Real estate Without the bricks and mortar - PowerPoint PPT Presentation

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Real estate Without the bricks and mortar

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Include underlying investments in income-producing real estate ... Rely on fortunes of a single company. Avoid potential pitfalls ... – PowerPoint PPT presentation

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Title: Real estate Without the bricks and mortar


1
Real estateWithout the bricks and mortar
2
Bricks mortar
  • Comes with its own risks

3
Issues to be addressed
  • High cost of purchase
  • Ongoing upkeep
  • High levels of taxation
  • Changing environmental laws

4
Problems owning rental properties
  • Tenant conflicts
  • Vacancies
  • Not a liquid investment
  • Time and effort to sell

5
Introducing REITs
6
Two ways to invest in real estate
  1. Publicly traded real estate companies
  2. Real Estate Investment Trusts (REITs)

7
REITs
  • Growing class of securities
  • Trade like stocks
  • Include underlying investments in
    income-producing real estate
  • Apartments, shopping centres, offices and
    warehouses

8
Highly liquid investments
  • Bought and sold with relative ease
  • Similar investment potential as owning property
  • Provide steady income
  • Tax-advantaged income

9
Income capital growth
  • Can pay a regular stream of income
  • 85 - 100 earnings to unitholders
  • Potential for tax-advantaged income
  • Long-term growth potential
  • Low volatility

10
After-tax income comparison
Rental income Interest income (Bonds GICs) Dividend income Income from REITs
Income amount 1,000 1,000 1,000 1,000
Taxes owed 464 464 246 46
After-tax income 536 536 754 954
Assumes a hypothetical marginal tax rate of 46.4
per cent. REIT taxation rate based on a
hypothetical REIT distribution that includes 90
per cent return of capital. Return of capital
levels will fluctuate based on the level of
income earned and distributed by the REIT, as
well as availability of the original capital. For
illustrative purposes only.
11
Portfolio diversification
  • Economic sectors
  • Office buildings, hotels, apartment buildings,
    shopping centres and warehouses
  • Low correlation to other asset classes
  • Global REITs rise and fall in value at different
    times from stocks bonds

12
Global real estate A history of robust returns
13
A growing investment opportunity
  • First appeared in U.S. during the 1960s
  • Only 11 of worlds real estate market made
    available
  • Rest held by private investors

UBS Investment Research, June 2005
14
The global real estate company marketplace is
expanding
Source Citigroup, September 2006
15
Are REITs right for you?
  • Income stream is not guaranteed
  • Performance can be highly cyclical
  • Can underperform and be volatile
  • Rely on fortunes of a single company

16
Avoid potential pitfalls
  • Consider investing in a mutual fund
  • Take time to do research
  • Professional asset manager

17
Fast fact
  • The global real estate market has grown
    internationally and is expected to reach a total
    market capitalization of US 1 trillion by 2010.

FTSE, December 31, 2005
18
Speak to your advisor
19
Important notes
The commentary in this presentation is for
general information only and should not be
considered investment or tax service to any
party. Individuals should seek the advice of
professionals to ensure that any action taken
with respect to this information is appropriate
to their specific situation. Manulife
Investments is the brand name identifying the
personal wealth management lines of business
offered by Manulife Financial and its
subsidiaries in Canada. As one of Canadas
largest integrated financial services providers,
Manulife Investments offers a variety of products
and services including segregated funds, mutual
funds, principal protected notes, annuities and
guaranteed interest contracts. Manulife and the
block design are registered service marks and
trademarks of The Manufacturers Life Insurance
Company and are used by it and its affiliates
including Manulife Financial Corporation.
20
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