Student Investment Management – Stock Presentation: Real Estate Presented By: Mark Wilson, Rohit Kejriwal, Shuocun Yang

REIT Overview: Size of Sector

Current Holding DIGITAL REALTY TRUST INC (DLR) 1.06% in Portfolio Beta 0.66 EQUITY RESIDENTIAL (EQR) 1.04% in Portfolio Beta 0.75

Stock Analysis

Digital Realty Trust Company Overview REIT that focuses on data centers. Digital Realty's customers include domestic and international companies across multiple industry verticals ranging from information technology and Internet enterprises, to manufacturing and financial services. Digital Realty's 228 properties with 18.3 million square feet. Digital Realty does its business in 31 markets throughout Europe, North America, Singapore and Australia

Digital Realty Trust 7.7% price increase in the past 12 months 40% price increase in the past 2.5 years

Equity Residential Company Overview Equity Residential is a real estate investment trust that focused on the acquisition, development, management of rental apartment properties in urban and high-density suburban coastal cities. The company is an S&P 500 company.

Equity Residential

Equity Residential Key Business Driver Key Risks Strong economic growth Strong job opportunities growth High cost to own home High population density Large amount of affluent potential customers High barriers to entry due to scarcity of land and government regulation. Limited supply of new apartment properties Higher interest rate Higher mortgage rate Higher Unemployment rate Lower apartment occupancy rate Lower apartment rent Lower potential customer number

Equity Residential Relative Financial Ratios

Equity Residential DCF Model

Equity Residential Sensitivity Analysis

Duke Realty

Duke Realty Valuation

Duke Realty DCF

Boston Properties Boston Properties (BXP) is a real estate investment trust (REIT) based out of Boston, Massachusetts. BXP was founded in 1970 and filed for its IPO in 1997. The company is one of the largest owners, managers, and developers of Class A office properties in the United States. BXP has a primary footprint of 5 major metro areas: Boston, Los Angeles, New York, San Francisco, and Washington D.C. Tenants by Industry

Boston Properties

Boston Properties

Boston Properties Valuation

Boston Properties The company is a relatively safe investment because it owns 41.9MM square foot of Class A office space in 5 of the largest cities in America. We valued the company using a combination of a discounted cash flow model in a base case and downside case. The company was also value using an income capitalization approach in a base case and downside case.

Sector Overview

Life Cycles

Effect of Interest Rates Interest rates are negatively correlated with REIT returns. The correlation is -.66, which is moderate-high. Interest rates are currently at very low levels, and will inevitably increase in coming years.

Current Trends in Real Estate Construction activity is currently at peak levels, implying that REITs are either in the expansion stage on hyper supply stage However, REIT occupancy rates are at the highest levels since 2000, which implies that REITs are in the expansion stage, since hyper supply range is correlated with declining occupancy Given the large development pipeline in real estate right now, it seems likely that the hyper supply stage is imminent

Recommendation

Final Recommendation Final Recommendation: Hold current stock. Keep REIT underweight to S&P 500.

Questions??? Thank You!