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COVERNEWS

ISSUE 36September 2010

Standing tall in a flat landscapeA review of the EPRA Annual Conference 2010

EPRA’s Board of Directors take to the saddle.

2. _ EPRA NEWS / 29 / 20082. EPRA NEWS / 36 / 2010

AustrAliA• MacarthurCook• Stockland• Univ. of Western Sydney, Property Research Centre

• Valad Property Group• Vanguard Investments

AustriA• CA Immobilien Anlagen• Conwert Immobilien Invest• Sparkassen Immobilien

Belgium• Banque De Groof• Befimmo• Cofinimmo• Leasinvest Real Estate• Solvay Business School (Brussels Univ.)

BrAzil• Iguatemi Empresa De Shopping Center

British Virgin islAnds• Dolphin Capital Investors• Eastern Property Holdings

CAnAdA• OPTrust• Presima

FinlAnd • Citycon• CREF Center for Real Estate Investment & Finance

• KTI Finland• Sponda

FrAnCe• Acanthe Developpement• Affine• AffiParis• Altarea • ANF Immobilier• Baker & McKenzie• BNP Paribas• Cegereal• Credit Agricole Immobillier• EUROSIC• Foncière des Regions• Foncière Paris France• Gecina• ICADE• IEIF• Klépierre• Mercialys• Unibail-Rodamco• Silic• Société de la Tour Eiffel• Société Foncière Lyonnaise• Société Générale• Université de Paris-Dauphine

germAny• AIG International Real Estate• Alstria Office REIT• Beiten Burkhardt Rechtsanwaltsgesellschaft

• Deutsche EuroShop• Deutsche Wohnen

• DIC Asset• GAGFAH• Hamborner• Heitman• IREBS International RE Business School

• IVG Immobilien• MEAG Real Estate Management• PATRIZIA Immobilien• POLIS Immobilien• PricewaterhouseCoopers• Real Estate Management Institute

• RREEF Investment• SEB Asset Management

greeCe• Babis Vovos• Eurobank Properties REIC• Lamda Development• National Bank of Greece Property Services

• Pasal Development• Trastor Real Estate Investment

hong Kong• Univ. of Hong Kong, Dept. of RE & Construction

irelAnd• Nation Pensions Reserve Fund

isreAl• Gazit Globe

itAly• Beni Stabili• Immobiliare Grande Distribuzione

• Pirelli RE

luxemBourg• Orco Property Group

netherlAnds• Amsterdam School of RE• APG Asset Management• Atrium European Real Estate• BPF Bouwinvest• CB Richard Ellis• Citco Nederland• Clifford Chance• Cordares Vastgoed• Corio• Deloitte Real Estate• Ernst & Young European Real Estate Group

• Eurocommercial Properties• Fortis Investment Management• Houthoff Buruma• ING REIM Europe• Kempen & Co• KPMG Accountants• LaSalle Investment Management• Loyens & Loeff• MN Services• Nieuwe Steen Investments• PGGM• Prologis• Royal Bank of Scotland Group• Redevco Europe Services• Spazio Investments

• SPF Beheer• Univ. of Maastricht• VastNed• Wereldhave

norwAy• EdgeCapital• Norwegian Property• Renaissance Capital

russiA• PIK Group

singApore• Keppel Land Limited• National Univ. of Singapore

south-AFriCA• Growthpoint Properties

spAin• Fundación ESADE• Inmobiliaria Colonial• Metrovacesa• Neinver• Parquesol Inmobiliaria y Proectos

• TESTA Inmuebles & Renta

sweden• Aberdeen Property Investors Holding

• Castellum• Klovern

switzerlAnd• Center for Urban & RE Management

• Euro Institute of RE Management• PSP Swiss Property• Sal. Oppenheim RE• Swiss Capital Alternative Investments

• Swiss Prime Site• Strategic Capital Management• University of Geneva• Züblin Immobilien Holding

uAe• Abu Dhabi Investment Authority

united Kingdom• AMP Capital Brookfield• Asset Value Investors• Aviva Investors• Bank of America• BDO Stoy Hayward• Berwin Leighton Paisner• Big Yellow Group• British Land• Cass Business School• Capital & Counties Properties• Citigroup• Clearance Capital• Credit Suisse Securities• Derwent London plc• Deutsche Bank• Eurocastle Investment• Evolution Group• GIC Real Estate• Clearance Capital• Goldman Sachs International

• Grainger• Green Street Advisors• Grosvenor Group• Great Portland Estates• Hammerson• Henderson Global Investors• Ignis Asset Management• Invista Real Estate Investment Management

• JPMorgan• JPMorgan Cazenove• Land Securities• Liberty International• Linklaters• Macquarie Real Estate• M&G Investment Management• M3 Capital Partners• Morgan Stanley• Nabarro• Principal Global Investors• Prologis European Properties• Quintain Estates & Development• Scottish Widows Investment Partnership

• Safestore• SEGRO• Shaftesbury• SJ Berwin• Speymill Group• Standard Life Investments• Thames River Capital• UBS• Univ. of Cambridge, Dept. of Land Economy

• Univ. of Reading, Centre for RE Research

• Workspace Group

usA• AEW Capital Management• Alvarez & Marsal• Cohen & Steers Capital Management

• Columbia Business School• Cornerstone Real Estate Advisers• Duff & Phelps• European Investors Incorporated• Fidelity Management & Research.

• Forum Partners Investment Management

• FPL Advisory Group• Host Hotels & Resorts• ING Clarion Real Estate Securities

• MIT Center for Real Estate• Real Capital Analytics• Real Foundations• Rockefeller Group Investment Management Corp.

• Russell Investment Group• Simon Property Group• SNL Financial• Taberna Realty Finance Trust• The Tuckerman Group• Univ. of Cincinnati• Westfield Group• WP Carey• Zell-Lurie RE Center at Wharton

EPRA mEmBERSAs oF septemBer 2010

EPRA NEWS / 36 / 2010 3.

Credits

editor & productionDominic Turnbull

Article Credits

Steve Hays

photographerJoke Emmerechts

Please send your comments and suggestions to:

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NEWSStanding tall in a flat landscape 6

The EPRA perspective 8

How will this cycle be different? 10

Global retail titans 11

Sustainability – more economics than eco-nomics? 12

Behind the CEO mask 14

EPRA Awards 16

Demographics count 19

The original REIT 20

Gala Dinner 22

Every decision is fateful 25

Securing capital structure 27

What a difference a year makes 28

NEWSISSUE 36 | September 2010

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Cohen & Steers, Inc. is a publicly traded (NYSE ticker: CNS) investment manager of income-oriented portfolios. Founded in 1986, we maintain a strategic focus on real estate securities through global and regional portfolios. We also manage alternative investment strategies, such as global real estate long-short and global private real estate multimanager portfolios, for qualified investors. Additional investment strategies include global listed infrastructure and large cap value equity strategies. Headquartered in New York City, with offices in London, Brussels, Hong Kong and Seattle, Cohen & Steers serves institutional and individual investors through separate accounts, sub-advised portfolios, offshore funds and limited partnerships.

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EPRA NEWS / 36 / 2010 5. EPRA NEWS / 36 / 2010 5.

EPRA ConfEREnCE

eprA AnnuAl ConFerenCeseptemBer 2010

6. EPRA NEWS / 36 / 20106. EPRA NEWS / 36 / 2010

REViEW

stAnding tAll in A FlAt lAndsCApe

EPRA returned to its founding roots

at the 2010 Annual Conference

held in Amsterdam at the riverside

Hilton Hotel in the south of the

city. “Standing Tall in a Flat

Landscape” was the mantra for this

year’s gathering and topographical

metaphors certainly coloured the

conference as the proceedings

gathered momentum towards

the climactic keynote speech on

Friday morning.

By Steve Hays Bellier Financial, Amsterdam


Participants were left

with the sense of a

resurgent industry

poised on

the cusp of a new

period of expansion.

There was a marked contrast in the

conference mood, and the positions

of the companies’ represented share

prices, compared with the hair shirt

imposed austerity of the meeting

outside Brussels last year and the

“teetering on the edge of the abyss”

feeling of Stockholm - held just two

weeks before the Lehman Brothers

collapse in 2008.

With the leading listed real estate

companies in Europe having largely

successfully refinanced themselves,

renewed confidence was in the air

and an appetite for investment and

growth.

With the leading listed real estate

companies in Europe having largely

successfully refinanced themselves,

despite the adverse headwinds of

the credit crisis, renewed confidence

was in the air and an appetite for

investment and growth. On the

occasion of the 50th anniversary

of the first Real Estate Investment

Trust there was also a tangible

pride amongst the participants that

the REIT model -- relatively young

in some European countries -- had

resolutely proved itself around the

globe in possibly the most extreme

market conditions it had ever had to

face.

Speaker after speaker trumpeted

the strengths of liquidity and trans-

parency of real estate stocks relative

to the non-listed property industry,

where funds have generally fared

less well and found it more difficult

to attract refinancing in the past two

years.

The performance of the listed

real estate sector, and the economic

and financial environment in which

it operates, were examined in depth

by the speakers and panels and con-

ference participants were left with

the sense of a resurgent industry

poised on the cusp of a new period

of expansion.


EPRA Chairman Guillaume

Poitrinal opened the

conference with remarks

on the quality of the

participants the

event attracts.

Over 330 top executives were in

Amsterdam to discuss and exchange

views on the industry with all of the

CEOs from the eight largest European

listed real estate companies present

and EUR 1.0 trillion of investment

capital represented in the room.

Poitrinal said the number of

industry stakeholders coming to the

conference was a tribute to the per-

formance of the European listed sec-

tor which on average had returned

13% with dividends reinvested over

the past year. This resilience and

outperformance reflected the intrin-

sic quality of transparency that real

estate stocks offer, which enables

them to deliver counter-cyclical

returns in a way that private equity

property funds cannot match, he

added.

At the start of his term as EPRA

Chairman in September 2009,

Poitrinal proposed an ambitious

programme to the Association’s

board to support the REIT sector in

Europe. A year down the road good

progress is being made in most of

these areas to further lift transpar-

ency and attract investor capital.

On the day before the confer-

ence, the EPRA board approved new

key performance indicators (KPIs)

the eprA perspeCtiVe

oPEning REmARKS

“Our sector stands tall while

others have fallen flat, or

collapsed, within the new

financial order.”


for the EPRA Best Practice Recom-

mendations in financial reporting

and launched a new drive on BPRs

for sustainability reporting.

“We have intensified our lob-

bying efforts with the EU, govern-

ments, other regulatory bodies. We

want them to understand that our

profits as an industry are fully taxed

thanks to the dividend distribution

obligation and we have to explain

the economic benefits of what we

are doing for society as a whole. We

also want them to evaluate the side

effects of decision taken concerning

our tenants or investors”

Guillaume was followed onto

the stage by EPRA CEO Philip Charls

who outlined the association’s

priorities in the areas of corporate

governance, visibility to sharehold-

ers and the lobbying of policy mak-

ers – where the move to Brussels last

year is already paying dividends.

He also pointed to EPRA’s active

research programme and its investor

outreach efforts, particularly with

sovereign wealth funds and pension

funds.

“The EPRA indices are the best in

class and our bread and butter,” he

noted.

Philip said EPRA is intensifying

its efforts at the national level as

evidenced by its growing number

of events in European countries and

the gathering of national associa-

tions in Amsterdam.

Central to the success of all of

EPRA’s efforts is the effectiveness of

its communications and the support

of the industry, where Philip took

the opportunity to thank the confer-

ence sponsors who made the event

possible.

“Our sector stands tall while

others have fallen flat, or collapsed,

within the new financial order, as

we successfully adjusted to the chal-

lenges of 2009,” he concluded.


Anatole Kaletsky painted

an upbeat economic

outlook picture for the

commercial real estate

industry - even as the

world emerges from its

deepest recession since

the 1930s - in his third

consecutive keynote

speech to the EPRA

conference.

He said this economic cycle will be

characterised by low interest rates

for the foreseeable future and strong

investment flows into property,

attracted by its inflation hedging

characteristics and relatively high

yields.

After the first fall in 60 years,

nominal GDP is rising again in the

US and UK, with business sentiment

at similar levels as during and after

past recessions and unemployment

in the two main Anglo-Saxon econo-

mies and the euro-zone peaking

below previous highs.

The huge output gaps across the

world’s largest economies, however,

following the private sector’s robust

response to the recession in boost-

ing productivity through slashing

costs and labour, will weigh on

recovery and dampen the prospects

for inflation.

The recovery will need to be ex-

port and investment-led as Western

consumers continue to deleverage

and nurse their wounds from the

recession. Kaletsky said this will be

a long slow process, as despite the

focus on the Asian economies as

potentially strong engines of growth,

all of them combined are only twice

the size of the US economy and they

make-up a relatively small portion

of Western exports.

He said companies and investors

would have to accept far lower

returns on equity than in the boom

years; but that this would be eased

by lower costs of capital stemming

from low interest rates. Large firms

are well positioned to adapt to this

environment as they are sitting on

big cash piles and as corporate prof-

itability didn’t drop meaningfully

below trend during the recession.

Following the unprecedented

monetary and fiscal policies adopted

by governments to prevent their

economies from nose-diving into

depression during the crisis, central

banks will have to maintain interest

rates at record low levels for at least

the next few years, Kaletsky said.

Governments struggling to rein-in

massive deficits will be driven into

bankruptcy if the cost of debt soars.

This raises the prospect of future

inflation not being held in check

by interest rates if high government

spending continues and commodity

prices rise. Under that scenario rent

yielding commercial property will

be a better investment than bonds,

gold, or commodities, Kaletsky

concluded.

how will this CyCle Be diFFerent?

Companies and

investors would

have to accept far

lower returns on

equity than in the

boom years; but

that this would

be eased by lower

costs of capital

stemming from

low interest rates.

KEYnotE SPEAKER


“We’re much smaller. I’m sitting

next to giants,” Guillaume Poitrinal

noted, before responding to David

Simon’s offer of a merger by saying

it was “simply a matter of price.”

This set the tone for an entertaining

cabaret act, masterfully moderated

by Henley Business School’s An-

drew Baum, where the three chief

executives explained how they had

successfully built their companies

into the global retail property titans

they are today.

David Simon said his firm is

overwhelmingly US-based with

over 95% of its income coming

from North American operations.

Although Simon Property has aspira-

tions for international expansion,

and already has overseas assets

such as its dynamic Asian outlet

business, David expressed frustra-

tion with the bureaucratic planning

process in Europe, which tends to

push the time horizons for returns

on investment beyond the threshold

of patience for most US investors.

Westfield’s Peter Lowy said the

limited opportunities for growth

in its Australian home market had

pushed the company towards inter-

national expansion, but the focus

of investment had been very much

on other Anglo-Saxon economies,

including the UK, US and New Zea-

land, which share similar cultural

and legal environments.

Unibail-Rodamco’s approach

to its retail business is very tailor-

made to location with the emphasis

on large malls in the capital cities of

Europe, Poitrinal said. This means

micro data on the catchment area

of the retail assets is weighted with

relatively more importance than

national macroeconomic data.

Andrew Baum asked the panel

members what the most significant

turning points had been for their

companies:

Simon Property: “The USD 5.8

billion acquisition of the Corporate

Property Investors private REIT in

1998 (transaction adds 23 malls and

four offices buildings to the Simon

portfolio) took us to the next level.”

Unibail-Rodamco: “Merging with

Rodamco and combining Unibail’s

retail property in France, with their

assets across Europe, in Holland,

Spain, Scandinavia and France. This

created a very specific dynamic

with the company that has driven

us forward.”

It would be fair to say that the conference was gripped

by the first panel of the day as EPRA had managed to

assemble the CEOs of the world’s two largest quoted

real estate companies, Simon Property and Westfield on

the stage. For once Europe’s biggest listed firm Unibail-

Rodamco, contributing the third CEO to the panel,

was relatively overshadowed by the size of its US and

Australian peers.

REtAil titAnS

gloBAl retAil titAns

Westfield: “There were two key

turning points for us. The acquisition

of CenterMark in 1994 put us on a

growth path in the US. Then the

takeover of Rodamco in the US in

1992 really changed everything for all

of us. That transaction marked the

start of the global real estate camp

to match the reach of the global

retailers.”


The subject of

sustainability, which

appeared to have dropped

somewhat out of the

limelight for the real estate

industry during the crisis,

was back on the agenda

at the conference in the

first panel after the break

and with it a noticeable

hardening of attitudes

that environmental

responsibility should also

pay its way.

Moderator Piet Eichholtz of the Uni-

versity of Maastricht presented the

findings of a survey on the environ-

mental performance of the industry.

The survey found large variations

in performance across companies

and between countries. Listed firms

generally performed better than the

non-listed market and bigger compa-

nies topped smaller ones. There was

also a correlation between superior

financial performance and good sus-

tainability practices. Australia, the

U.S., Germany and Southern Europe

were relatively weaker than other

main investment markets.

James Gibson, CEO of the UK’s

Big Yellow storage firm told the

conference his company took a

strategic decision between four and

five years ago to move the business

onto a sustainable basis. He said Big

Yellow had brought in an outside

expert to held guide it through com-

plex legislation in the area and to

formulate its environmental targets.

The company found that there were

a lot of easy wins initially and this

approach helped it significantly

in dealing with local authorities

in planning processes and in its

general marketing.

SuStAinABilitY

sustAinABility – more eConomiCs

thAn eCo-nomiCs?


SuStAinABilitY

Joost Bomhoff, Executive Director

at Unibail-Rodamco, said the firm

had looked at the energy consump-

tion at the offices in its portfolio and

achieved remarkable results in areas

such as electricity use and carbon

dioxide emissions with relatively

little effort.

“It’s generally a question of

attitude on the part of the people

working in offices who are the ones

that can really drive these efforts

successfully,” he noted.

The institutional investor

representative sitting on the panel,

Patrick Kanters, Managing Director,

Global Real Estate at Dutch APG,

said his company used the results

of the Maastricht survey to sit down

with companies and to discuss what

more they can to do improve their

sustainability performance and that

firms welcome this approach.

“There’s a lot of ethical pressure

put on pension funds not to invest

in category C companies, but it’s

also about making money. If you

look at the “Green Stars” they’re the

companies who anticipate what’s

happening and react early on. We

happen to have a lot of Green Stars

in our portfolio as they tend to be

good performers generally and

outperform at several levels such

as quality of management, invest-

ments, corporate governance etcet-

era. When we invest in companies

below standard in these areas, we’ll

engage with them on improving their

performance, which in turn boosts

their value,” Patrick concluded.

Bruno Schefer, CEO of Swiss

property company Zueblin, pointed

out that just the day before the

conference, the EPRA Management

Board had approved a decision to

SuStAinABilitY

“When we invest in

companies below

standard in these areas,

we’ll engage with them

on improving their

performance, which in

turn boosts their value.”

extend its Best Practices Recom-

mendations to sustainability report-

ing. The intention is that the EPRA

sustainability BPRs will become the

established standards in Europe, in

the same way that its guidelines on

financial reporting are the industry’s

benchmark.


Following two successful

previous CEO conferences,

Ian Coull CEO of SEGRO

and the nominated

chairman of the event,

gave an outline of

discussions held behind

closed doors.

So what draws competing CEOs from

across Europe to this table? Coull

cheered the audience with a touch-

ing comment that CEOs were rarely

appreciated and often under valued.

Afterall, with whom can they share

their burden? “There’s always the

chairman,” he said “ but he’ll likely

be the one who sacks you after two

years so you don’t want to be too

open. Your CFO spends his days

thinking about why you shouldn’t

do things, and any external coach

won’t understand your business.”

With this in mind, the CEO confer-

ence was born to allow an open an

honest dialogue.

“We came away feeling engaged,

energised and took ideas back

to our companies” he admitted,

after this May’s 1.5 day gathering in

Brussels.

Following a remarkable demo-

graphics presentation by Amlan Roy,

Coull explaned that the discussion

swiftly turned to the recession, how

the group survived it and where

they saw resumed trade. McKinsey

facilitated the exchange around

Growth, Competitive Positioning and

Consolodation.

Ideas flew: How is our model

transferrable across region, sector &

border? Is development part of the

REIT package? Do we buy and hold

as REITs, or do we buy and manage?

What’s the right level of leverage?

“Indeed, we heard that some

EUR 10 billion was sitting on the

EPRA index with nowhere to go –

that was back in May”

During the course of the morn-

ing, he said it became clear that

sector positioning had emerged as

an issue across all topics. The REIT

sector as a whole was significant

rather than just the sectors within it.

Coull went on to question how we

differentiate ourselves from other

asset-based allocators; what are the

benefits of REITs, and do investors

understand? Conclusion: we should

do more and EPRA is a good vehicle

for this.

“One message emerged: ‘Look

after your tenants, and they’ll look

after your shareholders.’” Coull

encouraged other CEOs to become

involved. But with that in mind, the

frank and personal nature of the

event inevitably limits numbers of

participants.

Behind the Ceo mAsK

CEo ConfEREnCE

eprA produces a mass of invaluable monthly data for members. it consists of over 1,000 pages of research,

graphs and statistics that can affect your market understanding and support your decisions. this sector round-up with its

rich indices data is used widely and globally - can you afford not to receive these?

stay in touch: [email protected]

Patrick Sumner, Head of Property Equities,

Henderson global investors.

www.epra.com

Boulevard de la Woluwe 62 Woluwelaan, 1200 Brussels • Belgium

t +32 (0)2739 1010 • f +32 (0)2739 1020


eprA produces a mass of invaluable monthly data for members. it consists of over 1,000 pages of research,

graphs and statistics that can affect your market understanding and support your decisions. this sector round-up with its

rich indices data is used widely and globally - can you afford not to receive these?

stay in touch: [email protected]

Patrick Sumner, Head of Property Equities,

Henderson global investors.

www.epra.com

Boulevard de la Woluwe 62 Woluwelaan, 1200 Brussels • Belgium

t +32 (0)2739 1010 • f +32 (0)2739 1020

Global REIT

Survey

Corporate Governance

Monthly Emerging Markets Report Monthly Index Chart Book

Monthly Published

NAV Bulletin

RCA Monthly

Transaction

Overview

Monthly Market Review

Monthly Statistical Bulletin

Monthly

Company

Chart Book

Best Practices Recommendations

“Relevant, timely, comprehensive – an invaluable monthly round-up of the sector”

http://www.epra.com/research_monthly_bulletin.jsp

http://www.epra.com


For the highest scoring annual

reports based on compliance

with the BPR and which stand

out as leading reports for the

industry.

For annual reports scoring

highly based on compliance

with the BPR.

For annual reports scoring well

based on compliance with

the BPR.

The EPRA conference

in Amsterdam saw the

presentation of the results

of the EPRA 2009/10

Annual Report Survey,

following a review by

Deloitte of the annual

reports of 80 listed real

estate companies

across Europe.

The purpose of the Survey is to

promote awareness of EPRA’s Best

Practices Recommendations (BPR).

The BPR aim to raise the standard

of financial reporting in the sector

through improving clarity, transpar-

ency and consistency of annual

reports.

Adoption of the BPR is becoming

increasingly widespread across Eu-

rope, with Awards from the Survey

being presented to companies in ten

out of the 12 countries represented

in the Survey.

Award processAnnual reports for years ending be-

tween June 30, 2009 and March 31,

2010 were reviewed for members of

the FTSE EPRA/NAREIT Developed

Europe REITs and Non-REITs indices,

comprising 80 listed real estate

companies across Europe.

Reports were reviewed for com-

pliance with the most recent EPRA

BPR, published in July 2009, by a

team of experts from the Deloitte

real estate audit practice in conjunc-

tion with a panel of experts from

the sector. The 2009 BPR included

a number of improvements and

new recommendations based on

consultation and feedback from the

industry, the most significant being

the addition of two new key report-

ing measures on vacancy rate and

net initial yield.

A new approach to the survey

was taken this year to provide better

recognition for companies comply-

ing with the EPRA BPR alongside the

many other challenges associated

with the delivery of relevant and

useful annual reports. Instead of

A Firm FoundAtion eprA AnnuAl report surVey 2009/10

EPRA AWARDS

an award for the best annual report,

broader recognition was made avail-

able through the following accredita-

tion levels:

As a minimum, all companies

receiving an award are required to

disclose at least one key EPRA meas-

ure within their annual reports, being

EPRA EPS, NAV or NNNAV. Encourag-

ingly, reporting of these measures,

in particular the NAV and NNNAV

measures, improved significantly

this year.


AwArd winners

Key Findings • The results of the 2009/10 EPRA

survey demonstrate the firm

foundations now underpinning

real estate financial reporting

across Europe, with over a third

of companies representing ten

different countries receiving

accreditation in the survey.

• Companies are reducing the

length of their annual reports

providing clarity and more suc-

cinct, investor-friendly reports.

• For the first time, some of the

best examples of reporting and

adoption of the BPR have been

identified, providing real life

examples for other real estate

companies seeking to adopt

the BPR (these are included in

the Deloitte report, see below).

• There has been a clear trend

towards faster financial reporting

with more companies comply-

ing with the 90-day reporting

recommendation. Faster finan-

cial reporting is a constant on

every analyst’s wish-list, and it

is encouraging to see companies

heading in the right direction.

• Only 36% of all companies re-

ferred to carbon reduction targets

in their annual reports. However,

this does not necessarily imply

that companies are not focused

on sustainability as many prepare

separate reports. The potential role

of the Annual Report to connect

sustainability and climate change

impacts to the core business is

often under-utilised and we an-

ticipate significant changes in this

respect going forward.

• Despite the importance of the

new EPRA net initial yield

definition, intended to provide

one comparable and consistently

calculated measure, it has not yet

been widely adopted.

The FutureThe BPR are currently undergoing

a significant revision, focusing on

those areas of reporting that are

seen to be of most relevance to

investors and where more consist-

ent reporting across Europe would

bring the greatest benefits. Improv-

ing transparency will attract more

investment into the sector.

CA Immobilien Anlagen

AG

Capital Shopping Centres

Group PLC

(formerly Liberty

International Plc)

Corio NV

Helical Bar plc

Klépierre SA

Safestore Holdings plc

Shaftesbury PLC

Unibail-Rodamco SE

Workspace Group PLC

Alstria Office REIT AG

Beni Stabili SpA

Big Yellow Group PLC

Castellum AB

Conwert Immobilien

Invest SE

Derwent London PLC

Development Securities

PLC

Grainger PLC

Quintain Estates and

Development PLC

Sponda Plc

Wereldhave NV

Züblin Immobilien

Holding AG

Percentage of companies providing NAV

and EPS figures compared to previous years

EPRA diluted adjusted NAV

40

35

30

25

20

15

10

5

0EPRA diluted NNNAV EPRA diluted EPS

2007/08

2008/09

2009/10

Average score by country

Aus

tria

(2)

Finl

and

(3)

Net

herl

ands

(7)

UK

(29)

Switz

erla

nd (

4)

Italy

(2)

Fran

ce (

9)

Belg

ium

(6)

Ger

man

y (8

)

Swed

en (

6)

Nor

way

(1)

Gre

ece

(3)

60%50%40%30%20%10%0%

Average score 2007/08



Country (Number of Companies in 2009/10)

Average score

Office/industrial

Retail


most improVed AnnuAl report AwArd

EPRA AWARD

Klépierre has significantly improved

its financial statements this year.

Highlights include:

- Transformation in presentation to

produce a single annual report

rather than separate financial and

activity reports.

- More investor friendly – key figures/

at a glance section, clear strategy

section, use of pictures and case

studies.

- Reports on a historical cost basis

(unusually) but clear balance sheet

and income statement disclosures

on a fair value basis in the notes to

the financial statements.

- Disclosure of key EPRA metric

EPRA NNNAV.

- Produced combined State-

ment of Comprehensive

Income.

- Disclosure of additional

portfolio information on a

property by property basis,

clearly provided by country,

enabling users to identify

key properties.

- Clear disclosure on like

for like rental growth on a

portfolio and geographical

segment level.

Further informationThe full Deloitte report on the EPRA Annual Report Sur-vey 2009/10 can be seen at www.deloitte.co.uk/epra2010. The report sets out both findings on the EPRA survey and also commentary on key financial reporting trends from the sector this year.

For any further information on the Survey, the Awards or the findings of the Deloitte review, please contact Claire Faulkner at Deloitte. Together with Gareth Lewis from EPRA, Deloitte would be happy to meet with finance teams to discuss the findings of the survey and ways of improv-ing individual company financial reporting in future.Claire Faulkner, DeloitteTel: +44 (0) 20 7007 0116Email: [email protected]

CorbridgeArt

mailto:cfaulkner%40deloitte.co.uk?subject=EPRA%20Award

www.corbridgeart.com


CEo ConfEREnCE

Demographic trends

are one of the top two

problems facing the world

today and affect every

consumer and worker,

yet they are widely

misunderstood and

misinterpreted resulting

in gross policy errors,

Dr. Amlan Roy, Head of

Global Demographics

and Pension Research at

Credit Suisse, argued in

a whirlwind presentation

at a concurrent session of

the conference.

The common myths that demo-

graphics are predictable, with issues

and effects that are long-term and

age-related in their nature, are inac-

curate characterisations missing out

key economic and behavioural as-

pects of the phenomenon, he said.

The recent sovereign debt crisis

in Greece and the fiscal deficit prob-

lems of other Southern European

countries such as Italy, Spain and

Portugal are directly related to pen-

sion promises which are unsustain-

able based on the demographics of

these states.

Official retirement ages in

Europe, largely based on 19th-

century German Chancellor Otto

von Bismarck’s famous observation

that a train driver could safely work

until 65 - when Germany’s average

life expectancy at the time was 46 -

are now woefully out of touch with

reality when the average German

can expect to live until nearly 80.

Amlan outlined the critical

policy actions required to tackle

the burgeoning demographic crisis

enveloping major economies:

- Flexible enabled retirement with

abolition of mandatory retirement

ages.

- Increased female labour participa-

tion rates with use of technology to

facilitate women to better balance

work life with family.

- Selective immigration policies.

- Outsourcing and off-shoring.

Amlan said that probably his

biggest call was on the strong down-

ward pressure that demographics

will exert on interest rates and asset

prices. In a prediction that had reso-

nance with the conclusions of Ana-

tole Kaletsky’s earlier presentation,

he forecast that the declining Yuppie

(number of 25 to 34-year olds) to

Nerd (number of 45 to 54-year olds)

Ratio would hold bond yields down

for years ahead. Yuppies borrow to

buy houses, cars, cribs etc., while

Nerds buy bonds for retirement.

The biggest impact of demograph-

ics on asset values is likely to occur

in the residential real estate sector.

While demographic factors have

contributed positively to residential

property values in many countries

in past decades, that trend is now

reversing and ageing will lower

house prices substantially over the

next 40 years, Amlan concluded.

demogrAphiCs Count

DEmogRAPHiCS


50 years on, what have

been the lessons learned

from the US, the home of

the original REIT?

Moderated by Dirk Brounen of the

Rotterdam School of Management,

the session featured Ed Walter (Host

Hotels & Resorts), Walter Rakowich

(ProLogis), Don Wood (Federal

Realty) and David Neithercut (Equity

Residential). Although the US REIT-

model is now 50 years old, all panel

members agreed that the modern

US REIT history only started 20

years ago and the REIT model is still

evolving today and continuing to be

improved.

Another observation made was

made that while the original REIT

was designed for private investors

looking for stable dividends, today

shareholders encompass much far

larger professional investors due to

the increased capital demands of

the companies. Regarding the share-

holder base, only approximately

10% of shares are in the hands of

short-term investors that have a high

trade turnover. This fact illustrates

the panel preference for long-term

shareholders, although REITs

do need to be careful regarding

liquidity.

Another development since the

launch was that REITs increasingly

have been focused on single sub-

sectors; a development the panel

expected to take place across other

regions as well.

the originAl reit

50tH AnniVERSARY


>www.corio-eu.com

“The trick is to

figure out what

your assets do

and marry that

with a business

plan which

marries up to

the right type of

shareholders”

Don Wood, Federal Realty

http://www.corio-eu.com


gAlA dinner

gAlA DinnER

Networking aboard a fleet of canal boats,

delegates took a scenic route through the heart of

Amsterdam to The Gala Dinner. The Koepelkerk

venue was built between 1668 and 1671 for the

wealthy Lutheran citizens of Amsterdam.

Now de-consecrated, it served as the cavernous

setting for the end of a hectic Day One.


JobNumber InsertionDate

ProductionManager CreativeDirector

Designer AccountManager

ArtDirector AccountDirector

Copywriter

Client FP – CREDITSUISSEFolder 14568 IFR Award Adapt for EPNA – 14568 Artwork

File 14568 IFR Award 138x196.indd ReproFilexx

Date 07.05.10Page 1Proof 1Operator Ian

Size T/A 138x196 mm Publication EPRA

LowRes LayoutHighRes Artwork Format InDesign 6.0.5 (CS4)

Winner of the IFR Bank of the Year Award

In 2009 our clients benefited from our focused business model and strengthened capital position. We are delighted that the International Financing Review recognised our efforts by voting us ‘Bank of the Year’. Credit Suisse, helping our clients thrive since 1856.

2009 bank of the yearOne Credit Suissehelping our clients thrive

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Responsible partnerA brand new eco-friendlycampus, global headquartersof Dassault Systèmes.

Strategic partner 200 Accor hotels owned since 2005.

Real estate partner For France Telecom, a day-to-day partnership for 338 sites.

www.foncieredesregions.fr

FONCIÈRE PARTENAIREFoncière des Régions is the real estate partner of the major corporates. The listed property company creates alongsidemajor end-users some bespoke and innovative real estate solutions.

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ign

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Leadership did

emerge among

those young men

on the mountain,

and this proved

to be the decisive

factor for surviving

and rescue,

alongside pure

luck and fate.

No-one should ever

face what he faced, yet

inevitably people do and

some emerge a leader.

The second day of the conference

started with the audience being

taken back 38 years to a freezing

and desolate spot 4,500 metres high

in the Andean mountain range in

Argentina. At that place in 1972, a

plane carrying 49 people including

a young Uruguayan rugby team

en-route from Montevideo to Chile,

crashed into a mountainside.

Miraculously, over half the pas-

sengers survived the initial break-up

on impact, as the front section of the

plane’s fuselage tobogganed down

the slope at 400 kilometres per

hour, narrowly missing giant rocks

on either side. After 1,500 metres the

fuselage ploughed to a halt nose first

on a glacier, crushing the two pilots

to death.

A survivor and hero of that event

Nando Parrado, came to relive his

story from the age of 19 with EPRA’s

members.

“Those were raw and unforgiving

moments of truth, when the very

best and worst of yourself and

others were laid bare, and you saw

and lived things you thought you

would never experience. The nights

were the worst; 72 terrible nights of

extreme cold, as low as 35 degrees

below freezing, and thirst and star-

vation,” Nando said.

He challenged the audience to

consider how they would react and

said it is always the leaders now

who think they would survive, but

personalities change dramatically

in times of extreme stress and only

a third of the people who boarded

the plane did not die. The eating of

the dead bodies, which the crash

is most remembered for, was not a

choice for the survivors, who had

found only two chocolate bars and

half a bag of chocolate peanuts in

the wreckage, he said.

Leadership did emerge among

those young men on the mountain,

averaging just 18 years-old, and this

proved to be the decisive factor for

surviving and rescue, alongside pure

luck and fate. The “achievement of

excellence” in the most adverse

circumstances imaginable, as Nando

put it.

The leaders included Marcelo the

rugby team captain, who saw the

need immediately to seal the broken

fuselage with bags to provide shelter

from the freezing temperatures, but

collapsed on hearing the news on

the radio that search efforts for the

plane had been given up.

In the end it was Nando himself

that proved the most decisive leader,

taking the decision to set out from

the crash site and scale sheer walls of

rock and ice with a companion, and

refusing to turn back in the face of

endless “false summits.” Equipped

only with summer clothes, rugby

boots, and sleeping bags made from

jeans and insulation materials, they

climbed and trekked over the Andes

for ten days and 75 kilometres,

before finding rescue. A sobering yet

inspiring tale.

eVery deCision is FAteFul

KEYnotE KEYnotE SPEAKER


A new era, new ambitions

A major French real estate group with a total €10.5 bn portfolio generating €650 mn rental income and €350 mn cash flow in 2009.

A well-balanced portfolio with leadership positions in offices, residential and healthcare real estate in France.

www.gecina.fr

Unibail-Rodamco, the leading listed European commercial property operator, investor and developer. Active in three major business lines: shopping centres, offices and convention-exhibition centres.

n° 1 listed European

commercial property company, part of the

French CAC 40 Euronext 100

and Dutch AEX index

12 countries

in operations

www.unibail-rodamco.com

UR - Pub Corporate.indd 1 16/07/09 9:51:54

http://www.gecina.fr

http://unibail-rodamco.com


Colin Lizieri of the

University of Cambridge

managed the transition

from survival in the high

Andes to the Capital

Structure panel with

the most aplomb seen

at the 2010 conference,

and probably every other

future EPRA conference.

“I would just like to thank EPRA for

giving me the completely impossible

task now of introducing the Capital

Structure panel,” he noted, before

proceeding to do a praise-worthy

job of doing exactly that.

Lizieri presented the preliminary

findings of EPRA’s first Capital

Structure Survey. A total of 44 firms

with a market capitalisation of EUR

72 billion responded to the survey,

which represents around 88% of the

market capitalisation of the EPRA

European index.

“We certainly formed the im-

pression of an industry reacting to

market conditions, using strategic

planning, and one that is not mak-

ing the best use of the analytical

tools to help it with crucial capital

allocation decisions. I need to

stress that these are preliminary

results and further analyses of the

survey’s implications need to be

undertaken,” he said.

David Atkins, CEO of Ham-

merson, extracted a metaphor from

Nando Parrado’s story when he lik-

ened the situation of the European

real estate industry after the crisis to

being stuck on top of a mountain of

debt, which arose from the growth

in asset values created by the excess

use of leverage. He said companies

had forgotten the value of equity

and not focused enough on what

they had, but rather on what they

could have.

“It is crucial to have a debt/

equity strategy and this should be

a service centre rather than a profit

centre, which is where many people

went wrong,” commented Gerard

Groener, CEO of Corio.

Robert Fowlds of JPMorgan Ca-

zenove said the lower cost of capital

for REITs was providing them with

a massive competitive advantage

and significant opportunities would

become available because the

capital markets would not be able

to refinance all the real estate debt

mountain. While the next two years

could be slow, spreads for distressed

debt may widen, and investment

opportunities multiply three to four

years out.

“Huge amounts of refinancing

still needs to be done and this will

lead to opportunities for REITs in

the UK and Continental Europe to

take advantage of. Within the banks

there’s a lot of property that’s not

of interest, but maybe that will be

floated out in IPOs, or as junk debt

at attractive yields,” David Atkins

concluded.

seCuring CApitAl struCture

CAPitAl StRuCtuRECAPitAl StRuCtuRE

“It is crucial to have a debt/

equity strategy and this

should be a service centre

rather than a profit centre,

which is where many people

went wrong.”


Each of the panellists gave an

overview of the state of politics in

their respective countries before ad-

dressing the state of the real estate

investment markets.

Patrick referred to Debra Cafaro,

CEO of the US Ventas healthcare

REIT, as probably having the most

impressive track-record

of the companies rep-

resented in the room

in terms of investment

returns. Over the past

five years Ventas has

achieved an annual to-

tal shareholder return

of 14.9%.

Debra said US REITs

have proven their val-

ue over the extremely

difficult markets of the

past 24 months, by ensuring they

secured access to capital and by

further building value for investors.

“As my mentor Sam Zell said –

‘liquidity equals value.’ REITs raised

USD 30 billion last year. That was

in the depth of the crisis in 2009

when we though stocks could go

to zero, but we were able to tap the

bond markets. David Simon started

the turnaround by raising capital in

March 2009 and so far in 2010 we’ve

raised USD 25 billion,” Debra said.

Joe Valente said Allianz liked

the fundamentals of the US prop-

erty market, which appeared to be

stronger than Europe.

He added that while there was

more knowledge in the European

market than two years ago, he ques-

tioned whether there was more

wisdom and that the mistakes of the

past could be repeated, with London

prime office yields heading towards

4% again and Amsterdam’s office

yields around 5%, despite a 20%

vacancy rate.

Hans Pars, CEO of Wereldhave

in the Netherlands, noted that

there hadn’t been as “much blood

on the carpet” as might have been

expected in the real estate industry

during the crisis, due to the prompt

action of central banks, and that his

own company had largely avoided

problems with a low loan-to-value

on its portfolio of around 30%.

Christophe Kullman, CEO of

CuRREnt AffAiRS

whAt A diFFerenCe A yeAr mAKes

The final panel of the conference addressed Current

Affairs and saw a last minute shuffle of moderators

as Patrick Sumner of Henderson gamely stepped in

to replace an absent John Waples. Four countries

were represented on the panel: the US, France, the

Netherlands and Germany, with Joe Valente - although

strictly speaking a Brit - picking up the German banner,

as he is head of Portfolio Management at Allianz Real

Estate and lives in Munich.


France’s Foncière des Régions said

he was optimistic about the future

of European REITs as their dividend

yields would continue to attract

investors, particularly when the

yields on government bonds are so

low, with bunds down to around

1.5%. He added that French insurers

were particularly interested in the

income returns from REITs to meet

their liabilities.

“What the hell is a European

REIT?” Valente commented. “What

makes an Italian REIT tax effective

and why can’t a German REIT invest

in residential property?”

Patrick interjected that “only

France has the perfect REIT,” and

questioned Debra on why the

average dividend yield on US REITs

was 4.5% whereas in Europe it was

closer to 6%. She responded that

REITs in the US didn’t have the same

fixation over NAV and tried to build

value in the share price, arguing that

you wouldn’t value a company such

as Johnson & Johnson by breaking

it down to the sales price of its

component assets.

Allianz Real Estate doesn’t yet

invest specifically in property stocks

and Valente concluded that any sec-

tor that offers higher returns with a

comparable risk, but isn’t punching

its weight in terms of investment

inflows, must be doing a lousy

marketing job.

This last point was picked up

by Philip Charls in his concluding

remarks to the conference, where

he pledged that EPRA would work

harder on marketing with its indus-

try association allies worldwide to

raise the profile of the listed real

estate sector with investors.

Looking for real estate value in today’s business environment?Unprecedented times bring unprecedented challenges — and opportunities. Having in-depth knowledge and experience on the ground can make all the difference.

We have a global network of over 7,000 real estate professionals who know the local cultures, real estate markets and regulatory environments. Our wide range of services include financial accounting and auditing, global tax, investment fund structuring, asset and transaction due diligence, valuation support and performance monitoring, risk advisory and cost control. We provide services to over 4,000 clients worldwide, including many of the top real estate owners, investors, lenders, and corporate users. Our team is ready to put this experience to work for you.

What’s next? ey.com/realestate

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© Ernst & Young LLP 2010. All rights reserved. The UK firm Ernst & Young LLP is a limited liability partnership registeredin England and Wales with registered number OC300001 and is a member firm of Ernst & Young Global Limited.

“There hadn’t been as

‘much blood on the

carpet’ as might have

been expected in the real

estate industry during

the crisis.”

http://www.ey.com


REPoRting

EPRA BPR draft online

EPRA has posted the final draft of its Best Practices Recommendations (EPRA BPR) onto the EPRA website.

The development of the EPRA BPR fall under the responsibility of the EPRA Reporting & Accounting Committee. In a series of meet-

ings held the day preceding the Annual Conference, the draft BPR were approved by this Committee and the EPRA Board of Directors.

The intention is to leave the BPR in final draft for comments from the wider membership before final publication on October 01, 2010

Further details on the process that EPRA have un-dertaken to develop the new recommendations are included on the webpage. Please send any comments to [email protected].

global REit Survey 2010 launchedTraditionally, the Conference is the time for EPRA to publish its hefty Annual Global REIT Survey publica-tion – however this year it went online. Not only is this an environmentally sensitive move, but the Survey content is now more accessible than ever and adaptable throughout the year.

The survey is developed under the overall guidance of the EPRA Taxation Committee, and tracks the ongoing development of REIT and REIT-like regimes around the globe.

With the new online version, the intention is to provide a more interactive portal for information on global REIT developments, allowing more timely updates, thought pieces and articles to comple-ment the Annual Survey in a supplementary docu-ment.


see you in london!EPRA Annual Conference 2011

September 01-02, 2011


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