Seeing Value in Real Estate Private and Confidential 1 Development of Real Estate Funds Management...

Seeing Value in Real Estate

Private and Confidential 1

Development of Real Estate Funds Management in Asia

Agenda

• Introduction of MGPA

• From MGPA to BlackRock

• Real Estate Funds– What role does real estate perform in a balanced portfolio

• Real Estate Funds in Asia– Real Estate in Asia – How it has developed over time– Capital inflows for Asia Funds 1995 -2013– Asian real estate returns– 2013 – 2018 Crystal ball

• Thailand-– In an Asian RE Investment context

• The landscape ahead: Where will capital go

• Q & A




Introduction of MGPA

MGPA Overview

• Vertically integrated independently managed, private equity real estate advisory company operating throughout Asia Pacific and Europe

• Focused on real estate funds management, co-investments and separate account mandates for institutional investors

• Offering products across the risk/return spectrum including development

• 14 year investment and development track record across Asia and Europe1

• 91 investors from Australia, Europe, Middle East and North America

• As of 31 March 2013 MGPA had (i) raised US$8.5 billion of equity commitments and (ii) gross assets under management of US$12billion


1 Including Lend Lease Global Properties Fund SICAF.

Capital Commitment by RegionHistorical AUM / EUM (US$ Millions)

20%

30%

10%

41%

Australia

Europe

Middle East

North America

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012

0

2,000

4,000

6,000

8,000

10,000

$12,000

AUM EUM

Global presence


EuropeCopenhagenFrankfurt LondonLuxembourgParisWarsaw

Asia PacificBeijingHong KongKuala LumpurShanghaiSingaporeSydneyTokyo

Extensive local network with 220 staff in 13 offices throughout Asia Pacific and Europe.


Long term growth, stable platform

1 Does not include the establishment and realisation of co-investment vehicles or separate accounts.

1995

1995APIC CloseUS$250 million

MGPA at a glance

• Activities– Eight funds currently under management in Asia and Europe – total cumulative equity commitments of approximately US$7.5 billion– Seven co-investments and joint ventures totalling US$385 million in equity commitments– Three advisory mandates– Invested in 421 properties with exposure to 21 countries

• Since inception – investors – 91 investors from 16 countries across four regions; Australia, Europe, Middle East and North America– Over 85% of investors have reinvested with MGPA

• Since inception - realised investments– 172 properties with total gross asset value at disposition of over US$6.3 billion– Realized net investment level returns across value add and opportunistic strategies IRR 19%,


1 As at 31 March 2013 includes all realised investments across LLGP, MGPA AFII, MGPA EFII, MGPA AFIII & MGPA EFIII.

Global industry recognition

2013 Best Asian PERE fund manager (REIW)

2013 Asian deal of the year (Ginza 4-Chome Tower) (REIW)

2012 Best Asian PERE fund manager (REIW)

2010 Europe deal of the year (acquisition of Aldi Portfolio, Germany)

2009 Asian firm of the yearAsia deal of the year (181 Queen’s Road)CEE retail awards investor of the year award (MGPA Europe Fund III, L.P.)

2008 Asian firm of the yearGlobal fundraiser of the year (Global Fund III) Asian fundraiser of the year (MGPA Asia Fund III, L.P.) Asian industry figure of the year (Simon Treacy)

2007 Asian & European firm of the year Asian industry figure of the year (Jim Quille)Asia deal of the year (8 Shenton Way)

2006 Asian firm of the year


Capital raised over past five years

• MGPA has raised US$5.4 billion of capital commitments over the last five years, ranking them (globally) number 11 of real estate asset managers

Source: PERE Magazine

2012 Rank Name of Firm

Capital Raised (US$ B)

2011 Rank

1 The Blackstone Group 29.100 1

2 Morgan Stanley Real Estate Investing 12.667 2

3 Goldman Sachs Real Estate Principal Investment Area 12.124 5

4 Tishman Speyer 12.104 3

5 Colony Capital 11.654 4

6 The Carlyle Group 9.639 8

7 Lone Star Funds 7.900 10

8 Beacon Capital Partners 6.580 6

9 Westbrook Partners 6.025 11

10 LaSalle Investment Management 5.864 7

11 MGPA 5.426 13

12 Starwood Capital Group 4.595 21

13 CBRE Global Investors 4.035 15



Investor profile

Capital commitment by investor type

• Total capital raised (including all Funds and co-investments) US$8.5 billion• 91 investors across all industry sectors from Australia, Europe, Middle East and North America

22

34

3

30

Chart Title

Australia

Europe

Middle East

North America

Capital commitment by region (number of investors)

Average equity commitment by investor US$ MM

75

73.6

268.4

115.2

Chart Title

Australia

Europe

Middle East

North America

Capital commitment by region

38%

17%

15%

11%

5%

5%5%

4%

Public Pension Fund

Investment Manager

Sovereign Wealth Fund

Corporate Pension Fund

Other*

Insurance Company

Industry Pension Fund

Foundation/Endowment

* Other includes HNW, Family office, FoF’s and Financial services

20%

30%

10%

41%Australia

Europe

Middle East

North America


MGPA in Europe – Proven Performance

• Well established European presence with over 80 staff in six offices– 13 nationalities, 24 languages

• 298 properties acquired since 1999 across 13 countries – Gross asset value of US$6.2 billion

• 20 development and re-development projects undertaken in ten countries

• Investments in 104 properties realised1

– Total gross asset value at disposition of US$3.4 billion– Realised net investment level IRR 19%,

1 As at 31 March 2013.

2 Includes all realised investments across LLG, EFII and EFIII.

Assets in 13 European countries


Belgiuml Banimmo Portfolio

(corporate, office & retail)l Sony Portfolio (office)

Denmark Illum (retail)

Francel Banimmo Portfolio

(corporate, office& retail)l Akeler Portfolio

(corporate, office/logistics)l Capital Sud (office) Logiffine (light industrial/logistics)l Balthazar (office) Le Madeleine (office & retail) Viva (office)

Germanyl Akeler Portfolio

(corporate, office/logistics)l MCT (office) GLI Portfolio (logistics) Sony Portfolio (office) ‘Dial’ and ‘August’ Portfolios (retail &

industrial) CNL GIT Portfolio (retail) Separate Account Portfolio (retail)

Greece Academy Gardens (retail)

Italyl Sony Portfolio (office/logistics) Light Building (office)

Luxembourg

l Banimmo Portfolio (corporate, office & retail)

Polandl Roundabout (office) Angel Wings (residential) Rondo 1 (office & retail) Wilanow One (residential) Karolinka (retail) Pogoria (retail)

Portugall Arrabida Shopping Centre (retail)l Akeler Portfolio

(corporate, office/logistics)

Spainl Amura (office)l Metrovacesa (equity)

Switzerland Sony Portfolio (office)

The Netherlandsl Haslemere (equity) Sony Portfolio (office)

UKl Meadow Portfolio (mixed use)l Hayes Office Park (office)l Storage King (self storage)l Akeler Portfolio (corporate, office/logistics)l Chancery Exchange (office) Sony Portfolio (office) LIH (corporate) Exchange Tower (office) Moorgate Exchange (office) 6 Bevis Marks (office)

l Realised assets Currently owned assets


MGPA in Asia – Proven Performance

• Over 130 staff in China, Hong Kong, Japan, Singapore, Malaysia and Australia

• 130 properties acquired since 1999 across seven countries– Gross value of US$11 billion

• 14 development and re-development projects undertaken in six countries

• 74 properties realised1

– Total gross value at disposition of US$2.9 billion– Realised net investment level returns across value add and opportunistic strategies, IRR 18%,

1 As at 31 March 2013.

2 Includes all realised investments in Asia and Japan across LLGP, AFII and AFIII.

Assets in eight countries across Asia Pacific


Chinal Platinum (office) Galleria Chengdu (retail)l Panyu (residential & retail) j-Tower (office)

Hong Kongl Lippo Towers (office)l Repulse Bay (residential)l 181 Queens Road (office & retail)l Vicwood (office & retail)l Great Eagle (equity)l HK Land (equity)

Malaysia The Intermark (office, retail & hospitality)

Singaporel Springleaf Tower (office) 8 Shenton Way (office & retail) Asia Square

(office, retail & hospitality) Asia Square (office & retail)l Cascadia (residential)l 8 Napier (residential)

Japanl Arasho (office)l MyAtria Ikebukuro (residential)l Sogo Portfolio (office)l Toranomon (office)l Ueno building (office)l Rosa Akasaka (residential)l KIR Otemachi (residential)l Osaka 2 Portfolio (office)l Noda (logistics)l Sanbacho (office) Whale Portfolio (residential) Ginza 4-Chome (office &

retail) Strings Portfolio (office)l MyAtria Portfolio (mixed use) Malera Shopping Centre

(retail) Fukuoka (office & retail) Meiwa 2 Portfolio

(office & residential) Higashi Ogijima (industrial)l Shirokanedai (office & retail) Fuji Grand Imabari (retail) l Ark II (office & residential) Whale Meguro

(office & residential)l Hybrid Portfolio

(office & residential) Kameido (office)l Meguro Yamate Place (office)l Atria Meguro Tower (residential)

l Realised assets Currently owned assets

Australia 6-10 O’Connell Street (retail & office) Optima Centre (office)

Thailand Evolution Capital (hotel & leisure) Andaman (hospitality & residential)

South Koreal M Tower (office)l KEB (NPL portfolio)l Financial News (office)

South Shin Otsuka Building (office) Shinjuku TX Building (office)


Asia Square – Singapore

Current asset developmentKey figures

Equity invested to date US$1,724 million

Ownership MGPA Asia Fund III

Acquisition date Q4 2007 (Tower 1) and Q1 2008 (Tower 2)

Size2.1 million sq ft of office and retail (NLA) and a 5-star hotel

Opportunity Buy, develop, sell

• Key information– Amalgamate two adjacent sites to develop an integrated premier office

complex with a 5-star hotel in new CBD of Singapore – Asia Square Tower 1 completed in June 2011; Tower 2 scheduled to be

completed in Q3 2013

– Deliver efficient space for the financial services sector– Tenants: Citi (anchor), Julius Baer, Sarasin Bank, Google, Lloyds of London,

Marsh & McLennan and Westin hotel– Tower 1 is certified LEED Platinum (first in Singapore) and Tower 2 is pre-

certified LEED Platinum.

The Intermark – Kuala Lumpur, Malaysia


Current asset redevelopment

Key figures

Equity invested to date US$244 million

Ownership MGPA Asia Fund II

Acquisition date Q2 2007

Size (NLA)

1,315,659 sq ft (office) 208,697 sq ft (retail)540 rooms (hotel)

Opportunity Buy, fix, sell

• Key information– A mixed use development of 2,755,948 sq ft comprising a 63 storey existing office

tower, a 40 storey new office tower, six storey shopping centre and a hotel

– Renovate existing office tower (Vista Tower) and hotel (Doubletree by Hilton)

– Demolish one of the poorly designed retail centres and re-develop into a new office tower (Integra Tower)

– Capture planning gain through increasing allowable plot ratio to ten times

– Integra Tower received Certificate of Completion and Compliance in November 2012

– Tenants: Vista Tower – UOB, SMBC, BNP Paribas and Petronas; Integra Tower – JP Morgan and Aker Solutions.

181 Queen’s Road Central – Hong Kong


Realised asset managementKey figures

Equity invested US$85.5 million

Ownership MGPA Asia Fund II (65%), co-investors (35%)


Size (GFA) 35,590 sqm

Realised date Q4 2009 to Q1 2010

Gross sales price US$434 million

Opportunity Buy, reposition, sell

• Key information– A 29 storey Grade B+ office building with retail podium

– Located in the fringe of Central Hong Kong

– Invested in an under-rented building in a market with limited supply, strong demand and a positive rental growth outlook

– Realised reversionary value – passing rents over 50% below prevailing market rents

– Sold through strata title, to take advantage of opportunity in market cycle

– Net investment level return: IRR 20%, EM 1.8x.

Vicwood Plaza – Hong Kong


Realised asset repositioning

• Key information– A 35 storey building over four levels of retail and 29 office floors– Excellent transport connections including a footbridge system linking it to Central – Realised reversionary value – passing rents 50% below market rents– Improved tenant covenants (e.g. HSBC and Mayer Brown JSM) – Revitalised retail tenant mix and created direct access from retail podium to MTR – Upgraded office floors and increased leasable area from 377,214 sq ft to 390,161 sq ft– Net investment level return: IRR 23%, EM 2.2x.

Key figures


Ownership MGPA Asia Fund II (51%), co-investors (49%)


Size (GFA) 377,214 sq ft

Realised date Q3 2010


Opportunity Buy, fix, sell


56 Repulse Bay Road – Hong Kong


• Key information– Located in Repulse Bay, traditional luxury residential area of Hong Kong, all 53 houses enjoy full

sea view

– Fixed the physical deficiencies, including water leakage, underperforming air conditioning and dated aesthetic design

– Value added opportunity to upgrade the asset via refurbishment, including replacement of the façade, upgrade of the car park and driveway and creation of new landscaped garden

– Rebranded the project including renaming it to ‘56 Repulse Bay Road’ and conducted high profile marketing campaign

– Disposed of the asset on a strata title basis, major buyers were local HNW and family offices


Key figures

Equity invested HK$622 million

Ownership Global Fund I (70%), co-investors (30%)


Size 188,294 sq ft


Gross sales price HK$3,049 million

Opportunity Buy, refurbish, sell

Toranomon – Tokyo, Japan



Key figures


Ownership Global Fund I


Size 4,692 sqm


Gross sales price US$71.3 million

Opportunity Buy, reposition, sell

• Key information– Located on a major arterial route in central Tokyo – Undertook extensive refurbishment and repositioning, including new façade to

provide modern office accommodation

– Let and sold into improving market cycle



Malera Shopping Centre – Gifu, Japan

• Key information– Acquire a retail investment in suburban Japan in order to rebalance and

reposition the centre in the trade area to capture increased sales

– Off market acquisition

– Property management efficiently restructured and redesigned– Centre has secured new tenants including new anchor tenants (Round One,

H&M, Zara and Bershka)

– Common areas have been improved and the centre re-zoned– NLA has been increased by 277 tsubo following conversion of common area to

let area.

Current asset repositioning

Key figures


Ownership MGPA Japan Core Plus Fund


Size 76,143 sqm

Opportunity Repositioning


Ginza 4-Chome – Tokyo, Japan

• Key information– A well-located office/retail property in the Ginza district of Chuo ward

– Lender took control of the asset following original developer’s bankruptcy. Decision to dispose asset at significant discount to the original loan amount provided attractive pricing

– 58% initial occupancy, to be leased-up and stabilized during the hold period

– The strategy is to lease-up and stabilize during the hold period and to achieve cost reduction by streamlining the building management and property management costs

– Sell at stabilized cash flows in central Tokyo to institutions such as J-REITs

– Increased occupancy to 100% within 6 months of acquisition

Current asset management

Key figures


Ownership MGPA Asia Fund III (100%)

Acquisition date March 2012

Size 60,536 sq ft

Opportunity Buy value with active management

M Tower – Seoul, Korea


Realised asset management

Key figures

Equity invested US$16 million

Ownership MGPA Asia Fund II (50%), co-investor (50%)


Size 34,173 sqm

Realised date October 2007


Opportunity Forward purchase

• Key information– A 19 storey Grade A office tower development located in a prime area of the

CBD with a redevelopment plan– Strong demand with limited supply. Building fully let prior to completion.

– Sold to a Korean REIT after the building was fully let


Galleria – Chengdu, China


Key figures


Ownership MGPA Asia Fund III (50%), JV partner (50%)


Size (GFA) 385,125 sq ft (retail)

Opportunity Acquire institutional Grade retail property with a strong rental growth outlook

• Key information– Occupancy remains unchanged at 100% – Leasing performance is above underwriting – Ongoing discussions with Auchan about the connecting foot bridge– Approximately 7,800 sqm of let (23% of NLA/65 leases) space will expire in

second half of 2013, providing good reversionary potential. Majority of these leases are on Levels 2 and 3.

Current asset management



From MGPA to BlackRock

Bigger platform with wider coverage

Source: BlackRock as at 5 June 2013BlackRock and MGPA investment offices

The combined platform will have substantial on the ground investment expertise in 18 offices across 13 countries

BlackRock Real Estate investment offices

MGPA investment offices

Tokyo

SydneyHong Kong

Shanghai

Beijing

Singapore

Kuala Lumpur

Copenhagen

London Frankfurt

Paris

Luxembourg

WarsawNew York

Boston

San Francisco

Newport Beach

Pittsburgh

• Platform expansion– A team of over 400 real estate professionals

collectively– Combined pro forma of approximately US$25

billion AUM as of 31 March 2013

MGPA US$12 billionBlackRock real estate US$13 billion

US$25 billion

Future initiatives

• Launch follow on Funds

• Grow in all 4 quadrants

• Large core funds in each region & major country

• Value add & opportunistic on a regional basis

• Grow AUM selectively




Real Estate Funds

What role does real estate perform in a balanced portfolio

• Inflation Protection – hedge against inflation– Rental income highly correlated with inflation

• Return enhancer – higher long-term return than and bonds and cash

• Income generator– Stable rental income from stabilised properties often secured against long term leases CPI indexed

• Diversification – weak correlation to equities and bonds

• Real assets– You can feel and touch

• Low beta– Lower long term volatility than equities


Real Estate offers many investment styles


Private funds - Core, core plus, value-add, opportunistic

REITsListed property funds

Eq

uit

y

PublicPrivate

Deb

t

MezzanineWhole loans

CMBSMortgage REITs

Retu

rn

Risk

Core:6%-8%

Core plus:10%-12%

Value-add:13%-15%

Opportunistic:18%-20%



Real Estate Funds in Asia

Real Estate in Asia – How it has developed over time


Private funds - Core, core plus, value-add, opportunistic

REITs,Listed property funds

Eq

uit

y

PublicPrivate

Deb

t

Mezzanine,Whole loans

CMBS,Mortgage REITs

1993199820042013

0

10

20

30

40

50

60

$0

$5

$10

$15

$20

$25

$30

$35

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Capital Raised (US$ bn) Number of Funds

Capital RaisedU

S$ bn

Num

ber of Funds

Capital inflows for Asia Funds 1995 -2013


Source: Preqin

• Fund raising environment remains challenging– Declining capital raised/fund ratio

Real Estate Funds Raised in Asia

What investors want

• Stability– Stable political and economical environment

• Certainty– Continuity of policies, regulations

• Transparency– Availability of information for investors making informed investment decisions

• Rule of Law– Law enforcement– Title

• Liquidity– An active transaction market – Robust Capital markets


What's changed in a post GFC world

• Initially less capital – This is changing

• LP’s want more say

• Definition

• New formats

• Less fees

• Greater Transparency

• Greater regulatory environment

• Operators V Allocators

• Fiduciary culture

• Increased communication


Where the capital is heading

• Capital is heading to markets that – welcome capital – have liquidity


Most active markets in H1 2013 Most active cities in H1 2013

Source: JLL

Institutional grade real estate market size


Source: Prudential Real Estate Investors

Estimated Size of Real Estate (US$ bn)

• The U.S. still dominant by a very large margin

Estimated Size of Real Estate (US$ bn)

21488489189198211241350467

656689784884990

1,2481,370

1,6151,864

2,6786,753

VietnamPhilipinesMalaysiaThailand

IndonesiaTaiwan

Hong KongSingapore

IndiaSouth Korea

AustraliaSpain

CanadaBrazil

ItalyFrance

U.K.Germany

ChinaJapan

U.S.

Asia – the growth engine



Forecasted Size of Real Estate (US$ tn)

• Asia Pacific is expected to become the largest real estate market in the world by 2021

• China will contribute the most to the global growth of CRE

Contributions to global growth of CRE

2013 – 2018 Crystal ball

• Defined benefit to defined contribution– More money – Greater liquidity– More allocation to alternatives


DB/DC Asset Split

Pension asset allocation

Source: Towers Watson

2013 – 2018 Crystal ball

• Real assets – growth trend– Infrastructure– Real estate– Timber– Agricultural land

• Emerging market– Retirement plan (pension)– Life insurance– Matching assets with liabilities


Pension asset development in Asia and CEE (€ bn)

Source: Allianz Dresdner Economic Research



Thailand- in an Asian RE investment context


• Current GDP 5.3%1

– 3-yr forecast average: 4.7%– 3-yr historical average: 4.4%

• Population 66.4 billion, growth at 0.3% p.a. (2010-15)2

– 2015 projection: 67.4 billion

• Diversified economy


1 Source: IHS2 Source: United Nations, Department of Economic and Social Affairs (as of 2010)

Source: CIA World Factbook, 2012 est.


• Asian real estate ex. Japan delivers consistent positive returns


Source: MGPA, JLL REISNote: the returns were calculated based on JLL office total return indices (local currency)China – Beijing & Shanghai

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Japan China Singapore Hong Kong Malaysia Thailand

5-Year Income Return 5-Year Capital Appreciation

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Japan China Singapore Hong Kong Malaysia Thailand

10-Year Income Return 10-Year Capital Appreciation

Asian markets 5-year total return Asian markets 10-year total return


• Much less inbound institutional investors– Thailand is not getting its “fair share”


Source: Real Capital Analytics

0

5

10

15

20

25

30

35

2007

2008

2009

2010

2011

2012

US$ bil Cross-boarder Investment Volume from Institutional Investors

China Singapore Thailand Malaysia India Indonesia

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2007

2008

2009

2010

2011

2012

US$ bil Cross-boarder Investment Volume from Institutional Investors (ex. China and Singapore)

Thailand Malaysia India Indonesia

Thailand- plenty of room to grow

• Thailand has lagged in developing a REIT market, compared to its peers in ASEAN

• It has also lagged in the size of institutional-grade real estate


Source: Asia Pacific Real Estate Association (APREA)

Japan72.2bn

Singapore47.1bn

Hong Kong24.3bn

Malaysia8.5bn

Thailand6.6bn

Taiwan2.9bn

Korea0.5bn

REITs Market Cap (US$ bn)

Note: For charting purpose, property funds are used as a proxy for REITs in Thailand

Japan2,678bn

Singapore241bn

Hong Kong211bn

Malaysia84bn

Thailand89bn

Taiwan198bn

Korea467bn

Insitutional-Grade RE Market Size (US$ bn)


The landscape ahead: Where will capital go?

• Its all about change

•The rate of change

•How we adapt to change

•Capital is agnostic

•Adapt and grow or atrophy and die

•Detroit




Development of Real Estate Funds Management in Asia

22 July 2013

Disclaimer

The information in this document is being delivered and provided on a confidential basis and as an information only document. No offer is being made by MGPA by delivery of this document and no reliance should be placed upon the contents of this document by any person who may subsequently decide to enter into any investments, investment services or transaction which may be described herein.

This document is provided for assistance only and is not intended to be and must not alone be taken as, the basis for a decision to enter into any investments, investment services or transaction which may be described herein.

Recipients of this document should not treat its contents as advice relating to legal, taxation or investment matters and are advised to consult their own professional advisers concerning any investments, investment services or transaction that may be described herein.

Third party information contained in this document has been compiled from sources believed to be reliable but no liability is accepted if this is not the case.

In considering any performance data contained herein, you should bear in mind that projected returns are not indicative of future results, and there can be no assurance that an investment will achieve comparable results or that projected returns will be met. A full list of past specific recommendations is available upon request.

This document is proprietary to MGPA. By accepting delivery of this document, the recipient agrees not to reproduce or distribute this document in whole or in part and not to disclose any of its contents (other than to obtain advice on it from a legal, business, investment or tax advisor) without the prior written consent of MGPA.

© MGPA 2013


Seeing Value in Real Estate Private and Confidential 1 Development of Real Estate Funds Management...

Documents

Transcript of Seeing Value in Real Estate Private and Confidential 1 Development of Real Estate Funds Management...