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Presentation map. A brief history of securitised real estate What defines a REIT The benefits of investment through REITs Demand drivers and investment trends. A Brief History of Securitised Real Estate. Post WW2 real estate investment by life companies

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  1. Presentation map • A brief history of securitised real estate • What defines a REIT • The benefits of investment through REITs • Demand drivers and investment trends

  2. A Brief History of Securitised Real Estate • Post WW2 real estate investment by life companies • 1960’s & 70’s: Pension fund appetite for real estate emerges • 1980’s: RE recognised as a fully fledged asset class • Increased familiarity of investors • Availability of industry performance data (NCREIF) • Risk characteristics (low correlation) • 1990’s – today: RE performance as an asset class rewarded • Total (risk adjusted) returns • Low volatility • Inflation hedging potential • Portfolio diversification benefits

  3. A Brief History Continued: The REIT Phenomenon • In the 1960’s & 70’s the first Dutch (FBI), US (REIT) and Australian (LPT) securitised vehicles emerged • Many countries have since adopted a REIT-type structure: • Malaysia (1986) REIT • Canada (1993) REIT • Belgium (1995) REITs • Singapore (1999) S-REIT • Japan (2000) J-REIT • Korea (2001) K-REIT • France (2003) SIIC • Taiwan (2003) REIT • Hong Kong (2003) REIT • Bulgaria (2005) REIT • And more to come : • United Kingdom to commence from 2007 • Germany – Enabling legislation expected in 2006

  4. A proposed definition of REITs A REIT is a widely held company or trust that: • derives its income primarily from long term investment in real estate, • distributes the majority of that income annually, and • does not pay on tax the distributed income. Notes:The definition assumes that:1. REITs satisfy all applicable domestic law; and,2. the concept of "widely held" and 'long-term investment‘ is determined domestically.

  5. Five reasons for REITs • Diversification • Distributions • Liquidity • Performance • Transparency

  6. The REIT market is big … and will get bigger TradableinvestmentsUS $ 6.3 trillion 50% Americas 27% Asia-Pacific 23% Europe All Commercial Real EstateUS $ 15 trillion 39% Americas 21% Asia-Pacific 37% Europe Listed Real EstateUS $ 1.3 trillion Sources: EPRA/NAREIT, LaSalle Investment Management Estimates are as at Q4 2005

  7. Percentage of population 65+ years 2000 2010 2020 US 12.50% 13.20% 16.60% Japan 17.10% 21.50% 26.20% Germany 16.40% 19.80% 21.30% Italy 18.20% 20.80% 24.10% Britain 16.00% 17.10% 19.80% Source : OECD estimates Investor demand to remain strong • Increased allocations to real estate & strong inflows tied to long term demographic changes: • Aging of the population & demand for annuity style, low risk income streams • Increased savings – pension and superannuation funds (15%/year)

  8. Investor allocations to real estate free cash flow to be invested $$$ Australia US Europe Asia Demand & allocations are on the rise everywhere Source: Pinnacle Property Group

  9. Domestic supply is constrained in mature markets

  10. Cross border investment growing fastest Overall Inter-regional Intra-regional Domestic 0 10 20 30 40 50 60 2005 investment growth (%) Source: Jones Lang Lasalle

  11. Inter-regional capital flows of US$114bn in 2005 Source: Jones Lang Lasalle

  12. Inter-regional capital flows of US$114bn in 2005 25.1 24.2 3.2 3.8 5.3 0.9 Global Source of Funds Global Source: Jones Lang Lasalle Source: Jones Lang Lasalle

  13. Inter-regional capital flows of US$114bn in 2005 1.3 3.7 25.1 24.2 11.1 3.2 2.7 3.8 5.3 0.9 Global Source of Funds Global Asia Pacific Source: Jones Lang Lasalle

  14. Inter-regional capital flows of US$114bn in 2005 6.2 9.2 1.3 3.7 25.1 24.2 11.1 3.2 2.7 3.8 5.3 2.7 0.9 Global Source of Funds 1.4 Global Asia Pacific North America Source: Jones Lang Lasalle

  15. Inter-regional capital flows of US$114bn in 2005 6.2 0.8 6.5 9.2 1.3 0.5 5.9 3.7 25.1 24.2 11.1 3.2 2.7 3.8 5.3 2.7 0.9 Global Source of Funds 1.4 Global Asia Pacific North America Europe Source: Jones Lang Lasalle

  16. Inter-regional capital flows of US$114bn in 2005 6.2 0.8 6.5 9.2 1.3 0.5 5.9 3.7 8.4 2.4 0.0 25.1 2.9 0.3 1.5 24.2 11.1 3.2 2.7 3.8 5.3 2.7 0.9 Global Source of Funds 1.4 Global Asia Pacific North America Europe Middle East Source: Jones Lang Lasalle

  17. Discussion points • Real estate is an established and expansive asset class: • Is this appropriately reflected under tax treaty arrangements? • Investor demand for real estate will remain strong. Investors want access to international options. • What tax distortions should be eliminated? • REITs are key to meeting investor demand. • What is an appropriate withholding rate on all REIT distributions? • Should there be a different withholding tax rate for portfolio investors? REIT investors in REITs? Others?

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