Colonial First State Global Asset Management

Whats next for the Asia Pacific

REITs?
An overview of REITs & AUS-REITs
Dr Anthony De Francesco
Head of Research
Colonial First State
28th September 2006

Outline
AUS-REIT market
Dr Anthony De Francesco, Colonial First State

J-REITs
Mr Yuichi Hiromoto, Japan Retail Fund Investment Corporation

K-REITs
Mr Brian Chinappi, Deutsche Asset Management (HK) Ltd

HK-REITs
Mr Jeremy Stewardson, Eagle Asset Management (CP) Ltd

S-REITs
Mr Chris Reily, Henderson Global Investors
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Evolution of REIT:

- increasing momentum towards REITs

Actual

0.05

Australia
(1971)

Netherlands
(1969)
US (1960)

Belgium
(1995)
New Zealand
(1982)

Canada
(1993)

Forecast

Taiw an/HK
UK
/Malaysia/Thailand (2007E)
Singapore
(2005)
Germany
/Korea
France
(2008E)
(2002)
(2003)
Japan
China
(2001)
(2010E)
Turkey
(1998)

0
1956
Source: CFS Research

1962

1968

1974

1980
1986
Time Line

1992

1998

2004

2010

Listed market valued at about US$500 Bn

- represents about 16% of investment grade R.E
Market Capitalisation

Number of REITs

Composition of the Existing Global REIT Market

Composition of the Existing Global REIT Market

market cap US$502Bn as at June 2006

no of REITs (303) as at June 2006

A US
13.7% JP N
6.0% FRA

US
67.9%
THA
0.1%

3.3%
NTL
CA N
2.8%
2.0%
HK
0.9% B EL
SGP 0.7%
NZ
1.5%
TUR 0.3%
0.2%
KOR
TA I
M LY
0.2%
0.2%
0.1%

Source: S&P/Citigroup Global Equity Indices, UBS, IRESS, HSBC, NAREIT and CFS Research.

JP N
11.9%
A US
10.6%

FRA NTL CA N
3.3% 2.3% 6.6% HK
1.3% B EL
2.3%

US
45.9%

THA
0.7%

SGP
3.3% NZ
3.3%
TUR
3.3%
TA I
KOR 1.3%
2.6%
M LY
1.3%

Source: S&P/Citigroup Global Equity Indices, UBS, IRESS, HSBC, NAREIT and CFS Research.

As at June 2006 Asian REITs had a global share of 9% in terms of market

cap and 22% in terms of number of trusts.

Proliferation of REITs in recent years

- the growing presence of Asian REITs
Global REIT market capitalisation
monthly data ending June 2006
500

9.0%
US
A US
CA N
TUR
SGP
TA I
KOR
THA

US$ billion

400
300
200

NTL
NZ
B EL
JP N
FRA
HK
M LY
Ratio o f A sia

7.5%
6.0%
4.5%
3.0%

100

1.5%

0.0%

Jul-89

Jul-91

Jul-93

Jul-95

Jul-97

Jul-99

Jul-01

Jul-03

Jul-05

Source: S&P/Citigroup, Colliers International and CFS Research.

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AUS REIT market experienced exceptional

growth, although now moderating
Australian REIT market
Bi-annual data ending June 2006
100

45

Market Cap (rhs)

40

Number of trusts (lhs)

35

Consolidation
phase

80
Takeovers/
mergers

IPO Boom

30
25
20

90

70
60

IPO / Organic
growth

50
40

15

30

10

20

10

Dec-86

Dec-89

Dec-92

Dec-95

Dec-98

Dec-01

A$ Billion

No. of indexed listed trusts

50

Dec-04

Source: UBS and CFS Research.

Growth expected to moderate substantially with LPT managers transferring

listed assets into new wholesale funds.

Pricing for property core sectors firming

- underpinned by investor demand & flow of funds

Property sector yields
as at year end, average across sub-sectors
12%

Jun-06

11%
10%
9%
8%
7%

CB D Office
Retail
Industrial

6%
5%
1984

1987

1990

1993

1996

1999

Yield compression cascading to non-core property sectors.

2002

2005

AUS REITs generally offer an attractive

yield premium to bonds
AUS REIT yield versus bond rate and bill rate
Monthly observations ending August 2006
10%
Distributio n yield
10 year T.bo nd rate
90 day bill rate

9%
8%
7%
5%
4%
Sep-95

M ar-97

Sep-98

M ar-00

Sep-01

M ar-03

Sep-04

M ar-06

Source: UBS, IRESS, RBA and CFS Research.

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Expanded product offering

- movement along the risk-reward space

Risk-reward space

Movement up along the

risk space with:

opportunistic

increasing exposure to
offshore real estate
markets

expected return

value-added

take-on of higher
gearing levels

enhanced
core
2

exposure to real
estate (re)
development

risk

Source: CFS Research.

Increasing exposure
to non-core sectors

Key features of the Australian REIT market

Market:
mature market - interplay between listed and unlisted markets
exposure to core sectors - retail (55%) and office (25%)
Managers:
operated by quality internationally rated managers
Return performance
relatively high income component and stable income returns
lower volatility of total returns to general equities
Highly transparent and efficient
due to research and legislation
high level of liquidity
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Disclaimer
This presentation is given by a representative of Colonial First State Investments Limited AFS Licence
232468, ABN 98 002 348 352 (Colonial First State). The presenter does not receive specific payments or
commissions for any advice given in this presentation. The presenter, other employees and directors of
Colonial First State receive salaries, bonuses and other benefits from it. Colonial First State receives fees for
investments in its products. For further detail please read our Financial Services Guide (FSG) available at
colonialfirststate.com.au.

This presentation does not take into account your individual objectives, financial situation or needs. You
should assess whether the information is appropriate for you and consider talking to a financial adviser
before making an investment decision.

The information is taken from sources which are believed to be accurate but Colonial First State accepts no
liability of any kind to any person who relies on the information contained in the presentation.

This presentation cannot be used or copied in whole or part without our express written consent.

Colonial First State Investments Limited 2006.

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