Real Estate Investment Trusts • • • The United States Experience

1. Real Estate Investment Trusts • • • The United States Experience CTPA Roundtable February 2, 2006 Paris, France Tony M. Edwards, EVP & General Counsel

2. Overview • U.S. Tax Treatment of REITs and REIT Shareholders • Operation and Profile of U.S. REITs • Benefits of Investment in U.S. REITs • Globalization of Real Estate Securities • Tax Treaty Issues for REITs and REIT Shareholders

3. Qualification as REIT for U.S. Tax Purposes • Company must be in the commercial real estate business • At least 75% of assets must be real property and be held for the long-term • At least 75% of revenue must come from real estate • Stock must be widely held • At least 100 shareholders • 5 or fewer individuals can not collectively own more than 50% of the REIT’s stock

4. U.S. Tax Treatment of REITs and Shareholders • REIT structure intended to eliminate entity-level tax • At least 90% of taxable income must be distributed annually to shareholders • Company receives a dividends paid deduction • Income taxes are paid at the shareholder level

5. What is a U.S. REIT? • Full-time professional management teams • Business plans designed to maximize shareholder value • SEC financial reporting and transparency • Stock values backed by real assets • Traditional corporate governance and accountability • Tax transparency

6. The U.S. REIT Industry in 2005 • Over $475 billion of commercial real estate owned • 15-20% of investment-grade commercial real estate • More than 24,000 properties nationwide • All major property sectors • All major geographic regions • $331 billion equity market capitalization • 197 publicly traded REITs in the NAREIT index • 169 REITs trade on the NYSE • 35 REITs in S&P indexes (9 in S&P 500)

7. 5 Reasons to Invest in U.S. REITs • Diversification • Dividends • Liquidity • Performance • Transparency

8. Dividends REITs Deliver Reliable Current Income Average annual total returns: 13.8% Average annual dividends: 8.1 percentage points or 59% of total return Percent Average annual dividend return 8.1

9. DividendsU.S.REITs Produce High Yields Before-tax yields as of January 17, 2006 Percent Corporate Bonds Equity REITs 3-Month T-Bills 10-Year T-Notes S&P 500 10-Year TIPs

10. PerformanceShort-Term and Long-Term Performance Compound annual total returns in percent, December 31, 2005 3-Year Compound Total Return 30-Year Compound Total Return REITs S&P 500 REITs S&P 500

11. Globalization of Real Estate Securities • Many countries have adopted a REIT-type structure: • LPT - Listed Property Trusts (Australia) • Dutch FBI - Fiscal Beleggings Instelling (Netherlands) • S-REIT – Singapore Real Estate Investment Trust • J-REIT - Japanese Real Estate Investment Trust • SIIC – Sociétés d'investissements Immobiliers Cotées (France) • Canadian REITs – Legislated in 1993, growing universe • Belgium REITs – Growing universe • Hong Kong REITs – Largest REIT IPO Completed in November 2005 • Bulgarian REITs – Newest country with REIT legislation • Malaysian REITs – Growing universe • Under discussion: • United Kingdom – Draft legislation issued by UK Treasury in Dec. 2005 • Germany – Enabling legislation expected in 2006 or 2007

12. Tax Treaty Issues for REITs and Shareholders • Current tax treaty issues for REITs are very different than the issues with respect to collective investment vehicles • The issue that has been addressed in the United States has been treaty treatment of dividends from REITs to REIT shareholders • Key question: treatment like other dividends versus treatment like direct real estate income

13. U.S. Tax Treaty Policy for REIT Dividends • Pre-1988: • Non-U.S. investors in U.S. REITs treated the same as investors in non-REITs • REIT dividends treated like all other dividends • 1988-1997: • Non-U.S. individuals owning less that 10% of the REIT treated the same as investors in non-REITs and subject to 15% withholding tax rate • All other shareholders treated the same as direct RE investors and subject to 30% withholding tax rate (except as otherwise provided under U.S. tax code)

14. U.S. Tax Treaty Policy for REIT Dividends • 1997-today: • Non-U.S. shareholders treated the same as investors in non-REITs and subject to 15% withholding tax rate if • the shareholder owns 5% or less of the REIT and the REIT is listed • the shareholder owns 10% or less of the REIT and the REIT is diversified • the shareholder owns 10% or less of the REIT and the shareholder is an individual • Other shareholders treated the same as direct RE investors and subject to 30% withholding tax rate (except as otherwise provided under U.S. tax code)

15. Theory Underlying U.S. Tax Treaty Policy • “Our new policy takes into account that portfolio investments in a REIT whether by individuals or institutional investors may be indistinguishable in intent and results from similar investments in other corporate securities and should be afforded similar tax consequences in appropriate circumstances. “ • - Statement of Department of the Treasury Joseph H. Guttentag, International Tax Counsel Before the Committee on Foreign Relations (October 7, 1997)

16. Future Treaty Issues for REITs and Shareholders • As REITs become increasingly globalized, tax treaties can help facilitate this cross-border activity • Cross-border investment in REITs by non-residents • Tax treaties could provide rules to address the treatment of cross-border real estate investments of REITs • Tax treaties could provide rules to address the cross-border investment of one REIT in another REIT