GRG - Real Estate Finance 06 May 2009 Global Restructuran Group Real Estate During the past 18 months the global real estate markets have been severely impacted by reductions in debt liquidity, outward movements in properly yields and increasing concerns on tenant failures and rising vacancy rates as global economies fall into recession. This has led to severe 30740 per cent falls in the capital values of commercial real estate in most major markets with predictions that values could ultimately fall 3560 per cent peak to trough in most countries. There is also substantial dislocation in residential development and investment markets in most major countries. RBS has significant but separately managed real estate finance operations in RBS UK. GBM. Citizens and Ulster Bank with a total publicised group exposure of approx GBPQO billion in commercial real estate finance. The scale of dislocation and restructuring activity in real estate markets has required Global Restructuring Group to form a dedicated team to tackle these issues across the world. This team will be led by -- (Head of Real Estate 7 GRG) and will initially be established by transferring a number of senior and experienced GBM REF individuals and the entire GBM REF Portfolio Management function into Global Restructuring Group. This team will continue to manage, from within GRG, the entire GBM REF portfolio including the fit and healthy components alongside any watch cases. This provides GRG with a global real estate infrastructure, comprising a specialist workforce of circa 120 people in 10 countries across US, Europe and Asia (including Japan and China where GRG is currently not present) and a restructuring and portfolio management capability in eight different languages. The team will include members of the existing GRG Property Management Unit in the UK. The GRG RE team has a good understanding of real estate markets and the investor community worldwide and extensive experience of both debt and equity markets. The team includes principal skills e.g. lease and management contract negotiation. Opcol Propco splits. and has experience across a wide range of sectors including offices. retail. industrials. pubs. hotels, nursing homes, car dealerships and hospitals. GRG RE will encompass activities from initial restructuring through to organising and managing the West Register buyrin infrastructure in real estate. Market demands in many of our major markets will require us to strengthen this infrastructure and the level of resourcing available to support the buyrin activity. The GRG Real Estate team will initially focus on real estate exposures arising out of the GBM. RBS UK and ABN AMRO books. GRG will seek to combine the best of both a global and a local approach to working out our stressed real estate exposure as. 1. Many real estate exposures are linked globally and how we manage an exposure in one country can have consequential effects in others. . 2. Many real estate client relationships are global or pan several countries and. where appropriate. we need to use our global relationship power and influence with these clients to maximise our position in managing these work outs locally. 3. Our local real estate teams in each country are. in some cases. relatively small and may lack certain experience so levering in more senior real estate expertise from outside country often adds considerable value. 4. When buying in assets we may. in Europe for example. create Paanuropean structures that broaden exit possibilities e.g. a Paanuropean logistics fund would be more marketable to investors than a one. 5. Real estate trends ultimately travel globally but with tags in time 7 thus a global view can often anticipate problems ahead of a country view. 6. We will need to create consistency across the buyrin process and consequent reporting and management of these portfolios. 7. GRG RE retain the responsibility to produce global portfolio, data and RWA usage reports back to GBM. It is intended that GRG Real Estate will usually take responsibility for managing GRG exposures where the primary risk is real estate. Where our risk is more operating businessrled or where there are particularly unusual or complex corporate issues, these will continue to be managed by the GRG Corporate Restructuring Unit (CRU) in each country with the GRG Real Estate team in support. The existence of a specialist real estate team within GRG provides an added capability for CRU to assess financing and restructuring alternatives for operating businesses which either own or lease their real estate and we hope to exploit this advantage. The general rule is that we are seeking to field the most appropriate team for the job and. in order to facilitate the building of close working relationships and good team work at local level. GRG Real Estate will appoint a local Coordinator at both regional and country level who. alongside their GRG RE reporting line, will have a joint reporting line to the local GRG Head. These Coordinators, who are detailed in the attached appendix, will have the responsibility of ensuring connectivity at local level and will involve and keep the local GRG head informed of material issues affecting the local business. Within the UK. the Business Restructuring Group (BRG) will continue to manage real estate exposures where the aggregate exposure is less than although GRG Real Estate will continue to offer advice and guidance on those exposures where required. GRG Real Estate will also work closely with the GRG Recoveries and Litigation team where real estate exposures involve or enter a formal insolvency process. -- will report directly to me. The following individuals will have a direct reporting line to Stephen. - Head of UK Restructuring.-- - Head of European/ Nordic Restructuring - Head of UK, European and Asia Portfolio Managemen - Head oi US- -- - Head of Australia -- . Head 0' UK Asset Recovery: -- - Head of Strategic Portfolio Managemenl and Reioning.-- - Head of Business Management: look forward to working wilh lhis learn going forward and would ask lhal you join me in wishing them every success in their new roles REF Flowchan Derek Sach Head, Global Restructuring Group Appendlx a Ilsl 0! GRG RE local Coordlnalors Reglon/ Counlry US Europe (Reglonal level) France German llaly Spaln Sweden] Flnlandl Asia (Reglonal level) Auslralla GRG RE Coordlnalor .loml GRG reporlln Ilne lo offices Chlna, Japan and lngapore