REIT - May/June 2010

FTSE EPRA/NAREIT Developed REIT Index
Weight
in Index
13.9%

Country
Australia
Belgium /
Luxembourg
Canada
France
Germany
Greece
Hong Kong
Italy
Japan
Netherlands
New Zealand
Singapore
United Kingdom
United States
Total
Market Value
($000)
58,821.3

%
2009 Total
Return (USD)
33.44%

3,976.7

19,613.9

31,773.0

309.5

186.6

6,573.9

259.8

19,575.4

10,497.6

563.2

9,681.6

31,173.8

228,904.1

$421,910.4

0.9%

4.6%

7.5%

0.1%

0.0%

1.6%

0.1%

4.6%

2.5%

0.1%

2.3%

7.4%

54.3%

100.0%

17.82%

83.17%

53.97%

70.01%

65.98%

64.61%

59.88%

- 6.84%

45.34%

39.07%

84.42%

23.76%

28.29%

32.49%

FTSE EPRA/NAREIT Developed Non-REIT Index
Weight
in Index
%
2009 Total
Return (USD)

0.3% NA

0.9% 128.86%

3.1% 72.75%

6.4% NA

0.8% 58.73%

1.8% 19.64%

0.1% - 23.06%

40.9% 90.76%

0.2% 13.63%

23.0% 5.06%

0.6% NA

0.4% 169.14%

9.9% 85.61%

3.0% 37.27%

2.9% 21.24%

2.6% 78.97%

3.0% 40.67%

100.0% 51.27%

Country

Australia
Austria
Canada
China
Finland
Germany
Greece
Hong Kong
Italy
Japan
Netherlands
Norway
Singapore
Sweden
Switzerland
United Kingdom
United States
Total
Market Value
($000)

ran ahead of other asset classes on the way down, according to the E&Y report. However, as the crisis has subsided, REITs are leading on the way back up.

Where things go from here may depend on the region. Some countries in southern Europe are facing sovereign-debt issues that could dampen demand for commercial real estate, says John

Robertson, managing director and CEO of Global Real Estate Securities, RREEF. Other markets, like Australia and Canada, only dipped into the recession and are back in growth mode, he adds.

Much like their U.S. peers, listed property companies around the world will continue to look to lower their leverage ratios, and companies will remain focused on planning for upcoming debt expirations, observers say. Transparency will also be a high priority. This will help for the long run, as investors choosing these securities will be looking at more modest gains, as property values fluctuate and companies simplify their business structures.

“With property yields increasing and investor return expecta-
tions resetting, REITs will be able to offer acceptable returns
with a focus on long-term, stable cash flows,” says Bob Lehman,
global director of REIT services at E&Y in New York. “That will
help REIT share prices.”
Capital management will continue to be a dominant theme.
“Everyone now is looking at future debt exposure, trying to man-
age equity well and looking to get their leverage ratios down to
a level that would allow them the flexibility to more forward,”
Lehman adds.

We now live in a world where the tide has gone out, exposing weak enterprises, says Adam Learmonth, a director at Anvil Capital in Sydney. “It is going to come back to being smart,” he says. “The better managers will start outperforming now.”

● ASIA

Expanding Access to Capital

Asian public real estate companies posted the strongest total returns ( 43. 4 percent) among the developed markets in 2009. Analysts expect Asia to continue to lead the world in the recovery from the global financial crisis. The continent’s REIT markets are dominated by Japan, Singapore and Hong Kong, which combined account for the majority of the region’s total real estate market capitalization. Yet, the countries offer vastly different stories.

In Japan, public real estate companies yielded a comparatively low return of 1. 4 percent last year, which accompanied industry consolidation as four mergers took place. By comparison, Singapore’s eco-