1. Andrew Baum and David Hartzell, Global Property Investment, 2011 Performance measurement

2. Andrew Baum and David Hartzell, Global Property Investment, 2011 Agenda Benchmarks Performance measurement single period return IRR TWRR The impact of expenditure Timing and cash injections Risk adjusted performance

3. Andrew Baum and David Hartzell, Global Property Investment, 2011 Property performance measurement Why measure? success or failure? attribution and staff rewards track records win business How to measure objectives? standards Technical issues return measure? risk?

4. Andrew Baum and David Hartzell, Global Property Investment, 2011 Delivered return Single period returns Income return income received over period/value at beginning of period Capital return capital gain over period/value at beginning of period Total return income return + capital return Multi-period returns TWRR or IRR?

5. Andrew Baum and David Hartzell, Global Property Investment, 2011 Total return: 1 Income return = Y 0-1 /CV 0 Capital return is the change in value over the measurement period divided by the value at beginning of the period CR = [CV 1 - CV 0 ]/CV 0 Total return is the sum of income return and capital return TR = [Y 0-1 + CV 1 - CV 0 ]/CV 0

6. Andrew Baum and David Hartzell, Global Property Investment, 2011 Total return: 2 CV 0 = £100,000 CV 1 = £105,000 Y 0-1 = £10,000 TR = [Y 0-1 + CV 1 - CV 0 ]/CV 0 TR = [£10,000 + £105,000 - £100,000]/£100,000 TR = £15,000/£100,000 TR = 15% IR = 10%; CR = 5%

7. Andrew Baum and David Hartzell, Global Property Investment, 2011 The optimal portfolio? UK, 1971-2010 Return (%)Risk (%)CV Equities 16.229.8 0.54 Gilts 10.913.3 0.82 Property 11.5 1.00 Source:IPD, PFR 2011 Returns are geometric means, annual data CV = coefficient of variation