The UBS Global Investors Index recorded a net total USD return of 0.13% in September. The best performing listed real estate market was Asia ex Australia, which recorded a net total USD return of 5.67%. North America recorded the lowest net total USD return for September of -1.90%. Year to date, the UBS Global Investors Index has recorded a net total USD return of 18.56%.

During September, one of the largest apartment REIT's (real estate investment trusts) Avalon Bay raised $450 million of 10-year unsecured debt at 2.95%, or 130 bps spread over treasuries. Although Avalon Bay has got a cost of capital advantage over most other REIT's, there are cheap sources of capital available to well capitalized REIT's. A number of REIT's in the US are now sourcing debt at rates below 4% fixed for 7 - 10 years. This low cost of debt boosts earnings growth, as old debt is re priced downwards, it also gives companies with low leverage the opportunity to buy quality assets that are still accretive from day one. The risks to watch out for are that companies do not buy poor quality assets that are accretive in the short term, but erode long term growth; in addition there are risks that companies increase their balance sheet leverage too much.

In an environment where debt funding is cheap (to well capitalized companies), new supply is very limited and yields on assets are reasonable, there are great opportunities for real estate companies. However, there is also the ability to destroy value by taking on too much balance sheet risk, buying poor quality assets, overpaying for assets or issuing equity at the wrong times (when trading at discounts to NAV). As a result of this, a lot of emphasis should be placed on management teams and their ability to create or destroy value in the long term.
Currently trading at an estimated forward FAD (funds available for distribution) yield of 5.23%, global listed property provides a positive yield spread versus 10 year government bonds, with reasonable earnings growth forecasts over the next few years.

The UBS Global Investors Index recorded a net total USD return of 6.00% in June. The best performing listed real estate market was Australia, which recorded a net total USD return of 9.83%. Asia ex Australia recorded the lowest net total USD return for May of 4.49%. Year to date, the UBS Global Investors Index has recorded a net total USD return of 14.14%, compared to the S&P 500 which has recorded a total return of 8.31% in USD over the same period.

We recently attended REIT Week (US listed property conference) in New York. Reading between the lines, most listed property management teams were happy with current fundamentals and cautiously optimistic about the future. There were a number of noteworthy themes to take out of the conference.

Across all property types, supply is extremely low. Since 2008 there has been very limited supply bought to market and it will continue to be well below historic norms over the next 3 to 4 years. Even though economic growth expectations are also below historic norms, the lack of supply means that this growth will be good enough to move property fundamentals in the right direction.

For companies with solid balance sheets and quality assets, funding is readily available. A number of companies have recently raised funding at fixed costs of below 4% for periods of 5 - 10 years. The quality management teams are also ensuring that they have a wide variety of options when raising capital.

Apartments continue to have the strongest fundamentals and although rent growth in this sector is expected to slow a bit, it is still strong. High end malls are also trading well, which should result in tenants being able to afford higher rents going forward. This is a function of two major themes; supply in this sector has and will be almost non existent for the foreseeable future and the high end consumer has been the least effected by the financial crisis. In the high barrier to entry office market, nodes with exposure to technology and energy are strong, while government and financial services continue to be weak.

At the back of the fundamentals queue are suburban office and industrial properties. Net new demand is weak in these sectors (baring certain nodes in industrial) and suburban office in particular was oversupplied during the last cycle. However, as vacancies get filled, fundamentals are improving and negative rent spreads have improved over the last 12 months, but the recovery is slow.

Currently trading at an estimated forward FAD (funds available for distribution) yield of 5.2% and with reasonable growth, global listed property looks attractive in an environment where low growth seems to be the "new normal".

The UBS Global Investors Index recorded a total USD return of 3.06% in March. The best performing listed real estate market was North America, which recorded a total USD return of 4.86%. Australia recorded the lowest total USD return for March of -4.77%. For the first quarter of 2012, the UBS Global Investors Index recorded a total USD return of 11.44%. Singapore was the strongest market during this period recording a total USD return of 17.29%.

During March, Simon Property Group, the largest REIT (real estate investment trust) in the world, purchased a 28.7% stake in Klepierre, Europe's second largest pan-European shopping centre REIT. The stake was purchased from BNP Paribas, who have retained a 22.2% stake in Klepierre. It is unlikely that Simon will pursue the remainder of the BNP stake until 2013, as there is a possibility that they would trigger capital gains tax if they purchased this stake prior to 1 January 2013. After 1 January 2013, it is expected that Simon will attempt to purchase the remaining BNP stake and take control of the company, unless there are issues that arise as a result of their due diligence. This deal provides evidence of two themes:

o Companies with strong balance sheets are in a position to take advantage of attractive acquisition opportunities.

o Simon Property Group, who have a proven track record as an astute investor and are one of the most successful operators of malls in the US, are happy to increase their exposure to European retail assets.

This deal will take a while to play out, but what will be interesting to watch is what value a quality management team like Simon can add to an operation like Klepierre, who until now have had a fairly lack luster management team.

The global listed real estate sector is currently trading at an estimated forward FAD (funds available for distribution) yield of 5.3%. The spread between the FAD yield and 10-year government bond yields is well above its historic average. We continue to favour companies with quality assets in high barrier to entry markets with good management teams and strong balance sheets.

The UBS Global Investors Index recorded a total USD return of 1.52% in December. The best performing listed real estate market was North America, which recorded a total USD return of 4.50%. The UK recorded the lowest total USD return for December (-6.80%). For the year the UBS Global Investors Index recorded a total USD return of -0.03%. North America was the strongest market recording a total USD return of 8.60% and Hong Kong was the weakest market recording a total USD return of -18.70%.

During the first half of the year markets performed well, with the UBS Global Investors Index up 13% to mid July 2011; this in spite of the tragic earthquake in Japan and conflicts in a number of countries in North Africa and The Middle East. The second half of the year was dominated by the European debt crisis. This resulted in an increase in volatility and weaker returns as investors reduced exposure to "risky" assets.

Looking at listed property markets, the "safe haven" status of the US ensured that this region outperformed other regions during the year. Less cyclical sectors like regional shopping malls, self-storage and high barrier to entry residential, were the winners from a sectoral point of view. The losers were the more cyclical sectors like offices and hotels.

The global listed real estate sector is currently trading at an estimated forward FAD (funds available for distribution) yield of 5.8%. The spread between the FAD yield and 10 year government bond yields is well above its historic average. We continue to favour companies with quality assets in high barrier to entry markets with good management teams and strong balance sheets.

The UBS Global Investors Index recorded a total USD return of -11.80% in September. The best performing listed real estate market was Japan, which recorded a total USD return of -4.96%. Hong Kong recorded the lowest total USD return for September (-17.36%). Year to date, the UBS Global Investors Index has recorded a total USD return of -7.99%. North America has been the strongest market recording a total USD return of -5.38% and Hong Kong has been the weakest market recording a total USD return of -21.29%. The weaker than expected job numbers in the US and the debt crisis within Europe and in particular Greece, continued to drive the markets during September. Equity markets were weak across all regions and treasuries were strong; the Federal Open Market Committee (FOMC) launched its long-expect additional round of stimulus called "Operation Twist". They have committed to purchase $400 billion in long-term Treasury bonds with maturities of six to 30 years, and to sell bonds with maturities of less than three years. During the month, the US 10 Year Government Bond yield strengthened from 2.22% to 1.92% and dipped as low as 1.72%. October will see most property companies release results for the third quarter of 2011. It is unlikely that the recent weakness in the global economy will have filtered through to companies earnings for the third quarter, however what will be interesting is to note the mood and outlook of management teams when they present their results. The global listed real estate sector is currently trading at an estimated forward FAD (funds available for distribution) yield of 6.1%; the spread between the FAD yield and 10 year government bond yields is well above its historic average. However with uncertainty around growth, global listed real estate together with general equities is likely to remain volatile over the near term.