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CBRE CHILE October 2011 Chile Overview Office and Industrial Market CBRE Chile Capabilities CBRE | Page 2 Chile Overview Introduction Key Facts Human development Index Chil iin th ld Chile the W World The UF Factor CBRE | Page 3 Chile Overview Chile is one of the most politically stable countries in Latin America. The wide diversification of its exports and the general economic stability which began in the early 1980’s has allowed Chile to construct economic prosperity sustained by natural resources (mostly metals), the timber industry, and marine resources. The Chilean financial system is considered the most advanced in Latin America. The country enjoys legal security, prides itself in its respect for the law and boasts a transparent financial market. In May 2010 Chile became the first South American country to join the OECD. In 2006, Chile became the country with the highest nominal GDP per capita in Latin America. Political and Economical environmental: Political and institutional stability. 2010 GDP Per Capita at Purchasing Power Parity over passed US$15.000. Decreasing D i unemployment l rate reaches h 7% in i llast months. h Prudent macroeconomic policy - High domestic savings rate. Sustained long-term economic growth – resumed strongly in 2010, despite earthquake. Foreign capital concentrated in medium and long term investments. y Solid bankingg system. Inflation risk - increasing interest rates - negative effects on property sales. CBRE | Page 4 Chile Overview Key y facts ANNUAL DATA 2010a HISTORICAL AVERAGES (%) Population (m) GDP (US$ bn; market exchange rate) GDP (US$ bn; purchasing power parity) GDP per head (US$; market exchange rate) GDP per head (US$; purchasing power parity) Exchange rate (av) Ps:US$ 17.1 196 8 196.8 257.4 11,510 15,056 b 510 3 510.3 Population growth Real GDP growth Real domestic demand growth Inflation Current-account balance (% of GDP) FDI inflows (% of GDP) a b 2006-10 1.0 33 3.3 6.1 3.8 2.1 76 7.6 Economist Intelligence Unit estimates. 2010 average MAJOR EXPORTS 2009 Copper Cellulose Fresh fruit LEADING MARKETS 2009 China US Japan Brazil % OF TOTAL 50.1 4.9 5.6 % OF TOTAL 16.4 11.2 9.0 6.7 Source: The Economist Intelligence Unit, www.eiu.com February 1st 2011 CBRE | Page 5 MAJOR IMPORTS 2009 Intermediate goods Capital goods Consumer goods LEADING SUPPLIERS 2009 US China Argentina Brazil % OF TOTAL 54.2 16.3 20.6 % OF TOTAL 23.6 13.9 10.5 9.4 Chile Overview 2010 UN Human Development p Index # 1 4 26 45 46 54 56 63 75 77 79 89 95 COUNTRY NORWAY USA UK Chile Argentina g Panama Mexico Peru Venezuela Ecuador Colombia China Bolivia The United Nations Human Development Index synthesizes four primary development statistics, statistics which measure health, health education, education and income. Some of the values for Chile are: Life expectancy at birth: 78.8 years Adult literacy rate: 96.9% Combined primary, secondary and tertiary Education enrollment ratio: 82.5% Source: United Nations Development Program (www.hdr.undp.org) Capital: Santiago – Ranked 2nd out of 140 Latin American cities in the Economist Intelligence Unit´s 2009 Liveability Survey. CBRE | Page 6 Chile Overview 2011 R Ranking ki off Economic E i Freedom F d B t Places Best Pl t Do to D B Business i 2010 2010-2014 2014 Chile is #11 out of 183 countries Chile is #15 out of 82 countries Source: Heritage Foundation 2011, www.heritagefoundation.com RANK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 COUNTRY OVERALL SCORE Hong Kong 89.7 Singapore 87 2 87.2 Australia 82.5 New Zeland 82.3 Switzerland 81.9 Canada 80.8 Ireland 78.7 Denmark 78.6 United States 77.8 Bahrain 77.7 Chile 77.4 Mauritius 76.2 Luxembourg 76.2 Estonia 75.2 74.7 The Netherlan United Kingdo 74.5 Finland 74.0 Cyprus 73.3 Macau 73.1 Japan 72.8 Source) : Economist Intelligence Unit ,www.eiu.org Singapore Switzerland Finland Canada New Zeland United States Germany Chile Ireland France Mexico Brazil Peru Colombia 1 2 3 5 8 13 14 15 17 19 35 40 45 51 0 20 40 60 Risk Ranking (*) Chile is #27 between 0 (minimum) to 100 (maximum) Source: The Economist Intelligence Unit 2010, www.eiu.com C Corruption ti P Perception ti Index I d Chile is #25 out of 180 economies Source: Transparency International 2009 www.transparency.org New Zeland Denmark Singapore Sweden Australia United… United… Chile Portugal g Costa Rica Brazil China Mexico Ecuador CBRE | Page 7 1 2 3 5 14 19 24 25 32 63 75 75 75 89 Norway Switzerland Canada United States Germany Chile France China Peru Australia Japan United Kingdom Mexico India Brazil Argentina Irak Zimbawe 10 16 20 20 21 27 30 33 33 36 37 37 41 42 43 61 76 89 Chile Overview UF factor The Unidad de Fomento (UF) is an essential factor to understand Chilean market. The UF is an artificial currency that adjusts daily to inflation of previous month. It is a Unit of account that is used only in Chile. The exchange rate between the UF and the Chilean peso is constantly adjusted to inflation so that the value of the Unidad de Fomento remains constant. It was created on January 20, 1967, for the use in determining principal and interest in international secured loans for development, subject to revaluation according to the variations of inflation. Afterwards it was extended to all types of bank loans, private or special financing, purchases or investments on installments, contracts, the majority of real estate operations, such as lease contracts, leasebacks and mortgage loans, use it. Individual payments are made in Chilean pesos (the country's legal tender), according to the daily value of the UF UF. Also it is used in legal standards such as the par value of stock/capitalization of companies, fines, etc. It has become the preferred and predominant measure for determining the cost of construction values of housing and any secured loan, construction, loan either private or of the Chilean government. DATE 12-31-2010 12-31-2009 12 31 2008 12-31-2008 12-31-2007 12-31-2006 12-31-2005 12 31 2004 12-31-2004 UF 1 1 1 1 1 1 1 CLP $ 21,455.55 20,942.88 21 452 57 21,452.57 19,622.66 18,336.38 17,974.81 17 317 05 17,317.05 USD$ 45.2 41.8 33 0 33.0 39.3 34.8 34.9 30 1 30.1 Due to UF effect, D ff rent values l are constant along l time, i usually ll escalation l i iis not needed d d iin contracts off three h to fifive years period. CBRE | Page 8 Santiago Commercial Real Estate Office Market Industrial Market CBRE | Page 9 Office Market A well developed p market SUBMARKET CLASS A (sqm) Las Condes 1,138,573 Providencia 210,622 Santiago Centro 282,153 Vitacura TOTAL 32,834 1,664,182 Source: CBRE Santiago MarketView, Chile, 2T11 Santiago marketplace shows a diverse offer of class A, and B offices. Counting just completed buildings, there are more th 33.157.000 than 157 000 sqm (plus ( l another th 500 500.000 000 sqm currently tl under d construction). t ti ) Cl Class A andd A A+ are 11,664,182 664 182 sqm, concentrated mostly in Las Condes (68%). Providencia is the main market for class B. CBRE | Page 10 Office Market A well developed p market CLASS A AND A+ OFFICES (SQM) CITY POPULATION (MM) OFFICE (SQM/PER CAPITA) 34,387,000 8.00 4.30 London 6,449,814 7.50 0.86 Santiago 1,623,000 5.40 0.30 Mexico City 3,080,938 19.30 0.16 Sao Paulo 1,796,000 20.30 0.09 Buenos Aires 855,489 12.90 0.07 Lima 402,000 8.50 0.05 New York Source: CBRE , 4T10 According cco d g too itss populationpopu a o Sa Santiago ago has as a very e y de developed e oped C Class ass A ooffices ces market, a e , in relation e a o too thee rest es oof Latin a American e ca cities. CBRE | Page 11 Office Market Class A Rent Values and Vacancy y Vacancy 14 00% 14.00% 0.6 12.00% 0.5 10.00% 0.4 8.00% 0.3 6.00% 02 0.2 4 00% 4.00% 0.1 2.00% 0 0.00% Trends 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Vacancy rrate UF/sqm Av. rent value U Average Rent Value 07 0.7 Vacancy Lease Rates Construction 2010 2T11 The financial crisis caused a reduction of transactions, meaning a slight rising on office market vacancy during 2009, but it just reached 4%, from under 1% prior level. Last peak in vacancy was after Asian crisis, which toke a longer g time to recovery. y In spite of the low vacancy and the scarce new supply projections for the next quarters, the rental values observed in class A show no increases. Contracts in Chile have an average duration of 3 to 5 years, and local legislation requires that the parties involved comply with the total agreed term, term which is why in rental negotiations the parties have a long term vision, not very sensitive to circumstantial stock variations. 1UF = US$ 46,46 as of 06/30/11 CBRE | Page 12 Office Market Class A Most Recent New Supply pp y 1Q11, Edificio de las Artes 46.176 sqm, Las Condes 4Q10, Parque Sur, 22 888 sqm, Las 22.888 L C Condes d CBRE | Page 13 4Q10, Plaza San Damián 15.457 sqm, Las Condes 3Q10, Alcántara Building 16 172 sqm, Las 16.172 L C Condes d 4Q10, Apoquindo 4700 8.500 sqm, Las Condes 2Q10, Arrau Building 21 000 sqm, Las 21.000 L C Condes d 1Q10, Titanium La Portada 75.000 sqm, Las Condes LEED Industrial Market Good performance p 1 1 North 2 South 3 4 4 3 2 Central West We define storage centers as facilities where the primary purpose is to offer space with uses such as receipt, storage, and redistrib tion of goods. redistribution goods We also include incl de flex fle space with offices for rental that have more than one user, and common areas under a central administration. The survey performed considered centers of at least 15,000 , usable sqm of storage facilities. At present, the total usable aggregate surface of surveyed centers that meet the previously p e ous y mentioned e t o ed c criteria te a is s 1,710,377 , 0,3 sqm, distributed in 36 centers owned by 18 different owners. Markets in Chile have been very active,, and the Industrial Warehousing g Centers are not an exception. After a 2009 that reflected the effects of the global financial crisis, significant reactivation has been observed during the 2010, evidenced b the by th entry t off new centers, t th absorption the b ti of important areas, with the consequent reduction in vacancy and a slight upward pressure in rental values. Continuing with the tendency observed during the previous year, the first half of 2011 again showed a strong increase in supply. CBRE | Page 14 Industrial Market Storage g Centers over 15.000 sqm q SUBMARKET USABLE AREA m2 VACANCY % ABSORPTIONm2 NEW SUPPLY m2 CONSTRUCTION m2 North 693,291 1.57% 24,209 19,635 South 285,561 4.20% 42,788 53,788 - 0.11 18,895 1.85% 1,456 - - 0.12 712 630 712,630 0 03% 0.03% 60 300 60,300 60 000 60,000 98 500 98,500 0 11 0.11 1,710,377 1.37% 128,753 133,423 238,764 0.12 Central West TOTAL 140,264 LEASE VALUE UF/M2/mes 0.13 Source: CBRE Santiago Industrial MarketView, Chile, 1S11 The dynamic activity of the industrial warehousing center market reflects the behavior of an economy that exhibits sustained g growth and high g expectations p of future development. p Although the earthquake of February seriously damaged the facilities of two centers, the area currently in reconstruction amounts to a mere 2% of the total available square meters. This implies two good news: first, that the quality of the warehouse constructions - just like that of the capital capital’s s high-rise high rise buildings - satisfactorily passed a quality test, which enhances their attributes in the eyes of foreign investors. Second, it is important to note that the significant reduction observed in vacancy is explained chiefly by the greater economic activity, and not by a reduction in the areas available. available CBRE | Page 15 Industrial Market Stability y 14% 0.12 12% 0.10 Trends 10% 8% 0.08 6% 0.06 4% Vacancy Rate Avera age lease rent U UF/sqm/month 0.14 Vacancy Lease Rates Construction 0.04 2% 0.02 0% 2S.06 1S.07 2S.07 1S.08 2S.08 1S.09 2S.09 1S.10 2S.10 1S.11 Source: CBRE Advisory Group, Chile, 2S10 • The behavior of vacancy indicates a reactivation of the warehousing market, since not only the stock that was vacated during the crisis has decreased, but the new 2010 entry, which exceeded 230,000 sqm, has been rapidly absorbed. • If economic activity maintains its pace shown during the last year, the market should easily absorb the square meters currently under construction. Consequently, vacancy should maintain its historical levels of under 4%. • A rising trend in rents was seen in the second half of 2010 for some centers. Yet rents remained virtually constant on average because space came onto the market lower in price due to less-exigent standards or non-prime locations. • Although demand has been increasing abruptly, supply is also growing rapidly. Therefore, a stability is predicted in vacancy and in the rent trends for the coming semesters. Rents have tended to rise consistently, at a very hesitant pace, which should continue provided demand continues to grow more quickly than supply and vacancies stay below equilibrium levels. • The stable upward trend is maintained, and continuity is observed in this market’s variations. CBRE | Page 16 Industrial Market Storage g Centers most recent new supply pp y Megacentro Renca Megacentro San Bernardo 1S10,Centro Industrial Abertis Logisticspark Santiago, Santiago located in the commune of Pudahuel (West Zone); its first stage totals a net floor area of 20,000 sqm. It has a total area of 63 hectares, where 335,000 sqm of warehouses for lease and 15,000 sqm of services will be built. 1S10, La Farfana Warehousing Center owned by Bodegas San Center, Francisco, located in the commune of Pudahuel (West Zone); its first stage totals a net floor area of 29,000 sqm , and the project includes the construction of more than more than 700,000 sqm of warehouse space, with which it will be the country’s largest warehousing center. 2S09, C 2S09 Centro t IIndustrial d ti lS Santa t Margarita, located in the San Bernardo district (South Zone submarket), has an approximate net floor area of 27,667 sqm. A strategic location with access through Autopista p Central,, Américo Vespucio p and Lo Espejo. 1S09, Centro 1S09 C t Lo L Boza B II off Flexcenter, located in the commune of Pudahuel (North Zone), has an approximate net floor area of 14,000 sqm. It combines Storage Facilities and office space, with topggrade finishes. This Center was built in the same site as Centro Lo Boza I. Megacentro Cordillera 2S10 Megacentro is a complex currently composed by 3 centers, which was consolidated during 2010, after being acquired, remodeled and enlarged from existing facilities, with different former uses. The 3 centers are located in Quilicura, with 57,000 m2 of usable storage space, San Bernardo, with 25,000 m2 and Renca, with 13,000 m2. CBRE | Page 17 CBRE Chile Capabilities Global and local leadership Location Lines of business CBRE | Page 18 CBRE Chile CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2010 revenue). The C Company h has approximately i l 31,000 31 000 employees l (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. Isidora Magdalena Tower, Tower where Management & Commercial areas are located CBRE | Page 19 In Chile, CBRE employs over 120 people in 2 offices ffi l located t d in i Santiago. S ti U i Using it strength, its t th resources and passion, CB Richard Ellis Chile helps clients successfully anticipate market opportunities, seize competitive advantages and achieve their real estate objectives. j As globally, in Chile CBRE provides the major integrated service platform in commercial real estate market. Centenario To Tower, er where here Management Services & backoffice areas are located CBRE Chile Santiago concentrates the main part of commercial real estate markets of Chile. This is the reason why the two offices of CBRE are located in the same city. Miraflores is in downtown, and Magdalena, Las Condes, in the CBD. Magdalena, Las Condes Miraflores, Downtown CBRE | Page 20 CBRE Chile With more than 12 years of experience in Chile, currently we have 120 professionals, inside our two offices in Santiago, plus the personnel who work in our client’s premises, which are managed by our company; in total, the human team that configures CBRE in our country, surpasses 500 people. We fit our capabilities to local reality and specific needs of our clients. We offer services in the following Lines of Business: Brokerage Valuation Property and Facility Management Project Management CLIENT Investment Properties Asset Management Global Corporate Services Research and Consulting CBRE offers clients thought leadership, leadership flawless execution and measurable results. results Our values—Respect, Integrity, Service and Excellence—are the ballast that grounds and guides our efforts. CBRE | Page 21 CBRE Chile Brokerage: Complete commercial real estate brokerage services for tenants and occupiers, in Offices, Industrial, Residential & Retail. In Offices, CBRE is the most important local agent, with about 29% of market share. • Durant D t 2010, 2010 CBRE’s CBRE’ brokerage b k t team advised d i d important i t t companies i f the for th negotiation of leasing and sale transaction, totalizing US$69.9 million. Investment Properties: Provides real estate investors with exceptional performance globally. Dedicated investment management teams focused on a specific geography and style of investing. We have been pioneers driving a new t d in trend i local l l market, k t which hi h is i the th commercialization i li ti off complete l t developments d l t to t major foreign investors. Global Corporate Services: Customized, innovative workplace solutions in multiple markets worldwide. CBRE has successfully relocated offices and industrial amenities, g generated savings g over client expectations, p and –in g generalprovided the needed solution, to corporate clients like OUTOKUMPU, IBM, Bechtel, Legg Mason, Dell, Barrik Gold, Foster Wheeler, Johnson Diversey, Rotter & Krauss, among others. CBRE | Page 22 CBRE Chile Property and Facility Management: The highest level of customer service and value, enabling clients to focus on their core business. CBRE manages 2 million square meters; in practice, this means approximately 70% of the country’s class A office ffi market. k t Project Management: Outsourcing strategies, program management services, interior build-outs, moves/adds/changes, tenant improvements. In Chile, we have best class strategic partners, which permit us to offer an impeccable service, with accuracy, accu acy, e efficiency c e cy a and d eco economies o es in eac each p project. oject Asset Management: Transforms assets into opportunities through customized, customized value-added solutions that deliver measurable results. We manage a portfolio over 100,000 sqf properties owned by private investors. CBRE | Page 23 CBRE Chile Consulting Services: Superior business performance for our clients by maximizing value from their real estate assets and management practices. Step by step, local investors turn slowly more opened to pay for an expert opinion b f before th start than t t with ith their th i projects. j t CBRE has h started t t d to t be b a main i referent f t for f the marketplace. Research: We provide commercial real estate forecasting; unrivaled, insightful analysis and opinions about global and local market. We delivery 4 Offices and 2 Industrial dust a MarketView a et e Reports epo ts by yea year,, p plus us ot other e local oca a articles, t c es, which c a are e exhibited on our website and local press media. Valuation: Accurate, reliable and timely valuations are critical to the success of every real estate transaction or financing. This area is focused to specialist studios of huge properties, complex cases and large institutional portfolios. IFRS Rule is being implemented to be on top of vanguard of service. service CBRE | Page 24 Magdalena M d l 140 40 Of. Of 901 90 Las Condes, Santiago T 562 562 2600 Miraflores Mi fl 383 Of. Of 1501 Santiago T 562 280 5400 www.cbre.cl b l CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2010 revenue). ) The Th Company C h has approximately i l 31,000 31 000 employees l ( (excluding l di affiliates), ffili ) and d serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com. CBRE | Page 25