1. The document discusses several megatrends driving long-term demand for real estate, such as urbanization, population growth, and aging populations. These trends are increasing the number of people and proportion living in cities around the world. 2. SKAGEN M2 is a global real estate fund that invests in listed real estate stocks. It applies SKAGEN's value-based investment philosophy and targets long-term real estate returns with balanced risk. 3. The fund's selection process examines macro trends, real estate fundamentals, valuations, and ESG factors. It takes a bottom-up approach to finding undervalued real estate markets and companies that benefit from megatrends in population shifts and

1. 1
Megatrends in
Global Real Estate
Michael Gobitschek
Portfolio Manager SKAGEN M2

2. Megatrends in global real estate
by Michael Gobitschek, Portfolio Manager SKAGEN M2

3. 3
“Buy land, they're not making more of it.”
- American author Mark Twain

4. 4
Why invest in global real estate?
• Predictable cash flow and return, with potential capital gain and inflation
protection
• Real estate reflect local dynamics, and offer diversification advantages
• Long-term low correlation with other asset classes
• Land is a scarce resource. Urbanisation, population growth and
increased wealth are important value drivers for property markets.

5. 5
MEGA-trends driving long term real estate demand
Geopolitics/
climate
Consequences/ value drivers:
 Housing shortage
 Land shortage
 Modernization demand
 Longer lifespan
 Growing cities
 Investable assets growth
 Alternative energy sources
 Increased asset competition
 Investments in infrastructure
 Growing global middle-class
 Single households increases
 Consumption/purchase power
Sustainability
Urbanization
/migration
Population
growth
Shift in
economical
power
Ageing
population
Globalisation
Disruptive
Technology

6. 6
There are increasinlgy more of us….
-
2,500,000,000
5,000,000,000
7,500,000,000
10,000,000,000
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Total world population
Source: World Bank

7. 7
…and we move to the cities
54%
urban in 2014
72%
urban in 2050
Source: World Bank

8. 8
“Super cities” – Most populated cities (millions)
6
6
5
6
6
7
8
9
13
14Tokyo
New York
Osaka
Los Angeles
Moskva
Buenos Aires
Shanghai
Chicago
London
Paris
19
19
20
20
21
21
21
24
26
38
Shanghai
Dehli
Tokyo
Beijing
Mexico City
Mumbai
Sao Paulo
Osaka
Cairo
New York
1955 2015
Source: World Economic Forum

9. 9
259
425 444 471 480
1 120
2 001
2 936
3 977
264263247
1 792
2024
3 670
North
Amerika
2034
Europe
Emerging
Markets
4 721
2 704
2004 2014
History Prognosis
Growing middle class - a new economic power factor
Population GrowthSource: Oxford Economics,

10. 10
…. and we are getting older ….
0%
25%
50%
75%
100%
1955 2005 2025 2045
65 and overSource: Population Reference Bureau

11. 11
Growth of ”Institutional-grade” properties = new possibilities
$7
$10
$14
$17
$19
$5
$20
$25
2012
+5,62%
2004
$24
2007
$29
$19
2020
$45
Emerging Markets Developed Markets in USD trl
Source: PWC

12. 12
SKAGEN’s philosophy applied to real estate
• SKAGEN M2 is a global fund that invests
in listed real estate stocks globally, and
offers daily liquidity.
• Targets a long term real estate return
with a balanced risk and return profile
• SKAGEN’s long-term, bottom-up value-
based philosophy leverages the parallels
between equity and real estate investing.

13. 13
SKAGEN m2 – The company selection process
Real Estate Risk/Return Profile
– How does the case fit into the portfolio?
Macro/political Trends
– How does it support the case short term/long term
Real Estate Mega Trends
– How is the case supported by these trends, drivers for the case?
3U
- How does the case meet the 3U’s?
Urbanizatio
n/migration
Population
growth
Shift in
economical
power
Return
Risk
• +3 000 listed RE companies globally
• Screening
• Risk
• Valuation/triggers
• ESG
• Positioning/size
• Monitoring
• Site visit
• Interest rates
• FX
• FDI
• Stimulus/ tightening
Ageing
population
Disruptive
Technology
The fundamentals The supportives

14. 14
Berlin real estate fundamentally undervalued
• Demographics:
 Migration from rural Eastern areas to large cities
 Berlin changes its character and attractiveness
 New immigrants fuel demand over time
• German residential prices cheaper than Madrid:
 Sector currently prices at ~7% rental yield. German bunds currently yielding
less than 1%
 Vacancy low and decreasing – no new supply
 Berlin rental growth higher than most of Germany.

15. 15
• Trends:
 Re-urbanisation or De-suburbanization
 Office landscape changing
NYC continues to grow in coming years

16. 16
THE CASE FOR LOGISTICS
 Good yields
 Long stabile lease contracts
 Moderate operational risks
 Good economies of scale
 Strong trends drive demand
 Shortage of modern facilities

17. 17
SKAGEN m² – Top 10 holdings at end of January 2016

18. 18
Geographical distribution vs benchmark January 2016
3
9
0
35
32
0
3
1716
13
01
5
55
2
010
12
6
19
CashThe NordicsOceaniaNorth
America
Middle East
& Africa
Latin AmericaFrontier
Markets
Europe EMEurope DM
ex. The
Nordics
Asia EMAsia DM
Index
Fund

19. 19
Global listed property investments have been among the three
best performing sectors in 10 out of the 17 past years
28,6%
1999 2000 2001 2002 2003 2004
36,9% 41,4% 15,3%
2005 2006 2007 2008 2009 2011 2012 2013 2014 2015
15,3% 41,5%
0,6% 6,0% 34,2%
22,9%
2010
Source: Goldman Sachs
Top3sectors

20. 20
Note: All returns beyond 12 months are annualised (geometric return)
* Inception date: 31 October 2012
SKAGEN m2 returns as of 22 February 2016
NOK, net of fees
YTD Since inception*
SKAGEN m2 A -10,7% 10,2%
MSCI ACWI Real Estate -7,9% 18,0%
Excess return -2,8% -7,8%
A

21. 21
$50
$100
$200
$400
$800
$1,600
$3,200
$6,400
$12,800
1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015
Eiendomsaksjer USA Aksjer USAUS Reits
What can we learn from history?
USD. Total Return
Source: REIT.com; Bloomberg
Performance of listed RE (US REITS) relative to S&P 500
S&P500

22. 22
SKAGEN m² – Outlook for real estate markets in 2016
Continued good
conditions for RE
stocks
“Wall of money”
into asset class
continues
Spread game
continues, rather
than NAV focus
Interest rate –
and deflation fear
creates volatility

24. 24