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1'08
2 3 4 1'09
2 3 4 1'10
2 3 4 1'11
2
Americas
AsiaPac
EMEA
Global transaction volume in the second quarter totalled $165.3b representing a 36% increase from a year earlier and bringing the total for 2011 at mid-year to approxi-mately $350.0b. � e period was marked by potential national defaults in Europe, natural disasters in Asia Pac and increas-ing worries about a double-dip recession across the globe. � erefore, property in-vestment trends are far more dynamic than the headline � gures imply. � e US mar-kets are roaring back to life this year with property sales soaring 147% year-over-year in Q2. Trading in EMEA was an anemic 10% gain year-over-year in Q2 on $42.5b in transactions, despite robust increases in Germany and Scandinavia. Japan saw volumes fall 42% in Q2 while transactions moderated in China and Hong Kong but surged in Singapore and Australia.
Billion
IN THIS ISSUE:• Overview: Investors Stay the Course
Average yields have continued to trend slightly downward in the Americas and EMEA. In the Americas, the
wave of capital entering the market this year is causing downward pressure, but that is being partially o� set by increased sales of troubled assets in the US. In EMEA, stable cap rates still re� ect strong German and Nordic volume combined with select UK trophy transactions. Higher yields in Asia Pac partly re� ect rebounding activity in Australia, where property o� ers among the highest average cap rates globally, as well as the severe slide in activity in traditionally lower-yielding Japan.
Pricing trends in the world’s global � nan-cial capitals provide more insight. Yields in these markets were relatively unchanged in Q2 and have moved little since the be-ginning of the year. � ese markets already
had very low cap rates, and without greater economic certainty, investors are hesitant about becoming even more bullish. In addition, with yields so low in these major markets, secondary cities and other higher yield-ing alternatives are more attractive. � e surge of cross-border capital into Australia well illustrates this trend.
TRANSACTION SUMMARYQ2'11
Vol ($B)YOY Chg
H1’11Vol ($B)
YOY Chg
Offi ce $41.2 29% $81.9 36%
Retail 32.7 97% 60.6 61%
Industrial 11.6 26% 22.3 41%
All Commercial $85.5 48% $164.8 45%
Hotel 8.8 80% 16.7 66%
Apartment 20.4 38% 33.2 37%
Land 50.6 14% 134.6 11%
Total $165.3 36% $349.3 30%
*Totals may not sum due to rounding
Billion Billion Billion
CAP RATES CAP RATES CAP RATES
TRANSACTION TRANSACTION TRANSACTION
YOY CHANGE IN TRANS VOL YOY CHANGE IN TRANS VOL YOY CHANGE IN TRANS VOL
QUARTERLY TRANSACTION SUMMARY BY ZONEOFFICE, RETAIL AND INDUSTRIAL
ASIA PAC EMEA AMERICAS
PROPERTY ACQUISITION YIELDS IN MAJOR GLOBAL MARKETS
United States $49.0 147% $77.8 124%Canada 4.5 8% 7.8 5%Latin America 2.1 17% 5.6 95%Americas $55.6 115% $91.2 102%Western Europe 28.8 27% 52.8 27%United Kingdom 9.0 -25% 24.3 14%Eastern Europe 3.1 17% 7.6 17%MidEast 0.8 -29% 1.5 -18%Africa 0.9 161% 1.1 -8%EMEA $42.5 10% $87.4 21%East Asia 50.7 21% 133.3 11%Japan 3.6 -42% 15.0 -5%SE Asia 6.6 41% 13.2 92%Australia - NZ 5.7 96% 8.1 24%India/Other 0.6 -71% 1.3 -56%Asia Pacifi c $67.2 17% $170.8 12%
Global* $165.3 36% $349.3 30%*Totals may not sum due to rounding
TRANSACTIONS BY COUNTRYALL PROPERTY TYPES
Q1’11 Q2’11 H1’11
Country Vol ($B)
YOY Chg
Vol ($B)
YOY Chg
Vol ($B)
YOY Chg
1 China $75.7 8% $41.8 21% $117.6 12%
2 United States 28.8 93% 49.0 147% 77.8 124%
3 United Kingdom 15.3 62% 9.0 -25% 24.3 14%
4 Germany 9.3 42% 11.2 65% 20.5 54%
5 Japan 11.4 18% 3.6 -42% 15.0 -5%
6 Singapore 5.4 237% 6.2 68% 11.5 119%
7 Hong Kong 3.5 -29% 6.0 38% 9.5 3%
8 France 3.9 32% 5.3 -20% 9.1 -4%
9 Sweden 2.8 23% 5.1 80% 8.0 55%
10 Canada 3.3 2% 4.5 8% 7.8 5%
11 Australia 2.0 -34% 5.6 102% 7.6 32%
12 Brazil 2.9 399% 1.1 -32% 4.0 85%
13 Taiwan 1.7 -8% 1.3 -41% 3.0 -26%
14 South Korea 1.5 71% 1.4 91% 3.0 80%
15 Italy 1.6 87% 0.8 -9% 2.5 37%
16 Spain 1.3 -31% 1.1 -29% 2.3 -30%
17 Netherlands 1.3 19% 1.0 -5% 2.3 7%
18 Russia 0.2 -91% 1.8 85% 2.0 -34%
19 Poland 1.4 91% 0.5 -22% 1.8 40%
20 Norway 0.4 -33% 1.1 77% 1.5 22%
21 India 0.8 -29% 0.6 -71% 1.3 -56%
22 Finland 0.3 4% 0.8 182% 1.2 91%
23 Belgium 0.4 -9% 0.8 105% 1.2 47%
24 Czech Republic 0.9 279% 0.2 24% 1.2 168%
25 Switzerland 0.5 97% 0.6 280% 1.1 162%
26 Denmark 0.5 38% 0.6 78% 1.1 56%
27 South Africa 0.2 -79% 0.8 1362% 1.0 12%
28 Malaysia 0.6 47% 0.3 -58% 0.9 -23%
29 Israel 0.2 -48% 0.6 -6% 0.8 -22%
30 Ukraine 0.6 446% 0.1 -80% 0.7 40%
31 Chile 0.2 100% 0.6 4453% 0.7 678%
32 Austria 0.6 38% 0.1 -79% 0.7 -19%
33 Turkey 0.6 30% 0.1 94% 0.7 38%
34 New Zealand 0.4 -39% 0.1 -10% 0.5 -33%
35 Hungary 0.4 20% 0.1 27% 0.5 22%
36 UAE 0.5 64% 0.0 -95% 0.5 -36%
37 Romania 0.5 207% 0.0 -100% 0.5 59%
38 Croatia 0.4 - 0.0 -100% 0.4 283%
39 Portugal 0.2 -43% 0.2 -68% 0.4 -57%
40 Thailand 0.3 61% 0.1 -61% 0.4 -10%
All Others 1.4 54% 1.3 69% 2.7 61%
Grand Total $184.0 25% $165.3 36% $349.3 30%
Each global zone combated pressures from within. Sovereign debt fears in EMEA’s peripheral countries and
heavy belt-tightening in the UK restrained growth, but domestic and cross-border investors were active in Germany and the stable Scandinavian economies. While
Russia struggled, Central and Eastern Europe at-tracted yield-seeking in-vestment. In Asia Paci� c, the retail and industrial sectors were a counter-weight to slow o� ce vol-ume and a sharp drop-o� in Q2 land sales in China. In the US, the intense selective focus on major assets in major markets began to spread out, as yield-conscious investors moved into other markets and embraced garden apartments. � e � ow of new distress slowed and, with credit easing and prices � rming, lenders opted more for liquida-tions than restructurings of troubled assets.
Highlighting the choppy and o� en local-ized activity across the global markets, many countries saw quarterly yoy volume trends reverse, in both directions, from Q1 to Q2. Other countries, with the US in the lead, saw strong positive acceleration in growth in Q2. � e US had the highest yoy growth in both Q2 and H1, with its second quarter gain of 147% outpacing its 124% H1 growth. Ger-many and Sweden were the standout gainers in EMEA as France and the UK lost ground. China’s land sales turndown slowed the gi-ant Asia Pac market to just 12% in H1, one-third below its growth for commercial prop-erty only. Australia’s transaction volume moved rapidly positive, pushing the country to a 102% gain. Spectacular Q1 growth in Singapore and Brazil inevitably slowed in Q2, but both countries turned in solid posi-tive improvements for H1.
Blackstone $9,008 CPP Investment Board 3,689 Capital Shopping Ctrs Grp PLC 3,098 China Vanke Co Ltd 3,048 Yunnan Zhonghao Props Co Ltd 2,714 CA Immo 2,402 Tesco Pension Trustees Ltd 2,200 Poly Real Estate Group 2,128 Invesco Real Estate 2,117 Wheelock & Co 2,105 Greentown China Hldgs Ltd 2,099 Cheung Kong (Holdings) Ltd 2,034 CapitaLand Limited 1,929 JP Morgan 1,747 China Overseas L & I Ltd 1,650 Mitsubishi Estate 1,611 China Merchants Group 1,517 Arminius Funds Mgmt 1,457 DekaBank 1,429 Far East Organization 1,423
Centro Properties Group $8,102 Urban Redevelopment Authority 3,356 Housing & Dev Board 2,821 Volksbank AG 2,426 Tesco plc 2,223 Beacon Capital Partners 2,215 Goldman Sachs 1,868 Deutsche Bank 1,782 CITIC Group 1,780 Broadway Partners 1,715 GE Capital 1,653 Aberdeen Property Investors 1,541 Eurocastle 1,544 Bracor Invtos Imobiliarios 1,297 Morgan Stanley 1,336 Equity Residential 1,345 Lone Star Partners 1,230 Unibail-Rodamco 1,242 Carlyle Group 1,097 Lehman Brothers Hldgs Inc 1,108
TOP 20 BUYERS#Vol
($M)
TOP 20 SELLERS #Vol
($M)
TOP 25 PROPERTY SALESType Transaction Location Price
($M)SF(K)/Units
PPSF/PPU (K) Buyer
1 RET The Trafford Centre† Manchester, GBR $2,498 1,900 $1,315 Capital Shopping Ctrs Grp PLC
2 RET Centr0† Oberhausen, DEU 1,913 2,174 880 Canada Pension Plan Investment Board
3 DEV Borrett Road Site, Mid-levels Hong Kong, HKG 1,498 113 13,266 Cheung Kong (Holdings) Ltd
4 OFF 280 Park Avenue† New York, NY 1,100 1,179 941 SL Green JV Vornado
5 RET Northland Shopping Centre† Preston East, AUS 998 994 1,004 Canada Pension Plan Investment Board
6 DEV Shenzhen 2011-K202-0014 Shenzhen, CHN 991 7,509 132 China Merchants Property Dev Co Ltd
7 DEV CITIC City B,C,D blocks (Prt II) Beijing, CHN 929 848 1,095 Financial Street Holding Co Ltd
8 OFF Otemachi PAL Bldg Tokyo, JPN 877 301 2,916 Mitsui Fudosan Co Ltd JV Mitsui & Co
9 OFF Deutsche Bank Twin Towers Frankfurt, DEU 857 807 1,062 DWS Investments Gmbh
Following six consecutive quarters of strong year-over-year gains, EMEA transaction volumes stalled in Q2.
� e slowdown, to $42.5b of signi� cant property sales, was � at against a year ear-lier and re� ects widening divergence in in-vestor outlook across core and peripheral European markets. Pricing was also gener-ally � at in Q2 across EMEA and yields on acquisitions have changed little since the beginning of the year.
Among property types, retail was the big-gest gainer in H1’11 with volume up 41% boosted by billion-dollar transactions such as Tra� ord Centre in Manchester, Centr0 in
Oberhausen and a major Tesco portfo-lio in the UK. � e of-� ce and hotel sectors also recorded healthy gains in transaction volume while indus-trial and apartment volume fell yoy.
Germany and the Nordic countries have emerged as fa-
voured investment targets in the current market and all posted robust gains in trans-action activity in each quarter this year. � is helped o� set signi� cant Q2’11 yoy declines in the UK and France of 25% and 20%, respectively, in addition to continued weak performance in the peripheral mar-kets such as Greece, Portugal, Spain and Ireland. Investors are � ocking to Germany and Scandinavia which currently o� er the highest risk adjusted yields (see page 7). Germany’s Q2’11 yoy growth of 65% was well ahead of its H1’11 gain of 54% (and the UK’s 14%) as domestic and cross-border demand broadened. Sweden, the hottest Nordic market, saw yoy growth of 55% for H1’11. With the strong exception of Russia’s 34% yoy decline, Eastern European activ-ity remained stable, with core properties in key markets attracting increased attention from yield-seeking investors. In the Middle East, both Israel and the United Arab Emir-ates saw a steep fallo� in activity in H1.
Among markets, positive yoy growth has slowed but been maintained in London and Paris indicating the
investment trends in secondary markets in the UK and France continue to under-perform. However, � ve German metros now occupy the top markets list, with all showing positive investment growth.
Cap rates on commercial properties in Western Europe and the UK are closely aligned averaging between 6.6% and 6.7%. Average cap rates in Eastern Europe record a decline in Q2, but are skewed by a higher quality of properties trading as investors seek to minimize risk. Recent prices and cap rates for new or newly ren-
ovated o� ce buildings in select European markets illustrate the premium prices commanded by the highest quality properties.
RECENTLY BUILT OR RENOVATED OFFICE BUILDING SALES IN Q2
Property City Price ($M)
PPSF/ PPU ($K) Cap Rate Built/
Renov
Selmer Building Oslo $166.7 1,006 4.5% 2008
Origami Paris 124.0 2,421 4.7% r2010
Guim'arts Brussels 46.7 620 5.4% r2010
DB Twin Towers Frankfurt 857.4 1,062 5.5% r2010
1 Finsbury Circus London 236.5 1,183 5.5% r2009
Billion Billion Billion
CAP RATES* CAP RATES* CAP RATES*
TRANSACTION TRANSACTION TRANSACTION
YOY CHANGE IN TRANS VOL YOY CHANGE IN TRANS VOL YOY CHANGE IN TRANS VOL
QUARTERLY TRANSACTION SUMMARY BY THEATEROFFICE, RETAIL AND INDUSTRIAL
Looking at investment volume increases across European markets and comparing spreads between cap rates and relevant
government bonds, it is clear that the momen-tum of real estate investment in Europe is � ow-ing towards the highest relative yields in the safest markets.
� e upper right quadrant of the momentum graph highlights the focus of capital on Ger-many and Sweden in response to the attractive cap rate spread over government bonds through Q2’11. Like Germany and the Nordics, the other countries in this quadrant display strong trans-
action volume growth both on a six-month and quarterly basis. � ey include a higher propor-tion of non-eurozone countries with more stable economic conditions. Countries plotted in the lower le� quadrant, notably Spain and Portugal, are experiencing negative transaction momen-tum. � e UK on a half-year basis yoy escapes this grouping, but its lower Q2’11 volume yoy re� ects a weakening market. Among the outli-ers, Ireland saw already low volume falter in Q2’11, while Russia’s good Q2 re� ects a major luxury Moscow hotel acquired by Kazakhstan backed private equity.
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60%
80%
100%
-40%-60% -20% 0% 20% 40% 60% 80% 100% 120%
Czech Republic
Norway
Hungary
Italy
Romania
Denmark
Germany
Turkey
Sweden
Switzerland
Finland
Ireland
Spain
Portugal
*Greece
Russia
Belgium
Austria
Poland
United Kingdom
Netherlands
Ukraine
France
Croatia
CAP RATE SPREADS TO SOVEREIGN BONDS
*No significant transactions recorded for Greece over the last 12 months. Based on percent change in Euros
INVESTMENT MOMENTUM BY COUNTRY ALL PROPERTY TYPES
H1’11 vs H1’10 % Chg
Q2’1
1 vs
Q2’
10 %
Chg
Capital Shopping Ctrs Grp PLC $2,498 CA Immo 2,402 Tesco Pension Trustees Limited 2,200 CPP Investment Board 1,913 Arminius Funds Management 1,457 Cerberus Capital Management 1,215 DekaBank 1,179 Deutsche Bank 1,160 AMF 948 AEW Capital Management 788 Invesco Real Estate 786 Blackstone 781 Signa Holding 721 Corio NV 716 Amdec Property Development 686 First Atlantic Real Estate SGR 652 Prudential PLC 640 Legal & General Property 631 Real I.S. AG 612 Verny Capital 609
Peel Group $2,498 Volksbank AG 2,426 Tesco plc 2,223 Stadium Group 1,913 Deutsche Bank 1,782 Aberdeen Property Investors 1,541 Eurocastle 1,544 Unibail-Rodamco 1,242 Beacon Capital Partners 1,043 Fourth Swedish Nat'l Pension Fund 948 Morgan Stanley 922 Pirelli & C. Real Estate SpA 804 ECE Projektmanagement 817 Schroders plc 781 Stanhope Plc 781 Kuwait Investment Authority 741 Highstreet Holding 760 GE Capital 734 Hermes 678 Investitori Associati 652
TOP 25 PROPERTY SALESType Transaction Location Price
($M)SF(K)/Units
PPSF/PPU (K) Buyer
1 RET The Trafford Centre† Manchester, GBR $2,498 1,900 $1,315 Capital Shopping Ctrs Grp PLC (CSC)
2 RET Centr0† Oberhausen, DEU 1,913 2,174 880 Canada Pension Plan Investment Board
3 OFF Deutsche Bank Twin Towers Frankfurt, DEU 857 807 1,062 DWS Investments Gmbh
4 OFF Chiswick Park London, GBR 781 1,900 411 Blackstone
5 RET La Rinascente Milan, ITA 652 566 1,151 First Atlantic Real Estate SGR
6 HTL Ritz Carlton HTL Moscow, RUS 609 334 1,824 Verny Capital
7 RET Boulevard Berlin Berlin, DEU 533 753 707 Corio NV
8 OFF Rolls Building London, GBR 492 262 1,880 Legal & General Property
9 OFF MidCity Place† London, GBR 468 352 1,329 Oxford Properties Group
10 OFF Aviva Tower London, GBR 439 315 1,393 Kuok Khoon Hong & Martua Sitorus
11 OFF River Court London, GBR 437 425 1,029 Chinese Estates Group
12 OFF 10 Aldermanbury London, GBR 434 312 1,393 JP Morgan
13 OFF River Ouest Bezons, FRA 400 689 581 ING RE Invt Mgmt France OBO Predica SA‡
14 OFF 20 Gresham St London, GBR 374 237 1,580 AXA RE Investments Managers (REIM)
15 OFF Park House London, GBR 366 310 1,180 Qatar National Bank
16 HTL Paris Marriott Champs-Elysees Paris, FRA 362 192 1,887 Abu Dhabi Investment Authority
17 RET Spitalerstrasse 22-26† Hamburg, DEU 361 55 6,560 Signa Holding
18 HTL Le Meridien Montparnasse Paris, FRA 350 953 367 Unibail-Rodamco
Sales of signi� cant properties in Asia Paci� c totaled $67.2b in Q2’11, bringing the total for the � rst half
of 2011 to $170.8b. While the region con-tinues to show solid, steady growth in commercial property investment, some signi� cant changes were noted in Q2 as investment surged in Australia and plum-meted in Japan. Hong Kong recovered from a relatively poor Q1 with a stronger Q2 to be � at at the mid-year point while Singapore’s 119% increase in transactions in H1 topped every major economy glob-ally except the US.
Also noteworthy, cross-border inves-tors were part of the surge in transactions
in Australia and Singapore, and the buyers included a healthy mix of Eu-ropean and North American invest-ment � rms which have been relatively quiet since 2007.
South Korea also posted strong results in each quarter this year and its 80% in-
crease in H1 was the second highest in Asia. � e only countries in Asia Paci� c where in-vestment momentum appears waning and volume fell in both quarters this year were India, Taiwan and New Zealand.
Across Asia Paci� c, growth accelerated in the second quarter in every property type save o� ce, which is largely due to curtailed investment in Japan. In China, sales of o� ce and retail properties nearly doubled in H1’11 while sales of develop-able land moderated in Q2 as China’s long-running e� orts to calm exuber-ant sales appear to be bearing fruit. In addition, transactions in China’s over-heated primary markets dropped as ac-tivity moved to secondary and tertiary cities. Land rights in China accounted for $38.7b in Q2, up slightly on a year-over-year basis, but half of levels recorded in the two most recent quarters.
At the same time, land-hungry inves-tors have poured capital into Singapore and Hong Kong, especially as Hong Kong authorities greatly expanded available de-velopment sites in Q2, a policy they are ex-pected to continue into Q3 as over $1.7b of sites were sold just in July.
Within Asia Paci� c, the di� erences in yields are signi� cant. Yields in Hong Kong, now averaging slight-
ly above 3.0% are by far the lowest in Asia and throughout the world. Stunningly, 36 signi� cant assets traded in Hong Kong in H1 at a 3.5% yield or lower, mostly strata retail units. Average cap rates in Asia (ex-Japan), displayed an uptick in Q2, but mainly due to an increasing number of transactions recorded in markets such as South Korea and Taiwan. Meanwhile,
Australia is o� ering some of the highest yields, per-haps explaining the recent surge in acquisitions there. A summary of select o� ce sales of recently construct-ed or renovated properties highlights the sharp dif-ferences in cap rates available in major and secondary markets throughout AsiaPac.
Billion Billion Billion
RECENTLY BUILT OR RENOVATED OFFICE BUILDING SALES IN Q2
Property City Price ($M)
PPSF/ PPU ($K) Cap Rate Built/
Renov
Arena Tower Yokohama $117.0 605 5.6% 2008
SA Water House Adelaide 98.5 587 7.6% r2010
Akihabara Business Center Tokyo 62.3 1,359 4.8% 2009
BAML HarbourFront Singapore 246.6 1,139 4.3% 2008
Wood Group House Perth 33.2 668 9.3% 2011
CAP RATES* CAP RATES CAP RATES
TRANSACTION TRANSACTION TRANSACTION
YOY CHANGE IN TRANS VOL YOY CHANGE IN TRANS VOL YOY CHANGE IN TRANS VOL
QUARTERLY TRANSACTION SUMMARY BY THEATEROFFICE, RETAIL AND INDUSTRIAL
ASIA - EX JAPAN JAPAN AUSTRALIA - NZ
*Q4'10 excludes several industrial sales at high cap rates
Australia’s property markets zoomed back into recovery mode in Q2 af-ter a steep retreat the prior quarter,
rising 127% yoy to $4.5b in commercial property sales alone. Australia’s tradition-ally higher yields—averaging over 8.3% in Q2—have drawn cross-border investment at a phenomenal clip, accounting for 42% of Australia’s total investment volume in Q2. � e capital originated with relative uniformity from each of the global zones.
Net cross-border acquisitions so far this year have already outpaced the combined total for 2009 and 2010. � e 2011 tally does not yet include Blackstone’s pending $764m acquisition of all the assets of Valad Properties, likely to close in mid-August. � e deal illustrates one source of assets that is contributing to the rising percent-age of foreign investment: Australian listed companies have been net sellers this year, with major dispositions by some of the most active companies, including Stock-land, Mirvac and Lend Lease. In contrast, dispositions by foreign owners account for less than $500m in volume, against nearly $4.0b in cross-border acquisitions.
Melbourne has captured over 50% of cross-border and overall investment, in-cluding the largest single-asset transaction so far this year. CPPIB from Canada, ac-quired a 50% interest in Northland Shop-ping Centre for nearly $1.0b, and Brook-� eld O� ce Properties was also an active investor. Other large deals include a $219m acquisition of a mixed-use complex by La-Salle and the purchase in Sydney by K-RE-IT of a 50% stake in an o� ce development project for $330m.
Singaporean investors have also been very active, representing a sizeable Asian investment contingent mainly in Victoria, Queensland, and New South Wales. � ese include the aforementioned K-REIT trans-action as well as the acquisition by GIC of multiple industrial assets including a large portfolio from Australand. Even European capital has been making the long swim to Australia, with Swiss, British, and German investors joining the value hunt.
ORIGIN OF CROSS-BORDER INVESTORS IN AUSTRALIA*
EMEA29% Americas
39%
AsiaPac32%
* Data based on past 12 months
CROSS-BORDER ACQUISITIONS AND DISPOSITIONS IN AUSTRALIA
AUSTRALIA TRANSACTION VOLUMEOFFICE, RETAIL AND INDUSTRIAL
Billion
Quar
terly
Vol
Rolli
ng 1
2-m
onth
s
Australia Rebounds on Cross-Border Buying
See all the details on these deals and keep up with this evolving trend using RCACross-border Capital Tracker at www.rcanalytics.com
China Vanke Co Ltd $3,048 Yunnan Zhonghao Props 2,714 Poly Real Estate Group 2,128 Wheelock & Co 2,105 Greentown China Hldgs Ltd 2,099 Cheung Kong (Holdings) Ltd 2,034 CapitaLand Limited 1,794 China Overseas L & I Ltd 1,650 CPP Investment Board 1,587 Financial Street Hldg Co Ltd 1,536 China Merchants Group 1,517 Far East Organization 1,423 SOHO China 1,350 Shimao Group 1,286 Farglory Land Dev Co., Ltd. 1,219 HSBC Holdings 1,197 Mitsubishi Estate 1,174 Keppel Land Limited 1,146 Sumitomo 1,133 Mitsui Fudosan 1,109
Urban Redev Authority $3,356 Housing & Dev Board 2,821 CITIC Group 1,780 Lone Star Partners 1,230 Promise Co Ltd 877 Mori Trust Holdings 762 Munich Re 715 ERGO Group 706 Wheelock & Co 703 Harvest Capital Partners 700 Tokyo Gas 700 JTC Corporation 680 Asia Pacifi c Land Limited 666 DE Shaw Group 666 Urban Renaissance Agency 653 Mitsui Fudosan 635 CapitaLand Limited 625 Mapletree 612 Goodman Group 589 Stockland Trust Group 566
TOP 25 PROPERTY SALESType Transaction Location Price
($M)SF(K)/Units
PPSF/PPU (K) Buyer
1 DEV Borrett Road Site, Mid-levels Hong Kong, HKG $1,498 113 $13,266 Cheung Kong (Holdings) Ltd
2 RET Northland Shopping Centre Preston East, AUS 998 994 1,004 Canada Pension Plan Investment Board
3 DEV Shenzhen 2011-K202-0014 Shenzhen, CHN 991 7,509 132 China Merchants Property Dev Co Ltd
4 DEV CITIC City B,C,D blocks (Prt II) Beijing, CHN 929 848 1,095 Financial Street Holding Co Ltd
5 OFF Otemachi PAL Bldg Tokyo, JPN 877 301 2,916 Mitsui Fudosan Co Ltd JV Mitsui & Co
Investment volume in the Americas surged to $55.6b in Q2, a 115% increase from a year earlier, just shy of the year-
end spike in transactions recorded in Q4’10. � e acceleration in sales cut across all property sectors and was dominated by the US, up 124% year over year (yoy), the highest gain among major economies globally. Prices were generally stable or improved over the quarter, but the dichot-omy in pricing between the favored major markets and all others persisted through-out the Americas.
A� er an explosive start to the year, di-rect property sales in Brazil fell 32% in Q2, yet there have been a hand-ful of recent real estate M&A deals and development joint ventures an-nounced. Canada recorded sales of $4.5b in Q2, up 8% yoy, but forward-looking activity is
already strong in Q3.Portfolios accounted for $26.7b of
Americas’ sales in H1’11, including the $9.2b acquisition of Centro’s US shop-ping centers by Blackstone. Nearly $10.0b of portfolio transactions are in contract, mostly in the US or Canada. � e rise in large multi-market portfolio signals a growing bullishness on entire property sectors as opposed to smaller bets on spe-ci� c assets in favored markets.
For the � rst half of 2011, property sales in the Americas totaled $91.2b and ap-pear on a trajectory to easily surpass the $200.0b mark for the year, almost quadru-pling 2009 volume. Yet recent turmoil in the bond market slowed originations by US CMBS conduits, at least temporarily.
Commercial property yields were sta-ble to slightly lower throughout most of the Americas in Q2 and in the US have been at similar levels since the beginning of the year.
Even in top markets such as Manhattan and DC, cap rates have been remarkably stable over the past two quarters. Canada has seen the most movement with yields falling over 25bps since the beginning of the year.
By property type, average US cap rates in H1’11 are � at across most sectors, except industrial and sub-
urban o� ce properties. � ese sectors have been the slowest to attract inves-tors in the recovery, but their yields were down slightly. Across all sectors, yields for prime assets are signi� cantly lower than the average and this gap is at histori-cally wide levels, a trend that shows no signs of abating even as investors begin to stretch their horizons.
Billion Billion Billion
CAP RATES CAP RATES CAP RATES
TRANSACTION TRANSACTION TRANSACTION
YOY CHANGE IN TRANS VOL YOY CHANGE IN TRANS VOL YOY CHANGE IN TRANS VOL
US AVERAGE CAP RATES
QUARTERLY TRANSACTION SUMMARY BY THEATEROFFICE, RETAIL AND INDUSTRIAL
Some $15.6b of distressed property traded in the US in H1’11, more than double the H1’10 level as lend-
ers increasingly chose to liquidate as op-posed to modify and restructure troubled mortgages. A year ago, half of all workouts were accomplished via loan modi� cations, dubbed “extend and pretend.” � at ratio had shi� ed dramatically to favor liquida-tions by six-to-one over modi� cations. As credit conditions and property prices have improved, lenders are moving more aggressively and decisively away from pre-tend-and-extend.
BUYER COMPOSITION
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BRAZIL AVERAGE PPSF*
sf
BillionDespite the decline in activity in Q2, Brazil appears on its way to establish a new record for transaction volume
in 2011 having already surpassed $4.0b of transactions at the mid-year point. Pricing is also in record territory with the average for commercial properties reaching $450/sf last quarter.
While Brazil is drawing increased inter-est and exploration from many global in-vestors, domestic institutional capital has been driving the recent spike in activity. Brazil-based institutions were responsible for more than half of acquisitions so far in 2011 and its share of acquisitions has in-creased steadily over the past three years. Recent transactions include Prosperitas’ $1.1b acquisition of Bracor, a prestigious owner of business parks and a joint ven-ture between Carlos Betancourt and Sam Zell’s Equity International Group. Other institutional investors such as BTG Pac-tual, Funcef, WWI Group and Previ have all made signi� cant acquisitions recently. In addition, cross-border institutional in-vestors have been clearly on the prowl for direct property acquisitions, entity-level investments, and development joint ven-tures.
BRAZIL TRANSACTION VOLUMEOFFICE, RETAIL AND INDUSTRIAL
A wave of mergers and acquisitions among commercial property bro-kers has been underway in recent
months. Among the targets are some sig-ni� cant players: DTZ, King Sturge, NAI Global and others. Most of the deals are strategic consolidations as the industry remains highly fragmented. While in-vestment agency is just one of many busi-ness lines for the major brokerage � rms, it is clear that the landscape for the in-vestment sector is changing quickly.
In investment sales, Jones Lang LaSalle is signi� cantly enhancing its European mar-ket share with King Sturge. BNP stands to almost double its market share in Europe
and establish a signi� cant pres-ence in Asia if combined with DTZ. � e acquisition of NAI Global by experienced investor Andrew Farkas of C-III could result in a new competitive force. � e same holds for Rock-wood, the former US a� liate of DTZ which is being acquired by a unit of equity fund heavy-weight Fortress. BGC Partners
has entered into an agreement to acquire Newmark, the real estate advisory � rm which operates as Newmark Knight Frank in the U.S. � eir alliance with London-based Knight Frank remains una� ected. � e Relative Market Share of Investment Brokerage chart highlights how fragmented the industry is, and how ripe it is for further consolidation. Europe is perhaps the most fragmented and Asia Pac the least. It also illustrates the di� culties many of the large European � rms have had in establishing signi� cant presence in the US, and high-lights the leading contenders to dominate Asia’s booming property markets. Only � ve � rms currently have a signi� cant market share across all global zones: CBRE, JLL, C&W, Colliers and Savills, but if the recent wave of M&A continues, expect a sixth or seventh global platform soon.
RECENT BROKERAGE M&AStatus Acquirer Target
Proposed SGL/BNP or UGL DTZ
Pending Jones Lang LaSalle King Sturge
Pending C-III Capital Partners NAI Global
Pending BGC Partners (Cantor) Newmark Knight Frank
Closed CWCapital Rockwood (fmr DTZ)
Pending Cassidy Turley Carter
RELATIVE MARKET SHARE FOR INVESTMENT BROKERAGE*
(by dollar volume, 12 months through June 2011)
*Based upon the percentage of brokered deals for property sales of US$10m+ involving all property types. Credit is given to both buy-side and sell-side representation and full credit is given to multiple different brokers involved in same deal. Based on published reports and RCA’s own research which is believed to be comprehensive, but not entirely complete. Over the past year, RCA has recorded a broker for 43% of EMEA transactions, 25% of AsiaPac transactions (excluding China land deals), and 62% of Americas transactions.
Reverberations from the world-wrench-ing � nancial crisis that upended global property markets in 2008 are still being
felt. One indicator of just how much ground was lost, and how much has been regained, is in the ranks of the most aggressive buyers from the 2007 peak that are still active today. Based on this indicator, AsiaPac has been the most resilient with 82 of the top 100 buyers in 2007 having bought at least one property since the beginning of 2010. In the US, the number is surprisingly high with 81 still active owing largely to greater non-recourse lending and the “pretend and extend” strategy employed by lenders until recently. Europe has been hardest
hit with only 60 of the most active buyers at the peak still buying.
But the strengths and weaknesses of all three zones are even more evident in the persever-ance of those at the very top, the 20 most active buyers in the year preceding the � nancial crisis and global recession. On those terms, only one buyer has vanished from Asia, while � ve from the US and 11 from Europe have been elimi-nated. Most of those that have dropped out are from countries with severe internal � nancial problems, such as Ireland, or from companies that have been liquidated, like Lehman Broth-ers. � e complete reports and lists are available for download on our website.
Top Buyers at PeakEurope United States AsiaPac
Company Still Buying* Company Still
Buying* Company Still Buying*
1 Unibail-Rodamco Blackstone Morgan Stanley
2 Morgan Stanley Tishman Speyer National Pension Service (NPS)
Reverberations from the world-wrench-ing � nancial crisis that upended global property markets in 2008 are still being
felt. One indicator of just how much ground was lost, and how much has been regained, is in the ranks of the most aggressive buyers from the 2007 peak that are still active today. Based on this indicator, AsiaPac has been the most resilient with 82 of the top 100 buyers in 2007 having bought at least one property since the beginning of 2010. In the US, the number is surprisingly high with 81 still active owing largely to greater non-recourse lending and the “pretend and extend” strategy employed by lenders until recently. Europe has been hardest
hit with only 60 of the most active buyers at the peak still buying.
But the strengths and weaknesses of all three zones are even more evident in the persever-ance of those at the very top, the 20 most active buyers in the year preceding the � nancial crisis and global recession. On those terms, only one buyer has vanished from Asia, while � ve from the US and 11 from Europe have been elimi-nated. Most of those that have dropped out are from countries with severe internal � nancial problems, such as Ireland, or from companies that have been liquidated, like Lehman Broth-ers. � e complete reports and lists are available for download on our website.
Top Buyers at PeakEurope United States AsiaPac
Company Still Buying* Company Still
Buying* Company Still Buying*
1 Unibail-Rodamco Blackstone Morgan Stanley
2 Morgan Stanley Tishman Speyer National Pension Service (NPS)
Real Capital Analytics, Inc (RCA) is an independent research firm focused exclusively on the capital investment markets for commercial real estate. RCA offers the most in-depth, comprehensive and current information of activity in the industry. Formed in 2000, RCA has offices in New York City, San Jose, and London. In addition to collecting transactional information for property sales and financing, RCA interprets the data including capital-ization rates, market trends, pricing and sales volume. The firm publishes a series of Capital Trends reports and offers an online service that provides real-time, global transactional market information. For more information, visit: www.rcanalytics.com.
It is a violation of Federal law to photocopy or reproduce any part of this publication, or forward it electronically, without first obtaining permission from RCA. To subscribe as an individual or to purchase a corporate license for your office, please contact us at [email protected].
Information presented by RCA has been compiled from sources believed to be reliable. While we have no reason to doubt its accuracy, RCA makes no representation or warranty regarding the information. The information is provided as is without warranties of any kind, express or implied, and may be subject to material revisions.
NOTES & METHODOLOGY
The information presented in this report is based on a proprietary data-base of commercial property transactions. With data integrity the primary concern, RCA has established a data collection and classification method-ology including sourcing requirements and other procedures to ensure the information is comprehensive, timely, accurate and completely objective.
The information contained in this report is based on sales of properties and portfolios valued $10m USD and greater. RCA endeavors to track all property sales within the specified property types above this threshold on a global basis.
The availability and reliability of property sales information varies greatly by country, but RCA endeavors to track transactions as comprehensively as possible via published reports, public filings, industry relationships and other proprietary means. In certain markets, RCA compliments its own research with data partners. Wherever possible, RCA attempts to conform to the standards and definitions adopted by the leading industry organizations.
Although averages provide a useful benchmark, commercial property is not a commodity. Each property and deal is unique and data points are not as plentiful as in other financial markets. The underlying specifics on each deal are available online at www.rcanalytics.com to subscribers only.
Geography: RCA divides the globe into three major regions:1. Americas: North and South America, and the Caribbean2. EMEA: Includes Europe, the Mid-East, and Africa3. Asia Pacific: Includes all parts of Asia (not including the Mid-East),
as well as Australia, New Zealand, and Pacific islands
Cross-Border Methodology: A transaction is defined as “cross-border” if the buyer or major capital partner is not headquartered in the same coun-try where the property is located. The buyer’s identity or country of origin is known for well over 90% of total volume. If the country of origin is not known, the buyer is assumed to be domestic. An increasing number of firms have subsidiaries accessing capital in multiple countries so a firm may have two headquarters locations for the purposes of this analysis. For example, ING Group is assumed to be based in the Netherlands for deals outside of the US while their acquisitions in the US are assumed to be made via its US headquartered subsidiary, ING Clarion. Deutsch Bank (DB Real Estate) and its RREEF unit are treated in a similar manner. For the purposes of this cross-border analysis, continental regions generally follow conventional definitions for continents except that the Middle East is treated as a sepa-rate continent and Hong Kong is treated as a separate country from China.
Property Types: This report is limited to office, industrial, retail, multi-family apartments, hotels and commercially developable land. Readers should note there is substantial investment activity not captured in this report outside these property types and below the $10m USD threshold.
Cap Rate: The initial annual un-leveraged return on an acquisition is known as the capitalization rate (yield is also used interchangeably throughout this report).
Prices: Prices are qualified as to the reliability of each source. Estimates of some prices are made using industry and market averages. Prices of prop-erties sold within a portfolio may be allocated pro rata (based on size) if individual pricing is not available. In either case, the estimates are excluded from any pricing analysis.
Transactions: Asset sales and entity-level transactions are included. Asset sales include properties that are sold individually (one-off) or with other properties in a portfolio. Entity-level sales include merger and acquisition activity of REITs and other real estate-owning companies. Transactions include only the sale of 50% or more and prices are grossed up to reflect a full valuation of the property.
Currency Conversion: Transaction prices are tracked in whatever currency is reported and are converted to USD, EUR, GBP and JPY based on the con-version rates in effect on the first day of the month when the transaction is reported to have occurred. Due to this, all price aggregations are composed of the sum of individually converted prices on the transaction level for the time period in discussion. For this reason pairs of figures representing volume in USD with its EUR equivalent do not represent a single conversion rate, currency conversion are on deal by deal basis at the time of transaction.
Measurement: Office, retail and industrial are tracked in square feet and square meters. Hotels and apartments are measured primarily by units based on the number of for “lease apartments” or hotel rooms in the property. Development sites are tracked in four units: hectares, acres, square feet and square meters and automatically converted to the alternate measures.
Global Land Methodology: RCA tracks the sale of plots of land that trade for more than $10m USD and are destined for commercial development. This includes the sale of land use rights in countries where plots are not traded on a freehold basis and where these rights are the equivalent of a land pur-chase in markets with freehold ownership rights.
Abbreviations: PPSF = Price Per Square Foot m2 = Per Square Meter BPS = Basis Points YOY = Year-Over-Year YTD = Year-To-Date Q1 = First Quarter of Year H1 = First Half of Year
Data PartnersTo become a data partner, please email [email protected]
Property Data in The United KingdomConfidencial Imobiliário in PortugalRP Data in AustraliaVastgoedmarkt in The NetherlandsKTI Property Information in FinlandE-Commercial in ChinaEconomic Prop. Research Ctr. (EPRC) in HKGJLR Real Estate Data Builders in CanadaVida Imobiliaria in Brazil
THOMAS DAILY in GermanyBulwienGesa AG in GermanyHBS-Research in FranceMate Plus in KoreaNikkei Business Publications in JapanGabetti Property Solutions in ItalyPrime in Costa RicaBregman-Baraz Real Estate in IsraelStrabo in Netherlands
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