IGUATEMI ENTERS THE PREMIUM OUTLETS SEGMENT, BY PURCHASING A STAKE IN A PROJECT UNDER DEVELOPMENT IN RIO GRANDE DO SUL
São Paulo, April 19, 2013 - Iguatemi Empresa de Shopping Centers S.A. (IGUATEMI) [Bovespa: IGTA3], one of the largest full-service companies in the Brazilian shopping malls segment, announces acquisition of a stake in Platinum Outlet, a premium outlet under development in Novo Hamburgo, in the Metropolitan region of Porto Alegre, in Brazil's southernmost state, Rio Grande do Sul.
About the acquisition
On April 18, 2013, Iguatemi signed an irrevocable commitment contract with Construtora São José and CSHG Brasil Shopping - Fundo de Investimento Imobiliário - FII, a fund managed by Credit Suisse Hedging-Griffo, for the acquisition of a 41% interest in a premium outlet being developed in the city of Novo Hamburgo, in the metropolitan region of Porto Alegre, capital of the State of Rio Grande do Sul.
This premium outlet will be inaugurated with 20,087 sqm of GLA and has potential for expansion of approximately
10,000 m2. The works are close to completion, with opening planned for the second half of 2013. The venture already has
73% of its total GLA contracted, to operators including Nike, Calvin Klein, Le Lis, Bô.bo, John John, Track&Field, VR, Richards, Bobstore, MMartan, Burger King, and McDonald's, among others.
Location Novo Hamburgo-RS
Total GLA 20,087 m²
Number of stores 87
1st Year NOI (100%) R$ 11.4 million
5th Year NOI (100%) R$ 22.2 million
The business will be concluded after satisfaction of certain usual conditions for this type of transaction. The total amount to be paid for the interest acquired by Iguatemi is R$ 46.2 million.
The project's expected real, delevered IRR is 17.1%. We expect the project to deliver an NOI of R$ 11.4 million in the first year of operation, and of R$ 22.2 million in the fifth year of operation.
About the strategy
Iguatemi has an intrinsic competitive advantage in operating premium outlets in Brasil, due to: (i) its relationship with leading Brazilian and international brands; (ii) positioning of the Iguatemi brand; and (iii) its strong regional presence in the densest cities of the Brazil's South and Southeast regions, which have the highest concentrations of publics from the A and B income groups, and thus the highest propensity to value differentiated brands.
Iguatemi has a further intrinsic competitive advantage in operating a premium outlet in the metropolitan-area of Porto Alegre, due to its strong presence in the city through the two leading shopping malls of the city, Iguatemi Porto Alegre and Praia de Belas.
According to a study by Jones Lang Lasalle, over 50% of Brazilian consumers that visit shopping malls in Brazil belong to the A and B income groups.
The target public for consumption in premium outlets is almost exclusively the A and B public, which essentially seeks good prices, but also the exclusivity of good brands.
The concept of premium outlets has become well rooted in the Brazilian public with purchasing power - a consumer group accustomed to buying differentiated brands in premium outlets in the rest of the world, especially in tourist destinations in the USA. The main motivating factor leading these consumers to premium outlets is the quest for differentiated brands with a discount.
This segment will be one of the levers for growth of Iguatemi in the coming years, maintaining the direct link with the company's final consumer market.
About Novo Hamburgo
The City of Novo Hamburgo is part of the metropolitan region of Porto Alegre, in the State of Rio Grande do Sul. Its GDP
per capita is around R$ 18,600 (Source: IBGE, 2010).
Novo Hamburgo is in the region known as "Vale dos Sinos", considered to be one of the regions with the strongest economic and industrial potential in Rio Grande do Sul. Multinationals and important companies of nationwide scope are established in the region. It is also Brazil's principal footwear manufacturing center. This factor has contributed significantly to its development, attracting investors who have found not only industrial potential but also strong potential for tourism. The region provides approximately 20% of the GDP of the state of Rio Grande do Sul.
The project is in a distinctive location, on the BR-116 highway in the direction of Gramado and other cities of the Serra Gaúcha, one of the region's principal tourist destinations. From the center of Porto Alegre it will be possible to reach the premium outlet in less than 40 minutes by car or 55 minutes by Metro train (the premium outlet is in front of a Metro station with a direct connection to the city of Porto Alegre).
Porto Alegre, the capital of the southern Brazilian state of Rio Grande do Sul, is one of the largest cities in the country, with a population of more than 1.4 million, and gross per capita annual income of approximately R$ 30,500 (Source: IBGE, 2010). It has Brazil's seventh-largest GDP, more than R$ 43 billion. Due to its location, Porto Alegre has become one of the key cities in the Mercosul free trade area, and a focal point for growing companies in the Southern Cone of the South American continent. It is now considered to be the most important industrial center in the South of Brazil.
Iguatemi has a strong presence in Porto Alegre, through two important shopping malls: (i) Iguatemi Porto Alegre - the leading and oldest mall in Brazil's Southern region, and one of Brazil's ten most productive malls in terms of sales/m2; and (ii) Praia de Belas - the second most productive mall in Porto Alegre in terms of sales/m2, with opening of its expansion
scheduled for April 2014 - which will increase its GLA to 47,000 m² (including proprietary stores).
Platinum Iguatemi P.A. Praia de Belas
About Iguatemi Empresa de Shopping Centers S.A.
Iguatemi Empresa de Shopping Centers S.A. ("Iguatemi") is one of the largest full-service companies in the Brazilian shopping mall sector. Its activities cover the whole range of the business, from conception, through planning, to development and management of regional shopping malls, and also mixed-use real estate complexes including developments such as office towers. Iguatemi has equity holdings in 13 shopping malls, with total GLA of 491,000m²; its owned GLA, based on its equity interests, totals 282,000m².
Iguatemi operates in the management of 12 of its shopping malls. Additionally, it currently has five greenfield shopping mall projects (including Platinum Outlet), 3 expansions of malls, and 1 office tower, in development. Its shares are traded on the Novo Mercado of the São Paulo Stock Exchange (BM&FBovespa), under the ticker IGTA3.
INVESTOR RELATIONS CONTACTS
Cristina Betts Vice-President for Finance, and Investor Relations Director
Gunther Schrappe Chief Strategic Planning Officer, Investment Relations Officer
Investor Relations Coordinator
Investor Relations Analyst
Tel.: (11) 3137-6877 [email protected] www.iguatemi.com.br
Any statements on the outlook for the business, estimates for operational or financial results, or the growth outlook for Igu atemi, that may be expressed in this report are projections, and as such are based exclusively on the expectations of Iguatemi's management in relation to the future of the business, and its continuing access to capital to finance the Company's business plan. Such statements are subject, substantially, to changes in market conditions, government rules, competitive pressures, the performance of the sector and the performance of the Brazilian economy, among other factors, and are, therefore, subject to change without prior notice.