Méka Brunel,prodapp.epra.com/media/EPRA_Industry_Newsletter_Issue_62...Antwerp Management School...

Industry Newsletter

M A R C H 2 0 1 8I S S U E 62

ALLIANZ REAL ESTATE – NAVIGATING THE GLOBAL MARKET

Page 6

BUILDING GREEN BONDS

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ITALY GIVES REITS A BOOST

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Méka Brunel, refocusing Gecina

A U S T R A L I AResolution CapitalWestfield Western Sydney University

A U S T R I ABUWOG GroupCA ImmoConwert Immobilien InvestIMMOFINANZS IMMO

B E L G I U MAedificaAG Real EstateAntwerp Management SchoolAscencioBefimmoCare Property InvestCofinimmoDeGroof PetercamIntervest Offices & WarehousesLeasinvest Real EstateMontea*Retail EstatesSolvay Brussels School WDPXior

B R I T I S H V I R G I N I S L A N D SEastern Property Holdings

C A N A D ACanada Pension Plan Investment Board*Presima

F I N L A N DCityconKTI RAKLITechnopolisUB Real Asset Management

F R A N C EAffineANF ImmobilierAXA Real Estate Investment Managers BNP ParibasCarmila*CeGeREALEurosicFONCIÈRE ATLAND*Foncière des RégionsFoncière INEA*FreyGecinaIcade

IEIFIvanhoé Cambridge Europe KlépierreMazars GroupMercialysSociété de la Tour EiffelSociété Foncière LyonnaiseSociété GénéraleUnibail-RodamcoUniversité Paris-Dauphine

G E R M A N YADLER Real EstateAllianz Real Estatealstria Office REITAroundtown PropertyDEMIREDeutsche EuroShopDeutsche Konsum REITDeutsche WohnenDIC AssetHamborner REITHAWK UniversityHeitmanIREBS LEG ImmobilienMEAG Munich ERGO AssetManagementPricewaterhouseCoopersReal Estate Management InstituteSavills Fund ManagementTAG ImmobilienTLG IMMOBILIENVIBVictoriaPartnersVonovia

G R E E C EGrivalia Properties REICNBG Pangaea REIC

H O N G K O N GUniversity of Hong Kong

I R E L A N DGreen REITHibernia REITIrish Residential Properties REIT

I S R A E LAzrieli GroupGazit Globe

I TA LYAedesBeni StabiliChiomentiCOIMA RESIGD SIIQ

Nova Re SIIQ*

J A PA NNN Investment Partners

L U X E M B O U R GADO PropertiesBaker McKenzie*Dream Global REITGrand City Properties

N E T H E R L A N D SABN AMROAmsterdam School of Real EstateAPG Asset ManagementASRAtrium European Real EstateBarings BouwinvestCB Richard EllisDeloitte Financial Advisory ServicesEuroCommercial PropertiesING Bank Real Estate FinanceKempen & CoLaSalle Investment ManagementLoyens & LoeffMN ServicesNSIPGGMRedevco Europe ServicesTilburg UniversityUniversity of MaastrichtVastned RetailWereldhaveYardi

N O R W AYEntraNorwegian Property

S I N G A P O R ENational University of Singapore

S O U T H A F R I C AGrowthpoint Properties

S PA I NAlbirana Properties SOCIMIAxiare PatrimonioGmp PropertyHispania Activos InmobiliariosInmobiliaria ColonialLar EspañaMerlin PropertiesURO HoldingsVBARE Iberian Properties

S W E D E NAtrium LjungbergCastellumDios FastigheterKungsledenPandoxSEBWihlborgs

S W I T Z E R L A N DHIAG Immobilien

Mobimo HoldingsPSP Swiss PropertySwiss Prime SiteUniversity of GenevaZüblin Immobilien

U A EAbu Dhabi Investment AuthorityEmirates REIT

U N I T E D K I N G D O MAEW EuropeAMP CapitalAssuraAviva InvestorsBank of America Merrill LynchBarclays BankBarclays CapitalBDOBig Yellow GroupBlackrock Asset ManagementBMO Global Asset Management (EMEA)British LandCapital & Counties PropertiesCBRE Clarion SecuritiesCitigroup Global Markets LimitedCivitas Social Housing*CMSCredit Suisse SecuritiesCustodian REITDerwent LondonDeutsche Alternative Asset Management (UK)Deutsche BankEdiston Property InvestmentsEmpiric Student PropertyEP&T GlobalEYGIC Real EstateGlobalworthGoldman Sachs International GraingerGreat Portland EstatesGreen Street AdvisorsHammersonHansteen HoldingHelical BarHenderson Global InvestorsImpact Healthcare REITintuInvescoJefferiesJLLJ.P. MorganKennedy Wilson Europe Real EstateKPMGLandsecLondonMetric PropertyMedicX FundMoody’s Investors ServiceMorgan StanleyNewRiver REITNottingham Trent UniversityPeel Hunt*Phoenix Spree Deutschland

Picton Property Income LtdPremier Asset ManagementPrimary Health PropertiesPrincipal Global InvestorsRedefine InternationalSafestoreSchrodersSEGROShaftesburySirius FacilitiesStandard Life InvestmentStenpropTarget Healthcare REITTritax Big Box REITU+I GroupUBSUnite GroupUniversity of AberdeenUniversity of CambridgeUniversity of Reading, CRERUrban & CivicWorkspace Group

U S ACenterSquareCohen & Steers Capital ManagementDickinson CollegeDuff & PhelpsEII Capital ManagementFidelity Management & ResearchNeuberger BermanNorthstar Realty EuropeReal FoundationsSNL FinancialUniversity of CincinnatiUniversity of WashingtonVirginia Tech UniversityZell-Lurie RE Center at Wharton

B P R L I C E N C E H O L D E R SA&J Mucklow GroupAllreal Holding*Baltic Horizon*CLS HoldingsCPI Property GroupHarworth GroupHome Invest Belgium*Huhtanen Capital*Inland HomesInvestors House*MAS Real Estate*McKay SecuritiesMRMOrava Residential REITPalace CapitalQrf City RetailRegional REITSecure Income REITSt. Modwen PropertiesSummit Germany*Terreis* WELCOME TO OUR NEWEST MEMBERS

Members list As of March 2018

Working with and for our members Real estate plays a critical role in all aspects of our everyday lives. Property companies serve businesses and the society by actively developing, managing, maintaining and improving

the built environment; where we all live, work, shop and relax. They also play a crucial part in providing retirement security to millions of people, by offering pension funds stable and highly competitive assets to invest in.

EPRA’s mission is to promote, develop and represent the European public real estate sector. We achieve this through

the provision of better information to investors and stakeholders, active involvement in the public and political debate, improvement of the general operating environment, promotion of best practices and the cohesion and strengthening of the industry.

Find out more about our activities on www.epra.com

Editor & Production ManagerKasia Jasik-Caínzos

Article CreditsAnna CreedSteve HaysSimon PackardSotiris TsolacosWillem van HasseltYi Wu

Design & LayoutZN Consulting | znconsulting.com

Comments & [email protected]

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In this issueMéka Brunel, refocusing GecinaAllianz Real Estate – navigating the global marketBuilding green bondsCofinimmo – green bonds in practiceEPRA Conference 2018 – join the debate2018 outlooks for the UK and Dutch marketsItaly gives REITs a boost

Listed real estate – a large contributor to the EU economy

Greek REITs step up their investments

EPRA’s partners in Asia

Share repurchases or special dividends?

Index focus

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18

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24

14

27

29

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I N T H I S I S S U E

In this first EPRA Industry Newslet-ter of 2018, I would like to look back to some of the highlights of last year. I think most people would agree, 2017 was marked by M&As and IPOs. To-wards the end of the year we saw some sector-defining mergers for 2018, a clear sign of the strength of the sector even in an era of rising interest rates.

The Developed Europe Index provided a 13.4% total return over the year and a dividend yield of 3.4%, reinforcing our argument that listed real estate provides a strong performance to long-term investors.

From EPRA’s point of view, we also had a record-breaking year for mem-bership, with the total reaching 250

and 94.3% of the Index. On top of that, we surpassed our 2018 targets for the number of companies complying with the EPRA financial Best Practices Rec-ommendations (BPR). On the sustain-ability side, after a very strong uptake of our sustainability BPR, we have now broadened this to include social and corporate governance indicators.

We continue to meet with investors across the globe, with a specific focus on generalists where we preach the benefits of our sector with the objec-tive that investors increase their asset allocation to European listed real es-tate.

The importance of our sector will fur-ther rise thanks to the recent decisions

by the largest index providers to treat listed real estate as a separate asset class in its own right.

Finally, Solvency II is a matter of great importance to our members and espe-cially the insurance companies across Europe. We have set up a working group of large insurers and property companies and met with the EU reg-ulator twice in 2017 to reinforce the message that listed real estate should be treated in the same way as direct property.

As EPRA’s new CEO for over a year now, I am delighted with the direction we are heading in and the vision we have for 2020, and I look forward to leading EPRA through this year. •

Update fromDominique Moerenhout

I S S U E 6 2 — M A R C H 2 0 1 8

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Five months after her appointment in January 2017, Brunel announced a EUR 6.2 billion friendly takeover of publicly traded Paris office landlord Eurosic. The deal, which effectively completed with Eurosic’s delisting in October, elevated Gecina to fourth place in a ranking of Europe’s largest REITs, with EUR 19.5 billion of assets.

To finance the deal, Gecina turned to the market to raise a total of EUR 3.2 billion from the sale of bonds and shares of EUR 2.2 billion and EUR 1 billion respectively. Brunel also began a EUR 1.2 billion to EUR 2.2 billion dis-posal programme that will serve, she said, to narrow the company’s focus onto its core businesses in the Greater Paris region: offices in the main busi-ness hubs and a smaller residential portfolio that includes student hous-ing. Gecina announced in early Janu-ary that it was already almost halfway to meeting the end of 2018 minimum disposal target and was achieving sale prices at an average 13% premium to

M É K A B R U N E L , R E F O C U S I N G G E C I N A

Gecina CEO Méka Brunel sees the ‘end of the beginning’ for the refocused company after takeover of EurosicMéka Brunel quotes Winston Churchill to describe her hyperactive first year as CEO of French real estate investment trust (REIT) Gecina: “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

IBOX, PARIS 12TH

Office project of 19,000 m², part of the Gare de Lyon neighbourhood PHOTO CREDIT: JEAN THIRIET

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E P R A I N D U S T R Y N E W S L E T T E R


their most recent appraisal value.

“The Eurosic deal made perfect sense for us since we wanted to focus on the centres of Paris’s main business areas,” she explained. “It allowed us to create a complementary portfolio of two parts – a network of living and work spaces – that we could leverage to manage these areas.”

The disposal programme involves Eu-rosic assets as diverse as hotels, lo-gistics warehouses and properties in Italy. She said that other assets ear-marked for sale are office buildings of Gecina and Eurosic with limited scope for further asset management im-provement, or which are in secondary locations.

Brunel’s ambitions for Gecina draw on the potential she saw in the com-pany as the representative of its larg-est shareholder. As Head of European Real Estate Investments for Ivanhoé Cambridge, the real estate investment arm of Canada’s Caisse de Dépôt et de Placement du Québec, Brunel had joined Gecina’s Board in 2014 having built a 23% stake in the company after former controlling shareholder Metro-vacesa exited.

Her arrival at Gecina, after fellow Board members led by Chairman Ber-nard Michel persuaded her to leave Ivanhoé Cambridge and take the CEO role, also marks a homecoming of sorts: she had worked at the company as an executive earlier in her career.

“The Board felt that, as a listed com-pany, Gecina needed more vision and a global view of the business from its CEO,” she said. “In a changing world, you cannot just say ‘I own the most beautiful real estate.’ The digital age is bringing new ways of working and our business is going through massive disruption. The Board felt that Gecina needed a different kind of manage-ment to face up to these challenges.”

To that end, she has launched a series of new initiatives to develop Gecina’s credentials in sustainability, corporate governance, social responsibility and digital connectivity, which she said are

“what shape her own approach to real estate.”

“These non-financial key performance indicators aren’t gadgets; they’re signs of the depth of our commitment and our globalised view of the real es-tate business. They provide coherence to the way we operate at Gecina,” she said. “Today, these are the daily con-cerns of CEOs, whereas in the past they were a matter for the respective corporate officers.”

Brunel is also overhauling the com-pany’s organisation to enable it to re-spond better to the rapidly changing needs of occupiers and residents in its buildings. This includes “explod-ing the silos” of the corporate teams, hiring new senior executives with sector-specific expertise, leveraging technology and being more open with occupiers about the company’s long-term goals for its properties.

Shortly after her appointment, Brunel began looking at why the company’s flexible office space offer, called Sec-ondesk, was underperforming. She found the company had established Secondesk mainly to lease small units of vacant space in its office buildings. It was an approach that “didn’t work because it put the landlords’ needs ahead of the tenants’ and didn’t take into account new patterns of office use,” she said.

Relaunched in January 2018, Gecina is rolling out Secondesk in most of its new developments to give tenants access to extra space that is differ-

PENTHEMONT, PARIS 7TH

Office project of 9,500 m² undergoing redevelopment

55 RUE D’AMSTERDAM, PARIS 8TH

Office building of 12,350 m² in Paris 8th, close to the Gare Saint Lazare

PHOTO CREDIT: THIERRY LEWENBERG STURM

I S S U E 6 2 — M A R C H 2 0 1 8

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ent from their own office environ-ment, with comfortable open areas and food stalls for informal meetings. She doesn’t intend Gecina to offer co-working space for start-ups with “lipstick and gadgets like table tennis or table football,” she said.

“As start-ups grow and become more corporate, they will gravitate to more traditional office space, so demand isn’t going to dry up,” she said. “Sec-ondesk will be part of our offer: the best locations in business areas and providing the best services to improve our relationship with our tenants.”

Gecina has stepped up its develop-ments and its spending on improving its existing portfolio, committing EUR 2.9 billion to a programme to capture the improving market conditions in the Paris office market, Europe’s largest by area. “Falling vacancy in the central business district of the French capital has made it easier to pre-lease build-ings under construction, or which are undergoing renovation, as economic growth gathers momentum, business confidence improves and concerns over political uncertainty recede,” she said.

“For the first time in many, many years we get the sense that things

are moving in France. At Gecina, we have all the ingredients to succeed, and the quality of our portfolio will be an accelerator for the business,” she remarked. “We will see the benefit in rents in 2019.”

Brunel has also changed the compa-ny’s strategy for its residential portfo-lio, diverging from the approach of her predecessors, who actively sought to sell off apartments piecemeal to ten-ants, she said.

Brunel has halted new sales cam-paigns for the residential portfolio, re-garding it as an integral part of Geci-na’s place-making strategy for those city centre locations with good ameni-ties and transport connections.

The appeal of home ownership is fall-ing, particularly for younger people in Paris, which is “in keeping with the global trends,” she noted. Retaining the residential assets, which account for about 15% of Gecina’s portfolio and which generate a resilient rental yield of about 3.5% annually, provides a “balance to the company’s more cy-clical office investments,” she said.

The CEO said the complementary na-ture of the Eurosic and Gecina’s of-fice portfolios means the integration is complete, while the disposal pro-

gramme is weeding out the non-core assets.

“We have digested Eurosic and can contemplate more acquisitions,” she remarked, without being more forth-coming. She regards M&A activity as a way of sourcing investment oppor-tunities to achieve exposure to certain markets or sectors but not as a strat-egy in its own right: “We are never forced buyers – primum non nocere (first, do not harm).”

Looking ahead, the Gecina CEO said she is focused on “delivering what we have promised. We are in good shape to do so and to benefit from the acceleration that is going on in the market.” •

M E K A B R U N E L Méka Brunel became Gecina’s CEO in 2017, having represented Ivan-hoé Cambridge on the company’s board since 2014. She was Ivanhoé Cambridge’s Executive Vice President for Europe from 2009, joining from Eurosic where she served as its CEO for three years. In the preceding decade, she held various executive management positions with Sim-co, which later merged with Gecina. Brunel has an Executive MBA from the HEC business school.

101 AVENUE DES CHAMPS-ELYSÉES, PARIS 8TH

In the corner of avenues George V and Champs-Elysées, and in front of the Fouquet’s, this 8,200 m² office building benefits from an exceptional location in the heart of the 8th arrondissement

PHOTO CREDIT: STÉPHANE MURATET


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High prices for prime buildings are mak-ing the world’s second largest property investor, Allianz Real Estate, pivot to-wards lending, investing through funds and in developments to deploy the ris-ing flow of capital from its insurance gi-ant parent.

“Yes, it’s expensive, but we find deals that overcome these issues,” explained Olivier Téran, Chief Investment Officer of Allianz Real Estate in an interview. “We won’t just buy a core asset in the market for a 3% yield.”

Téran is tasked with deploying the grow-ing allocation to real estate by more than 40 Allianz insurance companies as low interest rates make them seek higher income-generating assets. His mandate is to source investments that generate unlevered annual returns of 4% to 6% to cover Allianz’s liabilities, which range from pension and life insurance cover-age to shorter-term requirements of the group’s property and casualty insurance businesses.

“Real estate, with infrastructure, is be-coming an investment of choice for the group in the current environment,” he said. “The pick-up in global economic growth and low inflation may prolong the current investment cycle, which is already more than a decade old,” he add-ed, pointing to the acceleration in rents in continental Europe, the strength of the key Asia Pacific markets and contin-ued rental growth in the US.

Allianz Real Estate managed EUR 53 billion of assets at the end of the third quarter of 2017, a 6% increase from a year earlier; its goal is to grow this to EUR 75 billion by the end of the decade. More than half of these investments are direct holdings in buildings such as the Allianz One Tower in Paris’s La Défense business district, a 43% stake in the 1515 Broadway skyscraper on New York’s Times Square or Trinity Tower in Shang-hai.

Téran said he is reluctant to participate in widely marketed public auctions for properties because of “crazy” pric-ing. He prefers to source deals directly through the contacts of his on-the-ground origination team and through the reach of Allianz’s large network of partners. However, “there are plenty of deals where the auction process has failed and it’s possible to acquire a very nice piece of real estate at more relaxed pricing,” he added.

One solution has been to gain indirect exposure to quality assets as a lender. Allianz Real Estate’s commercial real estate mortgage lending business is well established in the US. and the company has expanded in Europe, where it has currently deployed around EUR 6 billion. Recent deals in Europe include loans secured against the Atrium Building in Amsterdam’s South Axis, London’s 55 Baker Street and the Liffey Valley Shop-ping Centre in Dublin.

Investing in value-add funds with tar-geted sector and/or geographic themes is another way that Allianz Real Estate is putting its clients’ money to work. A concerted drive to build its platform and develop relationships outside Europe, which began five years ago, is starting to pay off. Last year’s investments includ-ed a fund specialised in outlet centres in China and a joint venture focused on acquiring offices in major cities in India, some of which would be developed from scratch.

Developing prime assets in target mar-kets reflects the shortage of investable stock and/or pricing, Téran said: “We are increasingly looking at moving the in-vestment side to the ‘build to core’ sec-tor. The marginal increase in risk pays better than for core assets.”

Allianz Real Estate invested USD 100 million in a fund managed by E-Shang Redwood that will develop logistics and distribution warehouses in the tier one

hubs of Japan. It is taking a similar “build to core” approach for multi-family hous-ing development projects in the US.

Téran expects the majority of his invest-ment budget for this year to continue to be in Europe and he favours the major office markets in particular, since this is where he sees economic growth sup-porting higher rents. However, he will in-creasingly consider Central London for other reasons as he expects an adjust-ment in pricing to reflect the UK’s deci-sion to leave the European Union.

“We are increasing our monitoring of that market and will invest there at some point, given London’s historical and fu-ture relevance to global real estate allo-cation,” he remarked.

“Using the listed sector is not currently an option for Allianz Real Estate because of the existing solvency rules for insur-ers, plus the profit and loss volatility impact of holding real estate indirectly through listed shares, relative to direct ownership,” Téran said.

The EU’s Solvency II regulations re-quire insurers to hold capital to cover potential losses for their investments. The solvency ratio rate is 25% for direct property investments, whereas for listed real estate it is in line with the equities market as a whole, at a rate of 39%. The European Real Estate Association (EPRA) is challenging the unfavourable treatment of listed real estate.

“The main issue is the way that the sol-vency model is constructed, which is a one-year shot,” Téran explained. “Aca-demic research shows that, over a lon-ger period, property stocks’ volatility is comparable to that of the underlying real estate. It’s worth having the debate on the risk capital charges. Anything that helps the regulators understand volatility of real estate and listed real es-tate better is to be welcomed.” •

Allianz Real Estate navigates global market to find opportunities as prime building acquisitions get pricier

O L I V I E R T É R A N Olivier Téran has been Al-lianz Real Estate’s Chief Investment Officer since 2015. He joined the com-pany seven years earlier as Head of Special Proj-ects. After graduating with a degree in business and receiv-ing his masters in finance from Paris’s Dauphine University, Téran joined GE Real Estate, ending his time at the company as Managing Director for Business Development.

A L L I A N Z R E A L E S TAT E – N AV I G AT I N G T H E G L O B A L M A R K E T

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Significantly, the number of issuers keeps growing. The largest corporate issuers include European property in-vestment companies, with French and Swedish property companies having a particularly strong presence. The table above lists the 11 largest corporate green

bond issuers in the real estate sector.

How green is your bond?The key feature of a green bond is that

Green and climate bond market: young but growing rapidlyThe green and climate bond market is only a decade old: the European Invest-ment Bank and the World Bank first is-sued green bonds in 2007. However, as an investment category, green and cli-mate bonds remained a relatively niche market until about 2014 when local gov-ernment and corporate institutions en-tered the market. Since then, the green bond market has been growing rapidly, expanding to more than USD 155 billion in 2017. This compares favourably with the Paris Agreement’s UNFCCC call for reaching USD 100 billion for climate fi-nance by 2020.

However, green bonds still only rep-resent a tiny share of the overall bond market, so there remains plenty of room for growth.

Green buildings bonds: a substantial market share, with a diversity of issuersLow carbon buildings and energy ef-ficiency as a segment (including en-ergy efficiency in industrial facilities) accounted for USD 46 billion of green bonds issued in 2017. Issuers include real estate companies, REITs, banks with loans to green buildings and, most re-cently, a property fund manager using green bonds to raise capital.

Swedish property company Vasakronan was the first property and first corpo-rate green bond issuer and has placed 24 green bonds to date. Globally, many financial institutions have issued green bonds connected to green loans: Bar-clays in the UK; BerlinHyp, Deutsche Hypo and LBBW in Germany; Obvion and ABN AMRO in the Netherlands; SBAB in Sweden; SpareBank 1 Boligkreditt in Norway and NAB in Australia. The larg-est issuer in 2017 was US Agency Fannie Mae, with a staggering USD 26 billion of labelled Green Mortgage Backed Secu-rities (MBS) secured on US multifamily housing.

Building green bondsThe labelled green bond market is growing rapidly

2012 2013 2014 2015 2016 2017

1 0 0

1 2 0

1 4 0

1 6 0

8 0

4 0

6 0

2 0

0

LOAN

SOVEREIGN

GOVERNMENT-BACKED ENTITY

LOCAL GOVERNMENT

DEVELOPMENT BANK

NON-FINANCIAL CORPORATE

FINANCIAL CORPORATE

ABS

Green & climate bonds remained relatively niche with limited impact until about 2014.2017 saw even more explosive growth, with over USD 155 bn of green bonds issued.SOURCE: ‘GREEN BONDS HIGHLIGHTS 2017’. CLIMATE BONDS INITIATIVE

ISSUER COUNTRY AMOUNT ISSUES TO DATE (USD M)

Unibail-Rodamco

Vasakronan

Icade

Specialfastigheter

SFF

Foncière des Régions

Caisse des Dépôts et Consignations

Modern Land

Link REIT

Swire Properties

Digital Realty Trust

France

Sweden

France

Sweden

Sweden

France

France

China

Hong Kong

Hong Kong

USA

1,785

1,428

716

690

599

561

527

500

500

500

500

SOURCE: CLIMATE BONDS INITIATIVE, 2018

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it is financing assets or projects that are ‘green’ or that have an environmentally positive outcome. Defining this, how-ever, is complicated, particularly in the buildings sector, which is fragmented and where multiple opinions and met-rics already exist that partially align with environmental outcomes. Various prac-tices have emerged to strengthen this part of the green bond issuance process.

The Green Bond Principles (GBP) are voluntary process guidelines that rec-ommend transparency and disclosure and promote integrity in the devel-opment of the Green Bond market by clarifying the approach for the issuance of a Green Bond. The GBP explicitly rec-ognise several broad categories of eli-gibility for green projects. One of these is ‘green buildings which meet regional, national or internationally recognised standards or certifications’.

The GRESB Guidelines can be used to identify appropriate projects, metrics and reporting for green property bonds. These guidelines provide an overview of how different building rating systems (such as BREEAM, LEED, and Green Star) integrate with the different green project categories outlined by the GBP. They do not state which levels of certi-fication should be used in order to label the bond as green.

Therefore, in the market, issuers adhere to different schemes and the relative ‘greenness’ of bonds differs. Most green buildings bond issuances are linked to local and international building certifica-tion schemes (such as LEED and BREE-

AM) while some are linked more directly to energy performance and direct emis-sions tracking. For example, Vasakronan and Unibail-Rodamco use LEED Gold as a minimum eligibility criterion, while Re-gency Centres uses LEED certified.

One of the drawbacks of this is the in-consistency it brings to the market, complicating the picture for investors who then have to determine which lev-el of green is being offered and what is ‘green enough’.

To address this, the Climate Bonds Stan-dard (a fairtrade-like labelling scheme for green bonds) aims to set consistent benchmarks for levels of performance for green buildings that are compatible with the internationally agreed target of limiting global warming to no more than two degrees Celsius above pre-in-dustrial levels, and ideally no more than 1.5 degrees above. This requires rapid decarbonisation across all sectors, in-cluding real estate. Small incremental improvements will not be sufficient to achieve this goal.

On this basis, and on the advice of ex-pert advisors from across the climate and buildings nexus, the Climate Bonds Standard recognises as green, and therefore eligible for certification under the Climate Bonds Standard, buildings that are:

• In line with net zero carbon by 2050 emissions trajectories, demonstrated either by reporting of actual emis-sions intensity for the building, or compliance with a proxy (such as a building code or buildings certifica-

tion standard) where it can be estab-lished that a certain tier of perfor-mance under the code or standard is compatible with these net zero car-bon trajectories.

• Subject to an upgrade or retrofit that achieves emission intensity reduc-tions of 30% to 50% (depending on the bond term).

Compliance with these requirements must be independently verified by an approved verifier under the Climate Bonds Certification Scheme.

Future prospects for green building bondsThere remain some challenges limiting the market:

• The lack of standardisation in green definitions – which propagates con-fusion on the part of issuers and in-vestors alike about what will be re-garded as sufficiently green, or what is sufficiently green.

• The lack of robust, representative, publicly available benchmarking data on buildings’ energy and emissions performance. In some jurisdictions, the legislation requires that metrics are collected, making data required for a green bond readily available – but this is not common enough.

• The weak links between levels of en-ergy or emissions performance under many voluntary building codes and standards, and the resulting grade or tier awarded – which makes it chal-lenging to use these codes and stan-dards as ‘proxy indicators’ for energy efficient or low carbon buildings.

• The lack of green tagging by building owners and lenders – which prohibits easy identification of assets that can be linked to green bonds.

However, a number of developments are expected in 2018 that should provide a platform for growth in green building bonds:

1. Pressure growing on the banking sector to increase green lending along with investor demands on the largest corporate emitters to demon-strate more brown-to-green financ-ing to help meet the Paris targets.

2. Regulators developing new guide-lines, regulations and incentives to facilitate the adoption of green fi-

Buildings and energy efficiency accounted for 29% of green bonds issued in 2017.SOURCE: ‘GREEN BONDS HIGHLIGHTS 2017’. CLIMATE BONDS INITIATIVE

2016$87.2BN

$6BN 4%Sustainable Waste Management

$5BN 3% Sustainable Land Use & Forestry

$4BN 3% Adaptation

$5BN 5%Sustainable Waste Management

$2BN 2% Sustainable Land Use & Forestry

$4BN 5% Adaptation

$24BN15%Clean Transport

$13BN 15%Clean Transport

$20BN13%Sustainable Water Management

$12BN14%Sustainable Water Management

$45BN29%Low Carbon Building & Energy Efficiency

$19BN 21%Low Carbon Building & Energy Efficiency

$51BN 33%Renewable Energy

$33BN 38%Renewable Energy

2017$155.5BN

B U I L D I N G G R E E N B O N D S

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nance. The European Commission, for example, is considering lower cap-ital requirements for lending against energy efficient buildings.

3. Progress on common international standards and definitions for green bonds. For example, the Europe-an Commission’s High-Level Ex-pert Group on Sustainable Finance (HLEG) has recommended (i) the establishment of a ‘Sustainability Taxonomy’ setting eligibility criteria

for green investments, including in buildings; and (ii) the establishment of common European green bond standards. The Commission is due to respond to these recommendations on 22 March 2018.

In this environment, there is every oppor-tunity and expectation for continued, on-going growth in green building bonds. •

A N N A C R E E D Anna is the Standards Manager at the Climate Bonds Initiative. A strat-egy specialist, Anna has significant experience advising on green growth and low carbon develop-ment. For the past eight years she has worked with companies, governments and NGOs, advising on national and international policy development, and mechanisms to engage the private sector in sustainable land use.

Healthcare and office REIT Cofinimmo is among the pioneers of green sus-tainable corporate bond issuance in the listed real estate industry. It was the first company in Europe to also raise debt specifically linked to socially re-sponsible outcomes from investments in its portfolio. “While these are laud-able achievements for a company tak-ing the ESG demands of its investors and other stakeholders seriously, it is difficult, so far, to see the hard financial payback for Cofinimmo in structuring some of its balance sheet along these ethical principles,” CEO Jean-Edouard Carbonnelle mused during an interview with the EPRA Newsletter at the Brus-sels head office of the largest Belgian REIT.

“Of course, this is the right thing to do, and we see the intangible rewards in in-

Cofinimmo trailblazing the path to a green and social model for listed real estate financing

vestors’ and our people’s more positive perceptions of the company. But the green bond market hasn’t developed sufficiently in terms of volume and liquidity yet for us to really receive the benefits of cheaper debt financing versus standard corporate bonds – though I’m convinced that will happen in the future,” Carbonnelle said.

Cofinimmo’s CEO first raised the idea of issuing a green/social bond with a group of four or five banks at a meeting at the REALTY Belgian real estate trade fair in May 2016. The oversubscribed debt issuance of EUR 55 million, along International Cap-

RENOVATION OF THE GUIMARD 10-12 OFFICE BUILDING IN BRUSSELS

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B I G D ATA P U T S A P R I C E TA G O N E S GREDEVELOPMENT OF THE

BELLIARD 40 OFFICE BUILDING

IN THE EUROPEAN QUARTER

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ital Market Association (ICMA) green bond principles, was then executed in December of that year and carried a 2% coupon for an eight-year term. The ICMA principles have four main compo-nents:

1 . USE OF PROCEEDS: b. Green offices: Investments in ex-

isting and future assets in Cofinim-mo’s global portfolio with specified sustainability certifications (BREE-AM or BREEAM In-Use) with at least a ‘Very Good’ rating.

c. Healthcare real estate: Investments in existing and future assets that will provide and/or promote access to essential healthcare services for vulnerable groups of people (i.e. within psychiatry, geriatrics and care of disabled people).

2. PROJECT SELECTION PROCESS: This has to be defined publicly on the corporate website and supported by internal and external expertise as well as defined criteria on the use of proceeds to finance eligible projects, with further environmental, social and governance elements evaluated by the specialist ESG research and rating agency Vigeo Eiris.

3. MANAGEMENT OF PROCEEDS: A transparent allocation process based on clearly defined commitments and rules, with 100% (re)financing of eligible projects, and an internal tracking system put in place and integrated into annual financial reporting.

4. REPORTING: Transparent annual reporting should cover the use of proceeds (fund allocation) and the environmental and social benefits

of the selected projects, along with their responsible management in line with ESG indicators.

Cofinimmo has used the ring-fenced proceeds of its green/social bond issu-ance for the refurbishment of four proj-ects (three healthcare and one office in Brussels, Esvres-sur-Indres near Tours in France and Neustadt im Westerwald to the north of Frankfurt) to improve its social and sustainable credentials.

The ability to target specific assets with green/social financing raises intriguing questions over how the real estate debt market will evolve in the future as pric-ing becomes more calibrated to ESG factors as well as the traditional cor-porate and property portfolio elements determining the valuation of a listed company’s bonds.

“Leases for healthcare properties, for example, average 27 years in Belgium and between 20 and 30 years in Ger-many, compared with the progressively shortening periods seen in office mar-kets. Leases in Brussels rarely extend beyond three to nine years outside of government and EU institutional occu-pancy,” Carbonnelle said.

The valuation differentials implicit in these sectoral lease terms could at-tract more favourable debt pricing for healthcare assets in the future. They might also, for example, be used as a tool in government policy to encourage more private sector funding of better healthcare facilities for patients in Eu-rope’s growing dementia epidemic by reducing funding costs.

Cofinimmo’s Head of Property Services & CSR, Jean Van Buggenhout, who sits on EPRA’s Sustainability Committee, said the association is contributing to

the discussions within the European Commission’s working group on sus-tainable finance and how green/social bonds could be used as instruments for arriving at that destination. Carbon-nelle said that might be through such initiatives as guidance on the workings of the green/social rating agencies and government guarantees for some types of debt in these areas.

In the third edition of EPRA’s own sus-tainability Best Practices Recommen-dations (sBPR) launched last year, the recommendations were extended to cover environmental, social and gover-nance issues for the first time.

While Cofinimmo’s green/social bond constitutes only a very small part of the EUR 1.5 billion in debt on the balance sheet, the company’s positive experi-ence with the experiment means it will probably come back to the market with a larger issuance of around EUR 100 million in 2019.

Jean-Edouard Carbonnelle won’t be around to manage Cofinimmo’s next step down the sustainable finance road, as the veteran Belgian REIT executive will retire this year. •

D O M I E N S Z E KÇ RHead of Project Management

J E A N - E D O UA R D C A R B O N N E L L ECEO

J E A N VA N B U G G E N H O U THead of Property Services & CSR

REDEVELOPMENT OF THE QUARTZ OFFICE BUILDING IN THE EUROPEAN QUARTER NURSING HOME VILLA SONNENMOND IN GERMANY

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THANK YOU TO OUR EARLY SPONSORS:

#EPRAconf

EPRA CONFERENCE 2018

JOIN US FOR THE REALDISRUPTION DEBATE!

THE ADLONKEMPINSKI HOTEL BERLIN 4-6 SEPTEMBER

The 19th edition of the EPRA Confer-ence returns to one of our favourite ho-tels and cities, namely the Adlon Kem-pinski in Berlin. The Conference theme has majored on disruption and technol-ogy in real estate in recent years. This year we will bring that disruption dis-cussion to the heart of the sector and debate how trends we are all familiar with will impact our industry in a very real way in the present.

The format for this year’s conference will change, with the afternoon session dedicated to leaders from the retail and office disruption models and traditional suppliers debating the future of these two sectors. Moderated by Evan Davis, a UK broadcaster, it will bring senior CEOs from the sector head to head with executives from Alibaba and WeWork. The debates will also feature a panel of experts drawn from the relative sectors as well as investor and analyst commu-

nity, who will act as fact checkers. The aim is to explore the issues facing both retail and office sectors over the next few years from a new angle and look at how listed companies can respond and grow in the face of the rise of new busi-ness models.

The morning session will retain key-note speakers, and we are pleased to welcome Geoffrey West, a UK born but US resident urban scientist. Geoffrey has devised a leading theory about how cities grow, evolve and die. His most re-cent work, ‘Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies’, was de-scribed by The New York Times as mak-ing “a compelling argument against the ‘arrogance and narcissism’ reflected in the growing fetishisation of ‘big data’ in itself.” The author argues that basic mathematical models of physics can anticipate how cities, organisms and even corporations evolve.

The morning will also feature a double interview with high profile German pol-

iticians: Günther Oettinger, the current EU Commissioner for Budget and Hu-man Resources, and Joschka Fischer, the former Vice Chancellor and Foreign Minister in Gerhard Schröder’s cabinet. They will both be interviewed by Katya Adler, the BBC Europe Editor, who will grill them about German politics, the wider European political scene and Brexit.

Registration will open as usual in April, and we will update the programme as new speakers are confirmed.

Thank you to our early sponsors for their support: PSP Swiss Property, TLG IMMO-BILIEN, alstria Office REIT, Credit Suisse, Dream Global REIT, Hispania and JLL.

We look forward to seeing you in Septem-ber and hope you will join the debate! •

EPRA Conference 2018: Join the debate

E P R A C O N F E R E N C E 2 0 1 8 – J O I N T H E D E B AT E

THANK YOU TO OUR EARLY SPONSORS:

#EPRAconf

EPRA CONFERENCE 2018

JOIN US FOR THE REALDISRUPTION DEBATE!

THE ADLONKEMPINSKI HOTEL BERLIN 4-6 SEPTEMBER

I S S U E 6 2 — M A R C H 2 0 1 8

A resurgent Dutch economy is attract-ing large domestic and international capital inflows into the real estate in-vestment market, which is particularly benefitting the logistics sector given the Netherlands geographical position as the transport gateway to North-west Europe. But the market cap of the Dutch-listed property industry as a whole continues to punch below its weight relative to the size of the un-derlying investment opportunities and

its peers in neighbouring countries. Speakers at the EPRA Insight event held at the offices of law firm Loyens & Loeff in Amsterdam in January fo-cused on these issues and discussed whether proposed changes to the local FBI fiscal investment structure would impact on the listed real estate land-scape.

“The Dutch real estate investment market saw around EUR 20 billion in

new capital inflows in 2017, of which half were cross-border, ranking the Netherlands in seventh place glob-ally as a target for investors,” Jeroen Lokerse, Country Head at Cushman and Wakefield and the evening’s event moderator, told the audience.

He estimated that total investment flows would dip slightly in 2018 to about EUR 18 billion but be dispersed more widely across the five main

Dutch investment market gives upbeat backdrop to EPRA Amsterdam Insight event

EPRA Insight — Amsterdam

PANEL SESSION AT THE INSIGHT AMSTERDAM EVENT

From left to right: Jeroen Lokerse (Cushman & Wakefield), Joost Uwents (WDP), Bernd Stahli (NSI), Evert Jan van

Garderen (Eurocommercial Properties), Bert Lesterhuis (MN)

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Dutch cities of Amsterdam, Rotterdam, The Hague, Utrecht and Eindhoven and between alternative property sec-tor classes such as healthcare, hotels and student housing, maintaining the momentum of yield compression. The wide yield spread between prime and secondary locations would, however, also continue, he concluded.

“We’re all fighting for the same as-sets,” Lokerse said.

In the event’s panel discussion, Joost Uwents, CEO of Belgian headquar-tered logistics REIT WDP, said his com-pany’s investments in the Netherlands are doing particularly well because of the market’s great infrastructure, land availability, flexible job market and li-quidity. But the Dutch market could also become “a victim of its own suc-cess, due to a growing supply pipeline,” he warned. The average waiting period time for a construction permit has ris-en from around six to 12 months, while logistics construction costs have also increased, by between 10 and 20%.

“Yields have come down and have now stabilised at a lower level. If Venlo is full, they can extend Venlo, it’s not like high street retail where prices go up when you run out of space. So we’ve never seen real rental growth,” Uwents said.

He concluded that the accelerating evolution of ‘smart cities’ and the ‘In-ternet of Things’ would have a major impact on the logistics sector: “We’ll have buildings with brains. For us, it’s all about what happens to our clients and this will lead to fundamental dis-ruptions in logistics. Think of 3D print-ing, for example.”

Accelerating urbanisation is a key catalyst for the emergence of a more tech-focused real estate industry, Bert Lesterhuis of asset manager MN agreed.

“You have to be aware of disruptive technologies and the impact they’ll have as we transition towards smart cities. Everyone is talking about self-driving cars, for example. We are monitoring these trends very carefully though it’s too early to be actively im-plementing anything in our investment strategy. Ultimately, using these tech-nologies for implementing sustainable strategies is incredibly important for institutional investors and their pen-sioners. We therefore not only look at the financial returns but also at social returns. In today’s world, both are in-

extricably linked,” he said.

Bernd Stahli, CEO of Dutch office REIT NSI reinforced the view that self-driv-ing cars will have a huge effect on real estate in the future: “It will revolution-ise the way we design buildings: How many parking spaces do you need in a shopping centre? When people are building parking garages today, they are already thinking about what this investment will mean in ten years’ time.”

Evert-Jan van Garderen, CFO at Eu-rocommercial Properties, opened the panel’s discussion on the FBI regime, which applies to a range of investment structures in the Netherlands, not only real estate. The Dutch REITs Associ-ation has been lobbying the govern-ment to review the regulations, partic-ularly the dividend withholding tax.

“We were very surprised that the gov-ernment took this on board. But it’s still early days, and only one line in the entire agreement, so it’s not clear at all how and when this will be implement-ed,” Van Garderen said. He added that it could be 2019 or 2020 before any changes see the light of day.

“They’ve [the coalition government] had a response to their tax plans. Now it will be debated for a year or a year and a half. We don’t even know if the dividend withholding tax will be abol-ished. Whatever the case, we will fight for our cause,” Stahli noted.

Uwents said that the Dutch FBI struc-ture is out-dated and the European REIT industry could draw on the expe-rience of other countries to propose improvements. In Belgium, REITs are defined as normal operating compa-nies and so can be more entrepre-neurial in their investment strategies, whereas in the Netherlands they are really investment institutions or ‘be-lastinginstelling’ he concluded.

Bernd Stahli said that the Dutch REITs faced their own particular challenges and that the market was too small, but emphasised that the listed sector, due to its transparency and liquidity, re-mains the most viable way to invest in real estate.

As the discussion turned towards the macroeconomic outlook and the pros-pect of rising interest rates, the panel offered their views on the economic road ahead. Evert Jan van Garderen said companies should look at the strategies for locking in long-term

rates: “This could mean penalties but we’ve been saying money is cheap for years, and that will change.”

“We are a real estate business, so we do not hedge like a hedge fund; we just don’t want to be overleveraged. The in-dustry has deleveraged in the past few years even though rates have fallen to avoid being where we were in 2008. If four goes to five, it’s painful; but a 4.0% to 6.0% move when you’re 40% leveraged is a real problem,” Bernd Stahli concluded. •

EPRA Insight — London

CEOs see less gloomy outlook for Londonoffices and retail at EPRA Insight event“Prospects for Central London offices and retail real estate, two markets on which the largest UK listed property companies focus, may not be as dire as stock market pricing suggests,” a packed audience of real estate pro-fessionals heard at EPRA’s London In-sight event on January 8th.

As shares of listed companies with ex-posure to these two sub-sectors trade at discounts to net asset value (NAV), property values themselves have been “surprisingly resilient” since the UK voted to leave the European Union 18 months ago, Morgan Stanley analyst Bart Gysens explained.

“Overall, UK commercial real estate

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values are little changed since the June 2016 Brexit referendum: invest-ment volumes have recovered, and the outflows of open-ended real estate funds have stabilised,” Gysens said. He expects “a gentle slide in values” for Central London offices and retail-fo-cused property companies in 2018.

During the ensuing panel discussion, Great Portland Estates CEO Toby Courtauld recalled how his company’s share price slumped on the morning after the referendum vote as investors fretted about companies relocating to preserve access to the EU’s single market. “Today, the reality for the real estate market is not so dramatic,” he said, explaining why he is less down-beat about prospects.

“Leasing is robust, companies are tak-ing space, the supply side isn’t an issue at all and rents are progressing,” he observed, predicting that Central Lon-don office rents will be little changed to positive in 2018. British Land CEO Chris Grigg echoed this observation, remarking that the share price slide may have stemmed from a mispercep-tion about the market’s reliance on fi-nancial services for tenant demand.

Courtauld, Grigg and their three fellow panellists were speaking at the event held at the De Vere Grand Connaught Rooms near Covent Garden, a larger venue than for preceding EPRA In-sights in London, due to the increased interest with over 500 attendees. EPRA’s partner in organising the event was law firm CMS.

When the discussion turned to pros-pects for the retail real estate sector, James Wilkinson, European Chief In-

vestment Officer for global real estate securities at Blackrock, noted that the prevailing bearish view on the sector had created attractive buying oppor-tunities for investors.

“It’s still possible to make enormous amounts of money from physical re-tailing. Investors would be wrong to write off the sector as a whole because of the challenges posed by online sales,” he remarked.

Brian Bickell, CEO of Shaftesbury, said that locations like the West End of Lon-don offer shopping with theatres, cin-emas, museums, tourist sights, shops and restaurants – an experience that is impossible to replicate online. “A fo-cus on this area has enabled Shaftes-bury to generate annual rental growth of around 5% over the long term,” he said.

Bars and restaurants now account for a 35% share of his company’s rent roll, the same proportion as retail stores. He added that the pound’s Brexit-in-duced weakness has been a boon to tourism in London.

The recipe for investing successfully in retail assets is “all about quality and the right space for the right retailers,’’ said British Land’s Grigg. Grigg added later in the discussion that he felt no pressure to make acquisitions to scale up – a response to recent announce-ments of high-profile takeovers in-volving European retail property com-panies.

Grainger CEO Helen Gordon noted that achieving scale made a big difference in operating performances in the res-idential private rental sector (PRS),

as highlighted by the successful listed German multi-family sector.

As an operationally intensive sector of real estate, the PRS market in the UK is currently too fragmented and immature to allow landlords to out-source property management, “which is why Grainger handles these services in-house,” she explained. She predicts rents to grow by 3 to 3.5% this year.

Having sold off non-core businesses and deleveraged the company, Gordon resisted calls to use the proceed to buy back Grainger shares that were trading at a significant discount to NAV. In-stead, she reinvested the proceeds in the PRS strategy.

“We’ve just got the most fantastic op-portunity at the moment, and it would be absolutely crazy to return capital to our shareholders or to do forms of share buybacks when we see this as the start of a really good growth op-portunity. That’s come good in the cor-rection in the share price,” she said. •

MORE THAN 500 PEOPLE ATTENDED THE EPRA INSIGHT LONDON EVENT PANEL SESSION AT THE INSIGHT LONDON

From left to right: James Wilkinson (BlackRock), Helen Gordon (Grainger), Brian Bickell (Shaftesbury), Toby Courtauld (Great Portland Estates), Chris Grigg (British Land)

INTRODUCTION BY CHRIS LUCK FROM CMS LONDON, EPRA’S OFFICIAL PARTNER FOR THE EVENT

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Why was real estate excluded from the original law creating PIR schemes in Italy?There may have been a mistaken view that real estate is a passive and unpro-ductive sector. Italian institutions came to realise during the course of 2017 that real estate is a strategic and productive part of the Italian economy, so it was worthwhile reviewing and including real estate in PIRs.

How were you able to persuade the Italian Treasury/lawmakers to change its/their mind?Italy’s real estate association, Asso-immobiliare, worked with the Italian Ministry of Finance to amend the PIR regulation. It argued successfully that real estate is of strategic value to the country: it makes a substantial contri-bution to the economy and Italy needs to update and modernise its real estate stock. Opening up PIRs to real estate would also allow investment managers to diversify their growing PIR portfolios.

How did EPRA help and provide support to achieve this suc-cessful outcome?EPRA provided the Italian Minister of Economy and Finance with an interna-tional perspective and an insight into the European listed market. It was a valuable and effective contribution.

Why haven’t investors found listed Italian real estate appealing as an investment? Retail investors in Italy mainly invest in real estate through listed closed-end funds with limited lifespans. They have faced liquidity and performance prob-lems, particularly for those funds that built low-quality portfolios without a disciplined investment strategy or ac-tive asset management expertise. This may explain why retail investors are hesitant about investing in listed real estate.

For the corporate sector, there have been some issues with the track re-cords of some real estate companies in terms of governance, transparency, fi-

nancial discipline and project manage-ment, particularly in development.

Italy’s real estate markets had a much less pronounced correction than Ire-land or Spain during the financial cri-sis, due to the resilience and diversi-fication of our economy as well as the low levels of household debt. It meant, however, that financial institutions did not address problems straight away by marking down assets and selling them quickly. This has held back the econom-ic recovery and deprived global inves-tors of attractively priced entry points to buy real estate at the bottom of the cycle.

Reduced liquidity in the market coupled with question marks over asset valua-tions has also constrained the develop-ment of REITs in Italy.

There is also a structural shortage of in-vestment grade assets in Italy. In Milan, only 10% of its entire office stock is of a Grade A quality; in Rome, the propor-tion is around 5% of the total. Compare that with 50% in London and around 25% in continental European cities. This makes it hard for Italian REITs to build sizeable portfolios of high-quality assets. Thankfully, several new devel-opments have been completed in Milan over the last 10 to 15 years, and more product will close this gap and foster the development of a proper REIT sec-tor in Italy.

How will this change to PIR regulation ben-efit the Italian listed real estate sector?PIRs will help make real estate stocks more visible to Italian institutional in-vestors. Our hope is that real estate will become a sizeable investment alloca-tion in PIR portfolios over time, helping clear a growth path for Italian REITs. It may also help a new wave of IPOs in the sector in Italy.

What does it mean for your own company? Since our company’s inception, we have had a very active investor outreach pro-gramme aimed at Italian and interna-tional institutional investors. Now that real estate is eligible for PIR portfolios, Italian investors have one more reason

Italy gives REITs a boost by changing the rules for tax-exempt savings plans Italian lawmakers amended the rules for the country’s tax-exempt personal savings accounts (piani individuali di risparmio, or PIRs) in December to allow the inclusion of REITs. Manfredi Catella, Founder and CEO of COIMA RES, explains how his company and other Italian REITs will benefit.

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Our brief was to quantify for the first time the positive contribution that list-ed real estate companies make to em-ployment in the European Union. We calculated this from corporate financial reports filed for 2016 and by modelling economic impact as an investment and other spending filters through the econ-omy.

In the study, we identify four different categories of employment resulting from the sector’s activities and its ripple effect through the economy: direct, indi-rect, induced and hosted jobs.

Aside from transforming the physical environment in which we lead our daily lives, the listed property sector is an im-portant catalyst for job creation since it feeds so many other parts of the econo-

my. Our research will help EPRA inform policymakers of the far-reaching impact of Europe’s listed real estate companies and will be a valuable contribution in shaping their decisions concerning the sector.

We calculated that listed property com-panies that manage, develop and lease buildings account for about 84,000 jobs in the EU and generate an estimat-ed EUR 94 billion in revenue each year. The findings draw on an unprecedented amount of data that we compiled from companies in nine western European countries, representing about 90% of the listed sector.

External contractors and service providers to the companies account for an additional 249,000 indirect jobs, the study found.

Furthermore, private consumption on goods and services by the companies’ employees – such as spending on hous-ing, grocery shopping and transport – contribute to an additional 67,000 “induced” jobs across Europe, PwC’s re-search team estimates.

We estimate that listed real estate com-panies owned and managed real es-tate worth EUR 719 billion in 2016. Our research identifies hosted jobs as the fourth category of employment derived from the investments made by the com-panies. It estimates that the retail sector has 577,000 hosted jobs in shopping centres or other retail outlets, a number generated by the development and in-vestments of the listed property sector.

The infographic captures the study’s key quantitative insights on the contribution of the European listed real estate sec-tor. •

to get to know COIMA RES better and become shareholders.

What other changes would make listed real estate more attractive to Italian investors?Assoimmobiliare has already formed a working group led by the existing SIIQs to improve the Italian regime by making it more flexible through technical and

regulatory adjustments.

Ultimately, all Italian real estate com-panies – not just SIIQs – need to offer investors a credible investment strat-egy executed by teams with strong track records, attractive risk-adjusted returns, best-in-class governance and transparency, and share trading liquid-ity. This is exactly what we are trying to do at COIMA RES, and the market is starting to take notice. •

MANFREDI CATELLA Catella is Chairman of COIMA, the company established in 1974 and con-trolled by his family. He is a shareholder and CEO of in-vestment and asset manager COIMA SGR, and established COIMA RES in 2015 as a REIT. Previously, he was responsible for Hines’ Italian operations for 15 years. A chartered financial analyst with a Master’s degree in regional planning and real estate, Catel-la’s earlier career included various roles during his time at JP Morgan, Caisse Centrale des Banques Populaires, Heitman and HSBC.

Europe’s listed property companies are the catalyst to job creation in the European UnionNew research we conducted for the European Pub-lic Real Estate Association (EPRA) shows that listed property companies are the catalyst to 400,000 direct, indirect and induced jobs along with almost 600,000 hosted jobs in the European Union.

G EO F F ROY S C H M I T T Geoffroy Schmitt is a Transaction Ser-vices Partner based in Paris. As from January 2017, he is the Transforma-tion, Change & Innovation leader of PwC France and a member of the French leadership team. For the past five years, Geoffrey has led the Real Es-tate and Hospitality industry within PwC France and has been a member of the EMEA real estate leader-ship team.

VL AD I S L AVA I OVKOVA Vladislava Iovkova is a Director at PwC Strategy&. She is in charge of the Economic practice of PwC France and has led several socio-economic impact assessment studies over the past eight years, namely in the real estate sector.

L I S T E D R E A L E S TAT E – A L A RG E CO N T R I B U TO R TO T H E E U ECO N O MY

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Real estate investment company Grivalia Properties spent EUR 7 million upgrading the 15,000 m2 Green Plaza complex, obtaining a LEED Gold award for the sustainability improvements. The upgrade enabled the company to lift occupancy to 85% from less than 30% a year earlier and sign new leas-es at rents of around EUR 16.75 per square metre, more than double where they stood before the works.

“After a very long time, there are clear signs things are stabilising. 2017 was a good year for the Greek real estate market,” said Natalia Strafti, Grivalia’s Chief Operating Officer, in an inter-view. “For prime assets, demand is so high that we are finally seeing rents start to recover. Demand is focused on

new, prime and energy efficient com-mercial buildings so if you have assets that fit those requirements, you will have no problem in filling them.”

A tentative recovery in the prime seg-ment of the Athens real estate market reflects how Greece’s economy has probably turned the corner from its debt-fuelled crisis. The economy grew by about 1.8% last year and the growth rate may rise to 2.6% in 2018, the In-ternational Monetary Fund estimates. The country, hobbled by tax increases and cutbacks in public spending after three bailouts since 2010, may also have done enough by way of reforms and balancing its budget to persuade the European Union to allow it to exit the latest bailout programme, worth

around EUR 85 billion, later this year.

The crisis caused a freeze in new de-velopment so Grivalia has targeted the shortage of new or refurbished space with ‘value-add’ projects like Green Plaza. “Grivalia also leased about 30,000 m2 of space last year, part of which was vacant for the previous six or seven years,” Strafti said. This con-tributed to a 6% rise in revenues last year.

Competition for the best offices in Ath-ens, with good sustainability ratings, cut as much as 100 basis points from net initial yields – rental income as a proportion of a property’s purchase price – to a little over 8%. “The com-pression in yields for this type of asset

Greek REITs step up their investments as Greece turns the corner from its debt crisis A year-long renovation project involving an office complex in Maroussi, a suburb of north Athens, reveals a lot about the current state of the Greek real estate market after the country’s eight years of crisis.

5-STOREY OFFICE BUILDING, PART OF GREEN PLAZA COMPLEX IN MAROUSSI

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will continue,” she predicts, “provid-ed the economy continues to recover. Meanwhile, the process of forced sales by insolvent property owners and dis-posals by banks of non-performing loans (NPL) is starting.”

Another positive sign of the market performance is the increasing num-ber of REITs. Greece introduced REIT legislation in 1999. Of the handful of listings on the Athens Stock Exchange during the past eight years, two were of REITs: BriQ Properties in July 2017 and Intercontinental International in August 2016.

“There are great opportunities in Greece with a lot of real estate sitting on the balance sheets of non-prop-erty focused institutions, such as the banks and the Greek State,” said Straf-ti. She doesn’t expect any bonanza from privatisations and government asset sales, however, because of the slow pace of the state disposal pro-grammes.

As an example, Grivalia acquired a plot of land and 15 supermarket properties spread across the country in an insol-vency auction in October for EUR 16.3 million; in 2005, the same portfolio had fetched EUR 69 million.

The Grivalia COO expects the compa-ny to step up its acquisitions as debt markets have thawed. Last year, the company raised a total of EUR 110 mil-lion from a bond issue underwritten by Eurobank and from a long-term loan from the World Bank’s International Finance Corporation. Grivalia’s loan-to-value ratio rose to 14% in 2017 from 6% a year earlier.

Grivalia made no acquisitions from 2009 to 2013. The company survived the crisis having raised EUR 300 mil-lion in a share sale in 2007, by prioritis-ing income preservation and thanks to high occupancy with long-term leases for the majority of its portfolio. Since then, it has made a total of EUR 400 million of acquisitions and value-add investments, at a pace of between EUR 60 million and EUR 100 million annual-ly “and we’re going to be in the upper range of that in 2018,” Strafti said.

Tempering the positive mood in the Greek real estate market, however, is realism about the scale of the chal-lenges facing the country, particular-ly how the government will stimulate economic growth while cutting the public deficit. One legacy of the cri-sis is the country’s high tax rates. In

2016, the government lifted the tax on assets under management, which in-cluded cash deposits and equivalents, more than seven-fold and more than doubled the tax rate for a supplemen-tary single property tax. This lifted Grivalia’s tax bill by 60% in 2017.

“We hope that in the next few years the tax increases will be reversed and that there will be a differentiated treat-ment for REITs, which are engines of economic growth and attract foreign investment,” Strafti said. “The Greek REIT tax regime should also be equiv-alent to that of other long-standing REIT regimes in Europe, which will help improve their competitiveness and in-crease investors’ interest in them and the Greek market.” •

N ATA L I A S T R A F T I Natalia Strafti has been Chief Oper-ating Officer of Grivalia since 2014, after joining in 2008 as an Investment & Portfolio Manager. Prior to this, she worked for the company’s former shareholder EFG Eurobank Group for eight years where she was latterly Deputy Head of Advisory and Asset Management for its real estate division.

5-STOREY OFFICE BUILDING, PART OF GREEN PLAZA COMPLEX IN MAROUSSI

G R E E K R E I T S S T E P U P T H E I R I N V E S T M E N T S

PAGE 22


JAPAN, LAND OF THE RISING REIT - NOBUHIRO NAITOU

What is the composition of ARES membership and what activities do you undertake as an industry association?ARES was established in 2002, suc-ceeding its predecessor CRES to go beyond existing industry frameworks and bring together companies and oth-er organisations operating in a range of sectors related to real estate securitisa-tion in Japan. That includes real estate companies, construction companies, asset managers of J-REITs, banks, se-curities companies, appraisers, lawyers, accountants and think tanks. There are

296 members as of January 2018.

Our activities include policy recom-mendations for market system im-provements and taxation revisions to government agencies and information channels, as well as outreach to individ-ual investors to promote J-REITs and work to encourage real estate invest-ment by institutional investors, includ-ing the construction and publication of indices.

What do you see as the main attraction of J-REITs for international investors?In Asia, Japan holds an outstanding position in terms of political and social stability. The country also has highly developed market legislation, including

its corporate compliance regime. The inclusion of Japan, the second largest REIT market in the world after the US, is therefore essential for any international investor wishing to create a globally di-versified real estate investment portfo-lio.

J-REITs are characterised by high liquid-ity and transparency and have a stable track record of more than 15 years. The yield spread between J-REIT dividends and the Japanese 10-year Government Bond has stayed at a relatively high lev-el compared with other major REIT mar-kets, which makes J-REITs very compel-ling. (The yield spread of J-REITs at the end of 2017 was 4.1%, whereas in France it was 4.0%, Singapore 3.6%, the UK 2.5%, Australia 2.1% and the US 1.8%.)

In Europe, ARES has been working alongside EPRA to lobby against the ap-plication of the EU’s Alternative Invest-ment Fund Managers Directive (AIFMD) to J-REITs, which could disadvantage European investors. ARES and EPRA jointly met with EU authorities to dis-cuss this issue last September and we will continue to work together to edu-cate regulators on measures that may impede market efficiency.

How have J-REITs performed in terms of total investment returns and dividend yields in recent years relative to other international REIT markets and the broader Japanese equities index?The performance of J-REITs is roughly on par with other developed markets, but we would argue that they are un-dervalued compared with US and Hong Kong REITs.

The performance of the TSE REIT Index (with dividends) surpassed the Tokyo Stock Exchange Stock Price Index from early 2009 to end-2017. J-REITs sagged last year, but the vacancy rates of their properties have been low and rent levels are on a rising trend. The TSE REIT Index recovered to 1,734 at the end of January

EPRA’s partners in Asia: ARES and APREAAsia’s fast-growing listed real estate markets and large institutional investment sector represent both corporate peers with similar goals and deep potential sources of capital for EPRA’s company membership in Europe. Over recent years, we’ve been extending our relationships and investor outreach programme in the Far East, coordinated by our representative office in Hong Kong. Two key partners for EPRA’s endeavours in Asia are The Association for Real Estate Securitization (ARES) in Japan and The Asia Pacific Real Estate Association (APREA) in Singapore. Continuing our series of profiles on global real estate industry associations, we spoke to Nobuhiro Naitou, Executive Managing Director of ARES, and Peter Verwer, CEO of APREA, about their organisations.

E P R A’ S PA R T N E R S I N A S I A

PAGE 24


E P R A’ S PA R T N E R S I N A S I A

2018 (it was 1,662 end-2017 and 1,855 end-2016), reflecting the growing rec-ognition of how undervalued J-REITs are compared with general equities and other assets, and also the strong funda-mentals of the real estate market.

To what extent do Japanese institutional investors invest in other international REIT markets and how great is the potential for these investments to increase in the future? According to our survey of Japanese institutional investors in 2017, 4% of 71 pension funds and 17% of 61 other in-stitutional investors, such as insurance companies and trust banks, responded that they have already invested in other international REIT markets. Some 13% of pension funds and 16% of other insti-tutional investors responded that they were either considering or interested in investing in international REITs. So, I think there is potential for these invest-ments to increase in the future.

APREA, A BEACON FOR MAR-KETS ‘GROWING A BRUSSELS EVERY NINE DAYS’ – PETER VERWER

When was APREA founded, when did you join as CEO and what is the main mission of the association?APREA was established just over a de-cade ago, and I’ve been CEO for near-ly four years. APREA champions the growth and prosperity of the real estate investment asset class across AsiaPac by helping open up regional markets and removing barriers to cross-border investment.

APREA is:

• an influential voice that helps persuade AsiaPac governments to improve the landscape and ground rules for doing business;

• a business connector – we help members build markets and unlock commercial opportunities; and

• a portal to critical market intelli-gence and world-class business practices.

What is the composition of your membership and what activities do you undertake as an industry association?APREA’s membership comprises around 150 of the most respected real estate market-makers operating in AsiaPac, including sovereign wealth and pension funds, institutional investors, financial institutions, public and private fund managers, family office platforms, prop-erty companies, developers and major service providers. APREA’s member in-terests span all four investment quad-rants.

What are APREA’s priorities going forward?APREA’s main advocacy priority is to se-cure ‘state of the art’ REITs in all Asian markets, which is part of a broader pro-gramme to expand Asia’s investment grade real estate universe.

Our new ‘member connect’ programme links members to these expanding op-portunities. Our marquee event is the AsiaPac Property Leaders’ Summit, which was held in Hong Kong in early March.

What are the main drivers behind the listed real estate sector in Asia?

The main drivers of Asian growth are its relentless urbanisation and fast-rising middle classes. Compare Asia’s average daily urbanisation of 126,000 people to Europe’s 4,200; Asian growth equates to a new Brussels every nine days.

Or, contrast the budding spending pow-er of Asia’s additional 352,000 mid-dle-class citizens to Europe’s 6,500, day in and day out. Both factors feed demand for the real estate that activates and supports economic and social de-velopment.

Mounting middle-class wealth also in-spires a desire for savings that can pro-vide secure retirement in countries with limited social welfare programmes. As Asia’s capital markets expand and deep-en, the spectrum of real estate securi-tisation will swell to cover all aspects of community needs from childcare to senior living and, increasingly, all forms of economic infrastructure, from data centres to utilities.

India’s new InvIts – infrastructure in-vestment trusts – are an example of the expanding role of securitisation, which has piqued the interest of other emerging countries. And let’s not forget the world’s biggest asset class: family shelter. China’s leaders have declared housing-for-rent securitisation to be a national priority. This policy clarion call could stimulate the growth of housing REITs that could dwarf Western markets within the decade.

Are Asian institutional investors increasing their exposure to real estate relative to other mainstream asset classes and, if so, why?Yes. Medium and long-term returns from Asian listed real estate easily outpace Asian equities, which is why institutions are lifting target levels for exposure to real estate stocks. In addition, many of the institutional investors operating in Asian markets with ageing popula-tions are looking for the steady income streams offered by REITs to meet exact-ing redemption profiles.

I S S U E 6 2 — M A R C H 2 0 1 8

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25

S H A R E R E P U R C H A S E S O R S P E C I A L D I V I D E N D S ?

EPRA conducts regular investor outreach educational visits to institutional investors in Asia. Is it your impression that Europe is currently seen as an investment opportunity?European real estate is an attractive investment destination for Asian capital. The most recent real estate

listing in Singapore – and Singapore’s first Euro-denominated listing – was for a REIT comprising 74 properties across five European countries. EPRA’s twice-yearly trade missions to Asia garner wide interest from investors looking for core returns. •

P E T E R VE R W E R Peter Verwer is a Chief Executive at the Asia Pacific Real Estate Association (APREA). Before moving to APREA in Singapore in 2014, Peter was Chief Ex-ecutive of the Property Council of Australia for more than two decades. In addition, he chaired the Australia and New Zealand Government’s Joint Counter-Ter-rorism Committee’s Business Advisory Group on Mass Gathering Places, Livable Housing Australia and Aus-tralia’s Construction Forecasting Council.

N O B U H I R O N A I T O U Nobuhiro Naitou is an Executive Man-aging Director at the Association for Real Estate Securitization (ARES), based in Tokyo. After graduating from the University of Tokyo in 1981, Mr Naito joined Mitsui Fudosan. After working at various sections, he be-came a Section Manager in the Real Estate Securiti-zation Department in 2000 and played a major role in the founding of the Nihon Building Fund Investment Corporation. In 2009, he was seconded to ARES, then to Graduate School of Public Policy at the University of Tokyo where he served as Project Professor until March 2014. He has been in his current position since May 2015.

Share buybacks and special dividends have long been common financial man-agement tools for listed companies. Share buybacks refer to listed com-panies repurchasing their own shares, which they subsequently cancel or re-use later. A special dividend distribution is a non-regular extra dividend paid to shareholders. Through these corporate actions, companies pursue a range of objectives and strategic interests. They:

• indicate confidence in the prospects of the firm;

• support stock prices at periods of undervaluation – the so-called ‘sig-nalling’ motive;

• improve financial ratios such as EPS; • mitigate agency costs – particularly

in periods of excess cash; and • adjust target capital structure if the

firm holds too much equity.

Regardless of the objective, share buy-

back and special dividend announce-ments have repercussions for the valua-tion of companies and share prices.

Are these programmes worthwhile? The jury is still out. A key question is how markets perceive the announcement of these corporate actions. Most studies establish positive market reactions that pop stock prices and lead to excess re-turns. In the well-researched US REIT sector, the majority of studies conclude that share repurchase announcements have a positive impact on performance. REITs who repurchase their own shares display positive abnormal returns after the buyback announcement.

With regard to special dividends, re-searchers claim that excess dividends enhance value when the REIT structure is prone to higher agency costs, and when the board is dominated by insid-ers. Such evidence endorses the notion that dividend distribution mitigates agency costs and complements disclo-

sure policies. Moreover, a positive rela-tionship is revealed between extra div-idend payments and externally funded REIT growth.

Share repurchases and special dividends: assessing the impact on European REITs

INFORMATION SIGNALLING FROM EUROPEAN REITS ANNOUNCING SHARE BUYBACKS

- 1 2 . 0 %

- 1 0 . 0 %

- 8 . 0 %

- 6 . 0 %

- 4 . 0 %

- 2 . 0 %

0 . 0 %

- 1 4 . 0 %

- 1 6 . 0 %

- 1 8 . 0 %

0 + 1- 1

DIS

CO

UN

T T

O N

AV

T I M E

P O S T A N N O U N C E M E N T

F I G U R E 1 :

I S S U E 6 2 — M A R C H 2 0 1 8

PAGE

27

Given the potential benefits of these plans, how popular have they been with European REITs? From a sample of 236 REITs in Europe covering the pe-riod 2000 to mid-2017, 82 REITs have made one or more share buyback an-nouncements and 44 companies have announced special dividends. Figure 2 gives a picture of the magnitude of these programmes in Europe through time.

The number of REITs implementing share buybacks programmes as a per-centage of the REIT population has de-clined over time. However, as a share of market capitalisation, the size of share buybacks has risen. In recent years, more firms have used special dividends (as a percentage of the population of firms) to return capital to shareholders than buy back stock. Again though, in terms of actual size, share buybacks are considerably larger programmes than special dividends.

Evidence from the European REIT in-dustry on the impact of such corporate plans is lacking. Does the ‘signalling’

hypothesis receive support in Europe? That is, do managers announce these plans at times of low share prices and do prices recover? Our findings from the event study suggest that it is only share buybacks that have an impact on share prices. Figure 3 plots the relationship between stock repurchase announce-ments and share prices for an eyeball inspection.

The impact of repurchases on share prices is short-lived, mostly dissipating within a month. Hence, if the manager’s objective is to indicate unjustified un-dervaluation and signal confidence in the firm’s prospects, repurchase plans are valuable to use. Managers should note though that, following announce-ments and the short-term support to prices, markets assess the company fundamentals – such as book-to-market value, multiples on EBITDA and earnings – that will drive value in the long-run.

Another key question more identifiable with REITs is whether plans are an-nounced at periods of discounts to NAVs.

We do not establish a notable reversal in discounts to NAV six to twelve months post announcement. According to our event study, the worst discounts to NAV materialise at the time when REITs an-nounce the plans.

Back to the question of whether these plans are valuable. We propose that these plans, share buybacks in particu-lar, are corporate actions REIT managers should contemplate – if excess cash is not to remain idle – to assure markets about a company’s prospects at times of stock market volatility and stock un-dervaluations. The consensus among analysts and researchers is that the ob-jective of these programmes should be articulated convincingly.

Managers may not wish to take risks in a tightly priced market and execute ac-quisitions that do not add value. Hence, share repurchases or special dividends offer the best use of cash. Managers should indicate that undervaluations are not supported by fundamentals. Markets will not be impressed if share repurchas-es aim to improve financial ratios. And finally, recent research from the US has linked the success of these programmes to good governance. All in all, as the Eu-ropean industry grows, awareness about share buybacks and special dividends should increase and the options they offer for pursuing strategic interests ex-ploited. •

D R . YI W U Dr. Yi Wu joined Cass Business School from Sun Yat-sen University where she was Assistant Professor of Finance. Previously, she was a visiting scholar at the University of San Diego and the National Univer-sity of Singapore and spent time with Yuexiu, a Hong-Kong based REIT. Her research focuses on corporate finance and real estate investment, and she publishes in academic journals including Real Estate Econom-ics. Yi was honoured with the Lincoln Young Scholar in 2017 and a Distinguished PhD in AREUEA in 2016.

S OT I R I S T S O L ACO S Sotiris Tsolacos is a Professor of Real Estate Investment at Cass Business School and holds senior advisor posi-tions. Previously, he was at Henley Busi-ness School, Reading University, where he received his PhD and the Director of European Research at Property & Portfolio Research/CoStar. He also held positions with JLL, based in London. He works closely with the industry on risk and pricing both in the direct and listed sectors. He is a Fellow of the European Area Business Cycle Network and the Homer Hoyt Institute in the US.

NUMBER OF EUROPEAN REITS ANNOUNCING SHARE BUYBACKS AND SPECIAL DIVIDENDS AS % OF TOTAL NUMBER OF REITS

F I G U R E 2 :

1 5 %

2 0 %

2 5 %

1 0 %

5 %

0 %

20

04

20

00

20

12

20

08

20

16

20

05

20

01

20

13

20

09

20

17

20

06

20

02

20

14

20

10

20

07

20

03

20

15

20

11

Special DividendsShare Buybacks

SOURCE: AUTHORS’ CALCULATION BASED ON SNL, SDC PLATINUM, BVD-ZEPHYR AND THOMSON REUTERS EIKON.

SHARE BUYBACKS AND SHARE PRICES IN EUROPEAN REITS

1 5 0 6 %

2 0 0 8 %

2 5 0 1 0 %

3 0 0 1 2 %

1 0 0 4 %

5 0 2 %

0 0 %

F I G U R E 3 :

20

04

20

00

20

12

20

08

20

16

20

05

20

01

20

13

20

09

20

17

20

06

20

02

20

14

20

10

20

07

20

03

20

15

20

11

Index (left axis)

Share buyback announce-ments as a % of total cap

SOURCE: EPRA; AUTHORS’ CALCULATIONS

S H A R E R E P U R C H A S E S O R S P E C I A L D I V I D E N D S ?

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Index focus

FTSE EPRA/NAREIT Developed Europe Index

FTSE All-World Europe Index

JP Morgan Europe Bond Index

Comparison of asset classes

Developed Index sector share

Top 10 European performers (January 2018)

Value snapshot(January 2018)* 1-year LTV value as of Jan-17 and 10-year value as of 2008

DEVELOPED EUROPE

Total Return (%)

Loan-to-Value (%)*

Premium/Discount to NAV (%)

Dividend yield (%)

1 YEARLATEST (MONTHLY)

16.1%-1.03%

32.1%36.6%

-7.2%-3.2%

3.4%3.5%

10 YEAR(LONG RUN)

YEAR TO DATE

5.4%-1.0%

42.1%-

-11.0%-3.2%

2.5%-

F T S E E P R A / N A R E I T G L O B A L I N D E X

STOCK COUNTRY REIT STATUS

INVESTMENT FOCUS

DIVIDEND YIELDJAN-18SECTOR PRICE RETURN

JAN-18TOTAL RETURNJAN-18

Inmobiliaria Colonial

Hispania Activos Inmobiliarios

WDP

F&C Commercial Property Trust

Icade Management

Carmila

Picton Property Income Limited

Eurocommercial Properties

Workspace Group

Schroder Real Estate Investment Trust

SP

SP

BELG

UK

FRA

FRA

UK

NETH

UK

UK

REIT

Non REIT

REIT

Non REIT

REIT

REIT

Non REIT

REIT

REIT

REIT

Rental

Rental

Rental

Rental

Non-Rental

Rental

Rental

Rental

Rental

Rental

Office

Diversified

Industrial

Diversified

Diversified

Retail

Diversified

Retail

Office

Diversified

0.00

0.00

0.00

0.37

0.00

0.00

0.00

0.00

0.88

0.00

8.60

7.32

6.71

6.25

6.55

6.18

5.07

4.60

3.30

3.97

8.60

7.32

6.71

6.62

6.55

6.18

5.07

4.60

4.18

3.97

4 0 0 0

JU

L 0

2

JU

L 0

3

JU

L 0

5

JU

L 0

8

JU

L 1

2

JU

L 1

6

JU

L 0

4

JU

L 0

7

JU

L 1

1

JU

L 1

5

JU

L 0

6

JU

L 1

0

JU

L 1

4

JU

L 0

9

JU

L 1

3

JU

L 1

7

NO

V 0

2

NO

V 0

3

NO

V 0

5

NO

V 0

8

NO

V 1

2

NO

V 1

6

NO

V 0

4

NO

V 0

7

NO

V 1

1

NO

V 1

5

NO

V 0

6

NO

V 1

0

NO

V 1

4

NO

V 0

9

NO

V 1

3

NO

V 1

7

MA

R 0

3

MA

R 0

5

MA

R 0

8

MA

R 1

2

MA

R 1

6

MA

R 0

4

MA

R 0

7

MA

R 1

1

MA

R 1

5

MA

R 0

6

MA

R 1

0

MA

R 1

4

MA

R 0

9

MA

R 1

3

MA

R 1

7

3 0 0 0

2 0 0 0

1 0 0 0

1.7% Industrial/office

3.5% Self storage

4.1% Lodging/resorts

7.5% Industrial6.6% Healthcare

14.1

% R

esid

entia

l

12.4% Office

21.4% Retail

28.7% Diversified

PAGE

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HEAD OFFICE

Square de Meeus 231000 Brussels, BE

T +32 (0)2 739 1010

UK OFFICE

Devonshire House, One Mayfair PlaceLondon W1J 8AJ, UK

T +44 (0)7973 109117

HONG KONG OFFICE

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