Morgan Stanley

20 March 2015

Overview of REITsSundareswaran SExecutive Director, Morgan Stanley India

Table of ContentsSection 1 REIT Market Update

Section 2 Investors in REITs

Section 3 Risk-Return Analysis

REIT Market UpdateSection 1

4

Introduction to REITs

History of REIT Launches in Major Economies

1960 1971 1989 2001 2002 2003 2004 2007 2009 2010

US Malaysia

Australia Singapore Thailand Philippines

Finland

UK

GermanyHong Kong

Japan

South Korea

REITs have offered investors an alternative instrument for investment in real estate by holding units in income producing assetsSince introduction in 1960, economies across the world have put in place enabling regulation to encourage the development of REITs

Overview of Real Estate Investment Trusts (REITs)• Provides all types of investors an opportunity to invest in income-producing real estate such as offices, retail or hotels• Key features of a REIT are

– Largely (75%+) owns completed real estate projects and earns rental income, dividend yield or interest income from these assets – Required by regulation to distribute as dividend a significant (c.90%) of their distributable cash flows to stock / unit holders– Single stage taxation through the structure till ultimate recipient– Allowed to have related party transactions with adequate disclosure

• Today, there are c. 400 REITs globally with total market capitalization of US$ 1 Tn– Account for c.50% of the total market capitalization of listed real estate companies in most markets

REIT Market Update

5

Overview of the Key REIT Markets Globally

Sources Bloomberg, Broker Research, Capital IQ, Dealogic

Market Size and Investor Participation

US UK Australia Japan Singapore Hong Kong

Total Equity Market Cap (US$ Bn) 71,390 7,952 2,201 5,772 1,690 5,942

Year of Introduction of REIT 1960 2007 1971 2001 2002 2003

Number of REITs 393 41 52 51 37 13

Real Estate as a % of Country’s Market

Capitalization

REIT as a % of Real Estate Market (1)

Capital Raised in Real Estate CY 14 (US$ MM) 32,928 8,368 3,072 11,483 1,959 1,222

REIT Issuance in CY 14 (US$ MM) 32,032 4,356 1.500 7,750 1,842 -

Level of International Investor Participation

Level of Retail Investor Participation

REIT Market Update

Note:

1. REITs listed in a few markets also include some infrastructure assets

6

Expansion of the REIT Market in Asia ex-JapanREIT Market Update

Market Cap Evolution for REITs in Asia Since 2001Total Value (US$MM)

(1)

Note:

1. Countries include Korea, Taiwan and Malaysia

Source Bloomberg

Number of REITs in Asia Since 2001# of REITs

7

Secondary Performance of REITs in Asia ex-JapanREIT Market Update

Note:1. FTSE Straits Times REIT index2. Hang Seng REIT Index3. MSCI Asia-ex Japan Index

Source Bloomberg

S-REITs Have Strongly Outperformed the STIIndexed Share Price (Rebased to 100)

HREITs: 175%

MSCI: 139%

SREITs: 115%STI: 91%

HSI: 68%

(2)(1)

(3)

Spreads Have Tighten RecentlyAnnual Dividend (%) Spread Premium to 10 yr US Bond (%)

SREITs: 6.2%

HREITs: 6.1%

SG Spread: 4.2%

HK Spread: 4.1%

(2)(1)

• Most of the REITs in Singapore and Hong Kong are pure plays in terms of their respective asset geographies, taking advantage of investor familiarity with regards to asset specific drivers which will support long term sustainability of the yield, such as rental reversion and microeconomic outlook

REITs listed on the SEHK Top REITs by Market Capitalization Market Cap Asset Breakdown

Name US$MM HK (%) China (%) Link REIT 13,419 100 0

Hui Xian REIT 2,773 0 100

Champion REIT 2,348 100 0

Fortune REIT 1,780 100 0

Yuexiu REIT 1,518 0 100

Langham Hospitality Trust 927 100 0

Regal REIT 889 100 0

Sunlight REIT 763 100 0

Prosperity REIT 520 100 0

New Century REIT 377 0 100

Average 64 36

REIT Asset BreakdownREIT Market Update

8

REITs listed on the SGX Top REITs by Market Capitalization

Market Cap Asset Breakdown Name US$MM SG (%) Int’l (%) CapitaMall Trust 5,276 100 0

Ascendas REIT 4,306 100 0

CapitaCommercial Trust 3,588 100 0

Suntec REIT 3,327 100 0

Keppel REIT 2,769 88 12

Mapletree Commercial Trust 2,329 100 0

Mapletree Logistics Trust 2,183 44 56

Mapletree Greater China 2,019 0 100

Fortune REIT 2,003 0 100

Mapletree Industrial Trust 1,924 100 0

Average 73 27

Source Capital IQ

REIT Asset Breakdown in SingaporeREIT Market Update

Breakdown of REIT Asset by Total Market Cap

Industry

Total Market Cap

US$MM Top REITs Retail 12,135 CapitaMall Trust, SPH, Fortune

Industrial 11,186 Ascendas, Mapletree Logistics, Mapletree Industrial

Office & Retail 8,952 Suntec REIT, Mapletree

Commercial, Starhill Global

Office 7,570 CapitaCommercial, K-REIT, Frasers Commercial

Hospitality 5,085 Ascott Residence, CDL Hospitality, Far East Hospitality

Healthcare 1,723 Parkway Life, First REIT

Others 467 Soilbuild

Total 47,118

Retail26%

Industrial24%Office & Retail

19%

Office16%

Hospitality11%

Healthcare4% Others

1%

Singapore REIT Asset BreakdownTotal Market Cap: US$47,118MM

Source Capital IQ

9

Investors in REITsSection 2

11

REITs Have Attracted Their Own InvestorsInvestors in REITs

Source Bloomberg, EPFR Global Flows Database, Morgan Stanley Research

Singapore has an Established Pool of Institutional Capital for REIT InvestmentsSingapore Fund Inflow vs. IPO Issuance vs. Market Performance in Singapore from 2004 to 2014

Deal Volume and Fund Flow(US$MM) STI Index

• REIT IPOs have traditionally accounted for 32% of the total IPO volumes in Singapore– However, the soft rates environment and increased investor appetite for yield have led to REIT IPOs

accounting for 83% of the total IPO volumes in Singapore in 2014• Since 2004, the correlation between foreign institutional fund inflow and REIT IPO volumes have declined

meaningfully, thereby illustrating the increasing depth of the pool of institutional capital for REIT investments

REIT IPOs as% of Total IPO Volume

Evolution of Singapore Property Trust Market

Source Dealogic

Notes1. Using US$1 = S$ 1.2

Compared to a volatile capital raising environment on the equity side, capital raising volumes continue at pre-financial crisis level in the Singapore Property Trust Market highlighting the increased appetite for investors to hold income producing assets

Total Equity and Equity-Linked Capital Raised

Total Market CapAs of 31 December (US$Bn (1))

21.3 9.9 22.7 28.7 28.4 42.90.80.3

1.4 1.8 1.61.8 2.8 2.9

0.6 2.0 5.6 9.018.1 22.1

10.224.1 30.5 30.0

44.7 49.0 54.9

0

32

64

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20142

0

# of REITs

# of Business Trusts

3

0

5

0

7

0

13

0

17

1

19

2

19

2

22

3

23

4

26

5

30

6

40

6

REITs Business TrustsSource CapitalIQ

(US$MM)

Post GlobalFinancial Crisis

Post GlobalFinancial Crisis

Investors in REITs

12

0 40 0

612

1,731

117797

3,6350

345

1,252

41290 229993 1,589

2,827

5,415

1,552

3,460

6,578

3,2342,244

6,601

1,941

0

4,000

8,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

REITs RE

1,9005,349

1,8983,2342,9432,7321,4363,684

2,215

Capital Raising Activity in Real Estate Markets

Sources Dealogic, Prime Database, MA, IMA

Capital Market issuances by Indian Real Estate developers has been volatile in line with market sentimentsHowever, equity raising in the Singapore BT / REIT market has been relatively more stable

Capital Raising Activity in Real Estate Markets(US$MM)

2,254.0

1,010.0

1,994.0

972.0

1,619.0

407.0

1,191.0

231.0

2,947.0

1,790.0

20.0 90.0

523.0

102.0

2,132.3

3,459.93,295.7

3,524.1

1,828.0

4,898.0

1,842.0

0.0

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

2008 2009 2010 2011 2012 2013 2014

India: Sponsor and Strategic Transactions India Capital Markets Singapore REIT

5 2 8 4 8 16 5 5 18 5 1 13 4 1 11 1 6 13 4 3 10No. of Deals (1)

Investors in REITs

13Notes1. Deals>$100 MM for Sponsor and Strategic Transactions

14

Significant Investment by Established Funds in SG and HK REITsInvestors in REITs

Note:1. SGX REITs include CapitaMall Trust, Ascendas, CapitaCommercial Trust, Suntec Real Estate Investment, Keppel REIT, Mapletree Commercial Trust, Mapletree Logistics Trust, Mapletree Greater

China Commercial2. SEHK REITs include Link REIT/The, Hui Xian Real Estate Investmen, Champion REIT, Fortune Real Estate Investment, Yuexiu Real Estate Investment, Jinmao Investments

Source ThomsonOne

Top 40 Shareholders in SG and HK REITs (1) (2)

Investor Name AUM

(US$ MM) Country SGX

REITs SEHK REITs

Temasek Holdings Pte. Ltd. 141,748 Singapore

Capital Research Global Investors 447,873 United States

BlackRock Institutional Trust Company, N.A. 1,428,528 United States

Newton Investment Management Ltd. 55,186 England

APG Asset Management 159,121 Netherlands

CBRE Clarion Securities, L.L.C. 20,724 United States

The Vanguard Group, Inc. 1,698,500 United States

Schroder Investment Management (Singapore) Ltd. 8,721 Singapore

State Street Global Advisors (US) 1,049,602 United States

Norges Bank Investment Management (NBIM) 490,967 Norway

Matthews International Capital Management, L.L.C. 24,197 United States

Vontobel Asset Management, Inc. 28,744 United States

Dimensional Fund Advisors, L.P. 257,797 United States

Schroder Investment Management (Hong Kong) Ltd. 12,207 Hong Kong SAR

BlackRock Investment Management (UK) Ltd. 216,931 England

Columbia Wanger Asset Management, LLC 29,599 United States

BlackRock Advisors (UK) Limited 159,903 England

SEB Asset Management (Stockholm) 29,098 Sweden

Invesco Advisers, Inc. 176,715 United States

BlackRock Investment Management, LLC 108,546 United States

Top 40 Shareholders in SG and HK REITs (1) (2) (cont’d)

Investor Name AUM

(US$ MM) Country SGX

REITs SEHK REITs

Prudential Real Estate Investors 4,663 United States

First State Investments (HK) Ltd. 13,483 Hong Kong SAR

Schroder Investment Management Ltd. (SIM) 123,044 England

American International Assurance Co., Ltd. 1,321 Singapore

State Street Global Advisors Asia Ltd. 8,317 Hong Kong SAR

PGGM Vermogensbeheer B.V. 47,783 Netherlands

Bank of China Ltd 1,304 China

Capital World Investors 494,210 United States

Hang Seng Investment Management Ltd. 9,393 Hong Kong SAR

ARA Asset Management (Singapore) Ltd. 89 Singapore

Veritas Asset Management (UK) Ltd. 14,322 England

JP Morgan Asset Management 280,193 United States

ING Investment Management Advisors B.V. 34,785 Netherlands

AEGON Investment Management B.V. 16,582 Netherlands

Henderson Global Investors Ltd. 58,786 England

TIAA-CREF 264,762 United States

UBS Global Asset Management (Switzerland) 129,461 Switzerland

Value Partners Ltd. 4,972 Hong Kong SAR

Northern Trust Global Investments Ltd. 88,508 United States

CPP Investment Board 61,048 Canada

Risk-Return AnalysisSection 3

Risk / Return PropositionRisk-Return Analysis

16

• Fixed yield• Downside protection• No upside participation

Fixed Income Instruments

• Volatility in prices• No downside protection• Upside participation

Equities

Key Features• Income Stability - Requirement to distribute at least 90% of distributable cash• Growth - Driven by rental reversions and accretive acquisitions• Liquidity - Low cost and liquid opportunity to invest in high quality assets• Tax Benefits - Typically tax transparent in a number of jurisdictionsKey Investor Focus• Asset quality, sector and geographical exposures• Demonstrable pipeline of existing brownfield assets which could be injected• Sponsor’s track record in growing the assets organically and inorganically,

especially in executing earnings accretive acquisitions

REITs

Yield with asset backing Growth with diversification

44%

38%35%

32% 29% 29% 28%

20%

73%

29%

24%

7%

0%

20%

40%

60%

80%

KeppelREIT

MapletreeCommercial

SuntecREIT

CapitaMallTrust

FrasersCentrepoint

FortuneREIT

StarhillGlobal

Capita-Commercial

Trust

CitySpring

HutchinsonPort

AscendasIndia

ReligareHealth Trust

Current Leverage Levels (1)

%

Note:(1) Total Debt / Total Assets

Source: Capital IQ

21%

36%

4%

7%

Leverage at IPO

30%

35%34%

21% 27%15%

29%

31%

REITs to maintain leverage of <35% (with no credit rating)

REITs can have max of 60% leverage with credit rating disclosed

17

SG REITs and BTs: Leverage LevelsRisk-Return Analysis

Select REITs Select BTs

5.5% 5.4% 5.3% 5.3% 5.8% 6.2%5.3% 5.9%

8.4%

6.2%5.5% 5.4%

3.4% 2.6% 1.5% 2.5%

8.2% 3.2%

11.7%10.9% 10.7%

8.7% 8.4%7.7% 7.7%

14.1%

11.6%

0.0%

5.0%

10.0%

15.0%

SuntecREIT

FortuneREIT

Capita-Commercial

Trust

CapitaMallTrust

FrasersCentrepoint

StarhillGlobal

MapletreeCommercial

AscendasIndia

ReligareHealth Trust

Total Return: Dividend Yield Plus Dividend Growth%

Source: Capital IQ

CY14-16E DPU GrowthCY14 Dividend Yield

Select REITs Select BTs

18

SG REITs and BTs: Total Return AnalysisRisk-Return Analysis