Deloitte Real Estate Symposium March 2015

Real Estate Symposium – Luxembourg – 17 March 2015 1
Navigating the
change on Real
Estate
Real Estate Symposium
Luxembourg – 17 March 2015
Real Estate
Symposium

Opening remarks
Benjamin Lam, Head of Real Estate, Deloitte Luxembourg

Real Estate Symposium – Luxembourg – 17 March 2015 3Real Estate Symposium – Luxembourg – 17 March 2015
Market Buzz
“Qatar and Brookfield win battle to
take over Canary Wharf” –
FINANCIAL TIMES
“Abu Dhabi Investment Authority eyes
up prime London hotels”
THE NATIONAL “Blackstone eyes $1.5bn
Willis Tower deal” –
FINANCIAL TIMES
1
23
54
786
910
“The joint venture between US Private
Equity giant KKR and Real Estate
company Deutsche Immobilien Chancen
(…) plans to invest billions in Germany’s
property market” - HANDELSBLATT
“AG Real Estate finalises first major real
estate investment deal in Germany “-
AGEAS
“London’s commercial property market has gone from gloom to boom in just 18 months –
and its skyline is the biggest beneficiary” – FINANCIAL TIMES
“Brazilian billionaire Joseph Safra paid £726m
for Square Mile landmark the Gherkin” –
FINANCIAL TIMES
“Spain Banks With $55 Billion of Property
Seek Deals: Mortgages“ - BLOOMBERG
“Commerzbank AG recently began shopping
around the [Spanish] portfolio (…) that
includes loans with a face value of €4.4 billion
that are backed by shopping centers, hotels
and offices.” – THE WALL STREET
JOURNAL
“Investors believe prices have now
bottomed out in Paris and are keen to take
advantage of the favorable market
conditions” - FORBES

Some figures
N America Europe Asia
36,8% 44,6% 59,4%
% of investors willing to Increase Real Estate
Allocations in 2015
Source: Inrev – Investment Intentions Survey 2015
Volume
of Real
Estate
deals01/
EVOLUTION OF
VOLUME OF REAL
ESTATE DEALS IN
WESTERN EUROPE

Some figures
41,4%
Percentage of Investors whose preferred route to
investment will, in 2015, be through Joint
Ventures and Club Deals
GERMANY
1
3
2
4
UK
FRANCE
Top 3 investment destinations in Europe:
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
90,0%
EU Investors Asia Pacific North America
% of Allocation to EU non-listed RE funds
EU non-listed RE Funds Others

Navigating the change on Real Estate
A new cycle is upon us!
MACROECONOMICS
GLOBALIZATION
SOURCES OF
CAPITAL
SUSTAINABILITY
TECHNOLOGY
REGULATION
RISK PROFILE
ASSETS

Benjamin Lam
Partner
Deloitte Luxembourg
Benjamin is a partner within the audit department and has over 20 years of experience in the financial
services and commercial industries. He leads Deloitte Luxembourg's private equity and real estate
practice in Luxembourg and is specialized in both regulated and unregulated private equity and real
estate funds and in cross-border transactions.
Partner, Head of Real Estate, Deloitte Luxembourg
Key contact

Real Estate Symposium – Luxembourg – 17 March 2015
9:10 a.m. – 9:30 a.m. New ways of working – How the current era influences the way in which we use
Real Estate
Frédéric Sohet, Partner, Deloitte
9:30 a.m. – 10:00 a.m. Real Estate Capital Flows - Wealth Management as a source of Capital
Roberto Varandas, Global Head of Business Development - Property, Aberdeen Asset Management
10:00 a.m. – 10:30 a.m. How to address Risk Management and Valuation in Real Estate
- Frank Schickram, Head of Valuation, Strategy and Research, GLL Real Estate Partners
- Martin Müller, Head of Fund Accounting, GLL Real Estate Partners
- Andreas Meier, Deloitte
11:00 a.m. – 11:30 a.m. BEPS – Update and main challenges for Real Estate Players
David Capocci, Head of Real Estate Tax, Deloitte
11:30 a.m. – 12:00 a.m. A first glance at Deloitte’s European Real Estate Investment Management survey
Gerard Lorent, Deloitte
Agenda

New Ways Of Working:
How the current era influences the way in
which we use Real Estate
Frédéric Sohet, Deloitte Belgium

Efficiency of the workspace – Survey results
New Ways Of Working
- Survey conducted by Deloitte
France & Leesman
- 31 countries
- 52 customers
- 355 sites (90% located in Europe)
- 43.058 respondents
Only 53% feel that their workspace
allow them to work in a productive way.
2/3 believe that their workspace answer
their critical professional needs.
Decrease of noise pollution and better
temperature control are the most
bespoken ideas to improve the comfort of
the workspace.
6/10 believe that their
workspace reinforce the feeling of
belonging to the business
community.
39% wish to have more
individual concentration zones
and social interaction zones.

Major advances in technology and changing
demographics are transforming the workplace forever
New Ways Of Working
Key trends
reshaping
the workforce
today
Increasing globalization and
outsourcing
Growing dominance of networks
instead of hierarchies
Productivity measured in outputs,
not in hours
Intergenerational interaction and
conflict
Values versus rules
A trust-based culture
Organizations increasingly rely on
communication technologies, to
collaborate and communicate

Key trends reshaping the workforce and workspace
today
New Ways Of Working
Tenants embrace
TECHNOLOGY
Corporates
adopt new
audio and
video conference technologies
to efficiently conduct
business meetings.
Building design is evolving to better
accommodate flexibility that corporate tenants
need. New configurations would allow tenants
to rent about 15% to 20% less space.
Social media
is challenging the status quo of
developing talent capabilities,
use of mobile has led to
higher virtual collaboration.
According to our People Survey
work life balance and flexibility
have become one of the top items
on the agenda.
Corporates are adopting
alternative workplace strategies.
Generation Y drives changes in
workplace culture and behavior.

New Ways of Working what is it about?
New Ways Of Working
New Ways of Working is about developing a working
culture and environment which:
• stimulates innovation, creativity and is output driven;
• creates a better work-life balance and allows flexibility;
• is geared around communities;
• uses advanced technology;
• has a positive impact on sustainability.
New Ways of Working is a multidisciplinary path. It is about taking an integrated
set of initiatives to adapt your working culture & working environment to the
future challenges for your organization, in a way that it drives stakeholder value
creation.

New Ways of Working why is it taking off?
New Ways Of Working
Forces
Property
• Tendency of cost reduction (smaller
offices/ flexible, churn free spaces)
• Properties of proximity
• Activity based working & collaboration
• Increasing importance of privacy
Sustainability
• Increased corporate attention on
environmental sustainability
• Increased consumer and shareholder
awareness of the social and environmental
responsibility of companies Mobility
• Traffic is highly congested
• Transport systems
Technology
• Era of rapid technology advancement
• Broadband connections are cheap and
internet usage is very high
• Technology converging devices - iPad,
iPhone
People
• Changing demographics
• Changing demand for flexible
employment contracts
• Demand for work-life integration
/appreciation of good work-life balance
Culture
• Upcoming 24/7 culture
• The power distance between managers and
employees is low
• The importance and power of mass collaboration
Change Management &
Communication
• Coaching culture

Impact of these trends on the office market
New Ways Of Working
• “Smaller but smarter”.
• Over the past 30 years, some companies have reduced the allocation of space per
person by up to 50%.
• The allocation of a workplace per person evolved from a ratio higher than 1 to a ratio of
0,8 even 0,6 in certain companies.
• The average workplace occupation amounts between 60% - 70%.
• Average surface (GLA) per workplace has fallen from approximately 23 m² per workplace
to an average of 19,6 m² per workplace but some organization achieve today 14 m² per
workplace or less.
• Occupancy cost decreased by 15% in absolute terms over the last 8 years
(12.017 €/ FTE).
• Implementation of New Ways of Working can result in a saving of 15 to 20% of the total
surfaces.

New Ways of Working
Our Project

The starting point for Deloitte
New Ways Of Working
Opportunity to review our current working culture & environment
Move to GatewayOur strategy
Deloitte Ways of Working
(DWOW)
• Defining our vision of how NWOW can make us the distinctive firm to work with and for
• Enhancing collaboration, innovation, operational excellence, and productivity
• Delivering a roadmap (for talent, sustainability, mobility, technology, property and culture)

Our ambition levels
New Ways Of Working
Welcome to ‘your
Deloitte’ –
An open environment
inspiring connections,
sharing & collaboration
Deloitte offers you the
building blocks to
design and shape your
career
Our offices are
nerve centres for
moments that matter
Access to our unique
combined expertise is
easy through an
organisation which
fosters collaboration

Our approach
New Ways Of Working
Customer
Experience
Talent
Collaborative
communities
Mobility &
sustainability
As Is To Be Validate Implement
Work
streams
Steps
Program & change management
Marketing & Communication
Technology
Regional
offices
Headquarter
Other production
sites, SSC, etc.

We identified four Workstreams
New Ways Of Working
Collaborative communities
our offices are nerve centres
for moments that matter, with
individual work zones,
collaboration zones & informal
social zones.
Customer experience
an open environment
inspiring connections,
sharing and collaboration.
Mobility
optimise urban
mobility experience
of our employees.
Talent
building blocks
to design and
shape your
career.

Our lessons learned
New Ways Of Working
• Foresee sufficient time for the visioning phase whilst keeping momentum.
• Base your ambition level on your strategy and identify upfront your NWOW value
drivers:
• Increased asset efficiency;
• Increased productivity;
• Improved operating margins;
• Responsiveness to external expectations.
• Create firm-wide engagement and involvement – select NWOW ambassadors across
departments to stimulate collaboration.
• Set up a solid project management office with clear roles and responsibilities to keep
track of pilot project results and to capture value.
• Include a change management and leadership track in your project approach and work
on your coaching culture.

Appendix

Activity based working
Deloitte
Individual concentration zone Collaboration zone Social interaction zone
Social interaction zone Individual work zone

Deloitte Digital
Deloitte

Green house - Design, Create and Innovate
Deloitte

Frédéric Sohet
Partner
Belgium Real Estate & Construction Leader
Frédéric Sohet is the Real Estate & Construction Industry Leader for Deloitte Belgium and Partner Financial
Advisory Services since 2010.
Partner – Real Estate & Construction, Deloitte Belgium
Key contact

Real Estate Capital Flows:
Wealth Management as a source of
Capital
Roberto Varandas, Global Head of Business Development -
Property, Aberdeen Asset Management

Current state of capital markets

Property and other real assets experiencing
sustained growth over the last decade both in
terms of relative allocations to other asset
classes but also due to the emergence of more
sources of wealth concentration.
Allocations set to increase in the near future.
Size, Demand, Flows
Source: INREV Investor Intentions Survey 2015

• According to Preqin, size of private real estate funds industry currently at
$742bn (record high) and dry powder estimated to be at $221b.
• Funds launched in 2006 and 2007 starting to return capital to investors either
due to catch-up of prices and ability to exit, or simply, liquidation. INREV
predicts €17bn of fund liquidations coming due in 2015.
Size, Demand, Flows
Source: INREV Capital raising survey 2014

Investor intentions

Despite low prospective GDP growth, Europe still
very much flavour of the month with US investors
targeting value added and opportunistic strategies
and SWFs targeting large assets and portfolios.
Size, Demand, Flows
Source: INREV Investor Intentions Survey 2015

As economic growth returns, preference for value added strategies increases as
fund managers feel confident in taking on leasing risk or repositioning of assets.
Size, Demand, Flows

Alternative sources of capital

• After a hiatus from 2008 to 2012, wealth managers directing clients’ capital to
real estate investments.
• Investments channelled through feeders into co-mingled funds and/or dedicated
separate accounts / direct assets.
• Interest in real estate increases as property values increase almost everywhere,
particularly in the global gateway cities.
• Property investments sometimes create an emotional attachment.
• Wealth managers also looking at alternative channels into real estate – real
estate debt, secondaries, fund of funds.
Private banks / Wealth managers

Benefits Challenges
Can provide healthy levels of income Illiquid
Tends to have low correlation with other
asset classes
Diversifications requires large amount
of assets
Real asset - tangible Quality of assets varies greatly
Leverage Leverage
Low volatility High costs to own, including taxes
Requires specialized management
Benefits and challenges of real estate in a private client
portfolio

Considerations on real estate in private client portfolios
• Private client capital, even channeled via professionally managed feeders, does
not always sit well with institutional capital. Some investors are even precluded
from investing alongside private clients.
• Expectations around liquidity need to be very well managed:
• Open ended funds have limited liquidity both on during subscription and
redemption periods.
• Closed ended funds offer no liquidity and require earmarking of cash
during the commitment period.
• Structures can be complex and need to carefully consider tax, governance and
operational issues.
• Wealth managers tend to charge high fees, which can dilute returns
significantly.
• Private clients tend to have already high degrees of exposure to real estate.

Roberto Varandas
Global Head of Business Development - Property
London, United Kingdom
Mr Roberto Varandas is Global Head of Business Development - Property and is responsible for
property funds distribution and the property business development team. Roberto sits on the
Aberdeen Property Management Committee.
Roberto joined Aberdeen in September 2011 from UBS Global Asset Management where he was
Head of Business Development - Europe for UBS Global Asset Management - Global Real Estate.
Previously, Roberto worked for the Capital and Marketing Group, a capital markets adviser
specialised in capital placement for alternative investments, in particular, property funds.
Roberto has been involved in over 20 individual funds, totaling over €15 billion in equity capital.
Global Head of Business Development - Property
Key contact
Roberto.varandas@aberdeen-asset.com
M: +44 7825842842
T: +44 2074636437

How to address Risk Management and
Valuation in Real Estate
Market- and Asset- Rating as Risk Tool
Frank Schickram, Head of Valuation, Strategy and Research,
GLL Real Estate Partners
Martin Müller, Head of Fund Accounting, GLL Real Estate
Partners
Andreas Meier, Deloitte Luxembourg

Permanent, functionally and
hierarchically separated
Consistency with risk limits set,
monitor risk limits
Risk Categories
Risk Management
Risk Management function
Liquidity Risks
Credit (and counterparty) Risks
Market Risks
Main topic today
Strategic Risks
Risk identification, measurement,
management and monitoring
Report to governing body and senior
management
Main topic today

Identification of Risk
Rating System

Real Estate KITE™ Analysis
RISK
MONITORING
/ IDENTIFICATION

Rating Systems - Overview
GLL
MARA
GLL
KITE
Investment
Market
Real Estate
Fundamentals
Economy
(Macro / Regional)
Location
Risks
„Cash-Flow“ Risks
Asset
Risks
Market Risks

Rating Systems – Components
Building
Quality
Fit
Out
Life
Cycle
Sustainability
Suitability of
Micro
Location
Quality of
Transportation
Local supply
facilities for
target
occupier
Acts
of
God
WALT
Value
Tenant
Credit
Letting
Situation
Fungibility
Transaction
Volumes last
Year
10 Year
Transaction
Average
Transactions
compared to
Market Cap.
Vacancy
Absorption
Ratio
Net Additions
in next 3 Y.
Net
Absorption in
next 3 Y
Cap rate
compared to
10 Y History
Rental
Growth next 3
Years
Spread to
Government
Bond
5 Year
GDP Growth
IMD
Competitiven
ess
Moody´s
Country
Rating
Selected ratio Selected ratio
W
GLL
MARA
GLL
KITE

Rating Systems

Rating Systems – Assessment and Monitoring
OVERSUPPLY FLOOD RISK SHORT
WALT
CAPEX
RISK
FALLING
MARKET
RENTS
WEAK
DEMAND
IN LEASING
LESS
TRANS-
ACTIONS
POSSIBLE RISKS AFFECTING REAL ESTATE / VALUATIONS
Selected ratio Selected ratio
Building
Quality
Fit
Out
Sustainability
Suitability of
Micro
Location
Local supply
Facilities for
target
occupier
Tenant
Credit
Letting
Situation
Fungibility
Life
Cycle
Quality of
Transportation
Acts
of
God
WALT
Value
W
Transaction
Volumes last
Year
10 Year
Transaction
Average
Transactions
compared to
Market Cap.
Vacancy
Absorption
Ratio
Net Additions
in next 3 Y.
Net
Absorption in
next 3 Y
Cap rate
compared to
10 Y History
Rental
Growth next 3
Years
Spread to
Government
Bond
5 Year
GDP Growth
IMD
Competitiven
ess
Moody´s
Country
Rating

Rating Systems – Coverage & Update
Global
Cities
94 North-
American
Metros
54 European
Metros
35 Latin-
American
Metros
5
Datapoints
to generate
one Kite™
98 Biannual
Updates
2
VISUALISATION GLL Real Estate KITE™
Coverage
Data Inputs & Update
GLL
KITE

GLL KITE ™
Let´s take a closer look!
GLL
KITE

HIGH transaction volume, instant
market exit possible
LOW transaction volume,
PROLONGED exit period needed
LOW vacancy, HIGH demand, LOW
future supply
HIGH vacancy, LOW demand, HIGH
future supply
STRONG GDP outlook, politicaly
STABLE
WEAK GDP outlook, LOWER
transparency
PREDICTABLE
returns
VOLATILE
returns
„CHEAP“
buyer market
„Expensive“
seller market
Market LiquidityLeasing Potential
1 2 3 4 5
low high
Economic StabilityStability of ReturnsPrice Attractiveness
How to read the Risk with the KITE™

How to read the KITE™ - Price Attractiveness
5,0%
6,0%
7,0%
8,0%
9,0%
10,0%
Washington
SanFrancisco
NewYork
Boston
Chicago
Pittsburgh
Austin
Denver
Nashville
Seattle
Portland
Net Initial Yield (10Y)
Max Min Last
2,3%
15,3%
16,6% 16,8%
9,3%
7,2% 7,0%
11,5% 12,1%
9,2%
14,0%
Washington
SanFrancisco
NewYork
Boston
Chicago
Pittsburgh
Austin
Denver
Nashville
Seattle
Portland
Rental Growth (3Y, Sum)
Cap rate
compared to
10 Y History
Rental
Growth next 3
Years

How to read the KITE™ - Visual Comparison
WASHINGTON NASHVILLE

How to read the KITE™ - Leasing Potential
Prague
Copenhagen
Helsinki
Lille
Lyon
Marseille
Paris: Central
Berlin
Frankfurt
Hamburg
Munich
BudapestDublin
Milan
Rome
Amsterdam
Vienna
Brussels
Rotterdam
Oslo
Warsaw
Lisbon
Barcelona
Madrid
Stockholm
Birmingham
Edinburgh
Glasgow
London: Central
London: City
London: WE
0
100.000
200.000
300.000
400.000
500.000
600.000
0 100.000 200.000 300.000 400.000 500.000 600.000 700.000
3-YearNetAdditionForecast
3-Year Net Absorption Forecast
Net Addition
next 3Y
Net
Absorption
next 3Y

How to read the KITE™ - Visual Comparison
PARIS ROME

KITE™ - Monitoring
H1 2014H2 2014

KITE™ - Portfolio Analysis
Madrid
Paris: CBD
Washington
Manchester
London: Central
Paris: CBD
Brussels
Austin
Seattle
Denver
Brussels

KITE™ - Strategic Risk in Overview
H1H2
Net Addition
next 3Y
Net
Absorption
next 3Y
Cap rate
compared to
10 Y History
Rental
Growth next 3
Years

Asset 1 Asset 2 Asset 3 Asset 4 Asset 5 Asset 6 Asset 7 Asset 8 Asset 9 Asset 10 Asset 11
Market 3,9 4,2 4,0 4,2 4,0 3,9 3,1 3,7 3,7 3,7 3,7
National 20% 4,8 4,8 4,2 4,6 4,3 4,3 3,0 3,6 3,6 4,2 4,2
Economic Stability (incl. Transparency, Credit Risk) 4,8 4,8 4,2 4,6 4,3 4,3 3,0 3,6 3,6 4,2 4,2
Exchange rate volatility (for information only) 2,0 2,0 2,0 2,0 2,0 2,0 2,0 5,0 5,0 2,0 2,0
Regional 80% 3,6 4,1 4,0 4,0 3,9 3,8 3,1 3,7 3,7 3,5 3,5
Socio-economic development & attractivness 3,8 3,9 4,1 3,3 3,9 4,3 3,5 2,4 2,4 2,5 2,5
Real Estate Market 3,6 4,1 4,0 4,2 3,9 3,7 3,0 4,0 4,0 3,8 3,8
Price Attractivness (to sell - Cap rate to Min) 4,3 4,2 4,5 3,5 4,3 4,7 2,9 4,4 4,4 3,7 3,7
Rental growth potential 2,1 4,3 4,0 4,6 4,4 5,0 5,0 4,1 4,1 3,5 3,5
Cycle 3,1 2,8 3,1 2,4 3,0 3,1 1,8 2,7 2,7 2,7 2,7
Liquidity 4,5 4,6 3,8 4,3 3,2 5,0 3,6 4,5 4,5 3,5 3,5
Vacancy - supply and demand 2,9 3,5 4,1 4,1 4,3 3,3 2,8 3,9 3,9 2,9 2,9
Volatility 3,5 4,3 4,0 4,3 4,2 2,8 2,7 3,6 3,6 5,0 5,0
Asset Total 4,4 4,2 3,4 4,4 3,8 4,0 3,3 3,6 3,9 3,9 4,2
Location 4,3 4,1 3,3 4,4 4,0 4,1 4,5 4,1 4,1 3,9 4,3
Quality / Suitability of Microlocation for property type 4,5 4,5 4,0 5,0 4,5 4,5 5,0 4,5 5,0 4,0 4,5
Quality of transportation 4,5 4,5 3,0 5,0 4,0 5,0 5,0 4,5 4,0 4,5 4,5
Quality of local supply facilities for target occupiers 5,0 4,5 3,0 4,5 4,5 4,0 5,0 4,5 4,5 4,0 5,0
Acts of God 3,0 3,0 3,0 3,0 3,0 3,0 3,0 3,0 3,0 3,0 3,0
Asset 4,8 4,6 3,6 4,8 3,7 3,7 3,3 3,0 4,0 4,5 4,3
Building Quality: Architecture and Concept 5,0 4,5 4,0 5,0 4,5 4,0 5,0 4,0 4,5 5,0 4,5
Fit out 5,0 4,5 3,5 5,0 4,0 4,0 3,0 3,0 4,5 5,0 4,5
Structural condition / Life Cycle 4,5 5,0 3,5 5,0 4,0 4,0 3,0 3,0 4,5 4,5 4,5
Maintenance (Capex)/ cost effectiveness building 4,5 4,5 4,0 4,5 3,0 3,5 3,0 2,5 3,5 4,0 4,0
Sustainability 5,0 4,5 3,0 4,5 3,0 3,0 2,5 2,5 3,0 4,0 4,0
Cash-Flow 4,1 3,9 3,3 4,1 3,7 4,1 1,0 3,3 3,3 3,5 4,0
Remaining Lease Term 5,0 5,0 2,5 5,0 3,0 4,0 1,0 3,0 3,0 3,0 4,0
Tenant Credit 4,0 4,5 4,0 3,5 4,0 4,0 0,0 5,0 4,0 4,0 4,0
Letting Situation 3,0 3,2 3,8 4,0 3,7 3,8 3,3 2,2 2,7 3,3 3,3
Vacancy, number of tenants, occupier mix 3,0 3,0 4,0 4,0 4,0 4,0 1,0 2,5 2,0 4,5 3,5
Recoverable and Non Recoverables 3,5 3,5 3,0 4,0 4,0 3,0 4,0 3,0 3,0 3,0 4,0
RP Rental Growth Potential 2,5 3,0 4,5 4,0 3,0 4,5 5,0 1,0 3,0 2,5 2,5
Letting prospects / fungibility 4,5 3,0 3,0 4,0 4,0 4,5 4,5 3,0 3,5 3,5 4,5
MARA – All Risks in Overview

Building
Quality
Fit
Out
Sustainability
Suitability of
Micro
Location
Local supply
Facilities for
target
occupier
Tenant
Credit
Letting
Situation
Fungibility
Transaction
Volumes last
Year
10 Year
Transaction
Average
Transactions
compared to
Market Cap.
Absorption
Ratio
Net Additions
in next 3 Y.
Net
Absorption in
next 3 Y
Cap rate
compared to
10 Y History
Rental
Growth next 3
Years
Spread to
Government
Bond
5 Year
GDP Growth
IMD
Competitiven
ess
Moody´s
State Rating
Life
Cycle
Quality of
Transportation
Acts
of
God
WALT
Value
W

Riskmanagement - Process
RISK
MONITORING
/ IDENTIFICATION
INFORM
INVOLVED
PARTIES
TAKE
ACTION
ADJUST
ACCORDING TO
RISK
FLY
TO
LUXEMBOURG
HOLD
THIS
SPEECH
PERFORM
CALCULATIONS
STRESS
TEST
CONTROL
THE RESULT
DONE?

Frank Schickram
Head of Research & Strategy
Munich, Germany
Frank Schickram is responsible for Valuation, Strategy and Research at GLL Real Estate Partners
GmbH.
He joined the group in 2005 and worked prior to his current position as acquisition officer and fund
manager for a globally invested, separate account.
Before joining GLL, Frank Schickram was responsible for International Portfolio Valuations at the
HypoVereinsbank (Unicredit), where he started his career as real estate appraiser in 1994.
Frank Schickram is active in the industry since 1990 with extensive experience in all aspects of
property valuation and management of commercial real estate. He is dedicated in the field of training
and education of valuers and active consultant for a series of current valuation topics (e.g. member of
the valuation committee at the ULI Greenprint Center of Building Performance).
He graduated in Mass Communications, Law and Market Psychology at the Ludwig-Maximilians-
Universität in Munich in 1992.
Head of Research & Strategy
Key contacts

Martin Müller
Head of Fund Accounting
Munich, Germany
Martin Müller is responsible for Fund Accounting at GLL Real Estate Partners GmbH.
Martin Müller joined GLL in 2006 and heads GLL’s Fund accounting team. He is a certified
international accountant and is responsible for the consolidation and the financial statements of
several funds with a total volume of over two billion Euros.
Besides dealing with the optimization of the actual tax structure he is also involved in corporate
finance of the GLL Funds and heads the GLL IFRS accounting competence center.
Prior to joining GLL, Martin Müller was working as a manager in a well-known German tax and audit
company, where he was responsible for the audit and consulting of German and International
companies.
Head of Fund Accounting
Key contacts

Andreas Meier
Partner
Deloitte Luxembourg
Andreas is a Partner within the Audit department, where he currently is servicing audit clients in the
Private Equity and Real Estate department. Andreas has over 14 years of experience in the Financial
and Non Financial Services industry, servicing investment management and commercial clients in an
audit and advisory capability in Luxembourg. In addition he has important knowledge in standalone
and consolidated financial statements audits under Luxembourg GAAP, German GAAP and IFRS.
Audit Partner, Deloitte Luxembourg
Key contacts

BEPS – Update and main challenges
for Real Estate Players
David Capocci, Head of Real Estate Tax, Deloitte Luxembourg

BEPS ?
This is dummy text it is not here to be read
• Level one bullet
‒ Level two bullet
• Level three bullet
BEPS ?
This is dummy text it is not here to be read
• Level one bullet
‒ Level two bullet
• Level three bullet
What the BEPS are we talking about?
BEPS

Setting the scene
BEPS

Setting the scene
BEPS
December 2015…
“Many governments have decided
to encourage PE investments in
Infrastructure. Private sector
participation can bring additional
capital but also end-user benefits
from a more competitive
environment. (…) Infrastructure
investments will only be made if
investors are able to earn
adequate risk-adjusted returns
and if appropriate market
structures are in place to access
this capital”.
Thisisa
pointer
style
OECD PROJECT ON
INSTITUTIONAL
INVESTORS AND
LONG TERM
INVESTMENT
(MAY 2014)

What if there is only a timing
difference on taxation of actual
payments routed through
intermediary company (instead of
a different tax characterization)?
What is Action 2?
Reverse Hybrids
Hybrid Instruments
Hybrid Entities
Hybrid Financial
Instruments &
Imported Mismatch
Reverse
Hybrid Entity
payments
Hybrid Entity
payments
Hybrid
instrument
A
B
Fund
GP
Partners
A
Hybrid
instrument
“Exploit a difference in the
characterisation of an entity or
arrangement under the laws of
two or more tax jurisdictions to
produce a mismatch in tax
outcomes where that mismatch
has the effect of lowering the
aggregate tax burden of the
parties to the arrangement”
Should timing differences
on taxation and/or notional
deductions be considered
as a hybrid mismatch?
How will Action 3 impact
Action2? Any conclusion
should only rightfully be
drawn after April 2015
Behind the scene on Action 2
BEPS

Real Estate Symposium – Luxembourg – 17 March 2015 70Real Estate Symposium – Luxembourg – 17 March 2015 70
01
OPTION
LIMITING INTEREST DEDUCTOIN TO THE
ENTITY’S GROUP POSITION
02
OPTION
LIMITING INTEREST
DEDUCTION TO A FIXED
RATIO
What is Action 4?
“Action 4 stresses the need
to address BEPS using
deductible payments such
as interest that can give rise
to double non taxation in
both inbound and outbound
investment scenarios. (…)
similar concerns are raised
by payments under financial
instruments such as
guarantees and
derivatives.”
BEPS
What is the likely implication of this
Action towards Banks lending to
Alternative Investment Funds?
How to synchronize Action 4 with OECD
accepted standards for activity remuneration
(ie, TP circulars in Luxembourg)?
How to address different criteria in different
jurisdictions (and if within same company Group)
and also current BEPS oriented measures which
are already implemented?

What is Action 6? Focus on CIV’s
Room for Interpretation
Limitation on
Benefits (“LOB”)
General
Treaty
Override
Clause
Principal Purpose
Test (“PPT”)
“To develop: (i) model treaty
provisions and
recommendations regarding
the design of domestic rules to
prevent the granting of treaty
benefits in inappropriate
circumstances; (ii) clarification
that tax treaties are not
intended to be used to
generate double non-taxation,
and (iii) tax policy
considerations that countries
should consider before
deciding to enter into a tax
treaty”.
• Genuine commercial reasons
for setup (risk diversification,
increase exposure due to
capital pooling, economies of
scale);
• The wider the investor base,
the lower the possibility to
influence tax structuring
• Directly or Indirectly most
Investors already have Treaty
Access;
• Intermediary HoldCos should
be entitled strong “in principle”
grounds for Treaty Access
• “it is reasonable to conclude”
• “one of the principal purposes”
• “object and purpose of the
relevant provision”:
A
B
Fund
GP
Partners
A
Focus on Substance
• Place of board of directors meetings
• Where the CEO and other senior executives usually carry on their activities
• Place of senior day-to-day management and Headquarters location
• Which country’s laws govern the legal status of the person
• Where its accounting records are kept
BEPS

1
MASTER FILE
The guidance on TP
documentation requires
MNEs to provide to their tax
authorities information on (i)
global business operations
and (ii) TP policies.
LOCAL FILE
Companies will need to
supply more detailed
information on a Local File
in each country they
operate identifying related
party transactions, amount
thereof, and TP policy
followed to treat each such
transaction.
2 3
BEPS
COUNTRY BY COUNTRY
REPORTING
Sets forth an obligation for
multinational companies to
report on an annual basis
(and in each tax jurisdiction
in which they have a
presence):

Is it all really tax driven?
BEPS
1
23
54
786
910
PROTECTION
OF BRAND AND
INTANGIBLES
SYNDICATION OF
INVESTORS / CLUB DEALS
NON TAX TREATY NETWORK (IE,
EXPROPRIATION CONVENTION)
BANKRUPTCY
REASONS
CREDIBILITY AND REPUTATION FOR
POTENTIAL INVESTORS
SEGREGATION BETWEEN
PRIVATE AND BUSINESS
ASSETS (PERSONAL ASSET
PROTECTION)
REGULATORY
ENVIRONMENT AND
REGULATORY ENTITY
REPUTATION
CULTURAL AFFINITIES
(ABILITY TO SPEAK
SAME LANGUAGE).
GEOGRAPHIC
LOCATION
(LOGISTICS,
ROADS, PORTS,
AIRPORTS))
BANKING
REQUIREMENTS
(PLEDGE)
10 NON TAX REASONS TO INCORPORATE A COMPANY
OTHER OECD WORKSTREAMS

Country A
Advisory
Co
Lux SPV 2
LUX LP
Lux SPV #Lux SPV 1
Local
Target 1
Local
Target 2
Local
Target #
Lux ManCo
Sarl
(AIFM)
GP
B
Advisory
Co
Investment
Advisory
Services
Management
Services / GP
interests
AIF (Lux SCSp)
(unregulated or
regulated SIF)
C Advisory
Co
D
Advisory
Co
LPs
LP
Lux Masterco
An upgraded Luxembourg investment platform
BEPS

Conclusion

David Capocci
Partner
Deloitte Luxembourg
David joined the tax department in 2004, where he currently leads the Tax Real Estate practice.
David has over 18 years experience in international tax with a focus on the Real Estate & Private
Equity market. He is experienced in structuring deals for both listed and private clients. He also
leads the development of the Latin America and the Middle East market. He obtained his Islamic
Finance Qualification in 2009. Recently, he advised the set up of the first Islamic bank in the
Eurozone.
Partner, Head of Real Estate Tax, Deloitte
Key contact

A first glance at Deloitte’s European Real
Estate Investment Management survey
Gérard Lorent, Deloitte Luxembourg

Agenda
Context1
Results of the Survey2
Asset Managers2.1
Q & A3
Asset Servicers2.2

Context
• Following the feedback received from
our 2013 Luxembourg Private Equity
Survey and our observations of how the
market is evolving, Deloitte decided to
conduct a survey covering as well the
Real Estate asset class for both Asset
Managers and Asset Servicers from a
Pan-European context
• The Survey is particularly interesting as
it gives insights on current market
trends such as:
 Asset Servicers moving towards a
Pan-European coverage via
acquisitions or opening of new
offices in RE centers
 Convergence of service offerings
between specialized RE entities
entering the depositary space
thanks to AIFMD and mainstream
banks entering the non-regulated
RE business

Results of the Survey
Asset Managers

Objectives and Scope
• This Survey covers RE Asset
Managers, particularly those
active in the Pan-European
market
• The aggregate net assets
under management of the
RE Asset Managers
participating to the survey is
approximately €200Bn Investment
Portfolio
Taxation
Investors Regulatory
Changes
General
Overview
and Key
Figures
Other
Operational
Aspects
Growth
and
Outlook

36%
29% 29%
14% 14% 14% 14%
AIFM
reporting and
leverage
Delegation
of functions
Remuneration Liquidity
management
Regulatory
capital
Valuation Risk
management
Custodian
75%
25%
19%
13%
0% 0% 0%AIFMD FATCA EMIR Dodd-Franck MiFID II Solvency II Other
Regulatory Changes
• Four regulations
were considered
highly significant
but 75% of RE
Asset Managers
agree that
AIFMD is a
primary concern
Regulations considered to be ‘highly significant’
Impact of AIFMD provisions on the organization
• AIFMD’s
reporting and
leverage
requirements is
the greatest
challenge for
RE Asset
Managers

Fundraising Activities
50%
21%
7%
21%
Easy Difficult Very difficult No change
Assessment of fundraising over the last 24 months• 50% of Asset
Managers have
had a positive
experience in
the fundraising
activity over the
past two years
10
0%
No change
Assessment of the fundraising over the next 24 months
10
0%
Difficult
• Fundraising is
expected to get
less complex in
the next two
years
66%
34
%
Easier No change
10
0%
No change

Pension
funds
18%
Insurance
companies
14%
Funds of
funds
11%
Corporation
s
11%
Sovereign
wealth
funds
10%
Others
36%
Main Business Feeders
• The top 5 investors in RE
are pension funds (18%),
insurance companies
(14%), fund of funds
(11%), corporations (11%)
and sovereign wealth
funds (10%)
• Others mainly represent
charities, foundations and
non-profit organizations
(8%), high net worth/family
offices (8%), government
institutions (8%),
investments banks (6%)
and others (6%)
Top investors
Increase DecreaseNo change

Strategy and Country of Investments
54%
17%
29%
53%
19%
28%
Core Value-added Opportunistic
Breakdown of Real Estate assets by strategy
Main markets for investments in the future
91% 91%
82%
45%
27% 27%
64%
UK Germany France Nordic
countries
Spain Eastern
Europe
Rest of EU
• There is an
increase in the
investment
allocation for the
value-added
strategy and a
slight decrease
in core and
opportunistic
• UK, Germany
and France are
the top ranked
countries where
RE Asset
Managers are
looking to invest
in
FutureCurrent

Taxation
73%
60%
20% 20% 20%
13% 7%
0%
20%
France Germany Italy Luxembourg United
Kingdom
Spain Netherlands Ireland Others
Countries where tax authorities have increasingly challenged cross border tax benefits
Expected changes in the implementation of OECD’s BEPS framework
85%
69%
54%
46%
31%
23%
0%Increased in
substance /
personnel in
"holding
company"
jurisdictions
Increase in tax
costs on deal
underwriting
Major changes Decreasing use
of "holding
company"
jurisdictions
Minor changes Greater use of
REIT structures
Others
• Accordingly, RE
Asset Managers
have
experienced the
most activity
around cross
border tax
benefits with the
French and
German tax
authorities
• 85% of RE Asset
Managers
anticipate an
increase in
substance where
the holding
companies are
set-up

Service Providers
10
7
6
3 3 3 2 2
Property
managers
Lawyers Accounting /
corporate
services
Tax advisors Fund
administrator
Auditors Custodian Financial
advisors
Average number of service providers used by RE Asset Managers
Expected changes in the coming years in terms of use of service providers
61%
28%
11%
Current service providers Use new service providers Decrease number of service
providers
• Complex
network and
relationship
management
• Some
changes but
not towards
simplification
or relationship

Focus of Future Investments and Developments
Analyst
(4%)
Tax (10%)
Information System (11%)
Regulatory/Legal (13%)
Investor Relations (13%)
Risk Management (14%)
Portfolio Management (16%)
OrderofPriority
Low
High
• The RE Asset
Managers are
notably prioritizing
investments or
improvements
around portfolio
management, risk
management,
investor relations
and regulatory
• These development
areas have been
identified as key
issues and
challenges
currently faced by
most RE Asset
Managers
Compliance (6%)
BMO Corporate (6%)
BMO(1) Fund Admin (6%)
Future investments and developments

Results of the Survey
Asset Servicers

Objectives and Scope
Portfolio
Valuation
Reporting
Client
Acceptance
General
Overview
and Key
Figures
Regulatory
Framework
Growth
and
Outlook
• Our RE market survey
covers the RE Asset
Servicers, particularly those
active in the Pan-European
market, and is aimed
primarily to gain an
understanding of key areas
in their business, their
operations and their insights
on business growth and
development
• The aggregate assets size of
the RE Asset Servicers
participating to the survey is
approximately €123Bn
under administration and
€102Bn under depositary
Other
Operational
Aspects

Organization
Dedicated RE unit within the organization• The majority of the Survey
Respondents have a
combined PE-RE team
within their organization,
we observe that some
market players have
reached a sufficient critical
mass to segregate the RE
from PE activity
• While the remaining
Survey Respondents have
no dedicated units within
their operating model they
have put in place a
dedicated staff or teams
covering RE activity but
only in some departments
rather than a desk
centralizing all services
82%
18%
of which
27%
have a
dedicated RE
team
Combined PE and RE unit No dedicated team

Net Assets Under Administration and Custody
RE assets volumes
30%
19%
5% 5%
41%
19%
26%
13%
7%
35%
Less than
€500M
€500M - €1bn €1bn - €5bn €5bn - €10bn €10bn - €50bn
DepositaryAdministration
• Majority (64%) of the
Service Providers offer
combined Central
Administration and
Depositary services
• Only some mainstream
banks offer stand alone
Depositary services (niche
providers)
• The book of regulated
business of the Central
Administrators surveyed is
concentrated on the
opposite sides of the
defined AuA spectrum i.e.
less than €500M and
€10bn – 50bn

Other Operational Aspects - IT Systems
Are you satisfied with your current RE system?
36%
55%
73%
27%
NoYes
• Almost all Survey
Respondents are satisfied
with their current RE
systems, with a large
majority (73%) however
considering an upgrade in
the next 12 to 24 months
• At the same time over one
third of the respondents are
considering a system change
Change in the RE system
in the next 12 or 24 months
91%
9%
Upgrade in the RE system
in the next 12 or 24 months

Focus on Future Developments
Other
(14%)
Operating Model or
Organizational
Transformation (20%)
Marketing and Business
Development (20%)
Technology
(23%)
Staff Development and Recruitment
(24%)
OrderofPriority
Low
High
Priority order for the future developments• Staff development,
recruitment and retention is
a high priority for majority of
the Survey Respondents
(24%), with over 55%
responses indicating staff
increase of 11-20 %
• The participants also
demonstrated a strong drive
towards improvement of
their staff capacity through
operating model or
organizational transformation

Q & A
2015 European Real
Estate Investment
Management Survey

Gérard Lorent
Director
Deloitte Luxembourg
Gérard is a Director within the Strategy and Corporate Finance Department of Deloitte Tax &
Consulting. He is specialized in Regulatory, Strategy and Operations set-up engagements. His
areas of activities include Asset Management and Services client, Global Custody and Banking
clients for traditional and alternative assets. Gérard is leading Deloitte Luxembourg Consulting
PE/RE initiative. Gérard is an active member of different professional associations notably ALFI
and ALCO.
Director, Strategy & Corporate Finance, Deloitte Luxembourg
Key contact

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and
their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not
provide services to clients. Please see www.deloitte.com/lu/about for a more detailed description of DTTL and its member firms.
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected
network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and high-quality service to clients, delivering the
insights they need to address their most complex business challenges. Deloitte’s more than 200,000 professionals are committed to becoming the standard of
excellence.
In Luxembourg, Deloitte consists of 74 partners and about 1,500 employees and is amongst the leading professional service providers on the market. For over
60 years, Deloitte has delivered high added-value services to national and international clients. Our multidisciplinary teams consist of specialists from different
sectors and guarantee harmonised quality services to our clients in their field.
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively,
the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for
any loss whatsoever sustained by any person who relies on this communication.

Deloitte Real Estate Symposium March 2015

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Deloitte Real Estate Symposium March 2015