EFTA01171975.pdf

Capital Confidence Barometer Global real estate and hospitality survey 2011 WI' III I ElERNST&YOUNG Quality In Everything We Do EFTA01171975 Capital Confidence Barometer Global real estate and hospitality survey 2011 In April 2011, Ernst & Young, in conjunction with the Economist of REH executives six months ago. (See Chart 1.) In comparison, Intelligence Unit (EIU), conducted the third semiannual Capital 66% of the Global 1,000 executives are more optimistic as of Confidence Barometer (the Barometer) survey of senior executives April 2011, and 13% are less optimistic. (See Chart 2.) As of from large companies around the world. The survey panel was April 2011, no REH companies responded that they were less composed of selected Ernst & Young global clients and contacts and optimistic. regular EIU contributors. In total, there were 1,000 survey participants • Forty-two percent of the REH companies are focused on either (Global 1,000). raising or investing capital, gearing up for what is expected to be Ernst & Young's Real Estate and Hospitality group performed an in- an extended period of growth and transactions in the real estate depth analysis, specifically focusing on responses from real estate and and hospitality sector. hospitality (REH) companies. Below are some of the key findings from • The outlook for M&A activity is getting brighter among REH the data analyzed: companies; as compared to October 2010, the percentage of • As of April 2011, approximately 80% of the REH executives are more companies likely to execute transactions in the next six months optimistic about the prospects for the economy, compared with 57% has increased from 20% to 44%. (See Chart 3.) Chart 1: REH survey participants Chart 2: Global 1,000 survey participants 14% 15°. 13% 25% 22% 18% 84% 79 67 57% a Apt-I0 Oct -10 April Apr-10 OCI-11:1 Apr-I I ■Less optimistic • No change ■More Opt ',lisle ■Less optimistic • No change ■More optimistic EFTA01171976  • Companies are continuing to build sustainable improvements into Chart 3: REH companies likely to execute transactions* their business operations. Areas where they plan to invest greater effort include cash flow/liquidity, operational efficiencies/cost reduction and performance monitoring of subsidiary businesses. (See Chart 4.) Our latest findings again underline one critical point: how companies • 44% manage their Capital Agenda today will define their competitive aa% position tomorrow. How they raise, invest, optimize and preserve their capital is vital to their future success. The Barometer clearly shows that coming out of the recession, fundamentals are improving for the real estate and hospitality market, presenting significant opportunities for 20% Investment in a new economic and real estate growth cycle. Oct-10 April Chart 4: Top 5 areas of focus for the REH companies over the next —s-04 months maths --A- I-2 years 12 months 'Respondents were able to choose more than one response CaSh flew/liquidly • Enthusiasm for emerging market and non-distressed assets investment remains strong; the percentage of REH companies saying they are considering an emerging market acquisition is 50% higher Operational efficiencies/cost reduction than it was in October 2010. Interest in non-distressed assets is 75% higher than it was in October 2010, as the distressed assets did not Performance monitoring of subsidiary business materialize or were not very attractive. • Almost 66% of REH companies say access to funding is not a Capital structure and effectiveness problem; approximately 70% of the REH companies in the survey have a debt-to-capital ratio below 50%. In spite of the improvement in financing conditions for deals, the preferred source for funding Customer segmentation and profitability over the next 12 months remains cash (42%), followed by bank loans (32%). • At the same time, 32% of the REH companies are still focused on capital optimization, followed by 26% focused on capital preservation. Capital confidence barometer Real estate and hospitality survey 2011 EFTA01171977 Understanding your Capital Agenda Ernst & Young Assurance I Tax i Transactions I Advisory A strong Capital Agenda needs to be at the heart of all strategic boardroom and management decisions. Using the Capital Agenda will help companies consider their issues and challenges. and more importantly, understand their options to make more informed strategic capital About Ernst 8 Young decisions. Ernst 8. Young is a global leader In assurance, tax, transaction and advisory services. Worldwide, our 141,000 people are united • Stress and distress - e.g.. liquidity issues • Optimizing asset portfolio by our shared values and an unwavering and turnaround plans • Customer and supplier analysis • Delivery of synergies and commitment to quality. We make a difference • Preserving tax assets and effective integration by helping our people, our clients and our wider mizing costs a • Improving working capital communities achieve their potential. • Relinancing or restruclui ing debt. a and releasing cash equity and other obligations • Optimizing capital structure Ernst 8. Young refers to the global organization 0 • Dealing with stakeholder • Optimizing tax and of member firms of Ernst 8 Young Global relationships and pressure corporate structure Limited, each of which is a separate legal entity. • Dispute resolution Ernst 8. Young Global Limited, a UK company The Capital limited by guarantee, does not provide services It to clients. Agenda For more information about our organization, • Fundraising (equity and debt ) please visit www.ey.com. • Acquisitions and alliances IPO readiness, rights issues. • Planning and structuring PE. private placement and About Ernst 8 Young's Global Real Estate transactions to optimize capital markets Center stakeholder return • Optimizing funding structures • Focused due diligence to mitigate Today's real estate industry must adopt new • Asset divestment risk and drive value approaches to address regulatory requirements • tnlrastructure projects • Asset valuations and financial risks - while meeting the challenges • Cost-and tax-efficient • Cost-and tarellicient structures structures of expanding globally and achieving sustainable growth. The Ernst 8. Young Global Real Estate Center brings together a worldwide team of professionals to help you achieve your potential - Contacts a team with deep technical experience in providing assurance, tax, transaction and If you would like to discuss your company's Capital Agenda. please contact your usual advisory services. The Center works to anticipate EY advisor or any of the Global Real Estate or Transaction Real Estate contacts listed below. market trends, identify the implications and develop points of view on relevant industry Global Real Estate ThansactIon Real Estate issues. Ultimately it enables us to help you meet your goals and compete more effectively. Howard Roth Michael Fishbin It's how Ernst 8 Young makes a difference. Global Real Estate Leader Principal. Ernst & Young LLP For more information, please visit www.ey.comfrealestate. Rick Sinkuler Mark Lunt Global Real Estate Markets Leader Principal, Ernst & Young LLP ei 2011EYGM Limited. All rights reserved. EYG no. DF0125 1106.1262297NY Dean Hodcroft Troy Jones Europe, Middle East, India and Africa Real Estate Leader Principal, Ernst 8 Young LLP Ttis pubkationcontahs information it summary form and is therefore kitended for general guidance arty. II is not intended to be a substtute for Cetdted research ce the exercise of professional judgment. Neither EYGM Limited nor any °the. Christopher Lawton Brian Tress member of theglotol Ernst & Youig organization can accept Asia Pac Real Estate Leader Executive Director, Ernst & Young LLP any responsibility Ice loss occasioned to any person acting or refefillinO from action as a result of any material in the publcation. On any specific matter. reference should be made to the appropriate darnel. Shohel Mande Mike Magrans Japan Real Estate Leader Senior Mane er Bruce Kaminksy Associate Director Acknowledgements Our special thanks go to the Global 1.000 for their contribution to this survey. EFTA01171978