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What do you get with a property security?

Beyond just bricks & mortar: global property securities Stephanie Fennessey Client Portfolio Manager, Property Securities. What do you get with a property security?. Like equity, shares in a company, not “bricks & mortar”

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What do you get with a property security?

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  1. Beyond just bricks & mortar: global property securitiesStephanie FennesseyClient Portfolio Manager, Property Securities

  2. 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

  3. 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

  4. Generally, there are two types of property securities Properties: Office, Warehouse, Apartments, Malls, Shopping Centres, etc. Income from Rent and Sales Income from Rent and Sales Real Estate Operating Company (REOC) Real Estate Investment Trust (REIT) Taxes Government Dividend Income Dividend Income Shareholders Shareholders Taxes Taxes

  5. The growth of property securities is a global phenomenon Global Property Research 250 Index Market cap ($ billions) Source: Global Property Research, JPMorgan Investment Management

  6. Belgium1990 Brazil1993 Canada1993 Turkey 1998 Success of U.S. REITs led to the adoption of REITs and REIT-like securities around the world Japan2000 Mexico2004 Dubai China Malaysia2005 South Korea2001 Finland EU U.S.1960 Germany 07? Thailand2005 Australia1971 Luxembourg1988 France2003 Netherlands1969 Israel 2006 Hong Kong2003 India Italy 07? Singapore1999 UK2007 Taiwan2003 1960s 1970s 1980s 1990s 2000s Under consideration Sources: NAREIT, JPMorgan Investment Management

  7. Global Growth Potential The property outside the U.S. is much less securitised, leaving considerable room for growth Publicly traded property £ billions 6.5% of Non-US commercial property market* 6.5% of U.S. commercial property market ~£210 bn incremental equity market cap ~£171 bn equity market cap ~£131 bn current equity market cap

  8. Property Securities Investment Advantages • Long term property exposure with equity like liquidity • Diversification benefits • Strong historical returns

  9. Low historical correlations with other asset classes 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

  10. Strong historical performance relative to other asset classes Annualised returns for periods ending 31 December 2006 (%) Source: FactSet, Global Property Research, Morgan Stanley Capital International, JPMorgan Investment Management, IPD

  11. If current portfolio, Return: 7.09% Std Dev: 7.16% Sharpe Ratio: 0.48 If current portfolio, Return: 8.00% Std Dev: 6.32% Sharpe Ratio: 0.69 Conclusion: adding global property securities diversifies a portfolio Then adding 10% to Global Property Securities 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 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

  12. Immediate access to the global real estate market GPR 250 Index As of 31 December 2006 • No investor queues • Efficient pricing • Unmatched portfolio diversification • 20+ countries • Thousands 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.

  13. Returns across the global are diversified 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 Source: Global Property Research *Includes New Zealand NA = North America, Eur = Europe ..adding to consistency of return and supporting global yet local coverage

  14. Our global equity and property presence North America Property Securities AUM: £2.6 billion Equity AUM: £56.1 billion Europe Property Securities AUM: £205 million Equity AUM: £74.0 billion Asia/Australia Property Securities AUM: £2.6 billion Equity AUM: £41.4 billion Global Direct Property AUM: £19 bn …essential for picking the right stocks

  15. 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

  16. Global property securities provide • Improved efficiency • Low correlation to UK direct real estate • Higher expected returns • Improved liquidity for your property allocation • Cost-efficient access to growing global real estate markets Place Vendôme, Paris, France IVG Immobilien AG Bondi Junction NSW, Australia Westfield Group Umeda Daibiru Building Osaka, Japan Daibiru Corporation

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