ING Office Fund European acquisition Prague, Czech Republic Budejovicka Alej 3 July 2006
Transaction summary Key benefits Improves the Fund s earnings and growth prospects New, fully leased, high quality building Blue chip multi-national and national tenants Strategically located on key transport nodes Attractive total return outlook Geographic diversification into European Union (450million people) 2
Transaction summary Property details Location: Prague 4 (midtown) Purchase price: 37.0m Appraisal: 37.0m Initial yield: 5.8% Net initial yield (after costs): 5.5% Market rent: 174sqm (net) Passing rent: 174sqm (net) Occupancy: 99% Entrance to underground car park at Budejovicka Alej 3
Transaction summary Property details (ctd) Type: Grade A (completed 2005) Major tenants: Shell, Nissan, Deloitte, SG Equipment, AT Kearney Leases: Western style, euro denominated, annual CPI indexation, 3-7yr terms Average lease expiry: 4.5 years Net rentable area: 11,673sqm (9 storeys) Parking: 156 underground and 8 surface spaces Land area: 6,307sqm Ownership: Freehold 4
The Building Location Situated in major commercial district of Prague 4 an important centre of commerce - most sought after and established submarket - attracts high calibre multinational and national tenants Strategically located on key transport nodes - excellent public transport access via Metro - direct private transport access from main highway connecting north & south of city - Bus arrival and departure stations adjoin the property 5
The Building Location 6
Czech Republic Overview Highly liberalised and dynamic economy growing above EU average. Abundant supply of well educated, technically skilled multilingual workers Czech Republic 10.2 mill population 4.0% GDP growth 2006 $19,311 GDP per capita $41.7billl foreign direct investment (1989 2004) Low company taxes complement low wages, attracting material foreign investment Western style accommodation at Central European rents Source: Business Week, Cushman and Wakefield. Note: map adapted from AFR. 7
Czech Republic Emerging Europe s top commercial property markets Country Czech Republic Hungary Poland 2005 1 2 3 2004 1 2 3 Ranking by Macro Factors (EU accession, Politics, Economic & foreign investment) Slovakia 4 4 Estonia Russia Latvia 5 6 7 5 7 8 Property Market Activity (maturity, occupier and investment activity and values) Lithuania 8 6 Romania Bulgaria Croatia Slovenia 9 10 11 12 12 10 11 9 Property Market Structure (transparency, foreign ownership, leases, property taxes & costs, legal structure & planning) Turkey 13 13 Source: 2004 Emerging Europe report, C&W/H&B 8
Prague office market Overview Total office stock of 1.8million sqm Annual five year net absorption of 99,000sqm (5.5% of current stock)* Net absorption expected to remain at stable and high levels Increasing land values and construction costs have pushed up economic rents Forecast rental growth for 2007 2009 of 4% p/a** Further yield convergence with Western Europe expected * Cushman & Wakefield Healey and Baker ** PMA 9
Prague office market Key metrics Vacancy and its determinants on the Prague office market 250 20% 1,000 sqm 200 150 100 50 15% 10% 5% 0 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005F 2006F 2007F 2008F 2009F Net absorption (left axis) Net addition (left axis) Vacancy rate (right axis) Current overall vacancy of 12% and falling Solid forecast net absorption Source: PMA 10
Prague office market Sub markets Out of Tow n 28% CBD 23% Edge of Centre 20% Mid Tow n 29% CBD covers old city of Prague Budejovicka Alej located in midtown (largest sub market) Future growth focused in out of town locations Source: CBRE 11
The transaction Acquisition funding A$* Source of funds New property level debt 44.8m 26.0m New entity level debt 20.4m 11.8m 65.2m 37.8m Application of funds Property 63.8m 37.0m Acquisition costs 1.4m 0.8m 65.2m 37.8m * A$/ spot = 0.58 12
The transaction FX and interest rate hedging Hedged Rate Duration Property level debt 100% 4.8% 5.0 yrs Entity level debt 100% 4.7% 5.0 yrs EURO income hedge* 100% 0.55 5.0 yrs * /A$ spot = 0.58 Indicative rates, incl. margins 13
Transaction summary Global diversification Boston 4% New York 8% Washington DC 15% Dallas 3% Prague 3% Perth 2% Melbourne 12% Brisbane 15% Sydney 34% Canberra 4% 14
Summary Improves the Fund s earnings and growth prospects Highly sought after commercial property market in Central Europe New, fully leased, high quality building Blue chip multi-national and national tenants Strategically located on key transport nodes Solid rental growth outlook expected to deliver attractive total returns Geographic diversification into key European Union market 15