DIRECT MARKET REPORT GERMAN RETAIL - Europe Real Estate

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Yields As stated before, from an investment point of view 2006 was one of the best years ever for retail, very much supported by the low interest rates. Total investment volume in retail only was EUR 15.5bn, i.e. 1/3 rd of total real estate volume in Germany and 182% higher than 2005. However, the Karstadt deal only made up for 29%. Demand of Anglo-Saxon investors remained very high. In June 2007 yields were unchanged on March 2007 across all sub sectors, following the downward yield shift in the first quarter. There is a little sign of investor interest diminishing and the second quarter recorded numerous transactions. However, we have to take into account that –due to the credit crunch perils- higher financing costs have led to a withdrawal of financially driven investors which made up for 65% of total commercial property transactions last year. During last 3 months yields for retail premises have increased by 50 basis points on average. In order to put things in perspective we have to look back however. Net initial yields of western German retail property in city centres have risen over the past ten years by 30 basis points to roughly 6.5%. In the east of Germany initial yields have climbed since 1995 by 80 basis points and are currently about one percentage point above the level in the west. Here, too, there are marked regional differences. In Dresden the initial yield, close to 6%, is well below the average East German level, in Görlitz, at almost 10%, is clearly above. Both the trend and the yield differential between East and West German cities are plausible in the light of the market developments described. They clearly reflect the higher risk in the weaker retail markets, some of which post high vacancy rates. It speaks for itself that the risk premium for the eastern part has always been in place, although a certain conversion has taken place lately. Exhibit 24 Prime yields in Germany 1999-2007 Source: Jones, Lang Lasalle What about near future expectations? An investigation by the Hahn Group made clear that overall investors in retail are, of course, largely positive. Only 10% think that the volume of German retail transactions will decrease. While a third feel that prices for retail assets will continue to rise, 46.7% believe that prices will stagnate. In the event of any changes in asset prices, investors say exhaustion of interest rates would be the main drivers. We expect that yields will have increased German retail update - 28/11/2007 26
y approximately 25 basis points by the end of Q1 2008 i.e. one year of net rental income. For secondary grade assets overall expectations are more bearish, an increase of 50 basis points is expected for the coming 6 months at least. According to the Hahn Group survey German retail overall is “no longer up-to-date”. However, for both A and B grade assets one has to distinct market dynamics per sub segment within the retail chapter; shopping centres, retail parks/warehouses and individual high street shops. Shopping centres The shopping centre boom of 1990-1995 is past and new openings of centres seem to have levelled out on a growth rate between 2.5% and 4.5% p.a. For the moment no saturation of the shopping centre market is foreseen, also helped by the relative low density of shopping centres in (Western) Germany. In 2006 and 2007 the federal states of North Rhine-Westphalia, Bavaria and Lower Saxony registered the highest increase in shopping centres. In Berlin, on the other hand, in that same time phrame, 8 new centres were in the stages of planning or completion, even though the city already has a retail space density of 229m 2 /1,000 inhabitants. Also in this segment the trend from the green field back to the inner cities can be seen. Besides new developments, the revitalization of existing shopping centres will become a central issue. The statistic average between the initial construction and the first revitalization of a shopping centre is 17 years. Taking into account that the boom was in 1990- 1995, one can easily presume the consequence for available shopping centre space and property prices. Yields for prime centres are expected to harden marginally further in the years to come. Mixed in-town/residential area schemes (e.g. office-retail combination) are regarded as favourites in the near future. After 5 years we foresee a flattening out of average yields due to an increased maturity of this specific market taken supply, demand and competition into account. German retail update - 28/11/2007 27
Page 1 and 2: www.petercam.com Real Estate Novemb
Page 3 and 4: Executive Summary “The secret of
Page 5 and 6: Introduction Following the record r
Page 7 and 8: The ZEW Indicator of Economic Senti
Page 9 and 10: 2 Destatis 3 Federal Statistical Of
Page 11 and 12: Consumer Price Index Consumer price
Page 13 and 14: Exhibit 11 Division median net inco
Page 15 and 16: Exhibit 14 Population, purchase pow
Page 17 and 18: Exhibit 16 Life cycles of the vario
Page 19 and 20: Corporate tax rate to 15.8% In the
Page 21 and 22: (30%) 4 . The preference for hyperm
Page 23 and 24: Exhibit 20 Indexed space developmen
Page 25: Exhibit 23 Shopping centre pipeline
Page 29 and 30: spread of DIY over shopping centres
Page 31 and 32: Rental levels Not only prime assets
Page 33 and 34: Exhibit 30 Retail yields and rents
Page 35 and 36: acquisition of new shopping centres
Page 37 and 38: Dawnay Day Treveria • Bloomberg t
Page 39 and 40: Exhibit 34 Portfolio overview BBI I
Page 41: Petercam Institutional Research and

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