Communicating with Investors Managing Risk in Gulf Real

Communicating with Investors Managing Risk in Gulf Real Estate Blair Hagkull Managing Director Jones Lang La. Salle, Middle East & North Africa October 2008

Dubai : Boom or Bust – Predictions – 2006 BOOM BUST “The supply is not keeping up with demand. If this were true, then market forces would be driving rents and house prices down, and the reverse is the case. ” Dubai Property Group “The market is cooling down, we are not seeing the prices rise as we saw last year. ” Andrew Jeffreys, Editor In Chief, Oxford Business Group “Will demand ever be satisfied? I don’t think so – the constant demand for properties in Dubai will keep pushing prices up and make it into a premium city. ” Faisal Ali Moosa, Managing Partner, High Rise Real Estate “Supply will never catch up with demand… What investors are paying for is not just square feet of built up space, but a quality of life that is rarely found elsewhere in the world. ” Hashim Al Dabal, Chairman, Dubai Properties “The market has stabilized… in 2006 and beyond, unreasonable and unrealistic margins will come down to more realistic levels. ” Abid A Junaid, Executive Director, ETA Star “Property prices have jumped over 1000% over the last three year period in some places in Dubai. Can you name a place in the world where such a growth has happened without a crash following it soon? I cannot!. ” Mishal Kanoo, Deputy Chairman, The Kanoo Group 2

GCC Real Estate Investment Trends INDIRECT MEED & JLL Estimates Funds CMBS REITs …Approximately USD 2. 5 Trillion worth of real estate and infrastructure projects in the GCC… Merrill Lynch DIRECT …UAE, Kuwait and Saudi Arabia constitute 44% of the USD 1. 7 trillion equity market cap in “frontier markets”… Destination Communities Economic Cities Integrated Mixed-Use Developments Infrastructure Investment HSBC. . . Active since 1973, ADIA’s assets account for approximately one-third of the world’s sovereign wealth funds… 3

Global Ascendancy- The Expansion of the Gulf Investor Global REACH Increasing DIVERSITY Mobilize CAPITAL Leveraging EXPERTISE Gaining INFLUENCE Facilitate CHANGE …Gulf based Investors are unique in the world in that they develop other markets at the same time as they develop in their own… 4

Major GGC Real Estate Investment Bodies by Type Sovereign Wealth Funds Prime Real Estate, Low Yields, Stable Government Sponsored Companies Large Scale Investments Financial Institutions Stable, Higher Yields Family Offices “Trophy Assets” Personality Driven 5

The Rise of the Enterprising City States Dubai Hong Kong Singapor e. . . Each city state is positioned as a regional gateway and has few natural resources. . . Each city state was has a more established regulatory framework than its region. . . The GCC to achieve in 20 years what others have taken 100 years to establish 6

Inward Investment: The Past 10 Years Regional Funds International Investors 1998 2007 1999 2000 2001 Bahrain Freehold Property Law TECOM Announced 2002 2003 2004 Oman Freehold Property Law Dubai Freehold Property Law 9/11 & Repatriation Dubai 99 -Year of Arab Leasehold Law Capital Announcement 2005 Abu Dhabi, RAK, Qatar Freehold Property Law 2006 Dubai Strata Law & Green Building Code Establishment of RERA Registration of Land Titles Registration of Developers & Agents Escrow Accounting Procedure Landlord & Tenant Law – Law No 26 Strata Law – Law No 27 7

Inward Investment: The Next 10 Years Regional Funds Boutique Funds International Institutional Funds 2008 2016 2009 2017 2010 2011 2012 2013 2014 2015 Short Term Medium Term Long Term Yield Compression Increased Regulation Increased Transparency Export of Expertise Global Best Practices Excellence in Infrastructure Consolidation Maturing Market Setting Higher Standards 8

GCC Demographics: Sustaining Demand GCC Population Growth Forecast 2002 – 2007 CAGR 0. 45% 1. 00% 1. 45% -0. 40% Source: IMF & EIU … 2008 GCC population less than that of California …GCC population to double by 2030 1. 60% 0. 60% 9

GCC Economic Overview GDP CAGR 2002 – 2007 9% 2. 75% 7% 11. 5% 2. 80% 9. 4% 3. 60% 5. 5% 5. 0% 6. 90% 8. 50% Source: IMF & EIU …GCC 2002 -7 CAGR is 7. 2% 10. 60% 10

The Future: Developing International Investment Grade Product End User Compatibility International Investment Grade Product Branding / Delivery Sustainability 11

GCC Property Prices and Rents to Continue to Rise 12

The Next Wave: “Flight to Quality” Creates Two-Tier Market

“Flight to Quality” Creates Two-Tier Market 2008 Investment Grade Long Term Value § Rental Rates § Occupanc – Sustainability – Large Floor Plates y – Quality Finishes – CBD Location – Multinational Tenants Less Competitive Long Term Value § Rental Rates – Fragmented § Occupanc Management y – Small Floor Plates – Poor Finishes – Secondary Location – Small Business Tenancy January 2008 14

Assessing Risk Economic Risk § § Inflation Rate Interest Rate Economic Growth Changes in government Policies § Exchange Rates Industry Risk § Regulation / Customer specs § Cyclical nature of Industry § Competition § Barriers to Entry § Capital Intensity Company Financial Risk § § § § § Liquidity Stability of Returns Profit Margins Financial Leverage Operational Leverage Expected earnings / Cash flow growth Market share Diversification of customer base Diversification of products Geographic diversification 15

Investor Communications Appropriate to Market Understandable – “Straight Goods” Substantive vs Hyperbole Increasing Sophistication Global benchmarks - Quantify 16

Q: Best performing MENA real estate markets over next 12 Q: 24 months § Investors remain bullish towards the UAE, which is expected to show the best performance over the short-term § Saudi Arabia offers strong potential – large and rapidly growing market continues to open up and offer new opportunities § Qatar expected to offer strong performance building upon its reputation as the next emerging GCC real estate market 17

Middle East Investors: Where Next? Where? Why? North Africa Sub-Continent China Central Asia South East Asia Culture & Capital Relationships & Experience Track Record & Appetite Invitation & Proximity Culture & Inclination Sub Saharan Africa North America Opportunity Profile – Market What? Destination Communities Distressed Assets Integrated Mixed-Use Developments Infrastructure Investment 18

Middle Eastern Investment Cycle ACQUIRE Acquire § Trophy Assets § Indirect Investments § Brands - Hampton’s - Sotheby’s - Four Seasons - John Laing Leverage § § § Expertise Brands Execution Resources Experience Mobilization LEVERAGE Homes - MGM Transfer TRANSFER § Expect Development Activity § Branding § Expertise § Recognition § Capital Implement § Local Development § Regional Development § Delivery of large communities § Achievements IMPLEMENT 19

Conclusion Global Increasing Mobilize REACH DIVERSITY CAPITAL Leveraging EXPERTISE Gaining INFLUENCE Facilitate CHANGE 20

Thank You Jones Lang La. Salle MENA Blair Hagkull Managing Director Jones Lang La. Salle Middle East & North Africa blair. hagkull@jll. com This publication is the sole property of Jones Lang La. Salle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Jones Lang La. Salle IP, Inc. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. Jones Lang La. Salle does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication. COPYRIGHT © JONES LANG LASALLE IP, INC. 2008