“Investment in offshore property portfolios” – Stanlib
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  • Total market cap as at sep 11
  • Total market cap usd as at feb 2011Classified according to forecast of total revenue for next 3 years. Diversified if less than 50%
  • USD

“Investment in offshore property portfolios” – Stanlib “Investment in offshore property portfolios” – Stanlib Presentation Transcript

  • Global Listed Property Overview Keillen Ndlovu Head of Listed Property Funds Senate Conference March 2013
  • The STANLIB Listed Property Team Keillen Ndlovu Riaan Gerber Ndabezinhle Mkhize Craig SmithHead: Listed Property Funds Property Analyst Property Analyst Property Analyst Portfolio Manager Offshore Focus Local Focus Local Focus BCom (Hons) Finance BCom(Hons) Finance B Compt (Hons) BSc (Actuarial Science) BSc (Hons) Property StudiesProperty Development Programme Property Development Programme CAIA CFA CAIB(SA) CA(SA) CFA Passed CAIA Level 1 exams 8 years 5 years 8 years 4 years asset management experience asset management experience asset management experience physical property experience (8 years listed property) (5 years listed property) (6 years listed property) (1.5 years listed property) (8 years with STANLIB) (5 years with STANLIB) (2 years with STANLIB) (1.5 years with STANLIB) 3
  • Stanlib Global Property Fund● Objective ● The Fund invests in the global property market comprising of both developed and emerging territories. ● To provide superior long term investment performance based on sound fundamental research.● Portfolio Characteristics ● The Fund aims to outperform the UBS Global Real Estate Investors Index ● Manager selects stocks from the bottom up rather than attempting to take big regional bets. ● The Fund has a very strong bias toward investors rather than developers.● Investment Style ● Involves selecting companies that generate above average growth in their rental streams ● We invest in companies that are trading at reasonable values relative to their growth prospects. ● We focus on defensive attributes such as balance sheet strength, tenant stability and core rental earnings.● Target Market ● Investors that seek a diversified portfolio of global property stocks that aims to diversify exposure away from the South African listed property market ● Investors that need to add diversity to their offshore cash, equities and/or bond exposure. ● Investors that need to add diversity to currency exposure 3
  • We do stock picking in-house but we outsource most of the research UBS MacQuarie Credit Suisse Morgan Stanley JP Morgan Merill Lynch Morningstar Deutsche Bank CB Richard Ellis Jones Lang La Salle  Monthly or quarterly conference calls Ad hoc conference calls  Conversations Email Bloomberg chats  Analysts visiting us at our offices One-on-one meetings Property markets reports Daily reports Weekly reports Monthly reports4
  • Increased appetite for STANLIB’s offshore listed property offering The STANLIB Global Property Feeder Fund has grown to R790m making it the biggest offshore property fund in South Africa Source: I-Net & STANLIB5
  • STANLIB Global Property offering – managed in-house - a top performer● STANLIB Global Property Fund (underlying fund – US Dollar denominated) ● Ranked 2nd in the world over 2 years as at 31 December 2012 (in USD)● STANLIB Global Property Feeder Fund (Rand denominated) ● Winner of the Morningstar Award ● Best Risk-Adjusted Return Over 1 and 3 years to Dec 2011 ● South African ranking(in ZAR) – Jan 2013 ● 1st over 1 year out of 6 funds ● 1st over 3 years out of 5 funds ● 1st over 5 years out of 3 funds Source: Morningstar & FundsDataNB: We do not aim for this. It’s an outcome of our investment philosophy and process. 6
  • STANLIB Global Property Fund gross total returns to 31 December 2012 - USD 1 3 6 1 3 Since Month Month Month Year Year Inception (%) (%) (%) (%) (%) Sept 2009* (%)STANLIB Global Property Fund 3.25 4.67 9.97 26.79 16.13 16.60 Benchmark : 2.85 4.58 8.86 24.93 15.55 15.84 UBS Global Investors Outperformance 0.40 0.08 1.11 1.86 0.59 0.76 *annualised Official STANLIB takeover July 2009 Fully invested Sept 2009 Source: STANLIB Performance
  • STANLIB Global Property Fund gross total returns to 31 December 2012 ZAR 1 3 6 1 3 Since Month Month Month Year Year Inception (%) (%) (%) (%) (%) Sept 2009* (%)STANLIB Global Property Fund -1.55 7.03 13.85 32.85 21.68 21.05 Benchmark : -1.93 6.94 1.70 30.90 21.06 20.26 UBS Global Investors Outperformance 0.38 0.08 1.15 1.95 0.61 0.79 *annualised Official STANLIB takeover July 2009 Fully invested Sept 2009 Source: STANLIB Performance
  • Our benchmark has achieved the highest return with the lowest risk STANLIB Global Property Fund Benchmark 9% 8% UBS Global Investors FTSE EPRA/ NAREIT Total Return Per Annum 7% Global 6% 5% GPR 250 4% MSCI World RE* 3% UBS Global 2% Developers 1% 0% 16% 18% 20% 22% 24% 26% 28% Risk Per Annum Source: UBS – Data from 1990 to 20129
  • STANLIB Global Property Fund exposure by region Portfolio by Region 4.0% 5.6% North America 5.6% 3.7% Europe UK Oceania 10.3% Japan 54.7% Hong Kong 5.7% Singapore 10.3% cashSingapore retail, Suntec City Mall May 2009 site visit Source: STANLIB Research Dec 2012
  • STANLIB Global Property Fund exposure by sector Portfolio by Sector 1.6% 5.6% 17.3% office retail 20.2% industrials HOSPITALS residential diversified 11.1% hotels 37.1% cash 7.2% PRISONS Source: UBS, Bloomberg Dec 201211
  • The retail sector has provided the best returns with the lowest risk 10% 9% Global Investors 8% Retail Return Per Annum 7% 6% Diversified Residential 5% Industrial 4% 3% Office 2% Global Developers 1% 0% 13% 15% 17% 19% 21% 23% 25% 27% 29% 31% 33% Risk Per Annum Source: UBS – May 2002 to Jan 201212
  • STANLIB Global Property Fund Current HoldingsTop 10 Holdings Portfolio % Top 10 Overweight Positions RelativeWestfield Group 2.0% American Campus Communities 0.72%Wharf Holdings Ltd 2.0% Westfield Retail Trust 0.73%Ventas Inc 2.0% Brookfield Office Properties 0.75%Equity Residential 2.1% Can Real Estate Invest Trust 0.78%Boston Properties Inc 2.2% Can Apartment Prop Real Estate 0.82%Prologis Inc 2.5% Primaris Retail Real Estate 0.89%Unibail-Rodamco Se 2.6% Simon Property Group Inc 1.02%Public Storage 3.0% Tanger Factory Outlet Center 1.06%New Europe Property Invest 3.4% Growthpoint Properties Austr 1.60%Simon Property Group Inc 7.1% New Europe Property Invest 3.37% 28.8% 11.72% Source: STANLIB Research as at Dec 2012 13
  • Imagination is a poor substitute for experience Havelock Ellis Some of our many site visits NB: All photos taken by the STANLIB Listed Property team
  • Shopping JK Iguatemi, Sao Paulo – Brazil’s most beautiful shopping centre July 2012 Owned by Iguatemi Empresa de Shopping Centers one of our holdings15
  • Norte Shopping, Rio de Janeiro, Brazil – Low income centre – BR Malls Source: STANLIB Research July 2012 16
  • USA – New York site visits – June 2012 Source: STANLIB Research June 201217
  • USA – New York Site Visits Source: STANLIB Research June 201218
  • London Jan 2012 site visits - Westfield Stratford City – Westfield Group Opened in September 2011 and cost £1.45bn (R17.5bn) to build 190,000m²- the largest shopping centre in Europe (Canal Walk in Cape Town is 150,000m²) Average lease length is 10 years Anchored by John Lewis (24,000m²), Marks & Spencer (20,000m²), Waitrose (3,200m²) & 6,500m² casino (UK’s largest) 17 cinemas – all with 3D screens Vacancy of 6% - looks to be fully let before Olympic Games 70% of the visitors to the Olympics will pass through Westfield Stratford 58 trains per hour connect Stratford and Central London Source: STANLIB Research January 2012 19
  • Westfield White City – London – Westfield Group - January 2013• Opened in October 2008 and cost circa £1.6bn (R22bn) to build• 150,000m² in size placing it at a similar size to Canal Walk in Cape Town• 255 stores• Anchored by Debenhams, M&S, Waitrose (3,200m²)• The project took five years to build• Shop front floor to ceiling height on upper level is double volume Source: STANLIB Research Jan 2013 Source: Westfield, Stanlib Research 20
  • Canary Wharf, London - January 2012 & 2013 • Owned by Canary Wharf plc • Canary Wharf precinct commenced in the mid to late 1980’s Photo by Craig Smith Photo by Craig Smith • precinct now comprises approx 1.5m m² of office and retail space • Working population in excess of 105 000 people • Occupiers include Thomson reuters, Ogilvy, McGraw-Hill, BP Shell, Chevron, Total, Clifford Chance, Allen and , Overy, HSBC, Barclays, Citi, Morgan Stanley, Credit Suisse, BNY Mellon, BOA Merrill Lynch, KPMG, Fitch, Moodys, Standard & Poors, Mastercard, FSA, JP Morgan) • The Cross rail line will link in to Canary Wharf and is expected to open in 2018 Source: STANLIB Research Jan 2013 Source: Songbird Estates, Stanlib Research 21
  • Hong Kong – One of the most densely populated cities Source: STANLIB Research January 201222
  • No wonder why there’s queues at shopping centres in Hong Kong Harbour City – Hong Kong’s largest mall – 177,000m² Normal trading day. No specials. Source: STANLIB Research January 201223
  • Hong Kong site visit - Langham Place Mall – Champion REIT  Dividend yield 6.2%  Gearing 26%  Cost of debt 1.1%  100% occupied  Footcount up 5.2% to 8.5m visitors per month – management looking to improve it!  Turnover up 24% year on year  Rental growth up 20% over expiring rents No weakness or slowdown expected in occupancies or rents Source: STANLIB Research January 2012 24
  • Romanian towns and cities visited by STANLIB in 2011 Areas where NEPI is exposed to25
  • The new Romania – upmarket shopping centres - NEPI Source: STANLIB Research May 2011 Promenada Mall , Braila - New Europe Property Investments (NEPI) 26
  • The new Romania – NEPI - modern office buildings with multinational tenants City Business Centre, Timisoara Floreasca 169, Bucharest Source: STANLIB Research 27
  • Singapore site visits – August 2011 – Strong fundamentals across all sectors Marina Bay Sands New CBD – letting very well. Taken up by banks No material impact on existing retail and hotelsNew shopping centre on Orchard Road – fully let Old CBD – holding up despite increase in supply 28
  • Singapore site visits – August 2011- Strong fundamentals across all sectors Hotel Retail Retail Retail – first H&M store in Singapore 29
  • Westfield Retail Trust, Australia - October 2011- Management breakfast● A$9.3bn market capitalisation (R85bn)● Owns malls in Australia and New Zealand● Less than 2% of rent linked to sales turnover● 99.5% of portfolio leased i.e. 0.5% vacancy● Low gearing of 20% Westfield Sydney, Sydney CBD, Australia30
  • STANLIB offshore conferences, management meetings & site visits in 2012 ● Hong Kong – January ● UK - January ● US – June ● UK - June ● Romania – June ● Brazil – July ● Singapore – August 31
  • Offshore conferences, mgnt meetings and site visits planned* for 2013 & 2014 ● UK/France ● Romania/Turkey ● Philippines/Malaysia/Indonesia ● China/Hong Kong ● Australia/New Zealand ● USA/Canada ● Germany/Switzerland ● Japan/Singapore * May change 32
  • Physical property fundamentals
  • Global Prime Retail – Rental market is looking good Top 10 Prime Retail Rents in the World Market R/m² per month Hong Kong 34 803 New York 23 847 London 9 044 Paris 8 673 Sydney 8 151 Tokyo 7 828 Zurich 6 846 Melbourne 6 815 Moscow 5 930 Beijing 5 313 Source: CB Richard Ellis Q4 Report 2012 & Source: Jones Lang LaSalle Q1 Report 2013 STANLIB conversions using € exchange rate of 11.834
  • Global Listed Property Prices are 30% below the peak achieved in 2007Global Listed Property(USD): 30% below 2007 peaks SA Listed Property (ZAR): 33% above 2007 peaks UBS Global Real Estate Investors Index SA Listed Property Index 3500 600 3000 +33% -30% 500 2500 400 2000 300 1500 -76% -37% 200 1000 500 100 0 0 It’s a similar story with, for example, the MSCI World Real Estate Index and the S&P Global REIT Index Source: Bloomberg Feb 2013 35
  • Global Listed Property Prices are 30% below the peak achieved in 2007Global Listed Property(USD): 30% below 2007 peaks SA Listed Property (ZAR): 33% above 2007 peaks UBS Global Real Estate Investors Index SA Listed Property Index 3500 600 3000 +33% -30% 500 2500 400 2000 300 1500 -76% -37% 200 1000 500 100 0 0 It’s a similar story with, for example, the MSCI World Real Estate Index and the S&P Global REIT Index Source: Bloomberg Feb 2013 36
  • Global Prime Office – Rental market is holding up Source: Jones Lang LaSalle Q1 Report 2013 Source: CB Richard Ellis Q4 Report 201237
  • The Global Office Market Rent Cycle Top 10 Prime Office Rents in the World Markets R/m² per month Hong Kong 1943 New York 1734 London 1557 Paris 1459 Sydney 1446 Tokyo 1417 Zurich 1374 Melbourne 1364 Moscow 1040 Beijing 1026STANLIB view: Johannesburg and Cape Town FYI – Johannesburg is R175/m² per month andfall under “Rental Decline Slowing” does not feature in the top 50 office markets Source: CB Richard Ellis 2012 STANLIB conversions using a USD exchange rate of 8.8 38
  • Limited supply of global office space – Demand exceeds supply Regional demand and supply as a % of existing stock Global demand and supply as a % of existing stock Manhattan offices, New York USA site visit May 2011 Source: CB Richard Ellis Q3 2012 39
  • Global office vacancies are improving Regional Vacancies Source: CB Richard Ellis Q3 2012 Shinjuku office node, Tokyo Hong Kong Central December 2010 site visits April 2009 site visit40
  • Global office rentals – a generally positive trend Projected Value Changes in 2013Marina Bay, SingaporeSeptember 2010 site visit Source: Jones Lang la Salle Q1 2013 41
  • Prime Industrial Warehousing – Rental growth is fairly strong Top 10 Prime Industrial Rents in the World Markets R/m² per month Tokyo 168 London 160 Singapore 139 Stockholm 113 Hong Kong 103 Sydney 99 Sao Paulo 99 Source: Jones Lang LaSalle Q1 Report 2013 Brisbane 93 Paris 87 Perth 87 Source: CB Richard Ellis Q4 Report 2012 STANLIB conversions using USD exchange rate of 8.8 Source: CB Richard Ellis Q3 201242
  • Valuations - Why investing in Global Listed Property still makes sense
  • Global Listed Property Prices are 30% below the peak achieved in 2007Global Listed Property(USD): 30% below 2007 peaks SA Listed Property (ZAR): 33% above 2007 peaks UBS Global Real Estate Investors Index SA Listed Property Index 3500 600 3000 +33% -30% 500 2500 400 2000 300 1500 -76% -37% 200 1000 500 100 0 0 It’s a similar story with, for example, the MSCI World Real Estate Index and the S&P Global REIT Index Source: Bloomberg Feb 2013 44
  • Attractive forward yields by region and sector Region Forward Yield Sector Forward YieldNorth America 3.6 Office 3.6Europe 3.3 Retail 3.7UK 3.8 Industrials 4.8Oceania 6.2 Residential 3.5Japan 3.4 Diversified 4.3Hong Kong 2.8 Hotels 2.3Singapore 5.0Weighted Average 3.9 Weighted Average 3.9 All regions are trading comfortably above their respective bond yields Source: Bloomberg, UBS , STANLIB at Dec 201245
  • Real estate physical values have sufficient protection Current cap rate spread to 10-year bond yields by country or region (%) Source: Jones Lang LaSalle, IPD, NCREIF, DataStream, UBS October 2012 *Average spread calculated over 11 years to 20 years depending on region46
  • Global Listed Property trading in line with NAVs – Not cheap but not peak 0.3 0.2 PREMIUM 0.1 0 -0.1 -0.2 EXPENSIVE -0.3 -0.4 Global Investors (Discount)/ Premium to NAV (LHS) Average * Global Investors – Listed property companies with investment properties Source: UBS – Nov 2012 47
  • Global Property earnings track GDP growth Source: UBS, Thomson Reuters, Datastream, JLL, IPD, NCREIF Dec 201248
  • Balance sheets have been repaired and debt is available and affordable Global REITS Gearing (Net Debt-To-Total Assets) o 35% is a comfortable level of gearing o Most property companies are raising cheaper debt in the bond market o 63% to 86% of the debt is fixed for 3 to 5 years Source: UBS and DataStream49
  • The GDP outlook - though not as exciting - is still positive IMF Projections 2012 2013 2014 World 3.2 3.5 4.1 Advanced Economies 1.3 1.4 2.2 US 2.3 2.0 3.0 Euro Area -0.4 -0.2 1.0 Japan 2.0 1.2 0.7 Emerging Economies 5.1 5.5 5.9 China 7.8 8.2 8.5 India 4.5 5.9 6.4 Brazil 1.0 3.5 4.0 Sub-Saharan Africa 4.8 5.8 5.7 South Africa 2.3 2.8 4.1 Source: IMF January 2013GDP growth Employment Growth Demand for space Lower vacancies Higher rents Higher NAVs & Higher Profits Higher Share Prices 50
  • 4 reasons why it makes sense to include Global Listed Property in a Balanced Portfolio
  • 1.a) Global total returns (ZAR) – listed property has boosted returns Annualised Returns of Portfolios with Different Weightings in Property 14 12.5 11.8 12 11.1 10.4 10 Annualised Return (%) 8.0 8.2 7.8 8 7.4 7.7 7.4 6.9 6.5 6.0 6.2 6 5.4 5.7 4 2.1 2.3 2.4 2.5 2 0 15 yrs 10 yrs 5 yrs 3 yrs 1 yr Investment Horizon 0% Property 5% Property 10% Property 15% Property  Equity – MSCI Index  Bonds – JP Morgan Global Bond Index] Source: BNP Paribus Cadiz Quantitative Research  Cash – US 3 Month Treasury Bill  Property – UBS Global Real Estate Investors Index 52
  • 1.b) Global total returns (ZAR) – listed property has provided superior returns 160 Index Performance (rebased to 100) TR ZAR 150 140 130 120 110 100 90 EM Property EM Gov Bond EM Equity DM Property DM Equity DM Gov Bond EM – Emerging Markets DM – Developed Markets Source: Bloomberg, MSCI, UBS, JP Morgan Dec 2012 53
  • 2) Global Listed Property provides a relatively stable income stream 50% 30% 10%-10%-30%-50% Income Return Price Return Total Retun Source: UBS & Bloomberg Dec 201254
  • 3) Global Property is good diversifier The average correlation is nowhere near “1” to either Equities or Bonds 1.20 1.00 0.80 0.60 0.40 0.20 0.00 -0.20 -0.40 -0.60 Dec-01 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 REITs-Equity Correlation REITs-Bond Correlation Avg REIT-Equity Avg REIT-Bond REIT = Real Estate Investment Trust = Listed Property Source: UBS 55
  • 4. Global Listed Property is a rand hedge – 2011 example 130.0 8.5 125.0 120.0 8.0 115.0 UBS Investors 110.0 7.5 Index Based to 100 105.0 USDZAR 100.0 7.0 95.0 90.0 6.5 85.0 80.0 6.0 UBS Investors Index (ZAR) UBS Investors Index (USD) USDZAR UBS Investors Index (Global Property) flat in USD but +20% up in Rand terms Source: UBS, Bloomberg Jan 201256
  • Conclusion● Global property is a great diversifier ● Currency ● Income, regions and sectors● Upside risk ● Earnings profile has bottomed ● Physical property cap rates comfortably above bond yields ● Limited supply of new properties ● Low funding costs● Downside risk ● Lower than expected GDP growth (recession) leading to lower rental growth and rising vacancies ● Global markets volatility● Yield ● We are looking at USD income (yield) of 3.9% in 2013 ● Global market consensus for total returns is 10% to 15% in USD in 2013 57 Prediction is very difficult, especially about the future Niels Bohr
  • There is definitely a place for global listed property in offshore allocations. Annualised Returns of Portfolios with Different Weightings in Property 14 12.5 11.8 12 11.1 10.4 10 Annualised Return (%) 8.2 7.4 7.7 8.0 7.8 8 6.9 7.4 6.5 6.0 6.2 6 5.4 5.7 4 2.1 2.3 2.4 2.5 2 0 15 yrs 10 yrs 5 yrs 3 yrs 1 yr Investment Horizon 0% Property 5% Property 10% Property 15% Property  Equity – MSCI Index  Bonds – JP Morgan Global Bond Index]Source: BNP Paribus Cadiz Quantitative Research 2013  Cash – US 3 Month Treasury Bill  Property – UBS Global Real Estate Investors Index 58
  • THANK YOU FOR LISTENING
  • Legal DisclaimerInformation and ContentThe information and content (collectively information) provided herein are provided by STANLIB Asset Management(“STANLIBAM”) as general information for information purposes only. STANLIB does not guarantee the suitability orpotential value of any information or particular investment source. Any information herein is not intended nor does itconstitute financial, tax, legal, investment, or other advice. Before making any decision or taking any action regardingyour finances, you should consult a qualified Financial Adviser. Nothing contained herein constitutes a solicitation,recommendation, endorsement or offer by STANLIBAM.CopyrightThe information provided herein are the possession of STANLIBAM and are protected by copyright and intellectualproperty laws. The information may not be reproduced or distributed without the explicit consent of STANLIBAM.DisclaimerSTANLIB has taken care to ensure that all information provided herein is true and accurate. STANLIB will therefore notbe held responsible for any inaccuracies in the information herein. STANLIBAM shall not be responsible and disclaims allloss, liability or expense of any nature whatsoever which may be attributable (directly, indirectly or consequentially)to the use of the information provided.STANLIB Asset Management LimitedRegistration No: 1969/002753/06. A Financial Services Provider licensed under the Financial Advisory and IntermediaryServices Act, 37 of 2002. FSP license No: 719.