3. Real Estate and REITs A starting point for discussion

4. Presentation map A brief history of securitised real estate What defines a REIT The benefits of investment through REITs Demand drivers and investment trends

5. A Brief History of Securitised Real Estate Post WW2 real estate investment by life companies 1960’s & 70’s: Pension fund appetite for real estate emerges 1980’s: RE recognised as a fully fledged asset class Increased familiarity of investors Availability of industry performance data (NCREIF) Risk characteristics (low correlation) 1990’s – today: RE performance as an asset class rewarded Total (risk adjusted) returns Low volatility Inflation hedging potential Portfolio diversification benefits

6. A Brief History Continued: The REIT Phenomenon In the 1960’s & 70’s the first Dutch (FBI), US (REIT) and Australian (LPT) securitised vehicles emerged Many countries have since adopted a REIT-type structure: Malaysia (1986) REIT Canada (1993) REIT Belgium (1995) REITs Singapore (1999) S-REIT Japan (2000) J-REIT Korea (2001) K-REIT France (2003) SIIC Taiwan (2003) REIT Hong Kong (2003) REIT Bulgaria (2005) REIT And more to come : United Kingdom to commence from 2007 Germany – Enabling legislation expected in 2006

7. A proposed definition of REITs A REIT is a widely held company or trust that: derives its income primarily from long term investment in real estate, distributes the majority of that income annually, and does not pay on tax the distributed income. Notes: The definition assumes that: 1. REITs satisfy all applicable domestic law; and, 2. the concept of "widely held" and 'long-term investment‘ is determined domestically.

8. REITs in common Global REITSUSAustraliaNetherlandsCanadaJapanFranceUK Date Established1960197119691993200020032006 REIT format Distributions taxed at source?No Real Estate Investments75%+ >50% of revenue from rent* 100%80%+75%+Flexible75%+ Payout >90% of taxable income (post depreciation) 100% of taxable income (post depreciation) 85% of 100% of fiscal distributable cash (pre- depreciation) >90% of taxable income (Post depreciation) 85% of taxable income from rentals, 50% of capital gains 95% of rental asset income (post allowable deductions)^^ ^

9. Five reasons for REITs Diversification Distributions Liquidity Performance Transparency

10. The REIT market is big … and will get bigger Tradable investments US $ 6.3 trillion 50% Americas 27% Asia-Pacific 23% Europe All Commercial Real Estate US $ 15 trillion 39% Americas 21% Asia-Pacific 37% Europe Sources: EPRA/NAREIT, LaSalle Investment Management Estimates are as at Q4 2005 Listed Real Estate US $ 1.3 trillion

11. Investor demand to remain strong Increased allocations to real estate & strong inflows tied to long term demographic changes: Aging of the population & demand for annuity style, low risk income streams Increased savings – pension and superannuation funds (15%/year)

12. Demand & allocations are on the rise everywhere Asia Europe US Australia free cash flow to be invested $$$ Investor allocations to real estate Source: Pinnacle Property Group

13. Domestic supply is constrained in mature markets

14. Cross border investment growing fastest 0 10 20 30 40 50 60 Domestic Intra-regional Inter-regional Overall 2005 investment growth (%) Source: Jones Lang Lasalle

15. Inter-regional capital flows of US$114bn in 2005 Source: Jones Lang Lasalle

16. Inter-regional capital flows of US$114bn in 2005 24.2 25.1 3.8 3.2 Global Source of Funds Global 5.3 0.9 Source: Jones Lang Lasalle

17. Inter-regional capital flows of US$114bn in 2005 5.3 24.2 25.1 3.8 3.2 Global Source of Funds Global 3.7 1.3 Asia Pacific 11.1 2.7 0.9 Source: Jones Lang Lasalle

18. Inter-regional capital flows of US$114bn in 2005 5.3 24.2 25.1 3.8 3.2 Global Source of Funds Global 3.7 1.3 Asia Pacific North America 2.7 1.4 9.2 6.2 11.1 2.7 0.9 Source: Jones Lang Lasalle

19. Inter-regional capital flows of US$114bn in 2005 5.3 24.2 25.1 3.8 3.2 Global Source of Funds Global 3.7 1.3 Asia PacificNorth America 2.7 1.4 9.2 6.2 11.1 2.7 Europe 0.5 0.8 6.5 5.9 0.9 Source: Jones Lang Lasalle

20. Inter-regional capital flows of US$114bn in 2005 0.9 5.3 24.2 25.1 3.8 3.2 Global Source of Funds Global 3.7 1.3 Asia PacificNorth America 2.7 1.4 9.2 6.2 11.1 2.7 Europe 0.5 0.8 6.5 2.4 8.4 2.9 1.5 0.3 0.0 Middle East 5.9 Source: Jones Lang Lasalle

21. Discussion points Real estate is an established and expansive asset class: Is this appropriately reflected under tax treaty arrangements? Investor demand for real estate will remain strong. Investors want access to international options. What tax distortions should be eliminated? REITs are key to meeting investor demand. What is an appropriate withholding rate on all REIT distributions? Should there be a different withholding tax rate for portfolio investors? REIT investors in REITs? Others?