Week 6

This past week I did a lot of traveling. I was in Goiania, Manaus, Curitiba, and Caxias do Sul visiting the different malls and gaining a cultural perspective on the different areas. Goiania was very interesting because the C Class consumer (middle class) makes up 50% of the population. The mall management in this area focused on creating a safe atmosphere for families to come and experience the mall. It is interesting to think about this idea relative to malls in the United States. I don’t think about going to a shopping center and not feeling safe. For the emerging middle class the mall provides a place that a family can enjoy, and at the same time, they do not have to worry about their well being. Also, many shoppers come to malls to get out of the heat. Mall air-conditioning brings in a consumer that may not spend a lot, but they get a chance to see the mall and recognize some of the products and services they provide.

Shopping Amazonas (Manaus, Brazil) was a very interesting experience. The mall management team is focused on improving the infrastructure of the mall. Because of new competitors in the area, Shopping Amazonas is adjusting to these changes. Their plan is to build a new parking structure and create a more modern look inside and out.

Curitiba and Caxias do Sul were two places I visited in the south of Brazil. These regions were culturally different than others I have visited in Brazil. The infrastructure was very European looking and the population looked to be mostly of European decent. In Caxias do Sul, most of the population was Italian. I had the opportunity to eat at an Italian restaurant in Shopping Caxias do Sul and the food was great.

I flew back into Rio de Janeiro today to sum up my project. I have a lot of information that I need to put together. I hope to talk to Tenda, an entry level homebuilder, to get to some more information on the housing market in Brazil. Also, I will be putting together a presentation for the directors at BR Malls to show them what I have learned from my experience here.

Week 5

This past week I left Sao Paulo and went to Belo Horizonte to see the Malls and Greenfield projects in the area. In Sao Paulo I went to shopping Villa Lobos, Granja Vianna (Greenfield project), shopping Tambore, and Campinas Shopping. The most interesting place, for me was the Greenfield project in Granja Vianna. The site is projected to be completed in early October and as of now everything is on schedule to meet the deadlines. Granja Vianna was interesting to see because I learned more about the development process. The project started in 2007 with basic plans and purchasing of the property. Construction of the mall started at the beginning of this year and has been moving extremely fast. When I was there, the construction team was working very hard to stay on schedule. The construction manager explained that finishing the mall required that the team work on the building everyday until the deadline.

The most interesting part of the building, for me, was the lifestyle construction on the top floor. Looking at the plans, there is an open area on the top floor that will create scenic view of the surrounding area. This area is a perfect area for family entertainment and restaurants. BR Malls is adding high quality restaurants and a movie theatre. The layout of the mall will serve as a providing a very nice experience for the surrounding population.

Shopping Estacao HB is a greenfield project located outside the city of Belo Horizonte. This site has not yet started construction; however, I was able to see the layout and get a feel for what the advantages are for choosing to construct a Greenfield like this one. The mall will be built over a train station and a bus station. The growth of Belo Horizonte toward this area is increasing dramatically. This train station allows for a commute from the downtown area of BH to the outskirts of the city. A new building was built near the Greenfield that local government will be working in. Because the government is looking to move away from the downtown area and closer to this Greenfield, BR Malls is confident that this is a great indicator that the population will continue its trend and move in this direction.

The major problem concerning Shopping Estacao HB is to maintain a safe and accessible environment for those who are using the train and bus stations during construction. Although this is a concern, BR Malls is confident that the appropriate steps will be taken to make sure this occurs. Also, because the World Cup will be hosted in Brazil in 2014, massive infrastructure projects will be taking place. It is crucial for the government and BR Malls to work together to make sure the new infrastructure in this area makes the mall accessible. Coordinating the mall plans and new infrastructure is crucial for the ingress and egress of the center to flow.

Shopping Del Rey is a mall that is positioned well for future growth. Del Rey was the first mall I visited that had abundant parking that can be utilized for other activities or future expansion. This mall, for me, is the definition of family entertainment. Creating an atmosphere of cheap family fun, Del Rey focuses on creating events that that bring in the local population. One example is a comedy show they put on every Thursday. This idea struck me as one of the most innovative and progressive ideas in all the malls I visited. Thursday night was considered a slow night at Del Rey, so they decided to have a two hour comedy show at the food court free of charge. The comedians work in radio and were looking to gain exposure so they charged a very cheap price for a 3 month contract. Not only did it bring more people into the mall to see the show, other people stayed longer and decided to spend more. One example is a group of girls that were going to grab a coffee after work, and instead, decided to buy dinner and watch the show. Fast food sales increased 30% compared to average Thursday night sales. Also, the comedians used themes that marketing decided could help the mall. Last week, the comedians focused on Valentine’s Day, which is in June in Brazil. They not only entertained, but the comedians also reminded the shopper that Valentine’s Day was coming soon and they needed to buy gifts.

I think the biggest weakness of this mall is that there are no sit down restaurants. In order to truly make the Del Rey experience complete, I would add some relatively cheap sit down restaurants that would allow shoppers to stay longer and spend more.

So far my experience here has been great. I have learned some of the basics of the language and I am starting to feel more comfortable communicating. Brazilians seem to be very understanding of the language barrier and appreciate when I make an effort to speak in Portuguese.

Week 4 Sao Paulo

This week was a great week because I visited two different companies and talked with them about a different aspect of the real estate market, housing. I learned much regarding the credit system and Brazil’s movement toward making housing more affordable. I learned of a major program created by the Lula administration called Minha Casa Minha Vida (My House My Life). This program is intended to provide subsidies and tax breaks for those families who make up to 10 times the minimum wage. This creates a great opportunity for homebuilder and those families looking to buy a home. I talked with two major companies, Gafisa and Itau Bank, to get an idea as to what this project entails. Itau Bank gave me great insight into future projections of the real estate market. Working with both companies gave me great insight into the housing market. My previous internship focused on the smaller shopping centers. This was a great opportunity to learn about residential real estate market.

I also had the opportunity to work at Shopping Metro Santa Cruz Mall. The mall is exactly the type of mall I wanted to study while I was down here. This mall focuses on the B and C class incomes and works to create a safe a memorable experience for its clients. The mall location is perfect because it is located above a subway station and is adjacent to a bus station. This mall is 100% owned by BR Malls and is has the 3rd largest NOI/m2 (indicator of profitability for the mall). This reveals that focusing on the emerging middle class can lead to a very profitable business. In my report I plan on making comparisons from all the malls I visit with a special focus on malls like this one.

Aside from work, I have been enjoying Sao Paulo. Today I was able to take a tour of the city and learn about the history and development of Sao Paulo. I was able to visit the business center on Paulista Av. and see the Bovespa exchange. The most interesting experience, for me, was seeing the Central Church. When I walked in I could feel the history. The choir was singing and the room was filled with people. I also saw different income areas of Sao Paulo. I was able to visit the wealthiest parts of the region and also drive past some of the Favelas. It was very interesting to see the difference between the two areas. The upscale areas were in gated communities that were comparable to nicest houses in the United States. The favela areas were poorly kept and the infrastructure looked old. The favelas did not look like were in good enough shape to provide satisfactory living conditions. I hope to further analyze how the government is working to make better housing establishments for these people.

Week 3

Being in Rio de Janeiro has been a great experience. This week I visited 5 different malls to get a feel for the industry. Every mall I visited is looking for ways to improve the experience it provides for its customers. It was very interesting to see how each mall catered to the different classes of people in the region. Plaza Niteroi was, for me, the most interesting experience. Each floor of the mall was strategically created for a specific class of people. On the first floor, local tenants that provided inexpensive goods and services were tightly packed together. The second floor was spread out and focused on the B class of customers. The most premier and expensive stores and restaurants were on the top floor. It was very interesting to move from floor to floor and see how different the shopping experiences could be depending on your shopping preferences.

Aside from work, I was able to go to a soccer match where two big rival teams played in the most famous Brazilian stadium, Maracana. This stadium holds the record for the greatest attendance for a sporting event at 200,000 people. The rivalry is so intense that I had to take off my jersey while walking down the street due to the fact that it could cause a confrontation with fans from the other team. The fans here are very passionate about soccer and their teams.

I was able to eat at a Brazilian Barbeque where I tried some exotic foods. I told everyone in the office that I was willing to try anything once, so they made sure I ate a variety of food. I tried Caviar, raw beef, and chicken heart. I also tried local drinks such as Guarana, which is made from the Guarana fruit found in Brazil.

Today, I am in Sao Paulo getting ready for a meeting with Gafisa, Brazil’s leading home builder. I hope to get insight relating to emerging middle class and its relationship to homebuilding. My main goal is to find out how Gafisa is positioning itself for a rising middle class by getting information as to its strategies and projections for future homeowners. Throughout this week I will be visiting more properties from BR Malls and visiting with Itau, a large private bank in Brazil. My goal is to get some depth on the financial status of the Brazilian consumer and relate that to different aspects of the real estate market. This week is critical for the project and should be a great learning experience.

Week 2

This was a very exciting week for me. I met the staff at EGI in Chicago and worked on researching and developing an outline for my project. My main goal is to confirm the company’s thesis—the emerging middle class in Brazil is growing and will increase the demand of the real estate opportunities. I plan on examining how the different portfolio companies are positioning themselves for this growth. Also, analysis pertaining to the risks involved is a concern. If the Brazilian markets are overheated these companies need to have an exit strategy that will allow them to adjust to these risks. My preliminary research has been highly informative; however, further research into the possibility of increasing interest rates needs to be explored.

I had the opportunity to describe my project to Sam Zell, the Founder of Equity Group Investments. He expressed interest in the project and the stipend. On Wednesday, I watched Mr. Zell give a speech regarding multitenant housing. He discussed the economy and provided his take on its relationship to the real estate market. It was interesting to hear his perspective on where the real estate market stands and its future. One question was asked regarding his investment in Brazil. He responded with the fact that the emerging middle class is growing causing sustainable development that creates a need for retail space and homes. Listening to Mr. Zell speak was a very interesting experience and I learned a lot about his thoughts on investing in real estate.

I also worked with the Ira Chaplik the COO of Equity International on the logistics of my trip and discussed some of the most important aspects of why Brazil was a good investment. He also gave me insight toward some of the concerns I had regarding increases in the interest rate. Mr. Chaplik does not see small interest rate increases as a long term negative factor on the economy. He explained that compared to the United States, Brazilians take on very little debt and small increases in the interest rate are not of a major concern considering that interest rates are at an all time low. He also gave me tips and informed me how to conduct myself while in Brazil. Everyone in the office has been very informative and helpful. With their guidance, I hope to produce a very informative and insightful report.

Although I have interned with a real estate firm for the past two years, it is humbling to work with EGI. I had the opportunity to sit in on conference calls and meetings regarding new developments and investments and soon realized how much I need to learn. The high caliber of these workers and their understanding of the real estate market is incredible. It was difficult for me to follow the technical analysis of how they were financing projects; however, this week was one of the best learning experiences I have had. I took notes and researched terms and concepts that I was unclear on for further research

I arrived in Rio De Janeiro, Brazil Yesterday. I spent the day settling into and getting ready for my first day at BR Malls. Rio is truly a beautiful place and my view of the beach from my room is spectacular. I spent most of my time taking pictures and trying to experience the great weather and views.

Today was my first day in the BR Mall office. BR Malls has been a great source for my project. I was introduced to people in all different branches of the office. I had a chance to interview and discuss topics relevant to my project with the IR and leasing departments. We discussed my project along with some basic background information of the company. I got a feel for the BR Mall Business model and how they position themselves for the emerging middle class.

I also worked with members of the staff to develop my itinerary for the remainder of the trip. In order to get a stronger idea of the different social classes in Brazil, I am working with management to get an analysis of about 10 malls throughout Brazil. By doing so, I hope to get a strong understanding and comparison of the different types of malls and how they cater to the surrounding demographics.

The culture of BR Malls could not be better for this type of project. Everyone has been extremely helpful and inviting, creating a very comfortable atmosphere that has allowed me to work efficiently. It is very interesting to see how hard everyone in the office works, while still taking time to step aside and talk with me about the company. I got to the office at around 9 am and when I arrived everyone was diligently working. I am now in the office at 9 pm typing this blog and everyone is still working. I am not sure if BR Malls is an anomaly, but this office does not believe in the “9 to 5” work day.

First Day

5/15/10

I am beginning my travels today to Chicago for research and training for my internship in Brazil. I am meeting with the president of real estate for Equity Group Investments, David Contis, to get settled in for the week. I hope to work with the company to learn as much about the Brazilian real estate market and its components in order to compile a very informative presentation on the emerging middle class in Brazil. I am very excited for this experience and I look forward to working with EGI to further my knowledge and experience in real estate.