Lend Lease Real Estate Investments

1
Global Real Estate Company

• Listed on ASX, strong balance sheet, 75 of
  revenues from outside Australia.
• 2 Core global Businesses - Real Estate
  Investments and Real Estate Solutions.
• 500 investor clients, public-private,
  debt-equity products, core to opportunistic.
• Approx US50Bn in assets under management, 30
  year track record in REITs and RE Securities.
• GPT, LLUSOT, LLRosen, Houllihan-Rovers,
  Australian RE Securities Fund.

2
J-REIT Market
Progress Snapshot

• 5 J-REITs since Sept 01, US3.4Bn market cap,
  12 of listed RE sector, 0.15 of TSE.
• Mainly retail investors (35-65), domestic
  institutions (25-40), foreign (10-25)
• Office sector focus, A to C- grade, some retail.
  RE sector facing some issues.
• Regulatory framework OK, 100 tax pass through,
  external management, MERs 44 65Bpts.
• Abundant cheap debt, typical LTVs 35 - 45.
• 4.5 - 8.5 asset NOI yields, 6.6 - 9.9 FFO
  yields, 4.8 6.6 dividend yield forecasts.
• High yield spreads to JGB (approx. double
  developed markets).
• Post IPO performance 24 to 6.6 movements.
• NAV performance 2 to 1.

3
J-REITs - Progress Scorecard

• Its easy to be critical, BUT
• Great result in a very short period!!!
• Remember that approx. 4 years ago, Japan didnt
  even have enabling SPC regulations.
• Japan has significantly benefited from the past
  mistakes in US and Australia.
• Potential sponsor conflicts have been managed
  reasonably well (considering the various issues).
• Post IPO performance is an issue but view in
  light of overall market.
• High spreads reflect market immaturity - major
  investor groups wait and see.
• Current public/private yield arbitrage constrains
  growth.

4
J-REITs - Looking Forward

• What we need to see
• 2 3 reporting cycles, prospectus forecasts
  delivered.
• Quantified RE market concerns (2003 problem in
  Tokyo, regional growth concerns).
• Work-through some of the IPO mistakes.
• Analyst coverage, TOPIX inclusion, investor
  decision-making (equity or real estate?).
• UP-REIT structure will help, margin lending to
  take-off.
• Capital from major domestic institutions and
  conservative retail investors will occur when
  they see a positive risk-return equation.
• US and Australian comparisons - J-REIT market
  cap US75-100Bn within 8-10 years -
  CMBS market size US100Bn within 8-10 years.

5
Real Estate Investments