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Global Outlook for 2013 Jacques Gordon Global Strategist

Toronto Real Estate Forum

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Each region faces a different set of challenges Asia-Pacific faces the risk of a hard landing in China. US (and hence all of North America) must avoid the “Fiscal Cliff”. The European Union remains fragile and needs an overhaul.

Backdrop for 2013: ultra-low interest rates and risk aversion Stabilized, prime real estate acts as a magnet for capital. Flight to real assets (in reserve currency countries) reinforces this trend. Low-cost debt counteracts the downward drift in unlevered returns.

Anticipate a regime shift by 2015 Gradual lifting of risk aversion Gradual improvement in world growth Expiration date for the Low-Low-Low credit card

*Low growth, low interest rates, low inflation in advanced economies

Low-Low-Low

2014

Cheap, but not easy, credit

Low-Low-Low* Extends to 2014

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-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Com

pone

nts

of W

orld

GD

P G

row

th

Middle East & North Africa Latin America Rest of the WorldCEE Asia-Pacific ex-Japan North AmericaWestern Europe Japan

4.0%

Source: Global Insight Forecast as of 15 November 2012

2013 Global Growth Outlook Below Long-Term Trend

Emerging Markets

Developed Markets

3.5%

2.6% 2.5%

4.2%

-2.0%

1.6%

4.1%

3.0%

3

Source: Global Insight Forecast as of 15 November 2012

-2%

0%

2%

4%

6%

8%

10%

Eurozone UnitedKingdom

Japan NorthAmerica

CEE World LatinAmerica

Asia-Pacificex-Japan

Rea

l Ann

ual G

DP

Gro

wth

2011 2012 2013 2014

The Multi-Speed Global Economy (no top gear) Low-Low-Low Advanced and Slower Growing Emerging Economies

Low Interest Rates Low Inflation Low Growth Developed World

Higher Inflation High Growth and Urbanization Rising Interest Rates Developing World

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Americas Recovery Ahead of Europe, Behind Asia Modest Growth to 2015

90%

95%

100%

105%

110%

115%

120%

125%

130%

135%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Recovery Indexed to 2008

Asia-Pacific Mexico Canada United States Europe

2012-15 Average Annual Growth

Asia-Pacific Mexico Canada United States Europe

4.8% 4.1% 2.3% 2.7% 1.2%

Source: Global Insight Forecast as of 15 November 2012

Asia-Pacific

Mexico

Europe

Canada

US

5

50%

60%

70%

80%

90%

100%

110%

2003

Q3

2004

Q1

2004

Q3

2005

Q1

2005

Q3

2006

Q1

2006

Q3

2007

Q1

2007

Q3

2008

Q1

2008

Q3

2009

Q1

2009

Q3

2010

Q1

2010

Q3

2011

Q1

2011

Q3

2012

Q1

2012

Q3

Inde

xed

Cap

ital V

alue

–

Pre

-rec

essi

on P

eak

= 10

0%

United States Canada United Kingdom Australia Japan

Source: IPD, NCREIF (US) Quarterly data Japan to 2Q 2012, all other markets through 3Q 2012 Note: IPD’s quarterly returns for Australia, Canada, and Japan are presented only on a rolling annual basis; the quarter-over-quarter series has been estimated Series are adjusted to remove the impact of capital expenditures

Capital Value Change - Peak to Current

US Japan UK Canada Australia

-18.4% -21.6% -32.1%

4.3% -9.6%

Canada

Global Real Estate Capital Value Trends Canada above Pre-Recession Values

UK

US

6

To 3Q 2012

Average Annual Returns

Global Stocks1

Global Govt.

Bonds2

Global Corp

Bonds3

Global RE Securities

4

UK Direct Property

(IPD)5

US Direct Property

(NCREIF)6

Canada Direct

Property 7

1 Year 21.2% 4.3% 11.5% 30.6% 3.3% 11.0% 15.0% 3 Years 7.3% 4.2% 8.0% 12.9% 11.6% 10.9% 11.3% 5 Years -1.9% 4.9% 7.5% -2.2% -1.2% 2.3% 8.7% 10 Years 7.5% 3.9% 6.3% 11.8% 6.3% 8.3% 11.2% 20 Years 7.4% 5.6% 6.7% 10.1% 8.8% 8.6% 9.3%

Real Estate Returns in Context: Through Q3 2012 Global Returns by Asset Class

Notes on Sources 1. MSCI All Country Gross World Total Return Index in Local Currency 2. Citigroup World Government Bond Index All Maturities Total Returns in Local Currency 3. Citigroup World Corporate Bond Index Total Return in US Dollars (Local Currency History Not Available Prior to 1999) 4. EPRA/NAREIT Global (Developed) Index Total Return in US Dollars (Ticker: RUGL). *The 20 year correlation numbers between stocks and real estate securities

are elevated by the higher correlations seen since the GFC. For the period prior to the GFC,(6/30/92 to 6/30/08) the correlations was 0.56. 5. UK Investment Property Databank (IPD) Quarterly Standing Property Total Returns in British Pounds, data prior to Dec 2000 is based on IPD UK Monthly Property

Index. Returns are based on property valuations , not transactions. 6. US NCREIF Property Index Total Returns in US Dollars . Returns are based on property valuations , not transactions. 7. REALpac / IPD Canada Annual Property Index quarterly standing investments total returns in Canadian dollars. Data prior to 2000 is based on the Russell

Canadian Property Index Data through 3Q 2012

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1,450

1,550

1,650

1,750

1,850

1,950

Nov

-11

Dec

-11

Jan-

12

Feb-

12

Mar

-12

Apr

-12

May

-12

Jun-

12

Jul-1

2

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Year ending 26 November 2012

Source: Bloomberg As of 26 November 2012 Note: The EPRA/NAREIT Global Price Index contains all publicly quoted real estate companies that meet the EPRA ground rules in 21 countries across Europe, North America, and Asia.

200 Day Moving Average

EPRA/NAREIT Global Index

REIT Pricing: Often a Leading Indicator of Private Equity Pricing

REIT Prices Flat in November Up 18.8% Year to Date

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Themes for the ‘Teens’

Economic growth will be below historic trends - Deleveraging of private sector - Indebtedness of the public sector could constrain future growth - Financial sector still recovering from GFC - Aging societies

Urbanisation will be an important source of demand especially in emerging markets

Productivity gains will show significant variation between countries

Geo-political forces could interrupt trade growth and dampen activity, - Large economies re-align: China rivals the US, China-Japan relations remain tense - Continuing instability in the Middle East - Co-operation between nations is put to the test in the Eurozone

Impact on real estate: Slow improvement in fundamentals and occasional interruptions in cross-border capital flows

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The UN has no single definition of what qualifies as “urban”. It is based on the definitions used by each national statistical agency.

0.00.51.01.52.02.53.03.54.04.55.0

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

Popu

latio

n, B

illio

ns

Global Urban Population Over Time

Moving Toward a More Urbanized World Global Majority now Urban; Emerging Markets Dominate Urban Growth

Rural Population

Urban Population

Emerging Markets Urban Population

Developed Markets Urban Population

Source: United Nations, Department of Economic and Social Affairs, Population Division (2012). World Urbanization Prospects: The 2011 Revision

Crossover In 2009

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Latest data released April 2012

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Regional Contributions to Global Growth

13%

16%

25%

27%

19%

1997-2007

23% 21%

21%

16%

19%

2010-2020

China

Rest of Asia-Pacific

Rest of World

Europe

United States

Source: Global Insight, LaSalle Investment Management

China will produce more growth than the US in this decade

China

United States

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Global Office Index - Prime Rents, 2000-Q3 2012

Asia Pacific – stock weighted average of 27 markets; Americas – stock weighted average of 39 markets: Europe – stock weighted average of 24 markets Global Index based on GDP weighted average of the three regional indices Source: Jones Lang LaSalle, October 2012

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The Jones Lang LaSalle Property ClocksSM Amsterdam

Global Office Property Clock Q3 2012

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Rome Madrid, Detroit

Brussels Frankfurt, Istanbul, Dubai, Seoul, Atlanta, Chicago

Los Angeles

Tokyo

Mumbai, Delhi, New York, Mexico City, Johannesburg

Dallas

Abu Dhabi

Stockholm, Moscow

Washington DC

Beijing

Berlin

Sao Paulo

Shanghai, Paris, London

Rental Growth Slowing

Rents Falling

Rental Growth Accelerating

Rents Bottoming Out

Milan

Sydney, Warsaw

Zurich Americas Asia Pacific EMEA

Singapore Hong Kong

Toronto, San Francisco

This data is based on material/sources that we believe to be reliable. While every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors.

Neither Jones Lang LaSalle nor any of its affiliates accept any liability or responsibility for the accuracy or completeness of the information contained herein

Source: Jones Lang LaSalle IP, October 2012

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0 5 10

Tokyo

Stockholm

Bangkok

Buenos Aires

Denver

San Francisco

Beijing

Rio de Janeiro

Mexico City

Jakarta

% change q-o-q

Global Office Index – Prime Rents Top 10 Global Performers in Q3 2012

Based on rents for Grade A space. In local currency. Source: Jones Lang LaSalle, October 2012

Americas Europe

Asia Pacific

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-5.0 0.0

Montreal

Milan

Hanoi

Madrid

Hong Kong

Utrecht

The Hague

Brisbane

Melbourne

Detroit

% change q-o-q

Global Office Index – Prime Rents Bottom 10 Global Performers in Q3 2012

Based on rents for Grade A space. In local currency. Source: Jones Lang LaSalle, October 2012

Americas Europe

Asia Pacific

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Prime Office Yields - Global Cities

Source: Jones Lang LaSalle Due to differences in reporting metrics across the globe, data is not strictly comparable.

ECONOMIC OVERVIEW

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Source: Jones Lang LaSalle, October 2012. Covers all office sub-markets in each city. Tokyo - CBD-3 kus

Office Supply Pipeline - Major Markets, 2013 - 2014

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Source: Jones Lang LaSalle, October 2012

Direct Commercial Real Estate Investment , 2007 - 2012

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The World’s Most Transparent Countries, 2012

Note: Scores shown rounded to two decimal places; rankings are based on unrounded scores. Sources: Jones Lang LaSalle, LaSalle Investment Management

Highly Transparent

Transparent

Global Rank Market Composite

Score 1 United States 1.26 2 United Kingdom 1.33 3 Australia 1.36 4 Netherlands 1.38 5 New Zealand 1.48 6 Canada 1.56 7 France 1.57 8 Finland 1.57 9 Sweden 1.66 10 Switzerland 1.67 11 Hong Kong 1.76 12 Germany 1.80 13 Singapore 1.85 14 Denmark 1.86 15 Ireland 1.96

Dominated by Anglophone Markets

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JLL Transparency Index Results: 2012

Biggest Improvers

1. Turkey

2. Brazil

3. Mexico

4. Romania

5. Croatia

6. Indonesia

7. Philippines

8. Vietnam

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A World of Knightian Uncertainty

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LaSalle Investment Management Research & Strategy

For more information please contact

Robin Goodchild, London +44 20 7852 4390

Jacques Gordon, Chicago +1 312 228 2760

Paul Guest, Singapore +65 6494 3599

Bill Maher, Baltimore +1 410 878 4822

Chris Langstaff, Toronto +1 416 304 6018

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This information is intended to assist professional investors in deciding whether they wish to consider the investment further. This publication does not constitute an offer to sell, or the solicitation of an offer to buy, any securities or any interests in investment funds sponsored by, or the advisory services of, LaSalle Investment Management and is subject to correction, completion and amendment without notice. Any such offer, if made, will only be made by means of a confidential prospectus. The prospectus will include information regarding investment risk and investors should have the financial ability and willingness to accept these risks. All information obtained from third party sources is believed to be reliable and current, but accuracy cannot be guaranteed and we do not undertake to update any information contained in this document. All assumptions, figures and calculations contained in the information must be independently verified by the professional investor. This publication has been prepared without regard to the specific investment objectives, financial situation or particular needs of recipients. No legal or tax advice is provided. Recipients should independently evaluate specific investments and trading strategies. By accepting receipt of this publication, the recipient acknowledges that this publication is confidential and agrees not to distribute, offer or sell this publication or copies of it and agrees not to make use of the publication other than for its own general information purposes. Copyright © 2012 LaSalle Investment Management. All rights reserved. No part of this publication may be reproduced by any means, whether graphically, electronically, mechanically or otherwise howsoever, including without limitation photocopying and recording on magnetic tape, or included in any information store and/or retrieval system without prior permission of LaSalle Investment Management.