Post on 25-Dec-2015
Better insight + Better process = Better results
Beyond just bricks & mortar: global property securities
Stephanie FennesseyClient Portfolio Manager, Property Securities
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Better insight + Better process = Better results
What do you get with a property security?
Like equity, shares in a company, not “bricks & mortar”
Like property, ownership of actual property assets, but in the form of a share
These shares trade on global stock exchanges
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Better insight + Better process = Better results
So is this equity or property?
The answer is YES. Consider….
Long-term exposure = property
Equity-like liquidity and volatility
Think of it as property, but be prepared for more fluctuations due to marketplace fluctuations
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Better insight + Better process = Better results
Generally, there are two types of property securities
DividendIncome
Shareholders
Real Estate Investment Trust
(REIT)
DividendIncome
ShareholdersTaxes
Real Estate Operating Company
(REOC)Taxes
Government Taxes
Incomefrom Rent and Sales
Incomefrom Rent and Sales
Properties:
Office, Warehouse, Apartments, Malls, Shopping Centres, etc.
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Better insight + Better process = Better results
The growth of property securities is a global phenomenon
0
100
200
300400
500
600
700
800
'89 '91 '93 '95 '97 '99 '01 '03 '05
Americas Europe Asia/Australia
Global Property Research 250 IndexMarket cap ($ billions)
Source: Global Property Research, JPMorgan Investment Management
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Better insight + Better process = Better results
Success of U.S. REITs led to the adoption of REITs and REIT-like securities around the world
Sources: NAREIT, JPMorgan Investment Management
1960s 1990s1980s1970s Underconsideration
2000s
U.S.1960
Netherlands1969
Australia1971
Luxembourg1988
Israel2006
Turkey1998
Canada1993
Belgium1990
Brazil1993
South Korea2001
Singapore1999
Hong Kong2003
Taiwan2003
France2003
Mexico2004
Malaysia2005
UK2007
Japan2000
Germany07?
India
Italy07?
Finland
Dubai China
EU
Thailand2005
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Better insight + Better process = Better results
Global Growth Potential
£0
£50
£100
£150
£200
£250
£300
£350
£400
U.S. Ex U.S.
Publicly traded property £ billions
The property outside the U.S. is much less securitised, leaving considerable room for growth
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Better insight + Better process = Better results
Property Securities Investment Advantages
Long term property exposure with equity like liquidity
Diversification benefits
Strong historical returns
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Better insight + Better process = Better results
Low historical correlations with other asset classes
0.550.47
0.42
0.320.27
-0.030.01
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
GlobalEquity
US Equity UKEquities
Europe exUK
Equities
GlobalFixed
Income
UK DirectProperty
UK FixedIncome
Global property securities correlations of returns*(%)
Source: Global Property Research, Morgan Stanley Capital International, Citigroup, JPMorgan Investment Management. Index proxies for each asset class are: Global Real Estate Securities: Global Property Research 250 Index; Global Equity: MSCI World Index; US Equity: S&P 500 Index; UK Equities: FTSE 100 ; Europe ex UK Equities: MSCI Europe ex-UK; Global Fixed Income: JPMorgan Government Bond Index Global; UK Fixed Income: FTSE UK GILTS. Indices do not include fees or operating expenses and are not available for actual investment. Indices presented are representative of various broad-based asset classes. They are unmanaged and shown for illustrative purposes only. * Based on ten years of monthly total returns through 31 December 2006
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Better insight + Better process = Better results
Strong historical performance relative to other asset classes
30.9%27.5%
12.7%
18.3%15.2%
13.5%14.1%
8.9%6.5%
2.9%
8.3%5.3%
0%
5%
10%
15%
20%
25%
30%
35%
3-year 5-year 10-year
Global Property Research 250 Index
IPD Index (UK Direct Property)
MSCI World Index
JPMorgan Government Bond Index Global
Annualised returns for periods ending 31 December 2006(%)
Source: FactSet, Global Property Research, Morgan Stanley Capital International, JPMorgan Investment Management, IPD
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Better insight + Better process = Better results
Conclusion: adding global property securities diversifies a portfolio
Index proxies for each asset class are: Global Property Securities: Global Property Research 250 Index; UK Equity: FTSE All Share; UK Bonds: FTSE UK GILTS Index; UK Direct Property: IPD Index. Indices do not include fees or operating expenses and are not available for actual investment. Indices presented are representative of various broad-based asset classes. They are unmanaged and shown for illustrative purposes only. * Based on ten years of monthly total returns through 31 December 2006
Return: 7.71%
Std Dev: 7.09%
Sharpe Ratio: 0.58
Then adding 10% to Global Property
Securities
Return: 8.59%
Std Dev: 6.32%
Sharpe Ratio: 0.79
Then adding 10% to Global Property
Securities
Return: 7.09%
Std Dev: 7.16%
Sharpe Ratio: 0.48
If current portfolio,
UK Equities50%
UK Bonds50%
Return: 8.00%
Std Dev: 6.32%
Sharpe Ratio: 0.69
If current portfolio,
UK Equities45%
UK Bonds45%
UK Direct Property
10%
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Better insight + Better process = Better results
Immediate access to the global real estate market
No investor queues
Efficient pricing
Unmatched portfolio diversification20+ countriesThousands of properties worldwide
Source: Global Property Research. *Other Europe includes Austria, Belgium, Denmark, Finland, Germany, Greece, Italy, Netherlands, Poland, Spain, Sweden, Switzerland and Turkey. Other Asia/Australia includes Singapore, New Zealand and the Philippines. South Africa (0.28%) is not represented in the chart above. Each of these countries has a weight less than 2.5% of the benchmark. Indices do not include fees or operating expenses and are not available for actual investment. Indices presented are representative of various broad-based asset classes. They are unmanaged and shown for illustrative purposes only.
Canada2%
Japan15%
Australia11%
Hong Kong6%
Other Asia/ Australia*
2%UK
11%Other Europe*
12%
South Africa0%
US41%
GPR 250 IndexAs of 31 December 2006
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Better insight + Better process = Better results
Returns across the global are diversified
Source: Global Property Research*Includes New ZealandNA = North America, Eur = Europe
..adding to consistency of return and supporting global yet local coverage
Trailing 10 year return correlations of regional property security markets
NA Eur Asia Australia* Africa
NA 1.00
Eur 0.41 1.00
Asia 0.29 0.34 1.00
Australia* 0.36 0.27 0.22 1.00
Africa 0.02 0.24 0.20 -0.05 1.00
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Better insight + Better process = Better results
Our global equity and property presence
Europe
Property Securities AUM:£205 million
Equity AUM:£74.0 billion
Asia/Australia
Property Securities AUM:£2.6 billion
Equity AUM:£41.4 billion
…essential for picking the right stocks
North America
Property Securities AUM:£2.6 billion
Equity AUM:£56.1 billion
Global Direct Property AUM: £19 bn
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Better insight + Better process = Better results
Opportunities in GPS markets: Canada
Stable macro outlook: Canadian economy is experiencing low inflation and relatively stable monetary policy
Compelling valuation for Canadian REITs
Bullish on Western Canada due to strong job growth from its exposure to the oil & gas industry
Stock example: Dundee REIT
230 properties total = 19.4 million square feet
Buildings located throughout Canada
Average occupancy rate: 98%
30/12/2005 Price: C$ 24.26
31/12/2006 Price: C$ 38.65
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Better insight + Better process = Better results
Global property securities provide
Improved efficiencyLow correlation to UK direct real estateHigher expected returns
Improved liquidity for your property allocation
Cost-efficient access to growing global real estate markets
Place Vendôme, Paris, FranceIVG Immobilien AG
Umeda Daibiru BuildingOsaka, Japan
Daibiru Corporation
Bondi JunctionNSW, Australia
Westfield Group
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Better insight + Better process = Better results