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

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Presentation on theme: "Seeing Value in Real Estate Private and Confidential 1 Development of Real Estate Funds Management in Asia."— Presentation transcript:

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

2 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 –Asian real estate returns –2013 – 2018 Crystal ball Thailand- –In an Asian RE Investment context The landscape ahead: Where will capital go Q & A Private and Confidential 2

3 Seeing Value in Real Estate Private and Confidential 3 Introduction of MGPA

4 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 Europe 1 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$12billion Private and Confidential 4 1 Including Lend Lease Global Properties Fund SICAF. Capital Commitment by Region Historical AUM / EUM (US$ Millions)

5 Global presence Private and Confidential 5 Europe Copenhagen Frankfurt London Luxembourg Paris Warsaw Asia Pacific Beijing Hong Kong Kuala Lumpur Shanghai Singapore Sydney Tokyo Extensive local network with 220 staff in 13 offices throughout Asia Pacific and Europe.

6 Private and Confidential 6 Long term growth, stable platform 1 Does not include the establishment and realisation of co-investment vehicles or separate accounts APIC Close US$250 million

7 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%, Private and Confidential 7 1 As at 31 March 2013 includes all realised investments across LLGP, MGPA AFII, MGPA EFII, MGPA AFIII & MGPA EFIII.

8 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) 2010Europe deal of the year (acquisition of Aldi Portfolio, Germany) 2009Asian firm of the year Asia 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 year Global 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) 2007Asian & European firm of the year Asian industry figure of the year (Jim Quille) Asia deal of the year (8 Shenton Way) 2006Asian firm of the year Private and Confidential 8

9 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 Private and Confidential 9

10 Private and Confidential 10 Investor profile Capital commitment by investor type Total capital raised (including all Funds and co-investments) US$8.5 billion 91 investors across all industry sectors from Australia, Europe, Middle East and North America Capital commitment by region (number of investors) Average equity commitment by investor US$ MM Capital commitment by region

11 Private and Confidential 11 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 realised 1 –Total gross asset value at disposition of US$3.4 billion –Realised net investment level IRR 19%, 1 As at 31 March Includes all realised investments across LLG, EFII and EFIII.

12 Assets in 13 European countries Private and Confidential 12 Belgium Banimmo Portfolio (corporate, office & retail) Sony Portfolio (office) Denmark  Illum (retail) France Banimmo Portfolio (corporate, office& retail) Akeler Portfolio (corporate, office/logistics) Capital Sud (office)  Logiffine (light industrial/logistics) Balthazar (office)  Le Madeleine (office & retail)  Viva (office) Germany Akeler Portfolio (corporate, office/logistics) 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) Italy Sony Portfolio (office/logistics)  Light Building (office) Luxembourg Banimmo Portfolio (corporate, office & retail) Poland Roundabout (office)  Angel Wings (residential)  Rondo 1 (office & retail)  Wilanow One (residential)  Karolinka (retail)  Pogoria (retail) Portugal Arrabida Shopping Centre (retail) Akeler Portfolio (corporate, office/logistics) Spain Amura (office) Metrovacesa (equity) Switzerland  Sony Portfolio (office) The Netherlands Haslemere (equity)  Sony Portfolio (office) UK Meadow Portfolio (mixed use) Hayes Office Park (office) Storage King (self storage) Akeler Portfolio (corporate, office/logistics) Chancery Exchange (office)  Sony Portfolio (office)  LIH (corporate)  Exchange Tower (office)  Moorgate Exchange (office)  6 Bevis Marks (office) Realised assets  Currently owned assets

13 Private and Confidential 13 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 realised 1 –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 Includes all realised investments in Asia and Japan across LLGP, AFII and AFIII.

14 Assets in eight countries across Asia Pacific Private and Confidential 14 China Platinum (office)  Galleria Chengdu (retail) Panyu (residential & retail)  j-Tower (office) Hong Kong Lippo Towers (office) Repulse Bay (residential) 181 Queens Road (office & retail) Vicwood (office & retail) Great Eagle (equity) HK Land (equity) Malaysia  The Intermark (office, retail & hospitality) Singapore Springleaf Tower (office)  8 Shenton Way (office & retail)  Asia Square (office, retail & hospitality)  Asia Square (office & retail) Cascadia (residential) 8 Napier (residential) Japan Arasho (office) MyAtria Ikebukuro (residential) Sogo Portfolio (office) Toranomon (office) Ueno building (office) Rosa Akasaka (residential) KIR Otemachi (residential) Osaka 2 Portfolio (office) Noda (logistics) Sanbacho (office)  Whale Portfolio (residential)  Ginza 4-Chome (office & retail)  Strings Portfolio (office) MyAtria Portfolio (mixed use)  Malera Shopping Centre (retail)  Fukuoka (office & retail)  Meiwa 2 Portfolio (office & residential)  Higashi Ogijima (industrial) Shirokanedai (office & retail)  Fuji Grand Imabari (retail) Ark II (office & residential)  Whale Meguro (office & residential) Hybrid Portfolio (office & residential)  Kameido (office) Meguro Yamate Place (office) Atria Meguro Tower (residential ) 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 Korea M Tower (office) KEB (NPL portfolio) Financial News (office)  South Shin Otsuka Building (office)  Shinjuku TX Building (office)

15 Private and Confidential 15 Asia Square – Singapore Current asset development Key figures Equity invested to dateUS$1,724 million OwnershipMGPA Asia Fund III Acquisition dateQ (Tower 1) and Q (Tower 2) Size 2.1 million sq ft of office and retail (NLA) and a 5-star hotel OpportunityBuy, 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 Q –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.

16 The Intermark – Kuala Lumpur, Malaysia Private and Confidential 16 Current asset redevelopment Key figures Equity invested to date US$244 million OwnershipMGPA Asia Fund II Acquisition date Q Size (NLA) 1,315,659 sq ft (office) 208,697 sq ft (retail) 540 rooms (hotel) OpportunityBuy, 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.

17 181 Queen’s Road Central – Hong Kong Private and Confidential 17 Realised asset management Key figures Equity investedUS$85.5 million OwnershipMGPA Asia Fund II (65%), co-investors (35%) Acquisition dateQ Size (GFA)35,590 sqm Realised dateQ to Q Gross sales priceUS$434 million OpportunityBuy, 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.

18 Vicwood Plaza – Hong Kong Private and Confidential 18 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 Equity investedUS$67.4 million OwnershipMGPA Asia Fund II (51%), co-investors (49%) Acquisition dateQ Size (GFA)377,214 sq ft Realised dateQ Gross sales priceUS$488 million OpportunityBuy, fix, sell

19 Private and Confidential Repulse Bay Road – Hong Kong Realised asset repositioning 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 –Net investment level return: IRR 29%, EM 1.7x. Key figures Equity investedHK$622 million OwnershipGlobal Fund I (70%), co-investors (30%) Acquisition dateQ Size188,294 sq ft Realised dateQ Gross sales priceHK$3,049 million OpportunityBuy, refurbish, sell

20 Toranomon – Tokyo, Japan Private and Confidential 20 Realised asset repositioning Key figures Equity investedUS$13.4 million OwnershipGlobal Fund I Acquisition dateQ Size4,692 sqm Realised dateQ Gross sales priceUS$71.3 million OpportunityBuy, 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 –Net investment level return: IRR 61%, EM 3.2x.

21 Private and Confidential 21 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 Equity invested to dateUS$153 million OwnershipMGPA Japan Core Plus Fund Acquisition dateQ Size76,143 sqm OpportunityRepositioning

22 Private and Confidential 22 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 Equity invested to dateUS$25 million OwnershipMGPA Asia Fund III (100%) Acquisition dateMarch 2012 Size60,536 sq ft OpportunityBuy value with active management

23 M Tower – Seoul, Korea Private and Confidential 23 Realised asset management Key figures Equity investedUS$16 million Ownership MGPA Asia Fund II (50%), co-investor (50%) Acquisition dateQ Size34,173 sqm Realised dateOctober 2007 Gross sales priceUS$166 million OpportunityForward 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 –Net investment level return: IRR 91%, EM 1.6x.

24 Galleria – Chengdu, China Private and Confidential 24 Key figures Equity invested to dateUS$67 million OwnershipMGPA Asia Fund III (50%), JV partner (50%) Acquisition dateQ 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

25 Seeing Value in Real Estate Private and Confidential 25 From MGPA to BlackRock

26 Bigger platform with wider coverage Source: BlackRock as at 5 June 2013 BlackRock 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 Sydney Hong Kong Shanghai Beijing Singapore Kuala Lumpur Copenhagen London Frankfurt Paris Luxembourg Warsaw New 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 MGPAUS$12 billion BlackRock real estate US$13 billion US$25 billion

27 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 Private and Confidential 27

28 Seeing Value in Real Estate Private and Confidential 28 Real Estate Funds

29 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 Private and Confidential 29

30 Real Estate offers many investment styles Private and Confidential 30 Private funds - Core, core plus, value-add, opportunistic REITs Listed property funds Equity Public Private Debt Mezzanine Whole loans CMBS Mortgage REITs Return Risk Core: 6%-8% Core plus: 10%-12% Value-add: 13%-15% Opportunistic: 18%-20%

31 Seeing Value in Real Estate Private and Confidential 31 Real Estate Funds in Asia

32 Real Estate in Asia – How it has developed over time Private and Confidential 32 Private funds - Core, core plus, value-add, opportunistic REITs, Listed property funds Equity Public Private Debt Mezzanine, Whole loans CMBS, Mortgage REITs

33 Capital inflows for Asia Funds Private and Confidential 33 Source: Preqin Fund raising environment remains challenging –Declining capital raised/fund ratio Real Estate Funds Raised in Asia

34 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 Private and Confidential 34

35 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 Private and Confidential 35

36 Where the capital is heading Capital is heading to markets that –welcome capital –have liquidity Private and Confidential 36 Most active markets in H1 2013Most active cities in H Source: JLL

37 Institutional grade real estate market size Private and Confidential 37 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)

38 Asia – the growth engine Private and Confidential 38 Source: Prudential Real Estate Investors 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

39 2013 – 2018 Crystal ball Defined benefit to defined contribution –More money –Greater liquidity –More allocation to alternatives Private and Confidential 39 DB/DC Asset Split Pension asset allocation Source: Towers Watson

40 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 Private and Confidential 40 Pension asset development in Asia and CEE (€ bn) Source: Allianz Dresdner Economic Research

41 Seeing Value in Real Estate Private and Confidential 41 Thailand- in an Asian RE investment context

42 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. ( ) 2 –2015 projection: 67.4 billion Diversified economy Private and Confidential 42 1 Source: IHS 2 Source: United Nations, Department of Economic and Social Affairs (as of 2010) Source: CIA World Factbook, 2012 est.

43 Thailand- in an Asian RE investment context Asian real estate ex. Japan delivers consistent positive returns Private and Confidential 43 Source: MGPA, JLL REIS Note: the returns were calculated based on JLL office total return indices (local currency) China – Beijing & Shanghai Asian markets 5-year total returnAsian markets 10-year total return

44 Thailand- in an Asian RE investment context Much less inbound institutional investors –Thailand is not getting its “fair share” Private and Confidential 44 Source: Real Capital Analytics

45 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 Private and Confidential 45 Source: Asia Pacific Real Estate Association (APREA) Note: For charting purpose, property funds are used as a proxy for REITs in Thailand Source: Prudential Real Estate Investors

46 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 Private and Confidential 46

47 Seeing Value in Real Estate Private and Confidential 47 Development of Real Estate Funds Management in Asia 22 July 2013

48 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 Private and Confidential 48


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