Business Model

São Carlos’ goal is to generate profit for its shareholders through investments in commercial income properties. We have been working consistently over the years in accordance with the following business model:

(1) Initially we: (a) prospect the market for opportunities to acquire existing corporate towers, located mainly in Sao Paulo and Rio de Janeiro, and retail properties located in major shopping malls. This process is handled by the São Carlos Business Development team, as well as by independent brokers on the company’s behalf. In certain specific cases, the company may also invest in the development of this type of real estate; (b) assess the risks and opportunities of the transaction by conducting due diligence on the property; (c) acquire a stake in the property (preferably 100%) enabling the company to take over complete management and implement the necessary improvements without major difficulties; (d) finance most of the property’s acquisition value, with the aim of increasing the company’s profitability.

(2) After acquiring the property, we begin implementing improvements and eliminating inefficiencies through our management style. Among other procedures, at this stage we deal with: (a) leasing vacant areas, (b) reducing common property expenses; (c) investing in improvements that increase the attractiveness of the property (air conditioning, elevators, lobby, etc.), (d) exploring other revenue potentials (rental of antenna and generator space, dedicated parking spaces, the building’s auditorium, etc.), (e) correcting and completing the property’s documentation, (f) reviewing the tenant mix in relation to the property’s location and quality, and (g) developing the building’s untapped construction potential, if any.

(3) While we are implementing the above-mentioned interventions, we seek to increase contractual rental values to reflect the property’s improved conditions and attractiveness in the market. This phase usually takes three years to complete.

(4) Our property value increases, due to the higher total rent revenue achieved in the previous phase. The value of the property may also change significantly in accordance with higher or lower investor demand for income commercial properties. Changes in the demand from investors are in turn mainly due to alterations in future interest rates in Brazil and the availability of credit for the acquisition of commercial properties in general.

(5) São Carlos chooses to maintain the property in the portfolio or sell it and make a profit. Selling real estate is part of São Carlos’ business model.

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