1. ROMANIAN REAL ESTATE MARKET WITHIN CENTRAL EASTERN EUROPE EU Accession Effects Presentation to: JW Marriott Bucharest Grand Hotel, May 4, 2004 May 4, 2004

2. CEE ECONOMICAL STATISTICS

3. GDP GROWTH IN CEE In 2003, GDP growth in non-EU countries was between 3-7% GDP Growth (real) in CEE

4. INFLATION IN CEE All markets have now inflation rates below 15% (most markets are below 10%) 2003: 14.1% inflation rate, significant decrease recorded by Romania since 1990 Inflation in CEE

5. FOREIGN DIRECT INVESTMENT (FDI) IN CEE USD 15bn invested in CEE in 2003, 46% decrease from the record FDI levels tracked in 2002 (USD 28bn) € 1.381bn (acc. to NBR data) - FDI in Romania, in 2003, the highest achieved in CEE Total volume of FDI in Romania (USD 10.433bn) is still low compared to other CEE countries (Poland USD 38bn, Czech Republic USD 26bn) Source: CB Richard Ellis

6. OVERVIEW OF CEE OFFICE MARKET

7. CEE MODERN OFFICE STOCK Most buildings left from communist times are currently occupied by governmental organizations and local companies, are classified as class C office buildings and are not included in the statistics Bucharest – still undersupplied compared with other CEE capitals *Class C not included Source: CB Richard Ellis *CEE Modern Office Stock per 1,000 inhabitants (as at Dec. 2003) *Class C not included *CEE Modern Office Stock (as at Dec. 2003) Source: CB Richard Ellis

8. CEE MODERN OFFICE STOCK DYNAMICS In the late ’90s the rapid growth of Budapest, Prague and Warsaw created an oversupply, so that ‘developers’ market’ ended, ‘tenants’ market’ began Bucharest – constant upward trend BUCHAREST Modern Office Stock Source: CB Richard Ellis

9. CEE MODERN OFFICE SUPPLY/COMPLETIONS BUCHAREST Annual Modern Office Stock Approx. 1.33m sq m of new office space completed in 2003 in CEE countries, 7.1% decrease from 2002 82,000 sq m of new modern office space completed in 2003 in Bucharest, 19% increase from 2002 (total completions - relatively similar with 2002) Over the last 3 years office completions have decreased the fastest in Warsaw and Budapest, while growing in Sofia, Prague and Bucharest Source: CB Richard Ellis

10. CEE OFFICE SUPPLY FORECAST 23% - total expected growth during the next 2 years (by roughly 2.5% per quarter) in CEE countries 5.7% - total expected growth in the next 6-8 months in CEE countries ROMANIA (by 67.8% - ~350,000 sq m) and Sofia (by 35.5%) – fastest growth expected in the next two years

11. CEE OFFICE TAKE-UP Bucharest Take up by Type of Property (2002 - 2003) Bucharest (by 60%) and Bratislava (by 150%) have recorded the highest increase of office take-up in 2003 CEE Office Take up Bucharest – total take-up in 2003: 132,000 sq m Source: CB Richard Ellis

12. CEE – PRIME OFFICE RENTS AS AT DEC. 2003 CEE Prime Office Rent Average prime office rents in CEE ~€22/sq m/month are lower than in every other major markets in Europe Average prime office rents in Bucharest (~€18/sq m/month) Source: CB Richard Ellis

13. CEE – PRIME OFFICE YIELDS CEE Prime Office Yields Investing in office products in CEE provides the best returns in Europe Prime office yields between 8% (Prague) and 13% (Sofia and Bucharest) Bucharest prime office yields – currently between 12% and 13% Bucharest prime office yields - forecasted to reach 10% by 2007 Source: CB Richard Ellis

14. CEE – INVESTMENT ENVIRONMENT Decrease in risk (and perceived risk) of investing in CEE countries determined: Investment transactions Yields compression, in the last 5 years Office investment market – more mature than retail, industrial or hotels Investors – looking for good quality product determine: Prices up Yields down Most active investors : - German and Austrian open-ended funds - Middle Eastern – strengthening - Irish funds

15. LOCAL INVESTMENT ENVIRONMENT General assessment Before 1990 most land and real estate assets were state owned Building ownership by foreign individuals and companies – no restriction Land ownership by foreign individuals and companies is restricted but Romanian and foreign owned companies are entitled to land ownership

16. LOCAL INVESTMENT ENVIRONMENT General assessment Law 1/2000 and Law 10/2001 govern the restitution of property in Romania Romania’s country risk – upgraded in 2003 from BB- to BB, but still did not reach the “Investment Grade” BBB Since 2002 the number of property investment enquiries has increased in Bucharest Large investment funds as Heitman, Europolis, GE Capital Golub, CA Immo, HVB have started to look seriously at all market segments Most active investors : - German and Austrian open-ended funds - Middle Eastern – strengthening - Irish funds

17. LOCAL INVESTMENT ENVIRONMENT Office Investments The office investment market is the most predictable The lack of quality products determined a reduced number of transactions, commited for only a total of 26,100 sq m Achieved prime yields – still high (12 to 13%) Poorly defined business district Foreign investors are focusing on international quality commercial developments, having good covenant Trend: Prices up Yields down

18. CONCLUSIONS EU accesssion effects on property market:  Increase of VAT directly affects tenants costs and developers constructions costs  Employment law: more strict regulations regarding working conditions  Commercial law: improved to make contracts more enforceable and transparent  Decrease of perceived investment risk  Increase of new incoming int’l companies, moving operations to CEE to take advantage of: oLower labour costs oGovernmental incentives oHighly skilled labour force oLower office occupational costs compared to Western Europe Main consequences of EU expansion in CEE, in 2004, for Romania:  Less expensive labour force than in the CEE countries, EU members  Still lower real estate development quality standards and costs

19. CB RICHARD ELLIS ROMANIA KEY CLIENTS Existing clients of CBRE benefit from accurate, constant and reliable consultancy. Louis Dreyfus Trading