0. Forums on Issues and Innovations in Real Estate Global Products and Sources for Real Estate Capital
October 2006

1. Agenda Global real estate capital flows Real estate products
Tommy Brown

2. Agenda Global real estate capital flows Real estate products
Tommy Brown

3. Global cross-border capital flows are increasing
Note: The table summarises the major sources of cross-border real estate investment in 2005, and the arrows indicate the source and destination of these flows
Source: RREEF Research, RCA, JLL, DTZ
>4.0 billion
>1.5 billion
>0.5 billion
2005 outward overseas investment
(US$bn)
USA 19
Germany 15
Australia 9
UK 5
Tommy Brown

4. The scale of investable real estate is also increasing in different markets
Asia
America
Europe
Invested stock
US$2.4 trillion
Invested stock of
US$7.1 trillion
Total stock of
Investible stock
US$4.7 trillion
US$4.0 trillion
US$7.5 trillion
US$5.2 trillion
US$1.4 trillion
US$4.6 trillion
US$2.5 trillion
Global total = $20tn
Global Investible = $12.4tn
Global Invested = $7.8tn
Note: Estimates as at end 2005
Scale of Total, Investible and Invested Real Estate, by Region
Source: RREEF/DB Real Estate, DTZ, ULI/PWC
Tommy Brown

5. Additionally, overall capital to real estate is increasing
Pubic equity
Public debt
Note: Size of global listed real estate market
Source: UBS
Note: Issuance of CMBS
Source: Deutsche Bank Securitisation Research
Private debt
Private equity
Note: Bank lending to commercial real estate
Source: RREEF Research, DTZ
Note: Direct real estate investment activity
Source: RREEF, DTZ, JLL, RCA
Tommy Brown

6. US institutional investors’ target and actual portfolio allocations (2006)
Sector 2006 Target 2006 Actual Mean (%) Mean (%) Difference (%)
All Real Estate
US Stocks
Foreign Equities
Fixed Income
Venture Capital/ Private Equity
Money Market Funds/ Cash Equivalents
Hedge Funds
Other
Source: Kingsley Associates, 2006 Plan Survey
Tommy Brown

7. US institutional investors’ over/Under allocation
Investors remain challenged to meet real estate targets.
Source: Kingsley Associates, 2006 Plan Survey
Tommy Brown

8. Agenda Global real estate capital flows Real estate products
Tommy Brown

9. Real estate products are broadly divided between private and public
Private vs public real estate investing
Private real estate
Control of property assets
More stable income stream
High transactions costs
Appraisal based valuations
Lower volatility of returns
Public real estate
Greater liquidity
More informational efficiency in asset pricing
Greater geographical/property diversification for a given amount invested
More subject to the disciplines of the public markets
Higher volatility of returns
Note: The capitalisation rate is the yield someone will pay for the cash generated by the property; it is similar in concept to a bond yield
Tommy Brown

10. Several questions need to addressed when investing in real estate
Investment process
Strategic asset allocation
Real Estate
Equity
Debt
Cash
Other
How much to invest in Real Estate?
Where to invest?
What’s The Risk/Reward balance?
What type of property?
What format?
How much liquidity is required?
Who is performing mgmt/ oversight of investment?
Geographic allocation
Domestic
Europe US
Asia
Investment strategy
Core
Core plus / Value add
Opportunistic
Sector allocation
Office
Retail
Industrial
Residential
Special property(1)
Investment vehicle
Private equity direct(2)
Private equity indirect(3)
Private debt
Public equity(4)
Public debt(5)
Real estate investment
Includes self storage, care homes and medical labs
Real Private equity direct (buildings)
Private equity indirect (funds)
Public equity (REITS / Mutual funds)
Public debt (CMBS / Mezzanine)
Private real estate investing
Public real estate investing
Tommy Brown

11. Breakdown of universe of real estate investment products
The real estate universe has matured to provide an array of investment alternatives
Low Risk (and leverage) High
Breakdown of universe of real estate investment products
Private
Core Value-added returns Opportunistic (up to 8%) (up to 14%) (+18%)
Direct
Indirect
Note: The above illustration can be further segmented by geography and property type. The returns shown are for illustrative purposes only and are indicative IRRs (internal rate of return) without regard to the duration of the investment.
Source: Deutsche Bank
Public
Equity
Debt
Direct investments in existing assets
Funds
Real estate operating companies
Opportunity funds
Direct property development
Mortgage lending
Mezzanine debt
CMBS
Unsecured debt of real estate companies
Real estate companies
Mutual funds
Structured products
Debt / Mezz funds
Tommy Brown

12. Non-listed institutional real estate funds
European market for private real estate funds is achieving scale and positioned to increase substantially
Non-listed institutional real estate funds
Source: INREV, Quarterly Report, Issue No,12
Tommy Brown

13. There has been significant new public real estate equity issuance
Historical public real estate equity issuance
Source: Equityware
Tommy Brown

14. The CMBS market also continues to grow
Source: Commercial Mortgage Alert
Tommy Brown

15. Disclaimer
THIS PRESENTATION CONTAINS INFORMATION WHICH HAS BEEN PROVIDED BY A NUMBER OF SOURCES. WHILE THE INFORMATION HEREIN IS BELIEVED TO BE RELIABLE, NO REPRESENTATION IS MADE HEREIN BY DEUTSCHE BANK OR ANY OF ITS AFFILIATES, AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
THIS PRESENTATION HAS BEEN PREPARED FOR INFORMATIONAL AND DISCUSSION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER, OR AN INVITATION TO OFFER, OR A RECOMMENDATION TO ENTER INTO ANY TRANSACTION. DEUTSCHE BANK IS NOT ACTING AS YOUR FINANCIAL ADVISOR OR IN A FIDUCIARY CAPACITY IN RESPECT OF ANY TRANSACTION WITH YOU UNLESS EXPRESSLY AGREED BY DEUTSCHE BANK IN WRITING. BEFORE ENTERING INTO ANY TRANSACTION YOU SHOULD TAKE STEPS TO ENSURE THAT YOU UNDERSTAND THE TRANSACTION AND HAVE MADE AN INDEPENDENT ASSESSMENT OF THE APPROPRIATENESS OF THE TRANSACTION IN THE LIGHT OF YOUR OWN OBJECTIVES AND CIRCUMSTANCES, INCLUDING THE POSSIBLE RISKS AND BENEFITS OF ENTERING INTO SUCH TRANSACTION. YOU SHOULD ALSO CONSIDER SEEKING ADVICE FROM YOUR OWN ADVISORS IN MAKING THIS ASSESSMENT. NEITHER DEUTSCHE BANK OR ANY OF ITS AFFILIATES ACCEPT ANY LIABILITY WHATSOEVER WITH RESPECT TO THE CONTENT OF THIS DOCUMENT, ITS USE OR ANY LOSS ARISING FROM IT.
Tommy Brown

16. Forums on Issues and Innovations in Real Estate Global Products and Sources for Real Estate Capital
October 2006