The UK electorate’s 52/48 vote to leave the European Union has caused uncertainty in markets, with property investment one of the sectors generating the most headlines. Aon Hewitt Partner Nick Duff provides our lead story ‘Brexit and the immediate aftermath’ with some practical observations. He suggests despite some pressure on valuations, the UK property market is likely to hold up owing to its attractiveness to long term investors.

1. Aon Risk Solutions
Real Estate
Risk. Reinsurance. Human Resources.
Introduction
The UK electorate’s 52/48 vote to leave the European Union has caused uncertainty in markets,
with property investment one of the sectors generating the most headlines. Aon Hewitt Partner
Nick Duff provides our lead story ‘Brexit and the immediate aftermath’ with some practical
observations. He suggests despite some pressure on valuations, the UK property market is likely
to hold up owing to its attractiveness to long term investors.
As buyers of insurance, real estate investors will soon encounter additional reporting requirements
due to the new Insurance Act coming into force this month, which fundamentally alters the
duties between insurer and insured. Mark McGee, Client Director at Aon, considers some of
the challenges for property investors.
Aon’s international viewpoint comes from Italy, as Andrea Giorgi, Unit Director at Aon in
Milan, offers some helpful tips for developers, particularly when they are required to lodge
collateral with public authorities.
Finally, our interview this issue is with Ryan Prince of Realstar Group who shares his views on
the role of the UK private rented sector in tackling the housing shortage.
If you have any queries relating to any of the articles featured or otherwise, please do not
hesitate to contact us at real.estate@aon.co.uk . Our full contact details can be found here.
Newsflash – Fly tipping concerns at commercial industrial units. Property owners are
reporting problems with illegal occupants running large scale waste disposal operations
within vacant industrial units particularly in some areas within the M25. Units targeted
include those with standard protective measures such as bollards, static security, CCTV and
barriers. Owners would be advised to ensure their site management protocols are sufficiently
robust to respond and site access should be monitored and limited. We recommend enhanced
security features such as concrete barriers that are fixed to the floor rather than freestanding.
Should you have any concerns or queries with respect to this issue please contact us.
In this Issue
2 Investors: Brexit and the
immediate aftermath
3 Asset Managers: The
Insurance Act
4 International: Italian
developers find
favour with surety solutions
5 Asset Managers: Dealing with
major loss scenarios
6 Interview with... Ryan Prince,
Realstar Group
8 Staff Profile: Anna Whitfield
9 Hotel and legal indemnity
clients boosted by expansion of
Aon Real Estate team
Property Eye
Summer 2016

2. Property Eye | Aon Risk Solutions | Summer 2016 2
Optional Page/Section Header
Investors: Brexit and the immediate aftermath
1
Source: MSCI IPD UK Monthly Index
Nick Duff | Aon Hewitt Partner
We do not believe that the UK commercial real
estate market will suffer the same magnitude of
capital value losses that followed the last downturn
(mid-2007 to mid-2009) when values fell by 44%
and net initial yields increased by 330 bps1
.
However valuations are likely to be put under
pressure as occupier demand wanes and foreign
investment is reduced. The Central London
office market is likely to be hardest hit given that
a fully-fledged Brexit could see some employment
falls in the financial sector and lower occupational
demand generally.
We also expect to see some pressure on more
secondary assets in non-core locations across
the UK, reflecting weaker economic conditions
in the UK as a whole. We would, however,
expect core commercial funds with a focus
on primer assets to outperform their peers.
Whilst we expect capital values to fall in the
short term, the income producing nature of
property means that it is still an attractive asset
class for long-term investors and we would still
expect positive returns over a five year period,
all things being equal.
In addition, we are not in a period of oversupply
as was the case in 2007, a weak pound should
help to cushion the fall in overseas investment
into the UK and there will now be a period of
continued low gilt yields. All these factors will
provide some protection against significant rises
in UK property yields.
Key takeaways
• Property is a strategic asset class for pension
schemes and we do not believe that economic and
market conditions will deteriorate to a point where
it is justified to incur the high round trip costs of
exiting or underweighting property exposure
• Brexit has negative implications for other growth
asset classes and we have witnessed sharp falls
in global equity prices and widening of credit
spreads; in our view property has not become
less attractive overall relative to other asset classes.
In addition, pension schemes are long term
investors and this means they should be able to
weather shorter term volatility and property’s key
characteristics remain attractive
• Private Rented Sector: The case for PRS is driven
by strong supply and demand dynamics; given
the lack of new development since the start of the
financial crisis, it is estimated that over 240,000
new homes are required each year until 2021
to meet ongoing and latent demand. Return
assumptions for PRS funds are underpinned by
positive rental growth expectations brought on by
these changes
• We continue to recommend that UK pension
schemes consider alternative real estate
investments within their portfolio.
Aon Hewitt Retirement
Investment provides
integrated and
comprehensive solutions
across actuarial,
plan administration,
investment and
insurance disciplines.
Aon Hewitt Partner Nick Duff, shares his commentary on the prospects for UK
property investors following the UK’s decision to leave the European Union.

3. Property Eye | Aon Risk Solutions | Summer 2016 3
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Asset Managers: The Insurance Act
As buyers of insurance, real estate investors will soon encounter a new
regime which fundamentally alters the duties between insurer and
insured. Mark McGee, Client Director at Aon, considers some of the
challenges for property investors.
Mark McGee | Client Director,
Aon UK
There’s been a huge amount written about the
Insurance Act in recent months, with very good
reason, considering that it replaces legislation
governing the insurance sector since 1906.
Whilst the tenets of the new act should be welcomed,
it will impose a range of new duties on us as brokers,
on insurers and also on you as buyers of insurance.
The most significant of these will require you to
meet a new ‘duty to make a fair presentation of the
risk’. While the definition of ‘material information’
has not changed, the new disclosure duty is more
prescriptive than the current law in describing
from whom such knowledge needs to be obtained
and what the manner of disclosure is.
For example the Act states that what ”the insured
knows” is deemed to include knowledge held by
the insured’s senior management (i.e. those who
make decisions about managing and organising
the insured’s activities) and individuals with
responsibility for the insured’s insurance.
The definition of “senior management” is
intentionally flexible so that is suits companies of all
shapes and sizes. Of course the more complex your
company structure e.g. company control is vested
in several operating divisions, the more individuals
you will need to consult for risk information.
Additionally you will be required to disclose material
information that your senior management and
individuals with responsibility for your insurance
“ought to know”. On the latter point, there may be a
degree of nervousness in some organisations about
involving senior management but senior managers
are privy to information which could prove material
to the success or failure of the business and while the
board has probably only found itself responding to
material disclosure requests in relation to directors
and officers insurance in the past, their scope to
get involved may increase.
Meanwhile, the disclosure obligation also means
that you will need to carry out a reasonable search
of not just information held by ‘the insured’ but
also by ‘any other person’.
This includes agents and persons covered by the
insurance, but is open to interpretation and may
go far wider than this e.g. to include property
managers and your professional team. There are a
number of specialist service providers, involved in
the ownership and management of property, who
will hold “material information” on your behalf.
Finally you need to avoid data dumping i.e.
providing large volumes of information without
sufficient structure. All disclosures need to be
accessible and clearly presented, structured, indexed
and sign-posted. Your insurance brokers will be able
to provide guidance on meeting this obligation.
We expect there will be an overall increase in the
level of research and disclosure required by
companies in order to meet these new obligations
and Aon has already spent considerable resources
guiding buyers through the new process, across all
industry sectors.
What will one day be deemed ‘reasonable’ will
depend largely on the approach the industry
adopts as a whole. There will be a period of
uncertainty where some risk managers might take a
full and comprehensive approach to their research,
and others will remain at the periphery of their
core business. This is one aspect of the Insurance
Act which remains uncertain until it is tested in
court.
For real estate investors, the implications of the
new duties under the Insurance Act, will need
careful management. However we should
recognise that you already do a great job in
obtaining this information through your due
diligence and management processes. The key will
be ensuring that communication lines between,
owners, property managers, professional teams
and your insurers are open and that suitable
guidance is provided to ensure this data is shared.
For further information on the Insurance Act and its implications go to
http://www.aon.com/unitedkingdom/events/insurance_act.jsp

4. Property Eye | Aon Risk Solutions | Summer 2016 4
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International: Italian developers find
favour with surety solutions
Market sources suggest Italy’s prospects for developers could be improving;
but intimate knowledge is required for anyone navigating this historically
opaque market. Property Eye spoke with Andrea Giorgi, Unit Director at
Aon in Milan, who offers some helpful tips for developers, particularly when
they’re required to lodge collateral with public authorities. Andrea Giorgi | Unit Director,
Aon Milan
Recent reports point to a positive outlook in Italy for
developers. Milan was the eighth most active real
estate market in Europe last year, with €4 billion
invested between Q4 2014 and Q3 2015 and while
Rome has some more challenges, development
prospects in the Italian capital are judged to have
improved significantly with a nine-place leap on
one league table to Number 18 worldwide.1
Meanwhile, in March 2016, further signs that the
residential market was recovering emerged when
Italy’s Inland Revenue Agency reported an annual
rise in property sales of 6.5%. Again this was driven
by rapid growth in the northern powerhouse of
Milan but also by a strong showing from its far
southern counterpart of Palermo; both achieving
13%+ during the 2015 calendar year.1
Investors considering these growing urban
development opportunities will find one common
factor, namely the requirement to post collateral as
bond for public works such as roads, sewers and
other infrastructure, as well as a five year VAT Liability.
Andrea Giorgi, who heads up Aon’s office in Milan
explains: “Obviously this isn’t a unique situation to
Italy, but recently we have seen developers here
using new forms of collateral to satisfy public
authorities that they have the means to fund these
works when they become necessary.
“In many countries this might mean you have to
have a conversation with your lender to extend a
line of credit, but in Italy the situation is more
complex. Bank bonds in Italy are monitored by the
central Italian bank, with strict limits on how much
credit can be issued. This system of central control
can be quite slow to get around.”
Andrea says this is the first reason why issuing a
surety bond could be beneficial for real estate
developers. “The surety market is not centrally
controlled and allows the issuing of ‘Urbanisation
Bonds’, raising capacity with only the company’s
credit worthiness as cap; they are in many ways
more flexible and cost effective. Typically rates are
more attractive and this type of collateral can help
shorten the time authorities will consider an
application because insurance backed exposure is
commonly utilised and accepted by public entities.”
In addition to developers’ urbanisation
requirements, Andrea adds how a five year VAT tax
liability is a further consideration. “The VAT Credit
Refund Bond is another key issue for real estate
companies,” he says. “Again, using the bank
channel isn’t always the best idea, because your
credit line is kept busy at least for three years while
the surety option moves this off the balance sheet.
Essentially, our message is that this is a competitive
solution for developers which can really help them
make progress in Italy. The banks are not the only
means of posting bond for public works and VAT
and we encourage developers to consider their
options carefully.”
1
Source: Emerging Trends in Europe 2016 PWC

5. Property Eye | Aon Risk Solutions | Summer 2016 5
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Asset Managers: Dealing with
major loss scenarios
Aon Real Estate Claims Director, Dylan Allen says that the property
owners and asset managers who are most successful in getting back
on their feet are the ones who get their restoration response aligned
with their insurance claim.
Dylan Allen | Real Estate Claims
Director, Aon UK
Any property owner who has experienced a major loss will
testify to the challenge of bringing that asset back into operation.
Every day lost in the reinstatement process represents a
significant risk to the bottom line both for investors and tenants.
Having worked with real estate clients on a range of major loss
scenarios in recent years, Dylan Allen suggests that the process
of claims handling should, for the benefit of restoration project
management, be turned on its head:
“The traditional way, where the Insured meets the cost of the
reinstatement project cost, presents their invoices to the loss
adjuster and hopes to get the money back within a reasonable
time frame from their insurer, is something we’re looking to
move away from. We prefer instead a much more collaborative
approach between the Insured’s project management team
and the loss adjuster.”
Dylan adds how clients are finding more momentum when they
align project management with the advocacy of Aon’s claims
consultancy. “Costs are forecast at the outset and payments
negotiated on an interim basis so the balance sheet risk is much
less of a concern.”
Scenarios
As you can imagine, the circumstances leading to a major loss
scenario are hugely variable and unpredictable, although Dylan
says adverse weather across Europe has been a relatively
common cause in recent years. “There were a number of major
storm events across central Europe in 2013 and 2014. We worked
with a number of clients after flat rooved industrial units were
damaged by hail, with significant claims resulting from the loss.
“What can make a claim complicated is when the building is
damaged but the tenant remains in situ. If the building is
unusable, both the tenant’s and the landlord’s claims will run in
parallel with a similar set of objectives, that is to reinstate and
reoccupy as soon as possible. If the tenant remains in occupation
however, the reinstatement project has to be considerate of the
tenant’s operational needs. In this situation an early agreement
between tenant’s and landlord’s insurers with regard to meeting
any additional costs in this respect should be encouraged.”
Preparation
While the insurer’s own process following a claim is relatively well
known, Dylan advises that the client should be thinking more
carefully about the type of professional team they would like to
appoint when the worst happens.
“At Aon we encourage all of our clients to appoint a project
manager to deal with reinstatement works in the event of a major
loss. Where there is significant water or smoke damage we would
also recommend using a restoration company to help mitigate
the extent of damage. The PM plays a vital role in organising and
driving the reinstatement project but in tandem with this we
would advocate the appointment of a claims consultant, who can
carefully align themselves to the PM process and ensure that the
claim does not lose any momentum. For our clients who have
purchased Claims Preparation cover, the cost of a claims
consultant will be met by the insurer as a valid part of the claim.
Improving cash flow and forecasting
Dylan says. “A claims consultant brings additional resource
when a client needs it the most, managing the insurance
claim so that the PM is able to focus on reinstatement without
having to be concerned about communication with loss
adjusters and insurers.”
As Dylan alluded to earlier, the aim is for Aon to turn the claims
process on its head, in favour of the client’s own cash flow
management during restoration. “The client can ensure cash flow
is being managed by working with the Aon Claims Consultant
and producing cost forecasts that the insurer will authorise
interim payments against.
“This money won’t always be ‘volunteered’ so it’s easy to
understand the importance of having someone on the team to
ensure this process runs smoothly.”
In ideal circumstances this process can begin even before overall
quantum has been established. “This is a customer business and
it’s in everybody’s interest to get these types of claims settled
with the absolute minimum, additional costs,” Dylan adds.
“Integrating our claims consultancy as a conduit for cash flow
management so the client’s project manager can drive forward
the restoration makes perfect sense.”
For more information, please contact
real.estate@aon.co.uk

6. Property Eye | Aon Risk Solutions | Summer 2016 6
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Interview with... Ryan Prince,
Realstar Group
1. Over the past 40 years Britain has become an
increasing nation of home owners. How can
build to rent operators change the perception
of home ownership as the ideal?
That’s a very complicated and challenging
question. I have two suggestions:
First, we need public policy that enables the
sector to develop new-build product at scale.
Once there is meaningful product in the market
of a suitable quality and management offer,
customers (and they are customers, not tenants)
will finally be able to see for themselves the
difference between ‘buy to let’ and a genuinely
professionally run rental property.
Secondly, the government and media
messaging needs to change dramatically.
Renters are not failures or second class citizens.
There are many reasons for this including the
number of phenomenal urban metros where
renting is the norm. Millienials, for example will
have an average of 11 jobs in their careers. For
them, renting offers flexibility, choice and no
hassle without having to personally guarantee
loans for upwards of 10x their annual salary.
2. Planning for private rented sector in London
– a new mayor, a new dawn?
Like his predecessor, the new mayor recognises
the contribution that a new rental sector at
scale can bring to help solve London’s housing
shortage. At present, the mayor has limited
powers with no real ‘teeth’ to make this
happen. The silver lining, however, may be
that many of the former mayors team are now
at No 10, so maybe this will be the shot in the
arm the sector needs.
3. From a property perspective, what can the UK
learn from North America and vice-versa?
The British rental housing sector has already
spent a great deal of time studying the North
American operators. The ULI guide that was
published a couple of years ago and updated
recently talks to a number of these learnings,
including: customer service, design, amenities
and operating models.
On the flip side, London is arguably the most
global city in the world and North Americans
can learn a lot from its diversity and
regeneration areas such as Shoreditch,
Stratford and Elephant Castle. We’re also a
bastion of architectural and design innovation,
so I’m sure there’s something in that as well.
4. What initiative (or issue) has had the greatest
single impact on the property sector in the
course of your career?
In 2008, going into the financial crisis we were
one of the largest hotel owners up and down
the country with over 10,000 rooms. We had
CMBS bonds as part of our capital structure and
one of our joint venture partners was Lehman
Brothers. That was a pretty ‘challenging
situations. The good news – we made huge
improvements in operational efficiencies, all of
the shareholders were supportive and put
money back in the business in order to de-lever
the capital structure and as of December 2015
we completed the final disposition which
resulted in a highly successful investment over
the 12 year life of venture.
Ryan Prince | Vice President,
Realstar Group

7. Property Eye | Aon Risk Solutions | Summer 2016 7
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5. What, in your view, will be the biggest
challenge facing the property sector over the
next five years?
The over-arching question for all sectors is of
course, demand. This will be driven by job
growth, GDP and safety and security.
From a UK perspective, the largest challenge
will be uncertainty. Uncertainty permeates a
range of critical elements for investment
decisions in our sector, for investors, developer
and operators as well as a corporate occupiers
and residential buyer/renter. Government
policy and taxes, employment laws and rules,
and construction materials and labour will all
play a serious role in where the industry stands
in 5-10 years time.
6. Brexit – calamity or opportunity?
Fair disclosure: I was strongly in favour of
Remain. From here, I think the best we can
hope for is:
i. Visibility as soon as possible as to what the
outline of a deal will look like between the
UK and Europe. In real estate parlance, an
agreed non-binding Heads of Terms.
ii. No contagion or break-down across the rest
of the EU. If the far right gains true voter
traction in places like France and the
Netherlands, this would be a huge negative
for investment and society at large.
iii. Minimal high profile corporate defections
out of the UK – i.e. if Google or Facebook
announced they were significantly
downscaling their UK presence, this would
be a big psychological blow.
7. What alternative career might you have
pursued had you not gone into property?
I’d like to be the person responsible for
choosing musical scores for films.

8. Property Eye | Aon Risk Solutions | Summer 2016 8
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Staff Profile: Anna Whitfield
Aon Real Estate has welcomed one of the real estate insurance market’s
best known names to its team, with Anna Whitfield joining this April as
Client Director. Property Eye spoke with Anna about her move into the
broking market and how her role as Chair of the Insurance Institute of
London (IIL) Property Investors’ Committee can help Aon customers
looking for the ‘satellite view’. Anna Whitfield | Client Director,
Aon UK
Having spent 10 years at AXA and previous to that
12 years at RSA, Anna reflects on the switch from
underwriting to broking as one which benefits
both sides. “Working directly with clients was a
less frequent demand when I was on the insurer
side and was an aspect of my role that I really liked,
so it’s something I’m really enjoying now. Being a
part of the team at Aon has given me an opportunity
to focus my work around client needs at whichever
point they are in the real estate deal lifecycle.”
Her breadth of client knowledge is considerable,
having dealt with real estate investment customers
her entire working life. “Primarily I’ve been
exposed to pension fund customers and those
with large scale property investment vehicles as
well as major residential landlords,” says Anna.
“The market is there to support a range of diverse
organisations with interests in real estate
investment, including Build to Rent and specialist
student sectors.”
One of the defining aspects of Anna’s profile is her
presence as Chair of the IIL Property Investors’
Committee. “I’m very privileged to have this
role, which affords me the time to spend with
my peers discussing the latest hot topics in our
sector. We have a regular programme of lectures
which are always very well attended at the Lloyd’s
Old Library and there’s no doubt it keeps my
finger on the pulse on the issues that matter to
our customers.
“The guest speakers we are able to attract
are probably the highlight,” Anna continues.
“For example in 2015 we had a firm of
architects who specialise in the conversion of
office-to-residential use explain the challenges
of working in this market. We are seeing this
trend on an increasing basis across the UK by
virtue of Permitted Development Rights
legislation so it’s essential that we’re able to
understand what the impact on insurance of
property portfolios will be.”

9. Property Eye | Aon Risk Solutions | Summer 2016 9
Optional Page/Section Header
Steve Chapman | Client
Manager, Aon UK
Mark Manwaring | Legal
Indemnity Director, Aon UK
While you might be forgiven for thinking the
traditional hotel industry is under threat from
‘disruptors’ like Airbnb, Steve Chapman’s
experience suggests otherwise.
“The UK hotel market is performing well with
both occupancy and average daily rate numbers
increasing year on year. Having supported clients
in this area since 2002 it will be one of my main
focuses at Aon,” says Steve.
While the Aon Real Estate team looks after a
range of clients with international portfolios,
Steve says “the UK hotels market is predominantly
dominated by the global players, typically the
large US/international brands, largely operating
under a franchise agreement with the hotel owners.
There are very many UK/European-specific
operators and it’s a really dynamic space for real
estate investors. We will be providing programme
analysis and due diligence to clients with large asset
bases, where it’s not just about the bricks and
mortar, but the other factors which contribute to
the hotel’s income stream, particularly where the
owners are managing the operational side of the
business for their own account or outsourcing these
activities to other hotel management companies.”
The operational hotel sector’s income streams set
them apart from other more general property
owners, says Steve “with more complex risk profiles
and additional opportunities for the business to be
interruption by unforeseen events. It’s not just
about buildings, but also contents and stock and
the other things which make a hotel function
effectively and attractive to visitors. We are also
very used to the franchise model, with minimum
insurance coverage requirements being dictated by
the franchise/brand owners, so our role will always
be to understand these unique characteristics, help
clients analyse their programmes and avoid the
sorts of pitfalls that threaten gross profit and other
risks when an insurable loss occurs.”
Meanwhile, the practice’s Title/Legal Indemnity
team has responded to increasing demand with
the appointment of two new law graduates, India
Campbell for admin/case management and Paul
Weston who has many years of Legal Indemnity
broking experience.
Mark Manwaring, Client Director for Title/Legal
Indemnity says the expansion gives Aon Real Estate
the capacity for further growth. “Delivering service
is the key factor and with a contingent of five now
in our title team, we’re one of the most experienced
in the market. The risks we see are becoming
increasingly complex and clients require their cover
shaped to fit their needs rather than a broker acting
as a post-box for title underwriters.”
As Property Eye reported in its Spring Edition,
one of the areas in demand has been judicial
review coverage. With no slowdown in the volume
of JR applications against developers, the team has
seen a substantial increase in enquiries during
2016. “It’s been a very busy year so far, with JR
coverage a big factor, as well as advice on
restricted covenants, access ways and rights of
light,” says Mark.
Hotel and legal indemnity clients boosted by
expansion of Aon Real Estate team
Aon Real Estate continues to grow and diversify following the
appointment of ACII Chartered Insurance Practitioner Steve Chapman
as Client Manager and the addition of two legal professionals within
its Title/Legal Indemnity team.

10. Risk. Reinsurance. Human Resources.
About Aon
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