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Presentation map 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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