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The Nordics
Four countries, four
currencies
Dr. Marcus Cieleback
27th March 2013
2PATRIZIA Immobilien AG| © 2013
Central bank rates: Mirror image of the situation in the financial sector
Source: Federal Researve, ECB, Norges Bank, Riksbank, Bank of England
0 %
1 %
2 %
3 %
4 %
5 %
6 %
01/ 2007 01/ 2008 01/ 2009 01/ 2010 01/ 2011 01/ 2012
Fed ECB Norges Bank Sveriges Riksbank BoE
3PATRIZIA Immobilien AG| © 2013
Jan. 00 Jan. 03 Jan. 06 Jan. 09 Jan. 120%
1%
2%
3%
4%
5%
6%
7%
8%
Long term rates
DE GVB 10Y DK GVB 10Y SE GVB 10Y
NO GVB 10Y
Low interest rates, but turning at the long end and access to credit is challenging
Source: EZB, Riksbank, Norges Bank,
Jan. 00 Jan. 03 Jan. 06 Jan. 09 Jan. 120%
1%
2%
3%
4%
5%
6%
7%
8%
Short term rates
EURIBOR 3M CIBOR 3M STIBOR 3M
NIBOR 3M
4PATRIZIA Immobilien AG| © 2013
Nordics: Much more than the capital cities
DATA USED IN THE DEMAND SIDE ANALYSIS ON NUTS 3 LEVEL: Economic growth (history and forecast)
Population and population forecast
Population density
Employment and employment forecast
Source: PATRIZIA
wel
l ab
ove
ave.
..
abov
e av
erag
e
aver
age
bel
ow a
vera
ge
wel
l bel
ow a
ve..
.
0
6
12
18
24
30
0%
20%
40%
60%
80%
100%Distribution of NUTS 3 Regions in the
Nordics
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The Nordics: A Eurozone perspective
THE NORDICS ARE OFTEN SEEN AS ONE INVESTMENT REGION, BUT IN FACT THE INVESTOR INVESTS IN 4 CURRENCIES
The ERM II means, that de facto an investors from the Euro Zone has no currency risks when investing in Denmark
Investment returns in Norway and in Sweden are more volatile due to currency movements
Monitoring developments in the currency markets and a hedging strategy is a core component of investments in the Nordic countries
Jan.
99
Jan.
01
Jan.
03
Jan.
05
Jan.
07
Jan.
09
Jan.
11
Jan.
13
7.0 Krona/EUR
7.5 Krona/EUR
8.0 Krona/EUR
8.5 Krona/EUR
9.0 Krona/EUR
9.5 Krona/EUR
10.0 Krona/EUR
10.5 Krona/EUR
11.0 Krona/EUR
11.5 Krona/EUR
12.0 Krona/EUR
Exchange rates
SEK/EUR NoK/EUR DKK/EUR
6PATRIZIA Immobilien AG| © 2013
Data: PATRIZIA, IPD
What exactly does “Currency Risk“ mean?
20002001
20022003
20042005
20062007
20082009
20102011
20002001
20022003
20042005
20062007
20082009
20102011
20002001
20022003
20042005
20062007
20082009
20102011
-12 %
-6 %
0 %
6 %
12 %
18 %
24 %
30 %
36 %
42 %USD GBP
Office Residential Retail
Denmark
7PATRIZIA Immobilien AG| © 2013
8PATRIZIA Immobilien AG| © 2013
9PATRIZIA Immobilien AG| © 2013
Source: PATRIZIA
Office Denmark
Office Finland
Office Norway
Office Sweden
Residential Denmark
Residential FinlandResidential Sweden
Retail Denmark
Retail Finland
Retail Norway
Retail Sweden
5%
15%
Mean Total Returns by Asset Class, Currency and CountryEuro
Pound
Local
US-Dollar
Historical Mean Total Returns
10PATRIZIA Immobilien AG| © 2013
Source: PATRIZIA
Total Return Volatility
Office Denmark
Office Finland
Office Norway
Office Sweden
Residential Denmark
Residential FinlandResidential Sweden
Retail Denmark
Retail Finland
Retail Norway
Retail Sweden
1%3%5%7%9%11%13%15%17%19%
Total Returns Volatility by Asset Class, Currency and Country
Euro
Pound
Local
US-Dollar
11PATRIZIA Immobilien AG| © 2013
Source: PATRIZIA
Reward-to-Variability Ratio (Sharpe ratio)
RETURN / VOLATILITY = UNITS OF RETURN FOR A UNIT OF RISK IN %
SHARPE RATIOOFFICE RESIDENTIAL RETAIL
Denmark Finland Norway Sweden Denmark Finland Sweden Denmark Finland Norway Sweden
EUR 2,10% 2,42% 0,74% 0,63% 0,82% 3,86% 1,05% 3,09% 2,15% 0,98% 0,88%
Local 2,07% 2,42% 1,27% 0,86% 0,82% 3,86% 2,03% 3,09% 2,15% 1,97% 1,36%
GBP 1,06% 0,82% 1,29% 1,10% 1,03% 1,01% 2,31% 1,02% 1,06% 1,55% 1,57%
USD 0,90% 0,77% 0,72% 0,66% 0,78% 1,00% 0,83% 0,91% 0,86% 0,83% 0,75%
DenmarkFinland
NorwaySweden
0%
1%
2%
3%
4%
EUR
Loca
l
GBP
USD
Office
0%
1%
2%
3%
4%
Residential
DenmarkFinland
NorwaySweden
0%
1%
2%
3%
4%
EUR
Loca
l
GBP
USD
Retail
12PATRIZIA Immobilien AG| © 2013
Source: PATRIZIA
Clusteranalysis
OFFICE
RESIDENTIAL
RETAIL
DENMARK FINLAND SWEDEN NORWAY
Cluster Group Independent Market
13PATRIZIA Immobilien AG| © 2013
Investors‘ Comparison: Efficient Frontier for international Investors
Source: PATRIZIA Research / IPD
1 % 3 % 5 % 7 % 9 % 11 % 13 % 15 % 17 % 19 %7.5 %
8.5 %
9.5 %
10.5 %
11.5 %
12.5 %
13.5 %
14.5 %
15.5 %
Expected Volatility [%]
Expect
erd
Tota
l R
etu
rn [
%]
14PATRIZIA Immobilien AG| © 2013
Source: PATRIZIA
Summary
RETURNS BUT SPECIALLY VOLATILITIES HAVE DIFFERENT PATTERNS WHEN CONSIDERING CURRENCY RISKS. IT IS NOT ENOUGH FOR INVESTORS IN UNHEDGED INVESTMENTS TO LOOK ONLY AT THE RESPECTIVE NATIONAL
MARKETS WHEN DETERMINING THEIR OPTIMUM INVESTMENT STRATEGY. A PORTFOLIO INVESTMENT STRATEGY SHOULD EVALUATE CURRENCY VOLATILITIES IN ORDER MAXIMIZE THE
SHARPE-RATIO AND GENERATE THE OPTIMUM ALLOCATION.
RISK AVERSE PORTFOLIO ALLOCATION
COUNTRY
ASSET CLASS EURLOCA
LGBP USD
FI Office 11% 13% 0% 0%
NO Office 0% 0% 21% 0%
DK Residential 0% 0% 9% 0%
FI Residential61% 61% 15%
100%
SE Residential 0% 0% 55% 0%
DK Retail 27% 26% 0% 0%
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DR. MARCUS CIELEBACKHEAD OF RESEARCH
PATRIZIA Immobilien AGPATRIZIA BürohausFuggerstraße 2686150 AugsburgGermany
T +49 821 50910-669F +49 821 50910-679M +49 151 16150298marcus.cieleback@patrizia.agwww.patrizia.ag
Contact
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