1. Swedish Real Estate Market 2015
FEDESSA Swedish Self Storage Association Conference September 3, 2015

2. Investment themes Transaction market characteristics
More money than ever targeting European and Nordic CRE
Investors are still more risk-averse than previous cyclical peak
Need for new products and markets to satisfy investment targets

3. Total transaction volume peaked in 2014?
Sweden was ahead of rest of Europe in 2014 activity
EUR 9.4 billion of transactions YTD
+2% vs 9M 2014 (Rest of Europe +35%)
4Q 2015 expected to be slightly weaker than 4Q 2014
Total transaction volume per quarter, EURm

4. Transaction mix Retail and Industrial fastest growing segments y/y
Total transaction volume per segment, 2015 YTD

5. High activity in industrial segment
Big portfolio deals in 2014 and 2015
EUR 1.6 billion rolling 12 months
+30% from end of 2014
Logistics segment most active
Industrial real estate transaction volume, EURm

6. European comparison
Sweden and Stockholm top 5 most liquid market in last ten years
Real estate transaction volume in Europe totaled EUR 135 billion in the first half of 2015
Sweden accounted for 5.2 percent of the European total
Stockholm dropped from 5th busiest transaction market in 2014 to 10th in 2015

7. Investable assets and liquidity
Supply constraints in current market environment
Limit to transaction activity
Size of investable stock ~ EUR 125 billion
Quality of investable stock
Total real estate transaction volume, EURm

8. Cross-border investments
Weaker krona strengthens foreign investor interest
Foreign capital targets most Swedish commercial real estate segments
But domestic investors are still the most aggressive on pricing
Pre-crisis share of 40%–50% vs 20%+ today
Foreign investor share of total transaction volume, %

9. Money on the sidelines
Europe is seeing higher inflow of foreign funds than US and Asia
EUR 12 billion raised for Europe focused funds in 2Q 2015 alone
Dry powder available in real estate PE funds, USD billion

10. Pricing How low can yields go?
Pricing in prime locations have continued to harden
Prime asset yields are down 25–50 bps in six months
Office prime yields, %

11. Cost of real estate debt
Gap between real estate income and interest widens despite lower yields
All in cost of debt below 2% on core or value-add investments
Expected returns (IRR) remain intact despite sharper pricing
All in cost of debt, CRE LTV, %

12. Pricing in industrial segment
High quality logistics assets have pushed yields lower
Yields have contracted but upside to all time lows reflect remaining liquidity risk
Warehouse/Industrial/Logistics yield, %

13. Pricing across segments
Headroom in secondary segments reflect lingering risk-aversion
While prime yields in office and retail have contracted close to all-time lows attractive yield spreads remain in industrial segment and other secondary and tertiary markets
Dry powder available in real estate PE funds, USD billion

14. The search for investable assets
Pension money leading hunt for returns in real estate
Pension funds and PE funds looking for new segments of real estate investments
New segments explored since 2010
Public tenant real estate (municipal tenants or publicly funded operators)
Residential apartments
Food retail
Prime logistics
Student housing
Infrastructure
In the pipeline
Commercial development
Land plays in biggest cities
Joint ventures local and global
Need for new products and markets to satisfy investment targets

15. Land plays Cost of residential building rights Location SEK per sqm
Secondary suburbs
3,000–5,000
Best suburbs
6,000–10,000
Outside tolls
10,000–20,000
Inner city
20,000–40,000
Central Stockholm
40,000–60,000

16. Investment themes Summing up
The market liquidity will last another 12 months
Investors will remain more cautious than in the last cycle
Yield will be the primary driver of shifts to new real estate segments

17. Daniel Anderbring
Partner
Capital Markets
Mobile: +46 (0)

18. SELF STORAGE SECTOR REAL ESTATE OVERVIEW OLIVER CLOSE
SEPTEMBER 2015

19. Agenda MARKET STATUS – MAJOR SELF STORAGE REITS TRANSACTIONS
PROPERTY VALUATIONS
DRIVERS OF VALUE
SUMMARY & CONCLUSIONS

20. Market Status
US REITS

21. US Performance US REIT Operating Statistics - Occupancy
Source: Based on Same store data in K10 filings

22. US Performance US REIT Operating Statistics – Rental Rate
Source: Based on Same store data in K10 filings

23. US Performance US REIT Operating Statistics - RevPAF
Source: Based on Same store data in K10 filings

24. US Performance Movement Comparison FFO FOR THE QTR PER SHARE
SHARE PRICE AS AT 30 JUNE
ANNUALISED
MULTIPLE
$2.15
$184.37
4.66%
21.4
$0.31
$23.16
5.35%
18.7
$0.75
$65.22
4.60%
21.7
$1.24
$86.19
5.75%
17.4
Source: Yahoo Finance

25. Market Status
EUROPE

26. Europe Performance Operating Statistics – Occupancy (%)
Source: C&W Analysis extracted from published statements

27. Europe Performance Operating Statistics – Rental Rate (Mixed Currency)
Source: C&W Analysis extracted from published statements

28. Europe Performance Operating Statistics – RevPAF (Mixed Currency)
Source: C&W Analysis extracted from published statements

29. UK Performance Movement Comparison (Vs All UK REITs)
Source: REITA – bpf.org.uk

30. Supply

31. Supply Comparison UK NUMBER OF FACILITIES - 975 TOTAL SQ M - 3,200,000
Bubble graph 2: EU - selected countries UK
NUMBER OF FACILITIES - 975
TOTAL SQ M - 3,200,000
SQ M PER PERSON – 0.05

32. Transactions
DEAL OR NO DEAL?

33. Major Transactions December 2014 October 2014 June 2015 December 2014
April 2014

34. Transactions – a problem?

35. Valuation Approach DCF Valuations Analysis of the trading data
Model set up and process
Freehold -v- Leasehold
Capitalisation rate
Portfolio analysis

36. Principal Drivers of Value
Cashflow
REVENUE – THE BIG 5 DRIVERS
MLA
Stable occupancy assumption
Fill rate
Rental rate
Additional income
OPERATING COSTS
RENT, MANAGEMENT FEES & CAPITAL RESERVES

37. Principal Drivers of Value
Capitalisation
LOCATION
BUILDING & PROMINENCE
TENURE
GEARING
TRACK RECORD
ABSORBTION RISK
GROWTH AND DISCOUNT RATE
RESULTING RETURNS ANALYSIS

38. Principal Drivers of Value
Other
PROPERTY SELECTION & STRATEGY
PORTFOLIO PREMIUM
ALTERNATIVE USE POTENTIAL
LEASE RE-GEARS ETC
MARKET CYCLE
HOLD PERIOD

39. Q & A

40. OLIVER CLOSE
PARTNER, VALUATION & ADVISORY
43/45 Portman Square
London
W1A 3BG
+44 (0)