Understanding Real Estate Understanding Real Estate

Understanding Real Estate 

Strategies for Today’s Markets 

Live Webinar: 

June 3, 2009 3:30 –4:30 p.m. EDT

Welcome 

Jim Wiandt 

Publisher 

IndexUniverse.com 

Journal of Indexes 

Agenda: 

‐ The US U.S. Housing Market 

‐ Commercial Real Estate & REITs 

‐ Panel Discussion 

‐ Q&A

Our Panelists 

Robert Steers 

Co‐Chairman/Co‐CEO 

Cohen & Steers 

Robert Shiller 

Co‐Founder/Chief Economist 

MacroMarkets 

• Co‐founded Cohen & Steers (NYSE: 

CNS) in 1986 

• Considered to be pioneer in 

real estate securities investing 

• Arthur M. Okun Professor of 

Economics, Yale University 

• Co‐Designer, S&P/Case‐Shiller 

Home Price Indexes 

• Author of Irrational lExuberance, 

Animal Spirits, Subprime Solution, 

and other notable books on 

investing

The State of the Commercial 

Real Estate Market 

Robert Steers 

Co-Chairman & Co-CEO 

June 3, 2009

Global Real Estate Securities Market Outlook 

What Has Happened And Why We See Significant Opportunity 

‣ Bear market has set a record decline 

• Price decline of -74.1% February 2007–March 2009 (1) 

‣ Fundamental and technical factors are root causes 

‣ We expect cash flows will decline 10% in 2009; driven by 

demand d contraction, ti not oversupply 

Market Performance (2) 

Since YTD 

Low (3) 2009 2008 

North America 50.8% -12.7% -43.9% 

Europe 46.0% -6.2% -53.3% 

Asia Pacific 40.4% -3.6% -54.4% 

Global 44.4% 4% -7.9% -50.2% 

‣ Real estate companies will utilize public markets to manage capital needs 

‣ Valuations are attractive 

‣ Upside potential is significant and will be unleashed by: 

• Monetary stimulus and other policy measures 

• Equity recapitalization process 

• Economic bottoming early 2010 

• Acquisition opportunities 

Total return prospects are compelling for long-term investors 

Based on Cohen & Steers expectations. 

(1) FTSE EPRA/NAREIT Developed Real Estate Index in USD, 2/22/07–3/9/09; (2) Source: Bloomberg; price-only returns for FTSE EPRA/NAREIT Developed Real Estate Indexes 

in USD, at 4/30/09 and 12/31/08; (3) North America 3/6/09–4/30/09; Europe 3/9/09–4/30/09; Asia Pacific 3/9/09–4/30/09; Global 3/9/09–4/30/09 

CPRET8309_OS

2009 Global Real Estate Securities 

Market Developments 

Significant positive developments 

‣ Stimulus continues to expand globally; monetary stimulus is in 20th month 

• Financial programs are beginning to work; U.S. is narrowing in on effective solutions 

‣ PPIP/TALF targeting commercial real estate loans and CMBS (1) markets 

• CMBX spreads are 308 bps tighter (AAA) (1) 

• REIT unsecured bond spreads have improved 634 bps (2) 

‣ Equity recapitalization process has begun 

• U.S. secondary offerings have positively surprised the market—$12 billion raised in common equity 

and unsecured bonds 

• Significant recapitalizations in U.K. ($4 billion), Australia ($6 billion) and Singapore ($3 billion) 

• Asset sales and debt refinancings have been better than expected 

‣ China stabilizing 

Negative developments 

‣ Global economy deteriorated—cash flow growth expectations downgraded for 2009–2010 

‣ Equity recapitalizations are dilutive (Continental Europe and Japan still need to recapitalize) 

Market discounted the economic downshift, 

but has been positively surprised by REIT access to capital 

Source: Cohen & Steers 

(1) CMBX derivatives are a group of indexes made up of 25 tranches of commercial mortgage-backed securities (CMBS), each with different credit ratings. Spreads measured from the widest on 

3/9/09 to 5/15/09. 

(2) Spreads measured from 12/31/08 to 5/13/09. 

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The Four Pillars Of REIT Investing 

How We See the Future for... 

1. Total Return 

‣ Returns after bear markets have been substantial 

‣ Positive return cycle beginning 

Phase 1: De-leveraging (2009–2010) 

Phase 2: Acquisitions (2010–2014) 

Phase 3: New fundamental cycle (late 2010) 

2. Current Income 

‣ Dividends are being cut to taxable income, but yields remain attractive at 7.3% 

‣ Will emerge from this period with the lowest dividend payout ratios ever, at 47% 

‣ Will see meaningful, consistent dividend growth as credit crisis abates and payouts normalize 

3. Volatility 

‣ Will decline significantly and stabilize at slightly higher levels than pre-crisis levels 

4. Correlations 

‣ Converged for many asset classes during crisis—correlations will separate again 

Cohen & Steers analysis and expectations 

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Cohen & Steers Is Leading Global Recapitalizations 

‣ Recapitalization process addresses balance sheet risk, creating profit opportunity and greater certainty 

of long-term investment 

• Estimate 10–20% “alpha” unlocked when balance sheets are strengthened 

(1) 

‣ Equity-raising may be combined with other capital sources to ensure balance sheet liquidity into 2012 

‣ Cohen & Steers, through “reverse inquiry,” was instrumental in, and was cornerstone investor for, the vast 

majority of U.S. recapitalizations including Simon Property, AMB, Kimco, ProLogis, Regency and 

Host Hotels 

• Demonstrate companies have access to public capital; spark process to improve cost of capital 

• Modify dividend policies and capital strategies 

‣ Provides long-term entry point into high-quality real estate companies at extremely attractive valuations 

Offering Size Offering Discount to 5/22/09 Total RMZ Excess 

Common Placement (2) ($ millions) Price Last Sale Price Return Return (3) Return 

SPG (3/20/09) $543 $31.50 -8.4% $48.45 53.8% 24.1% 29.7% 

AMB (3/25/09) $576 $12.15 -7.7% $16.91 39.2% 27.0% 12.2% 

KIM (4/3/09) $747 $7.10 -5.2% $11.00 54.9% 19.1% 35.8% 

PLD (4/8/09) $1,154 $6.60 -3.2% $7.71 16.8% 21.1% -4.2% 

DRH (4/14/09) $86 $4.85 -47% -4.7% $5.90 21.6% 34% 3.4% 18.3% 

DRE (4/16/09) $575 $7.65 -9.4% $8.61 12.5% 3.9% 8.7% 

WRI (4/17/09) $458 $14.25 -9.1% $14.40 1.1% 0.1% 1.0% 

REG (4/21/09) $325 $32.50 -5.3% $32.93 1.3% 11.2% -9.9% 

VNO (4/22/09) $742 $43.00 -8.5% $44.95 4.5% 1.2% 3.4% 

HST (4/24/09) $500 $6.60 -7.0% $8.20 24.2% 0.8% 23.4% 

LHO (4/24/09) $125 $10.10 -9.1% $12.05 19.3% 0.8% 18.5% 

(1) Cohen & Steers; (2) Source: Cohen & Steers & Bloomberg at May 22, 2009; (3) The MSCI US REIT Index (RMZ) broadly and fairly represents the equity REIT opportunity set with proper investability 

screens to ensure that the index is investable and replicable. The index represents approximately 85% of the US REIT universe. 

CPRET8309_OS

Global Recapitalizations 

European Recapitalizations 

Offering Size 

Last Price 

Date (1) Issuer 

(US$ 

millions) (2) 

Offering 

Price (Local) 

Discount to 

Last Sale 

(Local) 

4/30/09 

Total 

Return 

Index 

Return (3) 

Excess 

Return 

3/18/09 BLND LN $1,095 2.25 -40.5% 4.21 87.1% 14.2% 72.9% 

3/23/09 HMSO LN $887 1.50 -48.9% 3.11 107.2% 5.8% 101.4% 

3/24/09 LAND LN $1,109 2.70 -46.0% 5.48 103.0% 28.8% 74.2% 

3/30/09 COFB BB $95 75.00 -9.6% 83.18 10.9% 8.6% 2.3% 

4/7/09 SGRO LN $737 0.10 -43.1% 0.23 132.5% 39.5% 93.0% 

5/27/09 LII LN $440 3.10 -22.8% 3.94 27.0% 4.7% 22.3% 

Asia Recapitalizations 

Offering Size 

(US$ Offering Discount to Last Price Total Index Excess 

Date (1) Issuer millions) (2) Price (Local) Last Sale (Local) Return Return (4) Return 

11/19/08 MGR AU $46 0.90 -6.2% 1.07 18.9% -21.7% 40.6% 

12/9/08 DXS AU $199 0.77 -8.3% 0.71 -7.8% -25.0% 17.2% 

1/21/09 AREIT SP $200 1.16 -14.1% 1.34 15.5% 15.3% 0.2% 

1/29/09 CPA AU $127 0.80 -11.1% 0.82 2.5% -10.8% 13.3% 

2/11/09 WDC AU $1,903 10.50 -13.2% 10.53 0.3% -15.5% 15.8% 

3/19/09 CAPL SP $1,217 1.30 -33.5% 2.76 112.3% 13.6% 98.7% 

4/1/09 CT SP $830 0.82 -30.7% 1.25 52.4% 13.6% 38.8% 

(1) Settlement dates 

(2) Exchange rates as of settlement except for LII LN 

(3) FTSE EPRA/NAREIT Europe Developed Real Estate Index 

(4) FTSE EPRA/NAREIT Asia Developed Real Estate Index 

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The History Of Our Future? 

Value of $100 Invested in U.S. REITs and Direct Real Estate 

$130 

Listed Real Estate Securities 

Direct Real Estate 

(2) 

(1) 

$110 U.S. 

$90 

Recession 

Ended 3/91 

Job Losses 

Peaked 1/92 

Rockefeller Center 

Mortgage Defaults ‘95 

$70 

RTC Formed 

(dissolves ’95) 

$66 

Kimco IPO 

11/91 

O&Y Goes 

Bankrupt 5/92 

$69 

$50 

8/89 12/89 4/90 8/90 12/90 4/91 8/91 12/91 4/92 8/92 12/92 4/93 8/93 12/93 4/94 8/94 

U.S. REIT share prices bottomed well before end of recession and real estate downturn 

in early 1990s; REITs’ access to capital provided seven years of accretive acquisitions 

Past performance is no guarantee of future results. An investor cannot invest directly in an index. 

Source: Cohen & Steers; Green Street Advisors 

(1) Price return of the FTSE NAREIT Equity REIT Index, an unmanaged market-capitalization-weighted index of all tax qualified Equity REITs listed on the NYSE, AMEX and Nasdaq that have 75% or more of their gross invested book 

assets invested directly or indirectly in the equity ownership of real estate.; (2) Capital return of the NCREIF Index, a measure of investment performance of a very large pool of commercial real estate properties. 

CPRET8309_OS

Starting Over—1990s Redux 

Value of $100 Invested in U.S. REITs and Direct Real Estate 

$150 

Listed Real Estate Securities 

Direct Real Estate 

(2) 

(1) 

$125 

EOP LBO 2/07 

$100 

TARP 10/08 

$75 

PPIP/TALF 3/09 

$50 

$25 

$0 

Credit Crisis 

Begins 8/07 

U.S. Recession 

Begins 12/07 

$29 

GGP Bankruptcy 4/09 

Recapitalizations Commence 

SPG, AMB, KIM, PLD 4/09 

1/07 5/07 9/07 1/08 5/08 9/08 1/09 5/09 9/09 1/10 5/10 9/10 1/11 5/11 9/11 1/12 

Downturn is more severe compared with 1990s; public market 

has begun to provide equity to de-leverage the real estate industry 

Past performance is no guarantee of future results. An investor cannot invest directly in an index. 

Source: Cohen & Steers 

(1) Price return of the FTSE NAREIT Equity REIT Index, an unmanaged market-capitalization-weighted index of all tax qualified Equity REITs listed on the NYSE, AMEX and Nasdaq that have 75% or more of their gross invested 

book assets invested directly or indirectly in the equity ownership of real estate; (2) Capital return of the NCREIF Index, a measure of investment performance of a very large pool of commercial real estate properties. 

CPRET8309_OS

Future Of Securitization 

Why securitization stalled 

‣ Private market capital was cheap and plentiful 

‣ Private market provided: 

• Highest price 

• Control 

• Tax efficiency 

‣ Decline in stock prices shut down IPO market 

Why we believe securitization will accelerate 

‣ Dearth of capital in private market 

‣ Recapitalizations 

‣ Need for acquisition funding 

‣ IPOs 

Key factors for growth 

‣ Shareholder-friendly corporate structures/conflict management 

‣ Good governance 

Cohen & Steers analysis and expectations 

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REITs Structure Continues To Advance 

‣ Adoption of REIT structure has spread around the world 

United States 

Netherlands 

Australia 

New Zealand 

Canada 

Belgium 

1960 1969 1971 1971 1993 

1995 

Japan 

Singapore 

France 

Hong Kong 

2000 2002 

2003 

2003 

United Kingdom 

Germany 

Italy 

2007 

2007 

2007 

‣ Finland, Spain and China are the next countries evaluating the REIT 

structure 

Additional countries with REIT structures: Turkey (1999), South Korea (2001), Taiwan (2003), Bulgaria (2005), Malaysia (2005), Thailand (2005), Dubai (2006), Israel (2006) 

Additional countries considering REIT structures: Brazil, Costa Rica, India, Mexico, Nigeria, Pakistan, Philippines, South Africa 

CPRET8309_OS

REIT Suite 

United States 

Global 

International 

Asia Pacific 

Europe 

For investors who recognize the 

benefits of investing in U.S. real 

estate investment trusts. 


Realty Shares 

CSRSX No load 


Realty Income Fund 

CSEIX Class A 

CSCIX Class C 

CSDIX Class I 


Institutional Realty Shares 

CSRIX Institutional 

iShares Cohen & Steers 

Realty Majors ETF 

ICF 

For real estate securities 

investors seeking an extra 

level of geographical 

diversification through one 

investment vehicle. 


Global Realty Shares 

CSFAX Class A 

CSFCX Class C 

CSSPX Class I 


Institutional Global 

Realty Shares 

GRSIX Institutional 


Global Realty Majors ETF 

GRI 

For investors who want to 

diversify their real estate 

allocation beyond the U.S. or 

who seek direct exposure to 

the economies of Asia Pacific 

and Europe. 


International Realty Fund 

IRFAX Class A 

IRFCX Class C 

IRFIX Class I 

For investors who seek direct 

exposure to the Asia Pacific 

region’s economies and real 

estate markets. 


Asia Pacific Realty Shares 

APFAX Class A 

APFCX Class C 

APFIX Class I 

For investors who seek direct 

exposure to Europe’s 

economies and real estate 

markets. 


European Realty Shares 

EURAX Class A 

EURCX Class C 

EURIX Class I 

Please consider the investment objectives, risks, charges and expenses of any Cohen & Steers fund carefully before investing. A prospectus containing this and other information may be 

obtained by visiting cohenandsteers.com or by calling 800.330.7348. Please read the prospectus carefully before investing. 

There are certain risks inherent in real estate securities, including declining property values or declining rents resulting from legal or economic developments. Foreign securities carry their own 

risks, such as currency fluctuations, political and economic uncertainties and differences in accounting standards. 

Cohen & Steers Capital Management, Inc. (Cohen & Steers) is a registered investment t advisory firm that t provides investment t management services to corporate retirement, t public and union 

retirement plans, endowments, foundations and mutual funds. Distributed by Cohen & Steers Securities, LLC. 

NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE 

CPRET8309_OS

Legal Notes 

This presentation is for investment professional use only. It is for information purposes, and 

reflects prevailing conditions and our judgment as of this date, which are subject to change. 

It does not constitute investment advice or a recommendation or offer. We consider the 

information in this presentation to be accurate, but we do not represent that it is complete or 

should be relied upon as the sole source of suitability for investment. Past performance is no 

guarantee of future results. 

Risks of investing in real estate securities include falling property values due to increasing 

vacancies or declining rents resulting from economic, legal, or technological developments. 

As a non-diversified investment company, the fund may invest in fewer individual companies 

than a diversified investment company, which may increase the risk of large price 

fluctuations. 

The views and opinions in the preceding commentary are as of the date of publication and 

are subject to change. This material represents an assessment of the market environment at 

a specific point in time, does not constitute investment advice, recommendation, or offer, 

and is not intended to predict or depict performance of any investment. 

The performance data quoted represents past performance. Past performance is no 

guarantee of ffuture results. 

No representation or warranty is made as to the efficacy of any particular strategy or fund or 

the actual returns that may be achieved. 

Cohen & Steers Capital Management, Inc. (Cohen & Steers) is a registered investment 

advisory firm that provides investment management services to corporate retirement, public 

and union retirement plans, endowments, foundations, and mutual funds. 

CPRET8309_OS

U.S. Housing 

21 st Century Alternatives 

for 

Investment and Risk Management 

MacroMarkets LLC © 2009 

MacroMarkets LLC © 2009 

16 

16 

Copyright 2009 | MacroMarkets LLC

Important t Information 

Market information displayed herein is obtained from non-proprietary market sources, and is subject to frequent change. MacroMarkets LLC and its affiliates cannot attest to the accuracy, completeness, 

or timeliness of any information obtained from third-party sources. 

The content herein may contain "forward-looking statements," including projections, forecasts and estimates. These forward-looking statements are based upon certain assumptions. Actual events are 

difficult to predict and may differ from those assumed herein or used within any pricing calculators. Accordingly, there can be no assurance that the estimated returns or outcomes described herein can 

be realized, that the factual assumptions upon which forward-looking statements are based will materialize, or that actual results will not be materially different than those presented herein. Any historical 

performance information included herein is presented by way of example only. Historical performance information is not indicative of future performance or of future investment returns of MacroShares or 

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The information herein concerning MacroShares is solely for informational purposes and constitutes neither an offer to sell nor the solicitation of an offer to buy securities to any person in any jurisdiction. 

The information presented herein is not, and is not intended to be, a complete discussion of all material information you should know about MacroShares or any other product. If you are considering 

purchasing MacroShares, you should read the relevant prospectus thoroughly prior to making a purchase, and carefully consider the investment objectives and policies, risk considerations, charges, and 

ongoing expenses applicable to the MacroShares before investing or sending money. MacroShares are risky investments. In addition to the normal risks associated with investing in securities generally, 

due to the unique structure of MacroShares, their underlying benchmarks, their terms and attributes, MacroShares can trade at premium or discounted prices relative to underlying values (UV), and may 

exhibit higher volatility and have less liquidity when compared to more traditional equity or debt instruments. Although liquidity providers and market makers commonly narrow or eliminate differences 

between ee the prevailing market price and corresponding UV applicable to traded securities es through arbitrage, age, investors s should expect epec premium and discounted market prices to prevail over most of the life 

of a MacroShares investment. Premiums and discounts will be affected by a MacroShare issue’s expected remaining term, interest rates, supply and demand, structural leverage (if any), termination 

triggers, and other factors. You may lose all of the money that you invest in MacroShares. Any underwriter or dealer participating in the offering can arrange to send you the prospectus pertaining to a 

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The content and any and all intellectual property rights herein are and shall remain at all times the property of MacroMarkets LLC or its licensors or suppliers. MacroShares is a trademark of 

MacroMarkets LLC. The S&P/Case-Shiller Home Price Indices are licensed by Standard & Poor’s. The Case-Shiller® Indexes are a product of Fiserv, Inc. MacroShares is an applied-for trademark of 

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make any representation or warranty, express or implied, to the owners of the Products or any member of the public regarding the advisability of investing in securities generally or in the Products 

particularly or the ability of any S&P/Case-Shiller Home Price Index to track performance of the residential real estate and housing markets. S&P's and its third-party licensors’ only relationship to 

MacroMarkets is the licensing of certain trademarks and trade names of S&P and the third-party licensors and of certain S&P/CS Indices, which are determined, composed, and calculated by S&P or its 

third-party licensors without regard to MacroMarkets or the Products. S&P and its third-party licensors have no obligation to take the needs of its licensees or the owners of the Products into 

consideration in determining, composing, or calculating any S&P/CS Index. Neither S&P nor its third-party licensors is responsible for and none has participated in determining the pricing, quantities, or 

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For more information, please call 1-888-9House5 

U.S. Housing: 21 st Century Alternatives for Investment and Risk Management 

17 

MacroMarkets LLC © 2009

U.S. Housing as an Asset Class 


18 


U.S. Housing: The Largest Asset Class 


$30.0 

Aggregate Capital Value ($ Trillions) 

As of 12/31/08 

$25.0 

$20.0 

$15.0 

$20.5 Housing 

$10.0 

$5.0 

$- 

$10.3 

U.S. Stocks 

$6.0 

U.S. Real Estate 

Commercial 

Sources: CME, Federal Reserve, MacroMarkets, Standard & Poor’s, and World Federation of Exchanges 

U.S. Housing: 21 st Century Alternatives for Investment and Risk Management 19


AM Major Asset tClass 

Yet… 

Housing markets remain highly inefficient, incomplete 

• Generally, prices are established by non-professionals (i.e., homeowners) 

• Periods of speculative behavior exacerbate momentum 

• Transactions touch concentrations of net worth and emotion 

- “Sticky-downward” prices 

• Incomplete information 

• Very high transaction costs 

• Illiquid; significant elapsed time to complete transactions 


20 



Direct investment t limited it to buying/selling individual id houses. 

“Brick & mortar” exposure entails: 

• Significant transaction friction 

- 5-6% real estate broker commission 

- 1-3% 1 other closing costs 

- Abundant paperwork, processes, and emotional involvement 

• Large carrying costs 

- Mortgage interest 

t 

- Property taxes, insurance, and maintenance 

- Property management 

• Very limited liquidity and no efficient means to hedge 

• Difficulty in achieving portfolio scale and diversification 

1 Source: Bankrate, Inc. 2006 Closing Costs Survey 


21 



Relative Performance: Domestic 

600 

550 

500 

450 

400 

350 

300 

250 

200 

150 

100 

50 

Housing 

Commodities 

Bonds 

Stocks 

REITs 

S&P/Case-Shiller Comp-10 

GSCI 

JPM US Govt Bonds 

S&P 500 

NAREIT All 

0 

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 

Re-based Indices (1/1987 = 100), all indices are “Price Return” series 

Portfolio Diversificationifi i 

Correlation to U.S. Home Prices 

(year-over-year returns, since 1/1987) 

Commodities Bonds Stocks REITs 

0.17 - 0.28 0.08 0.34 


22 


Inefficient/complete markets = Opportunity 


For Investors (UMM) 

• Housing returns have had low or negative correlations vs. other asset classes 

• Diversification benefits and potential for attractive risk-adjusted returns 

• Far greater liquidity, much lower transaction costs vs. “brick & mortar” 

For Hedgers (DMM) 

• Need to protect the value of a large asset that cannot be sold short 

• Efficient and cost-effective execution is possible 

as of December 2008 Relative Performance Since 1987 

Correlation Return Volatility Sharpe 1 

S&P/Case-Shiller Comp-10 

JPM US Govt (Price Return) 

GSCI (Price Return) 

NAREIT All Index (Price Return) 

S&P 500 (Price Return) 

U.S. Housing 1.00 158.15% 10.90% 0.13 

Bonds -0.28 367.59% 17.49% 0.24 

Commodities 0.14 107.31% 78.47% 0.01 

REITs 0.32 -20.89% 71.06% -0.06 

Stocks 0.05 231.77% 54.71% 0.05 

1 Sharpe ratio calculated by taking the excess average, annualized returns above/below the risk-free rate, and dividing by annualized volatility of MoM returns. 


23 



Surrogates for home price performance exist … 

…but introduce significant basis risk. Not “pure plays.” 

Surrogate Benefits Limitations 

Mortgage-Backed Securities 

• Deep market 

• High yields possible 

• Not a pure play 

• Credit products; returns affected by defaults 

and prepayments 

• Relatively limited direct access and liquidity 

Housing-Related Equities • Simple • Not a pure play 

(i.e., Home Builders, home improvement 

chains, mortgage lenders) 

• Exchange market access & liquidity 

• Transparent 

• Subject to business/operational risks 

• Shorts face unlimited downside 

• Can be difficult to borrow 

REITs 

• Simple 

• Exchange market access & liquidity 


• Typically y commercial real estate exposure 

• Shorts face unlimited downside 

• Can be difficult to borrow 

ABX 

(Asset-Backed Security default swaps) 


• Hedge subprime MBS exposure 

• Limited to professionals; complicated 

• Speculate on subprime MBS performance • Counterparty risk 

• Stigmatized market, evaporating liquidity 

• Opaque market 

CDS 

(Corporate/Sector credit default swaps) 

• Relatively simple 

• Hedge or speculate on housing-centric 

single-names or related sector 


• Limited to professionals; credit product 

• Counterparty risk 

• Variable liquidity 

• Opaque market 


24 


The Standard for 

Measuring U.S. Home Price Changes: 

S&P/Case-Shiller Home Price Indices 


25 



S&P/Case-Shiller Shill Home Price Indices: Summary 

• Calculated l by Fiserv, published by Standard d & Poor’s 

• The settlement index for the CME housing futures and options platform 

• 2006 William F. Sharpe Award (Most Innovative Index for Institutional Investors) 

• Over 20 years of historical data; 3-month moving average, 2-month lag 

• Existing, single-family properties; no appraisals, no new homes 

• Repeat Sales Methodology – “the standard,” pioneered by Case & Shiller 

• S&P/Case-Shiller Composite-10 Index: integrated in Fed’s bank “stress test” 



Freely available data 

Bloomberg 

Bridge 

CME 

CQG 

DTN 

E-Signal 

FactSet 

FutureSource 

Hyperfeed 

Reuters 

Thomson 

TrackData 

Trade Station 

S&P/CSI data is also 

disseminated globally, in 

real time, by a wide variety 

of financial news services 

and quote vendors. 

www.MacroMarkets.com 


27 


Component Markets 

S&P/Case-Shiller Composite-10 Home Price Index 

Estimated Housing Stock Values 

($s in Billions; % of total U.S. housing stock) 1 

Boston 

$ 472 (2.3%) 

San Francisco 

$ 677(3.3%) 

Los Angeles 

$ 1,169 (5.7%) 

Las Vegas 

$ 103 (0.5%) 

Denver 

$ 226 (1.1%) 

Chicago 

$ 697 (3.4%) 

New York 

$ 1,743 (8.5%) 

Washington, D.C. 

$ 513 (2.5%) 

San Diego 

$ 287 (1.4%) 

Miami 

$ 328 (1.6%) 

1 

Percentages from 2000 US Census. Estimated market values derived by applying those percentages to the $20.5 trillion total figure from Q4 2008 Federal Flow 

of Funds Balance Sheet 


MacroShares Major Metro Housing 

An Investment & Hedging Breakthrough 

for the U.S. Housing Market 

http://www.time.com/time/specials/packages/article/0,28804,1852747_1854195_1854130,00.html 


29 


The only tradable security linked to U.S. Home Prices 

• Express a bullish view of U.S. Home Prices with MacroShares Major Metro Housing 

Up (NSYE: UMM) 

• Express a bearish view of U.S. Home Prices with MacroShares Major Metro Housing 

Down (NYSE: DMM) 

Establish bearish view without short selling, and without a margin account 

• No Counterparty Risk 

Trusts are fully secured by U.S. Treasuries and cash 

• Liquidity 

Listed on NYSE Arca 

Prior MacroShares product traded 3.3 million shares per day in 2008 

• Moderately Levered Returns that meet the needs of buy-and-hold investors 

The leverage factor is applied to cumulative index returns 

Unlike levered ETFs, these MacroShares are designed to deliver magnified index 

returns for holding periods beyond a single day 


No Counterparty t Risk or Credit Risk 

An Investment and Hedging Breakthrough 

*No assets are actually transferred between the trusts until a redemption, an early termination, or the scheduled maturity date occurs. The $3 “transfers” within this 

illustration represent payment obligations of one trust to the other, as mandated by the applicable settlement contract. 

Nothing contained in this presentation should be construed as a recommendation of the MacroShares as a beneficial investment for any particular group of individuals, types of companies, or institutions, or as a representation that an investment in the MacroShares may provide a complete and accurate hedge against any particular form of exposure to real 

estate. Before making a decision to invest in any MacroShares, investors should carefully review the prospectus for those MacroShares. Copies of the applicable prospectus may be obtained as specified under "Important Information" on page 2 of this presentation. 


Opportunities 

Investors: 

Enhanced returns, incremental liquidity, lower transaction costs 

Achieve levered housing market returns (or inverse returns) with ease 

Add a low-correlated asset class to diversify portfolio 

Generate periodic income to supplement capital return 

MacroShares Major Metro Housing 

Express either a bullish (UMM) or a bearish (DMM) view via a long security position 

No need to short-sell in order to establish a bearish view: one can purchase DMM 

Risk managers: 

Greater efficiency and transparency 

Directly hedge home price, inflation, and business-cycle exposures via a listed equity instrument 

Eliminate credit and counterparty risks via a collateralized security 

Implement hedges without short-selling 

Observe updated prices via NYSE/Arca throughout the trading day 

Nothing contained in this presentation should be construed as a recommendation of the MacroShares as a beneficial investment for any particular group of individuals, types of companies or institutions, or as a representation that an investment in the MacroShares may provide a complete and accurate hedge against any particular form of exposure to real 



32 


MacroShares: More Price Discovery for Housing 

• Like most financial instruments – corporate stocks, bonds, and commodities – 

MacroShares naturally trade at premium or discounted prices to their prevailing 

underlying, or baseline value. 

• The market prices of all of these financial instruments share a common attribute: they 

reflect investor expectations of underlying, baseline value beyond the near term. 

Premium prices imply relatively strong demand and/or optimism regarding future performance 

Discounted prices imply py relatively weak demand and/or pessimism regarding g future performance 

• For any asset or financial instrument, the degree of divergence between market price and 

underlying, baseline value: 

Changes along with consensus expectations over time, and 

Includes valuable price discovery for the marketplace at any moment in time. 



MacroShares: Price Discovery 

Financial 

Instrument 

Baseline 

Value 

Underlying 

Price reflects 

expectations of 

Baseline Value 

in future 

Expectations 

that are 

Price Drivers 

Price Discovery 

Futures Spot Contract Yes 

Future 

commodity prices 

or index levels 

Yes 

Bonds Face Note Yes 

Future interest 

rates, defaults, 

prepayments 

Yes 

Stocks Book Net Assets Yes 

Future earnings 

and dividends 

Yes 

MacroShares 

Underlying 

Value 

U.S. Treasuries, 

cash 

Yes 

Future index 

levels and net 

distributions 

Yes 

ETFs 

Net Asset Value 

Baskets of 

securities and 

derivatives 

No n/a No* 

*The market prices of ETFs can stray from NAV, but generally, the differences are small provided that there is liquidity in the underlying. For example, a U.S.-listed ETF that tracks a foreign stock index may trade away from net asset value during U.S. trading hours (while the foreign stock 

exchange is closed). In a liquid market, such divergence from NAV reflects investor expectations of the future change in the (foreign) index. 


34 


MacroShares: Summary 


Similar to ETFs and ETNs in some respects … different in others 

Intraday pricing/liquidity 

Continuous creations and redemptions 

Marginable 

Trustee & Custodian 

Issuer Credit risk 

Counterparty swaps risk 

Collateralized by U.S. Treasuries & cash 

Shares must always be created/redeemed in pairs (Ups + Downs) 

Practical for asset class like home prices 

Leverage designed for buy-and-hold investors 

Premium & discounted market prices; price discovery 

ETFs/ETNs 

MacroShares 

Nothing contained in this presentation should be construed as a recommendation of the MacroShares as a beneficial investment for any particular group of individuals, types of companies or institutions, or as a representation that an investment in the MacroShares may provide a complete and accurate hedge against any particular form of exposure to real 



Our Panelists 

Robert Steers 

Co‐Chairman/Co‐CEO 


Robert Shiller 

Co‐Founder/Chief Economist 

MacroMarkets 

• Co‐founded Cohen & Steers (NYSE: 

CNS) in 1986 

• Considered to be a pioneer in 

real estate securities investing 

• Arthur M. Okun Professor of 

Economics, Yale University 

• Co‐Designer of S&P/Case‐Shiller 

Home Price Indexes 

A th f I ti lE b 

• Author of Irrational Exuberance, 

Animal Spirits, Subprime Solution, 

and other notable books on 

investing

Thank You! 

For More Information: 

IndexUniverse.com 

FA‐Mag.com 

cohenandsteers.com 

Macromarkets.com 

… Or contact Ashli Smith at asmith@indexuniverse.com 

CFP Credits can be applied for at www.cfp.net 

Sponsor: Index Publications LLC 

Program Name: Understanding di Real lEstate: Strategies for Today’s Markets 

Program ID: RE Webinar 0609

Understanding Real Estate Understanding Real Estate

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