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CENTER FOR

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MIT Center for Real Estate and Taurus Investment Holdings, LLC. October 27, 2006 ... What is the risk profile of those returns? ... – PowerPoint PPT presentation

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Title: CENTER FOR


1
  • The Role Of Real Estate In The Family Office
    Portfolio
  • Forums on Issues and Innovations in Real Estate
    (FIRE)
  • MIT Center for Real Estate and Taurus Investment
    Holdings, LLC
  • October 27, 2006
  • Professor Tony Ciochetti, Chairman
  • MIT Center for Real Estate

2
Agenda
  • Overview of MIT Center for Real Estate
  • Prof. Dr. Tony Ciochetti, MIT Center for Real
    Estate - Real Estate as an Investment
  • Prof. Dr. Rolf Tilmes, European Business School -
    Background on the Family Office Portfolio
  • Thomas Brown, Deutsche Bank AG Private Wealth
    Management - Global Products and Sources for Real
    Estate Capital
  • Dr. Jürgen Schäfer, MRICS, FERI Finance AG -
    Direct Investments in German Real Estate
  • Gerard de Gunzburg, Macquarie Capital Partners
    Ltd. - Co-Investing with Specialist Real Estate
    Operator
  • Caspar Noble, Deloitte Touche LLP - Tax Issues
    Associated with Real Estate Investment
  • Question and answer
  • Reception

3
MIT Center for Real Estate
  • 1984 - Based in MITs School of Architecture and
    Planning
  • With a mission to
  • Improve the global built environment
  • Elevate the real estate industry
  • Through the means of
  • Educational programs MSRED
  • Research
  • Industry outreach

4
Core Values
Education
Research
Industry
5
Center for Real Estate
  • MSRED
  • Core courses, electives, thesis, global
    orientation

6
Recent Employers
  • Global real estate investment banking CS First
    Boston, Merrill Lynch, Goldman Sachs, Lehman
    Brothers, Blackstone, Morgan Stanley, JP Morgan,
    Deutsche Bank
  • Real estate investment management AEW, Taurus
    Investment Holdings, LLC, GE Capital, RREEF, TA
    Associates, Lonestar, Colony Capital, Invesco,
    Fidelity, ING Clarion
  • Real estate finance John Hancock, Sun Life,
    World Bank, Freddie Mac, Moodys, KeyBank, Carr
    Capital, Prudential, HUD, Credit Suisse, Nomura,
    Bank of America
  • Real estate development Hines, Kravco, Leggatt
    McCall, Trammell Crow, Related Companies,
    Tishman, Bovis-Lend Lease, Petrini, Taurus
    Investment Holdings, LLC, Spaulding and Slye
    (JLL), HRO, Forest City Commercial

7
Recent Employers
  • Publicly traded companies Boston Properties,
    Pro Logis, AMB, Federated, AvalonBay, Equity
    Office Properties, Regency
  • Commercial brokerage Jones Lang LaSalle, CB
    Richard Ellis, Cushman and Wakefield, Meredith
    and Grew, Marcus and Millichap
  • Corporate real estate Dell, Fidelity, Met
    Life, Boeing, Burger King, Staples
  • Non-profit sector Oakland California Community
    Housing, Enterprise Foundation, City of Toronto,
    Urban Redevelopment Authority (Singapore), OMB
    (NYC)

8
Center for Real Estate
  • MSRED
  • Core courses, electives, thesis, global
    orientation
  • Research
  • HAI, CREDL, NCD
  • Industry involvement
  • Research initiatives, hiring students, advisory
    board, international outreach, PDC/Executive
    education, Forums on Issues and Innovations in
    Real Estate (FIRE)

9
Catching the FIRE
Stockholm
London
Berlin
Beijing
Frankfurt
Chicago
Paris
Tokyo
New York
Hong Kong
Munich
San Francisco
D.C.
Shanghai
Los Angeles
10
Real Estate and Family Offices
  • 750,000 HNWI in Germany
  • UHNWI control 1tn in assets
  • Role of real estate in these portfolios?

11
Why Real Estate Why Any Asset?
  • Do I receive appropriate returns?
  • What is the risk profile of those returns?
  • By adding this asset - will it help my portfolio
    performance?
  • How much hassle is it to play in the space?

12
Fundamental Issues
  • Will I get my money back?
  • Keeping up with inflation?
  • Will the asset help my portfolio?
  • How do I do it?

13
Capital Preservation? 406 Investment Periods, 11
with Negative Return (2.7)
Bought 83 Sold 86 11.60 Avg.
Returns 10
Year Sold
Returns 0 - 10
Returns Negative
Year Purchased
Source NCREIF
14
Inflation Protection?(10 year rolling returns)
15
Inflation Protection?(7 year rolling returns)
16
Risk/Return Profile(1982 2006)
17
Cross - Correlation of Return
18
Does Real Estate Help Portfolio?
10.1
9.6
8.14
19
What About Volatility of Real Estate?
20
Take Away?
21
Global Real Estate Why?
22
Whats Driving Global Real Estate Demand?
  • Weight of domestic capital
  • Attractiveness of real estate
  • Improving property fundamentals
  • Interest rates

23
Surplus of Financial Capital to US Commercial
Real Estate
Core property types 5 million and greater
Source Real Capital Analytics an MIT/CRE
Partner
24
Growth in Foreign Investment in US
Source Real Capital Analytics an MIT/CRE
Partner
25
Whats Driving Global Real Estate Demand?
  • Weight of domestic capital
  • Attractiveness of real estate
  • Improving property fundamentals
  • Interest rates
  • Search for yield
  • Expand opportunity set
  • Diversification
  • Global economy-customer driven

26
Global Opportunities
  • The investable universe of global real estate is
    approximately USD 8.0 trillion, or 16 of the
    total investable universe including global stocks
    and bonds
  • The largest market, the US, comprises only about
    39 of the total universe of real estate, so even
    for US investors significant opportunities exist
    outside of the country

Source UBS Global Asset Management, Real Estate
research as at 31 December 2005. This data does
not include single-family homes
27
Expanding REIT Universe 240 bn - 650 bn
Source UBS Global Asset Management, Real Estate
research
28
Global Growth in CMBS
Issuance 1991 2006P
Bn
91
93
95
97
99
01
92
94
96
98
00
02
03
04
06P1
05
111.861 billion priced as of March 31,
2006 Source Morgan Stanley Estimates, Commercial
Mortgage Alert
29
Global Challenges
  • Transparency comfort level
  • Emergence of debt markets f (title/property
    rights)
  • Yield compression
  • Local nature of real estate - partnerships
  • Investment segmentation
  • Opportunity/hedge funds
  • Private equity
  • Value added/core plus/core?
  • Role of global integration on investment
    strategy?

30
How Do I Do It?
  • Equity
  • Private Core, Core Plus, Value Added,
    Opportunity, Hedge, P/E
  • Public REITs, REOCs,
  • OE/CE funds
  • Debt
  • Private CMs
  • Public CMBS, CDOs
  • Derivatives Swap products

31
How Does This Relate to Family Offices?
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