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.
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editor & productionDominic Turnbull
Article Credits
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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
4. EPRA NEWS / 36 / 2010
guESt EDitoR
NOT INVESTMENT ADVICE OR A RECOMMENDATION OR OFFER OF ANY COHEN & STEERS PRODUCT OR SERVICE.
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.
We offer customized real estate solutions to meet investor needs:
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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
EPRA NEWS / 36 / 2010 7. EPRA NEWS / 36 / 2010 7.
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.
8. EPRA NEWS / 36 / 20108. EPRA NEWS / 36 / 2010
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.”
EPRA NEWS / 36 / 2010 9. EPRA NEWS / 36 / 2010 9.
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.
10. EPRA NEWS / 36 / 201010. EPRA NEWS / 36 / 2010
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
EPRA NEWS / 36 / 2010 11. EPRA NEWS / 36 / 2010 11.
“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.”
12. EPRA NEWS / 36 / 201012. EPRA NEWS / 36 / 2010
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?
EPRA NEWS / 36 / 2010 13. EPRA NEWS / 36 / 2010 13.
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.
14. EPRA NEWS / 36 / 201014. EPRA NEWS / 36 / 2010
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 NEWS / 36 / 2010 15. EPRA NEWS / 36 / 2010 15.
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
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Monthly Statistical Bulletin
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Best Practices Recommendations
“Relevant, timely, comprehensive – an invaluable monthly round-up of the sector”
16. EPRA NEWS / 36 / 201016. EPRA NEWS / 36 / 2010
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.
EPRA NEWS / 36 / 2010 17. EPRA NEWS / 36 / 2010 17.
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
Average score 2008/09
Average score 2009/10
Country (Number of Companies in 2009/10)
Average score
Office/industrial
Retail
18. EPRA NEWS / 36 / 201018. EPRA NEWS / 36 / 2010
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
EPRA NEWS / 36 / 2010 19. EPRA NEWS / 36 / 2010 19.
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
20. EPRA NEWS / 36 / 201020. EPRA NEWS / 36 / 2010
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
EPRA NEWS / 36 / 2010 21. EPRA NEWS / 36 / 2010 21.
>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
22. EPRA NEWS / 36 / 201022. EPRA NEWS / 36 / 2010
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.
EPRA NEWS / 36 / 2010 23. EPRA NEWS / 36 / 2010 23.
24. EPRA NEWS / 36 / 201024. EPRA NEWS / 36 / 2010
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
Dedicated partner In La Défense, the refurbishement of tower CB 21, headquarters of Suez Environnement.
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.
FONCIÈRE DES RÉGIONS
Des
ign
- Pro
duct
ion:
- 9
705.
Pho
to C
redi
t: O.
Oua
dah,
H4
Grou
p.
9720_210x148,5:9720_210x148,5 3/05/10 18:44 Page 1
EPRA NEWS / 36 / 2010 25. EPRA NEWS / 36 / 2010 25.
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
26. EPRA NEWS / 36 / 201026. EPRA NEWS / 36 / 2010
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
EPRA NEWS / 36 / 2010 27. EPRA NEWS / 36 / 2010 27.
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.”
28. EPRA NEWS / 36 / 201028. EPRA NEWS / 36 / 2010
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.
EPRA NEWS / 36 / 2010 29. EPRA NEWS / 36 / 2010 29.
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.
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“There hadn’t been as
‘much blood on the
carpet’ as might have
been expected in the real
estate industry during
the crisis.”
30. EPRA NEWS / 36 / 201030. EPRA NEWS / 36 / 2010
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.
EPRA NEWS / 36 / 2010 31. EPRA NEWS / 36 / 2010 31.
see you in london!EPRA Annual Conference 2011
September 01-02, 2011
32. EPRA NEWS / 36 / 201032. EPRA NEWS / 36 / 2010
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