mipim 2012 - wrap-up keynote address from mark roberts

RREEF Real Estate www.rreef.comConfidential – Not for Public Distribution

RREEF Real Estate

Global Strategic Outlook

Mark G. Roberts, CFA®, Managing Director, Global Head of Research, [email protected], +1-212-454-0974

9 March 2012

MIPIM

Certain information in this research report constitutes forward-looking statements. Due to various risks, uncertainties and assumptions made in our analysis, actual events or results or the actual performance of the markets covered by this research report may differ materially from those described. The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that events will turn out as we have opined herein.

Executive Summary & Global Portfolio ConsiderationsSection I

RREEF Real Estate – Global Strategic Outlook – 9 March 2012 3

Region Descriptions

United States

Economic growth supports higher tenant demand for property.

We recommend a pro-cyclical weighting with an overweight to industrial and office on a combined basis. Maintain a meaningful allocation to retail and apartments to protect against downside risk.

Asia Pacific

Government, household and corporate balance sheets are healthier than other parts of the globe and supports growth.

Vacancy rates across are lower than other regions across the globe and we forecast higher rent growth.

Retail and logistics benefit from rising domestic consumption

Europe

Austerity programs and Euro crisis have resulted in higher unemployment and weaker tenant demand.

Vacancy rates remain relatively stable with minimal rent growth.

Logistics in key logistics hubs provide higher income and protect on downside risk.

Prime shopping centers outperform offices and logistics due to stable, yet low retail sales growth.

Summary of global outlook & real estate implications

Source: RREEF Real Estate. As of February 2012.


Total returns favor Asia, while excess returns favor the U.S.

United States Europe Asia Pacific0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Total Return Spread to Risk-free Return

*Performance represents forecasted average annual total returns from January 1, 2012 through December 31, 2016. There is no guarantee these projections will materialize.Source: RREEF Real Estate. As of February 2012.

Income yield levels higher in the U.S., capital value growth higher in Asia

Regional Total and Excess Return ForecastAverage 2012 to 2016*


Capital value trends globally

Sources: RREEF Real Estate, IPD, data as of December 2010 for Denmark, Finland, Netherlands, Norway, Portugal and Sweden. Data as of 2Q2011 for France. Data as of 3Q2011 for Australia and New Zealand. Data as of December 2011 for UK, USA and Canada. All data represents most recent available.

Values remain well below peak levels and provide intrinsic valueA

ust

ralia

Ca

na

da

De

nm

ark

Fin

lan

d

Fra

nce

Ne

the

rla

nd

s

Ne

w Z

ea

lan

d

No

rwa

y

Po

rtu

ga

l

Sw

ed

en

UK

US

A

-40%

-30%

-20%

-10%

0%

10%

20%

-15%

-9%

-3% -4%

-13%

-8%

-14%-11% -10% -11%

-34% -33%

4%

13%

0% 1%

5%

0% 0%2%

0%

5%

10%

15%

-12%

3%

-3% -3%

-8% -8%

-14%

-9% -10%-7%

-28%

-23%

Peak-to-Trough Decline Increase Since Trough Values Relative to Peak


Spreads to risk free rates vary globally

Spain, 141 bps

Hong Kong, 177 bps

Singapore, 207 bps

France, 347 bps

United Kingdom, 474 bps

Australia, 476 bps

Germany, 507 bps

Japan, 512 bps

Canada, 526 bps

Sweden, 528 bps

United States, 555 bps

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Risk Free Rate Cap RateSpread

Source: Real Capital Analytics .As of February 2012.

Due to low sovereign yields, real estate yields are attractive relative to bonds

Global Risk PremiaCap Rates vs National Risk Free rates


Risk return matrix for IPD returns

10-Year Return vs. Risk of IPD Index Returns*

*Represents average annual returns for past 10 years ending December 31, 2011 versus risk over same period as measured by return volatility.Sources: IPD, RREEF Real Estate.

0 2 4 6 8 10 12 140.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

10.7171943052096

5.18388624999997

11.76577

5.3

6.1

6.9

9.2

6.9

9.9

3.0

3.6

6.6

7.7

9.58.6

8.9

14.0

7.5

6.6

5.8

7.6

5.7

6.2

10.654368

7.160027999999986.717765

North America

Europe

Asia

Risk

Re

turn


U.S. and U.K. have higher betas over the last 10 years

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

10 Year Betas in Relation to the IPD Global Index*

Sources: IPD, RREEF Real Estate. Based on average annual returns for 2001-2010.

BETAS

EconomicsSection II


Source: DB Research. As at January 2012.

While recession risks have risen in Europe, Asia-Pacific continues to lead, followed by the Americas and Europe

Global GDP forecast map – 2012


Debt vs. Demographics: Asia favorable, U.S. has time, Europe addressing risks today

Median age vs Debt/GDP ratio, bubbles represent relative size of debt outstanding

Bubble size is in relation to relative nominal GDP. Sources: IMF, CIA WorldFactbook. As of 2011.

34 35 36 37 38 39 40 41 42 43 44 450

102030405060708090

100110120130140150160

2,560

2,246

2,051

1,407

783

3,310

469

458

414

305

229 204

192

14,582

1,574

Asia Europe North America t

Median Age (years)

De

bt

as

% o

f G

DP

(p

erc

en

t)


-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2012f 2013f 2014fPercent

Projected GDP growth

f=forecast. There is no guarantee the projections or forecasts highlighted will materialize.Source: IHS Global Insight. As of February 2012.


01-2010 04-2010 07-2010 10-2010 01-2011 04-2011 07-2011 10-2011 01-20120

10

20

30

40

50

60

The market is settling and volatility is dropping

Global Equity Indices

VIX (volatility index)

Source: Bloomberg. As of February 2012.

01/2010 04/2010 07/2010 10/2010 01/2011 04/2011 07/2011 10/2011 01/201270

80

90

100

110

120

FTSEuroFirst 300 Index (Europe) MSCI Emerging Markets Index Topix Index (Tokyo) S&P500 (U.S)


Inflation has moved up due to commodities, but will likely settle

1/20

10

2/20

10

3/20

10

4/20

10

5/20

10

6/20

10

7/20

10

8/20

10

9/20

10

10/2

010

11/2

010

12/2

010

1/20

11

2/20

11

3/20

11

4/20

11

5/20

11

6/20

11

7/20

11

8/20

11

9/20

11

10/2

011

11/2

011

12/2

011

1/20

1280

90

100

110

120

130

140

150

160

170

180

Gold Prices Oil Prices Food Prices Metals

Sources: Daily Press, Federal Reserve Bank of St. Louis: FRED, U.S. Department of Agriculture (USDA), and U.S. Bureau of Labor Statistics (BLS).As of February 2012.

U. S. Producer Inflation


Inflation will likely be tame globally during next five years

Austra

lia

China

Japa

n

Singa

pore

South

Kor

ea

Asia-P

acific

Franc

e

Germ

any

Italy

Norway

Spain

Sweden

Unite

d Kin

gdom

Wes

tern

Eur

ope

Unite

d Sta

tes

Wor

ld-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%

Represents forecasted average annual inflation from 2012 to 2016. There is no guarantee the levels if inflation highlighted will materialize.Sources: IHS Global Insight, RREEF Real Estate. As of February 2012.

Average Annual Inflation Rate: 2012 to 2016


Interest rates expected to remain stable

Austra

lia

China

Japa

n

South

Kor

ea

Asia-P

acific

Franc

e

Germ

any

Italy

Norway

Spain

Sweden

Unite

d Kin

gdom

Wes

tern

Eur

ope

Unite

d Sta

tes

Wor

ld0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%

2012f 2016f

*f=forecast. There is no guarantee forecast rates will materialize.Sources: IHS Global Insight, RREEF Real Estate. As of February 2012.

Long term interest rates*


Global transaction volume

2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011$0

$20

$40

$60

$80

$100

$120

$140

United States AsiaPacEMEA Global Average

Source: Real Capital Analytics.As of February 2012.

Global Transaction VolumeU.S. $ in Billions

FundamentalsSection III


f=forecast. There is no guarantee the forecast vacancy rates shown will materialize. *Office properties experienced higher vacancy rates during the 1990’s downturn, but all other properties hit historical highs.Forecasts are of the market and not of a RREEF Real Estate product. Sources: REIS , CBRE-EA (history), RREEF Real Estate (forecast). As of February 2012.

2008 2009 2010 2011Forecast

2012fForecast

2013fForecast

2014fForecast

2015fForecast

2016f

Apartment 6.8% 8.2% 6.7% 5.3% 4.5% 4.1% 4.0% 4.8% 5.4%

Industrial 11.8% 14.3% 14.3% 13.5% 12.3% 11.1% 10.3% 10.2% 10.2%

Office 14.2% 16.6% 16.5% 16.1% 15.5% 14.2% 12.6% 12.0% 12.3%

Retail 8.7% 10.3% 10.7% 10.8% 10.3% 9.6% 9.3% 9.0% 9.1%

Vacancy rate forecasts: 2012 - 2016

National U.S. Vacancy Rate Trends


Sector* 2011 2012 2013 2014 2015 2016

Apartments 5.8% 4.9% 5.9% 4.6% 2.9% 1.8%

Industrial 0.6% 2.6% 5.7% 6.9% 5.8% 4.3%

Office-CBD 1.0% 1.6% 4.9% 8.1% 7.8% 4.4%

Office-Suburb 1.1% 1.2% 3.7% 6.9% 7.4% 4.4%

Retail 0.5% 1.5% 4.0% 3.5% 3.5% 3.0%

NNN Equivalent Growth

Apartments 7.7% 6.2% 7.6% 5.7% 3.3% 1.7%Office CBD 0.3% 1.4% 6.9% 12.0% 11.1% 5.6%

Office Suburb 0.5% 0.7% 4.8% 10.0% 10.6% 5.7%

Forecast Period

2007 2008 2009 2010 2011 2012 2013 2014 2015 201680

90

100

110

120

130

140

150

160

Apartments - NNN IndustrialOffice CBD - NNN Office Suburban - NNNRetail

f=forecast2011 = 100*Industrial and Retail are forecast on a NNN basis (“NNN” – tenant pays for all property taxes, insurance, and building maintenance). Apartments and Office are forecast based on Gross Rents, and these are converted to NNN equivalent , assuming 2% per year expense increases, for consistency in comparison across sectors . Data represents the unweighted average of markets surveyed by RREEF. Past performance is not indicative of future results. There is no guarantee the forecast rates shown will materialize.Source: RREEF Real Estate. As of February 2012.

Rent growth from market peak: office to outperform in the longer term

U.S. average rent growth in sum of markets surveyed, by sector

CBD office will be top performer

Retail will lag

Apartment growth will recedef f f f f


After 2012, rent growth in the office sector should match the retail sector in Europe

European Aggregate Rental Growth Rate (%), 2011 - 2016

f=forecastForecasts are of the market and not of a RREEF Real Estate product. There is no guarantee the forecast rates shown will materialize.Source: RREEF Real Estate. As of February 2012.

2004 2005 2006 2007 2008 2009 2010 2011 2012f 2013f 2014f 2015f 2016f80

85

90

95

100

105

110

115

Logistics Office Shopping Centre


Asian rent growth like to be rapid, but more so in industrial and retail sectors

Asia- Pacific Aggregate Rental Growth Rate (%), 2007 - 2016

f=forecastForecasts are of the market and not of a RREEF Real Estate product. There is no guarantee the forecast rates shown will materialize.Source: RREEF Real Estate. As of February 2012.

2007 2008 2009 2010 2011 2012f 2013f 2014f 2015f 2016f 85

90

95

100

105

110

115

120

125

130

Office Retail Industrial


Global office return metrics

f=forecastForecasts are of the market and not of a RREEF Real Estate product. There is no guarantee the forecast shown will materialize.Source: RREEF Real Estate. As of February 2012.

-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0% U.S. Europe Asia

Average Office NOI growth 2012 – 2016f

4Q

11

Off

ice

Yie

ld P

rem

ium

Beijing, Shanghai



Global retail return metrics

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%


Average Retail NOI growth 2012 – 2016f

4Q11

Ret

ail

Yie

ld P

rem

ium

Beijing

Toyko


-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%


Average Industrial NOI growth 2012 – 2016f

4Q11

In

du

stri

al Y

ield

Pre

miu

m

Global industrial return metrics


Beijing, Shanghai