LUXCAPITAL PARTNERS Company Presentation by LUXCAPITAL PARTNERS

LUXCAPITAL PARTNERS

Company presentation Dubai, 23th March 2009

Agenda  UAE Real Estate Market Overview  Introduction to Luxcapital Partners

L U X C A P I T A L

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Current Price correction – But fundamentals remain strong A

In spite of the real estate market downturn and the sudden price correction …

• Due to the financial crisis that erupted in September, the fall in investment confidence, mainly from speculators, together with the mortgage market tightening has triggered…

- … a sudden drop in the real estate valuations in the UAE, focused primarily in off-plan properties

- … an increase in rental yields

…the market fundamentals remain strong

Economy

• GDP growth

forecasted at 2-4% in 2009, above EU or US growth

• UAE as the financial, commercial and touristic hub in the Middle East

L U X C A P I T A L

Rental Yields

• Astronomic rental

yields of around 9-12% per year, which consolidates UAE as one of the more profitable markets

Price levels

• After the severe price

correction UAE command a discount of around 60% versus comparable ’hub’ cities like Hong Kong or Singapore

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Population

• In spite of the

forecasted stop in population growth in 2009 the economy will keep on attracting population from 2010 onwards

Mortgage market

• The weight of the

mortgage sector in the GDP still is a 25% of that of developed countries

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Market downturn – 30/50% according to our estimates

Price trends in different areas within Dubai (USD per sq. m.) 12,894 January '08

September '08

January '09

Price drop Sep’08 -Ene’09

7,819

7,526 6,345

6,078

4,970 3,361 1,833

4,033 -45%

4,278 3,216

-36%

2,211

-32%

3,972

4,020 3,056

-69%

-40%

-24% -31%

-76%

Palm Jebel Ali

3,667

Jumeirah Lake Towers

Dubai Marina

Palm Jumeirah

International City

Arabian Ranches

Burj Dubai

Springs

Fuente: HSBC (Enero y Septiembre 2008), analisis Luxcapital Partners (Enero 2009)

 According to our internal analysis using primary sources, the fall in prices in different areas has been much larger than what has been published by major banks in their reports  Drops in prices have been larger for off-plan properties. En areas like Palm Jebl Ali, prices have dropped to 1.800 USD per m2 levels, far away from prices in comparable cities. In more consolidated areas like Dubai Marina or the Springs, the drop has been lower

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But strong fundamentals – Expected +4% GDP Growth

Forecasted GDP Growth in 2009, % China

6.0% 5.8%

India UAE

4.0%

Russia

3.0%

World -0.7% -1.2% -1.7% -2.0%

0.9% Germany France Spain USA

Soure: World Bank, Economist IU, January 2009

 The UAE real GDP growth is expected to be around 4% in the next 2 years, in line with other high growth countries like China, Rusia and India and 6% over the EU and the US

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But strong fundamentals – Regional HQs Ranks 4th Multinational Regional Headquarters Number of Regional HQs set up in 2006

% of total

United States

United Kingdom

64 38

China

UAE India Rest of Middle East

7 3

14%

Main Specialised Business Cities in Dubai Dubai Internet City

 Hosts some of the world’s most prominent ICT-related companies (Microsoft, Cisco, Dell, Siemens, Oracle, HP, VISA, IBM, Intel, SUN, Sony Ericsson, Samsung)

Dubai International Financial Centre

 DIFC is the world's fastest growing int’l financial centre and accommodates major financial institutions (Merrill Lynch, MSDW, Goldman Sachs, Barclays, Credit Suisse, Deutsche Bank)

Jebel Ali Free Zone

 Drives industrial and trade development and ranks among the world’s largest and fastest growing free zones. Has attracted +6,000 companies with a diverse industrial mix

Dubai Media City

 DMC is the only global media and TV hub in the region where all media-related businesses thrive together (CNN, BBC, CNBC, Reuters, MBC, Showtime, Associated Press, Sony)

11% 7%

 Education industry specialisation, has attracted international educational institutions from Australia, Belgium, Canada, France, India, Ireland Pakistan, Russia, UK, etc. (e.g., INSEAD campus, Sorbonne campus)

Knowledge Village

0.5%

Dubai Healthcare City

 Healthcare community offers specialised medical treatment, leading prevention and rehabilitation, research and healthcare services

Dubai Maritime City

 DMC is the world's first purpose-built maritime centre and is creating an environment for the networking and integration of maritime industry players from all over the globe

Source: Landmark Real Estate Investment Management, 2006

Many companies have already set up their regional headquarters in Dubai A set of specialised cities are currently hosting the majority of the Fortune 500 companies in the world

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But strong fundamentals â&#x20AC;&#x201C; Dubai Ports Rank 8th Top-10 International Ports, 2006

Dubai Ports Evolution, 2001-2006

Container traffic, thousands of TEUs

10,000

Annual Growth

9,000

22%

23,539

Hong Kong

7,610

8,000 7,000

Busan, S.Korea

4,230 3,505

12,039

Kaohsiung, Taiwan

9,775

Rotterdam

9,655

3,000 2,000 1,000 0

2001 2002 2003 2004 2005 2006 Source: Dubai Ports Authority, 2008

18,469

Shenzhen, China

5,210

5,000

21,710

Shanghai, China

6,400

6,000

4,000

24,792

Singapore

8,923

Dubai

8,923

Hamburg

8,862

Los Angeles

8,470

Source: American Association of Port Authorities (AAPA) World Port Rankings, 2008

With an average annual growth of +20%, Dubai has emerged as one of the new leading container ports of the world, achieving the 9th position in overall traffic and the 3rd as a re-export hub. Moreover, Dubai's ports are expanding their cargo-handling capacity further to be able to handle 22 million containers a year by 2020

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But strong fundamentals – Dubai Airport Ranks 8th International Passenger Traffic, 2007 Million passengers

London

62.0

Paris

47.6

Frankfurt

47.0

Hong Kong

47.0

Singapore

35.1

Tokyo

34.3

Dubai

- Directly: As consistent increases in tourist arrivals result in greater demand for hotels and furnished apartments

54.7

Amsterdam

- Indirectly: Through the creation of jobs, which encourages the influx of expatriates and eventually leads to increased demand for quality housing

33.0

Bangkok

31.5

Seoul

30.6

 The robust performance of the UAE tourism and travel sector has had a positive impact on the demand for real estate in two ways:

Source: Airports Council International, 2008  Dubai International Airport had the highest growth rate (20%) in the world in 2007. It has grown at an average of 15% annually since 2002 and constitutes 27% of total Middle East traffic  The Emirate forecasts 40 M passengers in 2008 and 60 M by 2010. To achieve this growth, Dubai World Central, the largest airport in the world, is under construction in the Jebel Ali area. The total capacity will be 120 M passengers annually

 6.5 million tourists arrived in Dubai in 2007. The current governmental target for tourism includes receiving 15 million tourists by the end of the decade (which would represent a CAGR of 23%)  Hotel revenues have increased from approx. AED 1.8 billion in 1996 to AED 10.8 billion in 2006 (CAGR of 20 %.), and the average occupancy rate in Dubai reached 87% Source: BBC, Department of Tourism and Commerce Marketing

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But strong fundamentals – High Rental Yield UAE Rental Yield Vs other Countries, Dec’08 Singapore

4.0%

Hong Kong

3.7%

USA

4.4%

UK Spain Japan Germany Dubai July'08

 The rental yield in the UAE has grown to levels close to the 10 to13% mark, primarily due to the drop in real estate assets

4.1%

 The current UAE Cap Rate commands a +5/8% premium over other world markets …

3.7%

4.8% 8.0% 12.0%

Dubai January'09 Dubai future

 … which creates a floor resistance to real estate asset price drops since a high rental yield attracts investors

4.9%

6.5%

Fuente: Damac, Global Property Guide

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 Regardless of the trends, the astronomical rental yield is not sustainable in the long term and should be corrected in the short to mid term

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But strong fundamentals – Low prices UAE Price levels vs other cities, Oct’08 US$/ m2 London Tokyo

New York

Singapur Hong Kong Rome Moscow

Shangai Prague

Amsterdam Paris

Dubai

 There is a discount of 40-50% versus comparable “hub’ cities such as Hong Kong and Singapur Abu Dhabi

Kiev Cairo

 In comparison to major cities worldwide, on a relative basis, given the amount of wealth in Dubai, prices are still low

Budapest Varsovia

 In adition to that, after the relevant market correction that has taken place in UAE during the last 6 months, the gap is today even more important

GDP per capita, .000 USD

Source: Colliers International, CB Richard Ellis, HSBC, December 2008

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But strong fundamentals – Small mortgage market Mortgage Market, USD billion

Mortgage Market as % of GDP

Source: Central Bank, HSBC

 Despite the mortgage market tightening during Q4’08 and Q1’09 due to the global financial crisis an important growth is expected during the last three quarters of 2009

 The local mortgage market is extremely small compared to other developed markets

 This could awake additional demand that today cannot afford the purchase without financing

L U X C A P I T A L

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Agenda  UAE Real Estate Market Overview  Introduction to Luxcapital Partners

L U X C A P I T A L

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Introduction – Who we Are Management Team Oriol Font

Ignacio Aris

Victor Zhu

Managing Partner & Co-Founder

Non-Executive Director

 Over 9 years advising C-level executives at leading blue-chip firms

 Over 9 years experience investing in growing real estate markets (United Kingdom, Spain, United Arab Emirates)

 As the CEO of Tainan Int’l Group has been managing a USD200M real estate fund (Chinese investors base) for the last 4 years in the UAE

 Previously Senior Manager and member of the Management team  of Delta Partners Dubai, a leading Advisory & Private Equity firm in the ME established in 2006 with an impressive track record (+130 professionals, AED +250M revenues)   Over the last 4 years he has been focused on high-growth markets both in the Middle East and Africa, including UAE, Qatar, Jordan, Kuwait, Sudan and Afghanistan  Spanish National established in Dubai from 2005 holds a BS in Economic Sciences from the Barcelona University (UB) and MBA from IE in Madrid

L U X C A P I T A L

Managed a AED 400M Private Equity fund in Dubai focused on telecom industry and in the Middle East with Delta Partners Before founding Luxcapital Partners has been 7 years advising clients both in M&A and strategy consulting in London, New York, Mexico, Madrid and Dubai (Monitor Company, Europraxis and E&Y Corporate Finance)

 Spanish National established in Dubai from 2005 with a Masters in Business Administration from ESADE, and a Masters in Alternative Investments from INSEAD

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 Achieved impressive yearly returns on a consistent basis  Investment strategy focused on property development in the residential segment and an active real estate portfolio management  Mr. Zhu is member of LuxCapital Board of Directors and also participates in the Luxcapital Fund Investment Committee  Chinese National although has been living in Dubai for +18 years where he started working for the Chinese Government  Bacheror in Ecomomics by Shanghai University www.luxcapitalpartners.com

Introduction – Our Approach

Experienced Real Estate Advisors

 Investment team with experience running real estate investment vehicles in the UAE, both in the real estate industry as well as in telecom  Fund management/advisory background with fund-raising, due diligence and portfolio management capabilities and strong negotiation skills

Regional Expertise

 +4 years experience working and living in the region in Middle-Eastern Countries (UAE, Kuwait, Saudi Arabia, Jordan, Bahrain, Oman) and emerging markets in Africa (Kenya, Tanzania, Sudan, South Africa)

Strong Network

 Leverage of our extensive network in the real estate industry (with Local and Private developers, Government Authorities, Lawyers, real estate agents, etc.) as well as with Family Offices and HNWIs both in the Middle East and Europe (mainly Spain)

Long Term Results Oriented

End-to-end support

 Developing long term lasting relationship with the investor (not focused on one-shot operations)  Results oriented compensation scheme  Independent advice as not tight to any developer and charges are performance based

 Legal Support - Set up of investment vehicles that guarantee 100% ownership and an investment license to operate and own assets in the UAE  Creation of tax efficient structures that minimise income taxes thanks to double taxation treaties with some specific countries (i.e. Spain)  Strong Control and Governance mechanisms (Board of Directors, Reporting, Valuations, Audit)

L U X C A P I T A L

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Introduction – Our business Lines

LUXCAPITAL PARTNERS

Business lines

Product

• Combined Private Equity and Asset Management Firm specialised in Real Estate • Focused on high growth markets in the Middle East and Africa • Targets High Net Worth Individ. (HNWIs) and Family Offices, locals and non-residents

1 Private Equity Fund (DELTA PARTNERS)

2 Fund Management (LUXCAPITAL PARTNERS)

Asset Management (LUXCAPITAL PARTNERS)

• Telecom Private Equity Fund

• Focus on Residential

• Residential & Commercial

• Size: AED 400M

• Size: AED 150M

• Size: AED 500M

• Term: 5-7 years

• Term: 36 months

• Term: flexible

Fund raising

HNWI and Institutional Middle East

HNWIs Europe

HNWIs Spain

Investment scope

MENA

United Arab Emirates (Dubai & Abu Dhabi)

L U X C A P I T A L

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Different business units linked to investor profile & objectives

Luxcapital involvement across the investment lifecycle Business Line

1 Fund Management

2 Asset Management

Description

Strategy/ Scope

Main Objective

Assets

Relationship timeline

• Co-investment

• Closed

• Investment

• Diversified

• End-to-end

• Personalised

• Flexible

• Investment

• Multi-

• Mid to long

vehicle with clear and pre-defined strategy and timings

investment service according to the investor risk profile, return objectives and exit requirements

L U X C A P I T A L

focus on asset appreciation

flexible but focus on rental yields

group of assets

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unit/ building

Purchase

Portfolio management

Exit

term advisory

term support

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With differences in ownership and decision making process

Business Line

1 Fund Management

Description

Ownership

Decision Marketing

Main Advantages

• Co-investment vehicle

• The company is the

• Investment Committee

• Investor is a

• Board meets quarterly

• Economies of scale • Portfolio diversification • Easiness (Luxcapital

with clear and predefined strategy and timings

owner or co-owner of the assets shareholder in the company

defines investment strategy and executes and agrees the roadmap

• Quarterly Reporting

• Personalised investment

2 Asset Management

service according to the investor risk profile, return objectives and exit requirements

• Investor is the direct

and only owner of the assets

• The investor together

with the fund manager agree on the strategy and execute it

• Quarterly Reporting

manages the process end-to-end)

• Insider knowledge

• Personalizes service

according to the risk profile of the investor

• Investor involvement in the decision making process

• Direct ownership of the asset

• Insider knowledge

(1) Depending on the investor nationality and investment vehicle

L U X C A P I T A L

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Investment Fund â&#x20AC;&#x201C; Main Strategic Pillars The investment strategy of LUXCAPITAL PARTNERS UAE Investment Fund is based on the compounded effect of the 4 main pillars of LuxCapital strategy:

Investment Strategy Main Pillars Market Dynamics

Analysis and Selection

Capital gains derived from the intrinsic gains from distressed sales for up to 60% discount to peak price

Strategic selection of opportunities with largest growth potential through analysis and insider knowledge

Arbitrage

Leverage

Active research to identify underpriced properties using extensive comparable tables, plus bulk negotiation benefits

Operational leverage in the case of off-plan properties and financial leverage in specific operations

Expected Fund IRR: 15%

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Investment Fund â&#x20AC;&#x201C; Strategic Levers Main Strategic Levers to Design the Target Portfolio

Asset Turnover

Residential

Land

Off-plan

Dubai and Abu Dhabi

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Rationale

Margin

The Fundâ&#x20AC;&#x2122;s main objective is to actively manage the portfolio, with a high asset turnover in order to maximise returns reinvesting the realised profits, as well as investing in assets to be leased

Commercial

The fund will focus mainly on the residential market due to significant oversupply expected on the commercial/retail during 2009-10, and the significant excess demand in the residential sector

Built Assets

The Fund will invest in floors/units. Direct investment in land will only take place in case of opportunistic deals. Preference for villas over apartments, though depending on the area

Ready

Other Emirates

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The Fund will gear towards ready to move in investments or off-plan properties with less than 1 year until completion date

Even though the majority of the investments are expected to be made in Dubai and Abu Dhabi, there will be a percentage of investments in Ras Al Khaimah especially on the first year

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Investment Fund – Investment Terms Fund Size

 AED 150 million (10% invested by the Fund Managers)

Term

 36 months

Focus

 Investments will be made 100% in real estate in the UAE

Capital Calls

 Minimum commitment: - AED 2,000,000 - AED 8,000,000 to be part of the Board of Directors  Capital calls: 100% draw-down upon closing of the Fund

Diversification

 To ensure portfolio diversification the maximum equity allocation to any single direct investment will be 20 per cent of total commitments

Investment Vehicle

 The investments is done through an investment vehicle which owns all the assets on behalf of investors. Shareholdings are proportional to investors commitments

Fees and Returns

 Yearly management fee on total value of assets acquired: 2%  Success fee (‘Carried interest’ or ‘Carry’) on capital gains: 20%  Hurdle rate: 8% (1)  Expected IRR: 15%  All investment income, dividends, realisation proceeds and other distributions, net of fees and expenses, received by the Fund after the Investment Period will be distributed upon liquidation of the Fund

Distributions (dividends)

 Whenever an investment is realised the capital gains related to that investment, net of fees and expenses, will be distributed to Shareholders as dividends. The rest will be reinvested into the Fund

Advisors

 Tax: Cuatrecasas, Spain and Clyde & Co, UAE  Legal: Cuatrecasas, Spain and Clyde & Co, UAE  Audit: Ernst and Young  Valuations: Colliers International

(1) Should the IRR go beyond the hurdle rate all the Fund’s capital gains will be split 80/20 between the Investors and the Fund manager

L U X C A P I T A L

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Investment Fund – Control & Governance Mechanisms Board of Directors

 The Board of Directors id composed of the Fund Manager members and 5 shareholders with investments over AED8 million  Board meetings are called on a quarterly basis to analyse the Fund evolution and discuss potential portfolio strategy changes if deemed necessary

Advisory Board

 Composed of members of the Board and real estate experts invited from time to time  Its main objective is the analysis of different investment opportunities. It will be called by the Fund Managers when necessary

Administrator and Placement Agency

 An institution acts as an administrator. It ensures that the investments are made according to the Memorandum of Association  A placement agency was used to manage the exchange of funds and shares with the investors

Portfolio Valuation

Shareholders Reporting

Audit

 The Fund Manager will make portfolio valuations available to investors on a regular basis  Additionally, the Fund manager will request independent experts Colliers International to value the overall portfolio on a bi-annual basis

 Reporting of investments made throughout the period, its market value at that time and the investments and disinvestments forecast for the following quarter  The Quarterly Report will be sent to all investors

 A external audit of the Fund will be requested by the Fund Manager to Ernst & Young after the first 12 months and when the fund is liquidated

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Asset Management – The Process 2. Defining the structure and the collaboration

1. Understanding Client needs Investment objective

 Rental Yield  Capital gains through Asset appreciation  Investment Term

 Off-shore/ On-shore  Local partnerships/ Free-zones  Memorandum of Association

Legal/ Tax

Investor Profile

 Investor risk profile  Investor desired implication in the decision making process

Governance Mechanisms

Type of Asset

 Off-plan vs ready to move  Commercial/ Residential  Segment (high-mid-low end)  Emirate (Dubai, Abu Dhabi)

Compensation scheme

 Board of Directors  Shareholders reporting  Portfolio Valuations and Audit  Management fee  Success fee  Hurdle Rate

3. Luxcapital implication across the investment process Investment Strategy Definition  Define future capital gains and rental yield maximisation strategy

L U X C A P I T A L

Legal and Governance set-up

Product Sourcing

 Define and implement  Opportunity tax optimal legal identification, Due structure and Diligence and Asset Governance mechanisms prioritisation

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Portfolio Management  Coordination of the property management to maximise rental returns

Exit

 Define timelines and execute exit strategy

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Asset Management – Control & Governance Mechanisms Board of Directors

Administrator

 The Board of Directors is composed of the Asset Managers and the investors  Board meetings are called on a quarterly basis to analyse the investments evolution and discuss potential portfolio strategy changes if deemed necessary  They can be called by the investor at any time in emergency situations  An institution acts as an administrator. It ensures that the investments are made according to the Memorandum of Association

Valuations

 The Fund Manager will make portfolio valuations available to the investor on a regular basis  Additionally, the Fund manager will request independent experts Colliers International to value the overall portfolio on a bi-annual basis

Shareholder reporting

Audit

 A external audit of the Fund will be requested by the Fund Manager to Ernst & Young after the first 12 months and when the fund is liquidated

L U X C A P I T A L

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www.luxcapitalpartners.com

Asset Management – Compensation Schemes

Fixed Business Line

Minimum commitment

Commission

Management fee

• AED 2,000,000

(USD 500,000)

• AED 8,000,000

(USD 2,000.000)

Asset Management

L U X C A P I T A L

Carry

Hurdle rate

• 20% of capital gains,

• 8% of yearly return

• 2% annually over

• 20% of capital gains,

• 8% of yearly return

capital invested

✗

Claw-back

• 2% annually over

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Fund Management

Variable

capital invested

• 4% of purchase price

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if and only if the return on investment is above the hurdle rate of 8%

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