Parque Arauco. Equity Research. Cheapest shopping mall in the region; Buy!

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1 Cheapest shopping mall in the region; Buy! Revisiting Parauco s investment case, with a positive view After a capital increase in 1Q16 and recently announced M&A/greenfields, we are revisiting Parauco s investment case. Despite a nice stock performance recently (up ~40% YTD), we reiterate our Buy on a combination of: (i) an attractive valuation, at 6.0% FFO yield for 2017E, mainly compared to Brazilian peers and/or local benchmark interest rates; (ii) a dominant shopping mall portfolio; and (iii) growth opportunities in Chile, Peru and Colombia. Strong portfolio set to grow even further; Ebitda set to soar 43% by 2018E Parauco already has a very mature shopping mall portfolio in Chile, and is still growing at solid rates (1H16 sales/m² rose 8% y/y), while GLA addition is mainly coming from Peru (7 expansion/greenfield projects) and Colombia (mostly Parque La Colina), with the potential to add 158,000m² of GLA (18% of current area). Combined, sameproperty-basis growth (maturation of current portfolio) and inauguration of greenfields/expansions could boost Ebitda 43% by end-2018 (13% CAGR E). Equity Research BTG Pactual Affiliate Research Banco BTG Pactual S.A. Latin America Real Estate Company Note 12 September 2016 Rating 12m Price Target Price RIC: N.A., BBG: PARAUCO CI Trading Data and Return Forecasts Buy CLP1,800.00/US$2.69 CLP1,499.60/US$ wk range CLP /US$ Market cap. CLP1,334bn/US$1,991m Shares o/s (m) Free float 62% Avg. daily volume('000 Shares) 860 Avg. daily value (CLP m) 1,213.0 Forecast price appreciation +20.0% Forecast dividend yield 1.3% Forecast stock return +21.3% Stock Performance (CLP) 2, , Leverage (~6x ND/Ebitda) could delay new investments, but is not a concern While indebtedness levels (we forecast ~6x net debt/ebitda at YE16) may admittedly look high, cost of debt is low (~5% p.a.) and leverage could fall in the coming years (to an estimated 5.2x and 4.5x net debt/ebitda at YE17 and YE18, respectively). Our only fear is that Parauco needed more capital every time this ratio was reached in the past (i.e. two capital increases in last three years). We thus don't see the stretched balance sheet as an issue, although it could prevent more investments (without raising capital). 1, , , , Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun-16 Price Target (CLP) Stock Price (CLP) Rel. IPSA 12-Sep No longer a bargain but still very attractive; new CLP1,800/share TP = Buy We are revising our model and increasing our FFO estimates for 2016 and 2017 by 30% and 7%, respectively. We are also raising our target price to CLP1,800/share (20% upside), while we see the stock trading at 16.8x P/FFO 2017E (a sharp 10% discount to Brazilian peers) and yielding a juicy real IRR-to-equity of 7.1% (~350bps spread over blended real interest rates in Chile/Peru/Colombia). We thus reiterate our Buy rating on Parauco, our favorite LatAm shopping mall. Gustavo Cambauva Brazil Banco BTG Pactual S.A. gustavo.cambauva@btgpactual.com Valuation 12/ / /2016E 12/2017E 12/2018E RoIC (EBIT) % EV/EBITDA P/E Net dividend yield % Financials (CLPmn) 12/ / /2016E 12/2017E 12/2018E Revenues 125, , , , ,948 EBITDA 80,505 93, , , ,929 Net Income 56,837 48,287 66,346 79,701 87,066 EPS (CLP) Net DPS (CLP) Net (debt) / cash (343,497) (545,643) (597,433) (594,594) (562,463) Source: Company reports, Bovespa, BTG Pactual S.A. estimates. / Valuations: based on the last share price of the year; (E) based on a share price of CLP1,499.60, on 12 September ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 11 Banco BTG Pactual S.A. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Any U.S. person receiving this report and wishing to effect any transaction in a security discussed in this report should do so with BTG Pactual US Capital, LLC at , 601 Lexington Avenue. 57th Floor, New York NY

2 12 September 2016 page 2 Cheapest shopping mall in LatAm; Buy reiterated In this report, we are revising our estimates and target price (to CLP1,800/share) for Parauco, while reaffirming our Buy rating on the stock, which is the cheapest shopping mall in LatAm. In our view, Parauco combines: (i) strong bottom line growth (we forecast FFO expansion of 24% in the next 2 years); (ii) an attractive valuation (16.8x P/FFO 17E and real IRR-to-equity of 7.1%); and (iii) some free options (more M&A moves and use of landbank not included in our numbers). Figure 1: Shopping mall companies Selected financial and valuation ratios Financial Ratios Malls BRML3 MULT3 IGTA3 ALSC3 Parauco FFO Margin % 29% 48% 40% 25% 42% FFO Margin 2016E 30% 16% 47% 38% 20% 41% FFO Margin 2017E 36% 28% 47% 39% 25% 41% FFO Margin 2018E 38% 30% 49% 43% 27% 41% EBITDA Margin % 79% 73% 73% 73% 68% EBITDA Margin 2016E 74% 76% 72% 76% 70% 68% EBITDA Margin 2017E 74% 76% 73% 75% 70% 69% EBITDA Margin 2018E 76% 78% 75% 75% 70% 70% Net Debt/EBITDA x 4.5x 2.4x 3.9x 4.1x 5.9x Net Debt/EBITDA 2016E 3.6x 4.7x 2.3x 3.3x 4.0x 6.0x Net Debt/EBITDA 2017E 3.4x 4.5x 2.1x 3.0x 3.8x 5.2x Net Debt/EBITDA 2018E 3.0x 4.0x 1.8x 2.7x 3.6x 4.5x Valuation Metrics Malls BRML3 MULT3 IGTA3 ALSC3 Parauco Cap rate (NOI/EV) % 10.2% 6.9% 7.7% 10.4% 5.5% Cap rate (NOI/EV) 2016E 8.8% 9.2% 7.2% 8.2% 10.4% 5.6% Cap rate (NOI/EV) 2017E 9.6% 10.2% 8.2% 9.0% 10.9% 5.9% Cap rate (NOI/EV) 2018E 10.5% 11.0% 9.3% 9.9% 11.9% 6.4% EV/EBITDA x 11.2x 16.2x 13.9x 11.0x 18.3x EV/EBITDA 2016E 13.1x 12.8x 15.4x 13.1x 11.1x 17.8x EV/EBITDA 2017E 12.1x 11.7x 13.8x 12.3x 10.8x 17.0x EV/EBITDA 2018E 10.7x 10.4x 11.6x 11.0x 9.8x 15.6x P/FFO x 17.6x 22.6x 20.7x 19.9x 19.9x P/FFO 2016E 24.7x 33.3x 21.7x 20.4x 23.5x 19.0x P/FFO 2017E 18.6x 18.4x 19.3x 18.3x 18.6x 16.8x P/FFO 2018E 16.1x 15.6x 16.9x 15.8x 16.1x 15.8x FFO Yield % 5.7% 4.4% 4.8% 5.0% 5.0% FFO Yield 2016E 4.0% 3.0% 4.6% 4.9% 4.3% 5.3% FFO Yield 2017E 5.4% 5.4% 5.2% 5.5% 5.4% 6.0% FFO Yield 2018E 6.2% 6.4% 5.9% 6.3% 6.2% 6.3% Dividend Yield % 1.4% 1.9% 1.4% 2.6% 1.3% Dividend Yield 2016E 1.7% 1.2% 2.3% 1.7% 1.8% 1.4% Dividend Yield 2017E 3.4% 2.2% 3.6% 3.1% 4.7% 1.5% Dividend Yield 2018E 4.4% 3.5% 4.4% 3.9% 5.7% 1.6% Real IRR 6.5% 6.1% 6.9% 6.6% 7.1%

3 12 September 2016 page 3 Figure 2: Parauco Historical FFO vs. long-term real interest rates 12% 10% FFO yield UF10 (Chile) 8% 6% 4% 2% 0% Figure 3: Parauco Spread of FFO yield vs. UF-10 bond 8% 7% 6% 5% 4% 3% 2% 1% 0% Robust portfolio set for Ebitda growth of 43% + GLA expansion of 18% With most part of its portfolio still in Chile (56% of GLA), Parauco has invested heavily in recent years to develop a solid portfolio in Peru and Colombia (which together represent just 34% of Ebitda). With the bulk of revenue growth expected to come from Peru and Colombia which we deem positive given both countries' decent prospects Parauco s assets in Chile are still delivering nice growth rates (sales/m² and rents/m² were up 8% y/y in 1H16). Figure 4: Parauco Current portfolio of shopping malls Portfolio Location Total GLA CAGR Opening Sales 2015 Revenues 2015 (m2) 2015 Parque Arauco Kennedy Chile 116, ,347 41,747 7% Arauco Maipú Chile 73, ,096 13,029 7% Arauco Chillán Chile 32, ,181 5,395 13% Arauco Estación Chile 66, ,199 14,568 5% Arauco San Antonio Chile 28, ,651 3,851 6% Arauco Express (Strip Centers Chile) Chile 27, ,931 3,065 18% Arauco Premium Outlets Chile 45, ,370 5,858 40% Arauco Quilicura Chile 32, ,713 3,966 39% MegaPlaza Norte Peru 104, ,165,601 85,073 17% MegaPlaza Express Villa Peru 8, ,537 5,019 12% Larcomar Peru 26, ,747 36,689 13% Parque Lambramani Peru 29, ,166 12,213 9% MegaPlaza Chimbote Peru 28, ,659 11,501 6% MegaPlaza Express Villa El Salvador Peru 9, ,612 6,148 17% MegaPlaza Express Chincha Peru 9, ,698 4,642 29% InOutlet y Viamix Peru 22, ,109 10,060 80% MegaPlaza Cañete Peru 16, ,062 6, % MegaPlaza Express Barranca Peru 10, ,363 4, % MegaPlaza Pisco Peru 14, ,667 4,322 n/a El Quinde Cajamarca Peru 31, ,423 14,393 n/a El Quinde Ica Peru 36, ,559 16,454 n/a Plaza Jesús María Peru 14, n/a n/a n/a MegaPlaza Express Jaén Peru 14, n/a n/a n/a Parque Arboleda Colombia 40, ,348 21,636 10% Parque Caracolí Colombia 38, ,378 18,978 31% Subtotal 873,000 3,867, ,970

4 12 September 2016 page 4 Figure 5: Parauco Owned GLA per region Figure 6: Parauco Revenues per region Figure 7: Parauco Ebitda per region Peru 35% Colombia 9% Chile 56% Peru 32% Colombia 6% Chile 62% Peru 30% Colombia 4% Chile 67% Parauco s portfolio has performed well in recent years, which leaves us comfortable in assuming continued strong growth rates going forward. As recently announced by the company, SSS have been growing in line with inflation in all countries (with few exception periods), while SSR growth has tracked SSS expansion meaning we do not see any signs of pressure on tenants occupancy costs. With better economic forecasts for the region, we expect the portfolio to keep doing well. Figure 8: Chile SSS, SSR and inflation Figure 9: Peru SSS, SSR and inflation Figure 10: Colombia SSS, SSR and inflation Q15 2Q15 3Q15 4Q15 1Q16 2Q16 CPI (%) SSR (%) SSS (%) Q15 2Q15 3Q15 4Q15 1Q16 2Q16 CPI (%) SSR (%) SSS (%) -5 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 CPI (%) SSR (%) SSS (%) Source: Bloomberg, Parauco and BTG Pactual Source: Bloomberg, Parauco and BTG Pactual Source: Bloomberg, Parauco and BTG Pactual We also note that most shopping malls have been performing well, with strong growth and occupancy rates. Taking Chile as an example (since its portfolio has a longer track record), rents/m² have been growing at an average rate of 4% p.a. (with the exception of periods of GLA addition strip centers). At same time, vacancy rate of Parauco s portfolio is also at pretty low levels (it actually only increased a few times, when relevant area was added in Peru or Colombia, as shown in Figure 12). Figure 11: Parauco Rents/m² y/y growth (Chile only) 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Source: Parauco and BTG Pactual Figure 12: Parauco Occupancy rate of its portfolio 100% 95% 90% 85% 80% Chile Peru Colombia Source: Parauco and BTG Pactual

5 12 September 2016 page 5 Current pipeline of investments should add 158,000m² of GLA In addition to its solid portfolio, Parauco also has a sizable number of projects under construction (see Figure 13 below), which should add ~158,000m² of total GLA (~18% of current GLA) in the next two years, while requiring ~US$185mn in additional capex. Although our numbers do not assume any acquisitions, we are not ruling out M&A moves in the meantime, especially considering Parauco's solid M&A track record (over US$550mn spent on acquisitions in last 2 years see Figure 14). Figure 13: Parauco Projects under development (name, country, GLA, date of opening, capex) Greenfields Location Opening GLA (m2) Capex ($mn) MegaPlaza Express Huaral Peru 3Q16 16, Various Projects SCP Peru 2H17 19, Arauco Express Antofagasta Chile 2H16 6, MegaPlaza Villa El Salvador II Peru 2H16 11, Viamix Colonial Peru 2H16 3,000 8 Arauco Premium Outlet Bogotá Colombia 2H16 13, Parque La Colina Colombia 1Q17 63, Parque Angamos Chile 1H18 11, Subtotal 143, Expansions Location Opening GLA (m2) Capex ($mn) Expansión Viamix Chorrillos Peru 2H16 4, Megaplaza Norte Libertadores Peru 2H16 10, Renovación Parque Lambramani Peru 2H17 n/a 12 Subtotal 14, Figure 14: Parauco M&A historical (name, country, GLA, date of purchase, price) Malls M&A Location Date Total GLA (m2) Price (US$mn) MegaPlaza Chimbote Peru ,000 9 Mall Viña del Mar* Chile , Centro Comercial Plaza Jesús María Peru , Inversiones Inmobiliarias Arauco Colombia , Strip Centers del Perú Peru , El Quinde Cajamarca Peru , El Quinde Ica Peru , Buenaventura Premium Outlet* Chile , Arauco Express Chile ,000 n/a Larcomar Peru , Arauco San Antonio Chile , Arauco Estacion* Chile , Arauco Chillan* Chile , Megaplaza Norte Peru ,000 n/a Subtotal** 732, Parque Arauco also has a sizable landbank (740,000m²) that could be used in future developments. The acquisition cost of said landbank was ~CLP100bn (USD164mn), to which we only ascribe the acquisition value (although the land is located in a good

6 12 September 2016 page 6 neighborhood in Parauco s main markets and was purchased several years ago). Thus, and similar to any M&A optionality, the accretive use of Parauco s land for new malls is another free-option for the investment case. Figure 15: Parauco Landbank (name, country, GLA, date of purchase, price) Total Land Location % Owned Cost (Local Acquisition Currency) Cost ($mn) Quilicura Chile 100% 78,000 3 Buenaventura Chile 100% 460, Chicureo Chile 100% 201,000 8 Los Andes Chile 100% 115,000 5 Others in Chile Chile 100% 445, Parque El Golf - San Isidro Peru 70% 109, Chimbote Peru 100% 18,000 5 Talara Peru 100% 9,500 3 Ica Peru 100% 13,500 4 Chiclayo Peru 100% 5,000 2 Others MegaPlaza Peru 50% 80, Neiva Colombia 100% 19,000 6 Valledupar Colombia 100% 30, Barranquilla Colombia 100% 76, Subtotal 86% 164 Could leverage prevent future growth? Despite its big investment plans, we do not see leverage as a main concern, since: (i) we expect net debt/ebitda ratio to peak at 6.0x by year-end, being reduced to 5.2x in 2017 and 4.5x in 2018 and (ii) the low cost of debt (of ~5% p.a.) means leverage is not an excessive burden. That said, we highlight that Parauco has carried out a capital increase whenever it reached such leverage ratios (twice in the past three years), being the last move in 1Q16, when Parauco raised ~CLP70bn. And, although we do not discard another round of capital increase, we believe the main risk of Parauco s leverage is to prevent optionalities (M&A and use of landbank for new projects) from materializing. We also do not rule out Parauco divesting some assets (e.g. sale of a minority stake in a subsidiary, or part of its landbank). Recent deals in the region were made at cap rates of ~6.0% (in line with current trading multiples of Parauco), so we think asset sales could be made at accretive valuations. Figure 16: Parauco ND/Ebitda ratio ( E) 7.0x 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x E 2017E 2018E

7 12 September 2016 page 7 Reiterating Buy rating, with a new CLP 1,800/share TP Upping our FFO estimates (+30% for 2016E and +7% for 2017E) We take this opportunity to revise our earnings and valuation model, including: (i) Parauco s 2Q16 results (see our note: Bang in-line 2Q16, with solid operating figures); (ii) the CLP70bn capital increase at the start of this year; and (iii) recent acquisitions plus the inauguration of greenfields/expansions. Overall, we are raising our FFO estimates by 30% and 7% for 2016 and 2017, respectively (see main changes to our forecasts in Figure 17 below). Figure 17: Parauco Summary of earnings estimate changes (CLPbn, unless otherwise stated) New Old Chg % New Old Chg % New Old Chg % Owned GLA (m 2, avg) % % % Net Revenues % % % Adjusted Ebitda % % % Adj. Ebitda Margin 68.1% 71.7% 68.8% 77.0% 70.1% 78.2% Financial result (28.9) (29.3) -1% (25.3) (32.4) -22% (27.0) (31.3) -14% Taxes (15.5) (19.2) -19% (28.6) (24.9) 15% (31.4) (27.3) 15% FFO % % % FFO Margin 12.4% 8.9% 13.5% 11.4% 13.7% 11.6% FFOPS % % % Net Earnings % % % Net Margin 10.2% 8.4% 13.3% 10.9% 13.6% 11.1% EPS % % % After tweaking numbers, our adjusted Ebitda forecasts are 2% above consensus for both 2016E and 2017E, suggesting we may see some small upward revisions by the Street. Our FFO/share expectations are, respectively, 1% below consensus and 7% above consensus for 2016E and 2017E. But we believe this may be due to equity income line, which is excluded from our recurring FFO, making the adj. Ebitda comparisons more accurate. Figure 18: Parauco BTG Pactual vs. Consensus estimates BTG Pactual Consensus Difference Revenues % 3% Ebitda % 2% Net income % 8% FFO/share % 7%

8 12 September 2016 page 8 Upping our TP to CLP1,800/share; Buy rated Following the aforementioned earnings revision, we are setting our new 12-month forward target price at CLP1,800/share (20% upside), while reiterating Parauco as a Buy, on a combination of a strong portfolio of malls, solid growth prospects and attractive valuation. Our CLP1,800/share target price is based on a discounted FCFE model, with the assumptions of a terminal growth rate (g) of 4.5% and cost of equity (Ke) of 10.1%, both in nominal terms. Below we provide our main forecasts: Figure 19: Parauco Main forecasts (CLPbn, unless otherwise stated) E 2017E 2018E Net Revenues 146, , , ,948 Operating Costs (33,731) (38,369) (43,463) (44,801) Gross Results 112, , , ,147 Operating Expenses (19,094) (17,612) (19,107) (19,219) S, G &A Expenses (11,952) (13,060) (15,058) (15,170) Other (4,138) (1,496) (1,035) (1,035) Depreciation&Amortization (3,003) (3,056) (3,014) (3,014) EBIT 93, , , ,929 Equity Account 8,296 6,571 13,599 15,048 Net Financial Result (26,652) (28,939) (25,335) (26,997) Financial Revenues 3,538 6,888 6,800 8,867 Financial Expenses (30,190) (35,827) (32,135) (35,865) Non-operating Result 14,804 (6,978) 0 0 Earnings Before Taxes (EBT) 89,834 80, , ,979 Income Taxes/Social Contribution (18,084) (15,509) (28,638) (31,398) Minorities' Participation (11,663) (8,542) (11,433) (12,530) Net Earnings 60,088 56,312 76,687 84,052 EBITDA 99, , , ,943 EPS DPS FFOPS Gross Margin 76.9% 76.8% 77.3% 78.0% EBITDA Margin 68.2% 68.1% 68.8% 70.1% Net Margin 41.1% 34.0% 40.1% 41.2% FFO Margin 42.0% 41.2% 40.6% 41.5% Valuation looks attractive in pretty much all metrics In terms of valuation, we find Parque Arauco extremely attractive under several different metrics: (i) in absolute terms, we see the stock trading at 6.0% FFO yield for 2017E (which, although slightly above historical levels, has higher implied growth today) and offering a real IRR-to-equity of 7.1%; (ii) Parauco is ~10% cheaper than Brazilian peers (and, again, with some embedded growth); and (iii) the stock offers a juicy spread of ~500bps over benchmark real interest rates in Chile (UF-10 bond).

9 12 September 2016 page 9 Figure 20: Shopping Malls Selected valuation ratios Valuation Metrics BRML3 MULT3 IGTA3 ALSC3 Parauco Cap rate (NOI/EV) % 6.9% 7.7% 10.4% 5.5% Cap rate (NOI/EV) 2016E 9.2% 7.2% 8.2% 10.4% 5.6% Cap rate (NOI/EV) 2017E 10.2% 8.2% 9.0% 10.9% 5.9% Cap rate (NOI/EV) 2018E 11.0% 9.3% 9.9% 11.9% 6.4% EV/EBITDA x 16.2x 13.9x 11.0x 18.3x EV/EBITDA 2016E 12.8x 15.4x 13.1x 11.1x 17.8x EV/EBITDA 2017E 11.7x 13.8x 12.3x 10.8x 17.0x EV/EBITDA 2018E 10.4x 11.6x 11.0x 9.8x 15.6x P/FFO x 22.6x 20.7x 19.9x 19.9x P/FFO 2016E 33.3x 21.7x 20.4x 23.5x 19.0x P/FFO 2017E 18.4x 19.3x 18.3x 18.6x 16.8x P/FFO 2018E 15.6x 16.9x 15.8x 16.1x 15.8x FFO Yield % 4.4% 4.8% 5.0% 5.0% FFO Yield 2016E 3.0% 4.6% 4.9% 4.3% 5.3% FFO Yield 2017E 5.4% 5.2% 5.5% 5.4% 6.0% FFO Yield 2018E 6.4% 5.9% 6.3% 6.2% 6.3% Dividend Yield % 1.9% 1.4% 2.6% 1.3% Dividend Yield 2016E 1.2% 2.3% 1.7% 1.8% 1.4% Dividend Yield 2017E 2.2% 3.6% 3.1% 4.7% 1.5% Dividend Yield 2018E 3.5% 4.4% 3.9% 5.7% 1.6% Real IRR 6.5% 6.1% 6.9% 6.6% 7.1% Figure 21: Shopping Malls P/FFO 2017E multiples 20x 15x 10x 5x 0x BRML3 MULT3 IGTA3 ALSC3 Parauco Figure 23: Parauco Historical FFO vs. long-term real interest rates 12% 10% FFO yield UF10 (Chile) 8% 6% 4% 2% 0% Figure 22: Shopping Malls Implied real IRR-to-equity 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% BRML3 MULT3 IGTA3 ALSC3 Parauco Figure 24: Parauco Spread of FFO yield vs. UF-10 bond 8% 7% 6% 5% 4% 3% 2% 1% 0%

10 Parque Arauco 12 September 2016 page 10 Parque Arauco Income Statement (CLPmn) 12/ / / / / /2016E 12/2017E 12/2018E Revenue 86,345 93, , , , , , ,948 Operating expenses (ex depn) (25,117) (28,156) (33,183) (40,651) (45,683) (51,429) (58,521) (59,971) EBITDA (BTG Pactual) 66,187 60,656 65,281 80,505 93, , , ,929 Depreciation Operating income (EBIT, BTG Pactual) 68,519 62,307 68,063 84,093 96, , , ,943 Other income & associates (7,874) 14,064 5,931 9,663 20,097 (3,463) 10,585 12,034 Net Interest (11,674) (11,585) (15,166) (21,220) (26,652) (28,939) (25,335) (26,997) Abnormal items (pre-tax) Profit before tax 48,970 64,786 58,828 72,537 89,834 80, , ,979 Tax (5,879) (20,430) (8,811) (11,744) (18,084) (15,509) (28,638) (31,398) Profit after tax 43,092 44,357 50,016 60,793 71,751 64,854 88,121 96,582 Abnormal items (post-tax) Minorities / pref dividends (2,304) (7,939) 5,264 (3,044) (11,663) (8,542) (11,433) (12,530) Net Income (local GAAP) 40,787 36,417 55,281 57,749 60,088 56,312 76,687 84,052 Adjusted Net Income 48,662 27,898 59,013 56,837 48,287 66,346 79,701 87,066 Tax rate (%) Per Share 12/ / / / / /2016E 12/2017E 12/2018E EPS (local GAAP) EPS (BTG Pactual) Net DPS BVPS Cash Flow (CLPmn) 12/ / / / / /2016E 12/2017E 12/2018E Net Income 48,662 27,898 59,013 56,837 48,287 66,346 79,701 87,066 Depreciation (2,331) (1,651) (2,781) (3,589) (3,003) (3,056) (3,014) (3,014) Net change in working capital (9,958) (5,486) (9,382) 7,154 3,215 14,112 (3,170) (2,354) Other (operating) Net cash from operations 30,829 30,932 45,899 64,903 63,303 70,424 73,517 81,698 Cash from investing activities (76,945) (135,540) (156,294) (150,962) (226,015) (179,923) (65,140) (43,906) Cash from financing activities 94,553 70,021 72, , , ,342 (6,195) (5,187) Bal sheet chge in cash & equivalents 50,769 (32,937) (34,836) 41,115 4,164 3,899 5,196 35,619 Balance Sheet (CLPmn) 12/ / / / / /2016E 12/2017E 12/2018E Cash and equivalents 136, ,782 68, , , , , ,939 Other current assets 37,537 41,889 48,162 51,675 84,224 75,222 81,796 86,436 Total current assets 174, , , , , , , ,375 Net tangible fixed assets 704, , ,563 1,093,468 1,312,231 1,420,555 1,472,097 1,500,955 Net intangible fixed assets 10,702 19,222 30,617 31,134 31,350 29,914 26,899 23,885 Investments / other assets 51,573 69, , , , , , ,584 Total assets 941,240 1,051,367 1,201,955 1,413,758 1,671,939 1,845,752 1,919,648 2,000,800 Trade payables & other ST liabilities 29,938 40,192 43,356 63,366 91, , , ,385 Short term debt 30,245 30,475 32,707 32,285 33,853 20,242 21,067 21,569 Total current liabilities 60,183 70,666 76,063 95, , , , ,954 Long term debt 316, , , , , , , ,833 Other long term liabilities 60,762 71,658 84, , , , , ,175 Total liabilities 437, , , , , , , ,962 Equity & minority interests 503, , , , , , ,393 1,007,838 Total liabilities & equities 941,240 1,051,367 1,201,955 1,413,758 1,671,939 1,845,752 1,919,648 2,000,800 Company Profile: Founded in 1982 and headquartered in Santiago/Chile, Parque Arauco (Parauco) is one of Latin America s leading retail property companies, with operations in Chile, Peru and Colombia. Parauco owns interests in 25 shopping malls that comprise more than 873,000m2 of gross leasable area (GLA), boasting an average ownership of 81% (making up for an owned GLA base of 809,000m2). The company is controlled by Chilean businessman Jose Said Affie. Financial ratios 12/ / /2016E 12/2017E 12/2018E EBITDA margin 64.0% 63.9% 66.2% 67.3% 68.6% Operating margin 66.8% 65.9% 68.1% 68.8% 70.1% Net margin 45.1% 33.0% 40.0% 41.7% 42.7% RoE 9.9% 7.5% 9.5% 10.4% 10.5% RoIC 7.6% 7.4% 7.8% 8.7% 9.2% EBITDA / net interest 3.8x 3.5x 3.8x 5.1x 5.2x Net debt / EBITDA 4.3x 5.8x 5.4x 4.6x 4.0x Total debt / EBITDA 5.6x 7.1x 6.5x 5.6x 5.2x Net debt / (net debt + equity) 30.6% 41.3% 40.9% 38.9% 35.8% Source: Company reports and BTG Pactual estimates. Valuations: based on the last share price of that year(e) based on share price as of 12 September 2016

11 12 September 2016 page 11 Required Disclosures This report has been prepared by Banco BTG Pactual S.A. The figures contained in performance charts refer to the past; past performance is not a reliable indicator of future results. BTG Pactual Rating Buy Neutral Sell Definition Coverage *1 IB Services *2 Expected total return 10% above the company s sector average. Expected total return between +10% and -10% the company s sector average. Expected total return 10% below the company s sector average. 47% 46% 48% 43% 5% 60% 1: Percentage of companies under coverage globally within the 12-month rating category. 2: Percentage of companies within the 12-month rating category for which investment banking (IB) services were provided within the past 12 months. Absolute return requirements Besides the abovementioned relative return requirements, the listed absolute return requirements must be followed: a) a Buy rated stock must have an expected total return above 15% b) a Neutral rated stock can not have an expected total return below -5% c) a stock with expected total return above 50% must be rated Buy Analyst Certification Each research analyst primarily responsible for the content of this investment research report, in whole or in part, certifies that: (i) all of the views expressed accurately reflect his or her personal views about those securities or issuers, and such recommendations were elaborated independently, including in relation to Banco BTG Pactual S.A. and/or its affiliates, as the case may be; (ii) no part of his or her compensation was, is, or will be, directly or indirectly, related to any specific recommendations or views contained herein or linked to the price of any of the securities discussed herein. Research analysts contributing to this report who are employed by a non-us Broker dealer are not registered/qualified as research analysts with FINRA and therefore are not subject to the restrictions contained in the FINRA rules on communications with a subject company, public appearances, and trading securities held by a research analyst account. Part of the analyst compensation comes from the profits of Banco BTG Pactual S.A. as a whole and/or its affiliates and, consequently, revenues arisen from transactions held by Banco BTG Pactual S.A. and/or its affiliates. Where applicable, the analyst responsible for this report and certified pursuant to Brazilian regulations will be identified in bold on the first page of this report and will be the first name on the signature list. Statement of Risk Parque Arauco S.A. [CLPARA] (Primary) - Mais risks to Parauco investment case would be: (i) increased competition from deep-pocketed retail operators who are investing in malls; (ii) execution risk in new projects; (iii) swings in monetary policies and/or currencies in the Andean region; and (iv) thin liquidity of the shares. Valuation Methodology Parque Arauco S.A. [CLPARA] (Primary) - Our 12-month forward price target is based on a discounted FCFE model, which assumes a nominal cost of equity of 10% and perpetuity growth of 4.5%. Company Disclosures Company Name Reuters 12-mo rating Price Price date Parque Arauco 1, 2, 4, 6, 18, 19, 20 N.A. Buy CLP1, Within the past 12 months, Banco BTG Pactual S.A., its affiliates or subsidiaries has received compensation for investment banking services from this company/entity. 2. Banco BTG Pactual S.A, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking services and/or products and services other than investment services from this company/entity within the next three months. 4. This company/entity is, or within the past 12 months has been, a client of Banco BTG Pactual S.A., and investment banking services are being, or have been, provided. 6. Banco BTG Pactual S.A. and/or its affiliates receive compensation for any services rendered or presents any commercial relationships with this company, entity or person, entities or funds which represents the same interest of this company/entity. 18. As of the end of the month immediately preceding the date of publication of this report, neither Banco BTG Pactual S.A. nor its affiliates or subsidiaries beneficially own 1% or more of any class of common equity securities 19. Neither Banco BTG Pactual S.A. nor its affiliates or subsidiaries have managed or co-managed a public offering of securities for the company within the past 12 months. 20. Neither Banco BTG Pactual S.A. nor its affiliates or subsidiaries engaged in market making activities in the subject company's securities at the time this research report was published.

12 12 September 2016 page 12 Parque Arauco Stock Price (CLP) Price Target (CLP) 12-Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep-16 Buy Neutral Sell No Rating Source: BTG Pactual and Economatica. Prices as of 12 September 2016

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