MLC Property Strategies Update

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MLC Property Strategies Update

• 1 March 2007

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Disclaimer
This presentation has been prepared by MLC
Investments Limited (ABN 30 002 641 661) and MLC
Limited (ABN 90 000 000 402) 105-153 Miller
Street North Sydney, NSW 2060. This material
was prepared for advisers only. The presenters
are authorised representatives of MLC. This
presentation contains general information and was
produced as an information service only and may
constitute general advice. It was prepared
without assuming a duty of care. It has not been
prepared taking into account any persons
particular investment objectives, financial
situation or individual needs. It should not be
relied upon as a substitute for financial or
other specialist advice. Before making any
investment (or insurance) decisions on the basis
of the presentation, you should consider, with or
without advice, the contents of this presentation
in light of you particular investment objectives,
financial situation and individual needs.
Opinions expressed constitute our judgement at
the time of issue and are subject to change.
Before making a decision about any financial
products which may be mentioned in this material
you should obtain and read the Product Disclosure
Statement (PDS) or other disclosure document
directly related to that product, and consider
the contents of that disclosure document before
making a decision about whether to acquire or
continue to hold the product. Copies of these
documents are available upon request by calling
the MLC Service Centre on 132 652 or on our
website at mlc.com.au. Past performance is not
indicative of future performance. The value of an
investment may rise or fall with the changes in
the market.
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Agenda

• Changes to listed property markets
• Changes to MLC property strategies
• Professional investors perspective

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Changes to listed property markets

• Paul Duncan

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Clients Aust LPT exposure is increasing by
stealth
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LPT200 Index is poorly diversified
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Westfield (30 of Index) can be a volatile stock
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New risks due to rise of stapled Aust LPTs
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More risk from increased gearing of Aust LPTs
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More exposure to less reliable sources of income
11.2 of income is not sourced from rent (this
number is also increasing)
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Aust LPT market has already gone global!
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Listed property is now truly global!

• REIT legislation was also recently introduced in
  the UK Germany Italian will follow soon in 2007

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Australian versus global listed property stats
Source Resolution Capitals Expected Earnings
Growth in 2007
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Concluding comment on Aust LPT market

• Todays market is different to the past, these
  changes
• are structural (i.e. not cyclical)
• create the potential for higher long-term returns
• although with increased risks
• Investors need to
• be cognisant of the structural changes/problems
  with the index
• consider a more sensibly diversified portfolio
  than the index
• consider more pro-actively embracing global
  property

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Changes to MLC property strategies

• Jason Hazell

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(No Transcript)
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MLC Australian LPT Strategy

• New
• 2 manager mix
• 100 active strategy
• Higher return objective

• Old
• 3 manager mix
• 15 passive strategy
• Moderate return objective

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MLC Australian LPT Strategy

• Old
• LPT200 mandates
• Limited unhedged global REITs
• Limited discretion to invest outside the ASX200
  in Australia
• Westfield 33
• Top 5 stocks 65
• Top 10 stocks 84
• No. of stocks 35

• New
• LPT300 mandates
• 10 hedged global REITs
• 7.5 discretion to invest outside the ASX300 in
  Australia
• Westfield 26
• Top 5 stocks 58
• Top 10 stocks 81
• No. of stocks 65

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Westfield (30 of Index) can be a volatile stock
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MLC versus the Average Balanced Fund
Source Mercer average Balanced Fund Aust shares
(36.5) Aust LPT (7.8) allocation.
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• 2006 Horizon Property Strategy
• 75 SAA to Australia
• 25 SAA to Global (ex. Aust)

• 2007 Horizon Property Strategy
• 0 SAA to Australia
• 100 SAA to Global (inc. Aust)

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Morgan Stanleys concentrated MLC mandate versus
their standard product
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La Salles concentrated MLC mandate versustheir
standard product
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MLC global REIT strategys performance
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MLCs Global Property Strategy

• Three exceptional managers with complementary
  styles
• All running high conviction all country
  portfolios
• All benefit from a globally integrated approach
  to portfolio management
• Results in a well diversified global real estate
  portfolio

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Stats from transition to the new strategy

• In Dec 06 MLC sold 1B of Australian LPTs
• This 1B funded the increased allocation to
  global REITs
• Use of specialist transition manager minimised
  implementation leakages

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Professional Investors Perspective

• Andrew Parsons

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(No Transcript)
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Transformation of the ASX LPT
Transformation from Passive Investment product
with external management driven by growth in
Funds Under Management into powerful integrated
real estate and funds management platform with
internal management focused on return on
investment
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ASX LPT Sector Characteristics
LPT EBIT Split
Weighting of Stock by Market Cap in SP/ASX 300
Property Trust
Source RCL SP
Source UBS Warburg

• WDC represents 31 of index
• Top 5 stocks account for 65 of index
• Increasing exposure to construction, development,
  trading and funds management
• 40 of LPT assets are located in offshore markets

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ASX LPT Sector Characteristics, cont.
LPT Sector Arithmetic Average Debt to Assets

• Increased leverage and financial engineering
• Increasingly complex structures including JVs
• Slowing DPU Growth - est 3.0 in 06/07
• But DPUgtOperating Cashflow

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Global an effective safety valve
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Global Comparisons essential

• Only 5 LPT 300 vehicles have pure Australian
  exposure CFX, CHC,BWP, IPG, CPA

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Global Listed Real Estate Indices