FEBRUARY 2017 CBRE GLOBAL INVESTMENT PARTNERS THE CASE FOR INVESTING IN GLOBAL REAL ESTATE CANADIAN PERSPECTIVE ATION

Transcription

1 FEBRUARY 2017 CBRE GLOBAL INVESTMENT PARTNERS THE CASE FOR INVESTING IN GLOBAL REAL ESTATE CANADIAN PERSPECTIVE ATION

2 TABLE OF CONTENTS THE CASE FOR INVESTING IN GLOBAL REAL ESTATE Case for investing in global real estate... 4 What are the challenges and how can these be managed?... 8 Our track record in managing global real estate portfolios Our global capabilities Important Notice IMPORTANT INFORMATION The contents of this report or document (Report ) are confidential. This Report is being furnished to an investor that has an express confidentiality obligation not to forward the Report to any third parties, and any representatives or consultant of an investor that is receiving this Report is also expressly bound NOT TO FORWARD OR SHARE THIS REPORT WITHOUT THE CONSENT OF CBRE GLOBAL INVESTORS. IF YOU USE OR ACCEPT THIS REPORT, YOU ARE BOUND BY STRICT CONFIDENTIALITY OBLIGATIONS WHICH COULD LEAD TO LIABILITY IF ANY DISCLOSURE IS MADE TO THIRD PARTIES OR UNAUTHORISED PERSONS. CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 2

3 CASE FOR INVESTING IN GLOBAL REAL ESTATE Over the past 20 years real estate has become a global asset class in common with equities and bonds. CBRE Global Investors has established deep resources throughout the world to manage global real estate portfolios. We are frequently asked by clients to explain the relative merits of investing in global real estate versus simply investing in their domestic real estate market, and for our views on how to establish a global program. In this paper we set out our views on: 1. What is the case for having a global real estate allocation? 2. What are the challenges and how can these be managed? 3. How much should be allocated and how should a global real estate allocation be benchmarked? We also include a brief overview of our global real estate capabilities. This Topic of Interest was jointly authored by members of the CBRE Global Investment Partners team. JEREMY PLUMMER Chief Executive Officer CBRE Global Investment Partners IAN GLEESON Chief Investment Officer CBRE Global Investment Partners NADJA DE JAGER Chief Investment Risk Officer CBRE Global Investment Partners CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 3

4 CASE FOR INVESTING IN GLOBAL REAL ESTATE CBRE Global Investors believes there is a strong case for a Canadian pension fund to include an allocation to global real estate as part of its real estate portfolio for three principal reasons: 1. Greater opportunity set 2. Diversification benefits 3. Enhanced returns. 1. GREATER OPPORTUNITY SET CBRE Global Investors estimates that the global institutionally-investable real estate market has a value of $28.1 trillion. This is predominantly made up of assets in Developed Markets (73% of the current universe). With the demographic and structural trends underway, Emerging Markets are expected to increase their share to 39% by Canada s real estate investment market represents approximatelly 2.4% of the global investable universe. By broadening allocations to include markets outside Canada, investors can substantially increase their opportunity set. The range of opportunity for investors is diverse across the three principal regions of Europe, Asia Pacific and the rest of the Americas. The growing importance of Emerging Markets and their transition into large, Developed Markets is one of the key trends which will continue to drive the global economy. China is already the world s second largest economy measured by GDP at market exchange rates and is predicted to overtake the US in 20 to 30 years. BY BROADENING ALLOCATIONS TO INCLUDE MARKETS OUTSIDE CANADA, INVESTORS CAN SUBSTANTIALLY INCREASE THEIR OPPORTUNITY SET. Given the strong correlation between real estate rental growth and economic growth, there is obvious merit in gaining exposure to these faster growing markets, either directly or via more established markets which are benefitting from these trends. CBRE Global Investors believes that a key attraction of the global market is that it offers significantly greater opportunities for skilled managers to earn alpha than are available in the Canadian market alone. Alpha can be generated by allocating capital, top down, to markets which will outperform, as well as by successiful bottom up - asset selection and asset management within markets. We return to this point in the section global model portfolio active top down allocation approach. FIGURE 1: GLOBAL REAL ESTATE INVESTABLE UNIVERSE 2.9% 3.3% 5.3% 26.4% 3.1% 3.9% 5.6% 21.1% 15.1% % % 2.5% 14.7% 26.0% 29.7% 11.4% Developed Europe Rest of North America Emerging Asia Emerging Europe Canada Developed Asia Pacific Latin America Rest of World Developed Europe Rest of North America Emerging Asia Emerging Europe Canada Developed Asia Pacific Latin America Rest of World Source: CBRE Global Investors CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 4

5 2. DIVERSIFICATION BENEFITS Global real estate markets are not perfectly correlated to the Canadian market. Local demand and supply drivers often result in real estate markets following different cycles in different countries. This is especially the case for real estate types driven by local factors (e.g. an emerging middle class driving demand for new types of retail). As a result, a globally diversified real estate portfolio will have a lower overall risk than a pure Canadian portfolio. The heat map below represents the correlations in local currency total returns for the major developed real estate markets over the period The data suggests that the Canadian real estate market has the weakest correlation to UK and Eurozone out of the major global markets indicating that the greatest diversification benefits can be achieved by combining the Canadian with the properties in the UK and Eurozone. Japan, Sweden, US and Australian real estate have also high potential to diversify the Canadian domestic portfolio with correlations to the Canadian real estate market below 0.6. It should be noted that the data series does not include emerging markets, for which it is likely that the correlation was lower. Looking forward, it is possible that globalization of markets may lead to real estate markets becoming more closely correlated than in the past, but the obvious differences between the Canadian and some of the faster growing economies around the world is likely to result in diversification benefits continuing in the future. A GLOBALLY DIVERSIFIED REAL ESTATE PORTFOLIO WILL HAVE A LOWER OVERALL RISK THAN A PURE CANADIAN PORTFOLIO. In conclusion, there appears to be a strong case that adding global real estate market exposure to a pure Canadian real estate portfolio should reduce the overall portfolio risk. FIGURE 2: REAL ESTATE MARKET TOTAL RETURN CORRELATIONS The colours represent diversification potential (green- high, cream medium, pink low; the stronger the pink coulor less diversification benefits, the stronger the green colour more diversification benefits) Canada UK Eurozone Sweden US Australia Japan Canada UK Eurozone Sweden US Australia Japan Source: CBRE-Ikoma, IPD, NCREIF, PMA, CBRE Global Investors, all underlying returns are local currency, all property, by country CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 5

6 3. ENHANCED RETURNS The final consideration relates to the opportunity to earn higher absolute and risk-adjusted returns. One benefit of investing globally arises from the cyclicality of the economies of different countries and real estate markets as these are at different stages of maturities and cycles. Thanks to this characteristic, wide variations in returns across markets arise, which is illustrated in the figure below. The figure shows all property returns by country. Dispersion between the strongest and weakest performing real estate markets globally peaked in 2008 at 47.3%, when returns ranged from -34.8% for Ireland to 13.0% for South Africa. Canada recorded a total return of 3.7% in that year. In 2009 dispersion between the strongest and weakest performing real estate markets narrowed to 38.7%, with the rage going from -23.2% to 15.5%. Canada delivered slightly negative return in this year. Being exposed to solely Canada in 2009 would have been damaging from an investment performance perspective. Another year where large extremes were recorded was 2014, when the Italian real estate market delivered the weakest return (3.5%) and Ireland recorded the highest return (39.5%). Capturing the return generated by the Irish market in that year would have been extremely beneficial for a client portfolio. Emerging markets are not fully included in the IPD Indices and hence these don t feature on the chart below. In some cases these have also delivered very strong returns. So the point that can be made from this is that the wide range of these returns creates an opportunity to earn high excess return through top down market selection and to achieve higher performance relative to global averages/indices or any single domestic real estate market by tactically tilting allocations towards markets that offer better return potential. This means that alpha is generated by selecting the markets with higher risk-adjusted returns at each point in time. Our expectations to which markets/regions we expect to deliver outperformance on a risk-adjusted basis is articulated through our global model portfolios. THE WIDE RANGE OF THESE RETURNS PRESENT OPPORTUNITIES TO EARN EXCESS RETURN THROUGH TOP DOWN ALLOCATIONS TO THE BETTER PERFORMING MARKETS. FIGURE 3: DISPERSION IN TOTAL RETURNS BETWEEN STRONGEST AND WEAKEST PERFORMING MARKET (ALL PROPERTY, BY COUNTRY) Total return all property (% p.a.) 40% 30% 20% 10% 0% -10% -20% -30% -40% Min Max Canada Source: MSCI/IPD Multinational Index CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 6

7 Global Model Portfolio: active top down allocation approach Similar to the dispersion in the country by country returns, the dispersion among major regions displays cyclicality too. By creating global model portfolios we express our view on which regions we expect to deliver relative outperformance. The degree of underweight or overweight position represents our expectation of excess return reltive to the benchmark IPD Global Fund Index. As indicated by Figure below post GFC the U.S. market was the first to recover with Europe taking longer, which directly led to the large return dispersion from 2010 to GIP identified this trend early on through our firm s research capability. This pointed to an outlook where cap rates were likely to compress and rental growth would manifest itself earlier in the U.S. than in other regions. As such, our global model portfolio was positioned with a significant overweight to Developed Americas while placing an underweight position to Developed Europe. As the U.S. real estate market has delivered strong returns in recent years, pricing levels in certain parts of that market started to suggest moderation in return prospects, given diminishing scope for further yield compression. In European markets on the other hand, we expected more recovery. So over time we have gradually reduced the overweight position to Developed America and increased the allocation to Developed Europe in anticipation of the convergence in returns across regions. We come back to this point in the Second Section of this report Track Record and Global Capabilitis where we demonstrate how the portolio of our global flagship product (CBRE Global Alpha Fund) was tactically repositioned over time as our expectations of market conditions changed, together with the delivered outperformance of the fund relative to the IPD Global Fund Index. It is also important to note that the global universe provides more scope to construct a higher return seeking portfolio in comparison to a country specific product, by focusing on the markets and investments with higher growth potential. AN ACTIVE TOP DOWN ALLOCATION APPROACH CAN CONTRIBUTE STRONGLY TO THE PERFORMANCE OF THE GLOBAL MODEL PRTFOLIOS If a Canadian investor has a domestic portfolio and is considering to have a percentage allocation to global in addition to the domestic real estate portfolio the investor can benefit from tactical tilting between the domestic and international portfolio. As the outlook between Canada and global real estate shifts over time, enhancements to return can be delivered by tactically tilting the portfolio between Canadian and global allocation. So the global/canadian portfolio would benefit from some tactical tilting in line with the relative outlook for Canada and global real estate over time. In line with this we would advice to give discretion to the manager to make tactical recommendations. All in all an active top down allocation approach can contribute strongly to the performance of the global model portfolios. FIGURE 4: GIP MODEL PORTFOLIO FIGURE 5: IPD GLOBAL FUND INDEX ANNUAL Asia Pacific Americas Europe % Underweight 0% Neutral 15% Overweight The colours represents the degree of underweight / overweight position relative to the neutral position of the GIP model portfolio ranging from -15% (deep red) to +15% (deep green) Source: MSCI IPD Global Fund Index, CBRE Global Investors CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 7

8 WHAT ARE THE CHALLENGES AND HOW CAN THESE BE MANAGED? ACCESSING THE GLOBAL REAL ESTATE MARKET The data in the previous section is based on local currency, unlevered market returns. The challenge is how to access these return characteristics and how to manage the associated risks. In practice it is not possible to buy the real estate market return. Individual properties have high specific risk relative to their market and it is necessary to own a large number of buildings to diversify away these specific risks. Research studies 1 suggest that the minimum number of properties required to create a global direct real estate portfolio with a tracking error of 6% relative to the Global IPD index range between 100 and 300 assets. This would require a portfolio of at least bn. This means that only the largest investors have sufficient capital to buy a sufficient number of properties to create a globally diversified portfolio. When investing indirectly via local operating partners, an investor can gain exposure to a diversified portfolio with very limited capital e.g. by acquiring shares or units in vehicles/clubs which own portfolios of real estate assets in the relevant markets. Over recent years the real estate fund management industry has evolved to meet this demand and there is now a $2.3 trillion (gross asset value) universe of unlisted real estate funds, which provide access to the developed and emerging real estate markets. In addition, by partnering with operating partners that have delivered very strong track record through our long term partnerships we are able to structure joint ventures, club deals, and programmatic ventures and access real estate assets outside of existing funds. This provides access to large lot size assets notably dominant shopping centres, which have outperformed smaller schemes and access segments that require specialist skillset such as student accommodation, senior living, leisure and medical care. By aggregating capital across clients additional diversification benefits are provided as individual clients hold only a share of underlying investment/asset. THERE IS NOW A $2.3 TRILLION (GROSS ASSET VALUE) UNIVERSE OF UNLISTED REAL ESTATE FUNDS, WHICH PROVIDE ACCESS TO THE DEVELOPED AND EMERGING REAL ESTATE MARKETS. FIGURE 6: UNLISTED CLOSE-ENDED REAL ESTATE FUND UNIVERSE FIGURE 7: UNLISTED REAL ESTATE UNIVERSE 2% 1, $bn % 38% 43% Dry Powder (RHS) Unrealized Value (RHS) No. of Funds in Market (LHS) North America Europe Asia Latin America Source: Prequin Source: Property Funds Research, IMF, Pramerica REI 1 Kennedy P, Global Real Estate (2011) CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 8

9 RISK AND RETURN CHARACTERISTICS OF A GLOBAL REAL ESTATE PORTFOLIO Real estate funds are classified as either core (low risk, income producing) or value-add and opportunistic (higher risk, growth seeking). The key point to note is that these funds do not perfectly replicate the market return for a number of reasons: Real estate specific risk the amount of real estate specific risk depends on the number of properties held in a portfolio and the riskiness of the properties themselves (long leased income producing properties, or properties with vacancy or development activity). Portfolios with high asset concentrations, or development activity, will have a higher beta than the market. Leverage real estate managers employ varying amounts of leverage. Over the long run the cost of real estate loans is lower than the return on real estate, so leverage is generally accretive to return. However leverage amplifies the volatility of real asset values, again resulting in higher beta than the underlying real estate market. Tax real estate investments are structured to minimize tax costs, but cross border investment often results in some tax leakage for the investor. Management fees and other operating costs real estate funds have management fees and other operating costs. When investing internationally, fees may be higher than for UK core strategies. A global portfolio is therefore likely to have a higher total expense ratio (TER) than a pure UK portfolio. Currency risk currency exposure, if unhedged, will add extra volatility to the return characteristics of a global real estate portfolio. Hedging should be actively considered and the costs of hedging (for which a good approximation is the interest rate differential between the UK and relevant countries). MANAGING A GLOBAL REAL ESTATE PORTFOLIO Top down market allocations and investment selection both offer considerable opportunities to generate alpha in a global real estate strategy. Constructing a global real estate portfolio requires a detailed understanding of all of the issues outlined above, as well as research capabilities and skill to make allocations to the markets and investments that will outperform on a risk adjusted basis. To this point it is critical to select the best in class operators that are the local specialists in the proposed investment strategy. Based on thorough research of market fundamentals, allocations should be made, top down, to markets which are expected to outperform, while ensuring a well diversified mix of market exposures. Individual investment and operating partner selection is then critical. Real estate is a local business and skilled managers have significant opportunities to add excess return at the asset level. An on-the-ground network and rigorous due diligence process are required to source proven local operating partners, execute investments in a structured way, and actively manage the investments and risk on an on-going basis. TOP DOWN MARKET ALLOCATIONS AND INVESTMENT SELECTION BOTH OFFER CONSIDERABLE OPPORTUNITIES TO GENERATE ALPHA. CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 9

10 BENCHMARKING There is a clear case for a Canadian investor to make a significant strategic allocation to global real estate. The remaining question is how to manage this portfolio aside an existing Canadian real estaet portfolio and how to address benchmarking and performance measurement. The alternative approaches are: Treat the Canadian and global portfolios as separate portfolios with separate benchmarks; or Treat the Canadian and global portfolios as a single portfolio, with one benchmark for the combined portfolio. We recommend treating the Canadian and global portfolio as a single portfolio, so that the manager can be given discretion to manage the portfolio within strategic bandwidths. For example, if the long term strategic mix is set at 40:60, the manager could be permitted to use discretion to allocate within a range of 50% -70% global allocation, depending on the relative outlook for Canadian and global real estate over time. There are now established benchmarks for global real estate provided by Investment Property Databank (IPD), which also supplies Canadian benchmarks. Since the beginning of 2013 IPD has provided a Global Fund Index, reweighted by estimated real estate market size for each country and sector. This is currently the most appropriate relative benchmark for global real estate portfolios. In the example above, where the strategic allocation is set to 40:60, we would recommend a composite benchmark comprising 40% IPD Canada and 60% IPD Global. WE RECOMMEND TREATING THE CANADIAN AND GLOBAL PORTFOLIO AS A SINGLE PORTFOLIO, SO THE MANAGER CAN BE GIVEN DISCRETION TO MANAGE THE PORTFOLIO WITHIN STRATEGIC BANDWIDTHS. CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 10

11 APPENDIX: TRACK RECORD AND GLOBAL CAPABILITIES CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 11

12 OUR TRACK RECORD IN MANAGING GLOBAL REAL ESTATE PORTFOLIOS CBRE Global Investors has established a strong track record in managing Global Real Estate portfolios. Global Alpha, our flagship vehicle for investors seeking a pooled fund solution has delivered significant outperformance relative to the market since its inception in The track record of the Fund is shown in the figure below. It is worth highlighting that the Fund has also achieved outperformance on a regional basis with its exposure in the principal regions all outperforming the returns of the market index for those regions. At the same time the volatility since inception has also been low. GLOBAL ALPHA HAS DELIVERED SIGNIFICANT OUTPERFORMANCE RELATIVE TO THE MARKET SINCE ITS INCEPTION IN FIGURE 8: GLOBAL ALPHA PERFORMANCE IN ABSOLUTE AND RELATIVE TERMS, SINCE INCEPTION TO Q Annualised Return since inception 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 16.4% 14.6% 12.0% 11.8% 11.5% 10.7% 9.8% 9.9% 9.5% 6.9% Asia Pacific Europe UK North America All regions Region CBRE Global Alpha Fund MSCI/IPD Global Quarterly Property Fund Index (re-weighted) As of December 2016 *Notes: The MSCI/IPD Global Quarterly Property Fund Index independently measures core, open end quarterly valued real estate fund s NAV level performance in local currency net of fees. MSCI/IPD re-weight the Index by the estimated size of the global direct market. The Global Alpha Fund returns are stated in local currency net of taxes, fees and costs. Past performance is no guarantee of future returns. CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 12

13 Outperformance has been driven by top down market selection, bottom up - investment selection and efficient execution focusing on effective entry price versus NAV and avoiding costly, inefficient fee structures. We offset our own fee by obtaining more benefitial fee terms on underlying investments in comparison to the fees our clients would have to pay on their own. A sizeable part of outperformance has been delivered by tactical market repositioning in expectation of improving market fundamentals and market recovery. Figure 9 demonstrates how Global Alpha portfolio was tactically repositioned over time as our expectations of market conditions changed. At the outset of the real estate market recovery the large part of the portfolio has been invested in the U.S. fully capturing the upside potential. The exposure to Continental Europe was decreased during the Euro crisis but since the end of 2013 we have been actively seeking new opportunities in Europe to capitalize on attractive entry point in the cycle and in expectation of improving fundamentals. We have started to allocate to Japanese real estate ahead of Abenomics and have been building it up ahead of rebound in rental values in the office and logistics sector. Exposure to Japanese real estate has been gradually reduced as economic activity slowed down. Exposure to Australia and New Zealand have been kept reasonably steady and more recently increased as the countries were fairly shaded from the potential knock on effects from the Euro crisis and benefited from steady economic growth in addition to the liquidity and transparency of the real estate market. OUTPERFORMANCE HAS BEEN DELIVERED BY TOP DOWN MARKET SELECTION, BOTTOM UP - INVESTMENT SELECTION & EFFICIENT EXECUTION FOCUSING ON EFFECTIVE ENTRY PRICE VS. NAV AND AVOIDING COSTLY, INEFFICIENT FEE STRUCTURES. FIGURE 9: PORTFOLIO ALLOCATION OVER TIME Source: CBRE Global Investors As of 31 December, 2016 CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 13

14 OUR GLOBAL CAPABILITIES CBRE Global Investors, LLC (the Firm ) is a wholly-owned, independently operated investment management subsidiary of CBRE Group, Inc. (CBRE ) (NYSE:CBG). CBRE is one of the world s largest commercial real estate services and investment firms and maintains more than 400 direct offices globally (excluding affiliate and partner offices). It has more than 70,000 employees (including affiliates) and serves real estate owners, investors and occupiers worldwide. CBRE Global Investors manages real estate investment programmes across direct and indirect real estate and listed real estate securities, and as of 31 December 2016, has over 500 institutional investors and US$86.6 billion [2] worldwide in assets under management. Investors include public and private pension funds, insurance companies, sovereign wealth funds, foundations, endowments and private individuals. CBRE Global Investment Partners (CBRE GIP ) is a division of the Firm, and provides customised global real estate investment management solutions to investors. As at 31 December 2016, it manages US$17.3 billion [3] in assets under management, including both separate accounts and commingled funds, which is invested in primary funds, secondaries, club deals and coinvestments across the world. This platform is uniquely placed to service the requirements of investors seeking to build private global real estate exposure. We believe that our Firm offers a complete range of real estate investment solutions to a broad base of investors globally, and provides a number of competitive advantages that makes us exceptionally well placed to service the requirements of investors seeking exposure to real estate globally, both through public and private markets. Our key competitive attributes include: Genuine Information Advantage As part of the CBRE Group, we have access to a vast network of market intelligence. We are able to harness this to guide top down allocation and assist with local deal sourcing and due diligence. Our dedicated in-house research function collates and analyses real time market information derived from the wider Firms leasing, valuation and capital advisory work. This information advantage, which is especially important in a relative un-transparent market like property, helps us to make better investments decisions and drives the outperformance we seek to deliver. Global Real Estate Expertise based on Local Knowledge Our business is a truly global one but recognises the importance of local knowledge and we have professionals operating on the ground in markets in those regions. Furthermore we have been able to structure this as a single business that follows a consistent investment approach across the globe. Our infrastructure enables us to operate in a very connected manner and by doing so our clients benefit from this. Track Record CBRE GIP won its first global mandate in 2008, and the separate account part of the business has now grown to US$12 billion in assets under management. The CBRE GIP Global composite, which represents 11 global separate accounts and the Global Alpha Fund, has outperformed the IPD Global Property Funds Index over all time periods. Access to Transactions Our portfolio teams are able to access a wide range of investment opportunities through the CBRE platform as well as through strong relationships with many third party brokerage firms, small and large, specialist and generalist, located globally. In addition to this we have also developed an extensive network of relationships with more than 100 local specialist operators. Through this network, we are able to access a wide range of investment opportunities, many of which are not offered on the open market. In addition as one of the largest managers of global real estate securities we have access to senior management [2] Assets under management (AUM) refers to the fair market value of real estate-related assets with respect to which CBRE Global Investors provides, on a global basis, oversight, investment management services and other advice, and which generally consist of investments in real estate; equity in funds and joint ventures; securities portfolios; operating companies and real estate-related loans. This AUM is intended principally to reflect the extent of CBRE Global Investors' presence in the global real estate market, and its calculation of AUM may differ from the calculations of other asset managers. [3] CBRE Global Investments Partners AUM methodology changed, effective 31 December 2016, to reflect the gross value of real-estate related assets exclusively under our control. CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 14

15 of leading real estate companies, as well as credibility in the marketplace in terms of block trading, public offerings, research and institutional sales coverage Scale As one of the largest institutional real estate investors we are able to utilise our scale for the benefit of our investors. This is reflected in our ability to source transactions not widely available; to execute these in an efficient manner; to achieve cost savings and to ensure that we have control over material investment decisions. FIGURE 10: CBRE GLOBAL PLATFORM CBRE Locations: 400+Offices; 70,000+ Employees 2 CBRE Global Investors Locations: 29 Offices; ~700 Employees CBRE Global Investment Partners Locations: 5 Offices; 74 Employees CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 15

16 IMPORTANT NOTICE This publication is not for distribution in any territory or jurisdiction where such distribution would be illegal. CBRE Global Investment Partner (GIP) is a trading name of CBRE Global Investment Partners Limited which is authorised and regulated in the United Kingdom by the Financial Conduct Authority (FCA) and is a registered investment advisor with the United States Securities & Exchange Commission (SEC). Registration with the SEC does not imply a certain level of skill or training. CBRE Global Investment Partners Limited obtained its Alternative Investment Fund Managers Directive (AIFMD) licence from the FCA on 19 May 2014 and is the alternative investment fund manager (AIFM) for the CBRE Global Investment Partners Global Alpha Fund Series FCP-SIF (Global Alpha), which is an alternative investment fund (AIF). The FCA granted CBRE Global Investment Partners Limited a marketing passport to market the Global Alpha fund to professional investors in the following EEA countries : Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Sweden & the United Kingdom. The sale of units in Global Alpha to other relevant EEA member states is highly restricted and may be unlawful. The information contained herein must be treated in a confidential manner and may not be reproduced, used or disclosed, in whole or in part, without the prior written consent of CBRE Global Investment Partners Limited. This document is issued and approved by CBRE Global Investment Partners Limited, in accordance with the restrictions on the promotion of nonmainstream pooled investments, the communication of this document in the United Kingdom is only made to persons defined as professional client or eligible counterparties, as permitted by COBS R (Exemption 7) and the Collective Investment Scheme (Exemptions) Order Where funds are invested in property, investors may not be able to realise their investment when they want. Whilst property valuation is conducted by an independent expert, any such opinion is a matter of the valuer s opinion. Property is a specialist sector which may be less liquid and produce more volatile performance than an investment in broader investment sectors. Past or projected performance is not necessarily indicative of future results. Forecasts of future performance are not a reliable indicator of future performance. Targeted and forecasted returns are derived from analysis based upon both quantitative and qualitative factors, including market experience and historical and expected averages related to the risk/return profile for yet-to-be liquidated current investments of the prior funds and programs. The targeted and forecasted returns are based on a weighted blend of the prior funds and programs returns to date and the expected cumulative internal rates of return generated by the expected liquidation of investments across the remaining terms of the prior funds and programs. These forecasts and projections are hypothetical in nature, do not reflect actual investment results and should not be construed as providing any assurance as to the results that will actually be realized by the prior funds and programs or that may be realized by any future fund or program in the future. All target or projected gross internal rates of return (IRRs ) do not reflect any management fees, incentive distributions, taxes, transaction costs and other expenses to be borne by certain and/or all investors, which will reduce returns. Gross IRR or Gross Return shall mean an aggregate, compound, annual, gross internal rate of return on investments. Net IRR or Net Returns are shown after deducting fees, expenses and incentive distributions. There can be no assurance that the mandate will achieve comparable results, that targeted returns, diversification or asset allocations will be met or that the investment strategy and investment approach will be able to be implemented or that the mandate will achieve its investment objective. Actual returns on unrealized investments will depend on, among other factors, future operating results, the value of the underlying assets and market conditions at the time of disposition, foreign exchange gains or losses which may have a separate and uncorrelated effect, legal and contractual restrictions on transfer that may limit liquidity, any related transaction costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances on which the valuations used in the prior performance data contained herein are based. Accordingly, actual returns may differ materially from the returns indicated herein. If a fund investing in emerging markets is affected by currency exchange rates, the investment could either increase or decrease. These funds therefore carry more risk. The value of any tax benefits described herein depends on your individual circumstances. Tax rules may change in the future. Statements contained in this Presentation that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of GIP. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Actual events or results or the actual performance of the mandate may differ materially from those reflected or contemplated in such forward-looking statements. Certain economic and market information contained herein has been obtained from published sources prepared by third parties and in certain cases has not been updated. Neither GIP nor any CBRE Group Inc company its respective affiliates nor any of their respective employees or agents (collectively, CBRE ) assume any responsibility for the accuracy or completeness of such information. Whilst GIP believes that the information contained herein is accurate at the date hereof (or at the date shown in the document), neither GIP nor CBRE makes any representation or warranty, express or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of any of the information contained herein (including but not limited to information obtained from third parties), and they expressly disclaim any responsibility or liability therefore. CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 16

17 This proposal is for informational and discussion purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any security. Any such offer or solicitation shall be made only pursuant to a confidential private placement memorandum/private placement memorandum (as amended, restated, supplemented or otherwise modified from time to time, the Memorandum ) of the Fund, which describes risks related to an investment in the Fund as well as other important information about the Fund. Offers and sales of interests in any Fund will not be registered or qualified under the laws of any jurisdiction and will be made solely to qualified investors under all applicable laws. The information in the proposal set forth herein does not purport to be complete and is subject to change. This Proposal is qualified in its entirety by all of the information set forth in the Memorandum. The Memorandum and the governing documents of a Fund must be read carefully in their entirety prior to investing in a Fund. This proposal does not constitute a part of the Memorandum. Prior to investing in a Fund, prospective investors should consult with their own investment, accounting, regulatory, tax and other advisors as to the consequences of an investment in a Fund. In Canada, the Fund is offered only on a private placement basis and, as such, cannot be marketed to other than qualified investors through a dealer registered, or exempt from dealer registration, under an applicable rule of the Canadian Securities Administrators. In Canada, trades of units in the Fund will be made through CBRE Capital Advisors, Inc. CONFIDENTIAL AND PROPRIETARY CASE FOR GLOBAL REAL ESTATE 17

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