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					Emerging Trends in Real Estate
According to the Emerging Trends in Real Estate® Europe 2005 survey, real
estate investors in Europe anticipate profitable year

Real estate investors throughout Europe are optimistic about the industry's potential to generate
healthy returns over the coming year, according to the highly-regarded real estate investment report,
Emerging Trends in Real Estate® Europe 2005, published by PricewaterhouseCoopers and the Urban
Land Institute (ULI).

Based on interviews with more than 250 of the industry's leading authorities, Emerging Trends in Real
Estate states that 87% of the respondents believe profit growth will be “modestly good” to “excellent”
over the course of the year, and that real estate investments will outperform bonds and equities.

Paris ranks as the top overall investment market for risk-adjusted returns out of 27 markets listed.
Milan ranks second in the overall investment category, and ranks first for retail investment prospects,
with 67% of the respondents recommending buying retail properties there. That city is also listed as a
promising development market. London ranks third for overall investment prospects, although it is not
highly rated as a market in which to buy any specific property type.

Strong “buy” markets include Helsinki, Prague, Warsaw and Budapest; while Athens and Dublin are
listed as strong “sell” markets

While Slovakia was not covered by this survey, the strong interest in Slovakia as a real estate
investment and development market is becoming more evident. A large number of commercial and
retail schemes have come on line over recent years and the good geographic location of Slovakia,
together with major FDI wins in the automotive sector has meant that logistics is a market for the

Bratislava is making huge progress as a property investment location. In five years, from having
virtually no investment transactions it is becoming more interesting for investors, which show a high
degree of investor confidence in the future of Slovakia

Like other accession countries Slovakia is benefiting from strong economic growth - c.5% GDP growth
is forecast in 2005 and 2006, and falling inflation. Growing wealth in the population together with
increased tourism (Easyjet budget flights to Bratislava from Dec 2004) will stimulate retail spending,
particularly in Bratislava, and demand for improved retail provision.

From 1998 to the present approximately EUR 8.6 billion has been invested into property in CEE, with
approximately 72% of the total invested volume during this time period being invested within the last
two years. Although the three major Central European property markets – Czech Republic, Hungary
and Poland – continue to dominate the investment scene for the region and account for more than
93% of the total volume invested since 1998, we are beginning to see increased activity in Romania,
Russia and Slovakia. Investors are increasingly hungry to buy in these markets. Certainly demand for
product further east exists, but there is a lack of available product of sufficient quality. Nevertheless,
this is quickly changing and we expect to see investment activity push quickly eastward during the
next two years and Slovakia will benefit from general investor interest in CEE markets - as shown in
the ETRE survey.

Poland’s investment market in regional cities is so far the most active in CEE, although we expect to
see more activity in Czech and Hungarian regional cities as well during the next two to three years.
Outside of the three core CEE markets – Budapest, Prague and Warsaw – we are beginning to see
true cross border investments into Bratislava, Bucharest and Moscow. Bratislava finally made a
relatively sizable splash on the investment market in 2004 with approximately EUR 248 million

Bratislava, while a relatively small investment market, has seen yields decline in line with other CEE
capitals, but still benefits from a yield premium over most of the larger centres across all sectors, so it
will attract interest.

As investors find it increasingly difficult to acquire stock at "fair value" in Poland, Czech Republic and
Hungary then Slovakia and Slovenia, and also Bulgaria and Romania will come onto the radar of the
more adventurous investors.

Key trends in the European real estate market
   In contrast to 2004, the 2005 outlook for developers has improved, particularly for mixed-use
    developments (modern high-quality office, retail, and residential space). In terms of property types,
    shopping centres are again expected to produce the highest total returns in 2005, while retail
    parks outrank residential as the second most favoured investment choice. The residential sector is
    listed as top choice for development, followed by shopping centres and warehousing/distribution
   More money is being raised than can currently be placed in European real estate markets. The
    sources of capital are expanding, but there is a shortage of suitable assets for acquisition.
   European real estate markets will outperform bonds and equities again in 2005. The high level of
    inflows to real estate will continue because it is deemed “the least-worst asset class.”
   The disconnection between occupier markets and the investment market will not disappear, but
    more markets are turning the corner or will do so by the end of the year.
   Investors are taking on increasing risk in order to obtain real estate assets. They will continue to
    seek out niches where there is room for adding value through refurbishment or repositioning of
    assets in order to obtain additional returns.
   Prices are historically high and could face a setback if interest rates finally rise in earnest, but
    significantly higher rates are not expected this year. There has been a structural expansion in the
    investor base for real estate.
   The shift to indirect investment will continue as more institutions seek to diversify their real estate
    holdings across sectors and access foreign markets. There will be more listed and unlisted
    vehicles offering core and value-added strategies to meet this increasing appetite for
   The best investment markets for solid risk-adjusted returns will be Paris, Milan, and London. All
    three are seeing an improvement in occupier markets and have reasonably good fundamentals.
    The markets that garnered the most “buy” recommendations are Prague, Warsaw, and Budapest.
    Their economic growth is projected to be double that of the E.U. average, and they offer higher
    yields with prospects for further convergence.
   The best development markets - but with considerable risk - will be outside the E.U. Istanbul tops
    the rankings as it offers scope in most sectors and a vibrant, entrepreneurial high-growth economy
    that is aspiring to join the E.U. Moscow follows with its huge potential market and rising incomes,
    although political considerations complicate the picture.
   The best sectors to invest in will be shopping centres and retail parks, although they are unlikely to
    deliver the returns seen last year. Warehousing and residential properties are also attracting
    attention, and hotel fundamentals are expected to strengthen.
   Office fundamentals will remain problematic, but city centre offices will start to attract more
    investment interest as the year progresses, as investors seek to catch the cyclical upturn that is
    expected in coming years. Manufacturing and business parks and out-of-town offices are still
    mired at the bottom of the ranking.