47. • 400+ million population, $4.5 trillion GDP in target investment-grade markets of
Brazil, Mexico, Chile, Peru and Colombia
• Favorable demographics
• Young populations entering the workforce
• Rapid urbanization
• Expanding middle-class
• Rising incomes; tens of millions of people lifted out of poverty over past 15 years
• Two decades of political reform and macro stability exemplified by advances in
five key metrics: (1) rule of law; (2) inflation management; (3) fiscal balance; (4)
free trade; and (5) deregulation
• Healthy banking system; region weathered the GFC well; strong recovery
• Stable societies: little to no ethnic or religious conflict
• Local currencies are at an attractive entry point today
• Economic stagnation in Brazil creating interesting distress opportunities
Long-termregional growth outlook
48. Demand for modern real estate fueled bythe region’s global
competitiveness,attractive demographics, risinghousehold incomes,
and growing access tocredit
• Large pent-up demand for housing: 15+ million unit deficit in the region
• Growing mortgage market expands the prospect of home ownership to tens of
millions of potential new buyers
• Shortage of development capital (particularly debt) limits new supply of real
estate in most markets and product types
• High employment levels have mitigated impact of slowing GDP growth,
particularly for housing
• Region is now a more significant participant in the global economy, fueling
demand for prime office, industrial, retail and hotel properties
• Commercial properties are typically capitalized with low or no debt, so an
"abundance of distressed opportunities" is more marketing hype than reality
49. 10,000,000 5,000,000 0 5,000,000 10,000,000
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
Brazil Population - 2030
15,000,000 10,000,000 5,000,000 00 5,000,000 10,000,000 15,000,000
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
US Population - 2000
Source: Bloomberg,TheEconomistIntelligenceUnit,April 2010; US Census
15,000,000 5,000,000 5,000,000 15,000,000
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
US Population - 2030
Female
Male
15,000,000 5,000,000 5,000,000 15,000,000
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
US Population - 2030
Female
Male
15,000,000 5,000,000 5,000,000 15,000,000
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
US Population - 2030
Female
Male
15,000,000 5,000,000 5,000,000 15,000,000
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
US Population - 2030
Female
Male
Latin America’s babyboomers are entering the workforce bythe millions
10,000,000 5,000,000 0 5,000,000 10,000,000
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
Brazil Population - 2000
15,000,000 10,000,000 5,000,000 00 5,000,000 10,000,000 15,000,000
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
US Population - 1970
50. 0
5,000
10,000
15,000
20,000
25,000
1980 1985 1990 1995 2000 2005 2010 2015e
Brazil
Chile
Colombia
Mexico
Peru
Uruguay
Latamweatheredthe 2008-09 theGFC well and has resumed growth…
Real GDP Growth in Latin America by Country Key Paladin TargetMarkets
Real Growth Per Capita GDP (PPP)
…leading torising incomes and liftingtens of millions from poverty
InBrazil alone, 30+
million people were lifted
out of povertyduring the
past decade;over 4
million people expectedto
enter Brazil’s middle-class
annually through 2030
Sources:IMF WEO Data, Morgan Stanley Research, April 2014.
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Brazil Mexico Chile Colombia Peru
2010 2011 2012 2013 2014e 2015e
51. Real estate investments in LatinAmerica offer superior project-level returns
with downside risk mitigation due tolow leverageand significant pre-sales
§ Higher projected unleveredprofit margins in most markets and products than
comparable investments in the U.S. and other developed markets
§ Development risk in the housing market is greatly mitigated by substantial pre-
sales (30-70%) before start of construction
§ Lower leverage than comparable investments in the U.S. and Europe. Housing
developments typically built with debt equal to 30-40%of cost (vs. 70-90% in U.S.)
§ Higher local interest rates and regional cap rates mitigatecap rate expansion risk
and will likely lead to cap rate compression as growth picks up and rates decline
§ Key benefits to global real estate investors who choose to diversify into the region:
– Opportunistic returns (20-25%IRRs) projected with less than half the debt
of a typical opportunity fund
– Capital preservation, downside protection and diversification due to
combination of high projected profit margins, lower expectedleverage,
pre-sales and resilient real estate demand
