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A Value Menu for McDonald’s
Pershing Square
Capital Management
DISCLAIMER
Pershing Square Capital Management's ("Pershing") analysis and conclusions regarding

McDonald's Corporation ("McDonald's") are based on publicly available information. Pershing
recognizes that there may be confidential information in the possession of the Company and its
advisors that could lead them to disagree with the approach Pershing is advocating.
The analyses provided include certain estimates and projections prepared with respect to, among
other things, the historical and anticipated operating performance of the Company. Such
statements, estimates, and projections reflect various assumptions by Pershing concerning
anticipated results that are inherently subject to significant economic, competitive, and other
uncertainties and contingencies and have been included solely for illustrative purposes. No
representations, express or implied, are made as to the accuracy or completeness of such
statements, estimates or projections or with respect to any other materials herein. Actual results
may vary materially from the estimates and projected results contained herein.
Pershing manages funds that are in the business of trading - buying and selling - public securities.
It is possible that there will be developments in the future that cause Pershing to change its position
regarding the Company and possibly reduce, dispose of, or change the form of its investment in the
Company. Pershing recognizes that the Company has a stock market capitalization of
approximately $42bn, and that, accordingly it could be more difficult to exert influence over its
Board than has been the case with smaller companies.
1
Table of Contents
I. Overview of McDonald's 3
II. Pershing’s View of McDonald's 11
III. Pershing’s Proposal to McDonald's: McOpCo IPO 23
IV. Company Response to Pershing 39
V. Developing a Response to the Company 43
Appendix 58
A. Pershing’s Proposal: Assumptions 59
B. PF McDonald's Financial Analysis 66
C. McOpCo Financial Analysis 74
2
I. Overview of McDonald's
Pershing’s Involvement with McDonald’s
I. Overview of McDonald’s
On September 22nd, Pershing Square Capital

Management (“Pershing”) presented a proposal for
increasing shareholder value (“the Proposal”) to
McDonald’s management
f Pershing commends McDonald’s management for its strong operational

execution over the past two years
f Pershing appreciates the willingness and openness of McDonald’s
management to discuss the Proposal
f Management has taken our Proposal seriously – our Proposal was
presented to McDonald’s Board of Directors
Pershing had a follow-up meeting with McDonald’s

management on October 31 when the Company
communicated its response to our Proposal
Pershing is pleased to have the opportunity to share the

details of our Proposal with the broader investment
community
4
Review of McDonald’s
World’s largest foodservice franchisor and retailer

f $42 billion equity market value
f $55 billion in estimated system wide sales
f 32,000 system wide restaurants, globally
f Serves 50 million customers daily in 119 countries
Everyday 1 out of 14 Americans eats at a McDonald’s
One of the world’s most recognized brands

f Consistently named in the top 10 global brands along with Coke and Disney
One of the largest retail property owners in the world

f Estimated owned and controlled real estate market value of $46 billion (1)
f Estimated 18,000 restaurants where McDonald’s owns land and/or building
Significant free cash flow business
________________________________________________
(1) Based on Pershing’s assumptions. See page 64 in the appendix.
5
Historical Financial Performance
Following declines in same-store sales and profitability in 2001 and 2002, Management has improved
operations through product innovation, capital discipline and strong execution. As a result, the Company’s
profitability has increased.
McDonald’s Historical Revenue and EBITDA Performance (1)
($ in millions)
$20,000 $19,065 30.0%

$17,141
$14,870 $15,406
$15,000 $14,243 28.5%
Revenue / EBITDA
EBITDA Margin
$10,000 27.0%
$5,000 25.5%
$4,144 $4,041 $3,997 $4,512 $5,183

$0 24.0%
2000 2001 2002 2003 2004
Same-store
Sales Growth 0.6% (1.3%) (2.1%) 2.4% 6.9%
EBITDA Revenue EBITDA Margin

________________________________________________
(1) EBITDA is adjusted for certain non-recurring and non-cash items.
6
Historical Financial Performance (Cont’d)
As a result of the Company’s improved capital allocation, pre-tax unlevered free cash flow has
increased from a five-year low of $2.0 billion in 2002 to $3.5 billion in 2004.
Historical Pre-Tax Unlevered Free Cash Flow(1) Performance

($ in millions)
$4,000 26%
$3,483
$3,000 $3,205 22%
EBITDA – CapEx
Margin (%)
$2,000 $2,199 $2,134 18%
$1,994 18.7% 18.3%
$1,000 15.4% 14%

14.4%
12.9%
$0 10%
2000A
2000 2001A
2001 2002A
2002 2003A
2003 2004A
2004
EBITDA – CapEx Margin %
_______________________________________________
(1) Denotes Adjusted EBITDA – CapEx. Adjusted EBITDA is adjusted for certain non-recurring and non-cash expenses.
7
Stock Price Performance
Although McDonald's stock has rebounded from its 2003 lows, it has been range bound in the low
$30s for the past five years and is significantly off of its high of $48 per share reached in 1999.
McDonald’s Stock Price Performance

($ per share)
$50.00
High of $48.32
11/12/99
$40.00
$30.00
$20.00
$10.00
11/12/99 07/12/00 03/12/01 11/10/01 07/11/02 03/11/03 11/09/03 07/09/04 03/09/05 11/07/05
8
5-Year Indexed Stock Performance
Over the past five years, McDonald’s has only slightly outperformed the S&P 500 while its QSR
peer group has vastly outperformed the index.
McDonald's S&P 500 QSR Index

5 Year Indexed Performance 2.4% (9.6%) 177.3%
5-Year Indexed Stock Performance
350
300
QSR
250
200
150
100 MCD
S&P
50
0
11/10/00 06/01/01 12/21/01 07/12/02 01/31/03 08/22/03 03/12/04 10/01/04 04/22/05 11/11/05
(1)
McDonald's QSR Comp S&P 500
________________________________________________
(1) Includes YUM and WEN.
9
McDonald’s versus its Peers
EV / ’06E EBITDA
Despite McDonald’s 10.0x
strong real estate 9.5x 9.3x
8.9x
assets, number one 9.0x 8.7x
8.5x
QSR market
8.0x
position and leading
7.5x
brand, McDonald’s 30-Day Average Trailing
(1)
W EN YUM
trades at a discount
to its peers.
P / ‘06E EPS
2 5 .0 x
We believe this 2 0 .0 x
2 0 .4 x
1 6 .7 x
discount is due to a 1 5 .0 x
1 5 .6 x
fundamental 1 0 .0 x
misconception 5 .0 x
about McDonald’s 0 .0 x
(1 )
business. 3 0 -D a y A v e ra g e T ra ilin g W EN YUM
Long-Term
EPS Growth 9% 12% 12%
________________________________________________
(1)
McDonald’s stock price is based on a 30-day average trailing price as of 11/11/05.
10
II. Pershing’s View of McDonald's
McDonald’s: How the System Works…
Landlord, Franchisor, Restaurant Operator Franchisees
fFranchisor: Franchises brand and collects fee f Franchise Fee: 4% of

fOperator: Operates 9,000 McDonald’s restaurants restaurant sales
fLandlord: Buys and develops real estate and leases to its f Rent: greater of a
franchisees minimum rent or a percentage
fReal Estate and Franchise estimated pre-tax ROI of 17.5%(1): of restaurant sales (current
Cost of Land $650k avg. ~9% of sales)
Cost of Building 650k
Total Cost $1,300k f Franchisee bears all
maintenance capital costs
Est. Average Unit Sales $1,750k
Rent as a % of Sales 9.0%
Franchise Income as % of sales 4.0%
Rental Income $158
Franchise Income 70
Total Income $228
Unlevered Pre Tax ROIC 17.5%
________________________________________________
(1) Illustrative return based on Pershing’s assumptions for the cost of land and building and approximate average unit sales in 2004.
12
A Landlord, Franchisor and Restaurant Operator
Real Estate and Franchise Business McOpCo
Landlord Franchisor Restaurant Operator
f McDonald’s controls substantially f Approximately 32,000 f Approximately 9,000 Company-

all of its systemwide real estate restaurants where operated restaurants
f Estimated 11,700 restaurants McDonald’s receives 4% of
unit sales f Reported financials have
where McDonald’s owns both the
land and buildings and 7,000 overstated margins due to
restaurants where McDonald’s a lack of transfer pricing
owns only the buildings (1) Currently not
f Estimated $1.3 billion of income charged a franchise
generated from subleases fee
f Estimated real estate value: $46 Currently not
billion or ~94% of current charged a market
Enterprise Value (2)
rent
________________________________________________
(1) Assumes that McDonald’s owns the land and buildings of 37% of its system wide units and owns the buildings of 22% of its system wide units.
(2) Valuation based on Pershing estimates. See page 64 for more detail on real estate valuation.
13
Characteristics of Cash Flow Streams
Real Estate and Franchise Business McOpCo
Landlord Franchisor Restaurants

Maintenance Minimal Low High
Capital
f Triple net leases f Limited remodel subsidies as f Significant maintenance capex
Requirements:
well as corporate capex
Very Stable / Minimal Risk Stable / Low Risk Medium Risk
Risk
f Generates the greater of a f Low operating leverage f High operating leverage
Profile
minimum rent or a % of sales f Diverse and global customer f Sensitivity to food costs
(current average ~ 9%) base
7%–10% Margins (1)
Typical 70%–90% Margins 30%–50% Margins
f High food, paper and labor costs
EBITDA f Some real estate
f Rent
Margin: development expenses
f Franchise fee
Minimal: 5.75%-6.5% Low: 6.5%-7.5% Medium: 8%-9%
Typical average f Real estate holding companies f Choice Hotels, Coke and Pepsi f Mature QSR typical asset
cost of capital:(2) typical asset beta: ~.40 – typical asset beta: ~.50-.60 beta: ~.80-.90
f Hard asset collateral f Highly leveragable
________________________________________________
(1) Typical margins are illustrative restaurant EBITDA margins and assume the payment of a market rent and franchisee fee, similar to a franchisee.
(2) Typical betas are Pershing approximations based on selected companies’ Barra predictive betas. Average cost of capital estimates are illustrative estimates based on average asset betas.
14
Adjusting for Market Rent and Franchise Fees
In 2004, McDonald’s company-operated restaurants appeared to contribute 46% of total EBITDA.

However, once adjusted for a franchise fee and a market rent fee, McOpCo constituted only 22% of total
EBITDA, with the higher multiple Real Estate and Franchise businesses contributing 78% of total EBITDA.
2004 Total EBITDA 2004 Total EBITDA Adjusted for

As Reported Market Rent and Franchise Fees
McOpCo McOpCo
46% 22%
54% 55%
78%
Real Estate Real Estate

and Franchise and Franchise
2004 EBITDA % 2004 EBITDA %
McOpCo $2.4bn 46% McOpCo $1.1bn 22%
Real Estate and Franchise 2.8bn 54% Real Estate and Franchise 4.0bn 78%
Total $5.2bn 100% Total $5.2bn 100%
________________________________________________
Note: The analysis assumes that 75% of the total G&A is allocated to the Real Estate and Franchise business and 25% is allocated to McOpCo. McDonald’s management has
indicated this is a conservative assumption regarding the Real Estate and Franchise business. Analysis excludes $441 mm of non-recurring other net operating expenses.
. 15
Adjusting for Market Rent and Franchise Fees
II. Pershing’s View of McDonald's (Cont’d)
Once adjusted for market rent and franchise fees, McOpCo would be contributing only 14% of total
EBITDA-Maintenance Capex, with the Real Estate and Franchise business contributing 86% of total
EBITDA-Maintenance Capex ,based on FY 2005E projections.
2005E Total EBITDA – Capex 2005E Total EBITDA – Capex Adjusted

As Reported for Market Rent and Franchise Fees
Real Estate and Real Estate and
McOpCo
Franchise McOpCo Franchise
14%
47%
53%
86%
'05 EBITDA- '05 EBITDA-

Maint. Capex % Maint. Capex %
PF McDonald's 2.2bn 53% PF McDonald's 3.5bn 86%
________________________________________________
The analysis assumes that 75% of the total G&A is allocated to the Real Estate and Franchise business and 25% is allocated to McOpCo. McDonald’s
management has indicated this is a conservative assumption regarding the real estate and franchise business. In addition, we note that 2005E maintenance capex
includes certain one-time capital expenditures related to systemwide remodeling program. Please see appendix for full reconciliation
.
16
Reconciling McDonald’s 2004A P&L
Set forth below is a table which reconciles McOpCo’s, the Real Estate and Franchise businesses’ and stand-alone
McDonald’s FY 2004A income statements, assuming McOpCo pays a market rent and franchise fee. The analysis
demonstrates that the Real Estate and Franchise business contributed approximately 78% of total EBITDA.
(U.S. $ in millions)
Real Estate 2004
2004 McOpCo and Franchise Inter-Company Consolidated
Income Statement P&L P&L Eliminations Sum of Parts
Sales by Company Operated Restaurants $14,224 $14,224 $14,224
Rent from Franchise and Affiliate Rest. 3,336 3,336 3,336
Rent From Company Operated Rest. - 1,280 (1,280) -
Franchise Fees From Franchise and Affiliate Rest. 1,505 1,505 1,505
Franchise Fees From Company Operated Rest. - 569 (569) -
Total Revenue $19,065 $14,224 $6,690 ($1,849) $19,065
Company Operated Expenses:
Food and Paper 4,853 4,853 - - 4,853
Compensation & Benefits 3,726 3,726 - - 3,726
Non-Rent Occupancy and Other Expenses (excl. D&A) 2,164 2,164 - - 2,164
Company Operated D&A 774 427 347 774
Company-Operated Rent Expense 583 583 583 (583) 583
Additional Rent Payable to PropCo - 697 - (697) -
Franchise Fee Payable to FranCo - 569 - (569) -
Total Company Operated Expenses $12,100 $13,019 $930 ($1,849) $12,100
Franchised Restaurant Occupancy Costs 576 - 576 - 576
Franchise PPE D&A 427 427 427
Corporate G&A 1,980 495 1,485 1,980
EBIT 3,982 710 3,272 - 3,982
Depreciation & Amortization 1,201 427 774 - 1,201
EBITDA $5,183 $1,137 $4,046 $0 $5,183
% of Total EBITDA 100% 22% 78% 100%
________________________________________________
The analysis assumes that 75% of the total G&A is allocated to the Real Estate and Franchise business and 25% is allocated to McOpCo. McDonald’s management has
indicated this is a conservative assumption regarding the real estate and franchise business.
Note: Analysis excludes $441 mm of non-recurring other net operating expenses. 17
.
Historical EBITDA by Business Type:
As Currently Reported
Assuming 75% of G&A is allocated to the Real Estate and Franchise business, an allocation that
McDonald’s management indicates is conservative, we indicate below the EBITDA for McOpCo and the
Real Estate and Franchise businesses, as depicted in the reported financials. We note that McOpCo has
historically appeared to contribute approximately ~45% of consolidated EBITDA.
McDonald’s Consolidated EBITDA

($ in millions)
$6.0
$5,183
$5.0 $4,512
$4,144 $4,041 $3,997
$4.0 $2,403 McOpCo
$2,072
$3.0 $1,995 $1,893 $1,841 ~45%
$2.0 Real
$2,780 Estate and
$1.0 $2,149 $2,148 $2,156 $2,440
Franchise
$0.0 ~55%
2000 2001 2002 2003 2004
Real Estate and Franchise McOpCo
________________________________________________
Assumes McOpCo G&A to be 25% of consolidated G&A and Real Estate and Franchise G&A to be 75% of consolidated G&A. Management has indicated this is a conservative
assumption regarding the Real Estate and Franchise business.
18
Historical EBITDA by Business Type:
Adjusted for a Market Rent and Franchise Fee
Despite an economic recession in 2001-2003, significant dips in McDonald’s system wide same-
store sales growth and declines in McDonald’s stock prices, the Real Estate and Franchise business
has grown every year over the last five years.

($ in millions)
$6.000 Real Estate and Franchise McOpCo
$5,183
$5.000 $4,512
$4,144 $4,041 $3,997 $1,137
$4.000 $944
$1,006 $900 $828
$3.000 Real
Estate and
$2.000
$3,568 $4,046
$3,138 $3,142 $3,169 Franchise
$1.000 ~80%
$0.000
2000 2001 2002 2003 2004
Same-
store sales 0.6% (1.3%) (2.1%) 2.4% 6.9%
McOpCo Growth (1.1%) (10.6%) (7.9%) 14.0% 20.4%
RE/Franchise Growth (0.5)% 0.1% 0.9% 12.6% 13.4%

________________________________________________
Notes:
Assumes McOpCo G&A to be 25% of consolidated G&A and Real Estate and Franchise G&A to be 75% of consolidated G&A.
Assumes McOpCo pays franchise fees of 4% of sales and rent of 9% of sales.
19
Real Estate and Franchise Business:
Stable and Growing

($ in billions)
Based on Pershing Assumptions Based on Reported Financials
$6.0
$5.0
$1.1
$4.0 $0.9
$1.0 $1.0 $0.9 $0.8
$1.0
$3.0 $0.8 $0.8 McOpCo
$0.7
$0.7 Real Estate and
$2.0 $0.6 $0.6 $4.0
$0.5 $0.5 $3.6 Franchise
$2.9 $3.2 $3.1 $3.1 $3.2
$2.5 $2.6 $2.7
$1.0 $1.8 $1.9 $2.1
$1.5 $1.6
$0.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
McOpCo
2.3% 18.1% (2.2%) 17.0% 14.1% 3.6% 6.3% 18.0% 5.1% (1.1%) (10.6%) (7.9%) 14.0% 20.4%
EBITDA Growth
Real Estate & Franchise

4.9% 11.7% 8.5% 10.4% 15.3% 4.0% 4.3% 10.1% 7.4% (0.5%) 0.1% 0.9% 12.6% 13.4%
EBITDA Growth:
Change in Year-End
(15.6%) 30.5% 28.3% 16.9% 2.6% 54.3% 0.6% 5.2% 60.9% 5.0% (15.7%) (22.1%) (39.3%) 54.4% 29.1%
Stock Price:
________________________________________________
Notes:
20
Historical Perspectives on McOpCo
McDonald’s did not historically operate restaurants
The Company initially entered the business of operating

restaurants only as a defensive measure
f Limited number of restaurants
“The idea emerged that we should operate a base of ten or so stores as a
company. This would give us a firm base of income in the event the
McDonald brothers claimed default on our contract…” (1)
--Ray Kroc / Founder
Expansion of McOpCo units first occurred in the late 1960s
f Veteran franchisees were approaching retirement and needed liquidity
f McDonald’s stock was provided as a tax-free exchange for the restaurants
“Some of our operators had tremendous wealth but no money. And we
were using McDonald’s stock that was trading at 25 times earnings to
buy restaurants for seven times earnings” (2)
--Fred Turner / Former President and CEO
Turner realized in the mid 70s that owning too many McOpCo
units was not in the best interest of the Company
________________________________________________
(1) From Grinding It Out: The Making of McDonald’s, p. 108.

(2) From McDonald’s: Behind the Golden Arches, pgs. 288 - 291.
21
Superior Franchisee Economics
“Running a McDonald’s is a 363-day-a-year business and an owner/operator,

with his personal interests and incentives, can inherently do a better job than a
chain manager.” (1)
--Fred Turner / Former President and CEO
Illustrative Characteristics of Company Operated versus Franchisee Operated Restaurants (2)
Company Operated Franchisee Operated
Structure C-Corporation LLC / Partnership

Taxes Corporate level tax No corporate level tax
Leverage 10% - 30% 75% - 90%
Levered Returns Low teens 40% and higher
General manager Salaried employee/ Owner / Entrepreneur
________________________________________________
corporate manager
(1) From McDonald’s: Behind the Golden Arches, pgs. 288 - 291.
(2) Illustrative leverage and equity return figures. Not based on company data. 22
III. Pershing’s Proposal to McDonald's: McOpCo IPO
Pershing’s Proposal: McOpCo IPO
III. Pershing’s Proposal to McDonald's:
McOpCo IPO
Step 2: Issue Debt and Pursue

Step 1: IPO of 65% McOpCo
Leveraged Self Tender
f IPO 65% of McOpCo f Issue $14.7bn of financing secured

f IPO generates estimated $3.27bn of against PF McDonald’s real estate
after tax proceeds f Debt financing and IPO proceeds
Assumes a 7x EV/FY’06E EBITDA used to
multiple Refinance all of the existing $5 bn
Assumes $1.35 bn of Net Debt of net debt at Pro Forma
allocated to McOpCo McDonald’s
Repurchase 316mm shares at $40
per share
Pay $300mm in fees and transaction
costs
24
Pershing’s Proposal: McOpCo IPO (cont’d)
McOpCo IPO
Pro Forma
IPO 65%
McOpCo PropCo FranCo
f At the time of IPO, McOpCo signs f Resulting Pro Forma McDonald’s is a

market lease and franchise world-class real estate and franchise
agreements with Pro Forma business
McDonald’s (“PF McDonald’s”) McOpCo financials deconsolidated
from PF McDonald’s
f Leverage is placed only on PropCo
f FranCo is unlevered, maximizing its credit
rating
25
McOpCo IPO:
III. Pershing’s Proposal to McDonald's: A Transformational Transaction
McOpCo IPO
Significant value creation for shareholders

An IPO of McOpCo
would have several f PF McDonald’s would trade at an approximate 37%–52% premium over
positive strategic where it trades today, in the range of approximately $45–50 per share (1)
and financial
Creates investor transparency
implications for
both Pro Forma f Deconsolidation provides investors with transparent insight into PF
McDonald’s as well McDonald’s profitability (60% EBITDA margins), attractive FCF profile
(35% levered FCF margins) and world-class real estate/franchise assets
as McOpCo.
f Separation of McOpCo highlights the significant value of rental income
and franchise fees currently eliminated in consolidation
Enhances management focus and incentives at both

entities
f Enhances ability to attract and retain top McOpCo management
f Allows PF McDonald’s management team to focus on new product
innovation, improved marketing efforts, stronger real estate development
programs and higher quality franchisee performance monitoring / training
________________________________________________
(1) Based on recent stock price of $33 per share.
26
A Transformational Transaction (Cont'd)
McOpCo IPO
Improves operating and financial metrics at every level

f Significantly improves PF McDonald’s EBITDA and free cash flow margins
f Enhances return on capital and overall capital allocation for the PF McDonald’s
f Improves ability of PF McDonald’s to pay significant ongoing dividends
Typical
Standalone Pro Forma Mature
$ in millions FY 2006E FY 2006E QSR
Revenue $20,816 $7,393

EBITDA 5,594 4,464
EBITDA Margin 26.9% 60.4% 15% - 20%
EBITDA-Capex 4,335 3,739

EBITDA-Capex Margin 20.8% 50.6% 7.5% - 12.5%
EBITDA-Maintenance Capex 4,651 4,025

EBITDA - Maint. Capex Margin 22.3% 54.4% 10% - 15%
(1)
FCF 3,059 2,440
FCF Margin 14.7% 33.0% 5% - 10%
________________________________________________
We note that CapEx projections are net of proceeds obtained from store closures.
(1) Typical QSR margin based on Wall Street estimates for YUM! Brands and Wendy’s.
27
McOpCo IPO
An IPO of McOpCo Will likely lead to improved operating margins at McOpCo

would have several f Separation from PF McDonald’s will make margin improvement an
positive strategic imperative
and financial Improves capital structure while maintaining investment
implications for grade credit rating
both Pro Forma f Low-cost secured debt to replace current debt or issued incrementally on
McDonald’s as well current structure
as McOpCo. Cheap CMBS structured financing issued at PropCo could
judiciously utilize strong real estate collateral
CMBS financing is non-recourse to McDonald’s (parent)
FranCo remains unlevered and is at least a AA credit
PF McDonald’s, the holding company, remains investment grade
Improves alignment with franchisees (1)
Allows for share buybacks of higher return business

f Separation of McOpCo allows for share buybacks to be targeted
predominantly at PF McDonald’s, the stronger free cash flow business
________________________________________________
(1) Will be discussed at length later in the presentation.
28
McOpCo IPO
Allows for a voice in McOpCo through governance

An IPO of McOpCo
f Given its 35% stake in McOpCo post spin-off, PF McDonald’s will be able to
would have several elect several Board seats to the new entity
positive strategic f Governance affords visibility in McOpCo operations, which will help in:
and financial managing the McDonald’s brand
implications for both extending new products through the franchisee system
remaining in touch with unit-level economics and issues
McDonald’s as well
as McOpCo. Supported by highly similar, successful precedent
transactions
f Coca Cola Company carved-out its owned bottling operations in 1986 in what is
widely viewed as one of the most successful restructurings of all time
f PepsiCo followed suit in a similar transaction in 1999, with unanimous support
from the Wall Street research analyst community
Allows for an accelerated McOpCo refranchising program
Increases overall size of PF McDonald’s investor base

f Strong potential to attract both dividend / income-focused investors and real
estate-focused investors
29
Publicly Traded Comparable Companies
McOpCo IPO
PF McDonald’s operating metrics are much closer to a typical Real Estate C-Corporation or a high
branded intellectual property business such as PepsiCo or Coca-Cola than they are a typical mature QSR.
Pro Forma Typical High Branded Intangible Property

Typical Mature Real Estate Choice
(1)
QSR C-Corp Hotels
2005E Operating Metrics:
EBITDA Margins 60% ~15% - 20% ~70% - 80% 66% 23% 31%
EBITDA – CapEx Margins 50% ~7.5 % - 12.5% ~65% - 75% 61% 18% 27%
EPS Growth 9% ~10% - 12% NA 16% 11% 9%
Trading Multiples
(2)
Adjusted Enterprise Value /
CY 2006E EBITDA ~8.5x - 9.5x ~13x - 16x 15.1x 12.3x 12.6x
CY 2006E EBITDA – CapEx ~12x - 15x ~17x - 20x 16.0x 15.5x 14.2x
Price /
CY 2006E EPS ~15x - 19x NA 24.3x 20.1x 18.8x
(3)
CY 2006E FCF ~16x - 20x ~20x - 25x 24.0x 20.8x 18.9x
Leverage Multiples
Net Debt / EBITDA ~0.5x - 1.8x ~5x - 10x 1.7x 0.0x NM
Total Debt / Enterprise Value ~7.5% - 20% ~35% - 60% 11% 4% 4%
________________________________________________
Stock prices as of 11/11/05. Projections based on Wall Street estimates.

(1) Typical mature QSR based on YUM! Brands and Wendy’s.
(2) Adjusted for unconsolidated assets.
(3) FCF denotes Net Income plus D&A less CapEx. 30
REITs: Typical Trading Multiples
McOpCo IPO
We believe REITs trade in the range of 13x-17x EV/’06E EBITDA, depending on the type of
real estate and the businesses the properties support.
EV / '06E Div. P / '06E P / '06E

Company EBITDA Yield FFO AFFO
Health Care 14.7x 6.3% 12.6x 13.3x
Industrial 16.3x 4.2% 13.9x 17.2x
Multifamily 17.0x 4.8% 16.6x 19.4x
Office 15.2x 4.7% 13.8x 19.6x
Regional Mall 16.3x 3.8% 14.2x 16.9x
Self Storage 17.5x 3.8% 16.7x 18.3x
Strip Center 15.5x 4.5% 14.4x 16.5x
Triple Net Lease 13.1x 6.4% 12.8x 13.4x
REIT Industry Total / Wtd. Avg. 15.7x 4.8% 14.4x 16.8x
________________________________________________
Based on Wall Street research estimates at the time of Pershing’s initial Proposal to the Company.
31
Significant Value Creation for Shareholders
McOpCo IPO
$ in millions Low High

Based on relevant
publicly traded EV/'06E EBITDA Multiple Range 12.5x 13.5x
comparable companies, Enterprise Value $55,799 $60,263
including several real (1)
Less: Net Debt (12/31/05E) 14,650 14,650
estate holding C-
Corporations, Pro Forma Plus: Remaining Stake in McOpCo (2) 2,097 2,493
McDonald’s would trade Equity Value $43,247 $48,106
in the range of 12.5x–
Ending Shares Outstanding (12/31/05E) (3) 957.3 957.3
13.5x EV/CY ’06E
EBITDA. We believe PF Price Per Share $45 $50
McDonald’s would trade
Premium to recent price (4) 36.9% 52.3%
at a 37%–52% premium
over where it trades Implied P/FY 2006 EPS Multiple 19.9x 22.2x
today. Implied P/FY 2006 FCF Multiple (5) 19.8x 21.9x
Implied FCF / Dividend Yield 5.1% 4.6%
________________________________________________
(1) Assumes $1.35 bn of net debt allocated to McOpCo and $5.0 bn of net debt allocated to PF McDonald’s. In addition, assumes $9.7 bn of incremental leverage placed on
PF McDonald’s.
(2) Represents 35% of the market equity value of McOpCo.
(3) Assumes incremental leverage and the after-tax proceeds from McOpCo IPO (net of fees and expenses) are used to buy back approximately 316 mm shares at an average price of $40.
(4) Assumes a recent stock price of $33.
(5) P / FY ’06E FCF multiple adjusted for Pro Forma McDonald’s 35% stake in McOpCo.
32
McOpCo Valuation Summary
III. Pershing’s Proposal to McDonald's: and Potential IPO Proceeds
McOpCo IPO
McOpCo would likely be valued at $6.0 billion to $7.1 billion of equity market value or 6.5x–7.5x EV/’06E EBITDA.
McOpCo Financial Summary McOpCo Valuation Summary

$ in millions $ in millions Low High
EV/'06E EBITDA Multiple Range 6.5x 7.5x
McOpCo Financial Summary FY 2006E
McOpCo Enterprise Value $7,343 $8,472
Company operated revenues $15,429
Net Debt (12/31/05) 1,350 1,350
Segment EBITDA, pre G&A 1,690
EBITDA Margin, pre G&A 11.0% Equity Value of McOpCo $5,993 $7,122
Assumed G&A for McOpCo 560 Ending Shares Outstanding 1,274 1,274
Assumed G&A as a Percentage of Total G&A 25.0% Price per share $4.70 $5.59
EBITDA post G&A $1,130
EBITDA Margins 7.3% Estimated After-Tax IPO Proceeds (1) $3,042 $3,497
Net Income $308
See appendix for after-tax IPO proceeds schedule
EPS $0.24
________________________________________________
(1)
See appendix for McOpCo IPO after-tax proceeds schedule.
33
Pro Forma McDonald’s: Valuation Summary
McOpCo IPO
The valuation of PF McDonald’s suggests a valuation range of $45–$50 per share. Based on the midpoint of the
valuation analysis, PF McDonald’s could be worth $47.50 per share, a 44% premium over where it trades today.
PF McDonald's Summary Financials PF McDonald's Valuation

$ in millions $ in millions Low High
EV/'06E EBITDA Multiple Range 12.5x 13.5x
Financial Summary FY 2006E
Enterprise Value $55,799 $60,263
Franchise Revenue $2,275
(1)
Real Estate Revenue 5,118 Less: Net Debt (12/31/05E) 14,650 14,650
(2)
Total Revenue $7,393 Plus: Remaining Stake in McOpCo 2,097 2,493
Equity Value $43,247 $48,106
(3)
Franchise EBITDA, Pre G&A $2,275 Ending Shares Outstanding (12/31/05E) 957.3 957.3
Real Estate EBITDA, Pre G&A 3,869
Price Per Share $45 $50
Less: Allocated G&A 1,680
Premium to recent price (4) 36.9% 52.3%
Assumed G&A as a Percentage of Total G&A 75.0%
Implied P/FY 2006 EPS Multiple 19.9x 22.2x
Total EBITDA $4,464
Implied P/FY 2006 FCF Multiple (5)
19.8x 21.9x
EBITDA Margins 60.4%
Implied FCF / Dividend Yield 5.1% 4.6%
Net Income 2,141
Memo:Share Buyback:
EPS $2.27
Incremental Debt Issued $9,685
Less Transaction Fees and Expenses (6) ($300)
________________________________________________
(1) Assumes $1.35 billion of net debt allocated to McOpCo and $5.0 billion of net debt allocated to PF Approximate Cash Received From IPO, after Tax $3,270
McDonald’s. In addition, assumes $9.7 billion of incremental leverage placed on PF McDonald’s.
(2) Represents 35% of the market equity value of McOpCo. Total Funds Available for Repurchase $12,654
(3) Assumes incremental leverage and the after-tax proceeds from McOpCo IPO (net of fees and
expenses) are used to buy back approximately shares 316 million shares at an average price of $40. # of shares repurchased (mm) 316
(4) Assumes a recent stock price of $33.
(5) P / FY ’06E FCF multiple adjusted for Pro Forma McDonald’s 35% stake in McOpCo. Average price of stock purchased $40
(6) Fees and expenses associated with the IPO and financing transactions.
34
Capitalization and Credit Profile of Pro Forma
III. Pershing’s Proposal to McDonald's: McDonald’s
McOpCo IPO
Set forth below are the sources and uses of proceeds associated with a $14.7 bn issuance of secured
collateralized financing (net of cash on hand), or an incremental $9.7 of net debt, based on expected net
debt as of FY 2005E. We have assumed a 5% fixed rate for this collateralized financing. After this
transaction, Pro Forma McDonald’s would be leveraged approximately 3.5x Total Debt/EBITDA or at a
25% Debt to Enterprise Value ratio. Proceeds from this issuance would be used to repay existing debt,
buyback shares and pay financing fees and expenses.
$ in millions
Sources PF McDonald's Capital Structure
New CMBS Financing (net of cash) $14,650 FY2005E
Percentage Loan to Value 44% Total Net Debt at Stand-alone McDonalds $6,315
Less: Net Debt Allocated to McOpCo (1,350)
Total $14,650 Net Debt at PF McDonalds $4,965
Incremental Debt Issued through CMBS 9,685
Total Net Debt $14,650
Uses
Repay Existing Net Debt at PF McDonald's Total Debt / EBITDA 3.5x
$4,965
Net Debt / EBITDA 3.4x
Buyback Shares 9,535
Assumed Corporate Credit Investment Grade
Fees and Expenses 150
Total Debt / Total Capitalization 24.5%
Total $14,650
35
Comparing PF McDonald’s Credit Stats with
III. Pershing’s Proposal to McDonald's: Comparable Real Estate Holding C-Corporations
McOpCo IPO
Total Debt / ’05E EBITDA (1)
12.0x 11.3x 10.2x

8.1x
9.0x
6.1x
6.0x
3.5x
3.0x
0.0x
Brookfield Properties British Land Land Securities Forest City Enterprises
Pro Forma
Debt / Enterprise Value
100%
75% 56% 59%

48%
50% 35%
25%
25%
0%
Brookfield Properties British Land Land Securities Forest City Enterprises
Pro Forma
EBITDA/Interest: 5.8x (2) 2.3x 1.5x 2.5x NA
Rating: BBB BBB NR BB+
________________________________________________
(1) Based on Wall Street research estimates. Pro Forma McDonald’s EV assumes a valuation multiple of 13x EV/FY’06 EBITDA.
(2) Assumes an average 5% fixed rate on PF McDonald’s debt.
36
Credit Ratings of Large Public REITs
McOpCo IPO
A review of large REITs indicates that these businesses support investment grade ratings with a
debt to enterprise value of 36% on average, as compared to Pro Forma McDonald’s which would
have a debt to enterprise value of 25%.
Total Debt/ Moody's Moody's S&P S&P

Company Name Enterprise Value Rating Outlook Rating Outlook
Simon Property Group Inc. 47.2% Baa2 Stable BBB+ Stable
Equity Office Properties Trust 50.9% Baa3 Stable BBB+ Stable
Vornado Realty Trust 37.4% Baa3 Stable BBB+ Stable
Equity Residential 38.4% Baa1 Stable BBB+ Stable
Prologis 31.5% Baa1 Stable BBB+ Stable
Archstone-Smith Trust 33.5% Baa1 Stable BBB+ Stable
Boston Properties Inc. 36.0% NR NR BBB+ Stable
Kimco Realty Corp. 25.2% Baa1 Stable A- Stable
AvalonBay Communities Inc. 27.3% Baa1 Stable BBB+ Stable
Median Total Debt/EV 36%

Average Total Debt/EV 36%
PF McDonald's Total Debt/EV 25%
________________________________________________
Notes:
Stock prices as of 11/11/2005.
PF McDonald’s EV assumes a valuation multiple of 13x EV/FY’06 EBITDA.
Total Debt includes Preferred.
37
Pro Forma McDonald’s Has A Superior Credit
III. Pershing’s Proposal to McDonald's: Profile to a Typical REIT
McOpCo IPO
Despite being a C-Corp and lacking the tax

advantages of a REIT, PF McDonald’s has
several superior credit characteristics
f REITs are required to pay 90% of earnings

through dividends, whereas Pro Forma McDonald’s
has much more credit flexibility
f PF McDonald’s has significant brand value to support

its cash flows and overall credit
38
IV. Company Response to Pershing
Company Response to Pershing
McDonald’s asked its Advisors to help review the

Proposal
Goal was to review the proposal to assess 4 critical

areas:
Advisors reported back with judgments on
f (1) Valuation
f (2) Credit Impact
McDonald’s Management reviewed the Proposal to assess
f (3) Friction Costs
f (4) Governance / Alignment Issues
40
Management Concerns: Friction Costs, Credit
IV. Company Response to Pershing Impact and Governance Issues
Friction Costs Credit Impact Alignment Issues

Some friction costs Incremental $9bn of leverage Separation of McOpCo from
associated with the CMBS as proposed may put PF McDonald’s may cause
financing structure, but not a pressure on credit rating alignment issues in the
gating issue system
f Potential property tax f Rating agency consolidation

revaluations of McOpCo
f Legal costs f Lease commitments viewed
f Large transaction for CMBS as leverage
market
f Mostly driven by CMBS
financing
McDonald’s management stated that, assuming adequate value

creation, none of these issues would prevent a restructuring
41
Valuation: Judgments Made by Advisors
f Advisors were assigned to review the Proposal

f In general, Advisors agreed with Pershing on:
9 McOpCo valuation
9 Relative allocation of EBITDA between
McOpCo and PF McDonald’s
f However, their judgment was that PF

McDonald’s would not enjoy significant multiple
expansion
“PF McDonald’s would trade like a

restaurant stock”
42
V. Developing a Response to the Company
Pershing’s Response Regarding Friction Costs
V. Developing a Response to the and Credit Impact
Company
Friction Costs Credit Impact
9 Friction costs immaterial in the context 9 Stability of PF McDonald’s cash flow

of value creation stream and robust asset base should
allow it to incur additional debt without
9 Friction costs and transaction delays a material adverse change in rating
were driven by CMBS financing
9 YUM’s credit rating is BBB-
9 Similar transaction could be effected
with corporate debt
44
Franchisee Alignment:
V. Developing a Response to the “Skin in the Game”
Company
Franchisor/Franchisee Conflict
f Top Line (percent of sales) vs. Bottom Line
Some believe this conflict is mitigated by owning and

operating units
However, many of the most successful franchisors

operate few, if any, units
f Historical McDonald’s
f Subway
f Dunkin’ Donuts
f Tim Hortons
McDonald’s current “skin in the game” is overstated due

to lack of transfer pricing
f We believe McOpCo represents ~10% of McDonald’s total value
PF McDonald’s role as landlord, franchisor, 35%

shareholder and board member, leaves them with ample
skin in the game
45
Franchisee Alignment:
V. Developing a Response to the Benefits to Franchisees of an independent
Company McOpCo
McOpCo IPO would shift some power to the franchise

base—A good thing
f Franchisees know what’s best operationally
f Franchisees have been the source of most product innovations (i.e. Big
Mac, Egg McMuffin, Filet-o-Fish, Apple Pie)
f Driving force behind current process innovations (call centers at drive-
thru)
f IPO would sharpen focus on being best in class franchisor
Level the playing field: McOpCo should compete on the

same basis as franchisees
f Pay market rent and franchise fees
f Be focused on bottom-line profitability
f Be run by equity compensated management
Opportunity for Franchisees to expand unit count

f Heavy demand among operators to acquire/manage additional units
f McOpCo should refranchise units better managed by franchisees
46
What It Boils Down To:
V. Developing a Response to the
Company
Valuation of PF McDonald’s
Although there are some differences in opinion

regarding friction costs, leverage and potential
alignment issues, the key disparity between
Pershing and the Company’s views was
regarding the Valuation of Pro Forma McDonald’s…
47
PF McDonald’s FY2005E EBITDA
Company pre-G&A Contribution
Pro Forma McDonald’s is

Not a Restaurant Company
Brand Royalty
37%
63%
Real Estate
48
Comparable Companies
Company
PF McDonald’s operating metrics are much closer to a typical Real Estate C-Corporation or a high
branded intellectual property business such as PepsiCo or Coca-Cola than they are a typical QSR.
Assumes PF Pro Forma Typical High Branded Intangible Property

McDonald’s Real Estate Choice Typical
price of ~$47.50 C-Corp Hotels Mature QSR
EBITDA Margins 60% ~70% - 80% 66% 23% 31% ~15% - 20%
EBITDA – CapEx Margins 50% ~65% - 75% 61% 18% 27% ~7.5 % - 12.5%
EPS Growth 9% NA 16% 11% 9% ~10% - 12%
Trading Multiples
Adjusted Enterprise Value (2) /

CY 2006E EBITDA 13.0x ~13x - 16x 15.1x 12.3x 12.6x ~8.5x - 9.5x
CY 2006E EBITDA – CapEx 15.5x ~17x - 20x 16.0x 15.5x 14.2x ~12x - 15x
Price /
CY 2006E EPS 21.1x NA 24.3x 20.1x 18.8x ~15x - 19x
(3)
CY 2006E FCF 20.9x ~20x - 25x 24.0x 20.8x 18.9x ~16x - 20x
Leverage Multiples
Net Debt / EBITDA 3.4x ~5x - 10x 1.7x 0.0x NM ~0.5x - 1.8x
Total Debt / Enterprise Value 24% ~35% - 60% 11% 4% 4% ~7.5% - 20%
________________________________________________
Stock prices as of 11/11/05. Projections based on Wall Street estimates.

(1) Typical mature QSR based on YUM! Brands and Wendy’s.
(2) Adjusted for unconsolidated assets.
(3) FCF denotes Net Income plus D&A less CapEx. 49
Significant Free Cash Flow Yield / Dividend Yield
V. Developing a Response to the Assuming No Incremental Debt
Company
At McDonald’s current price of approximately $33 per share, we estimate Pro Forma McDonald’s dividend
/ FCF yield would be approximately 6.7%. (1)
McDonald's Stock Price $33.00 $37.00 $41.00 $45.00 $49.00 $53.00 $57.00
McOpCo Share Price (7x EV / EBITDA Multiple) $5.15 $5.15 $5.15 $5.15 $5.15 $5.15 $5.15
Implied Pro Forma McDonald's Share Price 27.85 31.85 35.85 39.85 43.85 47.85 51.85
Yield on Pro Forma McDonald's 6.7% 5.9% 5.2% 4.7% 4.3% 3.9% 3.6%
Memo: Pro Forma McDonald's Free Cash Flow

2006E EBITDA $4,464.0
Less: Maintenance Capital Expenditures (438.6)
Less: Growth Capital Expenditures (285.9)
Plus / Less: Decreases / (Increases) in Working Capital 6.2
Less: Interest (1) (250.0)
Less: Cash Taxes (1,112.7)
Free Cash Flow $2,383.0
PFMcDonald's Shares Out (assuming no self-tender) 1,273.7
Free Cash Flow per Share $1.87
________________________________________________
(1)
Assuming PF McDonald’s pays out 100% of its FCF as dividends.
(2) Assumes no incremental leverage and an average cost of debt of 5% on the existing $5 bn of net debt at Pro Forma McDonald’s.
50
Pro Forma McDonald’s:
Company Stable and Growing
Pershing believes the best way to think about Pro Forma McDonald’s is as a growing annuity.
Real Estate and Franchise EBITDA
($ in billions) Based on Pershing Assumptions Based on Reported Financials
$4.0
$3.0
$2.0 $4.0
$3.6
$3.2 $3.1 $3.1 $3.2
$2.7 $2.9
$2.5 $2.6
$1.0 $1.9 $2.1
$1.6 $1.8
$1.5
$0.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Real Estate & Franchise
EBITDA Growth: 4.9% 11.7% 8.5% 10.4% 15.3% 4.0% 4.3% 10.1% 7.4% (0.5%) 0.1% 0.9% 12.6% 13.4%
________________________________________________
Notes:
51
Which Would You Rather Own:
V. Developing a Response to the Pro Forma McDonald’s or a Large Retail REIT?
Company
McDonald's Stock Price $33.15 $35.15 $40.15 $45.15 $50.15 $55.15 $60.15 Typical
McOpCo Stock Price 5.15 5.15 5.15 5.15 5.15 5.15 5.15 Large Retail
PF McDonald's Stock Price $28.00 $30.00 $35.00 $40.00 $45.00 $50.00 $55.00 REIT (1)
Scenario 1: Pre-Tax Yield (2) 6.7% 5.9% 5.2% 4.7% 4.3% 3.9% 3.6% 4.0%
No Sharebuyback
No Incremental After-Tax Investor Yield (3) 5.7% 5.0% 4.4% 4.0% 3.6% 3.3% 3.1% 2.6%
Leverage
Estimated LT Dividend Growth 3% - 4% 3%- 6%
Scenario 2 PF McDonald's Stock Price $28.00 $30.00 $35.00 $40.00 $45.00 $50.00 $55.00
(4)
Proposed Pre-Tax Yield 8.5% 7.9% 6.7% 5.8% 5.1% 4.6% 4.1%
Sharebuyback
After-Tax Investor Yield (4) 7.2% 6.7% 5.7% 4.9% 4.3% 3.9% 3.5%
Estimated LT Dividend Growth 3% - 4%
________________________________________________
Note: Assumes a 7x EV / FY ’06E EBITDA multiple on McOpCo.

(1)
Retail / REIT dividend yield based on Simon Property Group. Illustrative LT Dividend growth based on Pershing’s estimates.
(2) Assumes full payout of free cash flows for PF McDonald’s.
(3) Assumes 15% tax rate on PF McDonald’s dividend and a 35% tax rate on the REIT dividend.
(4) Scenario 2 Pre-Tax and After-Tax Yields are adjusted for a 35% stake in McOpCo.
52
V. Developing a Response to the Pro Forma McDonald’s or 10-Year U.S. Treasury?
Company
McOpCo Stock Price 5.15 5.15 5.15 5.15 5.15 5.15 5.15 10 Year
PF McDonald's Stock Price $28.00 $30.00 $35.00 $40.00 $45.00 $50.00 $55.00 Treasury
(1)
Scenario 1: Pre-Tax Yield 6.7% 5.9% 5.2% 4.7% 4.3% 3.9% 3.6% 4.6%
No Sharebuyback
Leverage
Estimated LT Dividend Growth 3% - 4% 3% - 4% 0%
(3)
Sharebuyback
Estimated LT Dividend Growth 3% - 4% 3% - 4%

________________________________________________

(2) Assumes 15% tax rate on PF McDonald’s dividend and a 35% tax rate on the 10-Year Treasury dividend.
53
V. Developing a Response to the Pro Forma McDonald’s or a Treasury Inflation
Company
Protected Security (TIPS)?
McOpCo Stock Price 5.15 5.15 5.15 5.15 5.15 5.15 5.15 10 Year
PF McDonald's Stock Price $28.00 $30.00 $35.00 $40.00 $45.00 $50.00 $55.00 TIPS
Scenario 1: Pre-Tax Yield (1) 6.7% 5.9% 5.2% 4.7% 4.3% 3.9% 3.6% 2.1%
No Sharebuyback
Leverage
Estimated LT Dividend Growth 3% - 4% 2.5%
(3)
Sharebuyback
Estimated LT Dividend Growth 3% - 4%
________________________________________________

(2) Assumes 15% tax rate on PF McDonald’s dividend and a 35% tax rate on the TIPS dividend.
54
Valuation of McDonald’s as a Growing Annuity
Company
Based on a review of the cost of capital of Real Estate holding corporations and Intangible Property /
Franchise businesses like Coca Cola and Choice Hotels, we believe that Pro Forma McDonald’s levered
FCF could have a discount rate in the area 7.25% - 7.75%. As such, we believe PF McDonald’s would
have a FCF Yield of 4.25% - 5.25%. This implies a midpoint equity valuation range of $48 per share.
Low High
Estimated Discount Rate 7.75% 7.25%
Implied Perpetuity Growth Rate 2.50% 3.00% Midpoint of PF
Implied FCF Yield 5.25% 4.25% McDonald’s
Implied FCF Multiple 19.0x 23.5x Equity Value per
Share(2): $48
FY'06E Free Cash Flow per Share (1) $2.17 $2.17
(Note: FCF Assumes Proposal Scenario)
________________________________________________
(1)
Assumes no dividend paid in FCF calculation.
(2) Includes the value of PF McDonald’s 35% equity stake in McOpCo (approx. $2 per share). Assumes a 7x EV / FY ’06E EBITDA McOpCo valuation multiple.
55
Conclusions
Company
f McDonald’s is significantly undervalued today

Over 80% of its cash flows comes from real
estate income and franchise income
f Proposal creates value for several reasons

Increases shareholder value
Improves management focus
Increases transparency
Improves capital allocation
Improves franchise alignment
f There are multiple ways to unlock value

Pershing’s Initial Proposal
Variations on Pershing’s Initial Proposal
56
Next Steps
Company
f Engage constituents regarding proposal

Shareholders
Franchisees
Broad investment community
f Incorporate your feedback

f Consider revised proposal
57
Company
Q&A
58
Appendix
A. Pershing’s Proposal: Assumptions
McOpCo IPO: General Assumptions
f 65% of McOpCo shares are IPO’ed in the transaction

Pershing has assumed
the following structural 35% stake retained by PF McDonald’s allows for McOpCo’s business to
and tax assumptions be deconsolidated
with respect to an IPO f McOpCo is assumed to be essentially a debt free subsidiary
spin-off of McOpCo. f Immediately prior to the IPO, $1.35bn of McDonald’s consolidated FY ’05E
net debt is allocated to McOpCo
$1.5 billion of total debt allocated
$150mm of cash and cash equivalents allocated
f The remaining $5bn of FY ’05E net debt is allocated to PF McDonald’s
$5.15bn of total debt
$150mm of cash and cash equivalents
f McOpCo’s tax basis is assumed to be approximately $1.65 billion
Tax basis is equal to $3 billion of initial assumed basis (based on an
assessment of net equipment and other property at McDonald’s) less $1.35
billion of allocated net debt
f To the extent that the IPO distribution exceeds PF McDonald’s tax basis in
McOpCo, then the tax cost for the IPO would be the amount by which the IPO
distribution exceeds McDonald's basis multiplied by McDonald’s corporate and
state/local tax rate
61
McOpCo IPO: Structural And Tax Observations
Step 1: McOpCo dividends a $4.2bn Step 2: IPO of McOpCo and Step 3: Leveraged Self-Tender at
Note to McDonald’s (parent) Tax Costs Pro Forma McDonald’s
Equity Pro Forma

Markets PF McDonald’s
performs a
IPO of leveraged self-tender
McOpCo
Shares $4.2 bn cash received
McOpCo
$4.2bn
Note McOpCo repays $4.2 bn PropCo FranCo
Note to McDonald’s
McDonald’s Issues CMBS No debt at FranCo

McOpCo
retains financing, or
35% stake $9.7bn of
incremental debt
f McOpCo declares and pays a dividend to f McOpCo undertakes the IPO and uses the f PF McDonald’s is organized as a real estate
McDonald’s (parent) in the form of a Note in an proceeds to repay the dividend note. business (“PropCo”) and a franchise business
amount equal to the anticipated proceeds from (“FranCo”)
f The tax cost for the IPO would be the amount by
an initial public offering of McOpCo
which the IPO distribution exceeded McDonald's f PropCo issues secured financing with
f For illustrative purposes, we assume the Note is basis in the McOpCo stock multiplied by proceeds used for
for $4.2bn, or 65% of the equity market value McDonald’s corporate and state/local tax rate Repaying existing debt at PF
of McOpCo (assumed to be $6.5bn) McDonald’s
f Assuming a $4.2bn of IPO distribution, the tax
cost would be approximately $1bn Buying back shares
Tax cost equals $4.2 billion of distribution f PF McDonald’s performs a self tender using
less $1.65 billion of basis multiplied by the proceeds from:
tax rate of 38%
New CMBS financings
f As such, after tax proceeds of the McOpCo IPO
After tax proceeds of IPO
will be approximately $3.2 billion
62
McOpCo IPO Proceeds
McOpCo IPO After Tax Proceeds

Set forth herein is a Low High Average
schedule of the Taxes payable
McOpCo Equity Market Value $5,993 $7,122 $6,558
after-tax proceeds
IPO Percentage 65% 65% 65%
from the McOpCo
IPO. Distribution to PF McDonald's $3,895 $4,630 $4,262
Book Basis of McOpCo 3,000 3,000 3,000

Net Debt Allocated to McOpCo (1,350) (1,350) (1,350)
Adjusted Basis in McOpCo 1,650 1,650 1,650
Taxable Gain $2,245 $2,980 $2,612

Tax Rate 38% 38% 38%
Taxes payable $853 $1,132 $993
After Tax Proceeds

Distribution $3,895 $4,630 $4,262
Taxes Payable (853) (1,132) (993)
After Tax Distributions $3,042 $3,497 $3,270
63
Collateralized Financing
Assuming PF McDonald’s owns the land and building of 37% of its system wide units and owns the
buildings of 22% of its system wide units, then a preliminary valuation of McDonald’s real estate suggests
a value of $33 billion.
Avg. Annual Rev. Est. Market Est. Market Est. Est. Rent Cap Total Real
$ in million Per Unit Rent % Rent $ # of Units Income Rate Estate Value
Property Value
Owns Land and Building 1.75 9.0% 0.16 11,709 1,844.2 7.0% $26,346
Owns Building (Leases Land) 1.75 4.5% 0.08 6,962 548.3 8.0% $6,854
Estimated Property Value $33,200
Est. Rent Est. Est. Rent Cap Total Real

$ in million Spread Per Avg unit # of Units Income, Net Rate Estate Value
Leasehold Value
Leaseholds 0.10 12,975 1,322.8 10.0% $13,228
Estimated Leasehold Value $13,228
Total Real Estate Collateral Value $46,428
64
PF McDonald’s: Cost of Capital
We estimated the asset betas of several Real Estate holding C-Corporations and several
high branded intellectual property businesses.
High Branded Intangible Property Business Betas
(Dollar values in millions)
Adjusted Marginal Total Debt &

Equity Cost of Equity Total Preferred Tax Unlevered Preferred /
Company Beta Equity Value Debt Stock Rate Beta TEV
Coca Cola Co. 0.49 7.3% $101,776.1 $4,200.0 - 38.0% 0.48 4.2%
Pepsico Inc. 0.46 7.2% 99,498.9 4,607.0 41.0 38.0% 0.45 4.7%
Choice Hotels 0.86 9.3% 2,285.7 296.7 - 38.0% 0.79 11.7%
Mean 0.60 7.9% $67,853.6 $3,034.6 $13.7 38.0% 0.57 6.8%

Median 0.49 7.3% 99,498.9 4,200.0 - 38.0% 0.48 4.7%
Real Estate Business Betas

(Dollar values in millions)
Adjusted Marginal Total Debt &

Equity Cost of Equity Total Preferred Tax Unlevered Preferred /
Company Beta Equity Value Debt Stock Rate Beta TEV
British Land 0.62 8.0% $8,913.9 $11,391.1 - 38.0% 0.34 56.8%
Brookfield Properties 0.80 9.0% 6,805.9 6,208.0 1,477.0 38.0% 0.45 60.5%
Forest City Enterprises 0.66 8.2% 3,863.9 5,566.0 - 38.0% 0.35 59.3%
Land Securities 0.55 7.7% 12,279.2 6,484.2 - 38.0% 0.42 34.6%
Mean 0.66 8.2% $7,965.7 $7,412.3 $369.3 38.0% 0.39 52.8%

Median 0.64 8.1% 7,859.9 6,346.1 - 38.0% 0.38 58.0%
Note: Market information as of 11/10/05. Utilized treasury stock method.

Sources: Barra, company reports, Factset, and Wall Street Equity research.
65
PF McDonald’s: Cost of Capital (Cont’d)
Based on a blended asset beta calculation we determined a range of values for the WACC of
PF McDonald’s.
Blended Asset Beta Calculation
% Contribution from Blended Average
Asset % Contribution from Asset High Branded Unlevered
Beta Real Estate Beta Intellectual Property Asset Beta
Average Real Estate Average High Branded Intellectual Property
Unlevered Asset Beta 0.38 60.0% Unlevered Asset Beta 0.57 40.0% 0.45
Main Target Assumptions WACC Sensitivity Analysis

PreTax Cost of Debt 6.0%
Risk-Free Rate 4.6% Levered Beta
Equity Risk Premium 5.0% 0.45 0.50 0.55 0.60 0.65
Tax Rate 38.0% Equity Risk 4.0% 5.8% 5.9% 6.1% 6.2% 6.4%
Premium 5.0% 6.1% 6.3% 6.5% 6.7% 6.8%
6.0% 6.4% 6.7% 6.9% 7.1% 7.3%
WACC Calculation 7.0% 6.8% 7.0% 7.3% 7.6% 7.8%
Unlevered Asset Beta 0.46
Releverd Beta 0.56
Levered Cost of Equity 7.4% Levered Beta
Equity Weight 75.0% 0.45 0.50 0.55 0.60 0.65
Debt / TEV 15.0% 6.4% 6.6% 6.8% 7.0% 7.3%
AfterTax Cost of Debt 3.7% 20.0% 6.2% 6.4% 6.6% 6.8% 7.0%
Target Debt & Pref. / TEV 25.0% 25.0% 6.1% 6.3% 6.5% 6.7% 6.8%
Implied Debt / Equity 33.3% 30.0% 5.9% 6.1% 6.3% 6.5% 6.6%
WACC 6.5% 35.0% 5.8% 5.9% 6.1% 6.3% 6.4%
Note: Market information as of 11/10/05. Utilized treasury stock method.

Sources: Barra, company reports, Factset, and Wall Street Equity research.
66
B. PF McDonald's Financial Analysis
Pro Forma McDonald’s: Model Key Drivers
f Net Unit Growth

Approximates 1.5% - 2.0% of total franchise system unit growth annually or 1.0% - 1.5% of systemwide unit growth
f Revenue drivers:
Average systemwide same-store sales CAGR of ~2.5% annually
Set forth herein are Rental revenue from franchisees of 9.0% of franchise & affiliated system sales
Rental revenue from McOpCo of 9.0% of McOpCo sales
the assumptions for Franchise revenue from franchisees of 4.0% of franchise & affiliated system sales
the Pro Forma f
Franchise revenue from McOpCo of 4.0% of McOpCo sales
Cost drivers:
McDonald’s Franchise rental expense based on a historical % of rental revenue from franchisees
McOpCo rental expense based on a historical % of rental revenue from McOpCo
business. D&A calculated assuming a 20-year useful life for existing net depreciable PP&E of approximately $12.5 billion
(excluding land), and a 20-year useful life for depreciable PP&E purchased in the future
75% of SG&A allocated to Pro Forma McDonald’s
f Net CapEx drivers:
All CapEx is net of proceeds received from store closures
$1.3 million of CapEx for each new unit where Pro Forma McDonald’s owns the land and the building in 2005 and 2006,
growing at an inflationary rate of 2.0% thereafter
$650K million of CapEx for each new unit where Pro Forma McDonald’s owns the building but not the land in 2005 and
2006, growing at an inflationary rate of 2.0% thereafter
Run-rate maintenance CapEx of approximately $320 million, implying approximately $10K per system wide unit,
growing at 2%
Allocation of 75% of consolidated McDonald’s corporate CapEx
Consolidated corporate CapEx held constant at 0.7% of sales
f Other
Incremental total debt of $9.7 billion, resulting in total debt of approximately $14.8 billion (net debt of $14.65bn)
Free cash used to buy back shares and pay dividends
$150 mm minimum cash balance
Tax rate of 32%
Minimal working capital requirements
25% Debt to Cap ratio increasing to 30% in 2008
Assumes an illustrative 30% dividend payout ratio to match current consolidated McDonald’s
68
2004 McDonald’s P&L As Reported McDonald’s
Set forth below is table which reconciles McOpCo’s, the Real Estate and Franchise businesses’ and stand-alone
McDonald’s FY 2004 income statements, as they are currently reported. The analysis demonstrates how
McOpCo is paying neither a market rent nor a franchise fee.
Real Estate 2004
2004 McOpCo and Franchise Consolidated
Income Statement P&L P&L Sum of Parts
Total Revenue $19,065 $14,224 $4,841 $19,065
Food and Paper 4,853 4,853 - 4,853
Compensation & Benefits 3,726 3,726 - 3,726
Occupancy and Other Expenses (excl. D&A) 2,747 2,747 - 2,747
Total Company Operated Expenses $12,100 $11,753 $347 $12,100
Franchised Restaurant Occupancy Costs 576 - 576 576
Corporate G&A 1,980 495 1,485 1,980
EBIT 3,982 1,976 2,006 3,982
Depreciation & Amortization 1,201 427 774 1,201
EBITDA $5,183 $2,403 $2,780 $5,183
% of Total EBITDA 100% 46% 54% 100%
________________________________________________
The analysis assumes that 75% of the total G&A is allocated to the Real Estate and Franchise business and 25% is allocated to McOpCo. To the extent that there should
be more G&A allocated to McOpCo, then there would be a greater percentage of total EBITDA at the Real Estate and Franchise business than what is shown here.
.
2005E P&L Reconciliation
Set forth below is a table which reconciles McOpCo’s, Pro Forma McDonald’s and standalone
McDonald’s FY 2005E income statements. The analysis demonstrates the flow of rent income,
franchise income and rent expense upon separation of the businesses.
2005 Pro Forma 2005
Projected McOpCo McDonald's Inter-Company Consolidated
Total Revenue $20,211 $15,042 $7,124 ($1,956) $20,211
Food and Paper 5,132 5,132 - - 5,132
Corporate G&A 2,174 544 1,631 2,174
EBIT 4,075 510 3,564 - 4,075
EBITDA $5,362 $1,086 $4,277 $0 $5,362
% of Total EBITDA 100% 20% 80% 100%
Maintenance Capex 1,250 501 749 1,250
EBITDA - Maintenance Capex 4,113 585 3,528 4,113
% of Total EBITDA - Maintenance Capex 100% 14% 86% 100%
________________________________________________
(1) Assumes total PF McDonald’s D&A of approximately $712 million, which is composed of $499 million (or 70%) of franchise PP&E and $214 million (or 30%) of D&A associated with
company-operated units. 70
2006E P&L Reconciliation
Set forth below is a table which reconciles McOpCo’s, Pro Forma McDonald’s and standalone
McDonald’s FY 2006E income statements. The analysis demonstrates the flow of rent income,
franchise income and rent expense upon separation of the businesses.
2006 Pro Forma 2006
Projected McOpCo McDonald's Inter-Company Consolidated
(U.S. $ in millions) Income Statement P&L P&L Eliminations Sum of Parts
Rent from Franchise and Affiliate Rest. 3,730 - 3,730 - 3,730
Rent From Company Operated Rest. - - 1,389 (1,389) -
Franchise Fees From Franchise and Affiliate Rest. 1,658 - 1,658 - 1,658
Franchise Fees From Company Operated Rest. - - 617 (617) -
Total Revenue $20,816 $15,429 $7,393 ($2,006) $20,816
Food and Paper 5,264 5,264 - - 5,264
Company Operated D&A 808 587 221 - 808
Franchise PPE D&A 516 - 516 - 516
Corporate G&A 2,240 560 1,680 - 2,240
EBIT 4,269 542 3,727 - 4,269
EBITDA from Operations $5,594 $1,130 $4,464 $0 $5,594
% of Total EBITDA 100% 20% 80% 100%
Maintenance Capex 943 504 439 943
EBITDA - Maintenance Capex 4,651 626 4,025 4,651
% of Total EBITDA - Maintenance Capex 100% 13% 87% 100%
________________________________________________
(1) Assumes total PF McDonald’s D&A of approximately $737 million, which is composed of $516 million (or 70%) of franchise PP&E and $221 million (or 30%) of D&A associated with
company-operated units. 71
2006E Net Capital Expenditures Reconciliation
Set forth herein is a 2006E Net Capital Expenditures

table which
demonstrates net capital (U.S. $ in millions)
expenditures by Consolidated Pro Forma
category for McOpCo, McDonald's McOpCo McDonald's
PF McDonald’s and the
standalone New Restaurants, Net $316 $30 $286
(consolidated)
McDonald’s. Existing Restaurants 787 465 322
Note: Our Free Cash Corporate/Other 156 39 117

Flows are derived
using Net Capital Net Capital Expenditures $1,259 $534 $724
Expenditures, net of
proceeds received
from closures. We
note that the Company
typically generates
$300 - $400mm of
proceeds annually
from closings.
72
PF McDonald’s: Summary Income Statement
Below are the summary projections for Pro Forma McDonald’s based on the assumptions
detailed on page 68.
($ in millions, except per share data)
2006 - 2011
2002A 2003A 2004A 2005E 2006E 2007E 2008E 2009E 2010E 2011E CAGR
Income Statement Data
Revenue $5,401.0 $6,008.5 $6,690.0 $7,124.1 $7,393.1 $7,676.7 $7,969.9 $8,276.2 $8,596.2 $8,930.9 3.9%
% Growth 11.2% 11.3% 6.5% 3.8% 3.8% 3.8% 3.8% 3.9% 3.9%
EBITDA $3,168.7 $3,568.2 $4,046.0 $4,276.7 $4,464.0 $4,653.4 $4,849.3 $5,054.9 $5,270.8 $5,497.5 4.3%
% Margin 58.7% 59.4% 60.5% 60.0% 60.4% 60.6% 60.8% 61.1% 61.3% 61.6%
EBITDA - CapEx 4,046.0 3,312.7 3,739.5 3,909.2 4,085.0 4,258.5 4,440.1 4,630.1 4.4%
% Margin 60.5% 46.5% 50.6% 50.9% 51.3% 51.5% 51.7% 51.8%
D&A 774.0 712.3 736.9 768.5 794.5 821.5 849.6 878.8
EBIT $2,492.7 $2,827.4 $3,272.0 $3,564.4 $3,727.0 $3,884.9 $4,054.8 $4,233.4 $4,421.2 $4,618.6 4.4%
% Margin 46.2% 47.1% 48.9% 50.0% 50.4% 50.6% 50.9% 51.2% 51.4% 51.7%
Net Interest Expense (736.6) (801.5) (889.7) (932.5) (971.8) (1,012.7)
Equity Income from OpCo 35.0% 107.9 121.9 137.5 151.7 162.4 171.9
Net Income $2,141.4 $2,218.6 $2,289.8 $2,396.3 $2,507.9 $2,623.9 4.1%
EPS $2.27 $2.47 $2.72 $2.97 $3.24 $3.54 9.3%

Average Shares Outstanding 945.4 897.8 842.8 806.4 773.3 741.8
73
PF McDonald’s: Summary Cash Flow and Balance
B. PF McDonald's Financial Analysis Sheet
Below are the summary cash flow projections for Pro Forma McDonald’s based on the
assumptions detailed on page 68.

2006 - 2011
2002A 2003A 2004A 2005E 2006E 2007E 2008E 2009E 2010E 2011E CAGR
Cash Flow Data
EBITDA $4,464.0 $4,653.4 $4,849.3 $5,054.9 $5,270.8 $5,497.5
less: Cash Taxes (956.9) (986.7) (1,012.8) (1,056.3) (1,103.8) (1,153.9)
less: Cash Interest Expense (736.6) (801.5) (889.7) (932.5) (971.8) (1,012.7)
less: Dividends (653.2) (676.8) (698.5) (731.0) (765.0) (800.4)
less: Change in Working Capital 6.2 6.5 6.7 7.0 7.2 7.5
less: Growth CapEx (285.9) (291.6) (297.4) (314.7) (333.5) (354.0)
less: Maintenance CapEx (438.6) (452.6) (466.9) (481.7) (497.2) (513.4)
plus: After-tax Dividends from McOpCo 0.0 0.0 0.0 0.0 0.0 0.0
Free Cash Flow (post dividends) $1,398.9 $1,450.8 $1,490.7 $1,545.7 $1,606.7 $1,670.6
Free Cash Flow (pre dividends) 2,052.1 2,127.6 2,189.2 2,276.7 2,371.7 2,471.0
FCF per Share (pre dividends) $2.17 $2.37 $2.60 $2.82 $3.07 $3.33 8.9%
Illustrative Stock Price at 20x LTM FCF $43.41 $47.40 $51.95 $56.47 $61.34 $66.63
20
Balance Sheet Data
Cash 150.0 150.0 150.0 150.0 150.0 150.0 150.0
Revolver 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Long-Term Debt $14,800.0 14,800.0 17,393.4 18,331.6 19,104.0 19,904.5 20,740.4
Total Debt / Capitalization 24.5% 26.8% 30.0% 30.0% 30.0% 30.0% 30.0%
Total Debt / EBITDA 3.5x 3.3x 3.7x 3.8x 3.8x 3.8x 3.8x
Net Debt / EBITDA 3.4x 3.3x 3.7x 3.7x 3.7x 3.7x 3.7x
74
C. McOpCo Financial Analysis
McOpCo: Model Key Drivers
f Net Unit Growth

90 net new owned restaurants in 2005
Net unit growth thereafter only in the franchised system. Assumes 200 new gross units and 200 closed units
Set forth herein are annually.
the assumptions for f Revenue drivers:
Average same-store sales growthof 2.5% -2.7% annually on a total company basis
the McOpCo business. Average unit sales of $1.6mm on a global basis in FY 2005
f Cost drivers:
Food and paper costs held constant at 34.1% of sales, based on historicals
Payroll and employee costs of 26.1% in 2005, stepping down to 25.5% percent by 2011
Occupancy and other costs (excluding D&A) held constant at 20.5% of sales
D&A calculated as 110% of capex in 2006 trailing to approximately 107% of CapEx by 2015
4.0% of sales paid to Pro Forma McDonald’s as a franchise fee
25% of consolidated SG&A allocated to McOpCo
f CapEx drivers:
Average maintenance CapEx per unit of approximately $50k in 2005 and 2006, growing at an inflationary
rate of 2.0% thereafter
Allocation of 25% of consolidated McDonald’s corporate CapEx
Consolidated corporate CapEx held constant at 0.7% of sales
f Other
No dividends
Total Debt of $1.5 billion allocated (Net Debt of $1.35bn)
Free cash used to pay down debt and then buy back shares
$150 mm minimum cash balance
Tax rate of 32%
Minimal working capital requirements
76
McOpCo Summary Income Statement
Set forth below are the summary projections for McOpCo based on the assumptions detailed on page 76.
2006 - 2011
2004A 2005E 2006E 2007E 2008E 2009E 2010E 2011E CAGR
Income Statement Data
Revenue $14,223.8 $15,042.4 $15,428.9 $15,838.3 $16,259.2 $16,692.0 $17,136.9 $17,594.4 2.7%
% Growth 11.2% 5.8% 2.6% 2.7% 2.7% 2.7% 2.7% 2.7%
EBITDA $1,136.7 $1,085.7 $1,129.6 $1,173.3 $1,218.5 $1,265.4 $1,313.9 $1,364.2 3.8%
% Margin 8.0% 7.2% 7.3% 7.4% 7.5% 7.6% 7.7% 7.8%
EBITDA - CapEx 1,136.7 562.5 595.6 628.1 662.0 697.3 734.0 772.2 5.3%
% Margin 8.0% 3.7% 3.9% 4.0% 4.1% 4.2% 4.3% 4.4%
D&A 427.0 575.5 587.4 599.6 609.3 622.0 635.0 645.2
EBIT $709.7 $510.2 $542.2 $573.6 $609.2 $643.3 $678.9 $718.9 5.8%
% Margin 5.0% 3.4% 3.5% 3.6% 3.7% 3.9% 4.0% 4.1%
Net Interest Expense (90.9) (68.5) (43.9) (17.0) 0.2 3.4
Net Income $306.9 $343.5 $384.4 $425.9 $461.8 $491.2 9.9%
EPS $0.24 $0.27 $0.30 $0.33 $0.37 $0.41 11.3%

Average Shares Outstanding 1,273.7 1,273.7 1,273.7 1,273.7 1,248.1 1,191.9
77
McOpCo Summary Cash Flow and Balance Sheet
Set forth below are the summary cash flow projections for McOpCo based on the
assumptions detailed on page 76.
2006 - 2011
2004A 2005E 2006E 2007E 2008E 2009E 2010E 2011E CAGR
Cash Flow Data
EBITDA $1,129.6 $1,173.3 $1,218.5 $1,265.4 $1,313.9 $1,364.2
less: Cash Taxes (145.1) (163.9) (184.9) (203.9) (218.3) (231.1)
less: Cash Interest Expense (88.7) (61.5) (31.4) (6.1) 3.4 3.4
less: Dividends 0.0 0.0 0.0 0.0 0.0 0.0
less: Change in Working Capital 6.2 6.5 6.7 7.0 7.2 7.5
less: Growth CapEx (30.0) (30.6) (31.2) (31.8) (32.5) (33.1)
less: Maintenance CapEx (504.0) (514.5) (525.3) (536.2) (547.4) (558.8)
Free Cash Flow (after dividends) $367.9 $409.3 $452.5 $494.3 $526.3 $552.0 8.5%
Free Cash Flow per share (before dividends) $0.29 $0.32 $0.36 $0.39 $0.44 $0.49 11.1%
Balance Sheet Data

Cash 150.0 150.0 150.0 150.0 150.0 150.0 150.0
Revolver 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Long-Term Debt 1,500.0 1,132.1 722.8 270.3 0.0 0.0 0.0
Total Debt / EBITDA 1.4x 1.0x 0.6x 0.2x 0.0x 0.0x 0.0x
Net Debt / EBITDA 1.2x 0.9x 0.5x 0.1x -0.1x -0.1x -0.1x
78
Final Revised Proposal.ppt
A Plan to Win / Win

January 18, 2006
Pershing Square
Capital Management
Confidential
DISCLAIMER
Pershing Square Capital Management's ("Pershing") analysis and conclusions regarding

McDonald's Corporation ("McDonald's” or the “Company”) are based on publicly available
information. Pershing recognizes that there may be confidential information in the possession of
the Company and its advisors that could lead them to disagree with Pershing’s conclusions or the
approach Pershing is advocating.
Pershing manages funds that are in the business of trading - buying and selling - public securities.
It is possible that there will be developments in the future that cause Pershing to change its position
regarding the Company and possibly reduce, dispose of, or change the form of its investment in the
Company. Pershing recognizes that the Company has a stock market capitalization in excess of
$40bn, and that, accordingly, it could be more difficult to exert influence over its Board than has
been the case with smaller companies.
2
Agenda
A Revised Proposal for Creating Value
at McDonald’s
Background of our involvement
What are our objectives?
Brief review of our Initial Proposal
Our Revised Proposal
Benefits of our Revised Proposal
9 Company
9 Franchisees
9 Shareholders
Q&A
3
Pershing’s Involvement with McDonald’s

at McDonald’s
September 22, 2005: Pershing Square Capital Management

(“Pershing”) presented a proposal for increasing shareholder
value (“Initial Proposal”) to McDonald’s management
October 31, 2005: McDonald’s management communicated its

response to our Initial Proposal
f Management believed that our Initial Proposal (1) would result in potential
“frictional costs”; (2) could have an unfavorable credit impact; and (3)
could create system issues
f McDonald’s believed, based on its advisors’ valuation, that there was not
enough value creation to outweigh frictional costs and other concerns
November 15, 2005: Pershing presented the Initial Proposal to

the investment community
f Since November 15, we have had numerous discussions with shareholders

and franchisees from around the world
Today we would like to share our Revised Proposal for

Creating Significant Value at McDonald’s which incorporates
feedback from McDonald’s management, franchisees and other
shareholders
4
What Are Our Objectives?

at McDonald’s
In developing our Revised Proposal, our objectives

are to:
9 Improve McOpCo’s operating performance
9 Strengthen the McDonald’s System
9 Unlock significant shareholder value
We believe our Revised Proposal will:
f Achieve these objectives

f Address all of the Company’s concerns regarding our
first proposal
f Increase McDonald’s share price to $46-$50 per share
(before considering any operational benefits)
f Minimize execution risk and management distraction
5
Objective 1:
Improve McOpCo’s Operating
Performance
Confidential
Objective 1: Improve McOpCo’s Operating

at McDonald’s
Performance
McOpCo, as a wholly owned subsidiary, is not

achieving its full business and financial potential
f McOpCo does not pay a market rent or a franchise fee, unlike a

typical franchisee
f Adjusting for a market rent and a franchise fee, McOpCo has

lower average unit margins than those of an average U.S.
franchisee
f “Corporate subsidies” in the form of uncharged rent and

uncharged franchisee fees have led to McOpCo being run
inefficiently over time
Uneconomical capital allocation decisions
Suboptimal pricing policy
7

at McDonald’s
Performance (cont’d)
McOpCo’s Estimated Average Unit EBITDA margins

versus
U.S. Franchisees’ Estimated Average Unit EBITDA margins(1)
Estimated 4-Wall EBITDA Margins

16% (2)
14.8%
(1)
12.7%
Estimated 4-Wall EBITDA Margin %
12%
(1)
8.8%
8%
4%
0%
Avg. U.S. McOpCo Avg. Intl. McOpCo Avg. U.S. Franchise
Adjusted for a Market Rent and Franchise Fee

________________________________________________
Note: See page 57 of the Appendix for Pershing’s detailed assumptions.

1) Analysis is based on Pershing’s estimates using 2004 financial data. McDonald’s does not provide average unit data for McOpCo or McDonald’s franchisees in its
public financials. Assumes a market rent of 9% of sales and a franchise fee of 4% of sales.
2) Based on $260k of average EBITDA per franchised store and average revenues per franchised store of approximately $1,760k.
8

at McDonald’s
McOpCo managers do not have appropriate

compensation incentives
f No direct equity compensation in McOpCo’s business
f No market-based performance measurement system
f “Farm Team” mentality whereby the best McOpCo

managers are promoted to corporate McDonald’s
If they don’t join corporate McDonald’s, they
sometimes leave to become a franchisee
f Top restaurant operators need more incentive to

stay at McOpCo
9

at McDonald’s
“Earn the Right to Own”

McOpCo’s restaurant portfolio needs to be optimized in order to improve margins and capital allocation
Refranchise select f Because of their developed franchise systems,

units in mature mature markets do not need the same capital or
markets resources as emerging markets
f e.g., U.S., Canada and U.K.
f Capital and freed-up resources from refranchising

Redeploy capital and should be redeployed in fast growing / high return
resources in emerging QSR markets
emerging markets Regions where franchise laws are still in
McOpCo
infancy and McDonald’s franchise base is not
yet sufficient to drive growth
e.g., China and Russia
McOpCo
increases focus
on emerging f McOpCo should increase its focus on profitable
markets growth emerging markets growth
10
Objective 2:
Strengthen the McDonald’s
System
Confidential
Objective 2: Strengthen the McDonald’s

at McDonald’s
System
Pershing spoke with franchisees from around the world. Here’s what they told us:
(1) Inherent conflict between McDonald’s and the Franchisees:

McDonald’s “Top-line” focus versus Franchisees’ “Bottom-line” focus
f McDonald’s makes the bulk of its profits from the franchisees’ top line
f However, top line same-store sales growth does not always translate into improving franchisees’
bottom line
Stock market often rewards McDonald’s for higher same store sales growth even though the
franchisees are sometimes pressured to sacrifice margin for discount pricing
(2) McOpCo, with its subsidized economics, magnifies this conflict
f McOpCo does not compete on equal footing because it does not pay a market rent or franchisee fee
f Suboptimal pricing or capital allocation decisions do not impact McOpCo’s financials as
dramatically as those of franchisees
f Perception among franchisees is that McOpCo is not held to the same degree of accountability
12
Strengthening the McDonald’s System:

at McDonald’s
What Franchisees Had to Say
(3) Capital allocation criteria / decision-making process varies between McOpCo

and the franchisee community
f Low ROIC investments are occasionally forced upon franchisees
f McOpCo regional managers often make capital investment decisions they will not have to live with,
given their status as salaried employees with limited tenure in any one position
f “Made for You” program is an example of a historical capital investment decision that may have
been amended or prevented by an arm's-length McOpCo
Hundreds of millions of dollars of capital invested in a kitchen system that is widely
considered inefficient
For many franchisees, it has led to decreased profitability, increased wait times and increased
staffing requirements
Testing at McOpCo did not reveal the true economic impact of the program
“Made for You” problems could have been prevented if the system had the appropriate
“checks and balances”
13

at McDonald’s
What Franchisees Had to Say (cont’d)
(4) McOpCo undercuts on pricing
f McOpCo’s subsidized economics reduce the impact of lower margin product pricing decisions
f As such, approximately 27% (1) of the McDonald’s system currently does not price optimally
Reduces the profitability of the entire system
f Underpricing at McOpCo pressures franchisees to sacrifice “penny profits” for traffic

and sales volume
(5) McDonald’s should retain control of McOpCo
f Franchisees generally agreed that control of McOpCo should remain with McDonald’s
Keeps the franchisee vote democratic and dispersed
________________________________________________
(1): Based on approximately 8,119 McOpCo restaurants out of 30,516 systemwide McDonald’s restaurants, as of 2004.
14

at McDonald’s
What Franchisees Had to Say (cont’d)
(6) Strong interest in owning new units / McOpCo refranchising program
f Franchisees have a strong interest in buying McOpCo restaurants

Given McDonald’s exclusivity requirements for franchisees, the only opportunity for
franchisees to materially increase their wealth is to own more McDonald’s units
f A refranchising program would create an attractive incentive system

Would allow the top quartile performing operators to be rewarded with an opportunity to
increase units
f McOpCo’s current portfolio of restaurants needs to be rationalized through refranchising,

in order to
Increase McOpCo’s profitability
Improve systemwide same-store sales growth
Satisfy considerable franchisee demand

15
Objective 3:
Unlock Shareholder Value
Confidential
Objective 3: Unlock Shareholder Value at

at McDonald’s
McDonald’s
Brand McDonald’s McOpCo
Collects a royalty of 13% of systemwide sales Restaurant Operations

fOver 8,000 McDonald’s
Real Estate Franchise company operated
fMcDonald’s controls fApproximately 32,000 restaurants
substantially all of its restaurants where
systemwide real estate McDonald’s receives 4%
of unit sales
fEarns 9% of systemwide
unit sales as rent
fFor real estate it does not
own, it pays a rent expense
and generates income
through subleases 17

at McDonald’s
McDonald’s (cont’d)
There are very few

businesses in the Brand McDonald’s
world with all the
Collects a royalty of 13% of systemwide sales
attractive business
characteristics of Real Estate Franchise
Brand McDonald’s
9 World-leading brand
9 ~ 60% EBITDA Margins (1)
9 Low maintenance capital requirements
9 ~ 55% EBITDA – maintenance capex margins (1)
9 Low operating leverage / high earnings
stability
9 High ROIC
9 Low cost of capital
9 Valuable fixed asset base
________________________________________________ 9 50 year track record
(1) Based on Pershing’s estimates. Assumes
McOpCo pays a market rent and franchise
fee.
9 Global and diverse customer base
. 18

at McDonald’s
Financial statements are not transparent

The first step to
unlocking f McOpCo does not pay an “arm's-length” rent or franchise fee
shareholder value to Brand McDonald’s
is to introduce
transparent f As such, reported financials do not make apparent that
segment financials. approximately 80% of McDonald’s EBITDA is derived from
the higher multiple Brand McDonald’s
f Issuing transparent segment financials for McOpCo and

Brand McDonald’s would demonstrate
9 True profitability of Brand McDonald’s
9 True operating margins and capital requirements at

McOpCo
19

at McDonald’s
In 2004, McDonald’s company-operated restaurants appeared to contribute 46% of total EBITDA.

However, once adjusted for a franchise fee and a market rent fee, McOpCo constituted only 22% of total
EBITDA, with Brand McDonald’s contributing 78% of total EBITDA.
2004 Total EBITDA 2004 Total EBITDA Adjusted for

As Reported Market Rent and Franchise Fees
McOpCo McOpCo
46% 22%
55%
54%
78%
Brand McDonald's Brand McDonald's
2004 EBITDA % 2004 EBITDA %

Brand McDonald's 2.8bn 54% Brand McDonald's 4.1bn 78%
________________________________________________
Note: The analysis assumes that 75% of the total G&A is allocated to Brand McDonald’s business and 25% is allocated to McOpCo. McDonald’s management has indicated this is a
conservative assumption regarding Brand McDonald’s. Analysis excludes $441 mm of non-recurring other net operating expenses.
. 20

at McDonald’s
McDonald’s is fundamentally
Not a restaurant company
McDonald’s FY 2005E
EBITDA – Maintenance CapEx, Adjusted for a
Market Rent and Franchise Fee(1)
McOpCo
14%
86%
Brand McDonald's
Why is it valued as such?
_________________________________________
(1) FY’05E EBITDA- Maintenance CapEx contribution is based on Pershing’s estimates. CapEx is net of proceeds from restaurant closings. We note that the Company does not provide
EBITDA and Maintenance CapEx allocation by segment.
21

at McDonald’s
Lack of transparency had created an undervaluation by the market
f McDonald’s currently trades at roughly 8.9x EV/2006E EBITDA(1), despite over 85% of its
pre-tax unlevered cash flows being generated by Brand McDonald’s (2)
f We believe Brand McDonald’s, valued independently, is worth 12.5x – 13.5x EV/’06E EBITDA
High branded intellectual property/franchise businesses such as Choice Hotels, PepsiCo and
Coca-Cola trade in the range of 12x – 19x EV/’06E EBITDA
Real Estate C-Corporations and REITs typically trade in the range of 13x-16x EV/’06E EBITDA
f Only when Pershing’s ideas regarding transparency became public did Wall Street analysts
begin deriving sum-of-the parts valuations in the mid $40s per share
Recent UBS sum of the parts valuation: $46 per share (3)
Recent Goldman Sachs sum of the parts valuation: $44 per share (4)
_________________________________________
(1) Based on McDonald’s recent stock price of $34 per share.
(2) Pre-tax unlevered cash flows calculated as FY’05E EBITDA- Maintenance CapEx. We note that FY’05E EBITDA- Maintenance CapEx contribution is based on Pershing’s
estimates. CapEx is net of proceeds from restaurant closings. The Company does not provide EBITDA and Maintenance CapEx allocation by segment.
(3) UBS research report dated 11/10/2005.
(4) Goldman Sachs research report dated 11/18/2005. McDonald’s sum-of-the-parts valuation of $44 is before estimated frictional costs.
22
Review of our
Initial Proposal
Confidential
Review of Our Initial Proposal

at McDonald’s
Our Initial Proposal called for…
Step 1: McOpCo to be organized as an independent entity

Signs “arm's-length” rent and franchise agreements with McDonald’s
Step 2: IPO of 65% of McOpCo

McOpCo is deconsolidated and transparent financials are released to investors
Step 3: Issue $14.7bn of financing secured against real estate

Implies approximately $9.7bn of incremental debt
Step 4: Use Debt financing and IPO proceeds to

Refinance all of the existing net debt (approximately $5bn ) at Brand
McDonald’s (1)
________________________________________________
(1) Assumes $6.35bn of net debt on
12/31/05 at consolidated McDonald’s
Repurchase shares and pay transaction fees and expenses
of which $1.35 bn of net debt is
allocated to McOpCo and $5.0 bn of Our Initial Proposal is available on the internet at
net debt allocated to Brand
McDonald’s. http://www.valueinvestingcongress.com/Final-Pres.pdf
24
Mischaracterizations of Our Initial

at McDonald’s
Proposal…
Our Initial Proposal did NOT:

There have been
several
f Provide for the sale of any real estate by McDonald’s
mischaracterizations of
our Initial Proposal f Put franchisees in danger of having a new landlord
which we believe need
to be cleared up. f Involve the creation of a REIT
f Require a real estate financing to create significant value
f Hinge on a leveraged share buyback as its primary
method of value creation
Our Initial Proposal did:
f Assume significant value would be unlocked once

McOpCo was IPO’ed and investors had access to
transparent financials for Brand McDonald’s,
demonstrating that it is fundamentally NOT a
restaurant company
25
Concerns Regarding Initial Proposal

at McDonald’s
Frictional Credit Alignment

Costs Impact Issues
Frictional costs $9.7bn of incremental Brand risk due to

associated with the leverage may a loss of
Management CMBS financing and put pressure McOpCo control
taxes due to the on credit rating
65% McOpCo IPO
Concerns regarding a Concerns regarding McOpCo will compete

potential new any potential for new units
Franchisees landlord (rent hikes) increase in
borrowing costs
Fear of preferential
treatment of McOpCo
Management distraction
Shareholders Execution risk
26
Confidential

at McDonald’s
Step 1: Issue Transparent Step 2: IPO 20%

Segment Financials of McOpCo
f McOpCo signs arm’s-length lease and f McOpCo creates a separate Board of

franchise agreements with McDonald’s Directors
Corporation At least one Board member appointed
McDonald’s Corporation requires from the franchisee community
McOpCo to pay a market rent and f IPO 20% of McOpCo
franchise fee
20% IPO will generate no tax costs
f McDonald’s Corporation issues given existing tax basis
transparent segment financials for f McDonald’s retains full control of McOpCo
arm's-length McOpCo and Brand
McDonald’s f Minimal execution risk
f Frictional costs of roughly 5 cents per share (1)
(versus management estimates of $4-$5 per
share for the Initial Proposal)
________________________________________________
(1)
Continued
Assumes IPO transaction fees and expenses of 5% of IPO proceeds.
28
Our Revised Proposal (cont’d)

at McDonald’s
Step 3: Commence McOpCo Step 4: Dividend Increase and

Refranchising Program Share buybacks
f McOpCo commences refranchising 1,000 f McDonald’s increases its dividend payout to

units in mature markets (U.S., Canada and 90% of after-tax free cash flow from
U.K.) over the next two to three years roughly 35% of free cash flow currently (1)
Implies a dividend of $1.93 per share in
f Proceeds from refranchising can be FY 2006E versus 0.67 per share in 2005
redeployed in fast growing, high return
emerging markets (China and Russia) At a recent price of $34 per share,
implies a new dividend yield of 5.7%,
versus current yield of ~ 2%
f McDonald’s Corporation initiates

incremental share buybacks using existing
cash on hand and IPO proceeds
________________________________________________
f Revised Proposal requires no incremental
(1) Assumes $843mm of dividends paid in FY2005E. FY2005E dividend payout debt to be issued over total debt position
ratio based on 9/30/2005 Last Twelve Months after-tax free cash flows,
calculated as operating cash flows less cash flows from investing activities.
29
as of 9/30/05
Addressing Concerns Regarding the Initial

at McDonald’s
Proposal
Frictional Credit Alignment

Costs Impact Issues
9 No CMBS financing 9 No incremental debt 9 Maintain control of

McOpCo
Management 9 Minimal transaction 9 Transparency
costs improves 9 Retain flexibility
credit profile
9 No taxes
9 No transfer of 9 No increase in 9 Preserves highly

property borrowing cost for “democratic”
Franchisees operators franchisee system
9 No rent hikes
9 McOpCo will be a
net seller of units
in mature markets
Minimal management distraction

Shareholders
Minimal execution risk
30
Improving McOpCo’s Operating Performance

at McDonald’s
Current Issue Benefits of the Revised Proposal

McOpCo is not reaching 9 IPO of McOpCo would make margin improvement a key focus
its full business and
9 No more corporate subsidies to buttress operating margins
financial potential
9 McOpCo management can run its business based on the most
appropriate operating strategy
9 Publicly traded arm’s-length McOpCo would force improved capital
allocation decisions and optimal pricing policy
9 Refranchising and redeploying capital/resources would better position
McDonald’s in the most attractive growth markets
9 Investors will respond well to margin and capital allocation
improvement as well as the emerging markets growth story
Managerial focus and 9 McOpCo’s management can be compensated based on the market
incentives performance of its business
9 McOpCo managerial focus will improve as a result of having greater
accountability, increased responsibility, a better performance
measuring yardstick via the public markets and more direct incentives
31
Strategic Benefits to the McDonald’s

at McDonald’s
System
Pershing believes that a publicly traded arm's-length McOpCo, which remains controlled by
McDonald’s, would strengthen the McDonald’s System.
McOpCo makes optimal pricing, capital allocation and refranchising decisions
f Arm's-length McOpCo’s decision-making criteria on product pricing and capital allocation will be
substantially similar to that of the franchisee community
f McOpCo, no longer subsidized by Corporate McDonald’s, will review its restaurant portfolio more closely
for refranchising rationalization / opportunities
Refranchising program would create an incentive system whereby the best operators would be
rewarded with an opportunity to own new units
Poor performing operators will be motivated to improve performance to earn the right to own more
restaurants
Franchisees would recognize that the new McOpCo competes on equal footing
f McOpCo, required to pay arm's-length rent and franchise fees, would face the same economic
consequences as franchisees, thus creating a better aligned system
f Improves fairness and accountability throughout the system
32
Strategic Benefits to the McDonald’s

at McDonald’s
System (cont’d)
Would increase McDonald’s credibility in the system and allow it to better

understand the true impact of new product introductions
f Testing products at arm's-length McOpCo would provide McDonald’s with
A better understanding of the true economic impact of its new products on the typical
owner/operator’s bottom line
More credibility when communicating impact of new products to franchisees
f Franchisee participation on the McOpCo Board will temper any perception that McOpCo
receives “preferential treatment” from McDonald’s
f 80% ownership of McOpCo would preserve McDonald’s “skin in the game”
f Bottom-lined focused McOpCo would be influential in endorsing new products
33
Addressing Potential Franchisee Questions

at McDonald’s
Question: Would a publicly traded McOpCo be an aggressive competitor to franchisees,

given its need to grow its business for the benefit of its new shareholders?
Answer: No, quite the opposite. We believe a more likely scenario is the following:
3 McOpCo, no longer supported by corporate subsidies, will price more optimally

3 Refranchising program will remove McOpCo as a competitor in many key markets
3 McOpCo’s most attractive growth plan is to focus on emerging markets where the franchise
base is still in its infancy, such as China and Russia
Question: Under your Revised Proposal, is there any risk that McDonald’s real estate will
be sold or that franchisees will experience unexpected rent hikes?
Answer: No. We have never endorsed the sale of real estate or the creation of a REIT.
3 We don’t believe it’s the right operational move

3 We are confident management is not inclined to sell the real estate
34
Addressing Potential Franchisee Questions

at McDonald’s
Question: How will this change a franchisee’s day-to-day interaction with McDonald’s
Corporation?
Answer: There will be no changes. A franchisee’s day-to-day interaction with McDonald’s will not
be affected by the creation of a publicly traded McOpCo.
However, the franchisee community may find a strong ally in a publicly traded McOpCo
3 McOpCo’s management will be able to push back on lower margin / low return new products
introduced by Corporate McDonald’s
3 McOpCo will improve the check and balance mechanisms in the system
3 Testing at McOpCo on new products will be a better benchmark for how a product will perform
throughout the system
3 Many McOpCo stores in the U.S., Canada and U.K. will be up for refranchising
3 Franchisee representation on McOpCo’s Board will improve McOpCo’s credibility and
communication with the system
35
Addressing Potential Company Questions

at McDonald’s
Question: Would a publicly traded McOpCo hinder the current “Farm Team” system or
inhibit McDonald’s ability to recruit top McOpCo managers to work at Corporate?
Answer: No. We believe the creation of a publicly traded McOpCo will actually improve the
talent pool at both Brand McDonald’s and McOpCo.
3 Offering direct equity compensation in McOpCo will

fAttract “best-in-class” operators
fImprove retention
3 Arm’s-length, publicly traded McOpCo is better training ground than the current wholly owned
McOpCo
X Better “real world” business discipline for managers, once corporate subsidies are removed
X Teaches restaurant operators how to run a public business
3 With 80% ownership, Brand McDonald’s will still be able to leverage its deep relationship with
McOpCo for recruiting purposes
36
Unlocking Shareholder Value

at McDonald’s
A publicly traded McOpCo would increase financial transparency and would allow investors to
appropriately value McDonald’s on a sum-of-the-parts basis.
Current Issue Benefits of the Revised Proposal

Transparent 9 Separate arm’s-length McOpCo financials would be made available
financials to investors
9 Transparent segment financials would be made available at
McDonald’s, demonstrating the operating cash flows generated by
Brand McDonald’s
Dividends and 9 Ability to increase dividends

Equity Options 9 Reduce option dilution at McDonald’s through the use of McOpCo
currency
Valuation 9 McOpCo IPO would allow Wall Street analysts and the broad
investment community to value McDonald’s on a sum-of-the parts
basis
9 Investors would focus more on the value of Brand McDonald’s
37
Revised Proposal: Allows Investors to

at McDonald’s
Value on a Sum-of-the-Parts Basis
Brand McDonald’s operating metrics and business characteristics (100% royalty-based revenues, low cost
of capital and high earnings stability) are much closer to high branded intellectual property businesses
such as PepsiCo, Coca-Cola or Choice Hotels or a typical Real Estate C-Corporation than they are to a
typical QSR. We believe Brand McDonald’s could be worth 12.5x – 13.5x EV/2006E EBITDA.
Based on an approximate Brand Typical Typical

$48 sum-of-the-parts Real Estate Choice Mature QSR
(1)
value for McDonald’s C-Corp Hotels
EBITDA Margins 60% ~70% - 80% 66% 23% 31% ~15% - 20%
EBITDA – CapEx Margins 50% ~65% - 75% 61% 18% 27% ~7.5 % - 12.5%
(2)
Long-term EPS Growth 9% NA 16% 11% 9% ~10% - 12%
Business Characteristics:
Maint. Capital Requirements Low Low Low Low Low Medium
Earnings Stability High High High High High Medium
Average Cost of Capital Low Low Low Low Low Medium
Fixed Asset Value High High Low Low Low Low
Trading Multiples
Adjusted Enterprise Value (3) /

CY 2006E EBITDA 13.0x ~13x - 16x 19.1x 12.2x 12.0x ~8.5x - 9.5x
CY 2006E EBITDA – CapEx 15.5x ~17x - 20x 20.3x 15.4x 13.6x ~12x - 15x
________________________________________________
Stock prices as of 1/13/2006. Projections based on Wall Street research estimates. Analysis assumes a 7x EV/EBITDA valuation multiple for McOpCo.
(1) Typical mature QSR business characteristics based on YUM! Brands and Wendy’s.
(2) Brand McDonald’s long-term EPS growth rate is based on the Company’s current dividend payout ratio and assumes excess free cash flow after dividends is used for share buybacks.
(3) Adjusted for unconsolidated assets. 38
Revised Proposal: Allows Investors to

at McDonald’s
Value on a Sum-of-the-Parts Basis
We believe a minority IPO of McOpCo would force a market revaluation of McDonald’s.
($ in millions) Adjusting for a Market IPO of 20% of McOpCo

As Reported Rent and Franchise Fee and Transparency Drives Revaluation
EV/'06E EBITDA Enterprise
2006E 2006E EV/'06E EBITDA Enterprise Multiple Value
Segment EBITDA EBITDA Multiple Value Low - High Low - High
McOpCo $2,503 $1,130 7.0x $7,908 7.0x 7.0x $7,908 $7,908

Brand McDonald's 3,090 4,464 9.3x 41,675 12.5x 13.5x 55,799 60,263
Total $5,594 5,594 8.9x $49,582 $63,707 $68,171
Recent Stock Price $34.00 Implied Share Price $46 $50

(1)
Premium to Unaffected Price 45% 57%
Implied multiple,
based on a $34
stock price
________________________________________________
Note: Assumes $1.25bn of proceeds from IPO and $1.75bn of existing cash on hand used to repurchase shares. Capital structure assumptions are detailed on page 56 of the Appendix.
Analysis is pro forma for a McOpCo spin-off and McDonald’s share buyback on 12/31/05.
(1) Based on 10/31 closing price of $31.60. 39
McDonald’s Sum-of-the-Parts Analysis at

at McDonald’s
Various Multiples
Assuming McOpCo Assuming Transparent Segment Financials

pays a market rent
and franchisee fee, we McDonald's Equity Value per Share
have modeled
Brand McDonald's EV/2006E EBITDA
McOpCo FY ’06E
EBITDA of $1.1 billion 12.0x 12.5x 13.0x 13.5x 13.5x
and Brand McDonald’s
FY ’06E EBITDA of McOpCo 6.0x $42.97 $44.86 $46.74 $48.62 $48.62
$4.5 billion.
EV / '06E 6.5x 43.45 45.33 47.21 49.10 49.10
Based on these EBITDA 7.0x 43.93 45.81 47.69 49.57 49.57
assumptions, we
believe McDonald’s Multiple 7.5x 44.40 46.28 48.17 50.05 50.05
stock price would
trade in the range of
approximately $46 -
$50 per share, as a
result of a 20% IPO of
McOpCo.
________________________________________________
Note: Assumes 75% of consolidated G&A is allocated to Brand McDonald’s, with the rest allocated to McOpCo. Assumes McDonald’s FY ’05E Net Debt of $8.1bn,
Minority Interest in McOpCo of $1.3bn, and FY’05E Diluted Shares Outstanding of 1,186mm, all pro forma for Pershing’s Revised Proposal.
40
McDonald’s Free Cash Flow Yield Analysis

at McDonald’s
Pershing believes that McDonald’s, pro forma for the McOpCo 20% IPO, would have a 2006E Free
Cash Flow yield of 4.3 % - 4.7% at stock price in the range of $46 - $50 per share. We note our
Free Cash Flow calculation is based upon our estimates of 2006E After-Tax Levered Operating
Cash Flow less Growth and Maintenance Capital Expenditures. (1)
McDonald's 2006E FCF/Dividend Yield at Varous Stock Prices

Current Projected
Stock Price $34 $46 $47 $48 $49 $50
2006E FCF Yield 6.3% 4.7% 4.6% 4.5% 4.4% 4.3%
________________________________________________
(1) FCF Yield is based on Attributable Free Cash Flow before dividend payments. See Appendix page 54 for a calculation of FY 2006E Attributable Free Cash Flow.
41
Minimal Execution Risk

at McDonald’s
A minority IPO of McOpCo would have minimal

execution risk and negligible frictional costs
9 Simple transaction
McOpCo
9 Many successful value creating precedent transactions
9 Minimal management distraction
9 Frictional costs of roughly 5 cents per share
9 Preserves current structure’s control of McOpCo
McDonald’s would maintain the flexibility to
repurchase minority McOpCo stake
9 …if desired improvements were not obtained
9 Minority buyouts are simple and common transactions
with minimal transaction costs
42
Further Upside to Our Valuation

at McDonald’s
Pershing’s valuation is based on the business as it exists today, assuming no further

operational improvements.
f Pershing believes that creating a publicly traded arm's-length McOpCo will substantially improve
both top-line and bottom-line performance of McDonald’s
We believe that McOpCo has EBITDA margins of roughly 7.3% (post corporate allocation) (1)
Based on comparable restaurant businesses, we believe McOpCo is capable of achieving at

least 10% EBITDA margins
f However, Pershing has assumed no incremental operational improvements as part of its valuation
We also see potential G&A improvement as an additional opportunity
f Standalone McDonald’s LTM 9/30/05 G&A per systemwide unit of $68k versus YUM! Brands
LTM 9/30/05 G&A per systemwide unit of approximately $35k
We have not included an IPO / potential spin-off of Chipotle as part of our analysis
f IPO and potential spin-off of Chipotle will create additional value for investors
________________________________________________
(1) McOpCo EBITDA margins are after adjusting for a market rent and franchise fee and allocating 25% of McDonald’s consolidated G&A to McOpCo.
43
Further Upside to Our Valuation (cont’d)

at McDonald’s
We believe our Proposal can potentially increase McDonald’s share price to $50 per share. In
addition, we believe McDonald’s strong management team, running a world-leading brand, can
create significant additional value based only on incremental operating improvements.(1)
McDonald’s Potential Stock Price $61

$60
$56
Upside
$52
$50
$50
Pershing
$40 Proposal
Recent:
$34
$30
Pershing McOpCo Improve G&A to Improve G&A to
Proposal: improves $50k per YUM! levels of
McOpCo 20% EBITDA margins systemwide unit $35k per
IPO and Market to 10% (~$500mm of G&A systemwide unit
Revaluation of (approx. 275bps savings)(2) (~$1bn of G&A
McDonald’s improvement) savings)(2)
_______________________________________________
(1) See Appendix page 55 for more detail regarding our assumptions on operating improvements.
(2) Total savings denotes consolidated G&A, of which 75% is allocated to Brand McDonald’s and 25% is allocated to McOpCo.
44
A Plan to Win / Win

at McDonald’s
9 Addresses concerns of all stakeholders

9 Creates financial transparency for investors
9 Will lead to substantial value creation for McDonald’s shareholders
9 Simple transaction
9 Minimal execution risk, management distraction and frictional costs
9 Positions McOpCo to make optimal capital allocation and business
execution decisions
9 Improves the System’s “checks and balances”

9 Allows McDonald’s maximum control and flexibility regarding future strategic
alternatives
9 Significant upside, given strong Management team

45
Q&A
Confidential
Appendix
Confidential
2004 McDonald’s P&L As Reported

Appendix
Set forth below is a table which reconciles McOpCo’s, Brand McDonald’s and stand-alone McDonald’s
FY 2004 income statements, as they are currently reported. The analysis demonstrates how McOpCo is
paying neither a market rent nor a franchise fee.
Brand 2004
2004 McOpCo McDonald's Consolidated
Income Statement P&L P&L Sum of Parts
Total Revenue $19,065 $14,224 $4,841 $19,065
Food and Paper 4,853 4,853 - 4,853
Compensation & Benefits 3,726 3,726 - 3,726
Occupancy and Other Expenses (excl. D&A) 2,747 2,747 - 2,747
Total Company Operated Expenses $12,100 $11,753 $347 $12,100
Franchised Restaurant Occupancy Costs 576 - 576 576
Corporate G&A 1,980 495 1,485 1,980
EBIT 3,982 1,976 2,006 3,982
Depreciation & Amortization 1,201 427 774 1,201
EBITDA $5,183 $2,403 $2,780 $5,183
% of Total EBITDA 100% 46% 54% 100%
________________________________________________
The analysis assumes that 75% of the total G&A is allocated to the Brand McDonald’s and 25% is allocated to McOpCo. To the extent that there should be more G&A
allocated to McOpCo, then there would be a greater percentage of total EBITDA at Brand McDonald’s than what is shown here.
.
Reconciling McDonald’s 2004A P&L

Appendix
Set forth below is a table which reconciles McOpCo’s, Brand McDonald’s and stand-alone McDonald’s FY 2004A
income statements, assuming McOpCo pays a market rent and franchise fee. The analysis demonstrates that the
Brand McDonald’s contributed approximately 78% of total EBITDA.
Brand 2004
2004 McOpCo McDonald's Inter-Company Consolidated
Total Revenue $19,065 $14,224 $6,690 ($1,849) $19,065
Food and Paper 4,853 4,853 - - 4,853
Corporate G&A 1,980 495 1,485 1,980
EBIT 3,982 710 3,272 - 3,982
EBITDA $5,183 $1,137 $4,046 $0 $5,183
% of Total EBITDA 100% 22% 78% 100%
________________________________________________
The analysis assumes that 75% of the total G&A is allocated to Brand McDonald’s and 25% is allocated to McOpCo. McDonald’s management has indicated that this is
a conservative assumption regarding the real estate and franchise business.
Note: Analysis excludes $441 mm of non-recurring other net operating expenses.
. 49
Revised Proposal: Preliminary Transaction

Appendix
Assumptions
IPO assumptions
For modeling f 20% IPO of McOpCo generates $1.25bn of cash proceeds after expenses (on 12/31/2005)
purposes, we have Assumes a 7x EV/’06E EBITDA multiple for McOpCo
assumed a 20% IPO f No taxes paid given McOpCo’s basis which is assumed to be approx. $1.65bn
of McOpCo and the Tax basis is equal to $3 billion of initial assumed basis (based on an assessment of
proposed share net equipment and other property at McDonald’s) less $1.35 billion of net debt
repurchases occurred Share repurchases
on 12/31/2005. In f Approximately 7% of the share base repurchased using
addition to our IPO ~ $1.75bn of expected cash on hand at the end of the year (after paying dividends)
assumptions, set forth ~ $1.25bn of IPO proceeds, net of fees
herein are
Capital structure post share repurchases
assumptions
f Per management guidance, assumes McDonald’s issues a $3bn term loan to repatriate
regarding share
foreign earnings
repurchases, capital f No incremental debt issued at McDonald’s over total debt at 9/30/2005 ($8.1bn),
structure and dividend excluding a $3bn term loan required to repatriate earnings
policy. f Assumes FY’05E Net Debt at consolidated McDonald’s of $8.1bn
FY’05E Total Debt of $11.1bn, which includes $3bn of debt required for the
repatriation of foreign earnings
FY’05E cash balance of $3bn, based on proceeds received from repatriation
Increase dividend payout
f Increase dividend payout ratio to 90%
50
McOpCo IPO: Mechanics

Appendix
Step 1: McOpCo dividends a $1.3bn Step 3: Share Repurchases using

Step 2: IPO of McOpCo
Note to McDonald’s (parent) Cash on Hand and IPO Proceeds
Equity Equity
Markets Markets
IPO of
McOpCo Pays Repurchases
Shares $1.3 bn cash received $3.0 billion shares
McOpCo
$1.3bn
Note McOpCo repays $1.3 bn
Note to McDonald’s McDonald’s performs
a self-tender post the
McOpCo McDonald’s IPO
retains
80% stake
f McOpCo declares and pays a dividend to f McOpCo undertakes the IPO and uses the f No incremental leverage issued
McDonald’s (parent) in the form of a Note in an proceeds to repay the dividend note.
f PF McDonald’s repurchases approximately
amount equal to the anticipated proceeds from
f Any tax cost for the IPO would be the amount by 7% of the fully diluted share base using
an initial public offering of McOpCo
which the IPO distribution exceeded McDonald's
Excess cash on hand
f For illustrative purposes, we assume the Note is basis in the McOpCo stock multiplied by
for $1.3bn, or 20% of the equity market value McDonald’s corporate and state/local tax rate After tax proceeds of IPO
of McOpCo (assumed to be $6.6bn)
f Assuming a $1.3bn of IPO distribution, there
would be no tax cost associated with the IPO
Assume a $1.65 billion of tax basis
51
McOpCo IPO: Proceeds

Appendix
McOpCo IPO After Tax Proceeds

Given the estimated Low High Average
tax basis in Taxes payable
McOpCo Equity Market Value $5,993 $7,122 $6,558
McOpCo, we
IPO Percentage 20% 20% 20%
believe that no
Distribution to PF McDonald's $1,199 $1,424 $1,312
taxes would need to
paid in an IPO of Estimated Book Basis of McOpCo 3,000 3,000 3,000
McOpCo. Net Debt Allocated to McOpCo (1,350) (1,350) (1,350)
Adjusted Basis in McOpCo 1,650 1,650 1,650
Taxable Gain $0 $0 $0
Tax Rate 38% 38% 38%

Taxes payable $0 $0 $0
After Tax Proceeds
Distribution $1,199 $1,424 $1,312

Taxes Payable 0 0 0
After Tax Distributions $1,199 $1,424 $1,312
Estimated IPO fees (60) (71) (66)
Net Proceeds $1,139 $1,353 $1,246
52
McDonald’s Cash and Debt Schedules:

Appendix No Incremental Debt Issued Post 9/30/2005
$ in millions
Set forth herein are the Pre-IPO Cash Available to Fund Share Buybacks:
schedules for (1) FY Beginning Cash Balances 1/1/2005 $1,380
2005E funds available Plus: FY'05E Free Cash Flow Before Dividends and Debt Pay Down 2,351
for proposed share Less: FY'05E Debt Reduction (1,155)
buybacks; (2) ’05E Total Less: FY'05E Dividends (843)
Debt Balances; and (3) Equals: FY 2005E Cash on Books Available for Share Buybacks $1,733
’05E Cash Balances. FY 2005E Total Debt Balance:
We have assumed that Beginning Total Debt Balances 1/1/2005 $9,220
no incremental debt Less: FY'05E Debt Reduction (1,155)
would be issued at Estimated New Term Loan to Fund Repatriation 3,000
McOpCo as of Total Debt FY 2005E $11,065
9/30/2005 on top of the
estimated $3 billion Post IPO FY 2005E Cash Balance:
required to repatriate Beginning Cash Balances 1/1/2005 $1,380
earnings from foreign Plus: FY'05E Free Cash Flow Before Dividends and Debt Paydown 2,351
territories. Less: FY'05E Debt Reduction (1,155)
Less: FY'05E Dividends (843)
Plus: Estimated IPO Proceeds, net of fees 1,246
Less: Share buybacks ($2,979)
Plus: Proceeds from Repatriation 3,000
FY 2005E Ending Cash Balance $3,000
FY 2005E Net Debt $8,065

53
McDonald’s 2006E Free Cash Flow

Appendix Assuming a 20% IPO of McOpCo
Set forth herein is a 2006E Cash Flow Data ($ in mm except per share data)
schedule for 2006E Free

EBITDA $5,594
Cash Flow based on our
estimates. less: Cash Taxes (1,186)
Attributable free cash less: Cash Interest Expense (563)

flow per share deducts
less: Growth CapEx (Net of Proceeds from Closings) (316)
the minority interest free
cash flow pertaining to less: Maintenance CapEx (943)
the 20% stake of
McOpCo’s no longer less: Change in Working Capital 12
owned by McDonald’s.
FY2006E shares less: Minority Interest Free Cash Flow (74)
outstanding is pro forma
Attributable Free Cash Flow Before Financing Activities $2,525
for the proposed share
buyback. FY 2006E Average Shares Outstanding (mm) 1,176
Attributable Free Cash Flow per Share $2.15

Dividends Paid at 90% of Attributable FCF 2,272
Dividend Paid per Share $1.93
54
Assumptions: Upside Operating

Appendix
Improvements
Pr Forma Estimated Pro Forma

Set forth herein is a table 2006E EV/'06E EBITDA Enterprise
which details our Transaction / Assumptions

McOpCo EBITDA Improvement
Segment
McOpCo
EBITDA
$1,554
Multiple
7.0x
Value
$10,878
assumptions regarding Brand McDonald's 4,464 13.5x 60,263
potential operating 275bps

FY 2006E Financial Data:
Total 6,018 $71,141
improvements. McOpCo Revenue $15,429 Less: FY'05E Net Debt 8,065

McOpCo EBITDA $1,130 Less: Minority Interest (Market Value) 1,906
Current EBITDA Margin 7.3% Equals: Market Value of Equity $61,171
New Margins 10.1% PF FY'05E Diluted Shares Outstanding (mm) 1,186
New McOpCo EBITDA 1,554 Estimated Share Price $52
G & A Savings: Improving to $50k per unit McOpCo $1,679 7.0x $11,753
Unit Level Assumption: Brand McDonald's 4,839 13.5x 65,326
~50k per unit Total 6,518 $77,078
G&A Allocation Assumptions:
McOpCo 25.0% Less: FY'05E Net Debt 8,065
Brand McDonald's 75.0% Less: Minority Interest (Market Value) 2,081
Savings ($ in mm) Equals: Market Value of Equity $66,933
McOpCo $125 PF FY'05E Diluted Shares Outstanding (mm) 1,186
Brand McDonald's $375 Estimated Share Price $56
G & A Savings: Improving to YUM! Levels McOpCo $1,804 7.0x $12,628

Unit Level Assumption: Brand McDonald's 5,214 13.5x 70,388
~35k per unit Total 7,018 $83,016
G&A Allocation Assumptions:
McOpCo 25.0% Less: FY'05E Net Debt 8,065
Brand McDonald's 75.0% Less: Minority Interest (Market Value) 2,256
Savings ($ in mm) Equals: Market Value of Equity $72,696
McOpCo $250 PF FY'05E Diluted Shares Outstanding (mm) 1,186
Brand McDonald's $750 Estimated Share Price $61
55
Valuation Assumptions
Appendix
Set forth herein is a table which details our sum-of-the-parts valuation.
($ in millions) Adjusting for a Market IPO of 20% of McOpCo

Rent and Franchise Fee and Transparency Drives Revaluation
EV/'06E EBITDA Enterprise
2006E EV/'06E EBITDA Enterprise Multiple Value
Segment EBITDA Multiple Value Low - High Low - High
McOpCo $1,130 7.0x $7,908 7.0x 7.0x $7,908 $7,908

Brand McDonald's 4,464 9.3x 41,730 12.5x 13.5x 55,799 60,263
Total 5,594 8.9x $49,638 $63,707 $68,171
Less: FY'05E Net Debt 6,332 8,065 8,065

Less: Minority Interest (Market Value) - 1,312 1,312
Equals: Market Value of Equity $43,306 $54,331 $58,794
PF FY05E Diluted Shares Outstanding 1,274 1,186 1,186
Recent Stock Price Recent Stock Price $34.00 Implied Share Price $46 $50
(1)
Premium to Unaffected Price 45% 57%
________________________________________________
Note: Assumes $1.25bn of proceeds from IPO and $1.75bn of existing cash on hand used to repurchase shares. Analysis is pro forma for a McOpCo spin-off and McDonald’s share
buyback, as proposed, occurring on 12/31/05.
(1) Based on 10/31 closing price of $31.60. 56
Average Unit Level EBITDA Margins

Appendix
Set forth herein is a table which details our assumptions regarding average unit level 4-Wall EBITDA
margins for McOpCo and U.S. Franchisees.
($ in thousands) Avg. US McOpCo Unit Avg. Intl. McOpCo Unit Avg. US Franchisee Unit
Avg. Unit Sales $1,912 100.0% $1,494 100.0% $1,762 100.0%
Operating Income Before Rent Expense $433 22.7% $281 18.8%

Less: Market Rent & Franchisee Fee 249 13.0% 194 13.0%
Operating Income after Rent and Franchise Fee $185 9.7% $87 5.8%
Plus: Estimated D&A 57 3.0% 45 3.0%
(1)
4-Wall EBITDA (w/ Mkt. Fees) $242 12.7% $132 8.8% $260 14.8%
________________________________________________
Note: McOpCo estimates based on FY 2004 financial data and assumes 2,002 U.S. McOpCo units and 6,117 International McOpCo units.
(1) As presented by Ralph Alvarez, President of McDonald’s North America, at McDonald’s Analyst Meeting at Oak Brook, IL on 9/21/05.
.
57
III. Case Studies McDonalds 7 Year Stock Price Performance:

January 1999 to present
$50
$48
11/12/1999
$45
$40
$35
$30
$25
$20
$15
$10
1/19/99 10/1/99 6/12/00 2/22/01 11/4/01 7/17/02 3/29/03 12/9/03 8/20/04 5/2/05 1/13/06
58
Don’t Judge a Book By Its Cover
November 9, 2006
Pershing Square
Capital Management, L.P.
Disclaimer
The analysis and conclusions of Pershing Square Capital Management, L.P. ("Pershing") regarding
Borders Group, Inc. (“Borders” or the “Company”) are based on publicly available information.
Pershing recognizes that there may be confidential information in the possession of the Company
that could lead the Company to disagree with Pershing’s conclusions.
Pershing advises funds that are in the business of trading - buying and selling - public securities. It
is possible that there will be developments in the future that cause such funds to change their
positions regarding the Company and possibly increase, reduce, dispose of, or change the form of
their investment in the Company.
1
Borders Group
f 2nd largest U.S. book retailer

13% of U.S. retail book market (versus
Barnes and Noble at 17% and Amazon
Ticker: BGP
at 10%)
Recent f 2006E Rev of $4.1bn and EBITDA of $235mm

price: $21
f Year-end Enterprise Value of $1.6bn and
Equity Value of $1.1bn (1)
Note: BGP fiscal year EV / ’06 EBITDA: 6.9x

ends on January 31.
Presentation based on EV / ’06 EBITDA – Maint. Capex: 8.8x
a Calendar year.
P / ’06 EPS: 27.2x
Forward estimates based on Pershing estimates.
(1) Based on management’s guidance for Net Debt and shares outstanding at year end 2006. Assumes a $21 current stock price for BGP
throughout this presentation. 2
What is Borders?
Superstores Mall Stores International

■ Large format ■ Waldenbooks ■ U.K. and Australia
(25,000 sq ft) ■ Small format, mall-based ■ 90 units / mix of large /
■ Large selection ■ Limited selection small format stores
■ 476 units ■ 600 units ■ Declining profitability
■ Most profitable segment ■ Negative sales trends
■ Positive sales trends and declining profitability
% LTM Rev. 68% 17% 15%
% LTM EBITDA 92% 5% 3%
% LTM ROA 10% -1% -2%

3
Five Year Stock Price Performance
Borders was trading at approximately $27.50 per share in February

2005 but has since traded down primarily due to weakening margins
and same store sales trends
$ 28.50
$27.47
$ 26.50
$ 24.50
$ 22.50
Recent
$ 20.50
price:
$21
$ 18.50
$ 16.50
$ 14.50
$ 12.50
11/5/01 5/5/02 11/5/02 5/5/03 11/5/03 5/5/04 11/5/04 5/5/05 11/5/05 5/5/06 11/5/06
4
Borders Historical Financial Performance
In 2005, Borders’ consolidated Adjusted EBITDA margins fell to 7.4%

from the previous four-year average of approximately 8.6%
Adjusted EBITDA and Margins ($ in millions)
$350 $333 10.0%

$318
$308 $300
$294
$300 9.0%
8.6% 8.8%
$250 8.4% 8.5% 8.0%
$200 7.4% 7.0%
$150 6.0%
$100 5.0%
$50 4.0%
$0 3.0%
2001 2002 2003 2004 2005
5
Traditional Sentiment on Borders
f Unattractive industry
“Amazon risk”
Consumer interest in books is declining
Difficult SSS comparisons with Harry Potter
f Second place operator behind Barnes and Noble

More exposure to declining Music category
Worse execution (lower working capital turns and sales / sq.ft.)
Low margin, legacy mall stores
f Limited free cash flow due to large, recent cap ex initiatives

Consolidating distribution centers
Significant store remodel program
6
Why Do We Like
Borders?
Why Do We Like Borders?
1. The book superstore industry is misunderstood
f “Amazon risk” is largely exaggerated for superstores
f Book superstores are valuable franchises
f Minimal inventory risk because inventory is

returnable at cost
f Maintenance capital is significantly less than

depreciation because long-lived leasehold
improvements are depreciated over initial lease term
8
2. Borders is a mix of high-quality businesses and several

low-ROI, money-losing businesses which are in the
process of being rationalized
f Value of core Superstores business is obscured by declining

profitability in the Mall Stores and International Stores
f In addition, within the Superstores segment, value is being

masked by a declining category as well as several recent
management initiatives
Rapid decline of Music sales (music was 22% of sales in 2001,
now roughly 11%)
Recent initiatives, including (1) Remodel program, (2) Rewards
program, and (3) Distribution center consolidation, have reduced
reported Superstores profitability
9
Why Do We Like Borders? (cont’d)
f Superstores are healthy, growing and improving

Stable EBITDA margins (9.5% - 10+%) with high ROIC
Expected annual square footage growth of ~6%
Remodeling program will reduce Music category exposure
Opportunity to increase working capital turns
f Mall and International segments are low ROIC businesses that

can be monetized with minimal disruption
Estimated ~$200mm of Net Working Capital on an estimated
~$15mm of EBITDA contribution
Potentially “worth more dead than alive”
New Management is focused on rationalizing business
10
3. Extensive share repurchase program and newly hired

CEO should help drive value creation
f ~$500mm of share repurchases in the past 2.5 years

Common shares outstanding reduced by ~ 20%
f Company is repurchasing ~14% of market cap in the

second half of 2006
f New CEO George Jones joined in July
11
1. “Misunderstood
Industry”
“Amazon Risk?”
Superstores have increased share in tandem with Amazon

by focusing on selection and quality of experience
Losers have been Independents, Mall stores, Mass Merchants
and Book Clubs with limited selection
U.S. Consumer Book Industry 1993 U.S. Consumer Book Industry 2005
Superstores
5%
Independents
19% Superstores
Other (book clubs, 27%
Other (book clubs,
mass merchants) Independents
mass merchants) Malls 10%
48% 12%
66%
Internet 0%
Internet 12%
Source: Borders Group management presentation.
Malls 1%
13
Books Superstores Are Valuable Franchises
f Book Superstores are attractive “anchor” tenants

Favorable customer demographic – book buyers are well-educated,
high-income customers
Superstores are “Mini Malls” with books as the anchor
f High-quality customer experience

Borders ranked #2 in Overall Quality for Retailers in 2006 Harris Poll
Not just a book store: café, community events, meeting place
Customer spends an average of one hour in the store
f Opportunity to sell more than books

Barnes and Noble is the second-largest retailer of coffee in U.S.
Borders achieving success with Seattle’s Best and Paperchase

14
Gross Margin Stability at Superstores
f Best sellers are ubiquitous and extremely price

competitive, yet they represent less than 5% of typical
superstore sales
f Nearly all (~97%) book inventory is returnable

to the publishers at cost
Increases gross profit margin stability
f Book inventory is non-perishable and generally has

limited “fad” risk
15
Industry Maint. Capex is less than Depreciation
Reported earnings for Book Retailers understates true cash flow
Borders Group ($ in mm) 2006E

f Book retailers depreciate D&A $130
store assets over initial lease Maintenance Capex 50
term ~ typically 10-15 years Difference 80
Net Income $43

f Maintenance capital
Maintenance FCF (after-tax) $123
requirements are lower than
depreciation expense Price to Earnings 27.2x
Price to Maint FCF (after-tax) 9.4x
Fixed assets (book shelves)
last longer than lease terms Maintenance FCF = NI + D&A – Maintenance Capex
Maintenance costs typically

limited to paint and
carpeting
16
Based on Pershing estimates. Assumes a $21 stock price for BGP.
Superstores 2. High-Quality
Businesses Obscured by
Mall Stores Money-Losing
International Businesses
Healthy Superstores Obscured by Bad Businesses
Superstores profitability and stability have been obscured by

the Mall and International businesses, which are currently
being rationalized
Adjusted EBITDA Margins
12.0%
10.0%
Superstores
8.0%
6.0%
International
4.0%
Mall Stores
2.0%
0.0%
2001 2002 2003 2004 2005
Note: EBITDA Adjusted for non-cash asset impairment
18
associated with store closures.
Within Superstores, there is Opportunity…
Superstores performance has also been masked by

declining music sales and certain one-time costs in 2006
f Company has initiated a Store Remodel Program
Reduce exposure to declining Music sales
Increase high-margin Paperchase and Coffee sales
f Newly launched Rewards program and several one-time

expenses have created noise in reported 2006 financials,
obscuring results
Expenses for consolidating distribution centers, launching

rewards program and remodeling store base
f Superstores EBITDA could increase by 40+% by 2008 as result

of improved product mix, unit growth and elimination of these
one-time expenses
19
Borders
Superstores
Superstores: “Mini Mall” with several “Tenants”
Books “Anchor tenant.” Stable business
Café Seattle’s Best. “Mini-Starbucks.” High margin + growing
Paperchase Specialty paper like Kate’s Paperie. High margin + growing
Music Deteriorating rapidly
DVD Growth slowing
21
Superstores: Operating Data
f Typical store has 25,000 sq. ft

Up to 200,000 titles of books, music, movies plus a Cafe
f Attractive unit growth

476 superstores
Current plan is to grow 30 units / year (~6% annually)
f Unit economics:
$2.4mm of invested capital ($1.2mm of fixed assets, $1.2mm of
NWC)
Average unit sales of $5.7mm
Avg. 4-Wall EBITDA – Maint. Capex contribution of ~$700k
~29% “stabilized” unlevered ROI $700
= 29%
Based on Pershing estimates.
22
$2,400
Superstores Historical Financials
Over the last five years, the Superstores segment has

generated steady Adj. EBITDA margins between 9.6% - 10.3%
($ in millions) 2001 2002 2003 2004 2005

Operating Data:
Units 363 404 445 462 473
Growth 11.3% 10.1% 3.8% 2.4%
Reported SSS 2.0% -1.2% 1.2% 0.6% 1.1%
Financial Data
Sales 2,234 2,319 2,470 2,589 2,710
Growth 3.8% 6.5% 4.8% 4.7%
Adj. EBITDA 220 239 242 262 261

Margin 9.8% 10.3% 9.8% 10.1% 9.6%
Growth 8.5% 1.2% 8.6% -0.6%
EBITDA adjusted for non-cash asset impairment associated with store closures.
23
Music Category Exposure Has Hurt
Excluding Music sales, Superstores same store sales (“SSS”)

trends have averaged 1.5% more than average reported
comparable sales, based on our estimates
2001 2002 2003 2004 2005

Avg.
Reported Superstore SSS 2.0% (1.2%) 1.2% 0.6% 1.1% 0.7%
Estimated Music SSS (4.0%) (8.0%) (11.4%) (12.0%) (12.0%)

Music % of Sales 22.0% 17.0% 16.0% 15.0% 11.0%
Music Impact on Reported SSS (0.9%) (1.4%) (1.8%) (1.8%) (1.3%)
Avg.
Est. Superstore SSS (ex-music) 2.9% 0.2% 3.0% 2.4% 2.4% 2.2%
Difference 0.9% 1.4% 1.8% 1.8% 1.3%
24
Remodeling: Improving the Superstore
Remodeling program will reduce Music category exposure

by ~50% and improve Coffee and Paperchase sales
f Reducing Music category exposure and replacing with high-margin

Paperchase category
Music margins are ~20% versus Paperchase margins of ~50%
Paperchase has higher sales per square foot than Music
f Upgrading Café offering to Seattle’s Best Coffee (Starbuck’s

subsidiary)
f Significant financial benefits in Year 1

Estimated storewide 2.6% sales lift
40bps of margin improvement due to mix shift to higher-margin
products with minimal maintenance capital requirements
f Remodels one year after conversion continue to outperform

25
Remodeling: Attractive Use of Cash Flow
Based on the first year of remodel activity, the New Format

Superstores should have over 22% return on remodel cap ex
Old New
$ in thousands Format Format Commentary
Revenue $5,700 $5,848
Sales Lift (Year 1) 2.6%
Incremental Sales $148

Contribution Margin 35.0% Note: 40% current contribution margin
Profit on Incremental Sales $52
Margin Benefit from Mix (Year 1) 40 bps Seattle's Best Coffee / Specialty Paper
Margin Increase from Mix $23
Combined Margin Benefit $75

Remodel Cost (net of W/C reduction of $15k) $335
ROIC (Year 1) 22.5%
Based on Pershing estimates and management guidance.

26
Rewards Program Creating “Noise” in Financials
Newly launched Rewards Program has created noise in

Superstores financials
f What is the Rewards Program?

5% of all purchases (triggered at $200 per Rewards customer) are
credited towards a Holiday Spending Account
“Use it or lose it”
f What is the impact?

Accrual assuming 100% redemption
Launch and accrual expenses have reduced YTD Superstores
segment EBITDA compared to prior years
z Rewards accruals of $8.4mm
z Advertising and payroll for launch of $4.2mm
z Reduced YTD EBITDA by 18%
27
Rewards Program Creating “Noise” in Financials
What will be the impact of Rewards going forward?
f Q3 reported earnings will feel the most impact

Accrual amount likely to accelerate as larger member base exceeds
$200 spending level
Q3 is historically the weakest quarter, usually breakeven to slightly
negative earnings
f We expect that Q4 will see a positive impact from Rewards

We believe Q4 guidance conservatively assumes high redemption rate
and no incremental sales
f Prior year test markets showed positive impact

Comparable sales in test markets were higher – implying incremental
sales
Avg. ticket w/ rewards credit was 2x avg. ticket w/o rewards credit
28
One-Time Costs Expected in 2006E
Superstores Segment Financials

($ in millions) 2005A 2006E
Redundant distribution Same store sales 1.1% 0.0%
center costs: YTD $7.8mm Revenue $2,710 $2,795

EBITDA 261 228
Margins 9.6% 8.2%
One time costs:

Launch of Rewards: Redundant Distribution Center Costs $10
Advertising / G&A for Launch of Rewards 5
YTD: $4.2mm Impact of Remodels 5
Total $20
Pro Forma EBITDA $249

Pro Forma Margins 8.9%
One time P&L impact of
Remodels: YTD $2.5mm
Based on Pershing estimates.

29
What Could Superstores EBITDA be in 2008?
Assuming 2% comps and the Company’s unit growth plan, if EBITDA

margins were to improve 100bps by 2008 (returning to 5-year average
$340
levels), EBITDA could increase by 41% from “reported” levels
$320
$322
9.9%
$300
$289 Margin
EBITDA $ in millions
$280 8.9% Avg. 5 year 41%

margins: 9.9% increase
$260
$249
$240
$228 8.9%
$220 8.2%
$200 EBITDA
Margin
$180
One-time 2% comps Remodeling &
Superstores
expenses in and 30 new SSS leverage:
2006E
2006 of units 100bps margin
EBITDA
~$20mm annually increase
30
Working Capital Opportunity
Potential for $130mm of cash flow generation (or ~12% of the

current equity market value) through working capital
improvements at Superstores over the next 2 years
f Net Working Capital at Superstores currently at ~$550M
f Company can reduce working capital by 10-15% near term and

30-40% in the long term
Consolidating distribution centers and new merchandising system
Increasing “face outs” / decreasing stock
f Current Superstores inventory turns of ~1.7x
f We have assumed Superstores segment achieves inventory turns

equal to 2.2x, a discount to Barnes and Nobles at ~2.4x
Equals approximately ~$130mm of free cash flow generation
31
Mall Stores
Mall Stores: Obsolete Format
Obsolete Format: Mall stores have difficulty competing

with Mass Merchants on price and with book superstores
on selection / “experience”
f ~600 Waldenbooks stores
f Typical store has 3,000 sq. ft and 30,000 titles
f Best sellers are a higher % of sales
f Weak margins / deteriorating business

2006E Revenues of $615mm and EBITDA of $5m
Seasonal Calendar Kiosk business is the main EBITDA contributor
f Barnes and Noble has exited nearly all mall locations…
33
Mall Stores: Deteriorating Business
Mall segment Adjusted EBITDA margins in 2005 were 3%,

having fallen ~60% since 2003
$80 8.0%
7.4% 7.2% 7.5%
$70 $67 7.0%

$61 $61
$60 5.6% 6.0%
Adjusted Adjusted
EBITDA $50 5.0% EBITDA
($ in millions) $44
$40 4.0%
Margins
$30 3.0% 3.0%

$23
$20 2.0%
$10 1.0%
Note: EBITDA Adjusted
for non-cash asset $0 0.0%
impairment associated
with store closures.
2001 2002 2003 2004 2005
34
Mall Stores: Rationalization Plan
f 410 Mall Stores (~70% of total) have leases expiring

in 2006
f Management says that 200 are profitable, 200 are marginal,

and 200 are losing money
f Plan to close unprofitable stores as leases expire
f Remaining stores negotiate rent reductions with 1-year

renewals
35
Mall Stores: “Worth More Dead than Alive”
Assuming $150,000 of Net Working Capital on average per

Waldenbooks store, we believe there is $90mm of total
Net Working Capital trapped in the Mall segment
Waldenbooks Total Units 600

Net Working Capital per store ($000) $150k
Total Net Working Capital ($ in mm) $90mm
2006E EBITDA ~$5mm
36
International
U.K. Australia
International Stores
f U.K. stores
37 Borders Superstores
31 Books, Etc. (small format)
90 Paperchase
f Australia / New Zealand: 18 Superstores
f 2005 EBITDA margins of 4.3%
Significantly lower than 2005 Superstore margins of 9.6%
We estimate International 2006E EBITDA margins of 1.5%

(assuming revenue of $650mm and EBITDA $10mm)
38
International May Be Sold if Not Fixed Soon
Management has indicated it would sell the International

business (franchising) if it can’t be fixed in a timely manner
f International Segment has seen dramatic deterioration

UK Business is struggling
Books, Etc. (small format) stores are obsolete and have

negative EBITDA
UK Superstores challenged, contributing <$10mm of EBITDA
f Aus/NZ business is healthy, contributing ~$10mm of EBITDA
f Management sees no synergy to operating international

markets, has ceased additional development
39
International: Worth More Dead than Alive?
Based on our assumptions, we believe there is

approximately $110mm of Net Working Capital in the
International Stores
NWC / # of Net Working

Store Units Capital (mm)
UK Superstores $2.2mm 37 $80
Books, Etc. (small format) $285k 31 9
Australia / NZ Superstores $900k 18 16
Other (Puerto Rico, Singapore, etc…) $1.2mm 4 5
Total (in mm) $110
2006E International Stores EBITDA (mm) ~$10
40
3. Other Factors:
Share Repurchase
Activity and New
CEO
Strong Share Repurchase Focus
Borders management guidance implies ~55mm common shares

outstanding by January 2007. This is an approximate 30%
reduction from its common share count in March 2004 of 78mm.
Borders common share outstanding
90
78
80
73
70 65
60 55
50
40
30
20
10
0
March March March January
2004 2005 2006 2007E
42
New CEO: Focused on Returns
f New CEO, George Jones
Joined in July
Purchased ~$1mm of stock
Retail merchandising and operations expertise

(Target, Warner Bros., Saks)
Renewed sense of urgency
Fixing / rationalizing the business
Emphasis on returns
43
Valuation
We believe our valuation assumptions are conservative
f No EV / EBITDA multiple expansion
f Mall and International Segments value based on NWC

The least these segments are worth
Upside at International segment -- it was generating $40mm of

EBITDA in 2004 (versus ~$10mm in 2006E)
f Reduced share repurchase rate

Current rate of ~$250mm/year
We assume $80mm/year (proceeds from Superstores net
working capital improvements and FCF after capex)
No incremental leverage to fund share repurchases
45
Borders Group: What’s It Worth?
With no multiple expansion, Borders could be worth $36 in the

next 18 months, a 72% premium to the current price (of $21).
Segment Methodology Commentary Value
Superstores 7.0x '08E EBITDA of $322 Assumes no multiple expansion $2,257
Mall Stores Value of Net Working Capital The least it's worth 90
International Value of Net Working Capital The least it's worth 110
Unallocated G&A 7.0x '08E EBITDA of ($25) ($175)
Enterprise Value $2,282

Less: Net Debt expected at Year End 2006 (450)
Equals: Equity Value $1,832
FD shares outstanding expected at year end 2006 55

Less: Shares repurchased using $130mm from
NWC improvement at Superstores, net of options (1) (4)
Equals: FD shares outstanding 51
Share price $36.17
$ in millions,
except per share data Premium to current price 72.2%
(1) Assumes $130mm of proceeds from Net Working Capital improvement and $30mm of FCF generated between 2007 – 2008 used to repurchase shares at $30 per share.
Fully diluted calculation based on the treasury stock method and assumes ~7mm of options outstanding by FYE 2008.
46
Trading Multiples at Target Valuation
At a $36 share price (adjusting for ~$4 of equity value ascribed to the
NWC at the Mall and International Stores), Borders would trade at
7x ’08E EBITDA, 7.5x ’08E EBITDAR and approximately
11x ’08E Maintenance Free Cash Flow
BGP Trading Multiple 2008E
EV / EBITDA 7.0 x
EV / (EBITDA - Maint Capex) 8.4 x
Adj EV / EBITDAR 7.5 x
Price / Earnings 14.7 x
Price / Maint Free Cash Flow 10.9 x
47
Recent LBO Leverage Levels
At a $36 price, Borders would trade at 7.5x ’08E EBITDAR, only a

slight premium to 6.8x, the average of total leverage levels used
in several recent retail LBO transactions
Purchase Total Leverage

Price Adj. Debt/
Transaction: EV / EBITDA EBITDAR
Linens 'n Things 7.7 x 6.2 x
Burlington Coat Factory 7.4 x 6.5 x
The Sports Authority 7.7 x 6.8 x
Michael's Stores 11.0 x 7.8 x
Average 8.5 x 6.8 x
48
Concluding
Thoughts
Concluding Thoughts
Borders is similar to other investments where we have

had success
f Value of high-quality segment obscured by

performance of low-return segments
f Traditional sentiment on the Company is “negative”

or neutral at best
f Market is more focused on consolidated same store

sales rather than the underlying business quality
f New CEO is focused on making changes to fix the

business
50
Concluding Thoughts…
Investment requires a long-term view…
f Near-term performance impacted by current business

structure and initiatives (Rewards, Remodeling, etc…)
f Near-term risk is somewhat mitigated by an upcoming

slate of strong book releases
f We believe it will take time for management to realize full

opportunity
51
A TIP for Target Shareholders
October 29, 2008
Pershing Square Capital Management, L.P.

Disclaimer
The information contained in this presentation (the “Information”) is based on publicly available information about Target Corporation
(“Target”). None of Pershing Square Capital Management, L.P., its affiliates and any of their respective officers, directors and employees
(collectively, “Pershing”), nor any representative of Pershing, has independently verified any of the Information. Pershing recognizes that
there may be confidential or otherwise non-public information in Target’s possession that could lead others to disagree with Pershing’s
conclusions. The sole purpose of presenting the Information is to inform analysts and shareholders about the transaction described in
this presentation (the “Transaction”). This presentation does not constitute an offer or a solicitation of any kind.
Neither Pershing nor any of its representatives makes any representation or warranty, express or implied, as to the accuracy or
completeness of the Information or any other written or oral communication made in connection with this presentation or the Transaction.
The Information includes certain forward-looking statements, estimates and projections with respect to the anticipated future financial,
operating and stock market performance of Target in the absence of the Transaction and the two public companies that may result if the
Transaction is completed. Such statements, estimates and projections may prove to be substantially inaccurate, reflect significant
assumptions and judgments that may prove to be substantially inaccurate, and are subject to significant uncertainties and contingencies
beyond Pershing’s control, including those described under the caption “Risk Factors” in Target’s filings with the Securities and
Exchange Commission as well as general economic, credit, capital and stock market conditions, competitive pressures, geopolitical
conditions, inflation, interest rate fluctuations, regulatory and tax matters and other factors.
Pershing and its representatives expressly disclaim any and all liability relating to or resulting from the use of the Information or any
errors therein or omissions therefrom, including under applicable securities laws. The Information does not purport to include all
information that may be material with respect to the Transaction or Target. Thus, shareholders and others should conduct their own
independent investigation and analysis of Target, the Transaction and the Information.
The Information is not intended to provide the basis for fully evaluating, and should not be considered a recommendation with respect to,
the Transaction, Target, the securities of Target or any other matter. Except where otherwise indicated, the Information speaks as of the
date hereof. Neither Pershing nor any of its representatives undertakes any obligation to correct, update or revise the Information or to
otherwise provide any additional materials.
The preparation and distribution of this presentation should not be taken as any form of commitment on the part of Pershing to take any
action in connection with the Transaction.
Pershing is in the business of buying and selling securities. It has, and may in the future, buy, sell or change the form of its position in
Target for any or no reason.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any discussion of U.S. tax matters contained in this
communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal
Revenue Code; (ii) any such discussion of tax matters is written in connection with the promotion or marketing of the matters addressed; and (iii) you should seek
advice from an independent advisor.
1
Pershing’s Investment in Target
f Pershing initiated its investment in Target (“Company”)

in April 2007
f We currently have beneficial ownership of slightly less

than 10% of the Company
f Since May 2008, we have been discussing a potential

Transaction with Target management
f Pershing has improved its initial Transaction to address

issues raised by the Company. Today, we are presenting
this revised Transaction to the Company, its
shareholders, and members of the investment
community
2
Pershing’s Relationship with Target
f Since our first meeting with management in the summer

of 2007, Pershing has enjoyed a very constructive
relationship with Target
f We view Target’s management as the best in the Retail

Industry
f We appreciate management’s willingness to listen to and

evaluate ideas proposed by shareholders
f Our goal is to work with management and other

shareholders to find the best strategic and value-
maximizing outcome for the Company, its employees,
and its shareholders
3
Why Are We Going Public?
Given the materiality of the Transaction, Pershing thought it would

be beneficial to share the idea publicly with Target stakeholders and
the investment community
f The Transaction is important enough to warrant “testing” with

shareholders
f We think the insights gained by sharing the Transaction publicly

will be of tremendous benefit to Target as well as other stakeholders
f Target is currently evaluating the Transaction
f By going public with our presentation in advance of Target’s

decision regarding the Transaction, shareholders and the
investment community can provide their input on the
Transaction’s merits
4
Significant Preparation and Analysis
To assist in preparing this presentation, Pershing retained

UBS Investment Bank (“UBS”) and Sullivan & Cromwell
LLP (“S&C”) as financial and legal advisors
f Pershing and its advisors’ analyses are based on

publicly available information
f UBS has provided financial advisory services
f S&C has provided legal, structural, and tax advisory

services
Note: All financials in this presentation are based on Calendar Year

5
Agenda
Objectives
The Transaction
Transaction Rationale
Valuation
Appendix
■ Detailed Valuation Analysis
■ Credit Rating Analysis
■ Structural and Legal Considerations
6
Objectives
Target: Retail and Real Estate Operations
Retail Operations Real Estate Operations

■ Iconic U.S. retail brand ■ High-quality owned real estate in
attractive suburban and urban locations
■ Best-in-class operator with distinctive
merchandising strategy ■ Significant value embedded in real
■ 1,685 stores in 48 states estate, not accounted for in public market
valuation
■ Best management team in the retail
industry ■ Owns ~95% of its retail buildings and
■ Attractive growth profile, driven by mid-to- ~85% of the land under its retail locations
high single-digit square footage growth and
■ Owns ~84% of its distribution centers
market share gains
(“DCs”) and ~81% of the land under its
■ Recently sold an undivided interest in credit DCs
card receivables
■ Facilities Management Services
comprising hundreds of employees
responsible for property maintenance
8
Significant Real Estate Ownership
Target owns the highest percentage of its real estate compared to

other big box retailers
100 95% 92%
90 87% 87%
% Units Owned (Buildings)1
80
68%
70 63%
58%
60
50
40 34% 34%
30
20
10
0
% owned units/land(2): 85% 79% ND ND 55% ND 35% ND 27%

% DCs owned(3): 84% ND 2% 84% 76% 55% 89% 54% ND
“ND” represents Not Disclosed
(1) Represents % owned stores (includes owned stores on leased land)
(2) Represents % owned stores on owned land only
(3) Represents % owned DCs (includes owned DCs on leased land) 9
What if Target Were to Rent its Real Estate?
Assuming that Target were to rent all of its owned store locations at
an estimated market rent of 4.25% of store sales (or approximately
$13/sq. ft.) and its owned distribution facilities at $4.25/sq. ft., Target
would pay an additional rent of $2.5bn in 2008
Target Real Estate Co Pro Forma Target Corp

$ in billions 2008E $ in billions 2008E
Target Retail Sales $64.9 Existing Retail EBITDA (2) $6.3
Implied Retail Rent as % of Sales 4.25% Less: Additional Rent (2.5)
Percentage of Owned Real Estate 85% Equals: PF Retail EBITDA $3.8
Retail Rental Income $2.4 Implied EV of '08E EBITDA

Dist. Facilities Rental Income 0.2 (1)
Pro Forma Target Corp 7.0x $26.9
Real Estate 4-Wall EBITDA $2.5
Target’s resulting EBITDA after rent expense would be $3.8bn

(1) Implied cap rate of 8.5% on 35mm square feet of distribution facilities, valued at $50 per square foot
(2) Assumes for illustrative purposes that the remaining 53% interest in credit card receivables is sold to an Investment Partner for $4.4bn and
that Target retains $150mm of credit card income
10
$39 Billion of Real Estate Replacement Value
Assuming that on average, a new store costs $26mm to zone, develop and
build or approximately $197/sq. ft. (1) and that each Distribution Facility costs
$70mm or approximately $50/sq. ft. (1), the replacement cost of Target’s owned
real estate (excluding the value of its buildings on ground leased land and its
existing leases) is approximately $39bn
Replacement Value of Owned Land and Buildings (2), (3)

2008E Retail Real Estate:
2008E Estimated Owned Value / Total Value
Total Sq. Ft. (mm) % Owned Sq. Ft. (mm) Sq. Ft. ($bn)
222 85% 189 $197 $37.4
2008E DCs and WHs:
2008E Estimated Owned Value / Total Value
Total Sq. Ft. (mm) % Owned Sq. Ft. (mm) Sq. Ft. ($bn)
44 81% 35 $50 $1.8
Total Real Estate Replacement Value ($bn) $39.1

Implied Cap Rate @ $2.5bn of Estimated Market Rent 6.4%
(1) Based on average store size of 132k square feet, and DCs & WHs size of 1.4mm square feet
(2) Analysis excludes the value of owned buildings on third-party ground leased land; assumes cost of a Target store of $26mm ($13mm building
and $13mm land) and cost of distribution facility and warehouse of $70mm ($50mm building and $20mm land)
(3) Assumes 1,438 stores, and 25 distribution facilities and warehouses on owned land in 2008E
11
Market Assigns Little Value to Target’s Real Estate
Assuming Target were to rent its owned real estate and using a 7.0x
’08E EBITDA multiple on the pro forma retail business, the 20-day
trading average stock price of $40 implies only $13bn of value for
Target’s owned real estate, a significant discount to book and
replacement value
$ in billions
Current TGT Enterprise Value @ $40/Share $48.3 (1)
Less : PF Target Corp (26.9) (2)
Less : Credit Card Receivables (8.0)
Equals : Implied Real Estate Value $13.4
(1)
Gross Book Value of Land and Buildings $25.2
Discount to Gross Book Value 47%
Replacement Value of Owned Real Estate $39.1

Discount to Replacement Value 66%
(1) Based on 2008 Q2 company filings and a 20-day trading average stock price as of 10/24/08
(2) Assumes for illustrative purposes that the remaining 53% interest in credit card receivables is sold to an Investment Partner for $4.4bn and
that Target retains $150mm of credit card income
12
Objectives
In considering alternatives for the Company, Pershing Square’s

objective was to eliminate the stock market’s ascribed discount to
the intrinsic value of Target’s real estate and allow the Company to:
f Retain complete control of its buildings and its brand
f Retain 100% flexibility with respect to its construction,

remodeling, and relocation plans
f Improve the Company’s free cash flow and access to capital
f Increase the Company’s ROIC and lower its cost of capital
f Maintain an investment grade credit rating
f Increase the Company’s EPS growth rate
f Minimize tax leakage and friction costs
13
Several Alternatives Were Reviewed
In the course of our work, we reviewed several structures:
Transaction Alternatives Gating Items

1. Tax-Free Spin-off of all 7 Difficult to maintain sufficient control over
owned land and buildings buildings and achieve tax-free status
7 Lease life (including fixed rate renewals)
limited to 75% of the useful life of the buildings
2. Taxable Spin-off of all 7 Value destruction due to tax leakage, both at

owned land and buildings the corporate and shareholder levels
3. Large sale-leaseback 7 Value destruction due to tax leakage at the

transaction corporate level
7 Transaction execution may be difficult
Pershing concluded that the above alternatives were not optimal,

given the Company’s strategy and objectives
14
Pershing has identified a Transaction which will
achieve all of the stated objectives
The Transaction is consistent with the way Target

owns some of its real estate today
The Transaction will create tremendous

shareholder value
15
The Transaction
The Transaction
Tax-free spin of Target Inflation Protected REIT (or “TIP REIT”) as

Groundlessor and Facility Manager
Pre–Spin Post–Spin
TARGET TARGET
Shareholders Shareholders
Target Inflation
TARGET TARGET Corp
Ground Protected REIT
Leases
Existing Facilities
Owned
Retail Land Mgmt.
Buildings 1
Business Services
f New Target Corp owns its buildings f Leases back land to Target Corp through
on 75-year ground leases a Master Lease for a 75-year term
f Outsources Facilities Management f Elects REIT status at the time of spin-off

Services f Becomes Target Corp’s outsourced
facilities management provider
f Continues to maintain properties
f Becomes Target’s exclusive land
developer for the first two years
(1) Includes third-party ground leases f After two years, becomes Target Corp’s
Preferred Vendor for land procurement
17
Solving a Retailer’s Real Estate Dilemma
TIP REIT
Facilities Mgmt. Land under
Services Stores and DCs
Question: How can a Retailer unlock the value of its real estate
without losing control of its buildings?
Answer: Tax-free spin-off of an active business that ground

leases the land back to the Retailer
Retailer retains ownership of its buildings and 100% control with
respect to its construction, remodeling, and relocation plans
Retailer becomes a 75-year ground lessee for its owned properties

on attractive terms with no financial covenants
Retailer gets an unlevered business partner (a land-only REIT) that

can more efficiently finance future land development
18
Unlocking Immense Real Estate Value
REITs, private market ground leases, and inflation-protected securities

all trade at much higher valuation multiples than Target’s multiple, at
only 6.0x ‘09E EV/EBITDA, based on a 20-day trading average stock
price of $40
Inflation Protected Securities /

Target’s Market Valuation (1) REIT Market Valuations
2009E EV / EBITDA 2009E EV / EBITDA
6.0x 15.7x 17.0x 33.3x

$40/Share (1) Large Cap Recent “Big Inflation
REITs (1) Box” Ground Protected
Lease (2) Treasury
Securities
(TIPS) (3)
The Transaction creates immense and instant value because 22% of

Target’s current EBITDA will be valued at a significantly higher
multiple than where Target trades today
(1) Based on a 20-day trading average as of 10/24/08
(2) Based on mid-point precedent cap rate of 5.9%
(3) Based on current 20-year TIP yield of 3.0%
19
Execution is Not Impacted by the Current Markets
Target does not need access to the capital markets to

consummate this Transaction
f Given the global credit markets today, the only strategic

transactions that can take place are those that do not require
access to capital:
Spin-offs
Stock-for-stock mergers / acquisitions
Acquisitions by cash-rich acquirors
f The Transaction is structured as a spin-off where each current

shareholder will receive pro rata shares in TIP REIT
f No equity or debt capital is required to spin off TIP REIT
20
Transaction Plan: How Would it Happen?
Asset Contribution Transaction Description
f Step 1: The existing company (“Target
Target Corp Corp”) forms a new subsidiary (“TIP REIT”)
and transfers to it the Facilities
Management Services business, the owned
Land TIP REIT
Facilities
Management land under the stores, and the owned land
Services
under the distribution facilities
1
Land Lease
f Step 2: TIP REIT leases the land back to
2 75-year
Target Corp Target Corp through a Master Lease for a
Master Lease
75-year term
TIP REIT
Facilities
Land Management
Services
21
Transaction Plan (cont’d)
Spin-off and REIT Election Transaction Description
Shareholders f Step 3: Target Corp spins off TIP REIT to its
shareholders pro rata and tax-free
Tax-Free Target
3 Spin-off
Corp f Step 4: TIP REIT elects REIT status effective
immediately
TIP REIT 4 Simultaneously, TIP REIT drops the Facilities
Management Services business into a new
Land
Facilities Mgmt
Services
corporation, a taxable REIT subsidiary (TRS)
(TRS)
E&P Purge f Step 5: TIP REIT pays a taxable dividend (at the
15% dividend tax rate to non-corporate taxpayers)
Shareholders to shareholders equal to its allocated portion of
$8bn Taxable
5 Dividend Target’s $16bn of retained Earnings and Profits
(E&P Purge)
(“E&P”), estimated to be $8bn based on the implied
TIP REIT
Target mid-point valuation of TIP REIT/Target Corp
Corp
20% of the dividend ($1.6bn) may be paid in
Facilities Mgmt
cash with the remaining paid in TIP REIT
Land Services
(TRS)
common stock
75-year Lease
This cash dividend can be deferred until the end
of the calendar year in which the REIT election
occurs
22
Illustrative Master Lease Term Sheet
Lessee f Target Corp
Lessor f TIP REIT
Leased
Property f Land in fee under stores and distribution centers
Term f 75-year term
f Flat dollar amounts per year with annual increases

Rate
f For this Transaction we have assumed annual increases based on CPI increases
Financial
Covenants f None
Preferred f For the first 2 years post-Transaction, TIP REIT will be Target Corp’s exclusive land developer
Vendor f Thereafter, TIP REIT will become Target Corp’s preferred vendor for future land procurement / development
Agreement needs
Maintenance
of Buildings f Target Corp will have the right to re-model or tear down and rebuild stores as it sees fit
Sublease f Target Corp may sublease one or more sites but no sublease would release Target Corp from its
obligations under the lease
Lease f The lease is intended to be treated as a lease for tax purposes; lessor will be treated as the owner
Structure f Note: The lease is assumed to be treated as an operating lease for accounting purposes
23
Ongoing Relationships
Post separation, Target Corp and TIP REIT will continue to be closely
aligned, but on an arm’s-length basis
f TIP REIT will provide Facilities Management Services to Target Corp under a long-term
agreement
Arm’s-length terms
TIP REIT expected to continue to perform Facilities Management Services for third parties
after the spin-off
f Target Corp agrees to use TIP REIT as its land procurement developer for the first two
years after the spin-off on agreed-upon terms
Creates a contractual 2-year development pipeline for TIP REIT and a funding source
for Target Corp
f Afterwards, Target Corp will grant TIP REIT preferred vendor status for Target Corp’s
land procurement needs on market terms for future Target stores
Under this Preferred Vendor Agreement, it is anticipated that TIP REIT will be Target
Corp’s land procurement developer in the future
f After the spin-off, TIP REIT and Target Corp may also share overlapping board members
The number of overlapping board members would comprise a minority of each board
There may be restrictions on the duration of the overlap
24
Transaction Assumptions
The following transaction assumptions were used for an illustrative 01/01/09 transaction:
f ’09E rent/square foot on land for stores — $7/sq. ft.; equals to 7% of $100/sq. ft.
Lease Terms f ’09E rent/square foot on land for distribution centers and warehouses — $1.25/sq. ft.
f Rental rate grows based on CPI (assumes CPI = 2.5%)
Credit Card f Target sells 53% remaining interest of credit card portfolio
Business $4.4bn of proceeds used to pay down debt (including all securitized debt)
(Both Transaction Elimination of $3.6bn JPMorgan financing
and Standalone) f Target retains $150mm of pre-tax earnings stream from its credit card business in partnership
transaction
Capital f Target Corp funds all maintenance capex as well as all building development
Expenditures f TIP REIT funds all new Target store land procurement, development and improvement costs ($100/sq. ft.)
Facilities f Assumes $125mm of ’09E internal Facilities Management Services expense at Target Corp
Management f Assumes TIP REIT receives $144mm in revenues from Target Corp and third parties, expenses
Services $125mm of costs and earns $19mm in EBIT, implying a 13% EBIT margin in 2009E
f After reducing $4.4bn of debt from the sale of the remaining 53% interest of CC business (and
Capital accordingly eliminating the JPMorgan credit card liability), we have assumed all existing debt stays
Structure at Target Corp
f Flexibility to re-allocate debt between Target Corp and TIP REIT
f 100% of AFFO distributed at TIP REIT

Dividends
f Results in total dividends to shareholders of $1.86/share in PF2009E vs. current $0.60/share
f Assumes $20mm of G&A allocated to TIP REIT and incremental $15mm of standalone costs
TIP REIT G&A in ’08E
25
Selected 2009E Income Statement Data
Based on the assumptions provided, the Transaction would result in

$1.4bn EBITDA in 2009E to TIP REIT
2009E 2009E 2009E 2009E

Target
Target Corp TIP REIT "Combined"
Standalone
($mm, except per share)
22% of total EBITDA
EBITDA $5,172 $1,427 $6,599 (1)
$6,614 to TIP REIT
Minimal D&A at TIP

D&A 1,884 56 1,940 1,940 REIT and no
maintenance capex
EBIT 3,288 1,372 4,659 4,674

TIP REIT pays
almost no taxes
Taxes 1,004 7 1,011 1,528
(2)
EPS $2.23 $1.79 $4.02 $3.40
18% EPS accretion
from tax efficiencies
and improved free
cash flow
(1) Includes incremental $15mm of standalone costs at TIP REIT
(2) Normalized to exclude $112mm (approximately $0.16/share) of incremental interest expense due to CY2009 cash E&P distribution
26
2009E Detailed Income Statement Data
The table below sets forth the Income Statements for the two entities
2009E 2009E Intercompany 2009E
($mm) Target Corp TIP REIT Adjustments "Combined"
P&L Data:
Retail Revenue $68,249 – – $68,249
Rental Revenue – 1,444 (1,444) –
1
Facilities Management Revenue – 144 (144) –
Total Revenue $68,249 $1,587 ($1,587) $68,249
COGS (47,777) – – (47,777)
Gross Margin 20,472 1,587 (1,587) 20,472
Gross Margin (%) 30.0% 100.0% 30.0%
Less: Existing Rent Expense (173) – – (173)
2
Less: Incremental Ground Lease Expense payable to TIP REIT (1,444) – 1,444 –
Less: SG&A (excluding rent expense) (13,814) (20) – (13,834)
3
Less: Incremental Standalone Cost – (15) – (15)
1
Less: Facilities Management Expense (19) (125) 144 –
4
Plus: Credit Card EBITDA 150 – – 150
Equals: EBITDA $5,172 $1,427 – $6,599
% of Total 78.4% 21.6% 100.0%
Less: Depreciation and Amortization (1,884) (56) – (1,940)
Equals: EBIT $3,288 $1,372 – $4,659
% of Total 70.6% 29.4% 100.0%
(1) Reflects payment to TIP REIT of $144mm less assumed expense of $125mm
(2) Assumes rent of $7.00/sq. ft. on store land and $1.25/sq. ft. on DCs and WHs land for CY 2009E
(3) Incremental standalone cost of TIP REIT
(4) Assumes the sale of the remaining 53% interest on credit card receivables on 01/01/09, with Target retaining $150mm of credit card EBITDA
27
2009E Maintenance Free Cash Flows
The Transaction achieves significant cash flow savings given the tax-
efficient structure for owning land
2009E Maintenance Free Cash Flow per Share (1)

$6
16% $4.54
Maintenance FCF/Share
$5
$3.92
$4 TIP REIT
Target
$1.86
$3 Standalone
$2
Target Corp
$1 $2.68
$0
Target Target "Combined"
(1) Includes cost of store remodeling; normalized to exclude $112mm (approximately $0.16/share) of incremental interest expense due to CY2009 cash E&P
distribution
28
Detailed 2009E Maintenance Free Cash Flows
The Transaction achieves significant cash flow savings given the tax-
efficient structure for owning land
2009E 2009E 2009E 2009E

($mm, except per share data) Target Corp 1 TIP REIT "Combined" Standalone 1
Cash Flow Data:
EBITDA $5,172 $1,427 $6,599 $6,614
Less: Maintenance Capex (1,714) – (1,714) (1,714)
2
Less: Interest Expense (673) (76) (748) (694)
3
Less: Taxes (1,004) (7) (1,011) (1,528)
Plus: Change in Net Working Capital 79 – 79 79
Plus: Other 73 – 73 73
Equals: Maintenance Free Cash Flow $1,933 $1,344 $3,278 $2,830
Weighted Average Shares Outstanding 722 722 721
Maintenance FCF/Share $2.68 $1.86 $4.54 $3.92
Maintenance FCF/share accretion ($) $0.62
Maintenance FCF/share accretion (%) 16%
(1) Assumes sale of remaining 53% interest on credit card receivables for $4.4bn on 01/01/09 with Target retaining $150mm of credit card EBITDA
(2) Assumes interest rate on debt of 6.2% at Target Corp and 7.0% at TIP REIT; normalized to exclude $112mm of incremental interest expense
due to CY2009 cash E&P distribution
(3) Assumes tax rate of 38% for Target Corp and TIP REIT Facilities Management Services business
29
Valuation Summary
Based on the assumptions provided and using the mid-point of the valuation
analysis, this Transaction would result in total combined value of $70 per share
for Target shareholders (74% premium to the 20-day average trading price) and
$83 per share twelve months later
$83
$80
$70
TIP REIT
$60 74% TIP REIT $42
$/Share
$40 $38
$40
Target Target Corp

$20 Standalone Target Corp
$42
$32
$0
Target (20-Day Avg. Price) ¹ Target REIT Spin-Off ² 12-Month Price Target ²
For illustrative purposes, assumes Transaction occurs on 01/01/09
(1) Based on a 20-day trading average as of 10/24/08; assumes sale of remaining 53% interest on credit card business with proceeds used to pay down debt
(2) Based on mid-point of valuation analysis 30
Even ignoring valuation benefits, there are
important strategic reasons to consummate the
Transaction…
31
Target Corp retains control over its buildings and brand
Improves Target’s access to capital and decreases its capital needs
Creates a non-cash currency for tax-efficient real estate acquisitions
Improves management focus on core operations
Tax-free spin-off
Optimizes ownership of land
Increases total free cash flow
Improves store-level ROIC and Target’s EPS growth rate
Maintains investment grade credit ratings profile
Increases total dividends from $0.60/share today to $1.86/share in 2009E (1)
Enormous value creation
(1) Excludes $112mm (approximately $0.16/share) of incremental interest expense due to CY2009 cash E&P distribution
33
Retains Control Over its Buildings and Brand
Flexible lease structure will allow Target Corp to retain control of

its brand and stores
f Target Corp maintains control over its real estate construction, remodeling,
and relocation efforts
f All economic benefits of construction / remodeling of stores stay with Target
Corp
f Ground lease provides Target Corp with a high degree of control and
flexibility
75-year lease term with the ability to relocate and sublease
Lease term flexibility on a store-by-store basis
f Contingent rent eliminates GAAP straight-line rent leveling requirements

f Unique landlord / tenant relationship benefits both TIP REIT and Target Corp
TIP REIT and Target Corp have a mutual vested interest in maintaining the
strong viability of the Target brand and retail business
34
Improves Overall Access to Capital
Today, only the most stable and unlevered businesses can freely
access the debt and equity capital markets. TIP REIT will be one of
the most stable companies in the world today
TIP REIT
f Simple, predictable business
f High margins and strong cash flows
TIP REIT will have
f Unlevered balance sheet
better and cheaper
f 75-year lease access to the capital
f No transaction income markets than any
f Inflation-protected income stream retailer. As such, Target
f Tremendous security
will have a stable
strategic and financial
f No maintenance capital requirements
partner to fund future
f No currency or commodity risk growth
f High-quality, in-demand tenant
f Diversified real estate geography
35
Decreases Target Corp’s Capital Needs
Today, on average, it costs Target approximately $100/sq. ft. to

procure and develop land for its stores. In 2009, this is expected to
amount to roughly 50% of growth capital or $1.1bn
Land
Cost of raw land
Permits / Zoning
Professional fees (title search,
legal, engineering, appraisal, etc…)
Surveying and environmental assessments Outsourcing these capital
Real estate taxes
requirements to TIP REIT
Land Improvements would increase Target
Land excavation (fill, grading) Corp’s cash flows and
Drainage
Demolition costs of existing properties
decrease its need for
(1)
Sewage systems growth capital
(1)
Parking lots
(1)
Lights
(1)
Fencing
(1)
Sidewalks
(1)
Landscaping
(1) Depreciable asset 36

Decreases Target Corp’s Capital Needs (cont’d)
The Transaction enables Target Corp to generate more free cash flow
after growth capex than Target today. As such, Target Corp will not
need to access the capital markets because TIP REIT will provide
future growth capital and taxes will be reduced
2009E 2009E 2009E 2009E

($mm, except per share data) Target Corp (1) TIP REIT "Combined" Standalone (1)
Maintenance Free Cash Flow $1,933 $1,344 $3,278 $2,830

Less: New Building Development/Other Capex (1,112) – (1,112) (1,112)
Less: New Land Development Capex – (1,079) (1,079) (1,079)
Equals: Free Cash Flow after Total Capex $821 $266 $1,087 $639
Target Corp would have

approximately $200mm of
incremental FCF after growth
capex versus Target Standalone
as a result of not funding new land
development and reduced taxes
(1) Assumes sale of remaining 53% interest on credit card receivables for $4.4bn on 01/01/09 with Target retaining $150mm of credit card EBITDA in '09E
37
Creates Currency for Tax Efficient Acquisitions
Utilization of an UPREIT structure would provide TIP REIT with

an attractive acquisition currency that allows selling
landowners to access liquidity, diversification, and yield
without triggering tax
fAn UPREIT owns some or all of its assets through an Operating

Partnership (“OP”) and can make acquisitions by exchanging OP
units for real property
fOP units are convertible, on a one-for-one basis, into TIP REIT shares
38
Creates Currency for Tax Efficient Acquisitions
There are several benefits to an UPREIT structure

fTo TIP REIT:
OP units are an attractive acquisition currency in transactions with
landowners who typically have a very low basis in their properties
OP units do not require any capital market access
TIP REIT may be able to acquire land from current Target landowners
who historically would not sell for tax reasons
fTo Land Owners:

Defers tax on sale of land to OP
Conversion right gives seller liquidity
OP unit represents a diversified real estate investment
Structure allows a diverse group of property owners to manage
individual tax, liquidity, and other needs
39
Improves Management Focus
Management will be able to focus on retail operations
f Target’s core competency is retailing (i.e. merchandising,

branding, marketing, and designing a unique shopping
experience)
f Management will increase focus on Target’s core competencies

and outsource certain other functions:
Facilities management (lawn care, parking lot maintenance, etc.)
Land development, planning, and zoning
Environmental planning
Target Corp can better focus on retailing while TIP REIT can
focus on facilities management and land acquisitions
40
Tax-free Spin-off
The Transaction satisfies all of the requirements for a tax-free spin-off

Requirements Application
f The spin-off must be motivated by a non-tax 3 Improved access to capital and capital allocation
corporate business purpose 3 Improved currency for future real estate acquisitions
Business 3 Improved management focus on retail operations
Purpose 3 Enhanced equity-based management compensation
3 Leases are structured to ensure TIP REIT is treated as
tax owner of land
f Both Parent and SpinCo must each be engaged 3 Facilities Management Services business is an active
in an active trade or business immediately after trade or business that has been conducted by Target
Active the spin-off Corp, in addition to its retail business, for the past five
Trade or years
The business must also have been
Business conducted throughout the 5-year period TIP REIT expected to continue to offer Facilities
ending on the date of the spin-off Management Services to customers other than
Target Corp
f The spin-off cannot be principally used as a 3 Non-tax business purpose for separation, widely-held
device for the distribution of earnings and profits ownership of Target Corp and TIP REIT, and absence
of plan by shareholders to sell stake in either company
Device evidence that transaction is not a device
3 Leases are structured to ensure TIP REIT is treated as
tax owner of land
f Parent must have control of SpinCo immediately 3 Target Corp will have control of 100% of TIP REIT
Distribution prior to the distribution prior to spin-off
of Control Control means 80% of total voting power and
80% of the number of shares of each class of
non-voting stock
41
Optimizes Land Ownership: Depreciation Considerations
f Raw land (and the majority of the capitalized costs associated with
land procurement / development) cannot be depreciated
f Unlike buildings, which are depreciable and remain at Target Corp,

land development has minimal offsetting tax deductibility
f However, ground rent is tax deductible
f As such, long-term ground leases are a more tax-efficient way for a

tax-paying entity to control real estate than outright land ownership
f Unless it is in the business of land speculation, there is no distinct

strategic advantage for a retailer to own land versus a very long-
term, covenant-free ground lease
f On the other hand, a REIT should own land since (1) it is not a tax-
paying entity and does not get any benefits from depreciation and
(2) it is in the business of owning real estate
42
Optimizes Land Ownership: REIT Conversion
The Transaction satisfies all the requirements of a REIT conversion, thus

optimizing the ownership of land for Target shareholders
REIT Requirements Application
f REIT must have 100 or more shareholders f TIP REIT will be widely held by the public
f Five or fewer individual shareholders may hold no more f Restrictions will be placed on the ownership of TIP
Ownership than 50% REIT shares to ensure no single shareholder may
own > 9.9% of its shares
f At least 75% of assets must be comprised of real estate, f Land satisfies the asset test
cash or cash items and Government securities f The Facilities Management Services business will
Asset Test f REIT can conduct non-real estate related activities through be placed in a TRS and its income will be taxed at
a taxable REIT subsidiary (TRS). TRS shares could be up the corporate level
to 25% of the gross asset value of all the REIT’s assets f The value of TIP REIT’s TRS shares will be less
than 25% of the total value of TIP REIT
f At least 75% of REIT’s gross income must consist of rents, f Rental income from leases will satisfy the 75%
gain from disposition of real property and income from other income test; rental income and dividends will satisfy
REITs the 95% income test
f Rents from related parties are disqualified under the income f New 9.9% TIP REIT ownership restriction will
Income Test test (parties are related if there is a 10% or greater ensure that rents from Target Corp are not related-
ownership by vote or value of the tenant by the REIT) party rents
f At least 95% of gross income must consist of (i) income that
satisfies the 75% income test and (ii) dividends and interest
from any source
f In the year of election, REIT must distribute C-Corp f TIP REIT will make a taxable distribution of stock
Distribution earnings and profits by end of taxable year and cash by December 31 of year of spin-off to
Requirements f At least 90% of REIT taxable income must be distributed purge retained Earnings and Profits
annually (undistributed income would remain subject to f TIP REIT will distribute ≥ 100% of its REIT taxable
corporate-level tax) income
43
Increases Total FCF via REIT Conversion
The Transaction allows for greater free cash flow generation for
Target’s shareholders than the Standalone company provides
f Most D&A remains at tax-paying entity (Target Corp)
f Ground lease expense at Target Corp is tax deductible
f REIT does not pay taxes
TARGET TIP TARGET TARGET
Corp REIT 2 “Combined” Standalone Differential
1
2009E Maintenance FCF/Share $2.68 $1.86 $4.54 $3.92 $0.62
1
2009E EPS $2.23 $1.79 $4.02 $3.40 $0.62
f Using Target’s ’09 P/E multiple of 11.8x (based on $40/share),

the incremental earnings accretion from this Transaction
creates $7 per share of value ignoring other valuation benefits
(1) Assumes sale of remaining 53% interest on credit card business is sold in both Standalone and Transaction scenarios
(2) Normalized to exclude $112mm (approximately $0.16/share) of incremental interest expense due to CY2009 cash E&P distribution
44
Improves Store-level ROIC at Target Corp
Assuming the average store real estate costs $26mm, of which $13mm
is allocated to the land and $13mm to the building, store-level return
on investment increases from 23.0% to 39.8%
Owned Store Level Operating Data and Assumptions Standalone Pro Forma
($mm) 2007A 2007A
Retail Sales per Avg. Store $40 $40
Estimated Four-Wall Operating Costs 34 35
Ground Lease Expense per Avg. Store -- 1(1)
Estimated Four-Wall EBIT per Avg. Store $6 $5
Margin (%) 15.0% 13.0%
New Land Capex $13 --

New Building Capex 13 13
Total Investment $26 $13
Estimated Returns on Investment (%) 23.0% 39.8%
(1) Assumes $0.9mm of ground lease rent expense, based on $7/sq. ft. lease cost and 131k of store square footage, on average
45
Increases Target Corp’s EPS Growth Rate
Because of its higher ROIC, improved free cash flow profile, and more
efficient capital structure, Target Corp’s EPS growth will exceed that of
Target Standalone
Earnings per Share ($)

'09-'13
CAGR
2008 2009 2010 2011 2012 2013 (%)
PF Target Corp 1 $2.23 $2.67 $3.20 $3.70 $4.27

17.6%
EPS Growth (%) 19.5% 20.2% 15.5% 15.3%
Target Standalone 1, 2 $3.29 $3.40 $3.90 $4.57 $5.18 $5.89

14.7%
EPS Growth (%) 3.5% 14.8% 17.0% 13.4% 13.8%
Memo: Operating Assumptions:

Same-store sales 0.5% 3.3% 3.5% 3.5% 3.5%
Sq. ft. growth 4.7% 4.1% 6.0% 6.5% 7.0%
Gross Margin 30.0% 30.1% 30.2% 30.2% 30.2%
SG&A as % of sales 20.2% 20.1% 20.0% 20.0% 20.0%
(1) Assumes remaining 53% interest of credit card business sold for $4.4bn on 01/01/09 and all proceeds used to pay down debt
(2) Assumes Target Standalone maintains existing dividend policy
46
Increases Target Corp’s EPS Growth Rate (cont’d)
Pro forma for the Transaction, Target Corp’s long-term EPS growth
rate would be at the top of its peer group
Long-term EPS Growth (%)
21
17.6%(1),(2),(3)
18
16.0%
15.0% 14.7%(1),(2),(3)
14.5% Average(4) = 11.9%
15 14.0% 14.0%
13.5%
13.0% 12.9%
12.0% 12.0% 12.0%
12 11.0%
10.0% 10.0%
9.0% 9.0%
9 8.0% 8.0%
0
Whole Kohl's CVS Lowe's Staples Walgreens TJX Costco Safeway Home Best Buy Wal-Mart Sears BJ's Kroger JCPenney SUPERVALU Macy’s
Foods Depot
Corp Standalone
(1) Represents 2009–2013 EPS CAGR
(2) Assumes additional future share buyback at a constant forward P/E of 16.0x
(3) Assumes sale of credit card business for $4.4bn on 1/1/09 and uses proceeds to pay down debt
(4) Excludes Target
Source: FactSet and Company filings for Retailers, excluding Target
47
Maintains Investment Grade Credit Ratings
Post-transaction, we believe Target Corp will be rated investment grade, either

in the Mid - High BBB or Low A categories, depending on whether the rating
agencies take a “De-consolidated” or “Consolidated” view. A “Consolidated”
view would assess the credit profile of the Target system, effectively cancelling
TIP REIT’s rent payments, leading to a higher rating. This is similar to how the
agencies rate Coca Cola and its bottlers
Target Corp Target Combined
"De-consolidated View" "Consolidated View"
PF 2008E Credit Metrics:
Lease Adj. Debt/EBITDAR 3.6x 2.4x
Debt/EBITDA 2.3x 2.3x
EBITDAR/(Interest + Rent) 3.2x 7.3x
EBITDA/(Interest) 9.7x 8.8x
Expected Rating Mid - High BBB/Baa A- / A3
To be conservative, we have assumed that the agencies will take a

“De-consolidated View” and Target will maintain solid investment grade
ratings in the Mid - High BBB/Baa category (versus A+/A2 rating today)
48
Pro Forma 2008E Balance Sheets
The table below sets forth the Balance Sheets for the two entities
"Combined"
Consol. Rating
Target TIP Intercompany Angencies
($mm) Corp REIT Adjustments View
Balance Sheet Data:
8/2/08 Debt $19,655 – – $19,655
1
Less: Debt Paydown with H2 '08 Cash Flow (200) – – (200)
Less: Debt Paydown from Excess Cash – – – 0
CY2008E Debt 19,455 – – $19,455
Less: Debt Paydown from Credit Card Proceeds (4,400) – – (4,400)
Less: Elimination of JPMorgan Financing (3,600) – – (3,600)
2
Plus: Debt Issued for E&P Distribution at TIP REIT – 1,600 – 1,600
3
Plus: Debt Issued to Fund Land Development at TIP REIT – 1,322 – 1,322
Less: Debt Paydown – – –
PF2008E Ending Debt $11,455 $2,922 – $14,377
Plus: Lease Adjusted Debt (8x 2008E Total Lease Expense) 12,309 – (10,956) 1,353
PF2008E Lease Adj. Total Debt $23,764 $2,922 ($10,956) $15,730
PF 2008E Credit Metrics:

Debt / EBITDA 2.3x 2.2x – 2.3x
Lease Adj. Total Debt / EBITDAR 3.6x 2.2x – 2.4x
EBITDAR / (Interest+Rent) 3.2x 6.6x – 7.3x
(2) $1.6bn of debt issued to fund E&P dividend, which must be paid by December 31 of the year REIT status is elected
(3) Assumes that 1st year land acquisitions financed solely with debt
49
Target Corp: Deleveraging to an “A” Ratings Profile after 2 Years
TIP REIT will be required to fund land capex for the first two years after the
spin-off. Thereafter, TIP REIT will be Target Corp’s land developer through its
Preferred Vendor Agreement. As such, Target Corp will generate significant
free cash flow and will likely deleverage to an A-/A3 ratings profile after two
years
PF 2008E 2009E 2010E 2011E
($bn, except where noted)

End of Year Debt Balance 11.5 10.8 9.6 8.3
Lease Adj. Debt 12.3 12.9 13.8 15.0
End of Year Adj. Debt Balance 23.8 23.8 23.4 23.3
EBITDAR 6.5 6.8 7.5 8.4
Target Corp Adj. Debt/EBITDAR 3.6x 3.5x 3.1x 2.8x
Expected Ratings Profile Mid - High BBB/Baa Mid - High BBB/Baa High BBB/Baa A- / A3
Despite temporarily having a lower credit rating than today, (1) Target Corp will
not need access to capital because it will be significantly free cash flow
positive after growth capex and (2) it will be able to deleverage back to an “A”
category credit rating in a short time frame
50
Target Corp: Bondholders’ Perspective
The Transaction allows for meaningful debt paydown by 2011E

of $7.8bn. Of this amount, $4.4bn comes from selling the
remaining 53% interest in credit card receivables and $3.2bn
from free cash flow after operating and investing activities
Target Corp Balance Sheet Data
($bn) Debt Cash Comments
August 2, 2008 Debt $16.1 $1.5 Debt excludes JP Morgan GAAP liability of $3.6bn
Less: Credit Card Proceeds (4.4) Sale of 53% interest of credit card receivables for $4.4bn
Less: Debt Paydown from H2 '08E (0.2) Assumes $1bn of stock buyback
(1)
CY2008E Debt 11.5 0.5
(1)
Less: Debt Paydown in '09E (0.6) 0.7 78% of Free Cash Flow generated
(1)
(1)
(1)
CY2011E Debt $8.3 $0.8
(1) Assumes a minimum cash balance of 1% of sales
51
What’s Better: Debt or a TIP REIT Master Lease?
TIP REIT’s Master Lease is much more attractive than long-term debt
Debt TIP REIT Master Lease

Liquidity Risk Yes None
Financial Covenants Many covenants None
Holders Unrelated investors Strategic partner /

“Friendly landlord”
Market access? Currently difficult to access Spin-off will obviate

requiring access
Duration 30 year maximum 75 years
Target’s cost 7.3% for 10-year bond 7%

(20-day average cost) (Rent / cost sq. ft.)
52
Strong Similarities with a Credit Card Partnership
Credit Card TIP REIT

Partnership Spin-off
Control Target can control its credit card Target can control its buildings and
business without the need to own retailing strategy without the need to
receivables own land
Capital Allocation Receivables ownership is Land (and land improvements)
transferred to a party with a lower ownership is transferred to a party
cost of capital with a lower cost of capital
Use of Proceeds Primarily to return capital to Return capital to shareholders (via
shareholders (via buyback) spin-off of TIP REIT)
Taxable Gains Minimal None
Improved Access Credit Card Partner funds future TIP REIT funds future land
To Capital receivables growth procurement and development
ROIC CC ROIC improves significantly Store-level ROIC nearly doubles
53
Valuation Summary
$83
$80
$70
TIP REIT
$60 74% TIP REIT $42
$/Share
$40 $38
$40
Target Target Corp

$42
$32
$0
Equity Value ($bn) $29 $23 Equity Value ($bn) $30
Target
Corp
Enterprise Value ($bn) $40 $34 Enterprise Value ($bn) $40

'09E EV/EBITDA 6.0x 6.5x '10E EV/EBITDA 7.0x
'09E P/E 11.8x 14.2x '10E P/E 15.6x
Equity Value ($bn) $27.5 Equity Value ($bn) $30

TIP REIT
Enterprise Value ($bn) $27.5 Enterprise Value ($bn) $31

‘09E Dividend Yield 4.9% ‘10E Dividend Yield 4.7%
Cap Rate 5.3% Cap Rate 5.0%
'09E P/AFFO 20.5x '10E P/AFFO 21.4x
'09E EV/EBITDA 19.3x '10E EV/EBITDA 20.3x

(1) Based on 20-day trading average as of 10/24/08; assumes sale of remaining 53% interest on credit card business with proceeds used to pay down debt
(2) Based on mid-point of valuation analysis
54
Sources of Value
The main sources of value creation are incremental earnings generation via the
REIT structure and multiple expansion at TIP REIT and Target Corp
100
$5/share
$70/share
80 $17/share
$/Share
60 $7/share
$40/share
40
20
0
Target Standalone Incremental Earnings TIP REIT Multiple Target Corp Multiple Pro Forma Value/Share
Value/Share (Assuming Generation Expansion Expansion
20-Day Avg. Price
Multiples)
Multiple
Incremental EPS Generation Multiple Expansion Valuation Expansion
"Target Combined" 2009E EPS $4.02 Target Corp 2009E EPS $2.23 $2.23
Target Standalone 2009E EPS $3.40 Implied P/E Multiple 14.2x 2.4x
Difference $0.62 Target Corp ($/share) $32 $5
(1)
Target Current EPS Multiple 11.8x TIP REIT 2009E EPS $1.79 $1.79
(2)
Implied P/E Multiple 21.3x 9.6x
Value Creation from Incremental EPS ($/share) $7 TIP REIT ($/share) $38 $17
(1) Normalized to exclude $112mm of incremental interest expense due to CY2009 cash E&P distributions
(2) Implied P/E multiple of 21.3x based on the mid-point of today’s estimated market value of $27.5bn, implying a 20.5x 2009E AFFO multiple, 4.9% dividend yield and
5.3% cap rate
55
Hypothetical Value Creation over Time (1)
The implied hypothetical future value per share post-transaction for Target
shareholders is $109 in three years
Post-
$109
$110 Transaction
Hypothetical
Valuation
$100 $97
$90
$83
$/Share
$80
$70
$70
$60
$50
Today 1 Year 2 Year 3 Year
TRANSACTION
Target Corp - Hypothetical Value/Share $32 $42 $50 $58
TIP REIT - Hypothetical Value/Share $38 $40 $43 $45
(2)
TIP REIT - Cumulative Dividend $0 $2 $4 $6
Total Hypothetical Value/Share ($) $70 $83 $97 $109
(1) Future values post 1-year are based on constant multiples

(2) Excludes one-time dividend from E&P distribution
56
Valuation: Potential Questions
and Answers
Potential Questions
3 What’s so special about TIP REIT?

3 Why are TIPS the best comparable security to TIP REIT?
3 Why is TIP REIT more valuable than a private ground lease?
3 Why is TIP REIT unlike any existing REIT today?
3 Why would this Transaction improve Target Corp’s valuation?
3 Why is this Transaction ideally suited for Target?
3 What are the risks?
3 Other potential questions
58
What’s So Special About
TIP REIT?
TIP REIT Investment Highlights
“Land-only” structure is extremely secure

■ $39bn of “Lease Security”, including $20bn of unencumbered buildings
Long-term lease provides bond-like stability and inflation-protection

■ 75-year, inflation-protected “Master Lease” with Target Corp
Significant growth opportunity

■ Formal arrangement with Target Corp provides long-term growth pipeline
High quality locations and superb tenant profile
De minimis maintenance capex allows for strong FCF generation
Tremendous size and scale – a “must-own” REIT

60
“Land-only” Structure is Tremendously Secure
TIP REIT’s land-only leases are the most secure form of real estate
investment
f Ground leases are the most secure form of real estate investment
f In the event of a default on a ground lease, the building and
improvements revert to the landowner
As such, in the event of tenant default, a landowner can re-lease the land
and the building at significantly lower rent than market and still maintain
its current lease payments
Event of default
Illustrative Example: Significant
$13 sq. ft.
cushion for
Rent rents to fall
Today
in the event
$7 sq. ft. of default
Ground lessor
Rent re-leases land
Ground lessor
AND building
leases land at
$7 / sq. ft. at $13/sq. ft.
Because it will lose its building in the event of default, a tenant is highly
motivated to make its ground lease payments. The unencumbered
building acts as collateral, making the ground lease extremely secure
61
$39 Billion of “Lease Security”
Although the buildings are not pledged as security, they will revert to
the landowner upon a ground lease default. As such, illustratively, we
define TIP REIT’s “Lease Security” as the value of the land and
unencumbered buildings. Based on replacement cost, this “Lease
Security” is valued at $39bn
Total “Lease Security”: $39bn Unencumbered “Collateral”: $20bn (3)

(1), (2) (1)
Replacement Value of Owned Land and Buildings Value of Buildings Only (on the Owned Land)
2008E Retail Real Estate: Retail Buildings - 1,438 Stores in '08E:
2008E Estimated Owned Value / Total Value Estimated Replacement Cost per Square Foot $99
Total Sq. Ft. (mm) % Owned Sq. Ft. (mm) Sq. Ft. ($bn) 2008E Owned Square Feet (mm) 189
222 85% 189 $197 37.4 Value of Owned Store Buildings ($bn) $18.7
2008E DCs and WHs: DC and WH Buildings - 25 DCs and WHs in '08E:
2008E Estimated Owned Value / Total Value Estimated Replacement Cost per Square Foot $36
Total Sq. Ft. (mm) % Owned Sq. Ft. (mm) Sq. Ft. ($bn) 2008E Owned Square Feet (mm) 35
44 81% 35 $50 1.8 Value of Owned DC and WH Buildings ($bn) $1.3
Total Real Estate Replacement Value ($bn) $39.1 Total Value of Buildings on Owned Land ($bn) $19.9
(1) Analysis excludes the value of owned buildings on third-party ground leased land; assumes cost of a Target store of $26mm ($13mm building and $13mm land) and cost of DC
and WH of $70mm ($50mm building and $20mm land)
(2) Assumes 1,438 stores, and 25 DCs and WHs on owned land in 2008E
(3) Although the buildings are not pledged as security, the effective result is that they act like “collateral” in the event of tenant default
62
Unencumbered Assets Provide Significant Coverage
Based on our illustrative definition of “Lease Security,” if TIP REIT

trades at a dividend yield of 4.9%, its “Lease Security” would still be
worth 142% of the enterprise value of TIP REIT. No other REIT in the
world today has this level of asset coverage in the event of a tenant
default
$ in billions
"Lease Security"
Value of Land and Unencumbered Buildings $39.1
(1)
TIP REIT Enterprise Value at 4.9% Dividend Yield $27.5
Illustrative Asset Coverage

"Lease Security" / EV 142%
(1) Based on the implied mid-point of valuation

63
Benefits of a Master Lease
A Master Lease has a number of structural advantages that will

enhance the stability and security of TIP REIT
f Under a master lease, all of the sites will be subject to a single lease
agreement
f The master lease provides for an aggregate amount due for all of the
sites
Under the master lease, a failure to pay full rent due on a single site will
cause all of the leases covered by the master lease to be in default
f TIP REIT’s rights under the master lease require Target Corp to satisfy
its lease obligations under all events
As the tenant, Target Corp must continue making lease payments to
maintain ownership of all buildings and other improvements
64
Long-term Lease Provides Bond-like Stability
Given its long-term lease arrangement and its land-only structure, TIP
REIT’s risk profile will be similar to that of a long-term, senior secured,
highly-rated, and inflation-protected bond
75-year Master Lease

TIP REIT
3 Long-term lease
Risk profile:
3 100% occupancy
Long-term
3 Highly rated, high-quality tenant in Target
3 Inflation protection Senior Secured
3 Extremely low probability of lease default Highly-rated
Land-only REIT structure Inflation-
protected
3 $39bn of “lease security” or 142% asset
coverage at a 4.9% dividend yield
Bond
3 Effectively “over collateralized” by
$20bn of buildings
65
Significant Growth Opportunity
In addition to its incredibly stable and secure cash flows, TIP REIT
has strong growth prospects, given its initial 2-year exclusive right
as Target Corp’s land developer and its formal Preferred Vendor
Agreement with Target Corp thereafter
f TIP REIT’s Preferred Vendor Agreement with Target Corp will provide it
with a strong pipeline of land development opportunities
Target Corp believes that in the U.S. alone it can double its store count to
more than 3,000 stores
f Significant square footage growth at TIP REIT will translate into strong
NOI growth
2009E – 2013E retail square footage CAGR of 6.8%
2009E – 2013E top-line CAGR of 9.3%
2009E – 2013E NOI CAGR of 9.3%
66
High Quality Locations and Superb Tenant
TIP REIT’s high quality locations and strong tenant profile will
support its premium valuation
f Attractive urban / suburban locations with strong demographics

3 Geographically diversified portfolio of approximately 1,438 stores (1) in 48
states
3 Multiple opportunities for alternative use of land sites
3 Ability to attract shadow development, enhancing value of ground leases
as sites evolve into in-fill locations
f Strong tenant in Target Corp

3 Leading brand, market share winner and “in demand” tenant
3 Investment grade tenant with strong financial outlook
3 Strong focus on maintaining and improving buildings
3 100% occupancy for 75 years
3 Low store churn rate
(1) Represents 2008E Target Corp stores on TIP REIT land
67
Large Market Cap — Must Own Yield Stock
TIP REIT will be the 62nd largest company in the S&P 500
S&P 500 Ranked by Market Cap S&P 100 Non-Financials Ranked by Dividend Yield (1)
Market Cap.
Rank Company ($mm) Rank Company Dividend Yield (%)
55 Home Depot 31,439 1 Pfizer 7.7
56 Devon Energy 30,851
2 Verizon Communications 7.3
3 Dow Chemical 7.0
57 Lockheed Martin 30,382 4 Bristol-Myers Squibb 7.0
58 Union Pacific 29,674 5 General Electric 7.0
6 Altria Group 6.7
59 Colgate-Palmolive 28,291
7 AT&T 6.5
60 American Express 27,898 8 Carnival 6.0
61 UnitedHealth Group 27,896 9 Eli Lilly 5.9
10 E.I. DuPont de Nemours 5.6
62 TIP REIT 27,500
11 Merck 5.6
63 Burlington Northern Santa Fe 27,386 12 Philip Morris International 5.3
64 Southern Co. 26,656 13 Caterpillar 5.0
14 TIP REIT (2) 4.9
65 E.I. DuPont de Nemours & Co. 26,466
15 Home Depot 4.9
16 Southern Co. 4.9
Given its market cap, TIP REIT will be owned by S&P 500 index funds,
large cap funds, real estate index funds, yield-oriented investors, and
investors seeking inflation-protected assets
(1) Represents non-financial companies in the S&P 500 with market caps greater than $20bn
(2) Based on 2009E dividends
68
Why are Treasury Inflation
Protected Securities (“TIPS”) the
Best Comparable Security to
TIP REIT?
How is TIP REIT Similar to TIPS?
TIP REIT has many of the same features of Treasury Inflation

Protected Securities (TIPS). However, TIP REIT has the added benefit
of a growth platform and no “Phantom tax”
TIP REIT 20-Year TIPS

Extremely low Backed by highly-rated Target Corp Backed by federal
probability of default $39bn of “Lease Security” or ~140% government
TIP REIT’s EV at 4.9% dividend yield
Inflation protection Rent income adjusted for CPI Payment based on CPI
adjusted principal
Long-term duration with 75-year lease term 20 years
required payments REIT dividend payment required Interest payment required by
by law law
Liquidity $28bn market cap Over $450bn market (1)
Growth platform Yes No
“Phantom tax” No Yes (tax on inflation adj. principal)
(1) Size of total TIPS market
70
TIP REIT Can Be Valued As Two Entities
TIP REIT stock can be valued as two entities: (1) an Inflation-Protected

Secured Bond that is nearly identical to TIPS and (2) a Land Developer
with a stable growth platform
TIP REIT
TIP-like Security Land Developer
Cash flows from the rental income generated Cash flows generated as the Preferred Land
by the existing, “static” ground lease portfolio Developer of new Target stores
Nearly identical to TIPS, given Exclusive right to be Target’s land
stability, security and the long-term, developer for the first two years
inflation-adjusted nature of the post Transaction
Master Lease
Preferred Land Developer after two
Inflation-linked rents based on the years
same CPI measure as used for TIPS
Attractive 6% – 8% square footage
Semi-annual dividend payments on growth for the foreseeable future
the same date as TIPS interest
Provide Facilities Management
payments
services as part of land developer
Highly liquid platform
71
TIP REIT: (1) Valuing the TIP-like Security
The TIP-like Security should trade at a small spread to TIPS

of 165 – 215 bps
Rate / Yield Spread to TIPS
20-year TIP Yield Today 3.0% —
Current TGT Unsecured

1.65% — 2.15% 165 bps — 215 bps
CDS @ 190bps ± 25 bps
TIP REIT: 165 bps — 215 bps

4.65% — 5.15%
TIP-like Security
The current TIPS yield of 3.0% implies an expected 20-year inflation rate of
only 1.4%. If the expected 20-year inflation rate increased to 2.0% and the
20-year Treasury rate remained constant, then the 20-year TIPS would
yield 2.4% and TIP REIT would yield 4.05% – 4.55%. The higher the inflation
rate, the more valuable TIP REIT will be
72
TIP REIT: (1) Valuing the TIP-like Security (cont’d)
Importantly, we believe our TIPS-based valuation analysis

conservatively measures TIP REIT’s credit risk
In the preceding analysis, we use Target’s unsecured CDS

spreads as the measure of credit risk under the TIP REIT
Master Lease.
We believe this is conservative because while TIP REIT has

Target’s (unsecured) credit, it also has $20bn of
unencumbered buildings that would revert to TIP REIT in the
event of tenant default.
We estimate that Target’s ground lease credit risk should be

materially lower than Target’s unsecured CDS spread
73
TIP REIT: (2) Valuing the Land Developer
TIP REIT’s land development opportunity can be valued based on

its growth platform value
f Growth Platform Valuation

Based on 20-year DCF analysis
Implied valuation at 4.65% – 5.15% cap rate and 10.5% – 12.5% discount rate
2029E terminal NOI: $2,560mm
Valuation range of $0.0bn – $2.3bn
Terminal
Value (1)
2009 2010 2011 2012 2013 ... 2029
Incremental Rental Revenues $74 $145 $257 $391 $551
After-tax Facilities Management Income 12 12 14 15 17
Platform G&A Expense (20) (21) (21) (22) (22)
Value
Total Capex (1,079) (1,008) (1,582) (1,863) (2,190)
Free Cash Flow from Platform ($1,013) ($872) ($1,332) ($1,478) ($1,644)
Terminal Value $55,047
Discount Rate 12.5% 10.5%
Terminal Cap Rate 5.15% 4.65%
Present Value of Platform – $2,293
(1) Based on 2029E NOI of $2,560mm and 4.65% cap rate
74
Valuation: TIP REIT in Total
Based on “TIPS”-based valuation of TIP REIT, the implied TIP REIT

valuation is $29bn, or $40/share today
Equity Value (1) Implied Cap Rate (2) Valuation

2008E Existing dividends:
TIP-like $1,354mm
$38/share 4.9%
Security Dividend yield: 4.65% – 5.15%
Valuation: $26bn – $29bn
2029E NOI: $2,560mm

Terminal cap rate:
4.65% – 5.15%
Land
$2/share Discount rate on 20-yr DCF:
Developer 10.5% – 12.5%
Valuation: $0.0bn – $2.3bn
Total 2009E NOI of $1,462mm

$40/share 5.1% Valuation: $26bn – $31bn or
TIP REIT $36/share – $44/share
(1) At mid-point valuation

(2) Implied yield calculated based on NOI / Implied value
75
Conservative Approach to Valuation
Our mid-point valuation price for TIP REIT of $38 (1) implies a 4.9%
dividend yield for the TIPS-like security and (2) excludes the value
of the Land Developer
$70
Using a “TIPS”-based
TIP REIT valuation analysis, our
mid-point valuation price
$38
of $38/share excludes the
value of TIP REIT’s
development platform
Target Corp
$32
TIP REIT Spin-off

Equity Value / Share
76
TIP REIT Presents an Attractive Arbitrage
Long: TIP REIT @ $38 (mid-point of valuation analysis) –

implies a ~490 bps dividend yield
Short: TIPS @ 300 bps yield
= Spread: 190 bps
Value: (1) Keep the 190 bps spread (nearly risk-free, given
the security offered by $20bn of unencumbered
buildings), or hedge Target unsecured risk with
CDS
(2) Get the Land Developer for free, worth

$2/share
77
How is this Trade Possible?
This arbitrage trade is feasible for several reasons:
f The TIPS market is highly liquid
f TIP REIT would be a highly liquid security with an initial market

capitalization of approximately $28 billion
f TIPS trade, even in the current low liquidity environment,

approximately $1 – $2 billion per day
Normal volume is typically $3 – $5 billion or more per day
f TIPS are readily borrowable and easily shortable
f TIP REIT would pay semi-annual dividends on the exact same

day that TIPS pay interest payments (Jan 15th and July 15th )
78
High Demand for Inflation-Protected Securities
There is a strong demand for liquid, inflation-protected, income-

oriented securities that offer higher yields than TIPS
f Pensions, endowments, retirement funds
f Income-oriented institutional funds
f Retail / individual investors

TIP REIT solves the “phantom tax” problem for individual
investors
f Depository institutions
f Arbitrage / hedge funds
f Insurance companies
f Strong international demand generated by recent European

pension reforms requiring returns linked to inflation
79
Why is TIP REIT More Valuable
than a Private Ground Lease?
Ground Leases Typically Trade from 5.50% to 6.25%
Precedent private ground lease transactions support cap rates of

approximately 5.50% – 6.25% for a typical ground lease with no
development pipeline
Building Lot Total Lease

Size Size Lease Term with
Transaction Tenant Location (Sq. Ft.) (Acres) Cap Rate Term Options Options
For Sale Lowe's Princeton, WV 116,000 14.16 6.61% 20 Years 6, Five-Year 50 Years
For Sale Kohl's Selinsgrove, PA 68,416 4.47 6.25% 20 Years 8, Five-Year 60 Years
For Sale Lowe's Derby, CT 152,890 13.10 5.50% 20 Years 8, Five-Year 60 Years
For Sale Lowe's Eugene, OR 137,933 12.30 6.25% 20 Years na na
For Sale Wal-Mart Albuquerque, NM 40,000 5.15 5.50% 20 Years 15, Five-Year 95 Years
For Sale Kohl's Fort Gratiot, MI 89,008 14.75 5.75% 20 Years 4, Five-Year 40 Years
Sold Target Fairlawn, OH 99,402 5.28 6.00% 20 Years 6, Five-Year 50 Years
Sold - March 27, 2008 Lowe's Whitehall, PA 166,609 14.24 6.05% 20 Years na na
Sold - March 23, 2008 Home Depot Austell, GA 130,948 14.46 5.75% 20 Years na na
Sold - October 2007 Kohl's Reno, NV 94,213 9.09 6.10% na na na
Sold - September 2007 Lowe's Escondido, CA 178,712 11.27 6.00% 20 Years 6, Five-Year 50 Years
Sold - July 2007 Lowe's Sayre, PA 111,371 12.50 6.25% 20 Years 8, Five-Year 60 Years
Mean 6.00%
Median 6.03%
High 6.61%
Low 5.50%
Source: LoopNet and other public filings
81
Why is TIP REIT Better than a Private Ground Lease?
TIP REIT offers better value to investors than a typical private

ground lease
f TIP REIT has several qualities which make it more attractive than a
private ground lease
3 Large cap, liquid public ownership
3 75-year Master Lease term (longer than most private ground leases)
3 1,438 retail properties (1) in 48 states
3 Inflation-protected rental stream with annual adjustments
3 Best-in-class retail tenant
3 Geographic diversity
f Unlike a static ground lease, TIP REIT also has growth, given its
dependable new store growth pipeline
Given the above factors, TIP REIT will trade at a lower cap rate than an
individual private ground lease
82
Why is TIP REIT Unlike Any
Existing REIT Today?
TIP REIT: Unlike Any Existing REIT Today
TIP REIT Large Cap REITs

Leverage None High: 63% Debt-to-TMC
Average: 47% Debt-to-TMC
Refinancing High – REITs have borrowed at low rates
Risk / Earnings None and are facing much higher rates and
Pressure refinancing risk for debt maturities
Transaction None / 100% rental income Sometimes

Income
Yes, typically 10% or more of

Re-leasing Risk None / 75-year lease
leases up for renewal annually
Maintenance
Capital None Yes, typically 8% of EBITDA
Growth Preferred vendor arrangement No preferred arrangement
“Lease Security” $20bn of unencumbered buildings, None. Owns both land buildings
given “land-only” structure
84
TIP REIT: No Maintenance Capital Requirements
TIP REIT’s “land-only” structure maximizes cash flow. Unlike large cap
real estate companies that spend on average 8% of EBITDA to
maintain depreciable properties, TIP REIT requires virtually no
maintenance capital
10 Largest REITs (1) Maint. Capex / EBITDA (2)

1 TIP REIT 0.0%
2 Simon Property Group 8.7%
3 Public Storage 5.5%
4 Vornado Realty Trust 13.4%
6 Boston Properties 11.8%
5 Equity Residential 6.9%
7 HCP, Inc. 6.9%
8 Kimco Realty Corporation 6.7%
9 ProLogis 8.5%
10 AvalonBay Communities 5.7%
Average (Excluding TIP REIT) 8.2%
Given TIP REIT’s de minimis maintenance capital requirements, TIP

REIT’s free cash flow should be compared to a real estate investment
trust’s AFFO, not the “FFO” metric
(1) By equity market value
(2) Source: Wall Street research; 2008E maintenance Capex / EBITDA
85
TIP REIT: Tremendous Size and Scale
TIP REIT owns land under 225mm square feet of buildings (1),
including 35mm sq. ft. of distribution facilities. TIP REIT would have a
larger equity market capitalization than any real estate company in the
U.S. today
Equity Total Owned
Market GLA (3)
10 Largest REITs (2) Value ($mm) (mm)
1 TIP REIT (1) 27,500 225
2 Simon Property Group 20,836 160
3 Public Storage 13,891 125
4 Vornado Realty Trust 13,023 81
6 Boston Properties 10,679 41
5 Equity Residential 10,479 na
7 HCP, Inc. 8,450 na
8 Kimco Realty Corporation 7,451 74
9 ProLogis 7,170 487
10 AvalonBay Communities 6,106 na
Given its size and scale, TIP REIT will be a “must own” stock for any
real estate equity investor
(1) Represents 2008E Target Corp stores, distribution facilities and warehouses on TIP REIT land
(2) By equity market value; based on a 20-day trading average as of 10/24/08
(3) Based on company filings as of Q2 2008A
86
TIP REIT versus Triple Net Lease REITs
TIP REIT is a much more stable, faster growing and higher quality
business than any Triple Net Lease REIT
TIP REIT Triple Net Lease REIT

Lease Type Land-only Master Lease Fee simple individual leases
and Terms 3 Highly secure given unencumbered 3 No “over-collateralization” and often
buildings worth $20bn unmarketable specialty use properties
3 75-year lease term 3 ~13-year avg. remaining lease term (1)
3 Individual leases have re-leasing risk
Asset Quality High quality / Multiple alternative uses Mixed quality / Limited alternative use
Tenant Quality Investment grade credit and improving Generally below investment grade
3 Leading GM Retailer credit and deteriorating
3Unproven, often specialty retail
Size and Scale Largest market equity cap Small equity market cap
Growth Preferred Vendor Agreement Limited growth / no formal arrangement

with a fast-growing, leading retailer
(1) Extension option detail not disclosed in company filings
87
Side-by-Side Comparison with Triple Net Lease REITs
TIP REIT
Leases: @ $38/share
Leased Property Land-only Land and Building Land and Building Land and Building
Lease Type Master Lease Individual Leases Individual Leases Individual Leases
Unencumbered Assets of 1,438 Stores and 25

None None None
the Tenants Distribution Facilities (1)
Effective “Over-collateralization” $20 billion of Buildings None None None

( 3) (3) ( 3), (4)
Avg. Remaining Lease Terms (Yrs) 75.0 13.0 13.0 13.0
Estimated Lease Turnover (‘08–’17) 0.0% 34.8% ( 4) 45.6% (4)

35.4% ( 4)
Size:
(2)
Equity Market Value ($mm) $27,500.0 $2,405.5 $1,523.3 $1,428.9
Enterprise Value ($mm) (2) $27,500.0 $4,183.6 $2,714.5 $2,934.4

(1) (4)
Gross Leasable Area (mm sq. ft.) 225 19 11 9
Leverage:
(5)
(Net Debt + Preferred) / EV 8.6% 42.5% 43.8% 50.7%
Growth Opportunity:
Preferred Vendor Agreement Yes No No No
Source: Company filings

(1) Represents 2008E Target Corp stores, distribution facilities and warehouses on TIP REIT land
(2) Triple net lease REITs are based on a 20-day trading average stock price as of 10/24/08
(3) Extension option detail not disclosed in company filings
(4) Based on 2007A
(5) Based on 2009E
88
Triple Net Lease REIT Tenants: A Closer Look
Leading tenants for triple net lease REITs are predominantly junk credits with
some in bankruptcy; real estate has limited alternative uses
Five Leading Tenants: (23% of Revenues) (1) Five Leading Tenants: (32% of Gross Assets) (1)
Buffets The Pantry 7 Movie theatre REIT with AMC
♦ Filed for bankruptcy in January 2008 ♦ Convenience store operator with
♦ Buffets restaurants have limited bankruptcy concerns Entertainment representing
alternative use ♦ Junk credit with bonds Caa1 rated by over 50% of gross leasable area
Moody’s trading at 14.5%
Kerasotes ShowPlace Theatres Circle K (Susser Holdings)
7 AMC has ~6.4x rent adjusted
♦ Mid-west movie theatre chain ♦ Struggling owner of convenience stores leverage and its bonds trade at
♦ Junk credit rated B1 / B- ♦ Susser is B+ rated by S&P with a negative a 14.1% yield
♦ Real estate has poor alternative use outlook
♦ Senior Unsecured Debt is B3 rated by 7 The movie theatre industry is
Moody’s
highly competitive, very
The Pantry Kerasotes ShowPlace Theatres consumer sensitive and
♦ Convenience store operator with ♦ Mid-west movie theatre chain
suffering secular pressures from
bankruptcy concerns ♦ Junk credit rated B1 / B-
♦ Junk credit with bonds Caa1 rated by ♦ Real estate has poor alternative use at-home-entertainment
Moody’s trading at 14.5%
La Petite Academy Mister Car Wash
7 Movie theatres have limited
♦ Child care/learning center operator ♦ Conveyor car wash chain started in alternative uses
♦ Operate 570+ education centers in 36 Houston, TX
states ♦ Portfolio of 60 car washes, 24 lube shop,
and 3 convenience stores
Children’s World Road Ranger
♦ Child care/learning center operator ♦ Private Mid-west convenience store
♦ Mostly operating in the Mid-west operator
♦ Portfolio of 73 locations in seven states
(1) Source: Wall Street research
89
REIT Multiples
TIP REIT will trade at a significant premium to any REIT because of its
stability, security, and certain growth
2009E EV/EBITDA
2009E EBITDA (x)
19.3x
15.7x
12.7x
6.0x
TIP REIT Large Cap REIT Triple Net Lease Target

Average REIT Average Standalone
'09E Dividend Yield 4.9%
Cap Rate 5.3%
Note: Target Standalone, Large Cap REITs, and Triple Net Lease REITs stock prices based on 20-day trading average as of 10/24/08
90
TIP REIT’s only commonality with other
REITs is its Tax-Exempt structure
91
Why Would this Transaction
Improve Target Corp’s Valuation?
Improves Store-level ROIC at Target Corp
Assuming the average store real estate costs $26mm, of which $13mm
is allocated to the land and $13mm to the building, we believe store
level return on investment would increase from 23.0% to 39.8%
Owned Store Level Operating Data and Assumptions Standalone Pro Forma
($mm) 2007A 2007A
Retail Sales per Avg. Store $40 $40
Estimated Four-Wall Operating Costs 34 35
Ground Lease Expense per Avg. Store -- 1(1)
Estimated Four-Wall EBIT per Avg. Store $6 $5
Margin (%) 15.0% 13.0%

Estimated Returns on Investment (%) 23.0% 39.8%
(1) Assumes $0.9mm of ground lease rent expense, based on $7/sq. ft. lease cost and 131k of store square footage, on average
93
Increases Target Corp’s EPS Growth Rate
Because of its higher ROIC, improved free cash flow profile, and more
efficient capital structure, Target Corp’s EPS growth will exceed that of
Target Standalone
Earnings per Share ($)

'09-'13
CAGR
2008 2009 2010 2011 2012 2013 (%)
PF Target Corp 1 $2.23 $2.67 $3.20 $3.70 $4.27

17.6%
EPS Growth (%) 19.5% 20.2% 15.5% 15.3%
Target Standalone 1, 2 $3.29 $3.40 $3.90 $4.57 $5.18 $5.89

14.7%
EPS Growth (%) 3.5% 14.8% 17.0% 13.4% 13.8%
Memo: Operating Assumptions:

Same-store sales 0.5% 3.3% 3.5% 3.5% 3.5%
Sq. ft. growth 4.7% 4.1% 6.0% 6.5% 7.0%
Gross Margin 30.0% 30.1% 30.2% 30.2% 30.2%
SG&A as % of sales 20.2% 20.1% 20.0% 20.0% 20.0%
(2) Assumes Target Standalone maintains existing dividend policy
94
Increases Target Corp’s EPS Growth Rate (cont’d)
Pro forma for the Transaction, Target Corp’s long-term EPS growth
rate would be at the top of its peer group
Long-term EPS Growth (%)
21
17.6%(1),(2),(3)
18
16.0%
15.0% 14.7%(1),(2),(3)
14.5% Average(4) = 11.9%
15 14.0% 14.0%
13.5%
13.0% 12.9%
12.0% 12.0% 12.0%
12 11.0%
10.0% 10.0%
9.0% 9.0%
9 8.0% 8.0%
0
Whole Kohl's CVS Lowe's Staples Walgreens TJX Costco Safeway Home Best Buy Wal-Mart Sears BJ's Kroger JCPenney SUPERVALU Macy’s
Foods Depot
Corp Standalone
(2) Assumes additional future share buyback at a constant forward P/E of 16.0x
(4) Excludes Target
Source: FactSet and Company filings for Retailers, excluding Target
95
Multiple Expansion at Target Corp
Target Corp will trade at a higher multiple than current Target Standalone
due to a powerful combination of improved ROIC and EPS growth
ROIC and EPS Growth – key value drivers with a direct impact on
multiples
f Improving both metrics concurrently is a powerful value creating

combination which should lead to multiple expansion
More efficient cash generation results in higher ROIC at virtually

same level of risk, resulting in substantial economic value added
Increased returns and more efficient cash flow generation allow for
additional share buybacks that foster EPS growth
f “Growth does indeed drive multiples, but only when combined with a
healthy return on invested capital.” (Tim Koller et. al, McKinsey & Co.)
96
Why is this Transaction Ideally
Suited for Target?
“Land-only” REIT Spin-off is Value Maximizing for
Retailers Meeting Certain Criteria
To create the most value from a “Land-only” REIT spin-off, a retailer must meet
certain criteria including very high land ownership, predominantly U.S.-based
real estate and retail sales, strong square footage growth in the U.S., and low
valuation multiples. Target meets ALL of these criteria
Retailer Criteria: Commentary: Application to Target:
f Retailers that own most of their land and 3 Target owns more of its store land
High Land Ownership buildings are ideally suited for a “Land- and buildings than any other big box
only” REIT spin-off retailer in the U.S.
f Retailers with strong growth opportunities 3 Target is one of the fastest growing
in the U.S. can provide a dependable U.S. big box retailers in the country
Strong Square Footage
development pipeline for the “Land-only” with mid-to-high single digit expected
Growth Opportunity in the U.S. sq. ft. long-term growth for the
REIT, enhancing the REIT’s value
foreseeable future
f International real estate is not well suited 3 Target’s real estate is exclusively
Predominantly U.S. Real Estate for a tax-free REIT spin-off, given based in the U.S.
and U.S. Retail Sales regulatory issues and tax complications 3 Target’s EBITDA is generated
exclusively from U.S.-based sales
f Retailers trading at low EV / EBITDA 3 Target trades at 6.0x ’09E EBITDA

Low EV / EBITDA Multiple
multiples can release the greatest value versus large cap REITs at 15.7x
Relative to REITs from the “Land-only” REIT spin-off EBITDA and TIP REIT at 19.3x EBITDA
Strong, Stable Retail Operations f Retailers with strong and stable 3 Target is a market share winner with
operations will be a high-quality tenant leading retail operations, stable FCF
with Attractive Credit Profile
and strong management
98
High Quality, Stable Tenant
Target is ideally suited as a tenant for TIP REIT because of its high
business quality and stable operations, even during a recession
High Business Quality Stable Cash Flows Even Today

Best management team in the Discount retailer with prices
retail industry within approximately 1% – 3% of
Wal-Mart on comparable goods
Leading brand and strong
marketing capabilities Beneficiary of trade down
Best-in-class merchandisers Nearly 40% of sales are

consumables / non-discretionary
Quality suburban and urban in-
fill locations Less fashion risk than a
department store
Solid infrastructure, leading-
edge retailing systems Less cyclicality than a home
improvement retailer
~10% EBITDAR margins
Higher margins than grocery
stores and warehouse clubs
99
Target: Beneficiary of Trade Down
Consider the $1,235 patent-leather satchel with golden hardware designed by Anya
Hindmarch. Mary Hall, a marketing manager at I.B.M. in Redondo Beach, Calif., heard
its siren call. Then she went to Target to purchase a similarly shiny purse, made
out of polyvinyl chloride, by the same designer. Price: $49.99. “In the current
economy, I thought I would reform,” Ms. Hall said. Welcome to “recession chic” and
its personification, the “recessionista,” the new name for the style maven on a budget.
New York Times, 10/24/2008
Indeed, many diehard Nordstrom fans came prepared to open up their purses for $545
Moschino shoes and $1,495 Valentino handbags. Kim Calloway, a 38-year-old senior
accountant, arrived at 7:50 a.m. and walked out with $1,200 worth of jeans, cosmetics
and skin care products, noting that she hasn't cut back on her spending. "I probably
should, but I probably won't," she said. Others, warier about the economy, came more
for the spectacle. Charlene Stone, 49, of Wexford, an affluent suburb, didn't buy
anything but enjoyed looking. Lately, she has been shopping more at discounter
Target for her daughter's clothes. "I'm about the bargains," she said.
Wall Street Journal, 10/25/2008
100
What if TGT’s Valuation Normalizes to Historical Levels?
When reviewing Target’s historical EV / EBITDA multiples, on average,

Target has not been afforded the valuation levels of a typical Large
Cap REIT or the expected valuation multiple of TIP REIT
Target’s EV / Forward EBITDA Multiple REIT Forward EV / EBITDA Multiple
8.2x 6.0x 19.3x 15.7x

Last 5 year @ $40 (1) TIP REIT Large Cap
average @ 38/share REITs (1)
f Even if Target’s valuation multiples normalized over the next 12 – 18 months to

historical levels, Target’s Standalone valuation multiples would never reach the
expected EV/EBITDA multiples of TIP REIT
TIP REIT does not pay taxes and has no maintenance capital requirements
f Importantly, with 22% of Target’s existing EBITDA representing the ground lease
rents available to TIP REIT, the separation of TIP REIT would allow for significant
shareholder value creation for Target shareholders

101
What are the Risks?
Potential Concerns: Credit Ratings
Concern Mitigating Factor
Long-term Target Corp’s rating could be First two years of land development
Credit Rating temporarily lowered to a mid- capital will be contractually funded by
to-high BBB category TIP REIT. Thereafter, TIP REIT will be
the preferred land developer
The Transaction’s tax efficiencies
improve free cash flow at Target Corp
(ground lease is expensed while land
is not depreciable)
As such, Target Corp will not need

access to long-term capital because it
will generate $2bn of FCF after all
capex in the first two years alone
Cash flow will be primarily used to de-

lever to an “A” category rating after
two years
103
Potential Concerns: Credit Ratings / Inflation
Concern Mitigating Factor
Short-term Target’s commercial paper $2bn untapped line of credit which

ratings could be temporarily expires in April 2012
Credit Rating lowered to A2 / P2 category
Is the value creation worth the higher
cost of short–term financing using the
line of credit?
Line of credit financing cost L+14bps
Est. A1 commercial paper cost L-175bps
Approximate Spread 190bps
$ in millions, except per share data:
Short-term working capital needs $1,500

Months / year 3
Est. Incremental costs (pre tax) 1.9%
Estimated annual cost (after tax) $4.4
Estimated annual cost/share $0.006
Inflation- In periods of high inflation, Based on the current TIPS yield,

ground rent expense could Target can hedge 20-year inflation risk
adjusted Rent increase at ~140bps
104
Pros and Cons of this Transaction
Pros Cons
Instantly and meaningfully accretive on ⌧ Temporarily lowers Target Corp’s
all key measures (EPS, FCF/share) ratings from A+ / A2 to Mid - High
BBB/Baa
Improves ROIC and EPS growth at Target
Corp
Reduces taxes by ~$520mm in ’09E
Mitigating Factors:
More than triples dividends: $0.60/share
today to $1.86/share in ’09E Target Corp remains investment grade
Improves capital access and decreases Target Corp can pay down debt and
the need for growth capital at Target regain an “A” category credit rating
Corp profile in two years
Increases the stock price from $40/share

to $70/share today
We believe the Pros of doing this Transaction far outweigh the Cons of
having a temporarily lower rating. Post-Transaction, the Company will
have improved access to capital and lower capital needs. As such, credit
ratings will be less material to Target Corp going forward
105
Another way to pose the question:
Would you pursue this Transaction if

it were a Strategic Acquisition?
106
What If this Were an Acquisition?
Acquisition Rationale Acquisition Risks

Instantly and meaningfully accretive on ⌧ Temporarily lowers Target Corp’s
all key measures (EPS, FCF/share) ratings from A+ / A2 to Mid - High
Improves ROIC and EPS growth at Target BBB/Baa
Corp
Reduces taxes by ~$520mm in ’09E
Mitigating Factors:
More than triples dividends: $0.60/share
today to $1.86/share in ‘09 Target Corp remains investment
Improves capital access and decreases
grade
the need for growth capital at Target Target Corp can pay down debt and
Corp achieve a higher credit rating
Increases the stock price from $40/share in two years
to $70/share today
It is common for a company to pursue an acquisition that greatly

increases shareholder value and temporarily lowers ratings to an
acceptable investment grade level
107
Mitigating Risk
However, if in the future, unforeseen circumstances dictate

otherwise, TIP REIT could be collapsed back into the current
structure
f In the highly unlikely event that a recombination of Target’s real

estate with its retail operation would become desirable at some
point in the future, an unwind the structure can be effectuated:
Post REIT Spin-off: An unwind of the structure could be

accomplished with an agreed-upon tax-free merger by the two
companies
108
Other Potential Questions
What is the Governance Structure of TIP REIT?
TIP REIT would be incorporated where most REITs are

incorporated: Maryland
f Jurisdiction: We believe Maryland is the most favorable jurisdiction

for TIP REIT
f Ownership Restrictions: The certificate of incorporation of TIP REIT

would include a customary 9.9% actual and constructive ownership
limit and other provisions customary for REITs to assure compliance
with REIT ownership and related-party rent rules
f Other Governance Provisions: Similar to Target Corp’s existing

governance rules except as the Board may otherwise determine in
connection with the Transaction
110
Will Consents Be Needed?
No Shareholder or Bondholder consents are needed

f Minnesota Corporate Statute Requiring Shareholder Vote for Transfer of All or Substantially All
Assets
The Transaction meets Minnesota’s safe harbor for not being a transfer of “all or substantially all
assets” and therefore does not trigger shareholder vote
f Bond Indenture Covenants

Covenant restricting transfer of assets substantially as an entirety:
The Transaction – which only involves Target’s land – is not a transfer of assets
“substantially as an entirety” and therefore does not breach this covenant
Covenant restricting sale (or transfer) and leaseback of an “Operating Property” with an entity other
than a restricted subsidiary:
The transfer/leaseback is with an entity that at the time of the transfer/leaseback is a
restricted subsidiary and it is therefore exempt from this covenant (the subsequent spin off
is permitted since the indenture does not include any dividend stopper)
In addition, none of the land parcels being transferred is an Operating Property subject to
this covenant since none has a net book value greater than 0.35% of Consolidated Net
Tangible Assets
Also, if the Board designates subsidiaries currently holding land to be unrestricted
subsidiaries as permitted by the indenture, the covenant will not apply to a transfer /
leaseback by those subsidiaries
No other indenture issues identified
111
Q&A
Appendix
Detailed Valuation Analysis
Valuation Summary
$83
$80
$70
TIP REIT
$60 74% TIP REIT $42
$/Share
$40 $38
$40
Target Target Corp

$42
$32
$0
Target
Corp

'09E P/E 11.8x 14.2x '10E P/E 15.6x
Equity Value ($bn) $27.5 Equity Value ($bn) $30

TIP REIT
Enterprise Value ($bn) $27.5 Enterprise Value ($bn) $31


115
Valuation Analysis – TIP REIT
TIP REIT Summary of Valuation Analysis: Today
Various methodologies imply a TIP REIT reference range of $25 – $30bn, or $35
– $42/share today
Valuation Range
($25bn – $30bn)
Net Asset – 4.65% – 5.15% Dividend Yield on Existing Ground Lease

Value – Dividend Yield Based on Sum of CDS Spread and TIPS Yield
– CY2008 Existing Dividends: $1,354mm 26.3 31.4
(TIPS)
– 20-year DCF Analysis of Platform
– 10.50% – 12.50% Discount Rate on Platform
Net Asset – 5.50% – 6.25% Cap Rate on Existing Ground Lease

Value – Cap Rate Range Based on Precedent Transactions
(Precedents) – CY2009 Existing NOI: $1,354mm 21.7 25.8
Discounted – 8.0% – 10.0% WACC 27.8 33.6

Cash Flow – 4.65% – 5.15% Terminal Cap Rate
15.0 20.0 25.0 30.0 35.0 40.0
Equity Value ($bn)

Implied Multiples: ($mm) $25.0 $27.5 $30.0
CY2009 AFFO 1,344 18.6x 20.5x 22.3x
CY2009 EBITDA 1,427 17.5x 19.3x 21.0x
CY2009 Div. Yield 1,344 5.4% 4.9% 4.5%
Cap Rate 1,462 5.8% 5.3% 4.9%
117
TIP REIT Summary Income Statement
Pro Forma Calendar Year, CAGR
($mm, except as noted) CY2008 2009 2010 2011 2012 2013 '09 - '13
Gross TIP REIT Revenues from Ground-leased Store Land 1,325 1,398 1,501 1,645 1,811 2,004 9.4%
Gross TIP REIT Revenues from Ground-leased DCs & WHs Land 44 46 48 51 55 59 6.3%
Total Gross TIP REIT Revenues 1,369 1,444 1,549 1,696 1,866 2,063 9.3%
Total TIP REIT Net Rental Revenues 1,369 1,444 1,549 1,696 1,866 2,063 9.3%
% of Target Corp Retail Sales 2.1% 2.1% 2.1% 2.1% 2.1% 2.1%
Plus: Facilities Management Income 144 144 155 170 187 207
Less: Facilities Management Expense (125) (125) (134) (147) (162) (180)
Net Facilities Management Income 19 19 20 22 24 27 9.5%
Net Operating Income 1,388 1,462 1,569 1,718 1,890 2,090 9.3%
Less: G&A Expense (20) (20) (21) (21) (22) (22)

Less: Incremental G&A Cost (15) (15) (15) (16) (16) (17)
EBITDA 1,353 1,427 1,533 1,681 1,853 2,051 9.5%
Less: Depreciation & Amortization (42) (56) (68) (88) (111) (139)
Less: Interest Expense (205) (188) (221) (316) (428) (559)
Less: Taxes on Facilities Mgmt. Income 38% (7) (7) (8) (8) (9) (10)
Net Income 1,099 1,177 1,235 1,268 1,304 1,342 3.3%
Normalized Net Income (1) 1,211 1,289 1,331 1,364 1,400 1,438 2.8%
Ending Shares Outstanding 721.9 721.9 721.9 721.9 721.9 721.9

Earnings per Share $1.52 $1.63 $1.71 $1.76 $1.81 $1.86 3.3%
Normalized Earnings per Share (1) $1.68 $1.79 $1.84 $1.89 $1.94 $1.99 2.8%
% AFFO
Dividends on Common 100.0% 1,141 1,232 1,304 1,356 1,415 1,481 4.7%
Special Dividends - 1,600 - - - -
Normalized Dividends (1) 1,253 1,344 1,400 1,452 1,511 1,577 4.1%
Normalized Dividends per Share (1) $1.74 $1.86 $1.94 $2.01 $2.09 $2.18 4.1%
(1) Normalized to exclude incremental interest expense due to CY2009 cash E&P distribution
118
TIP REIT Summary Balance Sheet/CF Statement
Calendar Year,
($mm, except as noted) 2009 2010 2011 2012 2013
EBITDA 1,427 1,533 1,681 1,853 2,051
Less: Interest Expense (188) (221) (316) (428) (559)
Less: Taxes on Facilities Mgmt. Income (7) (8) (8) (9) (10)
Less: Development Capex (1,079) (1,008) (1,582) (1,863) (2,190)
Total Free Cash Flow 154 295 (226) (447) (709)
Total Cash 3 3 3 3 3
Total Debt 2,682 3,690 5,272 7,135 9,325
Total Debt / EBITDA 1.9x 2.4x 3.1x 3.9x 4.5x
EBITDA / Interest Expense 7.6x 6.9x 5.3x 4.3x 3.7x
Total Debt / Total Real Estate Value 11.1% 14.2% 18.6% 22.9% 27.0%
Ending Shares Outstanding 722 722 722 722 722
119
TIP REIT Valuation Matrix
Set forth below is a valuation matrix that demonstrates TIP REIT’s trading
multiples at various values within the reference range
Value per Share

($mm) $34.50 $36.50 $38.09 $40.50 $42.50
Shares O/S
EQUITY VALUE 721.9 24,907 26,351 27,500 29,238 30,682
Multiples of: Metrics

(1)
CY 2009 FFO 1,344 18.5x 19.6x 20.5x 21.7x 22.8x
(1)
CY 2010 FFO 1,400 17.8x 18.8x 19.6x 20.9x 21.9x
(1)
CY 2011 FFO 1,452 17.1x 18.1x 18.9x 20.1x 21.1x
(1)
CY 2009 AFFO 1,344 18.5x 19.6x 20.5x 21.7x 22.8x
(1)
CY 2010 AFFO 1,400 17.8x 18.8x 19.6x 20.9x 21.9x
(1)
CY 2011 AFFO 1,452 17.1x 18.1x 18.9x 20.1x 21.1x
Dividend Yield Assuming Payout Ratio of:

80% of CY 2009 AFFO 1,076 4.3% 4.1% 3.9% 3.7% 3.5%
90% of CY 2009 AFFO 1,210 4.9% 4.6% 4.4% 4.1% 3.9%
100% of CY 2009 AFFO 1,344 5.4% 5.1% 4.9% 4.6% 4.4%
Implied Value:
Implied Value of Land / Blended Sq. Ft. 225 $111 $117 $122 $130 $137
(1) Normalized to exclude incremental interest expense due to CY2009 cash E&P distributions
120
TIP REIT NAV (TIPS) Analysis
The implied TIP REIT valuation range on TIPS-based NAV analysis is $26 –
$31bn, or $36 – $44/share today
f Existing Lease Valuation

Inflation-indexed rent growth allows for a “TIPS-like” risk/return
Dividend yield range based on theoretical analysis:
TIPS yield of 3.00% + Target unsecured CDS of 1.65% – 2.15% = Total
yield of 4.65% – 5.15%
Implied valuation at 4.65% – 5.15% dividend yield range
2008E dividend: $1,354mm
Valuation range of $26bn – $29bn
f Platform Valuation
121
TIP REIT NAV (TIPS) Analysis (cont’d)
The implied TIP REIT valuation range on TIPS-based NAV analysis is $26 –
$31bn, or $36 – $44/share today
($mm, except per share data) 2008
Rental Revenues - Store Land $1,325

Existing
Rental Revenues - DCs & WHs Land 44
Ground
Lease Incremental Standalone Costs (15)
Rental Revenues from Existing Ground Lease $1,354
Dividend Yield 5.15% 4.65%
+ Present Value of Existing Ground Lease $26,300 $29,128
Terminal
Value (1)
2009 2010 2011 2012 2013 ... 2029
Value
Total Capex (1,079) (1,008) (1,582) (1,863) (2,190)
–
Existing Ground Lease $26,300 $29,128
Platform Value – 2,293
Total TIP Implied Enterprise Value $26,300 $31,421
REIT Value Net Debt – –
Implied Equity Value $26,300 $31,421
Value per Share $36 $44
122
TIP REIT NAV (Ground Lease Precedents) Analysis
The implied TIP REIT valuation range on Ground Lease Precedents-based NAV
analysis is $22 – $26bn, or $30 – $36/share today
f Existing Lease Valuation

Cap rate range based on ground lease precedents: 5.50% – 6.25%
Implied valuation at 5.50% – 6.25% cap rate range
2009E NOI: $1,354mm
Valuation range of $22bn – $25bn
f Platform Valuation
123
TIP REIT NAV (Ground Lease Precedents) Analysis (cont’d)
The implied TIP REIT valuation range on Ground Lease Precedents-based NAV
analysis is $22 – $26bn, or $30 – $36/share today
($mm, except per share data) 2009
Rental Revenues - Store Land $1,325

Existing
Rental Revenues - DCs & WHs Land 44
Ground
Lease Incremental Standalone Costs (15)
Rental Revenues from Existing Ground Lease $1,354
Cap Rate 6.25% 5.50%
+ Present Value of Existing Ground Lease $21,671 $24,626
Terminal
Value (1)
2009 2010 2011 2012 2013 ... 2029
Value
Total Capex (1,079) (1,008) (1,582) (1,863) (2,190)
–
Existing Ground Lease $21,671 $24,626
Platform Value – 1,138
Total TIP Implied Enterprise Value $21,671 $25,764
REIT Value Net Debt – –
Implied Equity Value $21,671 $25,764
Value per Share $30 $36
124
TIP REIT DCF Analysis
The implied TIP REIT valuation range based on DCF analysis is $28 – $34bn, or
$39 – $47/share today
Projected Calendar Year, CAGR
($mm) 2009 2010 2011 2012 2013 '09 - '13
Rent (Cash) - Store Land 1,398 1,501 1,645 1,811 2,004 9.4%
Rent (Cash) - DCs & WHs Land 46 48 51 55 59 6.3%
Net Facilities Management Income 19 20 22 24 27 9.5%
Less: G&A Expense (35) (36) (37) (38) (39) 2.5%
EBITDA 1,427 1,533 1,681 1,853 2,051 9.5%
Less: Taxes on Facilities Mgmt. Income (7) (8) (8) (9) (10) 9.5%
Less: Development Capex (1,079) (1,008) (1,582) (1,863) (2,190) 19.4%
Less: Maintenance Capex - - - - - na
UNLEVERED FREE CASH FLOWS 341 517 91 (19) (149) na
ILLUSTRATIVE VALUATION
Implied Equity Value
($ in millions, except per share amounts)
Terminal NOI - Store Land ¹ 2,209 Terminal
Terminal Cap Rate - Store Land 4.9% Store Discount Rate
Terminal Value - Store Land 45,072 Cap Rate 8.00% 9.00% 10.00%
5.15% 30,450 29,107 27,836
Terminal NOI - DCs & WHs Land ² 65 4.90% 31,939 30,529 29,195
Terminal Cap Rate - DCs & WHs Land 8.5% 4.65% 33,588 32,104 30,700
Terminal Value - DCs & WHs Land 764
Implied Perpetuity Growth Rate (%) ⁴
Present Value of TV 29,791
Sum of Discounted Cash Flows (2009-2013) ³ 739 Terminal
Implied Enterprise Value 30,529 Store Discount Rate
Less: Debt (01/01/09) - Cap Rate 8.00% 9.00% 10.00%
Plus: Cash (01/01/09) - 5.15% 2.6 3.6 4.5
Implied Equity Value 30,529 4.90% 2.9 3.8 4.7
4.65% 3.1 4.1 5.0
(1) Assumes store land 2014E NOI growth equal to 9.4%: NOI includes store related net facilities management income
(2) Assumes DCs & WHs land 2014E NOI growth equal to 6.3% NOI includes DCs & WHs related net facilities management income
(3) Assumes mid-year convention
(4) Normalized to exclude impact of development Capex in exit year
125
TIP REIT Valuation—12-Month Price Target
Various methodologies imply a TIP REIT reference range of $27.5 – $32.5bn, or

$38 – $45/share 12 months from today
Valuation Range
($27.5bn – $32.5bn)
Net Asset – 4.65% – 5.15% Dividend Yield on Existing Ground Lease

Value – Dividend Yield Based on Sum of CDS Spread and TIPS Yield
– CY2009 Existing Dividends: $1,429mm 28.0 33.3
(TIPS)
– Includes normalized dividends of $1,344mm in CY2009
Net Asset – 5.50% – 6.25% Cap Rate on Existing Ground Lease

Value – Cap Rate Range Based on Precedent Transactions
(Precedents) – CY2010 Existing NOI: $1,464mm 23.7 28.0
Discounted – 8.0% – 10.0% WACC 31.2 37.4

Cash Flow – 4.65% – 5.15% Terminal Cap Rate
17.5 22.5 27.5 32.5 37.5 42.5
Equity Value ($bn)

Implied Multiples: ($mm) $27.5 $30.0 $32.5
CY2010 AFFO 1,400 19.6x 21.4x 23.2x
CY2010 EBITDA 1,533 18.6x 20.3x 21.9x
CY2010 Div. Yield 1,400 5.1% 4.7% 4.3%
Cap Rate 1,569 5.5% 5.0% 4.7%
126
Valuation Analysis – Target Corp
Target Corp Summary Valuation Analysis: Today
The implied valuation range for Target Corp based on several methodologies
outlined below is $20.3 – $25.3bn, or $28 – $35/share today
Valuation Range
($20.3bn–$25.3bn)
Trading Data – – 5.5–7.5x EBITDA 17.5 27.8

Retailers 1 – CY2009 EBITDA: $5,172mm
(EV/EBITDA) – Current Multiple is 6.0x
Trading Data – – 11.0–14.5x EPS 17.7 23.4

Retailers 1 – CY2009 EPS: $2.23
(P/E) – Current Multiple is 11.8x
Trading Data – – 5 Year P/E of 15.9x and 5 Year EV/EBITDA of 8.2x 25.6 31.5
Target 5 Year Historical – CY2009 EPS: $2.23 and CY2009 EBITDA: $5,172mm
(P/E and EV/EBITDA) – Current P/E is 11.8x and current EV/EBITDA is 6.0x
Discounted – 9.0–11.0% WACC

Cash Flow – 6.0–7.0x Terminal EBITDA Multiple 26.4 35.4
15.0 25.0 35.0

Equity Value ($bn)
($bn)
Equity Value 20.3 22.8 25.3
Enterprise Value 31.3 33.8 36.3
Share Price ($/Share) $28 $32 $35
'09 P/E 12.6x 14.2x 15.7x
'10 P/E 10.6x 11.8x 13.1x
'09 PEG 0.7x 0.8x 0.9x
'10 PEG 0.6x 0.7x 0.7x
'09 EV/EBITDA 6.0x 6.5x 7.0x
(1) Based on 20-day average as of October 24, 2008 '10 EV/EBITDA 5.4x 5.9x 6.3x
128
Target Corp Summary Income Statement
Projected Calendar Year, CAGR

($mm) PF2008 2009E 2010E 2011E 2012E 2013E '09-'13
Retail Sales 64,892 68,249 73,356 80,479 88,710 98,241 9.5%
Retail Sales Growth(%) 5.6% 5.2% 7.5% 9.7% 10.2% 10.7%
COGS (45,459) (47,777) (51,279) (56,177) (61,919) (68,563)

Gross Margin (%) 29.9% 30.0% 30.1% 30.2% 30.2% 30.2%
SG&A (13,038) (13,814) (14,740) (16,093) (17,739) (19,646)
SG&A as % of Sales 20.1% 20.2% 20.1% 20.0% 20.0% 20.0%
Retail EBITDAR 6,395 6,657 7,337 8,208 9,051 10,033

Retail EBITDAR Margin (%) 9.9% 9.8% 10.0% 10.2% 10.2% 10.2%
Credit EBITDAR 143 150 161 177 195 216
Incremental Facility Management Services Expense (19) (19) (20) (22) (24) (27)
EBITDAR 6,519 6,789 7,478 8,363 9,221 10,222 10.8%
EBITDAR Margin (%) 10.0% 9.9% 10.2% 10.4% 10.4% 10.4%
Current Rent Expense 169 173 178 182 187 191

Additional Rent Expense 1,369 1,444 1,549 1,696 1,866 2,063
Pro Forma EBITDA 4,980 5,172 5,751 6,485 7,169 7,968 11.4%
EBITDA Margin (%) 7.7% 7.6% 7.8% 8.1% 8.1% 8.1%
Depreciation & Amortization 1,765 1,884 2,017 2,199 2,410 2,654

Net Interest (Income) / Expense 515 673 611 531 509 623
Income Tax Provision 1,037 1,004 1,199 1,441 1,632 1,802
Net Income 1,663 1,611 1,924 2,312 2,618 2,890 15.7%
Net Income Margin (%) 2.6% 2.4% 2.6% 2.9% 3.0% 2.9%
Weighted Average Shares Outstanding 766 722 722 722 707 677
Earnings per Share ($) $2.17 $2.23 $2.67 $3.20 $3.70 $4.27 17.6%
129
Target Corp Summary Balance Sheet/CF Statement
Significant Free Cash Flow generation allows Target Corp to de-leverage to

2.8x Lease Adj. Debt/EBITDAR
Projected Calendar Year,

($mm) PF2008 2009E 2010E 2011E 2012E 2013E
EBITDA 4,980 5,172 5,751 6,485 7,169 7,968
Less: Taxes (1,037) (1,004) (1,199) (1,441) (1,632) (1,802)
Plus: Decrease in Net Working Capital 79 79 120 167 193 224
Plus: Other 73 73 73 73 73 73
Less: Maintenance Capex (1,714) (1,714) (1,827) (1,785) (1,968) (2,179)
Maintenance Free Cash Flow 1,866 1,933 2,307 2,967 3,327 3,662
Less: Growth Capex (1,112) (1,112) (1,023) (1,615) (1,902) (2,237)
Total Free Cash Flow 754 821 1,284 1,352 1,424 1,425
Total Cash 500 682 734 805 887 982

Total Debt 11,455 10,817 9,584 8,303 8,938 10,078
Lease Adj. Debt/EBITDAR 3.6x 3.5x 3.1x 2.8x 2.8x 2.8x

Debt/EBITDA 2.3x 2.1x 1.7x 1.3x 1.2x 1.3x
EBITDAR/(Interest+Rent) 3.2x 3.0x 3.2x 3.5x 3.6x 3.6x
EBITDA/Interest 9.7x 7.7x 9.4x 12.2x 14.1x 12.8x
Ending Shares Outstanding 722 722 722 722 693 662

Weighted Average Shares Outstanding 766 722 722 722 707 677
130
Target Corp Valuation Matrix
Set forth below is a valuation matrix that demonstrates Target Corp’s trading
multiples at various stock prices
Value per Share
Valuation Range ($mm) $28.00 $30.00 $31.58 $33.00 $35.00
Shares O/S
EQUITY VALUE 721.9 20,214 21,658 22,800 23,824 25,268

Net Debt (1/1/09) 10,955 10,955 10,955 10,955 10,955
ENTERPRISE VALUE 31,169 32,613 33,755 34,779 36,223
Multiples of: Metrics

CY 2008 EBITDA 4,980 6.3x 6.5x 6.8x 7.0x 7.3x
CY 2009 EBITDA 5,172 6.0x 6.3x 6.5x 6.7x 7.0x
CY 2010 EBITDA 5,751 5.4x 5.7x 5.9x 6.0x 6.3x
CY 2008 Earnings $2.17 12.9x 13.8x 14.5x 15.2x 16.1x

CY 2009 PEG 17.6% 0.7x 0.8x 0.8x 0.8x 0.9x

CY 2010 PEG 17.6% 0.6x 0.6x 0.7x 0.7x 0.7x
131
Trading Data For Other Retailers (1)
Total Debt/
EV/CY08E EV/CY09E EV/CY10E P/E Ratio PEG Ratio
Stock % of Equity IBES CY08E Adj.
(2 )
Price 52wk Value EV Sales EBITDA Sales EBITDA Sales EBITDA CY09E CY10E CY09E CY10E LTG EBITDA Debt/CY08E
Company name ($) High ($mm) ($mm) (x) (x) (x) (x) (x) (x) (x) (x) (x) (x) (%) (x) EBITDAR (x)
Target –
Standalone
(3) 39.98 28,863 39,818 0.61 6.3 0.58 6.0 0.54 5.5 11.8 10.2 0.8 0.7 14.7 (5) 1.8 2.0
Target Corp( 4) 31.58 – 22,800 33,755 0.52 6.8 0.49 6.5 0.46 5.9 14.2 11.8 0.8 0.7 17.6 (5) 2.3 3.6
Discounters
Wal-Mart 54.91 86.0 216,168 255,900 0.63 8.4 0.58 7.8 0.55 7.4 14.4 13.0 1.3 1.2 11.0 1.5 1.8
Mean/Median 0.63 8.4 0.58 7.8 0.55 7.4 14.4 13.0 1.3 1.2 11.0 1.5 1.8
Supermarkets
Kroger 26.08 84.2 17,196 24,618 0.32 6.2 0.30 5.8 0.28 5.6 12.3 11.2 1.4 1.2 9.0 1.9 2.8
Safeway 22.39 62.2 9,617 15,105 0.34 4.9 0.33 4.8 0.32 4.7 9.3 8.8 0.8 0.7 12.0 1.9 2.7
SUPERVALU 18.32 42.3 3,879 12,755 0.28 4.8 0.28 4.8 0.28 4.7 6.5 6.1 0.8 0.8 8.0 3.4 4.0
Whole Foods 15.67 30.7 2,198 3,013 0.37 5.8 0.34 5.2 0.31 4.9 14.1 11.2 0.9 0.7 16.0 1.6 3.4
Mean 0.33 5.4 0.31 5.2 0.30 5.0 10.6 9.3 1.0 0.9 11.3 2.2 3.2
Median 0.33 5.4 0.32 5.0 0.30 4.8 10.8 10.0 0.8 0.7 10.5 1.9 3.1
Department Stores
Macy's 12.31 36.5 5,176 14,260 0.57 5.0 0.58 5.3 0.58 5.3 9.8 9.1 1.2 1.1 8.0 3.7 4.0
Kohl's 35.31 60.8 10,769 12,545 0.75 5.8 0.72 5.7 0.69 5.4 11.3 10.3 0.8 0.7 15.0 1.0 2.1
Sears 70.38 50.5 8,897 11,581 0.24 6.4 0.25 7.2 0.25 7.3 32.4 43.9 3.2 4.4 10.0 2.1 4.0
JCPenney 25.45 44.3 5,652 7,249 0.38 3.9 0.39 4.1 0.37 3.9 8.8 7.4 1.0 0.8 9.0 2.0 2.8
Mean 0.48 5.3 0.49 5.6 0.47 5.5 15.6 17.7 1.5 1.8 10.5 2.2 3.2
Median 0.47 5.4 0.48 5.5 0.48 5.4 10.5 9.7 1.1 1.0 9.5 2.1 3.4
Other Large Cap Retailers
CVS 30.13 68.0 43,682 52,640 0.61 7.2 0.57 6.4 0.52 5.7 10.6 9.4 0.7 0.7 14.5 1.3 2.5
Home Depot 21.59 67.8 36,678 47,282 0.65 6.5 0.66 6.7 0.64 6.0 13.2 11.1 1.1 0.9 12.0 1.6 2.3
Lowe's 19.85 69.7 29,089 33,699 0.69 6.1 0.68 6.1 0.64 5.5 13.6 11.5 1.0 0.9 14.0 1.0 1.4
Walgreens 25.63 63.4 25,369 26,346 0.43 6.0 0.40 5.5 0.37 5.0 10.6 9.5 0.8 0.7 13.5 0.3 2.4
Costco 57.95 77.0 25,310 24,463 0.33 9.2 0.30 8.4 0.28 8.0 17.8 15.9 1.4 1.2 12.9 0.9 1.3
Staples 18.08 68.0 12,936 17,200 0.72 8.2 0.61 7.1 0.58 6.5 11.5 9.7 0.8 0.7 14.0 2.1 3.5
Best Buy 28.42 52.7 11,718 14,589 0.32 5.1 0.29 4.8 0.26 4.5 9.0 8.0 0.8 0.7 12.0 0.9 2.4
TJX 27.43 73.1 11,686 12,023 0.61 6.1 0.59 5.9 0.55 5.5 11.5 10.2 0.9 0.8 13.0 0.4 2.8
BJ's 35.16 79.4 2,108 1,994 0.20 6.2 0.18 6.0 0.17 5.7 15.4 13.9 1.5 1.4 10.0 0.0 2.5
Mean 0.51 6.7 0.47 6.3 0.45 5.8 12.6 11.0 1.0 0.9 12.9 1.0 2.3
Median 0.61 6.2 0.57 6.1 0.52 5.7 11.5 10.2 0.9 0.8 13.0 0.9 2.4
Mean(6) 0.47 6.2 0.45 6.0 0.42 5.6 12.9 12.2 1.1 1.1 11.9 1.5 2.7
(6)
Median 0.41 6.1 0.39 5.9 0.37 5.5 11.5 10.2 0.9 0.8 12.0 1.5 2.6
(6)
High 0.75 9.2 0.72 8.4 0.69 8.0 32.4 43.9 3.2 4.4 16.0 3.7 4.0
Low (6) 0.20 3.9 0.18 4.1 0.17 3.9 6.5 6.1 0.7 0.7 8.0 0.0 1.3
(1) As of October 24, 2008
(2) Assumes 20-day average stock price, except for Target Corp
(4) Implied multiples from midpoint of Target Corp valuation ($20.3bn–$25.3bn)
(6) Excludes Target
132
Implied Valuation Based on Other Retailers
The implied Target Corp valuation range based on other publicly traded
retailers is $18 – $28bn, or $24 – $39/share today
2009E 2009E
Multiple Metric ($mm) Multiple Range Implied Value ($bn)
EV/EBITDA 5,172 5.5x – 7.5x 17.5 – 27.8
P/E $2.23 11.0x – 14.5x 17.7 – 23.4
Implied Reference Range
133
Target Corp Comparable Companies-Trading Multiples(1)
Target is currently trading near the midpoint of its peer group
2009E EV/EBITDA Multiples (x)
12
8.4
7.8
8 7.2 7.1 6.7 6.5(2) 6.4 Average(4) = 6.0
6.1 6.0(3) 6.0 5.9 5.8 5.7 5.5 5.3 5.2 4.8 4.8 4.8
4.1
4
0
Costco Wal-Mart Sears Staples Home CVS Lowe's BJ's TJX Kroger Kohl's Walgreens Macy's Whole Best Buy Safeway SUPERVALU JCPenney
Depot Foods
Corp Standalone
2009E P/E Multiples (x)

35 32.4
30
Average(4) = 12.9
25
20 17.8
15.4 14.4 14.2(2) 14.1 13.6 13.2
15 12.3 11.8(3) 11.5 11.5 11.3 10.6 10.6 9.8 9.3 9.0 8.8
10 6.5
5
0
Sears Costco BJ's Wal-Mart Whole Lowe's Home Kroger Staples TJX Kohl's CVS Walgreens Macy's Safeway Best Buy JCPenney SUPERVALU
Foods Depot
Corp Standalone
(1) As of October 24, 2008
(2) Implied multiple from midpoint of Target Corp valuation ($20.3bn–$25.3bn)
(3) Represents fiscal year ending January
(4) Excludes Target
134
Target Corp Discounted Cash Flow Analysis
The implied Target Corp valuation range based on DCF analysis is $26 – $35bn,
or $37 – $49/share today
Projected Calendar Year,
($mm) 2009E 2010E 2011E 2012E 2013E
1
EBITDA 5,172 5,751 6,485 7,169 7,968
Less: Depreciation and Amortization (1,884) (2,017) (2,199) (2,410) (2,654)
EBIT 3,288 3,735 4,285 4,759 5,314
Less: Taxes @ 38% (1,262) (1,434) (1,645) (1,827) (2,041)
After-Tax EBIT 2,025 2,301 2,640 2,931 3,274
Plus: Depreciation and Amortization 1,884 2,017 2,199 2,410 2,654
Less: Net Capital Expenditures (2,826) (2,850) (3,400) (3,870) (4,416)
Plus: Decrease in Working Capital 79 120 167 193 224
UNLEVERED FREE CASH FLOWS 1,162 1,588 1,606 1,665 1,736
ILLUSTRATIVE VALUATION
Implied Equity Value
($ in millions, except per share amounts)
2
Terminal EBITDA 8,824 Terminal Discount Rate
Terminal EV/EBITDA Multiple 6.5x Multiple 9.00% 10.00% 11.00%
Terminal Value 57,357 6.0x 29,668 27,993 26,404
3
Present Value of TV 35,614 6.5x 32,536 30,732 29,022
3
Sum of Discounted Cash Flows (2009-2013) 6,073 7.0x 35,403 33,472 31,641
Implied Enterprise Value 41,687
4
Less: Debt (1/1/09) (11,455)
4 Implied Perpetuity Growth Rate (%) 5
Plus: Cash (1/1/09) 500
Implied Equity Value 30,732 Terminal Discount Rate
Multiple 9.00% 10.00% 11.00%
6.0x 2.4 3.3 4.2
6.5x 2.9 3.8 4.7
Notes: 7.0x 3.3 4.2 5.1
1 Assumes sale of remaining 53% interest on credit card receivables for $4.4bn; ongoing royalty stream of $150mm
2 Assumes 2014E EBITDA growth equal to 2013E growth
3 Assumes mid-year convention
4 Assumes $4.4bn of proceeds from sale of remaining 53% interest on credit card receivables used to pay down debt
5 Assumes capital expenditures equal to depreciation and amortization in perpetuity
135
Target Corp—12-Month Price Target
The implied valuation range for Target Corp based on several methodologies
outlined below is $27.5 – $32.5bn, or $38 – $45/share 12 months from today
Valuation Range
($27.5bn–$32.5bn)
Trading Data – – 6.0–8.0x EBITDA 24.4 35.9

Retailers – CY2010 EBITDA: $5,751mm
(EV/EBITDA) – Current Multiple is 6.0x
Trading Data – – 13.0–16.0x EPS

25.0 30.8
Retailers – CY2010 EPS: $2.67
(P/E) – Current Multiple is 11.8x
Trading Data – – 5 Year P/E of 15.9x and 5 Year EV/EBITDA of 8.2x 30.6 37.0
Target 5 Year Historical – CY2010 EPS: $2.67 and CY2010 EBITDA: $5,751mm
(P/E and EV/EBITDA) – Current P/E is 11.8x and current EV/EBITDA is 6.0x
Discounted – 9.0–11.0% WACC

Cash Flow – 6.5–7.5x Terminal EBITDA Multiple 33.0 42.3
22.0 27.0 32.0 37.0 42.0
Equity Value ($bn)

($bn)
Equity Value 27.5 30.0 32.5
Enterprise Value 37.6 40.1 42.6
Share Price ($/Share) $38 $42 $45
'10 P/E 14.3x 15.6x 16.9x
'10 PEG 0.8x 0.9x 1.0x
'10 EV/EBITDA 6.5x 7.0x 7.4x
136
Credit Rating Analysis
Maintains Investment Grade Credit Rating
We believe the Rating Agencies will adopt one of two possible analytical
approaches when assessing the credit profiles of the ‘new’ Target Corp and
TIP REIT – ‘Consolidated’ vs. ‘De-consolidated’
f Target Corp and TIP REIT will have integrated, mutually dependent business models
Vast majority of TIP REIT revenues will be based on Target Corp land leases for many years
Lease arrangements and large size of land portfolio lead to high correlation of credit quality between TIP
REIT and Target Corp
TIP REIT will also provide facility management services to Target Corp
f Target Corp and TIP REIT will be separate legal entities with common public ownership at the onset;
shareholder base expected to diverge over time due to differing business profiles of the two entities
f Based on this structure, we believe that the Rating Agencies will adopt one of either two possible
analytical approaches for their analysis of Target Corp and TIP REIT:
a ‘Consolidated’ analysis of the combined group/system, or
a ‘De-consolidated’ analysis of the two separate entities on a standalone basis, but with some linkage
f A ‘Consolidated’ approach is supported by the integrated, economically inter-twined business
relationship between Target Corp as lessor and TIP REIT as landowner
f A ‘De-consolidated’ approach is supported by the fact that the companies will be separate legal entities
with no common ownership, except for shareholders initially
f Agencies may not unanimously take the same analytical approach when assessing Target Corp and TIP
REIT profile
Leading to potential for one or more agency taking a ‘consolidated’ approach and another taking a ‘de-
consolidated’ approach
138
Maintains Investment Grade Credit Rating (cont’d)
Regardless of the analytical approach adopted by the Agencies, we

believe that Target Corp will maintain Investment Grade credit ratings
f Under a ‘Consolidated’ methodology, Agencies are expected:

To review metrics of the consolidated group where lease payments between Target Corp and TIP
REIT are expected to ‘cancel out’
To assign the consolidated group’s rating to both Target Corp and TIP REIT
f Under a ‘De-consolidated’ methodology, Agencies are expected:
To review Target Corp and TIP REIT independently
To assign independent ratings to both Target Corp and TIP REIT, although we anticipate that
there will be some ratings linkage between the two
f Regardless of the analytical approach, we believe:
Target Corp will maintain solid Investment Grade credit ratings
Between Mid-High BBB/Baa to A-/A3
TIP REIT will achieve Investment Grade credit ratings
f Under any scenario, we anticipate that Target Corp will generate significant free cash flows
with ability to deleverage to credit metrics supportive of stronger Investment Grade ratings
over the near to intermediate term
139
Structural and Legal
Considerations
Land Development / Procurement
Set forth below is an illustrative example of how Target Corp and TIP REIT
can work together on future land procurement
f Immediately after spin-off, TIP REIT enters into a two-year exclusive agreement to
develop land for Target Corp
f Afterwards, Target Corp will have a Preferred Vendor Agreement with TIP REIT
It is anticipated that TIP REIT will act as the land procurement developer for Target
Corp
Target Corp will notify TIP REIT when it identifies a place to build a store and will
inquire about TIP REIT’s interest in providing land procurement development
services for the specified area (assembling, clearing and entitling one or more
parcels of land)
If TIP REIT expresses interest, the parties will discuss terms over a standard period
(e.g. 10+ days); upon reaching terms, TIP REIT will commence land procurement
development services
If TIP REIT decides not to pursue the opportunity offered by Target Corp, or the
parties do not agree upon terms within the specified standard period, Target Corp
may secure the services of another party or undertake the land procurement
development services on its own
141
Land Development / Procurement (cont’d)
f Target Corp will have the right to purchase land for the store directly, but in
that case Target Corp must notify TIP REIT to determine whether TIP REIT
wishes to purchase the land from Target Corp and lease it back to Target
Corp
If TIP REIT expresses interest and agrees on market terms within the specified
standard period, TIP REIT will purchase the land from Target Corp, clear and
entitle it and lease it back to Target Corp on the agreed terms
f Target Corp will be under no obligation to accept any terms if it determines in

good faith that doing so would not be in the best interest of Target Corp and
its shareholders
f The agreement will contain customary confidentiality and standstill

provisions that will prevent TIP REIT from misusing the information that
Target Corp is looking to build a particular site
f After the fifth anniversary of the spin-off, either TIP REIT or Target Corp may
terminate the Preferred Vendor Agreement
f Store development: Target Corp will retain its store development function and
will be solely responsible for developing its owned stores
142
Property Transfer Taxes
Transfer of property to TIP REIT may be subject to property

transfer tax
f Tax imposed at the state and local level in jurisdictions where

property is located
Rate of tax will vary among the jurisdictions
f Transfer may qualify for an exemption in some jurisdictions

whereby beneficial ownership of property is deemed unchanged
f In some states such as California, the transfer may trigger a

reassessment of the property value which would impose higher
ongoing property taxes
143
Supporting Data
Store–level ROIC
P&L Data: Standalone Pro Forma
($mm) 2007A 2007A
Retail Sales $61,471 $61,471
Retail Gross Margin 19,576 19,576
Retail EBIT $4,213 $4,213
Plus: Advertising (50% of Consolidated) 598 598
Plus: Buying Group Expense and Occupancy Expense 1,321 1,321
Less: Incremental Ground Lease Rent (Stores) -- (1,235) (1)
Less: Incremental Ground Lease Rent (DCs & WHs) -- (46) (2)
Plus: Estimated Corporate G&A 615 615
% of Revenues 1.0% 1.0%
Plus: Estimated Distribution Center Costs 2,459 2,505
% of Revenues 4.0% 4.1%
Estimated Four-Wall Retail EBIT $9,040 $7,970
Store Level Operating Data and Assumptions: Standalone Pro Forma

($mm) 2007A 2007A
Retail Sales per Avg. Store $39.9 $39.9
Memo: Avg. # of Stores 1,540 1,540
Estimated Four-Wall Operating Costs per Avg. Store $33.9 $34.7
Ground Lease Expense per Avg. Store -- 1
Estimated Four-Wall EBIT per Avg. Store $6.0 $5.2
Margin 15.0% 13.0%
Est. Pre-Tax Unlevered Returns on Investment 23.0% 39.8%
(1) Assumes $1.2bn of ground lease rent expense from stores, based on $7/sq. ft. lease cost, 131k of square footage per store and 1,350 stores, on average; implying a cap rate of 7.0%
(2) Assumes $46mm of ground lease rent expense from DCs & WHs, based on $1.25/sq. ft. lease cost, 1.4mm of square footage per DC & WH and 26 DCs & WHs, on average
145
Triple Net Lease REIT Tenants: Detailed Review
% of Adj. Debt/ LTM EBITDA/ LTM EBIT/ Yield ³
Tenant Revenue Industry Moody's / S&P ¹ LTM EBITDAR ² (x) Interest (x) ² Interest (x) ² (%) Commentary
Buffets 6 Restaurant WR / NR 9.8 0.8 0.3 In default ♦ March 31, 2008: Buffets auditor raises
"going concern" doubt
♦ January 22, 2008: Buffets files
for bankruptcy
Kerasotes ShowPlace Theatres 5 Movie Theater B1/ B- na na na na ♦ Moody’s does not expect Kerasotes to
become free cash flow positive until after
2009
The Pantry (NASDAQ: PTRY) 4 Convenience Store WR / B+ 6.5 4 2.4 1.2 14.5 ♦ July 17, 2008: Moody's downgrades
Pantry's Corporate Family Rating to B2 and
assigned a negative rating outlook.
♦ April 9, 2008: Merrill Lynch reduces its
investment rating on The Pantry to “Sell”
La Petite Academy 4 Education Services WR/NR na na na na ♦ June 26, 2008: Morgan Stanley Private
Equity acquires a 60% stake in Learning
Care Group Inc., the parent company of La
Petite Academy
Children's World 4 Education Services na / na na na na na ♦ na
% of Adj. Debt/ LTM EBITDA/ LTM EBIT/ Yield ³

Tenant Gross Assets Industry Moody's / S&P ¹ LTM EBITDAR (x) Interest (x) Interest (x) (%) Commentary
4
The Pantry (NASDAQ: PTRY) 11 Convenience Store WR / B+ 6.5 2.4 1.2 14.5 ♦ See above
Circle K – Susser Holdings (NASDAQ: SUSS) 9 Convenience Store B3 / B+ 6.1 2.7 1.4 14.3 ♦ August 6, 2008: Susser reports earnings;
Free Cash Flow for Susser Holdings
deteriorates 19.1%
Kerasotes ShowPlace Theatres 5 Movie Theater B1/ B- na na na na ♦ See above
Mister Car Wash 4 Conveyor Car Wash na / na na na na na
Road Ranger 4 Convenience Store na / na na na na na
% of Total Adj. Debt/ LTM EBITDA/ LTM EBIT/ Yield ³

Tenant GLA Industry Moody's / S&P ¹ LTM EBITDAR (x) Interest (x) Interest (x) (%) Commentary
AMC Entertainment 51 Movie Theater WR / NR 6.4 2.6 0.9 14.1 ♦ Real industry revenue is expected to decline
at an average annual rate of 1.8% over the
Regal (NYSE: RGC) 7 Movie Theater B2 / BB- 5.7 4.3 2.7 10.7
next 5 years
Rave Motion Pictures 6 Movie Theater na / na na na na na ♦ The industry is in a mature phase of its
5 development, as witnessed by the recent
Consolidated Theaters 5 Movie Theater na / na na na na na
significant operator site and screen
Muvico 35 Movie Theater na / na na na na na consolidation process associated with the
filing for Chapter 11 Bankruptcy protection
by most major operators in the early 2000s.
Source: Company filings and Wall Street research
(1) Bloomberg as of October 24, 2008
(2) Company filings
(3) Yield to Maturity of the most liquid security with the largest outstanding amount based on Interactive Data
(4) Rent Expense as of last fiscal year reported
(5) Wall Street research as of May 5, 2008
146
Model – Standalone
Standalone Model – Income Statement
Status Status
Quo Quo Credit Card Pro Forma Calendar Year, CAGR
($mm) CY2007 CY2008 Adj. CY2008 2009 2010 2011 2012 2013 '09 - '13
Retail Sales 61,471 64,892 64,892 68,249 73,356 80,479 88,710 98,241 9.5%
Base Sales Growth (%) 5.2% 7.5% 9.7% 10.2% 10.7%
Credit Revenue 1,896 2,078 (1,936) 143 150 161 177 195 216 9.5%
Credit Sales Growth 5.2% 7.5% 9.7% 10.2% 10.7%
Total Revenue 63,367 66,970 65,034 68,399 73,517 80,655 88,905 98,457 9.5%
Total Revenue Growth 5.2% 7.5% 9.7% 10.2% 10.7%
COGS 42,929 45,459 45,459 47,777 51,279 56,177 61,919 68,563
% of Retail Sales 69.8% 70.1% 70.1% 70.0% 69.9% 69.8% 69.8% 69.8%
SG&A (excluding D&A and Rent Expense) 12,392 13,058 13,058 13,834 14,761 16,115 17,761 19,668
% of Retail Sales 20.2% 20.1% 20.1% 20.3% 20.1% 20.0% 20.0% 20.0%
Credit Expenses 950 1,460 (1,460) - - - - - -
% of Credit Revenue 50.1% 70.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retail EBITDAR 6,150 6,375 6,375 6,637 7,316 8,187 9,029 10,011 10.8%
Retail EBITDAR Margin (%) 10.0% 9.8% 9.8% 9.7% 10.0% 10.2% 10.2% 10.2%
Credit EBITDAR 946 619 (476) 143 150 161 177 195 216 9.5%
Credit EBITDAR Margin (%) 49.9% 29.8% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
EBITDAR 7,096 6,993 6,517 6,787 7,478 8,364 9,224 10,227 10.8%
EBITDAR Margin (%) 11.2% 10.4% 10.0% 9.9% 10.2% 10.4% 10.4% 10.4%
Rent Expense 165 169 169 173 178 182 187 191
EBITDA 6,931 6,824 6,348 6,614 7,300 8,182 9,038 10,036 11.0%
EBITDA Margin (%) 10.9% 10.2% 9.8% 9.7% 9.9% 10.1% 10.2% 10.2%
Depreciation & Amortization 1,659 1,807 1,807 1,940 2,085 2,288 2,522 2,793
% of Retail Sales 2.7% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8%
Operating Income 5,272 5,017 4,541 4,674 5,215 5,894 6,516 7,243 11.6%
Net Interest (Income) / Expense 647 995 555 694 722 798 897 1,003
Income Tax Provision 1,776 1,483 1,469 1,528 1,725 1,957 2,158 2,396
Tax Rate (%) 38% 37% 37% 38% 38% 38% 38% 38%
Net Income 2,849 2,539 2,517 2,452 2,767 3,139 3,461 3,844 11.9%
Net Income Margin (%) 4.5% 3.8% 3.9% 3.6% 3.8% 3.9% 3.9% 3.9%
Current Diluted Shares Outstanding 882.6 819.0 819.0 721.9 720.4 697.3 677.3 659.1
Shares Repurchase (63.7) (97) (97.0) (1.6) (23.1) (20.0) (18.2) (14.0)
Share Repurchase from Options 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Shares Outstanding 819.0 721.9 721.9 720.4 697.3 677.3 659.1 645.2
Weighted Average Shares Outstanding 850.8 765.9 765.9 721.1 708.8 687.3 668.2 652.2
Earnings per Share ($) $3.33 $3.32 $3.29 $3.40 $3.90 $4.57 $5.18 $5.89 6.71 14.7%
148
Standalone Model – Balance Sheet
Status Status
Quo Quo Pro Forma Calendar Year,
($mm) CY2007 CY2008 Adj. CY2008 2009 2010 2011 2012 2013
Cash & Equivalents 2,450 500 0 500 607 653 716 790 874
Trade Receivables 8,054 8,383 (8,383) - - - - - -
Other Current Assets 8,402 9,232 9,232 9,710 10,436 11,450 12,621 13,977
Property, Plant & Equipment, gross 31,982 35,734 35,734 39,639 43,497 48,479 54,212 60,817
Accumulated Depreciation (7,887) (9,350) (9,350) (11,290) (13,375) (15,663) (18,185) (20,977)
Property, Plant & Equipment, net 24,095 26,384 26,384 28,348 30,122 32,816 36,027 39,840
Other Non-Current Assets 1,559 1,368 1,368 1,368 1,368 1,368 1,368 1,368
Total Assets 44,560 45,867 37,484 40,033 42,579 46,350 50,805 56,059
Debt 17,090 19,455 (8,000) 11,455 11,455 12,455 13,955 15,705 17,455
Other Current Liabilities 9,818 10,757 10,757 11,313 12,160 13,340 14,705 16,285
Other Non-Current Liabilities 2,345 2,392 2,392 2,392 2,392 2,392 2,392 2,392
Total Liabilities 29,253 32,604 24,604 25,160 27,007 29,687 32,802 36,132
Total Equity 15,307 13,264 (383) 12,880 14,873 15,572 16,663 18,004 19,927
Total Equity & Liabilities 44,560 45,867 37,484 40,033 42,579 46,350 50,805 56,059
149
Standalone Model – Cash Flow Statement
Calendar Year,
($mm) 2009 2010 2011 2012 2013
EBITDA 6,614 7,300 8,182 9,038 10,036
less: Interest Expense (694) (722) (798) (897) (1,003)
less: Taxes (1,528) (1,725) (1,957) (2,158) (2,396)
Share-based Compensation 73 73 73 73 73
less: Increase in Net Working Capital 79 120 167 193 224
less: Increase Funding of CC Growth 0 0 0 0 0
Cash Flow from Operating Activities 4,544 5,045 5,667 6,249 6,933
Capital Expenditures (3,905) (3,858) (4,982) (5,732) (6,605)

Cash Flow from Investing Activities (3,905) (3,858) (4,982) (5,732) (6,605)
Issuance of Debt 0 1,000 1,500 1,750 1,750

Repayment of Debt 0 0 0 0 0
Issuance of Equity / (Buy Back) (99) (1,688) (1,654) (1,713) (1,498)
Issuance of Dividends to Common (433) (454) (467) (481) (496)
Cash Flow from Financing Activities (532) (1,142) (621) (444) (243)
Beginning Cash Balance 500 607 653 716 790

Change in Cash 107 45 63 73 85
Ending Cash Balance 607 653 716 790 874
Average Cash Balance 554 630 685 753 832

Interest Income 3.0% 17 19 21 23 25
150
Standalone Model – Build-ups and Credit Metrics
Status
Quo Pro Forma Calendar Year,
Sales Buildup CY2007 CY2008 2009 2010 2011 2012 2013
Square Feet (mm) 208 222 232 241 256 273 292
$ / Sq. Ft. 296 293 294 304 314 325 337
Retail Sales 61,471 64,892 68,249 73,356 80,479 88,710 98,241
Implied Retail Sales Growth (%) 5.6% 5.2% 7.5% 9.7% 10.2% 10.7%
Sq. Footage Growth (%) 6.6% 4.7% 4.1% 6.0% 6.5% 7.0%
SSS Growth (%) (0.9%) 0.5% 3.3% 3.5% 3.5% 3.5%
CapEx Buildup 2007 2008 2009 2010 2011 2012 2013

Total System CapEx 4,369 4,112 3,905 3,858 4,982 5,732 6,605
CapEx as % of Retail Sales 7.1% 6.3% 5.7% 5.3% 6.2% 6.5% 6.7%
Status Status
Quo Quo Pro Forma
Credit Metrics CY2007 CY2008 CY2008
Lease Adjusted Debt 8x 1,320 1,353 1,353 1,387 1,421 1,457 1,493 1,531
Actual Debt 17,090 19,455 11,455 11,455 12,455 13,955 15,705 17,455
Total Lease Adjusted Debt 18,410 20,808 12,808 12,842 13,876 15,412 17,198 18,986
Total Lease Adjusted Debt/EBITDAR 2.6 x 3.0 x 2.0 x 1.9 x 1.9 x 1.8 x 1.9 x 1.9 x
Total Debt / EBITDA 2.5 x 2.9 x 1.8 x 1.7 x 1.7 x 1.7 x 1.7 x 1.7 x
EBITDAR / (Interest + Rent) 8.7 x 6.0 x 9.0 x 7.8 x 8.3 x 8.5 x 8.5 x 8.6 x
EBITDA / Interest 10.7 x 6.9 x 11.4 x 9.5 x 10.1 x 10.3 x 10.1 x 10.0 x
151
Model – TIP REIT
TIP REIT Model – Income Statement
Gross TIP REIT Revenues from Ground-leased Store Land 1,325 1,398 1,501 1,645 1,811 2,004 9.4%
Gross TIP REIT Revenues from Ground-leased DCs & WHs Land 44 46 48 51 55 59 6.3%
Total Gross TIP REIT Revenues 1,369 1,444 1,549 1,696 1,866 2,063 9.3%
Total TIP REIT Net Rental Revenues 1,369 1,444 1,549 1,696 1,866 2,063 9.3%
Net Facilities Management Income 19 19 20 22 24 27 9.5%
Net Operating Income 1,388 1,462 1,569 1,718 1,890 2,090 9.3%
Less: G&A Expense (20) (20) (21) (21) (22) (22)

Less: Incremental G&A Cost (15) (15) (15) (16) (16) (17)
EBITDA 1,353 1,427 1,533 1,681 1,853 2,051 9.5%
Net Income 1,099 1,177 1,235 1,268 1,304 1,342 3.3%
Normalized Net Income (1) 1,211 1,289 1,331 1,364 1,400 1,438 2.8%

Earnings per Share $1.52 $1.63 $1.71 $1.76 $1.81 $1.86 3.3%
Normalized Earnings per Share (1) $1.68 $1.79 $1.84 $1.89 $1.94 $1.99 2.8%
% AFFO
Dividends on Common 100.0% 1,141 1,232 1,304 1,356 1,415 1,481 4.7%
Special Dividends - 1,600 - - - -
Normalized Dividends (1) 1,253 1,344 1,400 1,452 1,511 1,577 4.1%
Normalized Dividends per Share (1) $1.74 $1.86 $1.94 $2.01 $2.09 $2.18 4.1%
153
TIP REIT Model – Balance Sheet

Real Estate:
Gross Existing Properties - Land & Improvements 12,228 12,228 12,228 12,228 12,228 12,228
Maintenance Capex - - - - -
Development Properties - Land & Improvements 1,079 2,087 3,669 5,532 7,722
Accumulated Depreciation (846) (901) (970) (1,058) (1,169) (1,308)
Net Real Estate Asset 11,382 12,405 13,345 14,839 16,590 18,641
Cash - 3 3 3 3 3
Total Assets 11,382 12,408 13,348 14,842 16,593 18,644 10.7%
Debt:
Revolver - 3 3 3 3 3
New Debt - 2,679 3,687 5,269 7,132 9,322
Total Debt - 2,682 3,690 5,272 7,135 9,325
Common Equity 11,382 11,382 11,382 11,382 11,382 11,382

Retained Earnings (Deficit) (1,656) (1,724) (1,812) (1,924) (2,063)
Total Equity 11,382 9,727 9,658 9,570 9,459 9,320
Total Liabilities & Equity 11,382 12,408 13,348 14,842 16,593 18,644 10.7%
154
TIP REIT Model – Cash Flow Statement
Calendar Year, CAGR

($mm, except as noted) 2009 2010 2011 2012 2013 '09 - '13
Cash Flow from Operating Activities:
EBITDA 1,353 1,427 1,533 1,681 1,853 2,051
Less: Taxes on Facilities Mgmt. Income (7) (7) (8) (8) (9) (10)
Net Cash Flow from Operating Activities 1,141 1,232 1,304 1,356 1,415 1,481 4.7%
Cash Flow from Investing Activities:

Development Capex (1,079) (1,008) (1,582) (1,863) (2,190)
Net Cash Flow from Investing Activities (1,079) (1,008) (1,582) (1,863) (2,190) 19.4%
Cash Flow from Financing Activities:

Debt Financing:
Increase (Decrease) in Revolver 3 - - - -
Increase (Decrease) in New Debt 2,679 1,008 1,582 1,863 2,190
Equity Financing:
Increase (Decrease) in Common Equity - - - - -
Dividends on Common (1,141) (1,232) (1,304) (1,356) (1,415) (1,481)
Special Dividends (1,600) - - - -
Net Cash Flow from Financing Activities (151) (295) 226 447 709
Beginning Cash Balance - 3 3 3 3

Net Change in Cash 3 - - - -
Ending Cash Balance - 3 3 3 3 3
155
TIP REIT Model – Rent Build-up
Assumptions ($mm, except as noted): CY2008 2009 2010 2011 2012 2013 '09 - '13
Total Combined Stores - Sq. Ft. Count
Owned Stores 1,438 189 200 209 224 240 259
Combined (Ground-leased) Stores 172 23 23 23 23 23 23
Third-party Leased Stores 73 10 10 10 10 10 10
Total Combined Stores Square Footage 222 232 241 256 273 292 5.9%
Total Combined Stores Square Footage Growth 4.7% 4.1% 6.0% 6.5% 7.0%
TIP REIT Stores - Sq. Ft. Count

Owned Stores 1,438 Yes 189 200 209 224 240 259
Total TIP REIT Stores Square Footage 189 200 209 224 240 259 6.8%
Total TIP REIT Stores Square Footage Growth 5.4% 4.8% 6.9% 7.4% 7.9%
Total Combined DCs & WHs - Sq. Ft. Count

Owned DCs & WHs 25 35 37 37 39 41 43
Combined (Ground-leased) DCs & WHs 1 1 1 1 1 1 1
Third-party Leased DCs & WHs 5 7 7 7 7 7 7
Total Combined DCs & WHs Square Footage 44 45 46 47 49 51 3.1%
Total DCs & WHs Sq. Ft. vs. Total Combined Stores Sq. Ft. 19.7% 19.5% 19.0% 18.5% 18.0% 17.5%
TIP REIT DCs & WHs - Sq. Ft. Count

Owned DCs & WHs 25 Yes 35 37 37 39 41 43
Total TIP REIT DCs & WHs Square Footage 35 37 37 39 41 43 3.7%
Total TIP REIT DCs & WHs Square Footage Growth 4.4% 1.8% 3.9% 4.4% 4.9%
Rent / Square Foot - Store Land $7.00 $7.00 $7.18 $7.35 $7.54 $7.73
CPI Growth 2.5% 2.5% 2.5% 2.5% 2.5%
Average Growth 2.5% 2.5% 2.5% 2.5% 2.5%
TIP REIT Revenues from Ground-leased Land 1,325 1,398 1,501 1,645 1,811 2,004 9.4%
Rent / Square Foot - DCs & WHs Land $1.25 $1.25 $1.28 $1.31 $1.35 $1.38
CPI Growth 2.5% 2.5% 2.5% 2.5% 2.5%
Average Growth 2.5% 2.5% 2.5% 2.5% 2.5%
TIP REIT Revenues from Ground-leased DCs & WHs 44 46 48 51 55 59 6.3%
Total TIP REIT Gross Revenues 1,369 1,444 1,549 1,696 1,866 2,063 9.3%
156
TIP REIT Model – FFO & AFFO Reconciliations,
Credit Statistics and Implied Metrics
FFO & AFFO Reconciliations: CY2008 2009 2010 2011 2012 2013 '09 - '13
Net Income 1,099 1,177 1,235 1,268 1,304 1,342
Plus: Depreciation & Amortization 42 56 68 88 111 139
Funds from Operations 1,141 1,232 1,304 1,356 1,415 1,481 4.7%

FFO / Share $1.58 $1.71 $1.81 $1.88 $1.96 $2.05 4.7%
Less: Maintenance Capex - - - - - -

Adjusted Funds from Operations 1,141 1,232 1,304 1,356 1,415 1,481 4.7%
Normalized AFFO (1) 1,253 1,344 1,400 1,452 1,511 1,577 4.1%
Credit Statistics:
Coverage:
(EBITDA - Maintenance Capex) / Interest Expense 7.6x 6.9x 5.3x 4.3x 3.7x
Leverage:
Capitalization:
(NOI capped at 6.0% and 8.5% for store land and DCs & WHs land, respectively)
Implied Metrics:
Incremental Stores Square Footage 10 10 14 17 19
SuperTarget Stores 50.0% 5 5 7 8 10
Implied New Combined SuperTarget Stores 0.177 Sq. Ft. / SuperTarget 29 27 41 47 54
% of Total New Stores Built 41.4% 41.5% 41.4% 41.2% 41.2%
Combined Total Number of SuperTarget Stores 239 268 295 336 383 437
General Merchandise Stores 50.0% 5 5 7 8 10
Implied New Combined GM Stores 0.124 Sq. Ft. / GM 41 38 58 67 77
Combined Total Number of General Merchandise Stores 1,444 1,485 1,523 1,581 1,648 1,725
Total Implied New Stores 70 65 99 114 131
Cumulative Combined Total Implied Stores 1,683 1,753 1,818 1,917 2,031 2,162
Incremental DCs & WHs Square Footage 2 1 1 2 2

Implied Combined New DCs & WHs 1.408 1 0 1 1 1
Total Implied New DCs & WHs 1 0 1 1 1
Cumulative Combined Total Implied DCs & WHs 31 32 33 34 35 36
157
TIP REIT Model – Capex Schedule
Calendar Year, CAGR

($mm, except as noted) 2009 2010 2011 2012 2013 '09 - '13
Total Combined Expenditures 3,905 3,858 4,982 5,732 6,605
Maintenance / Retail Capital Expenditures 1,714 1,827 1,785 1,968 2,179 6.2%
Target Corp - Store Buildings 1,714 1,827 1,785 1,968 2,179
TIP REIT - - - - -
Development Capital Expenditures 2,191 2,031 3,198 3,765 4,426 19.2%

Target Corp Building - Store and DCs & WHs 71.4% 1,112 1,023 1,615 1,902 2,237
TIP REIT Land - Store and DCs & WHs 28.6% 1,079 1,008 1,582 1,863 2,190
Target Corp - Other 0.0% - - - - -
TIP REIT Land - Store 1,056 999 1,560 1,836 2,158

Store Land Cost per Square Foot $102.50 $105.06 $107.69 $110.38 $113.14
TIP REIT Land - DCs & WHs 22 10 22 26 31
DCs & WHs Land Cost per Square Foot $14.00 $14.35 $14.71 $15.08 $15.45 $15.84
TIP REIT Land - Store Yes 1,056 999 1,560 1,836 2,158
TIP REIT Land - DCs & WHs Yes 22 10 22 26 31
Total Development Capex 1,079 1,008 1,582 1,863 2,190 19.4%
Development Financing Sources:

Debt Financing 100% 1,079 1,008 1,582 1,863 2,190
Equity Financing 0% - - - - -
158
Model – Target Corp
Target Corp Model – Income Statement
Status
Quo REIT Credit Card Pro Forma Calendar Year, CAGR
($mm) CY2008 Adj. Adj. CY2008 2009 2010 2011 2012 2013 '09 - '13
Retail Sales 64,892 64,892 68,249 73,356 80,479 88,710 98,241 9.5%
Credit Revenue 2,078 (1,936) 143 150 161 177 195 216 9.5%
Credit Sales Growth na 5.2% 7.5% 9.7% 10.2% 10.7%
Total Revenue 66,970 65,034 68,399 73,517 80,655 88,905 98,457 9.5%
COGS 45,459 45,459 47,777 51,279 56,177 61,919 68,563
% of Retail Sales 70.1% 70.1% 70.0% 69.9% 69.8% 69.8% 69.8%
SG&A (excluding D&A and Rent Expense) 13,058 (20) 13,038 13,814 14,740 16,093 17,739 19,646
% of Retail Sales 20.1% 20.1% 20.2% 20.1% 20.0% 20.0% 20.0%
Credit Expenses 1,460 (1,460) - - - - - -
% of Credit Revenue 70.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retail EBITDAR 6,375 6,395 6,657 7,337 8,208 9,051 10,033 10.8%
Retail EBITDAR Margin (%) 9.8% 9.9% 9.8% 10.0% 10.2% 10.2% 10.2%
Credit EBITDAR 619 (476) 143 150 161 177 195 216 9.5%
Credit EBITDAR Margin (%) 29.8% na na na na na na
EBITDAR (Pre-spin) 6,993 6,537 6,807 7,498 8,385 9,246 10,249 10.8%
EBITDAR Margin (%) 10.4% 10.1% 10.0% 10.2% 10.4% 10.4% 10.4%
Current Embedded Facility Management Costs (125) (125) (125) (134) (147) (162) (180)
External Facility Mgmt. Payments to TIP REIT 144 144 144 155 170 187 207
Current Rent Expense 169 169 173 178 182 187 191
Additional Rent Expense 1,369 1,444 1,549 1,696 1,866 2,063
Pro Forma EBITDA (Post-spin) 6,824 4,980 5,172 5,751 6,485 7,169 7,968 11.4%
EBITDA Margin (%) 10.2% 7.7% 7.6% 7.8% 8.0% 8.1% 8.1%
Depreciation & Amortization 1,807 (42) 1,765 1,884 2,017 2,199 2,410 2,654
% of Retail Sales 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%
Operating Income 5,017 3,215 3,288 3,735 4,285 4,759 5,314 12.8%
Net Interest (Income) / Expense 995 515 673 611 531 509 623
Income Tax Provision 1,483 1,037 1,004 1,199 1,441 1,632 1,802
Tax Rate (%) 37% 38% 38% 38% 38% 38% 38%
Net Income 2,539 1,663 1,611 1,924 2,312 2,618 2,890 15.7%
Net Income Margin (%) 3.8% 2.6% 2.4% 2.6% 2.9% 2.9% 2.9%
Current Diluted Shares Outstanding 819.0 721.9 721.9 721.9 721.9 693.0
Shares Repurchase (97.0) 0.0 0.0 0.0 (29.0) (31.4)
Total Shares Outstanding 721.9 721.9 721.9 721.9 693.0 661.6
Weighted Average Shares Outstanding 765.9 721.9 721.9 721.9 707.5 677.3
Earnings per Share ($) $2.17 $2.23 $2.67 $3.20 $3.70 $4.27 4.92 17.6%
160
Target Corp Model – Balance Sheet
Status
Quo REIT Credit Card Pro Forma Calendar Year,
($mm) CY2008 Adj. Adj. CY2008 2009 2010 2011 2012 2013
Cash & Equivalents 500 0 500 682 734 805 887 982
Trade Receivables 8,383 (8,383) - - - - - -
Other Current Assets 9,232 9,232 9,710 10,436 11,450 12,621 13,977
Property, Plant & Equipment, gross 35,734 (12,228) 23,506 26,332 29,182 32,582 36,452 40,868
Accumulated Depreciation (9,350) 846 (8,505) (10,389) (12,406) (14,605) (17,015) (19,669)
Property, Plant & Equipment, net 26,384 (11,382) 15,001 15,943 16,776 17,977 19,437 21,199
Other Non-Current Assets 1,368 1,368 1,368 1,368 1,368 1,368 1,368
Total Assets 45,867 26,101 27,703 29,314 31,599 34,312 37,526
Debt 19,455 0 (8,000) 11,455 10,817 9,584 8,303 8,938 10,078

Other Current Liabilities 10,757 10,757 11,313 12,160 13,340 14,705 16,285
Other Non-Current Liabilities 2,392 2,392 2,392 2,392 2,392 2,392 2,392
Total Liabilities 32,604 24,604 24,522 24,135 24,035 26,035 28,755
Total Equity 13,264 (11,382) (383) 1,498 3,182 5,179 7,564 8,278 8,771
Total Equity & Liabilities 45,867 26,101 27,703 29,314 31,599 34,312 37,526
161
Target Corp Model – Cash Flow Statement
Calendar Year,
($mm) 2009 2010 2011 2012 2013
EBITDA 4,980 5,172 5,751 6,485 7,169 7,968
less: Interest Expense (515) (673) (611) (531) (509) (623)
less: Taxes (1,037) (1,004) (1,199) (1,441) (1,632) (1,802)
Share-based Compensation 73 73 73 73 73 73
less: Increase in Net Working Capital 79 120 167 193 224
less: Increase Funding of CC Growth 0 0 0 0 0 0
Cash Flow from Operating Activities 3,501 3,647 4,134 4,752 5,294 5,841
Capital Expenditures (2,826) (2,850) (3,400) (3,870) (4,416)

Cash Flow from Investing Activities (2,826) (2,850) (3,400) (3,870) (4,416)
Issuance of Debt 0 0 0 1,977 2,470

Repayment of Debt (638) (1,233) (1,281) (1,342) (1,330)
Issuance of Equity / (Buy Back) 0 0 0 (1,977) (2,470)
Issuance of Dividends to Common 0 0 0 0 0 0
Cash Flow from Financing Activities (638) (1,233) (1,281) (1,342) (1,330)
Beginning Cash Balance 500 682 734 805 887

Change in Cash 182 51 71 82 95
Ending Cash Balance 682 734 805 887 982
Average Cash Balance 591 708 769 846 935

162
Target Corp Model – Build-ups and Credit Metrics
Pro Forma Calendar Year,
Sales Buildup CY2008 2009 2010 2011 2012 2013
Square Feet (mm) 222 232 241 256 273 292
$ / Sq. Ft. 293 294 304 314 325 337
Retail Sales 64,892 68,249 73,356 80,479 88,710 98,241
Implied Retail Sales Growth (%) 5.2% 7.5% 9.7% 10.2% 10.7%
Sq. Footage Growth (%) 4.7% 4.1% 6.0% 6.5% 7.0%
SSS Growth (%) 0.5% 3.3% 3.5% 3.5% 3.5%
CapEx Buildup 2008 2009 2010 2011 2012 2013

Total System CapEx 4,112 3,905 3,858 4,982 5,732 6,605
CapEx as % of Retail Sales 6.3% 5.7% 5.3% 6.2% 6.5% 6.7%
Maintenance/Retail CapEx 1,514 1,627 1,785 1,968 2,179

Additional Cap Ex 200 200
TOTAL Maintenance/Retail CapEx % of total 35.0% 1,439 1,714 1,827 1,785 1,968 2,179
– Target Corp 1,714 1,827 1,785 1,968 2,179
– TIP REIT (Existing DC & WH) 0 0 0 0 0
Development CapEx % of total 65.0% 2,191 2,031 3,198 3,765 4,426
Buildings (Tgt Corp) % of Development 50% 1,112 1,023 1,615 1,902 2,237
Land % of Development 50% 1,079 1,008 1,582 1,863 2,190
– Target Corp 0 0 0 0 0
– TIP REIT 1,079 1,008 1,582 1,863 2,190
Other (Target Corp) % of Development 0% 0 0 0 0 0
Facilities Management Business ($mm)

Total Current Costs 125 125 134 147 162 180
Growth % 0.0% 7.5% 9.7% 10.2% 10.7%
Markup to TIP REIT 15% 15% 15% 15% 15% 15%
Facilities Management Revenue to TIP REIT 144 144 155 170 187 207
Credit Metrics
Lease Adjusted Debt 8x 1,353 12,309 12,935 13,811 15,024 16,421 18,033
Actual Debt 19,455 11,455 10,817 9,584 8,303 8,938 10,078
Total Lease Adjusted Debt 20,808 23,764 23,752 23,394 23,327 25,359 28,111
Total Lease Adjusted Debt/EBITDAR 3.0 x 3.6 x 3.5 x 3.1 x 2.8 x 2.8 x 2.8 x
Total Debt / EBITDA 2.9 x 2.3 x 2.1 x 1.7 x 1.3 x 1.2 x 1.3 x
EBITDAR / (Interest + Rent) 6.0 x 3.2 x 3.0 x 3.2 x 3.5 x 3.6 x 3.6 x
EBITDA / Interest 6.9 x 9.7 x 7.7 x 9.4 x 12.2 x 14.1 x 12.8 x
163
Target:
A Revised Transaction
November 19, 2008

Disclaimer
The information contained in this presentation (the “Information”) is based on publicly available information about Target Corporation
(“Target”). None of Pershing Square Capital Management, L.P., its affiliates and any of their respective officers, directors and employees
(collectively, “Pershing”), nor any representative of Pershing, has independently verified any of the Information. Pershing recognizes that
there may be confidential or otherwise non-public information in Target’s possession that could lead others to disagree with Pershing’s
conclusions. The sole purpose of presenting the Information is to inform interested parties about the transaction described in this
presentation (the “Transaction”). This presentation does not constitute an offer or a solicitation of any kind.
Neither Pershing nor any of its representatives makes any representation or warranty, express or implied, as to the accuracy or
completeness of the Information or any other written or oral communication made in connection with this presentation or the Transaction.
The Information includes certain forward-looking statements, estimates and projections with respect to the anticipated future financial,
operating and stock market performance of Target in the absence of the Transaction and the two public companies that may result if the
Transaction is completed. Such statements, estimates and projections may prove to be substantially inaccurate, reflect significant
assumptions and judgments that may prove to be substantially inaccurate, and are subject to significant uncertainties and contingencies
beyond Pershing’s control, including those described under the caption “Risk Factors” in Target’s filings with the Securities and
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conditions, inflation, interest rate fluctuations, regulatory and tax matters and other factors.
Pershing and its representatives expressly disclaim any and all liability relating to or resulting from the use of the Information or any
errors therein or omissions therefrom, including under applicable securities laws. The Information does not purport to include all
information that may be material with respect to the Transaction or Target. Thus, shareholders and others should conduct their own
independent investigation and analysis of Target, the Transaction and the Information.
The Information is not intended to provide the basis for fully evaluating, and should not be considered a recommendation with respect to,
the Transaction, Target, the securities of Target or any other matter. Except where otherwise indicated, the Information speaks as of the
date hereof. Neither Pershing nor any of its representatives undertakes any obligation to correct, update or revise the Information or to
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The preparation and distribution of this presentation should not be taken as any form of commitment on the part of Pershing to take any
action in connection with the Transaction.
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IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any discussion of U.S.
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1
Recent Events
f On October 29, 2008, Pershing presented “A TIP for Target

Shareholders,” which detailed a potential Transaction
(“October 29th Transaction”) that would create long-term
value for Target Corporation and its shareholders
f After the presentation, Target expressed concerns regarding

the October 29th Transaction
f Since then, Pershing has met with Target, members of its

Board, as well as Retail and Real Estate investors
We have received valuable feedback from these meetings
f Today, we will present a Revised Transaction that addresses

Target’s concerns, incorporates feedback from the
investment community, and creates great value for Target
shareholders
2
Agenda
Review of the October 29th Transaction
Target’s Concerns
Benefits of the Revised Transaction
Appendix
3
Review of the October 29th
Transaction
Updating Our Model
We have updated our model to reflect Q3 2008 results as well as

revised guidance provided by Target management on its earnings
call on Monday, November 17, 2008
f Reduced Q4 ’08E same-store-sales expectations to negative 5%
f Lowered capital expenditures in 2009 by approximately $1bn
f Slowed square footage growth in 2010E
f Halted share buybacks in Q4 2008 and for the full year 2009
f Used a 20-day average stock price of $37 per share for Target
The analyses provided in this presentation reflect the updated model
5
Objectives
In reviewing alternatives for Target, Pershing Square’s objective

was to eliminate the stock market’s ascribed discount to the
intrinsic value of Target’s real estate and allow the Company to:
f Retain complete control of its buildings and its brand
f Retain 100% flexibility with respect to its construction,

remodeling, and relocation plans
f Improve the Company’s free cash flow and access to capital
f Increase the Company’s ROIC and lower its cost of capital
f Maintain an investment grade credit rating
f Increase the Company’s EPS growth rate
f Minimize tax leakage and friction costs
6
October 29th Transaction
Tax-free spin of Target Inflation Protected REIT (or “TIP REIT”) as

Groundlessor and Facility Manager
Pre–Spin Post–Spin
TARGET TARGET
Shareholders Shareholders
Target Inflation
TARGET TARGET Corp
Leases
Existing Facilities
Owned
Retail Land Mgmt.
Buildings 1
Business Services
f Outsources Facilities Management f Elects REIT status at the time of spin-off

f Becomes Target’s exclusive land
developer for the first two years
(1) Includes third-party ground leases f After two years, becomes Target Corp’s
Preferred Vendor for land procurement
7
Unlocking Immense Real Estate Value
REITs, private market ground leases, and inflation-protected securities

all trade at much higher valuation multiples than Target’s multiple, at
only 5.8x ‘09E EV/EBITDA, based on a 20-day trading average stock
price of $37
Inflation Protected Securities /
(1)
Target’s Market Valuation REIT Market Valuations
5.8x 14.5x 17.0x 35.7x

Large Cap Recent “Big Inflation
$37/Share (1)
REITs (1) Box” Ground Protected
Lease (2) Treasury
Securities
(TIPS) (3)
The Transaction creates immense and instant value because 22% of
Target’s current EBITDA will be valued at a significantly higher
multiple than where Target trades today
Note: Target valuation assumes sale of remaining 53% interest on credit card receivables for $4.4bn, with Target retaining $150mm of credit card EBITDA
(2) Based on mid-point precedent cap rate of 5.9%
(3) Based on current 20-year TIP yield of 2.8% as of 11/14/08 8
Valuation Summary
$80
$80
$67
TIP REIT
$60 81% TIP REIT $39
$/Share
$37 $36
$40
Target Target Corp

$41
$31
$0
Target (20-Day Avg. Price) ¹ TIP REIT Spin-Off ² 12-Month Price Target ²
Target
Corp

'09E P/E 11.4x 14.7x '10E P/E 16.1x
Equity Value ($bn) $27 Equity Value ($bn) $29

TIP REIT
Enterprise Value ($bn) $27 Enterprise Value ($bn) $30

Note: Target valuation assumes sale of remaining 53% interest on credit card receivables for $4.4bn
For illustrative purposes, assumes Spin-off Transaction occurs on 01/01/09
(2) Based on mid-point of valuation analysis 9
Even ignoring valuation benefits, there are
important strategic reasons to consummate
the Transaction…
10
Benefits of the October 29th Transaction
1. Allows Target Corp to retain control over its buildings and brand
2. Improves Target’s overall access to capital
There is risk to Target’s status quo. Retailers’ access to capital has been
called into question
TIP REIT is one of the most stable companies in the world
TIP REIT is better able to access capital for future land acquisitions than
Target today, given TIP REIT’s immense security, stability, and unleveraged
balance sheet
TIP REIT can use non-cash currency (OP units) for tax-efficient real estate
acquisitions
11
Benefits of the October 29th Transaction (cont’d)
3. Increases free cash flow at Target Corp by nearly $500mm, thereby

decreasing Target’s capital needs
After-tax rent expense of ~$890mm is offset by land development capex of

~$890mm, which is funded by TIP REIT
TIP REIT pays all of Target’s 2009E dividends of 64 cents/share as well as an

incremental $1.15/share to Target shareholders
2009E 2009E Net Incremental
($mm, except per share data) Standalone (1) Target Corp (1) Cash Flow
Memo: Incremental Rent Expense – 1,433
Cash Flow Impact on Key Affected Metrics

Incremental After-Tax Rent Expense – 888 (888)
Dividends Paid 483 – 483
Land Development Capex 890 – 890
Net Impact to Cash Flow $1,373 $888 $484
(1) Assumes sale of remaining 53% interest on credit card receivables for $4.4bn on 01/01/09, with Target retaining $150mm of credit card EBITDA in ’09E
12
4. Maintains an investment grade credit ratings profile
5. Provides a clear path back to an “A” category credit rating
PF 2008E (1) 2009E 2010E 2011E
($bn, except where noted)

Target Corp Adj. Debt/EBITDAR 3.4x 3.2x 2.8x 2.8x
Expected Ratings Profile Mid - High BBB/Baa Mid - High BBB/Baa A- / A3 A- / A3
6. Creates over $510mm of tax savings in the first year post transaction
Optimizes ownership of land, a non-depreciable asset, through a REIT
structure
(1) Assumes sale of remaining 53% interest on credit card receivables for $4.4bn on 01/01/09, with proceeds used to pay down debt
13
7. Increases total dividends for Target’s current shareholders from

$0.64/share to $1.79/share in 2009E (1)
8. Improves store-level ROIC and increases Target’s EPS growth rate
9. Achieves a tax-free spin-off
10. Creates enormous shareholder value, potentially increasing Target’s

stock price from $37 to $67 per share
(1) Excludes $112mm (approximately $0.15/share) of incremental interest expense due to CY2009 cash E&P distribution
14
TIP REIT Investment Highlights
“Land-only” structure is extremely secure

■ $39bn of “Lease Security”, including $20bn of unencumbered buildings
Long-term lease provides bond-like stability and inflation-protection

■ 75-year, inflation-protected “Master Lease” with Target Corp
Significant growth opportunity

■ Formal arrangement with Target Corp provides long-term growth pipeline
High quality locations and superb tenant profile
De minimis maintenance capex allows for strong FCF generation
Tremendous size and scale – a “must-own” yield stock

15
Large, Liquid, “Must-Own” Yield Stock
TIP REIT will be the 58th largest company in the S&P 500
S&P 500 Ranked by Market Cap (1) S&P 100 Non-Financials Ranked by Dividend Yield (2)
Market Cap (1)
Rank Company ($mm) Rank Company Dividend Yield (%)
50 Time Warner 32,821 1 Altria Group 7.9
2 Pfizer 7.9
51 Colgate-Palmolive 31,323
3 General Electric 7.7
52 Devon Energy 30,960 4 Bristol-Myers Squibb 6.3
53 Boeing 30,129 5 Verizon Communications 6.1
6 E.I. DuPont de Nemours 6.0
54 Union Pacific 29,160
7 Eli Lilly 5.9
55 Lockheed Martin 28,948 8 AT&T 5.8
56 Southern 27,273 9 Philip Morris International 5.6
10 Merck 5.6
57 Burlington Northern Santa Fe 27,257
11 TIP REIT (3) 5.0
58 TIP REIT 27,000 12 Southern Co. 4.8
59 Celgene 26,965 13 Caterpillar 4.5
14 Home Depot 4.4
60 Lowe’s 26,689 15 Dominion Resources 4.3
Given its market cap, TIP REIT will be owned by S&P 500 index funds,
large cap funds, real estate index funds, yield-oriented investors, and
investors seeking inflation-protected assets
(1) As of November 14, 2008
(2) Represents non-financial companies in the S&P 500 with market caps greater than $20bn
(3) Based on 2009E dividends
16
TIP REIT: Unlike Any Existing REIT Today
TIP REIT Large Cap REITs

Leverage None High: 54% Debt-to-TMC
Average: 44% Debt-to-TMC
Refinancing High – REITs have borrowed at low rates
Risk / Earnings None and are facing much higher rates and
Pressure refinancing risk for debt maturities
Transaction None / 100% rental income Sometimes

Income
Yes, typically 10% or more of

Re-leasing Risk None / 75-year lease
leases up for renewal annually
Maintenance
Capital None Yes, typically 8% of EBITDA
Growth Preferred vendor arrangement No preferred arrangement
“Lease Security” $20bn of unencumbered buildings, None. Owns both land buildings
given “land-only” structure
17
How is TIP REIT Similar to TIPS?
TIP REIT has many of the same features of Treasury Inflation

Protected Securities (TIPS). However, TIP REIT has the added benefit
of a growth platform and no “Phantom tax”
TIP REIT 20-Year TIPS

Extremely low Backed by highly-rated Target Corp Backed by federal
probability of default $39bn of “Lease Security” or 145% government
TIP REIT’s EV at 5.0% dividend yield
Inflation protection Rent income adjusted for CPI Payment based on CPI
adjusted principal
Long-term duration with 75-year lease term 20 years
required payments REIT dividend payment required Interest payment required by
by law law
Liquidity $27bn market cap Over $450bn market (1)
Growth platform Yes No
“Phantom tax” No Yes (tax on inflation adj. principal)
(1) Size of total TIPS market
18
Feedback from REIT Investors
Since the October 29th presentation, Pershing Square has met or

held calls with several of the largest REIT investors and received
valuable feedback regarding TIP REIT
Feedback from REIT investors
Appreciation of the security and stability offered by land-only structure

Agreement on a valuation premium for land-only REIT
(versus a land and building REIT)
Strong interest in an unlevered REIT
Desire for more large cap, liquid REITs
Interest in an independent TIP REIT Board and management
Valuation benefits of an “A” category credit rating at Target
19
Interest from a Broad Group of Investors
In addition, Pershing Square has received strong interest in TIP

REIT from a broad category of large investor groups beyond
traditional REIT investors
Pensions
Endowments
Income-oriented funds
These investors are seeking security, stability, long-term

inflation-protection, and a higher yield than that offered by TIPS
20
Target’s Concerns Regarding the
October 29th Transaction
Target’s Concerns
Target expressed the following concerns regarding the October

29th Transaction:
Concern Management’s Commentary

1. Valuation “The validity of assumptions supporting Pershing
Square's market valuation of Target and the separate
REIT entity”
2. Reduction in “The reduction in Target's financial flexibility due to the

Target’s financial conveyance of valuable assets to the REIT and the
flexibility and large expense obligation created by the proposed
inflation risk lease payments which are subject to annual increase”
3. Credit ratings, “The adverse impact that the company believes the
borrowing costs, proposed structure would have on Target's debt
and liquidity ratings, borrowing costs and liquidity, exacerbated by
current market conditions”
22
Target’s Concerns (cont’d)
Target expressed the following concerns regarding the October

29th Transaction:
Concern Management’s Commentary

4. Frictional costs “The frictional costs and operational risks, including tax
and operational implications, of executing Pershing Square's ideas”
risks
5. Management “The risk of diverting management's focus away from

diversion core business operations over an extended time period
to execute such a complex transaction, particularly in
the current environment”
23
Revised Transaction: <20% IPO of TIP REIT
Step 1: Formation of Target Step 2: Primary IPO of <20%

Inflation-Protected Real of TIP REIT shares
Estate Investment Trust
f Target contributes land and f At the time of the IPO, TIP REIT
Facilities Management will elect REIT status (3)
Services to a new subsidiary
(“TIP REIT”) (1) f IPO does not trigger any capital
gains taxes
f TIP REIT leases the land back f Target retains >80% interest in
to Target Corp through a TIP REIT
Master Lease for a 75-year
term (2) f Immediate valuation benefits:
Allows investors to value Target
on a sum-of-the-parts basis
f Credit ratings impact:
(1) TIP REIT assumes a portion of Target liabilities. This could include a portion of
Target’s debt
(2) TIP REIT will lease land to Target Corp (i.e. the parent company) Target Corp will maintain its
(3) Non-REIT assets (e.g., the Facilities Management Services) will be placed in a
taxable REIT subsidiary (TRS) A+/A2 credit rating
25
Post IPO: Pay Down ~$9bn of Debt
Step 3: Sale of the remaining Step 4: Pay down ~$9bn of Target

53% interest in Target’s Credit debt using all of the credit card
Card Receivables proceeds, a portion of the IPO
proceeds, and free cash flow
f At an opportune time (either ($bn)
pre- or post-IPO), Target sells Paydown using Proceeds from Credit Card Sale
Securitized Debt $1.9
remaining 53% interest in its Unsecured Debt 2.5
credit card receivables Total $4.4
Paydown using IPO Proceeds 3.0
f For this analysis, we have Paydown using Free Cash Flow
(1)
1.8
assumed $4.4bn of proceeds Total Debt Paydown $9.2
from the sale
$ in billions f $1.6bn of cash proceeds from
Gross Receivables CY 2008E $9.0 the IPO is left on TIP REIT’s
Allowance (0.8) balance sheet
Net Receivables CY 2008E $8.2
53% Interest at Net Book Value $4.4
(1) Assumes TIP REIT funds land development capital expenditures of approximately $0.9bn post-IPO using debt
26
Post IPO: Spin-off TIP REIT and Purge E&P
Step 5: Spin-off of remaining Step 6: TIP REIT purges

interest in TIP REIT to Target retained Earnings and Profits
shareholders
f Immediately prior to spin-off, f By December 31 of the calendar

Target enters into an inflation- year of spin-off, TIP REIT pays a
swap agreement to hedge $1.6bn cash E&P dividend to TIP
inflation (alternative is to buy REIT shareholders
swaption today)
f Note: Cash E&P dividend could be
materially lower than $1.6bn
f Target’s >80% interest in TIP
The REIT industry group has
REIT is distributed tax-free to
requested the Treasury
shareholders Department to issue a rule
allowing low-cash stock-cash
f Post spin-off, Target maintains dividends
its “A” category credit rating If granted, this rule would reduce
the cash portion of TIP REIT’s
E&P dividend to as little as
$400mm
27
TIP REIT IPO Proceeds
Assuming a 19.9% IPO of TIP REIT at a 15% IPO discount, the IPO would generate
roughly $5.1bn in gross proceeds. After frictional costs and expenses, IPO proceeds
of $3.0bn will be paid to retire Target debt and $1.6bn will remain at TIP REIT
$ in billions
TIP REIT Equity Value $27.0
Implied 2009E Dividend Yield 5.0%
Captive TIP REIT Equity Value $24.0 (1)
Discount 15% 20.4

New Issuance 19.9% 25.5
TIP REIT Post-IPO Equity Value $28.6 (2)
TIP REIT Gross IPO Proceeds $5.1 (3)
Use of IPO Proceeds:

Retire Target Debt $3.0
Cash Remaining at TIP REIT 1.6
Pay Frictional Costs and Fees 0.5 (4)
Total IPO Proceeds $5.1
(1) Calculation based on allocating and subsequently paying down $3.0bn of debt
(2) Calculation based on adding net proceeds of $4.6bn to captive TIP REIT equity value of $24.0bn; assumes cash balance of $1.6bn at TIP REIT upon IPO
(3) Assumes a 19.9% IPO of TIP REIT at a 15% IPO discount; net of paying $500mm after-tax frictional costs and fees, IPO proceeds are $4.6bn
(4) Assumes approximately $350mm of after-tax frictional costs and $150mm of IPO fees
28
Sources and Uses of Cash at Target Corp
Proceeds from the IPO and the sale of the remaining interest in the
credit card receivables can be used to pay down debt
Cash Sources ($bn) Cash Uses ($bn)
IPO Proceeds to Retire Target Debt $3.0 Paydown of Securitized Debt $1.9
Credit Card Sale Proceeds 4.4 Paydown of Unsecured Debt 7.3
1-Yr Cash Flow Generated at Target Corp (1) 1.8
Total Cash Sources $9.2 Total Cash Uses (Debt Paydown) $9.2
(1) Reflects cash flow generated after working capital, capex, and dividends; assumes maintenance of $500mm minimum cash balance;
assumes TIP REIT funds land development capital expenditures of approximately $0.9bn by issuing debt during the first year post-IPO
29
Post Spin-off: Target Corp Credit Ratings
Post Spin-off, Target Corp will maintain an “A” category credit

ratings profile
Target Pro Forma
Standalone Target Corp
($bn) 2008E Adjustments Post Spin-off
JPMorgan GAAP Liability $3.6 ($3.6) -
Credit Card Securitized Debt 1.9 (1.9) -
Unsecured Debt (1) 12.3 (7.3) 5.0
Ending Debt $17.8 ($12.8) $5.0
Plus: Lease Adjusted Debt (8x Total Lease Expense) 1.4 13.6
Ending Lease Adj. Debt $19.2 $18.7
(2) (3)
Lease Adj. Total Debt / EBITDAR 2.8x 2.6x
Expected Ratings Profile "A" Category "A" Category
Memo: Rent Expense 0.2 (2) 1.7 (3)
$9.2bn of
Total Debt
Paydown
(1) Based on $14.8bn of unsecured debt as of Q3 ’08A, reduced in 4Q ’08E by $2.5bn through debt pay down with free cash flow and cash on balance sheet (while maintaining
$500mm minimum cash balance)
(2) Based on 2008E EBITDAR for Target Standalone of $6.9bn and 2008E Rent Expense of $0.2bn
(3) Based on 2010E EBITDAR for Target Corp post spin-off of $7.3bn and 2010E Rent Expense of $1.7bn
30
Illustrative Timeline
2009CY 2010CY
Q1 Q2 Q3 Q4 Jan – Nov Dec
Step 1: TIP REIT Formation

Contribute Land & Facilities Management Services to TIP REIT
Execute 75-year Master Lease with Target Corp
Step 2: TIP REIT IPO

TIP REIT elects REIT status
Primary IPO of <20% of TIP REIT shares
Step 3: Sale of 53% Interest in CC Receivables
Step 4: Debt Paydown
Step 5: Spin-off of TIP REIT

Target enters into inflation-swap agreement
Tax-free spin-off of remaining >80% interest in TIP REIT
Step 6: TIP REIT E&P Purge
31
Valuation Analysis
$79
$80
$65
TIP REIT
$60 TIP REIT
77% $33
(Captive)
$/Share
$37 $30
$40
Target Corp Target Corp

$20 Target
Standalone $35 $46
$0
Target (20-Day Avg. Price) ¹ TIP REIT IPO ² 12-Month Future Price /
TIP REIT Spin-Off ²
Target

Corp

'09E P/E 11.4x 15.1x '10E P/E 16.8x
Equity Value ($bn) $29 Equity Value ($bn) $31

Enterprise Value ($bn) $27 Enterprise Value ($bn) $30
TIP REIT
(3) (3)
(3) (3)
Note: Target valuation assumes sale of remaining 53% interest on credit card receivables for $4.4bn, with Target retaining $150mm of credit card EBITDA
For illustrative purposes, assumes 19.9% REIT IPO occurs on 01/01/09 and full REIT Spin-off occurs on 01/01/10
(3) Based on Adjusted Equity Value excluding cash balance of $1.6bn reserved for E&P distribution in 2010E
32
Tremendous Upside at Various Assumptions
At any plausible valuation of TIP REIT and Target Corp, the

Transaction results in a significant premium to the stock price of
$37 / per share
TIP REIT ‘09E Dividend Yield
Value/Share ($)
7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5%
$52 $54 $55 $57 $59 $62 $65
EV/ ’09E EBITDA
6.0x
Target Corp
6.5x 56 57 59 61 63 65 69
7.0x 59 60 62 64 66 68 72
7.5x 62 64 65 67 69 72 75
8.0x 66 67 69 70 73 75 78
Premium to $37 TIP REIT ‘09E Dividend Yield

stock price (%) 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5%
41% 45% 49% 54% 60% 67% 76%
EV/ ’09E EBITDA
6.0x
Target Corp
6.5x 51% 55% 59% 64% 70% 77% 85%

7.0x 59% 63% 67% 72% 78% 85% 94%
7.5x 68% 72% 76% 81% 87% 94% 103%
8.0x 77% 81% 85% 90% 96% 103% 112%
33
Benefits of the Revised
Transaction
Advantages of a Minority IPO of TIP REIT
A <20% IPO of TIP REIT would have several important advantages
Immediate value creation for Target shareholders

Force a market revaluation of Target
Enable investors to value Target based on a sum-of-the-parts basis, using
the public valuation of TIP REIT
Immediately improves Target’s access to capital through TIP REIT
Increases Target’s liquidity, given ~$5bn of IPO proceeds
<20% IPO is a tax-free transaction
Maintains Target’s current “A” category credit rating
Provides funds for debt paydown
Preserves an “unwind” mechanism in the form of a buyback of the

public minority stake of TIP REIT
35
Advantages of a Minority IPO of TIP REIT (cont’d)
A Minority IPO would offer Target significant control and flexibility

in executing the Revised Transaction
Offers flexibility as to when Target:
Sells remaining interest in credit card receivables

Completes TIP REIT spin-off
Pays an E&P dividend ($1.6bn of cash in the calendar year of TIP
REIT spin-off)
While maintaining control of TIP REIT, Target has the

opportunity to:
“Test” the valuation of TIP REIT

Fine tune the relationship between Target / TIP REIT on land
development issues
36
Pros and Cons of the Revised Transaction
Assuming the spin-off of the remaining >80% interest in TIP REIT occurs
in 2010, the Revised Transaction offers many pros and few cons
Pros Cons
Meaningfully accretive on all key ⌧ Dilution: <20% IPO of TIP REIT results in
measures (EPS, FCF/share) some dilution to Target shareholders, versus the
October 29th Transaction proposal, equivalent to
Maintains “A” category credit rating ~$1.50 per share in total value (2)
More than doubles dividends: $0.64/share ⌧ Delay of certain benefits: Certain
today to $1.49 (1) share in 2010 benefits such as reduced taxes and increased
Improves capital access and decreases dividends won’t be fully achieved until the spin-
the need for growth capital at Target Corp off is complete
Mitigating Factors:
Reduces taxes by over $510mm
In the context of total value creation from
Improves Target’s ROIC and EPS growth
Target’s $37 stock price, the dilution is minimal
Increases the total stock price from Despite the longer transaction plan, the
$37/share to $79/share by 2010 increased flexibility afforded to Target will
(1) Assumes a 19.9% IPO which increases TIP REIT’s shares outstanding to
approximately 940mm shares from 755mm shares pre-IPO
significantly reduce execution risks
(2) Assumes a 15% IPO discount and a 19.9% IPO 37
Addressing Management’s Concerns
Concern Benefits of the Revised Transaction
1) Valuation 3 Under any plausible valuation of TIP REIT, the

Revised Transaction offers tremendous upside to
Total Stock Price at Various ’09E
Target’s stock price of $37
Dividend Yields and ’09E Multiples At Target’s current stock price of $37 and EV / ’09E
TIP REIT ’09E Dividend Yield
EBITDA multiple of 5.8x, the implied dividend yield
7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% of TIP REIT is an improbable 16%
6.0x $52 $54 $55 $57 $59 $62 $65
3 IPO provides a seasoning period for TIP REIT
EV/’09E EBITDA
Target Corp
6.5x 56 57 59 61 63 65 69
7.0x 59 60 62 64 66 68 72
An IPO would give the investment community
several quarters to value TIP REIT before it is spun
7.5x 62 64 65 67 69 72 75
off, effectively seasoning the market and attracting
8.0x 66 67 69 70 73 75 78 long-term investors
3 Potential “unwind” mechanism

Should the Company not be satisfied with TIP
REIT’s Transaction, Target can repurchase TIP
REIT’s public minority stake, effectively “unwinding”
the structure
38
Addressing Management’s Concerns (cont’d)
2) Reduction in 3 Target pays down ~$9bn of debt, eliminating

Target’s financial significant interest expense obligations
flexibility and
<20% IPO of TIP REIT provides the Company with
inflation risk the proceeds and flexibility to deleverage before the
spin-off of the remaining interest in TIP REIT
3 Ground lease is more attractive than debt

TIP REIT ground lease is, in many ways, more
attractive than Target’s debt given the 75-year term,
the lack of financial covenants, and the lack of
refinancing risk
3 Inflation risk can be hedged out cheaply

Target can lock in 20-year inflation protection today
at ~250 bps per year, which implies an annual after-
tax cost of approximately $0.03/share
39
3) Credit ratings, 3 Target will maintain its “A” category credit ratings
borrowing costs, at all times
and liquidity
Post spin-off of TIP REIT, Target Corp will maintain
its “A” category credit rating as a result of
deleveraging
3 Borrowing costs will not be impacted by the

Revised Transaction
3 The Revised Transaction offers several key credit

benefits:
Target’s liquidity is significantly increased given IPO
proceeds
Target’s access to and cost of capital is improved by
the formation of TIP REIT
40
4) Frictional costs 3 After-tax frictional costs are small in light of total

and operational value creation of $28-plus dollars per share
risks Main frictional costs are professional fees
(investment banking, legal, and accounting) and
property taxes
After-tax frictional costs will likely be less than $1 per
share
3 Operational risks are mitigated by the Revised

Transaction given:
The presence of an “unwind” mechanism
The ability to “test drive” the Target / TIP REIT
relationship during the IPO period
3 Tax-free nature of spin-off
41
5) Management 3 The formation of TIP REIT will require a modest

diversion amount of retail operating management’s time
Predominantly third-party legal and accounting work
CFO, EVP of Property Dev., and GC oversight required
Other members of senior operating management largely
uninvolved
3 The Transaction is akin to placing a master ground

lease on Target’s stores. It will be completely
transparent and seamless to Target’s core business
3 IPO and eventual spin-off of TIP REIT will not distract

Target’s core business teams:
Merchandising / purchasing Vast majority of
Marketing Target’s team
Regional and store-level members will be
uninvolved
IT / systems / administration
42
Risk of the Status Quo
In today’s world, even the best retailers may lose access to capital
f The TIP REIT IPO transaction would immediately increase

Target’s access to capital
TIP REIT will have strong access to the debt and equity capital markets,
far better than any retailer
TIP REIT will be able to issue OP units for tax-efficient land acquisitions
f This Transaction will best position Target to benefit from a

weak competitive environment
Given potential retailer bankruptcies, Target can use the liquidity
provided by TIP REIT to acquire real estate that might be for sale at
substantial discounts in the next 12-18 months
The risk of the status quo is that Target may lose access to capital
and not be able take advantage of the current environment
43
Why Is Now the Time?
The Transaction requires several months of planning before an

IPO is achievable. To complete an IPO even a year from now, work
on this Revised Transaction will need to begin shortly
X Formation of TIP REIT and the issuance of pro forma financials will take
several months
Predominantly legal (lease structuring) and accounting work

Search for a management team and new board of directors for TIP REIT
X To achieve a TIP REIT IPO in Q3 2009, the Company will need to authorize
work on this Revised Transaction in the beginning of 2009
X In 2009, there could be opportunities for Target to benefit from a weak

competitive landscape
TIP REIT needs to be in place for the Company to best do so
44
Fast Forward: 2010E and Beyond
For investors with a longer-term view, the Revised Transaction

offers explosive potential upside in 2010E and beyond
A turn in the economy would lead to
Potentially explosive
earnings growth at Target
Improved retail sales Corp, particularly given
recent expense reductions
Increased demand for TIP

Heightened inflation
REIT, given inflation-
expectations protected income stream
45
Pershing’s Relationship with Target
f Pershing has been in discussions with Target since

May 2008 about a potential real estate transaction
f We appreciate Target’s candid feedback and respect

the Company’s concerns
f Throughout this process, we have continually

improved upon the transaction in an effort to create an
outcome that satisfies Target’s strategic goals and
concerns
f We believe our Revised Transaction addresses all of

Target’s concerns and achieves enormous value
creation
46
Questions and Answers
Appendix
The Revised Transaction
Tax-free IPO and spin of Target Inflation Protected REIT (or “TIP REIT”)
as Groundlessor and Facility Manager
Pre–Transaction Post–Transaction Public

Shareholders
TARGET TARGET >80%
Shareholders Shareholders <20%
Target Inflation
TARGET TARGET Corp
Leases
Existing Facilities
Owned
Retail Land Mgmt.
Buildings 1
Business Services
f Outsources Facilities Management f Elects REIT status at the time of IPO

f Becomes Target Corp’s Preferred Vendor
for land procurement
(1) Includes third-party ground leases
49
Revised Transaction: Steps 1 - 2
Step1: Formation of TIP REIT Transaction Description
Target Corp f Step 1a: The existing company (“Target Corp”) forms
a new subsidiary (“TIP REIT”) and transfers to it the
Facilities Management Services business, the owned
Facilities
Land TIP REIT Management
Services
land under the stores, and the owned land under the
1a distribution facilities
TIP REIT will assume a portion of Target’s liabilities
Target Corp f Step 1b: TIP REIT leases the land back to Target
1b 75-year
Corp (i.e. the parent company) through a Master
Master Lease TIP REIT Lease for a 75-year term
Facilities
Land Management
Services
f Step 2a: After some period of time, TIP REIT offers up
to 19.9% of its shares in a primary IPO for cash
Step 2: IPO / REIT Election
Cash proceeds could be retained for corporate
Target Corp business purposes or used to reduce TIP REIT debt
Public
Cash
f Step 2b: TIP REIT elects REIT status effective
2b TIP REIT
2a immediately
<20% of
TIP REIT Simultaneously, TIP REIT drops the Facilities
Shares
Facilities Management Services business into a new
Land
corporation, a taxable REIT subsidiary (TRS)
Mgmt Services
(TRS)
50
Revised Transaction: Steps 3 - 6
Step 5: Spin-off Transaction Description
Target
Shareholders
f Step 3: Target Corp sells the remaining 53% interest
5 in the credit card receivables business to an
Tax-free Target TIP REIT
Investment Partner
Spin-off Shareholders
Corp
of TIP REIT f Step 4: Target Corp pays down debt using proceeds
shares held
by Target >80% <20% from the credit card receivables and the TIP REIT
pays down assumed debt using proceeds from the TIP
TIP REIT REIT IPO
f Step 5: Target Corp spins off its remaining >80.1%
Land
Facilities Mgmt
Services
interest in TIP REIT to its shareholders pro rata and
(TRS)
tax-free
Step 6: E&P Purge
f Step 6: TIP REIT pays a taxable dividend (at the
TIP REIT Target
Shareholders Shareholders dividend tax rate to non-corporate taxpayers) to
shareholders equal to its allocated portion of Target’s
<20% >80%
$16bn of retained Earnings and Profits (“E&P”),
estimated to be $8bn based on the implied mid-point
TIP REIT
Target valuation of TIP REIT/Target Corp
$8bn Taxable Corp
6 Dividend
(E&P Purge)
20% of the dividend ($1.6bn) may be paid in cash
with the remaining paid in TIP REIT common stock
Land
Facilities Mgmt
Services
This cash dividend can be deferred until the end of
(TRS) the calendar year in which the spin-off occurs
75-year Lease
51
Why are Treasury Inflation
Protected Securities (“TIPS”) the
Best Comparable Security to
TIP REIT?
TIP REIT: (1) Valuing the TIP-like Security
The TIP-like Security should trade at a small spread to TIPS

of 195 – 245 bps
Rate / Yield Spread to TIPS
20-year TIP Yield Today 2.8% —
Current TGT Unsecured

1.95% — 2.45% 195 bps — 245 bps
CDS @ ~220bps ± 25 bps
TIP REIT: 195 bps — 245 bps

4.75% — 5.25%
TIP-like Security
The current TIPS yield of 2.8% implies an expected 20-year inflation rate of
only 1.6%. If the expected 20-year inflation rate increased to 2.0% and the
20-year Treasury rate remained constant, then the 20-year TIPS would
yield 2.4% and TIP REIT would yield 4.35% – 4.85%. The higher the inflation
rate, the more valuable TIP REIT will be
53
TIP REIT: (2) Valuing the Land Developer
TIP REIT’s land development opportunity can be valued based on

its growth platform value
f Growth Platform Valuation

Terminal
Value (1)
2009 2010 2011 2012 2013 ... 2029
Value
Total Capex (890) (830) (1,539) (1,801) (2,117)
Free Cash Flow from Platform ($836) ($716) ($1,313) ($1,442) ($1,599)
54
Valuation: TIP REIT in Total
Based on “TIPS”-based valuation of TIP REIT, the implied TIP REIT

valuation is $28bn, or $38/share today
Equity Value (1) Implied Cap Rate (2) Valuation

2008E Existing dividends:
TIP-like $1,356mm
$36/share 5.0%
Security Dividend yield: 4.75% – 5.25%
Valuation: $26bn – $29bn
2029E NOI: $2,503mm

Terminal cap rate:
4.75% – 5.25%
Land
$2/share Discount rate on 20-yr DCF:
Developer 10.5% – 12.5%
Valuation: $0.0bn – $2.4bn
Total 2009E NOI of $1,452mm

$38/share 5.1% Valuation: $26bn – $31bn or
TIP REIT $34/share – $41/share
(1) At mid-point valuation

(2) Implied yield calculated based on NOI / Implied value
55
Conservative Approach to Valuation
Our mid-point valuation price (pre-IPO) for TIP REIT of $36

(1) implies a 5.0% dividend yield for the TIPS-like security and (2)
excludes the value of the Land Developer
$67
Using a “TIPS”-based
TIP REIT
valuation analysis, our
$36 mid-point valuation price
of $36/share excludes the
value of TIP REIT’s
development platform
Target Corp
$31
TIP REIT Spin-off

Equity Value / Share
56
Why is TIP REIT More Valuable
than a Private Ground Lease?
Ground Leases Typically Trade from 5.50% to 6.25%
Precedent private ground lease transactions support cap rates of

approximately 5.50% – 6.25% for a typical ground lease with no
development pipeline
Building Lot Total Lease

Size Size Lease Term with
Transaction Tenant Location (Sq. Ft.) (Acres) Cap Rate Term Options Options
For Sale Lowe's Princeton, WV 116,000 14.16 6.61% 20 Years 6, Five-Year 50 Years
For Sale Kohl's Selinsgrove, PA 68,416 4.47 6.25% 20 Years 8, Five-Year 60 Years
For Sale Lowe's Derby, CT 152,890 13.10 5.50% 20 Years 8, Five-Year 60 Years
For Sale Lowe's Eugene, OR 137,933 12.30 6.25% 20 Years na na
For Sale Wal-Mart Albuquerque, NM 40,000 5.15 5.50% 20 Years 15, Five-Year 95 Years
For Sale Kohl's Fort Gratiot, MI 89,008 14.75 5.75% 20 Years 4, Five-Year 40 Years
Sold Target Fairlawn, OH 99,402 5.28 6.00% 20 Years 6, Five-Year 50 Years
Sold - March 27, 2008 Lowe's Whitehall, PA 166,609 14.24 6.05% 20 Years na na
Sold - March 23, 2008 Home Depot Austell, GA 130,948 14.46 5.75% 20 Years na na
Sold - October 2007 Kohl's Reno, NV 94,213 9.09 6.10% na na na
Sold - September 2007 Lowe's Escondido, CA 178,712 11.27 6.00% 20 Years 6, Five-Year 50 Years
Sold - July 2007 Lowe's Sayre, PA 111,371 12.50 6.25% 20 Years 8, Five-Year 60 Years
Mean 6.00%
Median 6.03%
High 6.61%
Low 5.50%
Source: LoopNet and other public filings
58
Why is TIP REIT Better than a Private Ground Lease?
TIP REIT offers better value to investors than a typical private

ground lease
f TIP REIT has several qualities which make it more attractive than a
private ground lease
3 Large cap, liquid public ownership
3 75-year Master Lease term (longer than most private ground leases)
3 1,435 retail properties (1) in 48 states
3 Inflation-protected rental stream with annual adjustments
3 Best-in-class retail tenant
3 Geographic diversity
f Unlike a static ground lease, TIP REIT also has growth, given its
dependable new store growth pipeline
Given the above factors, TIP REIT will trade at a lower cap rate than an
individual private ground lease
59
Revised Transaction:
Financial Models
Key Revised Assumptions in Models
For illustrative purposes, we have assumed the sale of remaining 53%

interest in the credit card business and the 19.9% IPO of TIP REIT
occurring 1/1/09, to be followed by a full spin-off of TIP REIT on 1/1/10
X We have updated our model to reflect Q3 2008 results as well as new guidance
provided by Target management on its earnings call on Monday, November 17,
2008
X Consolidated Model
Assume TIP REIT is captive and fully consolidated with the retailer for accounting
purposes
For illustrative purposes, financials show full consolidation of the captive REIT
throughout the entire projection period (such consolidation would cease upon full
spin-off on 1/1/10)
X TIP REIT Model
$1.6bn of cash E&P distribution now funded with proceeds from the 19.9% IPO of
TIP REIT instead of additional debt
X Target Corp Model
Adjustments to opening balance sheet reflect de-consolidation of TIP REIT from
Consolidated Model
61
Model – Consolidated
Consolidated Model – Income Statement
Status Status
Quo Quo Credit Card 20% IPO Pro Forma Calendar Year, CAGR
($mm) CY2007 CY2008 Adj. TIP REIT CY2008 2009 2010 2011 2012 2013 '09 - '13
Retail Sales 61,471 63,720 63,720 66,600 71,171 78,082 86,068 95,316 9.4%
Credit Revenue 1,896 2,087 (1,944) 144 150 160 176 194 215 9.4%
Credit Sales Growth 4.5% 6.9% 9.7% 10.2% 10.7%
Total Revenue 63,367 65,807 63,863 66,750 71,331 78,258 86,262 95,530 9.4%
COGS 42,929 44,531 44,531 46,544 49,632 54,373 60,075 66,521
% of Retail Sales 69.8% 69.9% 69.9% 69.9% 69.7% 69.6% 69.8% 69.8%
SG&A (excluding D&A and Rent Expense) 12,392 12,899 15 12,914 13,596 14,423 15,744 17,352 19,213
% of Retail Sales 20.2% 20.2% 20.3% 20.4% 20.3% 20.2% 20.2% 20.2%
Credit Expenses 950 1,520 (1,520) - - - - - -
% of Credit Revenue 50.1% 72.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retail EBITDAR 6,150 6,290 6,275 6,460 7,117 7,965 8,641 9,582 10.4%
Retail EBITDAR Margin (%) 10.0% 9.9% 9.8% 9.7% 10.0% 10.2% 10.0% 10.1%
Credit EBITDAR 946 567 (424) 144 150 160 176 194 215 9.4%
Credit EBITDAR Margin (%) 49.9% 27.2% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
EBITDAR 7,096 6,857 6,418 6,610 7,277 8,140 8,834 9,796 10.3%
EBITDAR Margin (%) 11.2% 10.4% 10.1% 9.9% 10.2% 10.4% 10.2% 10.3%
Rent Expense 165 169 169 173 178 182 187 191
EBITDA 6,931 6,688 6,249 6,436 7,099 7,958 8,648 9,605 10.5%
EBITDA Margin (%) 10.9% 10.2% 9.8% 9.6% 10.0% 10.2% 10.0% 10.1%
Depreciation & Amortization 1,659 1,819 1,819 1,940 2,073 2,274 2,507 2,776
% of Retail Sales 2.7% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%
Operating Income 5,272 4,870 4,431 4,496 5,026 5,684 6,141 6,829 11.0%
Net Interest (Income) / Expense 647 942 (440) (232) 270 333 352 422 469 515
Income Tax Provision 1,776 1,545 1,519 1,469 1,659 1,879 2,032 2,272
Tax Rate (%) 38% 39% 36% 35% 35% 36% 36% 36%
Minority Interest Expense 259 259 257 266 273 280 289
Net Income 2,849 2,383 2,383 2,438 2,750 3,110 3,360 3,753 11.4%
Net Income Margin (%) 4.5% 3.6% 3.7% 3.7% 3.9% 4.0% 3.9% 3.9%
Current Diluted Shares Outstanding 882.6 819.0 819.0 754.7 754.7 702.1 688.3 678.3
Shares Repurchase (63.7) (64) (64.3) 0.0 (52.5) (13.8) (10.0) (7.2)
Share Repurchase from Options 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Shares Outstanding 819.0 754.7 754.7 754.7 702.1 688.3 678.3 671.1
Weighted Average Shares Outstanding 850.8 773.7 773.7 754.7 728.4 695.2 683.3 674.7
Earnings per Share ($) $3.33 $3.08 $3.08 $3.23 $3.78 $4.47 $4.92 $5.56 6.29 14.6%
63
Consolidated Model – Balance Sheet
Status Status
Quo Quo Credit Card 20% IPO Pro Forma Calendar Year,
($mm) CY2007 CY2008 Adj. TIP REIT CY2008 2009 2010 2011 2012 2013
Cash & Equivalents 2,450 500 0 1,600 2,100 2,100 500 500 500 500
Trade Receivables 8,054 8,249 (8,249) - - - - - -
Other Current Assets 8,402 8,903 8,903 9,305 9,944 10,909 12,025 13,317
Property, Plant & Equipment, gross 31,982 35,316 35,316 38,427 41,510 46,271 51,715 57,993
Accumulated Depreciation (7,887) (9,265) (9,265) (11,205) (13,278) (15,552) (18,059) (20,836)
Property, Plant & Equipment, net 24,095 26,051 26,051 27,223 28,233 30,719 33,656 37,157
Other Non-Current Assets 1,559 1,277 1,277 1,277 1,277 1,277 1,277 1,277
Total Assets 44,560 44,980 38,331 39,905 39,953 43,405 47,458 52,251
Debt 17,090 17,811 (8,000) (2,974) 6,837 5,925 6,675 7,425 8,175 8,925
Other Current Liabilities 9,818 10,373 10,373 10,842 11,586 12,711 14,011 15,516
Other Non-Current Liabilities 2,345 2,521 2,521 2,521 2,521 2,521 2,521 2,521
Total Liabilities 29,253 30,705 19,731 19,288 20,782 22,657 24,707 26,963
Minority Interest 0 0 4,574 4,574 4,563 4,550 4,533 4,511 4,485

Total Equity 15,307 14,275 (249) 14,026 16,054 14,622 16,215 18,239 20,804
Total Equity & Liabilities 44,560 44,980 38,331 39,905 39,953 43,405 47,458 52,251
64
Consolidated Model – Cash Flow Statement

($mm) CY2008 2009 2010 2011 2012 2013
EBITDA 6,688 6,436 7,099 7,958 8,648 9,605
less: Interest Expense (270) (333) (352) (422) (469) (515)
less: Taxes (1,545) (1,469) (1,659) (1,879) (2,032) (2,272)
less: Dividends Paid to Minorities (268) (268) (279) (289) (302) (315)
Share-based Compensation 73 73 73 73 73 73
less: Increase in Net Working Capital 54 66 105 159 184 213
less: Increase Funding of CC Growth 0 0 0 0 0 0
Cash Flow from Operating Activities 4,733 4,506 4,988 5,600 6,103 6,789
Capital Expenditures (3,820) (3,111) (3,083) (4,761) (5,444) (6,277)

Cash Flow from Investing Activities (3,820) (3,111) (3,083) (4,761) (5,444) (6,277)
Issuance of Debt 0 750 750 750 750

Repayment of Debt (912) (0) 0 0 0
Issuance of Equity / (Buy Back) 0 (3,760) (1,089) (890) (722)
Issuance of Dividends to Common (483) (495) (501) (519) (540)
Cash Flow from Financing Activities (1,395) (3,505) (839) (659) (512)
Beginning Cash Balance 2,100 2,100 500 500 500

Change in Cash 0 (1,600) 0 0 0
Ending Cash Balance 2,100 500 500 500 500
Average Cash Balance 2,100 1,300 500 500 500

65
Consolidated Model – Build-ups and Credit Metrics
Status
Quo Pro Forma Calendar Year,
Sales Buildup CY2007 CY2008 2009 2010 2011 2012 2013
Square Feet (mm) 208 222 231 239 254 270 289
$ / Sq. Ft. 296 286 288 297 308 318 330
Retail Sales 61,471 63,720 66,600 71,171 78,082 86,068 95,316
Implied Retail Sales Growth (% ) 3.7% 4.5% 6.9% 9.7% 10.2% 10.7%
Sq. Footage Growth (% ) 7.0% 4.0% 3.5% 6.0% 6.5% 7.0%
SSS Growth (% ) (3.1%) 0.5% 3.3% 3.5% 3.5% 3.5%
CapEx Buildup 2007 2008 2009 2010 2011 2012 2013

Total System CapEx 4,369 3,820 3,111 3,083 4,761 5,444 6,277
CapEx as % of Retail Sales 7.1% 6.0% 4.7% 4.3% 6.1% 6.3% 6.6%
Status Status
Quo Quo Pro Forma
Credit M etrics CY2007 CY2008 CY2008
Lease Adjusted Debt 8x 1,320 1,353 1,353 1,387 1,421 1,457 1,493 1,531
Actual Debt 17,090 17,811 6,837 5,925 6,675 7,425 8,175 8,925
Total Lease Adjusted Debt 18,410 19,164 8,190 7,312 8,097 8,882 9,669 10,456
Total Lease Adjusted Debt/EBITDAR 2.6 x 2.8 x 1.3 x 1.1 x 1.1 x 1.1 x 1.1 x 1.1 x
Total Debt / EBITDA 2.5 x 2.7 x 1.1 x 0.9 x 0.9 x 0.9 x 0.9 x 0.9 x
EBITDAR / (Interest + Rent) 8.7 x 6.2 x 14.6 x 13.1 x 13.7 x 13.5 x 13.5 x 13.9 x
EBITDA / Interest 10.7 x 7.1 x 23.2 x 19.3 x 20.2 x 18.9 x 18.5 x 18.6 x
66
Consolidated Model – Tax Adjustments

($mm) CY2008 2009 2010 2011 2012 2013
Profit Before Taxes 4,161 4,164 4,674 5,262 5,672 6,313
Tax Rate (%) 39% 38% 38% 38% 38% 38%
Taxes 1,636 1,582 1,776 1,999 2,155 2,399
Less: State Tax Savings (16) (16) (16) (16) (17) (17)
Less: Tax Adj. for Public REIT Shareholders (102) (98) (101) (104) (106) (110)
Less: Facilities Mgmt Tax Adj. (0) (0) (0) (0) (0) (0)
Net Consolidated Taxes 1,519 1,469 1,659 1,879 2,032 2,272
Adjustment Calculations:
State Tax Savings:
Total REIT Net Income 1,303 1,292 1,334 1,370 1,408 1,450
Net Income to Other Shareholders 259 257 266 273 280 289
Net Income to Target 1,044 1,035 1,069 1,097 1,128 1,161
Assumed Tax Rate (150bps less than current rate) 38% 37% 37% 37% 37% 37%
Total State Tax Savings (16) (16) (16) (16) (17) (17)
Facilities Management Adjustments:

Facilities Mgmt Income 19 19 20 22 24 27
Facilities Mgmt Taxes 7 7 8 8 9 10
Minority Interest on Taxes (1) (1) (2) (2) (2) (2)
Target Share of Facilities Mgmt Income 10 10 11 12 13 15
Adjustment for Dividend Received Deduction 12% 11% 11% 11% 11% 11%
Incremental Facilities Mgmt Adj. 1 1 1 1 2 2
Total Facilities Management Tax Adj. (0) (0) (0) (0) (0) (0)
67
Model – TIP REIT
TIP REIT Model – Income Statement
($mm, except as noted) CY2008 2009 2010 2011 2012 2013
Gross TIP REIT Revenues from Ground-leased Store Land 1,327 1,389 1,482 1,625 1,789 1,980
Gross TIP REIT Revenues from Ground-leased DCs & WHs Land 44 44 45 49 52 56
Total Gross TIP REIT Revenues 1,371 1,433 1,527 1,673 1,842 2,037
Total TIP REIT Net Rental Revenues 1,371 1,433 1,527 1,673 1,842 2,037
Net Facilities Management Income 19 19 20 22 24 27
Net Operating Income 1,389 1,452 1,547 1,695 1,866 2,063
Less: G&A Expense (20) (20) (21) (21) (22) (22)

Less: Incremental Standalone Cost (15) (15) (15) (16) (16) (17)
EBITDA 1,354 1,417 1,511 1,659 1,828 2,025
Less: Interest Expense - (62) (103) (196) (304) (431)
Net Income 1,303 1,292 1,334 1,370 1,408 1,450
Normalized Net Income (1) 1,303 1,292 1,334 1,370 1,408 1,450

Earnings per Share $1.38 $1.37 $1.42 $1.45 $1.49 $1.54
Normalized Earnings per Share (1) $1.38 $1.37 $1.42 $1.45 $1.49 $1.54
% AFFO
Dividends on Common 100.0% 1,347 1,347 1,400 1,455 1,515 1,584
Special Dividends (2) - - - - - -
Normalized Dividends (1) 1,347 1,347 1,400 1,455 1,515 1,584
Normalized Dividends per Share (1) $1.43 $1.43 $1.49 $1.54 $1.61 $1.68
(2) $1.6bn of proceeds from a 19.9% IPO of TIP REIT used to pay cash E&P distribution in CY 2010
69
TIP REIT Model – Balance Sheet

($mm, except as noted) CY2008 2009 2010 2011 2012 2013
Real Estate:
Gross Existing Properties - Land & Improvements 11,833 11,833 11,833 11,833 11,833 11,833
Development Properties - Land & Improvements 890 1,720 3,258 5,059 7,176
Accumulated Depreciation (885) (941) (1,007) (1,092) (1,199) (1,333)
Net Real Estate Asset 10,948 11,782 12,546 14,000 15,693 17,677
Cash - 3 3 3 3 3
Total Assets 10,948 11,785 12,549 14,003 15,696 17,680
Debt:
Revolver - 3 3 3 3 3
New Debt - 890 1,720 3,258 5,059 7,176
Total Debt - 893 1,723 3,261 5,062 7,179
Common Equity 10,948 10,948 10,948 10,948 10,948 10,948

Retained Earnings (Deficit) (55) (121) (206) (314) (448)
Total Equity 10,948 10,892 10,827 10,742 10,634 10,500
Total Liabilities & Equity 10,948 11,785 12,549 14,003 15,696 17,680
70
TIP REIT Model – Cash Flow Statement
Calendar Year,
Cash Flow from Operating Activities:
EBITDA 1,353 1,417 1,511 1,659 1,828 2,025
Less: Taxes on Facilities Mgmt. Income (7) (7) (8) (8) (9) (10)
Net Cash Flow from Operating Activities 1,141 1,347 1,400 1,455 1,515 1,584
Cash Flow from Investing Activities:

Development Capex (890) (830) (1,539) (1,801) (2,117)
Net Cash Flow from Investing Activities (890) (830) (1,539) (1,801) (2,117)
Cash Flow from Financing Activities:

Debt Financing:
Increase (Decrease) in Revolver 3 - - - -
Increase (Decrease) in New Debt 890 830 1,539 1,801 2,117
Equity Financing:
Increase (Decrease) in Common Equity - - - - -
Dividends on Common (1,141) (1,347) (1,400) (1,455) (1,515) (1,584)
Special Dividends - - - - -
Net Cash Flow from Financing Activities (455) (570) 84 285 533
Beginning Cash Balance - 3 3 3 3

Net Change in Cash 3 - - - -
Ending Cash Balance - 3 3 3 3 3
71
TIP REIT Model – Rent Build-up
Assumptions ($mm, except as noted): CY2008 2009 2010 2011 2012 2013 '09 - '13
Total Combined Stores - Sq. Ft. Count
Owned Stores 1,435 190 198 207 221 237 256
Combined (Ground-leased) Stores 176 23 23 23 23 23 23
Third-party Leased Stores 73 10 10 10 10 10 10
Total Combined Stores Square Footage 222 231 239 254 270 289 5.7%
Total Combined Stores Square Footage Growth 4.0% 3.5% 6.0% 6.5% 7.0%
TIP REIT Stores - Sq. Ft. Count

Owned Stores 1,435 Yes 190 198 207 221 237 256
Total TIP REIT Stores Square Footage 190 198 207 221 237 256 6.6%
Total TIP REIT Stores Square Footage Growth 4.7% 4.1% 7.0% 7.5% 8.0%
Total Combined DCs & WHs - Sq. Ft. Count

Owned DCs & WHs 25 35 35 35 37 39 41
Combined (Ground-leased) DCs & WHs 1 1 1 1 1 1 1
Third-party Leased DCs & WHs 5 7 7 7 7 7 7
Total Combined DCs & WHs Square Footage 44 44 44 46 47 49 3.0%
Total DCs & WHs Sq. Ft. vs. Total Combined Stores Sq. Ft. 19.6% 18.9% 18.2% 18.0% 17.5% 17.0%
TIP REIT DCs & WHs - Sq. Ft. Count

Owned DCs & WHs 25 Yes 35 35 35 37 39 41
Total TIP REIT DCs & WHs Square Footage 35 35 35 37 39 41 3.7%
Total TIP REIT DCs & WHs Square Footage Growth 0.0% 0.0% 5.7% 4.3% 4.8%
Rent / Square Foot - Store Land $7.00 $7.00 $7.18 $7.35 $7.54 $7.73
CPI Growth 2.5% 2.5% 2.5% 2.5% 2.5%
Average Growth 2.5% 2.5% 2.5% 2.5% 2.5%
TIP REIT Revenues from Ground-leased Land 1,327 1,389 1,482 1,625 1,789 1,980 9.3%
Rent / Square Foot - DCs & WHs Land $1.25 $1.25 $1.28 $1.31 $1.35 $1.38
CPI Growth 2.5% 2.5% 2.5% 2.5% 2.5%
Average Growth 2.5% 2.5% 2.5% 2.5% 2.5%
TIP REIT Revenues from Ground-leased DCs & WHs 44 44 45 49 52 56 6.3%
Total TIP REIT Gross Revenues 1,371 1,433 1,527 1,673 1,842 2,037 9.2%
72
TIP REIT Model – FFO & AFFO Reconciliations,
Credit Statistics and Implied Metrics
FFO & AFFO Reconciliations: CY2008 2009 2010 2011 2012 2013
Net Income 1,303 1,292 1,334 1,370 1,408 1,450
Plus: Depreciation & Amortization 44 55 66 85 108 134
Funds from Operations 1,347 1,347 1,400 1,455 1,515 1,584

FFO / Share $1.43 $1.43 $1.49 $1.54 $1.61 $1.68
Less: Maintenance Capex - - - - - -

Adjusted Funds from Operations 1,347 1,347 1,400 1,455 1,515 1,584
Normalized AFFO (1) 1,347 1,347 1,400 1,455 1,515 1,584
Credit Statistics:
Coverage:
(EBITDA - Maintenance Capex) / Interest Expense 22.7x 14.6x 8.5x 6.0x 4.7x
Leverage:
Capitalization:
(NOI capped at 6.0% and 8.5% for store land and DCs & WHs land, respectively)
Implied Metrics:
Incremental Stores Square Footage 9 8 14 16 19
SuperTarget Stores 50.0% 4 4 7 8 9
Implied New Combined SuperTarget Stores 0.177 Sq. Ft. / SuperTarget 25 23 41 47 54
Combined Total Number of SuperTarget Stores 239 264 287 328 375 429
General Merchandise Stores 50.0% 4 4 7 8 9
Implied New Combined GM Stores 0.125 Sq. Ft. / GM 36 32 58 66 76
Combined Total Number of General Merchandise Stores 1,445 1,481 1,513 1,571 1,637 1,713
Total Implied New Stores 61 55 99 113 130
Cumulative Combined Total Implied Stores 1,684 1,745 1,800 1,899 2,012 2,142
Incremental DCs & WHs Square Footage - - 2 2 2

Implied Combined New DCs & WHs 1.408 0 0 1 1 1
Total Implied New DCs & WHs 0 0 1 1 1
Cumulative Combined Total Implied DCs & WHs 31 31 31 32 34 35
73
TIP REIT Model – Capex Schedule
Calendar Year,
Total Combined Expenditures 3,111 3,083 4,761 5,444 6,277
Maintenance / Retail Capital Expenditures 1,332 1,423 1,638 1,806 2,000

Target Corp - Store Buildings 1,332 1,423 1,638 1,806 2,000
TIP REIT - - - - -
Development Capital Expenditures 1,779 1,660 3,122 3,638 4,278

Target Corp Building - Store and DCs & WHs 71.4% 890 830 1,583 1,837 2,160
TIP REIT Land - Store and DCs & WHs 28.6% 890 830 1,539 1,801 2,117
Target Corp - Other - - - - -
TIP REIT Land - Store 890 830 1,509 1,776 2,088

Store Land Cost per Square Foot $100.00 $102.50 $105.06 $107.69 $110.38
TIP REIT Land - DCs & WHs - - 30 24 29
DCs & WHs Land Cost per Square Foot $14.00 $14.00 $14.35 $14.71 $15.08 $15.45
TIP REIT Land - Store Yes 890 830 1,509 1,776 2,088
TIP REIT Land - DCs & WHs Yes - - 30 24 29
Total Development Capex 890 830 1,539 1,801 2,117
Development Financing Sources:

Debt Financing 100% 890 830 1,539 1,801 2,117
Equity Financing 0% - - - - -
74
Model – Target Corp
Target Corp Model – Income Statement
Status
Quo REIT Pro Forma Calendar Year, CAGR
($mm) CY2009 Adj. CY2009 2010 2011 2012 2013 '09 - '13
Retail Sales 66,600 66,600 71,171 78,082 86,068 95,316 9.4%
Base Sales Growth (%) 6.9% 9.7% 10.2% 10.7%
Credit Revenue 150 150 160 176 194 215 9.4%
Credit Sales Growth na 6.9% 9.7% 10.2% 10.7%
Total Revenue 66,750 66,750 71,331 78,258 86,262 95,530 9.4%
Total Revenue Growth 6.9% 9.7% 10.2% 10.7%
COGS 46,544 46,544 49,632 54,373 60,075 66,521
% of Retail Sales 69.9% 69.9% 69.7% 69.6% 69.8% 69.8%
SG&A (excluding D&A and Rent Expense) 13,596 (35) 13,561 14,387 15,708 17,314 19,175
% of Retail Sales 20.4% 20.4% 20.2% 20.1% 20.1% 20.1%
Credit Expenses - - - - - -
% of Credit Revenue 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retail EBITDAR 6,460 6,495 7,153 8,001 8,678 9,620 10.3%

Retail EBITDAR Margin (%) 9.7% 9.8% 10.0% 10.2% 10.1% 10.1%
Credit EBITDAR 150 150 160 176 194 215 9.4%
Credit EBITDAR Margin (%) 100.0% na na na na na
EBITDAR (Pre-spin) 6,610 6,645 7,313 8,177 8,872 9,835 10.3%
EBITDAR Margin (%) 9.9% 10.0% 10.3% 10.4% 10.3% 10.3%
Current Embedded Facility Management Costs (125) (125) (134) (147) (162) (179)
External Facility Mgmt. Payments to TIP REIT 144 144 154 169 186 206
Current Rent Expense 173 173 178 182 187 191
Additional Rent Expense 1,433 1,527 1,673 1,842 2,037
Pro Forma EBITDA (Post-spin) 6,436 5,020 5,588 6,300 6,819 7,580 10.9%
EBITDA Margin (%) 9.6% 7.5% 7.8% 8.0% 7.9% 7.9%
Depreciation & Amortization 1,940 (55) 1,885 2,007 2,189 2,400 2,642
% of Retail Sales 2.8% 2.8% 2.8% 2.8% 2.8%
Operating Income 4,496 3,135 3,581 4,110 4,420 4,938 12.0%
Net Interest (Income) / Expense 333 (31) 302 330 346 463 555
Income Tax Provision 1,469 1,077 1,235 1,430 1,504 1,665
Tax Rate (%) 35% 38% 38% 38% 38% 38%
Minority Interest 257 (257) 0 0 0 0 0
Net Income 2,438 1,757 2,015 2,334 2,453 2,717 11.5%
Net Income Margin (%) 3.7% 2.6% 2.8% 3.0% 2.8% 2.8%
Current Diluted Shares Outstanding 754.7 754.7 726.2 683.8 657.0
Shares Repurchase 0.0 (28.5) (42.4) (26.8) (29.3)
Share Repurchase from Options 0.0 0.0 0.0 0.0 0.0
Total Shares Outstanding 754.7 726.2 683.8 657.0 627.7
Weighted Average Shares Outstanding 754.7 740.4 705.0 670.4 642.3
Earnings per Share ($) $2.33 $2.72 $3.31 $3.66 $4.23 16.1%
76
Target Corp Model – Balance Sheet
Status
Quo REIT Pro Forma Calendar Year,
($mm) CY2009 Adj. CY2009 2010 2011 2012 2013
Cash & Equivalents 2,100 (1,600) 500 500 500 500 500
Trade Receivables - - - - - -
Other Current Assets 9,305 9,305 9,944 10,909 12,025 13,317
Property, Plant & Equipment, gross 38,427 (12,723) 25,704 27,958 31,179 34,823 38,983
Accumulated Depreciation (11,205) 941 (10,264) (12,271) (14,461) (16,860) (19,503)
Property, Plant & Equipment, net 27,223 (11,782) 15,440 15,686 16,719 17,962 19,480
Other Non-Current Assets 1,277 1,277 1,277 1,277 1,277 1,277

Total Assets 39,905 26,523 27,407 29,405 31,765 34,574
Debt 5,925 (890) 5,036 4,595 5,544 5,892 6,697

Other Current Liabilities 10,842 10,842 11,586 12,711 14,011 15,516
Other Non-Current Liabilities 2,521 2,521 2,521 2,521 2,521 2,521
Total Liabilities 19,288 18,398 18,702 20,776 22,424 24,735
Minority Interest 4,563 (4,563) 0 0 0 0 0

Total Equity 16,054 (7,930) 8,124 8,705 8,629 9,340 9,840
Total Equity & Liabilities 39,905 26,523 27,407 29,405 31,765 34,574
77
Target Corp Model – Cash Flow Statement
Calendar Year,
($mm) 2010 2011 2012 2013
EBITDA 5,020 5,588 6,300 6,819 7,580
less: Interest Expense (302) (330) (346) (463) (555)
less: Taxes (1,077) (1,235) (1,430) (1,504) (1,665)
Share-based Compensation 73 73 73 73 73
less: Increase in Net Working Capital 105 159 184 213
less: Increase Funding of CC Growth 0 0 0 0 0
Cash Flow from Operating Activities 3,714 4,201 4,756 5,110 5,646
Capital Expenditures (2,253) (3,222) (3,643) (4,160)

Cash Flow from Investing Activities (2,253) (3,222) (3,643) (4,160)
Issuance of Debt 1,507 2,483 1,815 2,291

Repayment of Debt (1,948) (1,534) (1,467) (1,486)
Issuance of Equity / (Buy Back) (1,507) (2,483) (1,815) (2,291)
Issuance of Dividends to Common 0 0 0 0 0
Cash Flow from Financing Activities (1,948) (1,534) (1,467) (1,486)
Beginning Cash Balance 500 500 500 500

Change in Cash 0 0 0 0
Ending Cash Balance 500 500 500 500
Average Cash Balance 500 500 500 500

Interest Income 3.0% 15 15 15 15
78
Target Corp Model – Build-ups and Credit Metrics
Sales Buildup CY2009 2010 2011 2012 2013
Square Feet (mm) 231 239 254 270 289
$ / Sq. Ft. 288 297 308 318 330
Retail Sales 66,600 71,171 78,082 86,068 95,316
Implied Retail Sales Growth (% ) 6.9% 9.7% 10.2% 10.7%
Sq. Footage Growth (% ) 3.5% 6.0% 6.5% 7.0%
SSS Growth (% ) 3.3% 3.5% 3.5% 3.5%
CapEx Buildup 2009 2010 2011 2012 2013

Total System CapEx 3,111 3,083 4,761 5,444 6,277
CapEx as % of Retail Sales 4.7% 4.3% 6.1% 6.3% 6.6%
Maintenance/Retail CapEx 1,332 1,423 1,638 1,806 2,000

Additional Cap Ex 0.0 0.0
TOTAL M aintenance/ Retail CapEx % of total 35.0% 1,332 1,423 1,638 1,806 2,000
– Target Corp 1,423 1,638 1,806 2,000
– TIP REIT (Existing DC & WH) 0 0 0 0
Development CapEx % of total 65.0% 1,779 1,660 3,122 3,638 4,278
Buildings (Tgt Corp) % of Development 50% 890 830 1,583 1,837 2,160
Land % of Development 50% 890 830 1,539 1,801 2,117
– Target Corp 0 0 0 0 0
– TIP REIT 890 830 1,539 1,801 2,117
Other (Target Corp) % of Development 0% 0 0 0 0 0
Facilities M anagement Business ($mm)

Total Current Costs 125 134 147 162 179
Growth % 6.9% 9.7% 10.2% 10.7%
Markup to TIP REIT 15% 15% 15% 15% 15%
Facilities Management Revenue to TIP REIT 144 154 169 186 206
Credit M etrics
Lease Adjusted Debt 8x 1,387 12,851 13,637 14,844 16,228 17,823
Actual Debt 5,925 5,036 4,595 5,544 5,892 6,697
Total Lease Adjusted Debt 7,312 17,887 18,232 20,388 22,120 24,520
Total Lease Adjusted Debt/EBITDAR 1.1 x 2.7 x 2.5 x 2.5 x 2.5 x 2.5 x
Total Debt / EBITDA 0.9 x 1.0 x 0.8 x 0.9 x 0.9 x 0.9 x
EBITDAR / (Interest + Rent) 13.1 x 3.5 x 3.6 x 3.7 x 3.6 x 3.5 x
EBITDA / Interest 19.3 x 16.6 x 16.9 x 18.2 x 14.7 x 13.7 x
79
The Nominees for
Shareholder Choice
May 11, 2009

Disclaimer
In connection with the 2009 Annual Meeting of Shareholders of Target Corporation (“Target”), Pershing Square Capital
Management, L.P. and certain of its affiliates (collectively, “Pershing Square”) filed a definitive proxy statement on Schedule 14A
with the Securities and Exchange Commission (the “SEC”) on May 1, 2009 containing information about the solicitation of proxies
for use at the 2009 Annual Meeting of Shareholders of Target. The definitive proxy statement and the GOLD proxy card were first
disseminated to shareholders of Target on or about May 2, 2009.
SHAREHOLDERS OF TARGET ARE URGED TO READ THE PROXY STATEMENT CAREFULLY BECAUSE IT CONTAINS
IMPORTANT INFORMATION. The definitive proxy statement and other relevant documents relating to the solicitation of proxies
by Pershing Square are available at no charge on the SEC’s website at http://www.sec.gov. Shareholders can also obtain free
copies of the definitive proxy statement and other relevant documents at www.TGTtownhall.com or by calling Pershing Square’s
proxy solicitor, D. F. King & Co., Inc., at 1 (800) 290-6427.
Pershing Square and certain of its members and employees and Michael L. Ashner, James L. Donald, Ronald J. Gilson and
Richard W. Vague (collectively, the “Participants”) are deemed to be participants in the solicitation of proxies with respect to
Pershing Square’s nominees. Detailed information regarding the names, affiliations and interests of the Participants, including by
security ownership or otherwise, is available in Pershing Square’s definitive proxy statement.
This presentation contains forward-looking statements. All statements contained in this presentation that are not clearly historical
in nature or that necessarily depend on future events are forward-looking, and the words “anticipate,” “believe,” “expect,”
“estimate,” “plan,” and similar expressions are generally intended to identify forward-looking statements. These statements are
based on current expectations of Pershing Square and currently available information. They are not guarantees of future
performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future
events that may not prove to be accurate. Pershing Square does not assume any obligation to update any forward-looking
statements contained in this presentation.
This presentation is for general informational purposes only. It does not have regard to the specific investment objective, financial
situation, suitability, or the particular need of any specific person who may receive this presentation, and should not be taken as
advice on the merits of any investment decision. The views expressed herein represent the opinions of Pershing Square, which
opinions may change at any time and are based on publicly available information with respect to Target. Certain financial
information and data used herein have been derived or obtained from filings made with the Securities and Exchange Commission
(“SEC”) by Target or other companies that Pershing Square considers comparable or relevant.
1
Disclaimer (cont’d)
Pershing Square has not sought or obtained consent from any third party to the use of previously published information as proxy
soliciting material. Any such statements or information should not be viewed as indicating the support of such third party for the
views expressed herein. No warranty is made that data or information, whether derived or obtained from filings made with the
SEC or from any third party, are accurate. Neither Pershing Square nor any of its affiliates shall be responsible or have any liability
for any misinformation contained in any SEC filing or third party report. Pershing Square disclaims any obligation to update the
information contained herein.
This presentation does not recommend the purchase or sale of any security. Under no circumstances is this presentation to be
used or considered an offer to sell or a solicitation of an offer to buy any security. There is no assurance or guarantee with respect
to the prices at which any securities of Target will trade. Pershing Square and its affiliates currently hold a substantial amount of
common stock and options of Target and may in the future take such actions with respect to its investments in Target as it deems
appropriate including, without limitation, purchasing additional shares of Target common stock or related financial instruments or
selling some or all of its beneficial and economic holdings, engaging in any hedging or similar transaction with respect to such
holdings and/or otherwise changing its intention with respect to its investments in Target. Pershing Square may also change its
beneficial or economic holdings depending on additions or redemptions of capital. Pershing Square is in the business of trading —
buying and selling — securities and other financial instruments. Consequently, Pershing Square’s beneficial ownership of Target
common stock and options will vary over time depending on various factors, with or without regard to Pershing Square’s views of
Target’s business, prospects or valuation (including the market price of Target common stock), including without limitation, other
investment opportunities available to Pershing Square, concentration of positions in the portfolios managed by Pershing Square,
conditions in the securities market and general economic and industry conditions.
2
Agenda
Situation Overview
Why Board Change is Warranted
The Nominees for Shareholder Choice

Food Retailing: Jim Donald
Credit Cards: Richard Vague
Real Estate: Michael Ashner
Shareholder Value: Bill Ackman
Corporate Governance: Ron Gilson
3 Target’s Board: Avoiding the Real Issues

3 Corporate Elections and Shareholder Choice
3
Situation Overview
Pershing Square
f Pershing Square is a long-term Target shareholder

Pershing Square initiated its investment in Target in
April 2007
f We are the third largest beneficial owner of Target
f We have ownership of 7.8% of Target

~$1 billion of common stock (3.3% of the company)
~$280 million in stock options (4.5% of the company)(1)
f Target is the largest investment in Pershing Square’s

portfolio
(1) Unless and until these options are exercised, the underlying shares do not carry voting rights.
5
Pershing’s Background with Target
f April 2007: Pershing Square becomes a Target shareholder
Retail Business Credit Card Business Real Estate Assets
f August 2007: Pershing Square, in its first meeting with Target management, proposes
that Target pursue a credit card partnership transaction to minimize credit risk, eliminate
funding risk, and increase Target’s valuation
f September 2007: Target announces a review of ownership alternatives for its credit
card receivables and an analysis of its capital structure
f December 2008: Pershing Square, in two separate presentations to Target, emphasizes

the importance of credit risk transfer in any contemplated partnership transaction
f May 2008: Target announces a sale of a 47% interest in it receivables, but retains
credit risk
MISTAKE: Board elects not to transfer credit risk in the transaction, primarily
to retain underwriting control
Target share repurchase program is principally funded with debt, despite credit risk
and funding risk remaining on its balance sheet
6
Pershing’s Background with Target (cont’d)
f May 2008: Pershing Square meets with management to discuss value creation
opportunities regarding Target’s real estate
Pershing Square proposes a spin-off of a land-only REIT to Target shareholders
Transaction would preserve Target’s flexibility in controlling its buildings/brand and

allow the market to appropriately value the company’s ~200 million square feet of
real estate
Management agrees that the transaction is worthy of further exploration
f July 2008: Pershing Square meets with Target and Goldman Sachs to discuss real
estate transaction
f September 2008: Board raises concerns regarding Pershing Square’s real estate
proposal, primarily with respect to credit ratings impact and valuation assumptions
7
f Fall 2008: Pershing Square encourages Target to halt buyback program due to credit
market conditions
f October 2008: Pershing Square seeks shareholder input by publicly presenting “A TIP
for Target Shareholders”
Immediately after the presentation, Target issues a press release expressing

concerns
f November 2008: Pershing Square presents “A Revised Transaction” which addresses

Target’s concerns regarding credit ratings and valuation
Within 48 hours of Pershing’s presentation, board rejects the Revised Transaction

without seeking rating agency review
Pershing defers discussion of the Revised Transaction until 2009 to allow Target to
focus on its business
8
f February 2009: Pershing Square meets with Target and Goldman Sachs to discuss the
assumptions behind the board’s decision
Pershing Square learns that the board restricted Goldman Sachs to the narrow task of
evaluating Pershing Square’s proposal, rather than fully investigating all potential
value creating alternatives for real estate
Pershing Square concludes that the Revised Transaction was not adequately
explored by the board or its advisors
f February 2009: Pershing Square requests one board seat and one additional
independent director
f March 2009: Pershing Square presents, in total, four candidates – Bill Ackman and three
independent nominees
Board rejects all four candidates, three without explanation
Board did not even meet with two of them (Richard Vague, Michael Ashner)
9
Situation Overview
On March 17, 2009, Pershing Square announces the

nomination of five independent directors for the open seats on
Target’s board
f We did so principally because we believe that the

incumbent Target board has:
Suboptimal composition
Made significant strategic mistakes that have destroyed

shareholder value
Performed key corporate governance duties poorly
f Our goal in this election:

Improve Target’s board and help make Target a stronger,
more profitable, and more valuable company
10
Why Board Change is Warranted
Why Board Change is Warranted in Our View
Board’s Mistakes in Board’s Faulty
Board’s Suboptimal Corporate
Assessing Strategic
Composition Governance
Transactions
⌧ Lacks senior operating ⌧ Board did not exit the ⌧ Board lacks a fair and open
experience in key business credit card business before nominating process
lines and assets (1) meeting Pershing Square
⌧ Compensation plan fails to
⌧ Lacks significant ⌧ The board-approved credit foster a culture of equity
shareholder representation card transaction structure ownership
was a mistake that we
⌧ Average tenure of believe cost shareholders ⌧ Board rejected the request
independents nearly a dearly for Universal Proxy thereby
decade limiting shareholder choice
⌧ Board did not authorize a
⌧ 12 incumbent directors full review of all real estate ⌧ Interlocking directorships
serve on 18 other boards ownership alternatives for and affiliate transactions
(including Citi, Wells Fargo maximizing shareholder
and Goldman) value
(1) Pershing Square defines senior operating experience as experience in a specific line of business with the director having served as the CEO of a company in that
business for a meaningful period of time during his or her career. Pershing Square’s view is not only based on the length of time served by a specific director in the
relevant business line, but also on the extent, nature and specialization of each director’s service and the principal responsibilities during that service.
12
Board Lacks Sufficient Relevant Experience
Our view of
Target’s Current Board
NO Retail
Retail Business senior operating experience
NO Credit Card
Credit Card Business senior operating experience
Real Estate Assets NO Real Estate

Over 200 million sq ft of senior operating experience
retail real estate
13
Board Lacks Significant Shareholder Representation
Target’s board lacks significant shareholder representation, owning

less than 0.3% of the company. Independent directors own only 0.02%
of the company in common stock
Board Members Issued shares

beneficially owned
Total beneficial
ownership
Austin 2,388 48,487
Darden 2,901 35,781
Dillon 0 3,058
Johnson 11,116 97,135
Kovacevich 61,569 128,671
Minnick 886 9,446
Mulcahy 7,114 29,536
Rice 0 3,058
Sanger 27,683 120,699
Tamke 10,334 86,300
Trujillo 38,025 124,181
Steinhafel 429,424 1,309,840
Total Board 591,440 1,996,192
% of common shares outstanding 0.08% 0.27%
Total Independent Directors 162,016 686,352

% of common shares outstanding 0.02% 0.09%
Common Shares Outstanding 752,672,699
Source: Target proxy 14

Average Tenure of Nearly a Decade
Years on
Board Member Current Occupation (Title) Board
Mary Dillon Executive Vice President and Global Chief Marketing Officer of 2
Incumbent
Nominees
McDonald’s Corporation
Richard Kovacevich Chairman of the Board of Wells Fargo & Company 13
Solomon Trujillo CEO of Telstra Corporation Limited, an Australian 15
telecommunications company
George Tamke Partner with Clayton, Dubilier & Rice, Inc., a private investment firm 10
Calvin Darden Chairman of the Atlanta Beltline, Inc., an urban revitalization project 6
for the City of Atlanta
Anne Mulcahy CEO and Chairman of the Board of Xerox Corp., a document 12
management company
Stephen Sanger Retired. Previously, CEO and Chairman of the Board of General 13
Mills, Inc
Roxanne Austin President of Austin Investment Advisors, a private investment 7
and consulting firm
James Johnson Vice Chairman of Perseus, LLC, a merchant banking 13
private equity firm
Mary Minnick Partner of Lion Capital, a private investment firm 4
Derica Rice Senior Vice President and CFO of Eli Lilly and Company 2
The average tenure of the independent directors is approximately 9 years.

The average tenure of the incumbent nominees is approximately 10 years
15
Board’s Strategic Mistake: Credit Card
Target’s board decided not to transfer credit risk in a credit card
transaction, despite Pershing Square’s repeated requests. In 2008,
Target’s credit card operating profits fell 65% predominantly due to
increased credit risk and bad debt expense
Credit Card EBIT as a % of average receivables

$1,000 $ in millions 14.0%
$930
$900
12.0%
12.8%
$800
Credit Card EBIT
$700 10.0%
$600
8.0%
65%
$500 drop
6.0%
$400
$322
$300 4.0%
$200 3.7%
2.0%
$100
$0 0.0%
Source: Company filings 2007A 2008A

16
Board Lacks Initiative: Real Estate
f Target owns over 200 million square feet of high-quality retail

real estate
f We believe that Target’s real estate has a replacement cost of

nearly $40 billion (based on management’s estimates of the
current average cost to build its stores and distribution facilities)
f Despite this immense value, Target’s board has been unwilling to

examine alternatives to unlock real estate value
f Notably, the board assigned its advisors the narrow task of only
evaluating Pershing Square’s TIP REIT spin-off structure
f Board would not authorize Goldman Sachs to explore alternative

real estate value creation opportunities
17
Governance: Faulty Nomination Process
Is Target’s board nomination process fair, open, and thorough?
⌧ Independent nominees Ashner and Vague were never interviewed
⌧ Nomination Committee Chair Sanger would not give an explanation for the
rejection of the nominees
⌧ Nominating Committee Chair Sanger received over $1.25 million in fees and
equity compensation since 2003 from incumbent nominee Kovacevich’s
Conflict
company, Wells Fargo
⌧ Nominating Committee Chair Sanger also serves on Wells Fargo’s
compensation committee
In our view, the board nomination process is insular, conflicted,

and unreceptive to shareholder input
18
Board is Attempting to Limit Choice
Request for a Universal Proxy card: Rejected
Request to name Target Nominees on Gold card: Ignored
Target’s Reasons Reality

7 Technology barrier 3 Feasibility confirmed by Broadridge,
consent of parties is all that is needed
7 Too Late 3 Can be implemented at any time
7 Too expensive 3 Pershing Square will pay the expense

7 Causes delay and confusion 3 Mitigates confusion and allows
shareholders to choose the best nominees
from both slates
7 Liability concerns 3 No liability to Target or its nominees
Shareholders have expressed disappointment with Target’s position.
Target and its nominees should consent to have all nominees named on
one proxy card. Even now, this can still be achieved. Shareholders
should press this issue with Target
19
Board Does Not Foster an Ownership Culture
We believe that Target’s compensation plan does not foster an

ownership culture at Target, as senior management and the board
have sold $429 million of stock in the last five years
Last Five Years of Activity in Target Stock (1)

Executive
Board (2) Total
Management
Total Open
Market $0.0 mm $3.8 mm $3.8 mm
Purchases
Total
$(419.7) mm $(8.8) mm $(428.5) mm
Sales
How can we be sure that Target’s board and managers are truly focused on
creating long-term shareholder value if they sell so much stock?
(1) Based on the trailing five years prior to the announcement of Pershing Square’s nomination of the Nominees for Shareholder Choice on 3/17/2009.
(2) Includes only non-employee directors.
20
Grading the Board: Key Duties
Key Duties Pershing’s Grade Commentary
Hiring / firing Good X Strong management team
management
Assessing strategic Poor X Credit card transaction structure approved by the board
transactions was a mistake
X Board did not authorize a full review of Target’s real
estate ownership alternatives
X Board’s decision to sell Mervyn’s and Marshall Fields
took years of prodding by the investment community
Nominating directors Poor X Independent directors have an average tenure of nearly a

decade
X Board lacks non-executives with CEO-level retail, credit
card, and real estate experience
X Board refused to interview two of Pershing’s nominees
X Board refused a request for universal proxy
Executive Poor X Board has not fostered an ownership culture, as

compensation witnessed by $429 million of Target stock sales by
executive management in the last five years
Advising management N/A X We question whether this board has sufficient expertise
on existing strategies to advise management on running a retail and credit card
company
21
We believe that Target’s suboptimal
board has contributed to the company’s
material underperformance during this
recession
22
Underperformance Relative to Wal-Mart
From the beginning of the fourth quarter of 2007 to the day prior to our
announcement of our proposed slate, Target stock declined by 51%.
Over the same period, the stock of Wal-Mart, Target’s principal
competitor, appreciated 11%, a ~62 percentage point outperformance
Stock price returns
138.39
118.39
Wal-Mart
98.39
Up 11%
78.39
58.39
Target
38.39 Down
51%
Measured on a 10-year trailing basis ending on the day prior to the announcement of the Nominees for Shareholder Choice, Wal-Mart’s stock
price outperformed Target’s stock price by approximately 18%.
23
Underperformance in Same Store Sales Growth
We believe that Target’s substantial negative returns to its

shareholders are reflective of its operating underperformance
compared with Wal-Mart
Year-over-Year Growth Rate of Quarterly Same Store Sales
6.0%
4.0%
Wal-Mart
2.0% US
0.0%
4Q07 1Q08 2Q08 3Q08 4Q08
(2.0%)
(4.0%)
(6.0%) Target
Source: Company filings 24

Underperformance in Earnings Per Share Growth
Since Q4 2007, Target’s earnings per share growth has been

significantly less than Wal-Mart’s earnings per share growth
Year-over-Year Growth Rate of Reported

20.0%
Quarterly EPS from Continuing Operations
10.0%
0.0%
4Q07 1Q08 2Q08 3Q08 4Q08
Wal-Mart
- 10.0%
-20.0%
-30.0%
Target
-40.0%

Target Retail Profitability Should Be Higher
Even before the recession, Target’s retail margins have been

deteriorating while Wal-Mart’s margins have remained higher and
constant, despite Wal-Mart selling a greater mix of food and other
lower margin goods
7.6%
7.4%
Retail EBIT Margins
Wal-Mart
7.2%
US
7.0% 7.3%
2008 Retail
6.8% EBIT margin
6.6%
6.4% 2006 –2007: Why were

Target’s retail margins
6.2%
weaker even during the Target
6.0% strong economy? 6.3%
2008 Retail
5.8% EBIT margin
5.6%
2005 2006 2007 2008

Wal-Mart’s Board Has Deep, Relevant Experience
Current Board
3 Allen Questrom, former CEO

Retail Business of JCPenney, Neiman Marcus,
Federated Department Stores
3 Roger Corbett, retired CEO of

Woolworths, Australia’s leading
retail company
Real Estate 3 Arne Sorenson, EVP and CFO

Wal-Mart owns a lower percentage of Marriott International
of its stores than Target
We note that Wal-Mart partnered with a financial institution for its store
credit card years ago. It does not own credit card receivables and has
none of the material risks associated with these assets
27
Is Target’s Board Too Insular?
Pershing Square’s observations of Target’s incumbent board:
⌧ Chose board members without relevant senior operating experience in

Target’s key business lines and assets
⌧ Rejected significant shareholder representation
⌧ Continually re-elects its own members, despite the lack of relevant

senior operating experience
⌧ Ignored major shareholder regarding credit risk
⌧ Refused to authorize full review of alternatives for real estate ownership
⌧ Rejected major shareholder’s request to join the board without

explanation
⌧ Refused to interview leading executives Richard Vague or Michael

Ashner in its nominating process
28
Retailing is a Constantly Evolving Industry
We believe that a key role of an independent board is to bring an

outside perspective to challenge strategies that might have worked in
the past but will likely need to evolve over time – contrary to Target’s
board’s apparent instinct to maintain the status quo
Competitive Landscape — 1993 Competitive Landscape — Today

3,000 3,000
Number of supercenters Number of supercenters
2,601
2,500 2,500
2,000 2,000
1,500 1,500
1,000 1,000
500 500
239
185
128
77 76 68 55
17 0
0 0
29
Time for Board Change
In our view, the Nominees for

Shareholder Choice will bring much
needed “new life” to Target’s insular
incumbent board
offer deep and relevant experience,
major stock ownership, and fresh
perspectives
30
Introducing the Nominees for
Shareholder Choice
Gold Proxy Card

Nominee for Significant Relevant

Shareholder Choice Experience Commentary
•
Jim Donald Food • 30 years of grocery experience

• Former CEO of Starbucks and Pathmark
Retailing • Oversaw the development and growth of Wal-Mart’s SuperCenter
business
•
Richard Vague Credit Cards • Leading credit card operating executive

• Former CEO and co-founder of First USA, the largest VISA credit
card issuer before it was sold to Bank One (now JPMorgan Chase)
•
Michael Ashner Real Estate • Established real estate CEO and investor
• Currently manages over 20 million sq ft of commercial real estate
• Has acquired more than $12 billion of real estate in 45 states
•
Bill Ackman Shareholder • Founder of Pershing Square

• Owner of a 7.8% stake in Target (1)
Value • Track record for creating value in consumer and retail businesses
•
Ron Gilson Corporate • World-renowned expert in the field of corporate governance

• Professor of Law and Business at both Stanford Law School and
Governance Columbia University School of Law
(1) Consisting of 3.3% in shares of common stock and 4.5% in stock options.
32
Nominees Are Entirely Independent
The Nominees for Shareholder Choice are entirely independent and

have no preconceived agenda other than to maximize shareholder value
f Jim Donald, Richard Vague, Michael Ashner, and Ron Gilson are independent
nominees with no commercial relationships with Target or Pershing Square
Each is a highly regarded leader in his area of expertise
Each has his own unique perspective, background, and ideas
f Pershing Square has no agreements, understandings, or arrangements with

the Nominees for Shareholder Choice, other than they have agreed, if elected,
to serve on the board (1)
f The Nominees for Shareholder Choice have only one common goal: to help
oversee the management of Target for the purpose of creating long-term value
for all stakeholders
If elected, the Nominees for Shareholder Choice will represent the

interests of all shareholders using their own independent business
judgment
(1) Other than customary indemnifications and expense reimbursement arrangements.
33
Comparison of Slates
The Incumbent The Nominees for

Nominees Shareholder Choice
⌧ Lack senior operating experience in 3 CEO-level operating experience in:
key business lines and assets Retail
⌧ Beneficially own less than 0.05% of Credit cards
the company Real Estate
⌧ Are accountable for strategic 3 Corporate governance expertise

mistakes
3 Beneficially own 7.8% of the company (1)
⌧ Three out of four incumbent
nominees have served for at least a 3 Offer fresh perspectives while
decade preserving board continuity
3 Entirely independent
(1) Consisting of 3.3% in shares (approximately $1bn in market value) and 4.5% in stock-settled call options (approximately $280mm in market value).
34
Food Retailing: Jim Donald
Food Retailing is A Critical Growth Initiative
Food retailing represents a critical strategic

growth initiative for Target.
We and the company believe that an
expanded food presence can help Target
increase the frequency of visits from its
customers and generate higher and more
predictable sales
36
Food: Critical Strategic Growth Initiative
“We continue to focus on food as a priority . . . [W]e’ve

nearly doubled our commitment to food over a five to seven-
year timeframe.”
Gregg Steinhafel, CEO
Target 2Q’07 Earnings Call, 8/21/07
“We also continue to invest in our food offering in

recognition of its importance in driving greater frequency,
increasing guest loyalty, and making Target a preferred
shopping destination.”
Gregg Steinhafel, CEO
Target 4Q’08 Earnings Call, 2/24/09
37
Target: Slow to Innovate with Grocery/Superstores
Wal-Mart was not always the dominant player in the supercenter /

grocery space, but eventually emerged as a clear segment leader
Competitive Landscape — 1993 Competitive Landscape — Today

3,000 3,000
Number of supercenters Number of supercenters
2,601
2,500 2,500
2,000 2,000
Did Target miss an
important opportunity
1,500 1,500 in food?
1,000 1,000
500 500
239
185
128
77 76 68 55
17 0
0 0
38
Increasing Food Could Help Sales Significantly
In our view, Target’s more limited food offering partially explains

why Target’s same-store-sales growth rate has been considerably
weaker than Wal-Mart’s in every quarter since Q4 2007
6.0% Year-over-Year Growth Rate of Quarterly Same Store Sales
4.0%
Wal-Mart
2.0% US
0.0%
4Q07 1Q08 2Q08 3Q08 4Q08
(2.0%)
(4.0%)
(6.0%) Target
(8.0%)
Source: Company filings
39
We Believe Target Needs A Retailer on its Board
Even before the recession, Target’s retail margins have been
deteriorating while Wal-Mart’s margins have remained higher and
constant, despite Wal-Mart selling a greater mix of food and other
lower margin goods
7.6%
Retail EBIT Margins
7.4%
Wal-Mart
7.2% US
7.0% 7.3%
2008 Retail
6.8% EBIT margin
6.6%
6.4% 2006 –2007: Why were

6.2%
Target’s retail margins Target
weaker even during the 6.3%
6.0% strong economy? 2008 Retail
EBIT margin
5.8%
5.6%
2005 2006 2007 2008
Why Wasn’t Target More Profitable in the Boom Times?
% of 2008 Sales
41% Non- 37.0%

Consumables
Consumables Consumables
Non-
Consumables
59% 63.0%
Consumables: Typically lower margin goods

Non-consumables (e.g., apparel, home furnishings): Typically higher margin goods
Source: Company filings. For Wal-Mart, consumables incorporate “grocery” and “health & wellness” categories. Includes Wal-Mart US
only. For Target, consumables defined as consumables and commodities.
41
Opportunities to Make Target More Profitable
Given the differences in profitability

between Target and Wal-Mart, we believe
there are opportunities to improve Target’s
retail margins.
Having an experienced retail operator on
the board can only help Target become a
more profitable company in our view
42
Jim Donald: Food Retailing Leader
Jim Donald served as the CEO of Starbucks Corporation from

April 2005 until January 2008. He joined Starbucks in October
2002 as President, North America. Jim served as Chairman,
President and CEO of Pathmark Stores, Inc. from 1996 until
joining Starbucks in 2005. Jim served as President and Manager
of Safeway Inc.’s 130-store Eastern Division from 1994 to 1996.
He was responsible for a $2.5 billion business, comprised of
10,000 employees working at 130 stores and two distribution
centers. From 1991 until joining Safeway in 1994, Jim was an
Jim Donald executive at Wal-Mart Stores, Inc, were he worked on the
Nominee for development and expansion of the Wal-Mart Super Center,
Shareholder supervising all merchandising, distribution, store design and
Choice real estate operations. Jim began his career in 1971 as a trainee
with Publix Super Markets, Inc. He joined Albertson’s in 1976 and
quickly rose through its managerial ranks in the Florida, Alabama
and Texas divisions. He was head of Albertson’s operations in
Phoenix, Arizona.
43
Compare Jim Donald with Mary Dillon
Mary Dillon Jim Donald

Target Incumbent Nominee Nominee for Shareholder Choice
EVP and Global Chief Marketing Leading Food Retailing Operating

Officer for McDonald’s Executive
7 Is fast-food marketing 3 Over 30-years of food retailing

experience highly relevant to experience
Target?
3 Former CEO Of Pathmark and
7 Ms. Dillon is not a grocery store Starbucks
operator
3 Oversaw the development of
7 Without Ms. Dillon, the board will Wal-Mart’s SuperCenters
continue to have marketing
expertise – Mary Minnick, Coca 3 Helped build out Wal-Mart’s
Cola’s former President of grocery business
Marketing
7 Target does business with
McDonald’s
44
Credit Cards: Richard Vague
Target Initially Resisted a Transaction for its Receivables
“We have consistent performance ... and we're enjoying

double-digit growth rates," Scovanner said. "No one else
in the credit-card arena has those attributes. For the life
of me, I don't understand why those attributes in
combination would cause anyone to want to get into an
active mode of analyzing a sale.”
Doug Scovanner, CFO

Star Tribune, July 15, 2007
46
Pershing Square Urged Target to Transfer Credit Risk
f From August through December 2007, in multiple calls and meetings,

Pershing Square endeavored to convince Target to transfer the credit
and funding risks associated with its credit card operation to a
partnering financial institution
f In May, 2008, Target sold a 47% interest in its credit card receivables
to JPMorgan Chase
Target elected, however, to retain substantially all of the credit risk and
more than half of the funding risks associated with this business
segment because of its insistence on retaining underwriting control
f We believe this decision was ill-advised, and shareholders have

suffered as a result
47
We Believe Target Made Poor Underwriting Decisions
In the summer of 2007, Target converted a large portion of its

private label Target card accounts (typically lower FICO score
customers with lower credit limits) to Target VISA accounts,
thereby giving lower quality credit customers significantly higher
credit limits and lower rates. We believe this was a mistake
“Average receivables grew 19.6% over last year,

faster than our pace of sales primarily due to
changing the product features for yet another
group of our higher credit quality Target card
accounts to become higher limit Target Visa
accounts.”
Doug Scovanner, CFO

Q3’07 conference call, 11/20/2007
48
The Results: Significant Profit Declines
In our view, as a result of poor underwriting decisions and exposure

to credit risk, Target’s credit card operating profits declined
65% in 2008
$ in millions
Credit Card EBIT as a % of average receivables

$1,000 14.0%
$930
$900
12.0%
12.8%
$800
Credit Card EBIT
$700 10.0%
$600
65% 8.0%
$500 drop
6.0%
$400
$322
$300 4.0%
$200 3.7%
2.0%
$100
$0 0.0%
2007A 49 2008A
Underperforming Relative to Credit Card Peers
In 2008, Target’s net write-offs as a % of average receivables

increased to 9.3% from 5.9% the year prior. This compares to
5.7% for Target’s credit card competitors in 2008
Net Write-offs as a % of Average Receivables
10.0%
9.3% Target
9.0%
8.0%
~360 bps spread
7.2%
7.0%
6.0%
5.9% 5.7% Credit Card
5.3%
5.0% 5.1% Competitor
4.0% Average
3.9%
(JPM, BAC, AXP,
3.0% 3.3% COF, DFS)
2.0%
1.0%
0.0%
2005 2006 2007 2008

Underperforming Relative to Credit Card Peers
In 2008, Target’s bad debt expense as a % of average receivables

increased to 14.4% from 6.6% the year prior. This compares to
7.3% for Target’s credit card competitors
Bad Debt Expense as a % of Average Receivables

16.0%
14.0%
14.4% Target
12.0%
~710 bps spread
10.0%
8.4%
8.0%
7.3% Credit Card
6.6%
6.0%
5.6% 6.1% Competitor
4.5% Average
4.0%
3.5% (JPM, BAC, AXP,
2.0% COF, DFS)
0.0%
2005 2006 2007 2008

Richard Vague: Leading Credit Card Executive
Richard Vague has served as CEO and co-founder of Energy

Plus Holdings LLC, a Philadelphia-based, progressive,
independent Energy Service Company (ESCO) since 2007. From
December 2004 until 2007, Richard served as the Chairman and
CEO of Barclays Bank Delaware, a financial institution and
credit card issuer. From 2000 until its sale to Barclays PLC in
2004, Richard was CEO of Juniper Financial, a direct
consumer credit card bank that he co-founded. From 1984 until
Richard 2000, Richard was President and then CEO and Chairman of
Vague First USA and Chairman of Paymentech, the merchant
processing subsidiary of First USA.
Nominee for
Shareholder
Richard co-founded First USA which grew from a start-up to
Choice
the single largest Visa credit card issuer in the United States
when it was sold to Bank One (now JPMorgan Chase) in
1997.
52
Compare Richard Vague with Richard Kovacevich
Richard Kovacevich Richard Vague

Chairman of Wells Fargo & Company Veteran credit card industry executive
7 Voted to retain the credit risk 3 Co-founder of First USA, serving

associated with Target’s credit as its CEO until it was sold to
card business Bank One (now JPMorgan Chase)
7 We believe this decision 3 Founded and sold Juniper

ultimately led to dramatic profit Financial
declines for Target last year
3 Valuable operating experience
7 Given the financial crisis, does can assist Target achieve
Mr. Kovacevich have the time to recovery in its credit card business
devote to being a Target
director? 3 Strong transaction experience
and relationships can help Target
7 Target does business with structure a risk-reducing
Wells Fargo transaction in the future
53
Real Estate: Michael Ashner
Target: Significant Real Estate Ownership
Target owns the highest percentage of its real estate compared to
other big box retailers
100 96% 92%
90 87% 87%
% Units Owned (Buildings)1
80
68%
70
61% 58%
60
50
40 34% 34%
30
20
10
0
% owned units/land(2): 86% 79% ND ND 55% 36% ND ND 27%

% DCs owned(3): 82% ND 2%(4) 84% 71% 90% 52% 54% ND
Represents data from latest 10-K filing
“ND” represents Not Disclosed
(1) Represents % owned stores (includes owned stores on leased land)
(2) Represents % owned stores on owned land only
(3) Represents % owned DCs (includes owned DCs on leased land)
(4) Represents % owned DCs on a square footage basis 55
Target: A Leading Owner of Retail Real Estate in the US
Target currently owns approximately 213 million square feet of retail

square footage (1), more than any other publicly traded retail real
estate company in the U.S. today based on our estimates
Estimated Total Owned

GLA (sq. ft.) (2)
(mm)
(1)
1 Target Corporation 213
(3)
2 General Growth Properties 168
(4)
3 Simon Property Group 153
(5)
4 The Macerich Company 76
(6)
5 Kimco Realty Corporation 74
(7)
6 CBL & Associates Properties 73
(8)
7 Developers Diversified Realty Corporation 67
(9)
8 Regency Centers Corporation 37
(10)
9 Weingarten Realty Investors 34
(11)
10 Pennsylvania Real Estate Investment Trust 26
(1) Includes owned and combined retail square footage. Excludes leased retail square footage and owned distribution centers square footage
(2) Based on the latest company filings
(3) Includes consolidated and unconsolidated GLA for the company
(4) Based on U.S. properties square footage which the company owns. Excludes international properties square footage
(5) Includes square footage of properties which the company owns or has a majority and minority ownership interest
(6) Based on pro rata share of GLA in shopping center portfolio
(7) Includes total square footage of the anchors (whether owned or leased by the anchor) and mall stores. Excludes future expansion areas
(8) Based on actual pro rata ownership of joint venture assets and excluding developments and redevelopments in process and scheduled to commence in 2009
(9) Based on wholly-owned and pro rata share of co-investment partnerships. Represents GLA including anchor-owned stores
(10) Based on retail GLA owned by the company
(11) Includes owned GLA on consolidated and unconsolidated properties
56
The Market Does Not Appreciate Target’s Real Estate
Real estate companies trade at substantially higher multiples of

EBITDA compared to Target or other retailers
Real Estate Companies and

Target’s Market Valuation (1) Private Ground Lease Valuations
7.2x 14.3x 17.0x

Large Cap Recent “Big
$40/Share(1) REITs (1) Box” Ground
Lease (2)
Pershing Square believes that there may be more efficient ways for
Target to structure its real estate business in order to highlight its
strong value. Pershing Square, however, does not currently have any
specific plans or proposals with respect to Target’s real estate
Note: Target valuation excludes the net book value of the credit card receivables and the operating profit associated with such receivables in order to better
compare Target with real estate companies which do not have credit card segments.
(1) Based on current stock price as of 05/01/09. Large cap REITs multiples are based on Wall Street consensus estimates.
(2) Based on mid-point precedent cap rate of 5.9%.
57
Questions to Ask
f Given the stock market’s discounted valuation of Target’s vast real

estate holdings, shouldn’t the board be willing to investigate
opportunities to create value?
f Pershing Square made several suggestions to Target, including a

tax-free 19.9% REIT IPO, which Pershing Square believed would
Improve Target’s access to the capital markets
Maintain its strong investment grade credit ratings
Allow Target to maintain control over its buildings and brand
Highlight the value of Target’s greater than 200 million sq ft of

real estate
f Pershing Square’s past suggestions may not have been the perfect
solution, but why was Target’s board unwilling to explore other real
estate strategic alternatives?
58
Michael Ashner: Experienced Real Estate Executive
Michael Ashner has served as the CEO of Winthrop Realty

Trust, Inc. since December 31, 2003 and Chairman of the board
of directors since April 2004. Michael served as the Executive
Chairman of Lexington Realty Trust, a REIT from December 31,
2006 through March 2008. He has also served as the Chairman,
President and CEO of Winthrop Realty Partners, L.P. (a real
estate investment and management company) since 1996.
Michael has served as the Managing Director of AP-USX LLC,
which owns a 2.4 million square foot office tower, since 1998.
Michael
Since 1981, Michael has been the President and principal
Ashner
shareholder of Exeter Capital Corporation, a privately held real
Nominee for estate investment banking firm.
Shareholder
Choice Michael manages over 20 million square feet of commercial
real estate and has acquired more than $12 billion of real
estate in 45 states, including more than 85,000 apartment
units, 50 million square feet of office, retail and industrial
space, and 10,000 hotel rooms.
59
Compare Michael Ashner with Solomon Trujillo
Solomon Trujillo Michael Ashner

CEO of Telestra Corporation an CEO and Chairman of Winthrop

Australian telecom company Property Trust
7 We do not believe that Mr. 3 Chairman and CEO of Winthrop

Trujillo’s Australian Realty Partners, L.P.
telecommunications
background brings relevant 3 Manages more than 20 million
expertise to a US retail square feet of commercial real
company estate, including over 11 million
square feet owned by Michael and
7 Why has Mr. Trujillo been on his affiliates
Target’s board since 1994 or
15 years?
60
Shareholder Value: Bill Ackman
Board Lacks Significant Shareholder Representation
Target’s incumbent board beneficially owns less than 0.3% of

Target. By contrast, Pershing Square beneficially owns 7.8%
of Target
Target’s Board Pershing Square

7 Owns ~0.3% of Target in common 3 Pershing Square beneficially owns
stock and options comprised of: 7.8% in common stock and options
comprised of:
~0.1% in common stock
~$1 billion of common stock, equal
~0.2% in stock options
to 3.3% ownership
7 Independent directors own less ~$280 million in stock options,
than 0.1% in common stock and equal to 4.5% ownership
options
3 Third largest beneficial owner
3 Fourth largest common stock holder

William Ackman: Leading Shareholder
Bill Ackman is the founder and managing member of the

general partner of Pershing Square Capital Management, L.P.,
an investment adviser founded in 2003 and registered with the
SEC. Pershing Square is a concentrated research-intensive
fundamental value investor in long and occasionally short
investments in the public markets, typically focusing on large-cap
and mid-cap companies. Bill has significant experience
investing in multi-billion dollar retail and consumer
companies.
Bill Ackman
Nominee for Pershing Square is the third largest beneficial shareholder of

Shareholder Target with 7.8% of the company, including approximately $1
Choice billion in common stock (3.3% of the company) and $280 million in
stock options (4.5% of the company) based on recent market
prices.
63
Compare Bill Ackman with George Tamke
George Tamke Bill Ackman

Partner at Clayton, Dubilier & Rice, Founder of Pershing Square, a public

a leveraged buyout firm equity investment firm
7 Owns 0.01% of Target in common 3 Pershing Square beneficially

stock and options owns 7.8% in common stock and
options (1)
7 Serves on the boards of Culligan
(Chairman), ServiceMaster 3 Represents the third largest
(Chairman) and Hertz – all Clayton, beneficial owner of Target
Dubilier & Rice portfolio companies
3 Significant investment experience
7 How does Mr. Tamke allocate his
in multi-billion dollar retail and
time?
consumer companies
7 Target purchases products and
services from “several companies”
that are controlled by Clayton,
Dubilier & Rice
(1) Consisting of 3.3% in shares (approximately $1bn in market value) and
4.5% in stock-settled call options (approximately $280mm in market value).
64
Pershing Square: Track Record of Success
In our view, Pershing Square has established a track record of

creating shareholder value in retail, consumer, and other
businesses
Canada
65
Corporate Governance:
Ron Gilson
Ron Gilson: Corporate Governance Authority
Ron Gilson is the Meyers Professor of Law and Business,

Stanford Law School (1979 to present) and the Marc and Eva
Stern Professor of Law and Business, Columbia University School
of Law (1992 to present).
Ron is a fellow of the American Academy of Arts and Sciences

and the European Corporate Governance Institute. Ron has
served on the board of directors of certain of the American
Century Mutual Funds, managing over $26 billion in assets, since
Ron Gilson 1995 and has been the Chairman of the board of directors since
2005.
Nominee for
Shareholder
Ron Gilson is one of our country’s preeminent thinkers on
Choice
corporate governance. We believe that, if elected, Ron’s
extensive academic and real world experience as an
independent board chair would ensure fair process, fair
dealing, and diligent care for the benefit of all shareholders.
67
Target’s Board: Avoiding the Real
Issues
Target’s Board: Avoiding the Real Issues
f We believe the Real Issue of this election is that Target’s

board is suboptimal
Lacks significant relevant senior operating experience
Lacks significant shareholder representation
Has made expensive mistakes in assessing strategic

transactions
Has failed on key governance duties
f In our view, Target’s board has not addressed this issue

satisfactorily
f Instead, the board, its advisors, and PR team have publicly

made what we believe to be misleading statements to
dissuade investors from focusing on the CORE ISSUES
69
“Favoring Risk Taking”
Target’s misleading stance: The ACTUAL FACTS:

Pershing Square’s sizeable X Target is Pershing Square’s largest investment
derivative position creates an
X Pershing Square owns $1 billion in common stock
incentive for risk taking
and $280 million in stock options
Unlike the incumbent board, Pershing Square paid cash
for its stock options and can extend the life of its options
X Target’s management and the board have a greater

percentage of their ownership in derivatives than
Pershing Square
X Pershing Square has been a major buyer of Target

shares in recent years unlike members of senior
management
Gregg Steinhafel, had not purchased one share of stock
during the last five years until 3/18/09 – one day after we
nominated directors for the board
Board and executive management have sold
$429 million of stock in the last five years
70
“Risky Agenda”
Target’s misleading stance: The ACTUAL FACTS:

Pershing Square has X The Nominees for Shareholder Choice are entirely
launched a proxy contest to independent
push its real estate agenda
There is no “Bill Ackman slate”
“Bill Ackman’s slate of X The independent nominees have no pre-conceived

nominees…” real estate agenda
X Even if all of the Nominees for Shareholder Choice

are elected, two-thirds of Target’s current board will
remain, providing board room continuity
X Bill Ackman supports exploration of real estate

ideas – if you don’t want Target to explore real
estate alternatives, don’t vote for him. You can still
vote for Jim Donald, Richard Vague, Michael
Ashner, and Ronald Gilson
This election is not about “Bill Ackman” but

rather about choosing board members with the
most relevant experience
71
Credit Ratings and Risk
Bill Ackman, if elected, does not intend to support any

action that will impair Target’s credit ratings
f Since our first meeting with management, Pershing Square has
urged Target to decrease credit risk
Instead, Target’s board chose to maintain credit exposure to the credit
card business
Fall 2008, Pershing Square encouraged Target to halt buyback
program
f In Pershing Square’s view, Target can be an enormously valuable

company without the need to over-leverage its business
f Pershing Square believes that positioning the company so that it can

increase its access to capital may allow it to take advantage of
distressed real estate opportunities that could result from the current
shakeout in the retail industry
72
“Hasty Selection”
Target’s misleading stance: Our Response:
Hasty selection of candidates by X The Nominees for Shareholder Choice are leaders
in food retailing, credit cards, real estate,
Pershing Square is inconsistent
shareholder value, and corporate governance
with a professional search
required by good corporate X The credibility, independence, experience,
governance reputation, and integrity of the Nominees for
Shareholder Choice speak for themselves
Questions to Ask Target:
X Why are the current independent board

members the most qualified to serve on the
board of Target, a retail and credit card
company?
X Why does Target’s board continue to

nominate its own members and not conduct a
professional search for new directors with
senior operating experience?
73
Target Says:
“We do not believe that Pershing

Square's nominees would add value to
the Board.”
- Target spokesperson
“Ackman campaign for Target like prize fight”

Reuters, 4/18/2009
74
Really?
Nominee for Significant Relevant

Shareholder Choice Experience Commentary
•

business
•

•
•

•

75
Corporate Elections and
Shareholder Choice
Pershing Square Offers Shareholder’s a Choice
Pershing Square is bringing shareholders an important

choice at the Annual Meeting
f In this election, you can choose to vote for:
The Nominees for Shareholder Choice, or
Target’s incumbent slate, or
Nominees from each of the two slates
f Had Pershing Square not nominated a slate, shareholders

would have no viable alternative other than to elect the
incumbent nominees
77
How We Think about Voting
This is an election is about choosing the best directors for Target

Considerations How to Choose
Incumbent
f Which candidates have the fewest 3 Choose candidates with no conflicting
commercial ties to Target? economic interests
Nominees
vs. f Is it possible that only incumbents are 3 Choose fresh perspectives
Shareholder
the best candidates? 3 Choose the best nominees with the most
Nominees f Are any incumbents accountable for relevant experience
underperformance?
f This contest is not a change of control 3 Choose continuity and fresh perspectives
f At least 2/3rds of the incumbent 3 Choose the best nominees with the most
Maintaining directors will remain on the board relevant experience
Continuity f Board continuity is preserved
f Both slates support management
continuity
f Should shareholders be forced to 3 Shareholder choice is good for Target

How Should simply choose from competing slates? and good for corporate governance
Elections f Should shareholders have the option 3 Support efforts to simplify the voting
Work? of choosing the best nominees from process and ensure that each vote is
all available candidates? counted
78
Vote for the Nominees for Shareholder Choice
GOLD PROXY CARD

•

business
•

•
•

•

79
The Buck’s Rebound Begins Here
May 27, 2009

Disclaimer
The analysis and conclusions of Pershing Square Capital Management, L.P. ("Pershing Square")
regarding General Growth Properties, Inc. and its affiliates (collectively, “GGP” or the “Company”)
are based on publicly available information. Pershing Square recognizes that there may be
confidential or otherwise non-public information in the possession of the Company that could lead
the Company to disagree with Pershing Square’s conclusions.
statements, estimates, and projections reflect various assumptions by Pershing Square concerning
Pershing Square advises funds that are in the business of trading - buying and selling - public
securities. Pershing Square owns GGP equity, total return swaps, and GGP unsecured debt. It is
possible that there will be developments in the future that cause such funds to change their
positions regarding the Company and possibly increase, reduce, dispose of, or change the form of
their investment in the Company.
1
Agenda
f Why We Like General Growth Properties
f A Brief History
f Not Your Typical Bankruptcy
f GGP’s Assets Are Greater Than Its Liabilities
2
Why Do We Like
GGP?
Ala Moana
What is GGP?
GGP REIT GGMI MPC

Includes Retail & Office Properties General Growth Management Inc. Master Planned Communities
■ Over 200 regional malls ■ Provides management, ■ Develops and sells land
(>160mm sq ft) (1) / leasing and marketing for residential and
outdoor shopping centers services commercial use
■ Over 30 grocery-anchored ■ Over 60% of revenue ■ Land located near
shopping centers derived from third party Maryland / Washington
■ Office properties in Arizona, (non-GGP) malls D.C., Summerlin, NV and
Nevada and near Maryland / ■ Manages many of GGP’s Houston, TX
Washington D.C. JV malls ■ ~18,000 saleable acres
■ 1.3bn mall visits per year
■ >24,000 tenants
■ >3,700 employees (2)
________________________________________________
(1)
Includes anchor GLA and the Company’s pro rata share of JV malls.
(2) >400,000 employees including retail tenants. 4
Diverse Footprint
GGP is geographically well-diversified with malls in 44 states. The

Company also has interests in joint ventures in Brazil and Turkey
5
Diverse Tenant Base
GGP has over 24,000 tenants, with its largest tenant accounting for
only 2.7% of revenue as of March 31, 2009
Memo:
Market Cap
$11.8bn
4.0bn
2.4bn
1.8bn
5.0bn
3.0bn
Private
Private
Private
6.0bn
________________________________________________
Source: GGP Q1’09 operating supplement.
6
High Quality Assets
Green Street assigns an ‘A’ grade to 73 malls in GGP’s portfolio
Not Included
Other Examples:
f Faneuil Hall Marketplace
f South Street Seaport
f Ward Centers (Honolulu, HI)
________________________________________________
Source: Green Street.
GGP’s portfolio consists of many of the best malls in America

7
High Quality Assets (Cont’d)
“Indicative of the strength within our portfolio is the performance of our

50 most productive United States centers. These properties generated
average sales per square foot of approximately $648. Not only do
these 50 centers produce tremendous sales per square foot, they also
represent approximately 50% of our total mall NOI. This is one more
example of the quality of our portfolio, and quality will be more
important than ever as we move forward in 2008 and 2009.”
–John Bucksbaum, Chairman and Former CEO, July 31, 2008
Because the NOI from GGP’s highest quality malls should

be valued at materially lower cap rates than its lower
quality malls, a substantial majority of GGP’s equity value
is in the Company’s best assets
8
Why We Like Malls
Relative to other real estate asset classes, malls have historically

generated the most stable cash flow
Weighted-Average Same-Store NOI Growth Across Various Property Types
8.0%
6.0%
Apartment
4.0%
Office
Industrial
2.0%
Mall
0.0%
(2.0%)
(4.0%)
(6.0%)
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E 2013E
________________________________________________ 9
Source: Green Street. Sector data represents weighted average of companies in coverage universe during the period in question.
Long Term Leases
GGP’s business is far less cyclical than that of the retail industry because its
revenues are insulated by long-term leases which are structurally senior claims
GGP Lease Expiration Schedule (1)

More than 75% of
GGP’s leases do
20.0%
18.0% not expire until

16.0% 2012 or later
14.0%
11.7%
12.0%
9.9% 10.1% 10.2%
9.7%
10.0% 9.0%
8.8%
8.1% 8.2% 8.4%
8.0%
5.9%
6.0%
4.0%
2.0%
0.0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 After
Rent & Recov.

Per Sq Ft $36.83 $41.07 $47.78 $53.07 $56.24 $56.04 $64.70 $67.47 $70.16 $74.81 $61.75
________________________________________________
Source: GGP Q1’09 operating supplement. Expiration includes Company’s pro rata share of its unconsolidated segment.
(1) Excludes leases on anchors of 30,000 square feet or more and tenants paying percentage rent in lieu of base minimum rent. Excludes all international operations which combined represent ~1% of segment basis real
estate property NOI. Also excludes community centers. Percentage is weighted based on rent per square foot.
. 10
Embedded Growth
GGP’s long term lease-based revenue model offers embedded

growth in good times and mitigates revenue declines in bad times
GGP Rent & Recoverable Per Sq Ft Expiration Schedule (1)
$75
$75.00
$70
$70.00
$67
$65
$65.00
$62
$60.00
Average:
$56 $56 $56
$55.00 $53
$50.00
$48
Embedded
$45.00
Growth
$41
Opportunity
$40.00
$37
$35.00
$30.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 After
________________________________________________
Source: GGP Q1’09 operating supplement. Expirations include company’s pro rata share of its unconsolidated segment.
(1) Data includes significant proportion of short-term leases on inline spaces that are leased for one year. Rents and recoverable common area costs related to these short-term leases are typically much lower than those
related to long-term leases. Any inferences the reader may draw regarding future rent spreads should be made in light of this difference between shrort- and long-term leases.
. 11
Inflation-Protected
Approximately 82% of GGP’s debt is fixed rate
________________________________________________
Source: Q1’09 operating supplement.
12
Why Do We Like GGP?
High Quality
Assets
Diversified
Geographical Footprint
Inflation-Protected High Quality
Stable Cash Flows
Business
Diverse
Tenant Mix
Embedded
Growth Opportunity
13
A Brief History
Town and Country Center

Cedar Rapids, 1954
The Rise of GGP: 1954 – 2007
1954: During its time as a April-2007:
Brothers Martin & Public Company GGP achieves
Matthew Bucksbaum a market cap
found GGP and open f GGP paid ~$4bn in dividends of ~$20bn
$70
Town & Country f GGP refinanced or paid down
Shopping Center in
~$32bn of debt
Cedar Rapids, IA
$60
f Until Q1’09, GGP never
defaulted on a mortgage
$50 August-2004:
1960: Rouse acquisition
GGP opens Duck
$40 Creek Plaza, one April-1993:
of the first malls to GGP goes public
have a department on the NYSE
$30 store anchor resulting in net
cash proceeds
of ~$383mm
$20
$10
$0
1954 1960 1993 1995 1997 1999 2001 2003 2005 2007
15
The Fall of GGP: 2008 – Current
March 28, 2008:
GGP raises $822mm in a stock
offering priced at $36 per share,
implying a market cap of ~$12bn.
$50 ~$100mm is purchased by an
affiliate of the Bucksbaum family
September 15, 2008:

$40 Lehman Brothers
declares bankruptcy.
Market cap: ~$9bn
$30
$20 June-July, 2008:

The CMBS new April 16, 2008:
issuance market November 28, 2008: GGP voluntarily
grinds to a halt $900mm of GGP files for bankruptcy
$10 debt comes due
November 12, 2008:
GGP market cap
hits ~$100mm
$0
Jan-08 Apr-08 Jul-08 Oct-08 Feb-09 May-09
16
The Problem
Over the past decade, GGP was a significant issuer of CMBS with
~$15bn of CMBS debt. In mid-2008, the CMBS market shut down
U.S. CMBS New Issuance Market ($ in billions)

$250
$230
$203 No market exists

$200 for refinancing
GGP’s ~$15bn of
$169 CMBS debt
$150
$100 $93
$74 $78
$67
$57
$51
$47
$50
$16
$0
$0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
________________________________________________
Source: Bank of America equity research. 17

The Problem (Cont’d)
GGP’s bankruptcy is the result of the unprecedented disruption in

the credit markets coinciding with large near-term debt maturities
________________________________________________
Source: GGP Q1’09 operating supplement.
18
Despite the turmoil in the credit
markets, GGP’s operating
performance remains strong
Occupancy as of Q1’09
GGP’s occupancy ranks among the top of its peer group
Glimcher occupancy benefitted in Q1’09

from the signing of temporary tenants to
one year leases that had previously been
excluded from the occupancy calculation.
Occupancy was 90.6% as of Q3’07
92.0%
91.2%
90.9% 90.8%
91.0% 90.5%
90.2% 90.1%
90.0%
88.9%
89.0%
88.0%
87.0%
86.0%
85.0%
83.8%
84.0%
83.0%
Glimcher General Growth Simon Property Taubman Macerich Westfield CBL Pennsylvania REIT
Group
________________________________________________
Note: Occupancy is defined as percent of mall shop and freestanding GLA leased.
(1) SPG figures are for regional malls only.
(2) CBL figures are for stabilized regional malls only (excludes new developments and redevelopments). 20
Trailing Twelve Month Cash NOI
As of Q1’09, GGP’s trailing twelve month cash NOI grew 1.4% on a year over
year basis. Adjusting for lease termination income, cash NOI grew 2.4%
TTM Cash NOI ($ in millions)
$2,750
$2,542 $2,554 $2,542 $2,524
$2,489
$2,500 $2,413
$2,328
$2,211 $2,211 $2,255
$2,250
$2,000
$1,750
$1,500
$1,250
$1,000
$750
$500
$250
$0
Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09
Cash NOI
6.6% 4.0% 5.0% 7.2% 9.2% 12.6% 12.7% 9.7% 5.3% 1.4%
Growth (YoY)
Excl. Termination Income

Adj. Cash NOI
5.7% 5.1% 5.7% 7.6% 9.1% 10.8% 10.9% 8.5% 5.1% 2.4%
Growth (YoY)
________________________________________________
Note: NOI figures exclude management fee income and NOI associated with the MPC segment.
Cash NOI adjusts for non-cash items such as straight-line rent, lease mark to market adjustments (FAS 141), 21
non-cash ground rent expense and real estate tax stabilization.
Not Your Typical
Bankruptcy
Water Tower Place

Unlike most bankruptcies where
equity holders lose most, if not all,
of their value, we believe GGP’s
bankruptcy provides the ideal
opportunity for a fair and equitable
restructuring of the Company that
preserves value for all constituents:
secured lenders, unsecured lenders,
employees, and equity holders
A Little Personal History
While in bankruptcy, Alexanders’ stock price appreciated 358%
$80
September 21, 1993:
Alexanders’ Plan of
$70 Reorganization is
confirmed
$60
$50
$40 March 1, 1995:

Alexanders emerges
from bankruptcy
$30
$20
May 12, 1992:
Alexanders files a voluntary
$10 petition for bankruptcy
$0
May-92 Jan-93 Oct-93 Jul-94 Apr-95 Dec-95
24
Amerco Bankruptcy
While in bankruptcy, Amerco’s stock price appreciated 456%
$80
February 2, 2004:
$70 Amerco’s Plan of March 15, 2004:
Reorganization is Amerco emerges
confirmed from bankruptcy
$60
June 20, 2003:
$50 Amerco files a
voluntary petition
for bankruptcy
$40
$30
$20
$10
$0
Jan-03 Aug-03 Mar-04 Oct-04 May-05 Dec-05
25
Why Did Amerco File for Bankruptcy?
Amerco filed for bankruptcy as the result of a liquidity issue that

arose even though the underlying business was solvent
f Following Enron in late 2002, Amerco’s auditors advised the company

that’s its financial results would have to be restated
f The restatement, which involved the consolidation of an off balance-sheet

financing subsidiary (SAC Holdings), resulted in a material decrease in
reported net worth and an increase in reported leverage ratios. The
restatement also required a time-consuming restatement of prior periods’
results that led to the delayed filing of quarterly reports with the SEC
f As this situation was developing, Amerco was attempting to negotiate and

replace its revolving credit facility and complete a $275mm bond offering
f Ultimately, Amerco was unable to complete the bond offering, and, as a

result, it did not have sufficient funds to meet maturing debt obligations,
which led to cross-defaults and an acceleration of substantially all of the
Company’s other outstanding debt instruments
26
Why Did Amerco Shareholders Retain Value?
Analyst Question: “How can there be any value left for shareholders
under your plan when in almost every bankruptcy stockholders receive
no recovery? Have creditors signed on to your plan for a full
recovery?”
Answer: “Well, quite simply, Amerco has more assets than liabilities.
Real estate appraisals showed the market value of Amerco’s
unencumbered owned real estate is $550 million higher than stated
book value. Two of four major creditor groups have agreed to our plan
and we’re working with the remaining persons to get agreement to our
plan.”
Joe Shoen, Amerco CEO, Q4’03 Conference Call Transcript
27
Bankruptcy 101
§ 1129. Confirmation of plan
(b) (2) For the purpose of this subsection, the condition that a plan be
fair and equitable with respect to a class includes the following
requirements:
(A) With respect to a class of secured claims, the plan provides–

(i)(I) that the holders of such claims retain the liens securing such
claims, whether the property subject to such liens is retained by the
debtor or transferred to another entity, to the extent of the allowed
amount of such claim
(B) With respect to a class of unsecured claims–

(i) the plan provides that each holder of a claim of such class receive
or retain on account of such claim property of a value, as of the
effective date of the plan, equal to the allowed amount of such claim
Creditors are entitled to a “fair and equitable” plan of reorganization

________________________________________________
Source: U.S. Bankruptcy Code, Title 11, Chapter 11, Subchapter II. 28
Bankruptcy 101 (Cont’d)
“Although many of the factors interpreting ‘fair and equitable’ are

specified in paragraph (2), others, which were explicated in the
description of section 1129(b) in the House report, were omitted from
the House amendment to avoid statutory complexity and because
they would undoubtedly be found by a court to be fundamental to “fair
and equitable” treatment of a dissenting class. For example, a
dissenting class should be assured that no senior class receives more
than 100 percent of the amount of its claims.”
Congressional Record – House

Regarding the Bankruptcy Reform Act of 1978
H.R. 7330, 95th Cong., 1st Sess. 201
September 28, 1978
A “fair and equitable” plan only entitles creditors to recover 100% of

the amount of their claims. When a debtor’s asset value exceeds the
amount of its liabilities, equity holders are entitled to the residual value
29
GGP Reminds Us of Amerco
Typical
Bankruptcy
Year Founded 1945 1954 N/A
Reason for Filing? Extrinsic Factors Extrinsic Factors
Insolvency
Created Liquidity Crisis Created Liquidity Crisis
High Quality Business? Yes Yes No

Assets Worth More Yes Yes No
Than Liabilities? (Post-Filing TBV: >$350mm) (Post-Filing TBV: >$1bn)* (Post-Filing TBV: Negative)
Cash Flow Before Positive Positive Negative

Debt Maturities
Stability of Cash Flows Medium High Low
Insider Owns Large
Yes Yes No
% of Company?
Shareholder Advocate Joe Shoen (CEO) Pershing Square None

________________________________________________
30
* We believe that Tangible Book Value materially understates the fair market value of GGP’s equity.
Historical Bankruptcy Analysis
We looked at 150 bankruptcies over the past decade to see if we could find any other
examples of public companies entering bankruptcy with (i) positive cash flow before
debt maturities and (ii) asset values in excess of liabilities.
Our analysis was limited to U.S.-based non-financial companies with asset values in
excess of $1bn. We could only find four bankruptcies that fit the bill
Shareholder
What Happened To Equity Holders?
Advocate?
f Shareholders retained 100% of post-reorg equity
f Stock appreciated 456% during bankruptcy;
increased from $4 to $105 trough-to-peak 3 Joe Shoen
f Creditors repaid in full
f Shareholders received warrants in ~30% of the
post-reorg equity 3 Mgmt
f Personal recourse management loans largely forgiven
f Shareholders retained 100% of post-reorg equity
f Stock appreciated 358% in bankruptcy;
increased from $13 to $467 trough-to-peak 3 Steve Roth
f Creditors repaid in full
f To be determined 3 Pershing
Square
________________________________________________
Note: Bankruptcies since 1999 in excess of $1bn as provided by Web BRD (Bankruptcy Research Database).
Post-filing tangible book value used as a proxy for asset value in excess of liabilities. 31
Asbestos liability bankruptcies excluded from the analysis.
Incentives of Various Constituencies in a Typical Bankruptcy
Given the incentives of the various parties involved in a typical

bankruptcy, equity holders require a shareholder advocate to
protect their interests
Liquidate? Valuation Rationale

f Full recovery of claim
Secured
Depends Low f Loan to own
Creditors f Eliminate unsecured leverage
f Desire to be fulcrum security

Unsecured
Creditors No >Secured ; <Equity f Aim to receive 100% of post-
reorganization equity
f “Hit with your eyes closed”

POR projections
Management No Conservative f Low-struck options
f Minimize post-reorg leverage
Post-reorganization equity is often underpriced as a result of the

incentives of the various constituencies in a bankruptcy process
32
Given the incentives of the various
constituencies in bankruptcy, what
is the best way for GGP to reorgan-
ize that preserves value for secured
lenders, unsecured lenders, employ-
ees, and equity holders?
A Simple Solution
A seven-year extension of GGP’s secured and unsecured loans at their

existing interest rates would provide the Company with sufficient time to
use cash flow from operations to delever its balance sheet. With a seven-
year extension, we believe the Company would be able to repay existing
creditors in full
Benefits of this Approach:
3 Secured and unsecured lenders receive 100% of the

present value of their claims
3 Prevents the liquidation of assets at “fire-sale” prices
3 Preserves value for equity holders
3 GGP platform remains intact
3 Preserves jobs
34
Deleveraging Analysis Assumptions
f All Debt maturities extended seven years at current interest rates
f Cash NOI projections per Green Street Same Store Mall NOI Projections (1)
GGMI income declines / grows at 2x Cash NOI
f GGP suspends its cash dividend payment to common shareholders

through year-end 2009
10% cash / 90% stock thereafter
f GGP maintains Future Development Spending as outlined in the

Company’s Q1’09 supplement
f GGP maintenance capex, tenant allowances and restructuring costs as

outlined in the Company’s 2009-2010 Cash Flow Forecast
Maintenance capex and TAs in forecast are increased by ~20% to account

for unconsolidated segment outlays
________________________________________________
(1) See Mall REITs: May 2009 Update, page 6. Note that Simon is guiding for same store regional mall NOI to be up 0% to 1% in 2009e.
Note that this method is conservative in that it does not account for NOI generated by future development spending projects.
35
Illustrative Deleveraging Analysis
Seven-year maturity extensions coupled with a reduced cash dividend would

allow GGP to delever its balance sheet and create a substantial equity cushion
(US$ in millions, except per unit data) Seven Year Period
2008a 2009e 2010e 2011e 2012e 2013e 2014e 2015e Total
Cash Flow Available for Debt Repurchase

Cash NOI (excl MPC) $2,542 $2,481 $2,412 $2,390 $2,411 $2,462 $2,536 $2,612
Growth 5.3% (2.4%) (2.8%) (0.9%) 0.9% 2.1% 3.0% 3.0%
Plus / Less: MPCs (1) 73 (38) 15 25 50 75 75
Plus: Fee income 98 92 91 92 96 102 108
Less: Overhead from recurring ops (2) (269) (272) (274) (277) (280) (283) (286)
Less: Restructuring / Strategic costs (180) (112) - - - - -
Less: Maint Capex / TAs (156) (197) (200) (200) (205) (205) (210)
Less: Development capex (183) (99) (138) (138) (140) (140) (145)
Less: Other (incl income taxes, pfd distributions) (50) (28) (30) (30) (30) (30) (30)
Less: Pro Forma Interest expense 6.04% (1,698) (1,693) (1,687) (1,676) (1,662) (1,642) (1,616)
Less: Cash dividend (10% cash) - (16) (6) (6) (15) (29) (47)
Cash Flow Available for Debt Repurchase $115 $48 $160 $202 $277 $385 $462 $1,648
Illustrative Equity Value

Propco Enterprise Value (@ 7.5% cap rate) $33,082 $32,155 $31,866 $32,153 $32,828 $33,813 $34,827
Plus: Cash / GGMI / Dvlpmt Pipeline / MPC (3) 3,119 3,119 3,119 3,119 3,119 3,119 3,119
Substantial
Less: Total Debt (EOP) (28,059) (28,011) (27,851) (27,649) (27,372) (26,987) (26,525)
Equity
Illustrative Equity Value $8,141 $7,263 $7,134 $7,623 $8,575 $9,944 $11,420 Cushion
Per Share $25.47 $22.73 $22.32 $23.85 $26.83 $31.12 $35.74
________________________________________________
(1) Assumes proceeds from ~$90mm sale of Bridgeland improve cash flow in 2009e. Aside from Bridgeland adjustment, cash flows based on 2009-2010 Cash Flow Forecast filed by the Company.
(2) Represents annualized Q1’09 overhead expense. Adjusts for seasonality and $38mm of restructuring costs included in overhead line items. Ignores the potential for incremental cost saves.
(3) See valuation section for details.
36
Illustrative Deleveraging Analysis:
Unsecured Debt Converts into Equity
Alternatively, 100% of GGP’s unsecured lenders could be converted into equity.

Under this scenario, GGP would be able to pay a meaningful cash dividend

2008a 2009e 2010e 2011e 2012e 2013e 2014e 2015e Total

Cash NOI (excl MPC) $2,542 $2,481 $2,412 $2,390 $2,411 $2,462 $2,536 $2,612
Growth 5.3% (2.4%) (2.8%) (0.9%) 0.9% 2.1% 3.0% 3.0%
Plus / Less: MPCs (1) 73 (38) 15 25 50 75 75
Plus: Fee income 98 92 91 92 96 102 108
Less: Restructuring / Strategic costs (180) (112) - - - - - Using
Less: Maint Capex / TAs (156) (197) (200) (200) (205) (205) (210) conservative
Less: Development capex (183) (99) (138) (138) (140) (140) (145) assumptions,
Less: Other (incl income taxes, pfd distributions) (50) (28) (35) (35) (35) (35) (35) GGP would be
Less: Pro Forma Interest expense (3) 6.45% (1,392) (1,392) (1,392) (1,392) (1,392) (1,392) (1,392) able to pay a
Cash Flow Available for Dividend $421 $366 $457 $487 $557 $658 $728 $3,673 4.4% dividend
Cash Dividend Yield 2.9% 2.7% 3.4% 3.6% 3.9% 4.3% 4.4% yield by year 7

Propco Enterprise Value (@ 7.5% cap rate) $33,082 $32,155 $31,866 $32,153 $32,828 $33,813 $34,827 In this scenario,
Plus: Cash / GGMI / Dvlpmt Pipeline / MPC (4) 3,119 3,119 3,119 3,119 3,119 3,119 3,119 Unsecureds
would require
Illustrative Equity Value $14,613 $13,686 $13,397 $13,684 $14,359 $15,344 $16,358
Per Share (Adj for dilution from debt conversion) $25.12 $22.22 $21.31 $22.21 $24.32 $27.40 $30.58 Average
~45% of post-
% of Equity Required for Unsecureds to get 100% of Claim 45.1% 48.1% 49.2% 48.1% 45.9% 42.9% 40.3% 45.6% reorg equity to
________________________________________________
be made-whole
Note: Assumes $6.6bn of GGP’s unsecured debt converts fully into equity.
(3) Assumes weighted average interest expense of unsecured debt is 4.7%.
(4) See valuation section for details. 37
What if our “Simple Solution” cannot
be achieved consensually?
The Bankruptcy Code offers the

ability for debtors to “cram down”
creditors so long as each class of
creditor receives the present value
of their claims
If a creditor is not paid in cash or
property upon emergence, it must
receive future payments, the
present value of which equals its
bankruptcy claim
“Plans that invoke the cram down power often provide for installment payments over
a period of years rather than a single payment. In such circumstances, the amount of
each installment must be calibrated to ensure that, over time, the creditor receives
disbursements whose total present value equals or exceeds that of the allowed
claim.”
– Opinion of Justice Stevens, Till v. SCS Credit Corp
What interest rate must the debtor
pay over time on its obligations to
its creditors in a cram down?
The Till Precedent
In the case of Till v. SCS Credit Corp. (2004), the U.S. Supreme
Court established a precedent upon which to adjust interest rates in
the bankruptcy context:
If There is an Efficient Market:

If an “efficient” market exists for the debt, then the
court may apply the “market rate,” which is the rate
that the market will bear for the proposed loan
Absent an Efficient Market:

Absent an efficient market, the court is to apply a
“formula approach” involving setting the rate at the GGP falls
prevailing prime rate plus a “risk adjustment” rate into this
generally between 1% and 3% category
41
The Logic of Till
“Thus, unlike the coerced loan, presumptive contract rate, and cost of
funds approaches, the formula approach entails a straightforward,
familiar, and objective inquiry, and minimizes the need for potentially
costly additional evidentiary proceedings. Moreover, the resulting
‘prime-plus’ rate of interest depends only on the state of financial
markets, the circumstances of the bankruptcy estate, and the
characteristics of the loan, not on the creditor’s circumstances or its
prior interactions with the debtor. For these reasons, the prime-plus
rate best comports with the purposes of the Bankruptcy Code.”
Opinion of Justice Stevens

Supreme Court of the United States
Till v. SCS Credit Corp
May 17, 2004
42
The Progeny of Till
Since the Supreme Court ruling in 2004, Till has been applied in
numerous bankruptcy proceedings
Cases: Rate: Source:

In re Bivens Prime + 2.25% 317 B.R. 755, 769 (Bankr.N.D.Ill.2004)
In re Cachu Prime + 0.5% 321 B.R. 716, 725 (Bankr.E.D.Cal.2004)
In re Cantwell Prime + 1.0% 336 B.R. 688, 45 (Bankr.D.N.J.2006)
In re Flores Prime + 1.0% Not Reported in B.R. (Bankr.D.N.J.2006)
In re Harken Prime + 3.0% Not Reported in B.R. (Bankr.N.D.Iowa.2004)
In re Pokrzywinski Prime + 1.5% 311 B.R. 846, 850-51 (Bankr.E.D.Wis.2004)
In re Prussia Associates Prime + 1.5% 322 B.R. 572, 44 (Bankr.E.D.Pa.2005)
________________________________________________
Note: The above list is not meant to be comprehensive.
43
In re Prussia Associates
The Bankruptcy Court’s ruling in the case of Prussia Associates, a

limited partnership that owns and operates one hotel in King of
Prussia, PA, shows that even if an efficient market is deemed to exist,
the Court might still opt for a “prime-plus” formula approach
“The Court is constrained, therefore, to conclude that, although this case

presented an occasion upon which it indeed made sense to inquire as to what
the relevant market rate of interest might be, the totality of the evidence
presented did not permit a sufficiently informed conclusion to be drawn. Put
differently, this case demonstrates that the mere existence of an efficient market
does not guarantee that the short-comings of the coerced loan approach to rate
setting, as described in Till, will automatically be overcome. The Court will thus
fall back upon Till, and the formula approach, as the preferred means for setting
the interest rate herein.”
Opinion of Judge Raslavich

United States Bankruptcy Court, E.D. Pennsylvania
April 5, 2005
44
In re Prussia Associates (Cont’d)
The Court ruled that the appropriate mortgage rate should be set at
Prime + 1.5% (7.25%), despite the Creditor’s contention that the
“market rate” was 9.72%
“The prime rate as of today is 5.75%. This rate, therefore, will be the applicable base We note that
rate. The risk premium, per Till, will normally fluctuate between 1% and 3%. The GGP is a
appropriate size of the adjustment, per Till, will depend on factors such as the higher quality,
circumstances of the estate, the nature of the security and the duration and lower risk
feasibility of the reorganization plan. The creditor bears the burden of proof on business than
this issue. In this instance, [the Creditor] has raised certain legitimate questions as to Prussia
the feasibility of the Debtor’s plan; however it has done little to overcome the evidence Associates,
which owns
which indicates both that the Debtor’s operations are improving apace, and that the
one hotel, the
value of Fremont’s collateral is appreciating steadily. The Court thus views the risks Valley Forge
attendant to the proposed loan as neither negligible nor extreme. Based upon this, the Hilton
Court will require the addition of a 1.5% risk premium to the aforesaid prime rate for
the recast [Creditor] loan.”
Opinion of Judge Raslavich
United States Bankruptcy Court, E.D. Pennsylvania
45 April 5, 2005
What Factors Will the Court Consider in Determining the
Appropriate Risk Adjustment Spread for GGP?
Based on these precedents, we believe the court could confirm a plan at a rate
that is lower than GGP’s current weighted average interest rate
3 Cash flow in excess of interest expense

3 NOI has increased since the issuance of
Circumstances >95% of GGP’s outstanding loans
of the Estate 3 In the process of deleveraging Appropriate Risk-
3 Cutting costs, lowering development
spending and reducing cash dividend
Adjustment Rate:
Nature of the
3 Oversecured Prime-plus
3 Equivalent in value to the present value
Security of the creditors’ claim 0.5% Æ 1.0%
3 Seven years, though debt paydown

Duration and begins day one
Feasibility of 3 Highly feasible POR
POR 3 Negiligible risk of nonpayment
“The appropriate size of [the] risk adjustment depends, of course, on such

factors as the circumstances of the estate, the nature of the security, and
the duration and feasibility of the reorganization plan”
– Opinion of Justice Stevens, Till v. SCS Credit Corp
46
The Prime Rate May be Sufficient
In light of GGP’s highly diversified, high quality portfolio, in a reorganization

where the unsecured debt converts to equity, the court may deem the Prime
rate plus 0% to be a sufficient rate of interest on GGP’s secured debt
Footnote 18:
“We note that, if the court could somehow be certain

a debtor would complete his plan, the prime rate
would be adequate to compensate any secured
creditors forced to accept cram down loans”
– Opinion of Justice Stevens, Till v. SCS Credit Corp.
47
What If GGP’s Debt Were Re-Priced
to Till-Mandated Rates?
Illustrative Deleveraging Analysis: Prime [3.25%] +
0.75% for Secured; Prime + 1.50% for Unsecured
A plan that sets GGP’s secured debt and unsecured debt to Prime + 0.75% and
Prime + 1.50%, respectively, would allow for substantial deleveraging and
further increase the probability of a highly successful reorganization
2008a 2009e 2010e 2011e 2012e 2013e 2014e 2015e Total

Cash NOI (excl MPC) $2,542 $2,481 $2,412 $2,390 $2,411 $2,462 $2,536 $2,612
Growth 5.3% (2.4%) (2.8%) (0.9%) 0.9% 2.1% 3.0% 3.0%
Plus / Less: MPCs (1) 73 (38) 15 25 50 75 75
Plus: Fee income 98 92 91 92 96 102 108
Less: Restructuring / Strategic costs (180) (112) - - - - -
Less: Maint Capex / TAs (156) (197) (200) (200) (205) (205) (210)
Less: Development capex (183) (99) (138) (138) (140) (140) (145)
Less: Other (incl income taxes, pfd distributions) (50) (28) (35) (35) (35) (35) (35)
Less: Pro Forma Interest expense (3) (1,161) (1,134) (1,107) (1,076) (1,042) (1,002) (958)
Less: Cash dividend (10% cash) - (126) (120) (124) (137) (155) (177)
Cash Flow Available for Debt Repurchase $652 $498 $622 $679 $770 $893 $985 $5,099

Propco Enterprise Value (@ 7.5% cap rate) $33,082 $32,155 $31,866 $32,153 $32,828 $33,813 $34,827
Plus: Cash / GGMI / Dvlpmt Pipeline / MPC (4) 3,119 3,119 3,119 3,119 3,119 3,119 3,119
Illustrative Equity Value $8,679 $8,251 $8,583 $9,548 $10,993 $12,871 $14,871
Per Share $27.16 $25.82 $26.86 $29.88 $34.40 $40.28 $46.53
________________________________________________
(3) Sets secured debt interest rate at Prime + 0.75% (4.00%) and unsecured debt interest rate at Prime + 1.50% (4.75%).
(4) See valuation section for details.
49
What’s the Alternative?
3 GGP is not the exception – many REITs have the same problem
________________________________________________
Source: Green Street estimates (5/14/09).
3 A liquidation will lead to a windfall for the secured creditors
3 It will destroy the GGP franchise
3 A liquidation will put downward pressure on real estate values

impairing other borrowers’ ability to refinance
3 Nearly all REITs and other leveraged real estate owners will
likely suffer the same fate if GGP is forced to liquidate
50
Valuation
The Grand Canal Shoppes

Because creditors are not entitled to get
more than 100% of their claim, valuation
will play an important role in determining
the extent to which GGP equity holders
receive value in the bankruptcy process
Simon is the Best Comp for GGP REIT
Based on size, similarity of portfolio quality and relevant operating

metrics, Simon represents the best comp for GGP
Note that ~20% of Simon’s GLA relates to the Mills portfolio. These
properties have lower occupancy and rent per square foot than traditional
regional malls and deserve a lower valuation than typical GGP assets
________________________________________________
Source: Green Street (May 14, 2009).

53
Simon Trades at an 8.4% Cap Rate
Share Price (as of 5/26/09) $51.32

Shares & Units (1) 343
Market Cap $17,598
Pro Rata for JVs: (2)
Plus: Total Debt (3) 24,172
Plus: Preferred Debt 276
Plus: Other Liabilities 1,983
Less: Cash (4) (2,847)
Less: Other Assets (5) (2,285)
Less: Development Pipeline (6) (256)
TEV 38,641
Less: Mgmt Business (7) (423)
Value of Simon's REIT 38,218
LTM Cash NOI (8) $3,211
Implied Cap Rate 8.4%
(1) Includes 23mm share issuance on 5/12. Includes diluted shares as detailed on pg. 8 of Simon's operating supplement.
(2) Numbers as reported in pro-rata balance sheet.
(3) Includes $600mm senior note issuance on 5/12.
(4) Includes proceeds from 23mm share issuance and $600mm senior note issuance, net of 3% fees.
(5) Excludes goodwill.
(6) Applies 25% discount to Simon's share of U.S. CIP (page 41 of operating supplement).
(7) Applies 25% EBIT margin to LTM fee income of $130mm and a 13.0x EBIT multiple.
(8) Excludes mgmt income. Adjusts for non-cash revenue items such as straight-line rent and FAS 141.
NOI calculation deducts interest income and land sale gains from other revenue to be apples to apples with GGP.
54
Simon Debt Maturity Schedule
With ~$11bn of debt maturities coming due by 2012, we note that

Simon has meaningful liquidity risk. We believe that Simon’s current
valuation reflects a downward adjustment for liquidity risk and the
likelihood of future equity dilution
________________________________________________
Source: Green Street (May 14, 2009).
55
Value of GGP REIT
Simon’s cap rate suggests the value of GGP REIT, not including
GGMI and MPC, is somewhere between $9 and $22 per share.
($ in millions, except per share data) Low High

We believe the market
LTM Cash NOI (1) $2,524 $2,524 assigns ≥100bp risk
Cap Rate 8.5% 7.5% premium for Simon’s
Implied Value of GGP's REIT $29,689 $33,647 refinancing risk

Less: Total Debt (3) (28,174) (28,174)
Less: Preferred Debt (121) (121) Note that GGP’s 2006
Loan Agreement uses
Less: Other Liabilities (4) (1,585) (1,585) a 6.75% Retail Cap
Plus: Cash (5) 722 722 Rate in its calculation
Plus: Other Assets (6) 1,777 1,777 of Capitalization Value
Plus: Development Pipeline (7) 603 603 for covenant purposes
Implied Equity Value 2,911 6,870
Per Share $9.11 $21.50
(1) Excludes mgmt income. Adjusts for non-cash revenue items such as straight-line rent, FAS 141, and non- cash ground rent expense.
(2) Applies 50% share to condensed balance sheet of unconsolidated real estate affiliates in 10-Q.
(3) Includes $400mm DIP loan.
(4) Excludes book value of deferred tax liabilities as these mostly relate to MPC. These are taken into account when valuing the MPC segment.
(5) Includes $400mm DIP proceeds.
(6) Excludes goodwill.
(7) 40% discount to book value. 56
Why 7.5% Æ 8.5% is a Conservative Cap Rate Range
Assuming that (i) GGP’s ‘A’ caliber assets deserve a 7.0% cap rate and
(ii) 75% of GGP’s NOI is derived from ‘A’ assets, GGP’s ‘A’ assets alone
are worth more than its liabilities
Illustrative Analysis: GGP’s ‘A’ Assets

This analysis suggests
Assumptions: Alone are Greater than its Liabilities GGP’s ‘A’ mall assets
f GGP’s top 50 assets ($ in millions)
alone validate GGP’s
current market cap.
generate 50% of NOI LTM Cash NOI (1) $2,524
(see pg. 8) % of NOI from 'A' assets 75.0% When buying the
LTM Cash NOI - 'A' assets 1,893 equity at ~$1.19, one is
getting the following
f We estimate GGP has Illustrative Cap Rate - 'A' assets 7.0%
for free:
Asset Value - 'A' Assets $27,038
>80 ‘A’ caliber assets >130 non ‘A’ malls
Less: Total Debt (1) (28,174)
(see pg. 7) Less: Preferred Debt (121) >30 grocery-anchored
Less: Other Liabilities (1) (1,585)
strip centers
f Therefore, we assume Plus: Cash (1) 722 GGMI
Plus: Other Assets (1) 1,777
~75% of GGP’s NOI is MPC
Plus: Development Pipeline (1) 603
derived from ‘A’ assets Net Asset Value - 'A' Assets $260 Hidden Asset Value
________________________________________________
(1) See page 56 for details.
57
Historical Mall Cap Rates
Since 1986, Malls have traded at an average cap rate of 7.6%, and this
average was achieved in much higher long-term interest rate markets
Historical Cap Rate Across Various Property Types
10.0%
9.0%
8.0% Mall
Average:
7.0%
7.6%
6.0% Apartment
Office
Industrial
Mall
5.0%
4.0%
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
________________________________________________ 58
Source: Green Street. Cap rates are weighted by (% NOI from primary property type times market cap). Data from January, 1986 through February, 2009.
Value of GGMI
GGMI is one of the few national platforms capable of providing

management and leasing services to regional retail centers.
We estimate its value to be between $1 and $2 per share
Low High
LTM Management Income & other fees $100 $100
EBIT Margin (1) 25.0% 35.0%
LTM EBIT $25 $35 CB Richard

Ellis trades at
Multiple 13.0x 17.0x ~15x NTM EBIT
Value of GGMI $326 $596
Per Share $1.02 $1.87
GGMI likely deserves a higher multiple given that CB Richard

Ellis’s fee stream is more transaction driven
________________________________________________
(1) Pershing Square estimate.
59
Value of MPC
We estimate the net value of GGP’s MPC segment to be anywhere

between $0.27 and $6.72 per share
Low High
Estimated Value Per Share As of 12/31/07,
Gross Value of MPC as of 12/31/07 (1) $3,280 $3,280 management estimated
Less: Estimated Bridgeland Portion (2) (721) (392) the gross value of these
Gross Value of MPC as of 12/31/07 excl. Bridgeland 2,559 2,888 assets to be $3.3bn,
Memo: Net Book Value (as of 3/31/09) 1,391 1,391 more than $10 per share
Haircut 100.0% 20.0%
Adj. Gross Value of MPC - 2,311
Plus: Estimated Proceeds from Sale of Bridgeland, net (3) 87 87 This segment generated
Less: Present Value of Deferred Tax Liability (4) - (250) ~$150mm of net cash
Net Value of MPC $87 $2,148 flow in 2005 and
Per Share $0.27 $6.72 ~$190mm in 2006
________________________________________________
Note: Does not reflect impact of Contingent Stock Agreement, which could, in certain circumstances, create meaningful dilution.
(1) Represents management’s valuation of the gross assets as of 12/31/07. Source: page 22 of Q3’08 operating supplement.
(2) Low case trues up 3/31/09 net book value of Bridgeland as a % of management’s 12/31/07 gross value estimate. High case represents Bridgeland net book value as of 3/31/09.
(3) Assumes Bridgeland is divested for $90mm, net of 3% transaction fees.
(4) Pershing Square estimate. The present value of the tax liability will depend on the operating performance of the segment.
60
Hidden Asset Value: Las Vegas
GGP’s Las Vegas assets have option value as future development

sites
“Fashion Show is a little bit of a different situation. The

income there continues to grow very significantly, well
ahead of our comp NOI average, and we expect that to
continue. There are other things that we've been telling
people for years that we're trying to get done there,
including getting a certain portion of the project land in the
Northeast corner under control, where we might be able to
do additional development of that site, given its highly
lucrative location right on the strip. So we wanted that
flexibility.”
–Bernie Freibaum, Former CFO of GGP,

Q1’08 earnings transcript
61
Hidden Asset Value: Victoria Ward
GGP recently received zoning approval to transform 60 acres of

land in the heart of Honolulu into a vibrant and diverse
neighborhood of residences, shops, entertainment and offices
The plan clears a path for GGP to bring to

the oceanfront neighborhood as many as:
* 4,300 residential units, many of them in
towers aligned to preserve mountain and
ocean views
* 5 million square feet of retail shopping,
restaurants and entertainment
* 4 million square feet of offices and other
commercial space
* 700,000 square feet of industrial uses
* 14 acres of open space, parks and public
facilities
62
Hidden Asset Value: Park West
In 2007, GGP spent $105mm developing its Park West property in Peoria, AZ.
Based on the recent photograph below, we estimate that this property has the
potential to generate substantially more NOI. There are likely other properties
like Park West that are currently under-earning in GGP’s portfolio
63
Hidden Asset Value: Non-Recourse Financing
GGP’s liabilities are one of its most valuable assets. Non-recourse

debt gives the Company a put option at the mortgage amount on
properties worth substantially less than their associated mortgage
f Relative to other REITs, GGP’s capital structure

consists of a high amount of non-recourse
mortgage debt
f The substantial majority of GGP’s ~$22bn of

secured financing is non-recourse
64
GGP’s Assets are Greater than its Liabilities
Value Per Share Low High
GGP REIT $9.11 $21.50

GGMI 1.02 1.87
MPC 0.27 6.72
Hidden Asset Value ? ?
Value Per Share $10.40 $30.08
Premium to Current (as of 5/26/09) 774% 2428%
65
What’s the Downside?
Using our most conservative assumptions, and assuming the conversion

of all unsecured debt into equity at the cap rate implied by GGP equity’s
current fair market value of $380mm, equity need only retain 5.5% of the
post-reorganization company to break even at today’s stock price
Illustrative Stock Price at Various Cap Rates and

Conservative Assumptions: Post-Reorganization Ownership Levels:
f Cap rate of 9.4% based on the Cap Rate
Does the
Unsecured
current market cap of $380mm Ownership 7.5% 8.0% 8.5% 9.0% 9.4% 10.0% Convert?
5.5% $2.37 $2.01 $1.69 $1.41 $1.19 $0.93 Yes
f GGMI is worth $1.02 per share 10.0%
20.0%
4.34
8.68
3.68
7.36
3.10
6.20
2.58
5.17
2.18
4.36
1.71
3.42
Yes
Yes
30.0% 13.02 11.04 9.30 7.75 6.54 5.12 Yes
f MPC is worth $0.27 per share 40.0%
50.0%
17.36
21.70
14.73
18.41
12.40
15.51
10.34
12.92
8.72
10.90
6.83
8.54
Yes
Yes
60.0% 26.04 22.09 18.61 15.51 13.08 10.25 Yes
f No value assigned to hidden 100.0% 22.79 16.21 10.40 5.24 1.19 (3.53) No
asset value opportunities
________________________________________________
Note: Current implied market cap based on $1.19 stock price as of 5/26/09.
66
Conclusion
f GGP equity offers an enormous potential reward for the

risk taken
f High quality, recession-resistant assets
f Principal risks are bankruptcy court outcome and a

further severe economic decline
f We believe bankruptcy law precedent and public policy

will lead to a favorable outcome for shareholders
f Inflation is the friend of the leveraged mall company
f The nuisance value of the equity is meaningfully greater

than zero
67
“O” No!
October 6, 2009

Disclaimer
The analyses and conclusions of Pershing Square Capital Management, L.P. ("Pershing Square") contained in
this presentation are based on publicly available information. Pershing Square recognizes that there may be
confidential information in the possession of the companies discussed in the presentation that could lead
these companies to disagree with Pershing Square’s conclusions. This presentation and the information
contained herein is not a recommendation or solicitation to buy or sell any securities.
The analyses provided may include certain statements, estimates and projections prepared with respect to,
among other things, the historical and anticipated operating performance of the companies, access to capital
markets and the values of assets and liabilities. Such statements, estimates, and projections reflect various
assumptions by Pershing Square concerning anticipated results that are inherently subject to significant
economic, competitive, and other uncertainties and contingencies and have been included solely for
illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of
such statements, estimates or projections or with respect to any other materials herein. Actual results may
vary materially from the estimates and projected results contained herein.
Funds managed by Pershing Square and its affiliates own investments in real estate investment trust
including long investments (e.g., General Growth Properties, Inc.) as well as short investments (e.g., Realty
Income Corporation). With respect to short investments, such investments may include, without limitation,
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Pershing Square manages funds that are in the business of trading - buying and selling – securities and
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Pershing Square hereby disclaims any duty to provide any updates or changes to the analyses contained here
including, without limitation, the manner or type of any Pershing Square investment.
1
We Are Short Realty Income
 Realty Income (“O”) is a Triple-Net-Lease REIT

 Owns standalone retail properties which it triple-net-
Ticker: “O” leases to middle-market retailers
Stock price: $25 (1)  Provides sale / leaseback financing to below
investment grade and unrated businesses
 Capitalization:
 Enterprise value: $4.3 billion
 Equity market value: $2.7 billion
 Total Debt (and preferred) / Enterprise value: ~40%
 Recent valuation multiples:

 ‘09E Cap rate: 7.3% (2)
1) Based on a five-day average price of
$25.34 for the period 9/28/09 – 10/2/09.  Annualized current dividend yield: 6.8%
2) Cap rate based on 2009E Cash NOI of
$316mm.
2
Realty Income: Business Review
 Owns 2,338 predominantly free-standing retail properties

 Single-tenant, typically specialty-use properties
 19mm rentable sq ft in total
 Average rentable space per property is ~8,100 sq ft

 Lease term typically 15 - 20 years
 Top 15 tenants account for ~53% of rental revenues
 Tenants:
 Typically leased to regional or local retailers
 Many large tenants have junk credit ratings
 Many smaller tenants are unrated and compete in struggling sectors of the
retail industry
 Average remaining lease term is ~11.6 years
 Occupancy rate is currently very high at 97%
 We believe a decline in occupancy is likely as tenant quality deteriorates…
Source: 6/30/09 10-Q.
3
Realty Income: Specialty-Use Properties
Below are properties listed on Realty Income’s website

(www.realtyincome.com) as for sale
Spring Hill, FL Wichita, KS Richmond, IN

Former Day Care Center Former Restaurant Former Audio / Video Store
5,371 sq ft 3,129 sq ft 6,449 sq ft
Hurst, TX Tucker, GA Alexandria, LA

Former Video Rental Store Former Auto Repair Shop Former Mexican Restaurant
7,366 sq ft 24,132 sq ft 5,858 sq ft
4
Capitalization and Trading Multiples
Realty Income trades at a 2009E Cap Rate of 7.3%, an AFFO multiple of

14.4x, and a dividend yield of approximately 6.8%, implying a valuation
of $227 / rentable sq ft
Capitalization Trading Multiples

$ in mm except per share and sq ft data 2009E
(2)
Recent share price $25 Cash NOI Cap Rate 7.3%
(1)
Fully diluted shares 105 EV / EBITDA 14.6x
Market Value of Equity $2,668
Price / Recurring FFO 14.1x
Net Debt and Preferred $1,645 Yield 7.1%
Enterprise Value 4,313 Price / Recurring AFFO (3) 14.4x

Rentable Square Feet (mm) 19 Yield 6.9%
Enterprise Value / Sq Ft $227
Dividend yield (4) 6.8%
1) Based on the treasury stock method using all options outstanding. Includes all unvested restricted stock.
2) 2009E Cash NOI ($316mm) is based on estimates for recurring NOI adjusted for straight line rents.
3) Recurring AFFO = Estimated recurring net income + D&A –recurring capital expenditures – straight line rent adjustment.
4) 2009E dividend yield annualized for current monthly dividend.
5
The “Monthly Dividend Company”
Realty Income pays a dividend every month. It aggressively markets

itself to retail investors as the “Monthly Dividend Company.”
6
Realty Income’s stated business purpose
is to maintain and grow its monthly
dividend…
7
The First 9 Pages of the Annual Report…
Cover Page 2 Page 3
8
First 9 Pages of the Annual Report (Cont’d)…
Page 4 Page 5 Page 6
9
First 9 Pages of the Annual Report (Cont’d)…
Page 7 Page 8 Page 9
10
Short Thesis:
Investment Highlights
Short Thesis: Investment Highlights
 Poor tenant quality

 High concentration of discretionary retail tenants (casual dining restaurants,
movie theaters, day care centers, etc…)
 Junk or unrated credits, many with bankruptcy potential
 Properties often have limited alternative use and high re-leasing risk
 Unlike prime shopping center locations, Realty Income’s standalone locations
generally lack anchor tenants to drive traffic and assist in re-leasing
 O’s profitability is levered to occupancy

 We believe the current 97% occupancy rate will decline due to tenant
deterioration
 Realty Income is responsible for all expenses (taxes, insurance) and capital
expenditures associated with a vacant property until it is re-leased
 A decrease in occupancy could materially impact NOI
12
Investment Highlights (cont’d)
 Balance sheet assets doubled from 1/1/05 – 12/31/07

 O was a leveraged lender to private equity during the real estate and credit
bubbles
 Dividend coverage is minimal

 If O misses its dividend, the Company’s reason for being is in question
 O trades at a substantial–and we believe unjustified–premium to private

market valuations
 Asking prices for properties similar to O’s are at a 10%-11% cap rate
 We don’t believe that O shareholders are being paid appropriately for tenant risk
 We believe that the “monthly dividend” marketing tactic has created

demand for O stock from retail investors who may not value the company
appropriately
 At a 9.5% Cap Rate and a 7.5% decline in NOI, Realty Income would
have a stock price of ~$14 (down ~46%)
13
Tenants: O Does Not Disclose Its Tenants
 Unlike many other REITs, Realty Income does not disclose its tenants
 Simon Property Group, for example, discloses tenants representing as little
as 0.2% of its minimum rental income
 Limited transparency as to:

 Names of tenants
 Credit of tenants
 Average credit rating of total tenant pool
 Individual tenant contribution to revenue
Analysts and investors have asked for more tenant disclosure, but
the Company has refused
QUESTION: Why?
ANSWER: We believe that O’s tenant quality is poor and the
company is concerned about the impact of transparency on its
stock price
14
Tenants: O Does Not Disclose Its Tenants
Q1 2009 Earnings Call Q2 2009 Earnings Call
Analyst: “I was just wondering if the RV Analyst: “The other thing is Rite Aid
dealer, Camping World, that's at that 1.2 announced that they're seeking rent relief on
times, 1.22 times [EBITDAR-to-rent 500 stores earlier this quarter -- or I guess in
coverage] at the low end, if they're one of the second quarter. Of the 24 Rite Aids that
the ones that only discloses annually? I was are in your portfolio, do you have any
just surprised to see that that 1.22 didn't exposure? I mean it's obviously not their
move.” whole -- their entire store base. It's just a
fraction of their system. I'm just wondering if
Company Representative: “Right. We do you have any exposure to that.”
not discuss the individual business of
tenants, so I wouldn't comment to that.” Company Representative: “Yes, it's not our
policy to comment on our individual tenants
Analyst: “Okay.” and what they're doing. We could sit here all
day. We have 118 tenants. And a lot of
Company Representative: “And we never times on these calls, people get mentioned
referred to them as that tenant.” who aren't our tenants, so that's the policy
15
we'll maintain.”
Tenants: Discretionary Consumer Risk
Realty Income As of Although Realty Income does not

Tenant Industries 6/30/09 disclose its tenants, it provides
tenant industry information
Restaurants 21%
Convenience stores 17%
Theaters 9%
The vast majority of its tenants
Child care 8%
are discretionary, regional
Automotive tire services 7% retailers
Health and fitness 6%
Automotive service 5%
Drug stores 4%
Nearly 40% are restaurants
Motor vehicle dealerships 3%
(predominantly casual dining
Sporting goods 2% restaurants) and convenience
Home improvement 2% stores
Other 16%
Total 100%
Source: 6/30/09 10-Q 16
Largest Tenants Are Poor Credits
We list below some of Realty Income’s largest tenants that we have

been able to identify. They are all junk credits with high leverage
Credit
Tenant Description Rating Commentary
Buffets Casual dining / steak-buffet Junk: Caa1  Adj. Debt / EBITDAR: 6.5x (1)
(owns Ryan’s Grill restaurants
 Emerged from bankruptcy in 2009
Buffet Bakery)
Pantry Regional convenience store Junk: B+  Adj. Debt / EBITDAR: 5.0x (2)
operator (Southeast US)
Estimated  Bonds trade at 9.75% yield
~20% of
La Petite Academy Day care operator Junk: B-  Adj. Debt/ EBITDAR: 7.4x (3)
Realty (Learning Care Group)  Morgan Stanley
Income’s Private Equity LBO
revenues (6)
Kerasotes Showplace Movie theatre chain Junk: B-  Adj. Debt/ EBITDAR: 5.9x (4)
Theatres
Knowledge Learning Day care operator Junk: B1  Adj. Debt/ EBITDAR: 4.7x (5)
Corp. (Children’s World)
Sources for tenants: Compiled using Wall Street Research, O’s filings, O’s website, various press reports and O’s earnings conference calls.
1) Source: Moody’s, April 2009. Based on Moody’s estimates post emergence from bankruptcy.
2) Source: Company filings, LTM ended June 2009. Capitalized operating rents calculated at 8x rent expense.
3) Based on Learning Care Group (parent company) S&P corporate ratings, leverage estimate for LTM ended June 2009.
4) Source: S&P, leverage estimate for LTM ended June 2009.
5) Source: Moody’s, leverage estimate for LTM ended June 2009.
6) Based on Citi sell-side report entitled, “Realty Income Corp (O): Non-Investment Grade Tenant Credit Weakness and Margin Pressure Add Risk,” dated 8/1/08.
17
Other Major Tenants Are Also a Major Concern…
Other major tenants are mostly regional discretionary retailers, including
several 2005-2007 vintage LBOs. Some tenants have already filed Chapter
11 and we believe many could be forced to liquidate
Listed in no particular order
Tenant Description Leverage / Commentary

NPC International Casual dining  Largest Pizza Hut franchisee
restaurants
 Adj. Debt / EBITDAR: 5.7x
 Merrill Lynch PE LBO (2006)
Midas Retail automotive  Adj. Debt/ EBITDAR: 5.8x
services
Big 10 Tires Tire retailer  Filed for Chapter 11 (4/2/09)
Realty
Friendly’s Casual dining / ice  Sun Capital LBO (2007)
Income cream distributor
major Rite Aid Drug store chain  Adj. Debt/ EBITDAR: 9.6x
tenants(1)  Bonds trade between 10 - 13%+ yield
Pier 1 Imports Specialty retailer of  LTM EBITDA is negative

home furnishings
Sports Authority Specialty apparel  Leonard Green LBO (2006)

retailer
 Mezz. Loan implied yield of ~18%
Circle K Convenience store  O provided $100.5m of sale-

operator leaseback financing for Alimentation
Couche-Tard acquisition of Circle K
Source for Adj. Debt / EBITDAR: Company filings (capitalized operating rents calculated at 8x rent expense) and recent credit rating agency reports.
Sources for tenants: Compiled using Wall Street Research, O filings, O’s website, various press reports and O’s earnings conference calls.
1) We define a major tenant as renting 10 or more Realty Income properties OR involved in a sale/leaseback transaction with O for $30m or greater.
18
If a Tenant Files for Bankruptcy…
Tenant bankruptcy filings raise a number of issues:
 Tenants in Chapter 11 could choose to reject their

lease(s)
 Vacant properties have re-leasing risk, typically require

significant capital investment and brokerage
commissions, and may be re-leased at materially lower
rents
 Tenants armed with market and/or bankruptcy leverage

will likely seek to renegotiate rents
19
Balance Sheet Doubled from 1/1/05 – 12/31/07
During the peak of the real estate and credit bubbles, Realty Income’s
assets more than doubled from $1.4bn to $3.1bn as the company
became a financing source for LBOs and corporate M&A
Realty Income Total Assets
$3,500
$3.1
bn
ub /07
$3,000
it B 2/31
ble
Realty Income provided
Cr 0 5 – 1 financing for the following LBOs:
$2,500 ed
/
1/1
Year Financing
Amount Transaction LBO Firm
$2,000 2006 $350mm $860mm LBO Caxton-
of Ryan’s Iseman
$1.4 Restaurants Capital
$1,500 bn (acquired by (owner of
Buffets) Buffets)
$1,000
2007 Undisclosed ~$340mm Sun Capital
amount LBO of
Friendly’s
$500
Sale/LB for 160 Restaurants
restaurants
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Note: Realty Income entered into a sale/leaseback transaction with
Friendly’s in October 2007, shortly after the August 2007 LBO of
20 Friendly’s by Sun Capital.
Dividend Coverage is Minimal
Dividend coverage is minimal. Small declines in NOI will stress

the company’s ability to maintain its dividend
Minimal room
for error
Decline in Recurring 2009E NOI (1)
0.0% -2.5% -5.0% -7.5% -10.0%
Recurring AFFO/share (2) $1.76 $1.76 $1.68 $1.61 $1.53 $1.46
Current annualized dividend $1.71 $1.71 $1.71 $1.71 $1.71
Dividend coverage 103% 98% 94% 89% 85%
Required Dividend Decrease NA -2% -6% -11% -15%
1) Calculation of AFFO assumes $21mm of G&A expenses, $3mm of capex and straight line rent adjustments, and $86mm of interest expense.
2) Recurring AFFO = Recurring Net Income + D&A – Cap Ex – straight line rent adjustment.
21
What Could Happen If…?
 Despite having no debt maturities until 2013, Realty Income could face
significant problems if its tenants continue to go bankrupt
 Even a small decline in NOI could prevent the company from funding
its current dividend from operating cash flow
 Liquidity from O’s current revolver may be at risk if there are sufficient
asset writedowns or sufficient reductions in FFO(1) (2)
 Asset writedowns could be caused by tenant bankruptcies and / or declines
in real estate values
 Current cash on hand represents only about 2.5 months of dividends
 O may need to reduce its cash dividend which we expect would adversely
impact its stock price
 Many retail shareholders own the stock for its monthly dividend
 We believe that O’s stock price depends on its ability to maintain its
monthly dividend
1) Dividends and Other Restricted Payments covenant: Per the Credit Agreement (5/15/08), quarterly dividends and share repurchases may not exceed 95% of FFO plus preferred
dividends for each of the trailing four quarters.
2) Minimum Tangible Net Worth covenant: Per the Credit Agreement (5/15/08), we estimate that O must maintain a Tangible Net Worth of ~$1.3bn and that Tangible Net Worth is
currently ~$1.6bn (as of 6/30/09) implying that O has an approximate $0.3bn cushion under that credit facility. O’s Net PPE is approximately $2.8bn.
22
O’s Business Model and its Stock Price
We believe that Realty Income’s ability to grow its

dividend is a function of several factors including:
1. Performance and creditworthiness of its existing tenant

portfolio
2. Ability to issue equity at a valuation materially higher than

private market values
We believe that if Realty Income’s stock price were to

decline meaningfully, its business model could be in
jeopardy
23
Equity Offerings: “Ceiling on Valuation”
Since 2005, Realty Income has issued equity to the public five times
at an average price of $25 and at ranges from $23.79 - $26.82
Average
price of
equity
offerings:
$25.15
Denotes equity offering
Given O’s recent stock price of ~$25, we would not be surprised if

Realty Income issues equity soon, based on this history
24
Properties Offered for Sale at a 11% Cap Rate
Current asking prices for some Ryan’s restaurants (one of O’s largest tenants)
is an 11% cap rate. In comparison, Realty Income trades at a 7.3% cap rate
Tenant Location Sq Ft Price / SqFt Cap Rate

Ryan’s Grill Buffet Bakery Indianapolis, IN 9,601 $178 11%
Ryan’s Grill Buffet Bakery Millington, TN 9,752 $176 11%
Ryan’s Grill Buffet Bakery Springfield, MO 11,557 $148 11%
Ryan’s Grill Buffet Bakery Simpsonville, SC 10,607 $161 11%
Ryan’s Grill Buffet Bakery Gastonia, NC 10,164 $169 11%
Ryan’s Grill Buffet Bakery Oak Ridge, TN 10,403 $165 11%
Ryan’s Grill Buffet Bakery Seymour, IN 12,331 $139 11%
Ryan’s Grill Buffet Bakery Foley, AL 10,996 $156 11%
Ryan’s Grill Buffet Bakery Gardendale, AL 11,066 $155 11%
Source: All listings with Colliers International. 25

Unwarranted Premium to Private Market Value
Knowledge Learning Corp., a large tenant of O’s, lists properties for sale on its
website at $115/sq ft, on average. In comparison, Realty Income trades at
$227/sq ft, a 97% premium
City State Bldg Size(sq ft) Land Size Listing Price Price/ Bldg Sq Ft
Waterford CT 6,054 1 Acre $299,000 $49
Decatur GA 6,400 48,351 $700,000 $109
Jonesboro GA 4,631 39,204 $440,000 $95
Snellville GA 6,365 1.3 Acres $650,000 $102
Beverly MA 4,335 23,990 $460,000 $106
Hattiesburg MS 4,625 22,000 $500,000 $108
Glassboro NJ 4,982 105,850 $990,000 $199 Not one
Lawrenceville
Desoto
NJ
TX
4,739
14,588
96,703
61,021
$990,000
$850,000
$209
$58
property
Garland TX 8,724 56,327 $925,000 $106 is offered
Houston TX 7,380 20,892 $500,000 $68
Sterling VA 5,130 0.75 Acres $995,000 $194
for sale at
Kennewick WA 7,243 31,947 $1,200,000 $166 or above
West Allis WI 4,860 0.25 Acres $250,000 $51
Temecula CA 6,206 34,788 $870,000 $140
O’s
Farmington Hills MI 8,880 71,743 $735,000 $83 valuation
Indianapolis IN 9,166 58,065 $900,000 $98
Sugarland TX 6,182 33,149 $925,000 $150
Lebanon PA 6,312 23,225 $600,000 $95
Avg Listing Price / Sq Ft $115
Realty Income Valuation

Enterprise Value / Sq Ft $227
Source: www.knowledgelearning.com/xls/Real-Estate-Listings.xls Premium 97%
26
Management’s View on Private Market Valuations
“In talking about cap rates -- I mentioned this last quarter, but I think it really is worthwhile
saying -- and that is if you look back on the 40 years that we've been doing this and kind of
follow cap rates, from 2005 to 2008, we were buying kind of in the 8.4% to 8.7% cap rate
range, and in those years bought about $1.5 billion worth of property. And I'd probably
estimate that we were 75 to 100 basis points in cap rate above where the one-off market was,
which was really a function of buying in bulk and you get a better price and a better cap rate.”
“From 2003 to 2004, the caps were around 9.5, and if you go back to when we went
public in '94 and take it to 2003, I went back and looked, and the cap rates from during
that period were always between 10 and 11. And then going back and looking at
transactions going all the way back before '94, cap rates were pretty much always up
11% or so.”
“So I really think that kind of the 7 and 8 caps that you saw at retail and even some of the 9
caps on the institutional transaction, like a lot of assets in many different areas, were a
function of the abundant and cheap financing that was out there, and it shouldn't be too
surprising to see cap rates moving up again.”
--Tom Lewis,
Realty Income, CEO
Q2 2009 Conference Call
27
If private market cap rates today for
Realty Income-type properties are
between 10% - 11%, then why should
Realty Income trade at a 7.3% cap rate?
Why is a ~40% premium to NAV justified?
28
RE Index Versus Realty Income Since 1/1/2008
Despite its tenant exposure, Realty income has outperformed

the U.S. real estate index (1) by ~35% since January 1, 2008
1) As measured by iShares Dow Jones Real Estate Index Fund

29
Insider Ownership and Selling
Realty Income does not foster an ownership culture
 Despite restricted stock grants, insiders own less than 1.5%

of the company
 The top three executives (CEO, COO, CFO) own less than
1% of the company despite having an average tenure at the
company of 18 years
 CEO, COO and CFO have not made an open market stock
purchase in over six years
Material insider selling
 On August 3, 2009, CEO Tom Lewis sold ~20% of his holdings

at $23.69, below today’s stock price
 On the same day, COO Gary Malino sold ~9% of his holdings
30
Insider Ownership and Selling
Are Insiders and Shareholders playing on an even field?
 Why should Management be permitted to sell stock knowing the

identity of all tenants and their creditworthiness while
shareholders are kept in the dark?
 We believe that the SEC should immediately require Realty

Income to disclose to all shareholders a list of its tenants and
financial information sufficient to assess their creditworthiness
 We believe that there is no competitive or other business reason

why Realty Income should not be required to do so
31
“Short” Sensitivity Analysis
Stock price at various cap rates and decline rates in

2009E Cash NOI
Assuming 2009E Decline in 2009E Cash NOI

$17.93 -2.5% -5.0% -7.5% -10.0% -12.5%
recurring Cash NOI
8.5% $19 $18 $17 $16 $15
of $316mm, if NOI
Cap rate
9.0% $17 $16 $15 $14 $14
drops only 5% to 9.5% $15 $14 $14 $13 $12
10.0% $14 $13 $12 $11 $11
10% and O’s cap rate 10.5% $12 $12 $11 $10 $9
increases to 9.5% to 11.0% $11 $10 $10 $9 $8
10.5%, Realty
Stock price return (from $25) at various cap rates and
Income’s stock price decline rates in 2009E Cash NOI
could decline ~43% Decline in 2009E Cash NOI
to ~60% from recent -2.5% -5.0% -7.5% -10.0% -12.5%
prices 8.5% -26% -29% -33% -36% -40%
9.0% -33% -37% -40% -43% -46%
Cap rate
9.5% -40% -43% -46% -49% -53%

10.0% -46% -49% -52% -55% -58%
10.5% -52% -54% -57% -60% -63%
11.0% -57% -59% -62% -65% -67%
32
How is Management Compensated?
 Management is compensated with restricted stock, no options are

granted
 In 2001, Realty Income discontinued the practice of granting stock options in favor
of only granting stock awards
 O’s 2008 10-K: “We believe that stock awards are a more appropriate incentive
to our executive officers given the focus of our business on monthly dividends”
 Vesting program for restricted stock is highly unusual

 Based on age rather than years of service
 New program approved in August 2008
Employee Vesting Executive Title Age

Age at Grant Date period Thomas A. Lewis CEO, Vice Chairman 56
55 and below 5 years Gary M. Malino COO 51
56 4 years Paul M. Meurer CFO 43
Michael R. Pfeiffer General Counsel 48
57 3 years
Richard G. Collins EVP, Portfolio Management 60
58 2 years Robert J. Israel SVP, Research 49
59 1 year Laura S. King SVP, Assistant GC 47
60 and above Immediate Michael K. Press SVP, Head of Acquisitions 35
33
Conclusion
 We believe that Realty Income’s current shareholders are not being sufficiently
compensated for the company’s tenant risk
 Shareholders and investors should demand transparency from O’s management
regarding its tenants
 If tenant deterioration continues…

 Realty Income’s cash flow may not be sufficient to pay its current dividend
 We believe that the SEC should require Reality Income to disclose its tenants
because without this information it is nearly impossible to value the company and
its associated risks
 At $25 and a 7.3% cap rate, we believe there is little downside to the short
 ~40% premium to current private market valuations
 Company has historically issued stock at these levels
 “Ceiling on valuation”
34
Prisons’ Dilemma
October 20, 2009

Disclaimer
Funds managed by Pershing Square and its affiliates have invested in common stock and total return swaps
on Corrections Corporation of America (“CXW”). Pershing Square manages funds that are in the business of
trading – buying and selling – securities and financial instruments. It is possible that there will be
developments in the future that cause Pershing Square to change its position regarding CXW. Pershing
Square may buy, sell, cover or otherwise change the form of its investment in CXW for any reason. Pershing
Square hereby disclaims any duty to provide any updates or changes to the analyses contained here
including, without limitation, the manner or type of any Pershing Square investment.
Corrections Corporation of America
f Corrections Corp owns and operates private prisons

Owns the land and building at most of its facilities
Largest private prison company

Ticker: “CXW”
Stock price: $24.50 (1) Fifth largest prison manager behind California, the
Bureau of Prisons, Texas and Florida
f Capitalization:
Enterprise value: $4.1 billion
Equity market value: $2.9 billion
f Recent valuation multiples:

’09e Cap rate: 12.2%
’09e P / Free Cash Flow Per Share: 13.3x

1) All financials in this presentation
assume a share price of $24.50.
2
Overview of CXW
CXW operates its business in two segments: Owned & Managed

Facilities and Managed Facilities
Owned & Managed Managed

Facilities Facilities
■ CXW owns the land and building for ■ CXW operates facilities on the
the vast majority of its owned & government’s behalf, but does not
managed facilities own the underlying property
■ 44 owned & managed facilities ■ 20 managed facilities
■ 61,054 beds ■ 25,916 beds
■ ~35% Facility EBITDA margin ■ ~14% Facility EBITDA margin
■ High-multiple, high-margin business ■ Subject to higher competition
~90% of Facility EBITDA ~10% of Facility EBITDA

________________________________________________
Note: Facility EBITDA is before G&A.
3
Strong National Footprint
________________________________________________
Source: CXW investor presentation, Aug. 2009.

4
Tenants Unlikely to Default
CXW provides services under management contracts to all three

federal agencies, 19 state agencies, the District of Columbia and
multiple local agencies
Other States
fAlaska
fArizona
fHawaii
fKentucky
fMinnesota
fOklahoma
fVermont
________________________________________________
Source: CXW investor presentation, Aug. 2009. 5

Market Leader
CXW is the clear leader in privatized prisons, controlling

approximately 46% of the private prison and jail beds in the U.S.
________________________________________________

He who has the
beds gets the
prisoners
Spare Capacity (includes development projects not yet completed)
~12,000 ~7,000 ~2,000 NA NA
________________________________________________
Source: Company filings and Pershing Square estimates.

6
Large and Under-penetrated Market
CXW addresses a total U.S. market that exceeds $65bn, of which

only ~8% is outsourced. Privatized beds have grown from nearly
11,000 in 1990 to over 185,000 today (17% CAGR)
________________________________________________
Source: Bureau of Justice Statistic: Prison Inmates at Midyear 2008, CXW investor presentation, Aug. 2009.
7
Supply / Demand Imbalance
Public-sector correctional systems are currently operating at, or in

excess of, design capacity
________________________________________________
Across the state of

California, facilities
are running at 170%
of designed capacity
8
Competitive Advantage: State vs. Private
CXW has historically outperformed the public sector in safety and

security
________________________________________________

Competitive Advantage: State vs. Private (Cont’d)
As a private company, CXW has cost and efficiency advantages

compared with its largest competitor
State / Federal Private

Lead Time for Prison Build 5 to 8 yrs ~1.5 yrs
Cost to Build / Bed ~$100-$150k <$70k
Annual OpEx / Inmate (1) $24k ~$16k
Average Age of Facility Old New
________________________________________________
(1) Source: 2007 Pew Charitable Trusts report – “Public Safety, Public Spending – Forecasting America’s Prison Population 2007 – 2011.” Annual Operating
Cost per Inmate for the year 2005. States vary widely; for instance, California had a $34k annual operating cost per inmate in 2005.
10
Increasing Market Penetration
Because of constraints in new public prison construction, private

prison operators were able to capture 49% of the incremental
growth in U.S. inmate populations in 2007
11
Historical Prison Population Growth
Historically, inmate populations in the U.S. have grown regardless

of economic factors
12
Prison Populations Expected to Rise
13
Federal Demand Drives Growth
Federal demand alone could fill CXW’s ~12,000 bed inventory over
the coming years
f The Federal Bureau of Prisons (“BOP”) is Federal Demand Drivers Beds

currently operating at 137% of rated capacity, BOP: Shift from 137% to 115% capacity (1) 28,000
with a stated desire to operate closer to 115% BOP: Undeveloped growth (2) 7,000
USMS / ICE (3) 15,000
Incremental Federal Demand 50,000
f The BOP projects that between 2008 and 2011
its population will grow by ~19,000 inmates, CXW inventory (as of 8/1/09) (4) 11,979
Incr. Federal Demand as % of Inventory 417%
with just over 12,000 new beds planned for
Capture Rate Required to Fill Inventory 24%
development by 2012 ________________________________________________
(1) Based on 172,827 inmates in BOP facilities as of 9/26/09. Source: BOP website.
Assumes the shift from 137% to 115% takes place over the next three years.
(2) The BOP projects its inmate population will grow by ~19,000 inmates from 2008 to 2011
f The United States Marshals Service (“USMS”) (3)
but has only planned the development of ~12,000 beds.
Assumes ~5% growth of USMS / ICE inmate populations over the next three years.
has a population of about 60,000-65,000 and Includes 2,572 beds not yet developed. Source: CXW investor presentation, Aug. 2009.
(4)
has grown 8%-10% per annum over the last

five years
f Since 1994, Immigration and Customs

Enforcement (“ICE”) detainee populations
have grown by over 300% to ~35,000
14
State Demand Drives Growth
State prison populations are projected to increase by more than

90,000 over the next three years. If CXW can capture ~13% of this
demand, it could achieve 100% occupancy
“Of the 19 state customers that CCA does business with, we are currently
estimating that those states will have an incremental growth that will be
twice as much as their funded plan capacity by 2013.”
– Damon Hininger, CEO, Q1 Earnings Call
15
Supply / Demand Imbalance Drives Growth
If private prisons can capture just 25% of the incremental growth in the
U.S. inmate population, CXW should achieve >98% occupancy in its Owned
& Managed business by 2012. Private prison operators captured 49% of the
growth in 2007 as state budget pressures have postponed new prison
construction
(Beds in thousands) Potential Growth Opportunity
2004a 2005a 2006a 2007a 2008a 2009e 2010e 2011e 2012e
Market Analysis
We estimate
Total Inmate Population (MM) (1) 1,546 1,580 1,627 1,655 1,677 1,701 1,726 1,760 1,795
Growth 2.1% 2.2% 3.0% 1.7% 1.3% 1.4% 1.5% 1.9% 2.0%
CXW’s owned
beds represent
Private Inmate Pop'n (000s) (2) 107 114 126 139 147 153 159 168 177
Growth 5.0% 6.8% 10.7% 10.7% 5.6% 4.1% 4.2% 5.3% 5.2% >40% of the
% Private 6.9% 7.2% 7.7% 8.4% 8.8% 9.0% 9.2% 9.5% 9.8% industry’s spare
Incremental Private Inmates capacity
Incremental Total Inmates 32 33 48 27 22 24 26 34 35
Private Capture Rate (2) 16.1% 21.6% 25.5% 49.1% 35.0% 25.0% 25.0% 25.0% 25.0%
Incremental Private Inmates 5 7 12 13 8 6 6 8 9
CXW Capture Rate (Owned only) 27.7% 18.5% 33.6% 33.4% 43.6% 40.0% 40.0% 40.0% 40.0%
Incremental CXW Beds (Owned) 1.4 1.3 4.1 4.5 3.4 2.4 2.6 3.4 3.5
Occupancy (Owned) 90.3% 88.3% 93.9% 98.6% 94.5% 87.5% 89.8% 93.2% 98.7% Potential
Memo: Pershing Square Forecast upside to our
Incremental CXW Beds (Owned) 1.4 1.3 4.1 4.5 3.4 1.9 2.0 3.3 2.5 estimates
Occupancy (Owned) 90.3% 88.3% 93.9% 98.6% 94.5% 86.6% 88.0% 91.5% 95.5%
(1) Source ('04-'07): Bureau of Justice Statistics and Office of Detention Trustee Statistics. Excludes juvenile, jail and ICE population.
Source ('08-'12): In 2007, Pew Charitable Trust estimated there will be an incremental 153,000 prisoners by YE 2011.
This analysis assumes an incremental 140,000 prisoners by YE 2012.
(2) Source ('04-'07): Bureau of Justice Statistics and Office of Detention Trustee Statistics. Excludes juvenile, jail and ICE population.
Assumes 35% private capture rate in 2008 and 25% private capture rate going forward.
16
Near-Term Catalysts: Post-Recession Growth
Inmate populations have historically grown at an accelerated rate

after recessions
Increased crime during

times of economic
weakness and high U.S.
recidivism rates drive
post-recessionary inmate
population growth
Of 300,000 prisoners released from 15 states in 1994, 67.5% were re-

arrested for a new offense within three years (1)
17
Near-Term Catalysts: Increased Occupancy Drives
EBITDA
At current margins, CXW management estimates its inventory of

existing beds could generate an additional ~$100mm of EBITDA
________________________________________________

Near-Term Catalysts: Operating Leverage
Management derives its ~$100mm estimate by applying CXW’s Q2’09

margin to the lease-up of its existing inventory; however, approximately
84% of the costs in CXW’s Owned & Managed Facilities segment are fixed
CXW Facilities (Owned-only) Q2'09

Revenue per man-day $66.88
Less: Fixed expense per man-day (1) (32.74)
Less: Variable expense per man-day (2) (10.68)
Implies ~$100mm of
Facility EBITDA per Man-Day $23.46
Margin 35.1%
incremental EBITDA
Contribution Margin Analysis: (3)
Revenue per man-day $66.88
Less: Variable expense per man-day (10.68)
Implies ~$230mm of
Facility EBITDA per Incremental Man-Day $56.20
Contribution Margin 84.0%
incremental EBITDA
While this contribution margin analysis implies $230mm of incremental EBITDA, we

believe the actual number will be somewhere between $100mm and $230mm
________________________________________________
Source: CXW Q2’09 financial supplement. See page 33 of the CXW investor presentation for details of the assumptions used to derive management’s ~$100mm estimate.
(1) The vast majority of CXW’s fixed expense is labor. Also includes utilities, property taxes, insurance, repairs & maintenance and other similar expenses.
(2) Includes legal, medical, food, welfare and other similar expenses.
(3) This analysis is illustrative. We note that there will be some amount of incremental fixed expense
19 associated with the ramp-up of CXW’s inventory as staffing requirements increase with occupancy.
We further note that some of the beds in CXW’s inventory have not yet been developed, and therefore do not yet have associated fixed expenses.
Near-Term Catalysts: Stock Buyback
CXW’s repurchase of 10.7 million shares in Q4 ’08 – Q2 ’09 (~8.5%

of total shares) provides a tailwind for NTM free cash flow per
share growth
Recent Share Repurchases

Per
Timeframe Shares (mm) Amount (mm) Share
November through December 31 1.1 $16.6 $15.09
January through February 1.4 21.4 $15.29
February through May 8.2 87.0 $10.61
Total 10.7 $125.0 $11.68
Memo: Remaining Buyback Authorization $25.0
Quarter Ended,
Q108a Q208a Q308a Q408a Q109a Q209a Q309e Q409e
WASO 126.1 126.5 126.5 126.1 120.6 115.7 117.3 117.3
Growth (YoY) (4.4%) (8.6%) (7.3%) (7.0%)
20
Strong Free Cash Flow Generation
Because prisons are made of concrete and steel, depreciation expense

meaningfully exceeds maintenance capex. As a result, CXW’s free cash
flow per share is substantially greater than earnings per share
$2.00
$1.73
$1.80
$1.60
$1.40
$1.40
$1.20 $1.06
$1.20
$1.00 $0.84 $1.07
$0.80 $0.64
$0.59 $0.86
$0.60
$0.61
$0.40 $0.53
$0.40
$0.20
$0.00
2003a 2004a 2005a 2006a 2007a 2008a
Diluted EPS Normalized FCFPS

________________________________________________

Strong Balance Sheet
As of Q2’09, CXW’s interest coverage ratio was 5.4x. Its next debt
maturity is not until 2012. Its cash interest expense is less than 6%,
and more than 80% of its debt is fixed rate
________________________________________________

High Returns on Capital
________________________________________________

Culture of Equity Ownership
Board and management own more than 6 million shares of CXW (1)
Total Beneficial
Name of Beneficial Owner Title Ownership (1)
William F. Andrews Director 525,523
John D. Ferguson Chairman 1,711,455
Donna M. Alvarado Director 50,916
Lucius E. Burch, III Director 1,282,934
John D. Correnti Director 83,124
Dennis W. DeConcini Director 5,500
John R. Horne Director 100,166
C. Michael Jacobi Director 97,700
Thurgood Marshall, Jr. Director 72,998
Charles L. Overby Director 47,284
John R. Prann, Jr. Director 87,232
Joseph V. Russell Director 352,410
Henri L. Wedell Director 1,377,920
Damon Hininger Chief Executive Officer 20,489
Todd J. Mullenger Chief Financial Officer 134,072
G.A. Puryear, IV General Counsel 159,295
Richard P. Seiter Chief Corrections Officer 144,742
William K. Rusak (2) Chief of Human Resources 91,984
All Directors & Exexutive Officers as a Group 6,453,308
Percent of Common Stock Beneficially Owned (3) 5.4%
________________________________________________
Source: CXW March 31, 2009 proxy and Bloomberg.

(1) Includes shares that could be purchased upon exercise of stock options at March 1, 2009 or within 60 days thereafter.
(2) William Rusak was succeeded by Brian Collins on September 14, 2009.
(3) Based on 117,681,012 shares outstanding as of March 1, 2009. Deems shares that could be purchased upon exercise of stock options as shares outstanding.
24
Valuation
CXW Capitalization and Multiples
CXW trades for ~13x free cash flow per share or at an implied cap
rate of 12.2%
(US$ in mm, except per share data)
Capitalization Summary Financials
Share Price $24.50 2008a 2009e 2010e 2011e 2012e
FDSO 117 Avg Occupied Beds (owned only) 51,005 52,868 54,889 58,218 60,763
Market Cap $2,873 Avg Total Beds (owned only) 53,990 61,043 62,340 63,626 63,626
Occupancy (owned only) 94.5% 86.6% 88.0% 91.5% 95.5%
Plus: Debt 1,212
Revenue $1,599 $1,650 $1,723 $1,828 $1,932
Less: Cash & Equivalents (28) Growth 8.1% 3.2% 4.4% 6.1% 5.7%
TEV $4,057
NOI (owned only) (2) 431 445 467 514 571
Margin 27.0% 27.0% 27.1% 28.1% 29.6%
Cap Rate Analysis EBITDA 395 402 419 462 518

Margin 24.7% 24.3% 24.3% 25.3% 26.8%
TEV $4,057
Less: Mgmt Business (1) (400) EBITDA - Maint Capex 359 362 372 414 470
Margin 22.5% 22.0% 21.6% 22.7% 24.3%
PropCo TEV $3,657
Normalized FCFPS (3) $1.73 $1.84 $1.95 $2.34 $2.90
Growth 23.6% 6.4% 5.9% 19.9% 23.8%
2009e NOI (owned only) (2) 445
Cap Rate 12.2%
Trading Multiples
2008a 2009e 2010e 2011e 2012e
TEV / EBITDA 10.3x 10.1x 9.7x 8.8x 7.8x
TEV / EBITDA - Maint Capex 11.3x 11.2x 10.9x 9.8x 8.6x
Implied Cap Rate 11.8% 12.2% 12.7% 14.0% 15.6%
________________________________________________ P / Normalized FCFPS 14.2x 13.3x 12.6x 10.5x 8.5x
(1) Applies an 8.0x multiple to Facility EBITDA from the management business.
(2) NOI is defined as Facility EBITDA from CXW’s Owned & Managed segment (“owned only”).
(3) Assumes a 38% cash tax rate. Assumes CXW uses future free cash flow to repurchase shares at
a premium to market. 26
Historical Stock Chart
$35 $105,000
$30 $95,000
$24.50
$25 $85,000
$20 $75,000
$15 $65,000
$10 $55,000
$5 $45,000
$0 $35,000
Jan-07 Jul-07 Feb-08 Sep-08 Mar-09 Oct-09
Stock TEV / Bed
Price
Owned & Managed Available Beds
46,681 48,933 50,909 53,464 59,184 61,054
Weighted Average Shares Outstanding
125.3 125.6 126.1 126.5 120.6 115.7
27
Opportunity for Multiple Expansion
CXW’s earnings quality has improved since 2007 as its Owned & Managed
segment now accounts for more than 90% of Facility EBITDA
TEV / Forward EBITDA
14x
Pre-Lehman
Average:
11.5x
11x
9.8x
8x
5x
Jan-07 Jul-07 Feb-08 Sep-08 Mar-09 Oct-09
Owned & Managed as % of Facility EBITDA (TTM)
85.9% 87.1% 88.9% 89.8% 89.6% 90.1%

________________________________________________
28
Source: Capital IQ, Pershing Square estimates.
Key Attributes of Corrections Corp
Principal Asset Real Estate

Primary Tenant Government
CXW has credit-
Growth Opportunity Secular worthy tenants,
requires limited
Maint Capex as % of Revenue ~2% maintenance capex,
and enjoys excellent
Tenant Allowances None competitive
Return on New Development High dynamics – all
features of a high
Competition for Existing Units Local Monopoly quality real estate
business
Competition for New Construction Oligopoly
Cyclicality Low
29
Health Care REITs are the Best Comp
Typical
(1)
Health Care REIT
Primary Tenant Government Government
Maint Capex as % of Revenue (2) ~2% ~3.5%

Supply / demand imbalance Aging baby boomers
Growth provides secular tailwind provide secular tailwind
Tenant Allowances None Minimal
Cyclicality Low Low
Competition for New Builds Oligopoly Medium

Senior Housing: High
Competition for Existing Units Local Monopoly MOBs / Hospitals: Local Monopoly
Skilled Nursing / Life Sciences: Medium
Cap Rate >12% ~7%

________________________________________________
Source: Green Street research and Pershing Square estimates. 30

(1) We define typical health care REITs to include senior housing, skilled nursing, MOBs, hospitals and life sciences.
(2) Maintenance capex is low for health care REITs due to the triple-net leases associated with senior housing, skilled nursing and hospitals.
Illustrative Sum-Of-The-Parts Valuation
CXW is composed of two businesses: an operating company

(“OpCo”) and a real estate company (“PropCo”)
Illustrative OpCo / PropCo Financials

($ in millions)
2010e 2011e 2012e
OpCo
CXW Revenue (owned-only) $1,349 $1,449 $1,543
Rent as % of Revenue 25.0% 25.0% 25.0%
Illustrative Rent 337 362 386
Per Bed $5,411 $5,692 $6,062
CXW EBITDA 419 462 518
Less: Rent (337) (362) (386)
PF EBITDA $82 $100 $132
PF Margin 4.7% 5.5% 6.8%
PropCo
Rental Revenue $337 $362 $386
NOI $337 $362 $386
Margin 100.0% 100.0% 100.0%
Less: Cash expenses (10) (10) (10)
AFFO 327 352 376
Margin 97.0% 97.2% 97.4%
31
Illustrative Sum-Of-The-Parts Valuation (Cont’d)
An OpCo / PropCo analysis suggests the stock could be worth

between $40 and $54 per share
($ in millions)
OpCo Valuation:
2012e PF EBITDA $132 $132
Multiple 8.0x 8.0x
OpCo Value $1,057 $1,057
PropCo Valuation:
2012e NOI $386 $386
Cap Rate 8.0% 6.0%
PropCo Value $4,822 $6,429
Memo: Dividend yield 7.8% 5.8%
Total Value $5,878 $7,485
Per Share $40 $54
32
CXW used to be a REIT…
From 1997 through 1999, CXW operated as two separate

companies: CCA Prison Realty Trust (a REIT), and Old CCA (the
operating company)
CCA Prison Realty Trust was a Huge Success
f IPO’d in July-97 at $21 per share and immediately traded up to $29
f Upon its formation, CCA Prison Realty Trust purchased 9 correctional facilities from Old
CCA for $308mm. It then leased the facilities to Old CCA pursuant to long-term, non-
cancellable triple-net leases with built-in rent escalators
f Within five months of its IPO, CCA Prison Realty Trust used the remaining proceeds from
its IPO and its revolver to purchase three additional facilities from Old CCA
By December-97, CCA Prison Realty Trust’s stock had moved up to the $40s,
trading at a ~5% cap rate and a ~4% dividend yield
33
CXW used to be a REIT… (Cont’d)
On January 1, 1999, Old CCA and CCA Prison Realty Trust merged to form
an even larger REIT, “New Prison Realty.” In order for New Prison Realty to
qualify as a REIT, it had to spin off its management business (“OpCo”)
$80 New Prison Realty was not a Success

f New Prison Realty saddled itself with debt to fund new prison builds
$70
f Before the new prisons had been completed and could generate revenue, OpCo’s
$60
operating fundamentals began to decline and occupancy fell
$50
f OpCo struggled to maintain profitability and rental payments to New Prison Realty
soon had to be deferred
$40
f As a result, New Prison Realty’s stock price declined precipitously, limiting its ability to
$30 raise liquidity. This was further exacerbated by a shareholder lawsuit stemming from
the fall in the stock price
$20
f By the Summer of 2000, CXW was on the verge of default and had to raise dilutive
$10 capital to restructure and avoid bankruptcy
$0
34
Jan-99 Feb-01 Mar-03 May-05 Jun-07 Jul-09
Why Did New Prison Realty Fail?
New Prison Realty did not fail because it was a REIT, it failed
because:
3 It had too much leverage
3 It had an overly aggressive development plan
3 Its tenant, OpCo, was also over-leveraged (1)
________________________________________________
(1) “The rates on the Operating Company leases were set with the intention that the public stockholders of New Prison Realty would receive as much of the benefit as possible from owning and
operating the correctional and detention facilities…. In fact, the Operating Company lease rates were set so that Operating Company was projected to lose money for the first several years of its
existence.” Source: CXW 2002 10-K.
35
NOLs
CXW has not been a large taxpayer for the last eight years because
of substantial NOLs that are now exhausted
Total: $149mm Total: $165mm
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
Going forward,
2001a 2002a 2003a 2004a 2005a 2006a 2007a 2008a 2009e 2010e CXW expects
to be a 38%
Cash Tax Rate 9.4% 2.4% 3.4% 20.4% 8.2% 24.1% 22.5% 37.6% 38.0% cash tax payer
36
Owned vs. Managed
Since 2000, CXW has increasingly shifted away from a business

focused on the management of prisons toward a business focused
on the ownership of prisons
Managed EBITDA as a % of Facility EBITDA
30%
25.7% 26.0%
25%
19.7% 19.9%
20% 18.4%
15% 14.1%
11.9%
10.6% 10.1%
9.3%
10%
5%
0%
2001a 2002a 2003a 2004a 2005a 2006a 2007a 2008a 2009e 2010e
37
Management Gets It
“The other thing I would point out is before we'd even sell stock, that there's a lot
of value in these assets. I hear people talking to me about regional malls selling
at six cap rates or parking garages selling at five cap rates or 20 times cash flow
and you think about -- or highways selling at 50 times cash flow, you think about
prisons as infrastructure or some type of real estate asset, I think these could be
even sold and harvested in some fashion to avoid selling stock in the future. So
there are a number of things that we could do to finance our growth, but just with
respect to cash flow and leverage, we could go quite a ways.”
– Irving Lingo, Former-CFO of Corrections Corp, Q2’06 Earnings Call
38
Conclusions
Market Leader /
Competitive Advantage
Secular Growth Opportunity
Several Near-Term Catalysts
Stable Free Cash Flow

High Quality
in Excess of EPS Business at a
Strong Management Substantial
Strong Balance Sheet
Discount to
Intrinsic Value
Attractive ROC /
Low Cost of Capital
39
If You Wait For The Robins,
Spring Will Be Over*
December 7, 2009

Disclaimer
Funds managed by Pershing Square and its affiliates have invested in long and short positions of certain mall
REITs, including long positions in General Growth Properties Inc. Pershing Square manages funds that are in
the business of actively trading – buying and selling – securities and financial instruments. Pershing Square
may currently or in the future change its position regarding any of the securities it owns. Pershing Square
reserves the right to buy, sell, cover or otherwise change the form of its investment in any company for any
reason. Pershing Square hereby disclaims any duty to provide any updates or changes to the analyses
contained here including, without limitation, the manner or type of any Pershing Square investment.
________________________________________________
* Warren E. Buffett, “Buy American. I am,” New York Times (10/16/08). 1
At the Beginning of 2009, The World was a Very Different
Place for Mall REITs
f The U.S. economy was on the verge of a depression
f The U.S. consumer had hit the wall
f Credit markets were closed
f Mall REIT balance sheets were dangerously leveraged

Since
f Cap rates increased and transactions stopped as bid-
ask spreads widened Then…
f Bankruptcy risk and tenant “right-sizing” initiatives were

expected to result in massive store closures
f Rent relief was a serious concern
f Tenant sales were expected to fall off a cliff
2
The U.S. Economy has Recovered
The Recession is “Very Likely Over”
GDP grew 2.8% in Q3 and Federal Reserve Chairman Bernanke

said the recession is “very likely over”
Real GDP (% Change)
4.0%
2.8%
2.0% 1.5%
0.0%
(0.7%)
(2.0%)
(2.7%)
(4.0%)
(6.0%) (5.4%)
(6.4%)
(8.0%)
Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 Q3’09
________________________________________________
Source: Bureau of Economic Analysis (11/24/09). 4
Unemployment Down in November
The U.S. unemployment rate improved 20bps in November
U.S. Unemployment Rate
10.5%
10.2%
10.0%
10.0%
9.8%
9.7%
9.5% 9.4%
9.0%
8.5%
July August September October November
________________________________________________
Source: Bureau of Labor Statistics (12/4/09). 5
Housing Market Showing Signs of Recovery
New home inventories are falling sharply and are projected to

continue to do so
________________________________________________
Source: Census Bureau, Haver Analytics, Barclays Capital (November 2009). 6
The U.S. Consumer is Beginning to
Bounce Back
Consumer Confidence Improving
The University of Michigan Survey of Consumer Confidence

Sentiment Index has improved since the beginning of the year
University of Michigan Consumer Confidence Index (Trailing Three Month Average)
80.0
74.9
75.0
70.5
70.0
67.5
65.0 64.0 63.7
61.1
60.2
60.0 59.2
55.0
50.0
Dec-Feb Mar-May Jun-Aug Sept-Nov Dec-Feb Mar-May Jun-Aug Sept-Nov
2008 2008 2008 2008 2009 2009 2009 2009
________________________________________________
Source: University of Michigan / Bloomberg. Most recent data point available as of 11/25/09. 8
The Credit Markets Have Improved
Financial Markets Normalizing
Overnight bank lending markets have stabilized and debt

issuance is beginning to pick up
________________________________________________
Source: FRB, FDIC, Haver Analytics, Barclays Capital (November 2009). 10
Stock Market has Rebounded
The S&P 500 is up over 60% since March
S&P 500 Index (YTD)

1200
1100 1,106
1000
900
800
700
600
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Dec-09
________________________________________________
Source: Capital IQ (as of 12/4/09). 11
REIT Stocks have Rebounded
The IYR REIT Index has doubled since March
IYR REIT Index (YTD)
50
45 $45
40
35
30
25
20
________________________________________________
REIT CDS Spreads Tightening
REIT CDS spreads have meaningfully compressed year-to-date
________________________________________________
Source: Credit Suisse equity research (December 4, 2009). 13
REIT Cost of Debt Improving
Over the past three months, REITs have been able to issue
large amounts of low-cost debt
DDR TALF Deal
f Closed on October 8, 2009

f $400mm loan
f Five year term
f Blended interest of 4.225%
________________________________________________
Source: Goldman Sachs Global Investment Research (December 2, 2009). Includes AMB Property Corp (AMB), ProLogis
(PLD), Boston Properties (BXP), DDR Corp (DDR), Vornado (VNO), Brandywine Realty (BDN), Kimco (KIM),
Avalonbay (AVB), Alexandria Real Estate (ARE), Ventas (VTR) and Simon Property Group (SPG).
“Based on secondary market trading, if Simon were to issue debt today, an issuance
of five year unsecured debt could potentially be completed at a cost of 5% or less”
– Credit Suisse Equity Research, December 4, 2009
14
Mall REIT Balance Sheets Have
Strengthened
REITs Have Raised over $18bn of Equity YTD
REITs have raised equity capital equivalent to approximately

10% of the market cap of the entire industry
________________________________________________
Source: Goldman Sachs Global Investment Research (December 2, 2009).
16
Mall REITs have Delevered
Mall REIT leverage ratios have decreased meaningfully since May
Mall REIT Leverage Ratio (total liabilities net of cash as a % of current value of assets) (1)
62.5%
60.0%
59.1%
57.3%
57.5% 57.0% 56.9%
56.7%
54.9%
55.0%
53.7%
52.2%
52.5%
50.0%
47.5%
May June July August September October November December
________________________________________________
Source: Green Street Real Estate Securities Monthly.
(1) Total liabilities (including preferred shares) net of cash as a % of current value of assets. Mall average includes CBL, GGP, Glimcher, Macerich, PREIT, Simon, Tanger, Taubman and Westfield.
17
Cap Rates Have Declined
Substantially
Mall REIT Cap Rates Have Declined and Should Decline
Further Based on Historical Precedent
Although mall REIT cap rates have come in from their double-digit
highs, they still trade at a wide spread to corporate Baa yields
Mall Implied Cap Rate vs. Baa Yields

10.0%
Mall Implied Cap Rate
9.5%
Baa
9.0%
8.5%
8.0%
7.5%
7.8%
7.0%
6.5%
6.0%
6.3%
5.5%
5.0%
9
Ja 7
Ja 8
Ja 6
Ja 5
M 9
M 8
M 7
M 6
M 5
Se 8
Se 9
Se 7
Se 6
Se 5
9
7
6
5
N 9
N 8
N 7
N 6
N 5
M 9
M 7
M 8
M 6
M 5
-0
-0
-0
-0
-0
0
0
0
0
0
l-0
l-0
l-0
l-0
l-0
-0
-0
-0
-0
-0
0
0
0
0
0
-0
-0
-0
-0
-0
n-
n-
n-
n-
n-
p-
p-
p-
p-
p-
ov
ov
ov
ov
ov
ay
ay
ay
ay
ay
ar
ar
ar
ar
ar
Ju
Ju
Ju
Ju
Ju
Ja
________________________________________________
Source: Green Street (as of November 2009).
19
Store Closure Fears were Overblown
White Knights
Although there have been some tenant bankruptcies year-to-date,

white knight buyers have minimized store liquidations
Selected
Bankruptcies White Knight Comments
Eddie Bauer Golden Gate f In July, CCMP bid $202mm for Eddie Bauer w/ plan to liquidate 121 of 371 stores
Jun-09 Aug-09 f In August, Golden Gate beat out CCMP w/ $286mm bid
f Golden Gate plans to keep “the substantial majority” of the company’s stores open
Ritz Camera David Ritz f David Ritz and RCI Acquisition LLC beat out three liquidators at auction
Feb-09 Jul-09 f Ritz will attempt to keep all the remaining 375 stores open, though some closures still expected
Filene’s Vornado / Syms f In May, Crown Acquisition bid $22mm for Filene’s w/ plan to liquidate 8 stores
May-09 Jun-09 f In June, a joint venture formed by Syms and Vornado beat out Crown w/ a $62.4mm bid
f Vornado / Syms plan to operate Filene’s remaining 22 outlets and re-open a location in Boston
J. Jill Golden Gate f At the beginning of 2009, Talbots had been considering winding down its J. Jill concept
Out of court Jun-09 f In June, Golden Gate acquired the J. Jill retail chain for $75mm
f Golden Gate plans to keep open 204 of the existing 279 locations open
Store closures that have arisen in bankruptcy have tended to be in low-

quality, underperforming locations
21
Liquidations Could Be Good For Malls
Retailers with successful concepts are acquiring leases from

liquidating retailers, allowing malls to refresh their product offerings
with concepts that should drive increased traffic
Selected Strategic
Liquidations Acquirer(s) Comments
Gottschalks Forever 21 f Gottschalks auctioned to liquidation company, Great American Group
Jan-09 Jun-09 f 13 retail spaces sold to Forever 21 on June 10, 2009
Joe’s Sports Dick’s Sporting f Joe’s Sports sold to liquidator Gordon Brothers for $61mm
Mar-09 Goods f 6 retail spaces sold to Dick’s Sporting Goods in July, which will be opened by year-end
Jul-09
Mervyn’s Forever 21 / Kohls f In December, Kohls and Forever 21 acquired 46 Mervyn’s leases for $6.25mm
Jul-08 Dec-08 f Forever 21 primarily focused on Mervyn’s mall-based locations
f Speculation that Forever 21 has acquired additional Mervyn’s spaces since December
22
Many Mall-Based Tenants Expanded in 2009
Although there have been some “right-sizing” initiatives in 2009,

many mall-based tenants actually expanded certain concepts
(1)
Stores
(2) (3)
Company Concept BOY Current
Abercrombie & Fitch abercrombie 212 213
Hollister 515 522
Gilly Hicks 14 16
Aeropostale Aeropostale U.S. 874 894
P.S. - 11
American Eagle Aerie 116 137
Bebe 2b bebe 32 33
Bed, Bath & Beyond buybuy BABY 15 25
CTS 52 57
Harmon Face Values 40 42
Charlotte Russe Charlotte Russe 495 501
Cheesecake Factory Cheesecake Factory 145 146
Chico's WH|BM 344 347
Soma 71 76
Children's Place Children's Place 917 950
Coach Coach N.A. (excl factory) 324 340
Coldwater Creek Coldwater Creek 348 356
Dick's Sporting Goods Dick's Sporting Goods 384 420
Dressbarn Dressbarn 834 846
Maurices 697 741
Subtotal 20 6,429 6,673
________________________________________________
Source: Company filings, earnings transcripts, investor presentations, company press releases. In some cases, stores were counted from the store locator on the companies’ websites. This analysis is not meant to be
comprehensive and is limited by its inability to get information for private or international based tenants (i.e. Forever 21, Luxottica, etc…) as well as many public companies.
(1) Where available, attempted to limit store count to U.S., mall-based locations; however, many store counts include international stores or non mall-based locations.
(2) Beginning of Year 2009. Most store data is as of January 31, 2009.
(3) 23
Most store data is as of October 31, 2009 or November 2009.
Many Mall-Based Tenants Expanded in 2009 (Cont’d)
(1)
Stores
(2) (3)
Foot Locker CCS - 2
Gamestop Gamestop U.S. 4,331 4,425
Genesco Journeys 1,012 1,022
Johnston & Murphy 157 162
GNC GNC N.A. (excl franchise) 2,774 2,806
Guess Guess N.A. 425 433
Gymboree Gymboree U.S. 583 594
Crazy 8 38 62
Janie & Jack 115 120
H&M H&M USA 169 175
hhgregg hhgregg 108 128
J Crew J Crew (excl outlets) 211 243
Crewcuts 6 9
Madewell 12 17
JC Penney JC Penney 1,093 1,109
Liz Claiborne Juicy Couture U.S. (excl outlets) 62 65
Lululemon Athletica Luluemon 113 119
LVMH Sephora 898 963
New York & Co New York & Co 589 592
Nordstrom Nordstrom full-line 109 112
Subtotal 20 12,805 13,158
________________________________________________
(3) 24
Many Mall-Based Tenants Expanded in 2009 (Cont’d)
(1)
Stores
(2) (3)
Payless Stride Rite 355 360
Restoration Hardware Restoration Hardware (excl outlets) 101 109
Rue21 Rue21 449 537
Stage Stores Bealls, Palais Royal, Peebles, Goody's 739 751
Talbots Talbots 587 589
The Buckle The Buckle 387 405
The Gap Banana Republic N.A. 573 582
The Limited Victoria's Secret 1,043 1,046
Henri Bendel 5 9
Tiffany & Co Tiffany U.S. 76 78
Urban Outfitters Urban Outfitters 142 151
Anthropologie 121 133
Free People 30 34
VF Corp VF-operated retail stores 698 733
Wet Seal Wet Seal 409 420
Williams-Sonoma West Elm 36 40
Williams-Sonoma Home 10 11
Zumiez Zumiez 343 378
Subtotal 18 6,104 6,366

Total 58 25,338 26,197
________________________________________________
(3) 25
Mall Occupancy is Stable
Occupancy is stable despite deterioration in lower-quality malls
Mall REIT Occupancy (GGP & Simon) (1)
100.0%
In Q3’09,
97.5% occupancy was up
40bps sequentially
95.0%
92.5% 92.6% 92.5%

92.2%
92.5%
91.4%
90.9% 91.0%
90.0%
87.5%
85.0%
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09
________________________________________________
(1) Average of Simon and GGP. Simon data excludes regional Mills malls.
26
Survival of the Largest
Comparing the occupancy performance of Simon & GGP to that of

smaller mall REITs shows the benefit of scale in leasing negotiations
Large Mall REIT Occupancy vs. Small Mall REIT Occupancy (1)
95.0%
Large Mall REITs Small Mall REITs
(GGP & Simon) (TCO, PEI, MAC)
92.5% 92.6% 92.5%

92.5% 92.2%
91.4%
90.9% 91.0%
89.8% 89.8% 89.9% 89.8%

90.0%
87.6% 87.8%
87.5%
87.5%
85.0%
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09
Difference 2.4% 2.7% 2.7% 2.7% 3.3% 3.4% 3.6%

________________________________________________
(1) Average regional mall occupancy. Excludes anchors.
Glimcher is excluded from the analysis as its occupancy includes temporary tenants
that are excluded from other mall REIT reported occupancy metrics. 27
Bad Debt Expense
Mall REIT provisions for doubtful accounts have not increased

materially
TTM Provision for Doubtful Accounts as a % of TTM Revenue (GGP & Simon) (1)
2.00%
1.50%
1.00%
0.87%
0.80% 0.82%
0.61%
0.47% 0.47% 0.46% 0.47%
0.50% 0.41%
0.32% 0.30% 0.33%
0.00%
Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09
________________________________________________
(1) Average of Simon and GGP. GGP data only includes revenue from the mall segment
(i.e. excluding MPCs and GGMI).
28
Tenants Are Much Better Capitalized
Tenant Stock Price Performance
Mall REIT tenant stock prices have outperformed the S&P 500
by more than 30% year-to-date
180%
170%
160%
150% +50%
140%
130%
120% +19%
110%
100%
90%
80%
70%
60%
(1)
S&P 500 Mall REIT Tenant Index
________________________________________________
Source: Capital IQ. Stock price data through December 4, 2009.
(1) Market cap weighted average index of GGP’s publicly traded top 10 tenants (Gap, Limited, Abercrombie, Foot Locker, American Eagle, JC Penney, Macy’s and Genesco).
30
Tenants have Delevered
(Top Ten & Selected Anchor Tenants)
On average, tenants have improved their net debt positions

more than 30% since the same period last year
($ in millions) Net (Debt) / Cash
Tenants Selected Concepts Last Year Current Improvement
(1)
Top Ten Tenants
The Gap Gap, Old Navy, Banana Republic $1,367 $2,398 75%
Limited Brands Victoria's Secret, Bath & Body Works (2,520) (1,912) 24%
Abercrombie & Fitch Abercrombie, Hollister, Ruehl 158 472 198%
Foot Locker Foot Locker, Champs Sports 272 300 10%
American Eagle American Eagle, Aerie, M+O 269 466 73%
Express Express NA NA NA
JCPenney Company JC Penney (1,881) (1,263) 33%
Forever 21 4 Love, Forever 21, Gadzooks NA NA NA
Macy's Macy's, Bloomingdale's (9,534) (8,221) 14%
Genesco Journeys, Underground Station, Lids (120) (5) 95%
Subtotal ($11,989) ($7,765) 35%
Selected Anchor Tenants
Bon-Ton Stores Bon-Ton ($1,306) ($1,212) 7%
Dillard's Dillard's (1,393) (900) 35%
Nordstrom Nordstrom, Nordstrom Rack (2,674) (2,131) 20%
Saks Incorporated Saks, Off Fifth (629) (512) 19%
Sears Holdings Sears (3,475) (2,450) 29%
Subtotal ($9,477) ($7,205) 24%
________________________________________________
Source: Capital IQ. Net debt data is most recent as of December 4, 2009.
(1) GGP’s top ten tenants as disclosed in its quarterly operating supplement.
31
Tenants have Delevered (Cont’d)
(Selected In-line Tenants)
On average, tenants have improved their net debt positions

more than 30% since the same period last year
($ in millions) Net (Debt) / Cash
Tenants Selected Concepts Last Year Current Improvement
Selected In-line Tenants
Anntaylor Anntaylor, Anntaylor Loft $73 $136 87%
Aeropostale Aeropostale, P.S. kids 107 286 166%
Bebe Stores Bebe, Bebe Sport, 2b bebe 120 201 68%
Borders Borders, Waldenbooks (487) (375) 23%
The Buckle The Buckle 118 94 (21%)
Chico's Fas Chico's, Soma, WH | BM 256 423 65%
Claire's Stores Claire's, Icing (2,382) (2,364) 1%
The Children's Place The Children's Place 101 102 1%
Coach Coach 407 970 138%
Hot Topic Hot Topic, Torrid 60 91 52%
Liz Claiborne Juicy Couture, Kate Spade, Lucky Brand (924) (803) 13%
Pacfic Sunwear Stores D.E.M.O., Pacsun (38) 16 141%
RadioShack Radioshack 63 169 170%
Tiffany & Co. Tiffany & Co. (661) (378) 43%
Wet Seal Wet Seal, Arden B 125 141 13%
Zales Corporation Zales, Piercing Pagoda (329) (442) (34%)
Zumiez Zumiez 62 82 33%
Subtotal ($3,329) ($1,652) 50%
Total ($24,795) ($16,622) 33%
________________________________________________
Source: Capital IQ. Net debt data is most recent as of December 4, 2009.
32
Case Study: Bon-Ton
At the beginning of 2009, Bon-Ton was perceived to be on the verge of

bankruptcy. Today, it’s stock has increased more than 10 times.
In November, it secured a 3.5 year extension on its $750mm credit facility
Bon-Ton Stock Price Performance (YTD)
$16
$14
$13
$12
$10
$8
$6
$4
$2
$0
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09
________________________________________________
Case Study: Claire’s
Like Bon-Ton, many feared Claire’s would seek bankruptcy protection.

Year-to-date, its debt has traded up more than 4 times
________________________________________________
Source: Bloomberg.
34
Case Study: Zales
Zales’ net debt increased YoY primarily as the result of accelerating its
payment of vendor merchandise receipts into Fiscal Q1. Going forward, its
liquidity should benefit from the recently passed Business Assistance Act of
2009, which extends the period for which companies can carry-back NOLs
“The recently-enacted Business Assistance Act of 2009, which

extended the carry-back period for net operating losses from two to
five years, is expected to provide a significant cash refund and tax
benefit to us in fiscal 2010.”
– Matt Appel, CFO of Zales Corp., November 24, 2009
We expect many other retailers will benefit from the Business Assistance Act
35
Rent Relief Has Been Minimal
Rent Relief Less of an Issue than Originally
Anticipated
Simon expects to lose less than 2bps of total revenue as the

result of rent relief concessions in 2009
“Our 2009 rent relief total will be under $10 million, as in the $7 million
to $8 million range. But as I think we said on the call last quarter, we
hadn’t seen much of it year-to-date. So it’s a little back-end weighted,
and as you look at the impact of average base rent it could have a
nominal impact. But it’s a small number in the context of the size of our
income statements.”
– Steve Sterrett, CFO of Simon Property Group, October 30, 2009
37
Tenant Sales are Down, but Inventories
are Down Even More While Retailer Cash
Flows Have Improved Materially
A New Paradigm: Sales vs. Cash Flow
Old Paradigm: New Paradigm:

Focus on Sales Focus on Cash Flow
f From 2003 to 2007, retailers f In 2009, retailers have used the

achieved high sales with bloated economic crisis to re-shape their
cost structures. Driven by Wall cost structures and improve
Street’s insatiable demand for inventory management to generate
same-store sales growth, retailers more cash flow at meaningfully
overspent to achieve high rates of lower sales levels
same-store sales growth
f Retailer focus has shifted from
f Even though mall REITs derive a growing sales to improving profit
small percentage of NOI from margins and increasing cash flow
overage rent, retail real estate
investors and landlords have f As same-store sales again begin to
focused disproportionately on increase, retailer profitability should
tenant sales accelerate
39
It’s Hard to Increase Sales when there is Less on the Shelves
Comparing November same-store sales to October inventory

levels partially explains why tenant sales were down in November
($ in millions) Inventory Memo:
Tenants Last Year Current Decrease Nov SSS
(1)
Top Ten Tenants
The Gap $2,224 $1,999 (10%) 0%
Limited Brands 1,648 1,426 (13%) 3%
Abercrombie & Fitch 505 347 (31%) (17%)
Foot Locker 1,262 1,228 (3%) NA
American Eagle 422 425 1% (2%)
Express NA NA NA NA
JCPenney Company 4,471 4,018 (10%) (6%)
Forever 21 NA NA NA NA
Macy's 7,161 6,622 (8%) (6%)
Genesco 380 360 (5%) NA
Subtotal / Wtd Avg $18,072 $16,425 (9%) (5%)
Selected Anchor Tenants
Bon-Ton Stores $979 $901 (8%) (6%) Inventories have
Dillard's 2,243 1,752 (22%) (11%)
Nordstrom 1,278 1,193 (7%) 2% declined more than
Saks Incorporated 1,016 799 (21%) (26%) same-store sales
Sears Holdings 11,364 10,805 (5%) NA
Subtotal / Wtd Avg $49,152 $44,876 (9%) (9%)
________________________________________________
Source: Capital IQ. inventory data is most recent as of December 4, 2009.
40
It’s Hard to Increase Sales when there is Less on the Shelves
Comparing November same-store sales to October inventory

levels partially explains why tenant sales were down in November
($ in millions) Inventory Memo:
Tenants Last Year Current Decrease Nov SSS
Anntaylor $275 $211 (23%) NA
Aeropostale 207 222 7% 7%
Bebe Stores 49 37 (26%) NA
Borders 1,257 1,157 (8%) NA
The Buckle 118 118 0% 1%
Chico's Fas 187 160 (15%) NA
Claire's Stores 149 139 (7%) NA
The Children's Place 233 251 8% (13%)
Coach 402 338 (16%) NA
Hot Topic 95 91 (3%) (10%)
Liz Claiborne 549 410 (25%) NA
Pacfic Sunwear Stores 234 168 (28%) NA
RadioShack 681 737 8% NA
Tiffany & Co. 1,639 1,542 (6%) NA
Wet Seal 41 40 (3%) (5%)
Zales Corporation
Zumiez
985
82
902
76
(8%)
(7%)
NA
(9%)
Inventories have
Subtotal / Wtd Avg $7,181 $6,599 (8%) (4%) declined more than
Total $74,406 $67,900 (9%) (6%)
same-store sales
________________________________________________
Source: Capital IQ. inventory data is most recent as of December 4, 2009.
41
Lower Inventory = Higher Cash Flow
Tenant cash flows have gone from materially negative to materially

positive. This is all the more impressive given that Q3 is usually cash flow
negative for retailers as they prepare for the holidays
($ in millions) Cash Flow from Operations Inventory

Tenants Q3'08 Q3'09 Improvement Decrease
(1)
Top Ten Tenants
The Gap $272 $432 59% (10%)
Limited Brands (244) (114) 53% (13%)
Abercrombie & Fitch NA NA NA (31%)
Foot Locker NA NA NA (3%)
American Eagle 76 65 (15%) 1%
Express NA NA NA NA
JCPenney Company (189) (30) 84% (10%)
Forever 21 NA NA NA NA
Macy's (275) (52) 81% (8%)
Genesco NA NA NA (5%)
Subtotal ($361) $301 183% (9%) Inventory declines,
Selected Anchor Tenants coupled with cost
Bon-Ton Stores NA NA NA (8%)
Dillard's (69) 78 214% (22%) reduction measures,
Nordstrom 83 104 25% (7%) has resulted in
Saks Incorporated NA NA NA (21%)
Sears Holdings (962) (35) 96% (5%)
materially higher
Subtotal ($1,697) $430 125% (9%) tenant cash flows
________________________________________________
Source: Capital IQ. Most Q3 periods ended in October.
42
Lower Inventory = Higher Cash Flow (Cont’d)
Tenant cash flows have gone from materially negative to materially

positive. This is all the more impressive given that Q3 is usually cash flow
negative for retailers as they prepare for the holidays
($ in millions) Cash Flow from Operations Inventory
Tenants Q3'08 Q3'09 Improvement Decrease
Anntaylor ($1) $8 715% (23%)
Aeropostale NA NA NA 7%
Bebe Stores 15 (10) (168%) (26%)
Borders NM NM NM (8%)
The Buckle NA NA NA 0%
Chico's Fas 1 56 3893% (15%)
Claire's Stores NA NA NA (7%)
The Children's Place 61 79 29% 8%
Coach 77 241 214% (16%)
Hot Topic 14 17 22% (3%)
Liz Claiborne (121) (101) 17% (25%)
Pacfic Sunwear Stores
RadioShack
(7)
54
(7)
(20)
(5%)
(137%)
(28%)
8%
Inventory declines,
Tiffany & Co. 1 99 8909% (6%) coupled with cost
Wet Seal 10 7 (36%) (3%) reduction measures,
Zales Corporation NA NA NA (8%)
Zumiez NA NA NA (7%) has resulted in
Subtotal $104 $369 253% (8%) materially higher
Total ($1,953) $1,100 156% (9%) tenant cash flows
________________________________________________
Source: Capital IQ. Most Q3 periods ended in October.
43
Which is better for the landlord,
tenant sales growth or tenant
cash flow growth?
Simon Property Group’s Point of View
“The retailers that we are dealing with are certainly focused on sales,
but they are far more focused today on profitability and cash flow,
which leads to capital allocation for new stores or remodeled stores
upon renewal. What we faced in 2009 was, most retailers saying we
are preserving our cash because we are unsure about our line [of
credit]. And we are insecure about our ability to finance. Now that they
have better cash margins and better cash on deposit, we are now
hearing that they are allocating money for new open-to-buys. And I
think David gave you a list in his comments of those stores that are
looking at that. So I think it is going to be less correlated with sales
and more correlated with profitability and cash flow generation.”
– Rick Sokolov, COO of Simon Property Group, October 30, 2009
45
Macerich’s Point of View
On the sales side, I want to talk about sales and talk about our leasing activity and our leasing spread. As you know in
the fourth quarter of last year, sales were off in general around 15% give or take, for most of the major mall owners
including ourselves. That was a disastrous comp sales decrease from a retailer's viewpoint. Because it was totally
unexpected from the retailer's viewpoint. As a result of that, it put the retailers into a freeze mode, not only into a freeze
mode, they even got into a cutback mode, because it was totally unexpected. Over the course of this year, the retailers
made major changes in their cost structure, major changes in their inventory levels and major changes in their business
plan. Made plans for their businesses to be down roughly 10 to 15%.
In February this year, we told you that we anticipated that for the first three quarters of this year, that we anticipated
double digit sales declines, and at the time, frankly, that was not a very thrilling prospect. In fact, we've had double digit
sales declines, off 12% in the first quarter, 11% in the second quarter, 9% in the third. But we're seeing a moderation in
the decreases, but more importantly, and I said this on the last call, is that you have to be careful about the comp sales,
because this year the difference between the first three quarters of this year and the fourth quarter of last year is that our
retailers planned to have their sales be off at this level. This was their business plan. They are meeting their business
plan.
They are maintaining their margins. So being off 10% when you plan to be off 10% and you keep your margin is a
significantly different situation than being off 15% when it wasn't your plan and your margins were decimated. As a
consequence of that, it's put our retailers into a mood where they're willing to talk about new leasing and we're able to
look at beginning to have some pickup in store growth. The moods of the retailers, and you've heard this on the other
conference calls with our peers, is improving dramatically. They went from being in a freeze mode in the fourth quarter of
last year, to things began to fall out in the second quarter of this year around ICSC. Now we're really having positive
conversations with our retailers about how they can grow their business and how we can grow our business together.
– Art Coppola, Chairman & CEO of Macerich, November 5, 2009
46
Summary
f The U.S. economy was on the verge of a depression
f Credit markets were closed
f Mall REIT balance sheets were dangerously leveraged

Since
ask spreads widened Then…
f Bankruptcy risk and tenant “right-sizing” initiatives were

expected to result in massive store closures
f Tenant sales were expected to fall off a cliff
48
The World has Improved Dramatically
3 The U.S. economy has recovered
3 The U.S. consumer is beginning to bounce back
3 The credit markets have improved
3 Mall REIT balance sheets have strengthened
3 Cap rates have declined substantially
3 Store closure fears were overblown
3 Tenants are much better capitalized
3 Rent relief has been minimal
3 Tenant sales are down, but inventories are down even more
while retailer cash flows have improved materially
49
Why We Are Optimistic About the
Next Five Years
We Performed a Bottoms Up Analysis to Inform Our
Outlook for Mall REITs
Using public information we analyzed:

f Store expansion plans for 2010 and beyond
f New concepts either currently being rolled out or upcoming
f Revenue forecasts
f Profit forecasts
Source of data for our analysis:

f Evaluated tenant websites, public filings, earnings transcripts, investor presentations
and press releases; mall REIT earnings transcripts; industry trade publications and
news articles to develop a sense of tenant expansions and new concepts on tap for
2010 and beyond
f Gathered consensus equity research estimates for tenant revenue and EBITDA
projections through 2010 and 2011
51
Expansions / New Concepts
Though there will continue to be store closures in 2010, there will be store
openings as well. More than half the companies we reviewed were either
planning to add new stores or roll out new concepts
Aeropostale A'gaci American Eagle
Rolling out 25-30 PS Kids new concept in '10 Growing store counts (per Simon) Plans to expand 77kids pop-up concept to a
25 Aeropostale stores in 2010 permanent brick & mortar store in 2010
Apple Bebe Bed Bath & Beyond
20-25 domestic stores in 2010 6 new stores in 2010 Expects to continue to add buybuy Baby
Expanding 2b bebe & PH8 concepts locations
Best Buy The Buckle Build-A-Bear
Sees Best Buy Mobile as a growth vehicle Continues to expand and has added 18 Sees potential for 350 stores in N.A.
going forward stores YTD
California Pizza Kitchen Charlotte Russe Cheesecake Factory
Growing store counts (per Simon) On track to open 20 stores in F2009 Testing Grand Lux and Rock Pan Asian
Already signed 11 leases for 2010 Kitchen concepts
Chico's The Children's Place CJ Banks
40 new stores in 2010 Rolling out new Tech II store format Will opportunistically pursue store
Expanding Soma concept expansions in 2010, incl jewelry concept
Coach Coldwater Creek Cotton On
20 new stores in N.A. in 2010 Sees opportunity to grow store base when Australian retailer looking to expand store
margins improve base from 600 to the 1,000s
________________________________________________
Note: This list is not meant to be comprehensive. It is based off publicly disclosed
expansion / new concept plans. Some of these tenants are also considering 52
selectively closing stores as well.
Expansions / New Concepts (Cont’d)
Dave & Buster's Destination Maternity Dick's Sporting Goods

Growing store counts (per Simon) 12 to 17 stores in 2010 Sees potential for 800 stores nationwide
Opening new multi-brand store concept (~420 in Oct-09)
Dressbarn Five Below Footlocker
15 Dressbarn stores in 2010 Aggressive growth plan -- 100+ stores in Plans to build out its CCS new concept in
35 Maurices in 2010 the next 3 years 2010
Forever 21 Gamestop Genesco
Rapid expansion in 2009 300 US stores in 2010 60 to 70 stores in 2010, incl recently
Rolling out Faith21 line acquired Sports Fanatic concept
GNC Guess Gymboree
Testing new prototype store 60 accessory stores in 2010 (new concept) Goal of opening a minimum of 50 Crazy 8
Plans to open more domestic stores in stores next year
2010 than 2009 (>30)
H&M hhgregg J Crew
Flagged US as market where it plans to At least 45 new stores in 2010 Considering rollout of Madewell concept
grow the most in 2010
Jones Apparel Group Jos A Bank Limited
Rolling out 6 Shoe Woo test stores by end Accelerating expansion plan to open 30 to 40 Expanding Henri Bendel in US
of F2009 stores in 2010
________________________________________________
Expansions / New Concepts (Cont’d)
Liz Claiborne Lululemon Mattel

Rolling out LCNY new concept Sees potential for over 300 stores in N.A. Expects to open more American Girl stores
(119 in Oct-09) stores over time
Michael Kors Microsoft Nordstrom
Growing store counts (per Simon) Rolling out retail store to compete with Apple 3 full-line stores in 2010
(new concept) 15 Rack stores in 2010
Pandora Jewelry Payless Red Robin
Has expanded to 10 US stores since Growing Sperry TopSider stores (per Simon) Growing store counts (per Simon)
opening first store in NC in 2007 Looking to expand Stride Rite in 2010
Restoration Hardware Rue21 Saks (Off Fifth)
Rolling out Baby & Child concept Sees opportunity to grow store base from Growing store counts (per Simon)
527 to >1,000 in 5 yrs
Rolling out Rue21! larger box concept
Sephora Stage Stores Target
Pursuing expansions in US, France and Increase from ~750 to 1,000 stores by Looking to grow store base, but they are
China 2014 constrained by new shopping center dvlpmt
Looking to move into existing malls
Tiffany TJ Maxx Urban Outfitters
Objective to open 14 stores (net) in F2009 Growing store counts (per Simon) 50 new stores next year
Experimenting w/ new, smaller concept
VF Corp Wet Seal Williams Sonoma
Selectively opening stores Sees opportunity to nearly double its US Rolling out PBteen concept
Expects to open 80 stores in F2009 store base (~400 stores)
________________________________________________
Store Expansions / New Concepts Create a Virtuous Cycle
for Mall REITs and their Tenants
The current environment has set the stage for tenants with value-
focused concepts, which are performing well in today’s market, to
expand and replace underperforming tenants. This mall “refresh”
creates a virtuous cycle
Start Here Tenant

Expansions / Increased
New Concepts Mall
Occupancy
Higher
Higher Mall
Tenant
Traffic
Cash Flows
55
Supply Constraints Enhance Virtuous Cycle
“And frankly, when you look at the capital situation today, the construction in the retail
sector is at a 20-year low. We certainly anticipate it will remain there, and the lack of new
supply can only hopefully help the demand side for the existing product.”
– Rick Sokolov, COO of Simon Property Group, December 4, 2009
________________________________________________
Source: Goldman Sachs equity research November 2009. 56
Low Store Build-out Costs Enhance Virtuous Cycle
“A lot of contractors out there, you have a lot of architect firms, you have a lot
of vendors that are doing fixtures, a lot of them are very aggressive right now
and doing deals. So if you’re going to grow and open up stores, there’s an
opportunity to really drive down your build-out costs there .”
– John Smith, SVP of Development, Collective Brands, October 6, 2009
57
Positive Tenant Sales Momentum
Though tenant sales are down year-to-date, sales momentum is

starting to build
Nordstrom Q3’09 Earnings Call

f “We experienced an improving sales trend in each month of the quarter and generated increases in
year-over-year transactions in the months of September and October”
Macy’s Q3’09 Earnings Release

f “Given the difficult economic climate, we had an excellent quarter. Our business improved
progressively each month during the period and we are entering the holiday season confident in our
locally focused organizational structure and the high caliber of our talent”
Bon-Ton Q3’09 Earnings Call

f “Our comparable store sales turned positive in the month of October with a 3.1% increase as
compared with last year, a good month following improvements in sales trends in August and
September”
58
Wall Street Anticipates Tenant Revenue Growth
Positive sales momentum has culminated in rising consensus revenue

estimates for mall-based retailers. Wall Street is now forecasting 2.6%
and 3.5% revenue growth in 2010 and 2011, respectively
($ in millions) Weight Consensus Revenue Estimates (CY) Consensus Revenue Growth

(2)
Tenants Selected Concepts Factor 2008a 2009e 2010e 2011e 2009e 2010e 2011e
Top Ten Tenants (1)
The Gap Gap, Old Navy, Banana Republic 2.9% $14,526 $14,149 $14,324 $14,672 (2.6%) 1.2% 2.4%
Limited Brands Victoria's Secret, Bath & Body Works 2.6% 9,043 8,528 8,612 8,799 (5.7%) 1.0% 2.2%
Abercrombie & Fitch Abercrombie, Hollister, Ruehl 2.3% 3,450 3,002 3,235 3,533 (13.0%) 7.8% 9.2%
Foot Locker, Inc. Foot Locker, Champs Sports, Footaction 2.3% 5,237 4,796 4,803 4,842 (8.4%) 0.1% 0.8%
American Eagle American Eagle, Aerie, M+O 1.5% 2,989 2,956 3,093 3,238 (1.1%) 4.7% 4.7%
Express Express 1.3% NA NA NA NA NA NA NA
JCPenney Company JC Penney 1.3% 18,846 17,583 17,760 18,115 (6.7%) 1.0% 2.0%
Forever 21 4 Love, Forever 21, Gadzooks 1.2% NA NA NA NA NA NA NA
Macy's Macy's, Bloomingdale's, Lord & Taylor 1.1% 24,892 23,448 23,838 23,908 (5.8%) 1.7% 0.3%
Genesco Journeys, Underground Station, Lids 1.1% 1,552 1,563 1,621 1,726 0.7% 3.7% 6.5%
Total / Wtd Avg 17.6% $80,534 $76,024 $77,286 $78,834 (5.8%) 2.6% 3.5%
________________________________________________
Source: Capital IQ consensus estimates as of December 5, 2009.
(1) Based on GGP’s top ten tenants as disclosed in its quarterly operating supplement. An analysis of other publicly traded mall-based
retailers results in similar growth expectations.
(2) Consensus revenue growth weighted average is weighted by each tenant as a % of GGP’s revenue (as disclosed in GGP’s quarterly
operating supplement).
59
Wall Street Anticipates Tenant Margin Expansion
Cost cutting and inventory management initiatives will help tenant

margins expand despite lower 2009 sales
($ in millions) Weight Consensus EBITDA Estimates (CY) Consensus EBITDA Margin Comments
Tenants Selected Concepts Factor (2) 2008a 2009e 2010e 2011e 2008a 2009e 2010e 2011e '10e Margin > '08a?
Top Ten Tenants (1)
The Gap Gap, Old Navy, Banana Republic 2.9% $2,116 $2,280 $2,399 $2,382 14.6% 16.1% 16.8% 16.2% Yes
Limited Brands Victoria's Secret, Bath & Body Works 2.6% 1,061 1,099 1,182 1,279 11.7% 12.9% 13.7% 14.5% Yes
Abercrombie & Fitch Abercrombie, Hollister, Ruehl 2.3% 695 349 477 594 20.2% 11.6% 14.7% 16.8% No
Foot Locker, Inc. Foot Locker, Champs Sports, Footaction 2.3% 286 252 269 311 5.5% 5.3% 5.6% 6.4% Yes
American Eagle American Eagle, Aerie, M+O 1.5% 440 392 486 551 14.7% 13.3% 15.7% 17.0% Yes
Express Express 1.3% NA NA NA NA NA NA NA NA NA
JCPenney Company JC Penney 1.3% 1,604 1,156 1,355 1,494 8.5% 6.6% 7.6% 8.2% No
Forever 21 4 Love, Forever 21, Gadzooks 1.2% NA NA NA NA NA NA NA NA NA
Macy's Macy's, Bloomingdale's, Lord & Taylor 1.1% 2,680 2,481 2,722 2,851 10.8% 10.6% 11.4% 11.9% Yes
Genesco Journeys, Underground Station, Lids 1.1% 113 123 135 145 7.3% 7.9% 8.3% 8.4% Yes
Total / Wtd Avg 17.6% $8,995 $8,132 $9,026 $9,608 12.2% 11.1% 12.4% 13.0% Yes
________________________________________________
Source: Capital IQ consensus estimates as of December 5, 2009.
(1) Based on GGP’s top ten tenants as disclosed in its quarterly operating supplement. An analysis of other publicly traded mall-based
retailers results in similar margin expectations.
(2) Consensus EBITDA margin weighted average is weighted by each tenant as a % of GGP’s revenue (as disclosed in GGP’s quarterly
operating supplement).
60
2009e Holiday Same-Store Comps
Citigroup performed a bottoms-up analysis to project 2009e holiday

same-store sales of positive 2.5 percent
61
Mall Traffic Trending Up
Citigroup also anticipates improving Holiday 2009 mall traffic
62
Growing Strategic Interest in Malls
October 2008 – June 2009:

f No material mall transactions that we have been able to identify
July 2009:
f Vintage Real Estate acquires regional mall, South Bay Pavilion, for $50mm
July 2009:
f Macerich sells a 49% interest in Queens Center in NY to Cadillac Fairview for $150mm in cash plus
$168mm in property level debt
September 2009:
f Macerich sells a 75% interest in its Flatiron Crossing Mall in CO for $116mm in cash plus $136mm of
assumed debt to private equity firm, GI Partners
October 2009:
f Heitman pays $168mm in cash and assumes $167mm of property level debt to acquire a 49.9% interest in
Macerich’s Freehold Raceway Mall in NJ and Chandler Fashion Center in AZ
November 2009:
f Blackstone acquires a 60% interest in two of Glimcher’s best malls – Lloyd Center and WestShore Plaza –
for $62mm in cash and $130mm in assumed debt
November / December 2009:

f Simon Property Group hires advisers to evaluate a potential acquisition of GGP
f The Wall Street Journal announces Brookfield has acquired $1bn of GGP’s unsecured debt
63
Mall REITs are Still Cheap
All of the principal drivers of mall valuations are favorable in the

current economic environment
Principal Drivers
of Mall Valuation Current Environment
1. Occupancy Store liquidations have been less than anticipated
Many retailers are planning expansions in 2010
New mall construction is on hold
Economics of new store openings are attractive
2. Risk-Free Rate 10-yr Treasury yield of 3.4%; 10-yr TIPS yield 1.3%;
other inflation protected assets trade at very low yields
Corporate BBBs yield ~6%
Mall cap rates are estimated to be ~7 to 8%
3. Tenant Tenant stock prices are up over 50% year-to-date

Creditworthiness Tenant cash flows have improved and margins are
projected to expand
Tenant balance sheets have strengthened
64
Which would you rather own?
1) A 10-yr Treasury at a 3.4% yield
2) A 10-yr TIP at a 1.3% yield, or
3) Shares in a mall REIT at a 7.5%,
7.0%, or even 6.0% cap rate
What are the Characteristics of the Ideal Mall REIT Best
Positioned to Perform in the Current Environment?
Assets Liabilities
■ Established national platform ■ Secured, non-recourse debt
provides leverage when dealing with a portfolio of options is more valuable than
tenants who are looking to expand or an option on a portfolio
reposition stores
■ Fixed-rate debt
■ High-quality malls, B+ to A+ provides a hedge against inflation
■ Established tenant relationships ■ Low interest rates

■ Low in-place occupancy costs ■ Long-dated maturities
■ Diverse footprint ■ A healthy amount of leverage
provides upside for return on equity
■ Lease-up / redevelopment
opportunities ■ Good liabilities are an asset
66
Conclusion
f During one of the worst recessions in over 50 years, mall

REITs and their tenants have proven to be highly resilient
f Consumer spending does not need to return to 2007 levels for

mall REITs and their tenants to outperform
f Store closures of underperforming tenants is a long-term

positive for the mall industry
f Tenant cash flows and balance sheets have massively

improved over the last twelve months
f Many opportunistic retailers have substantial growth plans.

Retailers on the sidelines are just like those investors who
didn’t buy stocks in the spring
67
General Growth Properties
“Fool’s Gold”
We Think Current Equity Investors Will Be
Disappointed in the Company’s
Reorganization
December 14, 2009 Hovde Capital Advisors LLC
Table of Contents
• Thesis (p.3)
• The Demise of Malls in America (p.4‐11)
• The Beginning of the End (p.12‐14)
• Valuation Analysis (p.15‐31)
• Commercial Real Estate Valuation (p.32‐35)
• Potential Roadblocks (p.36)
• Disclosures (p.37‐38)
December 14, 2009 Hovde Capital Advisors LLC 2
Our Thesis
• Due to highly leveraged acquisitions near the peak of the cycle, a decline in
the overall economy, and insufficient capital spending, we believe the assets
of General Growth no longer support the current capital structure.
• In our view:
‐‐ the company’s cash flows are insufficient to service the debt and pay for
maintenance capital at its malls; and
‐‐ the bankruptcy is not just the result of a liquidity problem; it is a cash flow
and loan‐to‐value problem.
• We believe the value of the assets no longer exceed the value of the debt, in
contrast to several recent analyses.
• Despite recent upward move in the GGWPQ share price, we believe current
equity investors are likely to be left with little in the restructured entity.
NOTE: THAT FUNDS ADVISED BY HOVDE CAPITAL ADVISORS, LLC AND ONE OF ITS PRINCIPALS HAVE
SHORT POSITIONS IN GGWPQ. SEE ADDITIONAL IMPORTANT DISCLOSURES AT PAGES 26 AND 27.
The Demise of Malls in America
Structural Change in Retail
Consumption and Distribution
Consumers Are Saving More and
Spending Less
Personal Savings Rate
(% of Disposable Income)
16
14
12
10
8
Percentage
‐2
‐4
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: U.S. Bureau of Economic Analysis.
Consumers Have Less Access to
Credit
Source: Federal Reserve.
Consumers Have Less Home Equity
Available to Support Spending
Source: Federal Reserve.
Consumers Are Focused on Value
• Given lower levels of discretionary income and higher savings rates, we
believe consumers are seeking more value in their consumption habits.
• This is evident in the outperformance of discount retailers versus broader
retail sales. These retailers tend to be discounters and in non‐mall
locations, typically stand alone or located in strip centers and power
centers.
• In our view, outlets are also likely to gain share, which we think is
demonstrated in the recently announced acquisition of Prime Outlets by
Simon Properties Group (NYSE:SPG). The outlet business offers
consumers better value, offers retailers lower occupancy costs, and
provides landlords with better margins.
• Online shopping has experienced tremendous growth in share of retail
spending as consumers seek value and efficiency.
• These trends do not bode well for mall fundamentals since neither are
mall based.
Non‐Mall Retailers Are Seeing
Improving Performance
Same-Store Retail Sales (% Chg.)
Nov-09 Oct-09 Sep-09 Aug-09 Jul-09 Jun-09 May-09 Apr-09 Mar-09 Feb-09 Jan-09 Dec-08
Non-Mall Average 1.2 2.8 1.4 (0.9) (4.0) (4.4) (1.8) (1.7) (2.7) (3.4) (8.5) (4.8)
BJ's Wholesale Club Inc 1.0 3.7 5.5 2.2 1.8 2.7 4.0 (4.9) 8.5 8.2 7.6 5.9
Cato Corp/The 2.0 - 6.0 5.0 (3.0) (3.0) (3.0) 11.0 6.0 8.0 (10.0) (2.0)
Costco Wholesale Corp 2.0 4.0 4.0 2.0 (1.0) 1.0 1.0 - 4.0 4.0 5.0 2.0
Kohl's Corp 3.3 1.4 5.5 0.2 0.4 (5.6) (0.4) (6.2) (4.3) (1.6) (13.4) (1.4)
Nordstrom: Rack Stores 3.3 5.9 - 3.8 (0.5) 0.6 2.2 4.4 0.1 (0.6) (2.2) (1.8)
Old Navy North Amer 6.0 14.0 13.0 4.0 (8.0) (7.0) 3.0 1.0 - (13.0) (34.0) (16.0)
Rite Aid Corp (0.8) (0.5) (0.3) (1.9) (0.6) (0.6) 0.6 1.8 (0.7) (0.9) 1.0 (0.2)
Ross Stores Inc 8.0 9.0 8.0 6.0 4.0 1.0 4.0 6.0 3.0 1.0 (2.0) -
Stage Stores Inc (12.5) (0.1) (5.6) (9.5) (11.9) (12.6) (7.2) (1.5) (15.0) (8.6) (13.1) (4.9)
Stein Mart Inc (7.2) (4.9) (5.4) (8.9) (5.5) (8.0) 0.2 (12.3) (1.4) (12.2) (16.7) (8.5)
Target Corp (1.5) (0.1) (1.7) (2.9) (6.5) (6.2) (6.1) 0.3 (6.3) (4.1) (3.3) (4.1)
TJX Cos Inc 8.0 10.0 7.0 5.0 4.0 4.0 5.0 3.0 2.0 - (4.0) -
Walgreen Co 3.9 (6.2) (17.6) (16.6) (25.5) (23.0) (27.0) (24.6) (31.2) (24.2) (25.8) (31.2)
Source: Bloomberg.
Mall‐Based Retailers are Performing
Poorly
We Believe This Is Likely to Lead to Retail Bankruptcies and Store Closings
Same-Store Retail Sales (% Chg.)
Nov-09 Oct-09 Sep-09 Aug-09 Jul-09 Jun-09 May-09 Apr-09 Mar-09 Feb-09 Jan-09 Dec-08
Mall-based Average (6.7) (2.6) (3.8) (9.3) (10.5) (10.6) (10.1) (6.1) (11.6) (8.3) (10.6) (8.6)
Abercrombie & Fitch Co (17.0) (15.0) (18.0) (29.0) (28.0) (32.0) (28.0) (22.0) (34.0) (30.0) (20.0) (24.0)
Aeropostale Inc 7.0 3.0 19.0 9.0 6.0 12.0 19.0 20.0 3.0 11.0 11.0 12.0
American Eagle Outfitters Inc (2.0) (5.0) - (7.0) (11.0) (11.0) (7.0) (5.0) (16.0) (7.0) (22.0) (17.0)
Banana Republic N. Amer (4.0) 5.0 (12.0) (8.0) (7.0) (20.0) (14.0) (8.0) (16.0) (16.0) (22.0) (15.0)
Bon-Ton Stores Inc/The (6.0) 3.1 (4.8) (5.1) (9.8) (8.0) (12.1) (5.1) (11.2) (8.5) (8.2) (5.8)
Buckle Inc/The 1.4 4.3 5.1 3.6 2.8 9.6 13.4 18.2 14.7 21.0 14.7 13.5
Childrens Place Retail Stores Inc/The (13.0) (2.0) 4.0 (8.0) (4.0) (12.0) (9.0) 5.0 (2.0) - (11.0) -
Destination Maternity Corp (11.6) (5.2) (7.0) (10.6) (8.3) (10.7) (5.4) (1.2) (7.6) (3.5) 5.1 (6.9)
Dillard's Inc (11.0) (8.0) (6.0) (12.0) (12.0) (14.0) (12.0) (6.0) (19.0) (13.0) (12.0) (5.0)
Gap North America (4.0) (6.0) (8.0) (7.0) (9.0) (10.0) (11.0) (10.0) (14.0) (12.0) (18.0) (12.0)
HOT Topic Inc (11.7) (2.6) (4.0) (8.1) (8.5) (7.9) (6.4) 3.1 7.1 10.8 6.0 4.3
JC Penney Co Inc (5.9) (4.5) (1.4) (7.9) (12.3) (8.2) (8.2) (6.6) (7.2) (8.8) (16.4) (8.1)
Ltd Brands Inc 3.0 (4.0) 1.0 (4.0) (7.0) (12.0) (7.0) (6.0) (9.0) (7.0) (9.0) (10.0)
Macy's Inc (6.1) (0.8) (2.3) (8.1) (10.7) (8.9) (9.1) (9.1) (9.2) (8.5) (4.5) (4.0)
Neiman Marcus Group (5.9) (6.0) (16.9) (19.6) (27.3) (20.8) (23.3) (22.5) (29.9) (20.9) (24.4) (27.5)
Nordstrom: Full-line Stores (0.6) 3.7 (3.9) (12.9) (7.8) (13.6) (16.7) (13.4) (16.9) (19.7) (18.1) (12.8)
Saks Inc (26.1) 0.7 (11.6) (19.6) (16.3) (4.4) (26.6) (32.0) (23.6) (26.0) (23.7) (19.8)
Wet Seal Inc/The (5.0) (1.3) (4.5) (11.2) (12.1) (11.1) (8.4) (2.2) (12.5) (6.6) (14.7) (12.5)
Zumiez Inc (8.5) (8.9) (0.8) (12.1) (16.8) (19.3) (20.7) (13.8) (17.9) (13.4) (14.8) (12.3)
Source: Bloomberg.
Online Sales Are Gaining Share
Estimated Quarterly U.S. Retail E‐commerce Sales as a Percent of Total
Quarterly Retail Sales:
4th Quarter 1999 Æ 2nd Quarter 2009
Percent of Total
Source: U.S. Census Bureau.
The Rouse Company
Acquired November 2004
The Beginning of the End
The Rouse Company Acquisition
• Purchase price: $14.3 billion.
• Portfolio of 37 regional malls (and various office assets) and
$2 billion of land and lots, mostly in Summerlin (Las Vegas)
– reports from market participants as noted on the next
page suggest land prices in this market have fallen
dramatically, and, in some cases, the land has an implied
value of zero or even negative values.
• Capitalization rate of 5.3% ‐ implies over $4 billion
destruction of estimated asset value at today’s market
prices, assuming an 8% cap rate.
• $400 million of goodwill – not only do we believe it was
purchased at near‐peak values, it was overvalued when
they bought it!
Source: Rouse Company SEC filings.
The Rouse Company Acquisition
• Las Vegas land is now worth materially less than in
2004. We think there is little value in the master
planned community assets of General Growth.
• “…finished lots are trading at a discount and the underlying land at many
nonprime locations for residential development has virtually no value in
today’s distressed market, Cherney says. There is more pain to come in this
Vegas land market. The fundamentals of supply and demand are alive and well
and will ensure further declines into 2009. This washout is far from over.” ‐
Craig Cherney, director of Western operations of Philadelphia‐based American Land Fund as quoted in the
Las Vegas Sun, March 1, 2009.
Valuation Analysis
Widely Relied Upon Analysis Is
Outdated
• We believe many investors/speculators have relied upon a Pershing
Square Capital LP analysis of the company issued in May 2009,
which used data from 2008. We are of the opinion that this very
dated analysis is flawed based on the deterioration in financial
performance at General Growth since 2008.
• The company’s actual cash flow (see p.19) is now more than 20%
below 2008 levels, and rents on new leases are down 33% versus
current in‐place rents as of the third quarter.
• We view the 7.5% capitalization rate assumption as far too
optimistic relative to private market transaction values. Macerich
(NYSE:MAC) recently sold comparable and higher quality mall
assets at cap rates higher than 8% (after factoring in preferred
returns to investors).*
• Bottom line: we believe the assets are worth less than the
liabilities.
*Source: Macerich press releases on September 3, 2009 and October 1st 2009; Macerich conference call November 5th, 2009.
Leverage is a Significant Valuation
Factor
• Pershing Square uses Simon Properties Group (NYSE:SPG)
as a comparable in their analysis without giving
consideration to leverage. Simon is moderately leveraged,
with debt to EBITDA of 6x, and is an investment grade rated
credit. General Growth’s leverage is in excess of 16x and
would still be in excess of 12x even if all of the unsecured
debt was converted to equity.
• There are no comparably leveraged public companies in
the mall sector, but those that are more highly leveraged
trade at a significant discount to those with less leverage.
Clearly companies with less leverage trade at premium
valuations as shown on the following page.
Source: General Growth third quarter 2009 supplemental package; Simon Property Group third quarter 2009 supplemental package.
Leverage Is a Significant Valuation
Factor
Leverage and Valuation Comparison
Implied Leverage
Cap Rate (Debt/EBITDA)
Average Average
CBL & Associates 9.3% 8.9x
Macerich 8.3% 8.2x
Simon Property Group 7.3% 6.8x
Average 8.3% 8.0x
General Growth Properties ? 16.5x
Average of analyst estimates from ISI and Deutsche Bank as of 12/4/09; General Growth third quarter 2009 supplemental package.
Cash Flows Have Collapsed
This is the
starting point
This is the
for Pershing
reality of today
(‐27% yr/yr). Square’s
analysis.
Source: Third quarter 2009 General Growth supplemental package.
Rents Are Rolling Down Dramatically
New lease rates are 33% lower
than in‐place rents. This is not
good for the NOI outlook.
NOI Sensitivity Drives Valuation
• The decline in NOI since 2008 drives a decline
in enterprise value of $3.8‐$4.3 billion under
the Pershing Square valuation framework.
• Applying Q3 annualized NOI to the Pershing
Square valuation analysis, the implied equity
value per share of the company today is
NEGATIVE $5.03 at an 8.5% cap rate and
+$5.73 at a 7.5% cap rate.
Source: “The Buck’s Rebound Begins Here” dated May 27, 2009 – Pershing Capital Management, L.P. (p. 56) and Hovde Capital Advisors LLC analysis (see
page 30).
Recent Comparable Transactions Indicate
Cap Rates Are Higher
• *Macerich’s (NYSE: MAC) sale of JV interest in
Queens Center (NYC, NY) to Cadillac Fairview
Corporation at a “low 7% cap” – per company
management.
• This mall generates $876/square foot in sales
versus General Growth’s $409/square foot.
*Source: Macerich press release July 30, 2009; Macerich conference call November 5th, 2009; third quarter 2009 General Growth
supplemental package.
Recent Comparable Transactions
Indicate Cap Rates Are Higher
• *Macerich’s (NYSE: MAC) sale of JV interests in
malls to Heitman and GI Partners at a “less
than 100 basis points over the 7.5% cap rate
on average.” – per Arthur Coppola (11/5/09
conference call). Thus we infer the effective
implied cap rate is in the 8.0%‐8.5% range.
• These malls generate $443‐$500/square foot
in sales versus General Growth’s $409/square
foot.
*Source: Macerich press releases on September 3, 2009 and October 1st, 2009; Macerich conference call November 5th, 2009.
Recent Comparable Transactions
Indicate Cap Rates Are Higher
• The recently announced acquisition of Prime
Outlets by Simon Property Group (NYSE:SPG) was
estimated to be priced at an 8.0%‐8.4% cap rate
on in‐place NOI based on some Wall Street
estimates.(1)
• These malls generate $370/square foot in sales
versus General Growth’s $409/square foot,
however, outlet malls generally tend to generate
slightly higher NOI margins than regional mall
format in our view.
(1) Deutsche Bank estimate 8.4% (report dated 12/8/09, titled “SPG Acquiring Prime Outlets.”) Sandler O’Neil estimates ~8% cap rate (report dated
12/8/09, titled “SPG: Stocking Up Before the Holidays; SPG to Acquire Prime Outlets.”
What Is the Appropriate Cap Rate?
• Based on recent comparable transactions, the use of
a cap rate below 8% seems disconnected with reality
in our view.
• We would argue a cap rate in the 8.5% range or
higher would be more appropriate for the General
Growth portfolio, given the below average
productivity of its malls* and the fact that it is
experiencing significant declines in new rents that in
our opinion will drive lower revenues and NOI for
some period of time.
* Source: based on Q3-09 disclosures from Macerich and Simon Properties Group.
Interest Coverage Is Unsustainable
(This is cash flow problem, not just a liquidity problem)
Interest
coverage has
fallen to
minimal levels
(1.17x) – this is
before capital
expenditures.
Amortizing Secured Debt Will Further
Reduce Debt Service Capacity
• Recent agreement with $9.7 billion of secured creditors
requires that interest‐only debt now amortizes principal
on a 30 year schedule.
• This will add over $300 million of annual debt service
initially, which steps up over time, i.e. increasing
amortization.
• By our estimates, this will initially drive the company’s
debt service coverage ratio to 1.0x or below based on the
company’s trailing 12‐month EBITDA as of 9/09.
• Based on the company’s projections, debt service
coverage for the properties secured by these loans will
be 1.0x in 2010, before considering mandatory principal
paydowns and other cash costs.
Source: US_ACTIVE:\43244255\04\47658.0008, debtor’s plan filed 12/1/09; third quarter 2009 General Growth supplemental
package.
Creditors Will Take the Cash
• Cash ($2/share) will likely be paid out to creditors in the form of
fees and reimbursement of legal expenses.
• According to documents recently filed in bankruptcy court, General
Growth will be forced to pay $423.2 million in extension fees,
servicer fees and expenses, catch‐up amortization payments,
accrued interest, the funding of certain escrows and other
expenses.
• This is only related to the agreement on $9.7 billion of secured
loans, so we believe the cost to secure agreements to restructure
the remaining $12 billion of debt will likely cost significantly more if
the costs are comparable to this agreement.
• Given our view that the cash costs of the restructurings will likely
exceed the company’s current cash position, we believe additional
claims will likely be settled in equity ownership, suggesting little if
any recovery for common shareholders.
Source: US_ACTIVE:\43244255\04\47658.0008, Exhibit 3, filed 12/7/09.
Valuation
Pershing Square’s Analysis Uses Dated NOI
This is Q3 annualized NOI, and rents
Pershing Square Analysis Framework This is from are rolling down sharply (‐33%),
2008 which will drive lower NOI.
More Realistic Scenario
($ in millions, except per share data) Low High
LTM Cash NOI $ 2,524 $ 2,524 $ 2,200 (1) $ 2,200 (1)

Cap Rate 8.5% 7.5% 8.5% 7.5%
Implied Value of GGP's REIT 29,694 33,653 25,882 29,333
Pro Rata for JVs:
Less: Total Debt

Cash will be (28,174) (28,174) (28,174) (28,174)
Less: Preferred Debt

paid to (121) (121) (121) (121)
Less: Other Liabilities

creditors in (1,585) (1,585) (1,585) (1,585)
fees and
Plus: Cash 722 722 0 0
recovery of
Plus: Other Assets 1,777 1,777 1,777 1,777
legal expenses.
Plus: Development Pipeline 603 603 603 603
Implied Equity Value $ 2,916 $ 6,875 $ (1,618) $ 1,833
Per Share $ 9.11 $ 21.50 $ (5.06) $ 5.73

(1) See calculation of NOI on the page 30.
Source: “The Buck’s Rebound Begins Here” dated May 27, 2009 – Pershing Square Capital Management, L.P. (p. 56) and Hovde Capital Advisors LLC
analysis.
Calculation of Today’s NOI
Net Operating Income Calculation (as of Q3-09)

(figures in 000s)
Consolidated & JV Share NOI (as reported) $ 585,203

Less: lease termination fees $ 3,859
Less: above/below-market rents $ 3,121
Less: straight lined rents $ 11,478
Less: tenant allowances & leasing costs $ 16,620
Less: capital expenditures $ 3,362
Plus: non-cash ground rent expense $ 1,823
Total NOI $ 548,586
Total Annualized NOI (x4) $ 2,194,344
Valuation
Assumes unsecured debt would require a moderate discount to convert, although it
is questionable in our view whether there will be any value for existing shareholders
given that we believe the value of the debt exceeds that of the assets.
Best Case Realistic Case
Best Case - Assuming Conversion Realistic Scenario - Assuming Conversion
($ in millions, except per share data) Conversion Price Range $5-$8 Conversion Price Range $3-$6
Annualized Cash NOI (1) $ 2,200 $ 2,200 $ 2,200 $ 2,200 $ 2,200 $ 2,200 $ 2,200 $ 2,200
Cap Rate 7.5% 7.5% 7.5% 7.5% 8.5% 8.5% 8.5% 8.5%
Implied Value of GGP's REIT 29,333 29,333 29,333 29,333 25,882 25,882 25,882 25,882
Pro Rata for JVs:
Less: Total Debt (21,174) (21,174) (21,174) (21,174) (21,174) (21,174) (21,174) (21,174)
Less: Preferred Debt (121) (121) (121) (121) (121) (121) (121) (121)
Less: Other Liabilities (1,585) (1,585) (1,585) (1,585) (1,585) (1,585) (1,585) (1,585)
Plus: Cash (2) - - - - - - - -
Plus: Other Assets 1,777 1,777 1,777 1,777 1,777 1,777 1,777 1,777
Plus: Development Pipeline 603 603 603 603 603 603 603 603
Implied Equity Value $ 8,833 $ 8,833 $ 8,833 $ 8,833 $ 5,382 $ 5,382 $ 5,382 $ 5,382
Per Share $ 5.14 $ 5.94 $ 6.69 $ 7.39 $ 2.03 $ 2.60 $ 3.13 $ 3.62
Assumed conversion price: $ 5.00 $ 6.00 $ 7.00 $ 8.00 $ 3.00 $ 4.00 $ 5.00 $ 6.00

(1) See calculation on page 24.
(2) Assumes cash is paid out to creditors in forbearance fees and reimbursement of legal expenses.
Commercial Real Estate
Valuation Analysis
Commercial Real Estate Values
Have Dropped 43% Since the Peak
Source: Moodys/REAL Commercial Property Index, Real Capital Analytics.

Capitalization Rates Have Moved
Significantly Higher Since the Peak
Capitalization Rates
11.00%
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
Oct‐01
Oct‐02
Oct‐03
Jan‐01
Apr‐01
Jul‐01
Oct‐04
Jan‐02
Apr‐02
Jul‐02
Oct‐05
Jan‐03
Apr‐03
Jul‐03
Oct‐06
Jan‐04
Apr‐04
Jul‐04
Oct‐07
Jan‐05
Apr‐05
Jul‐05
Oct‐08
Jan‐06
Apr‐06
Jul‐06
Oct‐09
Jan‐07
Apr‐07
Jul‐07
Jan‐08
Apr‐08
Jul‐08
Jan‐09
Apr‐09
Jul‐09
Apartment Industrial Office ‐ CBD Office ‐ Sub Strip All Core
Source: Real Capital Analytics.

2009 Mall Transaction Data
2009 Regional Mall Transactions
Retail - Regional Malls | North America | Us
Type Property Name sq ft Year Built Price in $ $/sq ft

Retail West Oaks Mall 1,083,573 1984 15,000,000 14
Retail Lloyd Center 1,229,140 1959 171,851,210 140
Retail Westshore Plaza 1,059,612 1967 148,148,790 140
Retail Bridgewater Falls 650,000 2005 43,750,000 67
Retail Chandler Fashion Center 1,325,379 2001 296,079,278 223
Retail Freehold Raceway Mall 1,666,812 1990 372,352,733 223
Retail New Orleans Centre Mall 668,000 1988 24,243,791 36
Retail Cupertino Square 476,000 1975 64,000,000 134
Retail FlatIron Crossing 722,855 2000 347,333,000 481
Retail Queens Center 966,499 1990 306,117,000 317
Retail Kohl's 83,281 1984 17,250,000 207
Retail South Bay Pavilion 370,000 1973 49,751,333 134
Retail Colonie Center Mall 633,000 1966 16,400,000 26
Retail Westland Fair Shopping Center (portion) 387,000 1963 25,505,000 66
Retail Cincinnati Mall 1,442,339 2004 35,450,000 25
Average $ 149
Source: Real Capital Analytics.
Potential Roadblocks
• Objections to the company’s plan of emergence related to
assets securing $9.7 billion of loans have been filed recently
by secured creditors who hold mechanics liens, tax liens,
claims relating to rent claw backs, and claims securing surety
bonds.
• Such creditors include:
– Apple
– Dillard’s
– Lewisville (TX) Independent School District
– Pima County (AZ)
– Travelers Casualty and Surety Company
Source: United States Bankruptcy Court for the Southern District of New York.
Disclosures
• Funds advised by Hovde Capital Advisors, LLC and one
of its principals have established short positions in the
common stock of General Growth Properties (OTC:
GGWPQ) and in the common stock of Macerich (NYSE:
MAC). One of the principals has established a short
position in Saks (NYSE: SKS). Their positions in these
stocks and others may change without further notice.
• Neither the funds advised by or any affiliates of Hovde
Capital Advisors, LLC hold positions in any other
companies mentioned in this document other than
those mentioned above.
Disclosures Continued
• The opinions and views express in this document
and the analysis set forth therein may change and
Hovde Capital Advisors, LLC is not undertaking to
update its opinions, views or analysis.
• Although the factual information contained in
this document is believed to be accurate, Hovde
Capital Advisors, LLC does not warrant its
accuracy or completeness.
• This document is not intended to be, and should
not be construed as, investment advice or a
recommendation to buy or to sell any security.
GGP Part II
May 26, 2010

Disclaimer
The analyses and conclusions of Pershing Square Capital Management, L.P. ("Pershing Square")
contained in this presentation are based on publicly available information. Pershing Square
recognizes that there may be confidential information in the possession of the companies discussed in
the presentation that could lead these companies to disagree with Pershing Square’s conclusions.
This presentation and the information contained herein is not a recommendation or solicitation to buy
or sell any securities.
The analyses provided may include certain statements, estimates and projections prepared with
respect to, among other things, the historical and anticipated operating performance of the
companies, access to capital markets and the values of assets and liabilities. Such statements,
estimates, and projections reflect various assumptions by Pershing Square concerning anticipated
results that are inherently subject to significant economic, competitive, and other uncertainties and
contingencies and have been included solely for illustrative purposes. No representations, express or
implied, are made as to the accuracy or completeness of such statements, estimates or projections or
with respect to any other materials herein.
Pershing Square manages funds that are in the business of actively trading – buying and selling –
securities and financial instruments. In particular, funds managed by Pershing Square and its
affiliates have invested in long and short positions of certain mall REITs, including long debt and
equity positions in General Growth Properties Inc. and other commitments to recapitalize that
company. Pershing Square may currently or in the future change its position regarding any of the
securities it owns. Pershing Square reserves the right to buy, sell, cover or otherwise change the form
of its investment in any company for any reason. Pershing Square hereby disclaims any duty to
provide any updates or changes to the analyses contained here including, without limitation, the
manner or type of any Pershing Square investment.
1
At Last Year’s Ira Sohn Conference, We Delivered a
67-page Presentation on General Growth Entitled:
The Buck’s Rebound Begins Here

May 27, 2009

2
On Page 34 of The Buck’s Rebound Begins Here, We Proposed
the Following Solution for GGP to Address Its Bankruptcy
A seven-year extension of GGP’s secured and unsecured loans at their

existing interest rates would provide the Company with sufficient time to
use cash flow from operations to delever its balance sheet. With a seven-
year extension, we believe the Company would be able to repay existing
creditors in full
Benefits of this Approach:
3 Secured and unsecured lenders receive 100% of the

present value of their claims
3 Prevents the liquidation of assets at “fire-sale” prices
3 Preserves value for equity holders
3 GGP platform remains intact
3 Preserves jobs
________________________________________________
Source: See page 34 of “The Buck’s Rebound Begins Here,” May 27, 2009. 3
GGP’s Bankruptcy has Progressed Largely as We Expected
3 All of GGP’s property-level debtors have consensually agreed to

extend $15bn of secured debt
3 The weighted average contract interest rate for these loans is 5.07%,
(1)
which is lower than the original interest rate
3 The weighted average duration of the loans is 6.5 years from

(1)
January 1, 2010
3 GGP has avoided a “fire-sale” of its assets
3 Equity value has been enhanced
7 While we suggested a maturity extension of GGP’s unsecured debt,

the vast majority of it will be repaid at emergence
________________________________________________
(1) Source: GGP Press Release (4/29/10).
4
GGP has Secured a Commitment for Enough Capital to
Repay its Unsecured Creditors in Full at Par Plus Accrued
________________________________________________
(1) Source: GGP Press Release (5/3/10).
5
The Buck Has Rebounded
Though GGP’s stock price has risen more than 1000% over the past year,
its TEV has only increased 12%. This compares to Simon Property Group
(“SPG” or “Simon”) whose TEV has risen 29% over the same period
GGP Stock Price Performance
$20
$18
$16
GGP traded at
$14
$1.19 as of last $14
$12 year’s Ira Sohn
Conference
$10
$8
$6
$4
$2
$0
Jan-09 Apr-09 Jul-09 Oct-09 Feb-10 May-10
________________________________________________
A Little Context…
f The U.S. economy was in a serious recession
f Mall REITs had limited access to capital

ask spreads widened Since
Then…
f Bankruptcy risk and tenant “right-sizing” initiatives
were expected to result in massive store closures
f Tenant sales were expected to continuously decline
8
U.S. Economy Recovering
U.S. Real GDP growth has been positive the past three quarters
Real GDP (% Change)

8.0%
6.0% 5.6%
4.0%
3.0%
2.2%
2.0% 1.5%
0.0%
(0.7%)
(2.0%)
(2.7%)
(4.0%)
(6.0%) (5.4%)
(6.4%)
(8.0%)
Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 Q3’09 Q4’09 Q1’10
________________________________________________
Source: Bureau of Economic Analysis (5/27/10). 9
The Housing Market is Showing Signs of Improvement
The ABX AAA 06-2 Index, which tracks pricing on a basket of 2006
vintage subprime loans, has marched upward over the past year
Markit ABX.HE.AAA 06-2 Index
________________________________________________
Source: Bloomberg (as of 5/28/10). 10
Consumer Confidence is Up
The University of Michigan Survey of Consumer Confidence

Sentiment Index has improved since the beginning of 2009
University of Michigan Consumer Confidence Index (Trailing Three Month Average)
75.0 73.5 73.1
70.5
70.0
67.5
65.0 63.7
61.1
60.0 59.2
55.0
50.0
Sept-Nov Dec-Feb Mar-May Jun-Aug Sept-Nov Dec-Feb Mar-May
2008 2009 2009 2009 2009 2010 2010
________________________________________________
Source: University of Michigan / Bloomberg. Most recent data point available as of 5/28/10. 11
Personal Savings Rate Reverting
After peaking in May 2009, the U.S. personal savings rate has
reverted to near its 10-yr average
U.S. Personal Saving as a Percentage of Disposable Personal Income
7.0% LTM
6.0%
5.0%
4.0% Average:
2.8% 3.6%
3.0%
2.0%
1.0%
0.0%
Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
________________________________________________
Source: Bloomberg / Bureau of Economic Analysis (as of 5/28/10). Most recent data point as of Apr-10. 12
Mall Traffic Improving
Consumers are returning to malls as evidenced by positive

mall traffic trends year-to-date in 2010
________________________________________________
Source: Jefferies equity research (4/22/10). 13
Retail Construction Remains at a 20-Year Low
“And frankly, when you look at the capital situation today, the construction in the retail
sector is at a 20-year low. We certainly anticipate it will remain there, and the lack of new
supply can only hopefully help the demand side for the existing product.”
– Rick Sokolov, COO of Simon Property Group, December 4, 2009
________________________________________________
Source: Goldman Sachs equity research November 2009. 14
Mall REITs Have Regained Access to Capital
Simon Debt Issuances

f On March 25, 2009, Simon announced the completion of the issuance
of $650 million of 10.35% senior notes due 2019
f On January 19, 2010, Simon announced the sale of $2.25bn of senior
unsecured notes, including:
$400mm of 4.20% notes due 2015 yielding 4.25%
$1.25bn of 5.65% notes yielding 5.70%
Macerich Equity Issuance

f Macerich Issues Biggest Share Offer On Record – WSJ 4/15/10
Macerich raised $1.23bn in equity at a ~7.0% cap rate, more than 25%
of its market cap, representing the largest secondary stock offering by a
REIT on record
The 30mm share sale was 62% over-subscribed relative to the original
18.5mm anticipated share sale announcement on April 14th
________________________________________________
Source: The Wall Street Journal, 4/15/10. 15
Mall REIT Cap Rates Have Declined and Should Decline
Further Based on Historical Precedent
Although Mall REIT cap rates have come in from their double-digit
highs, mall REITs still trade at a discount to corporate Baa yields
Mall Implied Cap Rate vs. Baa Yields
10.0%
Mall Implied Cap Rate
9.5%
Baa
9.0%
8.5%
8.0%
7.5%
7.0%
6.4%
6.5%
6.0%
6.1%
5.5%
5.0%
Ja 5
Ja 6
Ja 7
Ja 8
Ja 9
M 05
M 06
M 7
M 08
M 09
Se 05
Se 6
M 10
Se 07
Se 08
Se 9
Ju 5
Ju 6
Ju 7
Ju 8
0
N 5
N 6
N 7
N 8
N 9
M 5
M 6
M 7
M 8
M 9
M 0
-0
-0
-0
-0
-0
0
l-0
l-0
-0
-0
-0
-0
-0
-1
0
0
-0
-0
-0
-0
-0
-1
n-
n-
n-
n-
n-
l-
n-
l-
l-
p-
p-
p-
p-
p-
ov
ov
ov
ov
ov
ay
ay
ay
ay
ay
ay
ar
ar
ar
ar
ar
ar
Ju
Ja
________________________________________________
Source: Green Street (as of 5/1/10). Most recent available.
16
Tenant Bankruptcies Have Decreased
Taubman’s reported tenant bankruptcies dropped to 0% in Q1’10
Taubman Reported Tenant Bankruptcy Filings as a % of Total Tenants
1.5%
1.2%
1.1% 1.1%
1.0%
0.9%
0.9%
0.8%
0.6%
0.3%
0.1%
0.0%
0.0%
Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10
________________________________________________
Source: Taubman quarterly financial supplements. 17
Tenant CDS Spreads Have Narrowed
Mall tenant CDS spreads have narrowed approximately 400

basis points from peak levels seen in 2009
GGP Top 10 Tenants CDS Basket

600bps
500bps
400bps
300bps
200bps
139bps
100bps
0bps
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10
________________________________________________
Note: Represents an equal-weighted basket of CDS prices for GGP’s top 10 tenants (where CDS pricing
is available), which include Gap, Limited, JC Penney and Macy’s.
Source: Bloomberg (5/28/10). 18
Rent Relief Less of an Issue than Originally
Anticipated
Simon expects to lose less than 2bps of total revenue as the

result of rent relief concessions in 2009
“Our 2009 rent relief total will be under $10 million, as in the $7 million
to $8 million range. But as I think we said on the call last quarter, we
hadn’t seen much of it year-to-date. So it’s a little back-end weighted,
and as you look at the impact of average base rent it could have a
nominal impact. But it’s a small number in the context of the size of our
income statements.”
– Steve Sterrett, CFO of Simon Property Group, October 30, 2009
19
Mall Leasing Activity Picking Up Substantially
“Retail leasing activity increased significantly in the first

quarter of 2010, with total in-line and outparcel tenant leasing
deals covering 1.36 million square feet signed, an increase of
21% over the same period of last year. Within total deals, the
number of new lease deals grew 84%, representing new deal
square footage of approximately 284 thousand square feet.
Although rents remain below 2007 peak levels, they have
stabilized. As sales continue their upward trend, the Company
expects lease rates to reflect those increases over time.”
– GGP Q1’10 Operating Supplement
20
Tenant Sales Growing Quickly
Anchor tenant same store sales have turned from negative in

late 2008 and 2009 to materially positive so far in 2010
________________________________________________
Source: “Why the Sad Face Mall Sector?” Credit Suisse equity
research (4/26/10). 21
Mall REIT Comp Tenant Sales Growth Positive in Q1’10
8.0% 7.5%
6.6%
6.0%
5.3%
4.0% 3.4%
2.0%
0.0%
Based on Westfield’s U.S. portfolio only.
“On a quarterly basis, comparable tenant sales rose a healthy 7.5% year-over-year, with
momentum picking up over the course of the quarter. January 2010 comparable sales
increased 2.5% year-over-year, with February and March showing accelerating increases
of 6.0% and 10.0%, respectively.”
22
– GGP Q1’10 Operating Supplement
The World has Improved Dramatically
3 The U.S. economy has recovered
3 The U.S. consumer is bouncing back
3 Mall traffic is increasing
3 Demand for mall REIT debt and equity

capital is high
3 Cap rates have declined substantially
3 Store closure fears were overblown
3 Tenants are much better capitalized
3 Rent relief has been minimal
3 Tenant sales have returned to growth

23
What Will GGP Look Like When It Emerges?
GGP will emerge as two separate companies: General Growth

Properties (“PF GGP”) and General Growth Opportunities (“GGO”)
PF GGP GGO
■ Ownership or management of ■ Master Planned Communities (“MPC”)
approximately 200 regional malls ■ Development assets
■ Community / strip retail centers (i.e. Victoria Ward, South St Seaport)
■ Office properties ■ Non-income producing assets
■ GGMI (i.e. Fashion Show air rights)
■ 13 underperforming malls (“Special ■ Other assets
Consideration Properties” or “SCPs”)
assumed to be transferred to lenders
Estimated Value: ~$15 Estimated Value: ~$5
24
PF GGP
Why is PF GGP a Good Investment?
f Low Risk
PF GGP will emerge with much less debt, but similar NOI
PF GGP will be a portfolio of approx. 200 regional malls and other assets
~80% of its financing will be single-property, non-recourse debt
Removal of SCPs, settlement of Hughes claim, and elimination of
deferred tax liabilities
f High Quality
Approximately 100 of PF GGP’s malls are high-quality, “mini-monopolies”
within their respective markets
A disproportionate share of PF GGP’s NOI is generated by its top assets
Events of the past two years have further confirmed that high quality mall
assets are recession-resistant
f Recent Underperformance Creates Future Upside
Two years of financial distress have caused GGP to underperform its peer
group
Investors get the benefit of a turnaround opportunity without the risk
26
Why is PF GGP a Good Investment? (Cont’d)
A mall is like a trust which holds a portfolio of bonds
f Over the past twelve months, the credit quality of the “bonds”
has improved as tenant credit quality has strengthened and
their CDS spreads have narrowed
f Leasing up the mall adds new “bonds” and incremental cash

flow to the portfolio with minimal capital investment
f The “bonds” represent a diverse group of retailers, restaurants

and entertainment concepts, and if a tenant defaults, it can be
replaced at little cost
f Malls have a 50-year track record of stability and strong

performance
f This “bond” portfolio is inflation-protected due to percentage

rent and the rollover of 10-15% of leases per annum
27
The Value of Non-Recourse Debt
f Non-recourse financing creates material value for all real estate

portfolios, but mall portfolios in particular
f The reason is that B minus and lower malls have potential catastrophic
risk. For example, a mall might lose key anchor tenants, or be
disintermediated by a better located mall, which could cause a mall to
lose 80% or more of its value
f If such events were to destroy the value of a mall, the exposure to an

investor with non-recourse financing is limited to its equity in the mall
because the property can be “sold” to the lender for the mortgage
amount
f If a mall is a portfolio of bonds, then a mall REIT is a portfolio of

portfolios of bonds
f On the other hand, a mall REIT primarily financed with unsecured,

recourse debt (i.e. Simon or Westfield) is analogous to an investor’s
portfolio with margin debt, where the failure of a portion of the portfolio
can destroy large amounts, if not 100%, of the equity value
28
Illustrative Example: Non-Recourse Financed Mall Portfolio
Imagine a portfolio of three malls, each worth $100 and

each with a 60% LTV non-recourse mortgage
$60 $60 Leverage

$100
60%
$40 $60
$60
$100 $60
$40
$40
$60 $40
$100
$40 $40
Total Mall Value Total Debt Total Equity

$300 - $180 = $120
29
Illustrative Example: Non-Recourse Financed Mall Portfolio
(Cont’d)
Now assume one of the malls suffers catastrophic risk. One-

third of the equity value is lost, and leverage remains the same
Leverage
$0
60%
$60 $60
$100
$40
$60
$60 $40
$100
$40 $40

$200 - $120 = $80
30
Illustrative Example: Recourse Financed Mall Portfolio
Imagine the same portfolio of malls financed with

unsecured, recourse debt
Leverage
$100
60%
$180 $180
$100
$100 $120 $120

$300 - $180 = $120
31
Illustrative Example: Recourse Financed Mall Portfolio
(Cont’d)
If one of the malls dies, equity value is nearly wiped out. Given
the covenants associated with recourse debt, the destruction
of value would likely be even more severe
$0
$100
$180 $180
Leverage
90%
$100
$20

$200 - $180 = $20
32
PF GGP Operating Metrics
The disposition of Special Consideration Properties (SCPs) and

GGO assets materially enhances PF GGP’s operating metrics
TTM
Tenant Occup.
GLA (4) Sales PSF Occup. Cost
GGP (1) 65.3 $411 90.5% 14.6%
Less: SCPs / Highland (2) 3.9 250 82.5% 18.0%
Less: GGO Malls (3) 2.0 325 82.5% 17.0%
PF GGP 59.4 $424 91.3% 14.3%
(1) Source: GGP Q1'10 supplement pgs. 31-32.

(2) See appendix for details.
(3) Includes Victoria Ward, Landmark Mall, Rio West, South Street Seaport, Redlands Mall, Riverwalk Marketplace, Park West and Cottonwood Mall.
See Exhibit E docket #4874 for full list of GGO assets. Source for tenant sales, occupancy and occupancy cost: Pershing Square estimates.
(4) Mall and freestanding gross leasable area (excludes anchors). Units in millions of sq ft.
33
PF GGP Debt
PF GGP’s leverage will be meaningfully reduced upon emergence

PF GGP Debt Buildup ($ in mms)
Total GGP Debt (3/31/10) (1) $27,506

Interest coverage ratio (2) 1.2x
Less: SCPs debt (3) (948)

Less: GGO debt (3) (506)
Less: Stonestown mezz (4) (57)
Less: Highland (5) (32)
Less: TopCo unsecured debt (6) (6,373)
Less: DIP (6) (400)
Plus: New Debt (7) 1,500
PF GGP Debt (3/31/10) $20,691
Less: Additional amortization through 9/30/10e (3) (212)

PF GGP Debt (9/30/10e) $20,478
(1) Source: Q1'10 supplement pg 2. See appendix for details.

(2) As of 9/30/09, the last time GGP published its interest coverage ratio in its operating supplement.
(4) Paid down Apr-10.
(5) On 5/3/10 the property owned by the Highland JV was transferred to the lender (Source: 10-Q pg 40).
(6) Assumed to be paid down as part of PF GGP's emergence.
(7) Assumed to be issued as part of PF GGP's emergence. 34
PF GGP Cash NOI
Despite the dispositions of SCPs and GGO assets, PF GGP’s net

operating income will be relatively unaffected
PF GGP Adj Cash NOI Buildup ($ in mms)

LTM GGP Cash NOI (1) $2,360
Plus: Bankruptcy claims revenue/expense impact (2) 25
Plus: One-time R&M spend (3) 16
Plus: Real estate tax expense from dvlpmt projects (4) 5
Less: SCPs / GGO / Highland LTM cash NOI (5) (115)
LTM PF GGP Adj Cash NOI $2,290
(1) Source: GGP operating supplements. See appendix for detail.

(2) One-time revenue/expense impacts arising due to the bankruptcy. These are non-recurring items.
Assumes 2009 and LTM are equal. Source: GGP Q4'09 operating supplement pg 7.
(3) One-time additional property upkeep costs. This reflects "catch-up" R&M spend.
Assumes 2009 and LTM are equal. Source: GGP Q4'09 operating supplement pg 7.
(4) Represents drag to GGP NOI from PF GGP development projects. Source: Pershing Square estimate.
(5) Represents LTM cash NOI attributable to the SCP malls and GGO assets that are assumed
to not be included in PF GGP cash NOI post-emergence. Excludes MPC NOI.
Source: Pershing Square estimate.
35
PF GGP Shares Outstanding / Market Cap
At $15 per share, PF GGP would emerge with a ~$16bn market cap
(units in mms, except per share data) Illustrative PF GGP FDSO @ Various Share Prices
$10.00 $11.00 $12.00 $13.00 $14.00 $15.00 $16.00
Current FDSO (1) 324 324 324 324 324 324 324
BPF minimum commitment 440 440 440 440 440 440 440
Clawback shares (2) 190 190 190 190 190 190 190
Liquidity Equity Issuances (3) 65 65 65 65 65 65 65
PF GGP FDSO (excl warrants) 1,019 1,019 1,019 1,019 1,019 1,019 1,019
Warrants (share equivalent) (4) 31 36 41 45 50 53 57

PF GGP FDSO (incl warrants) 1,051 1,056 1,060 1,065 1,069 1,073 1,076
PF GGP Market Cap $10,506 $11,612 $12,725 $13,843 $14,965 $16,090 $17,219
Memo: Warrant Translation

Fair Value of warrants (5) $312 $399 $492 $590 $693 $799 $908
Divided by: Share Price 10.00 11.00 12.00 13.00 14.00 15.00 16.00
Warrants (share equivalent) 31 36 41 45 50 53 57
(1) Includes OP Units and options. Source: Q1'10 operating supplement, pg 27.
(2) Assumes full clawback of 190mm Pershing Square and Fairholme shares.
(3) Assumes GGP sells 65mm Liquidity Equity Issuances shares.
(4) Represents the share-equivalent amount of 120mm warrants at various PF GGP share prices.
(5) Black-Scholes warrant valuation. Assumes 20 vol, 60mm warrants at $10.50 strike, 60mm
warrants at $10.75 strike, and 7-yr duration.
36
PF GGP Would Be the Second Largest U.S. REIT
Top 5 REITs in the IYR REIT

Index by Rank (as of 5/28/10)
REIT % of IYR Mkt Cap
At $15 per share,
1. Simon Property Group 8.7% $29,987
PF GGP would be
PF GGP 0.0% 16,090 the second largest
2. Vornado 5.0% 15,016 REIT in the index
3. Equity Residential 4.4% 13,297
4. Public Storage 4.3% 15,456
5. Boston Properties 3.8% 12,341
15. Macerich 1.9% 5,782
________________________________________________
Source: Market cap data from Green Street Real Estate Securities Monthly (as of 6/1/10). 37
PF GGP Will Be A “Must-Own” REIT Stock
f Shareholder overlap among public REITs is extremely high

due to a large, dedicated REIT investor universe
f Dedicated REIT investors closely track REIT indexes
f As a result of GGP’s bankruptcy, it was removed from REIT

indexes
f When PF GGP emerges from bankruptcy, it will once again

be added to the real estate indexes. This will make it a
“must-own” equity
38
Simon Crossholdings Analysis
There is enormous shareholder overlap among the top five REITs in the IYR. On
average, the same 25 holders own ~60% of the top five REITs, yet they currently
own less than 1% of GGP. In order to obtain similar ownership of PF GGP, they
must buy 60% or $9bn of PF GGP
Equity Public Boston
(units in millions) Simon Vornado Residential Storage Properties Macerich GGP
Top 25 Holders Shares Value Shares Value Shares Value Shares Value Shares Value Shares Value Shares Value
The Vanguard Group 25 $2,120 14 $1,073 24 $1,068 11 $1,034 12 $922 9 $364 - -
BlackRock 20 1,668 13 975 22 977 11 969 11 833 9 359 0 0
Cohen & Steers 17 1,464 6 444 11 476 8 680 4 336 6 229 - -
State Street Global Advisors 13 1,117 8 579 13 555 6 559 6 481 3 130 0 2
Fidelity Investments 11 965 7 524 8 341 6 505 4 286 6 224 0 5
Stichting Pensioenfonds 9 789 6 489 12 519 5 490 5 400 2 68 - -
ING Investment Mgmt 9 761 7 567 8 332 2 149 2 145 12 496 - -
Morgan Stanley Inv Mgmt 8 660 5 392 17 734 3 288 4 299 1 30 0 0
Invesco 8 657 5 358 7 311 3 316 4 290 4 163 0 0
PGGM 10 852 4 280 5 225 2 194 3 213 3 128 - -
LaSalle Investment Mgmt 6 529 5 343 6 251 3 311 3 213 1 21 - -
Old Mutual Asset Mgmt 4 346 5 393 7 312 3 285 3 200 3 115 1 17
RREEF 7 547 1 99 3 150 3 317 4 335 2 96 - -
AEW Capital Mgmt 5 416 3 211 6 285 2 212 3 236 3 108 - -
T. Rowe Price Group 5 387 3 192 3 149 1 132 2 155 2 97 - -
Security Capital Research 3 266 1 98 6 254 2 185 3 231 2 76 - -
Frank Russell 4 325 2 154 4 168 2 180 2 125 2 64 - -
STB Asset Mgmt 4 310 2 189 3 139 2 160 2 171 0 3 - -
Northern Trust 3 291 2 152 3 150 2 146 2 129 1 31 - -
Principal Global Investors 4 328 1 108 2 102 2 159 2 151 1 27 2 24
Dimensional Fund Advisors 3 265 2 152 3 134 2 168 2 116 1 40 0 0
Goldman Sachs Asset Mgmt 5 436 1 66 0 14 1 118 2 178 0 3 0 6
TIAA-CREF 3 250 2 133 2 106 2 148 2 127 1 51 0 3
Nikko Asset Mgmt 3 241 2 159 3 118 1 130 2 137 0 16 - -
Adelante Capital Mgmt 3 218 2 126 3 142 1 126 2 117 1 31 - -
Top 25 Holders 193 $16,209 109 $8,255 182 $8,010 88 $7,961 90 $6,826 74 $2,971 4 $57
% of Mkt Cap (1) 66% 60% 64% 52% 65% 57% 0%
________________________________________________
Source: Capital IQ as of 5/21/10.
(1) % of market cap is based on Capital IQ market cap estimates, which tend to rely solely on basic shares outstanding.
% of GGP market cap is based on PF GGP market cap at $15 per share. 39
Not Your Typical Public Offering
f PF GGP’s emergence from bankruptcy will be tantamount

to an initial public offering (IPO)
f Unlike traditional IPOs where buyers have all the leverage,

PF GGP’s equity is already fully committed pre-offering. As
a result, rather than be a forced seller, PF GGP can achieve
a high value execution
f Under the terms of the Brookfield, Fairholme, and Pershing

Square agreement, PF GGO can sell up to 255 million (1)
shares at prices of $10.50 or greater
________________________________________________
(1) Assumes full clawback of 190mm PershingSquare and Fairholme shares.
Assumes GGP sells full amount of 65mm Liquidity Equity Issuances shares. 40
PF GGP IPO Supply / Demand Dynamic
Demand Supply
($ and shares in millions)
Anticipated PF GGP IPO Supply
Anticipated Demand from
the Dedicated REIT Universe Clawback shares (2) 190
Liquidity Equity Issuances (3) 65
PF GGP Market Cap (@$15) $ 16,090
PF GGP IPO Share Supply 255
Top 25 REIT Investors
average % of Mkt Cap (1) 60.0% PF GGP share price $ 15.00
Anticipated Demand $9,654 Anticipated Supply $3,825
(1) Based on Simon Crossholdings Analysis.

(2) Assumes full clawback of 190mm Pershing Square and Fairholme shares.
(3) Assumes GGP sells 65mm Liquidity Equity Issuances shares.
41
Illustrative PF GGP Valuation at Various Share Prices
At $15 per share, PF GGP would trade at a 6.6% cap rate, in line
with comparable mall REITs
(units in mms, except per share data) Illustrative PF GGP Cap Rate @ Various Share Prices Memo:
$10.00 $11.00 $12.00 $13.00 $14.00 $15.00 $16.00 $9.00
Price $10.00 $11.00 $12.00 $13.00 $14.00 $15.00 $16.00 $9.00
PF GGP FDSO (incl warrants) 1,051 1,056 1,060 1,065 1,069 1,073 1,076 1,045
Market Cap $10,506 $11,612 $12,725 $13,843 $14,965 $16,090 $17,219 $9,408
Target Net Debt (1) $22,971 $22,971 $22,971 $22,971 $22,971 $22,971 $22,971 $22,971
Less: SCPs debt (2) (948) (948) (948) (948) (948) (948) (948) (948)
Less: GGO debt (3) (506) (506) (506) (506) (506) (506) (506) (506)
Less: Highland debt (32) (32) (32) (32) (32) (32) (32) (32)
Less: Brazil adjustment (4) (15) (15) (15) (15) (15) (15) (15) (15)
Less: Excess Sources (5) (1,678) (1,729) (1,780) (1,831) (1,882) (1,933) (1,984) (1,678)
Plus: Other liabilities (6) 1,345 1,345 1,345 1,345 1,345 1,345 1,345 1,345
Less: Other assets (7) (1,686) (1,686) (1,686) (1,686) (1,686) (1,686) (1,686) (1,686)
TEV $29,957 $31,012 $32,074 $33,141 $34,212 $35,287 $36,364 $28,859
Less: GGMI (8) (151) (151) (151) (151) (151) (151) (151) (151)
Less: Development assets (9) (183) (183) (183) (183) (183) (183) (183) (183)
Adj TEV $29,623 $30,678 $31,740 $32,807 $33,878 $34,953 $36,030 $28,525
PF GGP LTM Adj Cash NOI 2,290 2,290 2,290 2,290 2,290 2,290 2,290 2,290
Cap Rate 7.7% 7.5% 7.2% 7.0% 6.8% 6.6% 6.4% 8.0%
Net Debt / TEV (10) 66.7% 64.4% 62.3% 60.3% 58.4% 56.6% 54.9% 69.2%
(1) Target Net Debt as of the original Cornerstone Investment Agreement. Target Net Debt is an estimate of GGP's net debt as of 9/30/10e. (4) Brazil debt included in Target Net Debt is $110.4mm (Source: Cornerstone Investment Agreement.)
Target Net Debt includes PF GGP and GGO liabilities. In addition, Target Net Debt includes non-debt liabilities, such as accrued interest and GGP's share of this debt as of 3/31/10 was $95.2mm. Source: Q1'10 supplement pg 2.
Permitted Claims (i.e. the KEIP), among other things. Therefore, Target Net Debt includes the Company's estimate of bankruptcy "exit costs." (5) See Excess Sources appendix page for details. Excess Sources are treated as cash and offset Target Net Debt. Bankruptcy "exit costs"
Furthermore, Target Net Debt includes the following: $1.5bn of New Debt, debt associated with GGP's international subsidiaries, and preferred stock. are excluded from uses in the Excess Sources calculation because they are included as Permitted Claims in Target Net Debt.
Source: pg 75 of docket #4874. See appendix for details. Excess Sources will likely be higher than presented, to the extent GGO's IPO Participation is greater than permitted liabilities.
(2) SCP debt needs to be removed from Target Net Debt to arrive at an estimate of PF GGP debt upon emergence (assumed to be 9/30/10e). (6) Includes GGP's other liabilities that are not accounted for as part of Target Net Debt. See appendix for details.
This assumes GGP "hands back the keys" on SCP malls. This is a Pershing Square assumption as the outcome is TBD. Source: pg 17 of Q1'10 10-Q.
(7) See appendix for details. Excludes goodwill.
See appendix for details.
(8) Applies 25% EBIT margin assumption to LTM management income of $80mm. Applies 7.5x
(3) Debt associated with properties going to GGO needs to be removed from Target Net Debt to arrive at an estimate of PF GGP debt.
multiple to implied LTM EBIT. Source for LTM fee income: GGP operating supplements.
GGO debt includes debt associated with Victoria Ward, GGP's headquarters leasehold, the Bridgelands MPC and GGP's pro rata share of the
Woodlands MPC debt. Debt estimate is derived from GGP's public filings and may not exactly reconcile to GGP's 9/30/10e estimate of such debt.
42 (9) PF GGP development assets including Christiana Mall, Fashion Place, St Louis Galleria. Source: Q1'10 operating supplement.
See appendix for details. (10) 9/30/10e PF GGP debt less $500mm of Proportionally Consolidated Unrestricted Cash.
GGP Currently Trades at a Meaningful Cap Rate Spread
to Simon
At a $14 share price, PF GGP trades at an 8.0% implied cap rate

net of GGO(1)
________________________________________________
Source: “Why the Sad Face Mall Sector?” Credit Suisse equity research (4/26/10). 43
(1) See previous page for details.
PF GGP Will Have An Industry Leading Balance Sheet
Although PF GGP will have slightly more leverage than its peers on an
absolute basis, it will have a long-dated, laddered debt maturity profile.
We believe a reasonable amount of non-recourse leverage, especially if
the debt is high-quality, is more of an asset than a liability
Pro Forma
(1) (2) (3) (4)
Interest Rate 5.21% 5.50% NA 5.49%
Debt duration 5.3 yrs 5.2 yrs 7.0 yrs 3.2 yrs
Non-Recourse 78% < 52% < 20% < 89%

(5)
Leverage Ratio 57% 50% 49% 53%
(1) See appendix for PF GGP balance sheet details. PF GGP Leverage Ratio represents Net Debt / Adj TEV at $15 per share.
(2) Source: Simon operating supplements. Assumes 100% of mortgage debt is non-recourse. Most likely, some of
this debt is recourse but disclosure is unavailable.
(3) Source: Westfield financial results. Data as of Q4'09 if Q1'10 data is unavailable.
(4) Source: Macerich operating supplements. Adjusted to reflect April 25, 2010 paydown of $690mm line of credit and
April 7, 2010 paydown of $24mm Carmel Plaza loan. Adjusted to reflect refinancing and extension of Vintage Faire Mall loan.
Assumes 100% of mortgage debt is non-recourse. Most likely, some of this debt is recourse but disclosure is unavailable. 44
(5) Source: Green Street Real Estate Securities Monthly (as of 6/1/10).
PF GGP Will Have Industry Leading Operating Metrics
PF GGP will have the added benefit of near-term growth as it refocuses
on its operations post-emergence and corrects for the under-
performance that resulted from its bankruptcy
Pro Forma
(1) (2) (3)
Sales per Sq Ft $424 $420 $400 $416
Occupancy 91.3% 91.0% 92.1% 91.2%

(4)
Occup. Cost 14.3% 15.1% 17.0% 14.2%
Tenants Sales
7.5% 6.6% 5.3% 3.4%
Growth (Q1’10)
(5)
Cap Rate 8.0% 6.6% 6.0% 7.0%

(1) Simon malls only. Includes regional mall portfolio, the Mills, Mills regional malls, and malls included in Other Properties (excl Highland Mall).
Source: Simon operating supplements and 10-K. See later pages for Simon Malls operating metrics details.
(2) Based on Westfield's U.S. mall portfolio only. Data as of Q4'09 if unavailable in Q1'10 financial results. Source: Westfield financial results.
(3) Source: Macerich operating supplements.
(4) Source for Macerich / Westfield: "U.S. Mall REITs May '10 Update" Green Street 5/19/10. See PF GGP Operating Metrics for PF GGP
occupancy cost details. See appendix for details on Simon's occupancy cost.
(5) Source for Macerich / Westfield: Green Street Real Estate Securities Monthly (as of 6/1/10). PF GGP cap rate based on implied share price
45
of $9 net of GGO. See appendix for details on Simon's cap rate.
Aliansce
GGP owns 35% of Aliansce, a Brazilian mall developer, which went
public in January. Pershing Square is the second largest owner
with roughly 14% of the total shares outstanding
(1) (2) (2) (2)
Sales per Sq Ft $540 $420 $400 $416
Occupancy 98.0% 91.0% 92.1% 91.2%
Occup. Cost 13.4% 15.1% 17.0% 14.2%
Tenants Sales
16.5% 6.6% 5.3% 3.4%
Growth (Q1’10)
Cap Rate ~11% 6.6% 6.0% 7.0%

(1) Source: Aliansce Q1'10 financial results and Pershing Square estimates.
(2) See previous page for details. 46
A Word On Simon’s Reported Operating Metrics
Beginning in Q1’10, Simon consolidated its Premium Outlets

segment into its Regional Malls segment. This caused its newly
reported Regional Malls segment’s occupancy and sales per square
foot to appear to increase meaningfully
________________________________________________ 47
Source: Simon operating supplements.
A Word On Simon’s Reported Operating Metrics (Cont’d)
f We note that Simon’s Regional Mall portfolio excludes

several regional malls in The Mills and Mills Regional Malls
segments
In our view, these assets should be included in Simon’s Regional
Malls portfolio
f Simon has also transferred certain of its underperforming

malls into its Other Properties segment
For example, Highland Mall, a joint venture between Simon and
GGP that was 51% occupied as of 12/31/09, was recently
transferred back to the lender
Highland Mall was included in Simon’s Regional Mall portfolio as of
12/31/08, but showed up in its Other Properties segment as of
12/31/09. This further served to increase Simon’s reported
Regional Mall occupancy and sales per square foot as of Q1’10
48
A Word On Simon’s Reported Operating Metrics (Cont’d)
We believe the most appropriate way to compare Simon and PF GGP

is to look at Simon’s true regional mall portfolio, which excludes its
outlets, but includes its Mills malls and the underperforming malls
included in its Other Properties segment
(GLA in millions) Simon Property Group (1)
Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10
Regional Malls
As of 6/1/10, Tanger
Occupancy (2) 92.4% 90.8% 90.9% 91.4% 92.1% 91.6% Factory Outlet Centers,
Sales per Sq Ft (2) $470 $455 $442 $438 $433 $440
Owned GLA (excl anchors) 59.6 59.6 59.7 60.3 60.1 60.1 the best comp for
The Mills Simon’s Premium
Occupancy 94.5% 89.7% 90.9% 92.4% 93.9% 93.3%
Sales per Sq Ft $372 $373 $369 $369 $369 $372 Outlets segment, was
trading at a higher cap
Owned GLA (excl anchors) 20.3 20.3 20.2 20.2 20.2 20.2
Mills Regional Malls
Occupancy 87.4% 87.4% 88.4% 88.9% 89.3% 87.4% rate than Simon*
Sales per Sq Ft $418 $410 $397 $388 $380 $410
* Tanger traded at a 6.9% implied cap rate as of 6/1/10.
Source: Green Street Real Estate Securities Monthly (as of 6/1/10).
Other Properties Malls (excl Highland Mall) (3)
Occupancy 30.0% 30.0% 30.0% 30.0% 30.0% 30.0%
Sales per Sq Ft (4) $250 $250 $250 $250 $250 $250
Simon Malls
Occupancy 91.8% 89.7% 90.1% 90.8% 91.7% 91.0%
Sales per Sq Ft $441 $430 $419 $416 $412 $420
(1) Source: Simon operating supplements.

(2) Q1'10 data not available in Simon filings. Source: Pershing Square estimates.
(3) Includes Mall at the Source, Nanuet Mall and Palm Beach Mall (at share).
49
(4) Data not available. Source: Pershing Square estimates.
GGO
What is General Growth Opportunities?
GGO’s portfolio features some of the best real estate development assets in the
country. We believe GGO will have the balance sheet and the intellectual and
operating capital to take full advantage of these opportunities
General Growth Opportunities (Select Assets)
MPC Development Non-Income/Other
■ Summerlin ■ Victoria Ward ■ Fashion Show

■ Columbia ■ South St. Seaport ■ Princeton Land
■ Woodlands ■ Summerlin Center ■ 110 N. Wacker
■ Bridgeland ■ Landmark Mall
■ Park West
51
GGO IPO Participation
Under the terms of the fully executed Cornerstone Investment Agreement, GGO
will retain 80% of every dollar PF GGP raises above $10 per share, up to the
value of the ~$300mm deferred tax liabilities and the Hughes claim. This IPO
Participation allows GGO to benefit from a successful PF GGP capital raise
GGO IPO Participation at a $15/share GGP Offering

GGP Shares Total Proceeds GGO % GGO $

Issued Proceeds above $10 Share Share
Clawback Shares 190 $ 2,850 $ 950 80% $ 760
Liquidity Shares (1) 65 975 325 80% 260
255 $ 3,825 $ 1,275 $ 1,020
Sensitivity of GGO IPO Participation to GGP Offer Price
GGP Offer Price $ 10.00 $ 11.00 $ 12.00 $ 13.00 $ 14.00 $ 15.00 $ 16.00
GGO IPO Participation $ - $ 204 $ 408 $ 612 $ 816 $ 1,020 $ 1,224
(1) Assume 65mm Shares
52
GGO IPO Participation (Cont.)
GGO’s use of proceeds from the PF GGP share offering is limited to

satisfying permitted liabilities. We believe that cash from a PF GGP
capital raise even at prices meaningfully lower than $15 per share is
more than sufficient to satisfy these claims
Permitted Use of IPO Participation

The face value of the note
($ in millions, except per share data) is equal to overruns above
a conservative projection
of bankruptcy exit costs
Promissory Note (1) $ -
Deferred Tax Liabilities (2) $ 304 At $15 per share, the GGO
IPO Participation will be
~$1bn, substantially more
Hughes Heirs' Claim X
than enough to satisfy
Permitted Liabilities $304 + X these permitted liabilities
(1) Projected bankrupcty exit costs, "Permitted Claims", are $650mm per Pershing Square assumptions
(2) Source: Cornerstone Investment Agreement
53
Hughes Claim
f GGP can settle the claim in bankruptcy at an estimation hearing
f Settlement is based on a 12/31/09 valuation of Summerlin MPC
f We expect the company to settle this claim at a reasonable

number
f Post settlement, GGO will have 100% ownership of Summerlin

(from 50%)
54
GGO Share Count
A $250 million share backstop at $5.00 per share strengthens GGO’s

balance sheet
Share Count (millions):

Current GGO FDSO (1) 324
Rights Offering Backstop Shares (2) 53
PF GGO FDSO (excl warrants) 377
Warrants (share equivalent) (3) 23
GGO FDSO (incl warrants) 400
(1) Includes OP Units and options. Source: Q1'10 operating supplement, pg 27.
(2) Assumes only the backstop rights are exercised. Includes 2.5mm share backstop consideration.
(3) Black-Scholes warrant valuation. Assumes 20 vol, 80mm warrants at $5.00 strike.
55
GGO Capital Structure (Cont.)
GGO will have a strong balance sheet. 100% of GGO’s debt is property
level and non-recourse. $250mm of balance sheet cash ensures GGO
has ample liquidity to fund value creation opportunities
GGO Capital Structure

Price $ 5.00
Shares (mm) 400
Equity Value 2,000
Non-Recourse, Property Specific Debt (1) 506

Permitted Liabilities, net of GGO IPO Participation -
Cash (2) (250)
Net Debt 256
Enterprise Value $ 2,256

(1) See Appendix
(2) Excludes property level cash balances because data is unavailable
56
MPC Portfolio
MPC Portfolio
Bridgeland Maryland, MPCs Summerlin Woodlands
■ 11,400 acres ■ Collection of ■ 22,500 acre ■ Successful

outside of properties community JV MPC near
Houston, TX between DC west of Las Houston, TX
and Baltimore Vegas
57
Development Asset: Victoria Ward
GGP recently received zoning approval to transform 60 acres of

land in the heart of Honolulu into a vibrant and diverse
neighborhood of residences, shops, entertainment and offices
The plan clears a path for GGP to bring to the oceanfront

neighborhood as many as:
f 4,300 residential units, many of them in towers aligned to

preserve mountain and ocean views
f 5 million square feet of retail shopping, restaurants and

entertainment
f 4 million square feet of offices and other commercial space
f 700,000 square feet of industrial uses
f 14 acres of open space, parks and public facilities

58
Development Asset: Victoria Ward (Cont’d)
1.43 acres of land

sold for $26mm
($18mm / acre)
here in June-07 (1)
________________________________________________
59
Development Asset: South St. Seaport
Before the market turned, GGP was exploring a billion dollar

redevelopment of South St. Seaport
Highlights of the development include:
f 400,000 square feet of retail space
f A 286 room hotel and a smaller 163 room boutique
f 103 residential units
f Nearly 5 acres of open space
60
Development Asset: South St. Seaport (Cont’d)
61
Non-Income Producing Asset: Fashion Show Air Rights
GGO owns the air rights above the Fashion Show Mall in Las Vegas
f This 48 acre, three-story property is located across from the

Wynn and Encore, the most lucrative part of the Las Vegas Strip
f In 2007, nearby North Vegas Strip land sold for $34mm/acre¹
f Fashion Show’s location is within walking distance of 75% of the

city’s more than 150,000 hotel rooms
f Located adjacent to Fashion Show is The Venetian, The Palazzo,

and Sands Expo Center – the largest hotel convention complex in
the world
¹Source: "Vegas Land Values Soaring Sky High", Glenn Haussman, Hotel Interactive, 5/25/2007
62
The North Vegas Strip
Encore
Fashion Show
Wynn
Palazzo
Venetian
Caesars
63
Conclusion
GGP Trades at a Meaningful Discount to Intrinsic Value
At a $14 GGP share price, you are buying GGO for negative $1
GGP Valuation
PF GGP ~$15
GGO ~$5
Combined ~$20
GGP Share Price ~$14
Implied Return at
Emergence by Year-end 43%
65
Over the years, people have
accused me of talking my book.
For my best investment idea…

Buy Christine Richard’s Book, and Tell Your Friends
67
And one more thing…
We have accumulated ~150mm shares of Citigroup during the past

several weeks…
68
Appendix
SCPs / Highland Mall
(units in millions, except per unit data) Balance Sheet Data Operating Metrics (4)
Interest Duration Sales Occup
GLA (5) Debt Rate (yrs) PSF Occup Cost
Consolidated Properties (1)
Eagle Ridge Mall 0.2 $47 5.41% 5.5
Oviedo Marketplace 0.3 51 5.12% 3.8
Grand Traverse Mall 0.3 84 5.02% 3.8
Country Hills Plaza 0.1 13 6.04% 6.2
Moreno Valley Mall 0.3 86 5.96% 3.8
Lakeview Square 0.3 41 5.81% 5.9
Northgate Mall 0.3 44 5.88% 6.4
Bay City Mall 0.2 24 5.30% 3.8
Mall St. Vincent 0.2 49 6.30% 4.3
Southland Center 0.3 107 4.97% 3.8
Chapel Hills Mall 0.4 114 5.04% 3.8
Chico Mall 0.2 56 4.74% 3.8
Piedmont Mall 0.2 33 5.98% 6.4
Subtotal 3.3 $750 5.38% 4.3
Unconsolidated Properties (2)
Silver City 0.2 66 4.95% 1.2
Montclair 0.3 134 5.88% 1.5
Subtotal 0.5 $198 5.57% 1.4
SCPs 3.7 $948 5.42% 3.7
Highland Mall (3) 0.2 32 6.83% 1.3 51.1%
SCPs / Highland 3.9 $980 5.47% 3.6 $250 82.5% 18.0%
(1) Source: Exhibit C, docket #3660.
Source for debt detail: Simon Q1'10 supplement.
Source for debt balance / interest rate / duration: 5/12/10 8-K.
Source for occupancy: Simon 10-K.
(2) Source for malls: Q1 10-Q pg. 21-22. Data presented pro rata (i.e. if GGP owns 50%, 50% of the GLA is shown).
Source for duration: Q3'08 operating supplement.
Source for debt balance / interest rate / duration: Q3'08 supplement.
(4) Source: Pershing Square estimates.
Source for subtotal debt balance (as of 3/31/10): Q1 10-Q, pg 22.
Note: Occupancy costs are higher at underperforming malls because sales are low but rents are locked in.
70 (5) Mall and freestanding gross leasable area (excludes anchor space).
GGP Debt Detail – GGO
Debt
($ in 000s) Debt Balance
GGO Debt Balance as of: Source
Victoria Ward Cmbd $213,889 3/31/10 5/12/10 8-K
110 N. Wacker 45,943 9/30/08 Q3'08 supp
Bridgelands MPC 29,812 12/31/09 10-K
Woodlands MPC 216,343 9/30/08 Q3'08 supp
GGO Debt $505,987
Note: Most recent debt balance reported assumed to be 3/31/10 balance.

True balance is actually less as amortization has occurred since most
recent reported debt balance.
Note: All GGO debt sits at the property-level and is non-recourse.
Note: Excludes debt which may arise to the extent there is a GGO Promissory Note.
We believe the amount of this note will be $0.
71
GGP Debt Detail – Debtor Entities
($ in 000s) Debt Debt Debt Debt
Debtor Entities: 3/31/10 Debtor Entities: 3/31/10 Debtor Entities: 3/31/10 Debtor Entities: 3/31/10
10 Columbia Corporate Center - Corporate Pointe #2 4,458 Mayfair Cmbd (offices included) 274,932 Sooner Cmbd 59,873
10000 Chrlston/ 9901/21 Cvngton 21,772 Corporate Pointe #3 4,458 Mondawmin Mall Cmbd 84,689 Southlake Cmbd 99,799
(1) (1) (1)
10000 Covington Cross - Country Hill Plaza 13,352 Moreno Valley Mall Cmbd 86,432 Southland Center Cmbd 106,940
10190 Covington Cross - Crossing Business Center #6 - Neighborhood Stores - Southland Cmbd 79,325
1160/80 Town Center Drive 8,320 Crossing Business Center #7 - Newgate Mall Cmbd 40,207 Southwest Plaza Cmbd 96,187
1201/41 Town Center Drive - Crossroads (MN) Cmbd 82,754 Newpark Mall 67,143 Spring Hill Cmbd 68,088
1251/81 Town Center Drive - Deerbrook Mall 71,202 North Plains Mall Cmbd 10,656 Staten Island Mall 278,672
1551 Hillshire Drive - Division Crossing 5,114 North Point Mall Cmbd 212,567 Steeplegate Mall Cmbd 76,505
(1) (2)
1635 Village Center Circle - Eagle Ridge Cmbd 46,942 North Star Mall 228,174 Stonestown Mezz 57,400
1645 Village Center Circle - Eastridge (WY) Cmbd 38,497 North Town Cmbd 114,976 Stonestown Notes A/B 215,600
(1)
20 Columbia Corporate Center - Eastridge Mall Cmbd 169,620 Northgate Cmbd 44,440 The Boulevard Cmbd 105,345
30 Columbia Corporate Center - Eden Prarie Cmbd 78,311 Northridge Fashion Ctr Cmbd 124,232 The Crossroads (MI) Cmbd 39,074
40 Columbia Corporate Center - Faneuil Hall Marketplace Cmbd 92,788 Oakwood Center Cmbd 95,000 The Gallery at Harborplace Cmbd 78,512
50 Columbia Corporate Center - Fashion Place Cmbd 142,255 Oakwood Cmbd 75,772 The Maine Mall Cmbd 212,597
60 Columbia Corporate Center - Fashion Show Cmbd 645,918 Oglethorpe Cmbd 138,994 The Palazzo 249,623
9950/80 Covington Cross - Foothills Mall Cmbd 50,758 Orem Plaza Center Street 2,386 The Shoppes at Fallen Timbers Cmbd 42,401
Ala-Moana - Total 1,482,189 Fort Union 2,670 Orem Plaza State Street 1,477 The Woodland Mall 239,268
(1)
Animas Valley Cmbd 35,054 Four Seasons Cmbd 97,950 Oviedo Marketplace Cmbd 51,066 Three Rivers Cmbd 21,132
Apache Cmbd - Fox River Cmbd 194,400 Owings Mills 53,281 Towneast Cmbd 102,775
Arizona Center Cmbd - Gateway Cmbd 39,148 Oxmoor Cmbd 56,128 TRS-Fallbrook Cmbd 84,820
Augusta Mall Cmbd 174,422 Gateway Crossing Shopping Ctr 14,931 Park City Center Cmbd 146,522 TRS-Grand Canal Shoppes Cmbd 386,487
Austin Bluffs Plaza 2,219 Gateway Overlook 54,877 Park Place Cmbd 173,397 Tucson Mall 118,674
(1)
Bay City Mall Cmbd 23,745 Glenbrook Square Cmbd 174,262 Peachtree Cmbd 88,121 Tysons Galleria Cmbd 254,194
Bayshore Cmbd 30,473 Grand Teton Cmbd 48,795 Pecanland Mall 56,159 University Crossing 11,147
(1) (1)
Beachwood Place Cmbd 240,164 Grand Traverse Cmbd 83,919 Piedmont Cmbd 33,478 Valley Hills Cmbd 55,775
Bellis Fair Cmbd 59,826 Greenwood Cmbd 43,952 Pierre Bossier Cmbd 40,382 Valley Plaza Cmbd 93,129
Birchwood Cmbd 44,308 Halsey Crossing 2,503 Pine Ridge Cmbd 25,956 Victoria Ward Center 57,175
Boise Towne Plaza 10,704 Harborplace Cmbd 49,884 Pioneer Place Cmbd 156,764 Victoria Ward Village/Gateway/Indust 88,214
Boise Towne Square 69,489 Hulen Mall Cmbd 111,085 Prince Kuhio Plaza 36,885 Victoria Ward Warehouse/Plaza 68,500
Brass Mill Cmbd 120,142 Jordan Town Creek Cmbd 182,227 Providence Place Cmbd 381,691 Village of Cross Keys Cmbd 10,257
Burlington Town Center Cmbd 31,406 Knollwood Mall Cmbd 39,332 Red Cliffs Mall Cmbd 24,669 Visalia Cmbd 40,253
Cache Valley Cmbd 28,043 Lakeside Mall Cmbd 176,810 Regency Square Cmbd 91,588 Vista Commons -
(1)
Capital Cmbd 19,975 Lakeview Square Cmbd 40,771 Ridgedale Center Cmbd 175,127 Vista Ridge Mall Cmbd 78,869
(1)
Chapel Hills Cmbd 113,785 Lansing Cmbd 23,081 Ridgley Building - Washington Park Mall Cmbd 11,893
(1)
Chico Mall Cmbd 55,913 Lincolnshire Commons 27,939 River Hills Cmbd 79,831 West Valley Cmbd 54,543
Chula Vista Center Cmbd - Lynnhaven Cmbd 233,105 River Pointe Plaza 3,696 Westwood Mall 24,117
Collin Creek Combine 65,884 Mall at Sierra Vista Cmbd 23,556 Riverside Plaza 5,290 White Marsh Mall Cmbd 186,800
Colony Square Cmbd 25,239 Mall of Louisiana 235,174 Rivertown Cmbd 115,948 White Mountain Cmbd 10,656
Columbia Center-C.A. Building - Mall of Louisiana Power Center - Rogue Valley Cmbd 25,966 Willowbrook Cmbd 155,974
Columbia Center-Exhibit Bldg - Mall of the Bluffs Cmbd 35,951 Saint Louis Galleria 233,390 Woodbridge Center Cmbd 203,884
Columbia Mall Cmbd 89,807 Mall St. Mathews Cmbd 142,008 Salem Center Cmbd 41,728 Woodlands Village 6,758
(1)
Columbiana Centre Cmbd 105,441 Mall St. Vincent Cmbd 49,000 Sikes Senter Cmbd 60,395
Coronado Center Cmbd 166,028 Market Place Cmbd 105,773 Silver Lake Cmbd 18,228 Debtor Entity Debt $14,712,876
Source: GGP 5/12/10 8-K.

Note: Entities with no debt will be unencumbered upon emergence.
(1) Represents an SCP mall. 72
(2) Paid down in April-10.
GGP Debt Detail – Non-Debtor Entities
Debt
Non-Debtor Entities: Balance as of: Source
110 N. Wacker (headquarters) $45,943 9/30/08 Q3'08 supp
Baybrook Cmbd 168,570 12/31/09 10-K
Bayside Marketplace Cmbd 84,103 12/31/09 10-K
Coastland Center Cmbd 117,006 12/31/09 10-K
Coral Ridge Cmbd 88,250 12/31/09 10-K
Cumberland Cmbd 103,862 12/31/09 10-K
Governor's Square Cmbd 74,368 12/31/09 10-K
Lakeland Square Mall Cmbd 53,675 12/31/09 10-K
Meadows Cmbd 101,463 12/31/09 10-K
Oak View Cmbd 83,292 12/31/09 10-K
Paramus Park Cmbd 102,855 12/31/09 10-K
Pembroke Lakes Mall Cmbd 126,924 12/31/09 10-K
The Mall in Columbia Cmbd 400,000 12/31/09 10-K
The Parks at Arlington Cmbd 174,517 12/31/09 10-K
The Shoppes @ Buckland Hills Cmbd 161,319 12/31/09 10-K
West Oaks Mall 68,301 12/31/09 10-K
10450 W. Charleston LLC 4,756 9/30/08 Q3'08 supp
Senate Plaza 12,084 9/30/08 Q3'08 supp
70 Columbia Corporate Center 19,676 9/30/08 Q3'08 supp
Non-Debtor Entity Debt $1,990,964

73
GGP Debt Detail – Joint Ventures (at share)
Debt Debt
($ in 000s) Debt Balance Debt Balance
Joint Ventures (at share): Balance as of: Source Joint Ventures (at share): Balance as of: Source
(3)
Alderwood Mall Cmbd $145,783 9/30/08 Q3'08 supp Provo Towne Centre Cmbd 43,302 9/30/08 Q3'08 supp
Altamonte Mall Cmbd 75,000 9/30/08 Q3'08 supp Quail Springs Mall 37,409 9/30/08 Q3'08 supp
Arrowhead Towne Center 25,820 9/30/08 Q3'08 supp Riverchase Galleria Cmbd 152,500 9/30/08 Q3'08 supp
(2)
Bridgewater Commons 47,754 9/30/08 Q3'08 supp Silver City Galleria Cmbd 65,528 9/30/08 Q3'08 supp
(3)
Carolina Place Cmbd 80,281 9/30/08 Q3'08 supp Spokane Valley Cmbd 41,052 9/30/08 Q3'08 supp
Christiana Mall 56,838 9/30/08 Q3'08 supp Stonebriar Centre Cmbd 84,405 9/30/08 Q3'08 supp
Clackamas Town Center Cmbd 100,000 9/30/08 Q3'08 supp Superstition Springs Center 22,498 9/30/08 Q3'08 supp
First Colony Mall Cmbd 95,149 9/30/08 Q3'08 supp The Oaks Mall Cmbd 52,020 9/30/08 Q3'08 supp
(3)
Florence Mall Cmbd 68,786 9/30/08 Q3'08 supp The Shops at La Cantera Cmbd 129,402 9/30/08 Q3'08 supp
(3)
Galleria Tyler Cmbd 125,000 9/30/08 Q3'08 supp The Streets at Southpoint 242,881 9/30/08 Q3'08 supp
Glendale Galleria Cmbd 191,317 9/30/08 Q3'08 supp Towson Town Center Cmbd 44,760 9/30/08 Q3'08 supp
Highland Mall Cmbd 31,990 3/31/10 Simon Q1'10 supp (1) Village of Merrick Park Total 76,034 9/30/08 Q3'08 supp
Kenwood Towne Centre Cmbd 168,095 9/30/08 Q3'08 supp Water Tower Place Cmbd 89,514 9/30/08 Q3'08 supp
(3)
Mizner Park Total - 3/31/10 Paid down Westlake Center Cmbd 68,119 9/30/08 Q3'08 supp
(2)
Montclair Place Cmbd 133,825 9/30/08 Q3'08 supp Westroads Mall Cmbd 45,518 9/30/08 Q3'08 supp
Natick Mall Cmbd 175,000 9/30/08 Q3'08 supp Whalers Village Cmbd 64,893 9/30/08 Q3'08 supp
Natick West 70,000 9/30/08 Q3'08 supp Willowbrook Mall 46,003 9/30/08 Q3'08 supp
Northbrook Court Cmbd 42,513 9/30/08 Q3'08 supp Owings Mills-One Corporate Ctr 4,119 9/30/08 Q3'08 supp
Oakbrook Center Cmbd 103,010 9/30/08 Q3'08 supp Center Pointe Plaza 6,846 9/30/08 Q3'08 supp
Park Meadows Cmbd 126,000 9/30/08 Q3'08 supp Lake Mead Blvd & Buffalo 2,947 9/30/08 Q3'08 supp
Perimeter Mall Cmbd - 3/31/10 Paid down Trails Village Center 8,073 9/30/08 Q3'08 supp
Pinnacle Hills Promenade / West 70,000 9/30/08 Q3'08 supp
Joint Venture Debt $3,259,984

(2) Represents an SCP mall.
(3) Represents a Joint Venture mall included in GGP's "Consolidated Debt" disclosure.
74
GGP Debt Detail – Other Debt
Debt
Other Debt Balance as of: Source
Bridgelands MPC $29,812 12/31/09 10-K
Woodlands MPC 216,343 9/30/08 Q3'08 supp
Homart I 245,115 3/31/10 5/12/10 8-K
Ivanhoe Capital 93,713 3/31/10 5/12/10 8-K
Turkey 57,221 9/30/08 Q3'08 supp
DIP 400,000 3/31/10 5/12/10 8-K
Unsecured Debt:
Exchangeable debt 1,550,000 3/31/10 5/12/10 8-K
Rouse debt 2,245,000 3/31/10 5/12/10 8-K
Revolver 590,000 3/31/10 5/12/10 8-K
Senior term loan 1,987,500 3/31/10 5/12/10 8-K
TopCo Unsecured Debt 6,372,500
TRUPS 206,200 3/31/10 5/12/10 8-K
Other Debt $7,620,904

75
GGP Debt Detail – 3/31/10 Reconciliation
($ in 000s) Debt
Total GGP Debt Balance
Debtor entity debt $14,712,876
Non-Debtor entity debt 1,990,964
Joint Venture debt 3,259,984
Other debt 7,620,904
Subtotal 27,584,728
Less: Amortization (1) (78,406)
Total GGP Debt (3/31/10) (2) $27,506,322
Note: Excludes mark-to-market debt discounts which would make the reported debt balance lower.
Excludes GGP's share of Brazil debt ($95.2mm as of 3/31/10). GGP has no obligations for further
contributions to its Brazilian subsidiary, Aliansce.
(1) Represents amortization that has occurred since the most recent reported date of GGP's debt.
For example, much of GGP's JV debt, reported as of 9/30/08, amortizes each month.
Data for which specific debt has been amortized, and in what amounts, is unavailable.
(2) Source: GGP Q1'10 operating supplement, pg 2.
76
PF GGP Debt Detail
PF GGP Debt Buildup ($ in mms)
Total GGP Debt (3/31/10) (1) $27,506

Less: SCPs debt (3) (948)

Less: GGO debt (3) (506)
Less: Stonestown mezz (4) (57)
Less: Highland (5) (32)
Less: TopCo unsecured debt (6) (6,373)
Less: DIP (6) (400)
Plus: New Debt (7) 1,500
PF GGP Debt (3/31/10) $20,691
Less: Additional amortization through 9/30/10e (3) (212)

PF GGP Debt (9/30/10e) $20,478
(1) Source: Q1'10 supplement pg 2. See appendix for details.

(2) As of 9/30/09, the last time GGP published its interest coverage ratio in its operating supplement.
(4) Paid down Apr-10.
(6) Assumed to be paid down as part of PF GGP's emergence.
(7) Assumed to be issued as part of PF GGP's emergence.
77
PF GGP Debt Detail – Interest / Duration / Non-Recourse
($ in millions) Cash Duration Non- Pct Non-
PF GGP Debt Detail Amt Interest (Years) Recourse Recourse
Debtor entities (1) $14,618 5.07% 6.3 $11,718 80.2%

Plus: Oakwood (2) 95 2.75% 4.2 - -
Less: Consolidated SCPs (3) (750) 5.38% 4.3 (710) 94.7%
Less: Victoria Ward (4) (214) 5.24% 4.9 (214) 100.0%
Less: Stonestown mezz (5) (57) 5.79% 3.8 (57) 100.0%
PF GGP Confirmed Debtors 13,692 5.03% 6.4 10,737 78.4%
Non-debtor consolidated debt (6) 2,530 5.68% 3.1 2,530 100.0%

Less: 110 N Wacker (4) (46) 5.14% 0.5 (46) 100.0%
Less: Bridgeland (4) (30) 6.50% 14.8 (30) 100.0%
PF GGP Non-Debtors 2,455 5.68% 3.0 2,455 100.0%
JV Debt (excl Consolidated JVs) (7) 2,946 5.61% 2.1 2,946 100.0%
Less: Woodlands (4) (216) 5.69% 3.5 (216) 100.0%
Less: Highland (8) (32) 6.92% 1.3 (32) 100.0%
Less: JV SCPs (Silver City / Montclair) (198) 5.57% 1.4 (198) 100.0%
PF GGP Pro Rata JV Debt 2,499 5.59% 2.0 2,499 100.0%
Homart / Ivanhoe (9) 339 5.89% 2.8 339 100.0%

TRUPs (9) 206 1.70% 26.0 - -
New Debt (10) 1,500 5.75% 3.0 - -
PF GGP Debt (3/31/10) $20,691 5.21% 5.3 $16,029 77.5%
(1) Includes all Secured Assset Loans, excluding Oakwood, Homart and Ivanhoe. Source: 5/12/10 8-K.
PF GGP LTM Adj Cash NOI (11) $2,300 Cash interest / duration as provided in GGP's 4/29/10 press release.
Amount that is non-recourse deducts $2.9bn. Source: Q1'10 10-Q pg 29.
Plus: LTM GGMI income (12) 80 (2) Interest rate assumed to be L+225. Source: docket #5225 and 5206.
Plus: LTM interest income 7 (3) Assumes $40mm is recourse to GGP.
(4) This debt will be going to GGO.
Less: Overhead (13) (260) (5) Paid down Apr-10.
PF GGP LTM EBITDA $2,127 (6) See Non-Debtor Consolidated Debt appendix page for details.
(7) See JV Debt (excluding Consolidated JVs) appendix page for details.
PF GGP Cash Interest 1,078 Interest rate / duration assumptions from Q3'08 operating supplement.
(9) Source: 5/12/10 8-K.
PF GGP Interest Coverage 2.0x (10) Assumes new debt issued at 5.75% cash interest with 3 year duration.
This debt will be issued at market rates. Note Simon issued 5-yr notes in Jan-10 yielding 4.25%.
(11) See PF GGP Cash NOI slide for details.
(12) LTM GGMI income as of 3/31/10. Source: operating supplements, see "Management fees and
other corporate revenues."
(13) Source: 2009 Annual Letter to Shareholders. Note "over the coming months, [GGP] intend[s]
78 to introduce many other innovations to improve the efficiency and effectiveness of the Company."
GGP Debt Detail – Non-Debtor Consolidated Debt
($ in 000s) Debt Duration
Non-Debtor Consolidated Debt Balance Interest Maturity (Yrs)
110 N. Wacker (headquarters) 45,943 5.14% 10/11/10 0.5
(1)
Baybrook Cmbd 168,570 5.75% 1/1/14 3.8
Bayside Marketplace Cmbd 84,103 6.00% 7/1/14 4.3
Coastland Center Cmbd 117,006 5.75% 1/1/14 3.8
(1)
Coral Ridge Cmbd 88,250 5.75% 1/1/14 3.8
(1)
Cumberland Cmbd 103,862 5.75% 1/1/14 3.8
(1)
Governor's Square Cmbd 74,368 5.75% 1/1/14 3.8
Lakeland Square Mall Cmbd 53,675 5.24% 10/1/13 3.5
Meadows Cmbd 101,463 5.54% 8/1/13 3.3
(1)
Oak View Cmbd 83,292 5.75% 1/1/14 3.8
Paramus Park Cmbd 102,855 4.97% 10/1/15 5.5
Pembroke Lakes Mall Cmbd 126,924 5.06% 4/11/13 3.0
The Mall in Columbia Cmbd 400,000 5.87% 10/1/12 2.5
(1)
The Parks at Arlington Cmbd 174,517 5.75% 1/1/14 3.8
The Shoppes @ Buckland Hills Cmbd 161,319 5.01% 7/2/12 2.3
West Oaks Mall 68,301 5.36% 8/1/13 3.3
10450 W. Charleston LLC 4,756 6.84% 12/31/18 8.8
Senate Plaza 12,084 5.79% 7/1/13 3.3
70 Columbia Corporate Center 19,676 10.15% 10/1/10 0.5
Bridgelands MPC (2) 29,812 6.50% 1/1/25 14.8
Consolidated JV Debt
Provo Towne Centre Cmbd 43,302 5.91% 4/5/12 2.0
Spokane Valley Cmbd 41,052 5.91% 4/5/12 2.0
The Shops at La Cantera Cmbd 129,402 5.29% 6/7/10 0.2
The Streets at Southpoint 242,881 5.45% 4/6/12 2.0
Westlake Center Cmbd 68,119 8.00% 2/1/11 0.8
Non-Debtor Consolidated Debt 2,545,532 5.68% 4/18/13 3.1
Less: Amortization (3) (15,163) Source: Interest rates per the Q3'08 GGP operating supplement. Many of these interest rates, especially to the
extent loans have been refinanced or are floating, may have changed since 9/30/08.
Source: Maturities per the Q3'08 operating supplement.
Non-Debtor Consolidated Debt (3/31/10) 2,530,369 5.68% 4/18/13 3.1
(1) For loans with maturity dates preceding 3/31/10, we have assumed they were refinanced with 1/1/14 maturity dates
and with 5.75% interest rates. Source: Pershing Square assumption.
Memo: Alternative Buildup (2) Source: Q3'08 operating supplement. Reported as "Houston Land Notes." The current interest rate is likely
Consolidated Debt (3/31/10) (4) 24,560,733 lower to the extent this debt is floating. Maturity date assumption is the midpoint of 2017-2033.
Less: Total Debtor Debt (3/31/10) (5) (22,030,364)
(4) Source: Q1'10 supplement pg. 29.
Non-Debtor Consolidated Debt (3/31/10) 2,530,369 (5) Source: 5/12/10 8-K.
79
GGP Debt Detail – Joint Venture Debt (excluding
Consolidated JVs)
($ in 000s)
Joint Venture Debt Debt Duration Joint Venture Debt Debt Duration
(Excl Consolidated JVs) Balance Interest Maturity (Yrs) (Excl Consolidated JVs) Balance Interest Maturity (Yrs)
Alderwood Mall Cmbd 145,783 5.03% 7/6/10 0.3 Quail Springs Mall 37,409 6.87% 6/5/15 5.2
Altamonte Mall Cmbd 75,000 5.19% 2/1/13 2.8 Riverchase Galleria Cmbd 152,500 5.78% 10/3/11 1.5
(2)
Arrowhead Towne Center 25,820 6.92% 10/3/11 1.5 Silver City Galleria Cmbd 65,528 4.95% 6/10/11 1.2
Bridgewater Commons 47,754 5.27% 1/2/13 2.8 Stonebriar Centre Cmbd 84,405 5.30% 12/11/12 2.7
Carolina Place Cmbd (1) 80,281 4.60% 1/11/14 3.8 Superstition Springs Center 22,498 3.45% 9/9/11 1.4
Christiana Mall 56,838 4.61% 8/2/10 0.3 The Oaks Mall Cmbd 52,020 5.87% 12/3/12 2.7
(3)
Clackamas Town Center Cmbd 100,000 6.35% 10/5/12 2.5 Towson Town Center Cmbd 44,760 5.75% 1/1/14 3.8
First Colony Mall Cmbd 95,149 5.68% 10/3/11 1.5 Village of Merrick Park Total 76,034 5.94% 8/8/11 1.4
Florence Mall Cmbd 68,786 5.04% 9/10/12 2.4 Water Tower Place Cmbd 89,514 5.04% 9/1/10 0.4
Galleria Tyler Cmbd 125,000 5.46% 10/11/11 1.5 Westroads Mall Cmbd 45,518 5.83% 12/3/12 2.7
Glendale Galleria Cmbd 191,317 5.01% 10/1/12 2.5 Whalers Village Cmbd 64,893 5.63% 11/8/10 0.6
(2)
Highland Mall Cmbd 31,990 6.92% 7/8/11 1.3 Willowbrook Mall 46,003 7.00% 4/1/11 1.0
Kenwood Towne Centre Cmbd 168,095 5.58% 12/1/10 0.7 Owings Mills-One Corporate Ctr 4,119 8.50% 12/1/11 1.7
Mizner Park Total - - - - Center Pointe Plaza 6,846 6.38% 1/2/17 6.8
(2)
Montclair Place Cmbd 133,825 5.88% 9/12/11 1.5 Lake Mead Blvd & Buffalo 2,947 7.30% 7/15/23 13.3
Natick Mall Cmbd 175,000 5.74% 10/7/11 1.5 Trails Village Center 8,073 8.24% 7/10/23 13.3
(3)
Natick West 70,000 5.82% 10/7/11 1.5 Woodlands MPC 216,343 5.69% 10/9/13 3.5
Northbrook Court Cmbd 42,513 7.17% 9/1/11 1.4 Turkey 57,221 6.72% 1/1/18 7.8
Oakbrook Center Cmbd 103,010 5.12% 10/1/12 2.5 Joint Venture Debt 3,008,792 5.61% 4/27/12 2.1
Park Meadows Cmbd 126,000 6.00% 7/5/12 2.3
Perimeter Mall Cmbd - - - - Less: Amortization (4) (63,203)
Pinnacle Hills Promenade / West 70,000 5.84% 12/8/11 1.7
Joint Venture Debt (3/31/10) (5) 2,945,589 5.61% 4/27/12 2.1
Source: Interest rates per the Q3'08 GGP operating supplement. Many of these interest rates, especially to the
extent loans have been refinanced or are floating, may have changed since 9/30/08.
Source: Maturities per the Q3'08 operating supplement.
(1) GGP extended this loan at 4.5975% in Jan-10. Source: 1/25/10 press release.
(2) Represents an SCP mall. On 5/3/10 the property owned by the Highland JV was transferred to the lender (Source: 10-Q pg 40).
(3) For loans with maturity dates preceding 3/31/10, we have assumed they were refinanced with 1/1/14 maturity dates
and with 5.75% interest rates. Source: Pershing Square assumption.
(5) Source: Q1'10 supplement pg. 29.
80
PF GGP Debt Detail – 9/30/10e Reconciliation
Target Net Debt Reconciliation ($ in mms)
Target Net Debt (9/30/10e) (1) $22,971

Plus: Proportionally Consolidated Unrestricted Cash (2) 500
Less: Permitted Claims (3) (650)
Less: Accrued interest (4) (625)
Less: Bridgelands/Woodlands (5) (246)
Less: Brazil (6) (110)
Less: Pfd stock (7) (121)
Less: SCP debt / Highland (5) (980)
Less: Other GGO debt (5) (260)
PF GGP Debt (9/30/10e) $20,478
PF GGP Debt (3/31/10) (8) 20,691
Additional Amortization Through 9/30/10e ($212)
(1) Target Net Debt as of the original Cornerstone Investment Agreement. Target Net Debt is an estimate of GGP's net debt as of 9/30/10e.
Target Net Debt includes PF GGP and GGO liabilities. In addition, Target Net Debt includes non-debt liabilities, such as accrued interest and
Permitted Claims (i.e. the KEIP), among other things. Therefore, Target Net Debt includes the Company's estimate of bankruptcy "exit costs."
Furthermore, Target Net Debt includes the following: $1.5bn of New Debt, debt associated with GGP's international subsidiaries, and preferred stock.
Source: pg 75 of docket #4874.
(2) Source: Original Cornerstone Investment Agreement.
(3) Represents Pershing Square's estimate of bankruptcy "exit costs," including the KEIP, transaction costs, etc.
Pershing Square estimates this $650mm estimate could be more than $200mm too high.
(4) Includes accrued interest on unsecured debt, DIP loan, Homart/Ivanhoe, TRUPs, pfd stock, and secured debt. Pershing Square estimate.
(5) As of 3/31/10. Projected 9/30/10e balances included in Target Net Debt may differ than 3/31/10 actual debt balances due to interim amortization.
(6) Per the Cornerstone Investment Agreement. GGP's share of this debt as of 3/31/10 was $95.2mm. Source: Q1'10 supplement pg 2.
(7) Source: Q1'10 supplement pg 2.
81
PF GGP Cap Rate Detail – Excess Sources
($ in mms, except per share data) Illustrative PF GGP Equity Raise Price
$10.00 $11.00 $12.00 $13.00 $14.00 $15.00 $16.00
Emergence Sources
New Debt (1) $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
BPF (pre-clawback) (2) 4,400 4,400 4,400 4,400 4,400 4,400 4,400
Clawback (3) 1,900 1,938 1,976 2,014 2,052 2,090 2,128
Liquidity Equity Issuances (4) 650 663 676 689 702 715 728
Emergence Sources 8,450 8,501 8,552 8,603 8,654 8,705 8,756
Emergence Uses
TopCo unsecured debt (5) 6,373 6,373 6,373 6,373 6,373 6,373 6,373
DIP loan (5) 400 400 400 400 400 400 400
Emergence Uses 6,773 6,773 6,773 6,773 6,773 6,773 6,773
Excess Sources $1,678 $1,729 $1,780 $1,831 $1,882 $1,933 $1,984
(1) New Debt is included as a source of funds because the corresponding liability is included in Target Net Debt.
The estimated fee to raise the New Debt is also included as a Permitted Claim in the Target Net Debt amount.
(2) Represents PF GGP's sale of 440mm shares to BPF at $10 per share. (250mm to B, 190mm to PF).
(3) Subject to the 80/20 GGO IPO Participation, PF GGP is entitled to keep 20% of excess proceeds raised above $10.
To the extent GGO's 80% IPO Participation exceeds permitted liabilities, PF GGP will be entitled to keep more cash
than presented above.
(4) Assumes GGP sells 65mm Liquidity Equity Issuances shares. GGP is entitled to keep 20% of excess proceeds
raised above $10.
(5) TopCo unsecured debt, which includes GGP's convert, Rouse debt, term loan, and revolver, and the DIP loan are treated as
uses of funds because they are excluded from Target Net Debt as part of the Reinstatement Adjustment Amount.
82
PF GGP Cap Rate Detail – Other Assets / Other Liabilities
PF GGP Other Liabilities (as of 3/31/10) ($ in mms) PF GGP Other Assets (as of 3/31/10) ($ in mms)
Consolidated other liabilities (1) $1,774 Accounts & notes receivable, net (1) $506
Plus: Unconsolidated other liabilities (2) 219 Deferred expenses, net (1) 384
Less: Hughes participation payable (3) (69) Prepaid expenses & other assets (1) 796
Less: Accrued interest accounted for in Target Net Debt (4) (383)
Less: Professional fees incl in other liabilities (5) (18) PF GGP Other Assets $1,686
Less: Accrued KEIP incl in other liabilities (6) (79)
Less: Other "Exit Costs" incl in other liabilities (7) (100)
PF GGP Adjusted Other Liabilities $1,345
(1) Source: GGP Q1 10-Q pg 34. Note: Excludes goodwill of $199.7mm as of 3/31/10.
(2) Assumes pro rata GGP share of unsonsolidated other liabilities is 50%. Source: 10-Q pg 23. (1) Includes unconsolidated other assets at 50% share. Source: pgs 3 and 23 of Q1'10 10-Q.
(3) Excluded from other liabilities as we assume this liability will be covered by the GGO IPO Participation.
Source: 10-Q pg 34.
(4) Target Net Debt includes accrued and unpaid interest on GGP's unsecured debt, pfd stock, partner loans,
DIP loan, and certain mortgage notes. As of 3/31/10, GGP had $450mm of accrued interest
included in other liabilities (Source: 10-Q pg 34). The vast majority of this is included in the Target Net Debt
amount and therefore needs to be adjusted to avoid double-counting. Pershing Square estimates at least
85% of this amount needs to be deducted as it likely relates to accrued interest included in Target Net Debt.
(5) Target Net Debt includes professional fees associated with GGP's bankruptcy. As a result, any amount
of professional fees included in other liabilities need to be deducted. Source: 10-Q pg 12.
(6) Target Net Debt includes GGP's ultimate KEIP payment, which was estimated to be $165mm as of
3/31/10. As of 3/31/10, $79mm of the KEIP had been accrued as a liability. Source: 10-Q pg 12.
(7) Includes pre-petition vendor liabilities and mechanics' liens that should be covered by the $650mm
Permitted Claims cushion in Target Net Debt. Source: Pershing Square estimate.
83
GGP Detail – LTM Cash NOI
($ in millions) GGP Cash Net Operating Income (1)

2Q09a 3Q09a 4Q09a 1Q10a LTM
Minimum rents $596 $584 $605 $593
Tenant recoveries 263 257 248 254
Overage rents 7 12 30 12
Other 35 32 48 27
Total Property Revenues $901 $884 $931 $885
Less: Real estate taxes (81) (82) (81) (85)

Less: Repairs & maintenance (58) (65) (82) (41)
Less: Marketing (8) (9) (16) (9)
Less: Other property operating costs (127) (136) (138) (157)
Less: Provision for doubtful accounts (11) (7) (7) (8)
NOI $616 $585 $607 $586
Less: Straight-line rent adj. (13) (11) 1 (13)

Less: FAS 141 adj. (lease mark to mkt) (4) (3) (2) (1)
Plus: Non-cash ground rent expense 2 2 2 2
Plus: Real estate tax stabilisation adj. 1 1 1 1
GGP Cash NOI $602 $573 $609 $575 $2,360
(1) Source: GGP operating supplements.
84
Simon Cap Rate Detail – LTM Cash NOI
($ in millions) 4Q08a 1Q09a 2Q09a 3Q09a 4Q09a 1Q10a LTM

Minimum rent $807 $746 $754 $754 $806 $758
Overage rent 63 21 26 33 58 26
Tenant reimbursements 393 345 345 356 376 342
Other income 92 68 56 57 92 80
Less: Interest income (1) (2) (15) (9) (9) (10) (13) (10)
Less: Gains on land sales (2) (5) (0) (3) (0) (19) (2)
Total Revenue $1,334 $1,171 $1,168 $1,191 $1,300 $1,194
Less: Property operating costs (172) (161) (168) (180) (164) (157)
Less: Real estate taxes (106) (112) (106) (99) (108) (114)
Less: Repairs & maintenance (47) (33) (30) (29) (43) (34)
Less: Advertising & promotion (42) (24) (25) (29) (39) (25)
Less: Provision for credit losses (10) (17) (9) (0) (2) 3
Less: Other (41) (35) (40) (36) (44) (35)
NOI $916 $789 $791 $817 $901 $830
Less: Straight-line rent adj. (3) (9) (11) (7) (8) (6) (5)
Less: FAS 141 adj. (lease mark to mkt) (3) (9) (7) (13) (6) (6) (5)
Cash NOI $899 $772 $770 $803 $889 $821 $3,284
Memo: Other income

Consolidated portion 62 45 35 36 71 56
Total share 92 68 56 57 92 80
Ratio 32.2% 33.6% 37.7% 35.8% 22.9% 30.2%
Source: Simon operating supplements.

(1) Simon includes interest income in other revenue. This needs to be backed out to create an apples to apples
comparison with GGP.
(2) Simon does not disclose the amount of interest income and gains on land sales from its unconsolidated
segment. Assumes the ratio of interest income and gains on land sales in other revenue is similar to the
ratio of consolidated other income to total share. For example, Q1'10 reported consolidated interest income
was $7.714mm. Multiplying this by 1.302x results in assumed total share interest income of $10.047mm.
(3) Source: See Footnotes to Reconciliation of Consolidated Net Income to FFO in Simon's operating supplements
for straight-line rent and FAS 141 adjustments.
85
Simon Cap Rate Detail – Cap Rate Buildup
(units in millions, except per share data)

Share Price (as of 5/28/10) $85.03
Shares & Units (1) 352
Market Cap $29,906

Plus: Total Debt 24,250
Plus: Preferred Debt 126
Plus: Other Liabilities 1,845
Less: Cash (3,609)
Less: Other Assets (3) (2,445)
Less: Development Pipeline (4) (35)
TEV $50,038
Less: Mgmt Business (5) (229)

Value of Simon's REIT $49,809
LTM Cash NOI (6) $3,284

Implied Cap Rate 6.6%
(1) Includes Series I preferred shares and options (Source: Simon Q1'10 operating supplement).
(2) As reported in Simon's pro rata balance sheet (Source: Simon Q1'10 operating supplement).
(3) Excludes $20mm of goodwill (Source: Simon 2009 10-K).
(4) Simon's share of U.S. CIP (page 36 of Q1'10 operating supplement).
(5) Applies 25% EBIT margin to LTM fee income of $122mm and a 7.5x EBIT multiple.
(6) See Simon LTM Cash NOI appendix page for details.
86
Simon Occupancy Cost Detail
Occup. Cost Buildup Memo:

(1)
GGP Simon GGP
Q4'07 Q4'09 Q4'09
(2) (5)
Rent per sq ft $35.32 $40.04 NA
Recoverable common area costs per sq ft 9.58 13.58 NA
(3) (8)
Rent & recoverable common area costs per sq ft $44.90 $53.62 $47.09
(6)
Rent & recoverable common area costs PSF / rent PSF 1.27x 1.34x NA
(3) (5) (8)

Reported Tenant Sales per Square Foot $444 $433 $393
Rent & recoverable common area costs / tenant sales 10.1% 12.4% 12.0%
(3) (8)
Occupancy Cost 12.5% 15.1% 14.6%
(7)
Adjustment Factor (4) 1.24x 1.22x 1.22x
Note: Unlike GGP, Simon does not disclose occupancy cost data. The exercise above uses historical reported
GGP data to attempt to back into Simon's implied Regional Malls occupancy cost. Actual data may vary.
(1) Represents Consolidated Portfolio (i.e. excl unconsolidated). This is done because GGP does not disclose
rent per sq ft metrics on a pro rata basis.
(2) GGP used to report rent per sq ft instead of rent & recoverable common area costs per sq foot before Q1'07.
Represents GGP Q4'06 consolidated rent per sq ft of $34.29 with assumed 3% YoY growth (same as Q4'06 reported growth).
Source: GGP Q4'06 operating supplement.
(3) Source: GGP Q4'07 operating supplement.
(4) Represents the ratio of Occupancy Cost to rent & recoverable common area costs / tenant sales.
(5) Source: Simon Q4'09 operating supplement.
(6) Assumes Simon's ratio of rent and recoverable common area costs PSF / rent PSF is 1.34x based on GGP's
historical ratio of 1.27x. Simon derives approximately 5% more of its revenue from tenant reimbursements than GGP.
(7) Based on GGP's adjustment factor as of Q4'09.
(8) Source: GGP Q4'09 operating supplement.
87
GGO Detail – Victoria Ward Comp
88
Wait to Rate:
How To Save The Rating Agencies
(and the Capital Markets)
May 26, 2010

Disclaimer
Funds managed by Pershing Square and its affiliates have invested in long and short positions in various
securities and financial instruments. Pershing Square manages funds that are in the business of actively
trading – buying and selling – securities and financial instruments. Pershing Square may currently or in the
future change its position regarding any of the securities it owns. Pershing Square reserves the right to buy,
sell, cover or otherwise change the form of its investment in any company for any reason. Pershing Square
hereby disclaims any duty to provide any updates or changes to the analyses contained here including,
without limitation, the manner or type of any Pershing Square investment.
1
The Context
Rating agencies were material contributors to the credit crisis as

their inaccurate ratings allowed for the issuance of trillions of
dollars of securities and derivatives which generated trillions of
dollars of losses globally
What they do well Where they have failed

■ Rating agencies are generally ■ Rating agencies overstated the
good at rating the debts of ratings of structured finance
corporate issuers securities and bond insurers
like MBI, ABK, FNM, FRE and
AIG
Various proposals have been floated to address the problem. As currently

proposed, we believe that none will succeed as comprehensive reform
2
What Are the Principal Problems?
Problems are caused by corrupting incentives at the original

issuance of a security or derivative by an issuer
Investors – Overly relied on ratings rather than their own due diligence
and are often subject to ratings-based investment limitations
Issuers/Banks – Are incentivized to get highest ratings with highest

yielding (riskiest) assets
NRSROs – Are conflicted by how they are paid; without high ratings,
agencies do not earn fees on new issue transactions
“Success Fee” model leads to competition and grade inflation among
NRSROs for new issuers and new product ratings
3
What Are the Principal Problems? (Cont’d)
Regulators and investors with ratings-based mandates have been ill-

served by the NRSROs before and throughout the credit crisis
Rating agencies have failed to meet expectations:

Act as Underwriters – in substance, have acted as part of the underwriting
team for new issues
Are Slow to Downgrade – are incentivized to keep ratings stable so new
issues can continue to be sold and rated
Are Loath to Pass Judgment on Themselves – did initially forbear from
downgrading financial guarantors (e.g., MBI, ABK, FNM, FRE, AIG), as
simultaneous downgrades would be triggered on thousands of other
securities, putting NRSROs in the uncomfortable position of questioning their
own prior ratings
4
How Do You Solve These Problems?
Make
Our a new law
suggested rider to the Restoring American Financial Stability Act of 2010
“New Issue Ratings Moratorium. Prior to the date 60 days after the issuance of
a new fixed income security, it shall be unlawful for any NRSRO to:
(1) Have any contact with issuers, sponsors, servicers, trustees or underwriters of
such security during such period,
(2) Comment publicly on, or issue ratings regarding, any such security, or
(3) Otherwise participate in the structuring, underwriting, offering or sale of such
securities during such period.
Notwithstanding the foregoing, NRSROs shall at all times be permitted to:
(a) Conduct due diligence based solely on publicly available information of the
issuer or otherwise related to the security in respect of future ratings for such
issuer or security, and
(b) At all times broadly publish their ratings standards, procedures and
methodologies.”
5
How Do You Solve These Problems? (Cont’d)
Allow Non-NRSROs to Publish During New Issue Moratorium – Firms can (1)
apply to be qualified as NRSROs and be subject to the new issue ratings moratorium
or (2) choose to be non-NRSROs and compete for business from investors during
the moratorium on the basis of the quality of their research
Creates incentive for the development of an “Investor Pays” model for non-
NRSRO rating agencies who will seek to fill the ratings void left by the New Issue
Ratings Moratorium on NRSROs
Insist on NRSRO Accountability – The SEC should be required to revoke a ratings
agency’s NRSRO status if it consistently underperforms its peers
While the SEC currently has the power to revoke NRSRO status, it has failed to
exercise that power likely because of the lack of credible alternatives to NRSROs
Bright line rules requiring the exercise of that power after material consistent
underperformance could address the breakdown caused by the SEC’s past
regulatory forbearance
Buyside analysts will develop into credible alternatives and even new NRSROs
6
How Do You Solve These Problems? (Cont’d)
Make a newNRSRO
Repealing law legal exemptions will mitigate undue reliance on ratings
Re-Thinking Reg FD – The SEC should repeal the NRSRO exemption from fair
disclosure rules that currently allow rating agencies access to issuers’ material non-
public information
Investors justified their over-reliance on ratings in large part on account of
NRSRO information advantages. Repeal of the SEC’s Reg FD exemption would
reduce reliance premised on information asymmetries
Prospectus Delivery Requirements – Each issuer that seeks an NRSRO rating

should be required to include in its bond offering prospectus all information that a
reasonable investor would need to form an investment decision
Any information that could reasonably be expected to impact ratings should be
viewed – by definition – as material and therefore should be disclosed in
prospectuses and in on-going public disclosures
Improved disclosure requirements would improve the accuracy of fundamental
analysis and level the playing field among market participants
7
What Are the Impacts of Our Proposed Changes?

Investors – overly relied on ratings and Investors – will need to do their own due
performed inadequate due diligence diligence and will benefit from truly
independent ratings/research
Issuers/Banks – structured deals to Issuers/Banks – ratings opinion
minimally achieve desired ratings uncertainty will force them to “under-
thresholds through negotiations with rating promise and over-deliver” creating
agencies margins of safety above ratings targets
NRSROs – monopolized ratings, became NRSROs – will “call ‘em like they see
an essential participant in underwriting ‘em” and will be completely removed from
process which was corrupted by the the structuring and underwriting process
success fee payment scheme
Investor Pay Research – creates
Investor Pay Research – “Investor Pays” opportunity for “Investor Pays” ratings
ratings model is virtually nonexistent and research to develop as non-NRSRO
analysts will be permitted to publish pre-
offering and during the blackout period
8
How Should Ratings Agencies Be Compensated?
New Fee Arrangements – Ratings fees should be “set aside” and

paid over time by issuers to NRSROs and failure to pay fees would be
deemed an “Event of Default” for issuers
Base Fee – a minimum fee will be paid in quarterly increments
over the life of the bond to those NRSROs that pre-commit to rate
a new bond after the 60-day moratorium and to continue to update
those ratings over the bond’s life
Ranking Fee – a portion of the remaining set aside will be paid in
annual increments based on investor-determined annual rankings
of each NRSRO
Performance Fee – the remaining set aside will be paid in annual
increments to the NRSROs based on the performance of the bond
relative to the ratings designated by each participating NRSRO
9
What Are the Impacts of Our Proposed Changes?
Investors – had no impact on NRSRO Investors – will help allocate ratings fees,
compensation closer to an “Investor Pays” model
Issuers/Banks – had the ability to Issuers/Banks – will have no ability to

manipulate the process through NRSRO set compensation or even choose which
compensation to achieve desired ratings NRSROs will rate a bond
NRSROs – received full, upfront NRSROs – will be paid over time, with a
payments which were unrelated to the large percentage of compensation based
ratings performance for that issue on performance; material consistent
underperformance assures loss of
Investor Pay Research – “Investor Pays” NRSRO status
ratings model is virtually nonexistent
Investor Pay Research – will create
market opportunity which will improve
independent research for buyside
investors
10
Conclusion
The combination of increased buyside due diligence coupled with

mitigation of conflicts of interest and a new payment scheme can restore
the integrity of ratings
The steps toward regaining confidence are deceptively simple:
Exclude the NRSRO rating agencies from the initial offering and
underwriting process
Create incentives for fundamental research and valuation analysis by
investors
Create the market opportunity for “Investor Pays” research and ratings to
develop
Create a payment regime that focuses on NRSRO performance and the
quality of their ratings over time and aligns their interest with investors
Failure to address fundamental flaws in the legacy ratings system is not an

option
11
Not for Public Distribution
How To Make A Fortune*

November 3, 2010
* My compliance team cautions you that this is a tongue in cheek title

Disclaimer
The analyses and conclusions of Pershing Square Capital Management,
L.P. ("Pershing Square") contained in this presentation are based on
publicly available information.
The analyses provided may include certain statements, estimates and
projections prepared with respect to, among other things, historical and
anticipated performance of certain assets, and the values of assets and
liabilities. Such statements, estimates, and projections reflect various
assumptions by Pershing Square concerning anticipated results that are
inherently subject to significant economic, competitive, and other
uncertainties and contingencies and have been included solely for
illustrative purposes. No representations, express or implied, are made as
to the accuracy or completeness of such statements, estimates or
projections or with respect to any other materials herein.
This presentation and the information contained herein is not a
recommendation or solicitation to buy or sell any securities.
Pershing Square hereby disclaims any duty to provide any updates or
changes to the analyses contained in this presentation.
1
What We Look for in Our Investments
f Low valuation
f Forced Sellers
f Attractive capital structure
f Favorable long-term supply dynamics
f Favorable long-term demand dynamics
f Out-of-favor
2
We Believe We’ve Identified an Investment with:

f A low valuation
Lowest valuation in at least a generation
f Forced sellers
A large number of distressed transactions
f Extremely attractive financing available

High LTV, low-rate, fixed-rate, long-dated, non-recourse debt,
pre-payable without penalty
f Favorable long-term supply dynamics

Short-term oversupplied market, but long-term supply is controlled
f Favorable long-term demand dynamics

Demographically driven demand growth
f Out-of-favor
Currently, this is a somewhat shunned asset class
3
So… How Can You Make A Fortune?

The American Dream - On Sale
5
What Happened?
What Happened in the Credit Markets?
More
Leverage /
More
Freely
Buyers
Available
Credit Increasing
Asset
9 Relaxed lending
standards
Values
9 Financial
“innovation”
9 CDO Demand
Decreasing
Defaults
Source: “Who’s Holding the Bag?,” PSCM, May 2007
7
Leverage Increased
The second lien market allowed borrowers to layer additional leverage
Total Second Lien & Piggyback Second Lien Issuance
Source: Standard & Poor’s, and “Who’s Holding the Bag?,” PSCM, May 2007
8
Financial “Innovation”
The popularity of Interest Only and Negative Amortization loans grew rapidly
IO and Neg. Amortization Originations (% of dollar volume)
35%
30% 29%
25%
25% 23%
20%
15%
10%
6%
5% 4%
2%
1%
0%
2000 2001 2002 2003 2004 2005 2006
Source: Loan Performance, Credit Suisse
9
The ABS Market Provided Liquidity for Originators
Sub-prime and Second-lien ABS Issuance Volume
Facilitated by Rating
Agencies and Bond
Insurers
Source: Thompson Financial, Deutsche Bank, “Who’s Holding the Bag?,” PSCM, May 2007
10
Asset Values Went Up
Between January 2001 and June 2006 home prices rose at a 13% CAGR
Home Price Appreciation (Case-Shiller 10-City Index)
250
230
210
190
170
150
130
110
90
70
50
Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09
Source: Case-Shiller Home Price Indices 11

Valuation
Asset Values Have Declined Meaningfully
Home prices are down 28% nationwide
Home Price Appreciation (Case-Shiller 10-City Index)
250
230
210
190
170
150
130
110
90
70
50
Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09
Source: Case-Shiller Home Price Indices 13

Housing is More Affordable Today

Falling home prices and lower interest rates dramatically improved affordability¹.
Median family income is now 78% higher than what is required to qualify for a
loan to purchase the median price single family home using 80% loan-to-value,
fixed-rate financing
NAR National Housing Affordability Index – Fixed Rate Composite
200
178
180
170
160
150
134 137
140 134 133
130
127 125 126 127 128 124 128
122 120
117 117
120
109 109 110
100
80
60
89
90
98
99
00
01
91
02
92
93
94
95
96
97
03
04
05
06
07
08
09
10
19
19
19
19
19
20
20
20
19
20
19
19
19
19
19
20
20
20
20
20
20
20
Source: National Association of Realtors
¹Affordability = Median Income/Qualifying Income
14
Cheap Compared to Renting
The breakeven appreciation rate for rental equivalent value is the best since the 1970s
Housing as a hedge: Home ownership with fixed-rate financing protects

buyers from asset and rent inflation
Source: Beracha and Johnson, “Lessons from Over 30 Years of Buy versus Rent Decision: Is the American Dream Always Wise?”
Assumptions in appendix
15
Forced Sellers
Foreclosures and Short Sales

Nationwide, ~30% of sellers are in or are approaching foreclosure
Distressed Sales (% of total re-sales)
Long-term the foreclosure crisis is good for housing. Over-priced and over-
leveraged homes will be transitioned to new, stable owners at more reasonable
prices and on more favorable financing terms
Source: Deutsche Bank, “Whither the distressed inventory flood” 17
Short Sales
Short sale transactions are increasing
Number of Short Sales Per Month
Source: HUD, Core Logic 18

Distressed Sales are an Opportunity for Buyers
REO sales tend to be priced below the broader market
Houston REO vs. Overall Pricing ($ thousand)

A Sellers’ Race to the Bottom in Vegas
Buyers benefit when conventional sellers compete with distressed sales. Las
Vegas is an extreme example, where distressed and non-distressed sale prices
have nearly converged
Las Vegas REO vs. Overall Pricing ($ thousand)

Financing
Mortgage Rates are Very Low
Mortgage rates have fallen to historically low levels. Fixed 30-year rates are
now below 4.5% for the first time in the history of the Freddie Mac lender survey
30-Year Fixed-Rate 80% LTV Mortgage
19%
17%
15%
13%
11%
9%
7%
5%
3%
1973 1977 1982 1987 1992 1997 2002 2007
Source: Freddie Mac 22
What Makes a Home Mortgage So Attractive?
Typical Conforming Mortgage Term Sheet
Low Fixed Rate – 4.43% APR
Long Term – 30-Year Amortization
High LTV – 80% (97% for FHA loans)
Non-Recourse – Loans are explicitly or effectively non-recourse
Adequate Financing Available – $417k to $730k, depending on location
No Prepayment Penalties – Creates refinancing optionality
Tax Deductible Interest – More valuable with coming tax increases
No other business or investor can get financing on such favorable terms
23
The Mortgage Market Benefits from Government Support
Support from the federal government provides qualified borrowers with

access to credit on favorable terms
f GSE and FHA mortgages are now >90% of the origination market
f The target Fed Funds rate is 0%
f The Fed has purchased more than one trillion dollars of Mortgage
Backed Securities
f FHA high LTV refinancing programs are helping distressed

borrowers
24
What Are the True Economics of Home Ownership?
Our Assumptions:
Conventional Loan Transaction Costs
Down Payment 20% Closing Costs (% of Purchase Price) 2%
Mortgage 30yr Fixed Rate Selling Fees (% of Sale Price) 6%
Interest Rate 4.40%
Annual Fees
FHA Loan Property Taxes (% of Home Value) 1.50%
Down Payment 3.5% Maint. + Insurance (% of Home Value) 2.00%
Mortgage 30yr Fixed Rate Annual expenses grow with home appreciation
Interest Rate 4.25%
Upfront Mtge Insurance (Financed) 1.00% Tax Rate
Annual Mtge Insur. Premium (First 5yrs) 0.90% Income Tax Rate 25%
Rent
Implied rent grows with home appreciation
Holding Period
10 Years
25
What Are the True Economics of Home Ownership?

(cont.)
After a small down payment, a buyer’s monthly after-tax cost of carry is at or

below the monthly rental expense
Average Two Bedroom Home in Baltimore:
Conventional FHA
Home Price $ 187,998 $ 187,998

Equivalent Monthly Rent 1,300 1,300
Owner's Monthly Out of Pocket 1,072 1,362
Downpayment + Closing Costs 41,360 10,406
LTV 80% 96.5%
Source: Trulia - home price and rent expense data

26
The Benefits of Low-Cost, High-LTV Financing
Homebuyers can make an excellent after-tax return on their equity investment,

even under modest appreciation assumptions
Conventional 80% Financing

IRR Assuming 10yr Hold
Annual Residual Current Multiple
Appreciation Return Return Total of Equity
1% 3.8% 6.6% 10.4% 2.7x
2% 6.9% 6.8% 13.7% 3.6x
3% 9.5% 7.0% 16.5% 4.6x
4% 11.8% 7.3% 19.1% 5.7x
5% 14.0% 7.5% 21.5% 7.0x
6% 15.9% 7.8% 23.7% 8.4x
If the borrower has the opportunity to refinance at better rates, returns would be even higher
27
The Benefits of Low-Cost, High-LTV Financing (Cont’d)
Homebuyers can make an excellent after-tax return on their equity investment,

even under modest appreciation assumptions
FHA 96.5% Financing

IRR Assuming 10yr Hold
Annual Residual Current Multiple
Appreciation Return Return Total of Equity
1% 16.3% 0.4% 16.7% 5x
2% 20.5% 1.7% 22.2% 7x
3% 24.0% 2.8% 26.8% 11x
4% 27.0% 3.8% 30.8% 15x
5% 29.7% 4.7% 34.4% 19x
6% 32.1% 5.6% 37.7% 25x
If the borrower has the opportunity to refinance at better rates, returns would be even higher
28
Favorable Long-Term Demand

Dynamics
Household Formation Trends
Household Formation has been positive, with some degree of cyclicality,

since at least the 1970s. Household growth will likely accelerate as the
recovery gains traction
Annual Household Formation (% growth)
5.0%
4.5%
4.0%
3.5% Household
growth is
3.0%
cyclically
2.5% depressed
2.0%
1.5%
1.0%
0.5%
0.0%
19
19
19
19
19
19
19
19
20
20
20
20
76
79
82
85
88
91
94
97
00
03
06
09
Source: US Census Bureau
30
Homeownership Rates have Normalized
Homeownership rates have declined to pre-bubble levels. While ownership is

above pre-2000 rates, higher affordability and an aging population should
support an ownership rate near today’s level
Homeownership (% of households)
70
69
68
67
66
65
64
63
62
61
60
1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Source: US Census
31
The Number of Owner Households Will Rebound
Accelerating household formation and a stabilization of the homeownership

rate should lead to growth in owner households
Change in Owner Households =

(Household Formation x Homeownership Rate) + [Number of Households x (Change in Homeownership Rate)]
Source: US Census Bureau, BLS, Maximus Advisors 32

Long-Term Demand for Housing
Projected Long-Term Demand for New Housing Units (single and multi-family)
Household
Formation
Growth needed to
maintain constant
vacancy rate
X Homeownership Rate Assumed: 66%¹

LT Annual Single Family Home Demand 1,101 1,253
Source: Joint Center for Housing Studies, Harvard University, “Updated 2010-2020 Household and New Home Demand Projections”
¹Applies 66% to all figures excluding: Vacant Rental (0%) and Second Homes (100%)
33
Favorable Long-Term Supply

Dynamics
Temporarily Elevated Inventory Levels
In the short-term, for-sale homes and shadow inventory will weigh on home
prices. This provides an opportunity to buy a long-term investment at an
attractive valuation in a market facing short-term distress
Change in Home Prices vs. Months of Inventory
-25%
Price 14
-20%
12
Months of Supply (6 Month Lead)

Home Prices (YoY%, Inverted)
-15%
10
-10%
8
-5%
Supply
0%
6
5%
4
10%
2
15%
20% 0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
35
Source: US Census Bureau
New Supply Growth Will be Slow

Builders have sharply reduced their construction capacity, increasing lead
times when the market does recover
Community Counts for Public Builders
It can take three to seven years to get land permitted in many of the more
desirable markets¹
Sources: Deustche Bank, “Builder Community Analysis”
¹Toll Brothers Management 36
Housing Starts are Now Below Long-Term Demand Growth
Housing starts have fallen sharply and are now lower than at any time in at least
the past 50 years. Starts today are less than half of average long-term demand
Seasonally Adjusted Housing Starts (thousands)
3,000
2,500
Projected LT
Demand:
2,000 1.1-1.25mm new
single family
homes per year
1,500
1,000 Inventory
Depletion
500
New Supply
0
Growth Will be
1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 Slow
Source: Chart: US Census Bureau
37 New Home Demand Projections”
¹Joint Center for Housing Studies, Harvard University, “Updated 2010-2020 Household and
Out-of-favor
Everybody Else is Afraid
The best investments we have made are the ones no one else would touch
“So even at 89 cents a share, it still looks pretty bleak out there for
General Growth Shareholders”
- Businessweek, April 2009
“The U.S. housing market is headed for a complete and total nightmare”
- Business Insider, August 2010
“Now They Tell Us: Experts say housing is a lousy investment and it
always will be”
- Yahoo Finance, August 2010
39
Concluding Thoughts
Why Now?
f Interest rates won’t stay this low forever
f New monetary easing increases the risk of inflation
f Even with the current inventory levels, at today’s valuations, it is

unlikely we will see another substantial decline in prices
f Forced selling may abate as lenders’ balance sheets improve
f Generally, there is more liquidity on the way down than on the

way up
f An economic recovery could cause housing to recover faster

than many people think
41
The Housing Purchase is One of the Most Emotional

Investment Decisions a Family Can Make
f Once a family is able to purchase a home, the decision is based on

psychological factors:
Confidence in the, and one’s, future
The fear of missing the opportunity to buy at the bottom
f These psychological factors have self-reinforcing qualities that are

similar to the forces that drive financial markets
Housing Increase in
Catalyst Prices Buyer
Increase Confidence
Decision to
Purchase
42
An Institutionally Under-Owned Asset Class
f Institutional investors have almost no exposure to single-

family home rental properties (“SFHRPs”) as an asset class
f Low valuation, high current yield and long-term appreciation

potential make SFHRPs an intelligent investment for
institutional investors
f Despite these investment characteristics, we are unaware of

any large pools of capital that have been raised to pursue this
opportunity. This will change
43
The SFHRP Investment Opportunity Is Best Understood By

Analogy
f For the vast majority of the 20th century, timber was never considered an
institutional asset class
f Led by forward thinking investors, institutional investments in timberland

emerged in the USA in the 1980s
f With the advent of timber institutional management organizations (TIMOs)

and timber REITs, institutional timberland investments have grown
significantly
DANA Limited estimated that institutional investors had invested ~$50bn in
timberlands as of early 2008
In 2007, the first timber ETF launched
f The same features that attracted institutional investors to timber:

current yield, inflation-protection, portfolio diversification, demand for “hard
assets,” and the ability to create long-term tax-deferred gains, also apply to
SFHRPs
44
Potential Institutional Investment Demand is Material
If global institutions and private wealth funds allocated approximately 1% of

their assets under management to SFHRPs, it would absorb the entire U.S.
for-sale inventory of single-family homes
Median Priced Single Family Home $172,000

U.S. For-Sale Inventory of Single-Family Homes 3,970,000
U.S. For-Sale Housing Inventory ($Tn) $0.7
Global Institutional & Private Wealth AUM ($Tn)* $64.3
U.S. For-Sale Inventory as % of Global AUM 1.1%
* Source: IFSL, US Census Bureau 45

Appendix
Appendix – Buy vs. Rent Assumptions:
Home Buyer's Assumptions Renter's Assumptions

Down Payment 20% Down Payment seeds investment portfolio
Mortgage 30yr Fixed Rate Diff between mtge and rent is invested
Closing Costs 2% Portfolio is made of stocks and bonds
Holding Period 8 Years Rent Growth Same as home appreciation
Selling Fees 6% Income Tax Rate 25%
Income Tax Rate 25% Capital Gains 20%
Capital Gains 20%
Property Taxes - Annual 1.50%
Maint. + Insur - Annual 2.00%
Annual expenses grow with appreciation
Source: Beracha and Johnson, “Lessons from Over 30 Years of Buy versus Rent Decision: Is the American Dream Always Wise?”
47
Linked to Win
September 14, 2011

Disclaimer
confidential information in the possession of instruments of state, governments and other interested parties
discussed in the presentation that could lead those constituents and other market participants to disagree
with Pershing Square’s conclusions. This presentation and the information contained herein is not investment
advice or a recommendation or solicitation to buy or sell any securities, currencies or other investment
instruments. All investments involve risk, including the loss of principal.
among other things, historical and anticipated events, access to and changes in capital markets and the
values of currencies, assets and liabilities. Such statements, estimates, and projections reflect various
political, regulatory, economic, competitive, and other uncertainties and contingencies and have been
included solely for illustrative purposes. No representations or warranties, express or implied, are made as to
the accuracy or completeness of such statements, estimates or projections or with respect to any other
materials herein and Pershing Square disclaims any liability with respect thereto. Actual results may vary
materially from the estimates and projected results contained herein.
Funds managed by Pershing Square and its affiliates own U.S. dollars, Hong Kong dollars and options on the
Hong Kong dollar. Pershing Square manages funds that are in the business of trading - buying and selling –
securities and other financial instruments. It is likely that there will be developments in the future that cause
Pershing Square to change its position regarding such investments. Pershing Square may buy, sell, cover or
otherwise change the form of these investments for any or no reason. Pershing Square hereby disclaims any
duty to any recipient hereof or to provide any updates or changes to the analyses contained here including,
without limitation, the manner or type of any Pershing Square investment.
Structure of the Presentation
I. The Context
II. The History
III. The Current State of Play
IV. Our Prediction of What is Likely to Happen
V. The Investment Opportunity
VI. Why Now?

I. The Context
The US Economy Today
4
GDP Growth – U.S.
U.S. economic growth remains sluggish
Real GDP Growth (%QoQ – Annualized, Seasonally Adj. )
5
________________________________________________
Source: Bloomberg.
GDP – U.S.
U.S. GDP is still below the Q4 ’07 peak
Annualized Real GDP (Billion USD, 2005 Dollars)
Still below Q4 ’07 peak
________________________________________________ 6
Source: Bloomberg.
Unemployment – U.S.
Unemployment in the U.S. remains stubbornly high at over 9%

Unemployment Rate (%)
________________________________________________ 7
Source: Bloomberg.
Inflation – U.S.
Inflation has picked up, but seems to have leveled off and is forecast to
decrease
Consumer Price Index Growth (YoY) Median

Bloomberg
Forecast:
2011 +3.0%
2012 +2.1%
________________________________________________ 8
Source: Bloomberg.
Home Prices – U.S.
U.S. Home Prices are down 32% from peak and have not recovered
Home Price Index (Case Shiller Home Price 10-City Index)
-32% from peak
________________________________________________ 9
Source: Bloomberg.
U.S. Monetary Policy Today
To combat persistent weakness in the U.S. economy, the Federal Reserve

has reduced short-term rates to zero and enacted two rounds of
quantitative easing
Economic Weakness Accommodative Monetary Policy
• Near 0% Short-Term Interest

Real GDP (YoY%) +1.5% Rates through mid-2013
Unemployment 9.1% • Multiple Rounds of

Quantitative Easing
Home Prices (YoY%) -3.8%
CPI (YoY%) 3.6%
________________________________________________ 10
Source: Based on the latest available Bloomberg data.
U.S. Monetary Policy Will Remain Extremely Accommodative:
“The committee currently anticipates that economic conditions –

including low rates of resource utilization and a subdued outlook for
inflation over the medium run – are likely to warrant exceptionally
low levels for the federal funds rate at least through mid-2013”
- Federal Reserve statement, August 2011
________________________________________________ 11
Source: Press, Release August 9, 2011 – Board of Governors of the Federal Reserve System (http://www.federalreserve.gov/newsevents/press/monetary/20110809a.htm).
Compare with Economy X
12
GDP Growth – Economy X
Economy X has recovered strongly from the global recession

Real GDP Growth (YoY)
________________________________________________
Source: Bloomberg.
GDP – Economy X
Economy X GDP is well above its peak
LTM Real GDP (Billion Local Currency)
________________________________________________ 14
Source: Based on Bloomberg data (Cumulative Last 4Q’s).
Unemployment – Economy X
Unemployment is 3.4% and back to pre-recession lows
Unemployment Rate (%)
________________________________________________ 15
Source: Bloomberg.
Home Prices – Economy X
Since January 2006, home prices are up ~90%
Home Price Index
________________________________________________ 16
Source: “Centaline Property Centa-City Leading HK Index” - Bloomberg.
Inflation – Economy X
Inflation is accelerating and is now nearly 6%
Underlying Consumer Price Index Growth (YoY)
________________________________________________
Source: “Monthly Report on the Consumer Price Index” - Census and Statistics Department, Hong Kong SAR Government.
(http://www.censtatd.gov.hk/products_and_services/products/publications/statistical_report/prices_household_expenditure/index_cd_B1060001_dt_detail.jsp).
17
Economy X’s Monetary Policy Mirrors the US’s
Despite surging growth and inflation, Economy X’s monetary policy mirrors
that of the United States with a near-zero interest-rate policy and large
amounts of money printing
Economy X U.S.
Real GDP (YoY%) +5.1% +1.5%
Unemployment % 3.4% 9.1%
Home Prices (YoY%) +18.5% -3.8%
CPI (YoY%) +5.8% +3.6%
________________________________________________
Source: Based on the latest available Bloomberg data. 18
Press Release, August 22, 2011 – Census and Statistics Department, Hong Kong SAR Government (http://www.censtatd.gov.hk/press_release/press_releases_on_statistics/index.jsp?sID=2798&sSUBID=19062&displayMode=D).
Who is Economy X?
Why would Economy X have the same monetary

policy as the United States?
19
Economy X = Hong Kong
Why Does Hong Kong share U.S. monetary policy?

The Hong Kong Dollar’s (HKD) peg to the U.S. Dollar
(USD) forces Hong Kong to import the U.S.’s ultra-
accommodative monetary policy, despite its much
stronger economy
II. The History
The Hong Kong Dollar Over Time
Hong Kong has implemented several different currency regimes,
demonstrating a pattern of change and adaptation during times of stress
HKD/USD (inverted)
Sterling Peg Free Floating Dollar Peg

HKD Strength
7.75 to 7.85 Band
’05 Strong Side

’98 Weak Side
Commitment
Commitment
________________________________________________ 22
Source: “Hong Kong’s Linked Exchange Rate System” – Hong Kong Monetary Authority, p.34 (http://www.info.gov.hk/hkma/eng/public/hkmalin/index.htm).
Sterling Link Adopted (1935)
f By 1935, facing a dramatic rise in the price of silver and a

shrinking money supply, Hong Kong abandoned silver as
backing for its currency
f HK replaced the silver link with a Sterling-based currency

board
f At the time, HK was a British colony and Sterling was a

major reserve currency
23
The Sterling Peg (1935-1972)
Sterling’s role as an international reserve currency was displaced by the USD
after WWII
Denomination of Foreign Currency Reserves 1950-1982
Sterling
________________________________________________
Source: “The Decline of Sterling: Managing the Retreat of an International Currency, 1945-1992” - Catherine R. Schenk, p.23.
Sterling Link Abandoned (1972)
In 1949 and in 1967, Sterling was devalued. Shortly after the 1967 devaluation,
the HKD was revalued by 10% against Sterling to preserve its purchasing
power
HKD/USD (inverted)
1967 14% Sterling

devaluation –
Countered by +10%
HKD revaluation
HKD Strength
________________________________________________ 25
Source: “Hong Kong’s Linked Exchange Rate System” - Hong Kong Monetary Authority, p.34 (http://www.info.gov.hk/hkma/eng/public/hkmalin/index.htm).
Sterling Link Abandoned (1972)
In 1971, Nixon gave up the gold standard and devalued the USD. In 1972,
Sterling broke its USD peg. Two weeks later HK announced a USD link
HKD/USD (inverted)
1967 14% Sterling Sterling ends USD

devaluation – peg and two weeks
Countered by +10% later HKD is pegged
HKD revaluation to USD
HKD Strength
1971 USD
devaluation
________________________________________________ 26
Source: “Hong Kong’s Linked Exchange Rate System” - Hong Kong Monetary Authority, p.34 (http://www.info.gov.hk/hkma/eng/public/hkmalin/index.htm).
First Dollar Link (1972-1974)
f In February 1973, with the US struggling with inflation

and Vietnam war debt, USD was devalued against gold
by 10%
f HK responded to this USD devaluation and adjusted its

currency to maintain HKD’s price relative to gold,
implying a 10% revaluation against USD
f Finally, in November 1974, without a reliable anchor, HK

discarded the USD link and floated its currency
27
The Float (1974-1983)
Until 1982, the Float worked reasonably well despite HK’s lacking a formal
central bank. The commercial banks were made responsible for managing
the system, leaving the HKD vulnerable to a crisis
HKD/USD
HKD Weakness
28
________________________________________________
Source: Bloomberg.
The Float Ends in Crisis (1983)
In September 1983, negotiations over the UK’s agreement to transfer control of
HK to the Mainland sparked a crisis of confidence in the HKD, leading to bank
runs and food shortages. A rapid decline in the HKD ensued
HKD/USD
Black Saturday (9/24/1983)

HKD hits an all time low: 9.60
HKD Weakness
________________________________________________ 29
Source: Bloomberg.
The Float Ends in Crisis (1983) Cont.
Panic Overwhelms the Streets Fear Grips Hong Kong
________________________________________________ 30
Source: “Hong Kong SAR’s Monetary and Rate Challenges” - Catherine Schenk, p149-50.
The Dollar Link (1983 – Present)
To stem the panic, authorities adopted a currency board and a USD peg.
While the initial workings of the currency board were basic, the strength of
the USD and the simplicity of the currency board made it credible
HKD/USD
HKD Weakness
Creation of 7.75 to 7.85 Band
’98 Weak Side ’05 Strong Side

Resumption of the USD peg,
Intervention Intervention
this time at 7.80 HKD/USD
Commitment Commitment
Floating Rate
________________________________________________ 31
Source: Bloomberg.
Why Did HK Choose the USD as an Anchor in 1983?
f US monetary policy established tremendous credibility in the

Volcker era
f There was no other viable anchor – Precious metals had been

discredited and Sterling was a secondary currency
f The US was a major HK trading partner
f The USD was commonly used in international trade and

finance
“The crucial factor is that there should be confidence that the

anchor currency will be managed responsibly by its central bank.”
- Tony Latter, Former HKMA Deputy Chief Executive and co-

architect of the peg
________________________________________________ 32
Source: “Hong Kong’s Money: The History, Logic and Operation of the Currency Peg” - Tony Latter, p.56.
How do we know what the HK government was thinking
when the peg was introduced in 1983?
This publically available HK government policy memo
details the HK government’s thinking at the time:
We will get back to this memo later in the presentation…
________________________________________________
33
Source: “Stabilization of the Exchange Rate” (http://www.sktsang.com/ArchiveI/1983.pdf).
HK Has Been Responsive to Change
f Event: Silver appreciation (1935)

Response: Sterling Peg
f Event: Sterling devaluation (1967, 1972)

Response: Revaluation; Switch to USD Peg
f Event: USD devaluation (1973, 1974)

Response: Revaluation; HKD Float
f Event: HKD Crisis (1983)

Response: USD Peg
34
III. The Current State of Play
Hong Kong
Population: 7.1mm
GDP by Sector: Finance
26%, Trade 27%, Public
Administration 18%,
Transportation 9%
Economic Freedom:
Ranked #1 for 17
consecutive years by the
Heritage Foundation
History:
•British colonial rule (1842-
1997)
•Reversion to Chinese
sovereignty (1997)
•“One Country, Two
Systems” (1997-2047)
•Harmonization with the
Mainland (2047 - Onward)
________________________________________________
Source: “Hong Kong Yearbook 2010” - Information Service Department, Hong Kong SAR Government, p.49 (http://www.yearbook.gov.hk/2010/en/index.html).
Picture - (http://www.expatify.com/hong-kong/navigating-the-residential-neighborhoods-of-hong-kong.html).
36
The Hong Kong Economic Miracle
Hong Kong’s real GDP has grown 21x over the last 50 years. This success
is a product of its unique location and successful economic policy
Real GDP ($HKD mm, 2005 dollars)
________________________________________________
Source: “National Income and Balance of Payments” - Census and Statistics Department, Hong Kong SAR Government, Table 32.
HK’s Currency Regime is Tremendously Flexible
f The Basic Law, HK’s constitution, allows for a broad

range of currency regimes
f Consequently, unlike many currency boards, the HKD

system can be quickly and easily amended
f Any change would be made through an administrative

process involving the Financial Secretary, the Chief
Executive, and the Monetary Authority (HKMA), with
likely consultation with Mainland authorities
The Linked Exchange Rate System (LERS)
39
The LERS
f Since 1983, the LERS has kept the HKD pegged to the
USD at a rate of ~7.80 HKD/USD
f The HKMA has established a 7.75 to 7.85 HKD/USD

trading band for the currency
f The price of the HKD is kept within the trading band

through a series of arbitrage and automatic intervention
mechanisms
How the LERS System Works
Strong Side Defense: Weak Side Defense:

7.75 HKD/USD 7.85 HKD/USD
Capital Inflow Capital Outflow
Market Participants Buy HKD Market Participants Sell HKD
Upward Pressure On Exchange Rate Downward Pressure On Exchange Rate
Currency Board Sells HKD at 7.75 Currency Board Buys HKD at 7.85
Monetary Base Expands Monetary Base Contracts
Interest Rates Fall Interest Rates Rise
Downward Pressure On Exchange Rate Upward Pressure On Exchange Rate

Back Towards 7.80 HKD/USD Back Towards 7.80 HKD/USD
A Lot Has Changed Since
1983…
America’s Trade Deficit
America’s trade deficit has grown enormously since 1983. Funding such
deficits requires large corresponding capital inflows
Trade Deficit as of GDP (%)
Sustainable limit¹
________________________________________________
Source: Bloomberg. 43
¹ “Estimates of Fundamental Equilibrium Exchange Rates” - Peterson Institute for International Economics, p.3.
Hong Kong’s Trade Surplus
Hong Kong’s large trade surplus reflects its position as a global trading and
financial services center, as well as the relative cheapness of its currency
Trade Surplus/ Deficit(% of GDP)
________________________________________________ 44
Source: “National Income and Balance of Payments” - Census and Statistics Department, Hong Kong SAR Government, Table 42.
America’s Debt Crisis
The U.S. has suffered from decades of chronic deficits
Deficit/GDP (%)
________________________________________________ 45
Source: Bloomberg.
America’s Debt Crisis – The US is No Longer AAA
America’s fiscal position has worsened considerably since 1983. S&P recently
downgraded the U.S., citing poor leadership from Washington in solving the
U.S.’s serious budget problems
Debt/GDP (%)
________________________________________________
Treasury Direct (http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo4.htm).
Hong Kong’s Fiscal Health is Solid
Hong Kong has a history of budget surpluses
HK Surplus (% of GDP)
________________________________________________
Source: Surplus - “Public Account, Money and Finance” - Census and Statistics Department, Hong Kong SAR Government, Table 192.
Nominal GDP - “National Income and Balance of Payments” - Census and Statistics Department, Hong Kong SAR Government, Table 32.
47
HK’s Fiscal Health is Strong – 2010 S&P AAA Upgrade
HK has built a USD $77bn foreign currency fiscal reserve, or $294bn (~126% of
trailing GDP) including the funds backing the currency board and other assets
Foreign Currency Assets (% of GDP)
________________________________________________
Source: Foreign Currency Assets - Bloomberg (Adjusted for HKD). 48
Nominal GDP - “National Income and Balance of Payments” - Census and Statistics Department, Hong Kong SAR Government, Table 32.
Evolving American Monetary Policy
Since the recent financial crisis, the Federal Reserve has struggled to
stimulate the US economy, resorting to massive quantitative easing and
promises of extended ultra-low interest rates
Fed Balance Sheet (Billion) Fed Funds (%)
QE II
________________________________________________ 49
Source: Bloomberg.
Persistent US Dollar Weakness
Accommodative monetary policy, a weak economy and large fiscal and
trade deficits have driven the USD lower and the HKD with it
Trade-Weighted Nominal USD Index
Down 49% since

Oct. 1983
________________________________________________ 50
Source: “Nominal Major Currency Index” - Board of Governors of the Federal Reserve System (http://www.federalreserve.gov/releases/h10/summary/default.htm).
“The success of a currency board arrangement,
and its acceptability to local people and
businesses, depend to a considerable extent on the
anchor currency being reasonably stable.”
- Tony Latter, Former HKMA deputy chief executive and

co-architect of the peg
________________________________________________ 51
Source: “Hands On, Hands Off?: The Nature and Process of Economic Policy in Hong Kong” - Tony Latter, p.75.
Links with China are growing
52
Trade Links with China are Growing
Hong Kong’s trade with America has fallen as a percentage of total trade, while
trade with China is booming
% of Hong Kong’s Total Trade
53
________________________________________________
Source: “External Trade“ - Census and Statistics Department, Hong Kong SAR Government, Table 60.
Monetary Links with Beijing are Growing
China’s increasing liberalization of the RMB market, especially via expanded

usage in trade settlement, has led to a rapid increase in RMB deposits in Hong
Kong, further deepening HK’s economic ties with the Mainland
RMB Deposits (Billion in RMB) RMB Deposits (as % of Total HKD Deposits )
~20% of all HK bank

assets are now on
the Mainland¹
________________________________________________
¹RBS, June 22, 2011
The USD Peg Has Materially Reduced
the Market Value of the HKD
55
HKD – Trade-Weighted Value
Dragged down by a weak USD, the HKD has lost ~35% of its value on a real
(inflation-adjusted) trade-weighted basis over the last ten years
Real Effective Exchange Rate (Trade Weighted)
China Begins
Revaluation
________________________________________________ 56
Source: “BIS Real Effective Exchange Rates” - Bank of International Settlements, Broad Index (http://www.bis.org/statistics/eer/index.htm).
Yuan Strengthening Pressures HKD Lower
HKD’s trade-weighted value will continue to fall as China, HK’s largest trading
partner, steadily strengthens its own undervalued currency. The Yuan’s
strengthening recently accelerated after the July U.S. credit downgrade
Yuan and HKD/USD
HKD Weakness
The RMB has appreciated by 30% since 2005 and

officials have indicated that it will continue to
appreciate¹
________________________________________________
¹ “China will stick to gradual appreciation of Yuan: Wen” - Economic Times (http://articles.economictimes.indiatimes.com/2011-03-15/news/28691614_1_wen-jiabao-growth-rate-exchange-rate).
Valuation Summary
Economist models and changes in trade-weighted real exchange rates

indicate that the HKD is materially undervalued relative to a basket of its
trading partners
Model % Undervalued (Multi‐Lateral)
Decline in Real Trade-Weighted Value - Last 10yrs 54%
Goldman Sachs DEER Model 26%
Barclays PPP Model 33%
Undervaluation 26% ‐ 54%
% Undervalued:
% Undervalued = (7.80/Fair Value) -1
________________________________________________
Source: “Economic Research: GS DEER” - Goldman Sachs, Q2 2011 Trade Weighted Misalignment.
“Currency valuation from a macro perspective” - Barclays Capital, June 14, 2011, p.3. 58
“Estimates of Fundamental Equilibrium Exchange” – Peterson Institute for International Economics, Real Effective Exchange Rate, May 2011.
A Lot Has Changed Since 1983...
________________________________________________
Source: Bloomberg.
A Lot Has Changed Since 1983… (Cont.)
________________________________________________
Source: Bloomberg.
At the time the peg was introduced, the HK government recognized
the risks of tying HK’s monetary policy to that of the US
“[D]omestic interest rates and domestic inflation will be

substantially influenced by the behavior of the economy to whose
currency it is tied (the USA in this case). It was, in essence, the
potential effect of such ties upon the Hong Kong economy which
led to the abandonment of the sterling link in 1972 and then the US
dollar link in 1974.”
- Hong Kong government policy memo, 1983
But in the midst of crisis, the government had no other choice
________________________________________________
61
Impact of the Peg on HK
Inflation – A growing concern
Consumer price inflation in Hong Kong is accelerating
Underlying Inflation (% YoY)
The HKMA recently increased its 2011

inflation expectation to 5.5% from 4.5%
________________________________________________ 63
Source: “Monthly Report on the Consumer Price Index” - Census and Statistics Department, Hong Kong SAR Government.
Asset Bubbles Building - Residential Real Estate
Prices in Hong Kong’s residential real estate market are soaring
HK Residential Price Index (Centaline Property Centa-City Leading Hong Kong Index)
222%
Increase
________________________________________________ 64
Source: Bloomberg.
Asset Bubbles Building - Residential Real Estate
Residential valuations are approaching Pre-Asian Financial Crisis levels
HK Residential Price to Income Ratio
________________________________________________ 65
Source: “Hong Kong Property” - Citi, May 2011, p.51.
Asset Bubbles Building - Commercial Real Estate
Prices in Hong Kong’s commercial real estate market are increasing rapidly
HK Commercial Price Index
f Class A office market stats:

Vacancy Rate: ~2%
Rent (% yoy): ~+18%
Cap Rates: ~3%
________________________________________________
Source: “Half-Yearly Monetary and Financial Stability Report - March 2011” - Hong Kong Economy, HK Commercial Price Index , p. 38 (http://www.hkeconomy.gov.hk/en/reports/index.htm).
1 CBRE Data – Prepared for Pershing Square.
66
How the USD Link Contributes
to Inflation
How Does the Peg Cause Inflation
f The USD peg and the vastly divergent US and HK

economies impact the HK economy through various
channels
Rapid Expansion of the Monetary Base
Imported Low Short-Term Rates

Diminished Purchasing Power
Rapid Expansion of the Monetary Base
69
The Monetary Costs of Intervention
In 2008 and 2009, attracted by its safe-haven status and undervaluation,
investors flooded into HKD, pushing the rate to 7.75 and forcing the HKMA
to print money to defend the strong side of the band
HKD/USD
Weak-side Intervention Level

HKD Weakness
Strong-side
Intervention
Strong-side Intervention Level
________________________________________________
The Monetary Costs of Intervention (Cont.)
As a result of strong side intervention, HK’s Monetary Base increased HKD
$671bn or ~200% over two years. HK has effectively no control over the size of
its Monetary Base
Monetary Base (HKD million)
Strong-side
Intervention
________________________________________________ 71
Source: “Monthly Statistical Bulletin - Table 1.1” - Hong Kong Monetary Authority, September 5, 2011 (http://www.info.gov.hk/hkma/eng/statistics/msb/index.htm).
Rapid Credit Growth
Growth in base money supply has contributed to HK having one of the fastest
rates of credit growth in the world
Private Credit Growth less Nominal GDP Growth – 12 Months
Same figure for

the US: -3%
________________________________________________ 72
Source: “Overheating Emerging Markets: Temperature Gauge” - The Economist (http://www.economist.com/blogs/dailychart/2011/06/overheating-emerging-markets-0).
The Strong Side Defense Risks Further Money Printing
f The HKD’s widely recognized undervaluation increases

the likelihood that the HKMA will need to print more
money to keep the HKD within the band
f With short-term interest rates already near zero, rates

can’t fall any further to discourage investors from
holding the HKD
Imported Low Short-Term Interest Rates
74
Tied to U.S. Short-Term Interest Rates
Arbitrageurs take advantage of the peg and keep Hong Kong short-term
rates (HIBOR) in line with LIBOR, irrespective of the suitability of such
rates for Hong Kong
1-Month HIBOR and LIBOR Rates
Home mortgage rates in

HK today are only ~2%
________________________________________________ 75
Source: Bloomberg.
High Negative Real Interest Rates Today
Interest-rate parity with the US means Hong Kong suffers frequently from
inappropriately high and low real interest rates
Real Interest Rates (1-Month HIBOR less Underlying CPI)
+10% real interest rates

post the Asian Financial
crisis retarded Hong Kong’s
recovery
High negative real interest rates

have contributed Hong Kong’s
current and prior asset bubbles
________________________________________________
“Monthly Report on the Consumer Price Index” - Census and Statistics Department, Hong Kong SAR Government, Underlying Inflation.
Diminished Purchasing Power
77
Rising Cost of Imports
Unable to revalue higher, Hong Kong’s weak currency has led to a large
increase in the cost of imports, particularly in the critical food sector
Unit Cost of Imports

Trade-Weighted HKD Inverted
Hong Kong imports 90% of
HKD Weakness
its food, mainly from China
________________________________________________
Source: “Nominal Effective Exchange Rate” – Bloomberg. 78
“External Trade “ - Census and Statistics Department, Hong Kong SAR Government, Table 76.
Mainland Tourists Flocking to HK
Partly attracted to HK by the cheap HKD, visitors from the Mainland are
flocking to HK, pressuring local prices upward
Mainland visitors (% YoY)
Mainland visits in 2011 is on pace for

~27mm, ~4x the population of HK
________________________________________________ 79
Source: “Half - Yearly Economic Report” - Hong Kong SAR Government, p.111 (http://www.hkeconomy.gov.hk/en/pdf/er_11q2.pdf).
Home Price Inflation Rises with HKD Undervaluation
Mainland Chinese home buyers are taking advantage of an undervalued HKD.
30% to 40% of luxury new home sales are to Mainland buyers
HK Residential Price Index Trade Weighted HKD Inverted
HKD Weakness
________________________________________________ 80
Source: Bloomberg.
Consumer Price Inflation Rises with HKD Undervaluation
There is a direct correlation between weak HKD and HK inflation
Underlying CPI Index (YoY) Trade Weighted HKD Inverted
HKD Weakness
________________________________________________
“Monthly Report on the Consumer Price Index” - Census and Statistics Department, Hong Kong SAR Government, Underlying Inflation .
HK’s Inflation Problem Will Likely Get Worse
f Near zero US short-term interest rates for two years or more
f Despite high inflation, the HKD is still undervalued by ~30%
f HKD’s undervaluation will only worsen as the RMB

appreciates
f Broad money supply (M2) has not yet grown to reflect the
full impact of the massive 2008/2009 Monetary Base
expansion
f Undervaluation increases the risk that the HKMA will need

to print more HKD to keep the currency within the band
f The HKMA estimates that HK has no spare resource

capacity to absorb further demand growth¹
________________________________________________ 82
Source: ¹ “Half - Yearly Monetary and Financial Stability Report” - Hong Kong Monetary Authority, March 2010, p.33.
Significant Risk of Overheating
The Economist ranks HK near the top of its list of emerging-markets at risk of
overheating
Emerging-Market Overheating Index
Countries were
measured across six
different economic
indicators of
overheating
Inflation
GDP Growth
Employment
Credit
Interest
Current Account
________________________________________________ 83
Source: “Overheating Emerging Markets: Temperature Gauge” - The Economist (http://www.economist.com/blogs/dailychart/2011/06/overheating-emerging-markets-0).
Growing Social Risks
Social Consequences of Inflation
The Middle Class, “Sandwich Class”

f Priced out of first time home ownership but too well-off to be
comfortable in public housing
The Elderly
f Value of their savings is eroded by inflation
f Low interest rates reduce fixed income investment returns
The Poor
f Do not have the savings to absorb price shocks
The Rich
f While some rich get richer speculating on real estate with low-
cost credit, their global purchasing power deteriorates
85
Hong Kong’s Wealth Gap
Hong Kong’s rich-poor gap is Asia’s widest according to UN data
________________________________________________ 86
Source: Pictures - Zoe Li, William McCallum, Christopher DeWolf (http://jmsc.hku.hk/hkstories/content/view/659/8786/) and (http://www.lcscapes.com/HK-VerticalHousing/LC-HK_VerticalHousing.html).
Beijing Has Taken Notice of HK’s Inequality
In 2009, Chinese Premier Wen Jiabao called on the Chief Executive of Hong
Kong to address “deep rooted contradictions in Hong Kong” in reference
to Hong Kong’s persistent and troubling wealth gap.
Gini Coefficient (2007)
45.0
40.0
The Gini Coefficient is a
35.0
Measure of Wealth Inequality
30.0
25.0
20.0
Japan
Norway
Republic
Germany
France
Switzerland
Australia
Kingdom
Italy
Zealand
States
United
Hong Kong
Czech
United
New
More Inequality
________________________________________________
87
Source: “Human Development Report 2009” - United Nation Development Programme, p.195 (http://hdr.undp.org/en/contacts/about/undp/).
Flat Real Wages
Gains from economic growth have not been evenly spread. Average wages
have been flat for many years despite very low unemployment and strong
productivity growth
Real Wages in Hong Kong – Indexed to 2003 = 100
________________________________________________
Source: “Real Wages” - Bloomberg. 88
“Census and Statistics Department” Hong Kong SAR Government, Productivity Index, table 103.
Housing Affordability is Squeezing the Middle Class
HK is one of the least affordable places in the world. With the home ownership
rate at only ~53%, home price appreciation only benefits a small percentage of
the population
Housing Affordability Index – (Median Home Price/Median Annual Household Income)
12
NYC Housing is nearly
10 twice as Affordable as
Hong Kong’s
8
0
Vancouver
Toronto
Francisco
Hong Kong
Honolulu
London
San Diego
Montreal
Sydney
New York
Los Angeles
San
________________________________________________ 89
Source: “7th Annual Demographic International Housing Affordability Survey: 2011” - Performance Urban Planning, p.10.
Apartment Rents Are Among the Highest in the World
In 2010, Hong Kong was the third most expensive market for two bedroom
rental apartments, up from ninth place in 2009
World’s 20 most expensive locations to rent a two bedroom apartment
Luxury rents in Hong

Kong are up 23% YoY
________________________________________________ 90
Source: “15% Rental Increase Makes Singapore 5th Most Expensive Locations Globally” - ECA International (http://www.eca-international.com/news/press_releases/show_press_release?ArticleID=7309).
A high-level Beijing official has expressed concern that the
housing situation may become politically destabilizing:
“Housing is of course a social and an economic

issue. However, if dealt with inappropriately, it will
also become a political issue.”
-Wang Guangya
Director of Hong Kong and Macau Affairs Office of the State
Council of the People’s Republic of China
________________________________________________
91
Source: “Wang Guangya Talking About Housing Market When Visiting HK: Housing Issues May Become a Political Issue if Inappropriately Deal With” – June 15, 2011 (translation).
Social Unrest – Pressure for Change
“Inflation, particularly in the price of food and housing; lack of democracy;

public austerity followed by handouts, followed by howling protests,
followed—some hope—by a change in government” –The Economist, May
2011
Tens of thousands of people are not 10,000 people protested against inflation Several organizations
satisfied with the level of political freedom (prices of food and housing) in March protested against the
in Hong Kong on July 1st, 2010 2011 dominance of property
developers and high prices in
May 2011
________________________________________________
Source: Picture - BBC (http://www.bbc.co.uk/news/10480116).
Picture - The Economist (http://www.economist.com/blogs/banyan/2011/03/protests_hong_kong). 92
Picture - Macau Daily Times (http://www.macaudailytimes.com.mo/china/25180-residents-protest-high-property-prices.html).
More…Social Unrest
This year, 218,000 people, the most since the massive 2003 civil liberty
protests, marched in Hong Kong's annual July 1st rally
“They aren’t happy with the fact that they do not see an improvement in
living standards, despite the good economic statistics.”
– Bloomberg July 1st , 2011
________________________________________________ 93
Source: Pictures - Seattle Pi (http://www.seattlepi.com/news/article/Marchers-vent-anger-on-Hong-Kong-prices-policies-1448544.php).
Unpopular Government
Despite a surging economy and 3.4% unemployment, the Chief Executive of
Hong Kong has a lower approval rating than President Obama
% Who Would Vote Yes for the Current
Chief Executive? Trade-Weighted Nominal HKD
75%
Approval
Rating
24%
Approval
Rating
Source: Bloomberg.
University of Hong Kong (http://hkupop.hku.hk/english/popexpress/ce2005/vote/poll/datatables.html). 94
Gallup (http://www.gallup.com/poll/149114/obama-close-race-against-romney-perry-bachmann-paul.aspx).
The Call for Change is Growing Louder
Major business publications, prominent investors, local politicians, and
economists have all recently questioned the suitability of the peg
Recent Headlines
“Hong Kong Faces Heat on Dollar Peg”

– Financial Times, November 2010
“Hong Kong Should End Peg to U.S.

Dollar, Deutsche Bank Says” –
Bloomberg, November 2010
“The Peg will be History” – The Standard,

January 2010
________________________________________________ 95
Source: Picture - Hong Kong Business (http://hongkongbusiness.hk/).
Diverse Voices are Calling for Change
Investor “A link to a basket of currencies or ‘no link at all’ is ‘more desirable’”¹

– Marc Faber – March 2011
Politician “Continuous appreciation of the Renminbi means diminishing

purchasing power of the Hong Kong dollar…The problem cannot be
tackled unless we abolish the linked rate in Hong Kong.”²
– The Honourable Chan Kin-Por, Legislative Council Member & Chief
Executive of Munich Re Hong Kong – January 2011
Economist “I think it’s a case of a frog boiling in water…It could happen sooner
than people think given the rapid rise in circulation of the currency
[RMB]”³ – Peter Redward, Barclays Economist – October 2010
Analyst “The merits of reform are high and the cost of the relevant option is
low.”4 – James Grant – May 2011
Source: ¹“It’s time to end the HK$ peg” - Hong Kong Business, March 10, 2011.
² Legislative Council Transcript of January 6, 2011 meeting.
³“Hong Kong May have to revalue in 2 years, Barclays says” - Bloomberg Businessweek, October 26, 2010.
96
4 Grant’s Interest Rate Observer, May 2011.
Fiscal and Regulatory Measures Have Been Inadequate
HK has implemented a series of unsuccessful “macro-prudential” reforms

to deal with its inflation and wealth gap problems. These efforts do not
address the underlying cause of the problems and in some cases are
actually inflationary (e.g. cash handouts)
f Housing – Efforts have failed to reduce prices meaningfully

LTV caps on new mortgages
Transaction tax on homes sold soon after purchase
Home Supply – Increased land sales
f Introduction of a Minimum Wage
f Rent Relief
f Utility Subsidy
f Cash Handouts
Real Estate Market Intervention is Not Working
For example, the prevalence of cash buyers has reduced the impact of
mortgage LTV caps
HK Residential Price Index
________________________________________________
Source: Bloomberg.
“Hong Kong Property” – Morgan Stanley, September 2, 2011, p.19. 98
“Asian Economics Analyst” – Goldman Sachs, June 23, 2011, p.4.
IV. Our Prediction of What is
Likely to Happen
Reminder
The history demonstrates that Hong Kong has modified its exchange rate
system to address major economic changes
HKD/USD (inverted)
Sterling Peg Free Floating Dollar Peg

HKD Strength
7.75 to 7.85 Band
’05 Strong Side

’98 Weak Side
Commitment
Commitment
________________________________________________ 100
Source: “Hong Kong’s Linked Exchange Rate System” – Hong Kong Monetary Authority, p.34 (http://www.info.gov.hk/hkma/eng/public/hkmalin/index.htm).
The only effective way to mitigate inflation and a potential
real estate bubble is to allow the HKD to appreciate
101
There are Four Principal Revaluation Alternatives
1. Allow the HKD to float
2. Repeg the HKD to a trade-weighted basket
3. Repeg the HKD to the RMB
4. Keep the USD peg, but revalue to an appropriate

exchange rate
Alternative One – Float
Pros:
Full monetary independence
The exchange rate would absorb economic shocks
Cons:
Large trade flows make it difficult for the monetary
authority to manage money supply
A floating exchange rate could be volatile
HK had a bad experience when it allowed its currency to
float between 1974 and 1983
103
Alternative Two – Peg to a Trade-Weighted Basket
Pros:
Monetary policy would more closely match that of its
trading partners
Reduces HK’s real exchange rate volatility
Singapore has successfully used this approach
Cons:
A basket is less transparent and more complicated than
the Peg
The average interest rates of HK’s trade partners is low
today, which would mean continued low HK rates
A basket introduces more discretion as trade weights can
be adjusted and are subjective, increasing the risk of
politicizing monetary policy
104
Alt. Three – A Direct or Basket RMB Link is Inevitable
f HK’s deepening economic ties with the Mainland make

a direct or basket RMB link the widely understood best
long-term solution to solving the pressures of the USD
link
f While the HKMA has said that it does not support an

RMB link now, it has laid out preconditions, which we
believe will likely be met in the coming years
f The biggest impediment to an RMB peg today is the

lack of capital account convertibility of the RMB
But we believe full capital account convertibility is

inevitable and coming soon…
The RMB is rapidly internationalizing in the current
account and full convertibility is possible by 2015:
“I should say it is quite possible for China to realise yuan
convertibility by 2015.”
– Li Daokui, People’s Bank of China (PBOC) Monetary Policy

Committee, September 2011
________________________________________________
Source: “Yuan Will Be Fully Convertible by 2015, Chinese Officials Tell EU Chamber” – Bloomberg, September 8, 2011 (http://www.bloomberg.com/news/2011-09-08/yuan-to-be-fully-convertible-by-2015-eu-chamber.html).
“China Yuan Likely Convertible by 2015” – Thompson Reuters – September 9, 2011. 106
The extremely divergent economic characteristics of HK
and the US make the status quo unsustainable,
destructive, and a distortion to the HK economy
The HKD will likely be pegged to the RMB or to an RMB-led

basket within the coming years. All that is needed is an
interim solution…
107
We believe the HK government will repeg the HKD at a
stronger exchange rate to the USD while leaving the LERS
intact
Contemporaneous with this revaluation, we believe the

HKMA may indicate that the HKD will eventually be pegged
to the RMB or to an RMB-led basket when the RMB is fully
convertible
108
Why Does This Make Sense?
f The current LERS is simple, transparent, and

credible so a continuation of the current system
makes sense
f A revaluation can be achieved quickly
f Only an interim solution is needed because the

RMB will be convertible in coming years
f No other interim change will be necessary

How much should the HKD be allowed to appreciate?
110
Considerations
f The exchange rate should be adjusted sufficiently to quell

speculation about further appreciation
f But not so much that the currency would become

overvalued
f A wider trading band could be introduced to provide

greater flexibility in a volatile world
We Believe a 30% Revaluation to 6:1 is Likely
f Would bring HKD back in line with fair value
f It would be sizeable enough to convince the market that this is

a one-time event
f A revaluation is consistent with HK’s handling of prior Sterling

and USD devaluations in the 1960s and 1970s
f Hong Kong would retain the simplicity and credibility of the

USD peg and maintain the current currency board apparatus
f It would reinforce the HKMA’s and government’s credibility as

responsible stewards of Hong Kong’s economy
Revaluation: How are Stakeholders Affected?
f Citizens:
The purchasing power of savings would instantly rise
The cost of food imports (~30% of the poorest half’s spending)¹ would drop
immediately
Real estate appreciation would moderate and rents should stabilize over time
f The Banks:
HKMA data show that banks would not suffer large FX or loan losses on a
revaluation²
f The HKMA:
Has sufficient foreign reserves to ensure that the Monetary Base is covered
f Mainland China:
A revaluation could be seen as evidence that HK is addressing its social divide
and political tensions
________________________________________________
Source: ¹ “Half-yearly Hong Kong Economic Report 2011” – Hong Kong SAR Government, p. 97.
² “Foreign Currency Position” and “Asset Quality of Retail Banks” – Hong Kong Monetary Authority (http://www.info.gov.hk/hkma/eng/statistics/msb/index.htm).
V. Investment Opportunity
Three Ways to Make Money
f Buy HKD Outright
f Buy HKD with USD Leverage
f Buy HKD Call Options

Buy HKD Outright
f The HKMA’s commitment to support HKD at 7.85

HKD/USD limits the downside to owning HKD to
~1%, making the HKD effectively a one-way bet
f The HKMA’s 7.85 HKD/USD defense is credible:

The HKD is materially undervalued
HK has substantial international reserves, at ~2.2x
the Monetary Base
The HKMA’s successful defense of the HKD during
the Asian Financial Crisis makes its credibility
unquestioned
Purchase HKD with USD Leverage
Similar short-term interest rates and the HKMA’s pledge to support
HKD at 7.85, means investors can cheaply and safely purchase HKD
on USD leverage
12-Month %Total Return (from 7.80)
Leverage: 7.85 6.24 5.78
(Notional/Equity) (Weak Side) (25% Reval) (35% Reval)
4.0x -3% 100% 140%
6.0x -5% 149% 209%
8.0x -6% 199% 279%
10.0x -8% 249% 349%
12.0x -9% 298% 418%
14.0x -11% 348% 488%
16.0x -12% 398% 558%
18.0x -14% 447% 627%
20.0x -16% 497% 697%
12 Month Financing Cost (Fixed)

HIBOR 0.67% Reflects the cost of financing for a bank.
LIBOR 0.82% Institutional and individual investors will pay a
Carry -0.15% higher rate (~35bps more)
117
HKD Call Options
HKD call options are extremely cheap
Option Terms
Notional $ 1,000,000,000 $ 1,000,000,000 $ 1,000,000,000
Strike (HKD/USD rate) 7.80 7.50 7.00
Premium (% of notional) 0.83% 0.57% 0.27%
Premium Dollars (USD) $ 8,300,000 $ 5,650,000 $ 2,700,000
Payouts at Exercise (Revaluation to 6.00, +30%)
USD Received $ 1,300,000,000 $ 1,250,000,000 $ 1,166,666,667
USD Spent (notional) 1,000,000,000 1,000,000,000 1,000,000,000
Payoff $ 300,000,000 $ 250,000,000 $ 166,666,667
Payoff/Premium 36x 44x 62x
USD received = value of HKD purchased at

strike price converted back at spot (6.00)
________________________________________________
118
Source: Indicative broker quote September 8, 2011.
HKD Call Options are Cheap
The HKD options market implies that the probability of a revaluation is
extremely remote. We think a ~30% revaluation is likely, giving investors a
~44x payout on one-year 7.50 strike options
Payout as Multiple of Premium
70.0x
60.0x
50.0x
40.0x
30.0x
20.0x
10.0x
.0x
10% 15% 20% 25% 30% 35% 40%
% Revaluation
119
The Market is Mispricing this Option
f Because of the peg, HKD/USD volatility is very low
f We believe HKD call options should be priced

based on expected value rather than volatility
Expected Value = (Probability of Reval) X (Expected Amount of Reval)
f We think a revaluation is more likely than not, but

the market price implies extremely low probabilities
One Year, 7.50 Strike
Expected Implied
HKD Probability of
Stregthening Payoff Revaluation
15% 18.7x 5.3%
20% 27.2x 3.7%
A revaluation 25% 35.7x 2.8% Market implied
will likely be in 30% 44.2x 2.3% probabilities are
this range 35% 52.8x 1.9% very low
40% 61.3x 1.6%
The HKD is a cheap hedge against a weakening USD:
A falling USD puts more pressure on HK

authorities to act
121
VI. Why Now?
Why Now? – Benefits Outweigh the Cost
f The benefits of acting now

Consumer inflation could get materially worse
It’s not too late to prevent a real estate bubble
Social unrest is building
The fiscal and economic divergence with the US will continue
Revaluation is inevitable when the RMB peg is established
f The costs of acting today are low

The credibility of the HKMA would be enhanced
The HKMA has reserves to support a large revaluation
HKMA data show the banks’ FX exposure is minimal and their
real estate loans are well performing¹
HK’s lack of an export manufacturing sector reduces the
economic risk of a stronger currency
________________________________________________
Source: ¹ “Foreign Currency Position” and “Mortgage Survey Results”– Hong Kong Monetary Authority (http://www.info.gov.hk/hkma/eng/statistics/msb/index.htm).
Why Now? – 2012 Election
The March 2012 HK Chief Executive election increases the chances
of a near-term revaluation
f Change tends to happen around political transitions:

Outgoing politicians are often less risk averse
Incoming politicians are often most bold when they first take
office
f A revaluation may well materially increase the new Chief

Executive’s approval ratings
f It would enhance HK’s citizens’ perception of China’s

beneficence
________________________________________________
Source: ¹ “Previewing the Political Year Ahead: Article 23” – Suzanne Pepper (http://chinaelectionsblog.net/hkfocus/?p=168).
Revaluing Now Mitigates the Financial Risk to the HKMA
f The conventional wisdom is that central banks (CBs) can

defend the strong side of their currency without limit by
simply printing an unlimited amount of money
f The reality is different:

The CB loses money on a revaluation, because a revaluation
reduces the value of foreign assets on their balance sheet
Printing money expands and leverages the CB’s balance
sheet, making it more costly to revalue
Printing money is highly inflationary
f Because the Basic Law requires the HKMA to back its

Monetary Base 100% with international reserves, printing
money could severely limit the HKMA’s future revaluation
options
Revaluing Now Mitigates Financial Risk to the HKMA
The HKMA’s 2008/2009 intervention, in response to over HKD

$600bn of money flows, greatly increased the size and leverage of
its balance sheet
Pre-Intervention Post-Intervention
Leverage: 75%
Leverage: 56%
Balance Sheet, Dec. 2007 Balance Sheet, July 2011

________________________________________________
Source: “Monthly Statistical Bulletin – Table 8.2” – Hong Kong Monetary Authority, July 2011 (http://www.info.gov.hk/hkma/eng/statistics/msb/index.htm).
We believe it would be imprudent for Hong Kong to
print more money
127
The principal argument against a revaluation is that it
might harm the HKMA’s credibility. We believe this is
false for two reasons:
1) Reducing inflation and the risk of asset bubbles in HK

enhances HK’s status as a stable, economically
successful, AAA rated region
2) Allowing the HKD to appreciate only increases the

credibility of the HKD as a store of value
128
Some observers have suggested a revaluation would be
inconsistent with the HKMA’s public statements
129
However, an upward revaluation was explicitly
contemplated in 1983 when the LERS was introduced:
“It will be acceptable to indicate eventual possible

appreciation in the event of confidence returning to such
a degree as to produce unduly rapid monetary expansion,
but such an indication must carry complete conviction
that the rate would only ever be adjusted in that
direction.”
- Internal Hong Kong government policy memo, 1983
________________________________________________
130
A peg depends on confidence and credibility. Any hint of
devaluation would compromise the integrity of the link:
“Any statement which can be interpreted as hinting at the

possibility of depreciating the announced rate would
sabotage the scheme from the onset.”
- Hong Kong government policy memo, 1983
________________________________________________
131
As such, anytime observers have questioned the link, the
HKMA has issued a prompt statement to quell speculation
"The Hong Kong dollar peg has been working well

since its adoption in 1983. It's the foundation for
the stability of the currency and financial system in
Hong Kong so we have no intention to make any
change"
– Norman Chan, HKMA Chief – August 2011
________________________________________________ 132
Sources: “Linked Exchange Rate System” – Hong Kong Monetary Authority, August 2011 (http://www.info.gov.hk/hkma/eng/insight/20110815e.htm).
In 2002, facing SARS, deflation, and budget deficits the
then Financial Secretary strongly defended the peg
publically:
“We have no plans to change the peg. One of the
reasons the peg remains and people are confident
about the Hong Kong dollar is that it has not
changed in the last 19 years”
– Antony Leung, Financial Secretary (2001-2003) – Nov. 2002
But in private the story was very different…
________________________________________________
133
Source: “Financial Secretary Transcript” - Press Release, November 23, 2002 (http://www.info.gov.hk/gia/general/200211/23/1123063.htm).
Behind the scenes…
“The chief executive, Joseph Yam, and I did

seriously evaluate the various options including
unpegging”
– Antony Leung, Financial Secretary (2001-2003)
Interview – “Hong Kong’s Peg Admission May Hurt its Future

Defense” Bloomberg, June 2007
________________________________________________ 134
Sources: “Hong Kong's Peg Admission May Hurt Its Future Defense” – Bloomberg, June 8, 2007 (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=akb5SpAzhFKg&refer=asia).
We also know from a document WikiLeaks released
August 30th, 2011 that in 2006 a float was seriously
considered by members of an important HK government
commission:
“Numerous commission [HK’s Commission on
Strategic Development – One of the HK
government’s most prominent] members who, in
Fung’s words, ‘have the ear of senior officials’ are
arguing that the HKD-USD peg should be floated
shortly after the Chinese RMB surpasses the HKD
in value.”
Internal US Treasury Memo, “Hong Kong Dollar Peg’s Future Under Consideration by
Government Advisory Body” – April 2006
________________________________________________ 135
Sources: Wikileaks, August 30, 2011 (http://wikileaks.org/cable/2006/04/06HONGKONG1383.html).
A prominent member of the HKMA committee responsible
for advising on the peg suggests a revaluation could
happen when the market least expects:
“[T]he HKMA might choose a hot and boring Friday

afternoon in mid-summer, when most fund
managers and top government officials had gone
vacationing, and announce the floating of the Hong
Kong dollar.”
-Shu-ki Tsang
Academic Economist and HKMA Advisory Board Member,
Currency Board Sub-Committee
________________________________________________
136
Source: “Commitment to Exit Strategies from a CBA” – Hong Kong Baptist University (http://sktsang.computancy.com/attrachment/Tsang20000506.pdf).
We have every reason to believe HK decision makers
will approach the HKD peg question with the same
diligence and rationality they have used in the past
137
Economic and Monetary Policy Making in HK
f Since its inception in 1993, the HKMA has built a reputation as

one of the most credible monetary authorities in the world
f The HKMA is known for its intelligence, transparency, and

prudent oversight of the economy and banking system
f Most importantly, the HKMA and other important decision

makers in Hong Kong have a track record of behaving in an
economically rational manner
Repegging is easy and quick to execute:
Unlike some other currency regimes, HK’s peg can

be modified through a purely administrative
process. No legislative action is required
139
In Sum:
A highly undervalued currency
+
A highly undervalued option
= An extraordinary investment opportunity
Q&A
A Homespun Fortune
October 18, 2011

Disclaimer
confidential information in the possession of the companies discussed in this presentation that could lead
contained herein is not investment advice or a recommendation or solicitation to buy or sell any securities.
All investments involve risk, including the loss of principal.
among other things, the historical and anticipated operating performance of the companies discussed in this
presentation, access to capital markets, market conditions and the values of assets and liabilities. Such
anticipated results that are inherently subject to significant economic, competitive, and other uncertainties
and contingencies and have been included solely for illustrative purposes. No representations, express or
implied, are made as to the accuracy or completeness of such statements, estimates or projections or with
respect to any other materials herein and Pershing Square disclaims any liability with respect thereto. Actual
results may vary materially from the estimates and projected results contained herein.
Funds managed by Pershing Square and its affiliates are invested in Fortune Brands Home & Security, Inc.
(“FBHS”) common stock and cash settled derivative financial instruments based on the price of FBHS
common stock. Pershing Square manages funds that are in the business of trading – buying and selling –
securities and financial instruments. It is possible that there will be developments in the future that cause
Pershing Square to change its position regarding FBHS. Pershing Square may buy, sell, cover or otherwise
change the form of its investment in FBHS for any reason. Pershing Square hereby disclaims any duty to
provide any updates or changes to the analyses contained here including, without limitation, the manner or
type of any Pershing Square investment.
1
Fortune Brands Home & Security
FBHS (or the “Company”) is a leading North American

residential building products company
Manufacturer of:
Ticker: “FBHS”
Faucets
Recent stock Kitchen and bath cabinets
price: $13 (1)
Security and storage products
Windows and doors
Equity market capitalization of ~$2.0bn
Enterprise valuation of ~$2.5bn
Spun-off from Fortune Brands on October 4, 2011
(1) Based on stock price as of Friday, October 14 2011.

2
Snapshot of FBHS
Plumbing
#1 Faucet brand in North America
Stable business driven by replacement
demand and “low ticket” remodeling projects
Kitchen & Bath Cabinetry

#1 N. American kitchen and bath cabinet maker
Leveraged to housing recovery
Security and Storage

#1 Padlock brand in North America
Stable, recurring cash flows
Good growth potential
Windows and Doors

Leveraged to housing recovery
3
Secular Winner…
Industry leader with significant scale and strong market positions
Winning new business and growing as financially leveraged competitors

remain defensive
Strong management team -- highly experienced operators
…And Cyclical Winner

Well-positioned when the housing market normalizes
Cyclical growth will not require capital investment above normal levels
Immense operating leverage: EBITDA can be 3x in a normalized housing market
Platform Business
Highly fragmented industry is ripe for consolidation
Opportunities to leverage scale and distribution through acquisitions in

adjacent categories (i.e. electronic security, bath accessories)
4
Attractive Valuation
Current valuation assumes minimal housing recovery over the next five years
Immense upside potential
If housing starts improve by 2016, stock is worth ~$18 to $27 today, depending
on the strength of recovery
Midpoint of valuation analysis is ~$22 per share today, up about 70%(1)
Minimal downside
If housing starts don’t improve, FBHS can still shrink capacity to
get to an attractive level of profitability
Classic spin-off dynamics

Orphaned stock: October 4th spin-off
Most Fortune Brands shareholders owned it for Beam, a non-cyclical business
Strong balance sheet

Flexibility to make opportunistic acquisitions
Limits downside risk as we wait for the housing markets to recover
(1) See page 31 for valuation analysis.

5
FBHS: Business Overview
Plumbing
The Plumbing segment, which contributed 54% of FBHS pre-corporate

2010 EBIT, has performed exceptionally well in the downturn due to
both marketplace gains and the “small ticket” aspect of the category
Commentary Financials
Manufactures faucets, $ in millions
accessories, and kitchen sinks Plumbing FY 2008 FY 2009 FY 2010

Revenue $967 $835 $924
under the #1 Moen brand Growth (14)% 11 %
EBIT $171 $117 $133
Large installed base helps win Margin 17.6 % 14.0 % 14.3 %
replacement sales
% of FBHS Revenues 26% 28% 29%
Faucets are a “small ticket” % of FBHS pre-corp EBIT 48% 81% 54%
remodeling expenditure – an
affordable way to improve the
look of the bathroom/kitchen
Generally a stable category

where branding and innovation
can drive marketplace gains
Variable-cost business model

7
Kitchen & Bath Cabinets
The Cabinets segment is barely profitable today as demand for new

homes and “big ticket” remodeling projects has diminished drastically
$ in millions
Kitchen & Bath Cabinets FY 2008 FY 2009 FY 2010
Revenue $1,552 $1,126 $1,189 The segment has significant excess
Growth (27)% 6%
EBIT $141 $4 $31
capacity, which is pressuring
Margin 9.1 % 0.4 % 2.6 % margins today, but will allow for
explosive growth when the housing
% of FBHS Revenues 41% 37% 37%
% of FBHS pre-corp EBIT 40% 3% 13%
markets recover
#1 North American manufacturer of kitchen and bath cabinets

Key brands include: Aristokraft, Omega, and Diamond
Well-balanced distribution channels and flexible supply chain allow for differentiated
price points and multiple levels of cabinet customization
Distributes through dealers, wholesalers, home centers, and large builders
Highly geared to “big ticket” remodeling projects and new home construction
Currently winning new business against competitors like Masco
High fixed-cost business model
8
Security and Storage
Masterlock is a great business with a strong marketplace position,

stable cash flows, minimal capex requirements and good growth
potential in adjacent categories
$ in millions
Manufactures Masterlock Security & Storage FY 2008 FY 2009 FY 2010
padlocks and Waterloo storage Revenue $571 $495 $520
products Growth (13)% 5%
EBIT $59 $42 $61
Margin 10.3 % 8.4 % 11.7 %
Historically stable demand in
core padlock market % of FBHS Revenues 15% 16% 16%
% of FBHS pre-corp EBIT 17% 29% 25%
FBHS exploring opportunities

to expand Masterlock brand Security and Storage contributed 25% of
through acquisitions FBHS’s 2010 EBIT
Good potential to grow in

adjacent categories (electronic
security and monitoring)
9
Windows and Doors
FBHS’s Windows and Doors segment contributed only 8% of total pre-

corporate EBIT in 2010.
$ in millions
Manufactures fiberglass and Windows & Doors FY 2008 FY 2009 FY 2010
steel residential and patio door Revenue $668 $551 $601
systems and vinyl-framed Growth (18)% 9%
EBIT ($17) ($19) $21
windows Margin (2.6)% (3.4)% 3.4 %
Key brands include % of FBHS Revenues

% of FBHS pre-corp EBIT
18%
(5)%
18%
(13)%
19%
8%
Therma-Tru Doors and
Simonton Windows
EBIT Margins remain depressed as the
segment is significantly leveraged to new
Currently lapping difficult
home construction
comparisons driven by 2010
federal tax credits for energy
efficiency
10
FBHS: Margins Significantly Depressed
Consolidated EBIT margins are currently at ~5%, well below peak levels
of 14% reached in 2006.
2006 2007 2008 2009 2010 LTM

($ in millions)
Revenue $4,694 $4,551 $3,759 $3,007 $3,234 $3,261

Growth (3)% (17)% (20)% 8% 1%
% of Peak 100 % 97 % 80 % 64 % 69 % 69 %
EBITDA $816 $703 $435 $195 $288 $264

Margin 17.4 % 15.4 % 11.6 % 6.5 % 8.9 % 8.1 %
Growth (11)% (25)% (44)% 37 % (9)%
% of Peak 100 % 86 % 53 % 24 % 35 % 32 %
EBIT $668 $553 $301 $81 $180 $160

Margin 14.2 % 12.2 % 8.0 % 2.7 % 5.6 % 4.9 %
Growth (15)% (34)% (66)% 107 % (12)%
% of Peak 100 % 83 % 45 % 12 % 27 % 24 %
Memo:
Housing Starts 1,812 1,342 900 555 586 569
Growth (26)% (33)% (38)% 6% (3)%
11
Segments: A Tale of Two Cities
The company’s operating profit margin decline is primarily the result of

comparatively weaker performance in the highly cyclical Cabinets and
Windows/Doors segments…
FBHS Segments Doing Well Today: FBHS Segments Under Pressure:

% of FBHS % of FBHS % of FBHS % of FBHS
2010 Revenue 2010 EBIT (1) 2010 Revenue 2010 EBIT
(1)
Plumbing 29% 54% Cabinets 37% 13%

Security and Storage 16% 25% Windows / Doors 19% 8%
Total 45% 79% Total 55% 21%
Strong and stable replacement demand

Leveraged to new home construction and
Leveraged to “low-ticket” remodeling big ticket remodeling
More variable-cost model More fixed-cost model
Represents ~45% of FBHS sales and Represents 55% of FBHS sales and ~20%
~80% of FBHS EBIT today (1) of FBHS EBIT today (1)
Margins have held up nicely Currently at low capacity utilization rates,
in anticipation of a recovery
Explosive growth potential when housing
(1) Excludes corporate costs 12 markets recover
Restructured the Business in the Downturn…
The Company substantially improved its cost structure by reducing its

footprint between 2006 and 2009. Manufacturing facilities and
employee count have been reduced by roughly 40%.
2004 2005 2006 2007 2008 2009

Employees 21,171 21,480 27,729 22,771 18,409 15,834
Y-o-Y Change 1% 29 % (18)% (19)% (14)%
Change Since Peak (18)% (34)% (43)%
Manufacturing Plants 48 53 64 56 47 41
Y-o-Y Change 10 % 21 % (13)% (16)% (13)%
Change Since Peak (13)% (27)% (36)%
13
…But Kept Enough Capacity for a Recovery
FBHS is well-positioned to accelerate profit growth as volumes grow in

a recovery scenario
Currently operating at ~60% capacity overall, in anticipation of a

recovery
Lower levels of capacity at highly cyclical segments (Cabinet and
Window/Doors)
Higher levels of capacity in more stable segments (Plumbing and
Security)
Footprint is currently right-sized to support $5bn in sales (at 1.5mm

new housing starts)
Current sales base is ~$3.3bn
14
What If Capacity Were Reduced Further?
If management becomes more bearish about a recovery, it can reduce

capacity further and shrink the cost base. We believe that if the
business were right-sized to the current sales base of ~$3.3bn, EBIT
margins could be approximately 10%
% of 2010 2010 Normalized

Revenue Margins Margins
Cabinets 37 % 2.6 % 10 %
Plumbing 29 % 14.3 % 15 %
reduction
Capacity
Windows Doors 19 % 3.4 % 8%
Security & Storage 16 % 11.7 % 12 %
Segment 7.6 % 11 %
Corp. Expense as % of Rev (2.0)% (1.4)%
Total 5.6 % 10 %
15
Secular Winner: Growing in the Downturn
Since the downturn, FBHS has been aggressively winning new

business and increasing its marketplace position through product
innovations. As a result, the company has experienced organic
growth in every quarter since Q1 2010 - even in this difficult housing
market
Winning New Business: Driving Sales through Innovation:
Martha Stewart Living cabinetry Moen “Spot Resist” finish

line at Home Depot
Developed new finish that
In-stock cabinetry at Lowe’s eliminates water spotting and finger
rolling out in 2011 printing
Strong product receptivity in the
Waterloo storage products market
rolling out Husky Garage
Organization at Home Depot Cabinetry: Paper laminate
technology
Fashionable color and textures at
affordable prices
16
Strong Balance Sheet Allows for Flexibility
The Company has significantly less financial leverage than its peers
allowing it to acquire smaller building products companies that are
currently operating at trough levels of profitability
Total Debt / EBITDA (1):
FBHS:
$520mm of total debt
LTM EBITDA - Capex:
$194mm
No liquidity concerns
(1) Peer average based on Moody’s. Peers include Armstrong, Lennox, Masco, Mohawk, Owens Corning, Stanley Black &
Decker and Whirlpool. FBHS leverage based on 12/31/2010 pro forma metrics.
17
Housing Market Review
Long-term Housing Market Drivers
Positive population / immigration growth

New Home
Construction Increased levels of household formation
Favorable housing affordability
Aging housing stock (average of 40

Repair and years), particularly homes > 12 years
Remodel
Existing home sales
Economic factors that enable a recovery:
Consumer confidence
Unemployment—at the local market level
Credit availability
Stability in home prices
Note: This page is taken from FBHS investor presentation dated September 6, 2011
19
Historical Housing Starts: 1965 to Present
Housing starts are currently at the lowest levels in the last 40 years and
well below the long term annual average of ~1.5mm
Average
~1.5mm
Source: Bloomberg 20
We are in Year Five of the Housing Recession
Housing starts are currently at ~25% of peak levels achieved in 2006

and have been below the long-term trend of sustainable housing
demand for nearly 4 years
Peak:
~2.3mm
Average
~1.5mm
Current: ~0.6mm
Trough: <0.5mm
Source: Bloomberg 21
What a Housing Recovery Might Look Like
Although the pace of the housing recovery is difficult to predict, we

believe a recovery over the next several years is highly likely
We believe that the current level of excess supply is ~2mm to 2.5mm housing
units and normalized housing demand is approximately 1.5mm
At a normalized level of housing demand:

Excess housing supply could be eliminated in roughly 2.5 years if housing starts
remain at ~600k
At the depressed level of housing demand (~1m):

Excess supply could be eliminated in ~ 5.5 years if housing starts remain at
~600k
(Units in 000s, except years) Depressed Normalized
Housing Demand 1,000 1,500
Housing Starts 600 600
Annual Reduction of Excess Supply 400 900
Current Excess Supply 2,250 2,250

Years to Zero Excess Supply 5.6 2.5
22
Repair/Remodel Market Overview
Repair / Remodeling projects are generally discretionary

Certain replacement projects can wait: Cabinets, tiling (versus more critical
items such as doors, windows, roofing)
Weak existing home sales are hurting the R&R market - new homeowners
spend 2x the average repair/remodel level
Despite the weak market, there is pent-up demand from an aging housing
stock
Today the ticket matters a lot

Big ticket remodel items (cabinets, tiling) are weak
Small ticket remodel items (faucets, paint) are showing strength
Longer term, Repair / Remodel growth rates tend to trend in line

with GDP
23
Housing Market Summary
Housing starts are currently at the lowest levels in 40 years

Long-term average of housing starts is ~1.5mm versus today of 600k
Repair and remodel market is likely facing pent-up demand given aging
housing stock
Before housing starts return to their long-term trend, we need to absorb
the current excess supply of homes – a matter of time
The current level of housing starts (~600k) is unsustainable over the

longer term
Historical levels of annual household formation are far in excess of 600k
We think a meaningful recovery in housing starts could happen in the

next several years
However, new homes will likely be smaller and more affordable (cheaper
products) than in recent years
FBHS’s market position may improve, given the Company’s skew to more
value-priced products
24
“The only way a correction takes place is to have
household formation exceed new construction by a
significant amount for a significant period of time. We've
had it for quite a while. And when you see these figures
of 500,000 or 600,000, that means we're sopping up
housing inventory. And I don't know exactly when that
hits equilibrium, but it isn't five years from now. I know
that. And I think it actually could be reasonably soon.”
--Warren Buffett (July 8, 2011 Bloomberg TV interview)
25
Valuation
Upside Case: Housing Recovery
Management estimates that when housing starts recover to ~1mm to

1.5mm, EBITDA will be 2 to 3x current levels
EBITDA: ~$850MM
EBITDA: ~$550MM
~3X LTM
~2X LTM EBITDA
EBITDA: ~$265MM
EBITDA
Last Twelve Partial Full Recovery /

Months Recovery Normalized Starts
Home Starts ~0.6M 1MM 1.5MM
Revenue $3B $4B $5B
EBITDA Margin 8% ~14% ~17%
Note: Partial Recovery assumes 2-3% Repair & Remodel CAGR and Full Recovery assumes 4-6% CAGR
27
Downside: What if there is No Housing Recovery?
If housing starts were to stay at depressed levels (~600k) for the longer
term, we believe FBHS could right-size the business to achieve a more
normalized level of profitability
FBHS has maintained excess capacity to position itself for a housing

rebound
If it fails to materialize, we believe management can right-size the cost
structure and achieve a ~10% EBIT margin
FY 2011E Revenue $3.3bn

Normalized EBIT Margin 10%
EBIT $330mm
Plus: D&A (reduced capacity) 70mm
EBITDA $400mm
We estimate that FBHS can generate at least $400MM in EBITDA on

today’s sales base by cutting capacity and excess cost
28
Current Trading Multiples
FBHS currently trades ~9.7x LTM EBITDA and ~16.5x LTM cash earnings. If
no recovery occurs, FBHS is trading at ~10x our estimate of cash earnings.
If a recovery occurs, FBHS trades at ~4x to 7x our estimates of cash
earnings, depending on the strength of recovery
No Recovery Recovery
LTM (Cut Capacity) Partial Full
Housing Starts (000s) 569 600 1,000 1,500
EBITDA $264 $400 $550 $850

EBITDA - Capex $194 $330 $450 $750
EPS $0.57 $1.26 $1.76 $3.00
FCF per Share $0.79 $1.26 $1.76 $3.00
EV / EBITDA 9.7 x 6.4 x 4.7 x 3.0 x

EV / EBITDA-Capex 13.2 x 7.8 x 5.7 x 3.4 x
P/E 23.0 x 10.3 x 7.4 x 4.3 x
P/FCF 16.5 x 10.3 x 7.4 x 4.3 x
Memo: Market Capitalization
Recent Stock Price $13.00
Diluted Shares (mm) 157
Market Cap $2,045
Plus: Net Debt 520
Enterprise Value $2,565
Note: EPS and FCF per share based on a 35% normalized tax rate.
29
Valuing FBHS in a Recovery
Assuming a 7x Forward EBITDA multiple, even if the recovery is

protracted or prolonged, we believe we will earn an attractive IRR at
the current share price
Total Return
Housing Starts 1.0M 1.3M 1.5M
EBITDA $550 $700 $850
2014 83 % 139 % 196 %
Recovery 2015 92 % 151 % 209 %
Year 2016 101 % 162 % 223 %
2017 111 % 174 % 237 %
IRR
EBITDA $550 $700 $850
2014 35 % 55 % 72 %
Recovery 2015 24 % 36 % 46 %
Year 2016 19 % 27 % 34 %
2017 16 % 22 % 28 %
Note: Assumes 7x EBITDA exit multiple and includes the value of annual free cash flow generated until exit. Based on R&M CAGR of
2-3%, 3-4%,and 4-6% for housing starts of 1.0m,1.3m, and 1.5m
30
Stock Price at Various Levels of Recovery
Assuming on a housing recovery over the next several years, we believe FBHS is
worth ~$18 to $27 per share today. The midpoint valuation is $22/share today,
which is up ~70% from the recent share price of $13. If the housing market never
recovers, we believe FBHS is still worth nearly $14 per share today
~$27 per share
What FBHS is worth today:
~$18 per share ~110% upside
~40% upside
~$14 per share
~8% upside
No Recovery Partial Full Recovery /
(capacity reduction) Recovery Normalized Starts
Year 2014 2016 2016
EBITDA ($MM) $400 $550 $850
EBITDA Multiple 7x 7x 6.5x
Note: Assumes 157MM shares, $520MM of net debt, and uses a 10% discount rate to discount the future stock price to today. Includes the
value of annual free cash flow generated until exit. 31
Conclusion
Pace and strength of a housing recovery is difficult to predict

However, at some point, the housing markets will recover
Investing in FBHS is a low-risk way to profit from an eventual housing

market recovery
Pure-play residential building products company
Best operators in the business
Improving marketplace position, even in tough housing markets
Many of its competitors are on the defensive
No liquidity concerns and currently generating a healthy FCF yield of 6%
Downside is limited, given clean balance sheet and Company’s ability to

reduce capacity, if necessary
Upside potential is enormous, as cyclical growth will not require capital
investment above normal levels
32
Waiting for a Bounce
from the Lowe’s
November 8, 2011

Disclaimer
confidential information in the possession of the companies discussed in this presentation that could lead
contained herein is not investment advice or a recommendation or solicitation to buy or sell any securities.
All investments involve risk, including the loss of principal.
among other things, the historical and anticipated operating performance of the companies discussed in this
presentation, access to capital markets, market conditions and the values of assets and liabilities. Such
anticipated results that are inherently subject to significant economic, competitive, and other uncertainties
and contingencies and have been included solely for illustrative purposes. No representations, express or
implied, are made as to the accuracy or completeness of such statements, estimates or projections or with
respect to any other materials herein and Pershing Square disclaims any liability with respect thereto. Actual
results may vary materially from the estimates and projected results contained herein.
Funds managed by Pershing Square and its affiliates are invested in Lowe’s Companies, Inc. (“LOW”)
common stock. Pershing Square manages funds that are in the business of trading – buying and selling –
securities and financial instruments. It is possible that there will be developments in the future that cause
Pershing Square to change its position regarding LOW. Pershing Square may buy, sell, cover or otherwise
change the form of its investment in LOW for any reason. Pershing Square hereby disclaims any duty to
provide any updates or changes to the analyses contained here including, without limitation, the manner or
type of any Pershing Square investment.
1
Lowe’s (“LOW”)
f Lowe’s (or the “Company”) is a leading North

American home improvement retailer
f Operates ~1,750 stores consisting of approximately

Recent stock
200mm ft² of selling space
price: $21.50 (1)
99% of stores located in the US
Ticker: “LOW”
f Equity market capitalization of ~$29bn
Div. Yield: ~2%
f Enterprise valuation of ~$34bn
f Current free cash flow yield of ~8%
(1) Based on stock price of $21.54 as of November 4, 2011.

2
Stock Price Performance: Last 5 Years
Lowe’s recent share price of $21.50 is nearly 40% below its peak of ~$35
in February 2007
3
Attractive retail category

f Limited internet risk relative to other retailers
f High gross margin retail category and diversified commodity risk
f Limited fashion risk
f Service component = consumer value proposition
Good barriers to entry

f Home Depot and Lowe’s are the central players in home center retail
f Home centers are low-cost providers, given scale and leverage with suppliers
f Limited risk of new entrants
Cheap Valuation
f Lowe’s trades at 6.5x depressed EBITDA and less than 13.5x depressed EPS
f Lowe’s EBIT margin currently 7.5% only 70bps higher than its trough in 2009 at 6.8%
f Company believes normalized EBIT margins are 10%
f Company has maintained staffing to provide high service levels and be positioned for a
recovery
4
Investment Highlights (cont’d)
Extremely shareholder friendly capital allocation policy

f All free cash flow after dividends goes towards share repurchase
f Company is increasing leverage levels modestly to further accelerate buyback
f We expect the Company to buy back $10bn to $13bn of stock from 2012 to 2015
Equivalent to 35% to 45% of the current market cap of the Company
Strong asset value and low financial leverage – limits downside

f Lease-Adjusted Net Debt / LTM EBITDAR = 1.6x
f Owns roughly 89% of its ~1,750 buildings
f $23bn gross book value of land and buildings, or ~65% of Lowe’s enterprise value
5
Business Overview
Lowe’s Business Snapshot
Overview of Lowe’s Revenue Mix

2010
f 2nd largest home improvement
retailer Discretionary
30%
f Typical customer shops at Lowe’s Repair &
three to four times per year and Maintenance 70%
spends ~$62 per transaction
f Each store averages ~$28mm in

revenue 2005
f LTM Sales/ft² is $246
Repair & Discretionary

Maintenance
50% 50%
Sales today are significantly more Repair &

Maintenance items than Discretionary items
7
Why Do Consumers Shop at Home Centers?
Valuable Customer Service

f Helps customers identify the exact products they need (e.g., replacement parts)
f Consults with customers on complex remodeling projects
f Provides installation services
One-Stop Shopping
f Home improvement purchases are typically project-oriented (e.g., bathroom remodel)
Consumers buy across categories (paint, plumbing, flooring, etc.) making one-stop
shopping ideal
f Home centers’ big-box layout allows for ~40,000+ SKUs
Product selection can’t be matched by general merchandise retailers
Instant Satisfaction
f Customers can purchase products and take them home from the store immediately
Convenience
f Lowe’s has ~1,750 stores across 50 U.S. states
8
Why Do Consumers Shop Online?
Online retailing has become a headwind for most brick-and-mortar

retailers over the recent years. Online shopping is most appealing to
consumers when the following conditions apply:
3 Product is relatively high-priced (i.e., sales tax savings are more material)
3 Product is not needed immediately
3 Shipping cost is low
3 Shipping is unlikely to damage the product
3 Professional installation is not needed
3 Item is not purchased as part of a larger project
3 End-user of the product is making the purchasing decision
We believe that the home centers face limited risk from online shopping
because the majority of products they sell do not meet most of these
conditions
9
Home Improvement Retail: Limited Internet Risk
We believe that only 10% of Lowe’s revenues face a high risk of

competition from online retailers
Est. Threat of
Category % of Rev. Product Example Internet Competition Reason
Lawn & Garden 13 % Grills, mowers, garden chemicals Limited Shipping issues
Electrical
Light Bulbs 1% High New LED bulbs ship well, high ticket
Technical Lighting 1% Switches, dimmers Limited Low ticket
Ceiling Fans 2% Moderate
Plumbing
Pipes/Fitting 3% Limited Contractor purchase, project-based
Faucets 2% Moderate High ticket, ships well
Large Fixtures 2% Tubs, sinks Limited
Paint & Accessories 9% Limited Paint not ship well, project-based
Floor & Wall
Flooring 4% Limited Shipping issues
Wall Storage 2% Closets storage Limited Shipping issues
Wall Décor 2% Curtain rods High Higher ticket, ships well
Hardware
Power Tools 3% Electric drills, screwdrivers High Higher ticket, ships well, not project-based
Handtools 3% Manual hammer, screwdriver Limited Low-ticket, project-based
Hardware Accessories 6% Nails, bolts, nuts Limited Low-ticket, project-based
Door Lock Sets 1% Front door knobs, deadbolts High High ticket, ships well
Windows & Doors 11 % Limited Shipping issues
Building Materials 20 % Lumber, insulation, roofing, concrete Limited Contractor purchase, project based, shipping issues
Appliances
Installable Appliances 8% Washer/Dryer, A/C, stove, refrig. Limited-Moderate Service component
Non-Installable Appliances 2% Small appliances High High ticket, no service component, ships well
Kitchen 5% Cabinets Limited Installation, shipping issues
Limited Risk 82 %
Moderate Risk 8%
High Risk 10 %
Note: Limited-Moderate category counts 50% towards limited, 50% towards moderate
10
Lowe’s Financials: Margins Down Significantly
Lowe’s sales/ft² is 25% less than peak levels achieved nearly six years
ago. EBIT margins are ~350bps below peak margins achieved nearly
five years ago
2005 2006 2007 2008 2009 2010 LTM
Revenue ($ in B) $43.2 $46.9 $48.3 $48.2 $47.2 $48.8 $48.8
Growth 19 % 9% 3% (0)% (2)% 3% (0)%
EBIT Margin 10.8 % 11.0 % 9.7 % 7.9 % 6.8 % 7.4 % 7.5 %
Sales / Ft² $328 $316 $292 $267 $249 $250 $246

Growth 5% (4)% (8)% (8)% (7)% 1% (1)%
% of Peak 100 % 96 % 89 % 82 % 76 % 76 % 75 %
SSS Growth 6.1 % 0.0 % (5.1)% (7.2)% (6.7)% 1.3 % (0.1)%
Units 1,234 1,385 1,534 1,638 1,710 1,749 1,753

Growth 14 % 12 % 11 % 7% 4% 2% 0%
11
LOW Outperformed HD for Most of the Last Decade…
Lowe’s level of same-store sales growth outpaced Home

Depot’s each year from 2001 to 2008
Same-Store Sales Growth
2000 2001 2002 2003 2004 2005 2006 2007 2008

Lowe's 1.2 % 2.4 % 5.8 % 6.7 % 6.6 % 6.1 % 0.0 % (5.1)% (7.2)%
Home Depot 4.0 % 0.0 % (0.5)% 3.7 % 5.1 % 3.1 % (2.8)% (6.7)% (8.7)%
Lowe's - Home Depot (2.8)% 2.4 % 6.3 % 3.0 % 1.5 % 3.0 % 2.8 % 1.6 % 1.5 %
Note: Home Depot same-store sales growth figures are for the entire company only, as Home Depot did not consistently disclose U.S.-only
same-store sales growth figures during the period from 2000 to 2008.
12
…But Now LOW is the Underperformer
Lowe’s level of same-store sales growth has underperformed

Home Depot’s for eight out of the last ten quarters
Same-Store Sales Growth

Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11
Lowe's (6.6)% (9.5)% (7.5)% (1.6)% 2.4 % 1.6 % 0.2 % 1.1 % (3.3)% (0.3)%
Home Depot - U.S. Only (8.6)% (6.9)% (7.1)% (1.1)% 3.3 % 1.0 % 1.5 % 4.8 % (0.7)% 3.5 %
Lowe's - Home Depot 2.0 % (2.6)% (0.4)% (0.5)% (0.9)% 0.6 % (1.3)% (3.7)% (2.6)% (3.8)%
Potential Causes of Recent Underperformance:

f Strength of HD’s current operational execution
Strong regional-level merchandising
Post Bob Nardelli, invigorated management team under CEO Frank Blake
f Lowe’s product mix is more discretionary than Home Depot’s

f Home Depot currently doing well with the basic repair customer versus
Lowe’s more fashion-oriented customer
13
Trading Multiples Reflect Underperformance
Based on its recent underperformance, Lowe’s trades at a discount to

Home Depot on both LTM and 2012 multiples
LTM Consensus 2012E

EV/EBITDA P/E EV/EBITDA P/E
Lowe's 6.5 x 13.3 x 6.3 x 12.2 x
Home Depot 8.5 x 16.1 x 7.8 x 13.8 x
Despite the valuation discount relative to HD, we believe Lowe’s long

history of same-store sales outperformance suggests that recent
underperformance is more likely temporary rather than structural
Memo: Capitalization
Lowe's Home Depot
Stock Price $21.50 $37.00
Diluted Shares 1,328 1,577
Market Cap $28,552 $58,349
Plus: Debt 6,620 10,775
Less: Cash & Investments (1) (1,423) (2,551)
Enterprise Value $33,749 $66,573
Dividend Yield 2.0 % 2.7 % (1) For Lowe’s, Cash & Investments are net of restricted cash balances.
14
Lowe’s Management is Bullish…
At last year’s analyst day, management guided to $3.40 of EPS in 2015,

driven by a 4% average growth rate in same-store sales, a 10% EBIT
margin, and an $18bn share repurchase program (2011 to 2015)
Recent Price $21.50

2015 EPS $3.40
Price / 2015 EPS 6.3 x
Note: This page is taken from Lowe’s investor presentation dated November 30, 2010. Red highlights added for emphasis.
15
…And is Buying Back Stock Aggressively
Management plans to use all free cash flow after dividends to

repurchase stock and will increase leverage to 1.8x Lease Adjusted Net
Debt / EBITDAR from 1.6x. We estimate share repurchases will be
~$10bn to $13bn from 2012 to 2015
f At the current share price, management could repurchase ~35% to 45%

of the Company between 2012 and 2015
f In the first half of 2011, management repurchased nearly $2.4B of

shares at an average price of ~$25
Repurchased ~7% of the current share base
f Share repurchases may accelerate annual core earnings growth by 8%

to 10% from 2012 to 2015
f Current interest rate environment makes debt financing an attractive

source of capital for share repurchases
16
Valuation
Our estimates are more conservative than management’s 2015 targets
Management Pershing Square Estimates

Targets Low Mid High
2012E to 2015E CAGR:
Home Improvement Market ~ 3.0 % 0.0 % 1.5 % 3.0 %
Impact of Share Gains ~ 1.0 % 0.0 % 1.0 % 1.0 %
Same-Store Sales 4.0 % 0.0 % 2.5 % 4.0 %
2015 EBIT Margin 10.0 % 7.3 % 8.3 % 9.3 %
2015 EPS $3.40 $2.00 $2.60 $3.20
% Increase from LTM EPS ~110% ~25% ~60% ~100%
Drivers of share gains:

Pershing Square Mid and
Growth from internet site
Gains from Mom & Pop dealers High cases reflect our
Gains from Sears view of the most likely
⌦ Losses from cannibalization outcomes
Note: Management targets based on November 2010 analyst day and annualized same-store sales growth reflected management estimates for
2011E to 2015E.
18
Sales/ft²
Sales/ft² is still 25% below 2005 peak levels six years later. We believe
sales/ft2 could increase materially by 2015 and still be meaningfully
below inflation-adjusted peak levels reached in 2005
Sales/ft2: 2015E 2005

LTM Low Mid High Peak
$328
~$290
~$275
$246 ~$245
2012E to 2015E Same-Store Sales CAGR 0% ~2.5% ~4%

% of 2005 Peak ~75% ~85% ~90%
% of 2005 Inflation-Adjusted Peak ~55% to 65% ~65% to 75% ~70% to 80%
Note: Inflation-adjusted peak based on a 1% to 2% annual inflation rate.

19
EBIT Margins
In our Mid and High cases, we believe EBIT margins could be ~8.3% to
9.3%. In our Low case, if same-store sales remain flat, we believe Lowe’s
can maintain current EBIT margins through cost reductions
Low Mid High

2012E to 2015E Same Store Sales CAGR 0.0% 2.5% 4.0%
Est. Annual EBIT Margin Improvement 0bps 25bps 50bps
2011E EBIT Margin 7.3 % 7.3 % 7.3 %

Plus: Total Est. EBIT Margin Improvement 0.0 % 1.0 % 2.0 %
2015E EBIT Margin 7.3 % 8.3 % 9.3 %
Note: Current gross margins are partially elevated by a favorable mix of higher-margin, lower-ticket
items. As sales recover, we expect a slight gross margin headwind, offset by positive operating
leverage. Management estimates each 1% of same store sales growth above 1% will result in 20bps of
operating expense leverage.
20
Valuing Lowe’s
We believe 2015 EPS will likely be between $2.60 to $3.20. At a 13x P/E, the
total value per share at year end 2014 is $36 to $43. If same-store sales
remain flat for the next several years, year end 2014 total value per share is
$28, driven largely by share repurchases
Year End 2014 Total Value ~$43 per share

Per Share (includes dividends):
~$36 per share
~100% Return
~$28 per share 26% IRR
~65% Return
~30% Return
18% IRR
9% IRR
Low Mid High
2012E to 2015E SSS CAGR 0% ~2.5% ~4%
2015E EBIT Margin 7.3% 8.3% 9.3%
2015 EPS $2.00 $2.60 $3.20
P/E Multiple (based on current) 13x 13x 13x
Note: Based on ~1% annual net unit growth. Includes ~$1.80 of dividends received between 2012 and 2014.
21
Conclusion
f We think Lowe’s is a good business in an attractive retail category

However, sentiment is poor because of the Company’s more recent
underperformance relative to Home Depot
We think this underperformance is more temporary than structural
f The current stock price is not factoring in a sales recovery, but we

believe one is likely in the next several years
f Even if no sales recovery occurs, we believe downside is limited

Minimal financial leverage, limited lease leverage, cheap stock
f Aggressive share repurchase program is a catalyst

Lowe’s has ~8% current cash earnings yield
The Company is returning all cash earnings to shareholders in the form of
buybacks and dividends
Investors are effectively paid to wait for a recovery
22

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A Value Menu for McDonald’s

Pershing Square Capital Management's ("Pershing") analysis and conclusions regarding

On September 22nd, Pershing Square Capital

f Pershing commends McDonald’s management for its strong operational

Pershing had a follow-up meeting with McDonald’s

Pershing is pleased to have the opportunity to share the

World’s largest foodservice franchisor and retailer

One of the world’s most recognized brands

One of the largest retail property owners in the world

Significant free cash flow business

McDonald’s Historical Revenue and EBITDA Performance (1)

$20,000 $19,065 30.0%

$4,144 $4,041 $3,997 $4,512 $5,183

EBITDA Revenue EBITDA Margin

Historical Pre-Tax Unlevered Free Cash Flow(1) Performance

$1,000 15.4% 14%

EBITDA – CapEx Margin %

McDonald’s Stock Price Performance

McDonald's S&P 500 QSR Index

strong real estate 9.5x 9.3x

business. 3 0 -D a y A v e ra g e T ra ilin g W EN YUM

Landlord, Franchisor, Restaurant Operator Franchisees

fFranchisor: Franchises brand and collects fee f Franchise Fee: 4% of

Real Estate and Franchise Business McOpCo

Landlord Franchisor Restaurant Operator

f McDonald’s controls substantially f Approximately 32,000 f Approximately 9,000 Company-

Real Estate and Franchise Business McOpCo

Landlord Franchisor Restaurants

In 2004, McDonald’s company-operated restaurants appeared to contribute 46% of total EBITDA.

2004 Total EBITDA 2004 Total EBITDA Adjusted for

Real Estate Real Estate

2005E Total EBITDA – Capex 2005E Total EBITDA – Capex Adjusted

'05 EBITDA- '05 EBITDA-

McDonald’s Consolidated EBITDA

Real Estate and Franchise McOpCo

McDonald’s Consolidated EBITDA

McOpCo Growth (1.1%) (10.6%) (7.9%) 14.0% 20.4%

RE/Franchise Growth (0.5)% 0.1% 0.9% 12.6% 13.4%

McDonald’s Consolidated EBITDA

Real Estate & Franchise

McDonald’s did not historically operate restaurants

The Company initially entered the business of operating

(1) From Grinding It Out: The Making of McDonald’s, p. 108.

“Running a McDonald’s is a 363-day-a-year business and an owner/operator,

Illustrative Characteristics of Company Operated versus Franchisee Operated Restaurants (2)

Company Operated Franchisee Operated

Structure C-Corporation LLC / Partnership

Step 2: Issue Debt and Pursue

f IPO 65% of McOpCo f Issue $14.7bn of financing secured

McOpCo PropCo FranCo

f At the time of IPO, McOpCo signs f Resulting Pro Forma McDonald’s is a

Significant value creation for shareholders

Enhances management focus and incentives at both

Improves operating and financial metrics at every level

Revenue $20,816 $7,393

EBITDA-Capex 4,335 3,739

EBITDA-Maintenance Capex 4,651 4,025

An IPO of McOpCo Will likely lead to improved operating margins at McOpCo

Improves alignment with franchisees (1)

Allows for share buybacks of higher return business

Allows for a voice in McOpCo through governance

Allows for an accelerated McOpCo refranchising program

Increases overall size of PF McDonald’s investor base