Dhi Brochure

2CONTTHE SITUATION OUR OFFER01 02

3ENTSBUY-AND-HOLD STRATEGIES03 PARTITIONING APARTMENT BLOCKS INTO

CONDOMINIUMS FOR RESALE04 THE BERLIN RESIDENTIAL REAL ESTATE MARKET05 GERMAN INCOME TAXATION06

A CUSTOM-TAILORED SOLUTION TO INVESTING IN RESIDENTIAL REAL ESTATE IN BERLIN

4

01THE SITUATION

5

RESIDENTIAL REAL ESTATE IS BACKIN FOCUS

6

REAL ASSETS As a result of the financial crisis real assets are back in focus in particular diversified portfolios of residential real estate

REAL ASSETS AS A WAY TO PRESERVE VALUE

• First a flight from capital markets as stock and corporate credit markets tumbled

• Then a flight from cash as fears of bank failures mounted

• Resulting in a flight to the safety of real assets such as gold and real estate

STABLE RETURNS FROM RESIDENTIAL REAL ESTATE

• In times of economic crisis, residential is safer than commercial real estate – provided it is a quality object in the right location bought at the right price

OPTIMISATION THROUGH DIVERSIFICATION

• An intelligently diversified portfolio of carefully chosen residential real estate assets spreads the risk and is thus safer than larger single assets

01THE SITUATION

7

Source: Infinanz Research 08/2002, Prof. Dr. Busse Infinanz GmbH in: Beteiligungsreport 04/2008

PERFORMANCEReal assets have consistently outperformed other asset classes in times of crisis

YEAR CRISIS REAL ASSETS GLOBAL STOCKS US GOVERNMENTBONDS

1987 STOCKMARKET CRASH 5.10% -15.5% +8.6%

1990 GULF WAR I 5.70% -11.3% +0.7%

1997 ASIAN CRISIS 6.02% -11.3% +4.6%

1998 RUSSIA AND LTCM CRISIS 5.97% -2.4% +5.1%

2001 SEPT 11TH 6.20% -14.2% +4.9%

2003 GULF WAR II 6.80% -3.7% +4.2%

8

RISK VS. RETURNRetail and office real estate moves with the economic cycle - residential real estate offers stable returns at comparatively low risk

RISK

RETU

RN

RESIDENTIAL REAL ESTATE

COMMERCIAL REAL ESTATE

SPECIAL SITUATIONS REAL ESTATE

THE SITUATION

GOAL

GOAL

9

DIVERSIFICATIONIntelligently assembling a large portfolio of residential real estate assets diminishes the risk of single acquisitions

NO. OF OBJECTS

RISK

10

Source: Deutsche Bundesbank, Investment Property Databank, Institut der deutschen Wirtschaft Köln

PROTECTIONResidential real estate offers good protection against inflation as demand is inelastic

Institut der deutschen Wirtschaft Köln: “…all in all, direct investments offer better protection from inflation than stocks. In particular residential real estate offers good protection, followed by retail and office. The reason is that demand for living space is independent of inflationary forces.”

YEAR

% R

ETUR

N

160

140

120

100

RETAIL

RESIDENTIAL

OFFICE

INFLATION

1998 2000 2002 2004 2006 2008

11

IN SUMMARY• REAL ASSETS ARE BACK, IN PARTICULAR DIVERSIFIED PORTFOLIOS OF RESIDENTIAL REAL ESTATE

• IN TIMES OF CRISIS, REAL ASSETS HAVE CONSISTENTLY OUTPERFORMED OTHER ASSET CLASSES

• RESIDENTIAL REAL ESTATE OFFERS STABLE RETURNS AT COMPARATIVELY LOW RISK & GOOD PROTECTION AGAINST INFLATION

• INTELLIGENTLY ASSEMBLING A PORTFOLIO OF RESIDENTIAL REAL ESTATE ASSETS DIMINISHES THE RISK OF SINGLE ACQUISITIONS

12

02OUR OFFER

13

AN INDIVIDUAL PORTFOLIO& A CUSTOMIZEDSTRATEGY

14

02OUR OFFER

WHY BERLIN? Berlin is a highly attractive location to invest in real estate

RANKED IN TOP 10 OF EUROPEAN CITIES TO INVEST IN EMERGING TRENDS IN REAL ESTATE 2009 SURVEY

GROWING ATTRACTIVENESS OF THE CITY SINCE GERMAN REUNIFICATION RESULTING IN RISING POPULATION AND WEALTH

• Structural change from manufacturing to diversified modern service economy

• Seat of Government (since 1999) attracting wide array of businesses and institutions

• Large and diversified cultural offering attracting both tourists and new residents

HIGHLY ATTRACTIVE FUNDAMENTALS FOR RESIDENTAL PROPERTY

• High rental yields in international comparison

• Comparatively low but rising rents

• Comparatively low per-square-meter prices

• Very low latent vacancy combined with growing population

BERLIN IS LESS AFFECTED BY THE CRISIS THAN OTHER CITIES

• Good mix of growing service industries with relatively low export orientation

• Did not participate in the bubble so little downside

15

WHY DHI ?DHI provides investors a ‘no-worries’ custom-made vehicle to realise their investment strategy

• DHI IS INVESTING IN RENTED RESIDENTIAL BUILDINGS IN BERLIN

• BERLIN MARKET IS OFFERING ATTRACTIVE RISK-ADJUSTED RETURNS

• EACH INVESTOR’S PORTFOLIO TAILORED TO THEIR SPECIFIC INVESTMENT STRATEGY

• DHI PROVIDES FULL SERVICE COVERING THE WHOLE LIFE CYCLE OF THE PORTFOLIO

» Detailed analysis of the property market in each micro location by Engel&Völkers Commercial Research and other sources

» Prospection of target properties

» Due diligence

» Asset management as well as property management

» Eventual disposal

16

STRATEGIESDHI offers tailor-made investment strategies ranging from buy-and-hold to condo conversion

BUY-AND-HOLD

• Buy for current income

• Buy for capital appreciation

• Opportunistic buy

• Buy for modernisation / development

CONDO CONVERSION

• Buy apartment building

• Refurbish if needed

• Split into individual condominiums

• Sell individual units

17

IN SUMMARY• BERLIN RANKED IN TOP 10 EUROPEAN CITIES TO INVEST IN REAL ESTATE 2009 SURVEY

• DHI IS INVESTING IN RENTED RESIDENTIAL BUILDINGS IN BERLIN

• DHI PROVIDES INVESTORS A ‘NO-WORRIES’ CUSTOM-MADE VEHICLE TO REALISE THEIR INVESTMENT STRATEGY

• DHI FOCUSES ON BUY-AND-HOLD & CONDO CONVERSION STRATEGIES

18

03BUY-AND-HOLD STRATEGIES

19

WE COVERTHE FULL SCOPEOF SERVICES

20

03BUY-AND-HOLD STRATEGIES

PROPERTY PORTFOLIODHI will assemble a diversified Berlin residential property portfolio for each investor which will display some or all of the following characteristics, their degree depending on the chosen overall strategy outlined before

• GENERALLY LOCATED IN GOOD AND UPCOMING NEIGHBOURHOODS

• BUILDINGS IN GOOD STRUCTURAL CONDITION

• MOSTLY TO FULLY RENTED WITH MID-RANGE RENTALS, OFFERING UPSIDE POTENTIAL THROUGH TENANT MANAGEMENT AND RENT INCREASES

• OFFERING ATTRACTIVE INITIAL YIELDS WITH STRONG OPERATING CASH-FLOW HISTORIES

• INCORPORATING RETAIL AND/OR COMMERCIAL SPACE (OF LESS THAN 20% OF INCOME) IN ADDITION TO THE RESIDENTIAL SPACE

21

CUSTOMIZED STRATEGYDHI covers the full scope of services, offering the convenience of a fund combined with the customized strategy of an individual portfolio

PORTFOLIO INDIVIDUALLY

STRUCTURED BASED ON THE

INVESTOR’S DESIRED

RISK/RETURN PROFILE,

TIME HORIZON AND OTHER

INDIVIDUAL CHARACTERISTICS

DHI THEN IDENTIFIES INVESTMENT

OPPORTUNITIES, USING ENGEL&VÖLKERS

COMMERCIAL'S EXTENSIVE NETWORK

AS WELL AS OTHER SOURCES,

EVALUATING BOTH FINANCIAL AS

WELL AS PHYSICAL BUILDING CONDITIONS

AS PART OF THE SELECTION PROCESS

DURING THE INVESTMENT PHASE,

OUR INVESTORS BENEFIT FROM THE

MARKET INSIGHT THAT RESULTS FROM

THE FULL RANGE OF ENGEL&VÖLKERS

COMMERCIAL'S AND BATO

GROUP‘S ACTIVITIES

THE REAL-TIME MARKET KNOWLEDGE

THAT E&V AND BATO GROUP GAIN IN

BUYING, SELLING, FINANCING AND

VALUING PROPERTIES IN THE BERLIN

MARKET IS GATHERED, ANALYZED,

AND APPLIED FOR THE BENEFIT OF

OUR INVESTORS

ONCE THE ACQUISITION OBJECTS

ARE IDENTIFIED, DHI MANAGES

ALL (TECHNICAL, LEGAL ETC.)

ASPECTS OF THE DUE-DILIGENCE

PROCESS IN CONCERT WITH

ESTABLISHED AND WELL-KNOWN

STRATEGIC PARTNERS

DURING THE OWNERSHIP PHASE,

THE SERVICES COMPRISE TENANT

MANAGEMENT AND RENT OPTIMISATION,

REFURBISHMENT AND MODERNISATION

INCLUDING FINANCIAL AND TECHNICAL

PROJECT MANAGEMENT AS WELL AS

CONTROLLING AND INVESTOR REPORTING

DURING THE DISPOSAL PHASE,

DHI IS AGAIN COVERING ALL ASPECTS,

ENSURING VALUE OPTIMISATION

FOR THE INVESTOR ACCORDING TO

THEIR INVESTMENT STRATEGY

OWNERSHIP & DISPOSAL PHASE

CONCEPTION

OWNERSHIP & DISPOSAL PHASE

PROSPECTION ANALYSIS DUE DILIGENCE OWNERSHIP DISPOSAL

ACQUISITION PHASE

22

SUMMARYSummary of terms buy-and-hold strategies

STRATEGY CORE CORE PLUS OPPORTUNITY INCOME ORIENTATED

PURCHASE PRICE PER M *1,500-2.000 *900-1,000 *650-850 *500

INITIAL YIELD /FACTOR *5.7% - 4.5% / 17.5 - 22 6.9% - 6.8% / 14.5 - 14.75 x 7.9% - 6.7% / 12.7 - 14.75 x 9.6%/10.4 x

LEVERAGE RATIO 45% / 40% 60% / 55% 70% / 65% 75%

ACQUISITION PHASE 1 YEAR 1 YEAR 1 YEAR 1 YEAR

RENT INCREASE TARGET(COMMERCIAL/RESIDENTIAL) 3.7% / 4.0% 3.7% / 3.8% 3.7% / 3.8% 3.2%

REFURBISHMENT BUDGET *10K / FLAT FOR 20% *10K / FLAT FOR 50% *10K / FLAT FOR 50% -

EXAMPLE AREAS KÜFURSTENDAMM,MITTE PRENZLAUER BERG

KREUZBERG, PRENZLAUER BERG, FRIEDRICHSHAIN,CHARLOTTENBURG

NEUKÖLLN, WEDDING,MOABIT, TIERGARTEN

NEUKÖLLN,WEDDING, MOABIT,

REINICKENDORF,HOHENSCHÖNHAUSEN

23

TARGET RETURNTarget return and expected performance for each strategy

CORE CORE PLUS OPPORTUNITY INCOME ORIENTATED

IRR ON EQUITY 9.5%-11% 13.5% 14.19% 21%

CASH-ON-CASH(BEFORE SALES) 2%-3.5% Ca. 4% 3.5-5.75% 8.25%

ROE (BEFORE SALES) 12-22% Ca. 25% 21%-38%% 64%

DISTRIBUTION MINIMUM & TIME FRAME

1.75%-3.0%, DISTRIB. AFTER 2ND YEAR

2.5%, DISTRIB. AFTER 2ND YEAR

2.5%-5.0%, DISTRIB. AFTER 2ND YEAR

8.0%, DISTRIB. AFTER 2ND YEAR

24

CORE CORE PLUS OPPORTUNITY INCOME ORIENTATED

ADVERSE DEVELOPMENTOF THE AREA LOW LOW-MEDIUM MEDIUM MEDIUM-HIGH

CAPITAL GAIN MEDIUM MEDIUM HIGH LOW-MEDIUM

TENANT RISK LOW LOW-MEDIUM MEDIUM-HIGH MEDIUM-HIGH

RISK FACTORSRisk factors of the presented buy-and-hold strategies

25

IN SUMMARY• DHI WILL ASSEMBLE A DIVERSIFIED & STRUCTURED BERLIN RESIDENTIAL PROPERTY PORTFOLIO TO SUIT INVESTORS’ NEEDS

• GENERALLY LOCATED IN GOOD AND UPCOMING NEIGHBOURHOODS, BUILDINGS ARE IN GOOD STRUCTURAL CONDITION

• DHI COVERS THE FULL SCOPE OF SERVICES WORKING WITH EACH INVESTOR THROUGH THE ACQUISTION TO DISPOSAL PHASE

• TARGET RETURNS ARE HIGH, RISK FACTORS ARE LOW

26

04PARTITIONING APARTMENT BLOCKS INTO CONDOMINIUMS FOR RESALE

27

WE OFFER A CARE-FREEPACKAGE COVERING ALL ASPECTS

28

AUFTEILUNGAnother strategy is buying properties for immediate partitioning into condominiums and selling them to investors or owner-occupiers

• BERLIN HAS A VERY LOW HOME-OWNERSHIP RATE OF ABOUT 13%

• DEMAND FOR CONDOMINIUMS („EIGENTUMSWOHNUNGEN“) IS RISING

» Small investors seeking safety of real assets in manageable volume

» As rents are rising and capital costs are low, buying becomes more attractive for tenants

• PER-SQUARE-METER PRICES OF CONDOS ARE SIGNIFICANTLY ABOVE THOSE OF APARTMENT BUILDINGS EVEN AFTER ASSOCIATED COSTS, OFFERERING ATTRACTIVE PROFIT POTENTIAL

• TIME HORIZON FOR INVESTMENT IS SHORTER THAN THE BUY-AND-HOLD STRATEGY AT ABOUT 2-5 YEARS, DEPENDING ON VOLUME

04PARTITIONING APARTMENT BLOCKSINTO CONDOMINIUMS FOR RESALE

29

DHI PACKAGEDHI is again offering a care-free package, covering all aspects of the process

DETAILED ANALYSIS AND VALUATION OF THE OBJECT

• Location, analysis of vicinity, assessment of marketability

• Condition of the building

• Opportunities to add value (e.g. building extension, roof conversion)

• Analysis of tenant structure

DEVELOPMENT OF THE MARKETING CONCEPT

• Total modernisation and redevelopment, e.g. with branding of the object

• Partial modernisation (e.g. only renovation of flats, not common space)

• Partitioning without extensive renovation

PROVISION OF DEBT FINANCING

• Introduction to banks offering debt financing

• Negociation of terms

• Presentation of detailed project planning

TENANT MANAGEMENT

• Negociation with current tenants to vacate flats

• Provision of temporary accomodation during renovation work for tenants turned owners

• Provision of alternative accomodation for tenants willing to move out

• Management of rent increases

30

DHI PACKAGEDHI is again offering a care-free package, covering all aspects of the process

OPTIMISATION OF FLOORPLAN DESIGN (PARTITIONING, OPTIMISATION, MERGING FLATS)

FLAT-BY-FLAT ANALYSIS OF ANTICIPATED RE-SALE PRICES BASED ON FLAT CHARACTERISTICS (FLOOR, LOCATION, LIGHTING, CONDITION,

FURNISHINGS ETC.)

OBTAINING CERTIFICATE OF SELF-CONTAINED CONDITION („ABGESCHLOSSENHEITSBESCHEINIGUNG“)

PREPARATION OF DECLARATION OF PARTITION („TEILUNGSERKLÄRUNG“), DRAFT OF SALES CONTRACT AND CONSTRUCTION SPEC LIST

PREPARATION OF (FUTURE) FLAT OWNERS ASSOCIATION RULES (CREATION OF RESERVE FUND ETC.)

CALCULATION / PLANNING OF NECESSARY CONSTRUCTION WORK AND REQUEST FOR QUOTATIONS

AWARD OF CONTRACT

SUPERVISION OF CONSTRUCTION/RENOVATION WORK

MANAGEMENT OF SALE PROCESS

31

SUMMARYSummary of terms condo conversion strategy

PURCHASE PRICE PER M2 *1,100

INITAL YIELD / FACTOR 6.5% / 15.4x

LEVERAGE RATIO 65 / 35

ACQUISITION PHASE 1 YEAR

SALES PERIOD 3-5 YEARS

REFURBISHMENT COST *10K / UNIT FOR 70% (RESIDENTIAL) & 50% (COMMERCIAL)

COST FOR BUYING OUT TENANTS *6,000 / UNIT FOR 70%

CONDO SALES PRICE PER M2 *2,200

32

RISK FACTORS Risk factors condo conversion strategy

• THE MAIN RISK IS PURCHASING PROPERTIES THAT HAVE CHARACTERISTICS HINDERING A SALE OF THE CONDOS AT THE PROJECTED PRICES

» Wrong orientation of the property (lack of light)

» Wrong micro-location, e.g. too noisy

» Lack of elevator

» Lack of outside space / balcony

• WE INTEND TO COUNTER THIS RISK BY CAREFULLY SELECTING PROPERTIES THAT FULFIL THE NECESSARY CRITERIA

• IN ADDITION, PROBLEMATIC UNITS CAN BE SOLD TO INVESTORS (AS OPPOSED TO OWNER-OCCUPIERS) AS RENTING TENDS TO BE LESS PROBLEMATIC

33

TARGET RETURNTarget return and expected performance for condo conversion strategy

CASH-ON-CASH 40%

ROE (BEFORE SALES) 80%

DISTRIBUTION MINIMUM & TIME FRAME 10% DISTRIB. 3RD YEAR

34

THE TEAMThe DHI Team, Expertise and Track Record

ANDREA BARBATO

• Founder and MD of BATO Group Real Estate Investments (total investment volume in Berlin 45mio euros, acquiring, financing,

managing of the assets)

• Previous assignments with Enstar Capital and Garbe Real Estate in London

RACKHAM F. SCHRÖDER

• Managing Director of Engel & Völkers Commercial Berlin (largest broker of residential buildings in Berlin), has accompanied about

2.5bn euros in residential and commercial real estate deals

MATTHIAS DUX

• 10 years banking experience with Deutsche Bank in London and Tokyo

• Previous assignments in Private Equity with Paribas bank in Paris and management consulting with Booz Allen & Hamilton in Chicago

• Insead MBA

35

IN SUMMARY• CHOICE OF STRATEGY FROM MENU OF BUY-AND-HOLD OR CONDOMINIUM STRATEGIES

• FULL-SERVICE PACKAGE DURING ALL PHASES OF THE PORTFOLIO LIFE CYCLE

• COMBINATION OF BENEFITS OF CUSTOMISED STRATEGY WITH SCALE AND EXPERIENCE OF LARGER ORGANISATION

• EXPERIENCED TEAM WITH PROVEN TRACK RECORD

36

05THE BERLIN RESIDENTIAL

REAL ESTATE MARKET

37

BERLIN IS GROWINGDESPITE THE OVERALLECONOMIC SITUATION

38

05THE BERLIN RESIDENTIAL

REAL ESTATE MARKET

BERLIN AT A GLANCE• CAPITAL OF GERMANY AND SINCE 1999 SEAT OF GOVERNMENT

• 3.4 MILLION INHABITANTS

• 128,000 RESIDENTIAL AND COMMERCIAL BUILDINGS

» Vacancy rate 2006: 5.1%

» Vacancy rate 2007: 4.6 %

• 1,882,000 RESIDENTIAL UNITS

• 18 MILLION SQUARE METRES OFFICE SPACE

• 4.3 MILLION SQUARE METRES RETAIL SPACE

39

ATTRACTIONSFurthermore, Berlin provides a wide scientific and cultural offer

• 7 UNIVERSITIES

• 20 PUBLIC AND PRIVATE COLLEGES

• 80 RESEARCH INSTITUTIONS (E.G., MAX-PLANCK AND FRAUNHOFER INSTITUTES)

• LEADING EUROPEAN TRADE FAIR AND CONVENTION LOCATION

• 3 OPERA HOUSES

• 326 THEATRES AND CINEMAS

• 175 MUSEUMS AND 400 ART GALLERIES

• MORE THAN 3,400 RESTAURANTS

• MORE THAN 120 CLUBS

• HERTHA BSC FOOTBALL, ALBA BERLIN BASKETBALL, EISBÄREN ICE HOCKEY, BERLIN MARATHON

40

Source: Office for Statistics Berlin Brandenburg, March 2009

RADICAL CHANGEBerlin has experienced a radical structural change from a production location to a well-diversified service location since German reunification

1991 2008

6%

21%

6%

17%

28%

10%

5%

7%7%

15%

3%

16%

34%

9%

7%

9%

TOTAL 57,428 MILLION EUROS TOTAL 75,523 MILLION EUROS

MANUFACTURING SECTOR

CONSTRUCTION INDUSTRY

TRADE, HOSPITALITY AND TRANSPORT

FINANCE, LETTING AND CORPORATE SERVICE PROVIDERS

PUBLIC ADMINISTRATION

EDUCATIONAL SECTOR

HEALTH CARE

PUBLIC AND PRIVATE SERVICE PROVIDERS

41

HEALTHCARE

TOURISM

MEDIA, INFORMATION AND COMMUNICATION

TRAFFIC ENGINEERING AND MOBILITY

CULTURE

ENVIRONMENTAL TECHNOLOGY

30%

22%11%

22%

13%2%

Source: Engel & Völkers Research & Consulting 2008

NEW JOBSNew jobs are created in various innovative and growing sectors in Berlin

42

CITY

EURO

S26,000

24,000

22,000

20,000

18,000

16,000

MUNICH DUSSELDORF STUTTGART FRANKFURT MAIN COLOGNE HAMBURG HANOVER BERLIN

Berlin has enormous potential for growth

Source: Engel & Völkers Research according to MB Research 2009

GROWTH POTENTIALPurchasing power per capita in euros (2009) - Berlin has enormous potential for growth

43

PEAK RENTSPeak rents for office space in international comparison

CITY

EURO

S1400

1200

1000

800

600

400

200

0

LONDON PARIS MADRID BERLIN FRANKFURT HAMBURG DUSSELDORF MUNICH

Q3 2007

Q3 2008

44

OFFICE MARKETSOffice markets in national comparison

CITY

1,00

0 M

2

18,000

16,000

14,000

12,000

10,000

8000

6000

4000

2000

0

HOUSING STOCK LET IN 1,000 M2

VACANCY RATE IN 1,000 M2

BERLIN DUSSELDORF FRANKFURT HAMBURG COLOGNE MUNICH (CITY) STUTTGART

45

BERLIN VACANCYBerlin has practically no latent vacancy

CITY

1,00

0 M

2100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

BERLIN DUSSELDORF FRANKFURT HAMBURG KOH MUNICH STUTTGART

ACTIVE SUPPLY SURPLUS

STRUCTURAL VACANCY

LATENT VACANCY

FLUCTUATION RESERVE

ACTIVE SUPPLY SURPLUS

STRUCTURAL VACANCY

LATENT VACANCY

FLUCTUATION RESERVE

46

GROWTH POTENTIALBerlin rents are increasing – but there is still potential for further increases compared to other German cities

YEAR

EURO

S12

10

8

6

4

2

0

MUNICHSTUTTGARTFRANKFURTDUSSELDORFHAMBURGKOLNBERLIN-WESTBELIN-EAST

1990 1994 1998 2002 2006 2010

47

PROPERTY YIELDSGerman property yields are among the highest in Europe

Source: Engel & Völkers Research according to Feri Research 2009

YEAR

YIEL

D %

9

8

7

6

5

4

3

GERMANYFRANCEITALYENGLANDSPAIN

1992 1994 1996 1998 2000 2002 2004 2006 2008

48

HOMEOWNERSHIPLow homeownership rate in Berlin offers high potential for partitioning apartment block buildings into individual flats

Source: Engel & Völkers Research according to Feri Research 2009

HOM

EOW

NERS

HIP

RATE

%

100

90

80

70

60

50

40

30

20

10

0

SPAI

N

NORW

AY

IREL

AND

PORT

UGAL

POLA

ND

ITAL

Y

GREA

T BR

ITAI

N

BELG

IUM

SWED

EN

FINL

AND

FRAN

CE

AUST

RIA

THE

NETH

ERLA

NDS

DENM

ARK

CZEC

H RE

PUBL

IC

GERM

ANY

SWIS

S

HOMEOWNERSHIP RATE OF 13% IN BERLIN

49

PRICESFavourable purchase price level for apartment block buildings

Source: Engel & Völkers Research according to empirica rental and purchase price ranking in the 3rd quarter of 2008

CITY

EURO

S PE

R M

23,000

2,500

2,000

1,500

1,000

500

0BERLIN DUSSELDORF FRANKFURT AM MAIN HAMBURG COLOGNE MUNICH STUTTGART

50

MIGRATIONPromising economic sectors and an attractive cultural offer have led to a positive balance of migration in Berlin in recent years

Source: E&V Research according to GENESIS Online, Office for Statistics Berlin Brandenburg, 2009

YEAR

MIG

RATI

ON14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

2003 2004 2005 2006 2007

51

HOUSEHOLDSBerlin – increasing number of households predicted due to singularization and new residents moving to Berlin

Source: E&V Research according to GENESIS Online, Office for Statistics Berlin Brandenburg, 2009

YEAR

HOUS

EHOL

DS (1

,000

’S) 2,100

2,050

2,000

1,950

1,900

1,850

1,800

2006 2010 2015

52

DEMANDDemand for living space per capita is increasing

YEAR

HOUS

EHOL

DS50

45

40

35

30

25

20

GERMANY WESTGERMANY EASTGERMANY

2000 2010 2020 2030 2040 2050

53

POOR OFFERINGThe increasing demand for living space meets a stagnating offer

Source: E&V Research according to State Office for Statistics Berlin Brandenburg 2009

YEAR

COM

PLET

ED A

PART

MEN

TS 35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

55

Reasons for Berlin:

• GERMANY’S INFRASTRUCTURE IS EXCELLENT

• BERLIN IS SITUATED IN A UNIQUE GEOSTRATEGIC LOCATION IN THE EU

• BERLIN IS GROWING BECAUSE IT IS ATTRACTIVE

• INDUSTRIES OF THE FUTURE ARE GROWING DESPITE DIFFICULT OVERALL ECONOMIC SITUATION

• NUMBER OF HOUSEHOLDS AND DEMAND FOR LIVING SPACE WILL EXCEED THE OFFER IN THE MEDIUM TERM

• RENTS AND PURCHASE PRICES ARE STILL LOW; THEY WILL, HOWEVER, INCREASE

• HOMEOWNERSHIP RATE OF MERELY 13%

56

06GERMAN INCOME TAXATION

57

WE OFFER TAILOR-MADEINVESTMENTSTRATEGIES

58

TAX FACTSSpecial Real Estate Based Tax Non-recurring Tax

REAL ESTATE TRANSFER TAX

• Triggered primarily by conclusion of a sales contract

• Tax Basis: purchase price

• Tax Rate: 3.5 % (except Berlin: 4.5 %)

Special Real Estate Based Tax Current Tax

LAND TAX

• Levied on any German real estate held for private or business purposes

• Tax Basis: special value assessed (only) for tax purposes

• Tax Rate: municipal rate fixed by the municipality amount depends on type and age of the

building (as part of the service charge regularly borne by the tenants)

06GERMAN INCOME TAXATION

59

GERMAN INCOME TAXCalculation of Income

• FINANCIAL ACCOUNTING OR CASH BASED ACCOUNTING DEPENDING ON LEGAL STRUCTURE AND STRATEGY

• TAX DEPRECIATION

• 2.0 – 3.0 % p.a. on buildings

• no depreciation on land

• DEDUCTIBLE EXPENSES

• Finance Costs

» fully deductible in case of private investment

» in case of business investment (with trading income) fully deductible if not exceeding 1 mill. EUR p.a.

• Costs for Maintenance and Repair

» in general fully deductible if no extension or material improvement

» except for costs following closely upon the acquisition (3 years period) if the expenditure exceeds 15 % of the acquisition costs of the building

60

BUY-AND-HOLDDirect Investment (no German SPV)

INCOME TAXLEGAL FORM INDIVIDUAL PERSON LIMITED COMPANY

INCOME TAX (EINKOMMEN / KÖRPERSCHAFTSTEUE) INCOME TAX CORPORATE INCOME TAX

TAX LIABILITY / TAX BASIS 1) LIMITED TO GERMAN-SOURCED INCOME LIMITED TO GERMAN-SOURCED INCOME

TAX RATE FOR CURRENT INCOME 26.25% - 44.31%47.48% FOR INCOME EXCEEDING TEUR 250 15.83%

TAX RATE FOR GAIN REALISED BY SALE STANDARD TAX RATE (SEE ABOVE)TAX EXEMPTION IF HOLDING PERIOD > 10YRS

ASSET DEAL:STANDARD TAX RATE (SEE ABOVE)

NO TAX EXEMPTION AVAILABLE

SHARE DEAL: 2)

NOT SUBJECT TO GERMAN INCOME TAX

TRADE TAXLEGAL FORM INDIVIDUAL PERSON LIMITED COMPANY

TRADE TAX (GEWERBESTEUER) NOT APPLICABLE 3) ONLY IN CASE OF PERMANENT

ESTABLISHMENT IN GERMANY

TAX BASIS NOT APPLICABLETRADING INCOME

(INCOME PLUS SEVERAL SPECIFIC ADDITIONS & REDUCTIONS)

TAX RATE NOT APPLICABLE

MUNICIPAL RATE FIXED BY THE MUNICIPALITY (E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX.

14.35%) ENHANCED REDUCTION OF RENTAL INCOME AVAILABLE ON REQUEST SO THAT EFFECTIVE TRADE

TAX MAY BE REDUCED TO ZERO

1) Tax rate includes 5.5% solidarity surcharge.2) Information for a shareholder having no German residence.3) Provided that no commercial trade exists. A commercial trade is generally assumed if more than 3 objects are sold within a 5 year period (so-called “3-object-limit).

Special Note:Taxation in the state of residence subject to the terms of the relevant double tax treaty.

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Indirect Investment (with German SPV)

INCOME TAXLEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1)

INCOME TAX (EINKOMMEN / KÖRPERSCHAFTSTEUE)

CORPORATE INCOME TAX TRANSPARENT FOR GERMANINCOME TAX PURPOSES

TAX LIABILITY / TAX BASIS PRINCIPALLY TOTAL INCOME 2) PRINCIPALLY TOTAL INCOME 2)

TAX RATE FOR CURRENT INCOME 3) 15.83%

INCOME PROPORTIONATELY ATTRIBUTED TO THE PARTNERS ACCORDING TO THEIR RESPECTIVE

INTEREST

TAX RATE FOR PARTNERS:-INDIVIDUAL PARTNERS: 26.25% - 44.31%

(47.48% FOR INCOME > TEUR 250)-LIMITED COMPANY PARTNERS: 15.83%

TAX RATE FOR GAIN REALISED BY SALE



SHARE DEAL: 5)

GENERALLY NOT SUBJECT TO GERMAN INCOME TAX, BUT DEPENDING ON DOUBLE TAX TREATY

STANDARD TAX RATE (SEE ABOVE) 4)

TAX EXEMPTION:-FOR INDIVIDUALS IF HOLDING PERIOD >10 YRS

- NOT AVAILABLE FOR LIMITED COMPANIES

TRADE TAXLEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1)

TRADE TAX (GEWERBESTEUER)

ALWAYS SUBJECT TO TRADE TAX NOT APPLICABLE (6) (7)

TAX BASIS TRADING INCOME (INCOME PLUS SEVERAL SPECIFIC ADDITIONS & REDUCTIONS) NOT APPLICABLE

TAX RATE

MUNICIPAL RATE FIXED BY THE MUNICIPALITY (E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. 14.35%) ENHANCED REDUCTION OF RENTAL INCOME AVAILABLE ON REQUEST SO THAT EFFECTIVE TRADE TAX MAY BE

REDUCED TO ZERO

NOT APPLICABLE

1) Since, generally, the GmbH as general partner of the partnership does not have any business activity, it will not be contemplated in the following.2) Except foreign-sourced income if applicable, the taxation of which depends on the respective double tax treaty.3) Tax rate includes 5.5% solidarity surcharge.4) Since the partnership is transparent for German income purposes, the gain realised by the sale of the interests in the partnership is taxed like the gain resulting from an asset deal.5) Information for a shareholder having no German residence.6) Provided that no commercial trade exists. A commercial trade is generally assumed if more than 3 objects are sold within a 5 year period (so-called “3-object-limit).7) Provided that partnership is structured as pure holding company.


BUY-AND-HOLDDirect Investment (no German SPV)

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CONDO CONVERSION Direct Investment (no German SPV)

INCOME TAXLEGAL FORM LIMITED COMPANY

INCOME TAX (EINKOMMEN / KORPERSCHAFTSTEUE) CORPORATE INCOME TAX

TAX LIABILITY / TAX BASIS 1) LIMITED TO GERMAN-SOURCED INCOME

TAX RATE FOR CURRENT INCOME 15.83%




SHARE DEAL: 2)

NOT SUBJECT TO GERMAN INCOME TAX

TRADE TAXLEGAL FORM LIMITED COMPANY


ONLY IN CASE OF PERMANENTESTABLISHMENT IN GERMANY

TAX BASISTRADING INCOME

(INCOME PLUS SEVERAL SPECIFIC ADDITIONS & REDUCTIONS)

TAX RATEMUNICIPAL RATE FIXED BY THE MUNICIPALITY

(E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. 14.35%) NO TAX EXEMPTION AVAILABLE

1) Tax rate includes 5.5% solidarity surcharge.2) Information for a shareholder having no German residence.


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Indirect Investment (with German SPV)

INCOME TAXLEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1)

INCOME TAX (EINKOMMEN / KÖRPERSCHAFTSTEUE)

CORPORATE INCOME TAX TRANSPARENT FOR GERMANINCOME TAX PURPOSES

TAX LIABILITY / TAX BASIS PRINCIPALLY TOTAL INCOME 2) PRINCIPALLY TOTAL INCOME 2)

TAX RATE FOR CURRENT INCOME 3) 15.83%

INCOME PROPORTIONATELY ATTRIBUTED TO THE PARTNERS ACCORDING TO THEIR RESPECTIVE INTEREST

TAX RATE FOR PARTNERS:-INDIVIDUAL PARTNERS: 26.25% - 44.31%

(47.48% FOR INCOME > TEUR 250)-LIMITED COMPANY PARTNERS: 15.83%




SHARE DEAL: 5)

GENERALLY NOT SUBJECT TO GERMAN INCOME TAX, BUT DEPENDING ON DOUBLE TAX TREATY

STANDARD TAX RATE (SEE ABOVE) 4)


TRADE TAXLEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1)


ALWAYS SUBJECT TO TRADE TAX

TAX BASIS TRADING INCOME (INCOME PLUS SEVERAL SPECIFIC ADDITIONS & REDUCTIONS)

TAX RATEMUNICIPAL RATE FIXED BY THE MUNICIPALITY

(E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. 14.35%) NO TAX EXEMPTION AVAILABLE

MUNICIPAL RATE FIXED BY THE MUNICIPALITY (E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. 14.35%)

TAX EXEMPT AMOUNT: EUR 24,500

1) Since, generally, the GmbH as general partner of the partnership does not have any business activity, it will not be contemplated in the following.2) Except foreign-sourced income if applicable, the taxation of which depends on the respective double tax treaty.3) Tax rate includes 5.5% solidarity surcharge.4) Since the partnership is transparent for German income purposes, the gain realised by the sale of the interests in the partnership is taxed like the gain resulting from an asset deal.5) Information for a shareholder having no German residence.


CONDO CONVERSION Direct Investment (no German SPV)

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DISCLAIMER Any description at this point may only be a rough outline about possible tax consequences, illustrated in consideration of main possible investment structures. The information contained herein is not exhaustive and can only be of general nature, not being intended to address the circumstances of any particular individual or entity. German tax law is furthermore subject to constant changes so that there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should therefore act on such information without appropriate professional advice after a thorough examination of the particular situation.

It is therefore strictly recommended to enlist personal tax adviser‘s assistance in the run-up to any potential property investment!

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DHI Deutsche Hauptstadt Immobilien Real Estate Investments GmbHVoßstr. 22 10117 Berlin Germany

www.dhiinvestments.comT: +49 (0) 30 33 93 59 40F: +49 (0) 30 33 93 59 51E: [email protected]

Dhi Brochure

Real Estate

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