Quarterly Review - LaSalle Investment Management

European
Real Estate
Securities
Quarterly Review Third Quarter 2008
Highlights
Credit crisis and bank failures drive negative returns
The EPRA Index fell 4.7% in the third quarter, as concerns surrounding the credit crisis,
inflation and the global economy drove property share prices lower. European real
estate securities outperformed general European equities (-11.8%), but underperformed
global real estate (+0.5%).
European economy and direct property markets
According to the EIU, the European economy is expected to slow substantially, and
unemplyoment rise, as the effects of the credit crisis filter through to the real economy.
Rental growth has slowed steadily across Europe and rent reversals have begun to
emerge in some locations. Cap rate expansion is expected across all property types
throughout most of Europe.
Securitization and REIT news
The sharp slowdown in IPO activity from last year continued: in the third quarter of 2008
there were no property IPOs in Europe. However there were several companies that
had to recapitalize to improve balance sheet ratios.
Outlook for real estate securities
We expect the financial markets to remain volatile until the lending environment returns
to some normalcy and investor confidence is restored. The global economy should
continue to adversely affect European real estate fundamentals for the foreseeable
future, however we expect companies with strong management, high quality assets and
financial flexibility to outperform those with less favorable characteristics as returns
required from real estate investors increase.

European Real Estate Securities
Quarterly Review Third Quarter 2008
Third Quarter 2008 Review
European property companies saw a negative return in the third quarter of 2008. The
EPRA Europe Index lost 4.7%, thereby underperforming bonds (+3.9%) and utilities
(+1.8%), but outperforming European equities. Europe underperformed the global
property universe (+0.5%).
Europe
EPRA Index (in €) (%) UBS Investors Index (in local) (%)
Cont.
Europe UK Globe Europe
Cont.
Europe UK Globe
JP Morgan
Bond
Index
EMU
(€) (%)
MSCI
European
Equity
Index
(%)
FTSE
E300
Utilities
Index
(€) (%)
Q3 2008 -4.7 -10.4 5.2 0.5 -7.3 -13.2 3.5 -1.5 3.9 -11.8 1.8
YTD 2008 -21.9 -20.7 -23.6 -19.5 -21.4 -22.7 -19.1 -13.3 3.2 -28.4 -8.2
3-year Ann -6.6 -4.4 -9.7 -2.7 -5.6 -5.1 -6.0 0.9 1.4 -3.7 11.0
5-year Ann 9.6 12.0 6.5 8.6 8.9 10.8 8.4 11.1 3.4 4.9 16.4
Standard
Deviation
4.4 4.3 5.2 4.4 4.4 4.4 5.1 4.1 1.0 3.6 3.0
Source: Bloomberg, FTSE EPRA/NAREIT. Standard deviations are monthly, from June 2003
Within Europe, the UK (+5.2%) outperformed the Continent (-10.4%) in Euro terms. This
outperformance was of the same magnitude on a local currency basis. Of the major
countries, low beta countries Belgium (+6.3%) and Switzerland (+4.8%) outperformed.
The higher geared companies of Finland (-21.3%) and Austria (-53.1%) raised
questions from investors about their financial stability and therefore underperformed.
Both in the UK and in the Continent, retail was the best performing sector. (see
following page for country and sector performance).
Although the difficult economic times were not difficult enough to offset the increased
inflation concerns, it led to weak REIT and general equities returns in the quarter.
Companies with higher leverage—and especially those with short-term refinancing
needs—were the worst performing companies this quarter. Economic news dominated
the headlines; weaker macro-economic data, expected growth of GDP corrected to the
downside, drying up of liquidity at the banks as well as the bankruptcy of Lehman and
AIG and alike problems at Merrill Lynch, Morgan Stanley and other big banks also
negatively impacted the equity markets along with the real estate companies.
ImmoFinanz and Immoeast were the top underperformers in the Continent following
their negative earnings announcements and disclosure about an inter-company loan.
Since September 18, when Immoeast reported earnings, ImmoFinanz and Immoeast’s
share dropped 43.2% and 41.8%, respectively, as investors question both companies’
financial status. IVG (IVG GY) was negatively impacted by the sale of its cavern
business for a lower than expected price of € 1.73 billion.
In the UK, Minerva (MNR LN) was the worst performing company after Limitless
confirmed it would not proceed with its proposed acquisition of Minerva following its due
diligence process. Hammerson (HMSO LN) announced that the Ontario Teachers
Pension Plan owns a 10% stake in the company, while rumors about the Simon
Property (SPG US) and Westfield’s (WDC AU) stake in Liberty International (LII LN)
caused speculation about potential takeouts in the sector.

European Real Estate Securities
Quarterly Review Third Quarter 2008
European Real Estate Securities:
EPRA Index performance and
exposure
Country/Sector
(total returns
in local currencies)
3Q08
(%)
2008
(%)
3-Yr
Annlzd
(%)
Country/Sector
(total returns
in local currencies)
3Q08
(%)
2008
(%)
3-Yr
Annlzd
(%)
Austria -53.1 -57.1 -28.6 Eurozone (in €) -10.8 -20.6 -4.7
Belgium 6.3 -0.7 2.6 All Europe (in €) -4.7 -21.9 -6.6
Denmark
-54.8 -61.4 -25.3
All Europe –
Investors
-7.3 -21.4 -5.6
Finland
-21.3 -33.5 -7.8
Cont Eur –
Diversified
-15.9 -27.6 -4.5
France -4.3 -9.7 4.6 Cont Eur – Office -14.0 -26.2 -8.6
Germany
-13.0 -40.8 -17.6
Cont Eur –
Residential
-18.6 -40.0 -24.8
Greece -10.5 -18.4 9.0 Cont Eur – Retail -6.9 -13.2 3.7
Italy -7.4 -43.2 -22.2 UK – Diversified 2.9 -20.8 -6.2
Netherlands -1.9 -10.8 2.5 UK – Industrial 2.6 -14.0 -6.0
Sweden -3.4 -23.0 -3.4 UK – Office -4.0 -30.2 -10.7
Switzerland 4.8 12.6 4.2 UK – Residential -4.7 -38.5 -16.5
United Kingdom 4.7 -18.0 -5.2 UK – Retail 7.8 -11.5 -0.8
Source: FTSE EPRA/NAREIT, UBS, and LaSalle Investment Management
EPRA Europe Real Estate Index –
Company Geographic Exposure
UK (36.3%)
Turkey (0.6%)
Switzerland (4.1%)
Sweden (6.8%)
Spain (2.5%)
Portugal (0%)
Norway (0.5%)
Netherlands (4.1%)
Italy (3.2%)
Greece (0.9%)
Germany (4.5%)
France (21.6%)
Finland (1.7%)
Denmark (0.4%)
Belgium (3.9%)
Austria (2.2%)
CEE (4.9%)
Other Country (1.2%)
United States (0.4%)
Data as at 30 September 2008 by geographic exposure; Source: FTSE EPRA/NAREIT and LaSalle Investment Management
EPRA Europe Real Estate Index –
Country Weights by Listing
Austria (6.1%)
Belgium (3.3%)
CEE (1.2%)
Denmark (0.3%)
Finland (1.4%)
France (24.9%)
Germany (2.9%)
Greece (0.9%)
Italy (1.3%)
Netherlands (10.0%)
Norway (0.5%)
Spain (0.1%)
Sweden (4.9%)
Switzerland (4.1%)
Britain (38,1%)
Data as at 30 September 2008 by listing; Source: FTSE EPRA/NAREIT and LaSalle Investment Management

European Real Estate Securities
Quarterly Review Third Quarter 2008
EPRA Europe Real Estate Index –
Company Sector Exposure
Other
0,6%
Office
18,7%
Diversified
36,1%
Industrial
4,7%
Residential
2,7%
Retail
37,2%
Data as at 30 September 2008 by company property exposure; Source: FTSE EPRA/NAREIT and LaSalle Investment Management
Best performers in the quarter
Worst performers in the quarter
During the third quarter the companies with low leverage or otherwise companies that were
able to secure refinancings and removed near term financial risks were the winners of the
quarter. Development Securities was the strongest performer in the month rebounding off its
52-week low in July, solid earnings in late August and a sell-side upgrade.
The worst performers of the quarter were the companies with higher degrees of uncertainty
concerning their respective futures. Plaza Centers was punished for its involvement in
(higher risk) Eastern-European developments, while the uncertainty surrounding the
financial condition of both Norwegian Property and ImmoFinanz resulted in large
underperformance. Minerva was negatively impacted by the withdrawal of a bid from
Limitless (a real estate development subsidiary of Dubai World).
Top- and bottom-performing
companies: EPRA Europe Index
Company Name Country Q3 2008 (%) YTD 2008 (%)
Development Securities UK 34.3 -20.3
Invista Foundation Property UK 34.1 -35.8
Daejan Holdings UK 22.3 -6.9
Intervest Offices Belgium 13.7 -2.5
Big Yellow Group UK 13.2 -24.4
Plaza Centers UK -54.5 -59.9
TK Development Denmark -54.8 -61.4
Norwegian Property Norway -57.8 -81.2
Minerva UK -60.7 -74.4
ImmoFinanz Austria -62.8 -64.9
Source: FTSE EPRA/NAREIT and Bloomberg

European Real Estate Securities
Quarterly Review Third Quarter 2008
European economy
Economic overview
Forecasts
Euro Area
UK
Sweden
Source: EIU
Current (Sep 08) (%)
QoQ Change (%)
(Jun 08 – Sep 08)
2008 2009 2010 2008 2009 2010
GDP 1.2 1.1 1.9 -0.4 -0.7 -0.2
CPI 3.5 2.5 1.9 +0.6 +0.3 -
Unemployment 7.3 7.6 7.3 +0.3 +0.8 +0.6
GDP 1.0 -0.3 1.1 -0.7 -1.7 -1.0
CPI 3.8 2.2 1.8 +0.4 -0.3 -0.3
Unemployment 5.5 6.3 6.7 +0.3 +0.9 +0.9
GDP 1.0 0.6 2.2 -0.9 -1.3 -0.7
CPI 3.6 2.4 2.1 +0.1 - -
Unemployment 6.1 7.1 7.1 - +0.9 +1.0
Rising interest rates, reduced availability of capital, the strong Euro, declining business
confidence and a gloomy world economic outlook have dampened economic performance
in the Euro zone region. GDP growth flattened, inflation hit record highs in the third quarter
of 2008 and commodity prices rose to levels never seen before.
In the Euro area, Germany and Spain will likely suffer a technical recession because of the
continued credit market crisis and high commodity prices. The economies of France and
Italy will likely remain stagnate, but are not expected to contract for consecutive quarters
despite their GDP contraction in the second quarter. The European commission expects
Britain to slip into recession in the second half of this year for the similar reasons: the
financial markets crisis, higher inflation plus its collapsing housing market.
Unemployment data showed that German labor market conditions are still improving despite
the slowdown in the wider economy, however survey measures of hiring intentions point to
a reduction in employment growth to come. Market conditions are deteriorating in Europe as
a whole, with unemployment now rising in France, Italy, Spain and the UK.
The headline inflation rates in Europe remain far above the central bank’s price stability
ceiling. Although increasing wage growth prevents core inflation from falling too sharply, the
latest economic figures have brought evidence that price pressure is receding. In
September, the oil price fell substantially and food inflation dropped from its recent highs of
over 6%.
The ECB, BOE and Riksbank all cut target lending rates in line with the coordinated central
bank activity in early October. As price pressures continue to fade, more rate cuts are
foreseeable in Europe.

European Real Estate Securities
Quarterly Review Third Quarter 2008
European direct property market
As 2008 has progressed and the impact of the credit crisis is now, a year after the first signs
of an evolving crisis, being felt in real estate markets across the region where many of the
markets have turned or are close to turning in favor of the occupier. Competition for space
and the volume of deals completed has been solid but far from spectacular. The rate of
rental growth has tailed-off steadily across the market and rent reversals have begun to
emerge in some locations. The choice of available product also shows signs of increasing
gradually in markets, albeit with the highest quality space remaining in short supply.
Yet these changes in market conditions have occurred at a time when occupier confidence
is falling sharply and the willingness to commit to new real estate has diminished
correspondingly. The wait-and-see attitude has become more widespread and pertinent
across Europe, not just the mature Western European markets. Investment activity remains
subdued and there continues to be a divergence between valuations and market pricing.
Key to outperformance over the next 18 to 24 months will be the successful conclusion of
asset management initiatives: keeping space occupied and capturing any residual rental
growth in the occupier markets, whilst ensuring that tenants have robust covenants.
Retail
Office
End 2Q08
vs 1Q08
Prime
Yield
(%)
Prime
Yield
Change
(%)
Prime Rent
Change
QoQ
(%)
Prime
Yield
(%)
Prime
Yield
Change
(%)
Prime Rent
Change
QoQ
(%)
London 5.00 0.00 1.80 London 4.50 0.00 -4.40
Paris 4.50 +0.50 7.70 Barcelona 5.25 +0.50 0.00
Barcelona 5.00 +0.50 0.00 Stockholm 4.65 +0.15 2.30
Madrid 5.00 +0.50 0.00 Madrid 5.25 +0.50 0.60
Stockholm 4.65 +0.15 0.00 Paris 4.75 +0.25 0.00
Frankfurt 4.75 0.00 n/a Amsterdam 5.25 +0.25 0.00
Munich 4.75 +0.25 n/a Brussels 5.75 +0.05 -3.40
Amsterdam 4.25 0.00 0.70 Frankfurt 4.80 +0.30 0.00
Brussels 4.50 0.00 0.00 Munich 4.75 +0.25 1.70
Source: JLL
Securitization and REIT news
The sharp slowdown in IPO activity from the previous quarters continued: in the third
quarter of 2008 there was no property IPO in Europe. However there were several
companies that had to recapitalize to improve balance sheet ratios.
In July Norwegian Property increased its share capital with a rights issue in order to
recapitalize the company. Aedes proposed a € 171 million capital increase, also in order to
solve financial problems. Sopaf has agreed to underwrite the rights issue that is not taken
up by the existing shareholders. The Board of Dawnay Day, Treveria has decided to pursue
a strategy of targeted disposals combined with a possible injection of new equity into the
business after breaching its loan covenants.
Klepierre announced a € 200 - 300 million rights issue, to be performed later in the year, to
finance its € 600 million stake in the Steen & Strom portfolio.
Several companies announced that they would (re-)launch a share buy-back program.
Austrian companies CA Immo and Conwert and Beni Stabili from Italy bought back shares
because the share price was at a deep discount to their NAV.

European Real Estate Securities
Quarterly Review Third Quarter 2008
Valuation and outlook for real estate
securities
The third quarter marked the beginning of a series of investment and commercial bank
failures that paralyzed the capital markets and created economic panic among investors.
These failures were not limited to a specific region or financial institution and impacted all
securities across the entire public market. European real estate securities were not an
exception. Companies with high leverage, significant refinancings and large development
exposure were hit hardest by the investor uncertainty.
Financial strains globally have pushed several European countries closer to or into technical
recession. Consumer spending throughout Europe has declined as a result of higher
savings and lower housing wealth, while corporate spending has slowed due to the frozen
lending environment and increase in debt cost.
We expect the financial markets to remain volatile until the lending environment returns to
some normalcy and investor confidence is restored. Worldwide rescue of financial
institutions thought too large to fail has already begun in the United States, Europe and
Asia. The United Kingdom, Germany, France, Ireland and Benelux countries have led
Europe in the public sector rescue of financial services firms, however more countries are
expected to follow.
The global economy should continue to adversely affect European real estate fundamentals
for the foreseeable future with further reductions in property values and rental growth rates
expected. We expect greater disparity in performance between companies with strong
management, high quality assets and financial flexibility to those with less favorable
characteristics. This bifurcation between high and low risk companies has already become
apparent with Austria as these companies with high leverage and poor disclosure
performed the worst in Europe this quarter.
Overall, European real estate companies are relatively well positioned to ride out the current
capital market crisis. The current 5.6% dividend yield is well covered and shares are trading
at nearly a 30% discount to NAV. We believe these discounted valuations provide
substantial buffer in the current economic environment.

European Real Estate Securities
Quarterly Review Third Quarter 2008
About LaSalle
LaSalle Investment Management Securities is a leading property securities investment
manager for pension funds, institutional and retail investors around the globe. With more
than 20 years of investment experience, the firm currently has $8.9 billion of assets
under management in listed property securities, including US, European and global
mandates. LaSalle Investment Management Securities is LaSalle Investment
Management’s specialist securities division and as such benefits from the resources of
both LaSalle Investment Management and Jones Lang LaSalle. LaSalle Investment
Management is one of the world’s leading property investment managers with more than
$54 billion of public and private property assets under management across Europe,
North America and Asia Pacific. The firm employs 631 professionals (747 staff in total),
including a 27-strong industry-leading strategy and research team.
LaSalle Investment Management is a wholly owned but operationally independent
division of Jones Lang LaSalle, a publicly-traded global property services provider.
Comments to
LaSalle Investment Management Securities B.V.
Ernst-Jan de Leeuw Portfolio Manager +31 20 530 8878
ernst-jan.de-leeuw@lasalle.com
Matthew Sgrizzi, CFA Analyst +31 20 530 8883
matthew.sgrizzi@lasalle.com
John Wallace Analyst +31 20 530 8876
john.wallace@lasalle.com
Sarah Blein Analyst +31 20 530 8877
sarah.blein@lasalle.com
Gerben Karkdijk Analyst +31 20 530 8896
gerben.karkdijk@lasalle.com
Panos Zafeiriou Analyst +31 20 530 8894
panos.zafeiriou@lasalle.com
Daniel DeMarco Trader +31 20 530 8872
daniel.demarco@lasalle.com
Michael Jongmans Trader +31 20 530 8897
michael.jongmans@lasalle.com
LaSalle Investment Management Research and Strategy (London)
Robin Goodchild +44 20 7852 4390
robin.goodchild@lasalle.com
Alistair Seaton +44 20 7852 4525
alistair.seaton@lasalle.com
Andrea Pavelka +44 20 7852 4492
andrea.pavelka@lasalle.com
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