Colonia Real Estate AG -...

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Colonia Real Estate AG

Investing in Real Estate Opportunities

for the

Morgan Stanley German Property DayLondon, January 11th 2006

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Mission Statement

Colonia Real Estate AG aims to become a market leader for opportunistic Investments in German Real Estate. We invest in cashflowing Investments in the areas of Residential, Hotel and Office Properties to create a diversified, high-dividend portfolio.

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Content

• Company Overview• Portfolio and Strategy

– Residential Real Estate– Commercial Real Estate

• Asset Management Capabilities • Market Overview


• CRE‘s Financials• Summary

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Key Highlights

• Specialized Team with deep experience in Real Estate, Private Equity and Capital Markets

• Diversified High-Yield Portfolio in Residential and Commercial Real Estate

• Low Competition through preferred Investmentsize of € 10 – 50 MM

• Commercial RE: Higher Yield through focus on 2nd Tier Cities with Top Tier tenants and Distressed Situations

• Residential RE: Higher Yield through focus on small to midsize portfolios (500 – 4000 Units)

• Active Buy-and-Sell Strategy with high restructuring expertise

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Company Structure

ResidentialReal Estate

• 100% CRE Wohnen GmbH

• 99.68% Grasmus Holding B.V.

OfficeReal Estate

• planned

HotelReal Estate

• 94% CRE Hotel Immobilien GmbH

Services

Colonia Real Estate AG

CRE Research &Management

• 100% CRE Research & Management GmbH

InvestmentDivisions

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CRE‘s Share Price Performance

• Best Performing Real Estate Stock in Germanyin 2005 with 805% return ytd

• 3,569,200 shares issuedand outstanding and currently Marketcap of EUR 230 mn

• Admission to Prime Standard as of Jan 2nd 2006

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Ownership Summary

• Fortman Cline Group (incl. SwissReal Estate) intens to remain major shareholder but to slide further below 50% to increase Free Float

• Cerberus Group will be minority shareholder (1.7%) in CRE with a 2 year Lock-up

OWNERSHIP STRUCTURE

Swiss Real Estate47.16%

Free Float44.17%

FortmanClineHolding AG

0.67%Cerberus

1.70%

Peter May6.30%

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Content






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Objectives in CRE‘s Investments

• Objectives for CRE‘s investments– Structuring of cash flow positive real estate portfolio – Opportunistic investments in distressed commercial real estate– Momentum Investment in undervalued residential real estate– Target investment size: EUR 10 mn - EUR 50 mn.– Target IRR >15% based on estimated holding period of two to eight

years• Objectives for CRE‘s portfolio management

– Distribution of investments among:• Residential and commercial properties: 50 : 50• Trading and holding real estate assets: 40 : 60

> Target Annual portfolio turnover: 30%

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Grasmus Portfolio

Residential Real EstateAcquisition: 06 / 2005Tenant: diverse portfolioLocation: Aurich, Delmenhorst, Emden,

Ganderkesee, Leer, Lueneburg, Sande, Wilhelmshaven and Wittmund

Long term value: EUR 96.2 mn.Equipment: 3,488 units, 1,137 parking lotsYear of construction:1968 - 1975Net rent: EUR 11.5 mn. p.a.Vacancy rate: 7.5%

10/05: Succesful Block Sale of 708 units to an international Investor Group

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Bremen & Hamburg Portfolio

„Bremen“ - Residential REAcquisition: PendingLocation: Brake and NordenhamPurchase Price: EUR 6.7 mn. Equipment: 356 units, 58 parking lotsNet rent: EUR 0.8 mn. p.a.

„Hamburg“ - Residential REAcquisition: PendingLocation: Elmshorn and ItzehoePurchase Price: EUR 38.2 mn. Equipment: 1,577 unitsNet rent: EUR 4.95 mn. p.a.

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CRE‘s Residential RE Strategy

• Active buy-and-sell strategy covering the entire value chain,through- Block trades- Privatizations- Initiation of REITs- Active management of real estate holdings and optimization of

lease payments in short to medium term- Lease payment is ca. 15% below market; abolition of contracted

lease period provides further potential

• Further Acquisition of small to mid size portfolios (500 – 4000 units)- Looking for off-market acquisitions- Avoiding auctions to achieve better yields

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Office Real Estate

Office Real EstateProperties: 2 office buildingsAcquisition: 01 / 2005Tenant: G.E.B.B. GmbHLocation: CologneLong term value: EUR 13.5 mn.Equipment: 6,680 qm office space, 150

parking lotsYear of construction: 2001Net rent: EUR 1.0 mn. p.a.Duration of lease: 2012• Indexed leases• G.E.B.B. is a 100% subsidiary of

German Ministry of Defense

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Hotel Real Estate

Hotel Real EstateProperties: 3 Marriott Hotels (Courtyard by

Marriott)Acquisition: 2004Tenant: HPI GermanyLocation: Kassel, Braunschweig, EisenachLong term value: EUR 27.2 mn.Equipment: 439 rooms, 6 restaurants,

3 Bars, 2 Spa‘s, Conference FacilitiesYear of construction: 1993 - 1995Net rent: EUR 2.0 mn. p.a.Duration of lease: 2022, triple net• Indexed leases• Fully guaranted lease payments

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CRE‘s Commercial RE Strategy

Market Trends:

• Expected increase of 2.4% in average renting levels in B-Cities until 2009 (BulwienGesa AG)

• Average Vacancy Rate in B-Cities is just at 6.2% (BulwienGesa AG)

• Hotel Room Turnover in Businesshotels has increased by 5.8% in 2004 (IHA)

Selective acquisitions of office buildings preferebly out of distressed or specialsituations in B-Cities with Top Tier Tenants

Further acquisitions of Businesshotels with longterm lease contracts and Premium Management

Additional acquisitions in retail portfolios (i.e. retail parks, shopping centers)

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Growth and Value in one strategy

t

Assets

Trading 30 - 40%

Holding and Optimization 60 - 70%

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Content



• Asset Management Capabilities• Market Overview



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Asset Management Capabilities

• Active Management of the portfolio- Concierge Service at GEBB Building - Reduction of vacancy rate in Grasmus Portfolio by 35% through the

implementation of CRE 10step-Plan- Reduction of outstanding rents in Grasmus Portfolio by 85%

through external NPR-Service Provider - Lease payment in current residential portfolio is ca. 15% below

market; abolition of contracted lease period provides further cash flow Enhencement

• Acquisition of Asset Management team with local partner network planned- preferebly with regional office structure across Western Germany to

cover most relevant markets

Steadily increasing recurring revenues streams

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Content






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German RE: A Sleeping Gigant

• Germany is Europe‘s biggest Real Estate Market, but prices are under-performing European peers

• Estimated 3.4 mn. RE units with an approx. value of about EUR 138 bn. with public entities

• ca. 900,000 units are held by corporates with an approx. value of EUR 37 bn.Massive potential for portfolio shifts and possible introduction of REITs will ease exit through stock listing

TOTAL REAL ESTATE VALUES IN EU

Source: Deutsche Bank, LBS, Unternehmensangaben, HVB Global Market Research,

NIMRO NMQP

UMR

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HPI‘s in EU

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Growth Potential in Germany

• Number of households is steadily increasing

• Average size of households decreased to 2.1-Persons

• Growth in number of households is estimated to remain strong through 2030

• Ratio of ownership in Germany is at only 38%, compared to 60% EU averageIncrease in Rents from 2006 until 2013 is estimated at 2.5% p.a. (Feri Institute)

JJJ

RIMMM

NMIMMM

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NUMBER OF HOUSEHOLDS

Source: Federal Statistical Office Germany

REAL ESTATE OWNERSHIP IN EU (2003A)

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Office RE determined by Economy

• Weak economic conditions limit office real estate development– Higher vacancy rates– Reduced values– Falling rental income

• Still new properties coming to the market worsen situation

• B-cities are exposed to limited competition and provide more less volatility and more stable values and income

• Potential on catch of returns on German Real Estate

CHANGE IN TOP OFFICE RENTALS

COMPARISON ON RETURNS (2004)

EOSIMBF

ENUIMBF

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Content



• Asset Management Capabilities• Market Overview



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Key Financials

3.531.80-0.27EPS (EUR) (fully diluted)

12.26.3-0.6Net Profit (EUR Mio.)

23.114.6-0.5EBIT (EUR Mio.)

34.620.10.7Sales (EUR Mio.)

2006e2005e2004Key Facts

Sales (EUR Mio.)

2004 2006e2005e

40

30

20

10

0

Net Profit (EUR Mio.)

2004 2006e2005e

12

10

8

6

4

2

0

-2

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121.237.8828.41Assets (EUR MM)

139.838.628.48Balance Sheet Total (EUR MM)

24.93.813.22Equity (EUR MM)

18%12%11%Equity-Ratio

31.12.2005e30.06.200531.12.2004

Balance Sheet IFRS (excerpt)

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Summary - A Historical Opportunity

• A highly motivated Management Team with a broad and complimentary skillset

• A unique and proprietary Investment process and team which is able to produce replicable above-averge returns

• A proven network within the Real Estate and Banking industry in Germany

• A growth and value opportunity covering the entire value chain at the beginning of the transition of Europe‘s largest Real Estate Market

The fundament is set – join us building the house…

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Disclaimer

This document contains forward-looking statements and forecasts based onassumptions and estimates made by Colonia Real Estate management. While we assume that the expectations of these forward-looking statements arerealistic, we cannot guarantee that the expectations will prove to becorrect. The assumptions may conceal risks and uncertainties which may leadto actual results significantly divergent from those made in the projectiveforecasts. The factors that can cause such a divergence include: changes inforeign exchange control or the economic and business environment, currencyexchange rate fluctuations, the low market entry barriers for competitors,insufficient acceptance of new products or services and changes in corporatestrategy. No update of the projected forecasts contained herein is planned,nor does Colonia Real Estate assume any obligation to do so.

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