1. Director, Private Client Services 27 October 2006 Caspar Noble Real Estate Funds and Tax.

2. ©2006 Deloitte PCS Limited. Private and confidential 2 Shift in real estate ownership patterns from direct to indirect ownership via professionally- managed, diversified funds, evidenced by rapid growth of funds under management: – Globally, there was €695bn of real estate held in RE funds at end 2005 (€485bn in 2004) of which €405bn in Europe (€310bn in 2004) Increase in cross-border capital flows within EU and, particularly, the eurozone: – €54bn in cross-border acquisitions in 2004 compared with €18bn in 1999 Recent push into emerging markets – $3bn of cross-border acquisitions in Asia-Pac (excl Japan) in 2004 Impact of REIT regimes globally Trends: – Increased complexity – Growing internationalisation Real Estate Funds Current commercial situation

3. ©2006 Deloitte PCS Limited. Private and confidential 3 Real Estate Funds Tax concerns 3 key levels: Investors Fund Asset

4. The asset

5. ©2006 Deloitte PCS Limited. Private and confidential 5 Real Estate Funds Asset - acquisition Transfer taxes / registration duties payable by purchaser? – Spain - 6%/7% depending on the location of the property – UK: stamp duty at 4% – France: 4.8% transfer tax on the sale of shares in French real estate companies or 4.89% registration duty on the purchase of buildings older than 5 years – Germany: 3.5% transfer tax Capital duty? 6 th directive tax? In many jurisdictions the above can be limited by acquisitions through local property holding Companies. May also be an administrative/legal requirement

6. ©2006 Deloitte PCS Limited. Private and confidential 6 Real Estate Funds Asset – exit Some jurisdictions do not tax capital gains realised by non resident investors in domestic real estate (eg UK). Owning property through a local holding company may allow a tax free gain to be achieved by a share sale. Commonly a separate company will be used to hold each company as this gives more options on exit. ‘Participation Exemption’ – partial or complete exemption from tax on gains on the sale of shares (eg Netherlands, Luxembourg, Belgium).

7. ©2006 Deloitte PCS Limited. Private and confidential 7 Real Estate Funds Asset – income and expenses Income recognition: Level of tax deductibility of expenses pushed down to asset level likely to be regulated: Thin capitalisation rules: − UK – arm’s length − Germany – 60:40 debt to equity on internal financing − Luxembourg – 85:15 debt to equity, however 99:1 may be permitted under a tax ruling Transfer pricing rules: − UK – arm’s length − Germany – arm’s length − Luxembourg – arm’s length, however interest margin can be agreed in a tax ruling Other deductions – ‘tax depreciation’ – Eg in Spain, tax depreciation is available on all tangible fixed assets (except land) at particular rates, depreciation methods and terms established by the tax regulations for various economic and industrial sectors

8. The fund

9. ©2006 Deloitte PCS Limited. Private and confidential 9 Transparency: Investor receives share of income flow and capital value of real estate in line with percentage share of investment Tax neutrality: Investment vehicle should be tax transparent, or at least not add material tax cost Liquidity: Investor may be able to dispose of shares in the vehicle separately from asset itself Real Estate Funds Key structuring considerations

10. ©2006 Deloitte PCS Limited. Private and confidential 10 Real Estate Funds Choice of vehicle – private structures Limited PartnershipCorporate UK, US, Guernsey, Netherlands CV, Ireland, Cayman Islands Tax transparent for most investors Familiar structure and tax treatment Generally not heavily regulated Flexibility: partnership laws not as strict as corporate laws eg no limits re distributable reserves Listing possible in certain jurisdictions - eg Ireland Sub fund holding structure (eg Lux co) to give availability of DTR Often tax-exempt or tax privileged through: - Domestic participation exemption - Finance rulings/advance rulings - Double tax treaties - EU Directives No actual tax transparency except for US investors who elect under ‘check the box’ rules Familiar corporate structure Greater regulation than Limited Partnership - Corporate laws

11. ©2006 Deloitte PCS Limited. Private and confidential 11 Real Estate Funds Choice of vehicle – public structures Real Estate Investment Trust – an alternative to listed property companies Key = no tax at vehicle level for a REIT but investment and distribution requirements, etc Now more than 20 jurisdictions eg: – 1960 - US REIT (Real Estate Investment Trust) – 1969 - Dutch FBI or FII (Fiscale Beleggingsinstelling) – 2003 - French SIIC (Sociétés d’Investissements Immobiliers Cotées); – 2004 - Italian FII (Fondi di Investimento Immobiliare); – 2004 - Luxembourg SICAR (Société d’Investissement à Capital Risque) – 2007 - UK REIT – 2007/2008 - German REIT (?) Displacing listed property companies?

12. ©2006 Deloitte PCS Limited. Private and confidential 12 Real Estate Funds Real Estate Investment Trust - conditions Should be no tax at level of Fund Advantage Investment requirements Distribution requirements Recently in UK, proposed in March 2005 and to be introduced on 1 January 2007 Closed Ended UK resident listed company − Conversion charge − 22% withholding tax on dividends − Taxable as UK property income in the hands of the investor Potential disadvantage

13. ©2006 Deloitte PCS Limited. Private and confidential 13 Real Estate Funds Fund Type of Fund and refinements to the Fund maybe driven by investors:

14. The investors

15. ©2006 Deloitte PCS Limited. Private and confidential 15 Real Estate Funds Real estate fund investors Investor key concerns, some common to all (even non taxables), others specific eg : Asset and Fund structured to minimise tax at those levels (as above) No tax withholdings on distributions from Fund Form of distribution from Fund – Capital/Income No investor exposure to individual “CFC” rules eg US PFIC, UK s739 issues Ability to pick up credits for underlying taxes, if relevant - eg US Limit or eliminate investor filings/disclosure caused by structure eg French 3% annual tax on real estate and US tax filings

16. ©2006 Deloitte PCS Limited. Private and confidential 16 Real Estate Funds Real Estate fund investors Addressing investor key concerns: Need to be addressed on a case by case basis: Common issues to address in structure eg tax leakage and withholdings Solution to specifics depends on weighting of investor concerns Can be addressed in structure or add ons eg structure which can give capital and income returns, or feeder to give capital? Structural solution to French 3% tax by listing or listed feeder? Check the box on Fund structure for US taxables and for US tax exempts?

17. ©2006 Deloitte PCS Limited. Private and confidential 17 Contact details Caspar Noble’s contact details: Direct tel : +44 (0)20 7007 3393 Direct fax : +44 (0)20 7007 0178 Email : casparanoble@deloitte.co.uk Address : Hill House, 1 Little New Street, London, EC4A 3TR

18. 18 This document is confidential and prepared solely for your information. Therefore you should not, without our prior written consent, refer to or use our name or this document for any other purpose, disclose them or refer to them in any prospectus or other document, or make them available or communicate them to any other party. No other party is entitled to rely on our document for any purpose whatsoever and thus we accept no liability to any other party who is shown or gains access to this document. Deloitte & Touche LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at Stonecutter Court, 1 Stonecutter Street, London EC4A 4TR, United Kingdom. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu ('DTT'), a Swiss Verein whose member firms are separate and independent legal entities. Neither DTT nor any of its member firms has any liability for each other's acts or omissions. Services are provided by member firms or their subsidiaries and not by DTT.

19. Member of Deloitte Touche Tohmatsu