Research Report Japan Real Estate Second Quarter 2018 · 2020-03-23 · Research Report . Japan...

Research Report Japan Real Estate Second Quarter 2018 April 2018

Marketing Material

On March 23, 2018, Deutsche Asset Management rebranded to DWS. The brand DWS represents DWS Group GmbH & Co. KGaAand any of its subsidiaries, such as DWS Distributors, Inc., which offers investment products, or Deutsche Investment Management Americas Inc. and RREEF America L.L.C., which offer advisory services. There may be references in this document which do not yet reflect the DWS Brand.

Please note certain information in this presentation constitutes forward-looking statements. Due to various risks, uncertainties and assumptions made in our analysis, actual events or results or the actual performance of the markets covered by this presentation report may differ materially from those described. The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that events will turn out as we have opined herein. For Professional Clients (MiFID Directive 2014/65/EU Annex II) only. For Qualified Investors (Art. 10 Para. 3 of the Swiss Federal Collective Invest-ment Schemes Act (CISA)). For Qualified Clients (Israeli Regulation of Investment Advice, Investment Marketing and Portfolio Management Law 5755-1995). Outside the U.S. for Institutional investors only. In the United States and Canada, for institutional client and registered representative use only. Not for retail distribution. Further distribution of this material is strictly prohibited.

2 Japan Real Estate Second Quarter 2018 | April 2018

Table of Contents

1 Executive Summary 3

2 Macro Economy 4

3 Capital and Investment Market 6

3.1 Lending 6

3.2 Pricing 7

3.3 Transactions 8

3.4 Performance 10

3.5 J-REITs 10

4 Market Fundamentals 13

4.1 Office 13

4.2 Retail 16

4.3 Residential 17

4.4 Industrial 18

4.5 Hotel 20

5 Past Topics of This Report 21

6 Important Information 22

7 Research & Strategy – Alternatives 26 The opinions and forecasts expressed are those of Japan Real Estate Research Report and not necessarily those of DWS. All opinions and claims are based upon data at the time of publication of this article and may not come to pass. This information is subject to change at any time, based upon economic, market and other conditions and should not be construed as a recommendation


1 Executive Summary — Macro Economy: Japan’s real GDP growth was estimated at around 1.8% in 2017, now forming the longest

quarterly expansion period since the government began recording statistics in 1994. Exports and private consumption, especially tourist consumption made positive contributions to growth, while the appreciation of the Japanese yen could become a drag for exporting industries. The unemployment rate sat at 2.5% in February 2018, sitting at the lowest level in 24 years. Core CPI made a continuous increase and achieved 1.0% in February 2018 for the first time in four years, reflecting the healthy economic conditions.

— Capital and Investment Market: The J-REIT index leveled off in the first three months to March 2018, after

dropping 10.4% in 2017. The volume of commercial real estate transactions in Japan in the rolling six months to March 2018 increased by 12% from the previous period. Foreign capital accounted for 33% of commercial real estate transactions in Tokyo, comparable to Sydney or Brisbane - markets regarded friendly to interna-tional investors.1 This is a significant jump from 14% in the 12 month period ended June 2017. The total return for real estate investments in Japan show solid performance at 7.2% on a preliminary basis in No-vember 2017.2

— Real Estate Market Fundamentals: Leasing markets and real estate fundamentals remained healthy in most

sectors. Office vacancy rates remained very tight in Tokyo, Osaka, Nagoya and other cities while average rent continued to post moderate growth in Central Tokyo. The record breaking number of foreign visitors contributed to robust performance at high street retail and hotels across the country, while the growth rate looks even stronger in Osaka than Tokyo. Condominium unit prices remained at the most expensive level in the last two decades, while residential rents strengthened in Tokyo. Due to a recent supply surge, the logis-tics sector in Greater Osaka experienced a demand-supply imbalance especially in the bay area.

1,2 Past performance is not a reliable indicator of future returns.


2 Macro Economy Japan’s real GDP growth was estimated at around 1.8% in 2017. Healthy growth is expected to have continued in the first quarter of 2018, marking the longest quarterly expansion period since the government began recording statistics in 1994.3 Exports and private consumption, especially tourist consumption made positive contributions to growth, while the appreciation of the Japanese yen could become a drag for exporting industries. The unem-ployment rate remained at 2.5% in February 2018, sitting at the lowest level in 24 years, and labour shortage has become a serious issue in retail, construction, logistics and lodging. Concerns remain over the geopolitical risks in the Korean peninsula and increasing protectionism especially between the US and China, which could affect the growth rate in the latter half of 2018.3

EXHIBIT 1: JAPAN'S GDP GROWTH OUTLOOK AND NIKKIE

Sources: Deutsche Bank “Japan Economics Weekly.” As of Apr 2018. Notes: E = preliminary estimate, F = forecast, there is no guarantee forecast growth will materialise. Please refer to Important Notes (see end of report). Past growth is not a reliable indicator of future growth. Japan’s corporate sector is still in healthy territory while some softening signs are observed. Owning to the unfa-vourable currency exchange rate, the latest results of the Diffusion Index (DI) of the Tankan Survey conducted by the Bank of Japan (BoJ) made a marginal correction to a reading of 24 points in March 2018 from 25 points in December 2017, but is still at one of the highest readings in 25 years.

EXHIBIT 2: DIFFUSION INDEX OF BUSINESS CONDITIONS

Sources: Bank of Japan, Japan’s Cabinet Office, DWS. As of Apr 2018. Past performance is not a reliable indicator of future performance.

3 Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which

might prove inaccurate or incorrect.

-100%

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F

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F

1997.04 VAT Hike1997.07 Asian Financial Crisis

2000-2001dot-com bubble burst

2008.09Global Financial Crisis

2014.04VAT Hike

-50

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F

Business Condition Leading Index (LHS) Diffusion Index of Tankan Survey (RHS)

Diffusion Index of Business Conditions:('favourable' minus 'unfavourable,' % points)

(2010=100)

Dot.com Bubble burst

Global FinancialCrisisConsumption

Tax Hike

Q1 Q2 Q3 Q4 Nikkei 225 YoY (RHS)

Forecast

Outlook


Volatility over global stock markets increased in the beginning of 2018 causing the Nikkei 225 index to drop by 8.5% in February and March 2018 combined. The Japanese yen strengthened by 2.7% against the US dollar in the same period, while capital markets stabilized in April 2018.

EXHIBIT 3: STOCK (NIKKEI) AND FOREX

Sources: The Bank of Japan, Japan’s Cabinet Office, Deutsche Bank. As of Apr 2018. Past performance is not a reliable indicator of future performance. Ten-year Japanese government bonds have been trading at around 0.04%, slightly lower than 0.05% in Decem-ber 2017. Core CPI has made a continuous increase since 2016 achieving 1.0% in February 2018 for the first time in four years, reflecting healthy economic conditions.

EXHIBIT 4: FORECAST OF INTEREST RATE AND CPI

Sources: The Bank of Japan, Japan’s Cabinet Office, Deutsche Bank. As of Apr 2018. Past performance is not a reliable indicator of future performance. Notes: F = forecast, there is no guarantee rates forecasted will materialise. JGB = Japanese Government Bond. CPI = Consumer Price Index. Please refer to Important Notes (see end of report). Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.

¥60

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Nikkei 225 (LHS) USD/JPY (RHS)

2008.09Global Financial

Crisis"Abenomics"

2011.10JPY peaked at 75

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2021

F

Overnight Call Rate 10Y JGB CPI CPI (VAT effect)

(%)

Forecast


3 Capital and Investment Market 3.1 Lending The BoJ’s Diffusion Index for lending attitudes of banks to the real estate industry (green line in Exhibit 5) was an index value of 21 as of March 2018, a decline from 26 in December 2017. Overall credit conditions remain accommodative for income-producing assets, but lenders have become increasingly cautious over tight yields and elevated valuations. Lending volumes for new projects dropped by 3.4% in the year ended December 2017, demonstrating three consecutive quarterly drops.

Sources: The Bank of Japan, Japan’s Cabinet Office, DWS. As of Apr 2018. Past performance is not a reliable indicator of future performance. The preliminary volume of commercial real estate transactions in Japan in the rolling 12 months to March 2018 was JPY 3.8 trillion. The final figure is expected to increase in line with the amount a year before.4 Deal flow is tight in Central Tokyo due to elevated priced valuations, while the market continues to see a number of large sized transactions, both by domestic and international investors in the surrounding areas.

Sources: Urban Research Institute, Bank of Japan, Real Capital Analytics, DWS. As of Apr 2018. Past performance is not a reliable indicator of future performance. There is no guarantee the estimates shown will materialize. Notes: E = preliminary estimate, F=forecast. Please refer to Important Notes (see end of report).

4 Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.

-40

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.03

growth of lending to new projects (yoy, LHS) lending attitude DI to all industries (RHS)

lending attitude DI to real estate industries (RHS)

Diffusion Index (D

I)

-36

-24

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24

36

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E20

18.0

9 F

Transaction volume (12 months, LHS) Lending attitude DI (6 months prior, RHS)

Diffusion Index (D

I)

EXHIBIT 5: REAL ESTATE LENDING BY JAPANESE BANKS

EXHIBIT 6: REAL ESTATE TRANSACTION VOLUME AND LENDING ATTITUDE DI


3.2 Pricing Office appraisal cap rates in Tokyo continued to compress to a preliminary 3.7% in the fourth quarter of 2017, a marginal decline from the previous quarter. Cap rates for existing income producing assets are under extreme pressure, with similar compressions seen in other cities and other sectors. The office yield spread — the differ-ence between the cap rates and ten year bond yields — were broadly flat at 2.9% in Tokyo in the fourth quarter of 2017, providing relatively attractive spreads among select global cities, compared to 2.7% in London or around 1.7% in New York City.

EXHIBIT 7: CAP RATE AND YIELD SPREAD

APPRAISAL PRIME CAP RATE OFFICE YIELD SPREAD (RCA AVERAGE TRANSACTED)

Sources: Association for Real Estate Securitization, TMAX, Real Capital Analytics, Bloomberg, DWS. As of Apr 2018. Past performance is not a reliable indica-tor of future performance.

The capital value for grade-A office in Central Tokyo stood at JPY 8.4 million per tsubo5 in September 2017, a 2.6% increase from a year ago but still 27% lower than the previous peak recorded in 2008 before the Global Financial Crisis. The listed J-REIT index — the leading indicator of office capital values in Tokyo over 12 months — has leveled off since June 2017, indicating stable capital value going forward.

EXHIBIT 8: REAL ESTATE CAPITAL VALUE IN JAPAN

Sources: Daiwa Real Estate Appraisal, Bloomberg, DWS. As of Apr 2018. Past performance is not a reliable indicator of future returns.

5 Tsubo is a Japanese unit of area. It is equivalent to 3.3 square metres (35.6 square feet)

3.0%3.5%4.0%4.5%5.0%5.5%6.0%6.5%

Q1

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Tokyo Office Osaka Office Tokyo Residential

Osaka Residential TMAX Economic

-1%0%1%2%3%4%5%6%

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Tokyo New York London

Hong Kong Singapore Sydney

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J-REIT Index (LHS) Office unit price (Grade-A, RHS)

Sep 08Global Financial Crisis

(JPY m/tsubo)


3.3 Transactions Exhibit 9 shows the largest real estate transactions announced since January 2018. The largest deal announced in the period was the acquisition of Hilton Tokyo Odaiba by Hulic and Fuyo Lease for JPY 60 billion, followed by NOC Building by Nippon Life Insurance for an estimated JPY 50 billion, Ocean Gate Minato Mirai by Lasalle Investment Management for an estimated JPY 45 billion and Kawadacho Comfort Garden by Westbrook Partners for JPY 43 billion. J-REITs monopolized the top five major transactions in the logistics sector, but relatively limited activities in other sectors. The most expensive unit price observed in the period was a strata title sale of Ginza Six for JPY 4.61 million per squarer meter, and the tightest cap rate reported was a partial sale of Akasaka Garden City at 3.0%.

EXHIBIT 9: REAL ESTATE CAPITAL VALUE IN JAPAN

Type Asset Price (JPY bn)

Unit price (JPYm

/GFA sqm) Cap rate Location Month Acquired by Investor

Origin

Office

NOC Building est. 50 1.88 - Chiyoda Feb-18 Nippon Life Insurance Japan

Ocean Gate Minato Mirai est. 45 0.82 - Yokohama Jan-18 Lasalle Investment Management U.S.

Kimuraya Building est. 35 0.91 - Shinjuku Jan-18 Invesco U.S.

Japan Amway HQ est. 35 1.49 - Shibuya Dec-17 Blackstone U.S.

8F of Ginza Six est. 25 4.61 - Chuo Dec-17 TWS LLC. (AM of HNW) Japan

33% of Akasaka Garden City est. 23 2.43 3.0% Minato Dec-17 Unkown Investor N/A

Dentsu Osaka Building etc (2 props) est. 18 0.66 - Osaka Feb-18 Tokyo Tatemono Japan

Front Place Nihonbashi 18 1.50 3.5% Chuo Jan-18 J-RE REIT J-REIT

Osaka Midosuji Building 15 0.18 - Osaka Jan-18 Heiwa Real Estate Japan

Prime Tower Shin-Urayasu 12 0.30 4.1% Chiba Dec-17 Invesco U.S.

Shibuya Cross Tower (building only) 10 0.16 10.5% Shibuya etc Jan-18 Mitsubishi Estate Japan

Retail Konoha Mall Hashimoto 10 0.13 5.6% Fukuoka Mar-18 Fukuoka REIT J-REIT

Logistics

GLP Okayama Soja 1&2 (2 props) 26 0.20 5.3-

5.4% Okayama Feb-18 GLP J-REIT J-REIT

Prologis Yoshimi 21 0.21 4.7% Saitama Mar-18 Nippon Prologis REIT J-REIT

Prologis Ichikawa 3 17 0.33 4.0% Chiba Mar-18 Nippon Prologis REIT J-REIT

DPL Fukuoka-Kasuya 13 0.15 4.8% Fukuoka Apr-18 Daiwa House REIT J-REIT

Prologis Tsukuba 1-a 13 0.18 4.8% Ibaraki Apr-18 Nippon Prologis REIT J-REIT

Residential

Kawadacho Comfort Gar-den 43 53 / unit - Shinjuku Jan-18 Westbrook Partners U.S.

Sekisui House Residential Portfolio (12 props) 16 22 / unit - Minato etc Jan-18 Overseas Investor U.S.

Hotel / Healthcare

Hilton Tokyo Odaiba 60 105 / room - Minato Nov-17 Hulic, Fuyo Lease Japan

Rhiga Royal Hotel Kokura (incl. retail property) 17 - 6.5% Fukuoka Jan-18 United Urban J-REIT

Source: Real Capital Analytics, Nikkei Real Estate Market, DWS. As of Apr 2018. Notes: Acquisitions by foreign managers are highlighted in grey and by J-REITs in green. This table is prepared solely for information purposes and not in-tended to recommend or endorse any specific company's shares or other products. Although information in this document has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness, and it should not be relied upon as such.


Tokyo’s volume of commercial real estate transactions for the rolling 12-month period ended March 2018 (pre-liminary) was US $16.5 billion, an increase from US $12.9 billion for the period ended in December 2017. It ranked second in the Asia Pacific region after Hong Kong. According to our own estimates about 39% of trans-actions in Tokyo were purchased by listed J-REITs while 33% were acquired by foreign capital in the period, a significant jump from 14% in the period ended June 2017. It is now at a similar level with Australian cities of Sydney and Brisbane. Yokohama came in tenth in transaction volume in the region in the same period followed by Osaka.

EXHIBIT 10: REAL ESTATE TRANSACTION VOLUME BY CITY (12 MONTHS ROLLING ENDED MAR. 2018)

Sources: Real Capital Analytics, DWS. As of Apr 2018. Notes: Commercial real estate transactions exclude non-income producing assets, such as development site transactions. There is no guarantee forecast growth will materialise. Past performance is not indicative of future results.

22%

33%

22%

33%

16%

46%

45%

0%

34%

41%

22%

19%

0 4 8 12 16 20 24

Hong Kong

Shanghai

Sydney

Seoul

Singapore

Melbourne

Beijing

Brisbane

Yokohama

Osaka

Guangzhou

Office Retail Apartment Industrial Hotel

Tokyo

Osaka

(

Yokohama

(of which cross border %)

J-REIT Domestic Overseas

($ bn)


3.4 Performance The average annual total return for unlevered direct real estate investment in Japan shows solid performance. It increased marginally from 6.9% in June 2017 to 7.2% in November 2017 on a preliminary basis (the latest period available), due to healthy income growth. Among property sectors, returns continued to be highest at 8.5% in the industrial sector in the period whilst hovering at the 6-7% range in the residential, office, retail and then hotel sectors respectively.

EXHIBIT 11: REAL ESTATE TOTAL RETURNS IN JAPAN (UNLEVERED)

TOTAL RETURN BY COMPONENT TOTAL RETURN BY SECTOR

Sources: MSCI Real Estate - IPD, DWS. As of Apr 2018. Notes: There is a time lag because of raw data being collected through semi-annual reports. Past performance is not indicative of future results.

3.5 J-REITs The J-REIT index softened by 1.6% in the first three months to March 2018, a moderate decline compared to the 5.8% correction in the broader Nikkei 225 index in the same period. Due to gradual interest rate increases, REIT stock price are still slightly below the previous peak recorded back in 2015 or in 2016 in many countries, including Japan (down by 11.3%), the United States (down by 5.5%) and Australia (down by 12.7%).

EXHIBIT 12: J-REIT INDEX AND LONG-TERM GLOBAL COMPARISON

J-REIT Index and Nikkei 225 (5-year) Global REIT Comparison (10-year)

Sources: Bloomberg, DWS. As of Apr 2018. Notes: Past performance is not indicative of future results. Tokyo Stock Exchange REIT Index (J-REIT), FTSE NAREIT All Equity REITS Index (US-REIT), S&P/ASX 200 A-REIT Index (A-REIT), FTSE ST REIT Index (S-REIT).

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Total Return Income Return Capital Growth

Preliminary

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Office Retail ResidentialIndustrial Hotel

Preliminary

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J-REIT Index (LHS) Nikkei 225 Index (RHS)

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J-REIT US-REITA-REIT (Australia) S-REIT (Singapore)

(Mar-09 = 100)


On average, the J-REIT dividend yield was 4.1% overall and 3.6% for office REITs in February 2018, flat from the previous period ended November 2017. The spread over ten-year government bond yields remained at an attractive level of 406 basis points in Japan in February 2018, compared to 154 basis points for US REITs and around 205 basis points for UK REITs6.

EXHIBIT 13: J-REIT EXPECTED DIVIDEND YIELD

Sources: Bloomberg, DWS. As of Apr 2018. Notes: Past performance is no guarantee of future results. JGB = Japanese Government Bond. The amount of capital raised by J-REITs was JPY 429 billion in the trailing six months ended March 2018 (pre-liminary), about 2.3 times the amount raised in the trailing six months to September 2017. There were two initial public offerings (IPO) in the first three months in 2018, Xymax REIT and CRE Logistics REIT, and multiple public offerings including GLP J-REIT, Daiwa House REIT and JRE Investment Corp in the same period.7 After the severe underperformance of the J-REIT stock market in the period ended in September 2017, the market has stabilized and the net acquisition volume by J-REITs recovered to JPYU 632 billion, a 52% increase from the period ended September 2017.

EXHIBIT 14: CAPITAL RAISING AND TRANSACTIONS BY REITS IN JAPAN (6 MONTHS ROLLING)

Public Offerings Month JPY bn

GLP J-REIT Feb-18 67

Daiwa House REIT Feb-18 59

JRE Investment Corp. Mar-18 40

Nippon Prologis REIT Feb-18 29

Nomura Master Fund Feb-18 20

Other POs Oct-Mar 161 Total 376

Initial Public Offerings Month JPY bn

Xymax REIT Mar-18 21

CRE Logistics REIT Mar-18 17

Total 38 Planned : Takara Leven (Residential & Retail), ESR (Logistics)

Sources: ARES, Nikkei, DWS. As of Apr 2018. Notes: Commercial real estate transactions exclude non-income producing assets, such as development site transactions. This table is prepared solely for information purposes and not intended to recommend or endorse any specific company's shares or other products. Although information in this document has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness, and it should not be relied upon as such.

6 There is also an argument that the wider spread could be a reflection of lower growth potential and or weaker governance at J-REITs. 7 This information is intended for informational purposes only and does not constitute investment advice, a recommendation, an offer or solicitation.

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J-REIT Office REIT 10Y JGB

Spread

0.0

0.5

1.0

2002

.03

2002

.09

2003

.03

2003

.09

2004

.03

2004

.09

2005

.03

2005

.09

2006

.03

2006

.09

2007

.03

2007

.09

2008

.03

2008

.09

2009

.03

2009

.09

2010

.03

2010

.09

2011

.03

2011

.09

2012

.03

2012

.09

2013

.03

2013

.09

2014

.03

2014

.09

2015

.03

2015

.09

2016

.03

2016

.09

2017

.03

2017

.09

2018

.03

IPO Public Offering 3rd Party Allotment Bond

JPY tn

Net acquisition by J-REITs


The preliminary volume of commercial real estate transactions in Japan in the rolling six months to March 2018 was around JPY 2.1 trillion, a 12% increase from the six month period ended in September 2017. J-REITs’ gross investment activity was especially strong at JPY 1,005 billion in the period, an 80% increase from the September 2017 period. Asset dispositions by J-REITs also soared from JPY 140 billion to JPY 373 billion in the same period resulting in a record breaking volume of disposals across the six month period in J-REIT history. The increased amount of dispositions reflects some REITs opting to recycle capital via dispositions in exchange for new acquisitions, while others successfully raising capital by public offerings.

EXHIBIT 15: REAL ESTATE TRANSACTIONS IN JAPAN AND J-REIT SHARE (6 MONTHS ROLLING)

Sources: ARES, Urban Research Institute, Real Capital Analytics, DWS. As of Apr 2018. There is no guarantee forecast growth will materialize. Past performance is not indicative of future results. Notes: E = preliminary estimate. Commercial real estate transactions exclude non-income producing assets, such as development site transactions.

Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.

-20%

0%

20%

40%

60%

80%

-1

0

1

2

3

4

2001

.09

2002

.03

2002

.09

2003

.03

2003

.09

2004

.03

2004

.09

2005

.03

2005

.09

2006

.03

2006

.09

2007

.03

2007

.09

2008

.03

2008

.09

2009

.03

2009

.09

2010

.03

2010

.09

2011

.03

2011

.09

2012

.03

2012

.09

2013

.03

2013

.09

2014

.03

2014

.09

2015

.03

2015

.09

2016

.03

2016

.09

2017

.03

2017

.09

2018

.3E

JPY

in tr

illio

n

Disposition by J-REITs Acquisition by J-REITs Acquisition by others J-REIT share (%) of all transactions (RHS)…


4 Market Fundamentals 4.1 Office The average office vacancy rates in Tokyo’s central five wards remained tight at 3.0% in February 2018, flat from November 2017, and still at the lowest level in the current cycle following the Global Financial Crisis. The vacancy rate at newly-developed buildings (average of new completed buildings in the last 12 months) moderated from 29.4% in May 2017 to 10.0% in February 2018. Quality office space in high specification buildings in the central area are becoming increasingly important for companies in order to recruit good staff especially when the unem-ployment rate is at an historical low. Given this, the average vacancy rate in Tokyo is expected to remain resilient in the remainder of the year despite a number of large sized supplies due for completion in 2018.8

EXHIBIT 16: OFFICE VACANCY RATE AND SUPPLY IN CENTRAL TOKYO (5 WARDS)

Supply Pipeline in Tokyo

Building Date Floors GFA (sqm)

Taiyo Life Insurance Nihonbashi Jan-18 27 58,084 Tokyo Midtown Hibiya Feb-18 35 115,500 Osaki Garden Place Mar-18 24 120,762 msb Tamachi S Jun-18 31 138,300 Nihonbashi Takashimaya Mitsui Jun-18 32 143,372 Shibuya Stream Aug-18 35 46,200 Nissay Hamamatsucho Crea Twr. Aug-18 29 51,900 Marunouchi 3-2 Project Oct-18 30 89,100 Muromachi 3 chome A Mar-19 26 168,000 Shibuya Nanpeidai Project Mar-19 21 46,954 Seibu Railway Ikebukuro Bldg. Mar-19 20 49,661 Okura Redevelopment Office Twr. Jun-19 41 41,400 Shibuya Sta. Dogenzaka Oct-19 18 58,900 Toranomon Business Tower Dec-19 36 94,000 Shibuya Scramble Square East 2019 47 73,000 Kyobashi 1 chome Tower A 2019 23 47,100 Yotsuya Sta. Redevelopment 2019 30 58,900

Sources: Mori Building, Miki Shoji, DWS. As of Apr 2018. Notes: GFA = gross floor area. sqm = square metres. There is no guarantee the supply pipeline will materialize. The average rent free period offered to tenants was 2.6 months in December 2017, a slight bump from 2.4 months in September 2017. Some landlords remain cautious given the anticipated increase in supply expected later in 2018, and have prioritized the filling up of vacant space rather than achieving higher rents, also still tending to offer generous incentives.

8 1. Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which

might prove inaccurate or incorrect. 2. This information is intended for informational purposes only and does not constitute investment advice, a recommendation, an offer or solicitation.

1 %

2 %

4 %

8 %

16 %

32 %

1 %

3 %

5 %

7 %

9 %

11 %

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

.02

All Buildings (LHS) New Buildings (log scale, RHS)

Vacancy for new

buildings (log sclae)

Vac

ancy

rate

for a

ll bu

ildin

gs


EXHIBIT 17: OFFICE VACANCY RATE AND RENT FREE PERIOD IN TOKYO

Sources: Sanko Estate, Xymax Real Estate Institute, DWS. As of Apr 2018. Notes: sqm = square metres Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect. On the back of tight vacancy rates, the average asking office rent (all classes) grew by 4.5% in February 2018 (year-on-year) in Central Tokyo, recording continuous growth for four years since the second quarter of 2014. Asking rents at prime buildings in the CBD continued to hover above JPY 40,000 per tsubo*, while the average rents at grade A office buildings also made a growth of 2.4% in the year to December 2017.

EXHIBIT 18: OFFICE ASKING RENT IN CENTRAL TOKYO BY BUILDING FLOOR PLATE

Sources: Miki Shoji, Sanko Estate, DWS. As of Apr 2018. Notes: F = forecast, there is no guarantee forecast rents will materialise. Please refer to Important Notes (see end of report). *Tsubo is a Japanese unit of area. It is equivalent to 3.3 square metres (35.6 square feet). Vacancy rates continued to remain tight in most major regional cities in Japan in the period ended February 2018. It stood at 2.4% in Sapporo, 3.4% in Fukuoka and Osaka and 4.0% in Nagoya as of February 2018, while it was at 5.1% in Yokohama in the same month, recovering from 5.8% in August 2017. Large sized supply is limited to only one building per respective city over the next two years, and the tight leasing environment is expected to persist at least until 2019 in those regional markets.9

9 1. Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which

might prove inaccurate or incorrect. 2. This information is intended for informational purposes only and does not constitute investment advice, a recommendation, an offer or solicitation.

0

2

4

6

8

-5%

0%

5%

10%

15%19

96.0

319

96.0

919

97.0

319

97.0

919

98.0

319

98.0

919

99.0

319

99.0

920

00.0

320

00.0

920

01.0

320

01.0

920

02.0

320

02.0

920

03.0

320

03.0

920

04.0

320

04.0

920

05.0

320

05.0

920

06.0

320

06.0

920

07.0

320

07.0

920

08.0

320

08.0

920

09.0

320

09.0

920

10.0

320

10.0

920

11.0

320

11.0

920

12.0

320

12.0

920

13.0

320

13.0

920

14.0

320

14.0

920

15.0

320

15.0

920

16.0

320

16.0

920

17.0

320

17.0

920

18.0

3

free rent period (RHS) Floor Plate : 165 sqm - 330sqm Floor Plate : 330 sqm - 660 sqm Floor Plate > 660 sqm Tokyo CBD Average

(month)

10,000

20,000

30,000

40,000

50,000

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

.03

2008

.06

2008

.09

2008

.12

2009

.03

2009

.06

2009

.09

2009

.12

2010

.03

2010

.06

2010

.09

2010

.12

2011

.03

2011

.06

2011

.09

2011

.12

2012

.03

2012

.06

2012

.09

2012

.12

2013

.03

2013

.06

2013

.09

2013

.12

2014

.03

2014

.06

2014

.09

2014

.12

2015

.03

2015

.06

2015

.09

2015

.12

2016

.03

2016

.06

2016

.09

2016

.12

2017

.03

2017

.06

2017

.09

2017

.12

2018

.02

2018

.06F

2018

.09F

All classes Newly built (all classes) Grade A Prime Buildings in CBD floor plate > 660 sqm

(USD/sqf/year)

109

182

73

145

(JPY/tsubo*/mon)

Forecast


EXHIBIT 19: OFFICE VACANCY RATES IN MAJOR CITIES IN JAPAN (ALL GRADES)

Supply Pipeline in Regional Cities

Building Date Floors GFA (sqm)

Yokohama Nomura Bldg Feb-17 17 81,556

JR Gate Tower (Nagoya) Mar-17 41 67,750

Nakanoshima Fes Twr W (Osaka) Apr-17 46 45,030

Global Gate West (Nagoya) Apr-17 36 ttl 40,692

Global Gate East (Nagoya) Jun-17 17

Ocean Gate MM 1 (Yokohama) Jun-17

15 ttl 55,578

Ocean Gate MM 2 (Yokohama) 6

Hirokoji Cross Tower (Nagoya) Mar-18 21 45,586

Kamiyo Hakata Chuo Bldg, (Fukuoka) Apr-18 13 18,820

Namba Sky-o (Osaka) Sep-18 29 35,818

Sapporo Sosei Square (Sapporo) 2018 28 35,112

Kajima Fushimi Bldg (Nagoya) 2019 13 16,891

Daido Life Insurance (Sapporo) 2020 14 23,958

OBIC Midosuji Bldg (Osaka) 2020 25 40,000

Tenjin Business Center (Fukuoka) 2020 16 60,250

MM21-54 Project (Yokohama) 2020 18 101,056

Sources: Miki Shoji, Sanko, DWS. As of Apr 2018. Sources: Miki Shoji, Sanko Estate, DWS. As of Apr 2018. Notes: GFA = gross floor area. sqm = square metres. There is no guarantee the supply pipeline will materialize.

0

4

8

12

16

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

.02

Sapporo Fukuoka Nagoya

Osaka Tokyo Yokohama

(%)


4.2 Retail Thanks to rapidly increasing international visitors, tourist consumption posted a strong increase of 27.8% in the fourth quarter of 2017 on a year-on-year basis. High street retail rents in major submarkets posted healthy re-coveries in the period on a quarter-on-quarter basis. The average high street rental growth on the quarter to December 2017 was 6.2% in Ikebukuro and 3.4% in Shinjuku, 1.4% in Shibuya and 0.2% in Omotesando while it declined -2.2% in Ginza and -3.1% in Shinsaibashi (Osaka), respectively.

EXHIBIT 20: HIGH STREET AVERAGE RENTS IN TOKYO AND OSAKA

Sources: Style Act, Miki Shoji, DWS. As of Apr 2018. Past growth is not a reliable indicator of future growth. Fueled by the increase in inbound tourist consumption, department store sales grew strongly by 2.2% in the January and February period in 2018, with growth especially strong in Osaka since the beginning of 2017, sur-passing growth in Tokyo. Growth at shopping centers and convenience stores were weaker both at 0.2% in the same period, reflecting lower dependency on tourists and continuous competition with online retailing.

EXHIBIT 21: RETAIL SALES GROWTH BY STORE CATEGORY (YEAR ON YEAR)

Source: Japan Council of Shopping Center, Japan Franchise Association, Japan Chain Store Association, Japan Department Store Association, DWS. As of Apr 2018.

0.0

0.5

1.0

1.5

0

12,000

24,000

36,000

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Tourist spending (RHS) Ginza Omotesando Shinjuku Shibuya Ikebukuro Shinsaibashi

(JPY/tb/m) (JPY tn)

-15%

-10%

-5%

0%

5%

10%

15%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

.03

2013

.06

2013

.09

2013

.12

2014

.03

2014

.06

2014

.09

2014

.12

2015

.03

2015

.06

2015

.09

2015

.12

2016

.03

2016

.06

2016

.09

2016

.12

2017

.03

2017

.06

2017

.09

2017

.12

2018

.02

Shopping Center (13 cities) Dept Store (Tokyo/Osaka) Chain Store (nationwide) Convenience Store

(for existing stores for all categories)

VAT hike


4.3 Residential The average price per unit of newly-built condominiums sold in Greater Tokyo was JPY60.4 million in the Janu-ary and February period of 2018, one of the highest marks in the last two decade, while high rises in the Cen-tral Tokyo and the Tokyo Bay area still contributed to the elevated price. The average contract rate for newly built units continued to struggle at 65.1%, one of the lowest levels following the Global Financial Crisis, reflect-ing slower sales in low to mid rise units in the suburbs, especially among first time buyers.

EXHIBIT 22: AVERAGE NEW CONDO PRICE AND THE CONTRACT RATE IN GREATER TOKYO

Sources: Real Estate Economic Institute, DWS. As of Apr 2018.

Due to the recent price escalation among for-sale condominiums in Tokyo, an increasing number of households continue to remain in rental apartments as opposed to buying. Rental demand among young couples and upper middle class workers remains especially strong in convenient locations near public transportation. Rents in-creased by 1.7% for prime apartments in the Central 3 ward in Tokyo in the year to December 2017, and by 1.4% for the broader 23 wards in the year to March 2018.

EXHIBIT 23: RESIDENTIAL RENT IN TOKYO (YEAR-ON-YEAR)

Sources: TAS Corporation with data from At Home Co. (23-ward vacancy), Leasing Management Consulting (5-ward asking rent), IPD-RECRUIT Residential Index (23-ward rent index), Miki Shoji. As of Apr 2018.

60

65

70

75

80

85

90

35

40

45

50

55

60

65

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

J/F

02 04 06 08 09 10 11 12 13 14 15 16 17 18

Avg. unit price (LHS) Contract rate (RHS)

(%)(JPY mm / unit)

-8%

-4%

0%

4%

8%

12%

2011

.09

2011

.12

2012

.03

2012

.06

2012

.09

2012

.12

2013

.03

2013

.06

2013

.09

2013

.12

2014

.03

2014

.06

2014

.09

2014

.12

2015

.03

2015

.06

2015

.09

2015

.12

2016

.03

2016

.06

2016

.09

2016

.12

2017

.03

2017

.06

2017

.09

2017

.12

2018

.03

Office - 5 ward Residential - 23 ward Residential - 5 ward Residential - 3 ward (prime)


4.4 Industrial The industrial sector shows a divergent trend by market. Vacancy rates at multi-tenant logistics assets remained at a healthy level of 4.9% in December 2017 in Greater Tokyo, and recovered strongly from 14.2% in September 2017 to 5.5% in December 2017 in Greater Nagoya, while vacancy rates increased from 15.7% to 19.7% in Greater Osaka in the same period. Rents strengthened in Greater Nagoya by 13.1% and more moderately by 1.2% in Tokyo in the year to December 2017, while they declined 4.9% in Greater Osaka in the same period, making six consecutive quarter declines.

EXHIBIT 24: LOGISTICS LEASING IN JAPAN BY METRO

VACANCY RATE OF MULTI-TENANT LOGISTICS LOGISTICS RENT

Sources: CBRE, DWS. As of Apr 2018. Notes: Past performance is not indicative of future results. The level of vacancy rates also varies significantly among sub markets in Greater Tokyo. Vacancy rates in es-tablished the logistics precincts of Gaikando and Route 16 both remained very tight at only 1.4% in December 2017 and 6.2% in the Tokyo Bay area, while the vacancy rate in Ken-o-do, the most outer ring road in the Tokyo metro area where new completions are concentrated, remained at an elevated level of 17.8% in the period. Rents strengthened by 4.7% in Tokyo Bay, the most expensive submarket close to the CBD, whilst remaining almost flat in other areas.

EXHIBIT 25: LOGISTICS LEASING BY SUB-MARKET IN GREATER TOKYO

VACANCY RATE OF MULTI-TENANT LOGISTICS LOGISTICS RENT

Sources: CBRE, DWS. As of Apr 2018. Notes: Past performance is not indicative of future results.

0%

5%

10%

15%

20%

25%

30%

2008

.06

2008

.12

2009

.06

2009

.12

2010

.06

2010

.12

2011

.06

2011

.12

2012

.06

2012

.12

2013

.06

2013

.12

2014

.06

2014

.12

2015

.06

2015

.12

2016

.06

2016

.12

2017

.06

2017

.12

Greater Tokyo Greater Osaka Greater Nagoya

2,400

3,000

3,600

4,200

4,800

2008

.06

2008

.12

2009

.06

2009

.12

2010

.06

2010

.12

2011

.06

2011

.12

2012

.06

2012

.12

2013

.06

2013

.12

2014

.06

2014

.12

2015

.06

2015

.12

2016

.06

2016

.12

2017

.06

2017

.12

Greater Tokyo Greater Osaka Greater Nagoya

(JPY/tsubo/month)

0%

5%

10%

15%

20%

25%

2014

.03

2014

.06

2014

.09

2014

.12

2015

.03

2015

.06

2015

.09

2015

.12

2016

.03

2016

.06

2016

.09

2016

.12

2017

.03

2017

.06

2017

.09

2017

.12

Greater Tokyo Tokyo Bay GaikandoRoute 16 Ken-o-do

3,000

4,000

5,000

6,000

7,000

2014

.03

2014

.06

2014

.09

2014

.12

2015

.03

2015

.06

2015

.09

2015

.12

2016

.03

2016

.06

2016

.09

2016

.12

2017

.03

2017

.06

2017

.09

2017

.12

Greater Tokyo Tokyo Bay GaikandoRoute 16 Ken-o-do

(JPY/tsubo/month)


The annual supply of logistics assets are expected to be 1.4 million square meters in 2018 and then 1.8 million square meters in 2019 in Greater Tokyo, making historical records in two consecutive years.10 Greater Osaka saw an all-time high supply of 0.9 million square meters in 2017 causing the current short term demand-supply imbalance. Vacancy rates are forecast to remain elevated in some sub regions including the Ken-o-do area in Greater Tokyo and also in the Osaka Bay area where supply is concentrated.11

EXHIBIT 26: LOGISTICS SUPPLY IN GREATER TOKYO AND GREATER OSAKA

GREATER TOKYO GREATER OSAKA

Sources: Ichigo Real Estate Service, DWS. As of Apr 2018. Notes: F = forecast, there is no guarantee forecast returns will materialise. Past performance is not indicative of future results.

10, 11 Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.

0%

4%

8%

12%

16%

20%

0.0

0.4

0.8

1.2

1.6

2.0

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

F20

19F

New Supply (LHS) Vacancy Rate (RHS)

(mm sqm)

0%

4%

8%

12%

16%

20%

0.0

0.2

0.4

0.6

0.8

1.0

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

F20

19F

New Supply (LHS) Vacancy Rate (RHS)

(mm sqm)

Forecast

Forecast


4.5 Hotel The number of foreign tourist arrivals to Japan grew by 19% in 2017, recording more than 28 million tourists visiting the country, making six consecutive rapid yearly growths since 2011. Hoteliers continued to show strong occupancy rates at 86.0% on average in Tokyo and Osaka in the fourth quarter of 2017 accordingly. Occupancy rates were especially high at 89.3% in Osaka’s upscale hotels in the period, while healthy occupancy recovery continued in Tokyo in the last four quarters. A new airport terminal dedicated to low cost carriers opened at Kansai International Airport in Osaka last year, with the number of tourist arrivals expected to further increase in 2018.12

EXHIBIT 27: HOTEL OCCUPANCY RATE IN TOKYO AND OSAKA (12 MONTHS TRAILING)

Sources: JTA, DWS. As of Apr 2018. Past growth is not a reliable indicator of future growth.

12 Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which

might prove inaccurate or incorrect.

50%

60%

70%

80%

90%

0

2

4

6

8

2003

Q2

2003

Q4

2004

Q2

2004

Q4

2005

Q2

2005

Q4

2006

Q2

2006

Q4

2007

Q2

2007

Q4

2008

Q2

2008

Q4

2009

Q2

2009

Q4

2010

Q2

2010

Q4

2011

Q2

2011

Q4

2012

Q2

2012

Q4

2013

Q2

2013

Q4

2014

Q2

2014

Q4

2015

Q2

2015

Q4

2016

Q2

2016

Q4

2017

Q2

2017

Q4

Foreign Visitors to Japan (LHS) Tokyo Upscale Hotel (RHS) Osaka Upscale Hotel (RHS)

Tokyo Budget Hotel (RHS) Osaka Budget Hotel (RHS)

(million)


5 Past Topics of This Report Vol Year Publication Research Topic

1

2008

Q2 Jun-08 Making sense of the rental market in Japan

2 Q3 Sep-08 Impact of the credit crunch

3 Q4 Dec-08 Revitalisation of ailing J-REITs

4

2009

Q1 Mar-09 Tokyo office market in its global context

5 Q2 Jul-09 Japan residential market

6 Q3 Oct-09 History repeats itself? A comparison of the ‘Year 2003 Problem’ with 2009

7 Q4 Jan-10 Introducing unit pricing analysis in Japan

8

2010

Q1 Apr-10 Portfolio optimisation analysis in Japan

9 Q2 Jul-10 Japan’s capital market in a global context

10 Q3 Oct-10 Quarterly Report

11 Q4 Jan-11 Cross-border investment into and out of Japan

12

2011

Q1 Apr-11 The Great Tohoku Earthquake and its impact on the Japanese real estate market

13 Q2 Jul-11 Adapting Japan’s land price index for real estate analysis


15

2012

Q1 Jan-12 The J-REITs next 10 years

16 Q2 Apr-12 Quarterly Report

17 Q3 Jul-12 Quarterly Report

18 Q4 Oct-12 The inward-looking focus of the real estate investors in Japan

19

2013

Q1 Jan-13 Can the housing tax credit boost demand?


21 Q3 Jul-13 Logistics : Rapid Modernisation Underway in the Asia Pacific Region


23

2014

Q1 Jan-14 Japan, Asia and Global Investing




27

2015

Q1 Jan-15 Quarterly Report

28 Q2 Apr-15 Emergence of Private REITs in Japan and Implications to the market



31

2016

Q1 Jan-16 Will the Third Arrow of Abenomics Fly?


33 Q3 Jul-16 Impact of Negative Interest Rate


35

2017





39 2018




6 Important Information On March 23, 2018, Deutsche Asset Management rebranded to DWS. The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries, such as DWS Distributors, Inc., which offers in-vestment products, or Deutsche Investment Management Americas Inc. and RREEF America L.L.C., which offer advisory services. The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or Deutsche Investment Management Americas Inc. and RREEF America L.L.C. which offer advisory services; in Germany: RREEF Investment GmbH, RREEF Management GmbH, and RREEF Spezial Invest GmbH; in Australia: Deutsche Investments Australia Limited (ABN 52 074 599 401) an Australian financial services incense holder; in Japan: Deutsche Securities Inc. (For DSI, financial advisory (not investment advisory) and distribution services only); in Hong Kong: Deutsche Bank Aktiengesellschaft, Hong Kong Branch (for direct real estate business), and Deutsche Asset Management (Hong Kong) Limited (for real estate securities business); in Singapore: Deutsche Asset Management (Asia) Limited (Company Reg. No. 198701485N); in the United Kingdom: Deutsche Alternative Asset Management (UK) Limited, Deutsche Alterna-tive Asset Management (Global) Limited and Deutsche Asset Management (UK) Limited; and in Denmark, Fin-land, Norway and Sweden: Deutsche Alternative Asset Management (UK) Limited and Deutsche Alternative As-set Management (Global) Limited; in addition to other regional entities in the Deutsche Bank Group. For purposes of ERISA and the Department of Labor's fiduciary rule, we are relying on the sophisticated fiduciary exception in marketing our services and products, and nothing herein is intended as fiduciary or impartial invest-ment advice unless it is provided under an existing mandate. Key DWS research personnel are voting members of various investment committees. Members of the investment committees vote with respect to underlying investments and/or transactions and certain other matters subjected to a vote of such investment committee. The views expressed in this document have been approved by the responsible portfolio management team and Real Estate investment committee and may not necessarily be the views of any other division within DWS. This material was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. It is intended for informational purposes only. It does not constitute investment advice, a recommendation, an offer, solicitation, the basis for any contract to purchase or sell any security or other in-strument, or for DWS or its affiliates to enter into or arrange any type of transaction as a consequence of any information contained herein. Neither DWS nor any of its affiliates gives any warranty as to the accuracy, reliability or completeness of information which is contained in this document. Except insofar as liability under any statute cannot be excluded, no member of the DWS, the Issuer or any office, employee or associate of them accepts any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this docu-ment or for any resulting loss or damage whether direct, indirect, consequential or otherwise suffered by the recipient of this document or any other person. The views expressed in this document constitute DWS or its affiliates’ judgment at the time of issue and are subject to change. This document is only for professional investors. This document was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. No further distribution is allowed without prior written consent of the Issuer. Investments are subject to risk, including market fluctuations, regulatory change, possible delays in repayment and loss of income and principal invested. The value of investments can fall as well as rise and you might not get back the amount originally invested at any point in time. Investment in real estate may be or become nonperforming after acquisition for a wide variety of reasons. Non-performing real estate investment may require substantial workout negotiations and/ or restructuring. Environ-mental liabilities may pose a risk such that the owner or operator of real property may become liable for the costs of removal or remediation of certain hazardous substances released on, about, under, or in its property. Addi-tionally, to the extent real estate investments are made in foreign countries, such countries may prove to be politically or economically unstable. Finally, exposure to fluctuations in currency exchange rates may affect the value of a real estate investment.


Investments in Real Estate are subject to various risks, including but not limited to the following: _ Adverse changes in economic conditions including changes in the financial conditions of tenants, buyer

and sellers, changes in the availability of debt financing, changes in interest rates, real estate tax rates and other operating expenses;

_ Adverse changes in law and regulation including environmental laws and regulations, zoning laws and other governmental rules and fiscal policies;

_ Environmental claims arising in respect of real estate acquired with undisclosed or unknown environ-mental problems or as to which inadequate reserves have been established;

_ Changes in the relative popularity of property types and locations; _ Risks and operating problems arising out of the presence of certain construction materials; and _ Currency / exchange rate risks where the investments are denominated in a currency other than the

investor’s home currency. An investment in real estate involves a high degree of risk, including possible loss of principal amount invested, and is suitable only for sophisticated investors who can bear such losses. The value of shares/ units and their derived income may fall or rise. Any forecasts provided herein are based upon DWS’s opinion of the market at this date and are subject to change dependent on the market. Past performance or any prediction, projection or forecast on the economy or markets is not indicative of future performance. In Australia: Issued by Deutsche Investments Australia Limited (ABN 52 074 599 401), holder of an Australian Financial Services License (AFSL 499 640). This information is only available to persons who are professional, sophisticated, or wholesale investors as defined under section 761 G of the Corporations Act 2001 (Cth). The information provided is not to be construed as investment, legal or tax advice and any recipient should take their own investment, legal and tax advice before investing. An investment with DWS is not a deposit with or any other type of liability of Deutsche Bank AG ARBN 064 165 162, Deutsche Investments Australia Limited or any other member of the Deutsche Bank AG Group. The capital value of and performance of an investment is not in any way guaranteed by Deutsche Bank AG, Deutsche Investments Australia Limited or any other member of the Deutsche Bank Group. Any forecasts provided herein are based upon our opinion of the market as at this date and are subject to change, dependent on future changes in the market. Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance. Investments are subject to investment risk, including possible delays in repay-ment and loss of income and principal invested. Deutsche Investments Australia Limited is not an Authorised Deposit-taking Institution under the Banking Act 1959 nor regulated by APRA. Dubai International Financial Centre: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulated by the Dubai Financial Services Authority. Deutsche Bank AG - DIFC Branch may only undertake the financial services activities that fall within the scope of its existing DFSA license. Principal place of business in the DIFC: Dubai International Financial Centre, The Gate Village, Building 5, PO Box 504902, Dubai, U.A.E. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Professional Clients, as defined by the Dubai Financial Services Authority. Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no. 07073-37) is regu-lated by the Capital Market Authority. Deutsche Securities Saudi Arabia may only undertake the financial services activities that fall within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya District, P.O. Box 301809, Faisaliah Tower - 17th Floor, 11372 Riyadh, Saudi Arabia. Notice to prospective Investors in Japan: This document is distributed in Japan by DeAMJ. Please contact the responsible employee of DeAMJ in case you have any question on this document because DeAMJ serves as contacts for the product or service described in this document. This document is for distribution to Professional Investors only under the Financial Instruments and Exchange Law. For Investors in Switzerland: This material is intended for information purposes only and does not constitute investment advice or a personal recommendation. This document should not be construed as an offer to sell any investment or service. Furthermore, this document does not constitute the solicitation of an offer to purchase or subscribe for any investment or service in any jurisdiction where, or from any person in respect of whom, such a solicitation of an offer is unlawful. Neither Deutsche Bank AG nor any of its affiliates, gives any warranty as to the accuracy, reliability or completeness of information which is contained in this document. Past performance or any prediction or forecast is not indicative of future results.


The views expressed in this document constitute Deutsche Bank AG or its affiliates’ judgment at the time of issue and are subject to change. Deutsche Bank has no obligation to update, modify or amend this letter or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate, or if research on the subject company is with-drawn. Prices and availability of financial instruments also are subject to change without notice. The information provided in this document is addressed solely to Qualified Investors pursuant to Article 10 para-graph 3 of the Swiss Federal Act on Collective Investment Schemes (CISA) and Article 6 of the Ordinance on Collective Investment Schemes. This document is not a prospectus within the meaning of Articles 1156 and 652a of the Swiss Code of Obligations and may not comply with the information standards required thereunder. This document may not be copied, reproduced, distributed or passed on to others without the prior written consent of Deutsche Bank AG or its affiliates. For investors in the United Kingdom: © 2018 Deutsche Alternative Asset Management (Global) Limited. All rights reserved. No further distribution is allowed without prior written consent of the Issuer. Issued and approved by Deutsche Alternative Asset Management (Global) Limited of 1 Great Winchester Street, London, EC2N 2DB, authorised and regulated by the Financial Conduct Authority (“FCA”). DeAAM Global is also registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act 1940 (the “Advisers Act”), however it complies with the Advisers Act only with respect to US clients. This document is a “non-retail communication” within the meaning of the FCA's Rules and is directed only at persons satisfying the FCA’s client categorisation criteria for an eligible counterparty or a professional client. This document is not intended for and should not be relied upon by a retail client. This document may not be repro-duced or circulated without written consent of the issuer. This document is intended for discussion purposes only and does not create any legally binding obligations on the part of DWS Group GmbH & Co. KGaA and/or its affiliates (“DWS”). Without limitation, this document does not constitute investment advice or a recommendation or an offer or solicitation and is not the basis for any contract to purchase or sell any security or other instrument, or for DWS to enter into or arrange any type of transaction as a consequence of any information contained herein. The information contained in this document is based on material we believe to be reliable; however, we do not represent that it is accurate, current, complete, or error free. Assumptions, estimates and opinions contained in this document constitute our judgment as of the date of the document and are subject to change without notice. Past performance is not a guarantee of future results. Any forecasts provided herein are based upon our opinion of the market as at this date and are subject to change, dependent on future changes in the market. Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance. Investments are subject to risks, including possible loss of principal amount invested. When making an investment decision, potential investors should rely solely on the final documentation relating to the investment or service and not the information contained herein. The investments or services mentioned herein may not be appropriate for all investors and before entering into any transaction you should take steps to ensure that you fully understand the transaction and have made an independent assessment of the appropriate-ness of the transaction in the light of your own objectives and circumstances, including the possible risks and benefits of entering into such transaction. For general information regarding the nature and risks of the proposed transaction and types of financial instruments please go to https://www.db.com/company/en/risk-disclosures.htm. You should also consider seeking advice from your own advisers in making this assessment. If you decide to enter into a transaction with us you do so in reliance on your own judgment. Any opinions expressed herein may differ from the opinions expressed by other DWS departments including DWS Research. DWS may engage in transactions in a manner inconsistent with the views discussed herein. DWS trades or may trade as principal in the instruments (or related derivatives), and may have proprietary posi-tions in the instruments (or related derivatives) discussed herein. DWS may make a market in the instruments (or related derivatives) discussed herein. Sales and Trading personnel are compensated in part based on the volume of transactions effected by them. The distribution of this document and availability of these products and services in certain jurisdictions may be restricted by law. You may not distribute this document, in whole or in part, without our express written permission. DWS SPECIFICALLY DISCLAIMS ALL LIABILITY FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL OR OTHER LOSSES OR DAMAGES INCLUDING LOSS OF PROFITS INCURRED BY YOU OR ANY THIRD


PARTY THAT MAY ARISE FROM ANY RELIANCE ON THIS DOCUMENT OR FOR THE RELIABILITY, ACCU-RACY, COMPLETENESS OR TIMELINESS THEREOF. Any reference to “DWS”, “Deutsche Asset Management” or “Deutsche AM” shall, unless otherwise required by the context, be understood as a reference to asset management activities conducted by DWS Group GmbH & Co. KGaA and/or any of its affiliates. Clients will be provided DWS products or services by one or more legal entities that will be identified to clients pursuant to the contracts, agreements, offering materials or other docu-mentation relevant to such products or services. DWS’s infrastructure investment business is part of the Alterna-tives platform. In the U.S., DWS relates to the asset management activities of RREEF America L.L.C.; in Germany: RREEF Investment GmbH, RREEF Management GmbH, and RREEF Spezial Invest GmbH; in Japan: Deutsche Securities Inc. (For DSI, financial advisory (not investment advisory) and distribution services only); in Hong Kong: Deutsche Bank Aktiengesellschaft, Hong Kong Branch (for direct real estate business), and Deutsche Asset Management (Hong Kong) Limited (for real estate securities business); in Singapore: Deutsche Asset Manage-ment (Asia) Limited (Company Reg. No. 198701485N); in the United Kingdom: Deutsche Alternative Asset Man-agement (UK) Limited, Deutsche Alternative Asset Management (Global) Limited and Deutsche Asset Manage-ment (UK) Limited; and in Denmark, Finland, Norway and Sweden: Deutsche Bank AG; in Australia: Deutsche Investments Australia Limited (ABN 52 074 599 401) an Australian financial services license holder. For investors in Nordics: Deutsche Bank AG is authorized under German banking law (competent authority: European Central Bank and the BaFin, Germany’s Federal Financial Supervisory Authority. Deutsche Bank Branches operates within the EEA on the back of the legal entity (Deutsche Bank AG) EU Passports within the European Economic Area (“EEA”). Reference is made to European Union Regulatory Background and Corporate and Regulatory Disclosures at https://www.db.com/company/en/risk-disclosures.htm. Details about the extent of our authorisation and regulation by BaFin are available from us on request." DBS is acting for and behalf of Deutsche Asset Management (UK) Ltd and if you decide to enter into a transaction with Deutsche Bank AG or one of its affiliates (“the principal”) will any and all contractual and commercial agreements be as entered into with that principal. This presentation is for information purposes only and is not intended to be an offer or an advice or recommendation or solicitation, or the basis for any contract to purchase or sell any security, or other instrument, or for Deutsche Bank to enter into or arrange any type of transaction as a consequence of any infor-mation contained herein. It has been prepared without consideration of the investment needs, objectives or fi-nancial circumstances of any investor. This document is not intended for and should not be relied upon by a retail client. This material has been deemed falling under the MIFID definition of marketing material as not presented as an objective or independent piece of research in accordance with Article 24 section 1.a (Article 19.2 in directive 2014/65/EU) of implementation directive 2014/65/EU as enacted into Swedish laws and regulations, inter alia Värdepappersmarknadslagen (2007:528), Lagen (1991:980) om handel med finansiella instrument and Chapter 11, Sections 8-9, of regulation FFFS 2007:16, as amended. The views set out in this presentation are those of the author and may not necessarily reflect the views of any other persons or division within Deutsche Bank, including the Sales and Trading functions of the Corporate and Investment Bank: services provided by the Sales and Trading functions of the Corporate and Investment Bank are purely on a non advised, execution-only basis. For investors in Bermuda: This is not an offering of securities or interests in any product. Such securities may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 2003 of Bermuda which regulates the sale of securities in Bermuda. Additionally, non-Bermudian persons (including com-panies) may not carry on or engage in any trade or business in Bermuda unless such persons are permitted to do so under applicable Bermuda legislation. © 2018 DWS Group GmbH & Co. KGaA. All rights reserved. (056522 -1.1 4/11/2018)


7 Research & Strategy – Alternatives

Office Locations: Team:

Chicago 222 South Riverside Plaza 26th Floor Chicago IL 60606-1901 United States Tel: +1 312 537 7000 Frankfurt Taunusanlage 12 60325 Frankfurt am Main Germany Tel: +49 69 71909 0 London Winchester House 1 Great Winchester Street London EC2A 2DB United Kingdom Tel: +44 20 754 58000 New York 345 Park Avenue 26th Floor New York NY 10154-0102 United States Tel: +1 212 454 6260 San Francisco 101 California Street 24th Floor San Francisco CA 94111 United States Tel: +1 415 781 3300 Singapore One Raffles Quay South Tower 20th Floor Singapore 048583 Tel: +65 6538 7011 Tokyo Sanno Park Tower 2-11-1 Nagata-cho Chiyoda-Ku 18th Floor Tokyo Japan Tel: +81 3 5156 6000

Global

Mark Roberts Head of Research & Strategy [email protected] Gianluca Minella Infrastructure Research [email protected]

Jessica Elengical Head of ESG Strategy [email protected] Yasmine Kamaruddin Global Strategy [email protected]

Americas

Kevin White Head of Strategy, Americas [email protected] Ross Adams Industrial Research [email protected] Bradley Doremus Quantitative Strategy [email protected] Ana Leon Retail Research [email protected] Ryan DeFeo Property Market Research [email protected]

Brooks Wells Head of Research, Americas [email protected] Liliana Diaconu Office Research [email protected] Michael Kodesch Capital Markets Research [email protected] Joseph Pecora Apartment Research [email protected]

Europe

Matthias Naumann Head of Strategy, Europe [email protected] Tom Francis Property Market Research [email protected] Farhaz Miah Property Market Research [email protected]

Simon Wallace Head of Research, Europe [email protected] Martin Lippmann Property Market Research [email protected] Julien Scarpa Property Market Research [email protected]

Asia Pacific

Koichiro Obu Head of Research & Strategy, Asia Pacific [email protected] Seng-Hong Teng Property Market Research [email protected]

Natasha Lee Property Market Research [email protected] Hyunwoo Kim Property Market Research [email protected]

mailto:[email protected]

mailto:[email protected]

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