Prime Office AG - A Strategy to Grow Its Real Estate Portfolio

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1 Prime Office AG Excellence in German Real Estate.

2 Prime Office AG A focused portfolio of high quality, modern and architecturally attractive office properties in major cities and conurbations across Germany A cost efficient organisational structure optimised for acquiring and managing properties Stable cash flows based on high occupancy levels and high creditquality tenants Successful track record in acquisitions (particularly via off-market transactions) and re-letting of properties Potential for value increases in the existing portfolio Growth opportunities through adding properties in major German office locations 1 to the portfolio and investing selectively in other large German cities with strong economic fundamentals. Within its investment universe Prime Office increasingly targets properties that qualify as green buildings A very experienced management and supervisory board with excellent connections across the property and financial sector Current financial figures (in meur) Q1/2011 Business 01/01 year /03/ /01 31/12/2010 Gross rental income FFO Portfolio market value NAV Corporate Profile Prime Office AG is a property firm focusing on investments in high quality office buildings across Germany as well as their facility and property management. The company is currently registered as a pre-reit joint stock company and aims to file for registration in the commercial register as a REIT joint stock company under the German REIT law after a planned IPO. The portfolio of Prime Office AG currently consists of 14 office properties in central locations across major cities and conurbations in western Germany. The properties are office or administrative buildings some of which also have a limited amount of retail, restaurant and hotel spaces. Ten of these properties are located in Germany s most important office property markets i.e. in the cities of Düsseldorf, Essen, Frankfurt am Main, Hamburg, Munich and Stuttgart 1. Four properties are located in Darmstadt, Heilbronn and Nuremberg. According to a valuation performed by the property surveyor CB Richard Ellis, the 14 properties had a total market value of approximately 970 million Euros as of 31 March 2011 and a total useable area of approximately 385,000 square metres. The management board and Prime Office AG s in-house asset managers have many years of experience in the German office property market. They can leverage their relationships across the sector in order to gain excellent access to potential buyers, tenants and sellers. 1 See BNP Paribas Real Estate, Property Report, Office Market in Germany

3 Strategy Prime Office AG seeks to generate stable long-term rental income using a return-oriented approach for managing the existing office real estate portfolio based on broad property, location and tenant diversification and to consistently increase rental income by purchasing suitable individual properties. The company plans to become a leading specialised REIT for prime office properties in Germany. Prime Office AG endeavours to consistently grow its property portfolio by following a distinct acquisition strategy with specific investment criteria which enable the company to conclude long-term leases with high credit-quality tenants leading to low vacancy levels and thus stable cash flows. The company focuses on prime office properties in Germany s nine most important office locations 1 and targets mainly single asset transactions in order to ensure a systematic expansion of the portfolio as part of its corporate strategy. To optimize returns, the company can also continue to invest selectively in prime office properties situated in choice locations in other major German cities. As part of its focus on sustainability and increased building efficiency and the resulting positive impact on rental income, the company also seeks to increasingly acquire properties that qualify as green buildings. Prime Office AG implements this strategy exclusively via prime German properties of superior architecture situated in choice locations across the country s nine most important office markets, i.e. Berlin, Düsseldorf, Essen, Frankfurt am Main, Hamburg, Cologne, Leipzig, Munich and Stuttgart. 1 Efficient portfolio management can help Prime Office AG to enhance the return potential of a property. In addition, active and efficient portfolio management enables the company to benefit from potential value increases of its properties leading to sustainable organic growth. Refurbishments and modernisations are to further increase the portfolio value. When managing its property portfolio, the company focuses on increasing rental income, particularly by identifying and exploiting cost-saving potentials, implementing economically sensible maintenance and refurbishment measures and achieving an optimised financing structure for the relevant properties or the overall portfolio. Properties are sold selectively in compliance with the provisions of the German REIT law in order to exploit additional business opportunities and to optimise the portfolio of the company. Prime Office AG has already been registered as a pre-reit joint stock company since June 2007 and is expected to transform into a REIT joint stock company after a planned IPO in order to benefit from the related tax privileges for REIT joint stock companies particularly in the context of acquisitions. Going forward, Prime Office AG will manage its businesses in a manner that ensures compliance with these REIT criteria. 1 See BNP Paribas Real Estate, Property Report, Office Market in Germany 2011 Excellent real estate inside and out. 3

4 Prime Office AG Properties Property City Useable Annual net Market value Anchor tenant space in m 2 rent in keur in keur T-Online headquarters Darmstadt 72,528 11, ,700 GMG Generalmietgesellschaft mbh Westend-Ensemble Frankfurt 35,101 10, ,600 Deutsche Postbank, am Main Post AG, KfW SZ Turm Munich 62,237 10, ,300 Süddeutscher Verlag Seestern 1 Düsseldorf 35,819 7,149 77,200 Vodafone D2 GmbH Hochtief Grugapark Essen 30,314 5,648 74,200 HOCHTIEF AG State Office for Stuttgart- 19,854 3,458 40,500 Federal State of Remunerations and Fellbach Baden-Württemberg Pensions of the Federal State of Baden-Württemberg Emporia Stuttgart- 24,906 3,366 41,300 Corporate Express, Möhringen Cenit AG T-Systems Darmstadt 24,686 3,334 53,400 Deutsche Telekom AG via GMG GmbH Imtech headquarters Hamburg 16,008 2,858 39,700 Imtech Germany Hochtief headquarters Essen 26,304 2,682 40,300 HOCHTIEF AG Neckarturm Heilbronn 14,748 2,168 29,100 Federal Employment Agency, Accor BMW Design Center Munich 8,224 1,703 24,200 BMW AG Medtronic headquarters Düsseldorf 8,038 1,296 16,700 Medtronic GmbH Meerbusch Sigmund Schuckert Haus Nuremberg 6,445 1,064 13,800 German Pension Agency et. al. (As at: 31 March 2011) 4

5 Portfolio figures Geographic breakdown of market values 1 Number of properties 14 in the portfolio, Rental space (in m 2 ) approx. 382,212 Market value (in meuros) 970 Average vacancy level (in %) 0.3 Weighted average lease term 6.82 (in years) Heilbronn 3 % Hamburg 4 % Stuttgart 8 % Düsseldorf 10 % Essen 12 % Nuremberg 1 % Darmstadt 23 % Munich 22 % Frankfurt 17 % (As at: 31 March 2011) 1 According to the market valuation opinion of CBRE as at 31 March 2011 The number of excellent real estate increases. 5

6 Essen Am Opernplatz Essen Alfredstrasse Düsseldorf Büropark Mollsfeld Düsseldorf Am Seestern Nuremberg Richard-Wagner-Platz Heilbronn Bahnhofstrasse Stuttgart-Möhringen Breitwiesenstrasse/Industriestrasse Stuttgart-Fellbach Philipp-Reis-Strasse 6

7 Hamburg Hammer Strasse Our objects Frankfurt Ludwig-Erhard-Anlage Darmstadt Deutsche Telekom Allee Darmstadt T-Online Allee Munich Hufelandstrasse Munich Hultschiner Strasse 7

8 Sustainability/ Green Building Prime Office AG places special importance on green buildings and sustainable developments in the property sector. As real estate offers great potential for using resources in a responsible manner, Prime Office AG has made green building part of its corporate strategy. The sustainability of a property has therefore become another key investment criterion alongside profitability and quality. This is for instance reflected in the headquarters of the Süddeutsche publishing house in Munich, the first office building in Germany to have been awarded the internationally recognised LEED gold certificate. The German headquarters of Medtronic in Düsseldorf/Meerbusch also comply with the green building standards. In 2008 the building was awarded a DGNB (Deutsches Gütesiegel für nachhaltiges Bauen) for sustainability (German Certificate for Sustainable Building). In addition to saving resources investors in environmentally friendly property projects benefit from sustainable advantages because life-cycle costs can be reduced while property value and productivity can be increased, says Claus Hermuth, CEO of Prime Office AG. Acquisition strategy The company focuses on buying prime office properties with a small portion of spaces dedicated to other commercial use situated in attractive locations in major German cities and conurbations. In addition, Prime Office AG looks for high quality office properties offering high building quality and attractive architecture. Buildings should qualify as green buildings wherever possible. The company targets properties with useable spaces between approximately 6,000 and 80,000 square metres; purchase prices should range between 20 and 200 million Euros. Other investment criteria include high occupancy levels and strong tenant credit-quality. The company focuses on properties with no or only little modernisation needs. In addition, the portfolio managers also look for well-maintained office properties in attractive locations that offer potential for value increases (for instance by reducing vacancies, modernising or repositioning single-tenant properties as multi-tenant properties) so-called value add properties. The asset management professionals of Prime Office AG have been working in the real estate sector for many years. As a result, they have special skills and experience in managing commercial properties and a proven track record. Asset management is performed in order to sustainably increase the value of the portfolio. Contact details of the Prime Office AG asset management team: Dietmar Haselbauer, Head of asset management Christian Scheck, Director asset management Phone: or [email protected] 8

9 Management Board The management board of Prime Office AG has long-standing experience in the property market and comprehensive insight into its regional and national developments. The management consistently leverages its established network to gain new access to buyers and sellers. It also maintains close business relationships in the market for closed-end property funds. The board members combine property, financial and investment banking skills, giving the management all important skills required for a sustainable success of Prime Office AG. 9

10 Claus Hermuth, CEO After studying law at the Ludwig Maximilians University in Munich and spending two years as a freelance associate at a law firm, Claus Hermuth co-founded a law firm specialising on investment and property law in He remained a partner in this firm until On 1 January 2000 he joined DCM AG as the Chairman of the Executive Board. Mr Hermuth has been Chairman of the Prime Office AG executive board since the company was founded in Alexander von Cramm, CFO After graduating in the United States, Alexander von Cramm began his professional career in 1987 as a management trainee with Deutsche Bank. Between 1995 and 1997 Alexander von Cramm formed part of a Londonbased project team of Morgan Grenfell responsible for the integration of Morgan Grenfell and Deutsche Bank. Between 1997 and 1999, Alexander von Cramm worked in the Investment Banking/M&A Department of Morgan Stanley in London before joining Deutsche Bank AG in Frankfurt in 1999 where he worked until 2000 as an Executive Director in Investment Banking/Equity Execution. Between 2001 and 2004 he was a Managing Director (CFO) of Loyalty Partner GmbH in Munich. Between 2005 and 2006 Alexander von Cramm served as Head of Corporate Development at Vivacon AG in Cologne before joining KWG Kommunale Wohnen AG as CEO in He became CFO of Prime Office AG in September Heinz-Theo Tetsch, COO Mr Tetsch served as an officer in the German armed forces from 1974 to As part of his officers training he graduated in business administration at the University of the German Armed Forces in Hamburg. He then joined Vereins- und Westbank AG in 1986 and moved on to NORD/LB five years later. In 1991 Heinz-Theo Tetsch was promoted to Bank Director, managing an integrated regional savings-and-loan branch for seven years. In 1998 he assumed responsibility for the Private Consultancy department. During his last year with Nord/LB he oversaw a restructuring involving several units designed to build the Private Banking division. Between 2001 and August 2009 Mr Tetsch served as the CFO of DCM AG. He became a board member of Prime Office AG in September Alexander von Cramm Claus Hermuth Heinz-Theo Tetsch 10

11 Supervisory Board Thanks to its successful business model, Prime Office AG could win high-ranking representatives of the corporate and financial sector, universities, the property sector and the political arena to serve in its supervisory board. The close interaction between the supervisory board members and the optimal co-operation with the management are important prerequisites for implementing strategic choices. Eminent consultants, bankers and real-estate experts are helping to shape and guide the development of Prime Office AG, today one of the key REIT players for high-quality office properties in Germany. Members of the supervisory board of Prime Office AG: Prof. Dr. h.c. Roland Berger is the founder and Honorary Chairman of Roland Berger Strategy Consultants, Munich, and a member of several supervisory and advisory boards of domestic and international companies, foundations and organisations. At the same time, Roland Berger also invests in start-ups and other companies. Prof. Dr. Kurt Faltlhauser has been an Honorary Professor of the Ludwig Maximilians University in Munich since Between 1974 and 1980 and between 1998 and 2008, Prof. Faltlhauser was a member of the Bavarian State Parliament; between 1998 and 1995 he was a member of the German Federal Parliament. From 1994 to 1995, Prof. Faltlhauser was Parliamentary State Secretary at the German Federal Minstry of Finance. From 1995 to 1998, he was Bavarian Minister of State (Staatsminister) and head of the Bavarian State Chancellery (Staatskanzlei), and from 1998 to 2007 Bavarian Minister of Finance (Finanzminister). Prof. Dr. Franz-Joseph Busse heads the department for Finance, Banking, Integrated Financial Services and Insurance at the Munich University (University of Applied Sciences). Previously, he served as a Personal Aide to the general director of Thuringia Versicherungs AG in Munich focusing on managing and overseeing sales, as general manager of a mid-market company in Baden-Baden specialising on services and international investment financing, and as a board member of a German-Arabic joint-venture structured as a joint stock company. Dr. Lutz Mellinger, a trained lawyer, served as a member of Deutsche Bank AG s board responsible for the corporate and real estate division between 1996 and During his tenure with Deutsche Bank, he held managerial positions in Frankfurt am Main, Munich and London where he served as a Director for Corporate Finance and Private Banking. Dr. Mellinger became a Member of the Board responsible for companies and real estate in Stefan Giesler worked in CIB/Asset Finance and Leasing at Deutsche Bank AG between 2000 and 2010 and as Managing Director and Head of Structured Real Estate Products at Deutsche Bank AG between 2005 and In this role he was responsible for structured real estate transactions and closed-end property funds. Since the spring of 2010, Mr Giesler has been a Managing Director of the private bank Sal. Oppenheim jr. & Cie. Prof. Dr. Harald Wiedmann was appointed a board member of KPMG Deutsche Treuhand-Gesellschaft AG in 1992 and served as this company s CEO between 1998 and Between 1996 and 2005 he was a member of the Executive Committee and International Board of KPMG International; between 2002 and 2005 he also served as the Chairman of KPMG Europe, Middle East and Africa. Between 1988 and 1997, Prof. Harald Wiedmann was a member of the Senior Chamber of the Institute of Public Auditors in Germany he had been heading since In addition, Prof. Harald Wiedmann has been working as Of Counsel in the law firm Gleiss Lutz since

12 Disclaimer This brochure does not constitute an offer of, or the solicitation of an offer to buy securities to any person in the United States of America, in Canada, Australia, Japan or in any jurisdiction in which such offer solicitation is restricted by law. The securities referred to in this brochure may not be sold or offered for sale in the United States absent registration under the U.S. Securities Act of 1933, as amended (the Securities Act ), or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Subject to certain exceptions under the Securities Act, the securities referred to in this brochure may not be offered or sold in Australia, Canada or Japan or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada or Japan. The offer or sale of the securities referred to in this brochure has not been and will not be registered under the applicable laws of Canada, Australia or Japan. There will be no public offer of securities in the United States. This brochure is not a prospectus. Interested investors should not purchase or subscribe for any shares referred to in this brochure except on the basis of the prospectus as approved by the German Federal Financial Supervisory Authority (BaFin) (or, for investors outside Germany, the international offering circular containing the approved prospectus) and published by the company in connection with the offering of such shares. Upon publication, the prospectus will be available free of charge from Prime Office AG (Hopfenstraße 6, München) or on the website and the international offering circular. This brochure contains forward-looking statements which are based on current views and assumptions arrived at by the management of Prime Office AG in good faith. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause the earnings, profitability, performance or results of Prime Office AG to deviate substantially from the earnings, profitability, performance or results assumed explicitly or implicitly or described in these forward-looking statements. Given these risks, uncertainties and other factors, recipients of these documents should not unduly rely on these forward-looking statements. Prime Office AG assumes no responsibility for updating such forward-looking statements nor will it adjust them in light of any future events and developments. Prime Office AG Hopfenstrasse Munich Telephone: Fax: [email protected] Contact person for investor and press relations Richard Berg Director Investor Relations/ Corporate Communications Telephone: Fax: [email protected] As at: May