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October 2006

Forums on Issues and Innovations in Real Estate Global Products and Sources for Real Estate Capital. October 2006. Agenda. Global real estate capital flows Real estate products. Agenda. Global real estate capital flows Real estate products. 2005 outward overseas investment (US$bn) USA 19

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October 2006

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  1. Forums on Issues and Innovations in Real EstateGlobal Products and Sources for Real Estate Capital October 2006

  2. Agenda • Global real estate capital flows • Real estate products Tommy Brown

  3. Agenda • Global real estate capital flows • Real estate products Tommy Brown

  4. 2005 outward overseas investment • (US$bn) • USA 19 • Germany 15 • Australia 9 • UK 5 >4.0 billion >1.5 billion >0.5 billion Note: The table summarises the major sources of cross-border real estate investment in 2005, and the arrows indicate the source and destination of these flows Source: RREEF Research, RCA, JLL, DTZ Global cross-border capital flows are increasing Tommy Brown

  5. Global total = $20tn Global Investible = $12.4tn Global Invested = $7.8tn Invested stock US$2.4 trillion Europe Investible stock US$4.7 trillion Total stock of US$7.1 trillion Invested stock of US$7.1 trillion Invested stock US$4.0 trillion Invested stock US$1.4 trillion Investible stock US$5.2 trillion Investible stock US$2.5 trillion Total stock of US$7.5 trillion Total stock of US$4.6 trillion Asia America The scale of investable real estate is also increasing in different markets Note: Estimates as at end 2005 Scale of Total, Investible and Invested Real Estate, by Region Source: RREEF/DB Real Estate, DTZ, ULI/PWC Tommy Brown

  6. Additionally, overall capital to real estate is increasing Pubic equity Public debt Note: Size of global listed real estate market Source: UBS Note: Issuance of CMBS Source: Deutsche Bank Securitisation Research Private debt Private equity Note: Bank lending to commercial real estate Source: RREEF Research, DTZ Note: Direct real estate investment activity Source: RREEF, DTZ, JLL, RCA Tommy Brown

  7. US institutional investors’ target and actual portfolio allocations (2006) • All Real Estate 7.9 6.7 -1.2 • US Stocks 36.1 38.4 2.3 • Foreign Equities 15.4 16.7 1.3 • Fixed Income 26.8 25.0 -1.8 • Venture Capital/Private Equity 5.8 4.2 -1.6 • Money Market Funds/Cash Equivalents 0.5 1.4 0.9 • Hedge Funds 4.5 4.2 -0.3 • Other 2.9 3.4 0.5 • Sector 2006 Target 2006 Actual Mean (%) Mean (%) Difference (%) Source: Kingsley Associates, 2006 Plan Survey Tommy Brown

  8. US institutional investors’ over/Under allocation Investors remain challenged to meet real estate targets. Source: Kingsley Associates, 2006 Plan Survey Tommy Brown

  9. Agenda • Global real estate capital flows • Real estate products Tommy Brown

  10. Private real estate Control of property assets More stable income stream High transactions costs Appraisal based valuations Lower volatility of returns Public real estate Greater liquidity More informational efficiency in asset pricing Greater geographical/property diversification for a given amount invested More subject to the disciplines of the public markets Higher volatility of returns Real estate products are broadly divided between private and public Private vs public real estate investing Note: The capitalisation rate is the yield someone will pay for the cash generated by the property; it is similar in concept to a bond yield Tommy Brown

  11. Investment process Strategic asset allocation Geographic allocation Investment strategy Sector allocation Investment vehicle Real estate investment Real Estate Domestic Core Office Private equity direct(2) Equity Europe Core plus / Value add Retail Private equity indirect(3) Private real estate investing Debt US Opportunistic Industrial Private debt Cash Asia Residential Public equity(4) Public real estate investing • Strategic asset allocation Other Other Special property(1) Public debt(5) • How much to invest in Real Estate? • Where to invest? • What’s The Risk/Reward balance? • What type of property? • What format? • How much liquidity is required? • Who is performing mgmt/ oversight of investment? • Includes self storage, care homes and medical labs • Real Private equity direct (buildings) • Private equity indirect (funds) • Public equity (REITS / Mutual funds) • Public debt (CMBS / Mezzanine) Several questions need to addressed when investing in real estate Tommy Brown

  12. Breakdown of universe of real estate investment products Core Value-added returns Opportunistic(up to 8%) (upto 14%) (+18%) Private Equity Direct investments in existing assets Direct property development Direct Funds Opportunity funds Real estate operating companies Debt Mortgage lending Mezzanine debt Indirect Public Equity Real estate companies Structured products Mutual funds Debt CMBS Debt /Mezzfunds Unsecured debt of real estate companies Low Risk (and leverage) High Note: The above illustration can be further segmented by geography and property type. The returns shown are for illustrative purposes only and are indicative IRRs (internal rate of return) without regard to the duration of the investment. Source: Deutsche Bank The real estate universe has matured to provide an array of investment alternatives Tommy Brown

  13. European market for private real estate funds is achieving scale and positioned to increase substantially Non-listed institutional real estate funds Source: INREV, Quarterly Report, Issue No,12 Tommy Brown

  14. There has been significant new public real estate equity issuance Historical public real estate equity issuance Source: Equityware Tommy Brown

  15. The CMBS market also continues to grow Source: Commercial Mortgage Alert Tommy Brown

  16. Disclaimer • THIS PRESENTATION CONTAINS INFORMATION WHICH HAS BEEN PROVIDED BY A NUMBER OF SOURCES. WHILE THE INFORMATION HEREIN IS BELIEVED TO BE RELIABLE, NO REPRESENTATION IS MADE HEREIN BY DEUTSCHE BANK OR ANY OF ITS AFFILIATES, AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. • THIS PRESENTATION HAS BEEN PREPARED FOR INFORMATIONAL AND DISCUSSION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER, OR AN INVITATION TO OFFER, OR A RECOMMENDATION TO ENTER INTO ANY TRANSACTION. DEUTSCHE BANK IS NOT ACTING AS YOUR FINANCIAL ADVISOR OR IN A FIDUCIARY CAPACITY IN RESPECT OF ANY TRANSACTION WITH YOU UNLESS EXPRESSLY AGREED BY DEUTSCHE BANK IN WRITING. BEFORE ENTERING INTO ANY TRANSACTION YOU SHOULD TAKE STEPS TO ENSURE THAT YOU UNDERSTAND THE TRANSACTION AND HAVE MADE AN INDEPENDENT ASSESSMENT OF THE APPROPRIATENESS OF THE TRANSACTION IN THE LIGHT OF YOUR OWN OBJECTIVES AND CIRCUMSTANCES, INCLUDING THE POSSIBLE RISKS AND BENEFITS OF ENTERING INTO SUCH TRANSACTION. YOU SHOULD ALSO CONSIDER SEEKING ADVICE FROM YOUR OWN ADVISORS IN MAKING THIS ASSESSMENT. NEITHER DEUTSCHE BANK OR ANY OF ITS AFFILIATES ACCEPT ANY LIABILITY WHATSOEVER WITH RESPECT TO THE CONTENT OF THIS DOCUMENT, ITS USE OR ANY LOSS ARISING FROM IT. Tommy Brown

  17. Forums on Issues and Innovations in Real EstateGlobal Products and Sources for Real Estate Capital October 2006

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