Real Estate FinanceInvestment Opportunities in Asia for TIAA Real Estate Account

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Study by: Bruno RAKOTOZAFY, Nicolas de FERAUDY, Gaël COUNILLON Florence OPIGEZ and Bastien DELESCOT

Real Estate FinanceMS SMIB /FEA– February 2011

Introduction

TIAA-CREF

400 US$ billion full-service US financial group

Two mains activities: insurances for public sector and retirement fund (the Real Estate Account is part of it)

Long-term investments preferred: non speculative group

Real Estate Account: 75 to 85% investment in Real Estate

Well diversified un the US (region/property type) but not present worldwide

Looking for some investment opportunities abroad in order to diversify and spread risks.

Investments in Real Estate

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Markets Overview (1/x)

China

Relatively recent market but quick development

Highly competitive nowadays (more than 200 real estate related companies)

Continuous growth since 2002 in Real Estate Development (2009 to 2010: +33%)

Development mainly finance by self-raising funds (37%)

Continuous increase in prices also

Real Estate Development (US$ Billion)

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Evolution in price indices (%)

Average 6,40%

Newly constructed residential buildings 7,60%

Commercial residential buildings (ordinary) 7,20%

Commercial residential buildings (luxury) 12,80%

Commercial residential buildings (economic) 1,00%

Second handed residential buildings 5,00%

Markets Overview (2/x)

China (cont’d)

After the 2008 crisis, boosting plans proposed by the Chinese government

Consequences more important than expected

High rise in prices, fear of bubble burst

New policies in 2010 (i.e. prohibition of acquisition of a second RE asset in Beijing for one family)

Regulation-sensitive market.

Back to normal expected in Beijing. Increase in prices in 2nd tier cities

Is there a bubble? Is it going to burst?

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Markets Overview (1/x)

Japan

Japan has been highly impacted by the crisis

Governmental stimuli in order to boost this sector (interest rates and tax deductions)

Low records in 2008/2009 in new constructions

Renting prices, land prices and occupancy rates seriously decreased

Some opportunities (volatile class A buildings, undervaluation of J-REITS)

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Office building (sq ft) in Tokyo Tokyo stock exchange REIT Index (pts)

Invest in an Indian Real Estate Fund to understand the market

ICICI Real Estate Fund

First real estate fund in India (US$ 562 million). Supported by the second-largest bank of the country.

Very diversified portfolio (office, mall, hospitality and residential properties).

Strategy of investment in economically strong and growing Tier I and Tier II cities.

High risk mitigation management. Allow to provide long term benefits.

ICICI Real estate returns: TO BE COMPLETED

In the future:

Create a 50/50 joint venture with ICICI Real estate Fund to invest in Pune (Tier II city).

Booming supported by IT industry. Opportunities of investment in offices and residential properties.

ICICI Real Estate Fund is part of ICICI Venture

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