DIC Asset AG: Letter to the Shareholders

Letter to the Shareholders

– FFO forecast for 2011 confirmed: EUR 40 to 42 million

– Vacancy rate significantly reduced

– Another office property acquired for EUR 22 million

Dear Shareholders,

With the new year just started, it is our pleasure to brief you on the main transactions completed before the end of the year as well as on the preliminary figures from the operating activities that are now available for the 2011 reporting year of DIC Asset AG (German Securities ID 509840/ ISIN DE0005098404).

Retrospective: The year 2011 stood under the sign of a stabilising recovery of real estate markets. DIC Asset AG benefited from the development on the basis of the significantly smaller portfolio volume, achieving, and to some extent exceeding, the objectives set for the operative real estate business.

The letting result of DIC Asset AG added up to around 245,000 sqm in 2011, nearly matching the previous year's level taking into account the significant portfolio reduction (2010: 256,600 sqm). Our activities focused on new rentals which, at roughly 120,000 sqm, equalled a year-on-year increase by 16 per cent (2010: 103,200 sqm). Given the lower number of expiring leases, follow-up rentals remained on a high level in 2011 at around 125,000 sqm (2010: 153,400 sqm). The strong re-letting result and the increase in new rentals translated into a significant reduction of the vacancy rate well below 13 per cent (2010: 14.3 per cent); this is a substantial improvement, as one percentage point was expected in 2011. A preliminary estimate suggests that the like-for-like rental income rose by around 1.5 per cent in 2011. After an extra 0.5 per cent in 2010, we can report a significant advancement here as elsewhere.

The crowning achievement of 2011 is the major letting contract over roughly 14,000 sqm at MainTor Quarter to Union Investment which enabled us to realise the MainTor Porta sub-project faster than expected. On 10 January 2011, we already briefed you in depth on the high forward commitment rate of 70 per cent at this property. The financing by the consortium headed by Deutsche Hypothekenbank ('Deutsche Hypo') is in place now.

This means that, with the MainTor Primus asset already sold, the construction for the two commercial sub-projects, which complement each other in planning and structural terms, will start within six months of each other, and the northern end of the compound facing the inner city will be the first to be completed in the coming two years. Accordingly, two out of the up to six sub-projects will be in the realisation stage as early as the beginning of 2012, representing roughly one third of the commercial project volume. The demolition work is progressing according to plan and within the projected budget, as does the development of the MainTor Primus sub-project now underway.

Acquisitions: In order to put our continued growth path on sound footing, we strengthened our capital basis by way of a capital increase and a corporate bond in 2011. This enabled us to acquire real estate in a volume of approximately EUR 300 million, achieving the upper end of our planning bracket (EUR 200-300 million). The transfer of legal titles for the two transactions in September were effected as planned during Q4 of the year concluded: in the case of Marktforum Duisburg for EUR 16 million as at 30 November 2011, and in the case of the two office properties in Karlsruhe and Leipzig for the 'DIC Office Balance I' real estate fund for EUR 62 million as at 31 December 2011.

As late as December 2011, we acquired an office property at Frankfurt Airport for approximately EUR 22 million, and it is planned to transfer the title in the course of Q1 2012. The recently completed property has a lettable area of around 11,500 sqm, an average lease term of seven years at the moment, and will generate EUR 1.6 million in annual rental income.

The real estate acquisitions of the previous year will increase the portfolio volume of DIC Asset by a pro-rata amount of approximately EUR 250 million, and contribute a total of approximately EUR 8.5 million annually to the FFO. This lays a solid foundation for another robust and stable FFO result in 2012.

With a view to the portfolio growth planned for 2012, we had contemplated a lower disposal volume in 2011. The transaction volume added up to approximately EUR 72 million in 2011 (2010: EUR 132 million). In addition, the MainTor Primus sub-project was sold before construction had even started. As in previous years, we continued the effort to optimise our portfolio structure in 2011 by disposing of 24 predominantly small properties. All things considered, the real estate portfolio of DIC Assets grew by approximately EUR 200 million after acquisitions and disposals, and now totals approximately EUR 2.2 billion.

Financing: The maturity structure of the financial debt with its average of around 3.5 years was consolidated further through planned and signed refinancing deals in the year concluded. The largest refinancing deal involved two office properties worth approximately EUR 55 million, and was signed as planned during Q4 2011. It had a volume of approximately EUR 37 million and a term of 5 years. The interest expenses undercut previous financings by around 120 basis points, and at less than 4% remained far below the average interest rate of around 4.45% across the entire financial debt. The interest expenses have also dropped for another two prolongations signed for two office properties, totalling approximately EUR 33 million.

On top of that, we arranged for fresh financing over a total amount of more than EUR 200 million for the acquisitions undertaken by DIC Asset and for the 'DIC Office Balance I' real estate fund, and for the MainTor Porta development. This, too, documents the acceptance of our business model among our banking partners, and our financial performance. The funds called down for the acquisition of DIC Asset have an average maturity of more than 9 years, with average interest expenses roughly matching the previous level. This, also, will have a positive influence on our financing structure. In 2012, a total of only approximately EUR 160 million in short-term financial debt will come up for renewal, specifically breaking down into three distinct and independent financing arrangements.

We are rather delighted with these preliminary figures from operating activities that remain fully within the framework of our plans dating back to early 2011. At this time, we assume that the FFO results for 2011 will range in the forecast bracket of EUR 40 to 42 million, as predicted. On 13 March 2012, we will publish the full-length annual results for 2011 with a detailed outlook for the ongoing year.

Kind regards,

Ulrich Höller (CEO) Markus Koch (CFO)

P.S: For more details on DIC Asset AG, please visit us on the Internet at www.dic-asset.de.