CBRE HCMC Tenants EveningHCMC Tenants Evening

Q4 2011

20th October 2011

Presented by Chris Currie

Recent Headlines

CBRE | Page 2

Presentation Overview

Market Overview

Why companies move?

Supply - 2012

Windows of Opportunity

• Missed Windows of opportunity

Building a Lease

CBRE | Page 3

HCMC Office Market Overview Q4 2011

Trade-up your Grade B lease and get Grade A lease!

Face rents flat – effective rents up for grabsFace rents flat effective rents up for grabs

Monthly Enquiries : Q3 2010 vs. Q3 2011 – down 17%

Average Quarterly Absorption: 2010 – 56,742m2 vs. 2011 – 40,000m2

Excellent Incentives in SELECTIVE buildings are back

2012 supply under construction but what’s after this?

Experienced occupiers now see the opportunities on offerExperienced occupiers now see the opportunities on offer

Sex BACK in the city - Companies returning to the centre now more attractive terms are on offer

CBRE | Page 4

now more attractive terms are on offer

The Softening Dong

Currency Caps

Advance Rent Payments atAdvance Rent Payments at fixed exchange rates

VND denominated leaseVND denominated lease agreements

Returning Deposit in PrimarySource: Standard Chartered Bank; https://research.standardchartered.com/researchdocuments/Pages/ResearchArticle.aspx?&R=77756

Returning Deposit in Primary Currency

Date Exchange USD Effective VND % increaseOctober 20 2008 VND 16,600.00 $25.00 $25.00 VND 415,000.00October 20 2009 VND 17,852.00 $25.00 $26.89 VND 446,300.00 7.54%October 20 2010 VND 19,500.00 $25.00 $29.37 VND 487,500.00 17.47%October 20 2011 VND 20,940.00 $25.00 $31.54 VND 523,500.00 26.14%

CBRE | Page 5

For indicative purposes only – based on Vietcombank Transfer rate

, ,

HCMC Office Stock – Q3 2011

2,000,000

HCMC OFFICE STOCKExisting Space New Space Coming Online

1,500,000

, ,

500,000

1,000,000

02004 2005 2006 2007 2008 2009 2010 Q3/2011

Q3 2011

9 - Grade A – 304,380 m2 Bangkok has 8 million m2 of office stock9 Grade A 304,380 m2

45 - Grade B – 767,270 m2

229 - Grade C – 772,038 m2

Bangkok has 8 million m2 of office stockSource: CBRE Thailand

CBRE | Page 6

TOTAL – 1,843,688 m2

Office Rents by Grade

ASKING RENTS BY GRADE

$80Grade A Grade B Grade C

$

$60

$20

$40

$0

$

2003 2004 2005 2006 2007 2008 2009 2010 Q3/20112003 2004 2005 2006 2007 2008 2009 2010 Q3/2011

CBRE | Page 7

HCMC Office Vacancy Rate by Grade

Overall market Vacancy runs at 16 8%

CBRE | Page 8

Overall market Vacancy runs at 16.8%

Major Buildings - What is available today?Approximate Available

Location Occupancy / CommitmentApproximate Available 

Leasable SpaceBitexco Financial Tower D1 40.00% 24,102.00 m2Kumho D1 98.00% 1,100.00 m2,Metropolitan D1 98.00% 1,000.00 m2Sun Wah Tower D1 96.00% 961.00 m2Diamond Plaza D1 100.00% 0.00 m2Saigon Centre D1 96.00% 876.00 m2Saigon Tower D1 98.00% 250.90 m2Me Linh Point Tower D1 100.00% 0.00 m2A&B Tower D1 93.83% 1,614.00 m2Green Power D1 70.20% 3,947.30 m2Vincom D1 51.00% 37,091.00 m2CENTEC D3 98 00% 200 00 m2CENTEC D3 98.00% 200.00 m2Saigon Trade Center D1 92.00% 3,500.00 m2Maritime Bank Tower D1 54.00% 8,786.00 m2CentrePoint PN 97 50% 682 00 m2CentrePoint PN 97.50% 682.00 m2e town TB 98.80% 1,000.00 m2REE Tower D4 20.00% 13,800.00 m2Flemington D11 75.00% 7,000.00 m2

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g

TOTAL 105,910 m2Source: Verified by Landlords or Landlords Representatives

HCMC Office Absorption Rate by Grade250 000

Grade A Grade B Grade C

150 000

200,000

250,000

50 000

100,000

150,000

0

50,000

2003 2004 2005 2006 2007 2008 2009 2010 2011-YTD

2011Take-Up*: Local 70% vs. Foreign 30%Sustainable? FDI Sensitive?

2007 Total 148,542 m2

*Approximate numbers based on CBRE

2008 Total 151,235 m22009 Total 154,459 m22010 Total 226 971 m2

CBRE | Page 10

2010 Total 226,971 m2Q3 2011 120,000 m2

CBRE Monthly Enquiries

CBRE Monthly Enquiries are down 17% from this time last year

Back to early 2010 levels

Sectors in Good demandBanking (local) Insurance

Education Industrial / Manufacturing

CBRE | Page 11

Education Industrial / Manufacturing

Oil & Gas

Windows of Opportunity

Why do companies move?

Not enough space – growth restrictionsFinancial savingsFinancial savingsImprove quality - Building / Image

• M&E• M&E• Management• Location• Access• Parking• Recruitment / RetentionRecruitment / Retention

= Competitive AdvantageCBRE | Page 12

Competitive Advantage

2012 Quality of the Supply

*Best in Class* designers / contractors – both local and foreignConstruction quality, M&E, floor design, workplace environment – higher efficienciesGreen accreditation – LEEDAmenities / Facilities – parking, F&B, access, security,

t

Handover for

management

Building Grade Total Leasable Floor PlateHandover for

Fit Out

Saigon One Tower A 50,000 m21,017m2 -1,175m2 Mar-12

President Place A 9,100 m2 748 m2 NFA Jun-12Le Meridien A 13,177 m2 1,883 m2 GFA Jul-12

Times Square A 12 704m2 1 588m2 NFA Mar-12

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Times Square A 12,704m2 1,588m2 NFA Mar-12

APPROXIMATE TOTAL LEASABLE 84,277.00 m2

2012 Supply – Times Square12 704m2 leasable 8 office floors12,704m2 leasable – 8 office floorsTypical floor plate 1,588m2 NFAHandover for fitting out MarchHandover for fitting out March 2012Mixed use Office, Hotel, Retail,Mixed use Office, Hotel, Retail, Serviced apartment

*Best in Class* foreign designers/ contractors – Kumho / IT – Cisco / Arup ArchitectureArup - ArchitectureConstruction quality, M&E, square floor design workplacefloor design, workplace environmentAmenities / Facilities – F&B,

CBRE | Page 14

access, security

2012 Supply – President Place9 100m2 leasable9,100m2 leasableTypical floor plate 748m2 NFAHandover for fitting out JuneHandover for fitting out June 2012Ground, Mezzanine + 12 floorsGround, Mezzanine 12 floors of Office

Vietnam’s first LEED GOLDVietnam s first LEED GOLD certification office building*Best in Class* local est C ass ocacontractors – CotecconsConstruction quality, M&E, floor design, workplace environmentAmenities / Facilities – parking, F&B access security

CBRE | Page 15

F&B, access, security, management

2012 Supply – Saigon One TowerApprox 50 000m2 leasableApprox 50,000m2 leasableFloor plate 1,017 - 1,175m2 NFAHandover for fitting out MarchHandover for fitting out March 2012Mixed use Office, Retail,Mixed use Office, Retail, Residential

*Best in Class* designers / contractors – Foreign - BouyguesConstruction quality, M&E, floor design – raised floors, workplace environmentenvironmentAmenities / Facilities – parking, F&B, access

CBRE | Page 16

2012 Supply – Le Meridien

9,000m2 NFATypical floor plate 1,500m2 NFAHandover for fitting out July 2012Starwood Hotel and Office

*Best in Class* contractors –local Cotecconslocal - CotecconsConstruction quality, M&E, floor design, workplace environmentdesign, workplace environmentAmenities / Facilities – parking, F&B, access

CBRE | Page 17

The Vista – District 2Approx 9 500m2 leasableApprox 9,500m2 leasableFloor plate 993m2 Handover for fitting out FebruaryHandover for fitting out February 2012Mixed use Office, Retail,Mixed use Office, Retail, Residential

*Best in Class* designers / contractors – Foreign – China State HK / RSP & BenoyState HK / RSP & Benoy architectsConstruction quality M&E floorConstruction quality, M&E, floor design – workplace environmentAmenities / Facilities – parking,

CBRE | Page 18

F&B, access

Maximising Leverage

When approaching a building, things to look for:

Vacancy

Landlord’s Track Record – market understanding

L dl d’ fi i l t thLandlord’s financial strength

Pre-commitment – favourable terms

Time in operation – pain threshold

New Landlords will offer more for quick decisions

CBRE | Page 19

The GIVE and The TAKE

The Give The Take

Covenant Strength

Payment terms

Rent Free

Stepped Rents&Payment terms

Deposits

Stepped Rents

Free / Reduced Parking&

Longer Leases

Forego penalty-free

Attractive signage

Forego penalty-free termination clauses

Acquired spaceAcquired space

Speed to deal

CBRE | Page 20

Incentives / Flexibility on Offer

Rent Free Periods – to offset fit out costs

Stepped RentsStepped Rents

Longer fit out periods

Free or reduced parking

Free or reduced signage

CBRE | Page 21

Effective RentArea 1 361m2

Incentives DO count – 16% saving off the face rentArea 1,361m2Rent (based on NET area) $30.00m2 / monthService Charge $6.00m2 / monthVAT 10%Total Rent Inclusive $39.60m2 / month $39.60 sq.m / monthTotal Monthly Rent Only $40 830 00USDTotal Monthly Rent Only $40,830.00USDTotal Monthly Service Charge $8,166.00USDTotal Monthly VAT $4,899.60USDTotal Monthly Rental inclusive $53,895.60USDLease Period 60MonthsTotal Rent during Lease period $3,233,736.00USDTotal Rent during Lease period $3,233,736.00USD

IncentivesRent Free 9MonthsRent Free amount $367,470.00USD

$4.50m2 / month $35.10 sq.m / monthq

Signage (1m x 1.2m) 1.20m2Market Rate $250.00m2 / monthTotal Signage Cost for 5 year lease $18,000.00USD

$0.22m2 / month $34.88 sq.m / monthFree ParkingCars 4spacesMarket Rate $200.00monthTotal Car Parking for 5 year lease $48,000.00USD

$0.59m2 / month $34.29 sq.m / month

Motorbikes 70spacesMarket Rate $20.00monthTotal Motorbike parking for 5 year lease $84,000.00USD

$1.03m2 / month $33.26 sq.m / month

CBRE | Page 22

Contribution Towards Fitting Out$0.00m2 / month

Effective Rent after all incentives $33.26 sq.m / month

How Incentives Offset CAPEX – Live Examples

Area 365 m2 1,361 m2

Rent $40 00 m2 / month $33 00 m2 / monthRent $40.00 m2 / month $33.00 m2 / month

1st year rent $35.00 m2 / month $30.00 m2 / month

Monthly Rent $14,600 / month $44,913 / month

Fit Out Cost $350 m2 $350 m2

Approximate Fit Out $127,750.00 $476,350.00

R F P i d 2 h( ) 5 h( )Rent Free Period 2 month(s) 5 month(s)

Rent Free Amount $29,200.00 $224,565.00

Stepped Rent Saving $18,250.00 $28,581.00

Total Incentive $47,450.00 $253,146.00

CBRE | Page 23

$ , $ ,

Rent free as % of fit out 37.14% 53.14%

After 2012….No quality CBD supply until 2015!

Vietcombank Tower SJC TowerVietinBank

SJC Tower

CBRE | Page 24

BIDV Tower – Nguyen HueSaigon Centre Phase II

Don’t get caught with your pants down!

ASKING RENTS BY GRADE

$80

ASKING RENTS BY GRADEGrade A Grade B Grade C

$40

$60

$20

$40

$02003 2004 2005 2006 2007 2008 2009 2010 Q3/2011 2012 …2015/2011

Jun2002

Apr2005

Jul2005

Dec2006

Dec2007

May2008

Jan2009

Jan2010

Doubled and Halved2002 2005 2005 2006 2007 2008 2009 2010

Low Zone 14 16 18 22 48 50 42 27

Mid zone 17 20 23 26 49 52 44 31

CBRE | Page 25

Mid zone 17 20 23 26 49 52 44 31

High Zone 20.5 24 28 28 50 54 46 32Notes: Rents excl SC & VAT

Q2 2011 Asian Rental Cycle

CBRE | Page 26

Think about your NEW space – Maximize usage

Use an experienced space planner

Make best use of the spaceMake best use of the space

Keep it flexible to allow for growth i.e. converting storage for desks asconverting storage for desks as headcounts increase

CBRE | Page 27

Building your lease

Build in provisions for growth / contraction• First right of refusal• Contraction• Termination

Assurances on future Property Management / MaintenanceIs there a sinking fund?s t e e a s g u dSuccession agreements – will the building be sold? Parking expansiong pLonger Leases – 5 years + and therefore get more incentives• Give and Take!

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Summary

Better QUALITY and GREEN are coming

The window is OPEN – your Landlords are ready and waiting

Face rents may stay flat but the REAL value is in the i ti th ill b t k ff th t bl tiincentives – these will be taken off the table over time

Thi k b t k b tThink about your new space – make best use

Stay flexible Build your leaseStay flexible – Build your lease

Remain competitive and DON’T GET CAUGHT WITH

CBRE | Page 29

Remain competitive and DON’T GET CAUGHT WITH YOUR PANTS DOWN!

www.cbrevietnam.comOver 300 markets in more than 50 countries

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33Thank YouWe obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and makeno guarantee warranty or representation about it It is submitted subject to the possibility of errors omissions change of price

Thank You

CBRE | Page 30

no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing or withdrawal without notice. We include projections, opinions,

assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the property and transaction.