ING OFFICE FUND Acquisition of Waltham Woods Corporate Center (50%) - PowerPoint PPT Presentation

ING OFFICE FUND Acquisition of Waltham Woods Corporate Center (50%) & The Homer Building (30%) 28 September 2005 CREATING VALUE PAGE 1

PRESENTATION Speakers � Valentino Tanfara, CEO ING Office Fund � Craig Tagen, US Portfolio Management � Deke Schultze, Asset Management / Acquisitions, Boston � Marc Deluca, Acquisitions, Washington DC CREATING VALUE PAGE 2

THE TRANSACTION Summary 50% interest in “Waltham Woods Corporate Center” – Boston Metro � Additional 30% interest in “The Homer Building” – Washington DC � Average acquisition yield of 7.1% (before costs) � Total acquisition price of US$128m (A$ 170.7m) before costs � Acquired from ING Group – related party transaction � CREATING VALUE PAGE 3

THE TRANSACTION Quantitative benefits DPU 2% from 1 October 05 � EPU 1% in first full year � Introduces Boston to 4% � Washington DC weighting to 16% � US weighting to 31% � CREATING VALUE PAGE 4

THE TRANSACTION Qualitative benefits Attractive acquisition yield in an international context � Solid rental growth underway and forecast to continue � Total return expectations in Boston and Washington DC amongst the highest in the US � Assets amongst the highest quality within their respective markets � Continues strategic expansion into key US markets with sound long term fundamentals � CREATING VALUE PAGE 5

THE TRANSACTION Acquisition funding Source of funds US$ A$* Equity from institutional placement 52.6m 70.2m** US$ borrowings - property level Waltham Woods 39.0m 52.0m - property level Homer Building 40.6m*** 54.1m 132.2m 176.3m Application of funds Property acquisitions 128.0m 170.7m Acquisition costs 2.6m 3.5m Debt retirement 1.6m 2.1m 132.2m 176.3m * A$/US$ spot = 0.75 ** Assumes floor price of A$1.30 per unit *** Includes participation loan estimate of US$14.8m based on 30/06/07 value CREATING VALUE PAGE 6

THE TRANSACTION Property details – Waltham Woods Corporate Center Location: 880, 890 Winter Street, Waltham, Massachusetts Interest: 50% (freehold) Purchase price: US$65.0m (US$332sqf) Year 1 yield: 7.6% Occupancy: 99% Passing rent: US$38sqf (gross) Market rent: US$32sqf (gross) Economic rent: US$40sqf CREATING VALUE PAGE 7

THE TRANSACTION Property details – The Homer Building 601 13 th Street, Washington DC Location: Interest: Additional 30% (leasehold) Ground lease: 99 years Purchase price (30%): US$63.0m ($503sqf) Year 1 yield*: 6.5% Occupancy: 100% Passing rent: US$50sqf (gross) Market rent: US$58sqf (gross) Economic rent: US$75sqf * Guaranteed NOI yield for 3 years from April 2005 CREATING VALUE PAGE 8

THE TRANSACTION Locations Boston New York Washington DC Existing IOF Assets incl. Homer Building Dallas Waltham Woods Corporate Center CREATING VALUE PAGE 9

THE TRANSACTION Focus on largest US markets and gateway cities Size (mill sqf) New York 421 Further expands the Fund into � Washington DC 254 Chicago 216 4 of the largest 6 US office markets Los Angeles 174 Boston 152 Forecast total returns most attractive in Dallas 142 � Houston 136 New York, Washington DC, Los Angeles Atlanta 124 and Boston Philadelphia 101 Total 1,720 CREATING VALUE PAGE 10

WALTHAM WOODS CORPORATE CENTER Waltham Woods Corporate Center Skylight atrium CREATING VALUE PAGE 11

WALTHAM WOODS CORPORATE CENTER Property details Type: Class A � Tenants: 19 office � Average lease expiry 3.9 years � Net rentable area: 391,654 � Layout: Two buildings � Height: 3 storeys � Land area: 36.7 acres � Completion date: 1999 � Parking: 1,308 spaces (201 undercover) � CREATING VALUE PAGE 12

WALTHAM WOODS CORPORATE CENTER The asset Attractive initial yield of 7.6% � Achieves highest market rents in submarket � Waltham Woods is regarded as “one of the premier office parks on the eastern seaboard”* � Diversified base of investment grade tenants � High average historic occupancy of 98% since 2000** � Well located with access to major arterial roads and proximity to downtown Boston � Property and asset management conducted by ING Real Estate since 2000 � Source * Independent Appraisal, ** ING Real Estate CREATING VALUE PAGE 13

WALTHAM WOODS CORPORATE CENTER Major tenants Tenant Leased % of blg. Passing rent Market rent Lease sqf income US$ sqf gross US$ sqf gross expiry BMC Software* 175,584 45% $38 $32sqf Mar-09 Duke Energy 28,341 7% $28 $32sqf Apr-14 Microsoft 21,715 6% $29 $32sqf Jan-10 CMP Media 21,155 5% $39 $32sqf Apr-08 * Subleased to 7 tenants CREATING VALUE PAGE 14

WALTHAM WOODS CORPORATE CENTER Tenant credit – BMC Software One of the world’s leading software solutions providers � Fortune 500 company listed on the NYSE � US $48 billion market capitalisation � Over 6,000 employees worldwide � No public debt � Rated “excellent” by independent credit advisory group* � *Alliance Research CREATING VALUE PAGE 15

WALTHAM WOODS CORPORATE CENTER Comparable sales Address Price (US$) Cap rate US$sqf Date 93 Worcester Street, Wellesley Hills $68.0m 8.6% $252sqf Nov-04 Bay Colony Corporate, Waltham $272.5m 6.6% $281sqf Jan-05 25 Mall Road, Burlington $54.7m 5.6% $198sqf Jul-05 Waltham Woods Corporate Center* $130.0m 7.6% $332sqf Sep-05 * 100% interest CREATING VALUE PAGE 16

BOSTON METRO Summary Major US gateway city � Population of 11 million � Hub of America’s intellectual capital � 152m sqf of office space (5 th largest in US) � Comprised of 12 established submarkets � Route 128 West largest submarket located � Source: CBRE close to Cambridge and downtown Boston CREATING VALUE PAGE 17

BOSTON METRO Economic / employment drivers for Boston Business capital of New England and highly diverse workforce � Unemployment rate of 5.0%, below national average � Healthcare sector accounts for 16% of total employment � Healthcare and Information Services expected to drive job growth over next 5 years � Boston metro job growth expected to average 1.5% over the next 12 months � Strong net absorption of 2.1msqf for Q2 2005 (1.4% of total stock) � CREATING VALUE PAGE 18

ROUTE 128 WEST SUBMARKET Market summary Largest sub-market in Boston metro with 23.7m sqf of office space � Proximity to desirable residential areas and downtown Boston – executive belt � Accessibility of transport access to downtown Boston and major arterial roadways � Net absorption of 1.3m sqf in 2004 equivalent to 5.6% of total stock � Market rents in upturn phase of cycle and experiencing solid growth � CREATING VALUE PAGE 19

ROUTE 128 WEST SUBMARKET Vacancy (all classes) Vacancy under downward pressure � 30% Forecast* 24% at Q4 03 to 16% at Q1 05 25% 20% Minimal new construction forecast � 15% Vacancy forecast to decline further � 10% 5% 0% 0 2 4 6 8 0 2 4 6 8 9 9 9 9 9 0 0 0 0 0 9 9 9 9 9 0 0 0 0 0 1 1 1 1 1 2 2 2 2 2 Source: Cushman & Wakefield, * ING Real Estate CREATING VALUE PAGE 20

ROUTE 128 WEST SUBMARKET Market rents (all classes) Economic rents materially above market rents � Forecast* 40 35 Market well positioned for recovery from low base � 30 25 Strong rental growth currently underway � 20 15 5%** in Q1 2005 for All Classes 10 5 12%** in Q1 2005 for Class A 0 0 2 4 6 8 0 2 4 6 8 9 9 9 9 9 0 0 0 0 0 9 9 9 9 9 0 0 0 0 0 1 1 1 1 1 2 2 2 2 2 Market rents forecast to continue to rise � Source: Cushman & Wakefield, * ING Real Estate ** Absolute increases CREATING VALUE PAGE 21

THE HOMER BUILDING Skylight twelve-storey atrium Facade CREATING VALUE PAGE 22

THE HOMER BUILDING Property details � Type: Class A office � Tenants: 26 office tenancies & 6 retail tenancies � Average lease expiry: 3.3 years � Net rentable area: 418,373sqf � Land area: 0.99 acres � Height: 12 storeys � Average office floor size: 38,000sqf � Parking: 282 undercover CREATING VALUE PAGE 23

THE HOMER BUILDING The asset � One of Washington DC’s finest office buildings � Outstanding location - 3 blocks from the White House and National Mall - situated over Metro Center (major rail commuter hub) - within retail and entertainment precinct � Offers value add / leasing opportunity in short term � Attractive guaranteed initial yield with strong growth prospects CREATING VALUE PAGE 24

THE HOMER BUILDING Comparable sales Address Price (US$) Cap rate US$sqf Date 1111 Pennsylvania Ave $160.0m 5.8% $483sqf Aug-04 1900 K Street $219.5m 5.9% $651sqf Dec-04 1001 Pennsylvania Ave $484.2m 5.4% $627sqf Dec-04 1875 K Street $113.1m 5.5% $603sqf Mar-05 701 13 th Street $220.0m 6.2% $570sqf Jun-05 The Homer Building (100%) $210.0m 6.5%* $503sqf Sep-05 * Guaranteed NOI yield for 3 years CREATING VALUE PAGE 25