US Taxation of Foreign Shareholders in US REITs Supplemental Materials

Table of Contents

• Excerpt from October 31, 2008 Joint Committee on Taxation Estimates of Federal Tax Expenditures: Taxation of Real Property Gains of Foreign Persons • Level of Foreign Investment in US Real Property • Illustrative Examples of Current FIRPTA Treatment and Proposed Reforms • Introduction • Observations • Examples • Major Foreign Investors in US Real Estate 2

Excerpt from October 31, 2008 Joint Committee on Taxation Estimates of Federal Tax Expenditures: Taxation of Real Property Gains of Foreign Persons

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Comments

• In October, 2008 the JCT estimated that FIRPTA in its entirety would raise only $300M in federal tax revenues between 2008 and 2012, or approximately $60M per year • FIRPTA is considered a “negative tax expenditure” because it increases the tax burden above what the general tax rules would impose • In 2004, the JCT estimated the revenue effects of providing ordinary dividend treatment for REIT capital gain distributions to 5% or less public shareholders at $140 million from 2004-2015, with the highest annual estimated cost at $23M in lost revenue in 2014 7

Level of Foreign Investment in US Real Property

The following is a summary of facts and statistics, prepared by UBS for Westfield’s internal use, concerning current and potential additional foreign investment in US real estate if impediments such as FIRPTA were removed. The source documents for these figures are referenced and can be provided upon request.

• Total market and equity capitalization of global real estate companies: – Estimate of total global high quality commercial RE is ~$19.2 trillion (of which the US has $5.9 trillion or 30.6%), and global listed RE is $1.1 trillion (of which US is $363bn or 32.8%), which represents ~6% of total global RE (based on "Global Real Estate Analyser," dated November 24th 2009, pg. 76) – ~$577bn in equity market capitalization (i.e., not including debt) for global listed RE excluding emerging markets (of which US has $138bn or 24%), and $758bn including emerging markets (based on UBS research report "UBS GRE Weekly", pg. 6) • Foreign direct investment in real estate: – According to the US Department of Commerce, Bureau of Economic Analysis, foreign direct investment in real estate (on a historical-cost basis) totaled $52bn at the end of 2008 or only 2.3% of all foreign direct US investment and less than 1.0% of total US high quality commercial RE totaling $5.9 trillion (as noted above) 9

• Private equity real estate funds available to invest: – Global private equity dry power of $143 billion with $78 billion available for investment in the US as of December 31, 2008 (based on Preqin research report) • Sovereign Wealth Funds: – Currently, there are 51 SWFs with a combined asset base of $3.05 trillion. SWF assets could grow as high as $11 trillion by 2013 (based on E&Y research, pg. 16) – 73% of SWFs invest in real estate (based on 2009 Preqin research, pg. 4) – As of July 2008, SWFs invest between 4 - 11% of their investment portfolios in real estate and this is expected to grow to 15% in the future (based on DEGI research, pg. 4 - 6) 10

Illustrative Examples of Current FIRPTA Treatment and Proposed Reforms

Introduction

• The following charts illustrate how foreign investors in US REITs are taxed in various typical ownership scenarios, both under current law and if proposed FIRPTA reforms are adopted • REITs distribute 100 percent of their income to shareholders every year, and shareholders are taxed on those distributions - including foreign shareholders, who are taxed through US withholding on distributions 12

Observations

• Current law results in different results, subjecting foreign shareholders in US REITs to significant shifts in US tax rates based on infinitesimal differences in such shareholders’ ownership, infinitesimal differences in other shareholders’ ownership, and whether the REIT is public or private – These troubling distinctions result from a complex regime that has been amended a dozen times, creating a patchwork of consequences that produce different results for substantially similar transactions • The proposed reforms are designed to create a rational, uniform, consistent and predictable system for the taxation of foreign shareholders in US REITs, stimulating critically needed foreign investment in US real property in order to avert the looming crisis in US commercial real estate 13

Example 1: 4.9% vs. 5.1% Foreign Shareholder in a Publicly Traded REIT Foreign Shareholder A Foreign Shareholder B Other Foreign Shareholders US Shareholders 4.9% 5.1% 40.1% US REIT (Publicly Traded) 49.9% Why should Foreign Shareholder B, owning only a 0.2% greater interest in the REIT than Foreign Shareholder A, be subjected to a higher tax on the sale of stock and a potentially lower tax on the receipt of capital gain distributions?

Sale of Stock Sale of Asset / Capital Gain Distribution Foreign Individual Shareholder A 0% 30% (or reduced treaty rate)

Current Taxation

Foreign Individual Shareholder B & Other Foreign Shareholders 15%* 15%** US Individual Shareholder

Proposed Reform

Foreign Individual Shareholder A Foreign Individual Shareholder B & Other Foreign Shareholders 15% 15% 0% 30% (or reduced treaty rate) 0% 30% (or reduced treaty rate) US Individual Shareholder 15% 15% Ordinary Dividend 30% (or reduced treaty rate) 30% (or reduced treaty rate) Graduated rates * Filing a US tax return is required. Withholding is 10% of gross sale proceeds.

** Filing a US tax return is required. Withholding is at 35%.

30% (or reduced treaty rate) 30% (or reduced treaty rate) Graduated rates 14

Example 2: Foreign Shareholder With a Less Than 5% Interest in a Domestically Controlled Private REIT Foreign Shareholders (each <5%) US Shareholders 49.9% 50.1% Compare to 30% tax in Example 4. Compare to 15% tax in Example 3. US REIT (Private) Sale of Stock Foreign Individual

Current Taxation

US Individual Shareholder Shareholder 0% 15%

Proposed Reform

Foreign Individual Shareholder US Individual Shareholder 0% 15% Sale of Asset / Capital Gain Distribution 15%* Ordinary Dividend 30% (or reduced treaty rate) * Filing a US tax return is required. Withholding is at 35%.

15% Graduated rates 30% (or reduced treaty rate) 30% (or reduced treaty rate) 15% Graduated rates 15

Example 3: Foreign Shareholder With a Less Than 5% Interest in a Foreign Controlled Private REIT For a sale of stock, why should some foreign shareholders enjoy a 0% tax (as in Examples 2 and 4) and other foreign shareholders whose percentage interest in the REIT is

identical

pay a 15% US tax simply because of an aggregate 0.2% shift from US shareholders to other foreign shareholders, a change completely beyond the control of the foreign shareholder, or because the REIT is public rather than private?

Foreign Shareholders (each <5%) 50.1% US Shareholders US REIT (Private) 49.9% Sale of Stock

Current Taxation

Foreign Individual Shareholder US Individual Shareholder 15%* 15%

Proposed Reform

Foreign Individual Shareholder US Individual Shareholder 0% 15% Sale of Asset / Capital Gain Distribution 15%** 15% Ordinary Dividend 30% (or reduced treaty rate) Graduated rates * Filing a US tax return is required. Withholding is 10% of gross sale proceeds.

** Filing a US tax return is required. Withholding is at 35%.

30% (or reduced treaty rate) 30% (or reduced treaty rate) 15% Graduated rates 16

Example 4: Foreign Shareholder With a Less Than 5% Interest in a Foreign Controlled Publicly Traded REIT Why should some foreign shareholders enjoy a 0% tax and other foreign shareholders whose percentage interest in the REIT is

identical

pay a 15% US tax on the sale of stock (as in Example 3) simply because the REIT is publicly traded rather than private?

Foreign Shareholders (each <5%) 50.1% US Shareholders US REIT (Publicly Traded) 49.9% Why should a foreign shareholder whose percentage ownership is

identical

to the ownership in Examples 2 and 3 be subject to a 100% higher tax simply because the REIT is publicly traded rather than private?

Sale of Stock

Current Taxation

Foreign Individual Shareholder US Individual Shareholder 0% 15%

Proposed Reform

Foreign Individual Shareholder US Individual Shareholder 0% 15% Sale of Asset / Capital Gain Distribution 30% (or reduced treaty rate) Ordinary Dividend 30% (or reduced treaty rate) 15% Graduated rates 30% (or reduced treaty rate) 30% (or reduced treaty rate) 15% Graduated rates 17

Example 5: Australian LAPT/ UK Pooled Investment Vehicle Ownership vs. Direct Ownership Australian / UK Public (each <5% unitholder) Australian / UK Unitholder Australian / UK Public (each <5% unitholder) 80% 20% Australian LAPT/ UK Pooled Investment Vehicle (Publicly Traded) <100% Why should different tax treatment apply to an indirect investment in a US REIT, where the investment is made through a vehicle US tax treaties recognize as being the equivalent of direct ownership?* US REIT US REIT (Publicly Traded)

Current Taxation Proposed Reform

Sale of Stock Sale of Asset / Capital Gain Distribution Ownership through Australian LAPT / UK Pooled Investment Vehicle 35% 35% Direct Ownership by Australian / UK Investors 0% 15% Ownership through Australian LAPT / UK Pooled Investment Vehicle 0% 15% Direct Ownership by Australian / UK Ordinary Dividend 15%** 15% 15%** * “The tax benefits [of investing in an LAPT] are intended to replicate the tax treatment of direct investment by these unitholders.” Dept. of the Treasury Technical Explanation of the Protocol between the Government of the U.S. and the Government of Australia, Sept. 27, 2001.

** With respect to 20% of REIT dividends, 30% withholding will apply due to the 20% unitholder in the LAPT.

Investors 0% 15% 15% 18

Example 6: Sovereign Wealth Funds (“SWFs”) with Controlling and Non-Controlling Interests in US REIT SWF A SWF B 49.9% 50.1% US REIT (Private) Sale of Stock SWF A 0% Sale of Asset / Capital Gain Distribution 35%*

Current Taxation

SWF B 35% 35%* SWF A 0% 0%

Proposed Reform

SWF B 0% 30% (or reduced treaty rate) 30% (or reduced treaty rate) Ordinary Dividend 0% 30% (or reduced treaty rate) 0% Liquidating Distribution 35%* 35%* 0% 30%** (or reduced treaty rate) * Per Notice 2007-55; SWFs do not pay this 35% tax because they sell their REIT stock before the REIT sells any real property or liquidates.

** Only to the extent of gain under section 331.

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Example 7: Sovereign Wealth Funds (“SWFs”) with Non-Controlling Interests in US REIT SWF A SWF B Other Shareholders 48% 2% 48% US REIT (Private) Sale of Stock Sale of Asset / Capital Gain Distribution Ordinary Dividend Liquidating Distribution SWF A 0% 35%* 0% 35%*

Current Taxation

SWF B 0% 35%* 0% 35%* SWF A 0% 0% 0% 0%

Proposed Reform

SWF B 0% 0% 0% 0% * Per Notice 2007-55; SWFs do not pay this 35% tax because they sell their REIT stock before the REIT sells any real property or liquidates.

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Example 8: SWF with 99.9% Interest in US REIT SWF 99.9% 100 Shareholders 0.1% US REIT (Private) Sale of Stock Sale of Asset / Capital Gain Distribution Ordinary Dividend Liquidating Distribution SWF 35% 35%* 30% (or reduced treaty rate) 35%*

Current Taxation Proposed Reform

SWF B 0% 30% (or reduced treaty rate) 30% (or reduced treaty rate) 30%** (or reduced treaty rate) * Per Notice 2007-55; SWFs do not pay this 35% tax because they sell their REIT stock before the REIT sells any real property or liquidates.

** Only to the extent of gain under section 331.

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Major Foreign Investors in US Real Estate

The following list of current and potential foreign investors was put together from AFIRE's (Association of Foreign Investors in Real Estate) membership list.

Company

Acacia Investments B.S.C.

ADIA AEW Europe AION Partners Al Fardan Group Alecta Real Estate Investment, LLC APG Asset Management US, Inc.

Arcapita ATP Real Estate Blue Sky Group Bouwfonds Real Estate Investment Management BPF Bouwinvest Breevast N.V.

Brookfield Asset Management BVT Institutional Investments, Inc.

Capital & Counties Capital Guidance Corporation CDP Capital, Groupe Immobilier Commerz Real Spezialfondsges, mbH Cordares Real Estate CPP Investment Board Credit Suisse Asset Management DEGI GmbH DEKA Immobilien GmbH DekaBank Deutsche Girozentrale Doctors Pension Funds Services B.V.

Doran Capital Partners Dorsay Development Corporation Dubai Investment Group - Real Estate E.ON AG Fortis Investments Gazit-Group LTD GIC Real Estate, Inc.

GLL Real Estate Partners Grosvenor Hamburg Trust Grundvermogen und Anlage GmbH Hannover Leasing GmbH & Co. KG Hongkong Land Hypo Real Estate Capital Corp.

Country

Bahrain Abu Dhabi France United Kingdom Dubai Sweden The Netherlands Bahrain Denmark The Netherlands The Netherlands The Netherlands The Netherlands Canada Germany United Kingdom Switzerland Canada Germany The Netherlands Canada Switzerland Germany Germany Germany The Netherlands Korea Canada Dubai Germany Belgium Israel Singapore Germany United Kingdom Germany Germany Hong Kong Germany

Company

IMMOFINANZ AG ING Real Estate IVG Institutional Funds GmbH JAMESTOWN US-Immobilien GmbH Kan Am International KGAL Group Landmark Developments La Salle Investment Management Louis Dreyfus Property Group Macquarie Capital (USA), Inc.

Metzler North America MIRVAC Mitsui Fudosan America, Inc.

New City Corporation Orchard Funds Management Oxford Properties Group Pacific Star Fund Mangement Pte Ltd Paramount Group, Inc.

PB Capital Corporation PGGM Pioneer Capital Management, LTD.

Prudential Property Investment Managers Redevco Europe Services, BV Rockefeller Group Investment Management RREEF Investment GmbH SCI-ROEV Partnership SEB Investment GmbH SNSPF International Standard Life Investments Syntrus Achmea Real Estate The IBUS Company UBS Global Asset Management, Global Real Estate Union Investment Real Estate GmbH Valartis Asset Management SA Wafra Investment Advisory Group Wealth Capital Management, Inc.

Westfield Corporation, Inc.

Westplan Investors, Inc.

Country

Austria The Netherlands Germany Germany Germany Germany United Kingdom United Kingdom France Australia Germany Australia Japan Japan Australia Canada Singapore Germany Germany The Netherlands United Kingdom United Kingdom The Netherlands Japan Germany Italy Germany The Netherlands Scotland The Netherlands The Netherlands Switzerland Germany Switzerland Kuwait Germany Australia The Netherlands 23

U.S. Treasury Department Circular 230 Notice

787380

To ensure compliance with Treasury Department regulations, we advise you that, unless otherwise expressly indicated, any federal income tax advice contained in this presentation was not intended or written to be used, and cannot be used, for the purpose of avoiding tax-related penalties under the Internal Revenue Code or promoting, marketing or recommending to another party any tax-related matters addressed herein

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