Real Estate Assets Investment Trend Indicator

Real Estate Assets Investment Trend Indicator Belgium 2014 Under embargo till Monday 13 January 8am

Agenda Real Estate Assets Investment Trend Indicator Belgium 2014 About the trend indicator 2014 Market outlook for Belgium 2014 Investment strategy for Belgium 2014 European outlook for 2014 Page 2

Key findings 2014 for Belgium Attractiveness Capital markets Transaction market Price trends Sellers, buyers Impediments Use types Preferred regions A high proportion of respondents (80%) see Belgium as an attractive or very attractive location to invest in real estate. Alternative debt providers as insurance companies, pension funds or debt funds will become more important in 2014. Basel III-effects on classic bank real estate loans will probably gain momentum. Prices in prime locations tend to increase for all types of use. Decreasing prices in peripheral areas. Seller groups: international funds, corporates and opportunity/pe funds. Buyer groups: opportunity/pe funds and private/family offices. A price mismatch between buyers and sellers is viewed as the major barrier for deal flows. Strongest investment focus on retail and residential properties. The preferred cities for investment are Brussels (office and residential) and Namur (retail). Page 3

Our trend indicator covers a broad range of investor groups in Belgium Trend indicator: real estate investment market The trend indicator is based on a survey of 20 companies that have been active in the Belgian property market in recent years. The survey focuses on two main areas: Assessment of the Belgian real estate investment market for the year to come. Outlook on the strategies that Belgian investors will pursue in the coming year. In addition to Belgium, this survey was conducted simultaneously in 14 other European countries. The different types of investor groups surveyed: Banks Closed-ended real estate funds Real estate stock corporations/reits Institutional investors Opportunity/private equity funds Insurance companies Housing companies Other investment vehicles Background EY has conducted this survey in Belgium since 2012. 20 investors reported on their expectations for the coming year. Objectives Assessment of the Belgian real estate investment market for the year to come. Outlook on the strategies that Belgian investors will pursue in the coming year. Method The trend indicator is based on a survey conducted by Valid Research in November and December 2013. The feedback from the interviews forms the results of the real estate trend indicator. Page 4

The survey was also conducted in other European countries European trend indicator: real estate investment market Participants from 15 European countries took part in the survey. All surveys took place in November and December 2013. Feedback was gathered from more than 500 companies operating in the real estate market in the surveyed countries. Those countries that have participated are listed below. Participating countries Austria Belgium France Germany Italy Luxembourg The Netherlands Poland Russia Spain Sweden Switzerland Turkey Ukraine United Kingdom Page 5

A majority sees Belgium as an attractive investment location The majority of the respondents (80%) view Belgium as an attractive or very attractive location to invest in real estate for 2014. Last year the confidence in the Belgian market was even stronger. 9 stated that Belgium was attractive or very attractive. Belgium s attractiveness as a location for real estate investments 5 2 Very attractive Attractive Less attractive Original question How do you rate Belgium s overall attractiveness as a location for real estate investments in 2014? Page 6

particularly compared with other European countries Compared with other European countries, again the majority of respondents rate Belgium as an attractive or very attractive investment location (79%, 2013: 8). Belgium s attractiveness as a location for real estate investments compared with other European countries 58% 21% 21% Very attractive Attractive Less attractive Original question How do you rate Belgium s attractiveness as a location for real estate investments in 2014 compared with other European countries? Page 7

Influence of the capital markets in 2014 Alternative sources such as insurance companies, pension funds or debt funds acting as debt providers will become more important in Belgium in 2014 (90% agree, 2013: 50%). Interest rates for real estate loans will probably rise (89% agree). The capital markets seems to be ready for real estate IPOs and equity increases (8 agree, 2013: 60%). Fear of high inflation also drives demand for real estate (74% agree, 2013: 80%). "Alternative "Alternative debt providers debt providers (insurance (insurance companies, companies, pension and debt pension funds, and mezzanine debt funds, providers) mezzanine will increasingly providers) provide will increasingly provide financing financing for real for estate real investments" estate 60% 30% "Interest "Interest rates rates for real for estate real estate loans loans will will rise rise in in 2014" "The capital market in in 2014 2014 will will be attractive be attractive for real for estate real estate IPOs and equity IPOs and capital equity increases" capital increases" "Due "Due to lower to lower loan-to-value loan-to-value ratios, demand ratios, for demand mezzanine for mezzanine financing financing will increase will increase 2014" in 2014" 32% 30% 33% 57% 5 4 11% 1 22% "Fear "Fear of high of high inflation inflation the in medium the medium term will term drive will investors drive investors towards the towards real estate the real market" estate market" 11% 63% 21% Strongly agree Agree Disagree Strongly disagree Original question Which of the following statements about Belgium s real estate financial/ capital market in 2014 do you agree with? Page 8

on real estate investment activity Basel III will have consequences for the mortgage business but nevertheless the classic bank real estate loans are gaining momentum (72%, 2013: 5). The CMBS market could revive in 2014 (60% agree, 2013: 5). Belgian real estate investors anticipate an increasing supply of real estate (5, 2013: 50%). The Eurozone debt crisis will have considerably less impact on the Belgian real estate market compared to last year (2014: 50%, 2013: 80%). Only a minority (44%, 2013: 6) believes that Belgium will face increasing consolidations (M&A activity) this year. Page 9 "Basel III regulation will make real estate loans less "Basel attractive III regulation for banks will make and lead real estate to greater loans restraint less attractive in the for banks and lead to greater restraint in the mortgage business" mortgage business" "The commercial mortgage-backed backed securities securities market market will revive will revive in 2014" in 2014" "Supply in in the the real real estate estate market market will increase will increase 2014 in (maturity 2014 (maturity of structured of structured debt, disposal debt, of nonperforming disposal of non-performing loans, liquidation loans, liquidation of open-ended of open-ended funds)" funds)" "The euro-zone sovereign debt crisis will increase "The Eurozone sovereign debt crisis will increase investments by investments by European investors in the XX real estate European investors in the Belgian real estate markets" markets" "There "There will be will an be increase an increase in consolidation of of real real estate companies in 2014" companies in 2014" Original question Which of the following statements about Belgium s real estate financial/capital market in 2014 do you agree with? 11% 7% 1 22% 4 53% 40% 22% 61% 4 33% 4 50% 22% 6% 7% 11% Strongly agree Agree Disagree Strongly disagree

The Belgian real estate transaction market (1/2) Green building standards will (90%, 2013: 7) even play an increasing role for existing properties. More portfolio deals are foreseen in the commercial real estate sector (8 agree, 2013: 5). Transaction volume is expected to increase (83%, 2013: 6). The average deal size is likely to increase in 2014 (6, 2013: 5). Increased investment activity by international real estate investors seems to be likely (63%, 2013: 5). "Green-building standards standards will play will a play more a important more important role with role with respect regard to existing to existing investment properties" "There will will be be more more commercial real estate real estate portfolio portfolio deals in deals in 2014 compared to 2014 2013" than in 2013" Overall, the transaction volume in in 2014 will will exceed exceed the the level level seen in 2013" seen in 2013" "The average size of real estate deals will increase in "The average size of real estate deals will increase in 2014 2014 "Investment activity by foreign by foreign real estate real estate investors investors Belgium in XX will increase will compared increase compared to 2013" with 2013" 60% 30% 7 1 22% 61% 11% 6% 16% 5 47% 3 32% Strongly agree Agree Disagree Strongly disagree Original question Which of the following statements about Belgium s real estate transaction market in 2014 do you agree with? Page 10

The Belgian real estate transaction market (2/2) The majority of respondents expects a revival of more risky investments (56% agree, 2013: 4). Transparency of information on the Belgian market could obviously be improved since only about half of the respondents (52%) are satisfied with the current situation. It is uncertain whether AIFM will lead to an increasing consolidation in the real estate funds industry (50% agree, 2013: 5) Speculative project developments are not widely anticipated (only 2 agree, 2013: 40%). "The "The share share of of value-add and opportunistic investments will 6% will increase in 2014" increase in 2014" "The "The quantity and and quality of information on on the the Belgian XX real real 50% 33% 11% estate transaction market market is sufficient is sufficient for investment for investment appraisal 21% 31% 16% 32% appraisal purposes" purposes" "The introduction of the AIFM Directive will lead to "The introduction of the AIFM Directive will lead to increasing increasing consolidation in the real estate funds consolidation in the real estate funds industry" industry" 8% 42% 33% 17% "Speculative "Speculative project project developments will will return in in 2014" 60% 1 Strongly agree Agree Disagree Strongly disagree Original question Which of the following statements about Belgium s real estate transaction market in 2014 do you agree with? Page 11

Price trend expectations vary greatly depending on location and type of use (1/3) Opinions concerning prices of office buildings in prime locations vary: one third of the respondents expects either increasing (33%), stable (34%) or decreasing prices (33%). Offices in secondary locations (72%) and peripheral areas (80%) are expected to decrease in price. The majority expects retail properties to decrease in price in prime locations (60%) as well as in secondary locations (69%) and peripheral areas (86%). At the same time, there is a significant share of respondents anticipating increasing prices for retail properties in prime locations (40%). Office Retail 86% 80% 72% 69% 60% 40% 33% 34% 33% 31% 21% 14% 7% 0% 0% 0% 0% Increase No change Decrease Increase No change Decrease Prime locations Secondary locations Peripheral areas Original question How do you expect purchase prices in Belgium to develop in 2014 based on the type of use and location? Page 12

Price trend expectations vary greatly depending on location and type of use (2/3) Residential properties are expected to decrease to a significant extent in prime locations (50%), secondary locations (73%) and peripheral areas (100%). At the same time, half of the respondents anticipate at least stable (2) or increasing prices (2) for residential properties in prime locations. Regarding hotel buildings, decreasing prices in all locations seem almost sure (100%). Residential 100% 73% 50% 2 2 27% 0% 0% 0% Increase No change Decrease Hotel 100% 100% 100% 0% 0% 0% 0% 0% 0% Increase No change Decrease Prime locations Secondary locations Peripheral areas Original question How do you expect purchase prices in Belgium to develop in 2014 based on the type of use and location? Page 13

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Price trend expectations vary greatly depending on location and type of use (3/3) The vast majority of respondents anticipate a decreasing price level for industrial buildings in all locations. Secondary locations are expected to suffer least with one third of the respondents anticipating stable (27%) or increasing prices (7%) here. Industrial 100% 66% 83% 27% 17% 7% 0% 0% 0% Increase No change Decrease Prime locations Secondary locations Peripheral areas Original question How do you expect purchase prices in Belgium to develop in 2014 based on the type of use and location? Page 15

Which seller groups will be the most active in 2014? Seller groups Seller groups International funds (8, 2013: 7), corporates (8, 2013: 7) and opportunity/pe funds (8, 2013: 80%) are expected to be the most active seller groups in 2014. Other international funds Corporates (non-property) Opportunity/PE funds 2 1 32% 60% 70% 52% 1 1 16% In contrast to last year, banks form the only group that will be cautious according to the respondents (only 40% expect banks to play an active role, 2013: 7). Open-ended funds (real estate) Residential real estate companies Public sector Insurance companies 11% 1 33% 4 68% 60% 4 2 21% 22% 2 30% REOC/REITs 67% 33% Closed-ended funds (real estate) 11% 52% 37% Banks 40% 60% Very active Moderately active Cautios Original question How active do you think the following seller groups will be in the Belgian real estate market in 2014? Page 16

Which buyer groups will be the most active in 2014? Buyer groups Opportunity/PE funds (84%, 2013: 6) and family offices (83%, 2013: 6) are expected to be among the most active buyer groups in 2014. Again, in clear contrast to last year, banks are seen as cautious players in 2014 (only 2 see an active role, 2013: 80%). Opportunity/PE funds Private/ family office Insurance companies Residential real estate companies Other international funds Sovereign wealth funds 11% 33% 40% 1 22% 73% 60% 6 56% 50% 40% 16% 17% 22% Open-ended funds (real estate) 1 60% 2 Closed-ended funds (real estate) 1 5 30% REOC/REITs 13% 49% 38% Banks 7 Very active Moderately active Cautios Original question How active do you think the following buyer groups will be in the Belgian real estate market in 2014? Page 17

Which will be the greatest impediments to deal flows in 2014? A price mismatch between buyers and sellers is viewed as the major barrier for deal flows in 2014 (7, 2013: 7), no change to last year. The level of equity required by debt providers is another big hurdle (6, 2013: 70%). The limited availability of debt funding remains an impediment, though not as much as last year: senior debt funding (60%, 2013: 80%) junior debt funding (58%, 2013: 70%) Transaction impediments Price mismatch between buyers and sellers Level of equity required Limited availability of senior debt funding Limited availability of junior debt funding 2 30% 21% 5 40% 30% 37% 30% 3 37% Strongly agree Agree Disagree Strongly disagree Original question Do you agree or disagree that the following will be impediments to Belgium's deal flow in 2014? Page 18

Bank actions to deal with distressed loans Approaches to dealing with distressed loans Selling distressed loans seems to be the most common way to deal with them (88%). An increase in debt-for-equity-swaps is expected (72%, 2013: 5). Enforcements will continue to play a certain role with regard to distressed loans, too (57%, 2013: 6). Sale of loans Increase in debt-for-equity swaps Increased enforcement Increase in consensual restructuring deals 17% 14% 1 72% 43% 40% 71% 36% 3 6% 6% 28% 7% The extension of the repayment period has become less popular compared to last year (42%, 2013: 6). Increase in replacement of real estate asset managers Extend repayment period 21% 42% 21% 42% 37% 11% 21% Strongly agree Agree Disagree Strongly disagree Original question Which actions do you expect banks to take regarding distressed loans in Belgium? Page 19

The following types of use will be popular with investors in 2014 Retail properties will have the highest focus for investors (22% strong, 2013: 2) or at least a moderate one (22%, 2013: 30%). Office real estate has lost even more significance compared to last year (34% strong and moderate, 2013: 50%). Interest in residential properties has not changed significantly (4 strong and moderate, 2013: 40%). Strong or moderate investment focus 22% 22% 17% 17% 17% 28% 6% 6% Strong Moderate Office Retail Residential Other Original question Compared to 2013, what kind of focus do you intend to give to the following real estate use types in your investment strategy for 2014? Page 20

The following types of use will not be as popular with investors in 2014 It seems that many Belgian investors do not have a clear focus on a special type of use. Low or no investment focus 88% 38% 39% 44% 28% 17% 11% 0% Low No focus Office Retail Residential Other Original question Compared to 2013, what kind of focus do you intend to give to the following real estate use types in your investment strategy for 2014? Page 21

Brussels preferred place for offices, small retail focus on Namur Brussels apparently is the most attractive city for office investments (30%, 2013:3). Other Belgian cities attract a lower demand for offices. Among those, Ghent is in the lead with (2013: ). Altogether, the differences in retail location demand is not spread apart very much. Namur has the highest retail focus with 1, 2013: 2). Office and retail focus 30% 1 0% 0% 0% 0% 0% 0% Office Retail Brussels Namur Liège Leuven Antwerp Ghent Mons Other Original question Which primary locations in Belgium will you be focusing your investments on in 2014? Page 22

Brussels, Liege, Ghent, Antwerp most sought after for residential real estate For residential investments, several cities are attractive: Brussels (3, 2013:), Liege (, 2013: 2), Ghent (, 2013: 30%) and Antwerp (1, 2013: ). Residential and no focus 80% 7 90% 7 6 80% 100% 3 3 1 0% Residential No focus Brussels Namur Liège Leuven Antwerp Ghent Mons Other Original question Which primary locations in Belgium will you be focusing your investments on in 2014? Page 23

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Most attractive exit options for real estate investments in 2014 The direct sale of single assets is anticipated to be the most favourable exit option in 2014 (39%). In the year before, trade sales had already gained significant importance as an exit channel. Planned exit options 39% 39% 11% 11% 11% 6% 0% Direct sale - Single asset Direct sale - Portfolio Closed-ended funds No exit Public real estate funds REOC/REIT (IPO) Other Original question What will be the most attractive exit options for your real estate investments in 2014? (Multiple answers possible) Page 25

Impact of the digital world on real estate Impact of the digital world on demand for space According to the respondents, different impacts for the individual types of use will occur due to the ongoing digitalization of the world. 63% 47% 61% The office sector will face a decreasing impact concerning space demand (61%), residential real estate will face no changes (63%) and retail real estate shows a mixed trend. 11% 33% 34% 33% 29% 28% 21% 16% 24% Increase No change Decrease Office Retail Residential Industrial Original question What impact will the digital world have on space demand for the following property types? Page 26

Impact of the digital world on real estate Impact of the digital world on demand for space The most obvious impact is expected with regard to online suppliers replacing local stores in weak locations (83%). "Online suppliers suppliers will will replace replace over-the-counter over-the-counter retail stores retailin stores in weak locations" weak locations" "E-Commerce suppliers will appear as tenants for retail "E-Commerce suppliers will emerge as tenants for retail space" space" 28% 67% 5 33% 17% On the other hand, e-commercesuppliers could emerge as additional tenants for retail space (67%). "Brokers "Brokers will lose will market lose share market for share renting/selling for renting/ residential sellingreal residential real estate estate due to due Internet to Internet listing listing services" "Home "Home office office working working is out-dated is out-dated and staff and will staff move will back move to the back to the workplace" workplace" 22% 18% 44% 47% 28% 3 6% Strongly agree Agree Disagree Strongly disagree Original question What impact will the digital world have on space demand? Page 27

Outlook for Belgium (1/2) Attractiveness The majority of the respondents (80%) view Belgium as an attractive or very attractive location to invest in real estate for 2014. Compared with other European countries, again the majority of respondents rate Belgium as an attractive or very attractive investment location (79%, 2013: 8). Real estate financial/capital market Alternative sources such as insurance companies, pension funds or debt funds acting as debt providers will become more important in Belgium in 2014 (90% agree, 2013: 50%). Interest rates for real estate loans will probably rise (89% agree). Real estate transaction market More portfolio deals are foreseen in the commercial real estate sector (8 agree, 2013: 5). Transaction volume is expected to increase (83%, 2013: 6). Purchase price expectations Opinions concerning prices of office buildings in prime locations vary: one third of the respondents expects either increasing (33%), stable (34%) or decreasing prices (33%). The majority expects retail properties to decrease in price in prime locations (60%) as well as in secondary locations (69%) and peripheral areas (86%). Residential properties are expected to decrease to a significant extent in prime locations (50%), secondary locations (73%) and peripheral areas (100%). Seller/buyer groups International funds (8, 2013: 7), corporates (8, 2013: 7) and opportunity/pe funds (8, 2013: 80%) are expected to be the most active seller groups in 2014. Opportunity/PE funds (84%, 2013: 6) and family offices (83%, 2013: 6) are expected to be among the most active buyer groups in 2014. Page 28

Outlook for Belgium (2/2) Greatest deal impediments A price mismatch between buyers and sellers is viewed as the major barrier for deal flows in 2014 (7, 2013: 7), no change to last year. Bank actions to handle distressed loans Selling distressed loans seems to be the most common way to deal with them (88%). Real estate use types Retail properties will have the highest focus for investors (22% strong, 2013: 2) or at least a moderate one (22%, 2013: 30%). Office real estate has lost even more significance compared to last year (34% strong and moderate, 2013: 50%). Interest in residential properties has not changed significantly (4 strong and moderate, 2013: 40%). Preferred regions Brussels apparently is the most attractive city for office investments (30%, 2013:3). Other Belgian cities attract a lower demand for offices. Among those, Ghent is in the lead with (2013: ). Altogether, the differences in retail location demand is not spread apart very much. Namur has the highest retail focus with 1, 2013: 2). For residential investments, several cities are attractive: Brussels (3, 2013:), Liege (, 2013: 2), Ghent (, 2013: 30%) and Antwerp (1, 2013: ). Planned exit options The direct sale of single assets is anticipated to be the most favourable exit option in 2014 (39%). Impact of the digital world The most obvious impact is expected with regard to online suppliers replacing local stores in weak locations (83%). On the other hand, e-commerce-suppliers could emerge as additional tenants for retail space (67%). Page 29

Page 30 Real Estate Assets Investment Trend Indicator Europe 2014

Key findings for Europe Attractiveness Transaction volume Transaction market Capital markets Capital markets Prices and focus Sellers, buyers E-commerce trends A clear majority in each of the countries surveyed think that their market will be attractive to real estate investors in 2014. Cross-border investments are set to drive an increase in transaction volume. More investors are set to target riskier assets as the market improves but the supply of core assets remains low. Eurozone crisis not main driver for real estate investments anymore. As banks limit their exposure to real estate, investors are set to turn to alternative sources of finance. Retail prices set to strengthen, especially in markets hit hardest by the downturn. PE funds set to be among the most active investors across Europe in 2014. Brokers and stores alike are braced for renewed pressure from e- commerce. Page 31

Market attractiveness continues to improve across Europe A clear majority in each of the countries surveyed think that their market will be attractive to real estate investors in 2014. The positive change in sentiment compared with last year is particularly striking in the countries hit hardest by the Eurozone crisis Spain and Italy. In comparison with other European countries, Germany and the UK are seen as most attractive by respondents. In 14 out of the 15 countries surveyed, more than two-thirds rate their real estate markets as attractive compared with other European markets. Page 32 Attractiveness of your market 4% 1% 6% 12% 16% 18% 33% 34% 39% 40% Very attractive Attractive Less attractive Poland Germany Original question: How do you rate the countries overall attractiveness as a location for real estate investments in 2014? / How do you rate the country s overall attractiveness as a location for real estate investments in 2014, compared with other locations in Europe?" 67% 67% 60% 6 60% 3 58% 47% 3 4 5 54% 57% 44% 4 49% 4 33% 32% 36% 30% 34% 30% 3 3 2 13% 9% 17% 1 UK Sweden Austria Russia Spain Luxembourg Turkey Switzerland Belgium Netherlands Ukraine Italy France In comparison with other countries 16% 21% 16% 13% 3 3 29% 27% 41% 3 47% 47% 59% 5 57% 40% 74% 3 58% 41% 69% 50% 61% 63% 56% 40% 3 3 39% 44% 30% 33% 32% 1 2% 2% 3% 13% 18% 21% 18%

Transaction volume expected to exceed 2013 level Transaction volume is set to increase in 2014 for the second straight year, driven largely by cross-border investments. In almost half of the countries, more than three-quarters of interviewees believe that volume will rise in their country. Spain and Italy are predicted to show the biggest improvements compared with last year. Majorities in all countries agree that cross-border activity will increase in 2014, Transaction volume 13% 2% 11% 13% 16% 6% 11% 19% 23% 27% 28% 74% 63% 64% 58% 61% 71% 77% 70% 50% 3% 27% 30% 70% 5 33% 26% 3% 3 41% 5 47% 13% 24% 23% 26% 22% 3% 22% 1 41% 9% Luxembourg UK Netherlands Spain Belgium Sweden Ukraine Russia Germany Italy Turkey Poland France Austria Cross-border activity 60% 57% 4% 81% 42% 48% 16% 47% 16% 63% 52% 7 31% 47% 3% 59% 60% 1 43% 1 57% 6% 50% 13% 7% 33% 4% 11% 32% 21% 48% 2 22% 38% 2 42% 28% 41% 3% 50% 4 Switzerland 50% 30% Agree Rather agree Rather disagree Disagree Original question Do you agree with the following statement: Overall, transaction volume in 2014 will exceed the level seen in 2013. / Investment activity by international real estate investors will increase compared with 2013. Page 33 In some cases no answers were provided by the respondents. This is not shown in the graph. Thus, the total might deviate from 100%.

Riskier investment targets on the rise As markets improve and the supply of core assets remains low, investors are expected to take more risks. Opportunistic investments 64% 70% 11% 78% 26% 11% Speculative project developments Spain Sweden 37% 38% 56% 52% 7% Netherlands 13% 67% Investors also anticipate a rise in speculative project developments in selected markets, especially where core products are often unable to deliver sufficient returns. 3% 13% 1 1% 18% 21% 2 66% 63% 56% 79% 70% 18% 22% 2 France UK Germany Russia Turkey 40% 56% 48% 63% 42% 57% 39% 38% 37% 48% 3% 4% 29% 71% Ukraine 4 5 29% 50% 21% Poland 8% 40% 48% 4% 1 1 60% Switzerland 2 4 30% 57% 8% Italy 8% 41% 48% 3% 11% 33% 50% 6% Belgium 60% 1 8% 46% 31% 1 Luxembourg 6% 56% 2 13% 56% 41% 3% Austria 22% 7 3% Agree Rather agree Rather disagree Disagree Original question Do you agree with the following statement: The share of value-add and opportunistic investments will increase in 2014. / Speculative project developments will return in 2014. Page 34 In some cases no answers were provided by the respondents. This is not shown in the graph. Thus, the total might deviate from 100%.

Inflation overtakes the Eurozone crisis as the main investment driver Most European countries no longer view the Eurozone sovereign debt crisis as the main driver for real estate investments. In just four countries Germany, Austria, Sweden and the UK more than two-thirds of respondents expect the debt crisis to push real estate investments in 2014. Concerns about the impact of inflation have decreased compared with last year s survey. However, majorities in most European countries believe that fear about future inflation will drive investors toward real estate investments. Perceptions of the Eurozone crisis 7% 33% 60% Germany 3% 16% 62% 19% Austria 2% 6% 6% 3% 4% 29% 27% 29% 40% 38% 39% 50% 48% 48% 71% 57% 59% 4 49% 4 4 41% 36% 14% 6% 1 8% 8% 12% Sweden UK Luxembourg Turkey France Spain Belgium Italy Poland 1 40% 30% 1 Switzerland 6% 3% 68% 6 68% 32% 29% 29% Netherlands Russia Ukraine Fear of inflation 37% 22% 4 7% 73% 13% 62% 1 60% 1 3 23% 40% 11% 63% 11% 43% 4% 39% 40% 3% 63% 57% 47% 52% 6 11% 13% 40% 19% 6% 47% 3% 37% 21% 43% 3% 57% 40% 27% 7% 43% 50% 3% Original question: Do you agree with the following statement: The Eurozone sovereign debt crisis will drive investments by European investors in the real estate markets. / Fear of high inflation in the medium term will drive investors towards the real estate market." Page 35 Strongly Agree Agree Disagree Strongly Disagree

Fund liquidation, disposal of NPLs and refinancing requirements set to drive real estate supply Importance of green-building standards Most European countries expect supply to increase in 2014, due to the maturity of structured debt, the disposal of non-performing loans (NPLs) and the liquidation of openended funds. Switzerland and Austria are the only countries in which fewer than half of investors expect an increase in real estate supply. Real estate supply outlook Russia UK Luxembourg Sweden 14% Netherlands 7% Turkey Italy 14% Germany 11% Poland 1 Ukraine 58% 90% 76% 62% 69% 60% 49% 53% 46% 63% 17% 24% 24% 24% 30% 31% 6% 34% 2% 3 4% 39% 3% France 52% 38% Spain 46% 37% 7% Belgium 1 40% 4 Switzerland 30% 5 Austria 6% 28% 63% 3% Strongly Agree Agree Disagree Strongly Disagree Original question Do you agree with the following statement: Supply in the real estate market will increase in 2014 (maturity of structured debt, disposal of non-performing loans, liquidation of open-ended funds)." Page 36 In some cases no answers were provided by the respondents. This is not shown in the graph. Thus, the total might deviate from 100%.

Commercial mortgage-backed securities market well-positioned for revival Importance of green-building standards The commercial mortgage-backed securities (CMBS) market is expected to rebound, particularly in the most liquid property markets of the core Eurozone. More than half of the countries surveyed expect levels of CMBS issuance to increase in 2014. Some southern and eastern European countries, such as Italy, Russia and Ukraine, are more pessimistic about the CMBS market. Commercial mortgage-backed securities market (CMBS) France Luxembourg UK Germany Belgium Sweden Netherlands Poland Spain Turkey Switzerland Russia Austria Italy Ukraine 13% 13% 7% 8% 13% 64% 56% 61% 52% 53% 60% 57% 46% 3 42% 47% 44% 43% 28% 31% 34% 33% 33% 3 43% 46% 49% 48% 41% 56% 57% 27% 23% 68% 77% 3% 2% 7% 3% 12% Strongly Agree Agree Disagree Strongly Disagree Original question Do you agree with the following statement: The commercial mortgage-backed securities market will revive in 2014." Page 37 In some cases no answers were provided by the respondents. This is not shown in the graph. Thus, the total might deviate from 100%.

Rising demand for alternative lenders Importance of green-building standards As many banks reduce their exposure to real estate, the majority of respondents predict that offer for mezzanine financing and other alternative lenders will rise. Ukraine and Poland are the only countries in which fewer than half of investors do not expect the share of alternative financing to increase. New debt sources are likely to help reduce the funding gap in the most liquid European markets. Alternative debt providers Belgium UK Netherlands Sweden 7% 14% Germany Luxembourg 39% 41% France 28% Turkey 1 Russia Spain 28% Switzerland 40% Austria 9% 60% 77% 57% 69% 79% 72% 4 41% 54% 6 48% 3 30% 9% 2% 14% 14% 16% 12% 6% 18% 23% 24% 2 34% Italy 58% 42% Ukraine 48% 52% Poland 1 31% 54% Strongly Agree Agree Disagree Strongly Disagree Original question Do you agree with the following statement: Alternative debt providers (insurance companies, pension and debt funds, mezzanine providers) will increasingly provide financing for real estate investments." Page 38 In some cases no answers were provided by the respondents. This is not shown in the graph. Thus, the total might deviate from 100%.

Office and retail prices stable or rising; residential property leveling off Price trends (prime locations) Most countries surveyed expect prices for office space in prime locations to remain stable or increase. However, some countries anticipate prices falling from peak levels. SWE In countries such as the Netherlands and Spain, which have been hit particularly hard by the market downturn, prices are expected to strengthen over the next year. Respondents in most countries anticipate stable or increasing prices for prime retail investments. NL BEL LUX UK F GER CH PL AT UA RUS Sentiment about residential prices for the year ahead is more bearish, with respondents in nearly half of the countries surveyed predicting price falls in prime locations. Rising Constant Falling SP I TR Office Retail Residential Original question How do you expect purchase prices to develop in 2014, based on the type of use and location? Page 39

Real estate investment trusts, international funds and private equity set to become more active Real estate operating companies (REOCs), real estate investment trusts (REITs), international funds and private equity (PE) funds are expected to be among the most active investors in real estate throughout Europe in 2014, on both the buy and sell side. In addition, private or family office, residential real estate companies and institutional investors are set to be among the most likely buyers of property in 2014. Page 40 Seller groups Buyer groups Original question: How active do you think the following seller and buyer groups will be in 2014? " REOC/REITs Other international funds Opportunity/PE-funds Open-ended funds Closed-ended funds Corporates (non-property) Residential real estate companies Banks Insurance companies Public Sector REOC/REITs Opportunity/PE-funds Other international funds Private/family Office Residential real estate companies Insurance companies Sovereign wealth funds Open-ended funds Closed-ended funds Banks Very active Moderately active Cautious 60% 26% 52% 22% 37% 41% 22% 30% 47% 23% 27% 49% 24% 1 57% 28% 31% 40% 29% 24% 44% 32% 19% 44% 37% 18% 42% 40% 26% 38% 33% 39% 33% 33% 27% 26% 23% 5 43% 47% 41% 44% 43% 49% 48% 43% 19% 19% 23% 24% 24% 26% 34% 13% 26% 61%

Investment to focus on residential property Investment focus: residential properties European respondents will focus their investment strategies most strongly on residential property. NL SWE Investors in the UK, Spain, France, Germany, Sweden and Italy show the strongest interest in office properties. BEL UK RUS Despite being the least favored use type, there will still be a significant number of investors focusing on retail in each of the countries surveyed. LUX GER PL UA F CH AT SP I Legend Strong & Moderately Active (values in %) Office Retail Residential TR Original question Compared with 2013, what level of focus do you intend to give to the following real estate use types in your investment strategy for 2014? Page 41

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E-commerce a major threat to retail outlets in nonprime areas Respondents in most countries believe brokers will lose market share for renting or selling residential real estate to internet listing services. Brokers lose market share 78% 74% 71% 70% 67% 67% 63% 62% 61% 57% Strongly agree 53% 53% 52% 44% Agree 32% The majority of investors in each of the countries surveyed sees e- commerce as a major threat to retail stores in less popular locations. Most of the respondents also expect e-commerce suppliers to rent retail locations in order to increase brand awareness. Replacement of over-the-counter retail stores 84% 84% 82% 80% 80% 76% 74% 68% 67% 67% 64% 63% 58% 54% 50% Original question Do you agree with the following statement: Brokers will lose market share for renting or selling residential real estate due to Internet listing services. / Online suppliers will replace over-the-counter retail stores in weak locations. / E-Commerce suppliers will appear as tenants for retail space. / Home office working is out-dated and staff will move back to the workplace. Page 43

Outlook Europe (1/2) Attractiveness A clear majority in each of the countries surveyed think that their market will be attractive to real estate investors in 2014. The positive change in sentiment compared with last year is particularly striking in the countries hit hardest by the Eurozone crisis Spain and Italy. Real estate financial/transaction market Transaction volume is set to increase in 2014 for the second straight year, driven largely by cross-border investments. Spain and Italy are predicted to show the biggest improvements compared with last year. As markets improve and the supply of core assets remains low, investors are expected to take more risks. Investors also anticipate a rise in speculative project developments in selected markets, especially where core products are often unable to deliver sufficient returns. Real estate capital market Most European countries no longer view the Eurozone sovereign debt crisis as the main driver for real estate investments. Concerns about the impact of inflation have decreased compared with last year s survey. Most European countries expect supply to increase in 2014, due to the maturity of structured debt, the disposal of nonperforming loans (NPLs) and the liquidation of open-ended funds. The commercial mortgage-backed securities (CMBS) market is expected to rebound, particularly in the most liquid property markets of the core Eurozone. New debt sources are likely to help reduce the funding gap in the most liquid European markets. Page 44

Outlook Europe (2/2) Price trends Sentiment about residential prices for the year ahead is more bearish, with respondents in nearly half of the countries surveyed predicting price falls in prime locations. Investment focus Most countries surveyed expect prices for office space in European respondents will focus their investment strategies prime locations to remain stable or increase. However, some most strongly on residential property. countries anticipate prices falling from peak levels. Investors in the UK, Spain, France, Germany, Sweden and Respondents in most countries anticipate stable or Italy show the strongest interest in office properties. increasing prices for prime retail investments. E-commerce trends Respondents in most countries believe brokers will lose market share for renting or selling residential real estate to internet listing services. Seller/buyer groups The majority of investors in each of the countries surveyed Real estate operating companies (REOCs), real estate sees e-commerce as a major threat to retail stores in less investment trusts (REITs), international funds and private popular locations. equity (PE) funds are expected to be among the most active investors in real estate throughout Europe in 2014, on both the buy and sell side. Page 45

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