Off Balance Sheet Financing for UAE Properties

February 2011

CONFIDENTIAL & PROPRIETORY

Executive Summary Current Issues in the UAE Property Market : i) ii) Banking Sector loan exposure to proper>es con>nue to be >ght. Property companies are now resor>ng to sell their completed proper>es in order to raise funds.

iii) Non-conducive market condi>ons to sell proper>es. In light of the above, there is real need for an alterna>ve property nancing product.

CONFIDENTIAL & PROPRIETARY

Introduction to a REIT A company or unit trusts that owns, and in most cases, operates income- producing real estate, through a wide variety of ac>vi>es, primarily including leasing ac>vi>es, real estate development and various permiJed tenant services. To be a REIT, a company must distribute 70% to 90% of its annual net income to shareholders annually in the form of dividends (depending on jurisdic>on) The REIT structure was designed to provide a similar structure for investment in real estate similar to mutual funds which provide for investment in stocks

CONFIDENTIAL & PROPRIETARY

Generic REITS structure The REIT is cons>tuted by Deed. The Deed will be executed between the REIT Manager, and the Trustee of the REIT. REIT Manager Proper>es Contributor will received a combina>on of Cash & REIT Units, when they inject their proper>es into the REIT.
Institutional & Retail Investors
!"#$%&'()#*+)'*% ,'%-.&/%0',*#% -.&/% 6"'"7)+)'*% 8)2(,9)#% <,#*2,=>?3'% 3'%<,(,@)'@#%

/2>#*))%;))#%

REIT
6"'"7)+)'*% 8)2(,9)#%;))#% A9*%3'%=)$"BC%3C% >',*%$3B@)2#%

Trustee

!"#$%:%-.&/%0',*#% <,#*2,=>?3'% 3'%<,(,@)'@#% 1234)2*5% 6"'"7)+)'*% 8)2(,9)#%

Assets Manager
1234)2*5% 6"'"7)+)'*% 8)2(,9)#%;))%

Properties Portfolio

&'D)9*%4234)2?)#% ,'*3%*$)% 4234)2?)#% 432E3B,3%

Properties Contributor

CONFIDENTIAL & PROPRIETARY

Real Estate Investment Trust (REIT) The uses of a REIT : i) ii) Exit (Cash-out) mechanism in a rising / toppish property cycle Financing (Borrowing) mechanism in a declining / low-end of a property cycle.

REIT is an O Balance Sheet Financing Product : i) The sale of proper>es into a REIT removes assets & loans from the Companys balance sheet. This will lead to clean balance sheet and higher return on assets

ii)

CONFIDENTIAL & PROPRIETARY

REIT as a Funding Mechanism

HIGHEST VALUATION MID-LATE 2008 OPTION TO EXIT (BY SELLING RETAINED REIT UNITS)

100%
EXIT CASH OUT STRATEGY

COSTS

75%

FUNDING BORROWING STRATEGY

50%

OFF BALANCE SHEET FUNDING THROUGH REIT MECHANISM

PROPERTY SALES CONSIDERATION = CASH + REIT UNITS

REPURCHASE OF OUTSTANDING REIT UNITS THROUGHH G.O. MECHANISM

CONFIDENTIAL & PROPRIETARY

Our Proposed REIT Transaction The REIT domicile & lis>ng : Singapore, Singapore Exchange (SGX) The REIT Management Company : a 50:50 JV between a recognised exis>ng REIT player based in Singapore and/or Malaysia & the UAE Client The minimum capital for the REIT Management Company is SGD 1 million, to be contributed by both par>es based on shareholding The REIT Fund Raising & REIT Management responsibili>es : REIT player / REIT promoter The REIT Assets Originator & Assets Manager responsibili>es : UAE Client

CONFIDENTIAL & PROPRIETARY

Our Proposed REIT Transaction Property Sales Value = Not more than the Market Valua>on to be conducted by 2 independent valuers Ini>al Property Sales Considera>on = Gross Cash : 50%, REIT Units : 50% Minimum Ini>al Public Oering Size = SGD 250 million Funding costs = 4.00% p.a. x 10 years, minimum (calculated on the gross cash amount received, payable upfront in the form of REIT Units). Issuance, Underwri>ng & Advisory Costs = 6.50% of the gross cash amount received, or 0.65% p.a. if amor>sed over 10 years (expenses prior to IPO date can be defrayed from Gross cash amount)

CONFIDENTIAL & PROPRIETARY

Comparison 1 : Loans vs. REIT

BORROWING THROUGH LOANS MV Additional Security Haircut Bullet Loan Principal Loan Tenor (years) Interest Rate p.a. Total Interest Rate pmts (10 years) 10% 50% 10 8.50% 19,125,000 191,250,000 % Amt 500,000,000 450,000,000 225,000,000 BORROWING THROUGH REIT MV Additional Haircut (Div Yield vs Mkt Yield) Public Offering of REIT Units Holding Period (years) Funding Costs ("FC") p.a. Total Funding Costs (10 years) Upfront Payment of Funding Costs (in REIT Units) Net REIT Units retained 20% 30% % Amt 500,000,000 10% 50% 10 4% 9,000,000 90,000,000 100,000,000 150,000,000 0.90 450,000,000 225,000,000 250,000,000 0.90 REIT Units 500,000,000 REIT Unit Price 1.00

TOTAL CASH RECEIVED TOTAL REPAYMENTS (P + i)

225,000,000 416,250,000

TOTAL CASH RECEIVED TOTAL REPAYMENTS (Repurchase 70%)

225,000,000 315,000,000 0.90

Income from the Properties Net Rental Yield (p.a.) on MV of 500,000,000 6% 30,000,000

Income from the 30% REIT Units retained Dividend Yield (p.a.) on Retained REIT Units of 150,000,000 units 6% 9,000,000

CONFIDENTIAL & PROPRIETARY

Comparison 2 : Loans vs. REIT

LOAN CASH FLOWS REIT CASH FLOWS

+
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 225,000,000 225,000,000

-19,125,000 -19,125,000 -19,125,000 -19,125,000 -19,125,000 -19,125,000 -19,125,000 -19,125,000 -19,125,000 -244,125,000 -416,250,000

Net Income from property after deducting interest Y0 10,875,000 10,875,000 10,875,000 10,875,000 10,875,000 10,875,000 10,875,000 10,875,000 10,875,000 10,875,000 108,750,000 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

+
225,000,000

0 0 0 0 0 0 0 0 0 -315,000,000 225,000,000 -315,000,000

Net Dividend Income

9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 90,000,000

CONFIDENTIAL & PROPRIETARY

10

REIT as a Funding Mechanism

HIGHEST VALUATION MID-LATE 2008 OPTION TO EXIT (BY SELLING RETAINED REIT UNITS)

Maximum funding costs is xed at = 4.00% x 10 years However, borrowing tenor is not xed, it depends on when the next downwards property cycle would be. It is also the op>on of the UAE Client to undertake the G.O. or not. Lower borrowing costs if repurchase tenor is longer :
Tenor Rates p.a. 10 years 4.00% 11 years 3.64%

100%
EXIT CASH OUT STRATEGY

COSTS

75%

FUNDING BORROWING STRATEGY

50%

OFF BALANCE SHEET FUNDING THROUGH REIT MECHANISM

PROPERTY SALES CONSIDERATION = CASH + REIT UNITS

REPURCHASE OF OUTSTANDING REIT UNITS THROUGHH G.O. MECHANISM

The Borrowing Tenor ?

12 years 3.33%

13 years 3.08%

14 years 2.86%

15 years 2.67%

CONFIDENTIAL & PROPRIETARY

11

Value Proposition Cheap Long Term Funding with Upside Op;onality Joint Management of the REIT Con;nuing sole management of the Proper;es First step towards embracing Asset Light Developer Model

CONFIDENTIAL & PROPRIETARY

12

CONTACT INFORMATION

Contact Information & Summary Profile

ARCap INSSEF Limited (LL01824) www.arcap-inssef.com

Arcap Inssef Ltd registration number LL01824, is a Labuan based fund management company, licensed by the Labuan Financial Services Authority (LFSA). It was established on 28 October 1998. Arcap has been operating in the Gulf region since 2004, and has undertaken various financial advisory mandates in the KSA, Kuwait, UAE and Oman. Arcap is highly qualified to act as an independent Financial Adviser for any fund raising out of the Malaysian & Singapore markets, given our principals track records and our current network within the financial & investor communities there . The combination of these past experiences, gave us a unique perspective in bringing Gulf issuers to the Malaysian & Singapore markets. ADVISORY TRACK RECORDS 2004 - 2010

Labuan (registered office) : Level 14B, Main Office Tower, Financial Park Labuan, 87000 Labuan, F.T. Malaysia Kuala Lumpur (marketing office) : Block J-08-05, No. 2, Jalan Solaris, Solaris Mont Kiara, 50480 Kuala Lumpur, Malaysia Tel: +603 62040151 Fax: +603 62040152
!"#$%&'$"&()*+,-.&(/,#0%+*1( /23456,5(!"#$%&'$"&(7+*(4$52( 8%&5&$(9()*+:$.&(;0'0&$,(<=5-,0( /*5>05? =$@&(ABBC(3(D$>(ABBE

/8F(GBB('0220+"(H+*@+*5&$(9( D0"5".052(/,#0%+*1 I0,,2$(85%&(F$#$2+@'$"&( <F->50J(K/8?( I5*(ABBE(L(=$@&((ABBE

!"#$%&'$"&()*+,-.&(/,#0%+*1 M5'6$$2()N=H(<F->50J(K/8?( D$>(ABBO(L(I51((ABBO

K=P(QEB('0220+"()*+:$.&(D0"5".0"R( /,#0%+*1( S+#$*"'$"&(+7(T$'$"(9( D+*65*,(8"$*R1 D$>(ABBO(3(N-"$(ABBO

K=P(AEB('0220+"(H+*@+*5&$(9( )*+:$.&(D0"5".0"R(/,#0%+*1( ^+-%0"R(F$#$2+@'$"&( /,'0"0%&*5&0+"(+7(M-*]$1(9( 8".+*@(_$*U5, /@*02(ABBO(3(N-21(ABBO

4$52(8%&5&$(!"#$%&'$"&(9( D0"5".0"R(/,#0%+*1( /20(I++%5(9(=+"%(S*+-@J( <=U5*:5UJ(K/8?( N-"$(ABBO(L(V.&(ABBO

/8F(WXB(>0220+"(;+"R(M$*'( /,#0%+*1(I5",5&$( )5*5'+-"&()*+@$*&0$%(;;H(<K/8?( Y+#$'>$*(ABBO(L(Y+#$'>$*(( ABBZ

/8F(CXE(>0220+"(;+"R(M$*'( /,#0%+*1(I5",5&$( /*5>(4$52(8%&5&$(H+((HN=H( <[-650&?( Y+#$'>$*(ABBZ(L(N5"-5*1(ABWB

/8F(QBB('0220+"(H+*@+*5&$(9( D0"5".052(/,#0%+*1( =+]++](!"#$%&'$"&(H+X(<K/8?( N5"(ABB\(L(/@*02(ABB\

/8F(WXB(>0220+"(D0"5".052( /,#0%+*1( 4/=!=(M0'$(F$#$2+@$*%(H+X( <K/8?( /-R(ABB\(L(Y+#(ABB\

Director Rashdan Ibrahim rashdan.ibrahim@arcap-inssef.com Mob (UAE) : +(971) 50 395 7226 Mob (KUL) : +6012 3988 170
H+*@+*5&$(/,#0%+*1( S*-"U5-%(8"$*R0$(S'>^( <S$*'5"1? /-R(ABB\(L(=$@&(ABB\ K=F(WAE('0220+"(D0"5".052( /,#0%+*1( !'+>0205*05(;-5",5(=+.052( Y+#(ABB\((L(D$>(ABWB 40%]%(I5"5R$'$"&(9( V@$*5&0+"%(/,#0%+*1(( HY(8"$*R1(;0'0&$,(<K/8?( Y+#(ABB\(L(+"R+0"R

=/4(A(>0220+"(D-",0"R(/,#0%+*1(( !%25'0.(H++@$*5&0+"(7+*(&U$( F$#$2+@'$"&(+7(&U$()*0#&$( =$.&+*((<[=/?( V.&(ABWB(L(+"R+0"R

VI4(QG('0220+"(D-",0"R( /,#0%+*1(( H5@0&5%(S*+-@(!"&$*"5&0+"52(( <[=/?( Y+#(ABWB(L(+"R+0"R

CONFIDENTIAL & PROPRIETARY

EXECUTIVE SUMMARY

Disclaimer
It is the purpose of this document to provide the latest Overview of the products & services provided by ARCAP INSSEF Ltd. These product & services shown may change in the future and ARCAP reserves the rights to change these without no;ce This document may be deemed as a preliminary oer to par;es who are interested in par;cipa;ng, engaging, inves;ng in the products & services shown. This document is submiQed to you on a conden;al basis. By accep;ng this document the recipient agrees that neither it nor any of its employees or advisers shall use the informa;on for any purpose other than for evalua;ng its interest in the Company or divulge such informa;on to any other party. This document shall not be photocopied, reproduced or distributed to others without prior wriQen consent of ARCAP INSSEF LTD.

Some statements contained herein that are not historical facts are forward-looking statements. These forward-looking statements are based on current expecta;ons, es;mates and projec;ons about the industry and markets in which the Company operates, managements beliefs and assump;ons made by the management. Words such as expects, an;cipates, should, intends, plans, believes, seeks, es;mates, projects, varia;ons of such words and similar expressions are intended to iden;fy such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertain;es and assump;ons which are dicult to predict. Therefore, actual outcomes and results may dier materially from what is expressed or forecast in such forward-looking statements. Prospec;ve recipients of this document should not treat the contents of this document as advice rela;ng to legal, taxa;on, nancial, investment of any other maQers. The recipients of this document should inform themselves as to: (a) legal requirements within their own countries; (b) any foreign exchange restric;ons which they might encounter; and (c) the income and other tax consequences which may apply in their own countries relevant to the project. Recipients of this document must rely upon their own representa;ves, including their own legal advisers and accountants, as to legal, tax, investment, nancial and related maQers concerning the project. All informa;on is correct at the ;me of prin;ng and subject to change without no;ce By accep;ng this document, the recipient hereof agrees to be bound by the foregoing.

CONFIDENTIAL & PROPRIETARY