Offshore Developed Markets Property Overview and Outlook

Keillen Ndlovu

Head: Listed Property Funds

November 2016

GLOBAL LISTEDPROPERTY

DEVELOPEDMARKETS

3

Management meetings, conferences and site visitsSTANLIB Foreign Property

2012 2013 2014 2015 2016Hong Kong UK China China JapanUK Romania France Philippines PhilippinesUSA Turkey Thailand Indonesia ZambiaRomania Philippines Hong Kong Nigeria Kenya & MauritiusBrazil Indonesia Taiwan Mexico Romania & SerbiaNigeria Hong Kong UK UK SpainGhana USA USA USA UKTanzania Germany Australia Romania USA

Singapore Romania Egypt China

Mexico Slovakia UAE AustraliaHungary Singapore Germany NetherlandsSlovakia Kenya Netherlands Germany & AustriaGermany Botswana Poland SwitzerlandBrazil Mozambique Kenya Poland & CroatiaZambia Namibia Croatia Mozambique & NamibiaMauritius Morocco Namibia Slovakia

Swaziland UAE

Developed MarketsEmerging MarketsAfrica

4

Mixed relative performance versus EquitiesYear-to-date Global Listed Property Total Returns (USD)

Source: UBS, EPRA/NAREIT Index Total Returns to 04 November 2016

BrexitUS electionsRate hike?

5

Brexit Impact – UK vs. Continental Europe Share Prices

Source: UBS Nov 2016

Based to 100

UK Property

Europe Property

Brexit Referendum

6

Intu’s retail properties in the UK and Spain

Source: STANLIB Research June 2016

7

Capital & Counties: Covent Garden & Earls Court, London, UK

Source: STANLIB Research June 2016

8

STANLIB Global Property Fund Exposure Portfolio Benchmark Difference

Europe 11.1% 6.2% 4.9%

Oceania 7.0% 8.0% -0.9%

Hong Kong 2.1% 1.8% 0.4%

Singapore 2.1% 2.8% -0.7%

Middle East 0.0% 0.0% 0.0%

UK 8.0% 4.9% 3.1%

Japan 8.1% 9.0% -0.9%

Cash 2.8% 0.0% 2.8%

North America 58.7% 67.3% -8.6%Total 100.00% 100.00% 0.00%

Source: STANLIB, Bloomberg October 2016

9

STANLIB Global Property Fund Top Holdings% Portfolio Benchmark Difference Region Sector

Prologis 4.16 2.29 1.87USA Industrial

Simon Property Group 7.12 5.29 1.83USA Retail

Deutsche Wohnen 1.62 - 1.62Germany Residential

Public Storage 4.30 2.70 1.59USA Self Storage

SL Green Realty Corp 2.30 0.88 1.42USA Offices

Extra Space Storage 2.12 0.81 1.30USA Self Storage

Life Storage Inc 1.17 - 1.17USA Self Storage

Boston Properties Inc 2.81 1.70 1.11USA Offices

Japan Retail Fund 1.60 0.51 1.08Japan Retail

Vonovia Se 1.08 - 1.08Germany Residential

Source: STANLIB, Bloomberg Sept 2016

10

at almost record lowsCentral London (UK) office vacancies

Source: Derwent London plc 2016

11

Size of London office job marketRemember the size of London vs European Cities

Source: Citi October 2016

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

La Defense Offices, Paris, France (Unibail-Rodamco)

Source: STANLIB Research April 2016

13

Driven by immigration, including refugeesGerman residential continues to be a strong performer

Source: JP Morgan Estimates, Bloomberg July 2016

Rental Growth Projections €

Vonovia Deutsche Wohnen

LEG0%

1%

2%

3%

4%

5%

3.0%

4.1%

2.7%2.9%

3.8%

3.0%

2016 Rental Growth

5-year CAGR Rental Growth Forecast

German residential property companies

14

Current rents and values less than half equilibrium levelsGerman residential replacement costs very high

Source: Citi Research November 2016

0

2

4

6

8

10

12

0

500

1,000

1,500

2,000

2,500

3,000

ANN's average capital value € psm (LHS)

Average replacement cost per sqm €(RHS)

15

Sydney - Rents are growing above trendAustralian Office Property Market

Source: JLL October 2016

16

Sydney - Take-up of space continues to be strongAustralian Industrial Property Market

Source: JLL October 2016

17

USA Property Market – Vacancies are falling

Source: REIS Analytics and JP Morgan September 2016

18

USA Property Market – Rents are going up

Source: REIS Analytics and JP Morgan April 2016

19

USA Property Market – Supply is picking up, marginally

Source: REIS Analytics and JP Morgan April 2016

20

US Property Market – But new space is being absorbed

Source: REIS Analytics and JP Morgan September 2016

21

Sales Forecast – 2015 to 2018 based to 100E-Commerce showing strong growth across the world

Source: CBRE 2016

22

Food, beverage & entertainment now new anchor tenants

Source: CBRE and STANLIB Research September 2016

“Experience-driven retail, which includes fine dining, education and family entertainment – all customised to the needs and wants of the local

catchment area – will be the key to success”

Mall of Scandinavia, Stockholm, Sweden (Unibail-Rodamco)

Source: STANLIB Research April 2016

“Experiential” shopping, technology and bigger stores

24Source: Unibail-Rodamco Results Presentation, February 2016

25

Times Square, New York City, USA – Vornado Realty Trust

Source: STANLIB Research September2016

26

Westfield World Trade Centre, New York City, USA – Westfield Corp

Source: STANLIB September 2016

27

Despite some weakness in AsiaRents up across all sectors and regions globally

Source: CBRE 2016

28

Global Property Earnings track Global GDP Growth

Global EarningsPer ShareGrowth

GlobalGDP Growth

Source: UBS, MSCI, Thomson Financial Datastream, 31 August 2016

29

Listed Property still cheaper than Physical Property generallyGlobal Listed Property Price to Net Asset Value (NAV)

Source: UBS , Worldscope, Datastream 31 October 2016

CHEAP

EXPENSIVE

30

Global Property still cheap relative to BondsYield Spread between Listed Property and Bonds

Source: BNP Paribus Cadiz , STANLIB Research 30 September 2016

Spread = Global Developed Property Yields less Developed Bond Yields

Current 3.08%

Average 1.55%

CHEAP

EXPENSIVE

Apr-0

5

Apr-0

6

Apr-0

7

Apr-0

8

Apr-0

9

Apr-1

0

Apr-1

1

Apr-1

2

Apr-1

3

Apr-1

4

Apr-1

5

Apr-16

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

FTSE EPRA NAREIT Developed Index and JP Morgan Global Bond Index Spread

Spread

Spr

ead

(%)

31

Property now cheaper than sub-prime periodGlobal Property-Bond Yield Ratio

Source: BNP Paribus Cadiz , STANLIB Research 30 September 2016

Ratio = Property Yield (EPRA/NAREIT Index) divided by Bond Yields (JP Morgan Index)

Average 1.80

Current 4.46

CHEAP

EXPENSIVE

1-Mar-

05

1-Aug-0

5

1-Jan-06

1-Jun-06

1-Nov-0

6

1-Apr-0

7

1-Sep-07

1-Feb-08

1-Jul-0

8

1-Dec-

08

1-May-

09

1-Oct-

09

1-Mar-

10

1-Aug-1

0

1-Jan-11

1-Jun-11

1-Nov-1

1

1-Apr-1

2

1-Sep-12

1-Feb-13

1-Jul-1

3

1-Dec-

13

1-May-

14

1-Oct-

14

1-Mar-

15

1-Aug-1

5

1-Jan-16

1-Jun-16

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

32

Lower correlation to bonds, above average yield gap/ratios give some comfort*Global Listed Property Outlook (USD)

1 Year Bull Case Base Case Bear Case

Total Return (Income and Capital) 14.13% 8.31% 3.09%

Assumption 1: US 10 Year Bond Yield (Current 1.80%) 1.50% 2.00% 2.50%

Assumption 2: Exit Yield (Current 4.60%) 4.45% 4.70% 4.95%

Assumption 3: Earnings Growth 5.70% 5.70% 5.70%

4 Years (Lower for Longer Interest Rates) Bull Case Base Case Bear Case

Total Return (Income and Capital) 9.62% 9.00%% 8.40%Assumption 1: US 10 year Bond Yield (Current 1.80%) 2.25% 2.50% 2.75%

Assumption 2: Exit Yield (Current 4.60%) 4.83% 4.95% 5.08%

Assumption 3: Average Earnings Growth 5.90% 5.90% 5.90%

Source: STANLIB Research, UBS, S&P, Bloomberg October 2016

* NB: Hence we apply only a 50% rating change to bond yield movements in our exit yields

33

STANLIB Global Property Fund Dividend Yield

Source: STANLIB, Bloomberg Nov 2016

12/2010

03/2011

06/2011

09/2011

12/2011

03/2012

06/2012

09/2012

12/2012

03/2013

06/2013

09/2013

12/2013

03/2014

06/2014

09/2014

12/2014

03/2015

06/2015

09/2015

12/2015

03/2016

06/2016

09/2016

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

Dividend yield %

Portfolio Benchmark

34

Property prices have gone up driven by good earnings growthGlobal Listed Property in a rising interest rate cycle

Source: DataStream and UBS August 2016

Grey shading is Fed rate hikes period

Equities

Property

35

Adding Global Listed Property Helps to Improve Returnsin Global Balanced Portfolios

Source: Cadiz BNP Paribus, Bloomberg and various indices to 30 September 2016

USD

15 yrs 10 yrs 5 yrs 3 yrs 1 yr0

2

4

6

8

10

12

6.3

4.9

7.7

4.8

10.1

6.5

4.9

8.0

5.0

10.4

6.8

4.9

8.3

5.2

10.7

7.1

5.0

8.6

5.4

10.9

Annualised Returns of Portfolios with Different Weightings in Property

0% Property 5% Property 10% Property 15% Property

Investment Horizon

Ann

ualis

ed R

etur

n (%

)

36

Global Property Provides Stable & Fairly Predictable Income

Source: UBS Investors Index , S&P Developed REIT Index, Bloomberg January 2016

USD

37

Rather than being part of Financials in S&P and MSCI IndicesListed Property now a stand-alone sector

Source: Data Stream, UBS August 2016

S&P Developed BMI MSCI World All Cap

38

➜ Better than expected economic growth

➜ Lower for longer interest rates

➜ Wall of money still chasing property

➜ Big gap between property yields and bond yields

➜ Limited supply of properties in most sectors

➜ Property now a standalone sector

➜ Rising global bond yields and interest rates

➜ Lower than expected economic growth

➜ Brexit uncertainty

➜ US political uncertainty

Ups

ide

Risk

Dow

nsid

e Ri

sk

Global Listed Property Conclusion Developed Markets

THANKYOU

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