04 Ian Gleeson.ppt

Irish Investment on the Global StagePresented by Ian Gleeson

Lambda Alpha Spring ConferenceDublin 31 May 2007

1. Ireland……..Some Basic Facts

2. Overview of the Irish Investor

3. The National Pensions Reserve Fund

Agenda

Before we start……..a quote from a local

“We have really everything in common with America nowadays except, of course, language”

Oscar Wilde, The Canterville Ghost, 1882

Ireland……Some Basic Facts

• Demographics

• The Economy

• How we invest our money


• Population of 4.2m, up from 3.6m in 1996

• Population growth of 2.0% per annum between 2002 - 2006

• Gross inward migration in 2006 of 86,900

• Median Age of the population is 34 years – the lowest in EU-27

• Most favourable old age dependency ratio in the EU-27

Demographics


• GDP Growth of 7.1% per annum in 10 year period to tend 2006

• GDP forecast to grow by 4.0% - 5.0% per annum in three years to end 2009

• GDP of €176.0bn with average GDP per head of €33,000 (EU Average = €24,000)

• Government Debt to GDP ratio of 25.1%

• National Development Plan targeting total spend investment of €184.0bn between now and end 2013

The Economy

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

97 98 99 00 01 02 03 04 05 06

% p

er

an

nu

m

Ireland EU 27

Real GDP Growth (% per annum)


How we invest our money

0

10

20

30

40

50

60

70

80

Public and Private Equity Cash/Bonds Property

% o

f to

tal a

sse

ts

Irish Investors Global Investors

Overview of the Irish Investor

• Who are they?

• What do they look like?

• Why have they gone overseas?

• Where have they gone?


Who are they?

• Private Client Managers• Equity Syndicators such as Quinlan Private, Warren

Private, Davy’s• Private Banks such as Anglo Irish, AIB, Bank of Ireland

• Institutions• Life Companies, Pensions Funds, Family Offices

• Builder/Developers• Irish house builders/construction companies looking to

diversify• Include groups such as Cosgrave, Bernard McNamara,

Mennolly Homes

• Retail Investors• Joe Public investing through pooled products offered by

high street banks and life companies


What do they look like?

• Direct investment is favoured although some indirect starting

• Trophy properties

• Highly geared

• Long term investors – not benchmark constrained

237 Park Avenue, New YorkCo-investment by Davy’s on behalf of their private clietns

Claridges Hotel, LondonAcquired by Quinlan Private

Woolgate Exchange, LondonAcquired by D2 Private

The Chicago Spire, ChicagoDevelopment project of

Shelbourne Developments


Why have they gone overseas and where have they gone?

Why are they investing overseas?

• Size of Domestic Market• Domestic returns have peaked?• Opportunity Driven• Need to diversify• Expensive to acquire• Cultural – Irish tend to travel and are

adventurous!

Where the capital is going

• Initially UK and Eastern Europe• …then continental Europe and USA….• And now……Asia

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06

Total Returns of Irish Commercial Property Market (% per annum)

Challenges ahead

• Market environment

• Interest rates

• Performance of Domestic Economy

• Need to diversify

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8.0

95 96 97 98 99 00 01 02 03 04 05 06

%

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1988

= 1

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Yield West End Rental Grow th

UK Market: All Property Yield (%) v. West End Rental Growth

The National Pensions Reserve Fund

• Background

• Property Investment Strategy

• Property Investments


• National Pensions Reserve Fund established in 2001 with the objective

“to meet as much as possible of the costs of social welfare and public service pensions from 2025 onwards so that the Exchequer burden arising from our additional pension

commitments over a very long time can be smoothened ”

• The Fund is a reserve Fund and is one of the first of its kind in the world

• Under legislation the Fund receives a contribution of 1.0% of GNP per annum from the exchequer currently c. €400.0m per quarter with no cash to be drawn before 2025

• Current value of the NPRF is c. €20.0bn but is expected to be c. €30.0bn by end 2009

• Initial asset allocation focused exclusively on equity and fixed income but strategy widened in 2004 to include alternative investments

• Targeting an allocation of 8.0% to property – expected to have a portfolio value of c. €2.5bn by end 2009

Background

15.0%

50.0%

35.0%

Europe North America Asia

30.0%

50.0%

20.0%

Core Value Add Opportunistic

• Targeting an 8.0% allocation to property by end 2009, subject to market conditions

• Investing indirectly with focus on private vehicles

• Will invest in all global regions and markets with investment grade sovereign credit rating

• Bias to value add and opportunistic style strategies

Strategic TargetsProperty Investment Strategy


US Investments (8) € 420.8mBroadway Partners € 31.9mBerkshire Multifamily Value Fund € 31.2mTishman Speyer VI US € 39.8mStrategic Partners US IV € 46.0m

+ Lehman Brothers Real Estate Partners € 19.8m+ Pramerica Real Estate Companies Account III € 28.6m

Global Investments (3) Morgan Stanley Real Estate Fund V € 39.3m - Europe 40%, Asia, 60%

Lehman Brothers Real Estate Partners II € 39.6m

Pramerica Real Estate Companies Account III € 38.2m

- North America 50%, Europe 30%, Asia 20%

- North America 75%, Europe 25%

Asia Investments (4) € 146.2mAsia Retail Mall II Ltd € 19.5m

+ Morgan Stanley Real Estate Fund V € 23.6m + Lehman Brothers Real Estate Partners II € 7.9m

CT Large Loan 2006 € 30.7m

MSREF V US € 76.4m

Broadway Partners II € 57.7m

Composition Capital Asia Fund € 19.0mForum Asia Realty Income II € 38.5m

European Investments (8) € 401.4m

Strategic Partners UK II € 36.9mFrench Dev. Venture II € 30.0mAirport Industrial Property Unit Trust € 43.4mGerman Retail Box Fund € 35.0mMorgan Stanley Eurozone Office Fund € 50.0mForum European Realty Income II € 50.0m

+ Morgan Stanley Real Estate Fund V € 15.7m + Lehman Brothers Real Estate Partners II € 11.9m + Pramerica Real Estate Companies Account III € 9.5m

The Mall € 44.0mTishman Speyer VI Europe € 75.0m

Macquarie Japan Core Plus € 37.7m

Madison Marquette Retail Enhancement € 58.7m


Bois Colombes, Paris – FDV II

EBay HQ, Berlin – FERI II

Kinta City Mall, Malaysia – ARM II

Royal Mail Unit, Heathrow – AIPUT

IBM HQ, Madrid – MSEOF

Metro Retail Portfolio, Germany – GRBF

AON Center, L.A. – Broadway I

522 5th Ave, NY – Broadway IISawgrass Mill, Florida – CTLL 2006

MetLIfe Building, NY – TSREV VI

Shanghai Square, Shanghai – MSREF V


Irish Investment on the Global Stage

Takeaways

• Ireland has experienced a golden era of wealth creation

• A significant portion of that wealth has been invested in property

• There continues to be a huge wave of capital being invested in property by Irish investors

• Irish investors are continuing to add to their property portfolios albeit looking to diversify away from their core markets

Ian Gleeson

Having graduated from Trinity College Dublin in 1992 Ian started his career in property as a researcher for Chesterton. In 1996 Ian joined ESN Pension Management Group as a property investment analyst. During 1996 ESN was acquired by Foreign & Colonial. Ian spent eight years with F&C and occupied a number of positions within their property team including Director responsible for indirect investment and strategy. Ian left F&C in 2004 to start the property investment programme for the National Pensions Reserve Fund (Ireland). During Ian’s tenure with the NPRF he committed c. €1.2bn to almost 30 unlisted property vehicles across the globe. In May 2007 Ian took up the new position of Head of International Multi Manager at Morley Fund Management.

Ian sits on the Management Board of INREV, the European Association for Investors in Non-Listed Real Estate Vehicles. He has also acted as Chairman of the Investor Platform of INREV.

[email protected]

Biographical Details

Business

04 Ian Gleeson.ppt