2

A. Falcon Real Estate Investment Company, LP

• US Commercial Real Estate firm created in 1991 by Howard Hallengren and Jack Miller,both from Chase. Offers comprehensive services to high-net-worth individuals andinstitutional investors. 6 US Regional offices, an office in Beijing, expanding in LatinAmerica and the European Union. $ 3 bn AUMs of US commercial real estate. 100% Out-performance vs. its benchmark (NCREIF) in 17 years.

B. Jack Miller, Co-Founder (1991) / President (New York and Chicago)

• Co-Founded Falcon after serving as Manager of the Real Estate Investment at ChasePrivate Bank where he was responsible for property acquisition, property managementand mortgage financing. Before he was at The First National Bank of Chicago for 10years in the bank’s real estate investment division. He is a founding member of theAccounting Standards Committee of the National Council of Real Estate InvestmentFiduciaries, which is the coordinating group that sets accounting standards for U.S.institutional investors. Mr. Miller received a BS in accounting, a Master of finance in realestate from De Paul University, and an MBA from the University of Chicago.

Short Profile on Firm and Speaker

3

Conference Outline

Introduction

1. Publicly vs. Privately Held Commercial Real Estate

2. The International Perspective

Conclusion

4

Conference Outline

Introduction

1. Publicly vs. Privately Held Commercial Real Estate

2. The International Perspective

Conclusion

5

Traditional Global Asset Classes

A. Traditional

• Money Market

• Bonds

• Stocks (Listed Real Estate Investment Trusts: “REITs”)

B. Alternative

• Private Equity (“Private Equity funds”, “Private REITs” or “Club Deals”)

• Hedge Funds (“Sector Specific”: Real Estate)

• Structured Products (“Principal Protected” around RE indices or “REITs baskets”)

• Managed Futures

• Commodities

• Real Estate (Direct investment by one investor in one building or owner-occupied)

6

Traditional Global Real Estate Asset Classes

Direct PropertyInvestments

$ 23 Trillion

Real Estate

Securities

$ 2 Trillion

Whole Mortgage Structured Debt (CMOs, CLOs etc.)

Private Public

De

bt

E

qu

ity

GLOBAL REAL ESTATE

•$ 25 Trillion (50% US)

$ 16 Investment Grade

$ 9 Non-Investment Grade

($ 10 pure investments)

•20% vs. Global Stock + Bond

Market Cap.

• 7 times bigger than Hedge

Funds

• 12 times bigger than Private

Equity

Real Estate Evolves with Private Equity

7

2. Venture Capital Funding

IPO

High Yield Debt & Equity

Traditional Bank Loans

Follow-on Offerings

Public/Private Debt

Convertible Debt

Venture StagePrivate

Company

Mezzanine StagePrivate

Company

Growth StagePrivate/Public

Company

Late StagePrivate/Public

CompanyMature StagePrivate/Public

Company

1. Buyouts

Purchase of controlling interest with

substantial borrowed capital

Focuses on investing in companies with

high growth rates

Industry

Mezzanine

Distress

Real Estate

PIPE

8

Conference Outline

Introduction

1. Publicly vs. Privately Held Commercial Real Estate

2. The International Perspective

Conclusion

Risk / Return of Real Estate Investment Strategies

Opportunistic

Value-Added

Long/Short

Public Equity

Core Property

Public Debt

Whole Mortgage

Risk Perception

Source: Fund Evaluation Group and Falcon Asset Management

Positioning Debt/Equity vs. Public/Private

Debt

Equity

9

10

“US Housing Going down”

April 26th 2007

“ Foreign Real-Estate Funds Boom Firms Unveil Scores of New Plays, Spurred by Strong Returns and Growth in

Overseas REITs”. July 7, 2007

“Euro soars to new high against U.S. dollar”

July 10, 2007

“Subprime poor practice risks turning to malpractice”

July 4 2007

Too Much Information?

11

R. Bernstein: Merrill Lynch Chief US Strategist

12

• 91.5% of long-term total account performance including Stocks, Bonds, Money

Markets resulted from asset allocation decisions (statistically tested over the past 20

years)

• Mitigate the necessity of secondary market - like in REITs

Security Selection

4.6%

Market Timing

1.8%

Other Factors

2.1%

Asset Allocation

91.5%

Source: Ibbotson Associates, Inc.

Asset Allocation and Expected Return: 1

13

Source: 1995—2005 Source: BHF-BANK

HIGH

LOW MEDIUM HIGH

Risk %

Retu

rn %

LOW

MEDIUM

Private

Equity

Global

Real Estate

Hedge

Funds

CommoditiesOil

GoldGlobal Bonds

Global

Stocks

Global

Money Markets

Risk Adjusted Returns (+ Standard Deviation): 2

NAREIT NCREIF

Source: Falcon /NCREIF & NAREIT/ Columbia Business School

US Public vs. US Private Real Estate Returns

US Public RE Benchmark (50% leveraged) vs. Private Benchmark (Unleveraged)

14

REITs Trade at NAV Premium vs. Underlying Assets

Source: Green Street Advisors, Current as of May 2007

40%

30%

Long-term Average = 6.6%20%

10%

0%

-10%

-20%

-30%

15

16

When Real Estate > Stock Market Volatility

S&P 500 120 Day Volatility

REITs 120 Day Volatility

1994 1996 1998 2000 2002 2004 2006 2008

Source: Bloomberg / RMS & SPX 120 Day Return Volatility

17

S&P 500 FTSE 100 NCREIF Index FALCON

Total Quarters 62 62 62 62

Positive Quarters 67.74% 69.35% 87.10% 98.39%

Negative Quarters 32.26% 30.65% 12.90% 1.61%

Median Quarterly Return 2.41% 2.08% 2.36% 3.44%

Average Quarterly Return 2.47% 2.27% 2.08% 3.74%

Standard Deviation 7.43% 7.09% 1.84% 1.79%

Best Quarter 20.87% 25.13% 5.43% 10.42%

Worst Quarter -17.63% -17.80% -5.33% -0.14%

Maximum Drawdown -45.60% -45.55% -9.66% -0.14%

Sharpe Ratio* -0.04% -0.07% -0.37% 0.55%

Correlation Matrix S&P 500 FTSE 100 NCREIF Index FALCON

S&P 500 1.00 0.73 -0.04 -0.04

FTSE 100 1.00 0.01 0.02

NCREIF Index 1.00 0.77

FALCON 1.00

Falcon Performance Statistics vs. Benchmarks: January 1991 - June 2006

* Risk free rate is 2.75% (the average 5-yr T-Note from Jan '91 Š June '06

Source: Falcon

Correlation Coefficients (+ covariance): 3

18

Source: 1980—2000 Source: Merrill Lynch Quantitative & Equity Derivatives Research

15.50

15.00

14.50

14.00

13.50

13.00

12.50

12.00

11.50

10.00 10.50 11.00 11.50 12.00 12.50 13.00 13.50 14.00 14.50

Risk %

Retu

rn %

Efficient Frontier without

Alternative Investments

Efficient Frontier with 5%

Alternative Investments

Efficient Frontier with 10%

Alternative Investments

Steps 1+2+3 = Efficient Frontier

19

Cash

Bond

Equity

Alternative

Invest.

50-60%*

*Real assets, which includes real estate and commodities, is the largest investment category

with 31 cents of each Harvard endowment dollar.

How Much Alternative Investments?

Source: Falcon

20

Synopsis of Private vs. Public Real Estate

Public Equity Advantages

Publicly traded (liquid)

Lower fees

No minimum size (individual investors)

Public Equity Disadvantages

Theoretically, lower returns

due to liquidity premium

Performance often driven by capital flows and

other non- real estate related factors

Higher correlation to public stock markets

Private Equity Advantages

Access to broader array of investments

Lower correlation to stock markets

Private Equity Disadvantages

Illiquid

Higher fees

Appraisal-based valuations

Difficult to benchmark

High dispersion of returns in value-added

and opportunistic sectors

21

Conference Outline

Introduction

1. Publicly vs. Privately Held Commercial Real Estate

2. The International Perspective

Conclusion

•Financial Markets offer broader access to capital from borrowers

•Financial Markets offer more efficient pricing

• Financial Markets increase opportunities for sharing risk BUT…

• Lately securitization has led to substantial increases in leverage and greater systemic risk for the entire financial system

0 100 200

1990

1995

2000

2005

2006TOTAL

Bank Deposits

Government Debt

Corporate Debt

Equities

Global Financial Markets (Excluding Derivatives)

Source: McKinsey Global Institute

Global: GDP $ 60 Trillion vs. $ 180 Trillion Listed

22

23

• 1990: 33 countries have domestic market capitalization (excluding derivatives) > GDP

• 2006: 72 countries – virtually all industrial economies and the largest emerging markets have financial markets that are two to three times the size of their GDP

Real Economy/Financial Markets Decoupling: G7?

Source: McKinsey Global Institute

Global Real Estate Markets As of January 07

•Invested stock

$3.2 trillion

•Mature/ Highly Mature: 83%•Maturing: 15%•Emerging: 2%

•Investable stock$6.1 trillion

Europe / Russia

•Invested stock

$4.7 trillion

•Total stock $9.2 trillion

Americas Total stock•$9.5 trillion

•Investable stock$6.6 trillion •Invested

stock$1.9 trillion

Middle East / Asia Total stock

•$5.9 trillion

•97%•Mature/ Highly Mature:

•Maturing:

•Emerging:

•1%•Investable stock

$3.5 trillion•1%

•Mature/ Highly Mature: 17%•Maturing: 72%•Emerging: 11%

Sources: RREEF; DTZ; ULI; PwC

Inter-regional capital flows of $115bn in H1 2007

24

25

International Real Estate Risk Adjusted Returns?

Returns and Risk of Public Property Securities Markets

(1993-2006, in U.S. dollars)

Source: Morgan Stanley, Global Property Research

•Returns and risk for public real estate securities in various regions around the world can

produce half of the returns for twice the risk and can produce twice the returns for half the risk

depending what you targeted country allocation is.

•Returns for Asia were for instance lower than other regions due to problems the region has

faced, including a weak Japanese real estate market for more than a decade and the SARS

outbreak in 2003

Return Standard

Deviation

U.S. 13.60% 14.90%

Europe 13.90% 14.40%

Asia 7.40% 33.20%

Australia 16.60% 18.20%

26

Correlation: International Real Estate Markets?

• International diversification within public real estate equities is beneficial due to the low

correlations of public real estate equities between various global regions

Correlation of Public Property Securities Markets

(1993-2006, in U.S. dollars)

U.S. Europe Asia Australia

U.S. 1 0.5 0.32 0.4

Europe 0.5 1 0.34 0.52

Asia 0.32 0.34 1 0.44

Australia 0.4 0.52 0.44 1

Source: Morgan Stanley, Global Property Research

AustraliaHong KongJapanOther Asian

France GermanyItalySpain NetherlandsOther EurozoneUKSwitzerland SwedenC & E Europe Other European USCanadaMexicoBrazilOther

Japan 11%Euro

zone

10%

Americas 57% Europe 18%

US 53%

Australia

9%Asia-Pacific

25%

Hong Kong5%

UK 6%

Sources: EPRA/NAREIT, LaSalle Investment Management

2007: $ 2 Trillion Listed Real Estate

27

28

Public and Private Real Estate Room to Grow

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Global North

America

Latin

America

Europe Asia-

Pacific

Middle

East

HNI's Real Estate Investments (2006)

REIT Commercial Residential* * Secondary Residence

Source: Merrill Lynch/Cap Gemini

The Luxembourg Fund Center

8 426

4 542

1 839

2 176

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

USA Europe Asia & Pacific

Luxembourg is the second

largest fund center in the

world after the USA

2007 Worldwide Mutual Funds

€ billions

Sources: EFAMA & ICI

29

Luxembourg Real Estate Funds: Before the SIF

30

AUM and Number of RE Funds

48

80

129

3636

0

5

10

15

20

25

30

35

40

02 03 04 05 06

AU

M U

SD

bln

0

20

40

60

80

100

120

140

Nu

mb

er

of

su

bfu

nd

s

AUM # (sub)funds

• Huge growth since 2004

• Closed-end and Open-end funds and funds of funds

Reasons for success:

• Strong yet flexible Regulation

• Cheaper for Fund Managers than the US

• Reputation of location

• Centre of sophisticated real estate investment funds

Global promoter base

Global investor base

• Tax efficiency and stability

SIF : Market Overview

Specialized investment funds launched since February 13, 2007

8 1225

38

72

93

115 119

220

0

50

100

150

200

250

2007-

02

2007-

03

2007-

04

2007-

05

2007-

06

2007-

07

2007-

08

2007-

09

2007-

12

31

SIF Launched in Feb. 07 is a Favored Structure

Profile of Luxembourg Investment Funds

Key criteria UCITS Non-UCITS SIF SICAR

Investment

restrictions (eligible

assets)

Restricted Flexible Flexible Moderate

Risk diversification High Medium Low None

Ease of public

distribution

High Medium Low Low

Supervisory

framework

Targeted to

retail investor

protection

Targeted to retail

investor protection

More flexible More flexible

Time to establish Low - Medium Medium - High Very low Low

Target investors All All Institutional /

HNWI

Institutional /

HNWI

32

The SIF Features are Tailored for Real Estate

Key Features UCITs Non-UCITs SIF SICAR

Umbrella structures Yes Yes Yes Yes(1)

Share-classes Yes Yes Yes Yes

Debt financing No No Yes Yes

Leverage No Yes Yes Yes

Valuation basisProbable realization

value

Probable

realization valueFair value

Probable

realization value

Subscription/

redemption priceNAV NAV

As per offering

documentNAV

NAV frequency

(minimum)Monthly Monthly Annual Annual (1)

Open or closed ended Open ended Both Both Both

Annual Report Yes Yes Yes Yes

Semi-annual report Yes Yes No No

Regulatory Reporting Yes Yes No No

33

The SIF: In a Nutshell

34

• Eligible investor base: Investment in a SIF

is reserved for “well-informed” investors

requiring a limited level of protection and

looking for investment flexibility suitable to

their particular expertise and needs.

• Investment flexibility: the range of assets

(nature of assets and/or associated risks)

eligible for a SIF is broad and consequently

includes, but is not limited to, equities,

bonds, derivatives, structured products,

real estate, hedge funds and private equity

type investments. The SIF should comply

with the general principle of risk

diversification.

• Light supervision

• Organisational adaptability

• Efficient tax regime

Criteria SIF

REGULATORY

Regulated vehicle? Yes

Pre-approval by regulator? No

Other than local GAAP? Yes

Investment restrictions? No

Investment in RE, PE, HF? All

Simplified prospectus regime? Yes

TAX

Subscription tax? Yes

Income tax? No

Access to DTT? Yes / No

Withholding tax on dividends

paid? (residents / non

residents)

No

Standard VAT rate? 15 %

DISTRIBUTION

Listing possible? Yes / No

Maximum number of

investors?No

Minimum investment

amount?Min. € 125k

Minimum experience

required?Yes

LICENSING

Service providers / persons

subject to regulator's

approval?

•Directors

•Custodian

•Auditor

Pension Funds Pooling: Increasingly In Demand

35

• Quantitative benefits:Economies of scales at asset management & custodian bank level up to 0.70% savings

• Qualitative benefits;Improve measurement/selection of service providerEnable consistent/centralized corporate governance.

• Multinationals running pension funds in several countries have implemented pension pooling vehicle

British

Pension

Fund

Irish

Pension

Fund

Chilean

Pension

Fund

Brazil

Pension

Fund

British

Pension

Fund

Irish

Pension

Fund

Chilean

Pension

Fund

Brazil

Pension

Fund

Investments Investments Investments Investments

Depositary bank

Paying agent

Administrative agent

Transfer agent

Auditors

Law consultant

Tax consultant

Asset administrator

Virtual or entity pension pooling

Investments

Shares DepositReal

EstateBonds

Converted in

36

Conference Outline

Introduction

1. Publicly vs. Privately Held Commercial Real Estate

2. The International Perspective

Conclusion

Conclusion

37

A. Privately Held vs. Publicly Held Real Estate

• Each have their own merit, even if the Privately-held RE is likely to continue to dominate

• Clearly Commercial Real Estate in all its forms will continue to grow for all the reasons we discussed

B. International Perspective

• Trend # 1; Hard Assets logic inescapable

• Trend # 2: The Global Real Estate market will continue to integrate

• Trend # 3: The Luxembourg Real Estate Funds will continue to grow

38

Questions & Answers

Muchas Gracias !

Jack D. MillerPresident

Falcon Real Estate Investment Company, LP150 North Michigan Avenue, Suite 2700, Chicago, IL 60601

Tel: (312) 240-9195, Fax: (312) 240-9194, E-mail: jmiller@falconreal.comwww.falconreal.com