DIRECT MARKET REPORT GERMAN RETAIL - Europe Real Estate

acquisition of new shopping centres and extending their share in a holding. 2007
was a year of consolidation -no new investments were made-, 2008 will be
important as 3 new centres will be operational for the first time. Galeria Baltycka
in Gdansk opened its doors for business on 4 October 2007. One expects that this
74% stake contributes EUR 11.3m per year to rental income. The Hameln
property is due to be opened in March 2008. The topping-out ceremony for the
Stadt-Galerie in Passau was held on 11 October, with the centre scheduled to
open in autumn 2008. Preletting rates for both properties are already high, at
95% for Hamelin and 76% for Passau. The company will focus more and more on
Germany and bordering CEE countries (75%/25%). In the meantime all centres in
France and Italy are disposed; in 2004 the exit of the Udine-Italy centre was a
fact, in April 2006 Etrembières in Annemasse-France (close to Geneva) was sold,
in December that same year the disposal of Viterbo-Italy was concluded. Mid 2007
the average net yield for the overall portfolio was 5.39%.
Deutsche EuroShop is owned for 19% by the Otto family, which also holds 100%
of the non listed ECE Projektmanagement G.m.b.H. & Co. KG. This also Hamburg
based company has implemented leased and managed shopping centres since
1965 and is the largest (inner-city) retail center manager in Europe and Deutsche
EuroShop's preferred center manager and supplier for developments.
The company is conservatively leveraged and fully hedged against interest risks,
for the moment the company is not applying for the REIT status. Investors buying
DEQ GY shares up to 1 January 2009 continue to receive dividends without any
tax deduction (return of equity), as of that date a flat rate of 25%, plus a
solidarity surcharge applies.
German retail update - 28/11/2007 35