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THE ROLE OF EUROPEAN EMERGING MARKET PROPERTY COMPANIES IN A PORTFOLIO

THE ROLE OF EUROPEAN EMERGING MARKET PROPERTY COMPANIES IN A PORTFOLIO. GRAEME NEWELL University of Western Sydney ALEX MOSS Macquarie Securities STANLEY McGREAL University of Ulster and KIM NGUYEN University of Western Sydney. INTRODUCTION. Developed property markets

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THE ROLE OF EUROPEAN EMERGING MARKET PROPERTY COMPANIES IN A PORTFOLIO

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  1. THE ROLE OF EUROPEAN EMERGING MARKET PROPERTY COMPANIES IN A PORTFOLIO GRAEME NEWELL University of Western Sydney ALEX MOSS Macquarie Securities STANLEY McGREAL University of Ulster and KIM NGUYEN University of Western Sydney

  2. INTRODUCTION • Developed property markets • Emerging property markets • European emerging property markets • Previous research • *General *Property • *European property

  3. PURPOSE OF PAPER • Nine (9) European emerging property markets • Listed property securities • Risk-adjusted performance • Portfolio diversification • Mixed-asset portfolios • 2007-2011 • Property investment implications

  4. GLOBAL COMPETITIVENESS #33: Estonia #36: Czech Republic #39: Poland #40: Cyprus #45: Slovenia #46: Portugal #47: Lithuania #52: Hungary #60: Slovak Republic #61: Turkey #63: Russia #67: Romania #71: Bulgaria #77: Croatia #83: Greece

  5. CORRUPTION PERCEPTION #26: Estonia #27: Slovenia #28: Cyprus #32: Portugal #41: Poland #46: Lithuania #50: Hungary #53: Czech Republic #56: Turkey #69: Romania #73: Bulgaria #78: Greece #154: Russia

  6. INSTITUTIONAL GRADE PROPERTY MARKET #11: Russia (6) #18: Turkey (10) #24: Poland (14) #25: Greece (15) #30: Portugal (19) #34: Czech Republic (20) #42: Romania (21) #43: Hungary (22) #44: Slovakia (23) #46: Ukraine (24) #50: Slovenia (26) #53: Bulgaria (27)

  7. PROPERTY TRANSPARENCY • #19: Portugal (13) #22: Poland (16) #24: Czech Republic (18) • #27: Hungary (19) #29: Greece (21) #30: Slovakia (22) • #31: Russia (Tier 1) (23) #32: Romania (24) #35: Russia (Tier 2) (25) • #36: Turkey (26) #40: Bulgaria (27) #43: Russia (Tier 3) (28) • #46: Ukraine (29) #53: Slovenia (30) #61: Croatia (31) • #70: Kazakhstan (32) #78: Belarus (33) • Transparent: #19-#27 (4) Semi-transparent: #29-#53 (10) • Low-transparency: #61-#78 (3) • Improvements: 2001-2010

  8. SECURITISED PROPERTY Russia Poland Turkey Greece Hungary Bulgaria Czech Republic Cyprus Portugal Estonia Latvia REITs #13: Turkey #19: Greece #21: Bulgaria

  9. PROPERTY ACTIVITY: 2010: COUNTRIES #13: Russia #21: Poland #24: Turkey #27: Portugal #32: Czech Republic #35: Romania #36: Ukraine #38: Hungary

  10. PROPERTY ACTIVITY: Q1 2011 PROPERTY ACTIVITY: 2010: CITIES #15: Moscow #13: Poland #19: Czech Republic #23: Turkey #26: Ukraine #27: Romania #31: Hungary #33: Croatia #35: Russia

  11. EMERGING MARKETS: GLOBAL CONTEXT • Listed property securities • Contribution • * developed: 80% * emerging 20% • Emerging market contribution: regions • Asia: 54% Americas: 15% • ME&A: 25% Europe: 5% • EPRA emerging markets index

  12. EMERGING MARKETS: EUROPEAN CONTEXT • Listed property securities • • Developed @ 93% versus emerging @ 7% • • Europe emerging = 1.0% global • • #12: Russia #17: Poland #18: Turkey • • Europe emerging @ EPRA emerging markets index

  13. METHODOLOGY • Listed property securities • European emerging markets (9) • Bulgaria Cyprus Czech Republic • Greece Hungary Poland • Portugal Russia Turkey • European developed markets (3) • U K France Sweden • Stocks • January 2007- April 2011: monthly total returns • Risk-adjusted performance; portfolio diversification • Sub-period analysis • January 2007-June 2009 • July 2009-April 2011

  14. PROFILE: APRIL 2011

  15. PROPERTY SECURITIES PERFORMANCE

  16. STOCK PERFORMANCE

  17. DIVERSIFICATION: PROPERTY SECURITIES

  18. DIVERSIFICATION: STOCKS

  19. PROPERTY/STOCK CORRELATIONS Bulgaria: 0.70 Cyprus: 0.41 Czech Rep.: 0.54 Greece: 0.71 Hungary: 0.68 Poland: 0.85 Portugal: 0.06 Russia: 0.67 Turkey: 0.83 UK: 0.68 France: 0.67 Sweden: 0.57

  20. SUB-PERIOD RETURNS: PROPERTY Bulgaria: -16.68%  6.01% Cyprus: -16.82%  -26.13% Czech Rep.: -26.80%  -11.39% Greece: -15.83%  -27.22% Hungary: -14.84%  7.14% Poland: -28.65%  17.85% Portugal: 22.61%  30.52% Russia: -29.29%  39.32% Turkey: -1.55%  47.11% Emerging: -21.62%  30.35% Developed: -33.66%  30.59%

  21. SUB-PERIOD RISK: PROPERTY Bulgaria: 20.37%  11.79% Cyprus: 32.92%  32.80% Czech Rep.: 27.64%  30.51% Greece: 33.19%  26.17% Hungary: 25.60%  14.80% Poland: 39.35%  18.27% Portugal: 44.61%  66.45% Russia: 54.24%  36.37% Turkey: 30.46%  22.22% Emerging: 40.41%  21.31% Developed: 25.04%  18.47%

  22. SUB-PERIOD RISK: STOCKS Bulgaria: 47.54%  26.81% Cyprus: 55.07%  35.78% Czech Republic: 33.40%  20.82% Greece: 37.23%  35.89% Hungary: 32.51%  20.86% Poland: 30.79%  16.90% Portugal: 25.75%  16.39% Russia: 41.35%  19.05% Turkey: 38.20%  25.12% UK: 18.38%  14.68% France: 21.53%  16.75% Sweden: 25.46%  13.56%

  23. SUB-PERIOD PROPERTY/STOCKS CORRELATIONS Bulgaria: 0.77  0.34 Cyprus: 0.49  0.29 Czech Republic: 0.63  0.41 Greece: 0.68  0.79 Hungary: 0.78  0.30 Poland: 0.86  0.73 Portugal: 0.09  0.03 Russia: 0.70  0.51 Turkey: 0.85  0.75 UK: 0.57  0.84 France: 0.61  0.71 Sweden: 0.57  0.49 Emerging property/Developed property: 0.66  0.45

  24. EUROPEAN EMERGING MARKETPROPERTY INVESTMENT IMPLICATIONS • Size; maturity; significance • Risk-adjusted returns • Portfolio diversification • Sub-period analysis • * risk * diversification

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