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What do you get with a property security? PowerPoint PPT Presentation


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Beyond just bricks & mortar: global property securities Stephanie Fennessey Client Portfolio Manager, Property Securities. What do you get with a property security?. Like equity, shares in a company, not “bricks & mortar”

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What do you get with a property security

Beyond just bricks & mortar: global property securitiesStephanie FennesseyClient Portfolio Manager, Property Securities


What do you get with a property security

What do you get with a property security?

  • Like equity, shares in a company, not “bricks & mortar”

  • Like property, ownership of actual property assets, but in the form of a share

  • These shares trade on global stock exchanges


So is this equity or property

So is this equity or property?

The answer is YES. Consider….

Long-term exposure = property

Equity-like liquidity and volatility

Think of it as property, but be prepared for more fluctuations due to marketplace fluctuations


Generally there are two types of property securities

Generally, there are two types of property securities

Properties:

Office, Warehouse, Apartments, Malls, Shopping Centres, etc.

Income

from Rent and Sales

Income

from Rent and Sales

Real Estate Operating Company

(REOC)

Real Estate Investment Trust

(REIT)

Taxes

Government

Dividend

Income

Dividend

Income

Shareholders

Shareholders

Taxes

Taxes


The growth of property securities is a global phenomenon

The growth of property securities is a global phenomenon

Global Property Research 250 Index

Market cap ($ billions)

Source: Global Property Research, JPMorgan Investment Management


Success of u s reits led to the adoption of reits and reit like securities around the world

Belgium1990

Brazil1993

Canada1993

Turkey

1998

Success of U.S. REITs led to the adoption of REITs and REIT-like securities around the world

Japan2000

Mexico2004

Dubai

China

Malaysia2005

South Korea2001

Finland

EU

U.S.1960

Germany

07?

Thailand2005

Australia1971

Luxembourg1988

France2003

Netherlands1969

Israel

2006

Hong Kong2003

India

Italy

07?

Singapore1999

UK2007

Taiwan2003

1960s

1970s

1980s

1990s

2000s

Under

consideration

Sources: NAREIT, JPMorgan Investment Management


Global growth potential

Global Growth Potential

The property outside the U.S. is much less securitised, leaving considerable room for growth

Publicly traded property

£ billions

6.5% of Non-US commercial

property market*

6.5% of U.S. commercial

property market

~£210 bn

incremental equity

market cap

~£171 bn

equity

market cap

~£131 bn

current equity

market cap


Property securities investment advantages

Property Securities Investment Advantages

  • Long term property exposure with equity like liquidity

  • Diversification benefits

  • Strong historical returns


Low historical correlations with other asset classes

Low historical correlations with other asset classes

Global property securities correlations of returns*

(%)

Source: Global Property Research, Morgan Stanley Capital International, Citigroup, JPMorgan Investment Management. Index proxies for each asset class are: Global Real Estate Securities: Global Property Research 250 Index; Global Equity: MSCI World Index; US Equity: S&P 500 Index; UK Equities: FTSE 100 ; Europe ex UK Equities: MSCI Europe ex-UK; Global Fixed Income: JPMorgan Government Bond Index Global; UK Fixed Income: FTSE UK GILTS. Indices do not include fees or operating expenses and are not available for actual investment. Indices presented are representative of various broad-based asset classes. They are unmanaged and shown for illustrative purposes only.

* Based on ten years of monthly total returns through 31 December 2006


Strong historical performance relative to other asset classes

Strong historical performance relative to other asset classes

Annualised returns for periods ending 31 December 2006

(%)

Source: FactSet, Global Property Research, Morgan Stanley Capital International, JPMorgan Investment Management, IPD


Conclusion adding global property securities diversifies a portfolio

If current portfolio,

Return:7.09%

Std Dev:7.16%

Sharpe Ratio:0.48

If current portfolio,

Return:8.00%

Std Dev:6.32%

Sharpe Ratio:0.69

Conclusion: adding global property securities diversifies a portfolio

Then adding 10% to Global Property Securities

Return:7.71%

Std Dev:7.09%

Sharpe Ratio:0.58

Then adding 10% to Global Property Securities

Return:8.59%

Std Dev:6.32%

Sharpe Ratio:0.79

Index proxies for each asset class are: Global Property Securities: Global Property Research 250 Index; UK Equity: FTSE All Share; UK Bonds: FTSE UK GILTS Index; UK Direct Property: IPD Index. Indices do not include fees or operating expenses and are not available for actual investment. Indices presented are representative of various broad-based asset classes. They are unmanaged and shown for illustrative purposes only. * Based on ten years of monthly total returns through 31 December 2006


Immediate access to the global real estate market

Immediate access to the global real estate market

GPR 250 Index

As of 31 December 2006

  • No investor queues

  • Efficient pricing

  • Unmatched portfolio diversification

    • 20+ countries

    • Thousands of properties worldwide

Source: Global Property Research. *Other Europe includes Austria, Belgium, Denmark, Finland, Germany, Greece, Italy, Netherlands, Poland, Spain, Sweden, Switzerland and Turkey. Other Asia/Australia includes Singapore, New Zealand and the Philippines. South Africa (0.28%) is not represented in the chart above. Each of these countries has a weight less than 2.5% of the benchmark. Indices do not include fees or operating expenses and are not available for actual investment. Indices presented are representative of various broad-based asset classes. They are unmanaged and shown for illustrative purposes only.


Returns across the global are diversified

Returns across the global are diversified

Trailing 10 year return correlations of regional property security markets

NAEurAsiaAustralia*Africa

NA1.00

Eur0.411.00

Asia0.290.341.00

Australia*0.360.270.221.00

Africa0.020.240.20-0.051.00

Source: Global Property Research

*Includes New Zealand

NA = North America, Eur = Europe

..adding to consistency of return and supporting global yet local coverage


Our global equity and property presence

Our global equity and property presence

North America

Property Securities AUM:

£2.6 billion

Equity AUM:

£56.1 billion

Europe

Property Securities AUM:

£205 million

Equity AUM:

£74.0 billion

Asia/Australia

Property Securities AUM:

£2.6 billion

Equity AUM:

£41.4 billion

Global Direct Property AUM: £19 bn

…essential for picking the right stocks


Opportunities in gps markets canada

Opportunities in GPS markets: Canada

  • Stable macro outlook: Canadian economy is experiencing low inflation and relatively stable monetary policy

  • Compelling valuation for Canadian REITs

  • Bullish on Western Canada due to strong job growth from its exposure to the oil & gas industry

Stock example: Dundee REIT

  • 230 properties total = 19.4 million square feet

  • Buildings located throughout Canada

  • Average occupancy rate: 98%

  • 30/12/2005 Price: C$ 24.26

  • 31/12/2006 Price: C$ 38.65


Global property securities provide

Global property securities provide

  • Improved efficiency

    • Low correlation to UK direct real estate

    • Higher expected returns

  • Improved liquidity for your property allocation

  • Cost-efficient access to growing global real estate markets

Place Vendôme, Paris, France

IVG Immobilien AG

Bondi Junction

NSW, Australia

Westfield Group

Umeda Daibiru Building

Osaka, Japan

Daibiru Corporation


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