PowerPoint Presentation...the United States, the United Kingdom, and Europe, considerable uncertainty still surrounds the Coronavirus and its potential effects on the population, which

PowerPoint Presentation6/6/2021
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AU STR ALI A BR AZ I L C AN AD A C H I N A D EN MAR K F I N LAN D F R AN C E GER MAN Y GR EEC E I N D I A I R ELAN D I TALY J APAN LU XEMBOU R G MEXI C O N ETH ER LAN D S PAN AMA POLAN D R U SSI A SOU TH KOR EA SPAI N U N I TED KI N GD OM U N I TED STATES
FOR INSTITUTIONAL USE ONLY. Not for distribution to the public.
Seeking Opportunity
Landscape Today
This is neither an offer to sell nor a solicitation of an offer to buy any securities which can only be made by means of a prospectus. Neither the Securities and Exchange Commission, the Attorney General of the State of New York nor any other state securities regulator has passed on or endorsed the merits of the offering of any securities offered by Hines Securities, Inc. Any representation to the contrary is unlawful.
Not for use in Ohio or New Jersey.
Hines Securities, Inc. Member FINRA, SIPC, is the dealer manager. 6/2021
Alternative investments involve a high degree of risk. Your clients should purchase these securities only if they can afford the complete loss of their investment. Risks will vary by investment, but in general risks include, but are not limited to:
There is not a public market for shares of alternative investments so it will be difficult for your client to sell their shares and, if they are able to sell their shares, they will likely sell them at a substantial discount;
These offerings may be conducted on a “best efforts” basis and as such, there is a risk that the program will not be able to accomplish its business objectives if substantial funds are not raised in the offering;
The availability and timing of distributions is uncertain and cannot be assured;
Alternative investments may offer share redemption programs; however, there are significant restrictions and limitations on your client’s ability to have all or any portion of their shares redeemed under such programs; if redemptions occur, they may be at a price that is less than the price your clients paid for the shares and/or the then-current market value of the shares;
Distributions may be paid from sources such as proceeds from debt financings, proceeds from the offering, cash advances by the advisor, cash resulting from a waiver or deferral of fees and/or proceeds from the sale of assets; distributions may exceed earnings; if distributions are paid from sources other than cash flow from operations, there will be less funds available for investment, and your client’s overall return may be reduced;
Alternatives offered by Hines Securities, Inc. (“Hines Securities”) may invest outside of the U.S. or in specific sectors which increases risk; in particular, international investment risks, include the burden of complying with a wide variety of foreign laws and the uncertainty of such laws, the tax treatment of transaction structures, political and economic instability, foreign currency fluctuations, and inflation;
Alternatives offered by Hines Securities are sponsored by Hines and these programs generally pay substantial fees to Hines and its affiliates for day-to-day operations and investment selection. These affiliates are subject to conflicts of interest.
General Risk Considerations
Hines Securities, Inc. Member FINRA, SIPC, is the dealer manager. 6/2021 1
Alternative investments are not suitable for all investors. Please refer to the suitability standards set forth in the prospectus or offering memorandum of the particular investment.
The photos shown in this presentation are for illustrative purposes only and are not part of any offering available through Hines Securities.
The Coronavirus (COVID 19) pandemic has had an adverse impact on global commercial activity. Investments in real properties and real estate related securities have not been immune to the impact of the pandemic. Although the outlook is improving in certain areas of the world, including the United States, the United Kingdom, and Europe, considerable uncertainty still surrounds the Coronavirus and its potential effects on the population, which makes it difficult to ascertain the long-term impact it will have on commercial real estate markets.
This material contains forward-looking statements (such as those concerning investment objectives, strategies, economic updates, other plans and objectives for future operations or economic performance, or related assumptions or forecasts) that are based on our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Any of the assumptions underlying the forward-looking statements could prove to be inaccurate and results of operations could differ materially from those expressed or implied. You are cautioned not to place undue reliance on any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements The views represented here are the opinions and beliefs of Hines and Hines Research and should not be viewed as legal, financial or tax advice.
General Risk Considerations Continued
Please see the “About the Indexes and Sources” slides at the end of the presentation for an explanation of the differences between the investments reflected in the indexes and investments in non-traded REITs, including how distributions are paid, as well as for a description of each index.
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Why Real Estate?
The “Optionality” of Real Estate: Offering Potential for Yield & Growth
1,2
Market Capitalization
Sources: Bank of International Settlements, Hines Research and World Federation of Exchanges.
There is no assurance that real estate investments will achieve capital appreciation or provide regular distributions. 1Market capitalizations: as of Q3 2020 for fixed income; as of December 2020 for global real estate (includes U.S. and international real estate); and as of December 2020 for equities. 2The value of an investment in global real estate may seem less volatile because its value is not subject to the market pricing forces to which publicly traded investments are subject.
An investment in global real estate is significantly less liquid than publicly traded investments and is not immune to fluctuations. Asset allocation/diversification does not guarantee a profit or eliminate the risk of loss.
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1000
1500
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3000
3500
4000
4500
+106% -49% +101% -57%
Source: Bloomberg as of April 2021.
Past performance cannot guarantee comparable future results. S&P 500 Index (SPX Index) - widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80%
coverage of available market capitalization. The SPX Index is meant to illustrate general market performance; it is not possible to invest directly in an index. Non-traded REIT shares
are significantly less liquid than fixed income and equities. Please see the end of the presentation for "About the Indexes and Sources in this Presentation".
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Income Options Are Limited 1
Asset Classes Yield
U.S. 10-Year Treasuries3 1.47%
U.S. Corporate Investment Grade Bonds5 2.17%
S&P 500 Stocks6 1.38%
1Data from May, 2020 through May 14, 2021. Past performance cannot guarantee comparable future results. 2U.S. investment-grade bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond Index. 3U.S. Treasuries are represented by the Bloomberg Barclays 10-Year Treasury Index. 4Municipal bonds are represented by the Bloomberg Barclays 10-Year Municipal Bond. 5U.S. corporate investment grade bonds are represented by the Bloomberg Barclays U.S. Corporate Investment Grade Index. 6Stocks are represented by the dividend yield of the S&P 500 Index.
An investment cannot be made directly in an index. Please see the end of the presentation for "About the Indexes and Sources in this Presentation".
Real Estate: Stable Total Returns Even When Other Risk Assets* Were Suffering In Public Markets
Sources: NCREIF, Standard & Poor’s, Bloomberg Barclays, NAREIT, Hines Research. Data is presented for the period from 4Q 1977 through 1Q 2021. The analysis uses quarterly
data. Hines Research identified the 10 most negative price returns for US Equities since 1977 and ranked them. Then Hines Research analyzed the total returns for the three asset classes shown over each of those 10 quarters. “Risk assets” refers to investments where the dividend pay-out is not fixed, as with fixed income bonds, but is set at the discretion of
the either the company (equities) or asset manager (real estate); moreover, return of capital is not guaranteed, unlike bonds, where return of capital is guaranteed if held to maturity.
Levered US real estate is represented by the NCRIEF Fund Index – Open-End Diversified Core Equity Value-Weighted Index (NFI-ODCE). To provide contextual information, we note that the leverage is the percentage of the gross asset value for the constituent funds, in aggregate, that consists of debt capital and is incorporated into the calculation of equity
returns. We provide the leverage as of 4Q 2020 as that was the recent update (22.3%). US Equities are represented by the S&P 500 Total Return Index. An investment cannot be
made directly in an index. Please see the end of the presentation for "About the Indexes and Sources in this Presentation". Past performance cannot guarantee comparable future results.
-45%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
4Q 1987 4Q 2008 1Q 2020 3Q 2002 3Q 2001 3Q 1990 3Q 2011 4Q 2018 2Q 2002 1Q 2001
To ta
s
PERFORMANCE BY ASSET CLASS OVER THE 10 WORST PRICE DECLINES FOR US EQUITIES SINCE 1977
US Levered Real Estate (ODCE) US REITS (NAREIT Equity REIT) US Equities (S&P500)
Global Real Estate Historically Has Enhanced a Traditional Portfolio Returns and Volatility1
1/1/2001 - 12/31/2020 | Annualized
40% Bonds
60% Stocks
35% Bonds
55% Stocks
Past performance cannot guarantee comparable future results. The financial markets have experienced volatility as a result of COVID-19, also called the Coronavirus. Investments in
global real estate have not been immune to the impact of the pandemic. Although the outlook is improving in certain areas of the world, considerable uncertainty still surrounds the Coronavirus and its potential effects on the population, which makes it difficult to ascertain the long-term impact it will have on commercial real estate markets. Global real estate is
represented by the MSCI Global Annual Property Index ("MSCI Global Annual"). Please see the “About the Indexes and Sources” slides at the end of the presentation for an explanation
of the differences between an investment in MSCI Global Annual and non-traded REITs, including how distributions are paid, as well as for a description of each index. *Sources: MSCI, Inc. and Hines Research; Period ended December 31, 2020. Portfolios with and without commercial real estate are hypothetical and this is not a recommendation of how
to allocate a portfolio. Volatility is presented on an annualized basis.
Stocks are represented by the S&P 500 Index. Bonds are represented by the Bloomberg Barclays Global Aggregate Bond Index.
The S&P 500 Index and the Bloomberg Barclays Global Aggregate Bond Index are meant to illustrate general market performance; it is not possible to invest directly in an index. Non-
traded-REIT shares are significantly less liquid than stocks and bonds. In addition, asset allocation/diversification does not guarantee or eliminate the risk of loss. 1A non-traded REIT’s offering price per share may be subject to less volatility than publicly-traded stocks and bonds because its NAV per share is based on the value of its real estate
assets and is not subject to market pricing forces. However, the value of a non-traded REIT’s underlying investments may fluctuate and may be worth less than the non-traded REIT initially
paid for them. Although the offering price is subject to less volatility than publicly-traded equities and REITs, a non-traded REIT's shares are significantly less liquid, and are not immune to fluctuations in value.
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Big Picture: The Cycle
Sources: Hines Research. As of 2021Q1. This image is intended to be illustrative so is not based on any one formal forecast for global GDP growth moving forward but represents a
view from Hines Research of the likely trajectory (shape only) and timing of declines and gains in output. Please note that the forecasts presented in this presentation were made by Hines Research, are about the respective markets and asset classes generally and are not intended to forecast the performance of any investment opportunities offered by Hines
Securities. These are forecasts and predictions based on Hines Research's reasonable assumptions and beliefs, which are based in part on a review of historical data and trends.
Actual results likely will vary. Great Financial Crisis (GFC) is an alternative label for the recession of 2008.
We now have strong conviction that the Early Recovery scenario is more probable.
Initial impacts to employment and output have been shockingly sharp but should be followed by sequential growth to soften subsequent year-over-year (y/y) growth rates.
There are relatively few systemic issues – as we had in the Great Financial Crisis (GFC) – to dramatically hinder a return to economic expansion if economies open up.
In an Early Recovery scenario, y/y growth would trough in mid- 2020 following a decline in COVID-19 cases in the US and Europe; we envisage the initial recovery to wax and wane in terms of strength (% growth) as COVID-19 cases also wax and wane. We would expect Asia to come back “on-line” with the strongest relative recovery but would need renewed demand from developed economies to fully recover.
In a Protracted Downturn scenario, the ultimate loss of output could be worse than in the Early Recovery scenario, but more critically, the recovery would be delayed and weaker.
Global Pandemic Scenario Analysis: GDP Impact
Y ea
r- o
ve r-
Y ea
4Q 2021 or
Early
Recovery
Protracted
Downturn
-2.7% -3.6%
Avg. Correction Average +/- 1 Standard Deviation
The Amplitude of a Price Correction Typically Dependent on Pricing Heading into Downturn
Sources: PMA, JLL, CBRE, CoStar, NCREIF, Hines Research. As of 2020Q4. Hines Research uses it proprietary view on pricing, the Composite Capital Markets Score (CCMS), to
categorize markets in the manner shown. The CCMS is an aggregate score based on five proprietary factors utilized in 5-year forward price forecasts produced by Hines Research for the markets under coverage. The CCMS is calculated as a percentile relative to each market’s own history. “Very expensive” refers to markets with composite prices in the 85-100th
percentiles of their history; “expensive” refers to markets with composite prices in the 70-85th percentiles of their history; “Near Intrinsic Value” refers to markets with composite prices
in the 30-70th percentiles of their history, considered fair value; “Inexpensive” refers to markets with composite prices in the 15-30th percentiles of their history; and “Very inexpensive” refers to markets with composite prices in the 0-15th percentiles of their history.
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Sources: CoStar, NCREIF, PMA, CBRE, JLL, Oxford Economics, Hines Research. As of 2020Q1, but using Q4 2019 as the starting point for the forecasting given that 2019 is
considered Year 0, and the forecasts are annual beginning from the end of 2019, i.e. pre-crisis. The analysis averages results for the 423 markets for which forecasts are published by Hines Research. CAGR is Compound Annual Growth Rate.
Comparing Implications for Prices for Early Recovery and Protracted Downturn Scenarios
-6.7%
-10.1%
-18.0%
-4.5%
-10.3%
-6.7%
-12.0%
-22.6%
-4.5%
-11.8%
GLOBAL PROPERTY 5-YEAR PRICE FORECAST BY SCENARIO
Early Recovery ("ER")-Cumulative Declines Protracted Downturn ("PD")-Cumulative Declines ER Price Growth CAGR PD Price Growth CAGR
Sources: CoStar, NCREIF, PMA, CBRE, JLL, Oxford Economics, Hines Research. As of Q4 2020. The Composite Capital Market Score (“CCMS”) is an aggregate score (0-100)
derived from the following metrics: Price to Trend, Cap Rate Spreads, Growth-Adjusted Spreads, Trailing Price Growth, and Trailing Total returns. The CCMS is calculated as a percentile relative to each market’s own history. Higher scores indicate that the market is expensive relative to its history. “Very expensive” refers to markets with composite
prices in the 85-100th percentiles of their history; “expensive” refers to markets with composite prices in the 70-85th percentiles of their history; “Near Intrinsic Value” refers to
markets with composite prices in the 30-70th percentiles of their history, considered fair value; “Inexpensive” refers to markets with composite prices in the 15-30th percentiles of their history; and “Very inexpensive” refers to markets with composite prices in the 0-15th percentiles of their history. This chart buckets all markets covered by Hines Research
by period according to the ranges provided above. This chart also displays that bucketing through 2021Q4 based on estimated future pricing given the assumption that Hines
Research price forecasts come to fruition. .
With Corrections Comes Opportunity
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
GLOBAL PRICING ENVIRONMENT: 2020Q4
Forecast
Sources: MSCI, Inc., NCREIF, Hines Research. As of Q4 2020 but using bi-annual data in France. This is the last data point that is consistently available across the markets shown.
Note that NL refers to Netherlands. Past performance cannot guarantee comparable future results. Cycles are defined as the change in values from a trough to a cycle peak (uninterrupted positive change). For markets with sufficient history to show a full long-cycle, generally covering the 1990’s to 2008, we show this as “Cycle 1,” i.e. the first long-cycle.
The horizontal axis shows the number of the year associated with the length of the cycle, so the year following the Cycle 1 tough would be Y1, the second year after the trough would
be Year 2, numbering all the way to the year of the Cycle 1 peak. The current cycle, generally starting in 2008, starts a new long-cycle, in our view (Cycle 2). We begin this new cycle from its trough and line up its progression as with Cycle 1 with the years as numbered here. Some markets have insufficient history to show both cycle (1 & 2), but their Cycle 2
progress is shown as comparison to the previous long-cycle as represented by the markets that have sufficient data to calculate that cycle (as noted above).
Looking through Current Uncertainty to the Long Cycle
% Property Total Returns Indexed
0
100
200
300
400
500
600
Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15 Y16 Y17 Y18
A ll-
Pr o
p er
ty T
o ta
Cycle 1-US Cycle 2-US Cycle 1-Australia Cycle 2-Australia
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Going Global
4.5%
United States Other Americas Europe Asia Pacific Africa & Middle East
The U.S. Is Becoming a Smaller Piece of the Global Investible Universe
Sources: Data set from 1993 – 2020, using annual data. Hines Research estimates the size of the investable real estate universe in each country by averaging that country's share of
global GDP, as sourced from Oxford Economics, and that country's share of global real estate transaction volume, as sourced from Real Capital Analytics, to estimate each country's share of the real estate universe. By blending the share of global transaction volume with the share of global GDP, Hines research believes it is able to produce estimates that
incorporate where real estate investors are actually allocating funds around the world.
Flows Matter: Fixing the Great Imbalance
Source: Oxford Economics, MSCI, Inc., NCREIF, ANREV, JLL, IPE, Hines Research. As of Q4 2020. Hines Research has used NCREIF’s NFI-ODCE Fund Index as representative of
the net equity invested in open-ended core equity funds. Net equity and number of funds are measures tracked by this index. For Europe, Hines Research uses the same measures from MSCI’s sub-index of “Balanced” funds, which are Europe’s version of the US “core” fund. The net equity figures shown here are in USD. While the European index starts in 2006
with 3 funds, prior to that start date there were 3 funds in the general Pan-European Index (as distinct from the Balanced Fund). The number of Pan-Asian Core funds and assets
under management come from an IPE/Real Assets article in the March/April 2020 magazine. Note, Hines Research extended the his tory of Pan-Asian investing back to 2006 (putting it in its 14th year of development) based on the statement by IPE/Real Assets in its article, “Asia-Pacific: APAC finds its core values,” from the May/June 2017 magazine that M&G’
Asia Fund is Asia’s largest and oldest open-ended core fund having been founded in 2006. The years as shown number the years over which we have history for the US fund series
(starting in 1978). For the other regions, the starting year of the respective representative data series utilized is Year 1 (2004 in Europe and 2006 in Asia) and subsequent progress is aligned with the subsequent years (as noted above).
With Pan-European open-ended core funds in their 20th year of development, and Pan-Asian open-ended core funds in their 15th year, both net equity invested and the number of funds for the two regions look similar to the US open-ended core fund universe in the early years of its development.
Net Equity
PAN-REGIONAL OPEN-ENDED CORE FUNDS
US Open-Ended Core Funds-Net Equity $B Europe Balanced Funds-Net Equity $B Asia-GAV $B
# of US Funds # of Europe Funds # of Pan Asian Open-Ended Funds
$208B
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Global Institutional Investors Targeting ex-US 1
Institutional investors invest on substantially different terms, including lower fees and expenses, than those offered by Hines-sponsored non-traded REITs, which do not have and do
not expect to have a material number of institutional investors. Note that totals may not add up to 100% due to rounding. *Source: 2021 PREA Investor Intentions Survey. PREA = Pension Real Estate Association. Survey respondents included 84 institutional investors with $743.8 billion of real estate
assets under management. Used with permission. 1Diversification does not guarantee a profit or protect against a loss.
95.0%
5.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Surveyed Institutional Investors
INTENTION TO DEPLOY NEW CAPITAL TO REAL ESTATE SECTOR IN 2021
Yes No
68%
The USD Has Strengthened = Purchasing Power
Sources: Oxford Economics, Hines Research. As of Q1 2021. Using quarterly exchange rates for each currency compared to the USD, Hines Research created a z-score (distance
from average expressed in units that are equal to the historical volatility of the currency in question) to show how strong or weak each currency’s current exchange rate is compared to its own history. Hines Research calculated the z-scores in such a way so that a positive z-score means that the currency is stronger and a negative equates to weaker. The start
date used for this analysis was thirty years as a default, but for currencies with histories shorter than thirty years that had movements of over 2 standard deviations since inception of
the currency, the start date was adjusted. The base starting point was end-of-year (“EOY”)1989; Russia starts EOY1993, Poland and Korea EOY1999, Czech Republic EOY2004, China, India and Mexico EOY2008.
(2.50)
(2.00)
(1.50)
(1.00)
(0.50)
Kingdom
S ta
n d
a rd
w a y F
WEAK
STRONG
What to Buy (or not)
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US Apartments
Fo re
ca st
C u
m u
la ti
ve R
ec o
ve ry
GLOBAL MARKETS: RECESSION MODELING PRICE DECLINES AND SUBSEQUENT RECOVERY
Markets May Offer Upside If/When We Get Forecast Declines
Sources: CoStar, NCREIF, PMA, CBRE, JLL, Oxford Economics, Hines Research. As of Q1 2020. The analysis is not updated as it i s meant to show what
expectations were at the start of the recession. The orange diamonds represent averages for sectors by region, while blue circles represent averages by sector for countries. The vertical axis shows the average annual price return expected if the forecasts for cumulative declines (Early Recovery scenario) come to fruition. As
the Early Recovery assumes losses occur over the first year of the 5-year forecast period, the Recovery CAGR is the average annual return required over the
remaining four years if, inclusive of price declines, the final 5-year average annual return is to equate to the pre-COVID Hines Research 5-year forecast by market. The analysis averages results for the 423 markets for which forecasts are published by Hines Research.
$-
Transaction Volumes turned up in Asia first
Sources: Real Capital Analytics, Hines Research. As of Q1 2021. “All Property” means all asset classes are included in the volume trends.
€ 0
€ 50
€ 100
€ 150
€ 200
€ 250
$-
Asia All Property Volume Trends
APAC 1-Year Avg 3-Yr Average
US Property Price Decline is Advanced = Opportunity
Price
Composite Capital Markets Score
Sources: CoStar, NCREIF, PMA, CBRE, JLL, Oxford Economics, Hines Research. As of 2020Q4.
The analysis averages results for over 400 markets covered by Hines Research by region. The Composite Capital Market Score (“CCMS”) is an aggregate score based on five proprietary factors utilized in 5-year forward price forecasts produced by Hines Research for the markets under coverage. The CCMS is calculated as a percentile relative to each market’s own
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US Europe Asia
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Largest concerns are the amount of supply coming (particularly in the US), and potential
eviction protections which could come into place as the crisis wears on.
There remains heightened increased regulatory risk for this sector as well as potential dilution
to net rents as local property taxes could see increases in some markets.
That said, if industrial is the obvious winner in this cycle, Living may be the second winner –
more time spent at home has increased consumer willingness to spend more on housing, and
given annual re-gearing of rents, the asset class has repriced quickly from a downturn.
Given the urban exodus that has started, Hines Research expects rents to be hardest hit in
traditionally expensive cities where units are small and employees will have a season of
working remotely anywhere.
Class A will be impacted as rental softness hits the general market, but cap rate movement
should be minimal compared to B and C product. Hines expects cap rate expansion reflecting
greater risk in lower-end product.
Hines View: Current circumstances support core acquisitions.
Sector Views: Living
NEAR-TERM VOLATILITY, long-term still good to own. High-end product not
immune. Likely second place after industrial.
L I V I N G /
H O U S I N G
US Renters Moving to the Suburbs
Sources: CoStar, NCREIF, Hines Research. As of Q1 2021.
Net Absorption (% Change in Occupied Units)
Relative Density Score (Higher = More Dense):
(20,000.00)
(15,000.00)
(10,000.00)
(5,000.00)
5,000.00
10,000.00
15,000.00
20,000.00
3-Year Average 5-Year Average 10-Year Average 2020Q1 2020Q2 2020Q3 2020Q4 2021Q1
All Classes - US National Absorption By Density Score
80 To 100 60 To 80 40 To 60 20 To 40 0 To 20
More Dense Less Dense
Sources: PMA, Oxford Economics, Hines Research. As of Q4 2019 as these studies were done to show the impact of COVID post 2019Q4 compared to pre-COVID expectations. (1)
COVID-19 Special Report #5: Supply Chain Shifts Poised to Generate Substantial New Demand (2) Prologis reported in an October 2015 research paper posted to its website, “European E-Commerce, E-Fulfilment, and Job Creation,” that for every €1 billion EURO of online sales, 77,000 square meters of logistics facilities is required. Bottom Chart: Hines
Research metro-level estimates of online sales in European metros where Hines Research has Logistics coverage. The acceleration assumption is that average online sales increases
from approximately 10% in 2019 to 30% in 2029.
Sector Views: Warehouse
0.0%
1.5%
3.4%
1.4%
2.6%
5.0%
-1%
0%
1%
2%
3%
4%
5%
6%
EUROPE LOGISTICS: RENT GROWTH BOTH HISTORICAL AND IMPLIED BY ACCELERATION SCENARIO
General Logistics Urban Logistics
Next 10 Years Required New Supply @ Current Online Sales Penetration %
Next 10 Years Required New Supply: Assuming Online Sales Penetration
US: For every 1% increase in online sales, there is
additional need for 45 million square feet of warehouse
space.1
US: If inventory increased by 5%, it is estimated the
market might need about another 300 million square feet
of warehouse. 1
EU: If country-level online sales increased from 9% in
2019 to about 25% by 2029, it would create the need for
just over 650 million square feet of logistics space in just
10 major economies (62 million square meters). 2
EU: For a similar acceleration scenario at the metro
level, annual average rental growth rates for logistics
could double over the next 10 years. Current disruption
to labor supply will push occupiers to accelerate move to
automation.
acquisitions.
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Sector Views: Office
IMPACTED BUT RESILIENT – Class A outperforms.
O F F I C E
While a new world will have more flexibility and remote workers than before; Hines Research
thinks the best office offerings will continue to do well post-COVID.
Space needs will evolve, with a strong focus on office space as additive to business
objectives: fostering collaboration, showcasing brand, etc. – landlords who provide simplicity,
flexibility, and high standards of service will win.
Hines Research expects cumulative loss of demand of 5%-15% depending on the market;
however, much of this can be offset by lower supply/withdrawals of obsolescent space as
well as potential additional space required for “Flexible Design” objectives (collaborative
space)
Renewed focus on health and safety, emphasizing need for modern product. Expectations
for quality in developing markets will increase.
Urban exodus could cause capital markets and fundamental dislocation over the next two
years, but expect that to be a temporary phenomenon that ultimately reverses. The reverse
is true for suburban node properties.
Hines View: Current circumstances support core acquisitions ONLY where rent
underwriting reflects decline in fundamentals.
Office: Outdated in US/EU; Lack of Supply in Asia
All charts as of Q4 2020. Left Chart: CoStar, Moody’s, Hines Research. Middle Chart: PMA, CBRE, Oxford Economics, Hines Research. The European average covers 42 office markets/submarkets covered by Hines Research. The Developed Europe average excludes Prague, Budapest, Warsaw and Moscow. Right Chart: CoStar, JLL-REIS, Oxford Economics, Hines Research. The inventory (“stock”) figures for all metros are best estimates for A/B quality. This quality breakdown is available for the US (where Hines Research used CoStar 5/4-star to be conservative) and Australia. In Asia, most figures are “Investible Stock,” which is generally aligned with Class A in a developing market context, but Class A/B if comparing to a Developed Market. GMP (Gross Metro Product) is in USD in order to be comparable across markets. It is adjusted by metro by multiplying by the percentage share for Financial and Business Services of Total Employment. US stock and Asia outside of Australia are gross floor area (GFA); Australia is net leasable (NLA). As data was available for Asia Pacific-ex Australia for both gross and net, Hines Research used the ratio for the developed markets in Asia Pacific-ex Japan to gross up both Europe and Australia. Asia includes India (Mumbai, Bangalore and Delhi). Hines Research did not include Europe in this analysis as PMA data is for all quality of property and is not available broken out by grade. The US total office inventory figure is aggregated for 54 US markets covered by Hines Research.
561
217
138
79
Current Asia Office
)
IMPLIED ADDITIONAL OFFICE INVENTORY FOR ASIA AT US AVERAGE (Sqm per GMP)
5%
10%
15%
20%
25%
30%
35%
DEVELOPED EUROPE AVERAGE
US OFFICE: MODERN AVAILABILITY
Sector Views: Retail
R E T A I L
Acceleration of all previous trends including ‘rightsizing’ of retailers’ footprints through
bankruptcies and closings; faster transition to omnichannel; near-term mall closings;
densification & redevelopment of existing centers.
As pool of willing tenants drops, vast majority of retail assets will have trouble backfilling
vacancies. High Street will not be immune but should hold up relative to other subtypes ONCE
tourism, both domestic and international, is back.
Expect pain to continue for tenants and landlords long after re-opening as tenants work through
inventory, hiring, and lower footfall issues.
Decline of US mall sector to accelerate; malls should remain more relevant in regions where
density of retail is well below US levels or where alternative forms of leisure is lacking.
Winners will be highest performing centers as retailers consolidate in best locations.
Opportunity for high quality investments at discounted pricing.
Retail amenitization for mixed-use development (creating “place”) will always have a role.
Hines View: Current circumstances do not support core acquisitions . . . yet.
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How to Invest
Sources: PERE, Family Office Real Estate Magazine Survey, Hines Research. Sourced from a PERE website article published on August 6, 2019 and authored by Lisa Fu.
Family Offices Appear to Prefer Private Equity/Direct Real Estate Exposure both for Equity and Debt
0.0%
0.0%
3.2%
3.6%
6.4%
6.8%
9.6%
11.4%
12.3%
16.8%
29.6%
45.0%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Mutual Fund
Direct Real Estate
Non-traded REIT
REAL ESTATE INVESTMENT VEHICLES FAMILY OFFICES EXPECTED TO USE IN 2019
Structural Enhancements: Finite versus Perpetual REITs
1
1The information provided reflects the structure that has been adopted by some non-traded REITs, but does not reflect the structure of all non-traded REITs.
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Structural Enhancements: Finite versus Perpetual REITs
The information provided is not a projection or forecast of future results. 1The information provided reflects the structure that has been adopted by some non-traded REITs, but does not reflect the structure of all non-traded REITs. 2The availability and timing of distributions that may be paid is uncertain and cannot be assured. 3While these fees are more closely aligned with investment performance, some REITs still reimburse its advisor for expenses it pays on its behalf. These expense reimbursements are not
tied to investment performance. 4The board of directors may terminate, suspend or amend the share redemption program without shareholder approval; stockholders may not be able to redeem their shares.
About the Indexes and Sources in this Presentation
This presentation contains information in the form of charts, graphs and/ or statements that we indicate were obtained by us from published sources or provided to us by independent third parties, some of whom we pay fees for such information. We consider such sources to be reliable. It is possible that data and assumptions underlying such third-party information may have changed materially since the date referenced. Your client should not rely on such third-party information as predictions of future results. None of Hines, its affiliates or any third-party source undertakes to update any such information contained herein. Further, none of Hines, its affiliates or any third-party source purports that such information is comprehensive, and, while it is believed to be accurate, it is not guaranteed to be free from error, omission or misstatement. Hines and its affiliates have not undertaken any independent verification of such information. Finally, your client should not construe such third-party information as investment, tax, accounting or legal advice.
Past performance cannot guarantee future results.
Global real estate, as represented by the MSCI Global Annual Property Index differs significantly from an investment in non-traded real estate investment trusts (REITs) and Hines-sponsored non-traded REITs.
Global real estate as represented by the MSCI Global Annual Property Index (MSCI Global).
The MSCI Global Annual reports the market rebalanced returns of the 25 most mature markets (including the U.S.). The index began tracking markets in 2001 and reporting results starting with the year ended December 31, 2001. Results are reported annually.
• The index tracks performance of 59,914 property investments, with a total capital value of USD 1,993.8 billion as at December 2020 and is comprised of all property sectors (retail, office, industrial, residential, hotel and other), direct ownership structures and interests. The index is computed at the building level and excludes properties held indirectly through investment in other funds, the impact of debt, fund management fees, taxation and cash. The MSCI Global Annual is used to gauge the performance of the global real estate market. The countries included in the MSCI Global Annual will be subject to change as the MSCI Global Annual’s coverage extends to more countries and as more accurate estimates of the value of each investment market become available.
• The MSCI Global reflects the results of direct investments in real estate. It reflects income as cash flow from operations.
About the Indexes and Sources in this Presentation –Continued
Hines-sponsored non-traded REITs also differ from the MSCI Global in several respects, including: they use debt; they require the payment of up-front selling commissions and other fees that typically exceed those of institutional programs, as well as the payment of expenses related to being a public company; investors in Hines-sponsored non-traded REITs will be investing in securities of a company and not directly in real estate; and the value of an investment in Hines-sponsored non-traded REITs may not be based solely on the appraised value of the underlying properties. The prices of the shares offered by Hines-sponsored non-traded REITs equal the then-current transaction price, which generally will be equal to the most recently determined NAV per share for each class of shares, plus, in the case of shares sold in the primary offering, applicable up-front selling commissions and dealer manager fees. The selling commissions and fees reduce the amount available for investment.
Additionally, the MSCI Global reflects income as cash flow from operations. Hines-sponsored non-traded REITs may pay distributions from cash flow from operations of the properties the REIT owns, as well as from other sources, including borrowings and offering proceeds, which may lower returns. The availability and timing of distributions Hines-sponsored non-traded REITs may pay is uncertain and cannot be assured. Additionally, Hines Global is subject to significant fees and expenses, which may lower returns. The Hines-sponsored non- traded REITs board of directors determine the timing and amount of distributions. There is no guarantee that distributions will be paid or that the distribution rate will be maintained.
The MSCI Global does reflect the impact of entity level expenses; however, it does not reflect the fees and expenses associated with raising capital to which an investment in Hines-sponsored non-traded REITs are subject, which may lower returns.
International investment risks, including the burden of complying with a wide variety of foreign laws and the uncertainty of such laws, the tax treatment of transaction structures, political and economic instability, foreign currency fluctuations, and inflation and governmental measures to curb inflation may adversely affect Hines-sponsored non-traded REIT’s operations and its ability to make distributions.
While funds used in the MSCI Global have characteristics that differ from Hines-sponsored non-traded REITs (including differing management fees and leverage), Hines-sponsored non-traded REIT’s management believes that the MSCI Global is an appropriate and accepted index for the purpose of evaluating the historic yields of global commercial real estate, respectively.
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About the Indexes and Sources in this Presentation —Continued Public real estate (U.S.) is measured by the FTSE NAREIT All Equity REITs Index, which is a free-float adjusted, market capitalization-
weighted index of U.S. equity REITs that are listed on an exchange. Constituents of the index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property. An investment in a traded REIT differs from an investment in a non-traded REIT in that non-traded REITs do not trade on an exchange, have limited redemption programs, and are subject to fees that may be higher than those paid with respect to traded REITs.
Levered US real estate is represented by the NCRIEF Fund Index –Open-End Diversified Core Equity Value-Weighted Index (NFI-ODCE). The NFI ODCE, a capitalization weighted, gross of fee, time weighted return index with an inception date of December 31, 1977. Other supplemental data such as equal weight and net of fee returns are also provided by NCREIF for information purposes and additional analysis. To be eligible for NFI ODCE membership, each member fund must be marketed as an open end fund with a diversified core investment strategy primarily investing in private equity real estate. All members funds must adhere to the following index inclusion criteria (1) At least 80 of market value of net assets must be invested in real estate 20 cap on cash and equivalents); (2) At least 80 of market value of real estate net assets must be invested in private equity real estate properties 20 cap on real estate assets invested in but not limited to, property debt, public company equity/debt or private company equity/debt); (3) At least 95 of real estate net assets must be located in U S markets; (4) At least 80 of market value of real estate net assets must be invested in office, industrial, apartment and retail property types; (5) No more than 65% (+/- for market force)s of market value of real estate net assets in one property type or region as defined by NCREIF Property Index (6) No more than 40% leverage. Each member fund must also comply with the NCREIF PREA Reporting standards. A benchmark index is not professionally managed. Investors cannot invest directly in an index.
US Unlevered Real Estate is measured by the MSCI U.S. Quarterly Property Index (Unfrozen). The MSCI Property Indexes are primarily based on real estate valuations, and where available, property transacted prices, supplied by its data providers. Groupings of MSCI property indexes include regional and market indexes and sector indexes.
The prices of real estate securities represented by these indices may change in response to factors including: the historical and prospective earnings of issues, the value of assets, general economic conditions, interest rates and investor perceptions. However, stocks, including stocks of traded REITs and T-Bills are easily traded and provide ready liquidity. An investment in direct real estate or a non-traded REIT does not. Additionally, stock investments are not subject to the fees and expenses, to which direct real estate and non-traded REITs would be subject.
Past performance cannot guarantee comparable future results. All indexes are unmanaged. An investment cannot be made directly in an index.
About the Indexes and Sources in this Presentation —Continued Stocks are represented by the S&P 500 Index. The prices of equity securities represented by the index may change in response to factors
including: the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates and investor perceptions. Stocks are easily traded and provide ready liquidity.
Stocks (Global) are represented by the MSCI World Index, a global equity benchmark that represents large and mid-cap equity performance across 23 developed markets countries. The index is reviewed quarterly with the objective of reflecting change in the underlying equity markets in a timely manner, while limiting undue index turnover.
Large cap stocks (U.S.) are represented by the S&P 500 Index, widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
Global equity is represented by the MSCI World Index, which is part of is a broad global equity benchmark that represents large and mid-cap equity performance across 23 developed markets countries. The index is reviewed quarterly with the objective of reflecting change in the underlying equity markets in a timely manner, while limiting undue index turnover. During the May and November semi- annual index reviews, the index is rebalanced and the large- and mid-capitalization cutoff points are recalculated. Stocks are easily traded and provide ready liquidity.
The prices of equity securities represented by these indices may change in response to factors including: the historical and prospective earnings of issues, the value of assets, general economic conditions, interest rates and investor perceptions. Stocks, including stocks of traded REITs, are easily traded and provide ready liquidity. An investment in direct real estate or a non-traded REIT does not. Additionally, stock investments are not subject to the fees and expenses, to which direct real estate and non-traded REITs would be subject.
Past performance cannot guarantee comparable future results. All indexes are unmanaged. An investment cannot be made directly in an index.
About the Indexes and Sources in this Presentation —Continued Treasury Bills (T-Bills) are represented by Bank of America Merrill Lynch 0-3 Month U.S. Treasury Bill Index, which tracks the performance
of the U.S. dollar denominated U.S. Treasury Bills publicly issued in the U.S. domestic market with a remaining term to final maturity of less than three months. Treasury bills and Treasury notes are guaranteed as to timely repayment of principal and interest by the U.S. government.
Corporate bonds (Global) are represented by the Bloomberg Barclays Global Aggregate Corporate Index, which is a flagship measure of global investment-grade, fixed-rate corporate debt. This multi-currency benchmark includes bonds from developed and emerging markets issuers within the industrial, utility and financial sectors. The Global Aggregate Corporate Index is a component of the Global Aggregate and Multiverse Indices. Index history is available through January 2001.
High Yield Corporate Bonds (U.S.) are represented by Bloomberg Barclays US HY Corporate Bond Index, which measures high-yield corporate bonds rated Ba1/BB+ or below.
Aggregate Bonds (U.S) are measured by Bloomberg Barclays Aggregate US Bond Index, which is a broad based, market capitalization- weighted bond market index representing intermediate term investment grade bonds traded in the United States.
Investment Grade Corporate Bonds (U.S.) are measured by Bloomberg Barclays US Investment Grade Corporate Bond Index, which measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD-denominated securities publicly issued by US and non-US industrial, utility and financial issuers.
Corporate Bonds (U.S.) the Bank of America Merrill Lynch U.S. Corporate Master Index, which tracks the performance of U.S. dollar denominated investment grade rated corporate debt publicly issued in the U.S. domestic market.
The Bloomberg Barclays 10-Year Municipal Bond Index is a broad-based index comprised of approximately 5,000 bonds.
The Bloomberg Barclays 10-Year Treasury Index measures the performance of 10-year U.S. Treasury notes.
Corporate bonds are debt instruments issued by corporations that pay a fixed amount of interest. Bonds are subject to interest rate risk, which refers to the risk that bond prices generally fall when interest rates rise and vice versa. Bonds are easily traded and provide ready liquidity. An investment in debt instruments, such as corporate bonds, may be secured by collateral and are repaid first should a company be liquidated, while an investment in a REIT is an investment in equity which will not be secured by collateral and the interest of shareholders of a REIT are subordinate to the REIT’s lenders should a REIT be liquidated. Investments in non-traded REITs or direct real estate may be subject to more expenses than a direct investment in bonds, including management fees and entity-level expenses.
Inflation is represented by the Consumer Price Index (CPI).
Past performance cannot guarantee comparable future results. All indexes are unmanaged. An investment cannot be made directly into an index.
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