Opportunities in European Real Estate

1. Opportunities in European Real Estate Dr Paul Kennedy, MRICS Head of European Research INVESCO Real Estate This presentation is for Investment Professionals only and is not for consumer use. C191

2. Our Autumn 2006 forecasts 01

3. GDP growth was expected to improve, but only modestly… Source: Consensus Economics (August 2006)

4. When combined with low and stable inflation forecasts this suggested relatively flat 10 year bond yields. Source: IRE calculations; Bloomberg. March 2007.

5. Office vacancy was expected to remain under control… Source: IRE calculations (Fall 2006); DTZ Research

6. …retail data suggested a similar pattern. Source: PMA; IRE calculations (Fall 2006)

7. We expected robust rental growth from offices in Paris, London, Madrid, Barcelona, Stockholm and the M25 West….. Source: IRE calculations (Fall 2006)

8. …retail rental growth was expected to be positive, but lower than the recent past (especially in the UK)…. Source: IRE calculations (Fall 2006); DTZ Research; CWHB

9. ...industrial / logistics rents were expected to keep pace with inflation. Source: IRE calculations (Fall 2006); DTZ Research

10. We expected capitalisation rates to remain broadly stable…. Source: DTZ Research; IRE (Fall 2006)

11. ...as a result, of the 143 markets covered by our forecasts, over 50% were expected to “out-perform” for total return investors… Source: IRE calculations (Fall 2006)

12. Office opportunities were particularly clear, with Paris, regional France, London and Spain leading. Source: IRE calculations (Fall 2006)

13. Key changes over the last 6 months 02

14. Our GDP growth forecasts have improved… Source: INVESCO Real Estate; Experian Business Strategies (June 2006 and December 2006)

15. ...particularly for Germany. Source: INVESCO Real Estate; Experian Business Strategies (June 2006 and December 2006)

16. Office take-up and rental values have recovered faster than we expected… Source: INVESCO Real Estate; DTZ Research (February 2007)

17. …as expected yields have continued to fall, reflecting improving rental growth prospects and weight of money. Source: INVESCO Real Estate; DTZ Research (February 2007)

18. Strong rental growth forecasts mean that investors could force prime office yields lower, while still achieving “appropriate” total returns. Source: INVESCO Real Estate (Spring 2007); DTZ Research (February 2007)

19. Other sectors • Retail • Rental growth has been in line with expectations. • Improving employment growth prospects should provide support despite indebted consumers (particularly in the UK) and tight margins. • Supply growth may be becoming more important. • Yield pressure appears to be easing. • Logistics • Rental growth has been lower than our forecasts. • Margin pressure combined with investment led development. • Demand for income has driven yields to unsustainable levels in some markets.

20. Is there still time for one last dance? • Yes… • GDP growth appears to be strengthening. • Inflationary pressures are likely to remain low. • Long-term interest rates should remain under 4.25% in the Eurozone and 5.25% in the UK. • Supply appears to be under control. • Rental growth is likely to accelerate, particularly in the office sector. • Yields can fall further in some markets without damaging return prospects. • But…. • Economic conditions could deteriorate (US, global equity markets etc.) • Some markets present clear challenges (e.g., parts of central Europe) • Supply might exceed our projections (e.g., in the City of London)

21. French acquisitions 03

22. Retail – Le Printemps Le Printemps – Paris 9Purchased in Q1 2007 for a US pension fund advisory mandate Prime retail building located in the heart of Paris CBD 13,300sqm department store Risk profile = Prime Purchase price = €184,600,000 Net initial yield:4.00% Expected Unlevered Global Return:5.46% For illustrative purposes only

23. Office - Le Directoire Le Directoire - St Cloud (92) Purchased in Q1 2007 for a listed company Office building located in the WBD 12,549 sqm multi-let 100% let Risk profile = Core Purchase price: €47,400,000 Net initial yield: 5.40%  Expected Unlevered Global Return: 8.35% For illustrative purposes only

24. Office - Le Diapason Le Diapason – Paris 19 Purchased in Q1 2007 for a listed company Office building located in the 19th district of Paris 6,548 sqm multi-let 100% let Risk profile = Core Purchase price = €23,600,000 Net initial yield: 6.54%  Expected UnleveredGlobal Return: 9.49% For illustrative purposes only

25. Office - Le Verdun Le Verdun – Gentilly (94) Purchased in Q1 2007 for a listed company Office building located in the peripheric market 2,524 sqm multi-let 100% let Risk profile = Core Purchase price = €14,000,000 Net initial Yield: 4.71%  Expected UnleveredGlobal Return: 7.66% For illustrative purposes only

26. Important information INVESCO Real Estate invests in property and land. This can be difficult to sell, so you may not be able to sell your investment when you want to. The value of the property is generally a matter of a valuer’s opinion. The value of investments and the income from them can fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Past performance is not a guide to future. INVESCO Real Estate has expressed its own views and opinions in this presentation and these may change. The information in this document is selective and does not constitute an offer or an invitation to subscribe for, or purchase, any securities. Current tax levels and reliefs may change. Depending on individual circumstances, this may affect investment returns. This presentation is issued by INVESCO Real Estate for Investment Professionals only and should not be issued to, or relied upon by, other parties. No representation, express or implied, is made as to the fairness, accuracy or completeness of the information contained in this presentation and no reliance should be placed upon it. For your protection, telephone calls may be recorded. Contact London: INVESCO Real Estate 10 Mount Row London W1K 3SD United Kingdom Phone: +44 20 75 43 35 00 www.invescorealestate.co.uk A Division of INVESCO Asset Management Limited Authorised and regulated by the Financial Services Authority Registered Address: 30 Finsbury Square, London EC2A 1AG A Member of the AMVESCAP Group