SOROS REAL ESTATE INVESTORS

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(No Transcript)
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SREI 2003 Annual LP Conference

• Monday, May 4th

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SREI 2003 Annual LP Conference

• Tuesday, May 5th

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Overview
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SREP 2002 Expectations vs. Outcome

• Outcome
• Weakened fundamentals
• Pricing out of line with fundamentals
• Slow reform, opportunities increasing

• Expectation
• U.S. Bearish
• Europe Cautious
• Japan Structural change driven by crisis

• Accelerated sales effort

• Significant capital events
• Niche / value investing
• Patience

• Strengthen / create platforms in
  targeted sectors
• Increase proprietary deal flow

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2002 Action Plan and Accomplishments

• SREP 2002 Action Plan
• Maintain strategic focus
• Execute existing platform business plans
• Target near term capital events
• Strategically pursue new business
• Continue to improve investor reporting

• Accomplishments
• Selectively invested 50 million
• Achieved strong results with six seasoned
  platforms
• Distributed 109 million 58 million in 2002 and
  51 million in early 2003
• Created four new platforms in targeted markets
  and sectors
• Created comprehensive performance metrics

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SREP 2003 Outlook
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SREP Team
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SREP Team
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SREP Team
Asia Richard Georgi
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SREP Team
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Review of Global Markets
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SREP Global Outlook
Macroeconomic Environment

• Geopolitical conflicts
• Real and perceived threat of terrorism
• Poor performance by largest economies U.S.,
  Japan and Germany
• Low consumer and corporate confidence
• Maximum monetary policy accommodation
• U.S. and Japan interest rates at historic lows
• Limited further interest rate decline in Europe
• Constrained fiscal policies
• Large U.S. budget deficits
• Maastricht Treaty constraints in Europe
• High debt to GDP in Japan

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SREP Global Outlook
Real Estate Markets

• Gap between pricing and fundamentals narrowing
  slowly
• Ample private equity / opportunity fund capital
  chasing opportunities
• Strong equity markets for core assets
• Individuals and pension funds in U.S.
• German funds and private investors in Europe
• Strong debt markets
• Low interest rates and tight spreads
• CMBS markets and European bank demand
• Distressed opportunities emerging in certain
  markets and sectors
• Germany, Japan
• Hospitality, serviced office
• Secure, well-leased assets are attractive

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Historical and Projected GDP Growth
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Outlook United States
Macroeconomic Environment

• Negatives
• Geopolitical conflicts, threat of terrorism
• Excess capacity, low corporate profitability
• Housing / mortgage refinancing cycles nearing
  end
• Extended consumer high debt / low savings
• Weak equity markets, significant loss of wealth

• Positives
• Historically low interest rates, further decline
  likely
• Increased federal spending
• Moderate near-term tax cuts
• Ongoing private / public sector adjustments to
  downturn

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Outlook United States

• Real Estate Markets
• Little new supply, but falling demand
• Fundamentals visibly deteriorating, pricing
  becoming more realistic
• Preferred asset class, strong equity and debt
  markets
• Low interest rates staving off distress

• SREP Strategy
• Complete disposition of Legacy Portfolio
• Position SREP for market re-entry in 2005

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Outlook United States
Divergence of Capital and Leasing Markets
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Outlook United States
Investment Volume ( in Billions)
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Outlook United States
Cap Rates Versus Interest Rates
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Outlook Western Europe
Macroeconomic Environment

• Positives
• 1990s expansion not as excessive, correction
  less severe
• Continuing reform / restructuring due to EMU
• Resilience of certain economies (e.g. Spain,
  U.K.)

• Negatives
• Weak business and consumer confidence
• High budget deficits
• Relatively high interest rates
• Geopolitical conflicts, threat of terrorism
• Structural rigidities and slow pace of tax,
  labor and pension reforms

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Outlook Western Europe

• Real Estate Markets
• Declining occupancies and rents in most markets
• Safe haven asset class, firm yields
• Relatively attractive debt markets due to
  aggressive bank lending
• Market sentiment becoming more realistic in 2003

• SREP Strategy
• Sell mature markets and aggressively refinance
  where possible
• Invest cautiously target niche, value-added and
  emerging distressed opportunities where available

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Outlook Western Europe
Divergence of Capital and Leasing Markets
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Outlook Western Europe
Investment Volume ( in Billions)
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Outlook Western Europe
Office Yields to Interest Rates
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Outlook Western Europe
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Outlook Japan
Macroeconomic Environment

• Positives
• Modest reforms
• Increased corporate restructuring
• High savings rate

• Negatives
• Broken financial system, high level of NPLs
• Severe structural inefficiencies in various
  sectors
• Persistent deflation
• Slow road to reform
• Poor export markets

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Outlook Japan

• Real Estate Markets
• Oversupply in office market, general
  deterioration in fundamentals
• Continuing distressed opportunities due to
  corporate restructurings
• Continuing investor interest

• SREP Strategy
• Buy distressed, complex, operating businesses and
  assets
• Implement intense financial, real estate and
  operational restructuring
• Capitalize on existing platforms experience and
  market positioning

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Outlook Japan
Tokyo Vacancy Rates and Rents
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Outlook Japan
Office Yields versus Government Bond Yields