Real Estate Practicum Project V

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Hotel Development ? Rio de Janeiro

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1. Executive Summary

Page 4

2. Development Program

Page 6

3. Site and Property Description Page 12

4. Market Analysis

Page 19

5. Development Issues / Strategy Page 37

6. Project Management Plan Page 39

7. Project Schedule

Page 40

8. Development & Construction Costs

Page 42

9. Financial Analysis

Page 43

10. Conclusion and Recommendations

Page 53

11. Exhibits & References

Page 57

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Abid Butt ? Spring 2012

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Hotel Development ? Rio de Janeiro

Notice

This report, drawings and analyses are intended for educational purposes only in conjunction with the author's practicum concluding the Master of Science in Real Estate program of the Johns Hopkins University. While the studied project is real, non-public information has been somewhat altered to preserve propriety. The critique, results and recommendations are the sole opinions of the author. As such nothing herein should be relied upon or communicated beyond the auspices of this specific practicum.

Abid Butt ? Spring 2012

Page 3

Executive Summary

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Hotel Development ? Rio de Janeiro

Brazil is experiencing a high growth and improved competitive rankings. It represents half of the Latin America's economy which is larger than India and Russia. Brazil weathered the most recent financial crisis far better than other countries. Consumers (200 million) with increased purchasing power present a great opportunity and investors and businesses are anxious to invest in this market. Though forecasts vary, but the International Monetary fund has forecasted that Brazil will be the 5th largest economy by 2015.

Rio de Janeiro, the capital city of the State of Rio de Janeiro is the second largest city in Brazil and third largest metropolitan area in South America. The combination of sea and mountains makes Rio one of the most beautiful cities in the world. In addition to the world renowned beaches, the city is home to several large corporations and presents a great combination of business and leisure activities.

This city is aware of the importance of tourism to the economy. Events like Carnaval and New Year?s Eve attract multitudes of visitors each year. There is very little marketing of the city in international markets and the number of tourists is way below the city potential, when compared to other destinations. Some measures have been adopted to stimulate the industry, but the sector still relies much on private initiatives.

Rio de Janeiro will host the first-ever Olympic Games in South America during August- September 2016. Twelve Brazilian cities will also host the 2014 World Cup Games. These two events will generate numerous trade and investment opportunities in several areas.

This project is to evaluate a limited service hotel development, to be built in an area of 71,795 square feet (1.65 acres). The facilities provided include 255 rooms, laundry, parking, and a business center. The hotel also will have all the space necessary to support the operation.

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The official location of the land to be developed is on Avenida Ambassador Abelardo Bueno, Parish, Jacarepagua, Rio de

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Abid Butt ? Spring 2012

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Hotel Development ? Rio de Janeiro

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This analysis indicates a good level of market activity in Barra

da Tijuca and good growth prospects. Given the outlook for

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the market, it is expected that the proposed project will reach

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an optimal level of operational performance. In addition, the

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hotel's cash flow will certainly be benefited by the hotel tax (property tax, and ITBI ISS) exemptions.

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By analyzing the operating performance of the hotel, planned deployment costs, and financing conditions of the enterprise,

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my view is that the hotel is viable. It is worth mentioning that

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the projections in this report took into account a strong demand due to the induced growth of Barra da Tijuca and its

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business areas. Finally, despite major efforts to identify new

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hotel supply in the future, there is the risk that new projects not

included in this report will be implemented. However, the

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information currently available suggests that this risk is low.

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The proposed hotel will be operated by Accor under the Ibis brand. Accor is an international hotel operator in the market

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with a very strong reputation both nationally and

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internationally.

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Abid Butt ? Spring 2012

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Development Program &

Hotel Development ? Rio de Janeiro

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This project proposes to evaluate the development of a select service hotel with 255 rooms. The site is zoned for two hotels and an office building. The second hotel of midscale positioning will be built during the second phase of development and will share some of the facilities in the common area. The total number of rooms will be approximately 400 with 255 rooms in the select service model (Hotel I) and the remaining 145 rooms in the midscale hotel (Hotel II).

The buildings will be designed with three floors and maximize the density, positioning and visibility for the hotels.

Abid Butt ? Spring 2012

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Hotel Development ? Rio de Janeiro

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Abid Butt ? Spring 2012

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