CENTURIA CAPITAL GROUP — AGM Information 2019

Nov 13, 2019

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Centuria Capital Group AGM

Thursday, 14 November 2019, 10:00 am Sofitel Sydney Wentworth, Hobart Room, Lobby Level, 61-101 Phillip Street, Sydney

Centuria Capital Group – 2019 Annual General Meeting Chairman and Joint CEO address to securityholders | 1

Chairman’s address: Garry Charny

Good morning ladies and gentlemen.

My name is Garry Charny, and I am the Chairman of Centuria Capital Group. On behalf of our board of directors and senior management, I would like to formally welcome you to our Annual General Meeting for the 2019 financial year.

Let me start by acknowledging the Traditional Custodians of this land on which we meet today, the Gadigal people of the Eora nation, and recognize their continuing connection to land, waters and culture. We pay our respects to their Elders past, present and emerging.

I would like to introduce my fellow directors: Peter Done, John Slater, Susan Wheeldon-Steele, Nicholas Collishaw, John McBain and Jason Huljich.

Centuria and the Board

The Centuria Group is a relatively complex business. At the end of FY19 our business comprised a large property funds management business, itself consisting of two independently listed A-REITs, Centuria Metropolitan REIT and Centuria Industrial REIT, 14 fixed term unlisted funds and one open-ended diversified fund. In addition, we have the operations at Centuria Life, the fourth largest investment bonds operator in Australia.

You may have also recently read about Centuria’s acquisition of a 63% economic interest in Heathley Limited. Now renamed Centuria Heathley, the business is one of Australia’s leading real estate fund managers specializing in healthcare property and currently has over $600 million of funds under management.

I think it is important to note that the majority of our independent directors sit on the APRA regulated Centuria Life board and the Over Fifty Guardian Friendly Society board. All of these boards and their attendant committees and compliance obligations make life very busy for our non-executive directors and the significant achievements achieved this year is testament to their hard work.

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This is a cohesive and focused board. In what is demonstrably a fast-moving environment, the directors all give willingly of themselves, often on short notice and at all hours and I thank them for their dedication and commitment. Given our growth of late, you should not be surprised if we appoint a further independent to our main board and subsidiaries in the near future.

As you would be aware from the Notice of Meeting, there are seven items of business to be discussed when we move into the formal part of the meeting.

Before proceeding to those items, I would like to make some general observations about the last 12 months or so and what lies ahead.

Our Joint CEOs, John McBain and Jason Huljich, will then comment in more specific terms on the company’s business activities and after that I will return to open the formal proceedings.

Year in review

I’m delighted to note that 2019 marked another successful year for Centuria. The Group’s results for the 2019 financial year were pleasing and we have continued to invest in the growth of the business. Centuria continues to evolve as one of Australia’s leading property fund managers. At the end of FY19, Centuria Capital Group’s property funds platform grew 27% to $6.2 billion in assets under management. This consisted of strong contributions from our two listed REITs, CMA and CIP, which both sit well within the S&P/ASX300 index, our strongly performing unlisted real estate division, Centuria Heathley and our Investment Bond division.

Both the board and management have retained a strong focus on distributions as we have continued to execute on the expansion of our platform, assets under management and the scalability of our business.

As Centuria’s platform expands, we are experiencing growing support from domestic and international equity fund managers, evidenced by the recent successful and heavily oversubscribed $100 million equity raising. Centuria’s strong security price appreciation, coupled with consistent distributions, generated a total security return of 34.4% for the FY19 year. As it stands, total securityholder returns in the past five years have averaged over 24% per annum.

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We have continued to see further investor interest and growing market presence with our market capitalization now over $900 million and the recent inclusion of CNI into the S&P/ASX 300 index along-side CMA and CIP.

Management

During the year there have been some important structural changes within the organisation. Jason Huljich was promoted to Joint CEO alongside John McBain. For more than twenty years, John and Jason have built the Centuria platform together. Jason is intrinsically part of the DNA of Centuria and this promotion has been championed not only by the Board but by John himself.

The pair have enjoyed a seamless 23 year working relationship which has added significant value to Centuria securityholders. They are themselves substantial securityholders in the Group and their interests are rigidly aligned with those of all investors. Both executives have indicated to the Board their desire to continue to work closely together to unlock what they believe is Centuria’s significant growth potential.

Ultimately, their shared history of collegiate success not only gave the Board comfort but allowed the company to make sure its next generation of leadership was firmly secured. The Board could not imagine two better stewards to collectively nurture the company in the years ahead and continue its growth and successes for the benefit of all securityholders.

Before concluding on John and Jason, could I briefly cover remuneration generally and in particular that of the joint CEO’s.

In terms of our structure with joint CEO’s, it is worth noting that Centuria operates a lean and efficient management structure. There is no Chief Operating Officer nor Chief Investment Officer for example. Those tasks are shared amongst the senior management. When considering appropriate remuneration, the REM Committee is cognizant not only of the high hurdles we have in place but also the tasks being asked to be undertaken in the roles together with a real comparison against peer set.

To give some context on the hurdles, most of you, as engaged shareholders, would be aware that CNI’s market capitalization has grown from approximately $80m at FY16 to approximately more than $900m

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today. Further, Centuria’ s total securityholder return (TSR) over the last five years has exceeded 20% with FY19 generating c.34% TSR.

That TSR is the critical, but not only, measure for the Remuneration Committee when assessing management incentivization. Further, consideration is given to the inherent paradox of showing wage restraint whilst attracting and retaining the best and brightest.

Ultimately, the Board and the Remuneration Committee are careful to balance all expectations in an appropriate and proper fashion – we believe that balance has been achieved. I will say that our future annual reporting will include more detailed information on fixed and incentive remuneration.

Elsewhere, Ross Lees has been promoted from his role as CIP’s Fund Manager to Head of Funds Management, reporting to Jason. Ross has done an exceptional job in actively managing CIP’s performance in recent years. His promotion, consistent with Centuria’s desire to develop talented employees and promote from within the organization wherever possible, is, again, part of future proofing the continued stable growth and operation of your company.

It also gives me great pleasure to welcome the Centuria Heathley family to our Group, in particular the chairman and directors of their associated boards and their CEO Andrew Hemming together with his executive team.

Centuria Heathley is looking forward to establishing compelling investment opportunities for our investors within the healthcare real estate markets as we integrate their knowledge and operating relationships with our own distribution network.

Governance and Community Standards

I would like to take a moment to discuss governance and community standards. The financial services industry appears to be operating in a transformed and transformative regulatory environment. As a collective, we are committed to not only keeping abreast of the evolving requirements within our industry but also adopting best practices to ensure not only compliance with, but adherence to community expectations of Centuria as a responsible and contributing corporate entity.

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That said, I would like to add a personal “post Hayne” observation. There has been a degree of mild hysteria around the new regulatory environment. Some of it is cumbersome and time consuming. There is no doubt it is costly and, ultimately, this may affect shareholder returns.

However, the touchstone for Centuria has not changed and it is a simple one. Do the right thing: by your shareholders, by your investors, by your policy holders, by your customers and by the community. It is not really new, it is not really that difficult and the concepts are not mutually exclusive.

Accordingly, during FY19, the team took further steps to enhance its governance framework and resources as the scale of our platform increases. Along with increased staffing within our governance and compliance team, we have introduced a Senior Executive Non-Financial Risk Committee, an Information Communication Technology Committee, to address cyber security issues, and implemented new finance systems for increased efficiency and efficacy.

I am also delighted to welcome Professor Simon Rice OAM as an independent member of our Conflicts Committee. Commercial and legal conflicts regularly arise in day to day transactions in a growing group such as Centuria and there is a community and regulatory expectation that they be dealt with ethically and properly matched equally by the same core belief from within. Professor Rice, who is, inter alia, currently Professor of Law and a Director of Professional and Community Engagement at Sydney University and a member of the Code of Conduct Committee, Australian Council for International Development, will bring an independent and analytical rigour to this important internal Committee.

Consistent with the abovementioned community expectations and our own internal ones, Centuria Life is currently working on implementing an impact and sustainable investment option in our Life Goals product capacity. Further, in a more immediately practical example of our environmental commitment, our portfolio management team has recently established an initiative to offer our tenants solar panels for our industrial properties, whereby they can activate electrical supply savings from on-site production of energy from roof top solar.

Conclusion

In summary, 2019 marked another year of strong results for Centuria, and we are well under way to

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executing further strategic initiatives in FY20. These would not be possible without the hard work and commitment of the entire Centuria team.

I would like to express my sincere thanks to my fellow directors from both the group and responsible entity boards for their ongoing dedication towards ensuring a strong performance throughout FY19. Your commitment to exceptional leadership and the expertise you bring to Centuria sets the foundation for a collegiate and dynamic framework in which we continually challenge ourselves and seek to deliver superior results whilst delivering as a good corporate citizen.

Finally, I would like to thank you, our securityholders, for your ongoing support for Centuria. As I have said before, we serve at your pleasure and deeply respect the trust you have placed in us. You have our pledge that your board and management team will continue to work in close cooperation and remain committed to a common goal of protecting and growing shareholders’ investments whilst acting in a transparent and socially responsible way as a company.

If I could now invite John McBain and Jason Huljich to deliver the Joint CEO’s report.

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Joint CEO’s address: John McBain and Jason Huljich

Thank you, Mr Chairman, and good morning everyone. Along with my joint CEO, Jason Huljich, let me also welcome you to the 2019 Annual General Meeting.

It gives me great pleasure to be addressing you today. FY19 was a transformative year for Centuria during which we have continued to grow in terms of scale and market position. Today we will discuss our FY19 financial results and highlights followed by some comments regarding our post FY19 activity and outlook.

Financial year 2019 in review

As our chairman outlined, total group assets under management (AUM) grew during FY19 from $4.9 billion to $6.2 billion, a year on year increase of 27% and in addition, total securityholder return for FY19 was 34.4% with additional security price accretion being experienced beyond FY19.

The Centuria real estate platform which to date has specialised in commercial and industrial sectors has now expanded into the healthcare real estate funds management sector with the creation of Centuria Heathley which we will discuss shortly.

In terms of market position, Centuria Capital recently joined the S&P ASX 300 Index representing an important milestone for the group and we have recently celebrated our market capitalisation exceeding $900 million, significantly higher than our $80 million market capitalisation just three years ago.

In addition to our traditional single asset unlisted property funds and our two managed REIT’s we have broadened our range of investment products adding a diversified unlisted property fund and the healthcare real estate funds business to our platform which helps underpin our rate of growth in assets under management.

Jason Huljich and I have worked together building the Centuria platform for over twenty years and I see Jason’s appointment as Joint CEO as another important milestone.

I am extremely pleased with the board’s decision in this matter, I believe it is progressive and sends a positive message to both our staff and the market. Jason and I have a shared passion for growing both the Centuria business and securityholder value, and we can assure you that this will not diminish.

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Financial Results

During 2019 group revenues exceeded $100 million and we recorded a net operating profit of $45.7 million, up from $45.1 million in the preceding year with operating earnings of 12.7 cents per stapled security (cps). Additionally, recurring revenue contribution increased to 77% of total revenue.

The 13% increase in property funds management profit (excluding performance fees) to $25.1 million further reflects the expansion of our real estate platform. Recurring profits have also been supplemented by our co-investments, which totalled $419 million and generated a strong 26.6% annualised total return during FY19.

The board and management retain a strong focus on reliable, growing distributions and FY19 distributions totalled 9.25 cps, reflected a 12.7% increase from FY18.

A strengthened balance sheet with $87.8 million of cash on hand at 30 June 2019, has provided us with an opportunity to fund transaction initiatives on hand at the time, as well as future growth opportunities that complement the Group’s platform.

Turning to our property platform I am pleased to introduce my Joint-CEO Jason Huljich who will outline the performance of the property and funds management divisions.

Good morning everyone.

FY19 marked another period of strong growth for Centuria’s property funds management platform. Property AUM increased 33% to $5.3 billion and was underpinned by substantial acquisitions in both the listed and unlisted divisions.

Centuria operates one of Australia’s leading unlisted property funds management businesses. For over 20 years, we have established deep expertise in identifying and delivering unlisted funds to our significant distribution networks. Centuria’s unlisted division currently has circa $2.0 billion of AUM across 14 fixed term funds, institutional wholesale relationships and the Centuria Diversified Property Fund.

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Since balance date we have launched two single asset unlisted funds, in Adelaide and Brisbane with both generating extremely strong investor interest.

The Centuria Diversified Property Fund also continued to expand, growing 215% year on year to reach $118.9 million at FY19. The funds expansion was aided by the acquisition of its first two direct real estate assets.

FY19 also provided another example of our active management capabilities, culminating in the sale of 821 Pacific Highway, Chatswood, NSW (The Zenith) owned in partnership with global wholesale capital partner, Blackrock. The asset was sold for $438 million after being acquired for $279 million three years earlier. This value accretion was generated by a lot of hard work by our asset management and leasing teams and I would like to congratulate them on an outstanding result. Not only did the outcome generate excellent capital gains on top of the consistent distributions for investors in this fund, but it also crystalised a performance fee of over $9 million for Centuria.

In emphasising the strength and quality of our unlisted division, we are proud to note our performance in the IPD/MSCI quarterly fund index where 6 of our unlisted funds have held top 10 positions each quarter for the last 10 quarters in a row to June 2019. The measure is a wonderful reflection of our real estate team’s ability to acquire and manage assets while demonstrating our ability to create value for investors.

Centuria Heathley

During the year, the Group also entered the strong performing healthcare real estate sector. The acquisition of a 63% economic interest in Heathley Limited for $24.4 million marks a strategic initiative to expand our platform into a new high growth sector. We are excited about our newly established partnership with Andrew Hemming, his team of highly capable staff and board, all of which represent a quality funds management operator in this emerging sector. We look forward to supporting Andrew and his team on their growth path in the healthcare real estate sector and are excited to be a part of the recently formed Centuria Heathley.

Healthcare is rapidly growing globally and we anticipate that the presence of this sector will increasingly expand here in Australia. With over $0.6 billion of assets under management, and an exciting pipeline providing capacity for near term AUM growth, Centuria Heathley has the potential to expand its asset

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footprint, increase recurring revenues and offer investors strong and stable returns via a range of wholesale and retail unlisted healthcare real estate funds.

Additionally, the recent establishment of a $500 million institutional healthcare real estate mandate with AXA Investment Managers – Real Assets and Grosvenor Group, seeded by two private hospital assets for a combined $88 million presents a significant opportunity to expand our healthcare portfolio in due course.

Centuria’s A-REITS

Centuria’s listed real estate investment trusts continued to increase in size and scale throughout 2019. Like CNI, both Centuria Metropolitan REIT and Centuria Industrial REIT are included in the S&P/ASX300 index and continue to position themselves for inclusion in the ASX/200 index in the foreseeable future.

CMA was launched by Centuria in an initial public offering in December 2014. Since then, the portfolio has transformed from a relatively small diversified fund into an established pure play office REIT. CMA has expanded its portfolio from 6 office and two industrial assets to 20 office assets and as at FY19 close had reached a market capitalisation of over $1.0 billion and an AUM of $1.4 billion.

CMA is geographically diversified across major Australian office markets and continues to focus on generating predictable and quality income streams and executing initiatives to create value across a portfolio of Australian office assets.

Some highlights for CMA in FY19 included:

• repositioning to become Australia’s largest pure play office REIT

• expanding its portfolio through the acquisition of four high quality office properties for an approximate value of $520 million

• divesting its remaining industrial assets at premiums to their respective book valuations

• recording a 12-month total unitholder return of 22.4%

• achieving a market capitalisation of over $1.0 billion and continuing to increase its liquidity to improve its scale and investor relevance

Centuria Capital Group is a strong supporter of CMA with a 24.9% co-investment as at 30 June 2019.

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CIP

Centuria Industrial REIT or “CIP” has been under Centuria’s management since January 2017 and represents Australia’s largest domestic pure play industrial REIT comprising a portfolio of high-quality assets and national tenants that are geographically diversified across Australia.

Some highlights for CIP in FY19 included:

• expanding assets under management to $1.3 billion

• CIP recorded a 12-month total unitholder return of 27.0%

• acquisition of a further six assets for $147.4 million

• achieving a market capitalisation of over $1.0 billion and continuing to increase its liquidity to improve its scale and investor relevance

Like CMA, Centuria Capital Group is a strong supporter of CIP with a 22.3% co-investment as at 30 June 2019.

Both of Centuria’s REITs continue to operate as the largest pure play REITs in their respective asset classes, being commercial office and industrial/logistics, and we remain focused on enhancing their market presence and executing on their stated strategies.

In summary, Centuria continues to search for opportunities to unlock attractive investments for the broad range of investor profiles that support the various divisions within our platform. Presently our platform is aligned to compelling sectors across commercial office, industrial/logistics and health care real estate. Our portfolio generates quality fee income streams, underpinned by a diverse range of tenants across differing sectors and industries. We are confident that our real estate funds management division can continue to thrive against a continuing backdrop of low interest rate and low growth global environments.

I will now hand back to John McBain who will make some closing remarks….

Thank you Jason.

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Investment Bonds

Turning now to investment bonds. Centuria Life is the fourth largest investment bond provider in Australia’s $7.4 billion investment bond market. For more than 35 years, Centuria Life has focused on offering flexible, tax effective investment options.

In FY19, investment bonds represented $0.9 billion of AUM across unitised bonds, Guardian prepaid funeral plans and the recently launched Centuria LifeGoals.

After launching Centuria LifeGoals in the second half of 2019, we have continued to progress dealer awareness, inclusion on dealer approved product lists and recently achieved a Recommended rating from Lonsec and Very Strong rating from Australia Ratings.

Activity post FY19

Centuria has commenced FY20 issuing strong FY20 distribution guidance of 9.7 cents per stapled security, an increase of 4.9% over FY19.

Activity in the current period has been strong, including;

• a successful equity raising for the $127 million unlisted Centuria 80 Flinders Street Fund

• formation of unlisted fund to acquire 348 Edward Street in Brisbane for $89 million

• CMA commitment and equity raising to acquire two A grade office assets for $380 million

• settling a 63% economic interest in Centuria Heathley

• establishing a $500 million healthcare real estate institutional mandate with AXA IM Real Assets and Grosvenor Group

• inclusion in the S&P/ASX 300 index

• completion of a $100 million equity raise within Centuria Capital

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Outlook

In closing, I want to comment on our near-term outlook.

In an increasingly uncertain global environment, we believe Australia remains an attractive destination for offshore capital. Further, we believe that low domestic interest rates will persist, and the combination of these factors has caused good quality commercial property yields to contract to new, even-lower levels. These trends support the business case for our listed and unlisted property fund divisions as they yield significantly more than traditional deposit rates.

We remain extremely focused on creating value for securityholders and continuing to build a strong funds management platform aligned to the commercial, industrial, healthcare and investment bond sectors.

Particular areas of focus include:

• growing our funds management platform both organically and by complimentary corporate acquisitions, this includes supporting the growth of Centuria Heathley

• continuing to grow recurring revenue as a proportion of all revenues and to unlock ongoing performance fees from our managed funds

• attracting further institutional capital partners in tandem with growing our already extensive retail investor network

• expanding our investment bond business particularly Centuria LifeGoals

We want to take this opportunity to thank our extremely committed and driven staff and our fellow senior managers for their hard work and dedication during FY19.

In addition, we wish to thank the Chairmen and the directors of both the Group and Responsible Entity boards both at Centuria and Centuria Heathley.

Thanks to both of these groups of people for their patience and the valuable contribution you make towards enhancing securityholder value for our investors. We know that the rate of growth we expect to achieve

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puts a large burden on directors and staff alike.

Finally, we wish to thank our securityholders for the continued trust and support you provide us. None of this is possible without support from investors at all levels of our platform and I thank you for the confidence you place in us.

I will now hand back to our Chairman, Garry Charny to continue proceedings.

Thank you.

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