The role of european propErty within an investment portfolio

18th European Real Estate Society (ERES) ConferenceEindhovenJune 2011

Graeme NewellUniversity of Western Sydney

Stanley McGreal, Martin Haran, Michael McCordUniversity of Ulster

Contact author: [email protected]

INTRODUCTIONINTRODUCTION

PURPOSE OF THE PAPERPURPOSE OF THE PAPER

Eleven (11) major European direct property markets – 10 yrs (2001-2010)

Risk-adjusted performance

Portfolio diversification

Mixed-asset portfolios

Property investment implications

GLOBAL COMPETITIVENESS

♯1. Switzerland ♯2. Sweden ♯5. Germany

♯7. Finland ♯8. Netherlands ♯9. Denmark

♯12. UK ♯14. Norway ♯15. France

♯18. Austria ♯19. Belgium ♯20. Luxemburg

CORRUPTION CORRUPTION PERCEPTIONPERCEPTION

♯1. Denmark ♯4. Finland ♯4. Sweden

♯7. Netherlands ♯8. Switzerland ♯10. Norway

♯11. Luxemburg ♯14. Ireland ♯15. Austria

♯15. Germany ♯20. UK ♯22. Belgium

♯25. France

INSTITUTIONAL GRADE INSTITUTIONAL GRADE PROPERTY MARKETPROPERTY MARKET

♯3. Germany ♯4. UK ♯5. France

♯7. Italy ♯8. Spain ♯11. Russia

♯14. Netherlands ♯16. Switzerland ♯17. Belguim

♯18. Turkey ♯19. Sweden ♯21. Norway

♯22. Austria ♯24. Poland ♯26. Denmark

PROPERTY TRANSPARENCYPROPERTY TRANSPARENCY

♯3. UK ♯4. Sweden ♯7. Ireland

♯8. France ♯9. Netherlands ♯10. Germany

♯11. Belgium ♯12. Denmark ♯13. Finland

♯14. Spain ♯15. Austria ♯17. Norway

♯19. Portugal ♯20. Switzerland ♯21. Italy

♯22. Poland ♯24. Czech Rep. ♯27. Hungary

MAJOR PROPERTY FUND MAJOR PROPERTY FUND MANAGERS: EUROPE EXPOSUREMANAGERS: EUROPE EXPOSURE

ING: 39% UBS: 54% RREEF: 45%

Morgan Stanley:

35%

JP Morgan: 10% Pramerica : 21%

LaSalle: 34% Aberdeen: 97% AEW: 67%

CB Richard Ellis:

38%

Cornerstone: 20% Tishman Speyer: 17%

Heitman: 16% PruPIM: 86% Hines: 20%

SECURITISED PROPERTYSECURITISED PROPERTY

♯7. France ♯8. UK ♯11. Sweden

♯18. Germany ♯20. Netherlands

REITsREITs

♯3. France ♯4. UK ♯8. Netherlands

♯10. Belgium ♯13. Turkey ♯16. Germany

PROPERTY ACTIVITY: 2010: PROPERTY ACTIVITY: 2010: COUNTRIESCOUNTRIES

♯3. UK ♯4. Germany ♯6. France

♯11. Sweden ♯13. Russia ♯14. Spain

♯17. Netherlands ♯19. Italy ♯21. Poland

♯22. Norway ♯23. Finland ♯24. Turkey

EUROPE: $154B @ 24% global

PROPERTY ACTIVITY: 2010: PROPERTY ACTIVITY: 2010: CITIESCITIES

♯1. London ♯4. Paris ♯10. Stockholm

♯15. Moscow ♯21. Berlin ♯23. Frankfurt

INDIVIDUAL TRANSACTIONS: 2010INDIVIDUAL TRANSACTIONS: 2010

♯4. London ♯5. London ♯7. London

♯8. Berlin ♯9. London ♯10. Frankfurt

PROPERTY ACTIVITY: Q1 2011PROPERTY ACTIVITY: Q1 2011

♯3. UK ♯5. Germany ♯7. France

♯11. Sweden ♯12. Italy ♯13. Poland

♯16. Spain ♯17. Netherlands ♯19. Czech Rep.

♯21. Austria ♯22. Belgium ♯23. Turkey

EUROPE: $44B @ 24% global

METHODOLOGYMETHODOLOGY

* Denmark * Finland * France

* Germany * Ireland * Netherlands

* Norway * Portugal * Spain

* Sweden * UK * Pan-European

EUROPEAN DIRECT PROPERTY MARKETS : 11 COUNTRIES

Direct Property: IPD Total Returns

*All Property •Retail *Office *Industrial

METHODOLOGY

Stocks (FTSE Indices) Bonds (10Y Government Bonds)

2001-2010 :annual

Risk-adjusted performance, portfolio diversification

European property markets omitted : 6

DIRECT PROPERTY: IPD 2010DIRECT PROPERTY: IPD 2010

DENMARK ASSET PERFORMANCE (2001-2010)

FRANCE ASSET PERFORMANCE

(2001-2010)

SPAIN ASSET PERFORMANCE (2001-2010)

UK ASSET PERFORMANCE (2001-2010)

PROPERTY PERFORMANCE: PROPERTY PERFORMANCE: 20102010

STOCK PERFORMANCE: 2010

PROPERTY PERFORMANCE: PROPERTY PERFORMANCE: 2001-20102001-2010

STOCK PERFORMANCESTOCK PERFORMANCE

PORTFOLIO DIVERSIFICATIONPORTFOLIO DIVERSIFICATION

Within Sector

Within Country

DIVERSIFICATION: PROPERTYDIVERSIFICATION: PROPERTY

DIVERSIFICATION: STOCKSDIVERSIFICATION: STOCKS

UK DIVERSIFICATIONUK DIVERSIFICATION

FRANCE DIVERSIFICATIONFRANCE DIVERSIFICATION

GERMANY DIVERSIFICATIONGERMANY DIVERSIFICATION

SWEDEN DIVERSIFICATIONSWEDEN DIVERSIFICATION

SPAIN DIVERSIFICATIONSPAIN DIVERSIFICATION

PROPERTY/STOCK CORRELATIONS

PROPERTY/BOND CORRELATIONSPROPERTY/BOND CORRELATIONS

EUROPEAN PROPERTY INVESTMENT EUROPEAN PROPERTY INVESTMENT IMPLICATIONSIMPLICATIONS

Size; maturity; significance

Risk-Adjusted Returns

Portfolio Diversification* Sectors * Countries

Mixed-Asset Portfolios

Other Property Markets: IPDAustria, Belgium, Czech Rep.Italy, Poland, Switzerland, CEE

International Investor Perspectives