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DES - Online Annual Report 2008

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Management control, objectives and strategy

We focus on investment in top-quality shopping centers in city centers and established locations that have the potential for stable, lasting value growth and generate substantial distributable free cash flows on an ongoing basis. We invest in shopping center project developments in their early stages with up to 10% of our equity as part of joint ventures.

Clear objectives and principles

Deutsche EuroShop’s two primary investment objectives are to generate high surplus liquidity from long-term leases that can be distributed to shareholders in the form of annual dividends, and to achieve sustained growth in the value of its portfolio. To achieve these objectives, the Company diversifies risk by investing in shopping centers in a number of European regions, with the focus on Germany. The desired high return is achieved through indexed and turnover-based commercial rents.

High-yield portfolio with stable value

Deutsche EuroShop has a well-balanced, diversified portfolio of German and European shopping centers. We concentrate investment on properties in premier locations that are expected to generate a high yield and maintain their value in the long term, so as to guarantee a high level of investment security.

Making the most of opportunities, maximising value

In line with our buy & hold strategy, we consistently place more value on the quality and yield of our shopping centers than on the rate of growth of our portfolio. We monitor the market continuously and are able to act as buyers when an opportunity arises. Short decision-making channels and considerable flexibility in terms of potential investment and financing structures enable us to adapt to any competitive situation. At the same time, we are committed to optimising the value of the existing properties in our portfolio.

Differentiated rental system

An important component of our leasing concept is a differentiated rental system. While individual owners in city centres are often concerned with achieving the highest possible rents for their property (thus resulting in a monostructured retail offering), we ensure an attractive sector mix and long-term optimisation of our rental income through combined costing. The rent our lessees pay is dependent on their sector and turnover. Indexed minimum rents (based on the consumer price index) provide a guaranteed minimum level of income for Deutsche EuroShop in economic slowdowns.

The concept of shopping as an experience

We have outsourced center management to an experienced external partner, the Hamburg-based ECE Projektmanagement GmbH & Co. KG. ECE has been developing, planning, implementing, leasing and managing shopping centers since 1965. With currently 112 shopping galleries under management, the company is the European market leader in this segment. We consider professional center management to be the key to the success of a shopping center. It not only ensures uniform opening hours and a consistently friendly, bright, safe and clean shopping atmosphere, it makes shopping an experience with in some cases striking presentations of merchandise, promotions and exhibitions. The 350,000 to 500,000 people who visit our 16 shopping centers on average every day are fascinated by the variety of sectors represented, but also by our unusual, unconventional promotions such as “Desert Fascination” or “Roncalli”. These turn shopping centers into marketplaces where something new and spectacular is constantly on offer.

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