Acquisitions

Timeline

1Q11

In 1Q11, the Company increased its interest in Shopping Center Crystal Plaza, Shopping Piracicaba and Shopping Curitiba. These three acquisitions added 11,200 m2 of owned GLA to the BRMALLS portfolio, with a total investment of R$108.7 million.

2Q11

On April 29, the Company concluded the acquisition of a 95% interest in Shopping Paralela, located in Salvador, Bahia. This is the Company’s fourth mall acquisition in the Northeast, giving it an important foothold for expanding and consolidating its presence in the region.

The acquisition added 37,800 m2 of owned GLA to BRMALLS’ portfolio.The investment totaled R$237.5 million, 40% of which in cash and the remainder in four equal annual installments, adjusted by the IPCA consumer price index.The acquisition also involved the payment of R$47.5 million for 95% of the parking operation, to be paid in the same manner as the mall acquisition. However the beginning of payment is conditioned on the charging of parking fees in the city.

Given the present value of the mall and estimated NOI of R$22.2 million for the next 12 months, the acquisition represents an entry cap rate of 10.1% and a real and unleveraged IRR of 15.4%. The present value of the acquisition price was equivalent to R$5,778.8/m², in line with the replacement cost and the average investment in our greenfield projects.

3Q11

In 3Q11 we completed the acquisition of the Catuaí Group and increased our interest in Shopping Piracicaba, adding 63,703 m² of owned GLA, with a total investment of R$515.5 million.

On August 5, the Company entered into a partnership with the Catuaí Group, through the acquisition of 70% of AlvearParticipações S.A. The transaction added two new shopping malls to our portfolio (Catuaí Shopping Londrina and Catuaí Shopping Maringá), in addition to two greenfield projects (Londrina Norte Shopping and Catuaí Shopping Cascavel). After the inauguration of both projects under development, we will have seven malls in Paraná, becoming the state’s largest mall operator.

This acquisition added 63,700 m² of owned GLA to our portfolio. The price of the two existing malls was R$510.5 million, while the two greenfield projects will absorb investments of R$262.3 million, representing R$5,971 of capex/m², in line with the Company’s average. BRMALLS received a discount of R$105 million on the total price, due to the assumption of Alvear’s debt, R$30 million of which was settled on the purchase date and R$40 million after 30 days. Stabilized NOI in the four malls will total R$95 million.

The transaction also involved the acquisition of a 217,000 m² site for R$18.9 million, with a construction potential of 772,600 m². In addition, the building potential in the areas around the malls will permit future expansions and the construction of corporate towers, generating major synergies and helping push up the number of visitors. The total construction potential area of 772,600 m² is broken down as follows: 87,900 m² in Catuaí Shopping Londrina; 420,400 m² in Catuaí Shopping Maringá; 248,100 m² in Londrina Norte Shopping; and 16,200 m² in Catuaí Shopping Cascavel.

Additionally, on September 2, BRMALLS increased its interest in Shopping Piracicaba by 2.5%, the second such increase in 2011, giving it a total share of 36.9%, or 10,054 m². We estimate that the additional 2.5% stake will add around R$0.6 million in NOI in the following 12 months, representing an entry cap rate of 18%. The transaction amounted to R$5 million, paid upon purchase.

4Q11

In 2011, the malls acquired recorded NOI of R$450.9 million, 21.5% above the projected figure of R$371.2 million.

In 4Q11, the Company completed the acquisition of 100% of Shopping Jardim Sul, 60% of which through BRMALLS Participações and 40% through a real estate investment fund, in which we currently hold a 100% interest. The acquisition added 30,800 m² of owned GLA to our portfolio. The transaction price was R$460 million, which was paid in cash. We estimate NOI of R$37.9 million (including service revenue) for the entire mall in 2012 and stabilized NOI of R$50.1 million, representing respective cap rates of 8.2% and 10.9%, On the same date, BRMALLS purchased two sites adjacent to the mall totaling 14,300 m² for R$30 million.

Initial real and unleveraged IRR is estimated at 11.5%. In the near future, BRMALLS plans to sell fund quotas to the market, thereby increasing real unleveraged IRR to more than 12.5%, thanks to the service revenue resulting from this transition.

With the acquisition of Shopping Jardim Sul and the inauguration of Mooca Plaza Shopping, the number of malls held by the Company increased to 11 in the state of São Paulo and 27 in the Southeast as a whole, consolidating BRMALLS as the largest mall operator in the state and region.

Shopping Jardim Sul

Inaugurated in 1990, Shopping Jardim Sul is located in the Morumbi neighborhood of São Paulo city, a region which is marked by strong residential and corporate expansion. Since its inauguration, Shopping Jardim Sul has acted as a catalyst for growth and has helped increase the value of its main catchment area.

In addition to the 190 diversified stores, including five anchor stores, the mall has 1,350 parking spaces and a flow of 135,000 vehicles per month.

The main anchor stores include C&A, Lojas Americanas, Pão de Açúcar and Renner.There is also a UCI cinema complex with 11 movie theaters, one of which 3D, and a unit of Fleury Medicina e Saúde, one of the best diagnostic laboratories in the country.

Revised IRR

Given that one of our main growth drivers is acquisitions, we periodically analyze the real returnsthat these investments will generate for the Company.In this report, we are presenting an analysis of all managed malls acquired up to 2009. In order to measure these returns, we built a cash flow model based on certain assumptions. From the acquisition date until June 2011, this cash flow is the amount effectively disbursed and received by BRMALLS on an accrual basis. As of July 2011, the model adopts conservative assumptions which we used to calculate the fair value of our investment property and a maintenance capexof 5% of NOI. A growth rate of 2.5% and a real discount of 12% were adopted for perpetuity. Once the nominal flow was established, it was adjusted for past and expected future inflation, resulting in real cash flow.

Our acquisitions of managed malls up to the end of 2009 presented a consolidated real and unleveraged IRR of 18.1%, led by those malls in which we hold a 100% interest – Campinas, Plaza Niterói and Ilha Plaza – which recorded real IRRs of 27.4%, 23.3% and 22.8% respectively. 

Shopping	Revised IRR	Initial IRR	%
2007
Amazonas	15,2%	13,5%	1,7%
Tamboré	12,2%	12,0%	0,2%
Araguaia	37,1%	16,9%	20,2%
ABC¹	16,7%	9,9%	6,8%
Estação	21,1%	14,5%	6,6%
Villa-lobos²	16,4%	13,1%	3,3%
Piracicaba	26,9%	15,0%	11,9%
Curitiba	33,4%	19,6%	13,8%
InMont	18,2%	11,3%	6,9%
Plaza Niterói	23,3%	9,9%	13,4%
Ilha Plaza	22,8%	17,7%	5,1%
Fashion Mall	6,4%	12,5%	-6,1%
Rio Plaza	19,5%	18,5%	1,0%
2008
West	11,0%	13,1%	-2,1%
Center	17,3%	13,4%	3,9%
2009
Campinas	27,4%	16,1%	11,3%
Metro Sta Cruz	16,2%	14,2%	2,0%
Average ('07-09)	18,1%	13,0%	5,1%

¹ Para cálculo de TIR do ABC foi desconsiderada a receita de serviços

² Para o cálculo de TIR do Villa-Lobos consideramos apenas 12% do NOI, a participação
adquirida em 2007