State of the Market – Investment in Asia Pacific

1. State of the Market – Investment in Asia Pacific Nicholas Brooke Chairman Professional Property Services Hong Kong

2. The Economic Backcloth and the Health of the Asian Property Sector • Global uncertainty : Terrorism, natural disasters, mobility of capital and debt • Acceptance of real estate as asset class • High liquidity / Low interest rates • Strong investor sentiment • Growing significance of REITS and other investment vehicles • Challenges of sustainability

3. Overall Economic Growth Trends China Vietnam Hong Kong Thailand Taiwan Malaysia Philippines Indonesia Singapore

4. The State of the Commercial Markets • Relatively weak occupational markets • Disconnect between occupational demand and investment appetite • Inflexibility of existing supply • Future of CBD? • “City” approach to the attraction of major space users

5. Hong Kong – CBD

6. The State of the Residential Markets • Affordability issues • Higher aspirations as to quality • Provision of Social Housing • High rise / mixed use debate • Sustainable communities • Regeneration versus new build

7. The Leighton Hill, Happy Valley

8. Key Ingredients of a World Class City • Diversity • Education • Employment • Quality of life

9. Hong Kong – the Current Position • A city undergoing transformation from enclave to hub of metropolitan region • Third major economic transformation well in hand • 1950’s – manufacturing economy, with back towards China • 1970’s – export/import with China as backyard platform • 1997 onwards – China facing hub managing flows of goods, services, people and money

10. Economic Transformation

11. Business Context • Level playing field and stable business environment • One country/two systems proving successful experiment • Hong Kong community developing sense of ownership • Move away from dependence on real estate • Quality of life high on the agenda • Community participation now expected

12. Hong Kong’s Response to Post 1997 Challenges • Repositioning as process manager rather than just middleman • Taking advantage of Hong Kong’s pivotal location to create regional logistics hub • Tourism and infrastructure – key areas of investment • Adding to menu – Science Park, Disney, Cyberport

13. Hong Kong Science Park BIOTECH ELECTRONICS IT PRECISION ENGINEERING

14. Cyberport

15. A More Predictable Property Market • Shift from trading to investment mentality • More comprehensive long term approach to planning and land use • Land supply driven policy • Less intervention by Administration • Re-think of housing policy • Market largely driven by fundamentals

16. Market Overview • In recovery mode but is it sustainable? • Residential- ultimate barometer of Hong Kong’s well being • Office – rental movement restricted to Grade A and CBD • Retail – strongest market sector fuelled by Mainland visitors • Hotel – strong in 2-3 star properties

17. Tin Shui Wai, Yuen Long

18. The Arcade, Cyberport

19. Advent of Foreign Investor • Mainland China • tightening of domestic credit. Greater dependence on foreign investment, bringing with it more discipline and more rigorous approach to asset management • Regional • emergence of office and retail REITs. Entry vehicles for both retail and institutional investors • Hong Kong, SAR • launch of Housing Authority Link REIT. 180 centres, 1 million sq.m., 100,000 parking spaces, US$3-4 billion. Precedent for other major privatisation exercises

20. Chasing the Tourism Dollar • National/city approach to creating world class tourist destinations • Development of family tourism – Disney • Legalisation and/or growth of gaming • Emergence of Macau as the Las Vegas of Asia

21. Macau

22. Sustainability • Governments now paying more than lip service to sustainable development concepts • Majority of large projects now being put at least to rudimentary tests • However lack of understanding as to the totality of sustainability • Yet to see market recognize and reward sustainable characteristics • Building for obsolescence debate

23. West Kowloon – Aerial View

24. West Kowloon Cultural Hub

25. Brown v/and Green Debate • Challenge of multiple ownership in urban areas • Attraction of green field approach • Ever growing demand for city living • Rural to urban migration • Absence of, and a reluctance to use, compulsory mechanisms • Growing attention to quality of life capital • Reducing pressure on existing infrastructure

26. Urban Regeneration Area

27. Ma On Shan, Shatin

28. Holistic Approach to Development and Public Transport/Infrastructure Planning • Joined up thinking – an integrated and comprehensive approach • Potential to maximise returns to all parties • Ample evidence that good transport networks enhance property values • Lifestyle, convenience and environmental benefits • Significantly reduced land take for road and other infrastructure provision

29. MTRC Mission To develop and manage a world class railway together with property and other related businesses, to enhance the quality of life in Hong Kong. We are a company that builds and operates railways and designs and builds communities.

30. Facts & Figures • Total route length : 88 km • Total no. of stations : 49 • Daily hours of operation : 19 hours • Total no. of passengers in 2003: 842M Average daily patronage : 2.3M (with a record high of 3.1M onChristmas Eve 2002)

31. MTRC Portfolio by Railway Lines Urban Lines 234,898 sq m 299,363 sq m 31,366 flats Development Total GFA:2.6 million sq. m. Management 28,729 flats 126,490 sq m 130,367 sq m Airport Railway 611,968 sq m 307,880 sq m 28,896 flats 294,072 sq m Development Total GFA:3.5 million sq. m. Management 254,190 sq m 46,170 sq m 13,345 flats Legend Office Retail Residential Hotel/Service Apt Tseung Kwan O Line Total GFA:2.3 million sq. m. Development 103,130 sq m 132,014 sq m 28,800 flats

32. Kowloon Airport Station - MTRC

33. Thank You!

34. Professional Property Services Limited