Author:
Attracting Investors to REITs
Fraser Hughes, EPRA 22 October 2014
Author:
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EPRA Strategy
Representing Gross Value >
EUR 350 Billion
Member Category No. %
Property Co/REITs 110 54
Investors 45 21
Universities 24 11
Consultants 11 5
Insurance Companies 10 5
Banks & Law Firms 7 3
Others 3 1
Total 210 100
All three areas support & promote the sector
• Investor Outreach, Indices & Research• Reporting & Regulation• Events & Networking
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Global Listed Real Estate Benefits
• FTSE EPRA/NAREIT Global Index• Diversification & liquidity• Quality assets & management• Strong Total Returns & Dividend Yield• Governance & Transparency• Research • Promotion
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FTSE EPRA/NAREIT Global Index
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FTSE EPRA/NAREIT Global Index
Minimum size
Minimum liquidity
Minimum
free-float
Minimum level of relevant real
estate income
Detailed English annual reporting
A focused, relevant and investible benchmark for global real estateTo create:
Five major criteria for inclusion:
Underpinned by 4 committees with
total of > 300 years experience!
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2
Countries
16
Countries1
Country
6
Countries
Developed Global
Emerging Global
Emerging Europe
Emerging MEA
5
Countries
5
Countries9
Countries
8
Countries
Emerging Americas
Emerging EMEA
Emerging Asia
Each index has multiple sub-indices:
9 Sectors Rental or Non-Rental
REIT or Non-REIT
Developed EMEA
Developed Asia
North America
FTSE EPRA/NAREIT Global Index
Global
Developed Europe
Developed MEA
Weight = 1.3%
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FTSE EPRA/NAREIT Global IndexGross Mkt Cap South Global Europe
South Africa Co’s Yield (FF) EUR Africa % Emerging % Equal 86 co RankGrowthpoint 6.7% 3,624 26.8% 3.2% INTU 6Redefine 7.6% 2,243 16.6% 2.0% Icade 20Hyprop 5.4% 1,529 11.3% 1.3% Cofinimmo 24Resilient 4.2% 1,369 10.1% 1.2% Wereldhave 26Capital Property 6.6% 1,275 9.4% 1.1% Merlin 27Attacq 0.0% 641 4.7% 0.6% Vastned 51Vukile 7.4% 628 4.6% 0.5% Alstria 52SA Corporate 8.0% 606 4.5% 0.5% Norway Prop 55Emira 8.0% 486 3.6% 0.4% NSI 61Acucap 7.1% 425 3.1% 0.4% PHP 64Fountainhead 6.8% 251 1.9% 0.2% Dios 77Arrowhead (B) 7.8% 218 1.6% 0.2% DIC 79Arrowhead (A) 7.9% 218 1.6% 0.2% DIC 79South Africa Total 6.3% 13,514 100% 11.82%
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FTSE EPRA/NAREIT Global Index
Index Wgt %GrossYield
Global Dev & EM 1.3% 3.7%
EMEA Dev 9.0% 3.6%
EMEA EM 45.0% 3.8%
Global EM 11.8% 3.9%
South Africa weights in the index
South African companies gross yield +6%
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FTSE EPRA/NAREIT Global Index
Underpinned by 4 committees with
total of > 200 years experience!
Index Use:• Specialist Managers • Pension Funds
• Global ETFs market• US$ 10.5bn AUM
• Futures contracts – Europe• OTC products
You need to be on
investors radar!
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Global diversification
Zones Zonal markets
Property sectors
No. of properties
Ave. price(€m)
Totalinvested
(€bn)
EMEA 10 4 25 25 25
Americas 10 4 25 25 25
Asia Pacific 10 4 25 25 25
Total Investment required: 75
Direct investment
and if real estate is 10% of the total portfolio = €750bn!
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PensionFund Country
2012AUM ($bn)
2013AUM ($bn)
GPJ Japan 1,181 1,227
APG NL 418 477
NPF Korea 359 402
CDC France 341 395
FR Thrift US 321 358
Others 27,134 29,121
Total (Source: Towers Watson 2014) 29,754 31,980
SovereignWealth Fund Country
2012AUM ($bn)
2013AUM ($bn)
GPF Norway 716 838
ADIA UAE 627 773
SAMA Saudi 568 676
CIC China 533 575
SAFE China 482 568
Others 2,396 2,892
Total (Source: SWF 2014) 5,322 6,322
Significant Global Investors
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(If) Government Pension Fund of Japan invests 5% in real estate = $60bn!
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Global Asset Exposure – €1.5 Trn
Region Companies Assets Top 10 own
Asia 78 5,100 900
Europe 86 14,300 1,500
Nth America 143 32,000 7,200
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12 South African companies own 1,500 Assets 18.5 sq.km. of Floor Space
South Africa Asset Exposure
Cape Town
Johannesburg
Sandton
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One New Change - London Paris 500,000 sqm owned at La Defense Major player in the Greater Paris project EPRA Member: Icade
The Leadenhall Building – London Paris Located in La Defense Tenants include: PWC, LCL Bank & Heineken EPRA Member: Gecina
Heart of City of London overlooking St Paul’s CathedralApprox. 20,000 sqm Retail, 35,000 sq m OfficesEPRA Member: Land Securities
Company Examples – Major Cities
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224m tall building in centre of City of London Office largest in Europe including 7 stories open plan EPRA Member: British Land
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Lowenbrau site - Zurich
Alte Post – Hamburg
Company Examples - Offices
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MainTor - Frankfurt
Oslo - Norway
Zürich West, former industrial area „Kries 5“Disused brewery dated back to 1897EPRA Member: PSP Swiss Property
Six impressive buildings in financial district Over 100,000 sqm (mix of retail and offices) EPRA Member: DIC
Addition of a new 6-floors development 9,800 sqm (mix of retail and offices) EPRA Member: alstria
Refurbishment docklands area Mixed use, office, retail and urban
space EPRA Member: Norwegian Property
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SOHO - London
Gare St Lazare – Paris
Company Examples - Retail
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Mix of retail, office & living space Mix of flagship stores and specialist retailers EPRA Member: Shaftesbury
Refurbishment of station attracting 500,000 commuters daily80 retailers & 10 restaurantsEPRA Member: Klépierre
11,500 sqm retail and leisure 16.7mn visitors per annum EPRA Member: Unibail-Rodamco
Carrousel du Louvre – Paris
Located in Euromediterranee regeneration area 190 stores & 260m long restaurant terrace EPRA Member: Hammerson
Les Terrasses du Port - Marseille
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Student Accommodation – UK Co Working & Shared Offices - UK
Healthcare – Belgium & France Industrial – UK & Europe Warehousing, logistic & datacenters 5.8million sqm worth over GBP4.5billionEPRA Member: SEGRO
43,000 Students in 130 sites in 23 UK cities New and refurbished modern & energy efficient units EPRA Member: Unite
Company Examples - Specialist
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30,000 people employed in offices Refurbished warehouses/derelict city spaces EPRA Member: Workspace
In 2005 Cofinimmo identified nursing homes Now 40% of total portfolio EPRA Member: Cofinimmo
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Sources: FTSE, EPRA, NAREITData as of: September 1, 2014
Regional Breakdowns 150 constituentsMkt Cap EUR 119 Bn.
53%
32%
16%
Developed
North America
Asia
EMEA
306 constituentsMkt Cap EUR 927 Bn.
56%26%
18%Emerging
Asia Pacific
EMEA
Americas
IndexSth Africa
Wgt %GrossYield
Global Dev & EM 1.3% 3.7%
EMEA Dev 9.0% 3.6%
EMEA EM 45.0% 3.8%
Global EM 11.8% 3.9%
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EPRA2012 Sources: FTSE, EPRA, NAREIT
Data as of: August 30, 2014
Global Property Sectors
4%30%
25%
13%
Residential10%
Health Care7%
Industrial6%
4%
Self Storage3%
2%
Diversified
Retail
Offices
Industrial/OfficesLodging &
Resorts
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20Sources: Eurostat, JP Morgan, FTSE, IPD, MSCI, Bloomberg, EPRA, NAREITData as of: September 30, 2014 Note: Based on assumptions made by EPRA
Strong Long Term Performance
Global Bonds Global Equities Global Real Estate Global Listed Real Estate
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
0.5%
3.4%2.6%
4.5%3.9%
1.3%
4.9%
4.5%
Capital Growth Yield
DIRECT
LISTED & REITs
15-year annualised total return in local currency
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Annualised Local Total Returns
Source: EPRAData as of: September 30, 2014
GlobalListed Real Estate
Global Government
Bonds
Global General Equities
3 years 18.0% 3.3% 19.1%
5 years 14.6% 3.9% 11.4%
10 years 7.6% 3.9% 7.8%
15 years 9.0% 4.4% 4.7%
20 years 8.7% 5.5% 7.7%
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Transparency - EPRA BPR 2014
Total of 84 European companies surveyed• 50% gained a ‘medal’ or award:
• 25 gold medals• 9 silver medals • 8 bronze medals
• 81% disclose at least 1 EPRA measure (91% mkt cap)• 33% disclose all 6 EPRA measures (58% mkt cap)
• South African BPRs & EPRA BPRs under EMEA umbrella?
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Transparency – BPR 2014
Alstria
Befimmo
British Land
Citycon
Cofinimmo
Corio
Derwent
FDR
Gecina
Hamborner
Hammerson
Icade
INTU
Klepierre
Land Secs
Leasinvest
Mobimo
NSI
PSP
SEGRO
Sponda
Unibail
Vastned
WDP
Wereldhave
Aedifica
Affine
Capco
Great Portland
Intervest Office
Mercialys
Picton
Shaftesbury
SPS
Atrium
Development Secs
DIC
EuroCommerical
Helical Bar
LondonMetric
STE
Workspace
Icade
NSI
Wereldhave
Aedifica
Intervest Office
Non-EPRA members are underlined
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Transparency....but 42 Co’s Below Bronze!
Deutsche Annington
Deutsche Euroshop
Deutsche Wohnen
GAGFAH
LEG
Prime Office
TAG
Balder
Castellum
Dios
Fabege
Hemfosa
Hufvudstaden
Klovern
Kungsleden
Wallenstam
Wihlborgs
Beni Stabili
IGD
ANF
Wereldhave Belgium
Big Yellow
Daejan Hldgs
F&C Commercial
F&C UK
Grainger
Hansteen
MedicX
Primary Health
Quintain
St Modwen
Safestore
Schroder REIT
Standard Life
UK Commercial
Unite
CA Immo
Convert
Colonial
Allreal
TechnopolisEurobank
Non-EPRA members are underlined
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Transparency - sBPR 2014 Results
Corio***
Hammerson***
STE*
Wereldhave***
Alstria***
Befimmo***
DIC Asset*
Sponda***
Technopolis
Wereldhave Belgium
Grainger
Great Portland**
INTU***
Klepierre***
Land Secs***
SEGRO***
Unibail***
Workspace*
British Land***
Beni Stabili
Citycon***
Cofinimmo***
Derwent London***
EuroCommercial*
FDR***
Gecina*** • 10 companies won gold BPR & sBPR
• 57% reported at least one sBPR (74% mc)
• 31% achieved an award (27% - 2013)
***Gold BPR** Silver BPR* Bronze BPR
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Transparency - GRESB
Ranking Table 2014 Points
Australia Listed 68
Australia Non-Listed 63
Europe Listed 54
Asia Listed 51
Nth America Listed 49
Europe Non-listed 47
Asia Non-listed 44
Nth America Non-listed 42
“Green Stars”Management = 64 * 0.30Implementation = 49 * 0.70
>50 required in both categories to achieve “green star” status
Global Listed scored 52 v Global non-listed scored 45
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EPRA Research
Daily, weekly, monthly & ad-hoc tailored research and data output based on the Global Index constituents
Author:0%
10%
20%
30%
40%
50%
60%
0
50
100
150
200
250
300
350
Q1 2001
Q1 2002
Q1 2003
Q1 2004
Q1 2005
Q1 2006
Q1 2007
Q1 2008
Q1 2009
Q1 2010
Q1 2011
Q1 2012
Q1 2013
Q1 2014
FTSE EPRA UK
DTZ Transactions UK
FTSE EPRA UK LTV
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UK Listed v Transactions & LTV
Sources: FTSE, EPRA, DTZAs of: June 30, 2014
Crisis+81% Values (26), LTVs Level + 35% Values (22), LTVs -15%
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0
50
100
150
200
250
Degeared FTSE EPRA UK NAVFTSE EPRA UK NAV FTSE EPRA UKIPD UK Capital Growth
FTSE EPRA UK leads IPD by +/- 2
quarters
Listed is Proxy for Direct
Sources: FTSE, EPRA, IPDData as of: Aug 31, 2014
FTSE EPRA UK par with spot NAV
Degeared FTSE EPRA UK
outperforms IPD
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Academic Research
• Leading universities in committee• Cambridge University is current chair
• Research to bolster the investment case• Average of 5 projects per annum focusing on:
• Performance• Allocations• Correlations
• Full academic reports and executive summaries published – hits a broad audience
• EPRA research compendium is home for all reports
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Correlation declines with equities and increases with direct real estate
• Correlation with stocks declines as investment horizon increases
• Potential for strategic investors:
Good diversification with allocation to listed real estate in the long run
0%10%20%30%40%50%60%70%80%
FTSE 100 / Developed Europe
1 3 6 12 24 36 48 60
0%
20%
40%
60%
80%
100%
Developed Europe / IPD property index
3 6 12 24 36 48 60
6 months 1 year 2 years 3 years 5 years 10 years0%
20%
40%
60%
80%
Correlation declines with equities and increases with direct real estate
General Equities v Listed Direct v Listed
Sources: IPD, Bloomberg, EPRAData as of: 31/12/2013
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Research – Equities or Property?
• “Are REITs real estate? • Examined whether listed real estate returns
reflect direct property or general equities in:• US, UK and Australia
• Short term linked to stock market• Mid/long term linked to direct real estate • Opportunities to ‘blend’ real estate exposure
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Research - Blended Allocations
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Events & Networking
• EPRA Annual Conference• 8 Property Tours• 21 Company pitches (South Africa in 2015?)
• EPRA Insight• London• Continental Europe
• EPRA Private Client Broker Events • London (GBP 500bn market)• Quarterly – company & investor pitches
• EPRA Asia (x2) & USA (x2) trips per year
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Summary
• Quality assets & management• Strong total performance• Attractive yields• Diversification
• regional, countries & sectors• Liquidity• Governance & transparency