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Offshore Developed Markets Property Overview and Outlook
Keillen Ndlovu
Head: Listed Property Funds
November 2016
GLOBAL LISTEDPROPERTY
DEVELOPEDMARKETS
3
Management meetings, conferences and site visitsSTANLIB Foreign Property
2012 2013 2014 2015 2016Hong Kong UK China China JapanUK Romania France Philippines PhilippinesUSA Turkey Thailand Indonesia ZambiaRomania Philippines Hong Kong Nigeria Kenya & MauritiusBrazil Indonesia Taiwan Mexico Romania & SerbiaNigeria Hong Kong UK UK SpainGhana USA USA USA UKTanzania Germany Australia Romania USA
Singapore Romania Egypt China
Mexico Slovakia UAE AustraliaHungary Singapore Germany NetherlandsSlovakia Kenya Netherlands Germany & AustriaGermany Botswana Poland SwitzerlandBrazil Mozambique Kenya Poland & CroatiaZambia Namibia Croatia Mozambique & NamibiaMauritius Morocco Namibia Slovakia
Swaziland UAE
Developed MarketsEmerging MarketsAfrica
4
Mixed relative performance versus EquitiesYear-to-date Global Listed Property Total Returns (USD)
Source: UBS, EPRA/NAREIT Index Total Returns to 04 November 2016
BrexitUS electionsRate hike?
5
Brexit Impact – UK vs. Continental Europe Share Prices
Source: UBS Nov 2016
Based to 100
UK Property
Europe Property
Brexit Referendum
6
Intu’s retail properties in the UK and Spain
Source: STANLIB Research June 2016
7
Capital & Counties: Covent Garden & Earls Court, London, UK
Source: STANLIB Research June 2016
8
STANLIB Global Property Fund Exposure Portfolio Benchmark Difference
Europe 11.1% 6.2% 4.9%
Oceania 7.0% 8.0% -0.9%
Hong Kong 2.1% 1.8% 0.4%
Singapore 2.1% 2.8% -0.7%
Middle East 0.0% 0.0% 0.0%
UK 8.0% 4.9% 3.1%
Japan 8.1% 9.0% -0.9%
Cash 2.8% 0.0% 2.8%
North America 58.7% 67.3% -8.6%Total 100.00% 100.00% 0.00%
Source: STANLIB, Bloomberg October 2016
9
STANLIB Global Property Fund Top Holdings% Portfolio Benchmark Difference Region Sector
Prologis 4.16 2.29 1.87USA Industrial
Simon Property Group 7.12 5.29 1.83USA Retail
Deutsche Wohnen 1.62 - 1.62Germany Residential
Public Storage 4.30 2.70 1.59USA Self Storage
SL Green Realty Corp 2.30 0.88 1.42USA Offices
Extra Space Storage 2.12 0.81 1.30USA Self Storage
Life Storage Inc 1.17 - 1.17USA Self Storage
Boston Properties Inc 2.81 1.70 1.11USA Offices
Japan Retail Fund 1.60 0.51 1.08Japan Retail
Vonovia Se 1.08 - 1.08Germany Residential
Source: STANLIB, Bloomberg Sept 2016
10
at almost record lowsCentral London (UK) office vacancies
Source: Derwent London plc 2016
11
Size of London office job marketRemember the size of London vs European Cities
Source: Citi October 2016
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
La Defense Offices, Paris, France (Unibail-Rodamco)
Source: STANLIB Research April 2016
13
Driven by immigration, including refugeesGerman residential continues to be a strong performer
Source: JP Morgan Estimates, Bloomberg July 2016
Rental Growth Projections €
Vonovia Deutsche Wohnen
LEG0%
1%
2%
3%
4%
5%
3.0%
4.1%
2.7%2.9%
3.8%
3.0%
2016 Rental Growth
5-year CAGR Rental Growth Forecast
German residential property companies
14
Current rents and values less than half equilibrium levelsGerman residential replacement costs very high
Source: Citi Research November 2016
0
2
4
6
8
10
12
0
500
1,000
1,500
2,000
2,500
3,000
ANN's average capital value € psm (LHS)
Average replacement cost per sqm €(RHS)
15
Sydney - Rents are growing above trendAustralian Office Property Market
Source: JLL October 2016
16
Sydney - Take-up of space continues to be strongAustralian Industrial Property Market
Source: JLL October 2016
17
USA Property Market – Vacancies are falling
Source: REIS Analytics and JP Morgan September 2016
18
USA Property Market – Rents are going up
Source: REIS Analytics and JP Morgan April 2016
19
USA Property Market – Supply is picking up, marginally
Source: REIS Analytics and JP Morgan April 2016
20
US Property Market – But new space is being absorbed
Source: REIS Analytics and JP Morgan September 2016
21
Sales Forecast – 2015 to 2018 based to 100E-Commerce showing strong growth across the world
Source: CBRE 2016
22
Food, beverage & entertainment now new anchor tenants
Source: CBRE and STANLIB Research September 2016
“Experience-driven retail, which includes fine dining, education and family entertainment – all customised to the needs and wants of the local
catchment area – will be the key to success”
Mall of Scandinavia, Stockholm, Sweden (Unibail-Rodamco)
Source: STANLIB Research April 2016
“Experiential” shopping, technology and bigger stores
24Source: Unibail-Rodamco Results Presentation, February 2016
25
Times Square, New York City, USA – Vornado Realty Trust
Source: STANLIB Research September2016
26
Westfield World Trade Centre, New York City, USA – Westfield Corp
Source: STANLIB September 2016
27
Despite some weakness in AsiaRents up across all sectors and regions globally
Source: CBRE 2016
28
Global Property Earnings track Global GDP Growth
Global EarningsPer ShareGrowth
GlobalGDP Growth
Source: UBS, MSCI, Thomson Financial Datastream, 31 August 2016
29
Listed Property still cheaper than Physical Property generallyGlobal Listed Property Price to Net Asset Value (NAV)
Source: UBS , Worldscope, Datastream 31 October 2016
CHEAP
EXPENSIVE
30
Global Property still cheap relative to BondsYield Spread between Listed Property and Bonds
Source: BNP Paribus Cadiz , STANLIB Research 30 September 2016
Spread = Global Developed Property Yields less Developed Bond Yields
Current 3.08%
Average 1.55%
CHEAP
EXPENSIVE
Apr-0
5
Apr-0
6
Apr-0
7
Apr-0
8
Apr-0
9
Apr-1
0
Apr-1
1
Apr-1
2
Apr-1
3
Apr-1
4
Apr-1
5
Apr-16
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
FTSE EPRA NAREIT Developed Index and JP Morgan Global Bond Index Spread
Spread
Spr
ead
(%)
31
Property now cheaper than sub-prime periodGlobal Property-Bond Yield Ratio
Source: BNP Paribus Cadiz , STANLIB Research 30 September 2016
Ratio = Property Yield (EPRA/NAREIT Index) divided by Bond Yields (JP Morgan Index)
Average 1.80
Current 4.46
CHEAP
EXPENSIVE
1-Mar-
05
1-Aug-0
5
1-Jan-06
1-Jun-06
1-Nov-0
6
1-Apr-0
7
1-Sep-07
1-Feb-08
1-Jul-0
8
1-Dec-
08
1-May-
09
1-Oct-
09
1-Mar-
10
1-Aug-1
0
1-Jan-11
1-Jun-11
1-Nov-1
1
1-Apr-1
2
1-Sep-12
1-Feb-13
1-Jul-1
3
1-Dec-
13
1-May-
14
1-Oct-
14
1-Mar-
15
1-Aug-1
5
1-Jan-16
1-Jun-16
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
32
Lower correlation to bonds, above average yield gap/ratios give some comfort*Global Listed Property Outlook (USD)
1 Year Bull Case Base Case Bear Case
Total Return (Income and Capital) 14.13% 8.31% 3.09%
Assumption 1: US 10 Year Bond Yield (Current 1.80%) 1.50% 2.00% 2.50%
Assumption 2: Exit Yield (Current 4.60%) 4.45% 4.70% 4.95%
Assumption 3: Earnings Growth 5.70% 5.70% 5.70%
4 Years (Lower for Longer Interest Rates) Bull Case Base Case Bear Case
Total Return (Income and Capital) 9.62% 9.00%% 8.40%Assumption 1: US 10 year Bond Yield (Current 1.80%) 2.25% 2.50% 2.75%
Assumption 2: Exit Yield (Current 4.60%) 4.83% 4.95% 5.08%
Assumption 3: Average Earnings Growth 5.90% 5.90% 5.90%
Source: STANLIB Research, UBS, S&P, Bloomberg October 2016
* NB: Hence we apply only a 50% rating change to bond yield movements in our exit yields
33
STANLIB Global Property Fund Dividend Yield
Source: STANLIB, Bloomberg Nov 2016
12/2010
03/2011
06/2011
09/2011
12/2011
03/2012
06/2012
09/2012
12/2012
03/2013
06/2013
09/2013
12/2013
03/2014
06/2014
09/2014
12/2014
03/2015
06/2015
09/2015
12/2015
03/2016
06/2016
09/2016
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
Dividend yield %
Portfolio Benchmark
34
Property prices have gone up driven by good earnings growthGlobal Listed Property in a rising interest rate cycle
Source: DataStream and UBS August 2016
Grey shading is Fed rate hikes period
Equities
Property
35
Adding Global Listed Property Helps to Improve Returnsin Global Balanced Portfolios
Source: Cadiz BNP Paribus, Bloomberg and various indices to 30 September 2016
USD
15 yrs 10 yrs 5 yrs 3 yrs 1 yr0
2
4
6
8
10
12
6.3
4.9
7.7
4.8
10.1
6.5
4.9
8.0
5.0
10.4
6.8
4.9
8.3
5.2
10.7
7.1
5.0
8.6
5.4
10.9
Annualised Returns of Portfolios with Different Weightings in Property
0% Property 5% Property 10% Property 15% Property
Investment Horizon
Ann
ualis
ed R
etur
n (%
)
36
Global Property Provides Stable & Fairly Predictable Income
Source: UBS Investors Index , S&P Developed REIT Index, Bloomberg January 2016
USD
37
Rather than being part of Financials in S&P and MSCI IndicesListed Property now a stand-alone sector
Source: Data Stream, UBS August 2016
S&P Developed BMI MSCI World All Cap
38
➜ Better than expected economic growth
➜ Lower for longer interest rates
➜ Wall of money still chasing property
➜ Big gap between property yields and bond yields
➜ Limited supply of properties in most sectors
➜ Property now a standalone sector
➜ Rising global bond yields and interest rates
➜ Lower than expected economic growth
➜ Brexit uncertainty
➜ US political uncertainty
Ups
ide
Risk
Dow
nsid
e Ri
sk
Global Listed Property Conclusion Developed Markets
THANKYOU
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