Libera Rise Of

Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: LIBERALISATION1.28” AND THE First page of new section: Section Head starts here Second page of new section: Body text starts here RISE OF ASIAN INSURANCE CBRE GLOBAL RESEARCH AND INVESTMENT IN REAL ESTATECONSULTING First page of new section: Heading 02 starts here

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Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green R 105 R 0 R 191 G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) B 40 B 77 B 87 always be 1pt more than the font size 69BE28 006A4D BFD857 Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black ENTERPRISING GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, GREEN

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Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ]

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Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here

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Text boxes have NO Internal Margins (Format shape/Text Box) Contents ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, between charts and Body Text TWO LINE SPACES after Body Text and start of Heading 02 4 Introduction

5 Large asset sizes but underweight on real estate

6 Liberalisation of regulations to facilitate real estate investment ALL GRAPHS to keep to same height and width. W6.11 x H2.26” (Plot Area no more than 2” height (same as this text box), Width to page margin) 8 Investment activity expected to gradually strengthen Legend: at the bottom Chart Title: Futura Md BT Bold, 10pts, Black 10 Cross-border investment involves several challenges Chart Text: Futura Lt BT, 7pts Chart Lines: ¼ pts, 50% Black 11 Outbound investment expected to accelerate moderately

Pls use CBRE colour palette 12 Asian insurers will utilise multiple channels of investment

Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] 15 Conclusion

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Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here

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3 CBRE GLOBAL RESEARCH AND CONSULTING © CBRE Ltd. 2014 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Introduction

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The Asian insurance industry has expanded rapidly in recent years on the back of strong economic growth CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text and low market penetration. According to a report published by Swiss Re in 20141, the sector’s penetration starts here rate in Asia, viewed as insurance premiums as a percentage of GDP, stood at just 5.4% compared to 7.4% LIME CBRE ENERGISING in North America and 6.3% worldwide. The insurance premium per capita for Asia stood at US$303 in Cover Title: Last line ALWAYS anchor on this margin GREEN GREEN GREEN 2013, a figure one-thirteenth of the North American average of US$3,979 and around half the world average of US$652. Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green R 105 R 0 R 191 G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) The growth of insurance premiums in Asia is being driven by emerging markets, particularly by China. B 40 B 77 B 87 always be 1pt more than the font size 69BE28 006A4D BFD857 Insurance premiums in China increased by 65% between 2008 and 2013, a rate of growth equivalent to Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green 11% per annum. The insurance business in Asia has significant potential for future growth and is expected REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black to continue its rapid absorption of funds from existing and potential policyholders, leading to rapid growth ENTERPRISING GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, in asset sizes. GREEN

Futura Lt BT, 10pts, line spacing 13pts R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, Until recently, regulations relating to investment by insurance companies in many parts of Asia were highly G 166 G 75 B 87 B 53 Futura Lt BT, 10pts, line spacing 13pts restrictive. The strict regulatory environment has limited the capital insurers have been able to deploy into 00A657 004B35 real estate. However, the situation is gradually changing as authorities in a number of major markets have Text boxes have NO Internal Margins (Format shape/Text Box) permitted overseas investment, increased allocations to real estate and simplified the approval process. ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, between charts and Body Text This paper will provide an overview of the regulatory relaxations currently taking place; quantify the TWO LINE SPACES after Body Text and start of Heading 02 expected increase in investment; identify the challenges involved in investing overseas; and discuss the various channels via which Asian insurers can invest in the global real estate market.

Chart 1: Insurance penetration rate* and premium density** by country, 2013 ALL GRAPHS to keep to same height and width. W6.11 x H2.26” (Plot Area no more than 2” height (same as this text box), Width to page margin) 20% Taiwan Legend: at the bottom 18%

Chart Title: Futura Md BT Bold, 10pts, Black 16% Chart Text: Futura Lt BT, 7pts Chart Lines: ¼ pts, 50% Black 14% Hong Kong South Korea 12% U.K. Pls use CBRE colour palette Japan 10%

PenetrationRate(%) U.S. Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] 8% Germany Thailand World Average New Zealand Singapore 6% Australia Asia Average India Malaysia 4% China Emerging Asia 2% Indonesia Philippines Vietnam 0% 0 1,000 2,000 3,000 4,000 5,000 6,000 Premium per capita (US$)

Note: *Penetration rate is defined as total insurance premium as % of GDP ** Premium density is defined as total insurance premiums per capita Source: CBRE Research, Swiss Re sigma study 3/2014,”World insurance in 2013: steering towards recovery”, June 2014.

Body text on each page ends here 1. Swiss Re sigma study 3/2014,”World insurance in 2013: steering towards recovery”, June 2014.

© CBRE Ltd. 2014 CBRE GLOBAL RESEARCH AND CONSULTING 4 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Large asset sizes but underweight on real estate First page of new section: Heading 02 starts here

The total assets of insurance firms in Asia reached US$6.7 trillion as of the end of 20132. This figure is CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text higher than the US$5.8 trillion and US$3.0 trillion accumulated by firms in the United States and the starts here United Kingdom respectively in 2012. Within Asia, Japan is the largest market, with insurers holding LIME CBRE ENERGISING US$3.3 trillion of assets in 2013. The remainder of the regional total is held by insurers in China, South Cover Title: Last line ALWAYS anchor on this margin GREEN GREEN GREEN Korea and Taiwan. These four countries collectively control about 90% of insurance sector assets in Asia. Between 2008 and 2013, insurance assets in South Korea and Taiwan grew by over 10% per Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green R 105 R 0 R 191 year whilst China recorded growth of 20% per year. Although growth in Japan has been slower at 5.0% G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) per year, the country remains the largest insurance market in the region. B 40 B 77 B 87 always be 1pt more than the font size 69BE28 006A4D BFD857

Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green Insurance companies in Asia are generally underweight on real estate because of stringent regulations Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black limiting their ability to invest in this asset class. Most Asian insurance companies have opted to invest in ENTERPRISING GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, liquid and transparent assets such as equities, cash, fixed income and government bonds. GREEN

Futura Lt BT, 10pts, line spacing 13pts R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, Industry statistics released at the end of 2013 show that insurance firms’ real estate allocations stood at G 166 G 75 just 1.0% in China, 1.8% in Japan and 2.4% in South Korea. These proportions are far lower than their B 87 B 53 Futura Lt BT, 10pts, line spacing 13pts 00A657 004B35 counterparts in developed markets, which typically allocate between 4.0-6.0% of their assets to real Text boxes have NO Internal Margins (Format shape/Text Box) estate. Within Asia, insurance firms in Taiwan have a relatively high proportion (4.8%) of their assets ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, allocated to real estate. However, all of this capital has been invested domestically as insurers have between charts and Body Text only very recently been allowed to invest abroad. Overall, insurance companies in Asia allocate around TWO LINE SPACES after Body Text and start of Heading 02 US$130 billion or 2.0% of their assets to real estate. This figure includes direct real estate and indirect real estate investments such as investing via funds and listed property stocks.

In recent years there has been an increasing trend for insurance companies to allocate capital into alternative asset classes such as private equity, hedge funds and infrastructure amidst low bond yields ALL GRAPHS to keep to same height and width. W6.11 x H2.26” and stagnant stock market performance. Due to its long-term leases and bond like behaviour, real (Plot Area no more than 2” height (same as this text box), Width to page margin) estate makes an ideal core asset class for insurance companies looking to diversify their portfolios and Legend: at the bottom long-term holdings. Chart Title: Futura Md BT Bold, 10pts, Black Chart Text: Futura Lt BT, 7pts Chart Lines: ¼ pts, 50% Black Chart 2: Insurance companies’ assets under management and allocation to real estate

Pls use CBRE colour palette 8% 7% Source: Name, Q#, 2014. Hong Kong United States * Source: Futura Lt BT, Italic, 9pts [ ] 6%

5% Taiwan United Kingdom

3% Singapore South Korea * 2% Japan

1% Malaysia China % Real% estateallocation 0%

-1% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Insurance company AUM (US$ billion)

Note: Bubble size: Insurance company AUM; * Life insurance company only; 2013 statistics except UK, US, Hong Kong and Malaysia which are updated to 2012 Source: CBRE Research, Q2 2014, American Council of Life Insurers, 2013, Association of British Insurers, 2013, Yearbook of China’s Insurance, 2013, China Insurance Regulatory Commission, 2013, Korea Life Insurance Association, Dec 2013, Taiwan Insurance Bureau, Dec 2013, Life Insurance Association of Japan, Dec 2013, Office of the Commissioner of Insurance (Hong Kong), 2012, Securities and Future Commission – Fund Management Activities Survey 2012, Monetary Authority of Singapore, Dec 2013, Bank Negara Malaysia, 2013. 2. Statistics cover 10 jurisdictions in Asia, namely Japan, South Korea, China, Hong Kong, Taiwan, Singapore, Malaysia, Thailand, Indonesia and India

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5 CBRE GLOBAL RESEARCH AND CONSULTING © CBRE Ltd. 2014 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Liberalisation of regulations to

First page of new section: Heading 02 starts here facilitate real estate investment

CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text starts here In recent years, national insurance regulators in China, Taiwan and South Korea have begun to LIME CBRE ENERGISING Cover Title: Last line ALWAYS anchor on this margin liberalise regulations covering insurance firms’ ability to invest in real estate. Steps have included GREEN GREEN GREEN increasing insurance firms’ maximum allocation to real estate; permitting investment overseas; and streamlining various procedures and processes. Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green R 105 R 0 R 191 G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) B 40 B 77 B 87 always be 1pt more than the font size 69BE28 006A4D BFD857 Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green Japan Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green In Japan there is no regulatory limit on real estate investment by insurance companies. However, many REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black firms incurred significant losses when doing so during the 1980’s, an experience which has dissuaded ENTERPRISING GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, them from re-entering the market. GREEN

Futura Lt BT, 10pts, line spacing 13pts R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, G 166 G 75 Futura Lt BT, 10pts, line spacing 13pts B 87 B 53 China 00A657 004B35 Domestic insurance companies in China were first permitted to invest in domestic real estate and Text boxes have NO Internal Margins (Format shape/Text Box) infrastructure in October 2009. However, detailed regulations were not promulgated until 2010. Since ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, then, several additional measures have been implemented. These include: between charts and Body Text TWO LINE SPACES after Body Text and start of Heading 02 • Permitting overseas investment in completed commercial properties in 45 countries worldwide, beginning in October 2012. • Removing approval requirements by the National Development and Reform Commission (NDRC) in December 2013 for overseas investments below US$1.0 billion by Chinese companies. However, insurance companies still need to obtain approval from the China Insurance Regulatory Commission ALL GRAPHS to keep to same height and width. W6.11 x H2.26” (CIRC) and the State Administration of Foreign Exchange (SAFE) when investing abroad. The (Plot Area no more than 2” height (same as this text box), Width to page margin) average approval period is around two months. Legend: at the bottom • Increasing insurance firms’ maximum allocation to real estate from 20% to 30% of total asset value, Chart Title: Futura Md BT Bold, 10pts, Black both domestic and foreign, in February 2014. Chart Text: Futura Lt BT, 7pts • Scrapping the approvals process for overseas borrowing using domestic guarantees (内保外贷) from Chart Lines: ¼ pts, 50% Black SAFE in June 2014 for Chinese companies, including insurance firms, when securing cross-border guarantees by onshore entities. Instead, they only need register with SAFE. Pls use CBRE colour palette

Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] South Korea In October 2013 the Financial Services Commission (FSC) of South Korea proposed the abolition of the approval process for foreign real estate investment by insurance companies. Under the proposals, Korean insurers would only be required to register their foreign property purchases. Authorities are aware of the need for South Korean insurers to achieve greater diversification of their portfolios by geography and by asset type. Additional regulatory relaxations are still under discussion.

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© CBRE Ltd. 2014 CBRE GLOBAL RESEARCH AND CONSULTING 6 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Taiwan Taiwanese insurance companies have been the dominant buyers of commercial properties onshore for some time, owning approximately one third of all Grade A office assets in Taipei. Their buying power has driven down prime office yields in Taipei from 3.5% in 2009 to just 2.2% in 2013. This has led to concerns First page of new section: Heading 02 starts here over high pricing and prompted regulators to implement the following changes:

CBRE COLOUR PALETTE • Raising the minimum yield requirement on onshore commercial property acquisitions from 2.125% to First page of new section: Heading 03 and Body text 2.875% in November 2012; requiring a holding period of at least five years. starts here • Allowing overseas property investment beginning in May 2013, albeit with stringent requirements. LIME CBRE ENERGISING Cover Title: Last line ALWAYS anchor on this margin • Permitting only insurance companies with a risk based capital ratio of 200% or above to invest in GREEN GREEN GREEN overseas real estate assets. The total consideration should not exceed 10% of shareholders’ equity. This implies that small insurance companies will be unable to invest abroad as the permitted size of overseas Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green R 105 R 0 R 191 investment per insurer is generally below NT$2 billion (US$67 million). G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) • Insurance companies are still not permitted to borrow from external lenders when purchasing real estate B 40 B 77 B 87 always be 1pt more than the font size assets overseas. However, rule amendments released in April 2014 enable insurance companies to buy 69BE28 006A4D BFD857 Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green overseas real estate assets through investment trusts or “Special Purpose Companies” (SPCs) which Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green could use funds borrowed from their parent companies under a shareholder loan structure. These REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black ENTERPRISING changes will enable insurance firms to be more flexible when structuring deals and related financing GREEN GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, issues. Futura Lt BT, 10pts, line spacing 13pts R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, G 166 G 75 Futura Lt BT, 10pts, line spacing 13pts B 87 B 53 Chart 3: Timeline of liberalisation of Asian insurance investment in real estate 00A657 004B35

Text boxes have NO Internal Margins (Format shape/Text Box) • Allowed to invest ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, maximum of 15% of • Raised maximum between charts and Body Text total assets in real allocation to real estate TWO LINE SPACES after Body Text and start of Heading 02 estate • Raised from 20% to 30% • China first • Allowed overseas maximum • Scrapped approval allows investment in allocation to process for overseas real estate stabilised properties real estate from borrowing using investment in 45 global countries 15% to 20% domestic guarantees

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Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] • Taiwan raised • Permitted insurers • South Korea held • Permitted SPCs to minimum with financial consultations on use funds borrowed annualised yield capacity to scrapping the from their parent on onshore acquire core two-month company for acquisitions from overseas assets approval process overseas 2.125% to 2.875% • Allowed to to acquire acquisitions • Must hold acquire through properties properties for at SPCs abroad least five years

Source: CBRE Research, China Insurance Regulatory Commission, Taiwanese Insurance Bureau, Financial Services Commission of Korea, Q2 2014.

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7 CBRE GLOBAL RESEARCH AND CONSULTING © CBRE Ltd. 2014 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Investment activity expected to

First page of new section: Heading 02 starts here gradually strengthen

The liberalisation of regulations relating to investment by insurance companies combined with CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text insurance firms’ increased appetite to increase their allocation to real estate is expected to result in starts here stronger investment activity in the coming years. LIME CBRE ENERGISING GREEN Cover Title: Last line ALWAYS anchor on this margin Asian insurance companies deployed around US$4.0 billion to the Asia Pacific direct commercial real GREEN GREEN estate investment market in 2013, an amount double that in 2008. Within Asia, China has seen the Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green biggest increase, with investment volume in Asia Pacific rising from US$468 million in 2012 to US$1.9 R 105 R 0 R 191 G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) billion in 2013. B 40 B 77 B 87 always be 1pt more than the font size 69BE28 006A4D BFD857 Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green Chart 4: Total direct real estate acquisitions in Asia Pacific by Asian insurance companies Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green REFRESHING ENTERPRISING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black $6 GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, GREEN $5 Futura Lt BT, 10pts, line spacing 13pts R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, G 166 G 75 B 87 B 53 $4 Futura Lt BT, 10pts, line spacing 13pts 00A657 004B35

billion Text boxes have NO Internal Margins (Format shape/Text Box) $3 ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, US$ between charts and Body Text $2 TWO LINE SPACES after Body Text and start of Heading 02 $1

$0 2006 2007 2008 2009 2010 2011 2012 2013

Note: US$10 million and above, office, retail, industrial, hotel and mixed use properties only ALL GRAPHS to keep to same height and width. W6.11 x H2.26” Source: CBRE Research, Q4 2013. (Plot Area no more than 2” height (same as this text box), Width to page margin) Legend: at the bottom Chart Title: Futura Md BT Bold, 10pts, Black Chart Text: Futura Lt BT, 7pts Insurance firms are beginning to look outside Asia Chart Lines: ¼ pts, 50% Black Strong demand for core assets combined with the lack of investment grade core and core plus Pls use CBRE colour palette properties in Asia has compressed prime office yields to historical lows and pushed up capital values to record highs. This is making it difficult for insurance firms to justify acquisitions at current prices. Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] Coupled with the recent rule relaxations, this environment is encouraging Asian insurance companies to explore opportunities in other regions. In 2013, there were around US$2.4 billion worth of direct real estate purchases by Asian insurance companies outside Asia Pacific. Firms have demonstrated a strong preference for trophy assets in gateway cities, particularly when making their first overseas purchase.

Cross-regional investment activity by Asian investors during 2013 focused predominantly on London, New York and Sydney. South Korean insurers have been particularly active and have co-invested or acquired several core office assets in London and Chicago. Chinese insurers have been purchasing core office assets in London and are reportedly considering buying properties in Australia. Taiwanese insurers are particularly interested in office properties in Shanghai due to its geographical proximity to Taiwan; London because of its liquidity, transparency and maturity as a market and the availability of assets; and Tokyo for its maturity as a market and also as part of a strategy to foster closer ties with Japan. In comparison to firms from China and Taiwan, South Korean insurers are more flexible when it comes to formulating investment strategy and investing in non-gateway cities.

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© CBRE Ltd. 2014 CBRE GLOBAL RESEARCH AND CONSULTING 8 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Insurers have demonstrated a strong appetite for big ticket deals ranging in size from US$300 to US$600 million. Ping An Insurance was the first Chinese insurance company to invest in overseas real estate, acquiring the Lloyd's building in London for £260m (US$421 million) in July 2013. Hyundai Marine and Fire Insurance co-invested with the Korean Federation of Community Credit Cooperatives (a Korean pension fund) to purchase Marks & Spencer’s London headquarters at Paddington First page of new section: Heading 02 starts here Waterside for US$327 million in late-2013. CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text Since 2013, Asian insurers which have completed their first purchase overseas have begun to look starts here beyond their preferred gateway markets to the likes of Chicago, Washington DC, Paris and Frankfurt in search of higher yields. LIME CBRE ENERGISING Cover Title: Last line ALWAYS anchor on this margin GREEN GREEN GREEN For example, Hyundai Insurance, Kyobo Life Insurance and a few South Korean institutional investors jointly acquired Galileo Tower in Frankfurt for US$340 million in June 2013. Elsewhere, Korea Post Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green R 105 R 0 R 191 Insurance and Hyundai Marine & Fire Insurance invested indirectly to purchase the Accenture building G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) (161 N Clarke Street) in Chicago for US$331 million in late-2013. Mirae Asset bought the West B 40 B 77 B 87 always be 1pt more than the font size 69BE28 006A4D BFD857 Bridge Building in Washington D.C. for US$156 million in early 2014 on behalf of a group of South Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green Korean institutional investors including Hyundai Insurance. Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black ENTERPRISING GREEN GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, Chart 5: Asian investors’ top 10 cross-border destinations in 2013 Futura Lt BT, 10pts, line spacing 13pts R 0 R 0 US$ billion G 166 G 75 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, 0 5 10 15 B 87 B 53 Futura Lt BT, 10pts, line spacing 13pts 00A657 004B35 London Text boxes have NO Internal Margins (Format shape/Text Box) New York ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, Sydney between charts and Body Text Singapore TWO LINE SPACES after Body Text and start of Heading 02 Shanghai Melbourne Guangzhou Beijing Hong Kong ALL GRAPHS to keep to same height and width. W6.11 x H2.26” Paris

(Plot Area no more than 2” height (same as this text box), Width to page margin) Note: US$10 million and above, office, retail, industrial and mixed use properties only Legend: at the bottom Source: Real Capital Analytics, CBRE Research, Q4 2013. Chart Title: Futura Md BT Bold, 10pts, Black Chart Text: Futura Lt BT, 7pts Chart Lines: ¼ pts, 50% Black Table 1: Global office investment themes in 2014

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Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] Income Return Strategy Capital Appreciation Strategy

• Prime assets in gateway cities that have already experienced rapid yield • Take on leasing risk in late recovery cities to adjustment are of low priority capture future rental growth Prime • Prime assets in regional cities benefitting • Build-to-core in under-supplied markets from a recovery in occupier demand • Favourites: Non-gateway cities in North America • Favourites: Australia, the UK and Nordic (e.g. Phoenix, Dallas) and Continental Europe Europe, US

• Secondary assets in gateway cities • Target peripheral European markets that suffered • Take advantage of the pricing gap the most from the Eurozone debt crisis as liquidity is between prime and secondary assets in Secondary improving and supply is limited major gateway cities • Take advantage of price dislocation • Favourites: UK (London), US (New York) • Favourites: Peripheral Eurozone and Australia

Source: CBRE Research, Q2 2014.

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9 CBRE GLOBAL RESEARCH AND CONSULTING © CBRE Ltd. 2014 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Cross-border investment

First page of new section: Heading 02 starts here involves several challenges

To date, only the leading Asian insurance companies have successfully completed real estate purchases CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text overseas. Many groups, particularly mid-tier firms, have found it difficult to enter the offshore market. starts here Indeed, there are a number of challenges facing Asian insurers looking to engage in cross-border real estate investment. These include: LIME CBRE ENERGISING Cover Title: Last line ALWAYS anchor on this margin GREEN GREEN GREEN The lack of overseas experience, knowledge and execution capability Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green Asian insurers are dominant and experienced real estate investors in their domestic markets but lack R 105 R 0 R 191 G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) nous in investing overseas. Most Asian insurers do not have professional real estate staff overseas and B 40 B 77 B 87 always be 1pt more than the font size lack expertise at the decision making level. However, this challenge can be overcome by utilising the 69BE28 006A4D BFD857 Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green knowledge and experience of asset consultants, investment managers and real estate service providers. Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black ENTERPRISING Tax considerations GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, GREEN Tax is an important but complicated issue, particularly as far as cross-border real estate investment is Futura Lt BT, 10pts, line spacing 13pts concerned. Many countries place additional tax burdens on foreign investors. However, structuring R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, G 166 G 75 deals in a more tax efficient way tends to make them more complex, lengthy and costly, thereby B 87 B 53 Futura Lt BT, 10pts, line spacing 13pts 00A657 004B35 reducing their competiveness in the market and limiting their after-tax performance compared to deals Text boxes have NO Internal Margins (Format shape/Text Box) completed in domestic market. ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, between charts and Body Text Concerns over the outflow of capital TWO LINE SPACES after Body Text and start of Heading 02 This issue is a concern most relevant to Taiwan given domestic insurers’ dominance of the local market. Although the Taiwan Insurance Bureau holds a positive attitude towards overseas real estate investment by domestic insurers, it remains concerned over the potential outflow of capital, should domestic insurers begin investing in the global real estate market. As a result, the regulator has put in place a number of measures including a lengthy approval process and risk based capital ratio criteria. ALL GRAPHS to keep to same height and width. W6.11 x H2.26” (Plot Area no more than 2” height (same as this text box), Width to page margin) Competition from other investors Legend: at the bottom In recent quarters a number of major western markets have experienced a revival in purchasing activity Chart Title: Futura Md BT Bold, 10pts, Black by domestic investors. Local groups possess many advantages when buying in their own market. Asian Chart Text: Futura Lt BT, 7pts insurers looking to invest in real estate abroad are therefore having to deal with increased competition, Chart Lines: ¼ pts, 50% Black particularly in gateway cities.

Pls use CBRE colour palette Several regulations and approvals remain in place Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] Whilst regulations and approvals processes have been relaxed, key markets have set a ceiling on real estate investments. This could exclude smaller players from investing in the real estate sector. To get around this obstacle, a number of medium-sized insurance firms are reportedly considering partnering with other insurance companies to co-invest in foreign countries.

All overseas investments remain subject to regulatory approval which will lengthen the process of overseas acquisitions. In China, the approval process involves multiple regulatory bodies such as SAFE and the CIRC. In Taiwan, insurers are opting to obtain pre-approval on potential investments from the Financial Supervisory Commission (FSC) so they do not need to wait until they confirm a purchase.

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© CBRE Ltd. 2014 CBRE GLOBAL RESEARCH AND CONSULTING 10 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Outbound investment is

First page of new section: Heading 02 starts here expected to accelerate

CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text moderately starts here Due to the many challenges facing Asian insurers looking to engage in cross-border real estate LIME CBRE ENERGISING investment, CBRE Research believes there will not be a significant short-term increase in Asian insurers’ Cover Title: Last line ALWAYS anchor on this margin GREEN GREEN GREEN allocation to real estate from the current overall level of 2.0%.

Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green R 105 R 0 R 191 In the longer-term, however, the allocation will need to rise, given the rapid growth in the asset size of G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) the Asian insurance sector. CBRE Research projects that the total real estate asset size of Asian insurers B 40 B 77 B 87 always be 1pt more than the font size 69BE28 006A4D BFD857 will grow from US$130 billion in 2013 to US$205 billion in 2018, which would translate into Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green additional inflows of around US$75 billion into real estate, including direct and indirect real estate Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black investment. ENTERPRISING GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, GREEN Asian insurers could invest up to US$45 billion in their domestic markets and US$30 billion in overseas Futura Lt BT, 10pts, line spacing 13pts R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, markets during this period, based on historical investment patterns. Chinese and Taiwanese insurance G 166 G 75 companies are likely to be the most active in overseas real estate markets in the coming years, given B 87 B 53 Futura Lt BT, 10pts, line spacing 13pts 00A657 004B35 the shortage of opportunities and low yields for prime core assets in their domestic markets. Text boxes have NO Internal Margins (Format shape/Text Box) ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, Japanese insurance firms have been relatively cautious in investing in overseas real estate, primarily between charts and Body Text because of the significant losses they incurred when investing aggressively overseas in the late-1980s. TWO LINE SPACES after Body Text and start of Heading 02 However, several major Japanese insurers are reported to have budgeted for investing in real estate both domestically and overseas in 2014.

South Korean insurance companies have been active in investing in overseas real estate over the past couple of years and now have a solid base of experience. These firms are expected to utilise more ALL GRAPHS to keep to same height and width. W6.11 x H2.26” indirect channels to expand their global portfolios in the years ahead. (Plot Area no more than 2” height (same as this text box), Width to page margin)

Legend: at the bottom

Chart Title: Futura Md BT Bold, 10pts, Black

Chart Text: Futura Lt BT, 7pts Chart 7: Estimated size of Asian insurance companies’ real estate assets Chart Lines: ¼ pts, 50% Black

Pls use CBRE colour palette US$130 billion US$205 billion Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] 200

150

100 US$billion Others Taiwan 50 South Korea Japan China Body text on each page ends here 0

Source: CBRE Research, Q2 2014.

11 CBRE GLOBAL RESEARCH AND CONSULTING © CBRE Ltd. 2014 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Asian insurers will utilise

First page of new section: Heading 02 starts here multiple channels of

CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text investment starts here To overcome their lack of in-house management capacity and experience, many Asian insurers are LIME CBRE ENERGISING Cover Title: Last line ALWAYS anchor on this margin looking to engage in separate account and club deals to secure direct access to offshore markets. They GREEN GREEN GREEN are also considering other indirect investment options such as investing via private equity real estate funds, listed real estate securities such as REITs, and a fund of funds. Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green R 105 R 0 R 191 G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) B 40 B 77 B 87 always be 1pt more than the font size CBRE Research expects that around US$40 billion will be channelled to the direct real estate investment 69BE28 006A4D BFD857 Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green market between now and 2018. Around US$35 billion will enter the indirect real estate investment Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green market during the same period. REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black ENTERPRISING GREEN GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, The choice of direct or indirect investment depends on the level of in-house property investment and Futura Lt BT, 10pts, line spacing 13pts expertise of external investment manager. Insurers in different markets also have their own specific R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, preferences. Major Chinese and Taiwanese insurers prefer direct investment and full ownership of an G 166 G 75 Futura Lt BT, 10pts, line spacing 13pts B 87 B 53 asset. They overcome their lack of in-house overseas real estate experience by engaging professional 00A657 004B35 managers to invest using a separate account. This ensures that their investment adheres to a pre- Text boxes have NO Internal Margins (Format shape/Text Box) specified investment strategy according to risk and return, property type and geographic requirements. ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, between charts and Body Text TWO LINE SPACES after Body Text and start of Heading 02 Chart 8: Alternative options for real estate investment Key Considerations Relevance to Asian insurance companies

• Internal fund management ALL GRAPHS to keep to same height and width. W6.11 x H2.26” In-house platform • Major players in China,

(Plot Area no more than 2” height (same as this text box), Width to page margin) management • Attracting experienced staff Taiwan, Japan (onshore) • Size of the investment Legend: at the bottom Chart Title: Futura Md BT Bold, 10pts, Black • Dependence on the expertise of specific Chart Text: Futura Lt BT, 7pts Separate • Major players in China and managers account Taiwan (offshore) Chart Lines: ¼ pts, 50% Black • Tailor-made strategy • Committed equity Pls use CBRE colour palette • South Korea: jointly with other • Alignment of interests South Korean institutions Club deal Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] • Timing of execution • China/Taiwan: more second- tier players to consider

• Alignment of investment • Japan: Investing offshore via style and objectives real estate and debt funds; • Can be equity or debt investing onshore via private Real estate fund investment REITs • Normally a blind pool and • South Korea: investing in funds passive investment by South Korean AMCs

• Market volatility • Subject to regulations on stock • Maturity of Asian REIT investment Real estate market • Asian REIT market size is too securities • Affected by stock market small, with the exception of performance Japan

• Double fees • Not seeing much investment via • Conflicts within FoF fund of funds Fund of funds managers • However, South Korean insurers • Normally a blind pool and are looking into this option Body text on each page ends here passive investment

Source: CBRE Research, Q2 2014.

© CBRE Ltd. 2014 CBRE GLOBAL RESEARCH AND CONSULTING 12 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Insurers looking at smaller sized deals are considering co-investment or club deals whereby they partner with two to four other like-minded investors with similar objectives. These types of deals enable participants to leverage the expertise and relationships of managers that already have an overseas presence and can result in savings on the transaction and management costs. First page of new section: Heading 02 starts here South Korean insurers have been regular participants in co-investment and club deals. They often team up with South Korean pension funds to invest via South Korean asset management companies (AMCs) CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text but have also invested with other Asian institutions. Examples include Hanwha Life Insurance’s co- starts here investment with China SAFE and AXA Real Estate to acquire Ropemaker Place in London for £472 LIME CBRE ENERGISING Cover Title: Last line ALWAYS anchor on this margin million (US$716 million) in Q1 2013. GREEN GREEN GREEN

Very few Chinese and Taiwanese insurers have adopted a similar approach in overseas markets. Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green R 105 R 0 R 191 However, this would be a viable strategy for them as many firms remain subject to tight restrictions on G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) B 40 B 77 B 87 always be 1pt more than the font size the volume of capital they are permitted to deploy overseas. Taiwanese insurers are only allowed to 69BE28 006A4D BFD857 Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green invest up to 10% of shareholders’ equity in overseas real estate markets, a restriction that limits the size Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green of deals in which they can participate. Smaller insurance companies would therefore be able to improve REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black their chances of acquiring a major asset by partnering with firms of a similar size. ENTERPRISING GREEN GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, Futura Lt BT, 10pts, line spacing 13pts R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, G 166 G 75 Case study Futura Lt BT, 10pts, line spacing 13pts B 87 B 53 Direct investment by Ping An Insurance 00A657 004B35

Text boxes have NO Internal Margins (Format shape/Text Box) Ping An Insurance was the first Chinese insurance ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, company to purchase a real estate asset overseas with its between charts and Body Text July 2013 acquisition of the iconic Lloyd's building in TWO LINE SPACES after Body Text and start of Heading 02 London for £260 million (US$421 million) at a yield of above 6.0%. The property was constructed in 1986 and is occupied by insurer Lloyd’s on a lease which expires in 2031.

ALL GRAPHS to keep to same height and width. W6.11 x H2.26” Ping An acquired the building via an Asian investment (Plot Area no more than 2” height (same as this text box), Width to page margin) manager in order to leverage on the manager’s overseas Legend: at the bottom market knowledge and experience. Chart Title: Futura Md BT Bold, 10pts, Black Chart Text: Futura Lt BT, 7pts Transaction Details Chart Lines: ¼ pts, 50% Black Property: Lloyd’s building Location: City of London, United Kingdom Pls use CBRE colour palette Type of Asset: Grade A office Buyer: Ping An Insurance Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] Seller: CLI Group Price: £260 million (US$421 million)

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© CBRE Ltd. 2014 CBRE GLOBAL RESEARCH AND CONSULTING 13 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Insurers wishing to acquire a portfolio of assets overseas can engage in indirect investment in real estate funds, a fund of funds or listed real estate equities such as REITs. Investing in real estate funds allows buyers to gain access to new markets and purchase assets in different sectors and geographies.

First page of new section: Heading 02 starts here Japanese insurance firms are increasingly investing in private REITs, which are essentially open-ended real estate funds backed by onshore commercial properties. Japanese insurers are also gaining exposure overseas by committing to real estate funds and debt funds in the United States and CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text Eurozone. Elsewhere, South Korean insurers and pension funds have been investing in funds by South starts here Korean AMCs. In March 2014, Schroder Property Investment Management announced that two large LIME CBRE ENERGISING Asian insurance companies would invest £40 million into the Schroder UK Property Fund. Cover Title: Last line ALWAYS anchor on this margin GREEN GREEN GREEN

Investing in real estate securities provides higher liquidity compared to direct property holdings. Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green R 105 R 0 R 191 However, with the exception of Japan and Singapore, REIT markets in Asia are underdeveloped, G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) meaning that investing in domestic real estate securities is not such an attractive option for insurers. B 40 B 77 B 87 always be 1pt more than the font size 69BE28 006A4D BFD857 Even in Japan, insurers companies are looking to ensure that their portfolios are stable and are Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green therefore sometimes reluctant to invest in listed J-REITs due to potential volatility in prices. Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black ENTERPRISING GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, Investing in a real estate fund of funds has increased dramatically in the United States and Eurozone in GREEN recent years. This trend is being driven by the increased number and complexity of real estate funds Futura Lt BT, 10pts, line spacing 13pts R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, available to investors, with investors seeking to draw on the expertise of fund of fund managers when G 166 G 75 making their investment decisions. The main challenge in pursuing this strategy relates to the charging B 87 B 53 Futura Lt BT, 10pts, line spacing 13pts 00A657 004B35 of double fees as well as the potential conflict of interest. To date, there has been very little investment Text boxes have NO Internal Margins (Format shape/Text Box) by Asian insurance companies via a fund of funds but several South Korean insurers are reportedly ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, beginning to consider this option. between charts and Body Text TWO LINE SPACES after Body Text and start of Heading 02

Case study: Co-investment by a South Korean consortium

ALL GRAPHS to keep to same height and width. W6.11 x H2.26” In Q2 2013 Samsung SRA Asset Management, an (Plot Area no more than 2” height (same as this text box), Width to page margin) asset management arm of Samsung Life insurance, Legend: at the bottom acquired 30 Crown Place in London for £142 million Chart Title: Futura Md BT Bold, 10pts, Black (US$215 million) at a net initial yield of 4.7% on Chart Text: Futura Lt BT, 7pts behalf of five South Korean institutional investors. Chart Lines: ¼ pts, 50% Black This deal structure enabled investors to diversify and Pls use CBRE colour palette reduce transaction and management costs. Smaller domestic institutional investors can adopt this Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] approach when participating in the overseas real estate investment market.

Transaction Details Property: 30 Crown Place Location: City of London, United Kingdom Type of asset: Grade A office Buyer: Five South Korean institutional investors Seller: Hannover Leasing GmbH & Co. KG. Price: £142 million (US$215 million)

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14 CBRE GLOBAL RESEARCH AND CONSULTING © CBRE Ltd. 2014 Be aware of Left and right hand page layout Crop Marks in the slide master. If need professional printing… copy and paste to left & right hand page PAGE MARGINS Liberalisation and the Rise of Asian Insurance Investment in Real Estate Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Bottom: 1.28” First page of new section: Section Head starts here Second page of new section: Body text starts here Conclusion

The liberalisation of regulations relating to overseas investment; higher allocations to real estate and the simplified approval process will result in a gradual increase in international real estate investment by First page of new section: Heading 02 starts here Asian insurers. At the same time, the rapid growth of the insurance industry in Asia will lead to the expansion of insurers’ investment portfolios, and thus greater pressure to deploy capital into the real CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text estate sector. starts here CBRE China, Taiwan and South Korea have already liberalised regulations permitting insurers to invest in LIME ENERGISING Cover Title: Last line ALWAYS anchor on this margin GREEN GREEN GREEN overseas real estate. Several insurers from these markets have already completed significant acquisitions of commercial property abroad. In Japan – the largest insurance market in the region – Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green insurers have turned more active onshore but remain quiet overseas. R 105 R 0 R 191 G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) B 40 B 77 B 87 always be 1pt more than the font size However, regulations remain stringent overall and continue to limit investment allocations to real 69BE28 006A4D BFD857 Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green estate. This, combined with Asian insurers’ lack of overseas real estate investment experience, means Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green that only larger and well capitalised insurance companies will be able to acquire trophy assets in REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black ENTERPRISING gateway cities. It will take more time for smaller and medium sized insurance firms to successfully GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, GREEN engage in cross-border acquisitions. Therefore, the improved regulatory environment and increased Futura Lt BT, 10pts, line spacing 13pts R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, appetite for investment will not result in an immediate or significant flow of Asian insurance money into G 166 G 75 the international real estate market. B 87 B 53 Futura Lt BT, 10pts, line spacing 13pts 00A657 004B35

Text boxes have NO Internal Margins (Format shape/Text Box) CBRE Research expects the increase in Asian insurers’ capital deployment to real estate to grow in ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, proportion with the total asset size of the sector, which expanded at a rate of around 13% per annum between charts and Body Text between 2008 and 2013. The total real estate asset size of the Asian insurance sector is projected to TWO LINE SPACES after Body Text and start of Heading 02 reach US$205 billion by 2018, an increase of US$75 billion over the next five years. The majority of capital will be deployed into direct real estate investment.

Chinese insurers are expected to be particularly active overseas given their sheer size whilst Taiwanese insurers are displaying the strongest desire to go abroad as it is difficult for them to pass the yield ALL GRAPHS to keep to same height and width. W6.11 x H2.26” hurdle set in their home market. Japanese insurers have significant buying power but appear to be (Plot Area no more than 2” height (same as this text box), Width to page margin) focusing on their domestic market and investing overseas via a fund structure. Legend: at the bottom Chart Title: Futura Md BT Bold, 10pts, Black In Asia, the current low yield levels and shortage of investable stock – particularly the lack of stable core Chart Text: Futura Lt BT, 7pts assets in domestic markets – is prompting Asian insurance companies to seek opportunities in overseas Chart Lines: ¼ pts, 50% Black gateway markets. The search for better returns has prompted more experienced Asian investors to Pls use CBRE colour palette increase their appetite for risk. This is resulting in greater enthusiasm for good secondary assets and non-gateway cities, a trend which is being observed globally. South Korean insurers are among the Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] most experienced in investing in overseas real estate markets and are expected to expand into non- gateway markets and explore other indirect investment channels.

Investing in assets in non-gateway cities will require a higher level of investment expertise. Asian insurers looking to do so are therefore advised to consider other investment options such as separate accounts, club deals, private equity funds, real estate securities or a fund of funds. All of these strategies can provide alternative channels for Asian insurers to access overseas real estate markets. These options are particularly relevant for small and medium sized firms.

CBRE expects that existing regulations relating to overseas real estate investment by insurance firms will be relaxed further in the coming years as regulatory bodies gain more confidence about overseeing such activity and insurance firms gain experience and know-how in investing globally.

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If need professional printing… copy Futura Md BT, 12pts, and paste to left & right hand page PAGE MARGINS Energising Green Left: 1.2” slide masters. Trimmed size is A4 Right: 1.2” Top: 1.1” Name: Futura HV BT, Bottom: 1.28” 14pts, line spacing- First page of new section: Section Head starts here For more information about advisory on capital markets and investments, please contact: single, White Second page of new section: Body text starts here Title, address, contacts: Greg Penn Marc Giuffrida Nick Crockett Futura, BK Bt, 14pts, Managing Director Executive Director Executive Director line spacing- single, Capital Markets, Asia International Capital Markets Capital Advisors, Asia Pacific White +852 2820 2857 +65 9770 7322 +65 6229 1136 First page of new section: Heading 02 starts here [email protected] [email protected] [email protected]

CBRE COLOUR PALETTE First page of new section: Heading 03 and Body text For more information about this regional SPECIAL report, please contact: starts here Ada Choi, CFA Frank Chen, CFA Hiroshi Okubo LIME CBRE ENERGISING Cover Title: Last line ALWAYS anchor on this margin Senior Director, Asia Pacific Head of Research China Head of Research, Japan GREEN GREEN GREEN +852 2820 2871 +86 21 2401 1369 +81 03 5288 9499 [email protected] Heading 01: Futura Md BT Bold, 30pts, line spacing 31pts, CBRE Green [email protected] [email protected] R 105 R 0 R 191 G 190 G 106 G 216 (You can make this smaller if heading is too long, but line spacing should) Justin Kim Ping Lee B 40 B 77 B 87 always be 1pt more than the font size Leo Chung, CFA 69BE28 006A4D BFD857 Director, South Korea Senior Manager, Taiwan Heading 02: Futura Md BT Bold, 16pts, line spacing 18pts, Lime Green Senior Analyst, Asia Pacific +822 2170 5855 +886 2 7706 9552 Heading 02: Futura Md BT Bold, 13pts, line spacing 15pts, Refreshing Green +852 2820 1527 [email protected] [email protected] [email protected] REFRESHING Body Text: Futura Lt BT, 10pts, line spacing 13pts, Black ENTERPRISING GREEN Body Text, Level 2: Bullets- Black, Indentation- Before text- 0.1”, Hanging- 0.1”, GREEN Lawrence Chou Futura Lt BT, 10pts, line spacing 13pts Analyst, Asia Pacific R 0 R 0 Body Text, Level 3: Dash- Black, Indentation- Before text- 0.2”, Hanging- 0.1”, +852 2820 1486 G 166 G 75 B 87 B 53 Futura Lt BT, 10pts, line spacing 13pts [email protected] 00A657 004B35

Text boxes have NO Internal Margins (Format shape/Text Box) For more information regarding Global Research and Consulting activity, please contact: ONE LINE SPACE between paragraphs, Heading 02 and start of Body Text, between charts and Body Text TWO LINE SPACES after Body Text and start of Heading 02 Nick Axford, Ph.D. Richard Barkham Global Head of Research Global Chief Economist +852 2820 8198 +44 20 7182 2000 [email protected] [email protected] Follow Nick on Twitter: @NickAxford1

ALL GRAPHS to keep to same height and width. W6.11 x H2.26” (Plot Area no more than 2” height (same as this text box), Width to page margin) Neil Blake, Ph.D. Henry Chin, Ph.D Raymond Wong Legend: at the bottom Head of Research, UK and EMEA Head of Research, Asia Pacific Managing Director, Americas Research Chart Title: Futura Md BT Bold, 10pts, Black +44 20 7182 2133 +852 2820 8160 +1 416 815 2353 Chart Text: Futura Lt BT, 7pts [email protected] [email protected] [email protected] Chart Lines: ¼ pts, 50% Black Follow Neil on Twitter: @neilblake123

Pls use CBRE colour palette Follow CBRE For GLOBAL Special Reports Source: Futura Lt BT, Italic, 9pts [ Source: Name, Q#, 2014. ] Change hyperlinks for: TWITTER: https://twitter.com/cbregr https://twitter.com/cbreasia

LINKEDIN: http://www.linkedin.com/company/cbre CBRE GLOBAL RESEARCH AND CONSULTING This report was prepared by Asia Pacific Research, which forms part of CBRE Global Research and Consulting—a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. For Short disclaimer of CBRE GLOBAL All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections, has been RESEARCH AND CONSULTING… change to: obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy, completeness and currency of the information of this publication. This report is presented CBRE Global Research and Consulting is an for information purposes only exclusively for CBRE clients and professionals, and is not to be used or considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments. All rights to the material are reserved and none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or integrated community of preeminent distributed to any other party without prior express written permission of CBRE. Any unauthorized publication or redistribution of CBRE research reports is prohibited. CBRE will not be liable for researchers and consultants who provide real any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication. estate market research, econometric forecasting, and corporate and public sector Body text on each page ends here strategies to investors and occupiers around the globe.