Post on 28-Jun-2020
Deutsche Real Estate Securities Capabilities
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Investment products: No bank guarantee I Not FDIC insured I May lose value
Agenda
Platform and Team
REIT Investment Universe
REIT Themes
REIT Valuations
Economic Backdrop and Real Estate Fundamentals
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Investment products: No bank guarantee I Not FDIC insured I May lose value
Our alternatives real asset platformStrength based on a unique global perspective
2
TokyoChicago
BethesdaNew YorkSan Francisco
Sydney
Singapore
Boston
Seoul
Global network of
more than
300investment professionals
40 years of investment heritage
with individuals, governments,
corporations and institutions.
AmsterdamFrankfurtLondon
Madrid
Paris Warsaw
ZürichMunich
Milan
One of the world’s leading
fiduciary alternatives managers with
$89BILLION
of assets under management
Source: Deutsche Asset Management as of 6/30/16.
Seattle
Costa MesaDallas
AtlantaHong Kong
Westborough
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
(1) Based in Chicago. (2) Based in London. (3) Based in Zurich. (4) Based in Sydney. (5) Based in Tokyo. (6) Based in Hong Kong.
(7) Association of Southeast Asian Nations. (8) Subject to applicable law, internal policies and procedures. (9) Shared across multiple asset classes.
*Includes 1.5 years as external employee. Source: Deutsche Asset Management. Years with firm/industry as of June 30, 2016. Years with industry #
Years with firm #
Real estate securitiesInvestment team organization
3
Deutsche AM and Deutsche Bank Resources8
Global
Client Group
Global
Research
Global
Direct Real Estate
Equities, Fixed
Income, and FX
Risk
Management
Trading
Desk
John Vojticek Head and CIO of Liquid Real Assets
MD, Global Portfolio Manager
Americas Europe Asia Pacific
Lead
Port
folio
Managers Joe Fisher1
Co-Head of Real Estate
Securities, Americas
D, Co-Lead Portfolio Manager
David Zonavetch1
Co-Head of Real Estate
Securities, Americas
D, Co-Lead Portfolio Manager
John Hammond2
Head of Real Estate Securities, Europe
MD, Lead Portfolio Manager
Daniel Ekins4
Co-Head of Real Estate
Securities, Asia Pacific
MD, Co-Lead Portfolio Manager
Chris Robinson4
Co-Head of Real Estate
Securities, Asia Pacific
MD, Co-Lead Portfolio Manager
Analy
sts
John Bejjani1
VP, Securities Analyst
Office/Datacenters
Derek Bower1
VP, Securities Analyst
Healthcare/Industrial
Vincent Kouch2
VP, Securities Analyst
Continental Europe
Eloise Blake4
VP, Securities Analyst
Australia
Todd McFarlane4
VP, Securities Analyst
Australia
Andrew Johns1
VP, Securities Analyst
Regional Malls/Retail
Christian Schroeder1
VP, Securities Analyst
Apartments/Hotels
Barry McConnell2
VP, Securities Analyst
United Kingdom
Hiroshi Miyata5
VP, Securities Analyst
Japan
Lihui Chen6
VP, Securities Analyst
HK/China
Ryan Zaborske1
AS, Securities Analyst
Specialty/Self Storage
Pierre Paren2
AVP, Securities Analyst
Ivy Ng6
AVP, Securities Analyst
Singapore/ASEAN7
Frédéric Mathier3
D, Portfolio Manager
Swiss Fund of Funds
Port
folio
Constr
uctio
n9 Evan Rudy1
D, Portfolio Manager
Amit Patel1
AVP, Portfolio Analyst
Christine Fitzpatrick1
AVP, Portfolio Management Assistant
Barry Steiner1
AVP, Portfolio Management
Assistant
Krishneel Singh4
AVP, Portfolio
Management Assistant
9
10
5
27
20
20
18
20
12
13
19
31
13
20
1
10
8
12
3
16
7
9
0
8
9
15
8
8
2
9
3
9
12
25
2
20
9
16
6
17
3
8
2
4
1
5
9
19
2*
10*
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value 4
(1) Diversified includes multiple property sectors.
(2) Weighted average.
Source: Global Real Estate Securities represented by FTSE EPRA/NAREIT Developed Index; Global ex-U.S. Real Estate Securities represented by FTSE EPRA/NAREIT
Developed Ex-US Index; U.S. Real Estate Securities represented by FTSE EPRA/NAREIT North America Index. excluding Canada. Market capitalization figures in USD millions.
Source: Factset. As of June 30, 2016.
Global real estate securities Investment universe
HoldingsMarket
Cap
Average
Market
Cap2Yield
Global Real Estate Securities 334 $1,409,675 $14,741 3.5%
Global ex-U.S. Real Estate Securities 202 $630,598 $10,443 3.5%
U.S. Real Estate Securities 132 $813,706 $18,219 3.6%
Index breakdown by sector1 Index breakdown by region
Diversified, 14.8%
Healthcare, 7.6%
Hotelsresrts, 3.9%
Industrial, 5.6%
Industrial Office Mixed,
1.2%
Office, 17.2%
Other, 2.2%
Residential, 17.5%
Retail, 25.3%
Specialty, 0.3%
Storage, 4.3%
United States, 55.3%
Asia ex-Japan, 9.0%
Japan, 11.1%
Australia, 6.1%
Europe ex-UK, 10.9%
United Kingdom,
4.6%
Canada, 2.9%
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
Rolling 10-year returns for real estate indices Real estate securities provided real estate returns over the long run
5
Please note: For Illustrative purpose only, you cannot invest directly into an index.
Sources: FTSE, Morgan Stanley, NCREIF, Standard & Poors. As of June 30, 2016.
Rolling 10-year returns
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
De
c-9
9
Jun-0
0
De
c-0
0
Jun-0
1
De
c-0
1
Jun-0
2
De
c-0
2
Jun-0
3
De
c-0
3
Jun-0
4
De
c-0
4
Jun-0
5
De
c-0
5
Jun-0
6
De
c-0
6
Jun-0
7
De
c-0
7
Jun-0
8
De
c-0
8
Jun-0
9
De
c-0
9
Jun-1
0
De
c-1
0
Jun-1
1
De
c-1
1
Jun-1
2
De
c-1
2
Jun-1
3
De
c-1
3
Jun-1
4
De
c-1
4
Jun-1
5
De
c-1
5
Jun-1
6
FTSE NAREIT Index (10-year) FTSE EPRA/NAREIT Developed Index (10-year)
NCREIF Property Index (10-year) S&P 500 Index (10 -year)
MSCI World Index (10 -year)
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
Long-term index performerLarge percentage of return from income
6
Note: Assumes dividend reinvestment. Past performance is historical and does not guarantee future results; based in USD. Yields are not guaranteed.
Sources: Deutsche Asset Management, Bloomberg, FTSE NAREIT as of 6/30/16. For illustrative purposes only.
Listed real estate (EPRA Developed Index) – Indexed to $100
Global equities (MSCI World) – Indexed to $100
$100$200$300$400$500$600$700$800$900
$1,000$1,100
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Price Return Income Return
$619
$362
$100
$200
$300
$400
$500
$600
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Price Return Income Return
$229
$332
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
REITs can provide access to the world's most prestigious and well known property assets
7
For illustrative purposes only. Information based on latest available and is subject to change. This information is intended for informational purposes only and does not constitute
investment advice, a recommendation, an offer or solicitation. No inference is made that above assets are part of, or will be part of, any Deutsche Asset Management investment
portfolio. Source: Deutsche Asset Management. Company data.
New York ‘The General Motors Building’US REIT: Boston Properties
London ‘Leadenhall Building’UK REIT: British Land
Paris ‘CB 21’French REIT: Fonciere des regions
Sydney ‘Westfield Sydney City’AU REIT: Scentre Group
― Crown jewel of the
Manhattan skyline,
― Located at southeast corner
of Central Park
― 2m square feet, 50 levels
― Apple ‘cube’ store in the
plaza has become top
tourist attraction
― Nicknamed the
‘Cheesegrater’
― World class office building
and City of London
landmark
― 603,000 square feet
― Has broken records for city
rents several times over
― Forefront of the business
district and stands out in the
Parisian skyline
― Located in the La Defense,
the high rise business district
in the west of Paris
― 68,000 square metres of
office space
― World class iconic retail
destination in the heart of
Sydney CBD
― 353 retailers, with 43.8m
customer visits
― Serves the biggest trade
area population in Australia
with approximately 4.9m
people
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
Macro ThemesData suggests slowing growth
8
Sources: Bloomberg, Deutsche Asset Management. As of June 30, 2016.
S&P 500 Index - Adjusted EPS
Late Cycle GDP
U.S. Initial Jobless Claims – 4 Week Moving Avg.
U.S. Manufacturing – New Orders
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Dec
-85
Jan
-87
Feb
-88
Mar
-89
Ap
r-9
0
May
-91
Jun
-92
Jul-
93
Au
g-9
4
Sep
-95
Oct
-96
No
v-9
7
Dec
-98
Jan
-00
Feb
-01
Mar
-02
Ap
r-0
3
May
-04
Jun
-05
Jul-
06
Au
g-0
7
Sep
-08
Oct
-09
No
v-1
0
Dec
-11
Jan
-13
Feb
-14
Mar
-15
Ap
r-1
6
Recession Nominal GDP Real GDP
Real (Nominal - Core PCE) Real (Nominal - Headline CPI) Real (Nominal - Core CPI)
0.0%9.0%
-60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Jan
-93
Mar
-94
May
-95
Jul-
96
Sep
-97
No
v-9
8
Jan
-00
Mar
-01
May
-02
Jul-
03
Sep
-04
No
v-0
5
Jan
-07
Mar
-08
May
-09
Jul-
10
Sep
-11
No
v-1
2
Jan
-14
Mar
-15
May
-16
Y/Y%
Recession Y/Y% Average +1SD -1SD
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Jun-87
Jun-88
Jun-89
Jun-90
Jun-91
Jun-92
Jun-93
Jun-94
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Y/Y%
Recession Y/Y% Average +1SD -1SD
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
Ap
r-8
7A
pr-
88
Ap
r-8
9A
pr-
90
Ap
r-9
1A
pr-
92
Ap
r-9
3A
pr-
94
Ap
r-9
5A
pr-
96
Ap
r-9
7A
pr-
98
Ap
r-9
9A
pr-
00
Ap
r-0
1A
pr-
02
Ap
r-0
3A
pr-
04
Ap
r-0
5A
pr-
06
Ap
r-0
7A
pr-
08
Ap
r-0
9A
pr-
10
Ap
r-1
1A
pr-
12
Ap
r-1
3A
pr-
14
Ap
r-1
5A
pr-
16
Y/Y%
Recession Y/Y% Average +1SD -1SD
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Jul-0
5
Fe
b-0
6
Oct-
06
Jun
-07
Fe
b-0
8
Se
p-0
8
Ma
y-0
9
Jan
-10
Au
g-1
0
Ap
r-11
Dec-1
1
Au
g-1
2
Ma
r-13
Nov-1
3
Jul-1
4
Ma
r-15
Oct-
15
Jun
-16
Spre
ad
Yie
ld
Spread (RHS) GlobalxUS (LHS) United States (LHS) Average (RHS) 1 SD (RHS) +1 SD (RHS)
10-year U.S. treasury and inflation expectationsCompressing global yields and inflation have compressed U.S. rates
9
(1) Some of the above information is a forecast or projection. Any projections are based on a number of assumptions as to market conditions and there can be no guarantee that
any projected results will be achieved . For Illustrative purpose only. Past performance is not indicative of future results. Left Hand Side (LHS). Right Hand Side (RHS).
Sources: Bloomberg, Deutsche Asset Management, Federal Reserve. As of June 30, 2016.
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Global yield spread1
United States 10-year breakeven inflation rate Appropriate pace of Fed policy firming1
2016 2017 2018 2019
1.0%
1.4%
1.8%
2.2%
2.6%
Jul-1
4Jul-1
4A
ug-1
4S
ep-1
4O
ct-
14
Nov-1
4D
ec-1
4Jan
-15
Fe
b-1
5M
ar-
15
Ap
r-15
Ma
y-1
5Jun
-15
Jul-1
5A
ug-1
5S
ep-1
5O
ct-
15
Nov-1
5D
ec-1
5Jan
-16
Fe
b-1
6M
ar-
16
Ap
r-16
Ma
y-1
6Jun
-16
Creeping Imposition of Negative Interest Rates
Deposit/Target Rate
-0.78%
-0.53%
-0.52%
-0.29%
-0.06%
-1.00% -0.80% -0.60% -0.40% -0.20% 0.00%
Switzerland
Sweden
Denmark
Euro Zone
Japan
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
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$17.5
$28.8
$55.5
$9.4
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
CY 2013 CY 2014 CY 2015 YTD 2016
Institutional capital currently increasing real estate exposure
For illustrative purposes only. FIRPTA refers to the Foreign Investment in Real Property Tax Act of 1980, which is a U.S. tax law that imposes income tax on foreign persons
disposing of U.S. real property interests. Sources: Deutsche Asset Management, Real Capital Analytics. As of June 30, 2016.
10
$17.5
$28.8
$55.5
$9.4
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
CY 2013 CY 2014 CY 2015 YTD 2016
Sovereign Wealth Funds Direct Real Estate Transactions$US billions
— Historically limited foreign capital flows into the U.S.,
specifically real estate
— Changes will double the percentage of publicly traded stocks a
foreign shareholder is permitted to hold without incurring
FIRPTA withholding and tax upon sale:
— Previously 5% increase to 10%
— Reform will exempt foreign pension funds from FIRPTA tax and
withholding
— Further applies to indirect holdings through a partnership
interest
— Extension of exemptions to RICS, or gain on sale of RIC
shares, from FIRPTA withholding tax
Changes to FIRPTA
— International sources (i.e. sovereign wealth funds, pension
funds) are seeking U.S. real estate deals
— FIRPTA reforms will serve to increase the flow of funds into
U.S. real estate development by:
— Broadening possibility for greater foreign investment in U.S.
public REITs
— Exemptions for certain gains on sale of REITs
— Exemptions for capital gain distributions from REITs
— Removing tax barrier provides additional incentive, specifically
for foreign pension funds, to invest in U.S. real estate
Implications for investors
— Sovereign wealth funds have been active across core, value-
add and logistics real estate asset classes
— Competition for core assets is particularly strong in cities such
as New York, Paris, London and San Francisco
— Notable participants: Norges (Norway), ADIA (Abu Dhabi),
GIC (Singapore), Australian Super, CIC (China), GPIF (Japan)
Sovereign capital providing support
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Private equity real estate dry powderRecord amount of capital waiting to be invested
(1) Bloomberg.com, Blackstone's Gray Says REIT Buyouts Loom Amid Bearish Market, October 2015; The opinions and forecasts contained herein are based on or derived from
publicly available Information from sources that we believe to be reliable. We do not guarantee their accuracy. This material is for informational purposes only and sets forth our
views as of this date. The underlying assumptions and these views are subject to change without notice. Source: Prequin, Morgan Stanley Research. As of June 30, 2016.
“Stock investors are too bearish on U.S. real estate, and the market’s decline probably will lead to more takeovers of publicly traded landlords, along
with asset sales, said Jon Gray, global head of real estate at Blackstone Group LP, the largest private equity investor in property worldwide. ‘There’s a
disconnect, and that creates opportunity,’ Gray said Thursday at a conference sponsored by the Pension Real Estate Association in San Francisco.”1
11
Global Closed-End Private Equity Real Estate Funds Dry Powder (US $bn)
— Private equity real estate fund dry powder has increased 14% in 2016 and is over 43% higher than pre-crisis levels
— Significant amount of private equity funds investment is intended for North America real estate – over 50%
— Notable Sponsors: Blackstone, Starwood, Lone Star, Brookfield, Colony, Carlyle, Fortress, Farrallon, TPG, Oaktree, Tishman
$39$55
$98
$132
$167 $171$180
$118
$167$156
$186$196
$210
$239
$0
$50
$100
$150
$200
$250
$300
Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jun-16
Dry
Pow
der
($bn)
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Asset ManagementFor registered representative use only. Not for public viewing or distribution.
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Domestic Capital markets and transactionsTransaction volumes are robust, yet investors are using less leverage this cycle than in the past
Source: Real Capital Analytics. SNL Financial LC, Commercial Mortgage Alert. As of June 30, 2016.
12
$67 $52$78 $93
$167$198
$229
$12 $3 $12$33 $48
$86 $94 $101
$31
$15 $52
$46
$117
$129
$139
$215
$128
$53
$109
$159
$196
$209
$255
$339
$159$82
$104$124
$209
$296
$337
$444
$140
$55
$121
$192
$244
$295
$349
$440
$190
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016YTD
CMBS Funded Transactions
Transaction volume US$ billions
2005-2007:
Total Transactions: $1,077 bn
Total CMBS: $594 bn (55%)
2013-2015:
Total Transactions: $1,084 bn
Total CMBS: $281 bn (26%)
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
Supply growth is at a historically low rateApartments are the exception while industrial should be monitored
Forecasts from 2016 through 2020. This information is a forecast and due to a variety of uncertainties, and assumptions made in our analysis, actual events or results or the
actual performance of the markets covered may differ from those presented.
Sources: CBRE-EA, Deutsche Asset Management. As of July 2015.
= Long-term average
13
Retail Completions as a % of Stock
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015F
2016F
2017F
2018F
2019F
2020F
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016F
2017F
2018F
2019F
2020F
Apartment Completions as a % of Stock
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016F
2017F
2018F
2019F
2020F
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016f
2017f
2018f
2019f
2020f
Industrial Completions as a % of StockOffice Completions as a % of Stock
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
REIT valuationsHistorical earnings growth versus broader equities
Past performance is not indicative of future results. Note: REIT 2016 Forecast = Deutsche AM; S&P 2016 Forecast = Bloomberg
Sources: Bloomberg, Factset, Deutsche Asset Management. As of June 30, 2016.
14
Weighted average year-over-year REIT FFO growth vs. S&P 500 EPS growth
— Over the last 16 years, annual REIT FFO growth of 8.6% has exceeded earnings of the S&P 500 at 7.8%
— Over the last 5 years, REITs have underperformed the S&P 500 despite cumulative REIT FFO growth of 61.7% that has
exceeded S&P 500 earnings by 25.3 percentage points.
9%
0%
6%4% 6%
11%
16%13%
-6%-9%
9%
22%
11%
17%19%
14%
8%
13%
-26%
14%
19%
14% 14% 15%
0%
-18%
-4%
29%
17%
3%6%
10%
-2%
7%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
REIT FFO Growth S&P EPS Growth
Deutsche
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Investment products: No bank guarantee I Not FDIC insured I May lose value
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
Jan-9
2
Ma
y-9
3
Sep-9
4
Jan-9
6
Jun-9
7
Oct-
98
Ma
r-0
0
Jul-0
1
No
v-0
2
Ma
r-0
4
Aug-0
5
De
c-0
6
Apr-
08
Sep-0
9
Jan-1
1
Ma
y-1
2
Oct-
13
Feb
-15
Jun-1
6
Green Street Average
U.S. REIT valuationsRelative to private real estate: Fair
Past performance is not indicative of future results.
Sources: Green Street Advisors, Deutsche Asset Management. As of June 30, 2016.
15
Average premium to NAV
-2.97%
2.77%
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
0.51%
4.32%
5.24%
3%
4%
5%
6%
7%
8%
9%
10%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Jun-0
6
De
c-0
6
Jun-0
7
De
c-0
7
Jun-0
8
De
c-0
8
Jun-0
9
De
c-0
9
Jun-1
0
De
c-1
0
Jun-1
1
De
c-1
1
Jun-1
2
De
c-1
2
Jun-1
3
De
c-1
3
Jun-1
4
De
c-1
4
Jun-1
5
De
c-1
5
Jun-1
6
Spread (LHS) Average Spread (LHS) BAA Corp Yield (RHS) Green Street Implied Cap Rate (RHS)
CHEAP
EXPENSIVE
(1) Mean reversion is a theory suggesting that prices and returns eventually move back toward the mean or average. No assertion is being made as to the likelihood or time frame
over which returns will or will not move back toward the mean or average. This information has been provided for historical context only.
Past performance is not indicative of future results. Returns are shown for illustrative purposes only and not indicative of any real estate investment strategy. There is no
guarantee the forecast returns shown will materialize. SPG refers to Simon Property Group. For Illustrative purpose only.
Sources: Green Street Advisors, Deutsche Asset Management. As of June 30, 2016.
U.S. REIT valuationsRelative to corporate bonds: Currently attractive
16
Implied cap rates and corporate bond yields
Implied Cap Rate: 5.24% BAA Corp Bond: 4.32% Current Spread: 92 bps Change to Average: -41bps Leverage: 33.0% Reversion to mean1: 12.6%
Please note: Cheap – indicates that actual spread is higher than average spread. Expensive – indicates actual spreads is lower than average spread.
0.92%
12/5/2006 – SPG issues
debt at 5.25%
1/8/2016 – SPG issues
debt at 3.30%
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
-2.16%
6.03%
4.42%
3%
5%
7%
9%
11%
13%
15%
-7%
-5%
-3%
-1%
1%
3%
Jun-0
6
De
c-0
6
Jun-0
7
De
c-0
7
Jun-0
8
De
c-0
8
Jun-0
9
De
c-0
9
Jun-1
0
De
c-1
0
Jun-1
1
De
c-1
1
Jun-1
2
De
c-1
2
Jun-1
3
De
c-1
3
Jun-1
4
De
c-1
4
Jun-1
5
De
c-1
5
Jun-1
6
Spread (LHS) Average Spread (LHS) S&P 500 Earnings Yield (RHS) REITs AFFO Yield (RHS)
CHEAP
EXPENSIVE
Green Street REIT 3-year AFFO yield versus S&P 500 3-year earnings yield
U.S. REIT valuations Relative to equities: Attractive
(1) Mean reversion is a theory suggesting that prices and returns eventually move back toward the mean or average. No assertion is being made as to the likelihood or time frame
over which returns will or will not move back toward the mean or average. This information has been provided for historical context only.
Past performance is not indicative of future results. Returns are shown for illustrative purposes only and not indicative of any real estate investment strategy. There is no
guarantee the forecast returns shown will materialize. For Illustrative purpose only. Adjusted Funds from Operations (AFFO) is calculated by adjusting recurring capital
expenditures, used to maintain quality of the REIT’s underlying assets, from REIT’s Funds from Operations (FFO).
Sources: Green Street Advisors, Deutsche Asset Management. As of June 30, 2016.
17
Please note: Cheap – indicates that actual spread is higher than average spread. Expensive – indicates actual spreads is lower than average spread.
AFFO Yield: 4.42% S&P Earnings Yield: 6.03% Current Spread: -161 bps Change to Average: 56bps Reversion to mean1: +14.0%
-1.61%
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
Real estate – A new GICS SectorMay provide more diversification and potentially lower correlations
This information is a forecast and due to a variety of uncertainties, and assumptions made in our analysis, actual events or results or the actual performance of the markets
covered may differ from those represented. Sources: Deutsche Asset Management, Dow Jones, Raymond James, Standard & Poors. As of December 31, 2015.
— S&P Dow Jones announced in November 2014 that as of
August 31, 2016, Real Estate will become the 11th sector
in the Global Industry Classification Standard (“GICS”)
— Real estate will not longer be a sub-industry within the
Financials Sector
— This move has the potential to reduce correlations to
broader equities, improve the diversification benefits, and
lower the cost of capital
— Real estate is 2.5% of the S&P 500 and approximately
15% of the Financials index
— Financials are approximately 16% of the S&P 500
— Real estate is the 2nd largest sub-industry in the S&P
Mid-Cap 400, at 10% of the index and 42% of Financials
— We estimate approximately $4-5 billion of REIT exposure
exists within funds benchmarked to the XLF index.
A new GICS Sector
— Raymond James REIT team produced the below
estimates showing how underweight broader equity
mutual fund managers are to REITs relative to their
respective benchmarks
— The $95 billion estimate equates to over 10% of the REIT
index market capitalization
— More fund managers will be forced to pay attention to
REITs when they become the 11th GICS sector
Under-owned by generalist investors
Category REIT Weighting Estimated
UnderweightMutual Funds Benchmark
Mid-Cap Growth 1.2% 1.6% $1 billion
Small Growth 1.9% 2.7% $1 billion
Mid-Cap Blend 4.7% 6.8% $5 billion
Small Blend 5.9% 8.6% $6 billion
Small Value 6.6% 14.6% $8 billion
Large Growth 0.6% 1.4% $10 billion
Mid-Cap Value 5.3% 12.5% $16 billion
Large Value 1.5% 4.1% $23 billion
Large Blend 1.4% 2.8% $25 billion
18
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
Market outlook – Global real estateLooking forward in summary
19
The comments, opinions and estimates contained herein are based on or derived from publicly available information from sources that we believe to be reliable. We do not
guarantee their accuracy. This material is for informational purposes only and sets forth our views as of this date. An investment in real estate involves a high degree of risk and is
suitable only for sophisticated investors who can bear substantial investment losses. The value of shares/units and their derived income may fall as well as rise. Past performance
or any prediction or forecast is not indicative of future results. Investments are subject to risks, including possible loss of principal amount invested.
As of June 30, 2016.
— Global economic growth continues to slow with divergences accelerating in 2016
— Supply remains subdued providing limited downside to rental rates; in place rents in most sectors/regions are
below market providing highly visible cash flow growth
— Private real estate pricing should be stable as a sizable backlog of allocated capital remains to be invested; we
expect some deterioration in secondary markets/assets
— Activism and corporate activity have replaced leveraged buyouts as the downside protection during this cycle
— Global dividend yields are well covered overall and currently stand at roughly 3.5 percent. We expect dividend
growth to remain in the high single digits in 2016 due to strong cash flow growth and low payouts
— Globally listed real estate is trading in line with historical valuations when measured against NAV but are
trading attractively relative to fixed income alternatives. Growing cash flow growth coupled with increased
external growth suggest listed the real estate indices can potentially deliver mid to high single digit returns over
the next 12 months
Deutsche
Asset ManagementFor registered representative use only. Not for public viewing or distribution.
Investment products: No bank guarantee I Not FDIC insured I May lose value
Important Risk Information
Any fund that concentrates in a particular segment of the market will generally be more volatile than a fund that invests more broadly. Investing in derivatives
entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. There are special risks associated with an
investment in real estate, including REITS. These risks include credit risk, interest rate fluctuations and the impact of varied economic conditions. The funds may
lend securities to approved institutions. Stocks may decline in value. Deutsche Real Estate Securities Fund is non-diversified and can take larger positions in
fewer issues, increasing its potential risk. Deutsche Global Real Estate Securities Fund invests in foreign securities. Investing in foreign securities, particularly
those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. See the prospectus for
details.
OBTAIN A PROSPECTUS
To obtain a summary prospectus, if available, or prospectus, download one from www.deutschefunds.com for more information regarding the fund’s
objectives, risks, charges and expenses.
Investment products offered through Deutsche AM Distributors, Inc. Advisory services offered through Deutsche Investment Management Americas, Inc.
Deutsche Asset Management represents the asset management activities conducted by Deutsche Bank AG or any of its subsidiaries.
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20
Investment products: No bank guarantee I Not FDIC insured I May lose value