COMPANY PRESENTATION October 2010

Transcription

1 COMPANY PRESENTATION October 2010

2 Agenda Pirelli Real Estate snapshot 3 H Results 9 Portfolio Data 24 Strategic Guidelines for Separation Plan from P&C 31 Annex 37 2

3 Pirelli Real Estate Key figures as of June 2010 A leading real estate asset manager focused on third party services with a fully integrated business model of specialistic services (agency, property and development management) and management activities (Fund & Asset management). Total Asset under Management 15.6 bn Italy 6.3 bn in Fund and Asset management Germany and Poland 6.8 bn in the residential and commercial segment Real Estate Net Asset Value Pro Quota ~ 1.2 bn Total Net Capital Invested ~ 1.15 bn Net Financial Position ~ 452 mln, gearing 0.7x market capitalization ~ 370 mln 3

4 Business model description Asset under Management (AuM) Financial Impact Target Property SPVs Property Investment Funds NPL SPVs Co-Investments Service Platform Fund & Asset management Agency Property Credit Servicing Income from investments (50%) Recurring income (50%) Recurring income 4

5 Business model by geography SERVICE PLATFORM CO-INVESTMENTS SERVICES NPLs REAL ESTATE FUNDS and ASSETS MGMT AGENCY PROPERTY FACILITY CREDIT SERVICING FUND MGMT (SGR) OTHER ASSET MGMT * EBIT including income from equity participations before restructuring costs, writedowns/revaluations and including interest income from participations 5

6 Steps paving the way for the turnaround today REFOCUS REBALANCE EFFICIENCY On core business; disposal of non-core assets Capital structure rebalance Structure optimization We are repositioning the company through clear strategic guidelines to regain market confidence and capture future sustainable growth as proven by 2009 achievements 6

7 Pirelli RE s historical picture ( m) Asset & Fund Management 59,5 73,4 74,7 81,5 73,5 61,2 Property 68,2 56,2 60,2 50,8 67,3 55,6 Agency 105,6 115,9 115,0 66,9 29,7 32,5 Credit servicing 35,0 27,3 17,1 Facility (Germany & Poland) 4,1 18,3 15,9 Recurring revenues 233,3 245,5 249,9 238,3 216,1 182,4 Promote/Success Fees 13,5 22,7 17,7 24,5 17,3 0,0 Total Revenues 252,9 272,3 269,6 274,2 235,0 195,8 Total Costs 201,2 192,3 213,3 244,8 265,2 188,0 Ebit Services platform A 51,7 80,0 56,3 29,4-30,2 7,8 20/30 Ebit Investment platform B 110,9 105,7 164,6 99,8-6,4-14,4 =/+ Total Ebit (A+B) 162,6 185,7 220,9 129,2-36,6-6,6 Real estate rev/devaluation C 67,5-135,8-31,4 Total A+B+C 162,6 185,7 220,9 196,7-172,4-38,0 NIC 813,4 883,3 1199,1 1596,5 1294,5 1173,4 NFP 245,2 292,5 430,5 816,1 861,8 445,8 stable Equity 520,0 552,1 708,7 720,1 366,4 663,1 Gearing 0,5 0,5 0,6 1,1 2,4 0,7 Headcounts

8 Pirelli Real Estate Strategy Optimising the portfolio through active asset management and disposals on non strategic assets Playing an active role in the consolidating Fund Management sector in Italy without additional co-investments Boosting service activities increasing third parties market Continuing a de-risking approach in the Germany & Poland actively managing the portfolio while seeking for partners Maintaining financial discipline 8

9 Agenda Pirelli Real Estate snapshot 3 H Results 9 Portfolio Data 24 Strategic Guidelines for Separation Plan from P&C 31 Annex 37 9

10 Results and Targets /mln H H FY 2010 target FY 2009 Real Estate Sales ( /mln) 1) ,300-1,500 1,031 Service Platform incl. G&A (3.2) +20/ ) Fixed Cost Saving (versus previous year) / NFP (excluding shareholders's loan) (452.3) (828.5) stable (445.8) 1) Thanks to the placement of the Anastasia Fund, sales will reach approx. 771 mln 2) Including 13.5 mln related to 10% Pirelli RE SGR and 20% Credit Servicing shares disposals 10

11 Consolidated Profit and Loss /mln ACTUAL JUNE 2010 ACTUAL MARCH 2010 ACTUAL JUNE 2009 Revenues of which service activities of which other revenues EBIT services Income from equity participations services (5.2) 2.0 Service platform/g&a (3.2) EBIT consolidated investment activities Income from equity participations Interest income from Shareholders' loans (4.0) (2.2) 12.9 (1.2) (0.1) (22.8) 13.7 Investments (6.0) EBIT incl. income from equity part. & interest income from shareholders' loans (9.2) Restructuring costs Real estate writedowns/revaluations 1) 0.0 (18.3) (11.5) (4.8) EBIT incl. inc. from equity part.after restr. costs, writedown/ reval. (0.4) 10.3 (25.6) Financial charges Profit before taxes (11.9) (12.3) (5.2) 5.0 (14.7) (40.3) Income taxes Net income (8.1) (20.4) (4.1) 0.9 (2.4) (42.7) Minority interests (0.5) (0.6) 0.4 Net income after minority interests (20.9) 0.4 (42.3) 1) Market appraisals by indipendent evaluators are updated on a six month basis 11

12 Segment Report /mln Italy GermanyTotal Poland NPL Holding Service platform Vehicles & funds EBIT including income and interest income SH Loans (0.9) (0.1) (0.6) (2.4) (5.2) (10.0) 11.2 (3.2) 2.8 (10.3) 4.3 (0.9) (1.5) (6.0) 18.0 (3.6) (2.1) 1.0 (5.2) (10.0) 17.9 (9.2) 12

13 Impact of Real Estate Writedowns and Revaluations on P&L /mln Writedowns June 2010 (18.3) June 2009 (50.3) June 2009 Revaluations Revaluations 45.5 Total impact (18.3) (4.8) 45.5 June 2010 (18.3) (4.8) (18.3) Writedowns (13.0) Italy (50.3) (5.3) Germany Writedowns 13

14 Sales trend /mln 1,300/1,500 Italy Germany Poland Development ~250 Gross margin of sales is approx. +5% as of June 2010 ~1,050 Trading & Soho ~200 Other ~600 Sales price vs market value is approx. -0.5% as of June Anastasia fund ~ ~50 Target 2010 June 2010 June

15 Fund Management New business for third parties /bln Expected new assets under Management Effective from Progetto Mida 0.6 Jan 2010 Fondo Anastasia Fondo Fedora 0.1 / / 2012 Enasarco 0.6 / / 2012 Total 1.6 / / /

16 Update on Cost Saving 2010 vs 2009 /mln Consulting costs IT & Communication +1.2 Depreciations +0.9 Others fixed costs Headquarters ) +25 / +30 Fixed Costs Saving s 6/2010 Labour Labour costs costs Marketing +0.7 Travel +0.8 Other ) Target H 10 1) Includes cost of Directors 2) Includes provisions, consummables and other 16

17 NFP excl. Shareholders Loans /mln (43.4) NFP Dec 2009 NFP Mar 2010 Sales / distributions Equity contrib. to funds and SPV Layoff Interests and other financial expenses Capex and other NFP Jun

18 Consolidated Net Cash Flow /mln ACTUAL JUNE 2010 ACTUAL JUNE 2009 Ebit before restructuring costs, reval./deval. Depreciation Change in investments Change in other fixed assets Change in NWC, Funds Free cash flow (0.3) (30.8) (15.2) (2.0) 3.6 (37.5) (0.7) 15.7 (20.8) Restructuring costs Interest income/expenses and taxes Cash flow before dividends (7.5) 2.3 (20.5) (23.6) (3.4) (47.8) Dividends paid Net cash flow before shareholders loan (20.5) (47.8) Shareholders loan (14.0) (81.2) Net Financial Position variation (6.5)

19 Consolidated Balance Sheet /mln ACTUAL JUNE 2010 ACTUAL December 2009 ACTUAL JUNE 2009 Fixed assets of which participations of which goodwill Net working capital Net invested capital Net equity of which Group net equity Funds Net financial position (NFP) of which Shareholders' loan (390.5) (404.4) (491.1) Total sources NFP excluding shareholders' loan NIC excluding shareholders' loan 1, , ,196.4 Gearing

20 Group Corporate Lines Current Situation Situation post separation Bank Commitment Expiry Bank Commitment Expiry CLUB DEAL (*) 320,000 lug-12 WEST LB 50,000 mag-11 UNICREDIT 25,000 dic-10 POP MILANO 10,000 lug-11 RBS 25,000 feb-11 CLUB DEAL (*) WEST LB UNICREDIT POP MILANO RBS PIRELLI & C. (**) 320,000 50,000 25,000 10,000 25, ,000 lug-12 mag-11 feb-11 lug-11 feb-11 lug-12 TOTAL 430,000 TOTAL 580,000 AVERAGE RESIDUAL LIFE 21 months AVERAGE RESIDUAL LIFE 22 months (*) Club Deal Partecipants: Unicredit 100M Banca Popolare Sondrio 20M Intesa SanPaolo 50M Banca Popolare Emilia Romagna 20M Monte Paschi Siena 50M Banca Carige 20M Banca Popolare Milano 50M UBI - Centrobanca 10M (**) Previously it was an uncommitted line; 20

21 Pirelli RE Debt Structure as of June Net Financial Position mln Maturity % 81% Gross Debt Liquidity NFP Total Commitment

22 Financial situation of partecipated vehicles/funds 1/2 /bn AUM ) 2) 10.5 Net debt as of June 30, 2010 Refinancing ,4 AuM 100% Net Debt 100% Net Debt proquota NPL Real Estate Beyond 1) Participated Real Estate+ NPL 2) Due to maturity 22

23 Financial situation of partecipated vehicles/funds 2/2 Bank Loan characteristics 1) LTV 67%: Italy 56%, Germany 80% and Poland 38% Ero B o M?? Average Duration close to 3.2 years (PRE pro-quota 3.0): Italy 2.7, Germany 3.6 and Poland 1.8 years Average spread: 222 bps (PRE pro-quota 177 bps) 83% hedged interest rate risk (PRE pro-quota 77%) Pro-quota recourse guarantees pro-quota for approx. 29 mln/ 1) Excluding NPL and subsidiaries. 23

24 Agenda Pirelli Real Estate snapshot 3 H Results 9 Portfolio Data 25 Strategic Guidelines for Separation Plan from P&C 32 Annex 38 24

25 Asset Allocation by Country (Market Value as of June 2010) Total Asset Under Management Open Market Value (15.6 /bln) ( /bn) NPL 1.5 (*) Poland 1% Real Estate 14.1 of which partecipated 13.1 Germany 47% Italy 52% ITALY 6.3 /BLN AUM GERMANY 6.6 /BLN AUM POLAND (**) 0.2 /BLN AUM Real Estate 14.4 Germany 49% Italy 50% (*) NPLs at Net Book Value (**) Only Residential Development 25

26 Key Real Estate Portfolio Data as of June 2010 /mln Mkt. Value 100% Mkt. Value PRE pro-quota Net Debt Net Debt 1) % PRE pro-quota (27% average) Book Value PRE pro-quota UCG PRE pro-quota LTV NAV PRE pro-quota NIC PRE pro-quota IAS 40 % ITALY 6,254 1,775 3, , % % GERMANY 6,644 1,664 5,566 1,325 1, % % POLAND % % TOTAL REAL ESTATE 13,070 3,503 9,163 2,348 3, % 1, % NPL (investment) SERVICES TOTAL PIRELLI RE ,146 1) Participated AUM (market value) NOTE: The difference between NAV and UCG+NIC (equal to 177 mln) is due to other assets and liabilities not included into the calculation of real estate NAV 26

27 Agenda Pirelli Real Estate snapshot 3 H Results 9 Portfolio Data 24 Strategic Guidelines for Separation Plan from P&C 31 Annex 37 27

28 Economic and Financial Targets for 2010 Real Estate Assets sales 1.3 / 1.5 /bln Stable AUM with a shift in geographical distribution (increase in Italy and continuous reduction abroad) Co-investments to 22-23% Continued disposal effort of low yield Soho and Trading assets (~200 mln) EBIT Service platform incl. G&A 20 / 30 /mln Back to profitability at operating level by increasing recurring returns and leveraging on further cost reduction Focus on Fund Management (SGR) exploiting both organic and external growth In NPLs increase credits collections and get services back to profitability Fixed Cost Saving 25 / 30 /mln 60% effect of actions implemented in 2009 NFP Substantially stable Financial discipline 28

29 Agenda Pirelli Real Estate snapshot 3 H Results 9 Portfolio Data 24 Strategic Guidelines for Separation Plan from P&C 31 Annex 37 29

30 Pirelli Real Estate Separation Plan: strategic rationale Feb.11, 2009: '09-'11 "Transformation path announcement assets portfolio reshaping & core business focalization In the last 18 months Pirelli RE changed its business model, went through a deep restructuring program, strengthened its capital structure and reached financial sustainability Today the Real Estate market is showing signs of recovery Right time to split the 2 businesses with benefits for both P&C and PRE shareholders Benefits for P&C Benefits for PRE Corporate structure streamlining: a clearer equity story with a positive impact on valuation metrics Free-float increase & higher stock liquidity More corporate contestability More flexible capital structure Better chance to create a platform for future industrial aggregation 30

31 Pirelli Real Estate Separation Plan: process (1/2) STEP 1: P&C SHARES REVERSE STOCK SPLIT Par value of ordinary and savings shares cancelled, followed by a split by category 1:11 Ratio SHARES AFTER REVERSE SPLIT 475,740,182 Ordinary shares 12,251,311 Savings shares 487,991,493 Total shares 1) Post reverse stock split accounting value Capital Euros 2) 3.19 per share = Total number of shares Rights on savings shares will remain the same 1)P&C own shares, post reverse split, equal to 351,590.9 ordinary shares and 408, )P&C capital 1,556,692,

32 Pirelli Real Estate Separation Plan: process (2/2) STEP 2 Assignment of Pirelli RE shares in portfolio through voluntary corporate capital reduction to P&C ordinary and savings Shareholders PRE s P&C Shareholding Assignment ratio 1:1 In shares 487,798,972 P&C s PRE shares to be assigned to Shareholders after reverse stock split (*) P&C s PRE shares not to be assigned to avoid split Capital reduction equal to PRE stake value assigned to P&C Shareholders Stake % 487,231, , % Price listed the day before the P&C Extraordinary Shareholders Meeting when transaction is approved (*) Post reverse splitting P&C s own shares in the portfolio, that is 351,590.9 ordinary shares and 408,342.6 savings shares shall not benefit from assignment rights to be attributed to P&C Shareholders in the 1:1 ratio. 32

33 Pirelli Real Estate Separation Plan: timing May, 4th 2010 Board of Directors by July 2010 P&C Extraordinary Shareholders Meeting to approve: Shares value cancellation and reverse stock split Capital reduction through assignment of goods in kind by July 2010 Entry of the decision into the Registry of Companies by October 2010 Creditors opposition deadline by October 2010 PRE shares assigment 33

34 Pirelli Real Estate Separation Plan PRE equity structure changes CURRENT POST SEPARATION Camfin 14.8% Floating 1) 42% Pirelli & C 58% Other members of the P&C shareholders agreement Floating 2) 69.4% 15.8% To guarantee stability of Pirelli RE shareholding basis, some members of P&C shareholders agreement, to become future PRE shareholders, expressed their positive views to enter an agreement involving less than 30% of the relevant share capital. 1) Inclusive of PRE s own shares (0.1% of circulating capital) and stake of Intesa San Paolo, Assicurazioni Generali and Unicredit worth 0.1% 2) Of which 27.4% ex P&C floating (net of own shares) and 42% ex PRE floating 34

35 Annexes 35

36 Annexes A guide to better understand our numbers 38 Details by Country 42 H Economic Results details by Country 53 Additional Information 59 36

37 A guide to better understand our numbers INDICATORS DRIVERS Sales of consolidated assets Offer of specialised services (listed below) Revenues Asset & Fund Mgmt.: Active Management. Blended average fee 0.5 % on Book Value. Additional fees in case of Success fees in case of performances exceeding targets Agency: Blended avg. fees 1.5-2% on Assets rotations. Expected ROS 20-25% Property: Various Service related to the portfolio. ~ 2%of total rents collected. ROS approx. 15% Credit Servicing: 5% Gross Fees on credit collections Ebit from services platform Ebit from consolidated investment Disposal of consolidated assets/activities activities Pro Quota net income from sales of minority investments Income from equity participations 37 (funds/ vehicles) Capital gain on participation disposals

38 A distinctive and refocused business model A lower risk profile approach - based on increasing recurring income from the service platform - for more predictable results Trend: growth EXPECTED CONTRIBUTION TO P&L Trend: reduction Income from equity participations Recurring income TRENDS CO-INVESTED PORTFOLIO SERVICE PLATFORM (CAPTIVE) management Agency Property Management Development Management Credit Servicing 38 SERVICES Funds and assets Real Estate Funds Real Estate SPVs NPLs THIRD PARTIES PORTFOLIO (NON CAPTIVE)

39 Pirelli RE services: overview TECHNICAL SERVICES ACTIVITIES PROPERTY Valuations Due Diligence Lease contract administration Document Management ITALY GERMANY COMMERCIAL SERVICES DEVELOPMENT MANAGEMENT Integrated valuation: From feasibility study to completion From technical, economical, financial to environmental aspects ITALY GERMANY POLAND 39 AGENCY Acquisitions Sales Leasing Financial Services ITALY GERMANY POLAND CREDIT SERVICING NPL Management Loan Portfolio Enhancement Monitoring of legal actions Property auctions ITALY

40 Annexes A guide to better understand our numbers 38 Details by Country 42 H Economic Results details by Country 53 Additional Information 59 40

41 Italy: Key Real Estate Portfolio Data as of June 2010 /mln Mkt. Value 100% Mkt. Value Book Value UCG Net Debt PRE pro-quota 1) PRE pro-quota PRE pro-quota PRE pro-quota LTV NAV NIC PRE pro-quota PRE pro-quota COMMERCIAL YIELDING & CORE 4,013 1, % TRADING & SOHO % DEVELOPMENT 1, % TOTAL ITALY 6,254 1,775 1, % Development 21% Italian participated portfolio 6.3 mln 1) Trading & Soho 15% Commercial Yielding & Core 64% Participated AUM (market value) NOTE: The difference between NAV and UCG+NIC (equal to 78 mln) is due to other assets and liabilities not included into the calculation of real estate NAV 41

42 Pirelli RE SGR: leader in the Italian fund management industry Italian leader with 18% market share Strategic partnership with Intesa San Paolo bank to exploit market opportunities Track record in the performance of the funds under management and in product innovation Fully integrated offer: From Fund Mgmt to specialised services (agency, property) Fund Mgmt market only segment in the real estate market expected to growth 1) Source: Our analysis on half year report Fondi Immobiliari Italiani Assogestiioni June

43 Pirelli RE s Service Platform will capture organic and consolidation growth opportunities Structural room for growth (NAV of RE funds and REITs / Value of the existing RE stock)* and short-medium term growth possibilities ( bn, AuM) 37.3% result in a consolidation opportunity 120% 48-64% % 100% 23 smaller SGRs Total 100% 80% % 60% 12.3% 40% 61% 42% 20% 19% 0% France Germany Italy AuM 31-Dec-08 *All data exclude residential assets (2007 data) Source: Scenari Immobiliari, Cushman Wakefield Expected AuM increase propelled by the launch of new products (PRE) Top 5 SGRs AuM 31-Dec-11 42% includes: Investire Immobiliare SGR BNP REIM SGR Fimit SGR First Atlantic SGR Source: Assogestioni Capture third party AuM without additional equity investment through leveraging on leading market position and the development of new investment products Consolidation opportunities offered by highly fragmented Italian SGR market Source: analysis and estimations of Value Partners based on data from Prometeia, Scenari Immobiliari, Inrev, AIFI, Pirelli RE 43

44 Organic growth new business from existing funds and development of new products Funds Description Casse and Enti di Previdenza Funds for Public Entities and Pension Funds Government Programs Other Public Entities (INAIL, INPS, etc.) First Generation Pension Funds New Generation Pension Funds Development of new Funds (through contribution of assets and blind pools of equity) in order to rationalize and efficiently manage the real estate assets of Public Entities and Savings Associations (so called Casse). Funds which can invest up to 20% of the total assets in RE. The other real estate assets in these funds can be transferred to specialized real estate funds through contribution. The 2006 pension fund reform gives the possibility to allocate to investment funds the Severance Indemnity Fund (TFR); the reform has unlocked the potential for significant flows into real estate funds. Sales programs from public entities Social housing Funds targeting disposals by national and local / public entities. Funds targeting social housing developments with high standards and energy saving in urban areas with a high population density. Transfer to Funds of distressed assets Funds which target distressed assets: use of speculative reserved real estate fund as a tool for executing debt restructurings among: i) debtor, owner of a real estate portfolio with high debt level; ii) banks, owners of real estate financing mortgages; iii) SGR with mandate for management and creation of the fund. Distressed Portfolios Equity restructuring in distressed Funds through issue of new privileged units Specialized Funds International Investors Family officers Funds created through contribution of existing assets and/or blind pools of equity targeting value added and opportunistic investments Core Funds and Foreign Investors Foreign Investors Sovereign Wealth Funds German Open-Ended Funds Funds investing in core assets with a hold strategy (i.e. Trophy Fund), in primary locations and leased to tenants of high credit standing on long-term contracts. Funds which gain real estate exposure through investments in mezzanine financing. New Products Fund of funds Alternative funds (distressed debt) Mezzanine funds Alternative energy funds (i.e. photovoltaic) Senior housing 44 Funds which target opportunities dedicated to the senior/retired people (over 65) through direct acquisition of residential real estate and conversion or development of senior housing facilities which is later leased to the target market generating an yield.

45 Pirelli Real Estate NPLs: snapshot Breakdown by Geography(*) Total porfolio AUM 1.5 /bln Net Book Value Secured 63% Strategy PRE Credit Servicing (PRECS) received from Standard & Poor s an evaluation of strong reaching the top of the ranking Leading Company with approx. 200 employees and 6 branches across Italy (*) Based on Gross Book Value corresponding to the nominal face value of the loans (**) In June 2009 Calyon acquired 20% stake in Pirelli Re Credit Servicing (PCRS) (***) CFT portfolio is the only investment done at 100% by PRE (****) Net Book Value is the residual purchase price of the loans 45 Improving the performance of the existing Investments PRE has been selected by Calyon (**) as a preferred partner in Italy Pirelli Re investments are done thought minority stake (***) Major Partner: Calyon Other partners: Morgan Stanley / General Electric Total invested capital 104 mln in 12 portfolios Net Book Value(****) 1.5bln, Gross Book Value 9.5bln Services Investments Partially Secured 21% Unsecured 16% Key Information Services Breakdown by typology(*) portfolios to maximize the return on invested capital No further co-investments in new portfolios Targeting yearly /mln collections Efficiently managing the existing portfolio Acquiring third parties mandates thanks to: Strong partners Unique skills in managing the entire process (from acquisition to financial and operating structuring)

46 Germany & Poland: Key Real Estate Portfolio Data as of June 2010 /mln Mkt. Value 100% Mkt. Value Book Value UCG Net Debt PRE pro-quota 1) PRE pro-quota PRE pro-quota PRE pro-quota LTV NAV NIC PRE pro-quota PRE pro-quota DGAG (Residential) % BAUBECON (Residential) 1, % HIGHSTREET (Commercial) 3, % Other (Ger) % Development (Poland) % TOTAL GERMANY 6,644 1,664 1, ,325 80% TOTAL POLAND % ) Participated AUM (market value) NOTE: The difference between NAV and UCG+NIC (equal to 99 mln) is due to other assets and liabilities not included into the calculation of real estate NAV 46

47 Pirelli RE in Germany : snapshot Germany AuM 6.6 /Bln (*) Portfolio Main Characteristics Limited net invested capital in real estate 233m ( total 866m) Exposure in residential and retail sectors Approx units managed ( m²) o/w approx owned (in joint venture) and of third parties Commercial Portfolio: Assets with 3.3 mln m² Gross Leasable Area 6 Commercial development projects: m² (Hamburg & Dresden) Shopping center management: Property Management of 6 centers in Hamburg, Konstanz, Mülheim and Krefeld (*) Development areas are areas where a buyer has already being identified and signed a preliminary contract 47

48 Residential Portfolio: a snapshot (FY 2009) Total Asset Under Management at Market Value of 2.8 /bln The portfolio in JV focused in North (59%) followed by Middle (19%) and East (18%) Units under management Overall Vacancy rate 4,2% Annual estimated net contracted rent 185 /mln Yield on MV approx. 6.7% Hannover 14% Kiel 24% Sudwest 4% Magdeburg 5% Berlin 18% Hamburg 20% Lubeck 15% The figures are estimated at December 31,

49 Residential Portfolio key data BauBecon Starting date: 2007 Numbers of units: 25,900 (of which resricted) Rented SQM: 1.6 mln Main cities: Berlin, Hannover Magdeburg NCR Monthly: 8.3 mln Vacancy (units): 5.0% Yield on MV app. 6.4% DGAG Starting date: 2007 Numbers of units: (of which 7,600 restricted) Rented SQM: 1.1 mln Vacancy - DGAG 4.0% Main cities (Kiel, Lubeck) NCR Monthly: 5.5 mln Vacancy (units): 2.4% Yield on MV app. 7.3% 3.5% 3.3% 3.6% 2.9% 3.0% 3.0% 2.5% 2.4% 2.0% Dec-07 SMALL DEALS Starting date: 2006 Numbers of units: 4,500 (of which 400 restricted) Rented SQM: 0.3 mln Main cities Berlin, Rostock, Dresden, Dusseldorf NCR Monthly: 1.6 mln Vacancy (units): 4.9% Yield on MV app: 6.4% 49 Dec-08 Jun-09 Dec-09 Vacancy - SMALL DEAL 9.0% 8.0% 8.3% 8.2% 7.0% 7.2% 7.0% 6.0% 5.0% 5.0% 4.0% Dec-07 The figures are estimated at December 31, 2009 Jun-08 Jun-08 Dec-08 Jun-09 Dec-09

50 Commercial Portfolio: Key data (FY 2009) Total Asset Under Management at Market Value 4.1 bln Total annual passing rent ca 277 mln Highstreet n.157 assets almost fully let to Karstadt and passing rent 271 mln Mistral: 6 trading assets and 4 development projects to be completed in 2010 MISTRAL Development HIGHSTREET Sale and lease back year lease N. 4 Development project in Hamburg Starting date: 2008 Starting date: 2007 Assets:ca 157 throughout Germany Surface: SQM Lettable area SQM 2.1 mln Main assets: KaDeWe Berlin, Munchen Oberpollinger Portfolio almost fully let to Karstadt Breakdown of total area by use Office 2,5% Passing rent (estimated): 6.7 mln Vacancy Rate: 16.0% Gross yearly rents ca 269 mil Sporting goods stores 2,5% Logistics 3,4% Potential rent: 8.1 mln Other 2,2% MISTRAL Trading N. 6 Trading assets Starting date: 2007 Surface: SQM Department Stores 83,7% Parking 5,7% Potential rent: 7.3 Passing rent 6.6 mln Vacancy Rate: 11.5% The figures are estimated at December 31,

51 Annexes A guide to better understand our numbers 38 Details by Country 42 H Economic Results details by Country 53 Additional Information 59 51

52 Economic Results Total Pirelli RE /mln JUNE 2010 MARCH 2010 JUNE (3.2) Result from vehicles & funds (6.2) (1.2) (19.8) of which Real estate (3.4) (3.5) (22.8) of which NPL (2.8) Int. Inc. from shareholders' loans (6.0) (9.2) Service platform & G&A Revenues Services Platform/G&A Result Vehicles & funds Vehicles & Funds Result (*) Total Result (*) (*) Result' represents EBIT including income from equity participations including interest income from shareholders loans 52

53 Economic Results Italy /mln JUNE 2010 MARCH 2010 JUNE 2009 Revenues Fund & AM Fee Result Revenues Agency Result (3.5) Revenues Property Result Total Revenues Service Platform Result Result from vehicles & funds 0.0 (0.1) (14.6) Int. Inc. from shareholders loans Vehicles & Funds Result (*) (10.3) Total Italy (*) (3.6) Fund & AM Fee Agency Property (*) Result' represents EBIT including income from equity participations including interest income from shareholders loans 53

54 Economic Results Germany /mln JUNE 2010 MARCH 2010 JUNE 2009 Fund & AM Fee Revenues Fund & AM Fee Result Revenues Agency Result Revenues Property Result Revenues Facility Result (0.1) (0.5) (0.4) Total Revenues Service Platform Result Agency Property Facility (3.6) (3.4) (8.8) Int. Inc. from shareholders loans Result from vehicles & funds Vehicles & Funds Result (*) (0.9) Total Germany (*) (*) Result' represents EBIT including income from equity participations including interest income from shareholders loans 54

55 Economic Results Poland /mln Fund & AM Fee Revenues Fund & AM Fee Result Agency Revenues MARCH 2010 JUNE (0.2) (0.1) (0.5) (0.1) (0.0) (0.1) Facility Result (0.5) (0.2) 0.6 Total Revenues (0.9) (0.3) (0.1) Result from vehicles & funds Int. Inc. from shareholders loans Vehicles & Funds Result (*) Total Poland (*) Agency Result Facility JUNE 2010 Revenues Service Platform Result (*) Result' represents EBIT including income from equity participations including interest income from shareholders loans 55

56 Economic Results NPL /mln JUNE 2010 MARCH 2010 JUNE 2009 Service platform Revenues (0.6) (0.0) (2.4) Result from vehicles & funds (2.8) Int. Inc. from shareholders' loans Vehicles & Funds Result (*) (1.5) Total NPL (*) (2.1) Services Platform Result Vehicles & funds (*) Result' represents EBIT including income from equity participations including interest income from shareholders loans 56

57 Annexes A guide to better understand our numbers 39 Details by Country 44 H Economic Results details by Country 55 Additional Information 59 57

58 Real Estate Writedowns and Revaluations (FY 2009) P&L Impact /mln Revaluations Italy Revaluations Total Regione Sicilia Fund 8.6 Trophy assets Fund R&E 27.2 (16.5) (52.3) Various investment 67.4 Writedowns (31.4) Germany and Poland Revaluations Small Deal DGAG 1) (14.9) Writedowns (46.6) Highstreet for (40.8) Writedowns 1) Includes -0.2 /mln related to Baubecon Investment as the difference between revaluations and writedowns (IAS 40/IAS2) 58

59 Participated Real Estate Assets under Management 1H % Quota PRE Passing Rent Vacancy Book Value Market Value Net Debt Passing Yield ( /000) Commercial Core Italy Fondo TECLA Fondo Cloe FONDO RETAIL & ENTERTAINMENT 44.8% 18.1% 31.6% Commercial Yieding Italy Fondo FIRPS TIGLIO 1 Fondo Raissa Fondo Olinda Dolcetto Tre S.r.l. PROGETTO PERUGIAsrl Fondo Armilla FONDO SPAZIO INDUSTRIALE FONDO HOSPITALITY & LEASURE 22.0% 12.9% 35.0% 11.3% 33.0% 100.0% 2.0% 22.1% 35.0% TOTAL Italy Commercial Germany Mistral Properties 35.0% Residential Yielding Germany DGAG - Residential+Special Properties BIB Small Deal TOTAL Germany 40.0% 40.0% 49.9% 2) TOTAL YIELDING PORTFOLIO Residential Small Office House Office ITA Development ITA Highstreet Germany 3) Development Germany Development Poland OTHER PORTFOLIO GRAND TOTAL REAL ESTATE 95, % 7.7% 1,612,607 1,738,160 1,082,738 40,073 30,511 24, % 6.8% 5.1% 8.1% 10.7% 688, , , , , , , , , , % 8.5% 2,153,269 2,274,540 1,108,842 20,390 13,413 21,046 32,570 1,426 1,984 16,878 34,876 9, % 7.7% 6.8% 6.3% 10.4% 6.1% 7.5% 7.2% 8.5% 286, , , ,103 13,675 32, , , , , , , ,010 19,100 34, , , , , , , ,411 9, , ,581 77, , % 8.4% 3,765,876 4,012,700 2,191,581 6, % 9.1% 104, ,910 65,878 6, % 9.1% 104, ,910 65, , % 2,728,803 2,762,449 2,154,861 66, ,651 18, % 6.7% 6.6% 2.4% 4.8% 5.4% 904,335 1,540, , ,151 1,552, , ,270 1,302, , , % 4.6% 2,833,795 2,869,359 2,220, , % 6.4% 6,599,671 6,882,059 4,412,319 14,791 2,401 n.m. n.m. n.m. n.m. 822,470 1,217, ,017 1,296, , ,528 3,279, % 4.0% 1.7% 3.1% 4.1% 1) 271,166 n.m. n.m. 3,650,000 4) 3,650,000 5,364 n.m. n.m. 111, ,430 65, n.m. n.m. 130, ,297 60, ,930 5,932,313 6,187,548 4,750, ,211 12,531,983 13,069,607 9,162,529 1) Vacancy calculated on units 2) Excluding Highstreet 3) Passing rents not including potential changes related with the current negotiation on the restructuring of Karlstadt group 4) Pending finalization of the negotiations aimed at restructuring the Karstdat group, the Highstreet s real estate market value has been conventionally estimated consistently with the expectations of recovery of the remaining net invested capital equal to approx mln 59

60 Pro-quota Real Estate Assets under Management 1H 2010 Quota PRE ( /000) Passing Rent pro-quota Passing Yield Vacancy 31, % 7.5% 540, , ,529 17,953 5,523 7, % 6.8% 5.1% 8.1% 10.7% 308,570 80, , ,330 99, , ,732 49, ,218 30, % 5.6% 439, , ,335 4,478 1,729 7,366 3, , ,715 3, % 7.7% 6.8% 6.3% 10.4% 6.1% 7.6% 7.2% 8.5% 62,969 22, ,315 58,546 4,513 32,737 4, ,506 37,375 63,646 27, ,844 64,185 6,303 34,200 4, ,826 37,884 46,443 15,344 40,557 27,392 3,208 2,716 51,434 27,241 62, % 6.2% 979,258 1,023, ,864 2, % 10.1% 44,556 45,234 27,790 Commercial Core Italy Fondo TECLA Fondo Cloe FONDO RETAIL & ENTERTAINMENT 44.8% 18.1% 31.6% Commercial Yieding Italy Fondo FIRPS TIGLIO 1 Fondo Raissa Fondo Olinda Dolcetto Tre S.r.l. PROGETTO PERUGIAsrl Fondo Armilla FONDO SPAZIO INDUSTRIALE FONDO HOSPITALITY & LEASURE 22.0% 12.9% 35.0% 11.3% 33.0% 100.0% 2.0% 22.1% 35.0% TOTAL Italy Commercial Germany 35.0% Mistral Properties TOTAL Germany 27, , % 4.8% 5.4% 370, , , , , , , ,816 88, % 4.7% 1,156,857 1,171, , , % 5.2% 2,136,114 2,194,727 1,485,987 5, n.m n.m n.m n.m 290, , , , , ,873 32,811 2,302 n.m n.m n.m n.m 441,650 45, ,650 51, ,223 29, n.m n.m 49,560 64,827 24,485 40,865 1,210,723 1,308, , ,713 3,346,837 3,503,494 2,347,758 3) Development Poland OTHER PORTFOLIO GRAND TOTAL REAL ESTATE 3.1% 45,234 Residential Small Office House Office ITA Development ITA Development Germany 1.7% 1,125,973 2) Highstreet Germany 4.0% 2, % 10.1% 76, % 4.1% 26,614 41,060 8, % 6.7% 6.6% 78,681 Net Debt Pro-quota 44, % 40.0% 49.9% TOTAL YIELDING PORTFOLIO 45.9% Market Value Pro-quota 1,112,301 Residential Yielding Germany DGAG - Residential+Special Properties BIB Small Deal Book Value quota PRE 1) 4) 1) Vacancy calculated on units 2) Excluding Highstreet 3) Passing rents not including potential changes related with the current negotiation on the restructuring of Karlstadt group 4) Pending finalization of the negotiations aimed at restructuring the Karstdat group, the Highstreet s real estate market value has been conventionally estimated consistently with the expectations of recovery of the remaining net invested capital equal to approx mln 60

61 Pirelli RE shareholders structure Market capitalization as of 30 September 2010 approx. 370 /mln Shareholders Structure Other 3.71% Institutional 15.54% Pirelli & C 58% Retail 22.75% International institutional investors (UK 39%, USA 18%, Italy 19%) Retail investors reached approx 23% of the free float 61

62 Gerardo Benuzzi, Pirelli Re s Financial Reporting Officer, declares, pursuant to article 154-bis of the Uniform Financial Act (Decree 58/1998) that the accounting information contained in this presentation, corresponds to the underlying documentary records, books of accounts and accounting entries. 62