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European Investors
STRICTLY PRIVATE AND CONFIDENTIAL
640 Fifth Avenue • New York, NY 10019 • Tel: (212) 735-9500
Presentation Prepared For:
The University of Wisconsin
Global Real Estate Markets Conference
November 30, 2012
Presented by:
Jim Rehlaender, Managing Director, Portfolio Manager
Global Real Estate Securities
6
European Investors
European Investors
Benefits of Real Estate Securities vs. Direct Investment
•
Requires less capital, fewer resources and lower transaction costs
•
Enter/exit where and when you want to – unlike direct property market
•
Invest with experienced management teams in prime locations
•
Conservatively capitalized
•
Liquidity, transparency and regulatory oversight
•
Broader diversification across sectors, countries and currencies
We believe investing in real estate securities is the most efficient and effective way to
manage / rebalance Global real estate exposure
.
See the last page of this presentation for important disclosures.
7
European Investors
Evolving Universe of Global Real Estate Securities
Global Universe(1)
Global
Americas
Asia
Europe
855
217
431
207
$1,598
$583
$761
$254
Number of Companies
Equity Market Cap. (billions)
Americas (36%)(2)
Europe (16%)(4)
Asia (48%)(3)
Sweden
7%
Spain
2%
Germany
4%
Hong Kong
31%
France
24%
USA
81%
NL
3%
Switzerland
5%
Japan
16%
China
17%
Benelux
5%
UK
17%
Australia
11%
Brazil
7%
Other
1%
Middle East
17%
Singapore
11%
Canada
11%
Italy
1%
Austria
2%
Russia
1%
Other
6%
Other
6%
T aiwan
2%
India
2%
Malaysia
4%
Af rica
6%
Source: European Investors Incorporated, Bloomberg
(1) Bloomberg data, EII screens, market cap > $200 million, as of December 2011
(2) Other Americas: Argentina, Chile, Mexico and Peru
(3) Other Asia: Indonesia, Mauritius, New Zealand, South Korea, Sri Lanka, Thailand and Vietnam
(4) Other Europe: Cyprus, Denmark, Finland, Greece, Guernsey, Jersey, Norway, Poland and Turkey
See the last page of this presentation for important disclosures.
8
European Investors
Global Portfolio Sector Diversification
As of 09/30/2012
Lodging
5%
Industrial
3%
Retail
26%
Retail
24%
Office
43%
Diversified
26%
Office
14%
Industrial
9%
Residential
19%
Residential
16%
Other
4%
Health Care
7%
Lodging
1%
Self Storage
3%
EII sector allocation based on the EII Global Property Fund (EIIGX), derived by using EPRA classifications (FTSE EPRA/NAREIT Developed Real Estate Index) Diversified breakout based on EII and UBS research and estimates
FTSE EPRA/NAREIT Developed Index, Source: FTSE International Limited (“FTSE”) © FTSE 2012. FTSE® is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under license. All
rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.
See the last page of this presentation for important disclosures.
9
European Investors
Asian Real Estate Securities Valuations
Real Estate Securities Premium/Discount to NAV
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
HK
HK Average
Jan-05
Jan-06
Singapore
Jan-07
Jan-08
Singapore Average
Jan-09
China
Jan-10
Jan-11
Jan-12
China Average
Source: European Investors Incorporated (EII) estimates, Bloomberg September 2012
See the last page of this presentation for important disclosures.
10
European Investors
European Real Estate Securities Valuations
Real Estate Securities Premium/Discount to NAV
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
-40.0%
-50.0%
-60.0%
UK
Europe ex UK
UK Average
Europe ex UK Average
Source: EPRA Research, September 2012 Monthly Statistical Bulletin
See the last page of this presentation for important disclosures.
11
European Investors
US REIT Valuations
REIT Premium/Discount relative to Real Estate NAV
40.0%
Price/NAV Premium
as of 09/30/2012
7.7%
20.0%
0.0%
-20.0%
NAREIT Dividend
Yield as of
09/30/2012 is 3.4%
-40.0%
Source: Green Street Advisers, Inc., NAREIT Equity Index - last data point as of 09/30/2012
See the last page of this presentation for important disclosures.
12
European Investors
Disclosure
This Presentation is for illustration and discussion purposes only. It is not intended to be, nor should it be construed or used as, financial, legal, tax
or investment advice. This is not an offer to sell, or a solicitation of any offer to buy an interest in any of the investment vehicles or accounts
managed by European Investors Incorporated and/or EII Realty Securities, Inc. (collectively, the “Manager”). Past performance is no guarantee for
future results. Unless otherwise indicated, portfolio returns are calculated since inception and are gross of all investment management fees. A
client’s returns will be reduced by the investment advisory fees and any other expenses the client may incur in the management of its advisory
account. A discussion of the Manager’s advisory fees is contained in our ADV Part 2 disclosure document. The returns reflect the reinvestment of
dividends and other earnings and are based on unaudited financial information.
This presentation is confidential and is intended for one-on-one presentations only for the person to whom it had been delivered. Under no
circumstances may it be shown, copied, transmitted, or otherwise given to any person other than the authorized recipient. This presentation is as
of the date indicated and is subject to revision, modification and updating and may exclude certain material information about the manager
including important disclosures and risk factors associated with an investment with the Manager. Certain information has been provided by thirdparties and although believed to be reliable, it has not been independently verified such that its accuracy or completeness can be guaranteed.
European Investors Incorporated is an SEC registered Investment Adviser managing Global Real Estate Securities and US balanced portfolios for
offshore domiciled clients. EII Realty Securities, Inc. is an independent registered Investment Advisor providing global real estate securities
portfolio management services to US and Canadian institutions, and the firm is a wholly owned subsidiary of European Investors Incorporated.
Before making any investment, investors should thoroughly review all of the materials provided by the manager and consult their own financial,
legal and tax advisors to determine whether an investment with the Manager is suitable for them in light of their financial situation. No
representation is made that the Manager will or is likely to achieve its investment objectives or that any investor will or is likely to achieve results
comparable to those shown or will make any profit at all or will be able to avoid incurring substantial losses. Additionally, no representation is
made that the Manager will make and/or maintain any of the investments described in this presentation on behalf of any investment vehicles or
accounts.
Financial indicators and benchmarks have been presented for illustrative purposes only. Financial indicators and benchmarks are unmanaged, do
not reflect any management fees, assume reinvestment of income, and have limitations when used for illustrative purposes as they may have
volatility, credit, or other material characteristics that are different from a particular managed account or investment vehicle.
Certain information contained in this presentation is based upon forward-looking statements, information and opinions, including descriptions of
anticipated market changes and expectations of future activity. The Manager believes that such statements, information, and opinions are based
upon reasonable estimates and assumptions. However, forward-looking statements, information and opinions are inherently uncertain and actual
events or results may differ materially from those reflected in the forward-looking statements. Therefore, undue reliance should not be placed on
such forward-looking statements, information and opinions.
13
European Investors
“Leading Markets:
A Tour Of The Globe”
CHINA
CHINA
C
O
•
•
•
•
•
•
•
V
V
G
G
E
I
“Will make it happen”
Deep demand –
• F
B
Y
D
G
C
O
markets – V
• P
•
•
•
•
H
P
K
A
equity – A
D
T
Co’s – L
Core assets – Attractive, limited supply
Opportunistic/value added – A
P
• M
• N
C
C
C
• R
• H
S
• P
• Money in – M
• A
• cA cess to capital –
• R
• L
C
I
D
R
• L
• C
• S
201 1
• pO portunistic returns: IRR 15-18%; EM 1.8–2 5
• Debt/Trust – 8 14
• Core – 3
7
INDIA
INDIA
I
O
•
•
•
•
•
•
•
V
V
A
G
D
D
L
D
• F
M
NCR A
P
B
C
I
• P
O
markets – L
• P
equity – A
P
S
A
• D
NBFC – A
• Core assets – Attractive, relatively new
• Opportunistic/value added – A
• M
• N
I
G
I
C
•
•
•
•
•
P
•
•
•
•
S
R
I
R
S
C
R
D
I
I
•
•
•
•
•
•
•
D
R
N
S
H
052 206
Investment demand slow 07–2 now
L
P
O
• Debt/NBFC – 10 18
• Core Assets –
IRR 18 25
10 13
EM 2 2 5
UK
UK
PREI®
PRUDENTIAL REAL ESTATE INVESTORS
UK: INVESTMENT OPPORTUNITIES ARISING FROM THE FUNDING GAP
Traditional funding sources are in retreat:
European Debt Maturity Profile*
€Billion
oDislocation in credit markets
oRegulatory change
EUROPEAN DEBT MATURITY PROFILE, €BILLION
€200
oMarket volatility
€470bn
Major funding gap for Europe
€150
oEstimated to be €300-600 billion;
oUK represents a meaningful share
€100
High quality assets / high quality operators need capital solutions
€50
Opportunity: Mezzanine Debt and Preferred Equity
o Returns: 8-15% depending on place in capital structure
€0
2012
2013
2014
2015
2016
2017
2018+
DEBT MATURITY PROFILE
o Directly originated to support acquisitions and refinancings
o Conservatively structured – typical tranche – 50-75% LTV
o High proportion of return from interest income and fees
o Sustainable opportunity
*Source: EBA (European Banking Association), CBRE, Morgan Stanley – “Banks Deleveraging and Real Estate” 2012
CONFIDENTIAL INFORMATION. NOT FOR FURTHER DISTRIBUTION.
REF: STWK-92HSKY
29
TURKEY
TURKEY
PREI®
PRUDENTIAL REAL ESTATE INVESTORS
TURKEY: FAST GROWTH & EMERGING MIDDLE CLASS  OPPORTUNITIES IN RETAIL
SHOPPING CENTRE PROVISION
SQ M PER 1000 INHABITANTS
Facts on Turkey:
o Population:
NORWAY
- 75 million
SWEDEN
- Approx 10% of Europe
IRELAND
FINLAND
- Favourable demographics
N'LANDS
SWITZ.
AUSTRIA
o Economy :
DENMARK
- 7th largest in Europe
W. EUROPE
- Diversified economy
- Forecast Growth – 4-5%
PORTUGAL
FRANCE
UKRAINE
POLAND
SPAIN
ITALY
Keys to Investing in Turkey:
o New found economic and political environment stability
o Strong GDP growth rates  sharp increases in discretionary spending
 need for retail space.
SLOVAKIA
GERMANY
HUNGARY
RUSSIA
ROMANIA
BELGIUM
TURKEY
o International retailers seeking access to the market.
BULGARIA
UKRAINE
o Under-retailed markets  8 cities with population > 1 million
 approximately 30 cities > 250K
GREECE
0
EXISTING
200
400
600
800
PIPELINE
Sources: Economist Intelligence Unit, Cushman & Wakefield, PREI Research
CONFIDENTIAL INFORMATION. NOT FOR FURTHER DISTRIBUTION.
REF: STWK-92HSKY
32
PREI®
PRUDENTIAL REAL ESTATE INVESTORS
Disclosure
Prudential Investment Management is the primary asset management
business of Prudential Financial, Inc. Prudential Real Estate Investors is
Prudential Investment Management’s real estate investment advisory
business and operates through Prudential Investment Management,
Inc. (PIM), a registered investment advisor. Prudential, the Prudential
logo and the Rock symbol are service marks of Prudential Financial,
Inc. and its related entities, registered in many jurisdictions worldwide.
These materials represent the views, opinions and recommendations of
the author(s) regarding the economic conditions, asset classes,
securities, issuers or financial instruments referenced herein.
Distribution of this information to any person other than the person to
whom it was originally delivered and to such person’s advisers is
unauthorized, and any reproduction of these materials, in whole or in
part, or the divulgence of any of the contents hereof, without prior
consent of Prudential Real Estate Investors is prohibited. Certain
information contained herein has been obtained from sources that PREI
believes to be reliable as of the date presented; however, PREI cannot
guarantee the accuracy of such information, assure its completeness,
or warrant such information will not be changed. The information
contained herein is current as of the date of issuance (or such earlier
date as referenced herein) and is subject to change without notice.
PREI has no obligation to update any or all of such information; nor do
we make any express or implied warranties or representations as to the
completeness or accuracy or accept responsibility for errors. These
materials are not intended as an offer or solicitation with respect
to the purchase or sale of any security or other financial
instrument or any investment management services and should
not be used as the basis for any investment decision. Past
performance is no guarantee or reliable indicator of future results.
No liability whatsoever is accepted for any loss (whether direct,
indirect, or consequential) that may arise from any use of the
information contained in or derived from this report. PREI and its
affiliates may make investment decisions that are inconsistent
with the recommendations or views expressed herein, including
for proprietary accounts of PREI or its affiliates.
The opinions and recommendations herein do not take into account
individual client circumstances, objectives, or needs and are not
intended as recommendations of particular securities, financial
instruments or strategies to particular clients or prospects. No
determination has been made regarding the suitability of any securities,
financial instruments or strategies for particular clients or prospects.
For any securities or financial instruments mentioned herein, the
recipient(s) of this report must make its own independent decisions.
CONFIDENTIAL INFORMATION. NOT FOR FURTHER DISTRIBUTION.
REF: STWK-92HSKY
33
IRELAND
IRELAND
BRAZIL
BRAZIL
BRAZIL
“Leading Markets:
A Tour Of The Globe”