presentation for: atchison global property forum, 2018 · across australia heitman’saustralian...

Presentation for:

Atchison Global Property Forum, 2018November, 2018

Heitman is a Real Estate Specialist

50+ years Investing on behalf of clients with an exclusive focus on real estate

A$60 billion managed across three complementary business units

As of 30 September 2018

2Atchison Global Property Forum, 2018

Private Public

Equity Debt Equity

Private

Equity

A$458

Public

Securities

A$310

AUSTRALIAN HOLDINGS BY BUSINESS UNIT

$768 million currently invested across Australia

Heitman’sAustralian Presence

Currently manage A$4.3 billion on behalf of 11 Australian mandates

Includes gross AUM and gross unfunded commitments as of 30 September 2018


Melbourne A$171

Sydney A$202

BrisbaneA$85

Perth

Tasmania

Office

Self-Storage

Industrial

Retail

Student Housing

Heitman Office

Sold /Current

AUSTRALIAN PRIVATE EQUITY INVESTMENTS

Global REITs

A$1,454

Value-Added

Private Equity

Funds

A$1,289

Core

Private Equity

Fund

A$857

Core Plus Private

Debt Fund

A$693

CURRENT AUSTRALIA DOMICILED INVESTMENT TYPES

Agenda

Global Investment Themes

Opportunities and Risks

Relative Value


Global Investment Themes

5

London

Global Interest Rates Are Diverging

6

10Y TREASURY YIELD INDEX, Q3 2008 = 100

Source: Oxford Economics, Heitman Research.

-20

0

20

40

60

80

100

120

140

160

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F

Yie

ld In

de

x (

Q3

20

08

= 1

00

)

US Australia Hong Kong Japan France Germany UK

GFC

DIV

ER

GE

NC

E

Atchison Global Property Forum, 2018

Globe Still Growing But Pace is Slowing

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

REAL GDP GROWTH BY REGION 2011 – 2019F

Asia Pacific

World

North America

Europe

Forecast


Source: Oxford Economics, Heitman Research

Cross Border Flows Remain Buoyant


Source: Real Capital Analytics; Heitman Research

$128.5BNorth

America

$117.1BEurope

$186.0BAsia-Pacific

ORIGIN REGION REGION INVESTED

CROSS BORDER CAPITAL INVESTED IN REAL ESTATE FOUR-QUARTER TOTAL ENDING SEPT 2018 (IN BILLIONS)

$83.6BUnited States

$196.4BEurope

$151.6BAsia-Pacific

Record Levels of Deployable Capital Will Keep Downward Pressure on Yields

$26

$36

$55

$70

$83 $85

$93

$79

$92

$79

$113

$102

$134

$145$151

$0

$20

$40

$60

$80

$100

$120

$140

$160

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Source: Preqin, Heitman Research

CLOSED-END FUND CAPITAL AVAILABLE TO INVEST IN US CRE2003-2017

(in Billions)

Economy at peak growth, reflecting enormous fiscal stimulus

US consumers and confident business sector driving expansion

Rate normalization underway amid low unemployment and benign inflation

Recession risk rises two years out. Focus on diversifying economic exposure

Yields at historical lows, but some divergence occurring

Market conditions remain generally healthy but new supply weighing on rents

Market Conditions - North America


INVESTMENT OUTLOOK - NORTH AMERICA

Macro Economy

− The economic recovery should continue and likely receive a boost

from tax law and spending changes in the US

− Canada economic growth continues to be strong

− Though, the US-China trade war could dampen sentiment

Capital Markets

− REIT equity and debt markets are open with strong demand from

investors

− There remains strong demand for REIT debt and several companies

have successfully issued 30-year bonds

− Public-to-public and public-to-private M&A activity has increased

Real Estate Markets

− Property fundamentals remain strong for this late in the cycle as

rent growth remains above trend growth as new supply is

reasonable

− REIT transaction activity has slowed in most sectors, though

1.25% 0.29%

-4.25%

0.54% 0.58%

-1.79%

-5%

0%

5%

US Canada FTSE EPRA/NAREIT

Developed Index

5-yr average prem/(disc) to NAV

Investment Themes & Outlook


PREMIUM/DISCOUNT TO NAV BY REGION –FTSE EPRA/NAREIT DEVELOPED INDEX

-2

-1

0

1

2

3

4

5

6

7

8

Se

p-0

7

Ma

r-0

8

Se

p-0

8

Ma

r-0

9

Se

p-0

9

Ma

r-10

Se

p-1

0

Ma

r-11

Se

p-1

1

Ma

r-12

Se

p-1

2

Ma

r-13

Se

p-1

3

Ma

r-14

Se

p-1

4

Ma

r-15

Se

p-1

5

Ma

r-16

Se

p-1

6

Ma

r-17

Se

p-1

7

Ma

r-18

Se

p-1

8

Spread L-T Avg.

As of Sep tember 30, 2018

Sources: Heitman Research, FTSE EPRA/NAREIT

FTSE EPRA/NAREIT NORTH AMERICADIVIDEND YIELD SPREAD TO BONDS

Strong economic growth, but some moderation

Expect volatility due to down-to-the-wire Brexit negotiations

Italy is in uncharted waters, German coalition showing strains, trade war

Investment activity down, but mostly due to lack of product for sale

Yield compression slowing, flat in lowest-yielding markets

Generally benign occupier market conditions, low supply

Market Conditions - Europe


-2

-1

0

1

2

3

4

5

Se

p-0

7

Ma

r-0

8

Se

p-0

8

Ma

r-0

9

Se

p-0

9

Ma

r-10

Se

p-1

0

Ma

r-11

Se

p-1

1

Ma

r-12

Se

p-1

2

Ma

r-13

Se

p-1

3

Ma

r-14

Se

p-1

4

Ma

r-15

Se

p-1

5

Ma

r-16

Se

p-1

6

Ma

r-17

Se

p-1

7

Ma

r-18

Se

p-1

8

Spread L-T Avg.

-5.24%

-10.25%

-4.25%

2.61%

-2.82%-1.79%

-15%

-10%

-5%

0%

5%

Continental Europe UK FTSE EPRA/NAREIT

Developed Index


INVESTMENT OUTLOOK - EUROPE

Macro Economy− Growth in Continental Europe to continue as the lagged

effects of QE support the economy

− UK consumer data is expected to remain soft as Brexit bites

into sentiment and inflation remains relatively high

Capital Markets− Policy issues surrounding the EU, such as Brexit, will continue

to cause near-term uncertainty

− Accommodative central bank policies expected to continue

to support capital markets in the short-term

Real Estate Markets− There is a shortage of new supply in most asset classes and

countries

− Selected asset classes (residential, offices, logistics) and

prime locations are expected to continue to outperform

− M&A and consolidation to be a continued theme



PREMIUM/DISCOUNT TO NAV BY REGION –FTSE EPRA/NAREIT DEVELOPED INDEX



FTSE EPRA/NAREIT EUROPEDIVIDEND YIELD SPREAD TO BONDS

Economic growth holding up, but headwinds emerging

Monetary policy is becoming less accommodative

US-China trade war rattling nerves

EM equity markets as well as local currencies have been affected

Positive business performance fueling occupier demand

Capital values holding, though cap rate compression decelerating

Government infrastructure helping to boost local commercial markets

Market Conditions - Asia-Pacific


3.91%

-27.29%

-10.55%

-4.25%

2.30%

-22.76%

5.58%

-1.79%

-30%

-20%

-10%

0%

10%

20%

Australia/New

Zealand

Asia Ex-Japan Japan FTSE

EPRA/NAREIT

Developed Index


INVESTMENT OUTLOOK - ASIA-PACIFIC

Macro Economy

− Japan, Hong Kong, and Singapore are growing above trend

as global growth becomes more synchronized

− However, domestic conditions in Australia remain sluggish

Capital Markets

− Rising rates in the US are a concern, possibly leading to

tighter credit conditions in most markets

− Sentiment remains cautiously positive

Real Estate Markets

− Office markets appear buoyant throughout the region with

rent growth now evident in all markets

− Except for Hong Kong, retail conditions remain challenging

− The logistics sector is benefiting from strong ongoing

demand from e-commerce growth



PREMIUM/(DISCOUNT) TO NAV BY REGION –FTSE EPRA/NAREIT DEVELOPED INDEX

0

1

2

3

4

5

6

7

Se

p-0

7

Ma

r-0

8

Se

p-0

8

Ma

r-0

9

Se

p-0

9

Ma

r-10

Se

p-1

0

Ma

r-11

Se

p-1

1

Ma

r-12

Se

p-1

2

Ma

r-13

Se

p-1

3

Ma

r-14

Se

p-1

4

Ma

r-15

Se

p-1

5

Ma

r-16

Se

p-1

6

Ma

r-17

Se

p-1

7

Ma

r-18

Se

p-1

8

Spread L-T Avg



FTSE EPRA/NAREIT ASIA-PACIFICDIVIDEND YIELD SPREAD TO BONDS

Opportunities and Risks

16

Hong Kong

This Cycle Characterised byHigh Degree of Secular/Structural Change

17

Retail

Living Sectors

Office

Industrial

online threat

3D printing

supply chain

reconfig

co-working

AI &automation

shifting retailer formats

click & collect

experienceopen-plan

urbanisation

growth of key cities

e-commerce growth

hot-desking

student mobility

ageing population

smaller householdslast-mile

“Generation Rent”


Many Global Markets Still Offering Favourable Spreads

Source: MSCI, Oxford Economics, Heitman ResearchLatest MSCI cap rate data as of end-2017.

18

CAP RATE SPREADS, MSCI OFFICE INCOME RETURNS VS LOCAL 10Y TREASURIESAS OF Q2 2018

0

50

100

150

200

250

300

350

400

450

Hong Kong China United States Singapore United Kingdom Australia France Germany Japan

Ba

sis

Po

ints

Average (Since 2008) 2008 Q2 2018


Industrial Supply and Demand Approaching Parity But Well Above Previous Peaks

9.9%

4.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Completions Net Absorption Vacancy Rate

INDUSTRIAL COMPLETIONS, NET ABSORPTION, AND VACANCYUS 2001-2018 (YEARS ENDING Q2)

Source: CoStar; Heitman Research

sf x1,000 Vacancy Rate (%)


Evolution in Shopping Patterns Has Widened Gap Between Winners and Losers

20

6.4%

2.3%

46.0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Overall Vacancy (L)

Centers with less than 20% vacancy (L)

Centers with over 20% vacancy (R)

RETAIL VACANCY RATETOP 50 MARKETS 2006-2017 (Q4)

Source: CoStar; Heitman Research


Relative Value

Chicago, Unites States of America

21

REITs vs. S&P 500 and Rate Changes


Source: NAREIT® analysis. NAREIT All Equity REIT and S&P 500 total returns indices via FactSet, GDP and 10 Year Treasury Constant Maturity Rate s via FRED. Quarterly intervals of 12 month rolling returns, rate changes and GDP growth.

-60

-40

-20

0

20

40

60

-2.5 -2 -1.5 -1 -0.5 0 0.5 1 1.5 2 2.5

RE

IT m

inu

s S

&P

50

0 R

etu

rn (

%)

Change in Interest Rates

REITS VERSUS S&P 500 AND RATE CHANGES: 1992-2016COMPARING 12-MONTH ALL EQUITY REIT AND S&P TOTAL RETURN AND CHANGE IN 10-YEAR TREASURY

Listed Real Estate Exposure Appears Attractive

23

Source: ODCE; Green Street; and Heitman

Buy REITs

Sell REITs

Allocation

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

-100.0%

-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

Ca

p R

ate

Sp

rea

d

CAP RATE SPREADS VS. 3-YEAR FORWARD RETURNS

3-Year Forward Spread - Public vs. Private Cap Rate Spread - 4Q Avg.


Discounts Appear in Most Markets

PREMIUM/(DISCOUNT) TO NAV BY REGION – FTSE EPRA/NAREIT DEVELOPED INDEX (AS OF 9/30/18)

24



3.91%

-27.29%

-10.55%

1.25% 0.29%

-5.24%

-10.25%

-4.25%

2.30%

-22.76%

5.58%

0.54% 0.58%

2.61%

-2.82%

-1.79%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Australia/NewZealand

Asia Ex-Japan Japan US Canada Continental Europe UK FTSE EPRA/NAREITDeveloped Index


M&A Activity Highlight a Floor in Pricing

25

Source: Green Street and Heitman


Announce Date Target Acquiror C ountry Prem to NAV

1/9/2018 Pure Industrial Blackstone Group Canada 27.0%

1/14/2018 Vastned Retail Belgium Vastned Belgium 8.6%

2/15/2018 Canadian REIT Choice Properties Canada 10.0%

2/17/2018 Brack Capital Partners Adler Real Estate Israel 15.5%

4/1/2018 Victoria Park Starwood Capital Sweden 10.7%

4/5/2018 Hispania Blackstone Spain 12.5%

4/17/2018 CA Immobilien Starwood Capital Austria (8.0%)

4/27/2018 ProLogis DCT Industrial Trust US 24.5%

5/3/2018 Victoria Park Vonovia Sweden 22.3%

5/18/2018 Viva Industrial Trust ESR REIT Singapore 26.0%

5/28/2018 Investa Office Fund OMERS Australia 2.4%

6/13/2018 Gateway Lifestyle Hometown Australia 8.2%

6/25/2018 Greystar EDR US 5.1%

9/6/2018 Pebblebrook Hotel Trust LaSalle Hotel Properties US 22.1%

9/13/2018 Centuria Industrial Reit PropertyLink Australia 16.3%

9/21/2018 Propertylink Group ESR Redwood Australia 10.6%

9/26/2018 Spring Real Estate Investmen PAG Hong Kong (20.1%)

10/8/2018 Asia Pacific Data Centre Next DC Australia 0.0%

10/8/2018 Australian Unity Office Fund Starwood Australia 10.5%

10/15/2018 Ntt Urban Development Corp NTT Japan (25.8%)

AVERAGE 8.9%

IMPORTANT NOTICE AND DISCLAIMER

− This confidential presentation and the information set out herein (the “Presentation”) is summary in nature only and is qualified in its entirety by the information set out in the confidential private placement memorandum or other formal disclosure document (the “Disclosure Document”) relating to the potential opportunity described herein (the “Opportunity”).

− This Presentation has been provided to the recipient by Heitman or an affiliate as sponsor (the “Sponsor”) and is only intended to assist sophisticated professional investors in deciding whether they wish to consider reviewing the Disclosure Document. This Presentation is meant for use in one-on-one presentations with sophisticated professional investors. However, the contents of this Presentation are not to be construed as investment, legal or tax advice and do not consider the particular circumstances specific to any individual recipient to whom this Presentation has been delivered. The recipient should obtain advice from the appropriate qualified experts. Further, the Sponsor is not acting in the capacity of a fiduciary of any recipient of this Presentation.

− This Presentation is furnished on a strictly confidential basis to sophisticated professional investors. None of the information contained herein may be reproduced or passed to any person or used for any purpose other than for the purpose of considering the Opportunity. No approach of any kind may be made by any officer, employee or adviser of the recipient of this Presentation to any officer, employee, customer or supplier of the Sponsor without the prior written approval of the Sponsor. Notwithstanding the foregoing, recipients (and each employee, agent or representative of any recipient) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of an investment described herein and all materials of any kind (including opinions or other tax analyses) that are provided that relate to such tax treatment or tax structure, except to the extent maintaining such confidentiality is necessary to comply with any applicable securities laws. The foregoing language is not intended to waive any confidentiality obligations otherwise applicable, except with respect to the information and materials specifically referenced in the preceding sentence. By accepting delivery of this Presentation, each prospective investor agrees to the foregoing.

− Any opinions, forecasts, projections or other statements, other than statements of historical fact, that are made in this Presentation are forward-looking statements. Although the Sponsor believes that the expectations reflected in such forward-looking statements are reasonable, they do involve a number of assumptions, risks and uncertainties. Accordingly, neither the Sponsor nor any of its affiliates makes any express or implied representation or warranty, and no responsibility is accepted with respect to the adequacy, accuracy, completeness or reasonableness of the facts, opinions, estimates, forecasts, or other information set out in this Presentation or any further information, written or oral notice, or other document at any time supplied in connection with this Presentation, and nothing contained herein or in the Disclosure Document shall be relied upon as a promise or representation regarding any future events or performance. Past returns from investment in real estate (or real estate related investments) are no guarantee that the same (or enhanced) returns from real estate (or real estate related investments) will be achieved in the future.

− The recipient’s attention is specifically drawn to the risk factors identified by the Sponsor relating to the Opportunity as set out in the Disclosure Document or any other documents provided to the recipient. The Sponsor also advises that any potential investment opportunities described herein are speculative, involve a degree of risk, and there is no guarantee of performance or a return of any capital with respect to any investment.

− By accepting delivery of this Presentation, the recipient accepts the terms of this notice and agrees, upon request, to return all materials received by the recipient from the Sponsor, including this Presentation without retaining any copies thereof.

Notice and Disclaimer

Appendix: Performance Notes & Disclaimer 26

presentation for: atchison global property forum, 2018 · across australia heitman’saustralian...

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