Brmalls - Annual Report 2009

2009 Highlights: BRMALLS’ Main Achievements during the year of 2009 The year of 2009 was a very important year for BRMALLS. In the first half of the year, when the effects of the subprime crisis were still present, we focused on improving our processes to ensure quality in all the services provided by us and on delivering important expansions already under construction. In the second half of 2009, with the recovery of the economy and the normalization of the credit market, we returned to our growth strategy and took advantage of the reheating of financial markets to fund this new growth phase.

Campinas Shopping Acquisition
The acquisition of 100% ownership stake in Campinas Shopping was completed in March 2009. It has approximately 33,000 m² in GLA (Gross Leasable Area) and receives more than 1.1 million visitors per month. Since March 2009, BRMALLS’ management turned Campinas Shopping around and significantly enhanced operational performance at the property, lowering late payments, decreasing vacancy and increasing NOI by 35% year over year.

Delivery of our First Expansion: Caxias do Sul
BRMALLS delivered its first expansion in April 2009, at Shopping Iguatemi Caxias do Sul. The expansion was completed on schedule and more than doubled the size of the original mall reaching 30,324 m² of GLA. As a result, the mall closed 2009 with an NOI increase of 34% over 2008.

Second Follow-on Offering
On July 1, BRMALLS concluded an equity offering, with the issuance of 30.3 million common shares (including 18,170,805 secondary shares) on the Bovespa, raising R$446 million. The proceeds will be used to finance the Company’s growth, of primary capital . The offering substantially increased our free float, which now represents approximately 71% of the Company’s shares, and further diversified our shareholder base. As a result, our share liquidity grew from an average daily traded volume (60-day average) of R$5.7 million before the offering to R$13.3 million.

Expansion and Revitalization of Goiânia Shopping
Delivered in July 2009, Goiânia Shopping’s expansion added 7,311 m² of GLA to the mall, improving its anchorage and store mix by bringing 62 new stores and a new cinema. Also, we revitalized the common area, and the food court, including a space for new restaurants as part of the lifestyle concept.

Shopping Metrô Santa Cruz Acquisition
On October 2009 we concluded the acquisition of a 100% ownership stake in Shopping Metrô Santa Cruz, which offers direct access to the subway and bus stations. The mall has a total of 19,270 m² of GLA and the acquisition has a real and unleveraged expected return rate of 14%. Despite being a mature mall, Metrô Santa Cruz had 20% annual growth in NOI in 2009, and became one of the top five NOI-generating malls in our portfolio.

Inauguration of NorteShopping and Ilha Plaza Expansions

In 2009 BRMALLS inaugurated two other expansions, at NorteShopping and Ilha Plaza. The first added approximately 1,400 m² of GLA to Norteshopping, totaling nearly 78,000 m² of GLA. In addition, above the mall, an office tower with 360 offices was built, which will increase the mall’s visitor traffic. At Ilha Plaza, the expansion added approximately 2,400 m² of GLA, including 4 movie theaters, making it the only cinema in the neighborhood .

MSCI Inclusion
On November 2009, our shares were included in the Emerging Markets Index (MSCI). This index measures the performance of emerging markets companies’ shares on global markets, and is adjusted by the market value of the company and traded volume of the shares. As a result, the volume of our traded shares increased and the Company has gained more visibility globally.

Shopping Tamboré Expansion
In November, we began the expansion of Shopping Tamboré, which will add 14,682 m² of GLA, increasing the size of the mall nearly 50%. The expansion was 85% leased by the end 1Q10. Also, there are plans to to build three commercial towers and 1,500 new parking spaces, totaling 75,000 m² of total area.

Initiated Granja Vianna and Sete Lagoas Projects
In 2009, we began construction of the Granja Vianna and Sete Lagoas projects, having obtained the necessary licenses and having leased more than 70% of the GLA with 8 and 7 months prior to opening, respectively. These are our first greenfield projects, which combined will add 46,000 m² of GLA to our portfolio. The projects are both ahead of schedule and will be inaugurated in 4Q10.

Adoption of New Accounting Practices
In anticipation of the new International Financial Reporting Standard (IFRS) rules which will be required by year end 2010, BRMALLS adopted nearly all of these practices in 4Q09, being the first Brazilian mall company to do so. The main advantages of this new accounting method are comparability with foreign companies, better information symmetry and audit efficiency.

Success of the CSC (Shared Services Center)
Our Shared Services Center (CSC) ended 2009 with 18 malls in the portfolio, compared to 11 malls in 2008. In addition to being a source of revenue for the Company, the CSC also helps to standardize processes, supports the ERP in our malls, and provides more control of the malls’ and the Company’s cash flows.