Author:

Attracting Investors to REITs

Fraser Hughes, EPRA 22 October 2014

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EPRA Strategy

Representing Gross Value >

EUR 350 Billion

Member Category No. %

Property Co/REITs 110 54

Investors 45 21

Universities 24 11

Consultants 11 5

Insurance Companies 10 5

Banks & Law Firms 7 3

Others 3 1

Total 210 100

All three areas support & promote the sector

• Investor Outreach, Indices & Research• Reporting & Regulation• Events & Networking

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Global Listed Real Estate Benefits

• FTSE EPRA/NAREIT Global Index• Diversification & liquidity• Quality assets & management• Strong Total Returns & Dividend Yield• Governance & Transparency• Research • Promotion

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FTSE EPRA/NAREIT Global Index

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FTSE EPRA/NAREIT Global Index

Minimum size

Minimum liquidity

Minimum

free-float

Minimum level of relevant real

estate income

Detailed English annual reporting

A focused, relevant and investible benchmark for global real estateTo create:

Five major criteria for inclusion:

Underpinned by 4 committees with

total of > 300 years experience!

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2

Countries

16

Countries1

Country

6

Countries

Developed Global

Emerging Global

Emerging Europe

Emerging MEA

5

Countries

5

Countries9

Countries

8

Countries

Emerging Americas

Emerging EMEA

Emerging Asia

Each index has multiple sub-indices:

9 Sectors Rental or Non-Rental

REIT or Non-REIT

Developed EMEA

Developed Asia

North America

FTSE EPRA/NAREIT Global Index

Global

Developed Europe

Developed MEA

Weight = 1.3%

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FTSE EPRA/NAREIT Global IndexGross Mkt Cap South Global Europe

South Africa Co’s Yield (FF) EUR Africa % Emerging % Equal 86 co RankGrowthpoint 6.7% 3,624 26.8% 3.2% INTU 6Redefine 7.6% 2,243 16.6% 2.0% Icade 20Hyprop 5.4% 1,529 11.3% 1.3% Cofinimmo 24Resilient 4.2% 1,369 10.1% 1.2% Wereldhave 26Capital Property 6.6% 1,275 9.4% 1.1% Merlin 27Attacq 0.0% 641 4.7% 0.6% Vastned 51Vukile 7.4% 628 4.6% 0.5% Alstria 52SA Corporate 8.0% 606 4.5% 0.5% Norway Prop 55Emira 8.0% 486 3.6% 0.4% NSI 61Acucap 7.1% 425 3.1% 0.4% PHP 64Fountainhead 6.8% 251 1.9% 0.2% Dios 77Arrowhead (B) 7.8% 218 1.6% 0.2% DIC 79Arrowhead (A) 7.9% 218 1.6% 0.2% DIC 79South Africa Total 6.3% 13,514 100% 11.82%

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FTSE EPRA/NAREIT Global Index

Index Wgt %GrossYield

Global Dev & EM 1.3% 3.7%

EMEA Dev 9.0% 3.6%

EMEA EM 45.0% 3.8%

Global EM 11.8% 3.9%

South Africa weights in the index

South African companies gross yield +6%

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FTSE EPRA/NAREIT Global Index

Underpinned by 4 committees with

total of > 200 years experience!

Index Use:• Specialist Managers • Pension Funds

• Global ETFs market• US$ 10.5bn AUM

• Futures contracts – Europe• OTC products

You need to be on

investors radar!

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Global diversification

Zones Zonal markets

Property sectors

No. of properties

Ave. price(€m)

Totalinvested

(€bn)

EMEA 10 4 25 25 25

Americas 10 4 25 25 25

Asia Pacific 10 4 25 25 25

Total Investment required: 75

Direct investment

and if real estate is 10% of the total portfolio = €750bn!

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PensionFund Country

2012AUM ($bn)

2013AUM ($bn)

GPJ Japan 1,181 1,227

APG NL 418 477

NPF Korea 359 402

CDC France 341 395

FR Thrift US 321 358

Others 27,134 29,121

Total (Source: Towers Watson 2014) 29,754 31,980

SovereignWealth Fund Country

2012AUM ($bn)

2013AUM ($bn)

GPF Norway 716 838

ADIA UAE 627 773

SAMA Saudi 568 676

CIC China 533 575

SAFE China 482 568

Others 2,396 2,892

Total (Source: SWF 2014) 5,322 6,322

Significant Global Investors

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(If) Government Pension Fund of Japan invests 5% in real estate = $60bn!

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Global Asset Exposure – €1.5 Trn

Region Companies Assets Top 10 own

Asia 78 5,100 900

Europe 86 14,300 1,500

Nth America 143 32,000 7,200

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12 South African companies own 1,500 Assets 18.5 sq.km. of Floor Space

South Africa Asset Exposure

Cape Town

Johannesburg

Sandton

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One New Change - London Paris 500,000 sqm owned at La Defense Major player in the Greater Paris project EPRA Member: Icade

The Leadenhall Building – London Paris Located in La Defense Tenants include: PWC, LCL Bank & Heineken EPRA Member: Gecina

Heart of City of London overlooking St Paul’s CathedralApprox. 20,000 sqm Retail, 35,000 sq m OfficesEPRA Member: Land Securities

Company Examples – Major Cities

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224m tall building in centre of City of London Office largest in Europe including 7 stories open plan EPRA Member: British Land

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Lowenbrau site - Zurich

Alte Post – Hamburg

Company Examples - Offices

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MainTor - Frankfurt

Oslo - Norway

Zürich West, former industrial area „Kries 5“Disused brewery dated back to 1897EPRA Member: PSP Swiss Property

Six impressive buildings in financial district Over 100,000 sqm (mix of retail and offices) EPRA Member: DIC

Addition of a new 6-floors development 9,800 sqm (mix of retail and offices) EPRA Member: alstria

Refurbishment docklands area Mixed use, office, retail and urban

space EPRA Member: Norwegian Property

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SOHO - London

Gare St Lazare – Paris

Company Examples - Retail

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Mix of retail, office & living space Mix of flagship stores and specialist retailers EPRA Member: Shaftesbury

Refurbishment of station attracting 500,000 commuters daily80 retailers & 10 restaurantsEPRA Member: Klépierre

11,500 sqm retail and leisure 16.7mn visitors per annum EPRA Member: Unibail-Rodamco

Carrousel du Louvre – Paris

Located in Euromediterranee regeneration area 190 stores & 260m long restaurant terrace EPRA Member: Hammerson

Les Terrasses du Port - Marseille

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Student Accommodation – UK Co Working & Shared Offices - UK

Healthcare – Belgium & France Industrial – UK & Europe Warehousing, logistic & datacenters 5.8million sqm worth over GBP4.5billionEPRA Member: SEGRO

43,000 Students in 130 sites in 23 UK cities New and refurbished modern & energy efficient units EPRA Member: Unite

Company Examples - Specialist

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30,000 people employed in offices Refurbished warehouses/derelict city spaces EPRA Member: Workspace

In 2005 Cofinimmo identified nursing homes Now 40% of total portfolio EPRA Member: Cofinimmo

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Sources: FTSE, EPRA, NAREITData as of: September 1, 2014

Regional Breakdowns 150 constituentsMkt Cap EUR 119 Bn.

53%

32%

16%

Developed

North America

Asia

EMEA

306 constituentsMkt Cap EUR 927 Bn.

56%26%

18%Emerging

Asia Pacific

EMEA

Americas

IndexSth Africa

Wgt %GrossYield

Global Dev & EM 1.3% 3.7%

EMEA Dev 9.0% 3.6%

EMEA EM 45.0% 3.8%

Global EM 11.8% 3.9%

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EPRA2012 Sources: FTSE, EPRA, NAREIT

Data as of: August 30, 2014

Global Property Sectors

4%30%

25%

13%

Residential10%

Health Care7%

Industrial6%

4%

Self Storage3%

2%

Diversified

Retail

Offices

Industrial/OfficesLodging &

Resorts

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20Sources: Eurostat, JP Morgan, FTSE, IPD, MSCI, Bloomberg, EPRA, NAREITData as of: September 30, 2014 Note: Based on assumptions made by EPRA

Strong Long Term Performance

Global Bonds Global Equities Global Real Estate Global Listed Real Estate

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

0.5%

3.4%2.6%

4.5%3.9%

1.3%

4.9%

4.5%

Capital Growth Yield

DIRECT

LISTED & REITs

15-year annualised total return in local currency

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Annualised Local Total Returns

Source: EPRAData as of: September 30, 2014

GlobalListed Real Estate

Global Government

Bonds

Global General Equities

3 years 18.0% 3.3% 19.1%

5 years 14.6% 3.9% 11.4%

10 years 7.6% 3.9% 7.8%

15 years 9.0% 4.4% 4.7%

20 years 8.7% 5.5% 7.7%

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Transparency - EPRA BPR 2014

Total of 84 European companies surveyed• 50% gained a ‘medal’ or award:

• 25 gold medals• 9 silver medals • 8 bronze medals

• 81% disclose at least 1 EPRA measure (91% mkt cap)• 33% disclose all 6 EPRA measures (58% mkt cap)

• South African BPRs & EPRA BPRs under EMEA umbrella?

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Transparency – BPR 2014

Alstria

Befimmo

British Land

Citycon

Cofinimmo

Corio

Derwent

FDR

Gecina

Hamborner

Hammerson

Icade

INTU

Klepierre

Land Secs

Leasinvest

Mobimo

NSI

PSP

SEGRO

Sponda

Unibail

Vastned

WDP

Wereldhave

Aedifica

Affine

Capco

Great Portland

Intervest Office

Mercialys

Picton

Shaftesbury

SPS

Atrium

Development Secs

DIC

EuroCommerical

Helical Bar

LondonMetric

STE

Workspace

Icade

NSI

Wereldhave

Aedifica

Intervest Office

Non-EPRA members are underlined

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Transparency....but 42 Co’s Below Bronze!

Deutsche Annington

Deutsche Euroshop

Deutsche Wohnen

GAGFAH

LEG

Prime Office

TAG

Balder

Castellum

Dios

Fabege

Hemfosa

Hufvudstaden

Klovern

Kungsleden

Wallenstam

Wihlborgs

Beni Stabili

IGD

ANF

Wereldhave Belgium

Big Yellow

Daejan Hldgs

F&C Commercial

F&C UK

Grainger

Hansteen

MedicX

Primary Health

Quintain

St Modwen

Safestore

Schroder REIT

Standard Life

UK Commercial

Unite

CA Immo

Convert

Colonial

Allreal

TechnopolisEurobank

Non-EPRA members are underlined

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Transparency - sBPR 2014 Results

Corio***

Hammerson***

STE*

Wereldhave***

Alstria***

Befimmo***

DIC Asset*

Sponda***

Technopolis

Wereldhave Belgium

Grainger

Great Portland**

INTU***

Klepierre***

Land Secs***

SEGRO***

Unibail***

Workspace*

British Land***

Beni Stabili

Citycon***

Cofinimmo***

Derwent London***

EuroCommercial*

FDR***

Gecina*** • 10 companies won gold BPR & sBPR

• 57% reported at least one sBPR (74% mc)

• 31% achieved an award (27% - 2013)

***Gold BPR** Silver BPR* Bronze BPR

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Transparency - GRESB

Ranking Table 2014 Points

Australia Listed 68

Australia Non-Listed 63

Europe Listed 54

Asia Listed 51

Nth America Listed 49

Europe Non-listed 47

Asia Non-listed 44

Nth America Non-listed 42

“Green Stars”Management = 64 * 0.30Implementation = 49 * 0.70

>50 required in both categories to achieve “green star” status

Global Listed scored 52 v Global non-listed scored 45

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EPRA Research

Daily, weekly, monthly & ad-hoc tailored research and data output based on the Global Index constituents

Author:0%

10%

20%

30%

40%

50%

60%

0

50

100

150

200

250

300

350

Q1 2001

Q1 2002

Q1 2003

Q1 2004

Q1 2005

Q1 2006

Q1 2007

Q1 2008

Q1 2009

Q1 2010

Q1 2011

Q1 2012

Q1 2013

Q1 2014

FTSE EPRA UK

DTZ Transactions UK

FTSE EPRA UK LTV

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UK Listed v Transactions & LTV

Sources: FTSE, EPRA, DTZAs of: June 30, 2014

Crisis+81% Values (26), LTVs Level + 35% Values (22), LTVs -15%

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0

50

100

150

200

250

Degeared FTSE EPRA UK NAVFTSE EPRA UK NAV FTSE EPRA UKIPD UK Capital Growth

FTSE EPRA UK leads IPD by +/- 2

quarters

Listed is Proxy for Direct

Sources: FTSE, EPRA, IPDData as of: Aug 31, 2014

FTSE EPRA UK par with spot NAV

Degeared FTSE EPRA UK

outperforms IPD

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Academic Research

• Leading universities in committee• Cambridge University is current chair

• Research to bolster the investment case• Average of 5 projects per annum focusing on:

• Performance• Allocations• Correlations

• Full academic reports and executive summaries published – hits a broad audience

• EPRA research compendium is home for all reports

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Correlation declines with equities and increases with direct real estate

• Correlation with stocks declines as investment horizon increases

• Potential for strategic investors:

Good diversification with allocation to listed real estate in the long run

0%10%20%30%40%50%60%70%80%

FTSE 100 / Developed Europe

1 3 6 12 24 36 48 60

0%

20%

40%

60%

80%

100%

Developed Europe / IPD property index

3 6 12 24 36 48 60

6 months 1 year 2 years 3 years 5 years 10 years0%

20%

40%

60%

80%

Correlation declines with equities and increases with direct real estate

General Equities v Listed Direct v Listed

Sources: IPD, Bloomberg, EPRAData as of: 31/12/2013

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Research – Equities or Property?

• “Are REITs real estate? • Examined whether listed real estate returns

reflect direct property or general equities in:• US, UK and Australia

• Short term linked to stock market• Mid/long term linked to direct real estate • Opportunities to ‘blend’ real estate exposure

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Research - Blended Allocations

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Events & Networking

• EPRA Annual Conference• 8 Property Tours• 21 Company pitches (South Africa in 2015?)

• EPRA Insight• London• Continental Europe

• EPRA Private Client Broker Events • London (GBP 500bn market)• Quarterly – company & investor pitches

• EPRA Asia (x2) & USA (x2) trips per year

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Summary

• Quality assets & management• Strong total performance• Attractive yields• Diversification

• regional, countries & sectors• Liquidity• Governance & transparency