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Market Bulletin

3rd Quarter 2010 - São Paulo / Rio de Janeiro / ABCD and Alphaville

In 2006, when Ocupantes was still a young firm in the Corporate Real Estate market, and was seeking clients, a directed research was undertaken to identify firms who might need expansion space. With the experience of the directors who had an accumulated knowledge of the market, Ocupantes was able to identify a potential requirement of Europ Assistance for more office space, approximately 2,200 m², in Greater São Paulo, at the time more specifically aimed at the ABCD region. The pioneer, and one of the largest multinational firms in the Assistance market, in the travel, automobile, health sectors, among others, with diverse clients including banks, insurers, credit card operators, and many others, the Europ Assistance Group chose to hire Ocupantes. “Having identified the requirement, we contacted the directors of the Europ Group. Following a very detailed search of the ABCD region, and later, by our suggestion, the Barueri region on the other side of town, we eventually closed a deal in an excellent building in the Alphaville market of Barueri,” tells Alan Roger, Consultant at Ocupantes Corporate Real Estate, responsible for all negotiations for the Europ Assistance account. The chosen building was the “West Side”, the tallest in Barueri, with 35 floors. The building was identified as the best option in both the qualitative and financial comparisons prepared by Ocupantes, and Barueri offered the same tax incentives as the ABCD municipalities. The support by Ocupantes was complete, since it covered technical issues of the building, contractual discussions and documentation analysis, leading to a level of comfort and trust within the Europ management that is evidenced by repeat business. Highly satisfied with the outcome of the

Project, Europ Assistance sought Ocupantes in 2009 to once again help them expand. According to Mr. Roger, the demand was for an additional 300 to 400 m², and Ocupantes was able to negotiate more space in the West Side, increasing the client’s leased space to five floors. In 2010 Europ Assistance received notice from their landlord at the West Side, informing that the rent of the original lease of 2,200 m² was below market and that the amount would have to be reviewed. Although the landlord was within his legal right to ask for a review, the news caught Europ Assistance by surprise, since the proposal was for a 60% increase in the rent payable. Therefore, once again, Ocupantes was called, this time with the purpose of helping Europ in this renegotiation, to try and reach a viable solution for both parties. “The client, with Ocupantes’ guidance, recognized that the rent paid was below market”, explains Alan Roger. “However, we needed a strategy to limit the rental increase as little as possible in order that the client’s operation was not compromised, and at the same time renew the lease for a further five years, which was the client’s wish. Following several negotiation rounds, and the presentation to the landlord of market evidence, we obtained a 28% reduction in the price that the landlord was asking and managed a new 5-year contract.” This is the third assignment that Ocupantes Corporate Real Estate concludes for the Europ Assistance Group. It started with a 2,200 m² lease in Alphaville in 2006, an expansion by an additional 400 m² in 2009, and a renewal of the whole 2,600 m² on five floors at the West Side building. “The Europ Group is a loyal client, and for whatever they need in terms of real estate Ocupantes is always sought. We continue working on assignments for them”, concludes Alan Roger.

HIGHLIGHTS SÃO PAULO The vacancy rate tightens for the 3rd consecutive quarter RIO DE JANEIRO Positive expectations ABCD and Alphaville A further drop in the Alphaville vacancy

SUCCESS STORIES Client Satisfaction guarantees repeat business for Ocupantes

OUR SERVICES For offices, industries or retail, our services are: • Relocations • Rent Reviews and Lease Renewals • Lease Terminations • Management of Opportunities and Critical Dates • Valuations • Divestments • Build-to-Suit • Sale & Leaseback • Project Management

PRESENCE IN: SÃO PAULO

SALVADOR

RIO DE JANEIRO

RECIFE

BELO HORIZONTE

ARACAJU

GOIÂNIA

FLORIANÓPOLIS

www.ocupantes.com Rua Fernandes Moreira, 1.166, 4º andar 04716-003, São Paulo - SP, Brazil Tel. (+55) 11 5182.3455

information contained in this document is a result of research undertaken by Ocupantes, with the aim of showing trends in the corporate real estate market. It does not constitute a legal document.

Europ Assistance Group Consistent confidence in Ocupantes


São Paulo THE VACANCY RATE TIGHTENS FOR THE 3rd CONSECUTIVE QUARTER Graph 1 - Net Absorption and Vacancy Rate 2 8 0 .0 0 0

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Net Absorption - Others Net Absorption - Class A Vacancy Rate - Others Vacancy Rate - Class A Forecast

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4t h q 1s uar t q te 2n ua r 20 d rte 05 q r 3r ua 20 d rte 06 qu r 4t ar 20 h te 06 q r 1s uar 200 te t 6 2n qua r 20 d rte 06 qu r 3r ar 20 d 0 q ter 7 4t uar 20 h 0 q ter 7 1s uar 20 t q te 07 2n ua r 20 d rte 07 3r qua r 20 d rt q e 08 4t uar r 20 h qu ter 08 1s ar 20 t q te 08 2n ua r 20 d rte 08 q r 3r ua 20 d rte 09 q r 4t uar 20 h te 09 q r 1s uar 200 te t 9 2n qua r 20 d rte 09 qu r 3r a 20 d rte 1 q r 0 4t uar 20 t 1 h qu er 2 0 ar 0 te 10 r2 01 0

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4t h q 1s ua t q rte 2n ua r 2 d rte 00 q r 5 3r ua 20 d rte 06 qu r 4t ar 20 h q ter 06 1s uar 20 te 06 t 2n qua r 2 d rte 00 6 qu r 3r a 20 d rte 0 qu r 7 2 4t a h rte 00 q r 7 1s uar 20 te 0 t 2n qua r 2 7 d rte 00 7 q 3r ua r 20 d rte 0 q r 8 4t ua 20 h rte 0 q r 8 1s uar 20 t q te 08 2n ua r 20 d rte 08 q 3r ua r 20 d rte 09 q 4t ua r 20 h rte 0 qu r 9 1s a 20 t rte 0 2n qua r 2 9 d rte 00 q r 9 3r ua 20 d rte 10 qu r ar 20 te 1 0 r2 01 0

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Graph 4 - New Stock 1 2 0 .0 0 0

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h q 1s uar t q te r 2n uar 20 te 0 d qu r 2 5 3r ar 006 te d r2 q 4t uar 00 t h 6 qu er 2 1s art 00 t q er 6 2 u 00 2n ar t 6 d q er 2 3r uar 00 t d 7 qu er 2 4t art 00 h er 7 q 2 1s uar 00 t q ter 7 2n uar 200 te d r2 7 q 3r uar 00 t 8 d qu er 2 4t ar 00 t h 8 qu er 2 1s art 00 t q er 8 2n uar 200 t 8 d q er 2 3r uar 00 t d 9 qu er 2 4t ar 00 t h qu er 2 9 a 0 1s r 0 t q ter 9 2n uar 200 te 9 d qu r 2 3r ar 01 t d 0 qu er 2 0 a 4t h rter 10 qu ar 201 te 0 r2 01 0

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Net Absorption and Vacancy Rate (Graph 1) – Since 2005 the Vacancy Rate in São Paulo has been reducing, with only a few moments of slight increase. During the third quarter of 2007 there was a small increase in the vacancy of Class A* space due to the Bank Boston building becoming vacant. One year later, in the third quarter of 2008, another slight increase in the Vacancy Rate was measured, due to the delivery of 47,000 m² of space in that trimester. It was at the Market Indicators start of the Global Economic Crisis that in general had little impact on the Brazilian Real Estate Market, beating the pessimistic expectations. At the end of Vacancy Rate 2009, the Vacancy Rate showed another small increase due to much of the Morumbi Office Tower Net Absorption being vacated by the Votorantim Group, and who had in the previous quarter been in double occupaNew Stock tion as it fitted out new space in the Berrini sub-market, in the CEC João Domingues de Araújo building. Construction Activity The Vacancy Rate continues on a downward trend in this third quarter of 2010, down from 5.57% to 5.45% in the Class A segment, and from 3.79% to 3.35% in the “Others” segment (Classes B and C). The Class A segment had a net absorption of 21,738 m², contributing thereby to the fall in availability. There is a predicted delivery of 107,000 m² during the last quarter of 2010, and an increase in vacancy/availability is expected for the following quarter, yet constant demand may once again bring this down over 2011. Vacancy Rate by District (Graph 2) – The biggest drop in Vacancy Rate in the Class A segment in the 3rd quarter 2010 was in the Jardim São Luis sub-market, in the southern zone of São Paulo, due to the take-up of 8,500 m² in two of the blocks at Panamerica Business Park. In the Santo Amaro sub-market the Jatobá Buildings (otherwise known as the Birmann 22) was totally vacated by Brasilprev who moved to the nearby building where Dow Chemical had their headquarters for many years, and who in turn moved to the new Diamond Tower of the Rochaverá complex. The Itaim Bibi district, which in the previous quarter had been a highlight, had a small drop in its Vacancy Rate in the “Others” segment, due to several leases. Construction Activity (Graph 3) – Construction activity remains on the rise for the fourth consecutive quarter as new projects hit ground. Itaim Bibi continues to be a highlight, with approximately 242,800 m² under construction, of which 50% are Class A and the remainder being good quality Class B space. Next is the Santo Amaro district, where approximately 115,000 m² is under construction, of which 98,000 m² falls in the Class A category. In total, the city of São Paulo has nearly 809,000 m² of office space under construction (the equivalent of eight times the Morumbi Soccer Stadium), with yet another 470,000 of projects in the hands of City Hall for approval. New Stock (Graph 4) – Out of the 98,000 m² predicted for delivery in the 3rd quarter, only three buildings were actually delivered: Spazio Faria Lima (17.500 m²) in Itaim Bibi, Company Work Station (7.500 m²) in Santo Amaro, and Atrium Itapeva (4.905 m²) in Bela Vista, totaling nearly 30,000 m². Accordingly, the delivery of the remaining 68,000 expected, plus the 39,201 m² of new deliveries, totals 107,000 m²**. * Class A: Buildings delivered after 1990, with a leasable area of 700 m2 per floor-plate, and high technical standards. ** Ocupantes works with information supplied by constructors and developers.

Market Bulletin is a quarterly publication about the office markets in São Paulo, ABCD region and Rio de Janeiro, prepared by Ocupantes’ departments of Research and Marketing. All rights reserved. Reproduction of this material in part or in its entirety is permitted as long the source is cited.


Market Bulletin

Rio de Janeiro

3rd Quarter 2010

POSITIVE EXPECTATIONS Graph 1 - Net Absorption and Vacancy Rate 7 0 .0 0 0

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Net Absorption - Others Net Absorption - Class A Vacancy Rate - Others Vacancy Rate - Class A Forecast

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1 0 .0 0 0 0 1s tq 2n uar te d r2 q 3r uar 00 6 t d qu er 2 4t ar 00 h t qu er 2 6 1s art 00 t q er 6 2n ua 20 d rte 06 r q 3r uar 200 t d qu er 2 7 4t ar 00 t h q er 7 1s uar 200 t q ter 7 2n ua 20 d rte 07 r q 3r uar 200 d t q er 8 4t uar 200 t h qu er 2 8 1s art 00 t q er 8 2n ua 200 8 d rte r q 3r uar 200 t d qu er 2 9 ar 00 4t t h 9 q er 1s uar 200 t q ter 9 2n uar 20 0 t d qu er 2 9 ar 01 3r t d q er 0 4t uar 201 h t qu er 2 0 ar 01 te r2 0 01 0

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1s tq 2n ua d rte q r 3r uar 200 t d qu er 2 6 4t ar 00 t h 6 qu er 2 1s art 00 t q er 6 2 u 00 2n ar t 6 d q er 3r uar 200 te d 7 qu r 2 4t art 00 7 h e qu r 2 1s art 007 t q er 2n uar 200 t d 7 qu er 2 3r art 00 d er 8 q 2 4t uar 00 h t 8 qu er 2 a 1s rt 00 t q er 8 2 u 2n a 0 d rte 08 r q 3r uar 200 te d r 9 q 4t uar 200 te h 9 r qu 2 1s art 00 t q er 9 2n uar 200 te 9 d qu r 2 3r art 01 d er 0 qu ar 201 te 0 r2 01 0

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Graph 4 - New Stock 1 2 0 .0 0 0

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Net Absorption and Vacancy Rate (Graph 1) – At the beginning of 2010, Rio de Janeiro was showing a considerable increase in construction activity; however, the vacancy rate continued to drop. In the months of April, March and June there was a small increase in Net Absorption, with the take-up of some Class A* Market Indicators space, more than in the “Others” segment. In the third quarter, as predicted, 53,000 m² was delivered at the Ventura Corporate Tower 2, Vacancy Rate which has increased the Vacancy Rate from Net Absorption 3.45% to 5.47% already counting with an immediate 60% occupation. The Net AbNew Stock sorption was 36,470 m², of which 30,304 m² Construction Activity was of Class A quality. There is an expectation that the Vacancy Rate will momentarily rise during the fourth quarter, due to the expected delivery of more than 60,000 m² of New Stock. Construction Activity (Graph 2) and Construction Activity by Administrative Region (Graph 3) – Construction Activity in Rio has had a slight decrease, as 53,000 m² of what was being built in Centro has now been delivered. Developers, as well as investing in new projects, are investing in retrofits. In Rio de Janeiro, Construction Activity in the Class A category is at approximately 220,000 m² and a further 22,400 m² in Class B, totaling 242,000 m². Barra da Tijuca continues being the main target location for developers: this region alone has 174,000 m² under construction. It is notable that Construction Activity in Rio de Janeiro is approximately 30% of the activity in São Paulo (close to 810.500 m²), while the Office stock in Rio de Janeiro (6.831.249 m²) is 68% of the size of the São Paulo office market (at over 10 million m²). This indicates that Construction Activity in São Paulo is more intense than in Rio. New Stock (Graph 4) – Despite the optimism that 100,000 m² was to come onto the market, only half was delivered: the expected peak in deliveries has not occurred in the 3rd quarter. The only delivery was the Ventura Corporate Tower 2, a Class A development in downtown Rio. Accordingly, the revised expectation for the 4th quarter of 2010 is a delivery of over 60,000 m² of office space. Today the total stock in Rio is 6.8 million m². ** * Class A: Buildings delivered after 1990, with a leasable area of 700 m2 per floor-plate, and high technical standards. ** Ocupantes works with information supplied by constructors and developers.

OCUPANTES is the first Brazilian Real Estate consulting firm to exclusively represent corporate end users in Brazil. It is composed of highly skilled professionals with ample experience representing Brazilian and multinational companies. Past trends should not be taken as indication of future results; Ocupantes is not liable for decisions made on the basis of information herein.


ABCD and Alphaville A further DROP IN THE ALPHAVILLE VACANCY Over the last three months, the Alphaville market, which covers portions of Barueri and Santana de Parnaíba municipalities, showed a drop of 10% in the Vacancy Rate of Class A space and 5% in the other categories of space. Total stock did not increase but new deliveries are expected, and therefore an increase in Class A vacancy rate over the last quarter of 2010 is expected. Since Alphaville is still a relatively small ABCD and Alphaville market overall, the delivery of one or two buildings generates a peak in the graphs, yet it must be noted that, for many occupiers seeking for alternative Total Stock and Vacancy Rate space, one or two buildings alone Alphaville may not add sufficient choice. Despite a projected increase in va4 5 0 .0 0 0 50% cancy rate, choice may remain lim4 0 0 .0 0 0 40% ited in terms of floor-plate size and 3 5 0 .0 0 0 Santo André 3 0 0 .0 0 0 standard; Alphaville lacks in class São Bernardo do Campo 30% São Caetano do Sul 2 5 0 .0 0 0 B space. Construction activity is Diadema Barueri - Alphaville 2 0 0 .0 0 0 still growing though, and in 2011 20% São Paulo 1 5 0 .0 0 0 more choice is expected. 1 0 0 .0 0 0 10% The ABCD region, that in5 0 .0 0 0 cludes the municipalities of Santo André, São Bernardo, São Caetano and 0 0% Diadema, has at present 36,910 m² which, although small, adds to what are still very small demand-driven markets. Total Stock - O thers

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SUCCESS STORIES

Client Satisfaction guarantees repeat business for Ocupantes CPS Color, leading supplier of tinting solutions, present in 11 countries, once again contacted Ocupantes Corporate Real Estate. In 2005, the company, specialized not only in colorants but in dispensing and mixing equipment, among other lines, had sought the services of Ocupantes to identify and negotiate an industrial facility. As a result, at the time, CPS leased an industrial property of 1.600 m² at the Espace Center industrial park in Vila Anastácio, in the western region of the city of São Paulo. Very satisfied with that first assignment, CPS Color did not hesitate to call Ocupantes’ specialist team of Corporate Representatives. CPS was expanding and needed to reduce their tax burden by moving outside São Paulo city into a neighboring town. The space was to have 2000 m² and accommodate 300 m² of office space. Following the presentation of several alternatives in Greater São Paulo, Alphaville was the chosen location. CPS Color opted to lease an industrial facility that had indeed 2000 m² Gross built area, including the desired Office space, located in a gated industrial complex. To the client the final result exceeded expectations, since it generated a considerable overall economy over the next five years of operation. Additionally, the move coincided with the lease termination in Vila Anastácio. TM

Múltiplo 1 - Alphaville


Market Bulletin 3rd Quarter 2010