Opportunities in Brazil

Opportunities in Brazil

GTIS Partners Overview GTIS Partners ( GTIS ) was founded in February 2005 as a joint venture with GoldenTree Asset Management ( GTAM ), an SEC-registered investment adviser with approximately $23 billion of assets under management GTIS is a registered investment advisor and became independent of GTAM in 2010 (with GTAM remaining as a passive minority shareholder) Headquartered in New York with offices in São Paulo, San Francisco, Los Angeles and Paris with 71 total employees Research-driven investing approach that leverages the team's hands-on real estate development experience and relationships Invested in 110 assets across the U.S. and Brazil GTIS has $3 billion of assets under management across four closed-end funds and eight co-investment or separate account vehicles GTAM Funds GTIS Real Estate Opportunities Fund I GTIS Brazil Real Estate Fund I GTIS Brazil Real Estate Fund II GTIS Co-Investment Funds GTIS US Residential Strategies Fund I G R Strate Vintage Year 2005 2007 2008 2010 2010-2013 2012 Vehicle Size $232M $508M $510M $810M $439M $526M Property Type Diversified Diversified Geography Number of Investments Capital Committed (Including Fees) U.S. with 15% Brazil allocation U.S. with 20% Brazil allocation Residential and Office Diversified 15 25 18 8 Residential and Office Residential Brazil Brazil U.S. and Brazil U.S. 8 Co-Investment Vehicles Fully Committed Fully Committed Fully Committed 79% Fully Committed 80% 18 ($75 R 2

GTIS Employees and Assets Under Management Net Assets Under Management Number of Professionals $3,000m $2,500m $2,000m $1,500m $1,000m $500m $0m 65 55 45 35 25 15 5 2007 2008 2009 2010 2011 2012 2013 2014-5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 GTIS has raised $3.2 billion in equity capital since the company s inception and currently has $2.9 billion of net assets under management Each of these funds includes institutional, tax-exempt, and high net worth U.S. and non-u.s. investors GTIS currently has a total of 71 employees of which 45 are based in the U.S. in the New York, Los Angeles and San Francisco offices, 25 in Sao Paulo and one in Paris There are 62 professionals dedicated to acquisition, asset management, finance, capital markets, construction, design, and development functions 3

GTIS Brazil 39 Projects Totaling R$2.5B of Equity GTIS Brazil Equity Commitments Residential Other 37% 1% Peak Equity, BRL Hotel 6% 39% 17% Office Logistics Hotel Office 10 office projects with 251k sqm of leasable area Eight for lease projects, one office condo and one strata title First office project (Ventura) disposed at 109% gross IRR (Phase I) and 77% gross IRR (Phase II), on an unlevered basis Tenants include Goldman Sachs, Credit Suisse, Apple, Facebook, Bloomberg Industrial/Logistics Office Other Residential 22 residential projects, of which eight are targeted at the high-end, four at middle income and 10 at the affordable segment Residential Retail 12,803 total apartment units delivered or under development 83% of units at projects under construction are already pre-sold, with prices at or above original underwriting Industrial/Logistics Focus in Rio and São Paulo Invested through three commingled and three coinvestment vehicles 2012 PERE Latam Award 3 industrial logistics projects (one in Rio and two in São Paulo) 260k sqm of total leasable warehouse area 167 modular warehouse units Hospitality São Paulo s first five-star branded hotel under construction 4

Brazil s Economy Faces Near-Term Headwinds Brazil Real GDP Growth* Annualized Inflation and Interest Rates 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 0.3% 1.9% 1.2% 16% 14% 12% 10% 8% 6% 4% 2% 0% *Deutsche Bank annual growth forecasts IPCA 3-Month Average Selic Target Rate Balance of Payments (12-Month Average, USD billions) Notes 7 6 5 4 3 2 1 - Trade Balance Net FDI Net Portfolio Investment Brazil s GDP growth briefly slipped into negative territory in Q3 2013 before recovering in Q4 2013. Deutsche Bank projects 0.3% and 1.2% growth in 2014 and 2015 The Central Bank has raised the Selic rate to 11% since Q1 2013 to combat elevated inflation despite below-normal economic growth While trade and hot money portfolio flows have dropped dramatically, leading to currency devaluation, foreign direct investment (FDI) in longer-term productive capacity remains stable companies are still investing in Brazil Source: Deutsche Bank, Banco Central do Brasil, Bloomberg 5

But Long-Term Demographic Drivers Remain In Place Key demographic drivers are expected to swell the ranks of working age population, expand the middle class and result in higher levels of income, smaller households and higher real estate demand % Population Under 35 65% 64% 61% 58% 51% 48% 45% 43% 37% 37% Lower Level and Middle Class as % of Population Working Age Population as % of Total Population 80% China Peak 10 80% Russia Peak 09 Brazil Peak 20 75% China Peak 10 Russia Peak 09 Brazil Peak 20 India Peak 40 75% India Peak 40 70% 70% 65% 65% 60% 60% 55% 55% Brazil China India Russia Brazil China India Russia 50% 50% 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Notes 2040 2045 2050 70% 65% 60% 55% 50% 45% 40% 35% 30% Middle Income and Above Low Income Brazil s population is relatively young and growing - average age is 28 yrs, with 61% under age 35 and half of the population under 26 Brazil s working age population (ages 15 to 64) is still growing (unlike Russia or China), and is projected to reach its peak of 70% of the total population in 2020 Brazil s middle class is becoming a large consumer force share of low income population declined from 60% to 30% since 1995 Source: UN, Banco Central do Brasil

Brazil Produces What The World Needs Brazil Exports by Category (USD billion) Chemical Products Animal Products Machines Transport-a tion All Other $15.1 $19.6 Metals $33.9 $20.1 $20.4 $31.1 $74.1 $33.7 Vegetable Products Mineral Products Foodstuffs Trade Balance of Oil and Oil Distillates (USD billion) Iron Ore Exports Rankings by Country and Product Soybean Exports Ethanol Production 1. Australia 1. United States 1. United States 2. Brazil 2. Brazil 2. Brazil 3. South Africa 3. Argentina 3. European Union 4. India 4. Paraguay 4. China 5. Canada 5. Canada 5. Thailand Notes 15 10 5 0-5 -10-1.6-0.7-2.3-4.2 0.6 0.3-2.3-0.5-1.0-6.0 0.5 6.0 25.0 Brazil is a top producer and exporter of raw materials and agriculture products, categories that will increase in demand as developing markets increase their share of global consumption China became Brazil s top trading partner in 2011 Significant portion of the current account deficit is due to the imports of oil and distillates -15-13.0 With most of the pre-salt oil basin expected to start production in 2016, Brazil should dramatically reduce dependence on foreign oil and become a net oil exporter Source: Massachusetts Institute of Technology, IBGE, Banco Central 7

Brazilian Corporates Have Taken on Significant Leverage Over the Past Few Years, Much of it USD Denominated Corporate Indebtedness as % of GDP Mid/long-term External Debt, By Sector (USD billions) Cental Bank Government Corporations Banks 50 350 40 30 300 250 200 58 63 64 68 20 10 0 150 100 50 0 71 66 63 64 56 51 60 63 25 37 39 35 65 78 52 96 105 110 115 100 107 97 104 Brazilian companies have taken on significant debt - leverage in the corporate sector increased from 28% to 47% over the past seven years As the economy slows, debt problems are leading many companies to monetize non-essential assets, in particular real estate Significant portion of the debt raised by corporates was USD denominated when the BRL was strong Foreign debt coming due over the next several years will cause further distress in the corporate sector due to the deterioration of the currency Source: IBGE, Banco Central 8

Opportunities In a Low-Growth Environment 1. Distressed Opportunities / Public Market Dislocation Assets below replacement cost Dysfunctional ownership and/or capital structure Corporate real estate dispositions Take private transactions 2. Undersupplied Asset Classes Hotels Rental apartments Data centers Industrial / Logistics 3. Zoning and Infrastructure Catalysts 4. Real Estate Credit Origination Rezoning and urban path of growth major rezoning initiatives in Rio and São Paulo Infrastructure catalysts government investment in infrastructure opening new areas for development Financing gap underfunded projects in construction, capital constrained developers Portfolio refinancing refinance assets with cross-collateralization benefits Inefficient credit market provide mezzanine or senior financing for equity-like returns 9

Palácio Tangará - Hospitality Palácio Tangará Sector: Luxury Hotel Closing Date: February 2013 Location: São Paulo Equity commitment: R$217.7M Investment Highlights Distressed acquisition of an existing hotel structure located in Burle Marx Park, considered one of the best parks in São Paulo Development of a seven story luxury hotel with 29,000 sqm of total constructed area, 150+ rooms, fitness center, indoor and outdoor swimming pool and spa facilities Irreplaceable location within one of São Paulo s most highly regarded parks with beautiful subtropical landscaping. Fully approved project that would be very difficult if not impossible to approve today Existing improvements (65% completed to Four Seasons design specifications in the late 1990 s), were acquired by GTIS at significant discount Construction was halted in 2001 due to lack of funding and resulting legal disputes between the original investors. GTIS was able to resolve the bifurcated ownership There are currently no major luxury brands present in São Paulo and only three small boutique hotels qualify as 5-star Performance Update The hotel has advanced in construction and fulfilled the requirements for receiving the temporary certificate of occupancy Following an extensive selection process, in which a number of global luxury brands submitted detailed proposals, GTIS has signed a Letter of Intent with the Oetker Group of Germany GTIS is negotiating and drafting the Management Agreement and Technical Services Agreement. Habite-se (certificate of occupancy) last month - planned reconfiguration of the hotel and completion of interior fitouts begin 10

11 Cambuci Residential / Commercial Cambuci Investment Highlights Acquisition of 107,000 square meters of contiguous land in the Centro submarket of São Paulo to be developed into a mix of affordable housing, free market housing, and/or commercial space Acquired from a public utility provider who was motivated to raise corporate liquidity One of the last land parcels of this size in close proximity to São Paulo s downtown, with convenient access to major roads, mass transit hubs, and commercial areas Sector: Residential Closing Date: December 2012 Location: São Paulo Equity commitment: R$150.6M Submarket is expected to benefit from redevelopment efforts by the municipal government to address the need for affordable and middle-class housing near major employment hubs GTIS pursuing a hybrid strategy of land sales and vertical development Performance Update Seller was contractually responsible for completing certain remediation and entitlement tasks within 24 months. The seller received the license to begin demolition in July and is expected to deliver the site to GTIS in December 2014 The City amended the Municipal Development Plan in July 2014, changing the original mix of affordable housing and commercial. The new Plan potentially leaves an additional room for commercial and free market use

Infinity - Office Tower Infinity Investment Highlights Class A corporate office tower on a 2.2 acre site featuring 35,305 sqm of leasable area Located in the heart of Faria Lima, the premier office district of São Paulo Designed by Kohn Pedersen Fox, the building will be developed to highest corporate standards, and seek a LEED Gold certification Combination of unparalleled location, world-class specifications and opportunity to lease large blocks of contiguous space will appeal to multinational tenants Given significant title issues of the few remaining development sites in Faria Lima, Infinity expected to beat competitive new office buildings to market Seller contributed land to the JV in exchange for a deferred payment of 38% of net revenues, substantially reducing GTIS required upfront equity Despite the credit crisis, São Paulo Class A office vacancy remained very low at less than 6%, and rents have continued to rise Project Update Sector: Office Development Closing Date: January 2008 Location: São Paulo Equity commitment: The building is fully leased to an exceptional roster of tenants including Goldman Sachs, Credit Suisse, Facebook, Apple, Bloomberg, ABN Amro, SAS and Linklaters Projected stabilized yield on cost is approximately 19% GTIS is monitoring market conditions to monetize the investment on attractive terms and optimal pricing R$215.2M 12

Seridó Luxury Residential Seridó Sector: Residential Closing Date: April 2009 Location: São Paulo Equity commitment: R$157.4M Investment Highlights A 128 unit, 59,538 sqm luxury residential development located in Jardim Europa, one of São Paulo s most desirable residential neighborhoods The project is located close to the Faria Lima office district, Iguatemi and Daslu shopping malls In proximity to a municipal park and two of the city s premier country clubs Extensive amenities including spa, pool, health club, tennis courts, and children s playground that is unmatched in competitive projects of this scale Amenities are significantly better than nearest comparables at lower common maintenance charges to the buyer Seridó units are highly customizable; the 400 sqm units can be delivered as a 1, 2, 3 or 4 bedroom Performance Update As of August 2014, 125 out of 128 units (98%) have been sold, with recent sales contracts approaching R$20,000 per sqm Construction of the project is complete and certificate of occupancy has been received $127 million of proceeds through Q2 2014 has been realized and distributed to the Fund 13