real estate investment strategies by tdelight



Investment Strategy Annual
                                                                                                LaSalle Investment Management

                                                                                                Lynn C. Thurber
                                                                                                Chief Executive Officer
                                                                                                Jack Chandler
                                                                                                Regional CEO, Asia Pacific
                         Managing Editors
                                                                                                Amy P. Erixon
                         Jacques N. Gordon, Ph.D.                                               Canada and Mexico
                         International Director, Investment Strategy
                                                                                                Jeff Jacobson
                         Gerald F. Blundell                                                     Regional CEO, Europe
                         European Director, Investment Strategy
                                                                                                Wade W. Judge
                         Robin N. Goodchild, Ph.D.                                              CIO, United States
                         European Director, Research and Strategy
                                                                                                Stan Kraska
                         William J. Maher                                                       Securities, United States
                         Regional Director, North American Research and Strategy
                                                                                                Robert La Fors
                         David Edwards                                                          Securities, Europe
                         Director, Asia Pacific Research and Strategy
                                                                                                Ian Mackie
                                                                                                Private Equity, Asia Pacific

                                           Research Staff                                       Keith Pauley
                                                                                                Securities, United States
                                           Gillian de Almeida                                   Simon Marrison
                                           Matthew Barrowclough                                 Private Equity, Continental Europe

                                           Mary Burke                                           Peter H. Schaff
                                                                                                CEO, United States
                                           Josh Gelormini
                                                                                                Celia Jennings
                                           Gregory Golovkin                                     Global Client Services
                                           Toyokazu Imazeki                                     Kimball C. Woodrow
                                           Nathan Kane                                          Global Chief Operating Officer

                                           Matthew Keane
                                           Alberto Lopez
                                           Alexander Lyell
                                           Catherine Marshall
                                           Katherine McNeil
                                           Darren Mewha
                                           Kim Palmbush
                                           Andrea Pavelka
                                           Matthew Ryall
                                           Chris Saunders
                                           Alistair Seaton
                                           Elysia Tse

Past performance is not a guarantee of future results. All information contained herein is from sources deemed reliable; however, no
representation or warranty is made to the accuracy thereof. LaSalle Investment Management and Jones Lang LaSalle take no responsibility for
any direct or indirect damage or loss suffered by reason of the inaccuracy or incorrectness of this document.
LaSalle Investment Management is a member of the Jones Lang LaSalle group.
Investment Strategy Annual

              Investment Opportunities and Risks

              Constructing a Cross-Border Portfolio

         13   Regional Outlook for 2005
         14   Asia Pacific
         21   Europe
         28   North America
         34   Logistics Real Estate

         36   Model Portfolios

         A new challenge faces the real estate asset
         class. The question today is not whether
         to include real estate in an investment
         portfolio … it is how and where to invest
         next. The expansion of real estate portfolios
         to include strategies that combine domestic
         and international holdings, low- and high-risk
         strategies, private equity and listed securities
         adds up to an asset class that has matured. It
         is the job of this 2005 Investment Strategy
         Annual to help investors make educated
         investment decisions about all the choices
         they now face.
Page 2   Investment Strategy Annual 2005
         Investment Opportunities and Risks

         Investment Opportunities and Risks

         The Price of Success                                         into 2005. It also suggests a possible solution—the
         Real estate enters 2005 as a well-accepted part of an gradual expansion of real estate portfolios to include
         investment portfolio, alongside stocks and bonds.After strategies beyond the three or four most common “food
         occasionally suffering from a credibility gap in the 1980s groups”1 in one’s home country.
         and early 1990s, this asset class has now produced
         steady, strong performance for more than a decade.As a Actuary vs. Head of Real Estate
         direct result, real estate has earned a permanent place in Actuary: My assetpercent. model says to raise real estate allocation
                                                                       by 2 percent to 4
         the long-term strategic plans of investors from all over Head of Real Estate: At current pricing? Are you sure?
         the world.
              Now, a new challenge faces real estate. The Actuary: This is not your decision … get invested.
         question today is not whether to own a real estate port- Head of Real Estate: But my managers and I are all paid to beat the Index, and
                                                                       I can’t buy the Index.
         folio … it is how and where to invest next. As prices for
                                                                       Actuary: Even if you are a bit below the index, we need what your asset class
         direct assets and real estate securities have risen around delivers to the portfolio.
         the world, investment managers must find a way to out- CIO: Let’s be thoughtful here, we have made mistakes in the past forcing money
         perform under a very different set of circumstances into frothy markets. Isn’t there some way we can increase the real estate
                                                                       allocation without overpaying?
         compared to just a few years ago. In this frothy capital
                                                                            and Actuary come out of an                      with this
         market, investors certainly must stay alert in order CIO“We don’t care if you expandexecutive sessionreal estatemessage: ag land,
                                                                                                          the definition of            to include
         to harvest outsized gains or cull chronic under-                  hotels, air cargo buildings, healthcare real estate, REITs, international,
                                                                           whatever ... it’s the combination of contractual income with an
         performers. But real estate’s permanent status in the             inflation-adjusted residual that our fund needs over the long term.”
         portfolio suggests that too much “market-timing”would Source: LaSalle Investment Management.
         run counter to what asset allocators and financial plan-
         ners try to achieve.A well-diversified portfolio matches              Real estate portfolios are expanding to include
         strategic long-term holdings with long-term financial strategies that combine domestic and international
         needs. Market timing in real estate, or any asset class, holdings, low- and high-risk investments, private equity
         can create new problems: reinvestment risk, higher and listed securities, and investment-grade and “dis-
         transaction costs, or simply the lack of perspective on tressed”debt—all of which adds up to an asset class that
         relative pricing across all asset markets.                   has matured. There are multiple ways to invest in real
              Investors then should have a realistic view of what estate now, just as there are for stocks and bonds. The
         lies ahead, especially in light of recent strong perform- methods for financing hard assets like real estate have
         ance for both listed real estate securities and private real grown more sophisticated over the years as have the
         estate in many of the major markets of the world. ways to invest. With its development as a mainstream
         Success can create unrealistically high expectations. asset class, the real estate sector has become more trans-
         This situation creates tension between what asset allo- parent. This is a secular, not a cyclical trend—rarely, if
         cators expect from real estate and what those ever, does an asset class retreat from high back to low
         responsible for real estate investment think is achiev- transparency. Real estate veterans, who suspect that
         able. The following dialogue summarizes the dilemma most of the recent run-up in prices is cyclical, should
         we real estate investors must contend with as we head not be surprised by today’s high prices and low yields.
             In Europe the food groups are: offices,retail units (high street,retail warehouses and shopping centers) and warehouse/logistics properties.
             In North America and Asia Pacific they are: offices, shopping centers, industrial parks/logistics properties and rental apartments.

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