Global Financial Landscape The New Normal and Implications for Real Estate Finance - Taiwan Prof James D. Shilling Michael J. Horne Chair in Real Estate Studies DePaul University

Lesson #1: Shortage of Capital Elsewhere in the World Stimulus is out and deficit reduction is in. Graph Illustrating G20 Budget Deficit as % of GDP Source: Economists

Lesson #2: US regions that are like Portugal, Italy, Ireland, Greece, Spain, and now Britain Graph Illustrating places that are struggling to repay their debt

Lesson #3: More favorable pricing is returning to real estate markets Graph Illustrating real estate income yields on US properties Source: NCREIF

Lesson #4: Fortunately, Asia is ahead of Europe and US in terms of GDP growth Graph Illustrating estimated GDP growth for 2010 Source: Economists

Lesson #5: Time to re-evaluate portfolio allocations

Lesson #6: Problems that could impede increased capital flows to the region Liquidity leads the way Publicly-traded REITs are needed to provide liquidity Without a well-established REIT market in Asia, how do foreign investors invest more in Asian real estate? How do foreign investors go about investing in companies they know (Merton’s argument)?

Lesson #7: Asian investors may have pushed up prices too high relative to current income (De Bondt and Thaler argument) Graph Illustrating REIT PE multiples, Source: NAREIT, FTSE

Lesson #8: A broader perspective is needed Individuals worldwide will need increased liquidity in their retirement portfolios

Lesson #9: ECFA should lead to higher real estate valuations Graphs illustrating relationship between current account deficits and real appreciation of real estate Source: Aizenman and Jinjarak (2008)

Source: FTSE NAREIT US REIT Index Monthly Return. Lesson #10: Dealing with leverage and volatility will be key Graph illustrating US REIT stock price volatility