Property markets 2011 ff.Investing in real assets in times of financial weakness

Expo RealMunich, 04.10.2011

22

Crises converge

Financial crisis

Sovereign debt

The euro

3

Dwindling confidence gives rise to extreme volatility

Sources: Bloomberg, CBRE, DekaBank: Status: Q2 / 2011The opinions expressed reflect our current assessment at the time of writing. This assessment can change at any time and wiithout prior notice.The content has been put together with great care. However, no liability can be accepted for inaccuracies.Status: 28.06.2011

‡ Financial market movements in past weeks are not fundamental (economic) but risk-related:

‡ Risk 1: Banks’ balance sheets still under pressure due to bad debts from the financial crisis

‡ Risk 2: Weakness in the government-bonds market because of high debt levels in Western industrialised nations

‡ Risk 3: Lack of clarity over the future of the euro increases uncertainty

-2

-1

0

1

2

3

4

5

Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11

Aktien Unternehmensanleihen Geldmarkt Covered Bonds Staatsanleihen Stress-Indikator

Deka financial market stress indicator

44

No rapid solutions in sight

Sources: IWF, DekaBankDebt levels in relation to GDP

20

40

60

80

100

120

95 97 99 01 03 05 07 09 11 13 15

Prognose

in %

Industrieländer

Schwellenländer

Sovereign debt acc. to region ‡ Risks have built up over past decades; repayment will also take years

‡ Banks: Focus on capitalisation and liquidity; assess effects of new regulations

‡ States: In the short term, programme of moderate savings; in the long term, reforms for greater competitiveness

‡ Euro: In the short term, secure credibility for the EFSF´s ability to intervene and relieve Greece´s debt burden; in the long term, place Europe on a new footing

5

‡ There is no ‘Lehman moment’ – the financial crisis is dampening confidence in the future, but is not leading to an economic crash such as in 2009

‡ The ‘ifo clock’ is not indicating a recession, but because of sharply reduced expectations, it does indicate a period of noticeable weakness

‡ We continue to expect (flat) growth (GDP 2012): D: 0.5 % USA: 1.5 %EUR-17: 0.9 % Welt: 3.5 %

Economic weakness, but no deep recession

Germany: ifo Business Climate finally shows weakness

ifo Business-Cycle Clock – Germany

*Axes on mean values since 1991: y-axis (expectations): -5.2 points, x-axis (current situation): -11.9 points.The data refer to the manufacturing, construction, wholesaling and retailing sectors; in the “clock” published by the ifo Institut, each axis is at 0 and it only refers to the manufacturing industry. Sources: ifo Institut, DekaBank; Status: 15.09.2011 The opinions expressed reflect our current assessment at the time of writing. This assessment can change at any time and wiithout prior notice.The content has been put together with great care. However, no liability can be accepted for inaccuracies.

-50

-40

-30

-20

-10

0

10

20

30

-50 -40 -30 -20 -10 0 10 20 30 40Geschäftslage (Saldenpunkte)

Ge

sch

äfts

erw

art

un

ge

n (

Sa

lde

np

un

kte

)..

Jan 10

Aufschwung

AbschwungRezession

"Boom"

Jan 08

Jan 09

Jun 08

Aug 09

Aug 11

Aug 10

Aug 08

Sept 11

6

The weakness in the economy is not yet having an effect on the jobs markets

USA

Sources: Bloomberg, DekaBank

Germany

BIP

-4%

-2%

0%

2%

4%

6%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Juni September

Arbeitslosenquote

-

2

4

6

8

10

12

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Juni September

BIP

-6

-4 -2

-2 4

6

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Juni September

Arbeitslosenquote

- 2

4 6 8

10

12 14

2005 2006 2007 2008 2009 2010 2011 2012

Juni September

?

7

Lower, but still positive outlook for returns

Sources: PMA, DekaBank forecasts *Average value for 25 locations; the opinions expressed reflect our current assessment at the time of writing. This assessment can change at any time and wiithout prior notice.The content has been put together with great care. However, no liability can be accepted for inaccuracies. Status: 29.09.2011

Forecast for total returns in %

Total returns positive despite a difficult environment

Recovery in total returns

Returns expected to flatten out to an average of 3% per year between 2012 and 2015, more than long-term German bonds

Slowdown in growth in rental income due to economic weakness

-15

-10

-5

0

5

10

15

20

2005 2007 2009 2011P 2013P 2015P12/10 03/11 06/11 09/11

in %

8

North America Europe Asia & Pacific

Status: 30 June 2011

Property markets - an overview

‡ Rental markets should have reached bottom despite slow economic development.

‡ Limited supply of first-class office property is stabilising prices in this segment.

‡ High potential for growth in rental income in particular in top buildings in New York and San Francisco.

‡ After market shake-down, potential for value recovery in core-plus/value-added property.

‡ Recovery in rental markets is continuing.

‡ Peak performers in rental growth still London, followed by Stockholm and Warsaw. Good prospects also on the German markets.

‡ Because property is rooted in the real economy, a short period of stress on the capital markets would not represent a danger to property values.

‡ Opportunistic strategies possible through a return to realistic risk premiums in countries on the periphery.

‡ High demand for office space because of expanding companies, especially in China.

‡ Demand in Tokyo did not collapse to the extent expected after the earthquake.

‡ Strongest growth in rental income in China and Hong Kong.

‡ Sale prices continue to rise, except in Tokyo and Seoul.

‡ Economic growth and rising incomes are stabilising the Chinese housing market.