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Commercial Property Trends Implications The Personal Finance Society Conference 13th November 2007 Dave Butler, Reit

. . Commercial Property

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Commercial Property Trends Implications The Personal Finance Society Conference 13th November 2007 Dave Butler, Reit

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    4. The UK commercial property market in 2007 whats really happened? If REITs are such a great prospect, why arent investors buying them? Why do advisers tell Datamonitor that REITs are a top 3 prospect for the future? REITs - a proxy for property? Exam relevance: CF2, J06, AF4

    6. IPD Monthly Total Return Index Sept 2007

    7. Need to look at details.

    9. We do not have good long-term data for any European property markets other than the UK. And we must remember two things: The performance of the two indices are based on different portfolios of properties with different strategies. Property performance is measured by valuers every 6-12 months, a process that tends to smooth fluctuations in value. By contrast, shares are repriced by the stockmarket every second of the trading day, which of course introduces volatility. However, we can see that the performance of property equities has followed the performance of the underlying property market, with fluctuations that can be explained by external factors, such changes in bond yields and equity market sentiment, and recently by the expected change in tax treatment.We do not have good long-term data for any European property markets other than the UK. And we must remember two things: The performance of the two indices are based on different portfolios of properties with different strategies. Property performance is measured by valuers every 6-12 months, a process that tends to smooth fluctuations in value. By contrast, shares are repriced by the stockmarket every second of the trading day, which of course introduces volatility. However, we can see that the performance of property equities has followed the performance of the underlying property market, with fluctuations that can be explained by external factors, such changes in bond yields and equity market sentiment, and recently by the expected change in tax treatment.

    10. Bullish model NAVs fall by 15% Securities prices have reached bottom, discount falls to 0 NAVs rise in spring 2008, discount stays at 0 Shares rise with NAV Bearish model NAVs fall by up to 30% Securities prices continue to fall, discount stays at 30% NAVs rise late 2008, discount swings back to positive Shares rise by 70% Consensus on Market is being driven by sentiment too few buyers Pricing is not driven by underlying economy tenant demand is strong REITs debut overshadowed by market issues Anomalies exist - opportunities for hedge funds? What about the future?

    11. Global returns The above returns are shown in local currency, i.e. ignoring currency effects. The recent strong performance indicates a significant re-rating of the sector in the last two yearsThe above returns are shown in local currency, i.e. ignoring currency effects. The recent strong performance indicates a significant re-rating of the sector in the last two years

    12. Global Property Investment Market

    13. Property Investment Structures

    14. The Global Opportunity Set

    15. Global REIT Development

    16. Some powerful drivers? Pension Fund Real Estate Allocations

    17. REITs whos investing?

    18. REITs whos investing?

    19. 2007 Pre-Budget Report The UK Real Estate Investment Trusts (REITs) regime, launched in January 2007, has been a marked success. REITs aim to promote greater efficiency in the property investment market by equalising tax treatment between indirect and direct investment in property, exempting eligible property companies from corporation tax, and instead taxing their investors at marginal rates. To date 16 companies have become UK-REITs with total market capitalisation of around 30 billion. The Government has recently reviewed the viability of residential REITs and the REITs listing requirements but has concluded that there is not at present a compelling case for change. However, the REITs regime will continue to be kept under review.

    20. UK REITs - attractive investment opportunities? UPDATEDUPDATED

    21. UK Government objectives:

    23. Importance of property investments by ranking UPDATEDUPDATED

    26. Diversification US & UK REITs

    27. Reita is an information only service and does not provide advice of any sort. Reita is not regulated by the Financial Services Authority. Investors should consult with their own professional advisers regarding their own circumstances and investment needs and the appropriateness of the products, securities or investment strategies discussed in this presentation. Nothing herein should be construed to be an endorsement by Reita of any specific company, security, product or investment strategy. Reita expressly disclaims any liability for the accuracy, timeliness or completeness of data in this presentation. All values are unaudited and subject to revision. Any investment returns or performance data (past, hypothetical, or otherwise) are not necessarily indicative of future returns or performance. Disclaimer

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