jarda
Pedra Estúdios
Precedents ………………………...………15
Wynwood, Miami
Vila Madalena, Sao Paulo
Fábrica Bhering, Rio de Janeiro
Site Details ……………………...…………20
Current Site Conditions
Proposed Site Conditions
Building Heights
Financial Summary …………….………..23
Overall Assumptions
Residential Assumptions
Retail Assumptions
Pertinent Assumptions
Tax Structure
C o n t e n t s

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Location
 Porto Maravilha is a neighborhood is transition that is rich with arts & culture with a distinctly
urban feel.
 Proximity to Centro, Rio de Janeiro’s CBD, with 80% of office stock.
 Adjacent to Pedra do Sal, the birthplace of samba and gathering place for samba lovers.
Property
 Minha Jarda – the neighborhood’s “living room” that is created through private-owned private
space that is complimentary to Pedra do Sal and serves as an artistic incubation area.
 Pedra Estúdios – Live/Work rental units catered to both artists and millennials seeking a unique
urban lifestyle. Units feature ground floor retail with residences on subsequent floors.
Market
 There is currently finite investor competition with limited capital available to take advantage of
current opportunities.
 Favorable long-term fundamentals exist in Brazil; near-term distress with long-term growth.
 Assets will be inexpensive with considerable upside potential, especially with proximity to transit
E x e c u t i ve S u m m a r y
Type Live/Work Studios
Residential RSM 3,467 sqm
Rental Rate $88 /sqm
Retail RSM 2,910 sqm
Rental Rate $126 /sqm
Gross Area 7,502 sqm
Stories 2 - 3 stories
Property Snapshot
P e d r a d o S a l

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Rentable Space 6,376 sqm
Purchase Price R$31,256,728
Going-in Cap Rate 11%
Loan-to-Value 29%
Interest Rate 12%
Loan Amount R$9,064,451
Terminal Cap Rate 9%
Unlevered IRR 19.59%
Unlevered Equity Multiple 3.98x
Levered IRR 20.63%
Levered Equity Multiple 4.09x
S u m m a r y o f Te r m s

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As a potential investor, there are many conditions that make Brazil an appealing investment opportunity. With
an understanding of market conditions and a description of the most important risks and subsequent mitigants,
cross-border investment opportunities can be pursued.
Brazil is currently the fifth largest country in the world, in both population and land area. Brazil is a country with
a large workforce age population, with approximately 62% of the country is under the age of 29. This translates
to a large demand for workforce housing in areas that appeal to the millennial demographic.
Despite the large workforce population, population growth has slowed and the population majority will grow older.
By 2025, the population is anticipated to tilt in an older majority with a smaller percent in the workforce. The
salient facts indicate a present opportunity for housing of first-time homeowners through the growth in the rental
sector of the residential market.
There is a large middleclass in Brazil, making up approximately 60% of the population. Despite concerns
regarding Brazil’s shrinking GDP and rising inflation, demographic fundamentals indicate a majority of the
population with expendable income. The middleclass has a stronger access to credit, formal employment, and
education that often translates to a more sophisticated consumer. However, income disparity between classes
in Brazil is extreme. This presents the opportunity to target a lower-middleclass demographic that may find the
prospect of renting interesting. This could be a result of a transient lifestyle or inability to purchase property due
to the high cost of debt in Brazil.
Due to current economic conditions, Brazil is a great market for buyers. Inflation is high and debt is expensive,
limiting the investment competition amongst local Brazilian real estate companies. A favorable currency
exchange rate strengthens the purchasing power of the US Dollar, with the Brazilian Real trading at 0.28 the
US$.
Brazil is host to the 2016 summer Olympic Games, offering the company global exposure. An influx of foreign
capital is likely to mitigate some of the short-term distress and in favor of long-term growth. Current economic
projections indicate a significant economic upturn around 2018.
Overall, the current market in Brazil poses many opportunities for investments. Reduced domestic completion
and a favorable currency exchange rate highlight long-term opportunity with solid fundamentals still omnipresent
in the major urban markets of Sao Paulo and Rio de Janeiro.
Snapshot of Investment in Brazil:
1. Assets will be inexpensive with
considerable upside potential,
2. Market dynamics will create forced
asset sales and bankruptcies,
3. There is currently finite investor
competition with limited capital
available to take advantage of
current opportunities,
4. Favorable long-term fundamentals
exist in Brazil; near-term distress
with long-term growth.
C u r r e n t M a r k e t C o n d i t i o n s
O u t l o o k f o r I n v e s t m e n t i n B r a z i l

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R i s k s M i t i g a n t s

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The question an investor should ask is whether or not to enter the market to take advantage of the devaluation
of the Brazilian Real versus the US Dollar or Euro. This makes investment in distressed assets an appealing
prospect.
There are considerable uncertainties as to the expectation of any returns during the current financial crisis. With
zero or depreciating returns an all too real possibility during 2016 and extending to 2017, investment decisions
in the market should be conservative. As a result of the current economic condition, investors must be prepared
for long-term considerations, especially with uncertainty surrounding the return to market rates.
It is important to consider the cyclical nature of real estate in relation to perceived asset values. According to
market reports, retail and middle-income housing are still declining; while hospitality, office, and
industrial/logistics have already bottomed out. Buying, holding, and redeploying assets between 2016 and 2018
seems to best align with the current market cycle.
Low-income housing remains a government priority, due in large part to the Minha Casa Minha Vida (MCMV)
“My House My Life” program. However, the actualized velocity of growth will be considerably less than predicted.
As a result, investor discretion should be considered between now and 2017. The relatively modest actualized
growth in housing remains an opportunity, especially offerings tailored to lower income or first-time homeowners.
Land banking as an asset class for long-term investors should be considered. The current economic situation
presents the opportunity to purchase raw or unproductive land well below assessed values. Locations to consider
include: near existing industrial hubs, urban centers, or close to major transportation corridors. Pockets of
valuable land near urban areas with tremendous upside potential can be identified in both Sao Paulo and Rio de
Janeiro. Further concerns with the need to grow infrastructure arise from not only the economic condition, but
the fact that Brazil is one of only a few G20 countries with rising greenhouse gas intensity. This only further
confirms the underlying value in proximity to urban centers with more established infrastructure. Moving forward,
property with proper access to transit will demonstrate a higher upside over the holding period of the asset.
V L T L i g h t R a i lA f f o r d a b l e H o u s i n g
F u l f i l l i n g U n m e t D e m a n d

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Porto Maravilha is an urban revitalization program in Rio de Janeiro’s port area; including the neighborhoods of
Caju, Gamboa, Saúde, Santo Cristoe, and part of Centro. Due to the lack of industry incentives, the area fell
victim to gradual degradation since the 1960s. The project focuses around sustainability through the restructuring
of streets, squares, and avenues to improve the quality of life for current and future residents. The total
development cost is $5 billion USD over the course of 15 years and 5 million square meters. Although a 2016
completion was anticipated, significant setbacks have the redevelopment behind schedule.
O ve r vi e w – P o r t o M a r a vi l h a
R e d e v e l o p m e n t o f H i s t o r i c P o r t D i s t r i c t
By the Numbers:
I. Total Area: 5MM m2
(1,235 acres)
II. Public Interventions:
$5B USD over 15 years
III. Private Development:
$25B USD
44MM SF
80,000 new housing units

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 Urban infrastructure
o Roads & utilities
 Streetscape upgrades
 Below-grade Utilities
 New expressway tunnel,
(following removal of elevated highway)
 Improvements to public waterfront access
o Mass transit
 New VLT (light rail system)
 Teleferico (commuter gondola)
 Utilization and development of empty land and idle structures
 Integration of the port district into the Rio CBD
 Emphasize cultural heritage
o Pinacoteca Art Museum
o Museum of Tomorrow
 Recover, protect, & promote historical buildings and sites
o Restoration and preservation
o Highlight Pedra do Sal
 Facilitate the adaptive reuse of neglected architecture
 Promote educational uses
 Promote maritime tourism
o Nightlife & live music venues
o Restaurants & cafes
o New cruise ship terminal(s)
 Stimulate economic activity & generate jobs
 Fair & equitable housing for local residents
o Housing for 80,000 new residents
o Minha Casa Minha Vida Program
o Social interest housing
o House 200,000+ residents in 15 years
 Enhanced urban landscape
o Mix of uses & safe public spaces
o Waterfront parks
o Refurbished plazas
o Green corridors
 Environmental sustainability
o Focus on water conservation & clean energy
o New sewer & storm drain system
o Clean Canal do Mangue
 Transparency in leadership, with community participation
 Enhance overall quality of life in Rio de Janeiro
R e d e v e l o p m e n t O b j e c t i v e s
P i n a c o t e c a A r t M u s e u m
M u s e u m o f To m o r r o w
S t r e e t s c a p e U p g r a d e
U r b a n L a n d s c a p e

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 Given the lofty goals of the Porto Maravilha
redevelopment, alignment of interest with
municipal leaders is essential to ensure
project success.
 The current building stock is typically very
poor and will likely need significant
expenditures for renovations.
 Long term investment may deter
investment, making procurement of funding
from equity partners difficult.
 The vast size of the redevelopment area
makes properly siting the development
difficult.
 There is a possibility that CEPACs are they
more trouble than they are worth, having
become too expensive. This can result in
land acquisition costs that are too high to
meet investor hurdles.
D e v e l o p m e n t C h a l l e n g e s
C u r r e n t B u i l d i n g S t o c k
C u r r e n t S t r e e t C o n d i t i o n

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CEPACs
Certificates for Potential Additional Construction, CEPACs, are
air rights that are purchased through auction. The securities
are listed on the Sao Paulo Stock Exchange (BOVESPA)
that can be traded on secondary markets and are
completely transferrable. CEPACs allow for private sector
financing for large urban interventions with upfront revenue,
reducing dependence on municipal debt. They offer relative
liquidity that improves efficiency of urban markets, which
allows cities to regulate and incentivize density around key urban
nodes. With all figures reported and posted, CEPACs offers greater
transparency for all parties involved with development.
Fund Structure
All CEPACs were transferred to Caixa, as a single buyer, in a single transaction
in 2011 that is listed as Caixa FII Porto Maravilha. It is listed as an open-ended
fund (much like a REIT) and is the largest real estate investment fund in Brazil.
The structure allows for city-owned land and CEPACS to be ‘swapped’ for an
equity stake in finished buildings, where Caixa co-invests in private
development. This allows Caixa to capture ‘upside,’ rather than the city of Rio
de Janeiro, for assuming the full risk of infrastructure funding obligations.
Investments include office, hotel, retail, and residential developments with a
partial equity stake.
C E P A C s & F u n d S t r u c t u r e
6.4MM CEPACs in total
R$3.5B in original valuation
R$500MM in gov’t owned land
R$8B cost of urban intervention

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The project opportunity springs from the need to create a “critical mass” in order to stimulate redevelopment in
the Porto Maravilha district. The proposal is predicated on the need to generate continuous activity in the
neighborhood that attracts a diverse demographic. Current redevelopment has targeted either office or
institutional programming that results in a lively, but seemingly sterile nine-to-five daytime condition. Further,
cultural centers, such as museums, are often perceived as passé by the local population and rely heavily on
tourism for profitability. This results in a transient streetscape dominated by tourists, which loses much of the
authenticity of the neighborhood. An infusion of local vibrancy can make Porto Maravilha a desirable live-work-
play center of Rio de Janeiro for locals and visitors alike. This can be achieved by a true Arts & Culture district
that is informed by the vibrancy of the city and its rich history. The project serves as an incubation space for the
arts that works synergistically with the existing cultural amenities of Porto Maravilha.
Vi s i o n
O p p o r t u n i t y i n P o r t o M a r a v i l h a
Proposed Development Site
S i t e w i t h i n P o r t o M a r a v i l h a

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Given the cultural component, the development opportunity comes from the acquisition of many of the
small parcels adjacent to Pedra do Sal as an assemblage on the southeast side of Porto Maravilha. A
portion of the assemblage will be razed to create negative space midblock. This space will be
transformed into a neighborhood “living room” as privately-owned public space. This plaza will serve
as a destination and meeting place for the community. Quality public space will be created through a
street art aesthetic that features local artists in an outdoor exhibition space. This project will require
minimal capital for demolition and minor aesthetic improvements. There is no need for the purchase of
CEPACs from the city since the project will result in a reduction in the existing FAR. The target block
was selected both for its proximity to Pedra do Sal and its low 1.4 FAR designated in the redevelopment
plan. The project aligns with municipal objectives through the improvement of public space and increase
in the current 4% open space of Porto Maravilha. Lastly, the project helps promote ethical practices
from the developer amongst the community to foster trust and confidence. Forging the relationship
between the developer and the neighborhood is essential for continued work in Porto Maravilha.
Projected
Assemblage Site
for Minha Jarda &
Pedra Estúdios
Ta r g e t e d B l o c k s & L o t s
Vi s i o n
M i n h a J a r d a

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Although Minha Jarda is essential to the redevelopment of the neighborhood as an Arts and Culture
destination, it does little to satiate investors’ anticipated returns. As a result, the majority of the
assemblage will be primed for redevelopment as live-work units. These units will feature first floor
galleries, restaurants, and retail to help promote an active ground plane and increased pedestrian
activity. The subsequent floors will be dwelling units targeted for artist rentals or first time homebuyers
looking for experiential living. The redevelopment will take advantage of the existing building stock and
much of the expenditures will be cosmetic renovations. Using the existing building stock mitigates the
need to purchase CEPACs from the city and eliminates encroachment onto Minha Jarda. Capital for
future projects in Porto Maravilha is generated through the sale of residential units and cash flow from
retail rents.
Vi s i o n
P e d r a E s t ú d i o s

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“The Wynwood Walls was conceived by the renowned community revitalizer and placemaker, the late
Tony Goldman in 2009. He was looking for something big to transform the warehouse district of
Wynwood, and he arrived at a simple idea: ‘Wynwood's large stock of warehouse buildings, all with no
windows, would be my giant canvases to bring to them the greatest street art ever seen in one place.’
Starting with the 25th–26th Street complex of six separate buildings, his goal was to create a center
where people could gravitate to and explore, and to develop the area's pedestrian potential.
Since its inception, the Wynwood Walls program has seen over 50 artists representing 16 countries
and have covered over 80,000 square feet of walls. They have become must see international
destination, with media coverage that has included the New York Times, BBC News, Vanity Fair and
Forbes, who mentioned them along with Wynwood on their list of America’s hippest neighborhoods.
The Walls were also a focus of the docu-series Here Comes the Neighborhood, which chronicled the
creation and evolution of the Wynwood neighborhood.” 1
1
http://thewynwoodwalls.com/
P r e c e d e n t s
W y n w o o d , M i a m i
F u t u r e D e v e l o p m e n t

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“Vila Madalena is a popular neighborhood in São Paulo, full of restaurants, bars, shops, galleries and
colorful street art. In the 1970s, São Paulo students flocked to the area in search of cheap
accommodation, giving it a bohemian character. While Vila Madalena is now considered a bairro
nobre (upper middle class neighborhood), it still retains a lot of its creative charm and is a wonderful
place to spend a day and evening exploring, appreciating art or satisfying hunger or thirst at one of the
many trendy bars and restaurants in the area. The neighborhood is a favorite of tourists and was
especially popular while Brazil was hosting the World Cup.” 2
2
https://journeyingjeff.com/2014/07/17/vila-madalena
P r e c e d e n t s
V i l a M a d a l e n a , S a o P a u l o

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The Bhering building is located in Santo Cristo, on the west end of the Porto Maravilha redevelopment area. A
former factory that produces candies and chocolates, the building has been reimagined as a series of workshops
and artists’ studios. The site previously sat abandoned and board for years before being given new life. The
building was converted in October 2012 by Associação Criativa Orestes 28 into tenant spaces for artists. It
consists of 52 studios and 21 companies with a shared vision of strengthening the artistic and cultural corridor
that is forming in Porto Maravilha. This includes the recovery of buildings and the promotion of cultural activities,
arts, and fostering the creative economy.
P r e c e d e n t s
F á b r i c a B h e r i n g , R i o d e J a n e i r o

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P r e c e d e n t s
F á b r i c a B h e r i n g , R i o d e J a n e i r o

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“Art Basel Cities will use its expertise, network, and communication channels to support cities in
developing their unique cultural landscape. In addition to hosting unique art events in the partner cities,
the program will bring projects from partner cities back to the Art Basel shows, providing them with
additional platforms to engage with Art Basel's international audience.
Art Basel aims to work with cities that have either an emerging or an already established cultural scene
and a strong commitment to establishing themselves internationally as a cultural destination. A newly
formed advisory board, consisting of prominent art world figures with expertise across various
disciplines, will work alongside Art Basel's Director of Business Initiatives, Patrick Foret, to develop this
new strategic initiative.” 3
A potential joint venture with Art Basel would serve a tremendous value as a branding mechanism for
the proposed redevelopment project. Exposure from Art Basel’s worldwide network could bring in global
investment and purchases that can serve as an equity component for subsequent development.
Further, Art Basel events in Porto Maravilha would put the neighborhood on the map as one of the
premier art destinations in the world; with the likes of Basel, Hong Kong, and Miami Beach. Based upon
the criteria for the initiative, Porto Maravilha is well suited for collaboration with the recent completion
of the Museu do Amanhá and Museu de Arte do Rio in close proximity to the site. Sales of live-work
units could be supplemented by patrons, such as Moishe Mana or Jessica Goldman Srebnick, who
look to sponsor emerging artists or need additional space for their extensive art collections.
3
https://www.artbasel.com/about/projects/detail/1751
P r e c e d e n t s
C o l l a b o r a t o r – A r t B a s e l C i t i e s I n i t i a t i v e

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S i t e D e t a i l s
C u r r e n t S i t e C o n d i t i o n s
Before After Before After Before Added Lost After Residential Retail
7 6 - - 31,360 3,840 5,120 30,080 16,960 13,120
A1 1 1 2 2 3,840 0 0 3,840 1,920 1,920
A2 1 1 2 2 4,480 0 0 4,480 2,240 2,240
A3 2 2 2 3 7,680 3,840 0 11,520 7,680 3,840
A4 1 1 2 2 5,120 0 0 5,120 2,560 2,560
A5 1 1 2 2 5,120 0 0 5,120 2,560 2,560
A6 1 0 2 0 5,120 0 5,120 0 0 0
Block A
# of Buildings # of Floors Building Size SF SF by Usage
Block Lot SF
Before After Before After
A 16,000 31,360 30,080 1.96 1.88
B 16,884 35,760 34,536 2.12 2.05
C 9,257 16,131 16,131 1.74 1.74
Total/Avg. 42,141 83,251 80,747 1.98 1.92
Built SF FAR

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F i n a n c i a l S u m m a r yS i t e D e t a i l s
P r o p o s e d S i t e d C o n d i t i o n s
14 13 - - 35,760 0 1,224 34,536 18,876 15,660
B1 1 0 1 0 1,224 0 1,224 0 0 0
B2 1 1 3 3 4,896 0 0 4,896 3,264 1,632
B3 1 1 3 3 4,752 0 0 4,752 3,168 1,584
B4 1 1 2 2 896 0 0 896 448 448
B5 1 1 2 2 1,792 0 0 1,792 896 896
B6 1 1 2 2 2,600 0 0 2,600 1,300 1,300
B7 1 1 2 2 2,600 0 0 2,600 1,300 1,300
B8 1 1 2 2 2,600 0 0 2,600 1,300 1,300
B9 1 1 2 2 2,400 0 0 2,400 1,200 1,200
B10 1 1 2 2 2,400 0 0 2,400 1,200 1,200
B11 1 1 2 2 2,400 0 0 2,400 1,200 1,200
B12 1 1 2 2 2,400 0 0 2,400 1,200 1,200
B13 1 1 2 2 2,400 0 0 2,400 1,200 1,200
B14 1 1 2 2 2,400 0 0 2,400 1,200 1,200
Block B

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S i t e D e t a i l s
B u i l d i n g H e i g h t s
10 10 - - 16,131 0 0 16,131 8,066 8,066
C1 1 1 2 2 2,423 0 0 2,423 1,211 1,211
C2 1 1 2 2 1,872 0 0 1,872 936 936
C3 1 1 2 2 2,245 0 0 2,245 1,123 1,123
C4 1 1 2 2 834 0 0 834 417 417
C5 1 1 2 2 1,251 0 0 1,251 625 625
C6 1 1 2 2 1,043 0 0 1,043 522 522
C7 1 1 2 2 2,385 0 0 2,385 1,193 1,193
C8 1 1 2 2 1,564 0 0 1,564 782 782
C9 1 1 2 2 1,451 0 0 1,451 725 725
C10 1 1 2 2 1,064 0 0 1,064 532 532
Block C

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F i n a n c i a l S u m m a r y
O v e r a l l A s s u m p t i o n s
Assumption Debt Rent Roll Residual Value
Property Name Porto Maravilha Loan Amount $9,064,451 Type RSM Mo. Rent Terminal Cap Rate 9.0%
Rentable Space (sqm) 6,376 Interest Rate 12.0% Phase A 2,375 $107 Selling Costs 6.0%
Purchase Price $31,256,727.67 Amortization 360 months Phase B 2,727 $107
Going-in Cap Rate 11.0% Monthly Payment $93,238 Phase C 1,274 $107
Total 6,376 $682,272
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
Income Inflation 0.0% 10.0% 8.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Rent $8,187,262 $9,005,988 $9,726,468 $10,310,056 $10,928,659 $11,584,378 $12,279,441 $13,016,208 $13,797,180 $14,625,011 $15,502,512
Other Income $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Recoveries $83,740.80 $92,115 $99,484 $105,453 $111,780 $118,487 $125,596 $133,132 $141,120 $149,587 $158,562
Potential Gross Income $8,271,003 $9,098,103 $9,825,952 $10,415,509 $11,040,439 $13,809,381 $14,637,944 $15,516,221 $16,447,194 $17,434,026 $18,480,067
Vacancy 50.0% 100.0% 85.0% 50.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Vacancy $4,135,502 $9,098,103 $8,352,059 $5,207,754 $1,104,044 $1,380,938 $731,897 $775,811 $822,360 $871,701 $924,003
Effective Gross Income $4,135,502 $0 $1,473,893 $5,207,754 $9,936,395 $12,428,443 $13,906,047 $14,740,410 $15,624,834 $16,562,325 $17,556,064
Expenses Inflation 0.0% 10.0% 8.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Marketing $28,415 $31,257 $33,757 $35,783 $37,930 $40,205 $42,618 $45,175 $47,885 $50,758 $53,804
Payroll $56,830 $62,513 $67,515 $71,565 $75,859 $80,411 $85,236 $90,350 $95,771 $101,517 $107,608
Repairs and Maintenance $56,830 $62,513 $67,515 $71,565 $75,859 $80,411 $85,236 $90,350 $95,771 $101,517 $107,608
Management $56,830 $62,513 $67,515 $71,565 $75,859 $80,411 $85,236 $90,350 $95,771 $101,517 $107,608
Insurance $56,830 $62,513 $67,515 $71,565 $75,859 $80,411 $85,236 $90,350 $95,771 $101,517 $107,608
Prop. Taxes (Escalation Every 3rd Year) $625,135 $625,135 $625,135 $662,643 $662,643 $662,643 $702,401 $702,401 $702,401 $744,545 $744,545
Operating Expenses $880,871 $906,445 $928,950 $984,687 $1,004,010 $1,024,492 $1,085,961 $1,108,975 $1,133,369 $1,201,371 $1,228,781
Net Operating Income $3,254,630 ($906,445) $544,943 $4,223,067 $8,932,386 $11,403,952 $12,820,086 $13,631,435 $14,491,465 $15,360,953 $16,327,283
CapEx $0 $13,448,532 $15,160,033 $6,949,951 $0 $0 $0 $0 $0 $0
Cash Flow from Operations $3,254,630 ($14,354,977) ($14,615,091) ($2,726,884) $8,932,386 $11,403,952 $12,820,086 $13,631,435 $14,491,465 $15,360,953
Debt Service $1,118,857 $1,118,857 $1,118,857 $1,118,857 $1,118,857 $1,118,857 $1,118,857 $1,118,857 $1,118,857 $1,118,857
Before Tax Cash Flow $2,135,773 ($15,473,834) ($15,733,948) ($3,845,741) $7,813,529 $10,285,095 $11,701,229 $12,512,578 $13,372,608 $14,242,096
Risk Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Loan Balance ($9,031,558) ($8,994,493) ($8,952,728) ($8,905,666) ($8,852,635) ($8,792,878) ($8,725,543) ($8,649,668) ($8,564,170) ($8,467,828)
DSCR 2.91X -0.81X 0.49X 3.77X 7.98X 10.19X 11.46X 12.18X 12.95X 13.73X
Debt Yield 36.04% -10.08% 6.09% 47.42% 100.90% 129.70% 146.93% 157.59% 169.21% 181.40%
Returns Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Purchase ($31,256,728)
Sale $181,414,257
Selling Costs ($10,884,855)
Total Unlevered CF ($31,256,728) $3,254,630 ($14,354,977) ($14,615,091) ($2,726,884) $8,932,386 $11,403,952 $12,820,086 $13,631,435 $14,491,465 $185,890,355
Free & Clear Return 15.42% 10.41% -45.93% -46.76% -8.72% 28.58% 36.48% 41.02% 43.61% 46.36% 49.14%
Unlevered EM 3.98X
Purchase ($31,256,728)
Loan Funding $9,064,451
Sale $181,414,257
Loan Payoff ($8,467,828)
Total Levered CF ($22,192,277) $2,135,773 ($15,473,834) ($15,733,948) ($3,845,741) $7,813,529 $10,285,095 $11,701,229 $12,512,578 $13,372,608 $176,303,669
Cash-on-Cash Return 16.68% 9.62% -69.73% -70.90% -17.33% 35.21% 46.35% 52.73% 56.38% 60.26% 64.18%
Levered IRR 20.63%
Levered EM 4.09X
Summary of Risk and Returns
Unlevered IRR 19.59% Avg. Free and Clear 15.42%
Unlevered EMx 3.98X Avg. Cash-on-Cash 16.68%
Levered IRR 20.63% Min DSCR -0.81X
Levered EMx 4.09X Min DY -10.08%

24
R e s i d e n t i a l A s s u m p t i o n s
Property Name Pedra Estúdios Loan Amount $4,928,268 Type RSM Mo. Rent Terminal Cap Rate 9.0%
Purchase Price $16,994,027 Amortization 360 months Phase B 1,491 $88
Going-in Cap Rate 11.0% Monthly Payment $50,693 Phase C 637 $88
Total 3,467 $305,077
Rent $3,660,921 $4,027,013 $4,349,175 $4,610,125 $4,886,732 $5,179,936 $5,490,733 $5,820,177 $6,169,387 $6,539,550 $6,931,923
Other Income $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Recoveries $16,157 $17,772 $19,194 $20,346 $21,567 $22,861 $24,232 $25,686 $27,227 $28,861 $30,593
Vacancy 50.0% 100.0% 85.0% 50.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Vacancy $1,838,539 $4,044,786 $3,713,113 $2,315,235 $490,830 $613,930 $325,383 $344,906 $365,600 $387,536 $410,788
Effective Gross Income $1,838,539 $0 $655,255 $2,315,235 $4,417,469 $5,525,371 $6,182,276 $6,553,212 $6,946,405 $7,363,189 $7,804,981
Marketing $15,449 $16,994 $18,354 $19,455 $20,622 $21,859 $23,171 $24,561 $26,035 $27,597 $29,253
Payroll $30,898 $33,988 $36,707 $38,910 $41,244 $43,719 $46,342 $49,122 $52,070 $55,194 $58,506
Management $30,898 $33,988 $36,707 $38,910 $41,244 $43,719 $46,342 $49,122 $52,070 $55,194 $58,506
Insurance $30,898 $33,988 $36,707 $38,910 $41,244 $43,719 $46,342 $49,122 $52,070 $55,194 $58,506
Operating Expenses $478,923 $492,827 $505,062 $535,366 $545,872 $557,008 $590,428 $602,940 $616,204 $653,176 $668,078
CapEx $0 $7,582,683 $8,285,870 $3,474,976 $0 $0 $0 $0 $0 $0
Debt Service $608,313 $608,313 $608,313 $608,313 $608,313 $608,313 $608,313 $608,313 $608,313 $608,313
Before Tax Cash Flow $751,303 ($8,683,823) ($8,743,990) ($2,303,420) $3,263,284 $4,360,049 $4,983,534 $5,341,958 $5,721,888 $6,101,700
Loan Balance ($4,910,384) ($4,890,232) ($4,867,525) ($4,841,938) ($4,813,105) ($4,780,616) ($4,744,006) ($4,702,754) ($4,656,269) ($4,603,889)
DSCR 2.24X -0.81X 0.25X 2.93X 6.36X 8.17X 9.19X 9.78X 10.41X 11.03X
Debt Yield 27.69% -10.08% 3.09% 36.76% 80.44% 103.93% 117.87% 126.53% 135.95% 145.75%
Purchase ($16,994,027)
Sale $79,298,917
Unlevered EM 3.13X
Purchase ($16,994,027)
Before Tax Cash Flow $751,303 ($8,683,823) ($8,743,990) ($2,303,420) $3,263,284 $4,360,049 $4,983,534 $5,341,958 $5,721,888 $6,101,700
Sale $79,298,917
Total Levered CF ($12,065,759) $751,303 ($8,683,823) ($8,743,990) ($2,303,420) $3,263,284 $4,360,049 $4,983,534 $5,341,958 $5,721,888 $76,038,793
Levered IRR 16.44%
Levered EM 3.16X

25
R e t a i l A s s u m p t i o n s
Property Name Minha Jarda Loan Amount $4,136,183 Type RSM Mo. Rent Terminal Cap Rate 9.0%
Purchase Price $14,262,700.51 Amortization 360 months Phase B 1,237 $126
Going-in Cap Rate 11.0% Monthly Payment $42,545 Phase C 637 $126
Total 2,910 $366,608
Rent $4,399,301 $4,839,232 $5,226,370 $5,539,952 $5,872,349 $6,224,690 $6,598,172 $6,994,062 $7,413,706 $7,858,528 $8,330,040
Other Income $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Recoveries $67,584 $74,342 $80,290 $85,107 $90,214 $95,626 $101,364 $107,446 $113,893 $120,726 $127,970
Vacancy 50.0% 100.0% 85.0% 50.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Vacancy $2,233,443 $4,913,574 $4,510,661 $2,812,530 $596,256 $758,438 $401,972 $426,090 $451,656 $478,755 $507,481
Effective Gross Income $2,233,443 $0 $795,999 $2,812,530 $5,366,307 $6,825,942 $7,637,471 $8,095,719 $8,581,462 $9,096,350 $9,642,131
Marketing $12,966 $14,263 $15,404 $16,328 $17,308 $18,346 $19,447 $20,614 $21,850 $23,161 $24,551
Payroll $25,932 $28,525 $30,807 $32,656 $34,615 $36,692 $38,894 $41,227 $43,701 $46,323 $49,102
Management $25,932 $28,525 $30,807 $32,656 $34,615 $36,692 $38,894 $41,227 $43,701 $46,323 $49,102
Insurance $25,932 $28,525 $30,807 $32,656 $34,615 $36,692 $38,894 $41,227 $43,701 $46,323 $49,102
Operating Expenses $401,949 $413,618 $423,887 $449,321 $458,138 $467,484 $495,533 $506,034 $517,166 $548,196 $560,703
CapEx $0 $5,865,849 $6,874,164 $3,474,976 $0 $0 $0 $0 $0 $0
Debt Service $510,544 $510,544 $510,544 $510,544 $510,544 $510,544 $510,544 $510,544 $510,544 $510,544
Loan Balance ($4,121,174) ($4,104,261) ($4,085,203) ($4,063,728) ($4,039,530) ($4,012,262) ($3,981,537) ($3,946,914) ($3,907,901) ($3,863,939)
DSCR 3.59X -0.81X 0.73X 4.63X 9.61X 12.45X 13.99X 14.87X 15.80X 16.74X
Debt Yield 44.44% -10.08% 9.11% 58.15% 121.50% 158.48% 179.38% 192.29% 206.36% 221.23%
Purchase ($14,262,701)
Sale $100,904,759
Unlevered EM 4.95X
Purchase ($14,262,701)
Sale $100,904,759
Total Levered CF ($10,126,517) $1,320,950 ($6,790,011) ($7,012,596) ($1,622,310) $4,397,625 $5,847,915 $6,631,394 $7,079,141 $7,553,753 $99,024,145
Levered IRR 24.56%
Levered EM 5.16X

26
Benefits
 Flexible structure, regulated through Brazilian Securities Exchange Commission (CVM).
 Foreign investors acquire quotas of FIP through portfolio investment (over-the-counter).
 Capital gains are not subject to taxation in Brazil.
 Common structure for investment in larger real estate deals.
Rules
 FIP only permitted to invest through special purpose company, either listed or non-listed.
 FIP must be created with no less than three investors.
 Each investor can hold no more than (a) 40% of all FIP units or (b) 40% of total income.
Ta x S t r u c t u r e
Delaware
Brazil
< 40%< 40%< 40%
Investor BInvestor BInvestor A
Local Debt
SPC
FIP
RE Asset(s)
29%
Step-by-step Instruction:
(i) Incorporation of FIP;
(ii) incorporation of SPC;
(iii) investment made by
investors in the FIP by means of
portfolio investments (Res.
2689/00);
(iv) FIP acquires shares of SPC;
(v) real estate due diligence; &
(vi) SPC invests in relevant real
estate asset(s).

27
Tishman Speyer
6% Broker Commission
$11-12k /sqm Replacement Cost
BR Properties
29% Loan-to-Value
11% Cost of Debt
11-12% Cap Rate
$10-11k /sqm Replacement Cost
^ 40-50% Land Value
GIC Brazil
10% Vacancy (high-end retail)
10-11% Cost of Debt
1.5-2% TR Base
GTIS Partners
2.7x Equity Multiple
Vinci Partners
96.000 sqm Moinho Development
$1B Development Cost
Cushman & Wakefield
$110 /sqm Residential Rental (Leblon)
$180 /sqm Retail Rental (Visconde de Pirajá)
^ Mid – Upper Class (Leeloo, Mango, Salinas)
P e r t i n e n t A s s u m p t i o n s & S o u r c e s

28
Meetings
Coelho, Rodrigo. Vinci Partners.
Goldberg, Guilherme. Vinci Partners.
Jaco, Martin Andrés. BR Properties. CEO.
Nigri, Ilan. Vinci Partners.
Okada, Fernando. Tishman Speyer. Managing Director, Acquisitions & Development.
Pinho. Rafael. Vinci Partners.
Poli, Denise. Tishman Speyer. Managing Director, Development & Property.
Pristaw, Josh. GTIS Partners. Senior Managing Director, Head of Capital Markets.
Souza, Erica Moreira de Souza. Vinci Partners.
Teixeira, João R. GTIS Partners. Senior Managing Director.
Vaca, Greg. Tishman Speyer. Managing Director, Acquisitions.
Valente, Gastão de Souza Mello. GIC. Senior Vice President.
Market Reports
Amsler, Shawn. Porto Maravilha. The Redevelopment of Rio de Janeiro’s Historic Port District
Assessoria Juridica Empresarial, Real Estate Investments in Brazil.
João da Rocha LIMA Jr. and Claudio Tavares de Alencar. International Journal of Strategic Property
Management (2008) 12, 109–123. Foreign Investment and the Brazilian Real Estate Market
J.P. Morgan. Brazil Real Estate 101 – 2016. Latin America Equity Search
Vinci Partners. Porto Maravilha. Moinho
João da Rocha LIMA Jr. and Claudio Tavares de Alencar. International Journal of Strategic Property
Management (2008) 12, 109–123. Foreign Investment and the Brazilian Real Estate Market
Websites
http://www.portomaravilha.com.br/
http://thewynwoodwalls.com/
https://journeyingjeff.com/2014/07/17/vila-madalena-a-wander-through-one-of-sao-paulos-most-
creative-and-colorful-neighborhoods/
https://www.artbasel.com/about/projects/detail/1751
http://cushwakeretail.com/wynwood-retail-update-q1-2015/
http://www.goldmanproperties.com/Real-Estate/Wynwood.asp
http://therealdeal.com/miami/2015/10/27/181238/
S o u r c e s

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