Inflation hedge - rationale
Lease agreements are typically linked to inflation-adjustments.
BUT:
Tenant in financial trouble
Market value not connected
Risk diversification in terms of RE - issue
Real estate implies high country risk (systematic risk), that cannot be diversified
What is a “seperate mandate”?
Fund is owned by an institutional investor (e.g., Allianz) but managed by a professional manager
With what are REIT returns correlated?
Long term: Real Estate
Short term: Equities
Anglo-Saxon REPE structure
Italian Authorized Fund structure
Fund life - stages
Set-up
Management
Reinvestment
Fund termination
Fund termination - how can the fund be terminated?
Asset by asset disposal
Portfolio disposal
New fund & evergreen
What are typical and important articles in fund-related contracts?
Duration of the fund
Investment policy
Expenses payable by…
Fund
Unit-holders
Management company
Advisory committee
Unit-holders meeting
Substitution of the management company
Subscription by means of contributions in kind
Liquidation of the fund
What types of fund structures exist?
Open ended
Closed ended
Funds of funds
What type of property is to be used in open-ended funds?
Core properties which have a regular inflow of money
What is a seeded fund?
A fund whose properties are already known
-> Opposite: “Blind Pool”
What fees does the fund pay to the fund management company?
Acquisition fee
On new investments
Entry and redemption fee
Open ended funds only
Annual asset managemment fee
On GAV (uncommon: NAV)
Performance fee
When return > target return
Real Estate Players - classification
Developers
Service providers (brokers, advisors, valuers who do not invest themselves)
Investment companies
Property companies
REITs
US Real Estate Investment Trusts - Requirements
Structure
Asset composition
Income
Dividend distribution
Ownership: held by 100 or more persons; <= 5 individuals may not own >= 50% of the shares
Listed or unlisted
>= 75% real propert, cash, government securities
Securities of taxable REIT <= 20%
>= 75% from rents + disposition gains, other REIT shares
>= 95% from above plus dividends, interest, gains from securities and hedging income
Distribute 90% of taxable income
Italian REIT “SIIQ” - Requirements
Asset test
Income test
Dividends
Listing
Shareholders
> 80% Income producing properties
> 80% rent
> 70%
Listed on stock exchange
<= 60% by main shareholder
25% of shareholders have <2% stake
SIIQ - taxation of capital gains
Tax free, but 50% have to be distributed within 2 years
Calculation: EPRA NAV
NAV adjusted:
Properties and other investment interests at fair value
Exclusion of certain items that are not expected to crystallize
Calculation: EPRA NNNAV
EPRA NAV adjusted:
Fair values of financial instruments
Fair values of debt
Fair values of deferred taxes
Calculation: EPRA Vacancy rate
ERV of vacant space divided by ERV of the whole portfolio
Calculation: EPRA Net Initial Yield
+ Annualised rental income (based on cash rents passing at balance sheet date)
- Non-recoverable property operating expenses
_____________________________
divided by the Property MV
+ Purchaser´s costs
Calculation: Coverage ratio
EBITDA / Interest expense
Calculation: Fixed-charge ratio
EBITDA / (Interest expense + preferred dividends)
REIT - leverage usage compared to Non-REITs
Lower, because REITs do not have a tax-shield
Last changed2 years ago
