UK Real Estate Market

1. UK Real Estate Market November 2006 Presentation: Glenn Newson, Head of UKRE Asset Management Asset Management

2. Background to the Market - UK economy • Investment performance - historic - market - sectors • Changing investment patterns - institutions - overseas - debt - REITS/derivatives • Market expectations Asset Management UK Real Estate Market November 2006 Asset Management

3. UK Economy • Interest rates rose in November +0.25% to 5.00% • Expectation of further increase +0.25% in early 2007 • Inflation broadly under control but energy prices pushed rates 0.50% higher than 2.0% Monetary Policy Committee target • GDP rose by 0.8% in Q2 2006 – highest level of growth in 2 years. Expected 2006 growth rate 2.5%. • House prices continue to grow despite interest rate increase in August +0.25%. • Benign economic outlook but increasing consumer nervousness Asset Management

4. Investment Performance - Historic • Commercial property delivered a return of 20.7% for the year to end September 2006. This compared to gilts at 2.5% and equities at 14.7%. • Calendar year returns to end August were 13.8% for property, 0.3% for gilts and 10.0% for equities. • UK Property has outperformed equities and gilts over 1,3,5,10 and 15 year time horizons.* Fantastic but potentially unhealthy and it should be remembered that past performance is not a guide to future performance. • Performance remains driven by yield compression and the All Property initial yield now stands at 4.7% and the equivalent yield at 5.5%. Capital values in Q2 improved by 3.1% but August at below 1.0% recorded the lowest return since early 2005. • Of the 13.8% calendar year total return over 9.5% is derived from capital growth. (* source IPD) Asset Management

5. Investment Performance - Market • Investment volumes have eased over the last quarter. Data to June shows a total of £7.5bn of purchases. Significantly, despite the buoyant market, this is the lowest level for over 3 years. (Market reaction or external factors?). • The dominant feature of the market remains a shortage of good quality stock and this is true across all price ranges. The shortage of stock is easing slightly but the quality remains polarised with at one end the large trophy assets and at the other the typically outmoded poorly located buildings in secondary locations. The latter stock is generally being sold by the property companies who are seeking to take advantage of the strong market to take substantial profit on secondary product. Asset Management

6. Investment Performance • After the close convergence of returns between the three sectors over the last few years, primarily driven by yield compression, the sectors have now started to diverge. This reversal has seen retail move from the top slot to the bottom, swapping places with offices. This trend has been widely forecast, and the expectations are it will continue into 2008/2009, as offices particularly central London, and in some instances the major provincial cities, experience rental growth far in advance of any other sector. Whilst this may give rise for future concerns, at this stage the mitigation is how far rents in central London fell in the last downturn, and therefore their ability to recover. Rents likely to have grown 25%+ in the West End this year. - Sectors; office, retail, industrial Asset Management

7. Changing Investment Patterns The UK real estate market remains attractive throughout the globe due to its position within a stable but relatively benign economy, its world class legal system and its leasing structure with upward only regular rent reviews. The number of market players is increasing in diversity. - institutional • The institutions have been the dominant investor in the last year, by a significant margin, fuelled by the “man on the street’s” appetite for the asset class. UK institutions invested almost £2bn in Q2, 2006, approximately 20% of all transactions. The life funds have been net sellers over the last year but this has largely driven a surge in property investment vehicles which have doubled in the last year alone to £27bn. • Asset allocation by pension funds to real estate still averages only 8% but many actuaries accept that closer to 15% is preferable to achieve diversification. As the investment “product” market widens so real estate diversification will require a greater percentage of assets. Asset Management

8. Changing Investment Patterns (contd.) - overseas • The German open-ended funds were net seller in early 2006 reflecting concerns over internal structures. The outflows brought to the market a number of large prime UK investments fortunately at a time when the market was categorised by a variety of willing purchasers keen to acquire assets originally seen as long term holds. • Middle Eastern investors remain active but it has been the Irish and Australians who have coped best with the current low yield environment, as they can still see value in the UK that is greater than they can achieve at home. Asset Management

9. Changing Investment Patterns (contd.) - debt • Loans on real estate continue to rise and in part the Banks are responsible for fuelling prices as they seek to lend to meet internal business targets. • Although swap rates have moved up during 2006 they now appear stable. This movement means that the arbitrage between the yield achieveable on real estate and the cost of debt is now broadly negative, suggesting that investors are requiring either rental growth or further yield compression to achieve profits. On an asset specific basis this could be a concern given the patchy prospects for rental growth. Asset Management

10. Market Expectations • High point in the cycle. • Market players more diverse than ever – assist sustainability REITS – January 2007. • Rental growth returning. • Interest rates rising but modestly, economy generally benign. • Modest performance prospects forecast for other asset classes but margin to gilts for liquidity at a quarter of the traditional 200bps. • Increasingly a global product – more players but bigger investible universe. • Our expectation of UK total returns for 2006 is 17%, fuelled by capital growth of 12% and a modest level of rental growth. • Forecast total returns for 2007 and 2008 show a significant reduction to 7-8% which suggests some softening of secondary yields, and limited rental growth outside of central London. Unleveraged returns remain attractive but investors will need to accept that the performance is going to be largely income growth led, and outperformance will require greater degrees of active management than many have relied on to date. Asset Management

11. Important Information • Past performance is not a guide to future performance; the price of real estate and the income from it may fluctuate upwards or downwards and cannot be guaranteed. Real Estate may not be readily saleable and the value of real estate is generally a matter of valuer’s opinion. • This document has been prepared and issued by CREDIT SUISSE PROPERTY INVESTMENT MANAGEMENT LIMITED One Cabot Square, London, E14 4QJ, www.credit-suisse.com/uk, Tel: 020 7888 1000, on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst all reasonable care has been taken to ensure that the information is accurate and any assumptions made or simulations used are fair and reasonable, CREDIT SUISSE PROPERTY INVESTMENT MANAGEMENT LIMITED, nor any director, officer nor employee, shall in any way be responsible for the contents. This document does not constitute investment advice and no reliance should be placed on its contents. Asset Management