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Agcapita Feb 2010 Agriculture Briefing


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Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with almost $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios. Agcapita publishes a monthly agriculture briefing.

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Agcapita Feb 2010 Agriculture Briefing

  1. 1. Agcapita Agriculture Update February 2010 1
  2. 2. Summary As people in the emerging economies of India and China make the transition to western standards of living there is an often- overlooked issue - their water consumption will rise dramatically, exacerbating an already precarious domestic supply situation. – China has only 8 percent of the world’s fresh water to meet the needs of 22 percent of the world’s people. – In India, urban water demand is expected to double—and industrial demand to triple—by 2025. – To support the diets of the additional 1.7 billion people expected to join the human population by 2030 at today’s average dietary water consumption would require 2,040 cubic kilometers of water per year—as much as the annual flow of 24 Nile Rivers. – According to the International Water Management Institute the key agriculture regions of the south-western US, Pakistan, western Australia, southern Africa and southern India are all Contents already water constrained begging the question how they will 2 Water Update increase production from this point forward. 3 Crops and Development Compete Seventy percent of the grain produced in China comes from for Land – 2 Acres per Minute irrigated land, but the country is seeing its irrigation supply Lost depleted on three fronts: the diversion of water from rivers and reservoirs to cities; the depletion of underground supplies 4 U.S. Feeds One Quarter of its in aquifers; and the increasing pollution caused by rapid Grain to Cars industrialization. Economically, farms can’t currently compete 4 Energy Analysis of Food with factories for water. A thousand tons of water produces one Production ton of wheat, which has a market value of around $300, whereas the same amount of water used in industry yields an estimated $14,000 of output - 70 times as much. The challenge facing China is how to meet the water needs of its swelling urban and industrial sectors without undermining both its own agricultural productivity. China is facing a decline in its capacity to irrigate its crops - signs of which include the drying-up of rivers and wells all over the northern region of the country. With its booming economy and huge trade surpluses, China may try to solve its water shortages by importing more of its food. 1
  3. 3. Agriculture Update water update Chart 2: IndIa – water supply According to a report by McKinsey& Company by and demand gap 2030, under an average economic growth scenario and no efficiency gains, global water requirements Gap between existing supply and projected 1 demand in 2030 Percent of 2030 demand Wat would increase over 50 percent from 4,500 billion m3 Billio Size of gap today (or 4.5 thousand cubic kilometers) to 6,900 Surplus billion m3. As Chart 1 shows, this is a full 40 percent Moderate (0% to 20%) above current accessible, reliable supply. Severe (20% to 80%) Indus Brahmaputra The driver for this increase is economic growth – food production and trade. Agriculture accounts WFR 1 2 Ganga for approximately 3,100 billion m3, or 71 percent Sabarmati Meghna of global water usage today, and without efficiency Mahi Narmada Subernarekha gains will increase to 4,500 billion m3 by 2030. The Tapi Godavari Brahmani-Baitarni Mahanadhi key centers of agricultural demand are primarily India Krishna Food (projected withdrawals of 1,195 billion m3 in 2030), WFR 2 2 EFR 1 2 Pennar Feed Sub-Saharan Africa (820 billion m3), and China (420 Cauvery Net EFR 2 2 billion m3). 1 The unconstrained projection of water requirements under a static policy regime  and at existing levels of productivity and efficiency Chart 1: InCrease In annual water 2 WFR = western-flowing coastal rivers; EFR = eastern-flowing coastal rivers demand 2005-2030 Gap between existing supply and projected 1 demand in 2030 Change from 2005 Water demand in agriculture Billion m 3 Percent of 2030 demand Percent Billion m 3 Size of gap 2.4% 1,195 Surplus China 178 300 54 532 61 979 Moderate (0% to 20%) 361 India 338 89 Severe (20% to 80%) 40 468 58 Rice 311 Sub-Saharan  Indus 320 Wheat 656 Africa 28 92 Brahmaputra 440 283 335 Sugar 219 299 Rest of Asia 243 117 80 440 54 Oil crops 152 WFR 1 2 Ganga Maize 236 132 137 N America 181 124 21 326 43 Cotton 87 Sabarmati Meghna 101 29 38 37 61 44 Mahi Other crops 105 Europe 72 100 12 184 Subernarekha 50 28 29 14 74 Narmada Tapi Brahmani-Baitarni 2005 2020 2030 S America 68 23 180 Godavari 89 Mahanadhi 95 Krishna Municipal and Domestic Food 98 96 95 MENA 6 92 85WFR 2 99 EFR 1 2 47 IndustryPennar Feed 2 4 5 Oceania 21 28 Cauvery Agriculture 109 Net export 5 3 1 7 EFR 2 2 Source: McKinsey Source: McKinsey 1 The unconstrained projection of water requirements under a static policy regime  and at existing levels of productivity and efficiency 2 WFR = western-flowing coastal rivers; EFR = eastern-flowing coastal rivers 2
  4. 4. Agriculture Update (continued) Industrial usage accounts for 16 percent of today’s Chart 3: ChIna – water supply global demand and is projected to grow to 22 and demand gap percent in 2030 - primarily due to China that alone accounts for 40 percent of the additional industrial Gap between existing supply and projected 1 demand in 2030 demand worldwide. Percent of 2030 demand Size of gap Water d – India: India’s demand in 2030 is expected to Surplus Withdra reach 1.5 trillion m3 driven by domestic food Moderate (0% to 20%) demand for a growing population that is moving Severe (20% to 80%) toward a middle-class diet (see Chart 2). Against Northwest Song this demand, India’s current water supply is Huang approximately 740 billion m3. As a result, most Municip of India’s river basins could face severe deficit by Domest 2030. Liao Industry – China: China’s demand in 2030 is expected to reach 818 billion m3, of which around 50 percent is from agriculture, 32 percent is from industrial Agricult demand (thermal power generation), and the remaining is domestic (see Chart 3). Current Hai Huai supply is around 618 billion m3. Significant Southwest Southeast industrial and domestic wastewater pollution Yangtze Pearl makes the “quality adjusted” supply-demand gap 1 The unconstrained projection of water requirements under a static policy regime  even larger than the quantity-only gap: 21 percent    and at existing levels of productivity and efficiency Gap between existing supply and projected 1 demand in 2030 of available surface water resources nationally are Percent of 2030 demand Water demand by sector unfit even for agriculture. Size of gap CAGR Surplus Withdrawals, billion m 3 2005-30 Moderate (0% to 20%) Percent 818 Crops and development Severe (20% to 80%) Compete for 1.6% land – 2 aCres per mInute lost Song 133 2.7 Northwest 667 Huang The American Farmland Trust recently stated “Every 555 88 minute of every day, we [the US] lose two acres Municipal & 265 2.9 Domestic 68 of agricultural land to development.” Millions of 194 Liao Industry 129 hectares of cropland in the industrial world have been paved over for development and this trend continues globally. Quick facts according to the Earth Policy 420 0.6 Agriculture 358 385 Institute: – In the U.S. each 12 million additional cars Hai consume roughly 1 million hectares of land in new Huai Southwest Southeast 2005 2015 2030 roads, highways, and parking lots. Pearl Yangtze Source: McKinsey 1 The unconstrained projection of water requirements under a static policy regime     and at existing levels of productivity and efficiency 3
  5. 5. Agriculture Update (continued) – Each U.S. car requires on average 0.07 hectares – If the entire U.S. grain crop were converted to of paved land for roads and parking space. Thus ethanol it would only supply 18 percent of U.S. for every five cars added in the US an area the automotive fuel needs. size of a football field is covered with asphalt. – A 2008 World Bank report unequivocally blamed – The United States has paved 6.3 million the mandated production of biofuels for the spike kilometers of roads, enough to circle the earth at in global food prices. According to the report, the equator 157 times. biofuels increased food prices by 75 percent. – The U.S. area devoted to roads and parking lots – Agcapita’s research estimates that current biofuel covers an estimated 16 million hectares almost as targets in the US, the EU, Canada, Japan, Brazil, much as the 20 million hectares that U.S. farmers India and China alone could require the diversion plant in wheat. of over 400 million acres of arable land or over – More and more of the 11 million cars added 10% of the world’s total from food production. annually to the world fleet of 531 million are being added in the developing world. energy analysIs of food produCtIon – If China were one day to achieve the Japanese ownership rate of one car for every two people, it Discoveries of conventional oil total roughly 2 trillion would have a fleet of 640 million, compared with barrels, of which 1 trillion have been extracted so only 13 million today. far. However the first trillion barrels was the low – Assuming the same paved area per vehicle in cost, technically simple oil while the remaining half China as in Europe and Japan, a fleet of 640 is the increasingly expensive, and technically difficult million cars would require paving nearly 13 oil. The transition to more difficult to produce oil million hectares—most of which would likely be is part of the phenomenon of peaking production. cropland. This would equal almost half of China’s The prospect of peaking oil production has direct 28 million hectares dedicated to rice production. consequences for food production, as modern agriculture depends heavily on the use of fossil fuels u.s. feeds one Quarter of Its graIn to at virtually every stage of the process. Cars The five key areas of energy use in food production The growing use of biofuels appears to have serious are fuel, fertilizer, irrigation, transportation and consequences for agricultural commodity prices. storage & packaging. Some trends, such as the shift More than a quarter of the total U.S. grain crop was to zero-tillage, are making agriculture less energy- turned into ethanol to fuel cars in 2009. Quick intensive, but rising fertilizer use, the spread of farm biofuel facts: mechanization, and falling water tables are having the – The amount of grain processed in biofuels has opposite effect. tripled in the US since 2004. 4
  6. 6. Agriculture Update (continued) – Fuel: U.S. agricultural fuel use has been declining – Transportation: Direct agriculture accounts for due to a shift to minimum- and zero-till practices only one fifth of the energy used in the U.S. on roughly two fifths of U.S. cropland. However food system. Transport, processing, packaging, in many developing countries it is rising as the marketing, and kitchen preparation of food are transition from draft animals to tractors continues. responsible for the rest. The U.S. food economy Canada is a world leader in the use of zero-till uses as much energy as the entire economy of technology. the United Kingdom. The 14 percent of energy – Fertilizer: Fertilizer accounts for 20 percent of used in the food system to move goods from U.S. farm energy use. The United States, for farmer to consumer is equal to two thirds of the example, exports some 80 million tons of grain energy used to produce the food. per year—grain that contains large quantities – Storage & Packaging: An estimated 16 percent of nitrogen, phosphorus, and potassium. The of food system energy use is devoted to canning, ongoing export of grain would slowly reduce the freezing, and drying food. Packaging accounts fertility of U.S. cropland if the nutrients were not for 7 percent of food system energy use. It is not replaced. uncommon for the energy invested in packaging – Irrigation: Irrigation requires more energy as to exceed that in the food it contains. As one water tables fall. In the United States, close to 19 analyst has observed, “An empty cereal box percent of farm energy use is for pumping water. delivered to the grocery store would cost about In some states in India where water tables are the same as a full one.” falling, over half of all electricity is used to pump water from wells. 5
  7. 7. Agcapita Macro Update February 2010 M1 6
  8. 8. Summary Complacent, comfortable and sitting on an economic fault line - that’s what I see when I visualize the West. Over the next 20 years as the baby boomers try to retire, the effects of the poor decisions our society has been making over the last 20 years will come back to damage the foundation of our affluent lifestyles. Why? – Low savings rates – Western economies are heavily skewed to consumption with commensurately low savings rates while the emerging economies are skewed towards capital accumulation and have extremely high savings rates. China saves 40% of household disposable income, the US saves 6%. Only savings can create capital and because of this our capital pool CONTENTS is shrinking while the emerging economies’ are growing. Capital, not consumption, drives growth M3 Subsidizing failure – is this really the so we should expect growth to continue to slow path to prosperity? in the west and continue to accelerate in the emerging world. M3 Debt to GDP – Inflation – The money supply in the west M3 Inflation the Insidious, Hidden Tax continues to grow more rapidly than any other time in history driven by fiscal deficits, currency M4 There’s no God-given gift of a ‘AAA’ interventions and bailouts. Financial assets tend sovereign debt rating to perform poorly in periods of high inflation and a large part of western wealth is tied up in these M6 Yuan is now the linchpin of the global types of investments. financial system – Debt – Debt to GDP levels are at all time highs M6 US current account deficit with $200 and growing. Unfortunately we have borrowed oil? to support consumption so we have not created assets that generate cash flow to service our M6 US Oversight Committee Says... debts. Our options are tax, repay, default or inflate. Which do you think is most likely? M7 Who Do Mainstream investment Funds – Demographics – Aging populations and large Actually Benefit? unfunded social programs with a diminishing number of workers to pay for them. On top of this M1
  9. 9. Summary (continued) we are increasingly competing with younger, well- educated work forces in emerging economies. – Energy – Western lifestyles are dependent on low cost energy with the highest per capita usage on the planet (think – long commutes, large houses etc). How do you protect your retirement in this environment? – Protect and enhance your intellectual capital - continually strive to build unique, high value skills otherwise your only competitive advantage in the global market for services will be price. – Protect the purchasing power of your savings and assets - place a portion of assets away from effects of local currency devaluation and inflation – Energy price hedges – Under consume and over-save – Make demographics your ally and invest in countries that have young populations and high savings rates – Start now – don’t delay and don’t rely on the government or house price appreciation to pay for it M2
  10. 10. Global Macro Update SUBSIDIZING FAILURE – IS THIS REALLY THE PATH TO PROSPERITY? Despite widespread belief to the contrary, The situation is not much better in most other government intervention into broad swathes of the western nations. Chart 2 shows the impact of economy to support “too big to fail” companies unfunded social obligations for ageing populations is not a positive for future growth. There is an across the developed world. economic truism that whatever you subsidize you get more of – hence by subsidizing failure we are INFLATION THE INSIDIOUS, HIDDEN TAX ensuring bigger failures in the future and worst of all penalizing well run businesses. The firms that were Just 3% annual inflation over the course of a 45- prudently managed leading up to the crisis should year working career can cause a 75% reduction in have benefited from the demise of their poorly run the purchasing power of your money. Of course, competitors – in a free economy capital would have inflation has been running much higher than a “mere” flowed to the profitable businesses rather than the 3%. The US government, like most others, regularly loss making ones. The fact that this didn’t happen recalibrates its inflation indicators to make the creates a perverse “if you can’t beat’em, join’em” numbers seem less alarming. Chart 3 highlights the mentality with respect to risky and imprudent disparity between the CPI-U produced by America’s business practices. Bureau of Labour Statistics and the SGS Alternate CPI produced by Shadow Government Statistics DEBT TO GDP using older, less massaged methodologies. Up and away into the wild blue yonder… CHART 2: IMPACT OF AGING CHART 1: TOTAL US DEBT TO GDP 300 380% 360% 2009 Q3=369.7 250 340% 320% 1933=299.8 300% 2003=301.1 200 280% 260% 150 240% 220% 100 200% 180% 1875=156.4 50 160% 2010 2015 2020 2025 2030 2035 2040 2045 2050 140% 1916=170.4 Advanced G20 economies, government debt / GDP ratio 120% 100% projected as % GDP 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Source: BEA, Federal Reserve and Census Bureau Source: IMF M3
  11. 11. Global Macro Update (continued) As you can see, over the past 20 years, prices have money and inflating asset classes versus the rest of been rising much faster than government numbers the participants in the economy. The net result is would have you believe. If you are searching for a that wealth is redistributed from the inflatees to the possible explanation for such a disparity Marc Faber inflators. summed it up succinctly when he said, “Never ask the barber if you need a haircut. Never ask the realtor THERE’S NO GOD-GIVEN GIFT OF A ‘AAA’ if the house you are considering buying is a bargain SOVEREIGN DEBT RATING at the price offered. And never ask the government to calculate the rate of inflation when it can save millions As has been predicted by the extensive financial crisis of dollars in cost-of-living adjustments.” research of Kenneth Rogoff, sovereign credit ratings are coming under pressure as fiscal deficits grow In addition to a general erosion of purchasing power, rapidly and tax bases shrink. The following is some inflation also has another more insidious effect. anecdotal evidence of this trend. Because inflation does not happen in the aggregate – does not increase the price of all goods and services – Portugal - “If Portugal wants to avoid a at the same rate at the same time - inflation benefits downgrade, it is going to have to take meaningful, the groups who have first access to newly created credible steps to get the deficit under control,” said Anthony Thomas of Moody’s credit rating agency. Financial Times - January 10, 2010 – Iceland - Standard & Poor’s put Icelandic debt CHART 3: CURRENT GOVERNMENTS under negative credit watch after Iceland’s CPI V. SGS ALTERNATE president blocked a bill of compensation for the failure of Icesave bank. The agency said “as a 15 CPI-U SGS Alternate CPI result, we could lower our ratings on Iceland by one to two notches within a month”. Fitch credit 10 rating agency downgraded Iceland’s long-term Year-to-Year Change (%) debt rating from BBB- to BB+ citing a “renewed wave of domestic political, economic and financial 5 uncertainty.” The Telegraph - January 6, 2010 – France and United Kingdom - Fitch Ratings 0 warned Britain and France that they risk losing their AAA status unless they map out a clear path to budget discipline over the next year. Telegraph -5 - December 22, 2009 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 – Mexico - Standard & Poor’s reduced Mexico’s Source: John Williams’ Shadow Government Statistics credit rating one notch to BBB from BBB-plus. M4
  12. 12. Global Macro Update (continued) The cut came after Fitch cut the country’s credit – Ukraine - Standard & Poor’s cut Ukraine’s rating one notch to BBB. This was Mexico’s first credit rating two levels to the lowest in Europe. downgrade in over 10 years. Reuters - December Ukraine’s long-term foreign currency rating was 14, 2009 lowered to CCC+, seven levels below investment – Dubai - Moody’s said that its rating downgrades grade. S&P left the outlook negative, indicating reflect the weakening in Dubai’s economy and a possible further cut. Bloomberg - February 25, the repercussions on its banks’ asset quality and 2009 earning power. Reuters - December 10, 2009 – United States - John Chambers, the chairman – Spain - Standard & Poor’s cut Spain’s credit of Standard & Poor’s sovereign ratings committee outlook to negative from stable. “Reducing said pressure is building on the “AAA” rating of Spain’s sizable fiscal and economic imbalances the United States. Chambers said “There’s no requires strong policy actions, which have not yet God-given gift of a ‘AAA’ rating, and the U.S. materialized,” according to Standard & Poor’s. has to earn it like everyone else.” Reuters - BBC News - December 9, 2009 September 17, 2008 – Greece - Fitch cut Greece to BBB+, outlook negative. Fitch said its move was due to “concerns over the medium-term outlook for public finances given the weak credibility of fiscal institutions and the policy framework in Greece.” CHART 4: GLOBAL SOVEREIGN Wall Street Journal Online - December 8, 2009 DOWNGRADE WATCH – United Kingdom and United States - Moody’s said U.S. and U.K debt ratings may “test the Aaa boundaries” because public finances are worsening in the wake of the global financial crisis. “The deterioration has been pretty severe,” said Pierre Cailleteau, managing director of sovereign risk at Moody’s. Bloomberg - December 8, 2009 – Japan - Moody’s removed the Japanese government’s last triple-A foreign currency credit rating. The agency described the move as a largely technical one but also said Japan was in a worse position than many other governments in its top ratings bracket. Reuters - May 18, 2009 M5
  13. 13. Global Macro Update (continued) YUAN IS NOW THE LINCHPIN OF THE GLOBAL FINANCIAL SYSTEM The US has been exporting inflation with China’s as underlying commercial real estate prices began cooperation for over a decade via China’s fixed to drop in late 2008. Once the bailout funds began exchange rate with the dollar – eventually all the to flow in 2009 REITs recovered rapidly and have dollars, Euros, loonies etc that China has been more than doubled from the stock market lows of last absorbing will come home to roost causing global March. inflation. Although, the Chinese government keeps the Yuan artificially depressed and appears set to do so for the immediate future, the Yuan ultimately will be CHART 5: REITS VERSUS S&P 500 INDEX revalued causing a severe downturn in the currencies of its trading partners. As part of the revaluation 300 Bloomberg Hotel REIT Index Bloomberg REIT Index process China will stop buying US treasuries causing 250 S&P 500 Index 200 interest rates to increase rapidly. Though US demand 150 for Chinese goods might rapidly decelerate this 100 could be offset by a large increase in the domestic 50 0 purchasing power of the Chinese economy and a -50 large reduction in input costs for Chinese companies 27 4/17 5/18 29 6/19 7/10 31 8/21 9/11 10/20 23 11/13 12/4 25 1/15/10 (commodity prices will fall in Yuan terms) – domestic Source: growth could accelerate in China. US CURRENT ACCOUNT DEFICIT WITH $200 This presents something of a paradox as the OIL? NCHREIF commercial real estate price index shows that underlying commercial property prices have Assuming 10 million bopd of imports, $200/bbl fallen almost 40% and do not appear to justify such a oil would add US$ 438 billion per year to the US recovery – in fact the evidence strongly supports the current account deficit. That would increase the conclusion that conditions are still deteriorating. deficit by approximately 4% of GDP on top of already historically high levels – how would the US fund such In the spirit of sublime understatement the latest a deficit and sustain its way of life? Congressional Oversight Panel (COP) report stated that the “most serious wave of commercial real US OVERSIGHT COMMITTEE SAYS, “MOST estate difficulties is just now beginning”. The report SERIOUS WAVE OF COMMERCIAL REAL ESTATE is an interesting read but here are some excerpts DIFFICULTIES IS JUST NOW BEGINNING” from the summary for those disinclined to read the entire document: Real Estate Investment Trusts (“REITS”) values increased steadily from 2000 to 2007 then fell sharply M6
  14. 14. Global Macro Update (continued) “Over the next few years, a wave of commercial space, have exerted a powerful downward pressure real estate loan failures could threaten on the value of commercial properties. America‘s already-weakened financial system. The Congressional Oversight Panel is deeply A significant wave of commercial mortgage defaults concerned that commercial loan losses could would trigger economic damage that jeopardize the stability of many banks, particularly could touch the lives of nearly every American.“ the nation‘s mid-size and smaller banks, and that as the damage spreads beyond individual banks that Is this prediction overly pessimistic? Japan’s it will contribute to prolonged weakness throughout experience with a commercial real estate collapse is the economy.” informative. Chart 6 shows that that land prices fell 87% over the last 20 years from their peak in 1990. Between 2010 and 2014, about $1.4 trillion in commercial real estate loans will reach the WHO DO MAINSTREAM INVESTMENT FUNDS end of their terms. Nearly half are at present ACTUALLY BENEFIT? ―underwater! – that is, the borrower owes more than the underlying property is currently worth. Michael Lee Chin founder of mutual fund company Commercial property values have fallen more than AIC Limited recently stated, “Let’s look at the history. 40 percent since the beginning of 2007. Increased If over the past 14 years you had invested $10,000 vacancy rates, which now range from eight percent in the best CI mutual fund, that would have earned for multifamily housing to 18 percent for office you $41,000, had you owned CI stock that derives its buildings, and falling rents, which have declined 40 money from revenue generated from that fund, that percent for office space and 33 percent for retail $10,000 [would be] worth $164,000.” According to Lee-Chin, the best AGF fund over the last 14 years was the AGF precious metals funds CHART 6: JAPANESE LAND PRICES - $10,000 invested in that would now be worth $35,000. But owning AGF stock would have given (Trillion yen, seasonally adjusted) (Mar. 2000=100) 800 you $56,000. Investors Group’s best fund would be 700 worth $26,000, [while] shares in IG would be worth $63,000.” Summary return data: 600 500 – CI mutual fund - $41,000 - return 22% 400 down – CI stock - $164,000 - annual return 22% Last seen 87% 300 – AGF mutual fund - $35,000 - annual return 9% in 1973 200 – AGF stock - $56,000 - annual return 13% 100 – Investors Group mutual fund - $26,000 - annual 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 0 return 7% – Investors Group stock - $63,000 - annual return Sources: Cabinet Office, Japan Real Estate Institute 14% M7
  15. 15. dIsClaImer: The information, opinions, estimates, projections and other materials contained herein are provided as of the date hereof and are subject to change without notice. Some of the information, opinions, estimates, projections and other materials contained herein have been obtained from numerous sources and Agcapita Partners LP (“AGCAPITA”) and its affiliates make every effort to ensure that the contents hereof have been compiled or derived from sources believed to be reliable and to contain information and opinions which are accurate and complete. However, neither AGCAPITA nor its affiliates have independently verified or make any representation or warranty, express or implied, in respect thereof, take no responsibility for any errors and omissions which maybe contained herein or accept any liability whatsoever for any loss arising from any use of or reliance on the information, opinions, estimates, projections and other materials contained herein whether relied upon by the recipient or user or any other third party (including, without limitation, any customer of the recipient or user). Information may be available to AGCAPITA and/or its affiliates that is not reflected herein. The information, opinions, estimates, projections and other materials contained herein are not to be construed as an offer to sell, a solicitation for or an offer to buy, any products or services referenced herein (including, without limitation, any commodities, securities or other financial instruments), nor shall such information, opinions, estimates, projections and other materials be considered as investment advice or as a recommendation to enter into any transaction. Additional information is available by contacting AGCAPITA or its relevant affiliate directly. #400, 2424 4th street sw tel: +1.403.218.6506 Calgary, alberta t2s 2t4 fax: +1.403.266.1541 Canada