COVER NEWS ISSUE 46 NOVEMBER/DECEMBER 2013

FEATURES REFERENCE - EPRA Annual Conference. - Time for focus. - European listed real estate — - Member offers. a bigger splash for your cash. - FTSE EPRA/NAREIT Global - Nordic offices – still shining bright? Real Estate Indices.

Blending listed real estate with an unlisted portfolio Alex Moss

Where East meets West Guest editor – Mark Cooper EPRA MEMBERS AS OF NOVEMBER 2013

AUSTRALIA • GSW • VastNed • Grainger • Univ. of Western Sydney, • Hamborner • Warehouse de Pauw • Property Research Centre • Heitman • Wereldhave • Green Street Advisors • Resolution Capital • IREBS International RE Business • Yardi • School • AUSTRIA • IVG Immobilien NORWAY • Hansteen Holding • CA Immobilien Anlagen • LEG • Norwegian Property • Henderson Global Investors • Conwert Immobilien Invest • MEAG Real Estate Management • Ignis Asset Management • Immofinanz AG • PATRIZIA Immobilien SINGAPORE • • Sparkassen Immobilien • POLIS Immobilien • Keppel Land Limited • Invesco • PricewaterhouseCoopers • National Univ. of Singapore • JPMorgan BELGIUM • Prime Office REIT • JLL • Aedifica • Real Estate Management SOUTH-AFRICA • KPMG • AG Real Estate Institute • Growthpoint Properties • Land Securities • Antwerp Management School • RREEF Investment • Linklaters • Banque De Groof • SEB Asset Management SPAIN • Metric (formerly London • Befimmo • TAG Immobilien • Fundación ESADE & Stanford) • Cofinimmo • VIB • Inmobiliaria Colonial • Macquarie Real Estate • Leasinvest Real Estate • TESTA Inmuebles & Renta • M&G Investment Management • Retail Estates GREECE • Morgan Stanley • Solvay Business School • Eurobank Properties REIC • Nabarro (Brussels Univ.) • Lamda Development • Aberdeen Property Investors • Nottingham Trent Univ. • National Bank of Greece Holding • Principal Global Investors BRITISH VIRGIN ISLANDS Property Services • Castellum • Quintain Estates & Development • Eastern Property Holdings • Trastor REIC • Fastighets AB Balder • Redefine International • SWITZERLAND • • Presima • Univ. of Hong Kong • Center for Urban & RE • Shaftesbury Management • Thames River Capital FINLAND ISRAEL • Euro Institute of RE Management • Tristan Capital • Aalto Univ. • Azrieli Group • Mobimo Holdings • UBS • Citycon • Gazit Globe • PSP Swiss Property • Unite Group • KTI Finland • Strategic Capital Management • Univ. of Aberdeen • Sponda ITALY • Swiss Prime Site • Univ. of Cambridge • Beni Stabili • University of Geneva • Univ. of Reading, Centre for • Immobiliare Grande RE Research • Affine Distribuzione TURKEY • • ANF Immobilier • Emlak Konut • BNP Paribas LUXEMBOURG • Torunlar REIT USA • Cegereal • GAGFAH • Cohen & Steers Capital • Foncière des Regions • Orco Property Group UAE Management • Gecina • Abu Dhabi Investment Authority • Centre Square • ICADE NETHERLANDS • Duff & Phelps • IEIF • ABN Amro UNITED KINGDOM • European Investors Incorporated • Ivanhoe Cambridge Europe • Amsterdam School of RE • AEW • Fidelity Management & • Klépierre • APG Asset Management • AMP Capital Brookfield Research. • Mazars • ASR • Assura • Forum Partners Investment • Mercialys • Atrium European Real Estate • Aviva Investors Management • Predica • BPF Bouwinvest • Bank of America • Host Hotels • Silic SA • CB Richard Ellis • Barclays Capital • Real Capital Analytics • Société de la Tour Eiffel • CBRE Global Investors • BDO • Real Foundations • Société Foncière Lyonnaise • Clifford Chance • • Russell Investment Group • Société Générale • Corio • Blackrock Asset Management • Simon Property • Unibail-Rodamco • Cornerstone Real Estate Advisors • • SNL Financial • Université de Paris-Dauphine • Deloitte Real Estate • Cass Business School • Univ. of Cincinnati • Zueblin • Eurocommercial Properties • Capital & Counties Properties • Ventas • Kempen & Co • CBRE Clarion Securities • Westfield Group GERMANY • LaSalle Investment Management • Cerberus European • Zell-Lurie RE Center at Wharton • Allianz Real Estate • Loyens & Loeff Capital Advisors • Alstria Office REIT • MN Services • Credit Suisse Securities • Deutsche Annington • Nieuwe Steen Investments • plc • Deutsche EuroShop • PGGM • Deutsche Bank • Deutsche Wohnen • Redevco Europe Services • EY • DIC Asset • Tilburg Univ. • GIC Real Estate • Fair Value REIT • Univ. of Maastricht • Goldman Sachs International

2.2. _ EPRA EPRA NEWS NEWS / /29 46 / /2008 2013 CONTENTS

NEWS

ISSUE 46 | NOVEMBER/DECEMBER 2013

GUEST EDITOR Mark Cooper 4

CEO UPDATE 8 FEATURES CREDITS Blending listed real estate with an unlisted real estate portfolio 10 EPRA Annual Conference 16 EU efforts on track 22 European listed real estate — Editor & Production Manager a bigger splash for your cash 24 Dominic Turnbull

Guest Editor Germany’s REIT dilemma 28 Mark Cooper Nordic offices — still shining bright? 32 Article Credits Dr Wilhelm Breuer Tim Kesseler Returning to the core 38 Barney Coleman Patrick Laureys Lars Flåøyen Alex Moss Taking a leap forward Matthew Fletcher Elias Oikarinen Fraser Hughes Kiran Raichura EPRA Annual Report survey 2012/13 42 Martin Hoesli Henrik Saxborn EPRA Annual Report results 44 Please send your comments and suggestions to: [email protected] Are public and private real estate

Design & LayOut returns and risks the same? 46 Fuse Consulting Limited London Time for focus 50 [email protected] Printers REFERENCE PAGES PCM Ltd Members offers. 52 FTSE EPRA/NAREIT global Real Estate indices. 54

EPRA

Head Office UK Office EPRA Hong Kong Ltd Square de Meeus 23, Berkeley Square House, Suite 2207-09, Tower II, 9th Floor, Berkeley Square, Lippo Centre, B-1000 Brussels, London, 89 Queensway, Belgium W1J 6BD, Admiralty, Hong Kong T +32 (0)2739 1010 United Kingdom T +852 2530 8170 www.epra.com T +44 (0)7973 109117 www.epra.com/china

EPRA NEWS / 46 / 2013 3. GUEST EDITOR

SOLD

WHERE EAST MEETS WEST?

There is no harder question to answer than: “What is the Asian property market like at the moment?” This region is the most heterogeneous of the three main global real estate area, which adds to its attractions and means you can’t get away with generalisations. But Europe, keep asking and watching.

4. EPRA NEWS / 45 / 2013 GUEST EDITOR Mark Cooper

At the moment however, the big story coming out of is the cash coming out of China and heading for real estate all over the world.

Japan, Asia’s richest and most eco- In fact, even without rental trend. How long this will last is nomically sluggish nation, has been growth, looks good to inves- uncertain, but with very little supply stealing the headlines from China tors. office yields tend to be in either sector, rents will probably recently, as Prime Minister Shinzo between 4% and 5%, but finance rise as soon as they hit a level that Abe’s plans to stimulate growth can be had for an all-in cost of 1%, tenants can bear. The investment have met with a level of success and making the most attractive spread in market remains incredibly com- support unheard of in recent times. the region. petitive: most of the major assets are held by mighty developers such as Real estate, especially the J-REIT Up down under Sun Hung Kai, Swire Properties and sector has benefitted enormously. also offers and attractive Hongkong Land and smaller B-Grade Transaction volumes are expected spread between property yields and assets are fought over by developers, to double this year from 2012 and finance costs, as significant buying property investors, owner-occupiers J-REITs have taken the lion’s share in the past 12-18 months has not and high net worth buyers. of them – nearly 70% in the third driven significant yield compres- quarter! Cap rates have compressed sion. The main reason for this is Singapore definitely seems to be sharply in the past 12 months and the weakness of the tenant market. on the brink of an office rental up- foreign investors from within and Australian offices for example offer swing after a turgid couple of years without the region are keen to buy. tempting yields of 6%-plus, but ten- in which supply has been nibbled ant incentives eat away at the gross away, although opinion is divided A few people in the market are figures and headline rents have on how strong rental growth will be making the argument that Japan’s been falling in some markets. in 2014. Pricing is already keen: local real estate market was in fact com- investors and REITs can get financ- ing into an upswing even before Some brokers reckon that ing as cheaply as in Japan and they ‘Abenomics’ took hold. However, the rental market is poised for a are already taking a punt on the next that is hard to swallow when – for turnaround, after a flat Q3 for their rental cycle. example – office rents have barely leasing businesses. If they are cor- started to bottom out even now. rect, then buying by both domestic Indonesia and the Philippines However, the mood is positive and and foreign investors could intensify remain markets where the volume if Abe can deliver structural reforms further next year. of chatter far outweighs the volume alongside his monetary and fiscal of deals. Both have favourable boosts, Japanese firms will start ex- Hong Kong boasts office and re- economic and demographic pictures panding again and rental growth will tail rents amongst the highest in the but both are very hard for property back up the recent buying activity. world, but both are on a downward investors to deal with at the bricks

EPRA NEWS / 46 / 2013 5. GUEST EDITOR

and mortar level. Lack of transpar- of unoccupied and unwanted prop- An enormous amount of capital ency and rampant corruption erties developed because someone is being raised for European real plague both markets, but both are was able to find sufficient funding estate funds at the moment and improving. not to have to worry about funda- some of this is coming from Asia. mentals. As well as private equity fund Indian politicians make life very capital, we are likely to see more difficult for investors! The farce At the moment however, the developer interest in Europe next over foreign direct investment in big story coming out of China is year and more listed sector interest multi-brand retail seems to have put the cash coming out of China and as well. There could be more than international retailers off altogether heading for real estate all over the one groundbreaking deal! and has a similar effect on retail real world. Chinese banks and insurers estate investors. New regulations are looking for trophy assets in ma- about site assembly will make large jor cities, with Ping An’s purchase development projects even harder of the Lloyds’ Building in the City Mark Cooper is the editor than they already are. However, of London set to be a landmark of AsiaProperty magazine, with an election looming, expect transaction. the leading monthly cover- a flurry of measures. The most ing pan-Asian real estate significant of these is of course the China’s developers are also get- investment. He launched the prospect of an Indian REIT, which ting in on the action with companies magazine while working for does seem to be closer than ever. such as Greenland Holdings and Reed Business Information However the proposed structure has China Vanke allocating billions of in the UK, where he was also some peculiarities, such as being dollars to projects overseas. Compa- group editor of EuroProperty, restricted to large investors (while nies such as these will probably be but is now based in Hong Kong retail investors can still put cash into already building up stakes in listed as co-owner of AsiaProperty. A highly-geared developer stocks). real estate companies in Europe and real estate specialist for over the US – a China-led M&A deal could a decade, he began his career The Chine connundrum easily happen next year. with the , the China’s property market po- UK’s longest-established real larises opinion like no other and At the same time, investors estate weekly and has also sometimes it seems that neither from South Korea and Malaysia in edited IPE Real Estate and bulls nor bears realise how diverse particular continue to be active in GlobalProperty. the country is. There are cities the market, while Hong Kong and and districts where commercial Singapore developers have a long mark.cooper@asiaproperty- and residential projects are seeing history of European activity, mainly publishing.com rapid rises in both rents and capital in the UK. values, and there are also swathes

6. EPRA NEWS / 46 / 2013 Our vision is to create Favourite Meeting Corio is one of the largest listed retail property com pa nies in Places: exciting and appealing centres Europe. We buy, develop and internally manage our shopping where people can shop, socialise, relax, centres at the heart of large and want to come back to. communities. CEO UPDATE

UPDATE FROM PHILIP CHARLS Philip Charls, EPRA CEO

The EPRA Annual With conferences in mind, we have EPRA held a private client broker Conference was held in three major events on the horizon. event in London with Broker Profile Firstly, we are currently in the final in September. The event attracted Paris on September 05-06. stages of organising an EPRA Asia around 40 private wealth managers On the whole we received road-show during the week of the from around the UK. Matt Fletcher positive feedback for the December 09 in , Hong Kong proved the audience with an and Tokyo. Five European compa- overview of background and aims conference. However, nies have committed – Unibail-Ro- of EPRA, and he was followed by we are always looking damco, Hammerson, Klepierre, PSP a fund manager perspective on the to improve and we are and GAGFAH and we are looking industry by Tom Walker at AMP forward to meeting decision-makers Capital. Company presentations working with a member- and major investors in Asia. There were made by Great Portland Estates led conference advisory will be time for the companies to and Land Securities. The event is group to further up meet investors on a one-on-one ba- backed by a periodic research publi- sis around the informal road-show cation outlining the fundamentals of the quality of the 2014 schedule. It proves to be a busy the listed real estate, pitched at the conference, and meet the and engaging week, with the aim of PCB/retail market. The event is part demands of the delegates. building long term relationships in of an ongoing series and dates for the region. 2014 will be available soon.

We are busy with final prepara- We have seen a number of key tions for the EPRA Insight evenings staff changes since the last newslet- in Amsterdam and London to be ter. At the EPRA Annual Conference, held on January 14 and 21 respec- I announced the appointment of an tively. Normally we expect 250+ in Asian Investor Outreach Manager, London and 120+ in Amsterdam. The Yuri Zhou, who opened the new events are an excellent start to the EPRA office in Hong Kong in Sep- year and offer the audience foresight tember to spread the word across on the year ahead from leading Asia on the attractive investment CEOs and investors form the EPRA attributes of European listed real membership. The evenings are open estate. Asian investors, including to EPRA members and non-members most recently the Chinese insurance alike, and are an excellent way to industry, have rapidly growing pools mingle with the broader real estate of capital to place in international community. Registration details can assets. In Brussels, former Belgian be found on www.epra.com. diplomat Patrick Laureys has joined

8. EPRA NEWS / 46 / 2013 the EPRA team as Director for Euro- We launched a DC research paper with the IPF in pean Affairs and Andrew Saunders as Director Reporting & Accounting. London on October 21. The research was focused Both positions have been created by splitting the role of previous Finance around the current position and the future Director Gareth Lewis who has left EPRA. potential growth of the DC market in the UK.

We are working with ESMA and the national bodies to explain potential growth of the DC market in the role and make-up of listed real the UK. The research was conducted estate companies/REITs. It is clear by CASS Business School Pension that we believe that the vast major- experts David Blake and Debbie ity of companies in the FTSE EPRA/ Harrison. Accordingly to a KPMG NAREIT Europe index and EPRA report, at a global level, DC schemes member companies should not fall have nearly doubled over the last within the scope of the Alternative ten years to approximately USD 13 Investment Fund Management trillion and offer tremendous source Directive (AIFMD) but the process of for capital going forward. convincing others is long and hard. We are currently designing a simple, Finally, I was invited by ZIA to understandable model to present to open their investor day conference ESMA and the national bodies to in Frankfurt. We continue to make clearly explain that we are not funds, progress in Germany, and we hope but operational going concerns like to see further developments in the Volkswagen, Google or Siemens. next 24 months. We push to build relationships with Government We launched a DC research paper officials and pension funds to help with the IPF in London on October them understand the benefits of a 21. The research was focused around healthy German listed real estate the current position and the future sector.

EPRA NEWS / 46 / 2013 9. FEATURES

BLENDING LISTED REAL ESTATE WITH AN UNLISTED REAL ESTATE PORTFOLIO: WHAT ARE THE RISK AND RETURN IMPLICATIONS?

Recent evidence We are interested in discovering the tility more than compensated for by suggests that there is a performance implications for inves- both superior returns and enhanced tors who choose to combine listed liquidity? There are a number of rea- reluctance by a number of with unlisted. After all, it has been sons why this is particularly topical institutions to incorporate shown that REITs can act as both a and relevant, and which suggest that listed real estate into return enhancer and diversifier in there will be an increase in interest a mixed asset portfolio (Lee, 2012), in using listed real estate in asset their real estate allocation and adding listed real estate to an allocation. These include, but are (Moss and Baum 2013). unlisted portfolio can enhance not limited to the following: This is despite the returns as well as liquidity (NAR- EIT, 2011). REITs are seen to produce 1. Most recently, and of most significant amount real estate returns over the me- relevance to investors, the deci- of work undertaken dium (three-year) term (Hoesli and sion by the UK’s National Em- by both practitioners Oikarinen, 2012), as well as having ployment Savings Trust (NEST) useful predictive properties (Cohen to include a 20% allocation to and academics on the & Steers 2009). real estate in its DC fund, and beneficial impact of for that 20% allocation to be adding listed real estate to So does the portfolio return executed via a hybrid vehicle improve over all stages of the cycle, (managed by Legal & General) a portfolio. and is the increased portfolio vola- which comprises a 70% weight-

10.10. EPRA NEWS / 4644 / 2013 FEATURES

It has been shown that REITs can act as both a return enhancer and diversifier in a mixed asset portfolio, and adding listed real estate to an unlisted portfolio can enhance returns as well as liquidity.

ing to UK direct property via the data on UK fund performance as i) the consistency of return en- their unlisted fund, and a 30% well as comments on this paper. hancement in positive or stable weighting to listed real estate market conditions, and via a Global REIT tracker fund. Summary of findings ii) the fact that during the GFC, 2. An increase in the emphasis The key finding in this study is the the inclusion of a 30% listed real placed by investors and consult- extent to which unlisted real estate estate weighting led to only a ants on liquidity post the GFC. portfolio returns are enhanced marginal (-2.2% over a two-year This clearly is an advantage for by adding listed real estate. At the period) diminution in returns. This listed real estate. most basic level, over the ten-year represents an extremely small cost 3. A critical focus on costs at the period studied, adding 30% global when taken against the dramatic asset management level, which listed exposure to UK unlisted funds improvement in liquidity as a suits listed real estate at the would have added 30% in absolute result of the listed weighting. expense of direct real estate. terms and 50% in relative terms to 4. Significant growth in “real as- the performance of unlisted funds in Table 2 quantifies the return en- set” allocations (i.e. real estate, isolation. (See Table 1) hancement of adding (30% and then commodities, and infrastruc- 50%) listed real estate to an unlisted ture). A number of commenta- In terms of breaking down these portfolio over the cycle. We have tors (Towers Watson, JP Morgan, returns into different periods of the modelled this by using actual fund Brookfieldet al.) have suggested cycle, the addition of a 30% listed data for returns rather than indices. that this real asset allocation allocation would have equated, in could increase to 20% of portfo- absolute terms, to an additional Differences from previous studies lio weightings. 22% portfolio return in 2003-07, We believe that there a number 5. Greater use of alternative risk and an extra 13% in the period of of reasons why this brief paper is measures to standard deviation QE led recovery 2009-2013. While different from previous studies, and (volatility), such as maximum this was to be expected during the adds to the current thinking on asset drawdown. Volatility has al- property-driven bull market due to allocation in real estate. ways been seen by non-users the gearing, and predictive power of listed real estate as a major of listed real estate what we believe Firstly, we have taken actual fund disadvantage. will surprise many is: data rather than index data. A >

Prima facie, a simple, cost- Table 1 effective, and mechanistic approach TOTAL RETURNS (%) GLOBAL LISTED 70% UNLISTED to combining listed and unlisted PERIOD UK UNLISTED FUNDS FUNDS 30% LISTED real estate should satisfy the criteria June 03 - June 2013 60.98 160.95 90.97 outlined above. To assess whether this is the case we need to examine Table 2 in detail the risk and return implica- tions of adding (global) listed real RETURN ENHANCE- RETURN ENHANCE- estate to an (UK) unlisted real estate MARKET TYPE PERIOD MENT 30% LISTED % MENT 50% LISTED % portfolio. Rising Property Values June 03 - June 07 22.00 36.67 Global Financial Crisis July 07 - June 09 -2.20 -3.87 I am grateful to Kieran Farrelley of the Townsend Group for providing QE Led Recovery August 09 - June 13 12.98 20.61

EPRA NEWS / 4446 / 2013 11. Table 3

NUMBER OF TOTAL UNLISTED TOTAL LISTED MARKET TYPE PERIOD MONTHS RETURN % RETURN % Rising Property Values June 03 - June 07 48 81.79 155.12 Global Financial Crisis July 07 - June 09 24 -33.13 -44.31 QE Led Recovery August 09 - June 13 48 31.32 68.22

number of previous studies have at times when real estate criteria nature, and equity market charac- used the IPD Index as a proxy for is a key driver, as well as times teristics in the listed sector, namely direct real estate and an EPRA Index when macro themes are the most that when direct real estate values as a proxy for listed real estate. significant determinant of returns. are rising steadily (2003-2007) The sample we have used in this This will allow allocators to alter listed real estate enhances unlisted study comprises UK unlisted real weightings of the listed/unlisted returns, when real estate values are estate funds, and Global listed real balance according to the stage of falling (2007-2009) they detract from estate funds. the cycle. performance (but only marginally), and when capital values are steady The reason for using funds Thirdly we have shown the (+/- 2% p.a.) the result will be more data is that we are interested in impact of three different thresholds dependent upon non real estate the investor level returns, and of listed real estate on portfolio influences. capturing tracking error from performance (0%. 30%, and 50%), a benchmark. For the single series which are maintained throughout However, what is noticeable of returns we use an unweighted the period. We have not used any about Graph 1 is the consistency of average of the fund returns. The portfolio optimisation techniques to the return enhancement form add- sample comprises five of the largest determine weightings. ing listed. Of the 109 months in the unlisted UK property funds, and period listed real estate enhanced four of the leading global real estate The study findings returns in 72 (i.e. 66% of them). securities funds. We have chosen Firstly, we examine the impact on global listed funds for reasons of returns. We have used 12-month roll- The next question to be asked liquidity, diversification, fund avail- ing returns, with monthly frequency is regarding the cumulative impact ability, and the Legal & General / for valuations. Our data starts from of these gains, and what strategies NEST precedent. June 2003, so the first data point is could be used to minimise the June 2004. We believe that showing maximum drawdown seen from Secondly, rather than use a single the results on a rolling monthly 2007-2009. To do this we need to Graph 1 — period, or peak-to-trough periods, basis shows a far better impression divide the study into three clearly Impact on 12m we have broken down the ten-year of the dynamics and quantum of identifiable periods: rolling returns period (2003-2013) into three distinct the results. i) Rising property values — June of adding 30% stages of the cycle. We believe that 2003 to June 2007 and 50% listed this allows asset allocators to assess The pattern is as we would ii) The global financial crisis — July exposure how listed and unlisted perform expect, given the gearing, predictive 2007 to June 2009 iii) The QE led recovery — Septem- 50.00% All unlisted ber 2009 to June 2013 40.00% 30pc Listed 50pc Listed As can be seen from the Table 3, 30.00% the results are a compelling case for 20.00% incorporating listed into an unlisted 10.00% portfolio. 0.00% 6/1/2004 6/1/2005 6/1/2006 6/1/2007 6/1/2008 6/1/2009 6/1/2010 6/1/2011 6/1/2012 6/1/2013 At a time of rising property val- -50.00% ues, returns from listed (in this case -40.00% global) funds were almost double that of UK unlisted funds. Perhaps -30.00% surprisingly at a time of financial -20.00% distress and dislocation, returns on -10.00% Source: Consilia Capital. Townsend, Bloomberg the listed funds were only margin-

12.12. EPRA NEWS / 4644 / 2013 FEATURES

Taking fund NAVs rather than secondary pricing volatility has reduced post–GFC, while the price of liquidity in listed funds is reflected in the maintained higher level of volatility post GFC.

ally worse (-44% vs. -33%) than location, and has enhanced them by for unlisted. At a time of market 13% thus far in the QE-led recovery. recovery and stabilisation of values returns from listed funds were more Table 5 shows the total return than double those of unlisted funds. differences over the period. We now break this down further, and in However, we need to dig a little Table 6 we have shown the return deeper to discover the stability and enhancement on a monthly basis. distribution profile of these returns, as they could be distorted by one or Volatility two months’ data. One of the most Having looked at the impact on re- common refrains from managers not turns we now turn to the impact > using listed is the volatility of returns and the fear of getting the market Table 4 timing wrong. We show in Table 4 the average monthly changes in each AVERAGE UNLISTED AVERAGE LISTED of the periods, which highlights con- MARKET TYPE PERIOD MONTHLY RETURN MONTHLY RETURN sistency of listed real estate return Rising Property Values June 03 - June 07 1.25% 2.03% enhancement in times of improving Global Financial Crisis July 07 - June 09 -1.66% -1.91% or stable real estate values and only marginally inferior returns at times QE Led Recovery August 09 - June 13 0.59% 1.40% of severe market dislocation. Table 5

The next stage is to see the impact RETURN ENHANCE- RETURN ENHANCE- on portfolio returns of adding listed MARKET TYPE PERIOD MENT 30% LISTED % MENT 50% LISTED % real estate in different weightings. Rising Property Values June 03 - June 07 22.00 36.67 Table 5 shows the difference in total Global Financial Crisis July 07 - June 09 -2.20 -3.87 returns in each period of adding first 30% and then 50% listed real estate QE Led Recovery August 09 - June 13 12.98 20.61 exposure to an unlisted real estate Table 6 portfolio. This demonstrates an extremely compelling case for listed RETURN ENHANCE- RETURN ENHANCE- real estate. Adding 30% listed real MARKET TYPE PERIOD MENT 30% LISTED % MENT 50% LISTED % estate weighting improves returns by Rising Property Values June 03 - June 07 0.25% 0.41% 22% at a time of rising property val- Global Financial Crisis July 07 - June 09 -0.21% -0.28% ues, reduced them only marginally (-2.2%) at a time of severe market dis- QE Led Recovery August 09 - June 13 0.27% 0.44%

EPRA NEWS / 4446 / 2013 13. These results demonstrate very clearly how the returns of a portfolio of UK unlisted real estate funds can be enhanced by the addition of (global) listed real estate funds in a very simple and straightforward manner.

on volatility, using a similar ap- Graph 2 — Impact on 12m rolling volatility of adding 30% and 50% listed exposure proach to that taken with returns. As 30.00% before we have used 12-month rolling All unlisted 30pc Listed volatility, with monthly frequency for 25.00% 50pc Listed valuations. Our data starts from June 2003, so the first data point is June 20.00% 2004. Again the pattern is broadly as would be expected, with the portfo- 15.00% lio volatility increasing with the per- centage of listed added. However, we 10.00% would point out that the returns data we have taken for the unlisted funds 5.00% is based on stated NAV, and takes no account of secondary pricing. If we 0.00% were to take account of this (which 6/1/2004 6/1/2005 6/1/2006 6/1/2007 6/1/2008 6/1/2009 6/1/2010 6/1/2011 6/1/2012 6/1/2013 broadly mirrors the NAV-based Source: Consilia Capital. Townsend, Bloomberg pricing in the listed sector) then the difference between the volatility Table 7 of listed and unlisted would be far AVERAGE UNLISTED AVERAGE LISTED smaller. MARKET TYPE PERIOD VOLATILITY VOLATILITY Rising Property Values June 03 - June 07 0.88% 11.73% Looking at the breakdown of volatility by period we can see that Global Financial Crisis July 07 - June 09 4.02% 23.93% taking fund NAVs rather than second- QE Led Recovery August 09 - June 13 1.85% 21.24% ary pricing volatility has reduced post GFC, while the price of liquid- ity in listed funds is reflected in the Alex Moss at Cambridge University, London maintained higher level of volatility REFERENCES gained an MA in Business School, and Oxford Said post GFC. Baum, A and Moss, A, (2013) The use of listed real estate securities the Economics Business School. In June 2012 he in asset management, EPRA of Finance and formed Consilia Capital. Conclusions Baum, A and Moss, A (2013) Are listed real estate stocks managed Investment from A number of funds have the ability as part of the real estate alloca- tion? A survey report for EPRA Exeter University He is a member of the EPRA to include listed real estate in their Cohen & Steers, (2009): in 1981, and has Research Committee, Chairman of portfolio but choose not to do so. Listed Property Performance as a Predictor of Direct Real Estate spent 30 years specialising in the the IPF Research Steering Group Similarly a number of investors do Performance property sector, encompassing sell looking at Real Estate Allocations not regard listed real estate as part Hoesli, M. and Oikarinen, E (2012) Are REITs real estate? side research, corporate broking, within Retirement Saving Schemes of their real estate allocation. These Evidence from international sector level data, Swiss Finance and private equity. He has written in the UK and Chairman of the results demonstrate very clearly Institute Research Paper Series Number 12-15 articles for numerous professional Advisory Board of the M&G Global how the returns of a portfolio of UK Lee, S.L (2010) The Changing publications, and is a regular Real Estate Securities Fund, which unlisted real estate funds can be Benefit of REITs to the Mixed-Asset Portfolio, Journal of Real Estate speaker at conferences globally. He he has been involved with since enhanced by the addition of (global) Portfolio Management, Volume 16, Number 3, 201-215 is a Visiting Lecturer at Cass Busi- inception listed real estate funds in a very NAREIT, (2011): Optimising Risk ness School, and has lectured on simple and straightforward manner. and Return in Pension Fund Real Estate: REITs, Private Equity Real global property securities markets [email protected] This was shown without altering Estate and the Blended Portfolio Advantage initial weightings.

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Icade_Donnons vie à la ville (corporate)_EPRA_anglais_148,5x210.indd 1 05/08/13 11:22 EPRA UNVEILS BIG INVESTOR RELATIONS EXPANSION DRIVE AT ANNUAL CONFERENCE

EPRA unveiled the largest The annual gathering of analysts, He also pointed to the launch of expansion in its investor financiers, investors, investor rela- a new drive to reach institutional tions and CEOs from the listed real investors and investment mangers relations capabilities in estate sector took place in Paris in in the UK and Nordic markets, who the association’s history September. “You asked us to focus control an estimated EUR 10 trillion at the 2013 Annual on investor relations, expand our in total assets, with the appointment research, make more noise in the of Matt Fletcher as Investment Out- Conference, together with press and with our communications reach Director for these countries. moves to strengthen its generally; and push for growth in research, public affairs, the European listed sector through In Brussels, former Belgian dip- effective lobbying at the EU and lomat Patrick Laureys has joined the reporting and accounting national market levels. So that’s EPRA team as Director for European teams in Brussels. what we’re now delivering,” EPRA Affairs and Andrew Saunders as Chief Executive Philip Charls told Director Reporting & Accounting. the membership gathered in Paris in Both positions have been created by his opening speech. splitting the role of previous Finance Director Gareth Lewis who has Charls announced the appoint- left EPRA. ment of an Asian Investor Outreach Manager, Yuri Zhou, to open a new EPRA Chairman David Atkins EPRA office in Hong Kong and reflected on the achievements of the spread the word across Asia on the listed sector during his two-year ten- attractive investment attributes of ure and the challenges it still faces. European listed real estate. Asian in- vestors, including most recently the “The listed industry has still not Chinese insurance industry, have been able to solve its most pressing rapidly growing pools of capital to issue, size. We are still in danger of place in international assets. being marginalised and finding a

16.16. EPRA NEWS / 4644 / 2013 FEATURES

solution to this is getting harder,” Investors panel discussion with in- Atkins said. vestors from outside Europe. Pascal Duhamel from the Abu Dhabi Invest- BBC Business Correspondent ment Agency and Meka Brunel from Alice Baxter acted as moderator Canada’s Ivanhoe described their for the two-day conference with organisations’ investment decision- the first Q&A session dealing with making processes which both said the outlook for the global and Euro- were based on finding suitable pean economies. opportunities rather than needing to be present in any particular markets. Economist Ian Shepherdson warned that an improving US The growing importance of economy meant that interest Chinese investors was reflected rates worldwide were rising back by the presence on the Global towards historically normal rates. Investors panel of Armstrong Chen While European rates are unlikely of the China Banking Regulatory to rise as much as those in the US, Commission and Isabel Chung from the cost of capital for companies China Taiping Insurance. Armstrong here is inevitably also going impressed on the audience the sheer to increase. scale of the Chinese financial sector and its institutions, while Isabel Focusing on the European walked through some recent regula- economy, Professor Andrea Boltho tory changes that have allowed of Oxford University sounded a som- these bodies to invest to a greater bre warning. While all economic extent overseas. indicators are now up, private and public sector debt is still too high Among the most visible signs and deleveraging has not gone well. of the rise of the Chinese > The Eurozone appears more stable than back in 2012, but the calm is masking some huge north/south imbalances. Wage growth in south- ern countries has far outstripped growth in the north, with no corre- sponding gains in productivity. Real exchange rates in the south have risen by 30% and unemployment rates there have exploded.

“How can this mean that there is a future for the Euro?” Andrea said.

Following the economics session, the conference moved on to a Global

EPRA NEWS / 4446 / 2013 17. insurers on international real estate main differences between the US Crossrail in London and Grand Paris investment markets was the and Europe, Cafaro said: “The US in the French capital, these benefits purchase of London’s Lloyd’s Build- REIT regime is more mature. Many were made very concrete. ing by Ping An. However, despite European structures were brought in the depth of capital available in just before the crisis and, because Both projects aim to change the China, Isabel counselled against they are tax-driven, are often limited face of their cities by constructing expecting to see too much of this to just one country. Not necessarily hundreds of kilometres of new rail- flowing outside the country in the a problem, but it does leave less way lines — in London’s case straight near future. Yields in China remain room for specialisation”. under the city centre, in Paris to link higher than abroad, and Chinese now-isolated suburbs. Ian Lindsay, firms will limit themselves to foreign That the traditional shopping Crossrail’s Land and Property Direc- ‘prestige’ projects. centre is going to be decimated by tor and Etienne Guyot, Grand Paris’ on-line shopping is an often-heard President explained that funding for After the coffee break, the prediction. But it’s not one shared both these huge projects can only CEOs of three leading REITs: Debra by Cuvillier and Groener, both of be met by large-scale real estate de- Cafaro of Ventas, Christophe Cuvil- whom welcome the possibilities velopment around the new stations, lier of Unibail-Rodamco, and Corio’s offered by new technologies. in which the listed sector is playing Gerard Groener took to the stage a leading role. to give their insights into current “While there will always be regulatory and market issues. people who will order on-line, there The alignment of investor and are many others who can be seduced company interests in relation to Responding to a question on the into shopping centres”, Groener compensation is an issue that has commented. “Technology allows received much attention in recent us to build a community with our times and gave rise to a lively customers”. His words were echoed discussion during the EPRA Mem- by the new Unibail-Rodamco CEO: bers’ platform session. Prior to the “For the first time a shopping centre session, an attendee poll found that company can talk directly to its just 3% of those present found that customers to see what they want.” interests were currently “very well” aligned, with almost 80% believing Society wins that while there was reasonable Listed real estate can deliver huge alignment, there was also room for benefits to society. While this was improvement. hardly news to most conference attendees, during a session devoted During the discussion it became to two large infrastructural projects: clear that investors want manage-

18.18. EPRA NEWS / 4644 / 2013 FEATURES

Paolo de Cesare, CEO and Chairman of French luxury retail group Printemps explained how physical stores can still grow and thrive in an environment where the retail market in France has declined by between 20% to 25% in the past four years and fixed costs are soaring. ment incentives to be based on total and Chairman of French luxury last ten years, increasing its market shareholder return (TSR) metrics retail group Printemps, explaining capitalisation by, on average, 15% a and more disclosure. how physical stores can still grow year since 2003 and producing an- and thrive in an environment where nual total returns of 17%. SIICs have Companies, while not opposing the retail market in France has far outperformed the 6% annual TSR metrics, feel they require nu- declined by between 20% to 25% in return on the CAC 40 French equi- anced implementation to be effec- the past four years and fixed costs ties index and the 9% of IPD’s direct tive, particularly in light of perceived are soaring. property index for France. concerns about the short-term nature of equity markets. They also “Today is not about selling a The panelists agreed that the SIIC indicated that they would welcome product — if that’s all you do you’ll regime should be left unchanged, as a more active role for investors in be sidelined by the Internet — it’s it is a near-ideal model for listed real remuneration issues. about creating a unique, exciting estate investors and an important and enriching shopping experience.” producer of jobs and source of Many suggestions came from investment for Paris in particular. the conference floor as to how France in the spotlight investor wishes can best be aligned The second day of the conference There was also an active discus- to company needs, including the es- started with a video celebrating sion on the need for mutual recogni- tablishment of BPR-like disclosures Paris and the tenth anniversary of tion of REIT regimes for tax purposes and better dialogue between all France’s SIIC regime — the poster- in the EU to allow cross-border parties. Clearly this is an area that boy of European REITs for investors. investment on the same terms as will continue to occupy the industry in national markets, possibly as the in the future. Pierre Schoeffler, moderator of first step towards the creation of a the SIIC panel, pointed out that this pan-European REIT. This was a sen- The first day of the conference sector has been the most successful timent echoed by Edward Walter, ended with Paolo de Cesare, CEO on the French stock exchange in the CEO of Host Hotels in the US, >

EPRA NEWS / 4446 / 2013 19. FEATURES

who complained of the bureaucracy the potential growth in listed real five minutes company pitches from and widely differing tax regulations estate markets in Europe through the CEOs of Safestore, Beni Stabli, faced by companies trying to invest corporate spin-offs, estimating that Citycon, Societe de la Tour Eiffel, in different European markets. This EUR170 billion of assets is the target Cofinimmo and Sponda. The session session was moderated by Bart pool. Alex Moss presented the case proved snappy, and painted a good Gysens of Morgan Stanley. for blending listed real estate stocks background to specialist sectors and with direct real estate and unlisted how individual take advantage of The concurrent sessions saw Ka- funds to generate outperformance, the opportunities. ren Sieriaki moderate the research a key theme going forward for DC panel which showcased Martin schemes for example. Go to: www.epra.com/conference. Hoesli’s prize-winning research on the performance of listed real estate The alternative session was as a direct proxy for direct real estate moderated by Nick Webb of BNP investment. Dirk Brounen exampled Paribas who oversaw six separate

20.20. EPRA NEWS / 4644 / 2013 FEATURES EU EFFORTS ON TRACK Our efforts to educate, Tackling the economic crisis and ment, the Indices and Benchmarks steer and monitor finding ways to put the EU back on Review and Solvency II. The AIFMD the road to sustainable growth is is by far the most important issue the activates of the still the focus of EU policymakers. on the agenda in terms of potential Institutions here in By now European leaders know full impact on our sector. However, the Brussels continue, but well that this is going to be a long- amount of influencing that can still term challenge and not just a matter be done is limited and our efforts all eyes and postures of waiting for the European econo- to communicate with ESMA and are turning towards the my to pick up. Growth-enhancing the national regulators have to be oncoming light that’s proposals will therefore continue to carefully weighed. dominate the Commission’s Work bearing down on us – the Programme for 2014, which will be ESMA is telling us that they are Parliamentary elections. directed at job creation, reducing still receiving a large number of sovereign debt, financial stability, questions, in particular from the enhancing long-term investment, smaller EU Member States, on the facing the pension system challenge guidelines they published in June of and continuing the sustainability this year. ESMA is taking a case-by- agenda beyond 2020. case approach as a working propo- sition, and this approach has also The next months will see the EU been taken by the national regula- machinery picking up speed ahead tors of Germany, France and the UK. of the European Parliamentary Recent news from the Netherlands elections in May 2014. Looking at also indicates that things seem to be the issues on the EU radar, EPRA is moving in the right direction. strategically directing its influencing efforts at topics that have, or risk Indexing the issues having, a high impact on the listed We’re working with FTSE to Euopean Parliament HQ, as viewed real estate sector. This is the case understand the implications of from EPRA’s office in Brussels. for the AIFMD, Long-Term Invest- the Commission’s proposal for a

22.22. EPRA NEWS / 4644 / 2013 FEATURES

We’re convinced that the listed real estate sector has a lot to offer when it comes to finding positive and constructive solutions to the many challenges that Europe is facing.

Regulation on indices used as a benchmark in financial instruments and financial contracts. On Solvency II the main consideration is whether REITs or other real estate assets are weighted on a look-through basis or as equity. This means the Directive are specifically mentioned in the has the potential to make direct recommendation of the Group. The Patrick and indirect exposure to real estate Commission will pick up these rec- Laureys assets less attractive to insurers. ommendations into its own work, Before joining Another issue is the calculation of which will likely feature a Roadmap EPRA in the capital requirements, where we on LTI. September believe that internal models allow 2013, Patrick for more flexibility and a more EPRA will continue to actively Laureys was a career diplomat granular approach. build a qualitative network and at the Belgian Ministry of dialogue with the European institu- Foreign Affairs. He has 12 years The Commission’s Green Paper tions and other stakeholders. We’re of experience in bilateral and on the long-term financing of the convinced that the listed real estate multilateral negotiation and European economy is interesting, sector has a lot to offer when it diplomacy, especially in the not because the final outcome comes to finding positive and EU framework. Most recently is a specific binding agenda, but constructive solutions to the many he was Deputy Director at the because it will set the tone for challenges that Europe is facing. It European Affairs and Coordina- the overall policy environment in comes down to telling our story to tion section of the Belgian Europe. The discussions within the the European policy makers so they Ministry, dealing with EU Council, the European Parliament see the true value listed real estate Energy, Telecommunications and the Commission will give us the brings to the economy and to the and Transport issues. opportunity to become clearer on European citizens. [email protected] the role we see real estate and the built environment play as drivers for Our members and indeed their the European economy. investors, can only benefit from our engagement at the EU level. We EPRA has been following the actively encourage member input discussions on long-term and SME as we are here to represent you in financing within the High Level Brussels, so please get involved and Expert Group led by John Moran tell us your concerns, comments and we are thrilled to see that REITs and ideas.

EPRA NEWS / 4446 / 2013 23. NEW STREET SQUARE City London Owner Land Securities Ownership 100% Property Sector Mixed Year Built 2008

Floor Area (Sq. m) 62,300 Occupancy rate 100% Date As at March 31 2013 EUROPEAN LISTED REAL ESTATE — A BIGGER SPLASH FOR YOUR CASH

The demand for European listed The companies within the FTSE absolute assets, (meaning they own property is increasing and investors EPRA/NAREIT Developed Europe In- smaller sized assets) followed by the dex hold assets in all major property UK, France and Germany. This map from across the world are looking sectors, with the highest stakes in does not indicate the true density of for stable long-term investments retail, residential, office and indus- the real estate market, but each dot to strengthen, and importantly trial respectively (based on square represents a building or asset. Some metres). The three countries with residential assets are residential diversify, their existing portfolios. the largest amount of floor-space to portfolios consisting multiple units. As the European real estate market let are Germany, France and the UK. continues to develop, investors In fact, European listed real estate Two of the biggest European amounts collectively to more than cities in terms of listed assets are beyond Europe are considering 120 square kilometres of floor-space, London and Paris, which are shown European listed companies/REITs which is the area of Brussels! below. The overview of London for many reasons. The FTSE EPRA/ clearly shows the City, retail and of- The Europe map shows 11,755 as- fices in West End and . The NAREIT Developed Europe Index sets in nine property sectors across map of Paris shows a nice mix of consists of 83 companies based in 13 most of Europe. Over 96% of all listed assets in the area around the countries with assets spread across FTSE/EPRA NAREIT Developed Eu- Avenue des Champs-Élysées. Good rope Index constituents are covered quality assets and prime locations! all European countries. in this overview. The map shows a widespread allocation of listed real Investing in the EPRA Indices estate throughout the continent. The provides the perfect opportunity to Netherlands and Belgium, which effectively invest in commercial and legislated the first REIT regimes in residential real estate. The broad Europe, show the highest number in diversification by both property type

24.24. EPRA NEWS / 4644 / 2013 FEATURES

Legend

Self Storage Specialty Office Retail Residential Lodging & Resorts Industrial Healthcare Map Key Diversified

Self Storage Specialty Office Retail Residential Lodging & Resorts Industrial Healthcare Diversified

This map does not indicate the true density of the real estate market, but each dot represents a building or asset.

ICADE City Paris Owner Icade Ownership 100% Property Sector Office Year Built 2009

Floor Area (Sq. m) 10,553 Occupation rate 100%

EPRA NEWS / 4446 / 2013 25. London Map Legend

Self Storage Specialty Office Retail Residential Lodging & Resorts Industrial Healthcare Diversified

Location: New Street Square

and geography allows investors to spread risk in their portfolio and to gain real estate exposure throughout Europe. Compared to owning private real estate, listed real estate provides a liquid and transparent investment which is managed by professionals in their local markets. This makes listed real estate a perfect comple- ment to private real estate in a diversified portfolio – with the added benefit of transparency through greater scrutiny from analysts, regu- lators and shareholders.

EPRA’s aim is to graphically show, Paris05 Map00 1000 1500 2000 m on a quarterly basis, the geographi- cal and sectoral investment spread which publically listed real estate Map Key companies deliver. Investing in these Self Storage Specialty companies individually using profes- Office sionally managed specialist funds, Retail Residential using index trackers or ETFs, is Lodging & Resorts investing in ‘real’ income-producing Industrial Healthcare real estate crossing many borders. Diversified This platform provides a bigger splash for your cash in Europe’s large property pool.

Location: 28 – 32 Blvd. de Grenelle

Tim Kesseler joined EPRA’s research team in August 2013 as a Junior Ana- lyst Research & Indices. He holds a bachelors degree in Finance and Control- ling and completed his MSc in International Business – Finance at Maastricht University.

[email protected]

Map Key

26.26. EPRA NEWSSelf Storage / 4644 / 2013 Specialty Office Retail Residential Lodging & Resorts Industrial Healthcare Diversified

GERMANY’S REIT DILEMMA BaFin has changed its view on REITs under the AIFMD regulation

On July 22, 2013 Germany’s Ka- ••Stock Corporation Act (AktG), that German REITs automatically pitalanlagegesetzbuch (Investment ••REIT Act (REITG), fell within the scope of the AIFMD. Code) came into force, which ••German Corporate Governance This pressure helped to make transposes the EU´s Alternative In- Codex (DCGK), BaFin change their mind: REITs do vestment Fund Managers Directive ••The respective Stock Exchange no longer automatically qualify (AIFMD) and other EU regulation Rules which effectively protect as “Investmentvermögen” and in into German law. Shortly before the investors. this way as Alternative Investment Easter weekend however, it came as Fund (AIF) under the AIFMD. a great shock for the listed German The consequences for REITs BaFin will judge on a case-by-case real estate sector when Germany’s would have been: basis – similar to the case of listed Federal Financial Supervisory ••Higher reporting and documenta- real estate companies without REIT Authority (BaFin) took in an unex- tion costs, additional costs for status – when it comes to applying pected proposal the view that REITs selection and appointment of a the new legal frameworks. automatically qualify as “Invest- depository which has to be entrust mentvermögen” (Investment Funds) with the booking of investor BaFin´s new view has to be and in this way have to be classified money on a segregated account, welcomed. It now follows closer as AIF and part of the fund sector the safe-keeping of financial the guidelines of the European under the AIFMD regulation. A instruments and the verification Securities and Markets Authority development that many participants of whether the AIF or the AIFM (ESMA) which recommend to clas- from the listed German real estate on behalf of the AIF has obtained sify REITs not automatically as AIF sector failed to foresee. ownership of all other assets. but to decide according to the spe- ••The de facto end for the REIT sec- cific situation in any single case. The The proposal exceeded by far tor in Germany as IPOs via REITs, new BaFin view helps to prevent the guidelines and targets that were or the conversion of Non-REITs German REITs from competitive dis- originally intended by the AIFMD: into REITs would have been unat- advantages in comparison to REITs to regulate fund managers and tractive. from other EU countries. This is investment funds in order to prevent important because other EU and na- Europe from future financial crisis. A concerted response tional regulations like the European That REITs fall into the scope of the BaFin received over 300 submis- Market Infrastructure Regulation AIFMD was all the more astonishing sions from EPRA, the German (EMIR/OTC Derivatives Regulation) as REITs were already regulated by property association ZIA, the Ger- or tax on financial transactions are several national German laws and man Investor Relations Association closely linked to the definition of Acts, including: (DIRK) and major other associations AIF. Thus a uniform interpretation as well as the German REITs and of “AIF” across the EU is vital to ••Securities Trading Act (WpHG), listed real estate investors express- establish a level playing field across ••Securities Prospectus Act (WpPG), ing concern with its original position the Union. > continued page 13

28.28. EPRA NEWS / 4644 / 2013 FEATURES

EPRA VIEWPOINT

LISTED ROLE IN GERMAN REAL ESTATE IS SEVERELY UNDERESTIMATED

The importance of listed companies compares with a total of roughly Indeed, there’s been substan- in the German real estate market as EUR 84 billion for German open and tial growth since September 2011 a whole has been severely underes- closed-ended property funds. That - Germany’s market share of the timated in the past, leading to a lack total includes significant foreign EPRA index has increased by 68%. of appreciation by politicians and holdings of real estate and also cash In absolute terms however, there’s the general public of the significant and fixed income securities, which still great potential to grow since economic contribution they make, a the open-ended funds require for it is Europe’s largest economy yet recent study by the German property liquidity purposes. the sector still lags behind France association ZIA and Barkow Consult- and UK. ing concludes. The market capitalisation of Germany’s listed real estate sector, The researchers also said the The researchers calculated the as measured by the DIMAX index, German market as a whole has real value of gross assets held by has increased 213% or by EUR 15.6 substantial potential for growth. The listed real estate companies to billion since the end of 2008 to combined free float market capitali- provide a more “like-for-like” com- reach EUR 22.9 billion. While about sation of the 15 residential and com- parison with the assets held by the 70% of the market’s growth in this mercial listed property companies other type of main property invest- period can be attributed to the included in the study makes up only ment vehicle in the German market general global rally in equities, EUR 60% of the free float of Europe’s -- open and closed-ended non-listed 7.7 billion has been raised in capital largest quoted real estate firm funds. They said the traditional placements and real estate IPOs in Unibail-Rodamco and 30% of that focus on free float equity market the last five years. of the Simon Property Group REIT capitalisation for quoted companies in the US. Therefore the German made the sector appear relatively The sector’s expansion has over- government needs to be careful that too small and compared “apples whelmingly been driven by compa- it doesn’t strangle the growth of the with pears” when it comes to real nies investing in residential assets listed sector with undue regulation estate investment options. on the back of Germany’s booming as this could lead to an unbalanced housing market. The residential and unstable domestic real estate The study estimated that Ger- market now accounts for nearly market emerging, they concluded. man listed property firms own 80% of the gross value of assets in around EUR 59 billion in domestic Germany’s listed real estate sector, Philip Charls assets, with foreign quoted investors which in turn forms by far the larg- EPRA CEO holding a further EUR 8.5 billion est proportion of listed residential continued of real estate in Germany. This property in the EU at 85%. page 13

EPRA NEWS / 4446 / 2013 29. Insight 2014

EPRA Amsterdam January 14, 2014 London EPRA January 21, 2014

Come to one of our free EPRA ‘Insight 2014’ events in January, focusing on the investment potential of European listed real estate.

Listen and interact with a panel of leading listed property, finance and analyst professionals in two European cities – with refreshments. It’s a great opportunity to learn more about investing in the listed sector. The evenings will appeal to a broad range of investment, pension fund and real estate Go to professionals. www.epra. com

EPRA insight 2013 full page ad_idents.indd 1 24/10/2013 11:15 FEATURES

Although BaFin has enlarged the catalogue of operational activities, still the acquisition, rental, management and disposal Insight of real estate (consequently the business of managing property 2014 for the long-term) are not recognised as “operational activities”.

When carrying out the case-by- If not, the only criterion left to if redeveloped/refurbished or not case examinations BaFin will espe- prevent REITs and Non-REIT real etc. It remains entirely open and is cially focus on two questions. First, estate investment companies from at the discretion of the management whether a REIT´s business is an being classified as Investmentver“ - board as to what activity is done at “operational activity”, and second, mögen” would be whether they what time and to what extent. This, whether it invests “along a speci- follow an “investment strategy” however, can be seen neither as a fied strategy” (investment strategy). – in this case they would qualify as strategy, nor as a pre-established Although BaFin has enlarged the AIF – or only a general “corporate investment strategy. In addition catalogue of operational activities, strategy” – in this case they do not board decisions can at every time EPRA Amsterdam still the acquisition, rental, manage- fall within the scope of AIFMD. Un- be changed by the board. It is to be ment and disposal of real estate fortunately it is not in any case pos- hoped that BaFin will recognise this January 14, 2014 (consequently the business of man- sible to distinguish in a clear way when carrying out the case-by-case aging property for the long-term) between an “investment strategy” examinations. are not recognised as “operational and a “corporate strategy”. activities”. In this way for example First published in the German Stock London the ongoing management of leases According to the explanatory Exchange Magazine and active engagement with oc- memorandum to the “Kapitalanla- cupiers to reduce the operational gegesetzbuch” (German Investment EPRA energy use is in BaFin´s eyes not Code) an “investment strategy” has operational while real estate project the pre-condition that the criteria a Dr Wilhelm development with subsequent sale company uses to invest the raised Breuer is January 21, 2014 to third parties is operational. money must be determined ac- founder of curately in writing and must go Dr Breuer Nevertheless REITs and other well beyond the scope of a general Capital Market listed real estate investment com- corporate strategy. In BaFin´s view, Advisory. Since panies without REIT status are often a defined investment strategy 2009 he has advised companies heavily engaged in development distinguishes from a general cor- in investor relations, financial Come to one of our free EPRA ‘Insight and refurbishment activities to in- porate strategy by clearly defined reporting, IPOs and other capital crease the value and profitability of investment criteria and a reduced market transactions. Prior to 2014’ events in January, focusing on the their real estate portfolios. This also room for manoeuvre of the AIFM this, he was for more than a investment potential of European listed includes the acquisition of land, ini- (=Alternative Investment Fund decade Director and Head of tiating, construction and letting out Manager) as set out in the invest- Investor Relations of IVG Im- real estate. of buildings and properties (includ- ment requirements, the statutes and mobilien. Before joining IVG he ing a possible subsequent disposal articles of association. worked as asset manager in a Listen and interact with a panel of leading listed at a later time) as a favourable alter- big German banking group. He native way to acquire properties for REITs however, do not meet this is member of the expert group property, finance and analyst professionals in two their portfolio. This activity is explic- requirement for the existence of ‘Real Estate’ of the German European cities – with refreshments. It’s a great itly stated as operational within the an investment strategy. It is neither Financial Analysts Association opportunity to learn more about investing in the BaFin statement. It is to be hoped, clearly set out in what kind or (DVFA) and was a founder listed sector. therefore, that BaFin will recognise sector of real estate a REIT has to member of EPRA´s Best Practices German REITs and listed Non-REIT invest, nor in what region, at what Committee. The evenings will appeal to a real estate investment companies degree of vertical integration, level Wilhelm.breuer@ broad range of investment, as operational when assessing on a of gearing, whether properties are breuer-cma.de pension fund and real estate case-by-case basis. held for the long or short term, if www.breuer-cma.de Go to acquired or constructed by the REIT, professionals. www.epra. com

EPRA NEWS / 4446 / 2013 31.

EPRA insight 2013 full page ad_idents.indd 1 24/10/2013 11:15 period. The underlying cause of this expected outperformance is the NORDIC OFFICES region’s low government debt levels. These mean that in contrast to — STILL SHINING BRIGHT? the heavy austerity requirements in most other European economies, the Property investors have But that, as they say, is history. Nordic governments have no need to treated the Nordics as With prime Nordic yields now well reduce spending or increase taxes. below their long-term averages, can Indeed, the relatively positive state a safe haven, but the investors still achieve their required of the public finances in the Nordic region offers a range of performance in these markets? economies has enabled the govern- opportunities and risks. ments to announce expansionary Ongoing reforms will support fiscal measures in recent Budgets, economic outperformance including corporate tax rate cuts in In common with the rest of the With the notable exception of Den- all four countries. Western world, the Nordic econo- mark — where a house-price fall of mies experienced sharp falls in more than 20% reduced consumer While the timing of these expan- economic output in 2009. But it was spending by nearly 4% from its Q4 sionary measures primarily reflects the recovery in which they differenti- 2007 peak — the Nordic region’s the weak external environment ated themselves: a fixed investment growth in 2012 was broadly based, and, arguably, build-up to the recent rose by 13% in its first six quarters with consumer spending, busi- and upcoming elections in Norway of recovery, compared to only 3% in ness investment and government (September 2013) and Sweden Europe and household consumption spending all contributing positively. (September 2014) respectively, these rose by 6% compared to 2%. The Conversely, throughout the whole of measures are part of many years of real estate markets evolved along 2012, the only positive contribution reforms following the region’s 1993 a similar pattern, with large capital to growth in the eurozone came financial crisis and should not be value declines in 2008-09 followed from net exports. characterised simply as responses by a recovery between 2010 and to economic weakness. In fact, 2012, on the back of positive rental Although the latest indicators between 1993 and 2012, Sweden value growth and yield reductions. suggest that a recovery is underway reduced its government spending The resulting strong performance in the European economies, the as a proportion of GDP from 67% to has driven investor interest in the outlook for the next three years 50% — a level that is in line with the Nordic markets, with competition (2014-16) remains weak. GDP growth EU 27 average (Exhibit 1). for prime stock causing the gap be- is forecast to average just 1.5% tween property yields in the region p.a. for Europe, compared to 2.1% But the recent strength of the and those of core Europe to close. p.a. for the Nordics over the same Nordic economies is not without

32.32. EPRA NEWS / 4644 / 2013 FEATURES

Exhibit 1 — Government expenditure as a % of GDP

% Denmark Finland Norway Sweden EU27 70

65

60

55

50

45

40

35 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Source: Datastream, AXA Real Estate Research risk. House prices have risen by prospects for the office occupier office markets in 2014 and 2015, 156% in the last 15 years (6.5% p.a.) markets correspond with this? with rental growth of 2.0% p.a. com- in the Nordic region ex-Denmark, in pared to 1.0% p.a. in Europe over the line with France and not far behind Strong occupier demand will same period. the UK, to what might be described drive prime rental value growth, as ‘bubble’ levels. except for in However, this outperformance is Demand for office space in the Nordic not expected to persist indefinitely. The household debt-to-income capital cities has rebounded sharply In Stockholm, large businesses ratio stands at an average of 148% in since the recession. Although some are increasingly being forced to the Nordics ex-Denmark (this figure of this demand could be regarded abandon the CBD in the search is over 250% in Denmark) and mort- as normal market churn, there has for either efficient modern floor gage terms have tended to be softer also been a degree of expansionary plates, or cheaper space, as rising than those in most other advanced activity, with net absorption positive rents have contributed to concerns economies. The high proportion since 2010 (Exhibit 2). On the other about increasing occupational costs. of homeowners on variable rates hand, net new supply has been low, With further tenant moves already (around 65% in Sweden) means that with only 0.6% of stock being added announced for 2014 and 2015, we when interest rates rise, there will per annum between 2009 and 2012. expect to see a rise in CBD vacancy be a significant impact on mortgage This compares to 1.2% for Europe as and a commensurate fall in prime repayments, while the bulk of mort- a whole in the same period. rental values in 2016 and 2017 gages granted in recent years have once this space is refurbished and been interest-only, making them The result is that prime office returned to the market. Due to the particularly sensitive to interest rate rental values have risen by 19% size of the Stockholm market, this changes. Exhibit 2 — Net absorption as a % of office stock

While the risk of a severe hous- % Copenhagen Helsinki Oslo Stockholm ing downturn is being addressed by 4 policymakers (LTV ratios have been 3 limited in Finland, Norway and 2 Sweden, while Sweden is moving 1 towards requiring amortisation over 0 shorter periods than previously), -1 the retail sector in particular would -2 face a severe negative impact -3 from such an eventuality. However, -4

the structural state of the economies 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 is such that the governments Source: Sadolin & Albaek, Catella, JLL, DTZ, AXA Real Estate Research are in a position to stimulate demand if a substantial slowdown since their trough in Q1 2010 — out- means that for the 2014-17 period, should occur. stripping all other European markets our forecasts predict only 1.1% p.a. except for the UK — and by 2.1% in rental value growth in the Nordics So we can see why the Nordics Q1-Q3 2013 (compared to 0.4% for versus 1.3% p.a. for Europe as a whole. are expected to outperform the Europe as a whole). We expect rest of Europe on economic growth strong occupier demand for limited Nevertheless, the positive short- measures and where the major risk prime CBD stock to continue to push term outlook for the office occupa- lies in these economies. But do the rental levels upwards in the Nordic tional markets helps explain >

EPRA NEWS / 4446 / 2013 33. Along with the yield rises being brought forward to 2014, the outlook has also been heavily impacted by

the shift in the time period Nordic region to rise by 5-10 basis returns of only 3.8% p.a. in 2014-17 points on average in 2014 and a and, although excluding Stockholm covered by the forecasts. further 50 basis points in 2015-17, increases this to 6.0%, the relative as investors shift their target from performance compared to the capital preservation to growth and European average has fallen sub- the strong investor interest for office pricing adjusts to the higher bond stantially. While, for many investors, assets in the region as other fore- yield environment. a 6% total return may be sufficient, casts do not share our pessimism for in a rising bond-yield environment, Stockholm in 2016-17. But does this Along with the yield rises being we perceive the risks as being to correspond with the outlook for the brought forward to 2014, the outlook the downside. This makes it capital markets? has also been heavily impacted by difficult to recommend purchasing the shift in the time period covered prime assets in these markets at Rising bond yields will limit by the forecasts. Exhibit 3. shows current pricing. prime property performance the change in our forecasts between With economic risks set to gradually December 2012 and August 2013, Reduce exposure to prime reduce and the risk of interest rate driven by both an earlier rise in Stockholm and Oslo offices rises increasing, our expectations bond yields and the shift in the Moreover, there are further concerns are for gradual rises in European forecast period, as 2013 total returns that reduce the attractiveness of bond yields through to 2017, with fall from the expected performance. these investments. Firstly, if we German bund yields expected The latter of these factors is more consider the volatility of European to rise to above 3% by the end of pronounced in the four Nordic prime office markets over the last the period. markets than for the European 15 years, we find that Norway has average, as we expected to see (and been among the most volatile, Nordic government bond yields have seen) further yield reductions with the standard deviation of total are unlikely to perform differently for prime stock. This reflected the returns reaching 26%, second only and may rise earlier than bunds due strength of the occupier markets and to Ireland at 27%. Sweden was also to the stronger economic recovery the continued investor demand for above average, at 17%. expected and the movement of core product in markets where the investor demand away from safe- perception of risk has been low. As a result of this high observed havens (Sweden, in particular, has level of volatility, Sweden and been seen as a ‘second Switzerland’ The result of these changes is Norway are forecast to be two of by some investors). We therefore that prime offices in the Nordic our worst performing prime office expect prime office yields in the markets are forecast to produce total markets on a risk-return basis in the 2014-17 period, ahead of only Exhibit 3 — Prime office total returns Switzerland. This suggests that,

% p.a. 2013-16 (Dec 2012 forecasts) 2014-17 (Aug 2013 forecasts) for a risk-averse investor, both 10 of these markets may be fully priced. Meanwhile, Denmark, and 8 Finland in particular, with below- 6 average volatility in the last 15 years, appear to offer better value 4 to investors wishing to increase their Nordic exposure. 2 Secondly, for a euro-denominat- 0 Denmark Finland Norway Sweden Europe ed investor, there is an additional Source: AXA Real Estate Research risk stemming from currency ef-

34.34. EPRA NEWS / 4644 / 2013 FEATURES

fects, as both Norway and Sweden have currencies that are free-floating against the euro (the Danish krone is pegged to the euro and is man- aged by the Danish central bank through currency purchases and interest rate movements). In order to quantify this risk, we have as- rencies appear to be heavily over- to prime assets in both Stockholm sumed a fully-hedged investment valued against long-term averages and Oslo. However, the relatively (although in practice, many property and purchasing power parity. low historic volatility and limited investors do not hedge at the asset Conversely, while it is possible to or zero currency risk in Denmark level). buy a forward contract in Denmark, and Finland, along with reason- this would incur a cost of only 0.1% able returns for prime property The cost to a euro-denominated p.a., because of Denmark’s peg to suggests that, on a relative basis at investor of fully hedging a five-year the euro. As a member of the euro- least, assets in these markets should investment in Sweden (through a for- zone, Finland bears no currency risk be held, with selective purchasing ward contract) would be 1.3% p.a. at for a euro-based investor. when mispriced opportunities current rates, while the cost would are identified. be 1.8% p.a. for the equivalent in The combined impact of our Norway. The net result of these costs total return forecasts and these Target out-of-town Stockholm and is that foreign investors’ returns two factors — volatility and foreign office to residential conversions would be even further diminished exchange risk — therefore leads us in Copenhagen for higher returns by this effect. This comes as little to conclude that euro-denominated Nevertheless, with the economic surprise considering that both cur- investors should reduce exposure outlook gradually improving > continued page 37

“Up in the Nordics/Scandinavia in the FTSE EPRA Europe Index the global stage, so I would we have long managed our and the Financial Reporting BPR encourage all Nordic listed finance and property sectors in an are reported by six companies property firms to consider greater efficient and well-regulated man- (50%) in the index. This allows ties with our wider European ner. Listed property companies comparability of performance and neighbours, work alongside EPRA have built a solid base of trust transparency of direction. Prop- on its many initiatives and have in the markets both home and erty firms have delivered jobs and a appropriate presence as Europe abroad. Performance in Sweden, infrastructure across Scandinavia, competes with North America for example, for those which and as awareness continues to and Asia for investment alloca- published figured demonstrated grow of the strong factors behind tion to the EPRA indices, and good performance. the region outside Europe, we as it competes with other forms look forward to greater allocations of non-listed property vehicles. The companies Fabege, Castel- of capital. I believe that closer alignment lum, AtriumLjungberg, Citycon, with EPRA and its network of top- Klovern, Wihlborgs Fastigheter One aspect which I believe level members will be beneficial and Kungsleden this month show could be strengthened is the for all.” an increase in their NAV between relatively few Nordic companies 2.3% and 4.2%. EPRA Sustain- closely engaging with EPRA. Henrik Saxborn, ability BPR reporting is followed We have very limited collective CEO of Castellum by all 12 Scandinavian companies voice or weight of our own on [email protected]

EPRA NEWS / 4446 / 2013 35. NORDIC VIEWPOINT STABLE, REWARDING AND UNDISCOVERED VALUE While there has been modest are slightly overpriced in aggregate. queue system to obtain the right to growth in overall transaction We recommend investors adopt a rent an apartment. The challenge volumes, we note that the recent low-risk approach to the markets. for investors is that initial yields share of international buyers has This might include avoiding aggres- are often low in major cities, as averaged just 11% (2009 to 2012) sive use of gearing or redevelop- many investors are willing to pay a and this is a little over a third of the ment strategies, for example. premium for a potential to convert level seen from 2002 to 2008. The The following are among the from rental apartments to owner- activity we have seen in the region property types we currently favour: occupier apartments some time in largely reflects a somewhat typical ••High quality office properties in the future. In our view, local investi- good locations, away from the gation can relatively easily highlight We are confident that the underlying most expensive CBD areas, but sub-markets with the potential for stability of the Nordic economies will not secondary. In essence, we do greatest capital growth prospects. continue to produce attractive and not fear the second tier. dependable returns to investors. ••Dominant, well anchored and The share prices of Nordic listed accessible retail propositions. property companies performed very Often this is understood to mean well from the beginning of the year global approach to cross-border the very largest shopping centres and up until May, running ahead of investing: a near unwavering focus but we see value in high quality the all-share index and reflecting on what is perceived to be prime, and dominant retail across the more optimism regarding eco- namely core CBD offices and the region. Size alone is not a defini- nomic outlook and property market largest shopping centres. tion of core or prime; rather we financing. However, the listed seek localised monopoly. We are property sector underperformed the We strongly advise investors increasingly mindful of the effects general stock market significantly that, while such strategies have of e-commerce, but for routine after May, which is partly a result their place, they often do not expose convenience and the best com- of higher long-term interest rates investors to the underlying value parison goods destinations we are and expectations that this eventu- that the Nordic markets offer and, less concerned. ally will put an upward pressure on commonly, they have a higher risk ••The high income characteristics property yields. than may first be perceived. Ad- of the industrial and logistics ditionally, the common perception properties. Solidity of the tenant, In conclusion, we are confident of “prime” is misjudged. We prefer flexibility of the premises and that the underlying stability of the to think of “core” investments alternative uses for the location Nordic economies will continue to being those where there is a high are important factors when con- produce attractive and dependable certainty of a durable income. sidering investments in the sector. returns to investors. We believe Such investments are to be found there will be opportunities across in many locations beyond the com- An alternative strategy to Nord- the four countries in coming years mon understanding of prime. ics might include investments in and strength and weaknesses can the residential markets. These differ. There are clear strengths As we investigate the sectors of are typified by substantial supply in the region: Finland offers high the market and the variations be- shortfalls which underpin a marked income, Denmark — stable rents tween prime, near prime and sec- opportunity in our view. and attractive financing, Norway ondary, this moderate overpricing — income growth and Sweden — of the markets in general is driven The historical growth in Swed- liquidity and transparency. by a strong overpricing of the prime ish residential rents, centrally markets. Of course, this implies that regulated, has remained below there is much better value to be the growth in wages and building found beyond the prime CBD and costs. This has led to a massive Lars Flåøyen is “best” retail in the principal cities. under-supply of rental apartments head of Nordic in major cities, and vacancy rates property research To illustrate this, our long-term below 1%. In Stockholm, it is not at Aberdeen Asset leading indicators show that at a uncommon for people to wait Management. national level the Nordic markets ten years in the public-managed [email protected]

36.36. EPRA NEWS / 4644 / 2013 FEATURES

and with bond yields rising along- side rising risk appetite, investors are beginning to demand higher returns and are willing to accept higher risks in exchange for this. Indeed, with increasing signs of a concerted of occupier, which, in turn, will at- that also provide investors with economic recovery, opportunities tract increased institutional investor opportunities to re-position assets to exist for achieving office sector demand. We also see opportunities meet occupier requirements. total returns in the 7-11% range for office to residential conversions for more core-plus to value-add in the region generally, but par- Parts of this article were first pub- type strategies. ticularly in Copenhagen, where the lished in IP Real Estate magazine downside risks to residential prices (Sept-Oct 2013) and since updated. We believe that these sorts of are limited and rents for apartments www.ipe.com/realestate returns are possible in the emerging are expected to continue to rise at out-of-town hubs in Stockholm, least in line with inflation. where improvements to road and rail infrastructure will improve In the current economic connectivity and large corporate and property market environment, occupiers are driving an improve- it is for these types of assets where Kiran Raichura is a research analyst ment in the quality of office stock. we perceive the greatest value to at AXA Real Estate Over time we expect these markets be — investments with stable or [email protected] to attract a greater breadth and depth improving macro fundamentals,

EPRA NEWS / 4446 / 2013 37. RETURNING TO THE CORE

The Pensions Institute at Cass Business School has recently issued a research report outlining that a new trend of increased real estate investment by Defined Contribution (DC) pension schemes in the UK can be ascertained which could lead to significant growth in the real estate investment sector.

Matthew Fletcher The objective of the research was From the research, it was Matthew Fletcher is investor to analyse and evaluate the role of apparent that although there is outreach director at EPRA. He is real estate in the UK’s DC pensions clear evidence real estate is being responsible for the management market in relation to auto-enrolment incorporated as a core (significant and development of relationships — the new system of pension separate) asset class in default in the UK and the Nordics. He’s a scheme provision for private sector funds, to fully harness the role real qualified accountant and his experience in investor employees in the UK, which is being estate can play, DC and real estate relations is complemented by a background in phased in by all employers between professionals need to build a bet- investment analysis. October 2012 and 2018. The most ter mutual understanding of their [email protected] important feature of auto-enrolment respective markets and objectives. schemes is the ‘default fund’, Fraser Hughes which is the multi-asset investment The study, which took place Fraser Hughes is Research Director strategy designed for the majority of between September 2012 and at EPRA. He held a number of members who do not wish to make September 2013, was commissioned investment-related positions in the investment decisions. The research by the Investment Property Forum City of London before relocating to presents what the authors believe (IPF) and jointly sponsored by them the Netherlands. He holds an MSc is the first comprehensive independ- together with EPRA, the Association in Investment Management and a BA in Finance. He ent academic study of its kind of Real Estate Funds (AREF), and the is a regular speaker at real estate related conferences that investigates the role of Institute and Faculty of Actuaries. and writes for a broad range of publications. real estate in the new world of These organisations did not seek to [email protected] auto-enrolment. influence the authors in any way. EPRA looks forward to supporting

38.38. EPRA NEWS / 4644 / 2013 FEATURES

EPRA has spent considerable time and effort breaking the myth that listed real estate only provides investors with equity-like performance.

18% UK Pension 16% Funds Real 14% Estate Holdings 12% as % of Total continued research in this area and, 10% Net Assets in particular, looking at the potential 8% 1962-2012 of the DC market in Continental 6% Europe in order to provide a broader 4% pan-European picture. 2% 0 1960 1970 1980 1990 2000 2010 “It is clear that as the DC market Source: ONS, Business Monitor MQ5 grows going forward, the role of real assets and real estate will become voured by auto-enrolment schemes other illiquid asset classes in due ever more important. The invest- are actively managed funds of UK course, such as infrastructure. ment characteristics of the listed real property and passively managed estate/REITs sector will offer savers funds of global listed real estate This move by the national multi- transparency, broad diversification companies — typically in the form employer auto-enrolment scheme, across regions, countries and prop- of REITs. Real estate derivatives are established by the government, erty sub-sectors, attractive dividend also emerging as a possible sub- demonstrates that the perceived yield coupled with the potential for class, but the real estate derivatives barriers (i.e., DC conventions rather capital growth, professionally man- market has significant capacity than regulatory requirements) to aged top quality real estate assets problems. real estate in DC – daily pricing, in a cost-effective liquid vehicle,” liquidity and cost – can be overcome said Fraser Hughes, EPRA director of The report forecasts that the DC within an overall cost constraint research. “NEST’s decision to invest auto-enrolment market will increase that achieves a member charge of 30% of its real estate allocation in six-fold by 2030, from GBP 276 0.5% p.a. over the long term. Other global listed real estate/REITs is a billion assets under management studies, such as the recent report by strong example of this.” (AUM) pre-auto-enrolment in 2012 CREATE Research, have suggested a to GBP 1,680 billion. Several new 20% overall allocation to real assets. EPRA has spent considerable DC schemes designed for auto- time and effort breaking the myth enrolment have selected real estate While the prog- that listed real estate only provides as the first illiquid or ‘alternative’ nosis overall for real investors with equity-like perform- asset class to be incorporated as a estate in DC schemes ance. While this is true in the short core component of ‘default’ multi- is positive, there is term (for holding periods under two asset investment strategies (‘default currently a wide gap years), a growing body of research funds’) with weightings of 5% to in the understanding from the industry’s leading inde- 20% and an average of 10%. Default that real estate and pendent academics clearly proves funds are likely to be used by 90% DC professionals that listed real estate/REITs provide to 97% of members, which means have of each direct real estate performance over that if this trend is adopted across other’s positions. the medium to long term. While the market real estate AUM in these On the one hand, some respondents to this report funds might be worth GBP 170 bil- real estate asset still subscribe to this myth, many lion by 2030. managers argue UK investors have changed the that there is a way they look at listed real estate/ The National Employment major disconnect REITs since the 2008 crash, and this Saving Trust’s (NEST’s) decision in between what DC default funds presents our sector with a host of 2013 to allocate 20% to real estate want and what they need. On the opportunities in the future. in both its principal and ethical other hand, DC professionals argue default funds is very significant. It is that real estate asset managers tend Key findings also important to note that the 20% to over-engineer their funds and The main real estate sub-classes fa- weighting in real assets will include concentrate too much on their >

EPRA NEWS / 4446 / 2013 39. Figure 2.2: UK ten-year rolling Sharpe Ratio by asset class, 1951-2012

Real Estate Equities Bonds 2.5

2

1.5

1

0.5 Sharpe Ratio

0

-0.5

-1 1950-1960 1960-1970 1970-1980 1980-1990 1990-2000 2000-2010 Conclusion The evidence indicates the begin- Source: Scott, The Property Masters, IPD ning of a clear trend towards the marketing presentations on the sub- default funds, but they need to be inclusion of real estate as a core classes and the underlying holdings. delivered in a DC-friendly format, asset class in DC default funds, espe- The DC approach, by contrast, typi- which requires a new approach. This cially in the new schemes designed cally is to focus on high-level asset is not so much about the tax status for auto-enrolment. These schemes allocation and to use funds that of the fund (which can be readily have chosen real estate not only offer the potential for market aver- made compliant with the DC tax re- to diversify investment risks and age (passive) or market-plus (smart gime), it is more about the sub-class increase risk-adjusted returns, but beta) returns. combinations. The preferred format also for its growth potential during favoured by NEST, and several the accumulation stage and its Further, DC platforms require dai- other new multi-employer schemes ability to generate reliable inflation- ly pricing and liquidity for all assets designed for auto-enrolment, is to linked cash flows during the decu- included on the platform. However, combine a domestic fund of actively mulation stage. this is not a regulatory requirement managed properties with a global and means that asset classes that REITs tracker. At the time of writing, the two have a potential role in improving main sub-classes being used in DC outcomes for DC members might be The DC market needs to under- default funds for real estate invest- excluded from the default fund. Nev- stand better the role of real assets in ment were funds of UK property ertheless, there are early signs that delivering optimal member outcomes. (actively managed) and funds of the real estate asset management Ultimately, it is the member who suf- listed companies (typically global arms of insurance companies are fers if restrictions on asset classes due tracker funds of REITs). NEST’s gaining some market share because to their low level of liquidity result in choice of a 70% UK direct and 30% they are beginning to understand DC less than optimal investment strate- global REITs fund allocation might objectives better. gies throughout both the accumula- provide a benchmark for the market tion and decumulation stages. going forward. The real estate asset management Figure 2.3: UK correlation between listed real estate and other assets market needs to understand better total returns 1987-2011 the political, regulatory and eco- nomic implications of and pressures IPD Index Desmoothes Equities Bonds 0.80 on auto-enrolment. The disconnect between DC professionals and the real estate market identified in the 0.60 research is far from unique — it extends to other managers of ‘real as- 0.40 set’ funds, such as infrastructure and commodities, both of which were 0.20 cited as examples of future ‘must- have’ asset classes in a diversified 0.00 default fund. -0.20 Arguably, real assets (i.e., those that match inflation) are essential -0.40 to the success of auto-enrolment 1 3 6 12 36 60 Source: IPD, EPRA, Datastream

40.40. EPRA NEWS / 4644 / 2013

TAKING A LEAP FORWARD EPRA ANNUAL REPORT SURVEY 2012/13

EPRA survey Fifty per cent of real estate highlights further companies surveyed gained an award in the 12th EPRA Annual improvement in Report Survey. There were 18 gold, reporting within 14 silver and 11 bronze awards European real issued, representing over 70% of the listed European real estate estate industry. sector by market capitalisation. The increase in awards highlights the continuing improvement in compliance with the EPRA’s Best Practice Recommendations across Europe.

“The survey results this year have taken a big leap forward with half of the companies surveyed achieving awards.”

The survey process Recognition is available through The survey, conducted by a team the following Award categories. of real estate experts from Deloitte, Gold Award reviewed 86 annual reports from 13 ••For exceptional compliance countries across Europe for compli- with the BPR. ance with EPRA’s Best Practices Recommendations. Silver Award ••For annual reports scoring The survey promotes awareness highly, based on compliance and encourages adoption of the BPR, with the BPR. focusing in particular on the key per- formance measures which are now Bronze Award widely recognised as important KPIs ••For annual reports scoring in the real estate industry. Signifi- well, based on compliance with the BPR. cantly, 79% of companies surveyed disclosed at least one performance Most Improved Award measure (representing 89% by mar- ••For the annual report showing ket capitalisation of the FTSE EPRA/ the greatest improvement in NAREIT Developed Europe indices), compliance with the BPR. a step ahead of the 84% by market capitalisation last year.

42.42. EPRA NEWS / 4644 / 2013 FEATURES

Looking ahead Highlights from the survey The more widely adopted A new EPRA cost performance ••50% of the companies in the measure has been published in survey gained an award: 18 Gold performance measures July this year, and the 2013/14 Awards, 14 Silver Awards and 11 survey will include an assess- Bronze Awards, 43 in total. have taken a leap forward, ment of compliance with this new ••Swiss Prime Site is the winner of measure. Of note, 14% of companies the Most Improved Annual Report 73% disclose NAV and 56% already present a form of cost Award, awarded to a Swiss com- metric, demonstrating the appetite pany for the second year running disclose EPS. in the industry to include this ••A leap forward in overall average information scores. 25 companies scored more than 70% and companies scoring Adoption of NNNAV still trails at Further information less than 30% decreased to 17. 50% but up slightly on last year. The full Deloitte report on the EPRA ••Companies in Switzerland, UK, ••The newer Yield and vacancy rate Annual Report Survey 2012/13 is France, Belgium, and the Nether- disclosures seem to be finally available to download from the lands have seen consistent marked gaining traction and leaping for- EPRA and Deloitte websites. increases in their scores in the ward. 37% disclose NIY and 38% last two years as the listed prop- disclose vacancy. Please contact Jennifer Chase erty sector reaches new heights ••14% of companies disclosed some at Deloitte (jchase@deloitte. in the adoption of the EPRA BPR form of cost ratio, looking ahead co.uk) or Mohamed Abdel Rahim across Europe. to the new EPRA Cost measure ([email protected]) at EPRA ••79% disclose at least one perform- published in July. if you would like any further ance metric (representing 89% by ••36% disclose the EPRA Perform- information about the survey. market capitalisation of the FTSE ance measures summary table. Deloitte real estate teams from EPRA/NAREIT Developed Europe ••Little overall improvement in across Europe were involved in indices). 28% of companies compliance with the Investment the survey and would welcome the disclose all five performance Property Reporting and Additional opportunity to meet locally with measures. disclosures sections of the BPR. > companies to discuss the survey ••The more widely adopted per- and individual company results, formance measures have taken as well as current trends in a leap forward, 73% disclose financial reporting. NAV and 56% disclose EPS. Jennifer Chase [email protected] Mohamed Abdelrahin [email protected]

EPRA NEWS / 4446 / 2013 43. EPRA ANNUAL REPORT AWARDS RESULTS

Gold Awards Silver Awards Bronze Awards

Beni Stabili SIIQ Big Yellow Group PLC Castellum AB Deutsche EuroShop AG Development Securities PLC DIC Asset AG EuroCommercial Properties NV Helical Bar PLC Prime Office REIT-AG Technopolis Oyj

Most Improved Annual Report “Swiss Prime Site acknowledges the value of the EPRA BPR to improve the comparability and transparency among Real Estate companies and we are delighted to have our efforts to report the EPRA BPR recognised through the most improved BPR award.”

Markus Meier, Deputy CFO, Swiss Prime Site

44.44. EPRA NEWS / 4644 / 2013

deviate from those on private assets due to factors such as higher liquid- ity and smaller transaction costs of the publicly traded assets, and due to varying diversification benefits offered by securities vs. direct assets.

We use sector-level REIT and direct real estate total return indices for the US and UK to investigate the similarity of public and private mar- ket returns and risks. The US data covers the period 1994-2011, whereas the UK data is for 1991-2011. While the US, private real estate indices ARE PUBLIC AND PRIVATE REAL ESTATE RETURNS AND RISKS THE SAME? Martin Hoesli and Elias An examination of the performance (NCREIF TBI) are transaction-based, Oikarinen further bolster of publicly and privately traded we unsmooth the appraisal-based assets is of importance to a large IPD private market returns for the the research inventory number of investors and financial UK to eliminate any bias that may providing evidence that institutions as it has clear portfolio arise from using such data. listed real estate and and hedging implications. But the approach does not give a clear indi- Refining the methodology REITs provide investors cation on whether the mean returns To obtain meaningful comparisons, with direct real estate of publicly and privately traded our data is adjusted to cater for the performance. The research assets should be the same. effects of leverage and management fees. More specifically, we calculate won the Nick Tyrrell On the one hand, it can be ex- deleveraged REIT returns by using research prize 2013 and pected that the returns and risks of the actual leverage ratios of the was commissioned and privately traded direct investments companies on a quarterly basis and and of securities that are based calculate private market returns sponsored by EPRA. on similar direct assets should be net of management fees. The com- alike, since the security cash-flows parisons are performed with annual are generated by the underlying management fees of 80 basis points, direct assets. On the other hand, the but various sensitivity analyses are returns on securities may notably also considered.

46.46. EPRA NEWS / 4644 / 2013 FEATURES

Figure 1 Real private market total return index together with its long- term equilibrium relation with the REIT market: the US office sector

400 Long-run Equilibrium 350 U.S. Office TBI 300

250

200

150

100

50

We propose an alternative 0 1 1 1 1 01 01 01 01 01 01 01 01 01 01 01 01 /0 /0 /03 /03 /03 /03 /03 /03 7/0 7/0 2/01 3/ 5/ 4/ 7/03 7/03 2 3 /03 5 /03 method to the conventionally used 4 /03 9 95 94 9 96/ 98/ 95 94 96 /03 98 /03 999/01 2011/ 19 999/03 19 2011 19 1 19 19 19 2001/ 2010/ 19 200 19 1 19 19 200 200 2001 2010 200 200 2009/ 200 2006/ 2008/ 2000/ 200 200 200 200 2009 /03 2006 /03 2008 /03 F-test, i.e., cointegration analysis, 2000 /03 to test for the equivalence of the returns over the long run. We argue the long-term relationship for the that cointegration analysis is more direct real estate total return index in reliable than the conventional F-test the US for the office sector, based on to study the topic. This method also the cointegrating relation between allows us to test formally and in a REITs and the direct market, together straightforward manner for a one- with the actual office TBI total to-one relationship between REIT return index. It is quite clear that the and direct real estate total return two types of real estate are closely indices. A one-to-one cointegrating related. relation between two series implies that there are tight economic forces The findings are somewhat differ- keeping the series together in the ent for the UK market. Similar to the long run and therefore an observed three US sectors, we find cointegra- equivalence of the mean returns is tion and cannot reject the one-to-one not just a coincidence that is likely long-run relationship between UK re- to vanish in the future. In the long term, public and private real estate For the US market, the results provide evidence of cointegration returns are similar after catering for the effects of between the public and private mar- kets in all the four sectors included property type, leverage, and management costs. in the analysis (retail, industrial, of- fice, apartments). Thus, the analysis shows that while in the short run tail REIT and IPD returns. However, the observed REIT and direct real there is no long-term relationship in estate returns can substantially devi- terms of cointegration between the ate from each other due to factors UK office sector indices. Therefore, such as data complications, market the substitutability of private and frictions, and slow adjustment to public real estate assets is worse in changes in the fundamentals in the this sector than in the other studied private market, in the long term, sectors. public and private real estate returns are similar after catering for the ef- We limit the test of risk equiva- fects of property type, leverage, and lence to the standard deviation of management costs. total returns. Based on Variance Ratio analysis, we compute and Moreover, in three sectors the graph the asset standard deviations hypothesis of a one-to-one relation and their confidence bands at each The full report is available between the adjusted total return investment horizon up to 20 quar- at www.epra.com. indices can be clearly accepted. ters. The return volatilities generally In the retail sector, private market do not differ significantly between mean returns are somewhat greater REIT and direct real estate regardless than those of REITs. Figure 1 shows of sector and time horizon. >

EPRA NEWS / 4446 / 2013 47. hman collapse. This is because the The return volatilities generally do not differ direct market is likely to follow the REIT market fall, and the expected significantly between REIT and direct real estate returns for REITs are therefore greater than those for direct real regardless of sector and time horizon. estate for some time after such adverse shock.

0.09 Private Real Estate ... from a clear direction REITs 0.08 Our findings have important practi- cal implications. First, securitised 0.07 and direct real estate investments Figure 2 can generally be considered to work 0.06 Return volatil- as good substitutes in an investment ity of US retail 0.05 portfolio with several years invest-

sector returns Standard Deviation ment horizon, since they provide depending on 0.04 similar total returns and return the investment variances, and co-move tightly over 0.03 horizon 11223 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 9 0 the long horizon.

Figure 2 shows the standard from the long-term relation for the As securitised real estate assets deviation of REITs and direct real US retail market). However, these enable diversification with smaller estate for the US retail sector. From a deviations appear to have been amounts of capital, and the liquidity statistical perspective, the standard only temporary, although the US is better and transaction costs are deviations of the two types of real apartment market is still far from lower in the public market than estate do not differ. Again, an excep- equilibrium in 2011Q4. in the private market, our findings tion is the UK office sector, where suggest that those investors who the unsmoothed private market These results confirm our ear- have relatively small amounts of returns have been more volatile lier findings according to which an capital and highly value liquidity than the REIT returns over the short investor should not reallocate his and low transaction costs should term. There may of course also portfolio from REITs to direct real tilt their real estate holdings towards be risks, such as liquidity risk, estate after a drastic drop in REIT publicly traded REITs. Neverthe- that differ between the public and prices due to shocks such as the Le- less, this does not necessarily private markets and that are not ca- tered for by the standard deviation Figure 3 Deviation of the private market index from its long-run of returns. relation with the public market: the US retail sector 40% Temporary deviation... 30% The findings are by-and-large robust 20% with respect to the assumed private market management fees. While the 10% cointegrating relations, including the 0% one-to-one relations, are generally -10% stable over time, notable deviations -20% from these relations emerged during -30% 1 1 01 01 01 01 02 02 02 02 02 02 /0 /03 /03 /03 /04

the global financial crisis (Figure 3 7/0 3/ 7/03 7/04 2/ 5/ 3 /04 4 /03 9 94 9 95 94 96/ 98 /03 19 999/ 2011/ 19 19 19 1 19 19 19 2001 200 2010 2009/ 200 2006/ 2000/ 200 200 200 200 2008/ 2009 /04 2006 /04 shows the deviation of the TBI index 2000 /04

48.48. EPRA NEWS / 4644 / 2013 FEATURES

Evidence suggests that REIT-related ETFs and derivatives can be used to hedge risks created by direct real estate holdings.

Martin Hoesli Martin Hoesli is Professor of real estate finance at the Universities of Geneva and Aberdeen and at the Kedge Business School in Bordeaux. He is the author of hold for all the real estate sectors, hedge risks in lending institutions’ six books and over 90 scholarly and liquidity and transaction costs portfolios that arise due to their articles in real estate. He is a tend to have less importance as outstanding mortgage-lending inven- past president of the European the planned investment horizon tory. Among other potential benefits, Real Estate Society (ERES) and is increased. such hedging could help banks to a board member of the Swiss survive better through the periods Financial Analyst Association Second, the long-term similar- of economic distress and drastically (SFAA). He is a Fellow of the ity of public and private returns decreasing real estate prices. Royal Institution of Chartered suggests that REIT-related ETFs and Surveyors (RICS) and a member derivatives can be used to hedge Due to the potentially lengthy of the EPRA research committee. risks created by direct real estate deviations from the equilibrium [email protected] holdings. As Fabozzi, Shiller and relations between public and private Tunaru (2009) note: “A primary real estate, hedging cannot totally Elias Oikarinen factor in deciding which derivative remove the risks. Moreover, in many Elias Oikarinen contract will provide the best hedge markets the current public market- holds a PhD is the degree of correlation between related vehicles are not sufficient in Economics the factors driving the price of the to properly exploit the hedging and is currently derivative instrument under consid- opportunities. That is, new financial an Assistant eration as the hedging vehicle and vehicles, especially for taking long- Professor at the Department of the underlying risk that investors term positions, and more liquid mar- Economics of the Turku School seek to eliminate”. kets for them are needed in order of Economics (Finland) and an to be able to better take advantage Adjunct Professor at the Univer- Due to the one-to-one cointegrat- of the hedging potentials. Anyhow, sity of Oulu (Finland). Several of ing relation between REITs and the longer the horizon and the his papers have appeared in the direct real estate in most of the faster the adjustment of the private leading international real estate studied sectors, a possibility to market towards the equilibrium journals. take short positions on ETFs, for in- relation, the better are the hedging [email protected] stance, offers a good opportunity to opportunities.

EPRA NEWS / 4446 / 2013 49. REFERENCES

TIME FOR FOCUS Via our new Industry It has long been a frustration months or even years in advance Calendar, analysts will be of the analyst and the investor (well done Affine for your detailed relations (IR) communities that results schedule). able to fully focus on you company reporting dates and their and quick-jump to your time schedules come thick and fast, Property companies can there- fundamental data on on top of one another, at certain fore see if their preferred time periods of the year. This inevitably clashes with a similarly sized com- www.epra.com/calendar leads to clashes, with companies of pany (or any company, but of course similar size and sectors reporting on the larger firms will take precedence the same day and at the same time. for analysts), and gives them the Like Kipling’s eponymous spider, opportunity to select an alternative analysts cannot be in two places at day/time that is free. During the once, so the dilemma arises as to busiest periods of reporting, share which call to attend – and therefore, adjustments, index reviews and which call to drop! results presentations, it pays to be aware what you are up against, and EPRA, with the assistance of soon an automatic ‘clash alert’ will the respective communities, has clearly list the full range of commit- developed an online calendar that ments your analysts will need to allows the IR teams from all the contend during your chosen day/ index companies to input their time. results dates and times, and secure their conference call slots - weeks, The ‘look and feel’ of the calen-

50. EPRA NEWS / 4443 / 20122013 REFERENCES

Create your own corporate entries. You must be logged in. Download everything to your local Outlook

Share details for reporting conference calls, events & roadshows etc

Choose dates which do not clash with other events or corporate actions so you can maximise market coverage.

dar is very similar to Outlook, so The calendar entries are also for: road-shows, financial results, users should be immediately able downloadable in Outlook, so users results presentations, property to add events and navigate. The tool can retain an entire year’s worth events, your Board meetings. More also has a search function allowing of reporting dates direct on their features will be added... users to search by Company, Type of desktop. But remember, the down- ••Free for all members to update; event, Country and Region. load .ics file is precisely that – just accessible for non-member via a snapshot of the dates held online. [email protected]; viewable by The calendar allows companies It is not streamed to your Outlook, everyone. to add all the normal details associ- so if you choose to house the ated with a reporting notice such as information locally you will need to url’s, conference call numbers and regularly update it by revisiting the Analysts can attend all the details. live EPRA calendar. results calls they need – We believe your numbers de- In addition, EPRA members can serve the most exposure to the most also add their own events such as mid-caps won’t be sacrificed analysts. As they can realistically road-shows, AGM’s, Board Meetings, only manage one call at a time, we Property Shows, conferences etc: because their timing coincides believe this will be widely used by them. To support their understand- In conclusion: with the big boys. ing and simply to save time, EPRA ••Analysts can search dates by links the calendar entry directly region & company, so make sure to the company’s fundamentals your activities are available to page so users can immediately see everyone to consider. performance data including: ••Analysts can jump straight to your Barney Coleman started his ••Annual reports and Corporate company details (daily updates of career as a general practice actions. NAV, LTV, assets, transaction his- Surveyor training and practising ••Price and Total Returns for any day tory, diversification, EPRA BPR etc) in the Central London commercial since index inclusion. from the calendar. property market in the 1990’s. ••Daily discounts to NAV since index ••It’s an especially convenient tool More recently his career has been entry. for analysts globally because property data related working on projects including ••Share price and market cap his- it overlays index review dates, the roll out of energy performance certificates in the tory. market closures and corporate UK and as Chief Operating Officer in a Joint Venture ••Transaction history. action dates in one place — so it will Company with HomeTrack. ••EPRA BPR. be used! [email protected] ••You can enter dates and details

EPRA NEWS / 4443 / 20122013 51. REFERENCES

MEMBERS OFFERS EPRA association membership not only offers anyone in the member organisation full access to the EPRA website/archive, regular research, economic, regulatory and index statistics updates; but much more.

IPE Magazine 4,000-5,000 top-level targeted subscribers in Discount of 20% on subscription. The full an- print (7,000-9,000 during MIPIM and Expo Real). nual rate is EUR 355. For more details, contact: PIE is written for investing institutions, capital [email protected] allocators and managers, banks, global REITs and other listed vehicles, IPE Real Estate is positioned at the interface funds, corporate treasur- of institutional investment and the real ers, academics and private estate industry. Drawing on its international investors – to help understand network of correspondents and supply-side reward, opportunity and risk research, the magazine and website’s mission in Europe’s diverse markets. is to bring to light the views and activities of European pension funds and other capital 12-month subscription owners (insurance companies and other plan rates are EUR 749, GBP 639 sponsors) investing in real estate and keep or USD 995, depending them up-to-date with the rapid evolution on delivery location, with of real estate as a sophisticated, global multiple subs available for asset class. institutions. Subscribers gain free entry to PIE events. Tel: + 44 20 7261 0666 EPRA and RICS mem- Fax: +44 20 7928 3332 bers receive a 10% discount on individual Email: [email protected] subscriptions. Register for a free 60-day trial now!

Go to: www.pfeurope.eu to register, PropertyEU is the pan-European information or email: [email protected]. source for real estate professionals. A full subscription package to PropertyEU includes the PropertyEU Daily Newslet- ter, PropertyEU newsflashes, PropertyEU magazine and special annual publica- tions Who’s Who and City Leaders as well as access to the subscriber-only The Institutional Real Estate Letter — Europe content on PropertyEU website. An an- is a monthly publication covering the $3.9 nual package normally costs EUR 495. trillion European institutional property EPRA members can enjoy a 20% discount, market. Written for the European pension paying only EUR 395 per year. Mail your fund community, The Letter - Europe gives contact details to: [email protected] pension funds, investment advisers, con- indicating your EPRA membership number. sultants and others serving this industry unique perspective on investment patterns, trends and strategies.

The Property Investor Europe mission is to bring transparency to Mainland Europe real For a FREE estate for US & global investment professionals. two-month Via a magazine, Online Weekly, HTML Letter, trial subscription, daily intelligence, podcast and events, its hard go to: news-analysis-commentary fosters investment www.irei.com/publications/ capital flows in and around the continent. A the-institutional- subscription-based service founded in 2005, PIE real-estate-letter-europe, is uniquely published in English from Frankfurt, or e-mail your request to Germany, with editors around Europe. Weekly, [email protected]. PIE reaches over 50,000 institutional profes- sionals via the PIE Letter, and goes monthly to

52. EPRA NEWS / 4443 / 20122013 NOW LIVE!

Go to: www.epra.com/charts REFERENCES

FTSE EPRA/NAREIT GLOBAL REAL ESTATE INDICES GLOBAL

400 GLOBAL EPRA/NAREIT Global TR (USD) 188.7% 350 EPRA/NAREIT North America TR (USD) 174.6% EPRA/NAREIT Asia TR (USD) 245.1%

300 EPRA/NAREIT Europe TR (EUR) 119.8% d to 100) e 250 eba s r

alue ( 200 V Ind ex 150

100

50 Jul 03 Oct 03Jan 04Apr 04Jul 04Oct 04Jan 05Apr 05 Jul 05 Oct 05 Jan 06Apr 06Jul 06Oct 06Jan 07Apr 07 Jul 07 Oct 07Jan 08Apr 08Jul 08Oct 08Jan 09Apr 09Jul 09Oct 09Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12April 12Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13

Top 5 and Bottom 5 Performers Investment Price Return Total Return Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Company Country Focus Sector (%) (Oct-31) YTD -1Y -3Y Oct-31 Q Eurobank Properties * Greece Rental Diversified 21.40 21.40 84.08 87.53 18.42 0.00% Q Development Securities UK Non-Rental Retail 18.73 20.08 67.69 49.87 2.27 0.02% Q Sabra Health Care REIT * USA Rental Health Care 16.91 16.91 28.55 27.14 19.12 0.05% Q St Modwen Properties UK Non-Rental Diversified 15.89 15.89 55.19 77.08 30.94 0.01% Q Cole Real Estate Investments * USA Rental Diversified 15.82 15.82 -NA- -NA- -NA- 0.02% q GLP J-REIT * Japan Rental Industrial -6.93 -6.93 54.81 -NA- -NA- 0.02% q Campus Crest Communities USA Rental Residential -7.31 -7.31 -14.87 -4.45 -1.78 0.07% q New World Development Hong Kong Non-Rental Diversified -7.89 -7.89 -9.65 -7.01 17.11 0.04% q Premier Investment Co. * USA Rental Residential -10.71 -10.71 -5.39 -4.00 45.38 0.05% q Digital Realty Trust * USA Rental Diversified -10.24 -10.24 -26.35 -17.42 -2.03 0.07%

Top 10 on Market Cap Investment Market Cap Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Company Country Focus Sector (EUR m) (%) Weight YTD -1Y -3Y Oct-31 1 Simon Property Group * USA Rental Retail 34,909.81 8.43 -0.06 4.53 20.18 0.03% 2 Mitsubishi Estate Japan Non-Rental Diversified 26,532.63 9.49 -3.42 77.90 10.82 0.00% 3 Mitsui Fudosan Japan Non-Rental Diversified 20,522.88 7.34 -1.82 101.92 14.84 0.01% 4 Unibail-Rodamco * France Rental Retail 18,765.31 16.31 10.69 15.85 12.77 0.04% 5 Public Storage * USA Rental Self Storage 17,556.28 4.24 17.77 23.94 21.86 0.03% 6 Sumitomo Realty & Dev Japan Non-Rental Diversified 16,508.39 5.90 -0.64 110.75 24.84 0.00% 7 Westfield Group * Australia Rental Retail 15,618.95 5.59 -1.73 6.21 2.45 0.05% 8 Sun Hung Kai Props Hong Kong Non-Rental Diversified 14,854.18 5.31 -3.70 -2.73 12.14 0.03% 9 Prologis * USA Rental Industrial 14,640.70 3.53 9.48 16.51 13.11 0.03% 10 Sumitomo Realty & Dev Japan Non-Rental Diversified 16,508.39 5.90 -0.64 110.75 24.84 0.00%

Indices Market Cap Close Value Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Index Description (EUR m) Oct-31 YTD -1Y -3Y Oct-31 EPRA/NAREIT Europe TR (EUR) 89,413.34 2,120.06 15.45 17.700 -11.24 4.18% EPRA/NAREIT Asia TR (USD) 306,179.92 2,352.20 13.95 14.66 -11.67 3.41% EPRA/NAREIT North America TR (USD) 337,107.80 3,476.50 25.49 43.36 -5.34 3.69% EPRA/NAREIT Global TR (USD) 768,453.88 2,851.93 18.18 24.74 -9.25 3.65%

Regional Breakdown by Market Cap Investment Focus Market Cap Breakdown SectorInvestment Breakdown Focus Market Cap Breakdown

Asia 34.5% Global Non-Rental 19% Global Industrial 5.8% Europe 14.2% Global Rental 81% Global Residential 9.7% Global Speciality 0.0% North America 51.2% Self Storage 3.2% Middle East 0.1% Global Retail 24.3% Global Office 12.8% Global Lodging/Resorts 2.9% Global Industrial/Office 1.5% Global Healthcare 7.0% Global Diversified 32.4%

54.54. _ EPRAEPRA NEWSNEWS // 4638 // 20132011 FTSE EPRA/NAREIT GLOBAL REAL ESTATE INDICES ASIA

500 GLOBAL EPRA/NAREIT Hong Kong TR (HKD) 329.2% EPRA/NAREIT Japan TR (JPY) 260.9% 400 EPRA/NAREIT Singapore TR (SGD) 217.3% EPRA/NAREIT Australia TR (AUD) 32.5%

300 d to 100) e eba s r

200 alue ( V Ind ex

100

0

Jul 03 Oct 03Jan 04Apr 04Jul 04Oct 04Jan 05Apr 05 Jul 05 Oct 05 Jan 06Apr 06Jul 06Oct 06Jan 07Apr 07 Jul 07 Oct 07Jan 08Apr 08Jul 08Oct 08Jan 09Apr 09Jul 09Oct 09Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13

Top 5 and Bottom 5 Performers Investment Price Return Total Return Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Company Country Focus Sector (%) (Oct-31) YTD -1Y -3Y Oct-31 Q Agile Property Holdings Hong Kong Non-Rental Diversified 9.48 9.48 -10.70 10.49 34.21 4.11% Q Shimao Property Hong Kong Non-Rental Diversified 9.42 9.42 37.28 35.61 39.14 2.82% Q New World China Land Hong Kong Non-Rental Diversified 9.23 9.23 15.32 21.29 33.11 1.64% Q Centro Retail Australia * Australia Rental Retail 8.77 8.77 9.25 18.42 88.40 5.69% Q Shui On Land Hong Kong Non-Rental Diversified 8.43 8.43 -20.23 -8.80 16.98 2.11% q Kenedix Realty Investment * Japan Rental Office -8.80 -6.87 52.54 68.31 30.94 4.25% q Mori Trust Sogo REIT * Japan Rental Office -6.92 -6.92 25.24 24.73 6.63 0.04% q GLP J-REIT * Japan Rental Industrial -6.93 -6.93 54.81 -NA- -NA- 2.33% q New World Development Hong Kong Non-Rental Diversified -7.89 -7.89 -9.65 -7.01 17.11 3.72% q Premier Investment Co. * Japan Rental Diversified -10.27 -8.04 32.50 45.27 19.81 5.02%

Top 10 on Market Cap Investment Market Cap Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Company Country Focus Sector (EUR m) (%) Weight YTD -1Y -3Y Oct-31 1 Mitsubishi Estate Japan Non-Rental Diversified 26,532.63 9.49 -3.42 77.90 10.82 0.43% 2 Mitsui Fudosan Japan Non-Rental Diversified 20,522.88 7.34 -1.82 101.92 14.84 0.68% 3 Sumitomo Realty & Dev Japan Non-Rental Diversified 16,508.39 5.90 -0.64 110.75 24.84 0.43% 4 Westfield Group * Australia Rental Retail 15,618.95 5.59 -1.73 6.21 2.45 4.64% 5 Sun Hung Kai Props Hong Kong Non-Rental Diversified 14,854.18 5.31 -3.70 -2.73 12.14 3.30% 6 Wharf Holdings Hong Kong Non-Rental Diversified 9,377.31 3.35 -2.83 26.30 -NA- 2.60% 7 Link REIT * Hong Kong Rental Retail 8,474.18 3.03 2.76 5.23 27.29 3.75% 8 Stockland Trust Group * Australia Non-Rental Diversified 6,440.28 2.30 3.62 22.83 5.87 5.99% 9 Westfield Retail Trust Australia Rental Retail 6,113.39 2.19 4.04 -NA- -NA- 6.29% 10 Goodman Group * Australia Non-Rental Industrial 6,038.30 2.16 3.69 18.60 3.41 3.83%

Indices Market Cap Close Value Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Index Description (EUR m) Oct-31 YTD -1Y -3Y Oct-31 EPRA/NAREIT Australia TR (AUD) 80,703.59 1,845.19 11.50 12.54 12.71 5.27% EPRA/NAREIT Hong Kong TR (HKD) 747,189.65 2,790.19 -4.78 3.26 0.53 3.15% EPRA/NAREIT Japan TR (JPY) 15,555,438.96 3,834.50 46.51 75.81 26.25 1.51% EPRA/NAREIT Singapore TR (SGD) 59,437.92 1,832.33 -2.42 4.96 2.95 3.34%

Country Breakdown by Market Cap Investment Focus Market Cap Breakdown SectorInvestment Breakdown Focus Market Cap Breakdown

New Zealand 0.2% Asia Non-Rental 53% Retail 18% Australia 20.1% Asia Rental 47% Residential 1% Office 13% Japan 41.7% Industrial 8% Hong Kong 25.4% Diversified 60% Singapore 12.6%

EPRA NEWS / 3846 / 20112013 _ 55.55. REFERENCES

FTSE EPRA/NAREIT GLOBAL REAL ESTATE INDICES EUROPE

500 EPRA/NAREIT Sweden TR (SEK) 339.1% EPRA/NAREIT France TR (EUR) 310.6% 400 EPRA/NAREIT Netherlands TR (EUR) 86.2% EPRA/NAREIT UK TR (GBP) 64.1% d to 100) e 300 eba s r alue ( V 200 Ind ex

100

0 Jul 03 Oct 03Jan 04Apr 04Jul 04Oct 04Jan 05Apr 05 Jul 05 Oct 05 Jan 06Apr 06Jul 06Oct 06Jan 07Apr 07 Jul 07 Oct 07Jan 08Apr 08Jul 08Oct 08Jan 09Apr 09Jul 09Oct 09Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 July 12 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13

Top 5 and Bottom 5 Performers Investment Price Return Total Return Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Company Country Focus Sector (%) (Oct-31) YTD -1Y -3Y Oct-31 Q Eurobank Properties * Greece Rental Diversified 21.40 21.40 84.08 87.53 18.42 0.00% Q Development Securities UK Non-Rental Retail 18.73 20.08 67.69 49.87 2.27 2.05% Q St Modwen Properties UK Non-Rental Diversified 15.89 15.89 55.19 77.08 30.94 1.06% Q Quintain Estates UK Non-Rental Diversified 14.79 14.79 82.16 81.31 34.91 0.00% Q IGD * Italy Rental Retail 11.68 11.68 15.79 19.13 -8.00 7.96% q Swiss Prime Site Switzerland Rental Office -1.64 -1.64 -9.89 -10.36 1.21 5.23% q Prime Office REIT-AG * Germany Rental Office -2.30 -2.30 -0.49 0.40 -NA- 0.00% q Wereldhave Belgium * Belgium Rental Diversified -2.34 -2.34 6.36 11.22 12.33 5.09% q TAG Immobilien Germany Non-Rental Diversified -2.98 -2.98 -3.74 2.66 15.60 2.81% q Norwegian Property ASA Norway Rental Office -4.15 -4.15 -8.00 -8.54 -9.62 2.62%

Top 10 on Market Cap Investment Market Cap Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Company Country Focus Sector (EUR m) (%) Weight YTD -1Y -3Y Oct-31 1 Unibail-Rodamco * France Rental Retail 18,765.31 16.31 10.69 15.85 12.77 4.35% 2 Land Securities * UK Rental Diversified 9,095.67 7.91 24.29 26.68 16.47 3.03% 3 British Land * UK Rental Diversified 7,338.79 6.38 15.40 22.72 11.25 4.27% 4 Hammerson * UK Rental Retail 4,423.41 3.84 12.08 16.00 11.46 3.46% 5 Klepierre * France Rental Retail 3,227.32 2.81 15.19 20.89 10.18 4.53% 6 Swiss Prime Site Switzerland Rental Office 3,076.92 2.67 -9.89 -10.36 1.21 5.23% 7 SEGRO * UK Rental Industrial 2,864.32 2.49 38.74 44.00 7.92 4.53% 8 INTU Properties UK Rental Retail 2,753.35 2.39 2.57 7.87 0.61 4.36% 9 Derwent London * UK Rental Office 2,706.91 2.35 20.72 23.29 19.69 1.38% 10 Capital & Counties Properties UK Rental Retail 2,685.32 2.33 43.99 54.05 33.07 0.43%

Indices Market Cap Close Value Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Index Description (EUR m) Oct-31 YTD -1Y -3Y Oct-31 EPRA/NAREIT UK TR (GBP) 38,831.58 2,424.32 23.44 28.05 14.49 3.15% EPRA/NAREIT Netherlands TR (EUR) 24,147.32 2,979.34 10.09 10.90 -4.30 5.02% EPRA/NAREIT France TR (EUR) 10,463.24 6,171.94 7.60 11.08 9.02 5.53% EPRA/NAREIT Sweden TR (SEK) 65,820.21 7,523.86 17.66 20.32 8.77 3.00%

Country Breakdown by Market Cap Investment Focus Market Cap Breakdown SectorInvestment Breakdown Focus Market Cap Breakdown

United Kingdom 40% Europe Non-Rental 5% Speciality 0.0% Nederlands 21% Europe Rental 95% Self Storage 0.9% Retail 33.8% France 9% Residential 7.7% Austria 1% Office 15.2% Sweden 7% Lodgings/Resorts 0% Other countries 22% Industrial 3.7% Healthcare 0.6% Diversified 38.1%

56.56. _ EPRAEPRA NEWSNEWS // 4638 // 20132011 FTSE EPRA/NAREIT GLOBAL REAL ESTATE INDICES NORTH AMERICA

350

GLOBALEPRA/NAREIT TR (USD) 166.9% GLOBALEPRA/NAREIT Canada TR (CAD) 193.4% 300

250 d to 100) e eba s 200 r alue ( V

150 Ind ex

100

50 Jul 03 Oct 03Jan 04Apr 04 Jul 04 Oct 04Jan 05Apr 05 Jul 05 Oct 05 Jan 06Apr 06 Jul 06 Oct 06Jan 07 Apr 07 Jul 07 Oct 07Jan 08Apr 08Jul 08 Oct 08Jan 09Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 July 12 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13

Top 5 and Bottom 5 Performers Investment Price Return Total Return Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Company Country Focus Sector (%) (Oct-31) YTD -1Y -3Y Oct-31 Q Sabra Health Care REIT * USA Rental Health Care 16.91 16.91 28.55 27.14 19.12 5.06% Q Cole Real Estate Investments * USA Rental Diversified 15.82 15.82 -NA- -NA- -NA- 1.83% Q Spirit Realty Capital * USA Rental Diversified 13.94 13.94 12.06 -NA- -NA- 5.18% Q Omega Healthcare Investors * USA Rental Health Care 11.28 12.89 47.17 53.01 18.57 5.78% Q Alexander’s Inc. * USA Rental Retail 12.46 12.46 -0.24 -24.55 -1.36 3.42% q Dundee Int. Real Estate Inv. Trust Canada Rental Ind./Office Mixed -3.61 -3.61 -17.02 -18.65 -NA- 8.82% q American Homes 4 Rent * USA Rental Residential -4.15 -4.15 -NA- -NA- -NA- 0.00% q Mack-Cali Realty * USA Rental Office -6.29 -4.92 -15.51 -15.12 -8.58 5.84% q Campus Crest Communities USA Rental Residential -7.31 -7.31 -14.87 -4.45 -1.78 6.59% q Digital Realty Trust * USA Rental Diversified -10.24 -10.24 -26.35 -17.42 -2.03 6.55%

Top 10 on Market Cap Investment Market Cap Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Company Country Focus Sector (EUR m) (%) Weight YTD -1Y -3Y Oct-31 1 Simon Property Group * USA Rental Retail 34,909.81 8.43 -0.06 4.53 20.18 2.98% 2 Public Storage * USA Rental Self Storage 17,556.28 4.24 17.77 23.94 21.86 2.99% 3 Prologis * USA Rental Industrial 14,640.70 3.53 9.48 16.51 13.11 2.80% 4 Ventas * USA Rental Health Care 14,119.53 3.41 3.91 7.27 10.65 4.11% 5 HCP * USA Rental Health Care 13,824.62 3.34 -3.50 -0.45 10.04 5.06% 6 Equity Residential Props * USA Rental Residential 13,726.00 3.31 -5.49 -5.37 5.67 3.06% 7 Health Care REIT * USA Rental Health Care 13,567.83 3.27 9.55 14.23 12.95 4.72% 8 Avalonbay Communities * USA Rental Residential 11,899.89 2.87 -5.41 -4.67 8.72 3.42% 9 Boston Properties * USA Rental Office 11,544.44 2.79 -0.34 -0.19 8.57 2.51% 10 Vornado Realty Trust * USA Rental Diversified 10,974.71 2.65 13.95 17.42 4.50 3.28%

Indices Market Cap Close Value Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Index Description (EUR m) Oct-31 YTD -1Y -3Y Oct-31 EPRA/NAREIT Canada TR (CAD) 48,290.07 5,212.61 -3.40 -0.44 8.51 5.54% EPRA/NAREIT United States TR (USD) 516,994.95 4,706.22 7.80 11.47 12.07 3.63%

Country Breakdown by Market Cap Investment Focus Market Cap Breakdown SectorInvestment Breakdown Focus Market Cap Breakdown

United States 92% North America Non-Rental 100% Speciality 0% Canada 8% North America Rental 0% Self Storage 6.0% Retail 26.1% Residential 15.8% Office 12.1% Lodgings/Resorts 5.4% Industrial 5.2% Industrial/Office 3.0% Healthcare 13.5% Diversified 12.0%

EPRA NEWS / 3846 / 20112013 _ 57.57. REFERENCES

FTSE EPRA/NAREIT GLOBAL REAL ESTATE INDICES EMERGING MARKETS

250

EPRA/NAREIT AIM TR (USD) -53.7% EPRA/NAREIT Emerging 200 Market TR (USD) 109.5% d to 100) e 150 eba s r alue ( V 100 Ind ex

50

0 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 Oct 06 Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 July 12 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13

Top 5 and Bottom 5 Performers Investment Price Return Total Return Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Company Country Focus Sector (%) (Oct-31) YTD -1Y -3Y Oct-31 Q Prestige Estates Projects Ltd India Non-rental Diversified 21.80 21.80 -20.26 -7.53 -9.83 0.84% Q SM Prime Hldgs Philippines Rental Retail 19.73 19.73 18.00 32.28 27.30 1.41% Q DLF India Non-rental Diversified 18.43 18.43 -34.24 -25.22 -24.00 1.32% Q Megaworld Corporation Philippines Non-rental Diversified 17.79 17.79 39.83 56.73 15.03 0.92% Q Intiland Development Tbk PT Indonesia Non-rental Diversified 15.63 15.63 10.45 17.46 -NA- 1.35% q JHSF Participacoes SA Brazil Non-rental Residential -12.81 -12.81 -33.57 -36.73 24.17 3.33% q Rossi Residencial SA Brazil Rental Residential -12.93 -12.93 -32.69 -33.95 -NA- 10.73% q Gafisa Brazil Non-rental Residential -15.36 -15.36 -35.67 -18.77 -38.63 0.00%

q PDG Realty S/A Empreendimentos e Participacoes Ord Brazil Non-rental Residential -17.48 -17.48 -34.19 -40.64 -39.56 0.00% q Desarrolladora Homex SA de CV Mexico Non-rental Residential -36.77 -36.77 -88.99 -89.76 -65.09 0.00%

Top 10 on Market Cap Investment Market Cap Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Company Country Focus Sector (EUR m) (%) Weight YTD -1Y -3Y Oct-31 1 China Overseas Land & Inv (Red Chip) China Non-rental Residential 9295.47 16.06 3.90 18.23 13.81 1.75% 2 China Resources Land (Red Chip) China Non-rental Residential 3970.98 6.86 6.40 26.84 13.68 1.54% 3 Emaar Properties UAE Non-rental Diversified 3637.20 21.56 64.80 68.42 16.71 1.64% 4 Growthpoint Prop Ltd South Africa Rental Diversified 3262.34 19.34 6.85 8.01 16.58 5.84% 5 BR Malls Participacoes S/A Ord Brazil Rental Retail 3084.40 21.06 -19.13 -18.73 10.65 2.19% 6 Ayala Land Philippines Non-rental Diversified 2825.28 4.88 11.76 25.05 21.23 0.99% 7 Redefine Income Find South Africa Rental Diversified 2178.41 12.91 12.93 14.44 13.46 6.43% 8 SM Prime Hldgs Philippines Rental Retail 1758.48 3.04 18.00 32.28 27.30 1.41% 9 Aldar Properties PJSC UAE Non-rental Diversified 1700.56 10.08 114.84 100.00 1.76 2.22% 10 Shenzhen Vanke (B) China Non-rental Residential 1638.09 2.83 5.04 29.87 6.01 1.70%

Indices Market Cap Close Value Total Rtn (%) Total Rtn (%) Total Rtn (%) Div Yld (%) Index Description (EUR m) Oct-31 YTD -1Y -3Y Oct-31 EPRA/NAREIT Emerging Market TR (USD) 95,767.94 2,171.85 -7.53 -0.10 -1.31 2.86% EPRA/NAREIT AIM TR (USD) 58,344.78 2,636.12 -3.44 8.37 7.12 2.41%

Country Breakdown by Market Cap Global Breakdown by Country Brazil 14.3% Asia Pacific 61% Chile 0% Europe 6% China 35.9% Middle East/Africa 18% Czech 1.0% Americas 15% Egypt 0.2% lndia 1.5% Indonesia 6.0% Malaysia 4.7% Mexico 1.1% Philippines 6.3% Poland 0.5% Russia 3.7% South Africa 11.8% South Korea 0% Thailand 5.5% Turkey 1.0% Taiwan 0.2% UAE 5.7%

58.58. _ EPRAEPRA NEWSNEWS // 4638 // 20132011 Europe ex UK

FTSE EPRA/NAREIT GLOBAL REAL ESTATE INDICES NAV & LTV UK Discounts to Latest Published NAVs in Europe 20% Switzerland

Sweden 0.0

Norway -0.2

Netherlands

-0.4

Italy

-0.6

Greece

-0.8 Germany

-1.0 France Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13

Europe France Netherlands Italy Greece

Belgium Switzerland Norway Germany Finland

Sweden UK Finland Austria

Belgium Historical LTV - European Market

75.00% Austria

65.00%

55.00%

45.00%

35.00%

25.00% Jul-11 Jul-13 Jul-12 Jan-11 Jun-11 Oct-11

Jan-13 Jan-12 Sep-11 Jun-13 Apr-11 Oct-13 Jun-12 Oct-12 Dec-11 Feb-11

Mar-11 Aug-11

Sep-12 Apr-13 Apr-12 Nov-11 Feb-12 Dec-1 2 Feb-12

Dec-10 Mar-13 Aug-13 May-11 Mar-12 Aug-12

Nov-12

Nov-10 Sept-13 May-13 May-12

Europe France United Kingdom Netherlands Germany Belgium Finland Sweden Switzerland

EPRA NEWS / 3846 / 20112013 _ 59.59. COVER

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