This presentation is intended for investment professionals

Global Real Estate Investment

What Strategies Make the Most Sense for 2012?

Peter Cuthbert

Head of Canadian Real Estate

Matthew Mowell

CRE Investment Analyst

17/09/11

What Strategies Make the Most Sense for 2012?

This presentation is intended for investment professionals

What Are the Broader Global

Risks/Issues?Risks/Issues?

What Markets Are Worth Looking At - Transparency

PhilippinesBulgaria

Croatia

Slovenia Qatar

CANADAUSA

South Africa

BelarusPeru

Mexico

New Zealand

Ireland

China-Tier I Cities

Portugal

Malaysia

ItalySweden Denmark

Czech RepPoland

NorwayBelgium

Netherlands

IndonesiaIndia

Brazil

Vietnam

ColombiaEgypt

South KoreaThailand

IsraelHungary Slovakia

Russia

Turkey

R2 = 0.5376

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

Off

ice C

ap

Rate

Co

re+

Assets

In

To

p M

ark

ets

Low Risk - High Return

3

• There is a strong relationship between transparency and pricing

• Most transparent markets are heavily priced or in troubled regions (Europe)

Where do you move out along the risk curve…?

UK

Taiwan

China-Tier I Cities

Hong KongSingapore

ItalyFrance

SwedenGermany

DenmarkSwitzerland Japan

0.00%

2.00%

4.00%

0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

JLL Transparency Index Value

Lower Score = Greater Transparency

Off

ice C

ap

Rate

Co

re+

Assets

In

To

p M

ark

ets

Source: JLL, Cushman & Wakefield, Colliers, SLI *Cap rates are based on Q4 2010 data.

High Risk - Low Return

What Markets Are Worth Looking At – Fiscal Health

Belgium

Iceland

United StatesAustria

Israel

NetherlandsSpain

ItalyGreece

Japan

Canada

Ireland

Switzerland40

60

80

100

120

140

To

tal

Go

ve

rnm

en

t D

eb

t/G

DP

(%

)

4

Denmark

New Zealand

Canada

Hong Kong SAR

Finland

Sweden

-60

-40

-20

0

20

-5 0 5 10 15 20

Current Defecit/GDP (%)

To

tal

Go

ve

rnm

en

t D

eb

t/G

DP

(%

)

Source: IMF, SLI

Canada has the healthiest public finances of any G8 country

Global Capital Flows

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

Mil

lio

ns

US

D

Asia Pacific Americas EMEA

5

• Does Asia Pac continue to lead in Capital Flow?

• America’s capital flow about 50% off peak:

oIs this the new norm?

oWhere does the growth come from?

• International market risk, hedging, tax leakage, transparency – what is the trade off?

$0

$50,000

2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1

Source: Real Capital Analytics, SLI

Global Currency Values

150

200

250

Tra

de W

eig

hte

d C

urr

en

cy V

alu

e I

nd

ex

BRB CHF GBP USD EUR JPY

6

• Does Asia Pac continue to lead in Capital Flow?

• $US, will it recover?

• Where is the Euro headed?

• Brazil is a hot market...what is your hedging strategy?

50

100

Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10

Tra

de W

eig

hte

d C

urr

en

cy V

alu

e I

nd

ex

Source: JP Morgan, SLI

Global Currency Volatility

10

15

20

25

30

Cu

rren

cy V

alu

e S

tan

dard

Devia

tio

n

7

• How do you hedge a volatile currency effectively

• The Green Back is at a low point for relative value and with low volatility

• Is now the time to buy in?

• What will trigger the recovery?

• Does it remain the world reserve currency?

0

5

BRB JPY GBP CHF EUR USD

Cu

rren

cy V

alu

e S

tan

dard

Devia

tio

n

Source: JP Morgan, SLI

IPD Yield Spread Over 10 Yr Canada Bonds

Global Currency Values•Even if all-property yields compressed 20 bps in Q3 their spread over Canadian 10-Year bonds will widen to over one standard deviation above their short historic mean in Q3.

•Cap Rates not likely to rise anytime soon

8

Source: JP Morgan, SLI

Is China the World’s Savior?

China Syndrome

Savior?

9

China – Exports Are Highly Exposed to Europe

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

% o

f C

hin

ese E

xp

ort

s

10

• Europe is China’s largest export market

• Italy alone accounts for 2% of total Chinese exports

Chinese exports will slow considerably – what will take their place?

0.00%

2.00%

4.00%

EU

US

A

Eu

rozo

ne

Ja

pa

n

Mid

dle

Ea

st

Afr

ica

Ind

ia

UK

Ita

ly

Ru

ssi

a

Au

str

alia

Bra

zil

% o

f C

hin

ese E

xp

ort

s

Source: IMF, SLI

China – Consumption Will Not Fill the Gap

55.0%

57.0%

59.0%

61.0%

63.0%

65.0%

Co

nsu

mp

tio

n /

GD

P

11

45.0%

47.0%

49.0%

51.0%

53.0%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Co

nsu

mp

tio

n /

GD

P

• China has had little success rebalancing its economy towards consumption

Without stronger consumption China may face a material economic slowdown

China – Housing Will Certainly Not Fill the Gap

80

90

100

110

Ch

inese H

ou

sin

g D

evelo

pers

Sto

ck P

rice I

nd

ex

12

50

60

70

Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11

Ch

inese H

ou

sin

g D

evelo

pers

Sto

ck P

rice I

nd

ex

Source: SLI

Falling home values may make the Chinese even less likely to spend…

This presentation is intended for investment professionals

THANK YOU

Peter Cuthbert

Head of Canadian Real Estate

Matthew Mowell

CRE Investment Analyst

17/09/11