EFTA01457965.pdf

tbrul Pcdttitql, Faro Ot Pt lull Irrrattincrit vuWC ihtti An:54as paspxtios favtir..^ Hvin43roviclyai ;don Long or short, Mark G. Roberts? The Head of Real Estate Strategy and Research considers immediate and longer-term investment issues Could global non-listed real estate continue to outperform? Is sustainability going to play an increasing role in property 523 According to MSCI, global non-listed ungeared property investment? generated a total return of 9.9% in 2014. With real interest rates After the advent of the internee in the mid-1990s, landlords likely to stay low in historical terms, total returns are likely to quickly learned that the provision of intemet access was not an remain ahead of their longer-term average of 7.5%. U.S. returns option to gain competitive advantage. Instead it was a required are benefiting from higher GDP growth while European returns amenity necessary to avoid building obsolescence. Today, are gaining from declining unemployment, rising tenant demand some of the same things can be said of sustainable building and limited new construction. Australia, South Korea and Japan practices. Tenants, regulators and investors alike vie the are likely to enjoy above-average performance but decelerating benefits of sustainable building practices. Lower energy costs, economic growth poses a threat to Chinese property markets. more efficient use of water resources and the need to avoid Hong Kong and Singapore office markets have pricing risk. overbuilding in lower-density areas will likely make sustainable practices commonplace and of continuing importance to Are U.S. listed real-estate returns likely to prove as attractive? investors. Listed real-estate investment trusts (REITs) utilize a higher degree of gearing which can increase the volatility of returns More broadly, will technology have an impact on long-term relative to the non listed market Between 1993 and 2014 there infrastructure investing? were 13 periods during which U.S. interest rates (as defined by Bea Yes - consider, for example, the interaction between the Treasury yield) were rising. During those periods, the S&P climate-change policies in Europe and energy-storage, energy- 500 Index rose by an average of 10% while U.S. REITs increased efficiency and zero-emission technologies Smart-grid systems by an average of 2.6% and the Barclays Aggregate U.S. Bond will help boost the share of renewable energy capacity, by Index declined by 2.7%. In the year that followed a rate increase, creating a more efficient energy network, aligning more closely however, REITs' returns averaged 16%, higher than the S&P 500 peak demand and production. Although at an early stage, energy Index's average total return of 9.7% and the Barclays Aggregate storage has a positive long-term outlook to address the problems U.S. Bond Index's 9.6% return. The Implication is that, in the of grid bottlenecks and intermittent renewable power with near term, U.S. REITs may prove volatile. implications for infrastructure investment. But won't dividend yields help offset this? Olga roprt!viettIS AI pOSII YO XISYVOr pea Higher dividend yields can serve to offset this volatility. row:awns a retnatrie ant,555 FiElTs currently provide a very attractive dividend yield of 3.87% which exceeds both the S&P 500 Index dividend yield of 1.97% and the 10-year U.S.-Treasury yield of 2.42%.' This higher dividend yield can dampen downside risk and underpin future outperformance. In addition, we estimate U.S. REITs are trading at a 10% discount to their net asset value. ' All dividend yields are quoted as of 7/10/15. Offers and sales of alternative investments are subject to Past performance is not indicative of future returns. regulatory requirements and such investments may be available No assurance can be given that any forecast. only to investors who are 'Qualified Purchasers" as defined investment objectives and/or expected returns will be achieved. by the U.S. Investment Company Act of 1940 and "Accredited Allocations are subject to change without notice. Forecasts are Investors" as defined in Regulation D of the 1933 Securities based on assumptions, estimates, opinions and hypothetical Act. Alternative investments may be speculative and involve models that may prove to be incorrect. significant risks including illiquidity, heightened potential for loss and lack of transparency. CIt) Mor I Atroncio E054,wildiuguft 2015 i5 CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0117702 CONFIDENTIAL SDNY_GM_00263886 EFTA01457965