1. © Nora Rothacher – ERES 2013 1 Maturity indicators for emerging real estate markets – Exemplified by the comparison of the Tanzanian and South African property market maturity Nora Rothacher, Doctoral Candidate IREBS University of Regensburg

2. © Nora Rothacher – ERES 2013 2 I.Background Global Market Indicators, Benchmarking and Indices II.Introduction of Paper Research III.Real Estate Market Maturity Paradigm IV.Strengths/Weaknesses and Opportunities/Threats of the Tanzanian and the South African Real Estate Market V.Classification of the countries’ property market maturity and economic evolution VI.Conclusion AGENDA

3. © Nora Rothacher – ERES 2013 3 Background Global Market Indicators, Benchmarking and Indices Global Market Indicators – Differentiation to Benchmarking and Indices Indexing in general considers companies with similar assets in the peer universe; these peers are therefore exposed to similar risks from a shareholder perspective. Goal of indexing – Performance assessment (like e.g. total return) of investment and asset management activities which exclude the impact of external factors, such as property market cycles – Informing the property investment process (allocation, selection and management)  Basis for benchmarking The primary goal of benchmarking is the enhancement of particular products and processes compared to a benchmark ("best in class").

4. © Nora Rothacher – ERES 2013 4 Background Global Market Indicators, Benchmarking and Indices Global Real Estate Market Indicators for Country Analysis IPD global coverage to promote market transparency by providing overall statements of a country’s investment property return, comparing property returns with other assets, identifying trends in major market sectors and segments in each country

5. © Nora Rothacher – ERES 2013 5 Background Global Market Indicators, Benchmarking and Indices Global Real Estate Market Indicators for Country Analysis Economical and Business Factors – Country Profile (Location, Historical Background and Socio-Cultural Environment, Political and governmental framework, Infrastructure) – Economic and financial environment (Natural resources, Currency, Industries, Export trade, Income and economic growth, Poverty and Private consumption, Inflation, Debt position, Financial institutions/Supervisory authorities, Financial markets) – Business framework (Legal security, Bureaucracy, Fiscal system, Subsidies, National commercial partners/chambers of commerce) Real Estate Market Factors – The rules of the game in the local real estate market (Market participants and institutions, Transaction process, Residential property market, Commercial property market, User, Return expectations, Lease structures) – Risks and opportunities in the local real estate market

6. © Nora Rothacher – ERES 2013 6 I.Background Global Market Indicators, Benchmarking and Indices II.Introduction of Paper Research III.Real Estate Market Maturity Paradigm IV.Strengths/Weaknesses and Opportunities/Threats of the Tanzanian and the South African Real Estate Market V.Classification of the countries’ property market maturity and economic evolution VI.Conclusion AGENDA

7. © Nora Rothacher – ERES 2013 7 Introduction Paper Research Overview Sub-Saharan Africa – Diverse geographical, socio-cultural and historical conditions – Different stages of economic evolution and market maturity  Benchmarking tool ‘Market Maturity’ could close gap between investment opportunities and low real estate investment activity Research Question – How mature are the real estate markets of Tanzania and South Africa? Goal – Objective analysis & comparison of the real estate market activity in Tanzania and South Africa – Assess the countries position on the global real estate maturity curve – Developing market information in emerging economies

8. © Nora Rothacher – ERES 2013 8 Introduction Paper Research Methodology Framework Property Market Performance: – ‘Market maturity’ on the basis of Keogh and D'Arcy (1994) – Emerging market study by Jones Lang LaSalle (2010) The methodological emphasis: o Research of contemporary literature o Empirical survey  Objective evaluation of theoretical information

9. © Nora Rothacher – ERES 2013 9 I.Background Global Market Indicators, Benchmarking and Indices II.Introduction of Paper Research III.Real Estate Market Maturity Paradigm IV.Strengths/Weaknesses and Opportunities/Threats of the Tanzanian and the South African Real Estate Market V.Classification of the countries’ property market maturity and economic evolution VI.Conclusion AGENDA

10. © Nora Rothacher – ERES 2013 10 Real Estate Market Maturity Paradigm Maturity Factors Market Maturity Market Transparency Connectivity with international capital markets Commercial building offer Robust domestic and international corporate base Social factors Political factors Legal factors Institutional factors

11. © Nora Rothacher – ERES 2013 11 I.Background Global Market Indicators, Benchmarking and Indices II.Introduction of Paper Research III.Real Estate Market Maturity Paradigm IV.Strengths/Weaknesses and Opportunities/Threats of the Tanzanian and the South African Real Estate Market V.Classification of the countries’ property market maturity and economic evolution VI.Conclusion AGENDA

12. © Nora Rothacher – ERES 2013 12 Measured Fund logo choice (bottom) Summary SourcesTanzaniaSouth Africa Market transparencyJLL, American Heritage Foundation, Cushman & Wakefield, Index of Economic Freedom, Doing Business Report, Not included in the transparency index (comparable to Ghana – 90. rank); Lacks basic investment performance indices; Tedious partnership or business venture process 21. Rank in the Transparency Index; Sufficient real estate networking possibilities; Performance measurement of real estate Commercial building offer Hughes & Arisson Formula, Knight Frank, Broll Stable prime yields (10% in 2012); Around US$ 3 billion REi (13% share of GDPi); Limited high-quality property stock; No freehold titles Prime yields comparable to value added investments; Over US$ 96 billion REi (31% share of GDPi); Established core stock of various property types; Common land titles exist (Long leasehold or freehold )

13. © Nora Rothacher – ERES 2013 13 Strengths/Weaknesses and Opportunities/Threats of the Tanzanian and the South African Real Estate Market Investible Commercial Property value Source: Own Calculations, World Bank

14. © Nora Rothacher – ERES 2013 14 Strengths and Weaknesses of the Tanzanian and the South African Real Estate Market Selected property market characteristics Source: Doing Business Report

15. © Nora Rothacher – ERES 2013 15 Measured Fund logo choice (bottom) Summary SourcesTanzaniaSouth Africa Connectivity with international capital markets OECD, IMF, National stock exchange Limited range of investment vehicles (non-property related debt securities) Functioning investment market; Diverse range of investment vehicles (listed real estate stocks, funds, debt securities), no REITs Domestic and international corporate base Porter, AfDB, World Economic Forum Competitiveness Report Small corporate base, large informal sector; Corruption Attractive corporate base (Major MNCs and domestic corporations); Infrastructural problems; Corruption

16. © Nora Rothacher – ERES 2013 16 I.Background Global Market Indicators, Benchmarking and Indices II.Introduction of Paper Research III.Real Estate Market Maturity Paradigm IV.Strengths/Weaknesses and Opportunities/Threats of the Tanzanian and the South African Real Estate Market V.Classification of the countries’ property market maturity and economic evolution VI.Conclusion AGENDA

17. © Nora Rothacher – ERES 2013 17 Classification of the countries’ property market maturity and economic evolution Maturity potential of real estate markets via a generic life cycle composition

18. © Nora Rothacher – ERES 2013 18 I.Background Global Market Indicators, Benchmarking and Indices II.Introduction of Paper Research III.Real Estate Market Maturity Paradigm IV.Strengths/Weaknesses and Opportunities/Threats of the Tanzanian and the South African Real Estate Market V.Classification of the countries’ property market maturity and economic evolution VI.Conclusion AGENDA

19. © Nora Rothacher – ERES 2013 19 Conclusion Great potential in enhancing maturity status in the long-term Countries have to expedite reforms and policies (i.e. governance, business, legal and social systems) Governments and aid providing institutions have to insist further on the adherence of regulations and democratic elections Maturity benchmark of real estate markets - an effective tool to evaluate a specific property market Market maturity does not necessarily imply efficiency

20. © Nora Rothacher – ERES 2013 20 Contact details Nora Rothacher, B.A. M.Sc. nora.rothacher@yahoo.de The topic is now up for discussion.