AREITs vs GREITs What is the best way to play the recovery in real - PowerPoint PPT Presentation

A‐REITs vs G‐REITs What is the best way to play the recovery in real estate? What is the best way to play the recovery in real estate? E... L... 1 m... tag

A­REITs – A Real Opportunity • The Australian economy is strong • A­REITs are again investment grade • Substantially de­risked • Lower beta, lower volatility • Strong reporting season • Australian property markets ­ stable and improving • Sector is trading below Net Asset Value • The sector NAV has upside 2

A­REITs – Substantially De­ Risked • Improved debt structures • Improving credit markets • Valuations have been written down significantly • Valuations are likely to increase • Gearing down to 30% (Debt / Assets) • More focus on recurring income • Increased transparency • Dividend payout ratios moved to FFO concept (sustainability) 3

A­REITs ­ good value, Estim Val Impl structurally improved ated uer Impl ied Gea Intere Ca ied Valu ring st p Cap e S&P/ASX 30% 3.3x 7.0 Cove Rat Rate Decl 300 % 7.6% 8% Div S&P/ASX A­REIT r e ine 5% PE Yield Payout Price to 300 Index discou 2011 2011 ratio NAV A­REIT 12.9 5.9% 76% nt Index Source: SG Hiscock & Company, 28 March 2011 4

A­REITs – substantially de­ risked Result: Substantial improvement in Beta Source: UBS 5

Volatility – now back to long term levels Source: IRESS 6

Office vacancies ­ nothing % Vacancy Jun­90 10 15 20 25 30 35 0 5 Jun­91 Source: PCA (A positive effect of the GFC) Jun­92 Jun­93 Jun­94 Jun­95 like the 90s Jun­96 Jun­97 Jun­98 Jun­99 Jun­00 7 Jun­01 Jun­02 Jun­03 Jun­04 Sydney Brisbane Jun­05 Jun­06 Jun­07 Jun­08 Melbourne Perth Jun­09 Jun­10

Office ­ positive • We remain positive on the office sector as previously mentioned – Low vacancy rates – Expected rental growth – Cap rates are higher (better value) than historic – Limited supply coming in the next few years • Rent growth 2009­2014 forecast to be strong in Melbourne and Sydney, with 8

Westfield update • Split into two vehicles � Westfield Group (WDC) (30% of Index): • carved off 50% of Aust. & NZ assets into WRT • retained overseas assets but owns no WRT • retained development and management 9 • higher growth, lower dividend yield

“EQT SGH Property Income Fund” – more diversified INDEX EQT SGH PIF Retail Office Indust Source: SG Hiscock, 3 March 2011 rial Other Cash EQT SGH PIF 27% 48% 14% 6% 4% ASX 300 56% 21% 12% 11% AREITs Source: SG Hiscock, 31 Dec 2010

A­REITS summary � Strong reporting season � Upgraded earnings � Sector trading at discount to fair valuation � Valuations and earnings will rise � Appropriate gearing, and payout ratios 11

A‐REITs vs G‐REITs What is the best way to play the recovery in real estate? What is the best way to play the recovery in real estate? E... L... m... tag

The Largest Market Cap Real Estate Company US$44 Billion 13

Largest Real Estate Companies by Market Capitalization Seven of the Top 25 are US­ Market Capitalisation Countries Company (HQ) ($ Billions) Invested 1. Sun Hung Kai Properties (HK) 43.8 2 Based; Seven are HK­Based 2. Simon Property Group (US) 30.7 7 3. Westfield (Australia) 28.2 4 4. Mitsubishi Estate (Japan) 27.0 3 5. Warf Holdings (HK) 21.1 2 6. Henderson Land (HK) 19.8 2 7. Hang Lung Properties (HK) 19.8 2 8. Public Storage (US) 19.6 8 9. Mitsui Fudosan (Japan) 18.4 5 10. Unibail­Rodamco (France) 17.5 13 Sources: LaSalle Investment Management, Bloomberg. As of 5/2/11. Only EPRA/NAREIT Global Index qualifying companies included. 14

Global REIT Index (Long­term Performance History) Recover to Long­term cycle 3500 3036 Index High – Feb 2007 (Feb 7 ) th 3000 2133 2500 (02/10/2011) 2000 1500 1000 856 Index Low － March 2009 (Mar 9 ) th 500 Dec­02 Dec­03 Dec­04 Dec­05 Dec­06 Dec­07 Dec­08 Dec­09 Dec­10 Source: LaSalle Investment Management (Securities), UBS Global Investors Index; Total Return, local currency index values; as of 02/10/2011 15

Global Real Estate Securities – Market Summary •Public real estate securities have staged a dramatic recovery –Credit market recovery –Improving economic outlook –Improving outlook for real estate fundamentals •Public real estate companies are well positioned to compete and grow –Well capitalised * Returns based on the UBS Global Investors Index (in local currencies) as of January 31, 2011. –Access to capital on favorable terms Past performance does not guarantee future results 16

Global Office Property Clock Q4 2010 Americas Cairo Asia­Pacific Europe Rental Growth Rents MENA Slowing Falling Abu Dhabi, Mexico City São Paulo Detroit Dubai London City, London West End Rental Growth Rents Hong Kong Accelerating Bottoming Out Beijing Seoul, Chicago, Los Angeles Washington DC, Singapore Atlanta, Dallas Shanghai Madrid Sydney Brussels Moscow, Stockholm Amsterdam, Rome, New York San Francisco, Mumbai, Berlin Frankfurt, Toronto Milan Delhi, Tokyo, Paris Milan Singapore, Madrid Amsterdam, Hamburg, Munich, Note Washington DC Paris, Moscow, Stockholm, Beijing, • This diagram illustrates where Jones Lang LaSalle estimate each Shanghai, Boston, Chicago, Los Toronto Angeles, New York, San prime office market is within its individual rental cycle as at end of Berlin Francisco, Sao Paulo December 2010 Mexico City Hong Kong. Brussels Cairo Toronto Toronto • Markets can move around the clock at different speeds and directions Chicago, Los Angeles Chicago, Los Angeles Rental Sydney, London Rents growth • The diagram is a convenient method of comparing the relative position Rental Growth Rental Growth Rental Growth Rents Rents Rents Mumbai falling slowing Slowing Slowing Slowing Falling Falling Falling of markets in their rental cycle Milan, San Francisco Milan, San Francisco Delhi Abu Dhabi Abu Dhabi Amsterdam, Brussels, Frankfurt, Amsterdam, Brussels, Frankfurt, • Their position is not necessarily representative of investment or Tokyo Madrid, Seoul Madrid, Seoul Seoul, Mexico City development market prospects. Singapore Singapore Rental Rents Rental Growth Rental Growth Rental Growth Rents Rents Rents • Their position refers to Prime Face Rental Values Accelerating Accelerating Accelerating Bottoming Out Bottoming Out Bottoming Out growth bottoming Berlin, Paris, Washington DC Berlin, Paris, Washington DC accelerating out Dubai Dubai Source: Jones Lang LaSalle IP, January 2011 Moscow, Delhi Tokyo Q4 2008 Mumbai Q4 2009 London, São Paulo, Hong Kong, Sydney London, São Paulo, Hong Kong, Sydney Shanghai Shanghai

Diversification benefits: G­REITs vs A­REITs Australian vs Global Listed Property Jan 1990 to Dec 2010 8.8% 8.6% 90/10 80/20 100% G­REITs 70/30 60/40 8.4% 50/50 Return (% pa) 40/60 8.2% Correlation = 0.63 30/70 8.0% 20/80 10/90 7.8% 100% A­REITs 7.6% 13.0% 13.5% 14.0% 14.5% 15.0% 15.5% 16.0% Standard Deviation of Return (% pa) Data Source: LaSalle, SG Hiscock & Co 18

Risk­adjusted return comparison Blend of risks and returns suggests benefits of adding GRES to Risk­Adj. Risk Return Returns portfolio Global Bonds 3.3% 6.3% 1.92 Global Real Estate 15.8% 8.2% 0.52 Securities Global Equities 14.7% 5.5% 0.37 Note: Risk is measured using standard deviation, returns are annualized. Returns are in local currencies. Past performance does not guarantee future results. Source: UBS Global Investors Index, UBS Global Developers Indices; January 1990 – January 2011. 19

Vast potential for securitisation of real estate Public Institutional Public All Commercial Real Estate & Private US$ 6.0 Real Estate US$ 2.0 trillion trillion US$ 34.4 trillion Approximately 6% of total commercial real estate globally is owned by listed companies Source: Investment Property Databank, LaSalle Investment Management As of 3Q 2010 20

Diverse regional exposure Market in preferred index UBS Global Investors Index Cap Wei # of Count (USD, ght Co’ United States ry Australi Continent millions % s 66,890 11.2% 16 a Australia Japan 34,714 5.8% 23 ) Britain Hong 21,519 3.6% 9 Japan Singapo Kong Hong Kong 20,784 3.5% 17 New Singapore re 1,768 0.3% 3 Canada Asia Zealand New Zealand 145,675 24.4% 68 Pacific Contine 78,666 13.1% 39 nt Britain 38,710 6.5% 19 Europe 117,376 19.6% 58 United 319,909 53.4% 94 States North Canada 16,571 2.8% 15 Americ 336,480 56.1% 109 100. a GLOBE 599,531 235 0% Source: UBS Global Investors Index; as of January 31, 2011. Weights may not add due to rounding. 21

Diverse sector exposure in Hotel preferred index Industrial 3% 5% Retail 25% Apartment 18% Office 23% Diversified 26% Source: UBS Global Investors Index; as of January 31, 2011. Weights may not add due to rounding. 22

Why invest in Global Real Estate Securities? � Long term competitive performance � Diversification benefits ­ low correlation with other asset classes � Second layer of diversification within real estate � Risk­adjusted returns complement typical mixed­asset portfolios � Large and growing investable universe � Diverse regional and sector exposure 23