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Alpha Real Estate Investments
German Property Newsletter
July 2007
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Welcome to the July edition of our German property newsletter.

Despite a few negative comments by British financial press
German growth positively surprises world's economists once
again. You can read this and more in our monthly news roundup.
In today's special feature we will look at the top performer
among east German states - Saxony, with its world famous
capital Dresden and second city Leipzig.

And, in case you've missed our recent newsletter issues,
they are available for you here:

In this issue you will find:

1. German Economy Surprises Again
2. Saxony - East German Dynamo
3. Hidden Gems in Untapped Markets
4. Tell Us What You Think!

===================== FEATURE EDITORIAL =================

1) German Economy Surprises Again

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With huge losses on the London stock markets this month we
have seen some very creative reporting on German economy.
While world's economists have praised Germany and upped
the country's growth forecasts for 2007, we have seen
some of the British financial press reporting as negatively
as possible. So to begin with, in this section of our
newsletter we're going to dispel some derisions.

First up is the fantastic news that GDP forecasts for 2007
are up dramatically this month. Yet, oddly, this tremendous
50% increase in the estimate for the year has been seen
by certain media as an indication of an economic slowdown!

Now let’s not forget that 2007 GDP growth forecasts for
Germany stood in January at only 1.7%. Today most analysts
expect the figures to come in at 2.6%, almost rivaling last
year's fantastic growth of 2.8%. So why have some British
sources called this a plateauing of growth... possibly trying
to steer capital away from foreign markets and bolster the
flagging London exchanges (400 points down in July so far)?

Judge for yourself:

The International Monetary Fund (IMF) announced Germany
to be one of the countries with the highest increase in
economic growth prospects. Compared to April, IMF has
increased its forecast for German GDP growth by 0.8%,
to a strong 2.6%.

German economists also also joining in the euphory and
seeing the economy in far more positive terms at last.
German Institute of Economic Research (DIW) is now
predicting a 2.6% GDP growth in 2007 (up from earlier
estimate of 1.7%) and a similarly strong 2.5% increase
in 2008. DIW sees domestic consumption as increasingly
strong factor in German growth, as well as forecasting
a further sharp drop in unemployment below the 10% mark,
down to 8.8% in 2007 and 7.9% in 2008.

IfW (Institut fuer Weltwirtschaft) sees the German economy
even more rosy and predicts a spectacular 3.2% growth for
this year. Finally, OECD’s forecast for Germany comes at
excellent 2.9% for 2007.

So, with world’s economists seeing another strong growth
year for Germany, EU’s largest economy looks to become
one of the fastest growing in Western Europe once again.

The positive economic development is having a significant
impact on the labour market, seeing unemployment drop to
8.9% (July 2007), down from 10.5% a year ago. (2007 has
so far seen 671,000 less unemployed than the previous year.)

Let's not forget that at the beginning of this year the
German rate of VAT increased to 19% (from 16%) which
effectively made all German goods 3% more expensive overnight.
This was expected to slow economic growth temporarily. The
VAT was raised in part to fund a scheduled 10% drop in
corporation taxes for the end of the year.

So for this year to come in, unexpectedly, with such a
strong economic growth is certainly not bad news. In fact
the Germans are over the moon with their current economic
position knowing that next year the country is going to be
even more competitive in terms of international business.

Industrial production has also seen a 1.9% increase this
month, despite a record breaking Euro/$ exchange rate.

Meanwhile, GfK (Gesellschaft für Konsumforschung) announced
an increase in its consumer climate index for August from
8.5 to 8.7 points. The traditionally cautious German
consumers are on a spending spree thanks to a favourable
development of the labour market and growing employment,
according to GfK researchers.

Property market news
--------------------

Regardless of what the broad sheets have been saying here
in the UK, the world's major blue chip investors have been
showing no signs that they agree. Most notably we have seen
the eruption of a frenzy after Allianz announced that it
is selling a portfolio worth nearly four billion euros of
German real estate. This is currently being marketed by
Rothschild and firms like Goldman Sachs, Morgan Stanley
and Tishman Speyer are among those vying to acquire the
$4.8 billion portfolio.

And this is not an isolated deal...

Develica Deutschland announced that it had added a portfolio
worth 270 million euros to its 1+ billion euros worth of
current holdings.

A property fund of Deutsche Bank in conjunction with italian
investor Pirelli Re have acquired the property holding
company BauBeCon (Berlin, Hannover and Kiel flats) from
Cerberus. The buyers have announced plans of renovation and
redevelopment of the portfolio.

DIC Asset AG has bought commercial real estate worth 155
million euros.

Gagfah SA moved on a portfolio of residential property in
Berlin (1,700 apartments) worth 90 million euros.

Quinlan Private acquired 50% of a 60 million euro office
and hotel complex in Frankfurt.

The Ascott Group signed a sale and purchase agreement with
GBI Gesellschaft für Beteiligungen und Immobilien-Projektwicklung
to develop and sell a 146 unit serviced residence property
in Munich for of 21.78 million euros.

Overall total transaction in German property came to a
massive 26.4 billion euros in the first six months of this
year, a whopping 34% up on the same six months last year.
72% of this came from foreign sources who obviously agree
with us that the market is showing a potentially explosive
value.

So to get involved with this market for the first time or
to develop your exposure to some of the exciting German
opportunities, don’t hold back and contact us today!

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2) Saxony - East German Dynamo

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Up until recently all investors' eyes have been on Berlin.
However, Germany is a big place and apart from the capital
several other areas are appearing as potential lucrative
investment destinations. After many months of research it
is Sachsen (Saxony) that, in our view, is ticking all the
right boxes.

Saxony, and in particular its capital Dresden and second
city Leipzig, is a true economic dynamo among the east
German states.

Several hundred miles south of Berlin and benefiting from
very similar conditions, Dresden's (and in the longer term
Leipzig's) property market should be poised for a very
lucrative future.

Leipzig

The second city of Saxony has benefited greatly over the
course of the last 5 years. With many manufacturing and
industrial based businesses basing themselves in the area,
Leipzig has seen good economic migration and along with
Dresden and Berlin is one of the few cities in Germany to
have a growing population.

Recently firms such as BMW, Amazon and Porsche have moved
manufacturing and distribution centres to Leipzig. The city
boast Germany’s second largest rail hub (after Berlin) and
along with Dresden sits almost in the centre point of Europe.

There are certainly opportunities in Leipzig, but investors
have to be careful of where to buy (more so than normal)
with still very high levels of vacancies in particular in
less sought-after locations and across unrenovated or lower
standard properties. Leipzig's tenants are selective and
demand higher quality, and investors should focus on fully
renovated buildings with modern layouts, balconies (where
possible) and good to very good locations.

Dresden

The capital of the federal state of Saxony and economic,
cultural and tourist centre of the region, Dresden is
benefiting from the same factors as Leipzig but with a
decidedly different twist. Dresden is now seen as the silicon
valley of Germany after having attracted numerous high tech
and innovative businesses. AMD, GlaxoSmithKline, ABB,
Infineon Technologies, Alstom and many more have made
Dresden their base of operations for Germany and Central
Europe.

Unlike Leipzig its not only raw business conditions that
have attracted these companies into the area. With its
nearly Mediterranean climate, centuries old history and
high quality (yet low cost) of living Dresden is rated as
being one of the best places to live in Germany. Importantly
for incoming investors, Dresden also offers a highly skilled
population, in particular thanks to its renowned University
of Technology with nearly 40,000 students.

This of course combined with the rapid influx of highly
paid jobs has led to a rapid increase in the population
(apx 10% in last 5 years) that is expected to continue
until 2030.

So with prices significantly below the construction costs
we have the same situation as seen in Berlin, with ever
increasing demand and no new supply. This has been exacerbated
by the ongoing demolition of the communist panel blocks
(Plattenbau), and should be a good recipe for a strong price
appreciation.

Even though there has been little margin for the residential
developers in recent years, commercial construction is
booming with the increasingly wealthier Dresdners demanding
new shopping centers, hotels, business parks and leisure
facilities.

Financially the governance of Dresden is in a very
advantageous and unique situation for Germany. Dresden sold
much of its social housing to Fortress in 2004, completely
freeing itself of all debt. This has led Dresden to have
greater flexibility to improve the city without having to
meet interest payments etc. That of course can only be of
benefit to the prosperity of the city, which in turn is an
ideal backdrop to a strong property market.

Fortress hasn’t been alone in their drive into Dresden’s
property market. Other large into investors in Dresden are:
Conwert Immobilien AG (from Vienna), Patrizia Immobilien AG,
TLG Immobilien (both German),fund manager Inovalis (France),
Mitco Estate (global investment firm), and many more.

So while the Dresden market is relatively untapped and hence
offering unrivalled opportunities at present, the early
investors are already starting to take advantage of these
favourable conditions. Billions of euros of investment
capital are now pouring into this exciting city.

All in all, the outlook for Dresden is very positive for
the next decade. This we feel should reflect very well on
a property market that is displaying tremendous value and
capital growth potential, paired with stronger yields than
those found in Berlin and other German cities.

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3) Hidden Gems in Untapped Markets

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After thorough research and assessment of numerous property
deals in Saxony's main cities, we will soon be launching
a range of exceptional investment opportunities in what
has been fast developing into East Germany's top performing
region.

Apartments in highest quality buildings and most sought-
after locations, benefiting from rock-bottom prices and
high yields will be offered exclusively to our clients
in the coming weeks.

To register your interest and receive a full information
pack email us at info@alphare.net.

A range of high quality apartment blocks and commercial
properties from 350k GBP to 300 million are also on offer
in main German cities. Please email us your requirements
or visit http://germany.alphare.net/ for further details.
We will be happy to assist you in taking advantage of this
exciting and lucrative market.

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4) Tell Us What You Think!

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We would love to hear what you think of this issue of our
newsletter. We hope you find the information useful and
wish you best success in your investment activities.
And of course, if you have any suggestions for upcoming
issues that you'd like to share with us, please send them!

Just e-mail us at: contact@alphare.net

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We are looking forward to seeing you next month. In the
meantime, if you have any questions or would like to
request further information, please contact us at
info@alphare.net or at +44 (0)207 851 3570.

Best of success,

Your Team at Alpha Real Estate Investments