Centro Brasilidade - A Redevelopment Proposal for Centro Velho, São Paulo

CENTRO BRASILIDADE A

- CENTRO BRASILIDADE A CELEBRATION OF THE BRASILIAN SPIRIT IN THE HEART OF SAO PAULO

May 17, 2013 Viaducto Development, LLC Keith Leung, Jared Press, Farrah Sabouni, Jake von Trapp

2

TABLE OF CONTENTS VISION

1

PROGRAM

2

DEVELOPMENT

3

FINANCIALS

4

DEAL PROPOSAL

5

APPENDIX

6

3

4

We will achieve our vision through the extension of the Urban Operation beyond the initially proposed dimension to allow for incremental development rights to extend to larger floor plate development sites that abut. This will also empower us to preserve the air rights over the cap for a pedestrian scale tourist hub that will catalyze the rebranding of the Centro. Before breaking ground we will purchase the GFA equivalent of 289,000 square meters of CEPACs for a total price of R$661MM. We expect that the proceeds of the CEPACs will fund the construction of the cap and that we will retain a long-term ground lease on the air rights over the cap at a nominal rate in exchange for agreeing to maintain the cap area. In addition, we will agree to fund within our project the cost of a 4,500-space underground parking structure and new roads, the latter of which will be dedicated back to the City upon completion for maintenance.

In addition, we will purchase the entirety of the assembled parcel along the escarpment and any other land the City acquires for R$9,375 per square meter, and will partner with the City to assist in the assembly of land parcels not currently under control. We commit to purchasing any land additionally assembled by the city for 125% of the cost of the fair market value paid in conjunction with their exercising of eminent domain power. The city will also benefit from a huge boost to the property tax base in conjunction with our development project.

Appendix Deal Proposal Financials Development

Subsequent phases will include a semi-private luxury condominium district, three hotels across the spectrum of service segments, the tallest Class A office tower in the City, and additional retail, conference and civic assets. The plan will leverage the substantial infrastructure investment in the highway cap and centralized underground parking structure to provide new pedestrian and vehicular connectivity across the Ahangabau Valley. Anchoring the site, the Instituto Brasilidade and adjacent Restaurant Row will become a celebration of Brasilian culture, driving domestic and international tourism to the site.

Program

The Centro Velho neighborhood in Sao Paulo is a grossly underutilized urban asset that suffers from the perception of crime, a lack of activity at night, and the eight-lane highway that divides it. Centro Brasilidade is an innovative multi-phased, mixed-use project that will transform Centro Velho into the pride of Sao Paulo. Our culturally themed master plan will catalyze the re-imagination of Centro, bringing twenty-four hour vibrancy back to the city’s origins. This will be accomplished through a deliberate, but flexible phasing plan which will initially bring Class A and small business offices, workforce condos and destination retail to historic Praca Sao Bento, the front door of our new diverse neighborhood.

Vision

EXECUTIVE SUMMARY

5

6

VISION 7

bra.si.li.da.de The Distinctive Characteristic Of Brasilians And Of Brasil LIFE IN CENTRO BRASILIDADE We are bringing the CITY back to the City, Brasilidade-style. The new Centro will provide locals with an unparalelled urban living experience. Gone are the days of three-hour traffic jams; why get in your car when you need something when your neighborhood can provide for you? Paulistas will be left wondering how they could have ever forgotten the magic of Centro.

8

Appendix Deal Proposal Financials Development

What makes this different from other arts districts is its clear sense of place.

No need for light pole banners - the city form will let you know that you have arrived.

Program

CITY AS ART

Vision

bra.si.li.da.de The Distinctive Characteristic Of Brasilians And Of Brasil

9

bra.si.li.da.de The Distinctive Characteristic Of Brasilians And Of Brasil CITY STADIUM Brasilians express their passion for life through the art of sport. Centro Brasilidade plays host to an unparalelled rotating outdoor sporting specticle where viaducts double as bleachers and the City is the stadium.

10

Appendix Deal Proposal Financials Development

You don’t have to travel far to to find the perfect place for an after-dinner drink or romantic evening stroll. Relax and enjoy your favorite Brasilian fusion restaurant at the cap level and exit through the roof top bar as you meander home along the original escarpment of the Anhangabaú Valley.

Program

CLIFFWALK

Vision

bra.si.li.da.de The Distinctive Characteristic Of Brasilians And Of Brasil

11

GEOGRAPHIC CONTEXT Brasil

São Paulo is the epicenter of South American commerce, but why can’t it also be a world reknowned cultural destination? Centro Velho is the natural place for the World, Brasilians and Paulistas to discover or rediscover what it means to viver Brasildade.

São Paulo Centro

12

Appendix Deal Proposal Financials Development Program

The site provides unique opportunities for strategic historic preservation and horizontal and vertical connectivity by depressing the highway in favor of a cap. Through the use of air rights, the cap will become the canvas of Centro’s re-imagination through cultural celebration.

Vision

THE ANHANGABAĂš VALLEY

13

STAKEHOLDERS Our vision seamlessly weaves the interests of the City of Sao Paulo, the Departamento do Patrimonio Historico, Viva o Centro, and community residents and stakeholders by offering a diverse package of direct and indirect benefits. The genius lies in the artful balance between civic value and profit maximization with a focus on long-term value creation for all affected parties.

This will be achieived through an integrated design process including a twoweek long charette, ensuring community acceptance of the plan.

14

15

Vision

Program

Development

Financials

Deal Proposal

Appendix

16

PROGRAM OVERVIEW 17

STRATEGIC GUIDELINES TETRIS AS A CITY FORM Vertical and horizontal connectivity in the context of a historically significant neighborhood

THE CITY AS A WORK OF ART Leverage the existing architectural assets to create a cultural district whose architecture is considered art in and of itself

CULTURAL TOURIST DESTINATION Use the culturally and historically significant neighborhood as a canvas for the celebration of the Brazilian improvisational spirit through music, dance, food and sport 18

Appendix

Transform the image of Centro through an active urban environment

Strategy

MIXED-USE URBAN DEVELOPMENT

by constructing a diverse mix of uses whose users bring 24-hour Financial

vibrancy to the neighborhood

rehabilitation of historic buildings to reinforce the cultural theme

INVEST IN TRANSFORMATIONAL INFRASTRUCTURE

Program

Honor the legacy of Sao Paulo’s architecture by investing in the

Development

PRESERVE HISTORIC ARCHITECTURE

services, assist the City in constructing a 4,500 space underground parking garage and highway cap to help reinforce the rebranding of

Vision

Through the purchase of CEPACs and construction management

the neighborhood 19

SITE PLAN

20

Vision

Program

Development

Financial

Strategy

Appendix

SECTION CUT

21

CIRCULATION PEDESTRIAN AT ESCARPMENT LEVEL VIA NEW MODERN VIADUCT

PEDESTRIAN VERTICAL CONNECTIVITY TO CAP LEVEL

PEDESTRIAN AT CAP LEVEL

PEDESTRIAN CROSSWALKS AT CAP LEVEL

22

Appendix Vision

HIGHWAY CIRCULATION - PARKING STRUCTURE ACCESS

Program

Development

Financial

Strategy

VEHICULAR CIRCULATION

23

RETAIL DIAGRAM Centro Brasilidade benefits from a proven retail scheme: the dumbell anchor. At either end of the site are destination indoor retail shopping malls that will capitalize on the foot traffic from both viaducts and the Sao Bento metro station. Connecting these two anchors is Restaurant Row, which will serve as the outdoor “food court� between each anchor. The northern vertical mall will also benefit from being in the tallest office building in Sao Paulo and the associated tourist and business related foot traffic. The diagram is further supported by a centrally located 4,500 space underground parking structure with dedicated spaces at a parking ratio of 2 spaces per 100 sq. meters. During peak hours spill over parking will be available via shared parking for the entire site. This parking can be accessed directly from the highway from the north and the south as well as at the cap level. A limited amount of in-line neighborhood service retail surrounds the residential district, which is anchored by a 1,000 sq. meter urban grocery store.

24

Appendix Strategy Financial Development Program

The new cap over the recessed highway serves to not only take highway traffic out of the pedestrian urban environment, but also becomes the canvas for driving traffic to the site. At the north end, the Instituto Brasilidade will house the history and latest innovations in Brasilian music, art, dance and sport. The Instituto will be thematically zoned to allow guests to focus on what interests them most. Tourists that come to the Instiuto will buy souvenirs in our retail stores and meals on Restaurant Row. Office workers and residents will enjoy the vibrancy and “eyes on the street� that this anchor will bring.

At the south end of the cap is an urban park complete with health club facilites. T+++his space will also play host to outdoor sporting events year round. The 5,100 sq. meters of space is perfectly sized to accomodate a wide array of showcase style tournaments including beach volleyball, futsal, wave machine driven surf competitions and tennis. These flexible and rotating events will offer a one-of-a-kind urban experience where the city becomes the stadium, taking advantage of the favorable climate and prime temporary bleacher seating on the viaduct.

The cultural and sports districts will provide intrigue for a wide array of people making Centro Brasilidade an international tourist destination.

Vision

OPEN SPACE

25

SUN SHADE DIAGRAM Sao Paulo enjoys one of the best climates in the world making outdoor opportunities desirable on the site. However, the afternoon sun in the city can be overwhelming. Our plan includes the tallest office building in Sao Paulo at the north end of the site in part to provide afternoon shading over the majority of the cap for visitors to enjoy. We intentionally left the south end of the cap unencumbered to allow the morning sun to permeate and warm the site on cool mornings. With deliberate urban design we are able to achieve a naturally temperate public realm ensuring that visitors to the site are encouraged to stay all day long, spending money as the hours pass.

JUNE - 9:30AM

26

Vision

Program

Development

Financial

JUNE - 2:30PM

27

Strategy

Appendix

PROGRAM BY USE

28

OFFICE

RESIDENTIAL

HOTEL

CIVIC

Program

Development

Financial

Strategy

Appendix

CONFERENCE

Vision

RETAIL

29

30

DEVELOPMENT PROPOSAL 31

MARKET DEMAND AND ASSUMPTIONS Office Market Demand – Class A Office headquarters for creative Multinationals

Residential Rental Market Demand – Luxury Convenience Focused Corporate Apartments

Residential Condo Market Demand – Semi-private hi-rise enclaves for Sao Paulo’s creative class

Hotel Market Demand – Wide spectrum of product types and service levels for International and domestic tourism on the weekends and business travelers during the week

Retail Market Demand – Tourist driven destination retail shopping mall with “main street” restaurant district supporting the residential and office district

32

33

Vision

Program

Development

Financial

Strategy

Appendix

OFFICE MARKET ANALYSIS According to market research provided by our office market consultants, the Centro submarket is particularly supply constrained and has not seen any new office product delivered since the late 1970s. In the last decade, office supply has been concentrated in Faria Lima and the Marginal, while existing product in Centro has continued to depreciate. Most recently, the supply of Class A office space in Sao Paulo has exploded in the submarket of Berrini, comprising almost 90% of recent deliveries. Although Centro and other Downtown submarkets still contain the most office space relative to other CBDs in Sao Paulo at 362,400 square meters, many of the buildings are in severe disrepair, with zero Class A product in the submarket. Overall market occupancy in the Centro submarket stands at a City high of 96.7%, but asking rents are by far the lowest of any CBD at R$720 per square meter annually. The low vacancy rate suggests that the Centro submarket could stand to absorb a significant increase in supply, but rent levels call into question whether Class A office tenants would be interested in this location given the current market dynamics. Excellent public transit and auto access to the site makes Centro particularly attractive for office space, with the current image and lack of prestige representing the biggest hindrance to office demand.

34

Appendix Financial Development Program

FACHADA, Sao Paulo

Vision

Based on our market research we believe that the office asset class is the overall highest and best use for the site as it achieves the highest stabilized yield on cost accompanied with robust market demand. We plan to build six office buildings on the site totaling almost 230,000 square meters, comprising almost half of the total program. We will strategically bring buildings online in accordance with our phasing plan to ensure that we are never bringing more supply than market absorption can handle. The broader market is currently absorbing 180,000 square meters annually, with new buildings accounting for the majority of absorption as tenants flock to Class A product. We will deliver 96,000 and 43,000 square meters respectively in each of our first two phases, which we plan to lease up over four year period, requiring us to capture less than 20% of total market demand when delivered. As Class A office demand continues to grow in this emerging economy, absorption should increase, bringing down our assumed capture rate.

Strategy

OFFICE MARKET ASSUMPTIONS

35

HOTEL MARKET ANALYSIS According to our hotel market analyst, the Centro submarket currently underperforms all other CBD’s in Average Daily Room Rate (ADR) and is near the bottom in average annual occupancy at R$190 and 64% respectively. On the bright side, there has not been a new hotel built in the entire city of Sao Paulo since 2002 and there are some significant near term demand drivers on the horizon including the World Cup and Olympics. In addition, domestic tourism has doubled in the last ten years with the rise of the middle class. Sao Paulo, specifically the historic downtown, stands to gain significantly from this demand growth. With little competition from national or international brands in the submarket, we see a significant market opportunity in this asset class, especially for a tourism and office focused redevelopment strategy such as ours.

36

Program Vision

HOTEL UNIQUE, Sao Paulo

Development

Financial

Strategy

We are proposing a total of 1,631 hotel keys in three different hotels, each in a prominent location on the site. We will provide a luxury boutique hotel, which will also serve as the gateway to the escarpment cliff walk, an upscale hotel, which will also have a limited number of corporate apartments and an upper midscale hotel with 5,000 square meters of conference/meeting space adjacent to the tallest office building in Sao Paulo. This variety in scale will accommodate the different price points and service levels the users of the site will demand. Two will serve critical functions as quasi public space integrating the escarpment level to the valley cap while offering direct access into the central underground parking structure. We have also considered hotel absorption in our phasing strategy to ensure financial success. All hotels will see mid-week demand from a significant amount of business travelers, while the cultural anchor and sporting events throughout the year will drive weekend and holiday tourist traffic.

Appendix

HOTEL MARKET ASSUMPTIONS

37

RESIDENTIAL MARKET ANALYSIS According to our residential market analyst, the residential market in Sao Paulo is predominately condo ownership, which is largely driven by the lengthy eviction process and long history of extremely high inflation. These factors have reduced the rental housing segment to merely 15% of the overall market. The condo market in the City has been absorbing an average of 30,000 units per year for the past several years with units delivered falling roughly in line with units sold. In 2011, units sold dropped off significantly while supply remained constant suggesting a softening in the market, likely driven by the rapid increase in asset prices over the past couple years as capital markets have become more sophisticated with the attraction of international capital. The Centro submarket lacks a critical mass of residential units and has seen only 645 units come on line in the last 24 months. The submarket suffers from a significant image problem given the lack of evening activity and nearby drug activity. A strong residential population is an important factor to getting more people with a vested interest in the Centro submarket, but the current image of the neighborhood has depressed demand for housing in this area. The existing transportation and service assets in the neighborhood make this particularly attractive for residential, provided that it is done in conjunction with a transformational project such as Centro Brasilidade.

38

Appendix Strategy Financial Development Program

We are proposing 142,500 square meters of residential development. This will include 1,200 condo units in six distinct buildings and 334 short-term corporate apartments on the upper levels of our upscale hotel adjacent to the new modern viaduct. The condo units will be a mix of midrise (artist lofts), hi-rise (luxury) and single loaded corridor (workforce and young professional) units in two distinct residential districts. The hi-rise luxury condos will be concentrated along the escarpment in a semi-private enclave above the centralized parking structure. These 648 units will be priced at an average of R$700,000 given the premier location overlooking the Anhangabau Valley with great proximity to public transit, world class restaurants and high-end shopping and services. The Artist lofts will be located on the west side of the valley adjacent to the cultural activity and restaurant row along the new highway cap. These artist lofts will sell for an average price of R$500,000 per unit. It is expected that the artist lofts will be absorbed at a rate of 50 units per month given this population’s interest in the cultural and architectural character of the existing neighborhood. We anticipate that the luxury units will be absorbed at an average rate of 30 units per month given the need to change the image of the neighborhood to attract the target population here. We have assumed a low occupancy on the short-term corporate apartments, given the target market for these will be more transient, but we believe this product will fill a particular need for corporate Joaomoura 1144, Sao Paulo, Brasil executives that wish to have a residence close to work, but prefer to have a permanent residence in the suburbs. We envision this as an an option for executives who wish to avoid driving in traffic every day of the week, but are not wealthy enough to own a helicopter. The rental hotel structure also allows us to circumvent onerous eviction laws and protects against inflation dilution as rents can be modified from month-to-month.

Vision

RESIDENTIAL MARKET ASSUMPTIONS

39

RETAIL MARKET ANALYSIS According to our retail market analyst, the competitive landscape within the Centro submarket for retail is one of focused districts by product type. Although this type of retailer agglomeration can give people a great comparative shopping experience, which can lead to a high level of customer satisfaction, this is not suitable for a cultural based tourist district. The rise of the middle class in Brasil coupled with increased urbanization has also contributed to the demand for urban destination retail. The submarket enjoys incredible transit and vehicular access with total daily transit rides from the five area metro stations exceeding 800,000. Occupancy for retail in the submarket is close to 100%, but rents vary widely (from R$100 1,300 per sq. meter annually) given the lack of modern retail product types ranging from inefficient street level in-line retail to small shopping centers called Galerias Comerciais, which both offer local brands at mid-level prices.

JK IGUATEMI SHOPPING MALL, Faria Lima, Sao Paulo

40

JK IGUATEMI SHOPPING MALL, Faria Lima, Sao Paulo

Program Vision

RUA OSCAR FREIRE, Jardins, Sao Paulo

Development

Financial

Strategy

We are proposing 46,000 square meters of retail, most of which will be found in two destination retail shopping malls, anchoring each end of the site. In addition we are proposing a limited amount of in-line street level retail along key traffic corridors. There are zero comparables in the submarket for this type of destination retail, so we are relying largely on similar products found in other CBDs to come up with our performance assumptions. In-line retail assumptions are shown at a slight premium to submarket comparables given the expected influence of the site repositioning. We believe there is significant unmet demand in this submarket for high-end retail if we are successful in changing the image of Centro. A diverse mix of uses, our strong cultural anchor and connectivity to the west of the site via the cap and additional viaduct should allow us to capture significant upside in this asset class given the existing heavy pedestrian and vehicular traffic in this area.

Appendix

RETAIL MARKET ASSUMPTIONS

41

DEVELOPMENT PROPOSAL

42

02. RESIDENTIAL CONDOS: Workforce / Young Professional: 21 Floors; 11,000 sm; Ground Floor Neighborhood Retail 03. MIXED - USE: Retail - Destination / Luxury: 4 Floors; 8,000 sm; Office - Class B: Small Business Creative / Service: 14 Floors; 10,000 sm

Appendix

01. OFFICE: Class B: Call Center / Back Office: 20 Floors; 26,000 sm; Ground Floor Neighborhood Retail

05. OFFICE: Class A: Large Multinationals: 26 Floors; 43,000 sm 06. CIVIC: Performing Arts: 2 Vaulted Floors; 3,000 sm

Strategy

04. MIXED - USE: Retail - Destination / Luxury: 4 Floors; 10,000 sm; Office - Class B: Small Business Creative / Service: 8 Floors; 7,000 sm

07. HOTEL: Full - Service Boutique: 20 Floors; 12,000 sm; Ground Floor F&B

09. RESIDENTIAL CONDOS: Semi-Private Luxury: 28 Floors; 32,000 sm 10. RESIDENTIAL CONDOS: Semi-Private Luxury: 22 Floors; 7,000 sm

Financial

08. RESIDENTIAL CONDOS: Workforce / Young Professional: 8 Floors; 3,000 sm; Ground Floor Neighborhood Grocery Store (Anchor)

12. RESIDENTIAL CONDOS: Semi-Private Luxury: 5 Floors; 6,000 sm; Ground Floor Neighborhood Retail 13. HOTEL: Upscale with Short-Term Corporate Apartments: 17 Floors; 36,000 sm 14. OFFICE: Class A: Large Multinationals: 26 Floors; 43,000 sm

Development

11. RESIDENTIAL CONDOS: Semi-Private Luxury: 26 Floors; 31,000 sm

16. HOTEL: Upper Midscale Full - Service Conference: 30 Floors; 49,000 sm with 8,000 sm of Conference Rooms 17. RESIDENTIAL CONDOS: Artist Lofts: 22 Floors; 21,000 sm

Program

15. MIXED - USE: Office - Class A: Large Multinationals: 42 Floors; 90,000 sm; Retail: Destination / Luxury: 5 Floors; 21,000

19. CIVIC: Cultural Institute: 1 Floor; 6,000 sm 20. RETAIL: Destination F&B: 1 Floor; 6,000 sm in Various Buildings

Vision

18. RESIDENTIAL CONDOS: Artist Lofts: 27 Floors; 14,000sm

21. CIVIC: Sports Complex: 1 Floor; 2,000 sm in Two Buildings 43

PUBLIC SPACE PROGRAMMING Our flexible recreation space on the south end of the cap will hold sporting showcases each weekend that will be nationally televised. The cap level streets will be closed during events to allow spectators to roam freely through the site. Paulistas and tourists will be drawn to the site to events that feature sports that Brasilians are passionate about including beach volleyball, surfing and futsal. In addition, the setting and unique spectator experience, including temporary bleacher seating along the viaduct, will transform this site into an international destination.

BEACH VOLLEYBALL, SUMMER OLYMPICS, London, England

SURFING COMPETITION ON ARTIFICIAL WAVE MACHINE, Peru

44

Appendix Strategy Vision

Program

Development

Financial

FEDERATION SQUARE, Melbourne, Australia Programmed for the 2008 Homeless World Cup

45

A CULTURAL ANCHOR FUELS A REBIRTH The Centro Velho suffers from a lack of 24-hour activity that has earned it a reputation for being dangerous that it does not deserve. As a result, we believe the primary value creation driver is in changing the image of this place. As the historic center of the city, a cultural anchor to catalyze a rebranding of this area is a natural fit. Leveraging the concentration of

Daytime View of Restaurant Row and the CliffWalk standing infront of the Hotel.

46

Appendix Strategy Financial Development Program

Evening View of Restaurant Row and the CliffWalk standing infront of the Hotel.

Vision

architecturally significant buildings, we will create a tourist destination in a City that is largely void of them. This asset will be in place in time for the Olympics in 2016, which will put an international microscope on Brasil. The intent is to bring Sao Paulo into the international tourism mainstream by offering one-of-a-kind experiences. Brasil’s greatest assets, Samba, Dance, Art, Architecture, Futsal, Beach Volleyball and Tennis, will be on display twenty four hours per day, threehundred and sixty-five days a year, driving traffic to the site and economic and civic value to key stakeholders.

47

A 24-HOUR CULTURAL ANCHOR

Three unique structures will be connected by an integrative shade structure serving as an outdoor atrium for the Instituto Brasilidade. Users will visit their area of interest while the outdoor shading will provide opportunities for

people watching and chance encounters. Pop-up cafes and kiosks will ensure activity while hexagonal shading ensures user comfort throughout the day.

At night, outdoor galleries will emerge in this space once a month for “First Friday’s Brasilidade,” featuring rotating art displays and copious wine tasting.

This space will also be available to host weddings, private or corporate parties and other functions.

48

Appendix

RESTAURANT ROW

Program

BELDEN PLACE RESTAURANTS, San Francisco, CA

Vision

THE TERRACES OF MONTMARTE, Paris, France

Development

Financial

Strategy

This string of restaurants and cafes will run parallel to the cultural district while connecting hotels fronting Praca Sao Bento and the new sister plaza.

Roof decks will provide access from the cliff walk escarpment and offer additional vertical connectivity. Three of the top five restaurants in Sao Paulo will be located on Restaurant Row making this an international and domestic tourist draw in its own right.

49

PHASING Our strategy takes into account realistic market absorption rates by balancing uses evenly across each phase. Our strategy is further organized by zone to isolate construction activity and minimize the impact on surrounding neighbors and new tenants and residents of the community.

PHASE I

PHASE II

PHASE III

REIMAGINE

INVIGORATE

SUSTAIN

Highway Cap and Parking Structure

Modern Viaduct

Tallest Class A Office Building in SP

Class A and B Office

Semi Private Residential

Artist Lofts

Destination Retail

Cultural, Restaurant and Sporting Anchor

Full Service Conference Hotel

Workforce Housing

Boutique Hotel

Performing Arts Center

128,000 sm - 24% Complete - 24 months

188,00 sm - 60% Complete - 24 months

208,188 sm - 100% Complete - 24 months

50

Appendix Strategy Financial Development Program

We propose to expand the proposed Urban Operation, which will allow us to take advantage of adjacent sites capable of supporting larger office floor plate currently sought after in the marketplace. This will allow us to maintain the highway cap as a pedestrian scale tourist destination while achieving a FAR in excess of 11. The density achieved also allows us to finance the up front infrastructure capital investments and CEPACs, the proceeds of which we expect will be used to fund the depression of the roadway and construction of a cap capable of supporting the tallest office building in Sao Paulo. We are in need of the GFA equivalent of 241,000 sm of CEPACS and are prepared to pay R$661,000,000 for the lot. With the cap cost currently estimated at R$250,000,000. This equates to R$1,038 per sm, which is consistent with historical pricing of early stage CEPACs in similarly challenging markets.

Vision

INFRASTRUCTURE AND CEPAC STRATEGY

51

MASSING AND SCALE Through the terracing of buildings we create a contextually respectful urban scale while maximizing FAR.

52

Appendix

DESIGN INSPIRATION

Vision

Program

Development

Financial

Strategy

The signature architectural style of Idea Zarvos of Sao Paulo inspired the design and scaling of Centro Brasilidade. The firm’s “OKA” building, pictured below, is a particularly good example of a building that takes advantage of the natural topography to create stunning views of the city while remaining appropriately scaled with the surrounding environment.

53

OFFICE BUILDING TYPOLOGY CLASS A OFFICE In response to the increasing demand for true Class A office space with large flexible floor plates we are proposing to construct Sao Paulo’s tallest building using a terraced form that is repectful of the Centro’s existing massing context.

The large and efficient floor plates will attract large creative multinational firms that seek collaborative and flexible work environments. The creative multinational set will be drawn to the Centro Brasilidade given the service rich environment and the cultural vibrancy. Great vehicular and mass transportation access will also add to the desirability for this product.

Ideal Building Aesthetic PINNACLE BUILDING Atlanta, GA

54

Ideal Building Form and Scale GEORGIA PACIFIC Atlanta, GA

Appendix Strategy Financial

llustrative rendering

Development

This 30m x 30m floor plate product will cater to the needs of small creative start-ups and service firms. It will be cut up into smaller suite sizes or leased to government or shared office service providers. The price point will make this sought after location accessible to more than just large multinationals.

Located directly adjacent to the front door of the site on Praca Sao Bento, this unique form will enjoy splendid views of the Ahangabau Valley in a midrise typology. Strategically located along the historic viaduct, the destination retail platform will command some of the largest foot traffic counts in the entire city.

Program

SMALL BUSINESS OFFICE

Vision

OFFICE BUILDING TYPOLOGY

55

HOTEL TYPOLOGY UPSCALE HOTEL WITH CORPORATE APARTMENTS This hi-rise staggered doubled-loaded corridor hotel will enjoy frontage on a new sister plaza to the Praca Sao Bento. It will be connected to Sao Bento via the escarpment cliff walk making this a focal point of the site. It will also serve as a vertical connection down to the cap via the hotel lobby. It will enjoy adjacency to restaurant row and 140,000 sm of Class A office space driving both mid-week and weekend traffic. The upper floors will be targeted towards adjacent corporate executives providing a short-term furnished rental product.

This will provide an alternative to a commute to the suburbs while maintaining flexibility for us and the tenant.

Illustrative image

56

This double-loaded corridor “L� shaped building will offer the most economical room rates on the site while providing more than 5,000 sm of meeting and conference space. This space will allow the adjacent multinational tenants to host large corporate events or small conferences. This will also support the sporting event space located on the south end of the valley providing opportunities for affiliated trade or vendor shows. The conference space will have an elevated plaza extending out from the third floor, which will also serve as the landing space for the newly constructed modern viaduct. Accordingly, this hotel will be able to drive ancillary income as a regular pit stop on the cliff walk loop.

Appendix Strategy

UPPER/MIDSCALE HOTEL

Financial

HOTEL TYPOLOGY

Vision

Program

Development

Illustrative Rendering

57

HOTEL TYPOLOGY BOUTIQUE HOTEL This double-loaded corridor hotel personifies our them of Tetris as a city form.

It will serve as both the gateway from Praca Sao Bento to the escarpment Cliff Walk as well as a vertical connection point down to the cultural district and Restaurant Row on the cap. Despite its architectural interest, it retains the efficiency inherent in the other hotels on site. A terrace bar accessed from both levels will provide views that will drive traffic from both tourists and Paulistas alike.

THE STANDARD HOTEL New York, NY

58

Appendix Strategy Financial

THE CLARENDON BUILDING Boston, MA

Development

This Hi-rise residential point tower will offer a semi-private enclave for affluent Paulistas interested in escaping the horrendous traffic that plagues the city. This highly amentized condo living experience will feature generous outdoor spaces with incredible views of the Ahangabau Valley. Strategically located along the Escarpment Cliff Walk and an easy walk from restaurant row, Paulistas will discover for the first time what it is like to have the lifestyle they desire without a car.

Program

LUXURY HI-RISE CONDO

Vision

RESIDENTIAL BUILDING TYPOLOGY

59

RESIDENTIAL BUILDING TYPOLOGY ARTIST LOFTS The form of our two residential loft buildings are meant to identify with the target market. These are functional residential point tower dimension buildings with terracing articulation to provide high quality outdoor space and to soften the massing. Unit floor plans are large with high cielings, but buildings boast very limited amenities. Bohemian Paulistas will be drawn from neighborhoods such as Vila Magdalena to this product type in a more transit oriented location.

JOHN MOURA 1134 Sao Paulo

60

Two similar vertical retail shoppig mall forms anchor the north and south end of the site and are connected by Restaurant Row. The spaces will boast large atriums to draw people in from the viaduct and street. They will also each contain one large anchor department store within them to drive sales in the secondary and tertiary in-line stores. For Paulistas, shopping is an event.

With the emerging middle class finding themselves with more disposable income than ever, our dual destination retail anchors are well positioned to succeed . Ample parking in the centralized 4.500 space garage will ensure these destinations remain convenient for suburbanites.

Appendix Strategy

DESTINATION RETAIL

Financial

RETAIL TYPOLOGY

Vision

Program

Development

JK IGUATEMI SHOPPING MALL, Faria Lima, Sao Paulo

61

CULTURAL BUILDING TYPOLOGY INSTITUTO BRASILIDADE This civic form provides architectural interest in a distinct winged form. Three total levels of interactive exhibit space are organized thematically to allow for ease of access. An extension of the building meanders up to the new modern viaduct and becomes an artistic gateway reminding pedestrians of the vibrancy bubbling up at the cap level. This form also reinforces the building’s use as an embodiment of the improvisational spirit of the Brasilian people.

THE MUSEUM OF MODERN ART Warsaw, Poland

62

Appendix Strategy Financial

AUSTIN CENTER FOR PERFORMING ARTS Austin, TX

Development

The intent of the Brasilidade Center for the Performing Arts is to create a world class music and theater venue to reinforce the new image of the Centro as a hub of Brasilian culture. This structure embodies in form the performances it will host by effortlessly wrapping the Mirante do Vale building to both enhance that building’s architectural appeal, but to also define the form as a unique place on the site.

Program

PERFORMING ARTS CENTER

Vision

CULTURAL BUILDING TYPOLOGY

63

64

FINANCIALS 65

ASSUMPTIONS

66

Vision

Program

Development

Financial

Strategy

Appendix

VALUE CREATED

67

FINANCING STRATEGY We intend to seek strategic GP joint venture relationships with asset class focused firms to ensure we are bringing the leaders in the world to the development of each use. Once we have identified the right JV partner for each use, we will use our network to collectively source LP investor equity capital Until the last decade, the Brasilian capital markets were fairly primitive given historic instability of the currency and financial markets.

Recently, Brasil has garnered significant interest from international and domestic institutional investors seeking superior returns in this hot emerging market. Our financing strategy will seek to blend old methods of capital raising with new methods, taking the best of both worlds to optimize our overall cost of capital.

RESIDENTIAL - For Residential Condo uses we will seek equity investment through the pre-sale of condos. We will not begin construction until 68

we have sold 50% of the units in a building. We will not retain ownership or maintenance of condo buildings over time, but we will set up the condo association to include a carveout to a homeowner’s association for the overall site to fund long-term common area site maintenance.

fund. Petros and FUNCEF are two other large domestic pension funds currently seeking high yields from real estate investments like Centro Brasilidade. One or a combination of these pension funds are potential money partners for this project.

Our waterfall financing proposal projects a 24% IRR for our money OFFICE, RETAIL AND HOTEL - Our partner and 35% IRR for Viaducto office, retail and hotel assets are of Development without utilizing costly institutional quality and so we will Brasilian debt financing. These seek domestic and international returns are realized by means of a pari institutional investors to source our passu prorata deal structure before capital for these asset classes. We a 10.5% hurdle, and a 60% money understand that with institutional partner/40% Viaducto Development investment comes some loss of pari passu structure after the hurdle. control over the exit, but our capital needs require us to look beyond CIVIC - We will partner with a local traditional sources of funding. The operator to run the civic portion of our goal would be to find a single capital site as this operates at break even. partner or fund for all of these asset This local operator will preferably be classes so as to limit administrative a non-profit that can bring capital and headache and streamline the operating subsidy to the construction financial closing and exit processes. and operation of the cultural district.

Brasil is home to some of the world’s largest pension funds today. With R$ 160 billion under management, PREVI is the world’s 27th largest pension

Vision

Program

Development

Financial

Strategy

Appendix

WATERFALL STRUCTURE

69

EXIT STRATEGY At Viaducto Development we invest for the long-term so we align ourselves with investors who prefer long-term cash flow versus a quick flip. As a result, our primary strategy is to hold the assets we control indefinitely enjoying stabilized cash flow overtime while preserving capital appreciation upside at the ultimate exit. We have intentionally master-planned the site to allow for a staggered exit by asset class. This will add flexibility to the exit, which will give us the opportunity to strategically sell assets at cycle peaks. This will also make the exit far more liquid as there are only a few firms in the world capable of acquiring the entire project in a single investment. Of course, if the right buyer comes along, we would consider an exit of the entire project, but this outcome is unlikely.

70

DEAL PROPOSAL 73

DEAL PROPOSAL Centro Brasilidade will bring tremendous civic value to the City of Sao Paulo, but it will also bring significant financial benefits. We have worked to create a balanced plan that respects the architectural context and massing of the surrounding neighborhood while maximizing financial returns to the stakeholders through strategic land assembly and targeted densification.

Using our innovative plan we are offering the following package to the City of Sao Paulo, which we feel is an extremely competitive partnership opportunity. s

2 MILLION IN #%0!#S 2 PER #%0!#

s

!N ADDITIONAL 2 MILLION FOR HIGHWAY CAP CONSTRUCTION

s

2 PER SQUARE METER PAYMENT FOR AIR RIGHTS OVER THE HIGHWAY cap and land already assembled by the city

s

$ESIGN AND CONSTRUCTION MANAGEMENT OF THE CAP

s

$ESIGN AND CONSTRUCT NEW HIGHWAY OFF RAMPS AND ON RAMPS FOR improved traffic circulation to the city and Centro Brasilidade

s

)NFRASTRUCTURE IMPROVEMENTS TO THE 3AO "ENTO TRAIN STATION

s

2ESTORATION OF HISTORIC BUILDING FACADES VIADUCT AND WALL

s

#ONSTRUCT ALL NEW CITY STREETS WITHIN THE DEVELOPMENT

s

0ROVIDE OFF STREET PARKING SPACES IN AN LARGE HIDDEN EFlCIENT parking structure

74

We understand that exercising eminent domain may bring controversy. To ensure the absence of negative press, Viaducto Development will deliver an exceptionally generous land payment to land owners: 125% of market value for the land. Market value of the land was determined by an analysis of comparables from Paulista and utilizing a land residual method on the highest and best use.

We look forward to this monumental partnership and the re-imagination of the Centro Velho. Together we can achieve a shared vision that will re-establish Centro Brasilidade as Sao Paulo’s primary CBD and a vibrant mixed-use urban habitat.

JARED PRESS ¦ Principal, Director of Urban Design Jared is responsible for all masterplanning and design visioning. He is revered in the field as the “urban oracle,” and speaks regularly at industry conferences. He holds a Masters in City Planning (MCP) from the Massachusetts Institute of Technology and a BA in Ebonics from Michigan. In his spare time he competes on the Mixed Martial Arts (MMA) circuit in his home city of Sao Paulo.

FARRAH SABOUNI ¦ Principal, Director of Architecture Farrah is responsible for all architecture creation and imagination. She is the leading “starchitect” in the world and is responsible for creating the annual Insomniarchitecture Competition, which brings together the leading architecture visionaries for a week complex architecture design challenges while sleep deprived. She holds a Masters of Science in Architecture Studies (SMArchS) and City Planning (MCP) from Massachusetts Institute of Technology. In her spare time she sleeps.

KEITH LEUNG ¦ Principal, Director of Finance Keith is responsible for raising debt and equity for all Viaducto ventures. He is best known in the industry for his ability to stop cap rate creep in its tracks. He holds a Masters in Real Estate Development (MSRED) from the Massachusetts Institute of Technology and a BS in Commerce from the University of British Columbia. In his spare time he builds scale models out of pink foam.

Appendix Strategy Financial Development

JAKE VON TRAPP ¦ Principal, Director of Development Jake is responsible for the day-to-day development operations. He has over 30 years of industry experience and has worked in South America extensively. He holds a Masters in Real Estate Development (MSRED) from the Massachusetts Institute of Technology and a BS in Finance from the Boston College Carroll School of Management. In his spare time he enjoys playing soccer.

Program

VIADUCTO DEVELOPMENT, LLC is an international mixed-use development firm focused on large scale high impact urban infill projects that transcend. We seek to create urban habitats that inspire inhabitants to dream, innovate and create. Our multidisciplinary team is built to provide turnkey master development services. We specialize in public/ private partnerships and understand the needs and desires of municipalities the world over. At Viaducto, placemaking is in our DNA and iconic international destinations are what we breed.

Vision

TEAM BIOS AND FIRM PROFILE

75

76

APPENDIX 77

FINANCIAL MODEL

INPUT SUMMARY TABLE Development Name:

Centro Brasilidade

Development Team:

Jake von Trapp Keith Leung Jared Press Farrah Sabouni

PROGRAM SUMMARY TABLE SITE & ALLOWABLE BUILDING AREA: 70,836 GSM

Site Area

7.40 F.A.R.

Proposed FAR Max. Bldg Area

524,132

GSM

Low

VALUATION: 7.08

hectares

Terminal Cap Rate

47,076 gsf net of new streets 11.13 F.A.R net of new streets

WACC

High

INFLATION:

10.0%

12.0%

Rent Inflation

7.0%

9.0%

12.0%

Expense/Cost Inflation

5.0%

All Rents and OpExp in Br Reals USE TYPE:

% of total

Annual

Except Resid-Sale

Op. Exp.

Office

44%

229,185

g.s.m @

85%

efficiency =

Retail

10%

50,252

g.s.m @

90%

efficiency =

Hotel

16%

82,094

g.s.m @

45

Residential Rental

3%

15,500

g.s.m @

85%

efficiency =

Conference

2%

8,163

g.s.m @

70%

efficiency =

5,714

n.s.m.

Civic

2%

11,941

g.s.m @

60%

efficiency =

7,165

n.s.m.

$

Residential Condos

24%

126,997

g.s.m @

85%

efficiency =

107,947

n.s.m.

$

Total

100%

524,132 -

78

gsm/key

194,807

Annual Gross Rent

n.s.m.

$

1,805

per nsm

$

-

NNN

84%

45,227 n.s.m.

$

1,242

per nsm

$

-

NNN

90%

1,824

rooms

$

13,175 n.s.m.

$

1,067

per nsm**

$

3,000

per nsm

** @ avg. unit size of surplus/(deficit)

Occupancy

385 Avg Rate

350 per nsm 6,273 45

per nsm****

75% of gross

68%

$ 600.00 per sm

70%

75% of gross $

80.00

50%

per sm

100%

3.00% Cost of Sale

n.s.m. this translates to

$

4,000

na per mo.

79

Vision

Program

Development

Financial

Strategy

Appendix

FINANCIAL MODEL

80

81

Vision

Program

Development

Financial

Strategy

Appendix

FINANCIAL MODEL ALL COSTS IN BRAZILIAN REALS

Water features (shallow, lined pool w/ concrete curb)

$1,000.00 per square meter

2 lane, 12 meter ROW

$1,500.00 per linear meter $1,800.00 per linear meter

4 lane, 18 meter ROW 4 lane w/ landscaped median, 20 meter ROW

60% Paved

$800.00

per s.m.

20% paved

$540.00

per s.m.

60% Paved

$600.00

per s.m.

20% paved

$375.00

per s.m.

$42,000 $30,000

/car assuming 30 gsm/car

Bituminous

/car assuming 30 gsm/car

Cobblestone

$3,000 /car assuming 30 gsm/car $4,000 /car assuming 30 gsm/car $6,500 /car assuming 30 gsm/car

Brick

$6,000 /car assuming 30 gsm/car

1 story conc block/stucco bldg - (whse/retail shell)

$800 /gsm $1,000 /gsm $1,200 /gsm

Concrete

1 to 4 floor conc block/plank; stucco exterior 1-4 floor c-i-p concrete; stucco & glass ext.

4-8 floor c-i-p concrete; stucco & glass ext.

8+ floor c-i-p Concrete w/ stone veneer & glass

82

$2,000.00 per linear meter $165.00 per s.m.

$1,400 /gsm $1,500 /gsm

83

Vision

Program

Development

Financial

Strategy

Appendix

FINANCIAL MODEL

Investor Sponsor Total Investment Hurdle

Investor: PREVI/FUNCEF Sponsor: Viaducto Dev. LLC

PREVI/FUNCEF Viaducto Dev. LLC 1,124,417 10.5%

Waterfall Analysis on Hotel, Rental Res, Office in '000s <== aka "money partner" , #27 largest fund in the world Caixa de Previdência dos Funcionários do Banco do Brasil <== aka "managing partner" Hotel, Rental Res, Office % of Dev Soft Costs Hard Costs Land/CEPACs 62% 1,279,737 R$ 680,985,594 695,658

Investment (Contributions) Total Capital % 95% 1,068,196 5% 56,221

Distributions <= Hurdle > Hurdle 95% 60% 5% 40%

Year 1

Net Operating Income Hard Costs Site Costs Land and CEPACs Terminal Values Property Before Tax Cashflow (PBTCF) Contributions Distributions Waterfall Before First Hurdle - Investor: PREVI/FUNCEF Beginning Balance Contribution Return Earned Return Paid Ending Balance < 1st Hurdle CF: Investor: PREVI/FUNCEF Before First Hurdle - Sponsor: Viaducto Dev. LLC Beginning Balance Contribution Return Earned Return Paid Ending Balance < 1st Hurdle CF: Sponsor: Viaducto Dev. LLC

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Year 11

Year 12

Year 13

Year 14

Year 15

0 -209,308 -61,219 -695,658

0 0 -62,535

141,668 -232,877 -4,488

151,585 0 0

268,773 -238,800 -2,247

288,985 0 0

537,021 0 0

578,265 0 0

622,578 0 0

670,186 0 0

721,327 0 0

776,260 0 0

835,259 0 0

898,622 0 0

966,665 0 0

-966,185 -966,185 0

-62,535 -62,535 0

-95,696 -95,696 0

151,585 0 151,585

27,726 0 27,726

288,985 0 288,985

537,021 0 537,021

578,265 0 578,265

622,578 0 622,578

670,186 0 670,186

721,327 0 721,327

776,260 0 776,260

835,259 0 835,259

898,622 0 898,622

8,787,866 9,754,531 0 9,754,531

irr = 10.5%

0 -917,876 0 0 -917,876 -917,876

-917,876 -59,409 -96,377 0 -1,073,661 -59,409

-1,073,661 -90,912 -112,734 0 -1,277,307 -90,912

-1,277,307 0 -134,117 144,006 -1,267,419 144,006

-1,267,419 0 -133,079 26,339 -1,374,158 26,339

-1,374,158 0 -144,287 274,536 -1,243,909 274,536

-1,243,909 0 -130,610 510,170 -864,349 510,170

-864,349 0 -90,757 549,352 -405,754 549,352

-405,754 0 -42,604 448,358 0 448,358

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

irr = 10.5%

0 -48,309 0 0 -48,309 -48,309

-48,309 -59,409 -5,072 0 -112,790 -59,409

-112,790 -90,912 -11,843 0 -215,545 -90,912

-215,545 0 -22,632 7,579 -230,598 7,579

-230,598 0 -24,213 1,386 -253,424 1,386

-253,424 0 -26,610 14,449 -265,585 14,449

-265,585 0 -27,886 26,851 -266,620 26,851

-266,620 0 -27,995 28,913 -265,702 28,913

-265,702 0 -27,899 31,129 -262,472 31,129

-262,472 0 -27,560 33,509 -256,522 33,509

-256,522 0 -26,935 36,066 -247,390 36,066

-247,390 0 -25,976 38,813 -234,553 38,813

-234,553 0 -24,628 41,763 -217,419 41,763

-217,419 0 -22,829 44,931 -195,316 44,931

-195,316 0 -20,508 215,825 0 215,825

irr = 27.7%

CF Avail for Dist after First Hurdle After Hurdle Distributions Investor: PREVI/FUNCEF Sponsor: Viaducto Dev. LLC

0

0

0

0

0

0

0

0

143,091

636,677

685,261

737,447

793,496

853,691

9,538,706

0 0

0 0

0 0

0 0

0 0

0 0

0 0

0 0

85,855 57,236

382,006 254,671

411,156 274,104

442,468 294,979

476,098 317,399

512,215 341,476

5,723,224 3,815,483

Total Cash Flows Investor: PREVI/FUNCEF Contribution <= First Hurdle Distrubution > First Hurdle Distribution Total CF: Investor: PREVI/FUNCEF

irr = 24.1%

-917,876 0 0 -917,876

-59,409 0 0 -59,409

-90,912 0 0 -90,912

0 144,006 0 144,006

0 26,339 0 26,339

0 274,536 0 274,536

0 510,170 0 510,170

0 549,352 0 549,352

0 448,358 85,855 534,213

0 0 382,006 382,006

0 0 411,156 411,156

0 0 442,468 442,468

0 0 476,098 476,098

0 0 512,215 512,215

0 0 5,723,224 5,723,224

Sponsor: Viaducto Dev. LLC Contribution <= First Hurdle Distrubution > First Hurdle Distribution Total CF: Sponsor: Viaducto Dev. LLC

irr = 35.5%

-48,309 0 0 -48,309

-59,409 0 0 -59,409

-90,912 0 0 -90,912

0 7,579 0 7,579

0 1,386 0 1,386

0 14,449 0 14,449

0 26,851 0 26,851

0 28,913 0 28,913

0 31,129 57,236 88,365

0 33,509 254,671 288,180

0 36,066 274,104 310,171

0 38,813 294,979 333,792

0 41,763 317,399 359,162

0 44,931 341,476 386,408

0 215,825 3,815,483 4,031,307

84

85

Vision

Program

Development

Financial

Strategy

Appendix