The Bricks & Mortar Report
Jan 09: How to price in a famine
Asia Real Estate
Christopher GeeAC
(65) 6882-2345
christopher.ka.gee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
See page 64 for analyst certification and important disclosures, including non-US analyst disclosures.
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FTSE EPRA NAREIT Asia Price Index
0
1000
2000
3000
Jan-04 Jan-06 Jan-08
Source: Bloomberg
Listed real estate markets size in Asia-
Pac
US$ in billions
114
169
171
44
8
18
0 50 100 150 200
Australia
Japan
HK/China
Singapore
India
Others
Source: EPRA
J.P. Morgan’s Asia-Pacific real estate
equities research team list is on page 62.
• Tactical start to ‘09 as real estate fundamentals still in flux. Asian
property securities ended 2008 with a 55% decline for the year, and
underlying real estate fundamentals still look vulnerable to downside
shocks. Real estate securities performance should be flow-driven in the
early part of 2009, with the critical pricing milestones likely to be during
the expected recapitalization of corporate balance sheets
• Real estate securities appear undervalued (30% discount to already
reduced NAV estimates), but we will likely only see a convincing rerating
of the stocks once there is greater confidence in underlying real
estate values. This may only come when there is stronger evidence that
regional economies are turning around. Historical evidence shows
economic performance leads to or is coincident with turning points in
physical property cycles, whilst stocks discount the physical property
cycles by 3 to 12 months.
• Convergence theme in public-private cost of real estate capital. We
continue to see a very wide 400-500bp gap between real estate stock
implied cap rates and those used to value underlying assets. This gap
persists and will likely close in the year as stock market equity is diluted
in upcoming recapitalization and underlying asset values are lowered.
• China and Singapore in focus early on in 2009. Chinese property
stocks have rebounded strongly from their Oct 08 lows, but we retain our
overweighting for now in our model portfolio with continued prospects
of sustained policy stimulus through the end of 1Q09 and the likely
absence of adverse news flow with last year’s weather-affected low base.
Singapore may attract some rotational interest with regional investors
looking to reduce or close significant underweights in the sector with the
regulatory easing of rights issue procedures and possible fiscal stimulus
at a brought-forward Budget announcement on Jan 22. We retain our
overall preference for the liquid names in the region, with Australia and
China our market overweights from an Asia-Pacific standpoint. We are
underweight Japan and most of the emerging real estate markets in Asia.

Table of Contents
Investment summary: How to price in a famine ....................3
Valuation screens...................................................................12
Recent research .....................................................................13
Australia market summary ....................................................52
China market summary..........................................................53
Hong Kong market summary ................................................55
Japan market summary .........................................................57
Singapore market summary ..................................................59