06 Trevor Cooke REITS ppt

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 A brief history of securitised real estate
 What defines a REIT
 The benefits of investment through REITs
 Demand drivers and investment trends
A Brief History of Securitised Real Estate

  Post WW2 real estate investment by life companies

  1960’s & 70’s: Pension fund appetite for real estate emerges

  1980’s: RE recognised as a fully fledged asset class
     Increased familiarity of investors
     Availability of industry performance data (NCREIF)
     Risk characteristics (low correlation)

  1990’s – today: RE performance as an asset class rewarded
     Total (risk adjusted) returns
     Low volatility
     Inflation hedging potential
     Portfolio diversification benefits
A Brief History Continued:
The REIT Phenomenon
  In the 1960’s & 70’s the first Dutch (FBI), US (REIT) and
  Australian (LPT) securitised vehicles emerged
  Many countries have since adopted a REIT-type structure:
     Malaysia (1986) REIT
     Canada (1993) REIT
     Belgium (1995) REITs
     Singapore (1999) S-REIT
     Japan (2000) J-REIT
     Korea (2001) K-REIT
     France (2003) SIIC
     Taiwan (2003) REIT
     Hong Kong (2003) REIT
     Bulgaria (2005) REIT
  And more to come :
     United Kingdom to commence from 2007
     Germany – Enabling legislation expected in 2006
A proposed definition of REITs


A REIT is a widely held company or trust that:
         derives its income primarily from long term investment in real estate,
         distributes the majority of that income annually, and
         does not pay on tax the distributed income.


Notes:

  The definition assumes that:
  1. REITs satisfy all applicable domestic law; and,
  2. the concept of "widely held" and 'long-term investment‘ is determined
  domestically.
Five reasons for REITs


  Diversification

  Distributions

  Liquidity

  Performance

  Transparency
  The REIT market is big … and will get bigger




                                         Tradable         All Commercial
                                       investments          Real Estate
              Listed Real             US $ 6.3 trillion   US $ 15 trillion
                Estate
            US $ 1.3 trillion          50% Americas        39% Americas
                                      27% Asia-Pacific    21% Asia-Pacific
                                        23% Europe          37% Europe




Sources: EPRA/NAREIT, LaSalle Investment Management
Estimates are as at Q4 2005
Investor demand to remain strong

  Increased allocations to real estate & strong inflows tied
  to long term demographic changes:

      • Aging of the population & demand for annuity style, low risk income
        streams
      • Increased savings – pension and superannuation funds (15%/year)


                        Percentage of population 65+ years
                             2000               2010               2020
 US                        12.50%             13.20%              16.60%
 Japan                     17.10%             21.50%              26.20%
 Germany                   16.40%             19.80%              21.30%
 Italy                     18.20%             20.80%              24.10%
 Britain                   16.00%             17.10%              19.80%
      :
Source OECD estimates
Demand & allocations are on the rise everywhere

                         Investor                 free cash flow
                       allocations                to be invested
                      to real estate                   $$$



Australia

US

Europe

Asia
                                       Source: Pinnacle Property Group
Domestic supply is constrained in mature markets
   Cross border investment growing fastest


      Overall



Inter-regional



Intra-regional



   Domestic


                 0            10     20        30         40    50   60

                                   2005 investment growth (%)
 Source: Jones Lang Lasalle
Inter-regional capital flows of US$114bn in 2005




                                        Source: Jones Lang Lasalle
Inter-regional capital flows of US$114bn in 2005




                                    5.3
                              0.9

      Global
      Source
     of Funds


        Global
 Source: Jones Lang Lasalle

                                          Source: Jones Lang Lasalle
Inter-regional capital flows of US$114bn in 2005




                                          1.3
                                    3.7



              11.1

                2.7
                                                      5.3
                                                0.9

    Global
    Source
   of Funds


     Global          Asia Pacific

                                                            Source: Jones Lang Lasalle
Inter-regional capital flows of US$114bn in 2005


                                    6.2

                                          9.2              1.3
                                                     3.7



              11.1

                2.7
                                                                       5.3         2.7
                                                                 0.9

    Global                                                                   1.4
    Source
   of Funds


     Global          Asia Pacific         North America

                                                                                         Source: Jones Lang Lasalle
Inter-regional capital flows of US$114bn in 2005


                                          6.2
                                                                         0.8
                     6.5
                                                9.2              1.3
                                                                                 0.5
              5.9
                                                           3.7



                    11.1

                      2.7
                                                                                5.3          2.7
                                                                       0.9

    Global                                                                             1.4
    Source
   of Funds


     Global                Asia Pacific         North America          Europe

                                                                                                   Source: Jones Lang Lasalle
Inter-regional capital flows of US$114bn in 2005


                                          6.2
                                                                                0.8
                     6.5
                                                9.2                 1.3
                                                                                            0.5
              5.9
                                                              3.7
                                                      8.4
                           2.4
                                                                                      0.0
                                 1.5                    2.9               0.3
                    11.1

                      2.7
                                                                                       5.3               2.7
                                                                          0.9

    Global                                                                                        1.4
    Source
   of Funds


     Global                Asia Pacific         North America             Europe                        Middle East

                                                                                                               Source: Jones Lang Lasalle
Discussion points

  Real estate is an established and expansive asset class:
     Is this appropriately reflected under tax treaty arrangements?


  Investor demand for real estate will remain strong.
  Investors want access to international options.
     What tax distortions should be eliminated?


  REITs are key to meeting investor demand.
     What is an appropriate withholding rate on all REIT distributions?
     Should there be a different withholding tax rate for portfolio
     investors? REIT investors in REITs? Others?

				
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posted:10/2/2011
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