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alstria office REIT-AG

Interim / Quarterly Report • Nov 19, 2008

31_ip_2008-11-19_f06b8468-ffd9-44c3-8fb5-798e4d09f7ba.pdf

Interim / Quarterly Report

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THIRD QUARTER 2008

INTERIM REPORT

HAMBURG, NOVEMBER 19th, 2008

Disclaimer

Cautionary Note Regarding Forward-Looking Statements

The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, general economic conditions, including in particular economic conditions in the alstria's core business and core markets, general competitive factors, the impact of acquisitions, including related integration issues, and reorganization measures. Furthermore, the development of financial markets, interest rate levels, currency exchange rates, as well as national and international changes in laws and regulations, in particular regarding tax matters, can have a corresponding impact. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.

No duty to update

The company assumes no obligation to update any information contained herein.

9 months highlights

  • Strong operating performance
  • Signing new 13,000 sqm lease agreement with Hamburger Hochbahn
  • Closing of EUR 95 m non recourse loan
  • Guidance 2008 confirmed
  • Dividend policy reviewed

Agenda

Operating performance - market performance

  • Financials
  • Financing strategy
  • Disposals

Outlook

alstria portfolio

ALSTRIA PORTFOLIO

M
tr
ic
e		 3
0.
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2
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9.
1
1.
2
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m		 9
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1

1 Incl. three assets classified as held for sale as of 30.09.08

2 Monthly gross rental income as of the specific date multiplied by 12

3 Calculated as Passing Rent divided by OMV

FFO increased by 35%

Investment market

  • 9Major slowdown of investment market following LEH/HRX
  • 9Limited financing available on the market (limited but not dry)
  • 9Limited numbers of sellers in the market
  • 9All major transaction withdrawn
  • 9Limited to no forced seller in sight

Leasing market

  • 9Limited impact so far on leasing markets but just a question of time
  • 9 Need to differentiate between top-market (above average) and mid-market (at or below average) rent level
  • 9 Top market rents are set to suffer the most as tenant looking to reduce occupancy costs
  • 9 Mid market rents are expected to remain stable as they usually allow tenant to realize efficiency gain/cost reduction

New lease agreement underlines asset management performance

  • Tenant: Hamburger Hochbahn AG
  • Area: around 13,000 sqm
  • Term: 20 years plus 5
  • Lease start: approx. 01.04.2010
  • Indexation: 80% CPI yearly as of signature date
  • Annual net rent: EUR 2,145 k (office rent EUR/sqm/month 14.50)

Illustration of the German market opportunity

2007 FINANCIAL RESULTSFINANCIAL RESULTS Q3 2008 2 April 2008 Nov 19th, 2008 9

Lease up of more than 27,000 sqm

Stable revenues by long-term investments and high-quality tenants

  • Key tenants generate 80% of our revenues
  • More than 50% of rental income public entities or public agencies
  • 30% of German Blue Chip corporations
  • Revenues secured for approx. 10 years

Agenda

Operating performance - market performance

Financials

  • Financing strategy
  • Disposals

Outlook

Q3 profit underlines successful operational performance

I
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Net profit impacted by valuation results

1.
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Key components of the balance sheet

Key numbers reflect sound financial position of alstria

Q
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* incl. Aurora-portfolio debt financing

** incl. assets held for sale and development properties

Agenda

Operating performance - market performance

Financials

Financing strategy

Disposals

Outlook

S
Y
N
D
I
C
A
T
E
D
L
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A
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Disposal proceeds used to reduce LTV

The balance sheet could support further yield expansion

in
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2
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bp		 2
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bp

Agenda

Operating performance - market performance

Financials

Financing strategy

Disposals

Outlook

Three properties and a plot of land have been sold*

For all transactions, alstria achieved higher sales prices than the fair values

O
S
O
S
S
V
E
R
V
I
E
W
D
I
P
A
L
Pr
ie
t
op
er
s		 Fa
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V
lu
a
es		 Sa
le
Pr
ic
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e		 Su
lu
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s		 Su
lu
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ha
rp
s
ng
e
bu
Ha
Du
te
tr
1
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rg
es
rn
s
,		 4,
0
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9
5
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3.
8
%
Ha
bu
Os
te
be
ks
tr
9
6
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r
,		 1
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7
5,
0
0
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1,
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5,
0
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0
%
Ha
Va
hr
l
de
S
tr
no
ve
r,
en
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r
w		 - 1,
2
5
0,
0
0
0		 1,
2
5
0,
0
0
0		 /a
n
Le
ip
ig
N
i
ko
la
is
tr
z
,		 1,
9
2
5,
0
0
0		 2,
0
0
0,
0
0
0		 7
5,
0
0
0		 3.
9
%
To
l
ta		 1
6,
5
0
0,
0
0
0		 1
9,
2
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0,
0
0
0		 2,
7
0
0,
0
0
0		 1
6.
4
%

* The plot of Vahrenwalder Str. does not influence the fair value of the property

Asset overview Nikolaistrasse 16

Agenda

Operating performance - market performance

Financials

  • Financing strategy
  • Disposals

Outlook

Strong underlying business model

We have not

  • 9relied on yield compression
  • 9nor ever considered trading as a viable strategy
  • 9nor looked at too many short term leases and high vacancy
  • 9nor relied on strong rental top rental growth assumption
  • 9nor relied on high gearing in order to boost our balance sheet

Strong underlying business model

But we have

  • 9Secured long term income backed by high quality assets
  • 9Covered our cost and dividend with our revenues
  • 9Limited the amount of risky assets
  • 9Chosen what at that time was conservative gearing
  • 9Relied on long term value added
  • 9 Focus our asset management on improving efficiency of buildings and reducing overall cost for tenant in what we called from inception win-win transaction
  • 9 Selectively disposed of assets were we did not see any additional value, or where alstria was not the best positioned to extract this value

Existing stakeholders considerations

  • Opportunities will come following the downturn, but there will be some balance sheet challenges to overcome first
  • LTV covenant monitoring is important, but not vital as the market seems to consider it
  • Breach of LTV covenant would in our view result in higher cost, and mark to market of loan
  • Main challenges will come at the time of refinancing as we expect that debt availability and terms will be different from what they were in the past
  • Medium to long term trend for (most) real estate companies will be to deleverage and we expect acceptable LTV to be between 40 and 50% (vs. 50 to 60%)
  • Structured approach to deleveraging is necessary in order to safeguard the interest of the existing stakeholders of the company
  • Available and executable options to deleverage are not static and are considered by alstria in a dynamic environment

It's a dynamic process

* Assumes all assets and all debt committed on 31/12/07 on balance sheet

No valuation backlog

1 Source: Jones Lang LaSalle, Key Market Indicators

1 RREFF Research, April 2008, Global Real Estate Investment and Performance 2007 and 2008

  • FFO target of EUR 40 m and revenues of EUR 101 m confirmed
  • Due to market conditions, dividend guidance to be sustained at the same level as FY07
  • Allows alstria to retain additional cash to support organic growth projects for next year, or react to unexpected value falls

Questions & Answers

Clear and focused strategy

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