Fall 2015 AREIT Board Meeting Presentation FINAL

Applied Real Estate Investment Track2015-2016 FALL BOARD MEETING

SEPTEMBER 25, 2015

Team Introduction

Zi Chong Jonathon Davis Jeffrey Grabowski

Agenda

Fund Objective and Investment Theme

Macroeconomic View

Investment Strategy & Implementation

Property Sector Fundamentals

Company Stock Recommendations

Portfolio Management

Questions & Discussion

Fund Objective

Outperform the MSCI US REIT Index

Investment Theme

Slower Economic Growth, Continued Volatility

Focus on Value Preservation

Agenda


Macroeconomic View






Macroeconomic View - Domestic

Recovered Housing

Housing Market Index 61

Manufacturing Expansion

High Capacity Utilization

Job Gains2-3 Millions

5.1% Unemployment Rate

GDP Growth2%+

Since 2012

Stable and Improving US Economy

Macroeconomic View - Global

China is SlowingRecession Risk

Brazil, Canada & Australia

Very Slow GrowthDeflation Risk

Reduced Demand for Commodity

Japan and Europe

Macroeconomic View - Implications

Volatile Stock Market Slower GDP & Job Growth SlowingU.S. Economy

Macroeconomic View – Capital Markets

Source: Commercial Mortgage Alert September 24, 2015

Macroeconomic View – Interest Rates

Market expects 61% chance that rate hikes in March 2016

Multiple Interest Rate Increases

Source: CME Group and St Louis Fed

Agenda


Macroeconomic View






Investment Strategy

• Underweight sectors most affected by global uncertainty• Overweight sectors driven by strong US fundamentals• Neutral all other sectors

Sector Weighting

• High Quality Real Estate• Strong Balance Sheet• Opportunities for Growth• Intrinsic Value

Stock Selection

Tactical Investment Implementation

Rank Multi-Family Rank Hospitality Rank Industrial Rank Office Rank Healthcare RankShopping

MallsRank

Shopping Centers

3 Month 2 0.70 6 0.90 7 0.92 5 0.79 1 0.56 3 0.74 4 0.776 Month 2 0.75 7 0.94 6 0.93 5 0.82 1 0.62 3 0.77 4 0.801 Year 2 0.63 7 0.94 6 0.81 5 0.72 1 0.48 3 0.69 4 0.703 Year 2 0.63 7 1.06 6 0.91 4 0.76 1 0.58 3 0.74 5 0.765 Year 2 0.85 7 1.36 6 1.23 5 1.00 1 0.82 4 0.99 3 0.9810 Year 2 1.37 7 1.80 6 1.75 4 1.48 1 1.25 5 1.55 3 1.44

Beta with S&P 500


Rank Multi-Family Rank Hospitality Rank Industrial Rank Office Rank Healthcare RankShopping

MallsRank

Shopping Centers

3 Month 2 0.95 3 1.02 7 1.16 4 1.04 1 0.91 5 1.04 6 1.066 Month 2 0.99 3 1.01 7 1.09 5 1.01 1 0.95 4 1.01 6 1.041 Year 3 1.01 5 1.02 7 1.04 2 0.99 1 0.98 4 1.01 6 1.033 Year 1 0.96 5 1.04 7 1.08 2 0.98 6 1.05 4 1.00 3 0.995 Year 2 0.96 6 1.18 7 1.18 4 1.01 1 0.95 5 1.03 3 1.0010 Year 2 0.99 6 1.15 7 1.18 4 1.03 1 0.88 5 1.09 3 1.00

Beta with RMS


UnderweightHospitality

NeutralIndustrial Office Healthcare Retail

OverweightMulti-Family

Agenda


Macroeconomic View






Industrial SectorCurrent Environment Strong fundamentals Growth in E-Ecommerce Housing & Auto Industry Strength

Looking Forward Plateauing Economic Indicators Strong Dollar Global slowdown

Weighting Recommendation: Neutral

Office SectorCurrent Environment Healthy Employment Data Limited Supply Growth Strong Net Absorption

Looking Forward Modest Economic Growth S&P 500 Downward Forecast Structural concern in office space usage


Retail SectorCurrent Environment Highest consumer sentiment index recorded

since 2010 Small business optimism index close to long run

average Record occupancy; SS-NOI growth between 3%-

5%

Looking Forward Muted supply (12MM SF) with strong

absorption (32 MM SF in 20151H)1

Stronger pricing power: contractual rent bumps E-commerce growth: from 7% current to 12% in

20202

Weighting Recommendation: Neutral Sources: 1) International Council of Shopping Center an CoStar.2) Quarterly Retail E-Commerce Sales, 1st Quarter 2015, U.S. Bureau News.

Healthcare SectorCurrent Environment Strong past NOI growth: 3%-4%1

Record high occupancy RIDEA structure increase risk and return

Looking Forward Low beta sector Demographics favor healthcare Short-term supply concern Great susceptibility to rising interest rates


Source: 1) Green Street Healthcare Sector Report 2015 Q2

Multi-Family SectorCurrent Environment Lowest homeownership rate since 1967 Population and job growth driven by millennials Record high occupancy

Looking Forward Millennial demographics continue to strengthen Construction to accelerate but in control Absorption to remain healthy as demand

continuesto outpace supply

Weighting Recommendation: Overweight

Hospitality SectorCurrent Environment Business travel biggest driver of demand Occupancy levels at record highs Enplanements have continued to grow. 2015 & 2016 REVPar growth revised downward

Looking Forward Drop in corporate earnings may affect business

travel Strong dollar will hurt foreign leisure travel Supply is concerning in Houston, Miami, and

New York

Weighting Recommendation: Underweight

Agenda


Macroeconomic View






Company Screening ConsiderationsReal Estate and

OperationsHigh Quality Real

Estate

Proven Operational Track Record

Internal & External Growth

Balance Sheet

Large Institutional Ownership

Credit Ratings

Valuation

Price/NAV

Price/FFO

Beta

DCT Industrial Trust, Inc. (DCT)

Primary Rationale

Major distribution market

concentration paired with strong

operating track record and

accretive disposition activity

DCT Industrial Trust, Inc. (DCT)Real Estate: Strategic portfolio repositioning into major

distribution markets 7.0% SS NOI Growth Rate

Balance Sheet Low leverage Staggered Debt Maturity Schedule Investment Credit Rating

Valuation Current Discount to NAV vs historical

premium Multiple in line with Peers

Regency Centers Corporation (REG)

Primary Rationale

High quality grocery-anchored

centers with high discount to

NAV.

Regency Centers Corporation (REG)Real Estate: 70% grocery-anchored centers ¾ of grocers have 1st /2nd largest market share 50% exposure to top 3 job gaining states.

Balance Sheet Lower-than-peers leverage; 96% fixed rate Investment grade balance sheet $794MM of line of credit

Valuation -12% to NAV vs historical average +0.5% Bigger discount than peer average -9%

Equity Residential (EQR)

Primary Rationale

High quality assets in

core and coastal markets

trading at a high discount

to NAV

Equity Residential (EQR)Real Estate: Over past 10 years, repositioned portfolio of

suburban and urban properties to a focused portfolio of urban properties in core markets.

Balance Sheet Healthy balance sheet with 28.8% Debt-to-

Capitalization S&P and Moody’s Investment Credit Rating

Valuation Trading at a (14.8%) discount to NAV

Financial Highlights EQR Peer AvgPrice $72.11Market Capitalization (B) 27.40 15.40Debt / Market Capitalization 28% 26%1 Yr Beta (RMZ) 0.76 1.01

Valuation EQR Peer AvgNAV $84.66Premium / Discount -14.8% -5.8%Nominal Cap Rate 4.6% 4.8%Dividend Yield 3.1% 3.3%P / FFO (2015E) 20.9x 18.8xP / AFFO (2015E) 23.8x 21.1xSS NOI Growth (2015) 4.8% 6.0%

Agenda


Macroeconomic View







Academic & Professional

Guidance

Weekly Macro Review

Weekly ASAP Updates

Active Portfolio Monitoring

Fall 2015 AREIT Board Meeting Presentation FINAL

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