Deutsche Real Estate Securities Capabilities Archive... · 2016-10-31 · Deutsche Asset Management...

Deutsche Real Estate Securities Capabilities

For registered representative use only. Not for public viewing or distribution.

Investment products: No bank guarantee I Not FDIC insured I May lose value

Agenda

Platform and Team

REIT Investment Universe

REIT Themes

REIT Valuations

Economic Backdrop and Real Estate Fundamentals

For registered representative use only. Not for public viewing or distribution.


Our alternatives real asset platformStrength based on a unique global perspective

2

TokyoChicago

BethesdaNew YorkSan Francisco

Sydney

Singapore

Boston

Seoul

Global network of

more than

300investment professionals

40 years of investment heritage

with individuals, governments,

corporations and institutions.

AmsterdamFrankfurtLondon

Madrid

Paris Warsaw

ZürichMunich

Milan

One of the world’s leading

fiduciary alternatives managers with

$89BILLION

of assets under management

Source: Deutsche Asset Management as of 6/30/16.

Seattle

Costa MesaDallas

AtlantaHong Kong

Westborough

Deutsche

Asset ManagementFor registered representative use only. Not for public viewing or distribution.


(1) Based in Chicago. (2) Based in London. (3) Based in Zurich. (4) Based in Sydney. (5) Based in Tokyo. (6) Based in Hong Kong.

(7) Association of Southeast Asian Nations. (8) Subject to applicable law, internal policies and procedures. (9) Shared across multiple asset classes.

*Includes 1.5 years as external employee. Source: Deutsche Asset Management. Years with firm/industry as of June 30, 2016. Years with industry #

Years with firm #

Real estate securitiesInvestment team organization

3

Deutsche AM and Deutsche Bank Resources8

Global

Client Group

Global

Research

Global

Direct Real Estate

Equities, Fixed

Income, and FX

Risk

Management

Trading

Desk

John Vojticek Head and CIO of Liquid Real Assets

MD, Global Portfolio Manager

Americas Europe Asia Pacific

Lead

Port

folio

Managers Joe Fisher1

Co-Head of Real Estate

Securities, Americas

D, Co-Lead Portfolio Manager

David Zonavetch1


Securities, Americas

D, Co-Lead Portfolio Manager

John Hammond2

Head of Real Estate Securities, Europe

MD, Lead Portfolio Manager

Daniel Ekins4


Securities, Asia Pacific

MD, Co-Lead Portfolio Manager

Chris Robinson4


Securities, Asia Pacific

MD, Co-Lead Portfolio Manager

Analy

sts

John Bejjani1

VP, Securities Analyst

Office/Datacenters

Derek Bower1


Healthcare/Industrial

Vincent Kouch2


Continental Europe

Eloise Blake4


Australia

Todd McFarlane4


Australia

Andrew Johns1


Regional Malls/Retail

Christian Schroeder1


Apartments/Hotels

Barry McConnell2


United Kingdom

Hiroshi Miyata5


Japan

Lihui Chen6


HK/China

Ryan Zaborske1

AS, Securities Analyst

Specialty/Self Storage

Pierre Paren2

AVP, Securities Analyst

Ivy Ng6

AVP, Securities Analyst

Singapore/ASEAN7

Frédéric Mathier3

D, Portfolio Manager

Swiss Fund of Funds

Port

folio

Constr

uctio

n9 Evan Rudy1

D, Portfolio Manager

Amit Patel1

AVP, Portfolio Analyst

Christine Fitzpatrick1

AVP, Portfolio Management Assistant

Barry Steiner1

AVP, Portfolio Management

Assistant

Krishneel Singh4

AVP, Portfolio

Management Assistant

9

10

5

27

20

20

18

20

12

13

19

31

13

20

1

10

8

12

3

16

7

9

0

8

9

15

8

8

2

9

3

9

12

25

2

20

9

16

6

17

3

8

2

4

1

5

9

19

2*

10*

Deutsche


Investment products: No bank guarantee I Not FDIC insured I May lose value 4

(1) Diversified includes multiple property sectors.

(2) Weighted average.

Source: Global Real Estate Securities represented by FTSE EPRA/NAREIT Developed Index; Global ex-U.S. Real Estate Securities represented by FTSE EPRA/NAREIT

Developed Ex-US Index; U.S. Real Estate Securities represented by FTSE EPRA/NAREIT North America Index. excluding Canada. Market capitalization figures in USD millions.

Source: Factset. As of June 30, 2016.

Global real estate securities Investment universe

HoldingsMarket

Cap

Average

Market

Cap2Yield

Global Real Estate Securities 334 $1,409,675 $14,741 3.5%

Global ex-U.S. Real Estate Securities 202 $630,598 $10,443 3.5%

U.S. Real Estate Securities 132 $813,706 $18,219 3.6%

Index breakdown by sector1 Index breakdown by region

Diversified, 14.8%

Healthcare, 7.6%

Hotelsresrts, 3.9%

Industrial, 5.6%

Industrial Office Mixed,

1.2%

Office, 17.2%

Other, 2.2%

Residential, 17.5%

Retail, 25.3%

Specialty, 0.3%

Storage, 4.3%

United States, 55.3%

Asia ex-Japan, 9.0%

Japan, 11.1%

Australia, 6.1%

Europe ex-UK, 10.9%

United Kingdom,

4.6%

Canada, 2.9%

Deutsche



Rolling 10-year returns for real estate indices Real estate securities provided real estate returns over the long run

5

Please note: For Illustrative purpose only, you cannot invest directly into an index.

Sources: FTSE, Morgan Stanley, NCREIF, Standard & Poors. As of June 30, 2016.

Rolling 10-year returns

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

De

c-9

9

Jun-0

0

De

c-0

0

Jun-0

1

De

c-0

1

Jun-0

2

De

c-0

2

Jun-0

3

De

c-0

3

Jun-0

4

De

c-0

4

Jun-0

5

De

c-0

5

Jun-0

6

De

c-0

6

Jun-0

7

De

c-0

7

Jun-0

8

De

c-0

8

Jun-0

9

De

c-0

9

Jun-1

0

De

c-1

0

Jun-1

1

De

c-1

1

Jun-1

2

De

c-1

2

Jun-1

3

De

c-1

3

Jun-1

4

De

c-1

4

Jun-1

5

De

c-1

5

Jun-1

6

FTSE NAREIT Index (10-year) FTSE EPRA/NAREIT Developed Index (10-year)

NCREIF Property Index (10-year) S&P 500 Index (10 -year)

MSCI World Index (10 -year)

Deutsche



Long-term index performerLarge percentage of return from income

6

Note: Assumes dividend reinvestment. Past performance is historical and does not guarantee future results; based in USD. Yields are not guaranteed.

Sources: Deutsche Asset Management, Bloomberg, FTSE NAREIT as of 6/30/16. For illustrative purposes only.

Listed real estate (EPRA Developed Index) – Indexed to $100

Global equities (MSCI World) – Indexed to $100

$100$200$300$400$500$600$700$800$900

$1,000$1,100

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Price Return Income Return

$619

$362

$100

$200

$300

$400

$500

$600

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Price Return Income Return

$229

$332

Deutsche



REITs can provide access to the world's most prestigious and well known property assets

7

For illustrative purposes only. Information based on latest available and is subject to change. This information is intended for informational purposes only and does not constitute

investment advice, a recommendation, an offer or solicitation. No inference is made that above assets are part of, or will be part of, any Deutsche Asset Management investment

portfolio. Source: Deutsche Asset Management. Company data.

New York ‘The General Motors Building’US REIT: Boston Properties

London ‘Leadenhall Building’UK REIT: British Land

Paris ‘CB 21’French REIT: Fonciere des regions

Sydney ‘Westfield Sydney City’AU REIT: Scentre Group

― Crown jewel of the

Manhattan skyline,

― Located at southeast corner

of Central Park

― 2m square feet, 50 levels

― Apple ‘cube’ store in the

plaza has become top

tourist attraction

― Nicknamed the

‘Cheesegrater’

― World class office building

and City of London

landmark

― 603,000 square feet

― Has broken records for city

rents several times over

― Forefront of the business

district and stands out in the

Parisian skyline

― Located in the La Defense,

the high rise business district

in the west of Paris

― 68,000 square metres of

office space

― World class iconic retail

destination in the heart of

Sydney CBD

― 353 retailers, with 43.8m

customer visits

― Serves the biggest trade

area population in Australia

with approximately 4.9m

people

Deutsche



Macro ThemesData suggests slowing growth

8

Sources: Bloomberg, Deutsche Asset Management. As of June 30, 2016.

S&P 500 Index - Adjusted EPS

Late Cycle GDP

U.S. Initial Jobless Claims – 4 Week Moving Avg.

U.S. Manufacturing – New Orders

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Dec

-85

Jan

-87

Feb

-88

Mar

-89

Ap

r-9

0

May

-91

Jun

-92

Jul-

93

Au

g-9

4

Sep

-95

Oct

-96

No

v-9

7

Dec

-98

Jan

-00

Feb

-01

Mar

-02

Ap

r-0

3

May

-04

Jun

-05

Jul-

06

Au

g-0

7

Sep

-08

Oct

-09

No

v-1

0

Dec

-11

Jan

-13

Feb

-14

Mar

-15

Ap

r-1

6

Recession Nominal GDP Real GDP

Real (Nominal - Core PCE) Real (Nominal - Headline CPI) Real (Nominal - Core CPI)

0.0%9.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Jan

-93

Mar

-94

May

-95

Jul-

96

Sep

-97

No

v-9

8

Jan

-00

Mar

-01

May

-02

Jul-

03

Sep

-04

No

v-0

5

Jan

-07

Mar

-08

May

-09

Jul-

10

Sep

-11

No

v-1

2

Jan

-14

Mar

-15

May

-16

Y/Y%

Recession Y/Y% Average +1SD -1SD

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Jun-87

Jun-88

Jun-89

Jun-90

Jun-91

Jun-92

Jun-93

Jun-94

Jun-95

Jun-96

Jun-97

Jun-98

Jun-99

Jun-00

Jun-01

Jun-02

Jun-03

Jun-04

Jun-05

Jun-06

Jun-07

Jun-08

Jun-09

Jun-10

Jun-11

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Y/Y%


-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

Ap

r-8

7A

pr-

88

Ap

r-8

9A

pr-

90

Ap

r-9

1A

pr-

92

Ap

r-9

3A

pr-

94

Ap

r-9

5A

pr-

96

Ap

r-9

7A

pr-

98

Ap

r-9

9A

pr-

00

Ap

r-0

1A

pr-

02

Ap

r-0

3A

pr-

04

Ap

r-0

5A

pr-

06

Ap

r-0

7A

pr-

08

Ap

r-0

9A

pr-

10

Ap

r-1

1A

pr-

12

Ap

r-1

3A

pr-

14

Ap

r-1

5A

pr-

16

Y/Y%


Deutsche



-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Jul-0

5

Fe

b-0

6

Oct-

06

Jun

-07

Fe

b-0

8

Se

p-0

8

Ma

y-0

9

Jan

-10

Au

g-1

0

Ap

r-11

Dec-1

1

Au

g-1

2

Ma

r-13

Nov-1

3

Jul-1

4

Ma

r-15

Oct-

15

Jun

-16

Spre

ad

Yie

ld

Spread (RHS) GlobalxUS (LHS) United States (LHS) Average (RHS) 1 SD (RHS) +1 SD (RHS)

10-year U.S. treasury and inflation expectationsCompressing global yields and inflation have compressed U.S. rates

9

(1) Some of the above information is a forecast or projection. Any projections are based on a number of assumptions as to market conditions and there can be no guarantee that

any projected results will be achieved . For Illustrative purpose only. Past performance is not indicative of future results. Left Hand Side (LHS). Right Hand Side (RHS).

Sources: Bloomberg, Deutsche Asset Management, Federal Reserve. As of June 30, 2016.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Global yield spread1

United States 10-year breakeven inflation rate Appropriate pace of Fed policy firming1

2016 2017 2018 2019

1.0%

1.4%

1.8%

2.2%

2.6%

Jul-1

4Jul-1

4A

ug-1

4S

ep-1

4O

ct-

14

Nov-1

4D

ec-1

4Jan

-15

Fe

b-1

5M

ar-

15

Ap

r-15

Ma

y-1

5Jun

-15

Jul-1

5A

ug-1

5S

ep-1

5O

ct-

15

Nov-1

5D

ec-1

5Jan

-16

Fe

b-1

6M

ar-

16

Ap

r-16

Ma

y-1

6Jun

-16

Creeping Imposition of Negative Interest Rates

Deposit/Target Rate

-0.78%

-0.53%

-0.52%

-0.29%

-0.06%

-1.00% -0.80% -0.60% -0.40% -0.20% 0.00%

Switzerland

Sweden

Denmark

Euro Zone

Japan

Deutsche



$17.5

$28.8

$55.5

$9.4

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

CY 2013 CY 2014 CY 2015 YTD 2016

Institutional capital currently increasing real estate exposure

For illustrative purposes only. FIRPTA refers to the Foreign Investment in Real Property Tax Act of 1980, which is a U.S. tax law that imposes income tax on foreign persons

disposing of U.S. real property interests. Sources: Deutsche Asset Management, Real Capital Analytics. As of June 30, 2016.

10

$17.5

$28.8

$55.5

$9.4

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

CY 2013 CY 2014 CY 2015 YTD 2016

Sovereign Wealth Funds Direct Real Estate Transactions$US billions

— Historically limited foreign capital flows into the U.S.,

specifically real estate

— Changes will double the percentage of publicly traded stocks a

foreign shareholder is permitted to hold without incurring

FIRPTA withholding and tax upon sale:

— Previously 5% increase to 10%

— Reform will exempt foreign pension funds from FIRPTA tax and

withholding

— Further applies to indirect holdings through a partnership

interest

— Extension of exemptions to RICS, or gain on sale of RIC

shares, from FIRPTA withholding tax

Changes to FIRPTA

— International sources (i.e. sovereign wealth funds, pension

funds) are seeking U.S. real estate deals

— FIRPTA reforms will serve to increase the flow of funds into

U.S. real estate development by:

— Broadening possibility for greater foreign investment in U.S.

public REITs

— Exemptions for certain gains on sale of REITs

— Exemptions for capital gain distributions from REITs

— Removing tax barrier provides additional incentive, specifically

for foreign pension funds, to invest in U.S. real estate

Implications for investors

— Sovereign wealth funds have been active across core, value-

add and logistics real estate asset classes

— Competition for core assets is particularly strong in cities such

as New York, Paris, London and San Francisco

— Notable participants: Norges (Norway), ADIA (Abu Dhabi),

GIC (Singapore), Australian Super, CIC (China), GPIF (Japan)

Sovereign capital providing support

Deutsche



Private equity real estate dry powderRecord amount of capital waiting to be invested

(1) Bloomberg.com, Blackstone's Gray Says REIT Buyouts Loom Amid Bearish Market, October 2015; The opinions and forecasts contained herein are based on or derived from

publicly available Information from sources that we believe to be reliable. We do not guarantee their accuracy. This material is for informational purposes only and sets forth our

views as of this date. The underlying assumptions and these views are subject to change without notice. Source: Prequin, Morgan Stanley Research. As of June 30, 2016.

“Stock investors are too bearish on U.S. real estate, and the market’s decline probably will lead to more takeovers of publicly traded landlords, along

with asset sales, said Jon Gray, global head of real estate at Blackstone Group LP, the largest private equity investor in property worldwide. ‘There’s a

disconnect, and that creates opportunity,’ Gray said Thursday at a conference sponsored by the Pension Real Estate Association in San Francisco.”1

11

Global Closed-End Private Equity Real Estate Funds Dry Powder (US $bn)

— Private equity real estate fund dry powder has increased 14% in 2016 and is over 43% higher than pre-crisis levels

— Significant amount of private equity funds investment is intended for North America real estate – over 50%

— Notable Sponsors: Blackstone, Starwood, Lone Star, Brookfield, Colony, Carlyle, Fortress, Farrallon, TPG, Oaktree, Tishman

$39$55

$98

$132

$167 $171$180

$118

$167$156

$186$196

$210

$239

$0

$50

$100

$150

$200

$250

$300

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jun-16

Dry

Pow

der

($bn)

Deutsche



Domestic Capital markets and transactionsTransaction volumes are robust, yet investors are using less leverage this cycle than in the past

Source: Real Capital Analytics. SNL Financial LC, Commercial Mortgage Alert. As of June 30, 2016.

12

$67 $52$78 $93

$167$198

$229

$12 $3 $12$33 $48

$86 $94 $101

$31

$15 $52

$46

$117

$129

$139

$215

$128

$53

$109

$159

$196

$209

$255

$339

$159$82

$104$124

$209

$296

$337

$444

$140

$55

$121

$192

$244

$295

$349

$440

$190

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016YTD

CMBS Funded Transactions

Transaction volume US$ billions

2005-2007:

Total Transactions: $1,077 bn

Total CMBS: $594 bn (55%)

2013-2015:

Total Transactions: $1,084 bn

Total CMBS: $281 bn (26%)

Deutsche



Supply growth is at a historically low rateApartments are the exception while industrial should be monitored

Forecasts from 2016 through 2020. This information is a forecast and due to a variety of uncertainties, and assumptions made in our analysis, actual events or results or the

actual performance of the markets covered may differ from those presented.

Sources: CBRE-EA, Deutsche Asset Management. As of July 2015.

= Long-term average

13

Retail Completions as a % of Stock

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015F

2016F

2017F

2018F

2019F

2020F

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016F

2017F

2018F

2019F

2020F

Apartment Completions as a % of Stock

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016F

2017F

2018F

2019F

2020F

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016f

2017f

2018f

2019f

2020f

Industrial Completions as a % of StockOffice Completions as a % of Stock

Deutsche



REIT valuationsHistorical earnings growth versus broader equities

Past performance is not indicative of future results. Note: REIT 2016 Forecast = Deutsche AM; S&P 2016 Forecast = Bloomberg

Sources: Bloomberg, Factset, Deutsche Asset Management. As of June 30, 2016.

14

Weighted average year-over-year REIT FFO growth vs. S&P 500 EPS growth

— Over the last 16 years, annual REIT FFO growth of 8.6% has exceeded earnings of the S&P 500 at 7.8%

— Over the last 5 years, REITs have underperformed the S&P 500 despite cumulative REIT FFO growth of 61.7% that has

exceeded S&P 500 earnings by 25.3 percentage points.

9%

0%

6%4% 6%

11%

16%13%

-6%-9%

9%

22%

11%

17%19%

14%

8%

13%

-26%

14%

19%

14% 14% 15%

0%

-18%

-4%

29%

17%

3%6%

10%

-2%

7%

-30%

-20%

-10%

0%

10%

20%

30%

40%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

REIT FFO Growth S&P EPS Growth

Deutsche



-50.00%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

Jan-9

2

Ma

y-9

3

Sep-9

4

Jan-9

6

Jun-9

7

Oct-

98

Ma

r-0

0

Jul-0

1

No

v-0

2

Ma

r-0

4

Aug-0

5

De

c-0

6

Apr-

08

Sep-0

9

Jan-1

1

Ma

y-1

2

Oct-

13

Feb

-15

Jun-1

6

Green Street Average

U.S. REIT valuationsRelative to private real estate: Fair

Past performance is not indicative of future results.

Sources: Green Street Advisors, Deutsche Asset Management. As of June 30, 2016.

15

Average premium to NAV

-2.97%

2.77%

Deutsche



0.51%

4.32%

5.24%

3%

4%

5%

6%

7%

8%

9%

10%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Jun-0

6

De

c-0

6

Jun-0

7

De

c-0

7

Jun-0

8

De

c-0

8

Jun-0

9

De

c-0

9

Jun-1

0

De

c-1

0

Jun-1

1

De

c-1

1

Jun-1

2

De

c-1

2

Jun-1

3

De

c-1

3

Jun-1

4

De

c-1

4

Jun-1

5

De

c-1

5

Jun-1

6

Spread (LHS) Average Spread (LHS) BAA Corp Yield (RHS) Green Street Implied Cap Rate (RHS)

CHEAP

EXPENSIVE

(1) Mean reversion is a theory suggesting that prices and returns eventually move back toward the mean or average. No assertion is being made as to the likelihood or time frame

over which returns will or will not move back toward the mean or average. This information has been provided for historical context only.

Past performance is not indicative of future results. Returns are shown for illustrative purposes only and not indicative of any real estate investment strategy. There is no

guarantee the forecast returns shown will materialize. SPG refers to Simon Property Group. For Illustrative purpose only.


U.S. REIT valuationsRelative to corporate bonds: Currently attractive

16

Implied cap rates and corporate bond yields

Implied Cap Rate: 5.24% BAA Corp Bond: 4.32% Current Spread: 92 bps Change to Average: -41bps Leverage: 33.0% Reversion to mean1: 12.6%

Please note: Cheap – indicates that actual spread is higher than average spread. Expensive – indicates actual spreads is lower than average spread.

0.92%

12/5/2006 – SPG issues

debt at 5.25%

1/8/2016 – SPG issues

debt at 3.30%

Deutsche



-2.16%

6.03%

4.42%

3%

5%

7%

9%

11%

13%

15%

-7%

-5%

-3%

-1%

1%

3%

Jun-0

6

De

c-0

6

Jun-0

7

De

c-0

7

Jun-0

8

De

c-0

8

Jun-0

9

De

c-0

9

Jun-1

0

De

c-1

0

Jun-1

1

De

c-1

1

Jun-1

2

De

c-1

2

Jun-1

3

De

c-1

3

Jun-1

4

De

c-1

4

Jun-1

5

De

c-1

5

Jun-1

6

Spread (LHS) Average Spread (LHS) S&P 500 Earnings Yield (RHS) REITs AFFO Yield (RHS)

CHEAP

EXPENSIVE

Green Street REIT 3-year AFFO yield versus S&P 500 3-year earnings yield

U.S. REIT valuations Relative to equities: Attractive

(1) Mean reversion is a theory suggesting that prices and returns eventually move back toward the mean or average. No assertion is being made as to the likelihood or time frame

over which returns will or will not move back toward the mean or average. This information has been provided for historical context only.

Past performance is not indicative of future results. Returns are shown for illustrative purposes only and not indicative of any real estate investment strategy. There is no

guarantee the forecast returns shown will materialize. For Illustrative purpose only. Adjusted Funds from Operations (AFFO) is calculated by adjusting recurring capital

expenditures, used to maintain quality of the REIT’s underlying assets, from REIT’s Funds from Operations (FFO).


17

Please note: Cheap – indicates that actual spread is higher than average spread. Expensive – indicates actual spreads is lower than average spread.

AFFO Yield: 4.42% S&P Earnings Yield: 6.03% Current Spread: -161 bps Change to Average: 56bps Reversion to mean1: +14.0%

-1.61%

Deutsche



Real estate – A new GICS SectorMay provide more diversification and potentially lower correlations

This information is a forecast and due to a variety of uncertainties, and assumptions made in our analysis, actual events or results or the actual performance of the markets

covered may differ from those represented. Sources: Deutsche Asset Management, Dow Jones, Raymond James, Standard & Poors. As of December 31, 2015.

— S&P Dow Jones announced in November 2014 that as of

August 31, 2016, Real Estate will become the 11th sector

in the Global Industry Classification Standard (“GICS”)

— Real estate will not longer be a sub-industry within the

Financials Sector

— This move has the potential to reduce correlations to

broader equities, improve the diversification benefits, and

lower the cost of capital

— Real estate is 2.5% of the S&P 500 and approximately

15% of the Financials index

— Financials are approximately 16% of the S&P 500

— Real estate is the 2nd largest sub-industry in the S&P

Mid-Cap 400, at 10% of the index and 42% of Financials

— We estimate approximately $4-5 billion of REIT exposure

exists within funds benchmarked to the XLF index.

A new GICS Sector

— Raymond James REIT team produced the below

estimates showing how underweight broader equity

mutual fund managers are to REITs relative to their

respective benchmarks

— The $95 billion estimate equates to over 10% of the REIT

index market capitalization

— More fund managers will be forced to pay attention to

REITs when they become the 11th GICS sector

Under-owned by generalist investors

Category REIT Weighting Estimated

UnderweightMutual Funds Benchmark

Mid-Cap Growth 1.2% 1.6% $1 billion

Small Growth 1.9% 2.7% $1 billion

Mid-Cap Blend 4.7% 6.8% $5 billion

Small Blend 5.9% 8.6% $6 billion

Small Value 6.6% 14.6% $8 billion

Large Growth 0.6% 1.4% $10 billion

Mid-Cap Value 5.3% 12.5% $16 billion

Large Value 1.5% 4.1% $23 billion

Large Blend 1.4% 2.8% $25 billion

18

Deutsche



Market outlook – Global real estateLooking forward in summary

19

The comments, opinions and estimates contained herein are based on or derived from publicly available information from sources that we believe to be reliable. We do not

guarantee their accuracy. This material is for informational purposes only and sets forth our views as of this date. An investment in real estate involves a high degree of risk and is

suitable only for sophisticated investors who can bear substantial investment losses. The value of shares/units and their derived income may fall as well as rise. Past performance

or any prediction or forecast is not indicative of future results. Investments are subject to risks, including possible loss of principal amount invested.

As of June 30, 2016.

— Global economic growth continues to slow with divergences accelerating in 2016

— Supply remains subdued providing limited downside to rental rates; in place rents in most sectors/regions are

below market providing highly visible cash flow growth

— Private real estate pricing should be stable as a sizable backlog of allocated capital remains to be invested; we

expect some deterioration in secondary markets/assets

— Activism and corporate activity have replaced leveraged buyouts as the downside protection during this cycle

— Global dividend yields are well covered overall and currently stand at roughly 3.5 percent. We expect dividend

growth to remain in the high single digits in 2016 due to strong cash flow growth and low payouts

— Globally listed real estate is trading in line with historical valuations when measured against NAV but are

trading attractively relative to fixed income alternatives. Growing cash flow growth coupled with increased

external growth suggest listed the real estate indices can potentially deliver mid to high single digit returns over

the next 12 months

Deutsche



Important Risk Information

Any fund that concentrates in a particular segment of the market will generally be more volatile than a fund that invests more broadly. Investing in derivatives

entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. There are special risks associated with an

investment in real estate, including REITS. These risks include credit risk, interest rate fluctuations and the impact of varied economic conditions. The funds may

lend securities to approved institutions. Stocks may decline in value. Deutsche Real Estate Securities Fund is non-diversified and can take larger positions in

fewer issues, increasing its potential risk. Deutsche Global Real Estate Securities Fund invests in foreign securities. Investing in foreign securities, particularly

those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. See the prospectus for

details.

OBTAIN A PROSPECTUS

To obtain a summary prospectus, if available, or prospectus, download one from www.deutschefunds.com for more information regarding the fund’s

objectives, risks, charges and expenses.

Investment products offered through Deutsche AM Distributors, Inc. Advisory services offered through Deutsche Investment Management Americas, Inc.

Deutsche Asset Management represents the asset management activities conducted by Deutsche Bank AG or any of its subsidiaries.

Deutsche AM Distributors, Inc.

222 South Riverside Plaza Chicago, IL 60606-5808

www.deutschefunds.com [email protected]

Tel (800) 621-1148

Important information

© 2016 Deutsche Bank AG. All rights reserved. (10/16) R-048254-1

20


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