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CHARTER HALL GROUP Annual Report 2010

Aug 23, 2010

64645_rns_2010-08-23_e161fe67-2b9f-4ecd-a663-46d1f48308bf.pdf

Annual Report

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Charter Hall Group

2010 Annual Results

24 August 2010

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Contents

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1 FY10 summary

2 Group strategy and managed funds overview

3 Charter Hall Property Trust (CHPT)

4 Development, leasing and property management

5 Financials and capital management

6 Outlook and guidance

7 Appendices

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David Harrison

Joint Managing Director

David Southon

Joint Managing Director

Jelte Bakker

Chief Financial Officer

2

Charter Hall Group 01 FY10 summary

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FY10 Highlights

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Expansion of funds management platform

  • Acquired majority of Macquarie core real estate platform

  • Increase in FUM from $3.4bn to $10.2bn

  • Expanded into listed funds management

  • Substantially increased exposure to unlisted retail investor market

  • Positioned wholesale funds management for further growth

FY10 earnings in line with guidance

  • Operating Earnings[1] of $34.9m

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  • Operating EPS of 4.11cps and DPS of 3.20cps

Raising new equity for property funds

  • Raising new equity for CPOF and CPIF with 50% of $300m target secured

  • Expanded wholesale third party mandate business – currently $230m of FUM

  • Raised more than $85m of equity for retail investor products – MMPT and 130 Stirling Street Trust

  • Pipeline of property funds for retail investor markets

NOTES:

  1. Previously referred to as Underlying Earnings, excludes fair value adjustments, gains/losses on sale, non-cash tax benefits and non cash expenses

4

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FY10 Highlights

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Delivered results at underlying property level

  • Investment property

  • Leased 254,000sqm of space across fund products

  • Maintained well above industry average WALEs across funds

  • Development

  • Realised two office developments in CHOF4 at or above hurdle returns

  • Strong business performance from 50% owned CIP, with FY11 strong work in progress

Capital position has substantially improved over FY10

  • Refinanced $376m of debt and extended debt maturities

  • Deleveraged all managed funds

  • Substantially increased liquidity in all funds

  • Simplified and reduced derivative book across funds

People

  • Grown size and depth of talent pool

  • Strong staff retention

  • Substantially increased penetration in sub markets and geographies

5

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FY10 Summary

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FY10 FY09
Operating Earnings1 $34.9m $34.8m
Operating EPS 4.11cps 7.61cps
DPS 3.20cps 4.96cps
NPAT (AIFRS) $0.2m ($82.2m)
At 30 June 10 At 30 June 09
FUM $10.2bn $3.4bn
Total Group Assets $988m $524m
Total Group Net Assets2 $773m $494m
NTA (per unit) $0.56 $0.71
Gearing3 6.5% 2.4%

Notes:

  1. Previously stated as Underlying Earnings. Excludes fair value adjustments, gains/losses on sale, non-cash tax benefits and non cash expenses 2. Total group net assets excludes group minority interest in CPRF

  2. Calculated as borrowings net of cash over total tangible assets net of cash. Increase reflects consolidation of CPRF on balance sheet

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Group Operating Revenue

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� FY10 Operating Revenue of $74.2m[1]

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$32.4m FY09 Other
corporate
Base
FY10 revenue
mgmt
28%
$26.4m fees 29%
$21.7m
$15.8m
Property
Income
$11.1m $10.6m 43%
$4.5m
$2.0m $1.5m $1.1m $2.0m
$0.9m $1.1m $1.1m
Property Income Base Management Other Property Performance Fees Property Development Other Corporate
Fees Services Fees Management Fees Investment Fees Services
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NOTES:

  1. Reconciles to revenue in the Appendix 4E by adding investment property expenses, interest income and other and subtracting equity accounted profits

  2. Property income includes net property income from CPRF and income from co-investments

  3. Other property services fees includes leasing, development management and transaction fees

  4. Other corporate services include advisory fees, accounting and other cost recoveries from managed funds

  5. Development investment fees includes income from the CHOFs and CIP

7

Charter Hall Group

02 Group strategy and managed funds overview

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Group Business Model

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  • Charter Hall is a specialist property fund manager with a vertically integrated business model

  • 20 funds diversified across the risk/return spectrum and equity sources

Charter Hall Group (ASX:CHC) Stapled Security

Charter Hall Limited (CHL)

Charter Hall Property Trust (CHPT)

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Fee income streams
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Alignment through equity co-investments

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Funds Platform $10.2bn FUM[1]

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� Funds Management $168m co-investment $177m co-investment $237m co-investment
� Asset Management Wholesale Investor Retail Investor Listed Funds
� Development Management Funds Funds
� Property Management $2.5bn FUM $1.5bn FUM $6.2bn FUM
� Asset Services
Sector
� Transaction Services Opportunistic Core Plus Diversified Specific CQO CQR
� Leasing
3 [rd] party wholesale
� Marketing and Branding mandates [2]
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NOTES:

  1. Total property assets under management, refer to slide 44 for more detail

  2. Third party wholesale mandates includes Riverside, Adelaide ($70m) and 50% of 275 George Street, Brisbane ($160m)

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Group Structure

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� Integration of the Macquarie Real Estate funds management platform is progressing well

Physical move � Staff moved in March 2010

Systems integration � Majority of systems now integrated

Business division restructure � Reduced number of direct reports and established group service divisions

Enhanced substantial support services platform � Established a dedicated corporate affairs team focused on corporate governance and risk management

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David Harrison / David Southon
Joint Managing Directors
Jelte Bakker Cedric Fuchs
Chief Financial Officer Executive Director
Wholesale Investment
CQO CQR Opportunistic Funds Mgmt Unlisted Retail
Funds Mgmt
CEO – Adrian Taylor CEO – Steven Sewell Michael Winnem CEO – Richard Stacker
Andrew Glass
Shared services
Asset Management Leasing Services Corporate Finance Finance & Treasury Corporate Affairs Investor Relations
Development Services Property Management Transactions Marketing HR & IT Asset Services
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10

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Group Strategy

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  • Charter Hall aims to be Australia’s leading specialist property fund manager

  • Utilising a vertically integrated business model

  • Diversified across the risk/reward spectrum within mainstream asset sectors

  • Charter Hall aims to maximise long term return on equity for investors through:

  • Enhancing the quality and performance of property portfolios in the underlying managed funds

    • Focus on property fundamentals, capital management and appropriate acquisition and divestment strategies

  • Grow external funds under management

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  • As a property specialist fund manager with diversified sources of equity, Charter Hall is well placed to capture the projected growth of superannuation funds in Australia

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Listed REITs Strategy

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Charter Hall Office REIT (ASX:CQO)

Achieved over last 12 months

  • Exiting non-core markets – Australian NTA exposure up from 47% to 64%

  • Strengthened balance sheet (refinancings, simplified derivatives, increased liquidity)

  • Continued leasing success

Strategy going forward

  • Growing EPU from FY11 “trough” year and recognition of value to reduce NTA to unit price spread
Fund CQO
Total Assets1 $4,463m2
Net Assets $2,068m
NTA 42 cpu
Balance Sheet Gearing 34%
Look Through Gearing 45%
FY10 EPS 3.0 cpu
FY10 DPS 1.9 cpu

NOTES: 

  1. Total assets calculated on a look through basis

  • Portfolio strategy

  • Orderly exit from MPG (Maguire) joint venture in US

  • Selective asset sales in line with total return strategy

  • Explore wholesale co-investment opportunity in US

  • Capital management strategy

  • Refinance debt expiries

  • Continue to simplify hedging book

  • Excludes Tampa intergroup facility

Unit price to NTA Spread

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42cpu
United States
Australia 15cpu
27cpu
25cpu
Unit Price NTA
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Listed REITs Strategy

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Charter Hall Retail REIT (ASX:CQR)

Achieved over last 12 months

  • Completed A$1.6bn of US asset sales and eliminated A$1.4bn of US CMBS debt

  • Re-invested offshore capital in Australia with four acquisitions

  • Occupancy up from 95.3% to 96.7%

Strategy going forward

  • Growing EPU from FY11 “trough” year and recognition of value to reduce NTA to unit price spread

  • Portfolio strategy

  • Dissolve NZ JV and realise equity

  • Realise remaining equity in US

  • Retain assets in Europe for the medium term, given high ROE (~18%)

  • Reinvest offshore capital in Australia

  • Recycle Australian capital (seeking to dispose of 11 (~$70m) low value assets)

  • Capital management strategy

  • Refinance A$ CMBS early in September 2011

  • Extend A$213m of European debt

Fund CQR
Total Assets1 $2,126m
Net Assets $1,110m
NTA 74 cpu
Balance Sheet Gearing 38%
Look Through Gearing 43%
FY10 EPS 6.6 cpu
FY10 DPS 5.3 cpu

NOTES:

  1. Total assets calculated on a look through basis

Unit price to NTA Spread

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Europe
New Zealand
74cpu
United States
5cpu
Australia 5cpu
11cpu
55cpu 53cpu
Unit Price NTA
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Wholesale Investment Fund Strategy

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Core Plus Office Fund (CPOF) and Core Plus Industrial Fund (CPIF)

Achieved over last 12 months

  • CPOF

  • Balance sheet strengthened

  • Leased 21,760sqm of space (12% of income)

  • CPIF

  • Acquired 27,000sqm investment, pre-leased to Volkswagen

  • Positioned to benefit from upswing with attractive portfolio fundamentals

  • High quality stable portfolio in both funds with high WALE’s and occupancy levels

  • Four redevelopment opportunities in CPOF

  • Expanded wholesale third party mandate business with $230m of FUM secured in FY10

Fund CPOF CPIF 3rd Party
Mandates
Assets2 $1,163m $364m1 $230m
Debt2 $505m $140m N/A
NTA3 86 cpu 80 cpu N/A
Gearing 44% 41% N/A
WALE 6.1 yrs 9.9 yrs 9.1 yrs
WARR 4.0% 3.3% 4.1%

NOTES:

  1. Assets calculated on a look through basis 2. Assets and debt are net of cash 3. Including derivatives

  2. Restructuring Core Plus Retail Fund into Direct Retail Fund for investment by retail investors

Strategy going forward

  • Currently raising new equity for CPOF and CPIF

  • 50% of $300m target commitments secured

  • Equity to be employed to fund CPOF development pipeline, acquire new assets and maintain gearing range of 35%-45%

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Wholesale Opportunistic Fund Strategy

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Charter Hall Opportunistic Funds 4 and 5 (CHOF4 & CHOF5)

Achieved over last 12 months

  • Successfully realised projects and returned equity and profits to investors

  • 50% interest in 275 George Street, Brisbane (1.3x equity multiple)

  • 50% interest in Alluvion, Perth (1.5x equity multiple)

  • CHOF4 fully drawn with most projects realised achieving a weighted average realised gross equity IRR exceeding 20%

  • Accessed $123m of non-recourse development finance for new projects

  • Launched two new developments, including

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Fund CHOF4 CHOF5
Total equity committed $165m $300m
Total equity allocated $163m $280m
Number of projects 8 6
Total equity drawn $163m $227m
Comp. date of last project Sep 2012 Nov 2014

  • Aquilo: 119 residential townhouses project in Mentone, Melbourne (68% pre-sold)

  • Lacrosse: 312 apartments project in Docklands, Melbourne (98% presold)

  • CHOF5 now 93% allocated across six projects

Strategy going forward

  • Focus on maximising IRRs

  • Identify and secure a pipeline of suitable projects for CHOF6

  • Currently raising equity for CHOF6, with first close scheduled for CY10

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Charter Hall Direct Strategy

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Diversified, sector specific and single asset funds for retail investors

Achieved over last 12 months

  • Fund raising initiatives:

  • Macquarie Martin Place Trust (MMPT) raising closed over-subscribed

  • 130 Stirling Street Trust raising near complete

  • Direct Industrial Fund (DIF), launched and open for investment

  • Focused on asset sales instead of dilutive equity raisings

  • Gearing reduced to acceptable levels across all retail products

  • Maintained distributions to investors

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Key Funds CHDPF DPF CHUF
Assets2 $500m $179m1 $147m
NTA3 $281m $65m $147m
Gearing 44% 54% N/A
WALE 4.8 yrs 7.4 yrs 7.9 yrs
WARR 3.78% 3.55% 3.60%

NOTES:

  1. Assets calculated on a look through basis 2. Assets are net of cash

Strategy going forward

  • Re-open diversified funds

  • Recently launched DIF (industrial - 10 year WALE target)

  • Restructuring the Core Plus Retail Fund (CPRF) into a core offering for retail investors, branded Direct Retail Fund (DRF)

  • Continue to launch new high quality property offerings

  • Including derivatives

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16

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Superannuation Equity Flows

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� Currently $1.26 trillion superannuation FUM

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–
Forecast to grow to a 2020 balance of between $2.5 trillion to $3.0 trillion
$3.0 trillion
$3,000bn
(10% growth pa)
SMSFs
$2,500bn Retail
$2.5 trillion
Public sector
(7% growth pa)
$2,000bn Industry
Corporate
$1,500bn Other
1997-2010: 11% pa average growth
$1,000bn $1.26 trillion
$500bn
Source: APRA
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
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� Net contribution flows of ~$60bn per year underlies net FUM growth of super

  • Reduced or increased by net investment income (income returns + capital returns less operating expenses)

  • Total net super FUM recovering after declines in 2008-2009

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$300bn Source: APRA
Net investment income (income + capital growth)
Net contribution flow
$200bn
Total Net FUM growth pa
Tax break for super
contributions
$100bn
-
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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Assuming net investment income of nil and a historical growth rate in net contributions of a conservative 5% per year

2020 total super FUM grows to a balance of $2.1 trillion

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($100bn)

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Superannuation Equity Flows

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Charter Hall well positioned

  • Net contributions currently stable at $60bn+ per year

  • Allocation to property currently 11%[1]

  • Reflects $7bn+ per year potential inflows to property fund managers (before re-investment of income)

  • Charter Hall’s diversified equity platform well placed to capture inflows across all sectors of superannuation

  • Further opportunity to attract extra equity inflows as current high cash deposit levels reduce to normal levels

  • Current residential cash deposits of $1.36 trillion (RBA), nearly double June 2006 levels

Total superannuation FUM $1,258bn

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SMSFs FUM [2] Non-SMSFs Non-Super
$402bn FUM $856bn FUM $165bn
Real Estate: $2.2bn+ potential flow pa Real Estate $4.7bn+ potential flow pa
(Based on current FUM ratios) [1] (Based on current FUM ratios) [1]
Wholesale Investor
Retail Investor Funds Listed Funds
Funds
Charter Hall
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NOTES:

  1. APRA allocation measures as per June 2009 & June 2008 2. Includes other small APRA regulated funds with less than 5 members

18

Charter Hall Group

03

Charter Hall Property Trust (CHPT)

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CHPT Co-investments

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Ownership CHPT Market cap rate Discount rate Minimum rental
investment reviews
(%) ($m) (%) (%) (%)
Listed Funds
Charter Hall Office REIT (CQO)1 7.5% 155.1 7.8% 9.3% 3.3%
Charter Hall Retail REIT (CQR)1 7.4% 82.3 8.1% 9.3% 4.0%2
Wholesale Investment Funds
Core Plus Office Fund (CPOF) 16.8% 112.6 7.8% 9.4% 4.0%
Core Plus Industrial Fund (CPIF) 25.0% 55.8 8.3% 9.7% 3.3%
Retail Investor Funds
Direct Retail Fund (DRF) 66.0% 103.3 8.4% 9.8% 3.6%
Diversified Property Fund (DPF) 31.9% 22.1 8.2% 9.6% 3.6%
Charter Hall Umbrella Fund (CHUF) 24.9% 41.6 8.2% 9.6% 3.6%
Charter Hall Direct Property Fund (CHDPF) 3.5% 9.8 8.6% 9.6% 3.8%
Total/weighted average 582.6 8.1% 9.5% 3.6%

NOTES:

  1. CHPT Co-investments in CQO and CQR are held at 30 June 2010 NTA

  2. Australian portfolio only

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Capitalisation Rate Movements

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� Peak to trough expansion in cap-rates across selected managed funds

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8.50%
CPRF/DRF
CPIF
DPF
8.00%
CQR
CPOF
CQO
7.50%
Fund Dec 07 Jun 10 Change
CPRF/ DRF 7.00% 8.35% +1.35%
7.00%
CPIF 6.91% 8.34% +1.43%
DPF 6.90% 8.17% +1.27%
CQR 6.58% 8.07% +1.50%
6.50%
CPOF 6.55% 7.76% +1.21%
CQO 6.07% 7.81% +1.74%
6.00%
Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10
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NOTES:

  1. Analysis is conducted on a like-for-like basis between December 2007 and June 2010

  2. Capitalisation rate weightings are based on June 2010 book values

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CHPT Look Through Tenant Profile

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WALE (years)

Top 10 tenants (30 June 2010)

WALE (years)
CPOF 6.1
CPIF 9.9
CPRF 7.8
DPF 7.4
CHUF 8.0
CQO 4.7
CQR 6.0
CHDPF 4.8
CHPT 6.6

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Tenant % Portfolio
leased
(by income)
Wesfarmers 8.9%
Woolworths Ltd 5.7%
Telstra Corporation 5.0%
Australian Governments 4.8%
Westpac Group 3.4%
JPMorgan Chase 1.7%
Volkswagen 1.4%
Mercer 1.2%
BHP Billiton 1.0%
Harvey Norman 1.0%
Total 34.1%

NOTES:

  1. Shows CHPT’s position based on the WALEs of individual funds and CHPT’s investment exposure in each fund

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CHPT Look Through Lease Expiry Profile

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62.9%
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8.6% 8.2% 7.8%
5.7% 6.7%
VACANT FY11 FY12 FY13 FY14 FY15+
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NOTES:

  1. Shows CHPT’s position based on the expiry profile of individual funds and CHPT’s investment exposure in each fund (weighted on a passing income basis)

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CHPT Look Through Assets

Diversification by investment

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CHDPF 2%
CPOF 19%
CQR 14%
CPIF 10%
CQO 26%
CPRF 18%
CHUF 7% DPF 4%
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Sector diversity

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Retail 36%
Office 50%
Industrial
14%
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Geographic diversity

Europe 4% Asia 1%

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US 16%
New Zealand
2%
Australia
77%
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Charter Hall Group

04 Development, leasing and property management

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Development

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Development Services

  • Development services FY10 contribution of $4.5m

  • Sourced from projects completed in FY10 ($400m) and currently active projects

  • Development book of $2.3bn across range of managed funds

  • Current book value of $0.6bn

  • Completing over the next 3-4 years

($m) Wholesale
Investment		 Wholesale
Opportunity		 Listed
Funds		 Total
Funds Funds
FY10 development services revenue 0.5 4.0 - 4.5
Active Projects
Current book value 24 23 60 107
Forecast on-completion value 75 250 292 617
Opportunities
Current book value 146 177 155 478
Forecast on-completion value 550 888 274 1,712
Total current book value 170 200 215 585
Total forecast on-completion value 625 1,138 566 2,329

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Development

CIP (50% owned)

  • National industrial development business

  • Strong relationships with many blue-chip clients including Fosters, Coles, and Toll

  • Over 600,000sqm of industrial space developed

  • Maintained profitability despite tough market conditions

  • Contributed $1.54m to CHC’s profit in FY10

  • Expect strong improvement to contribution in FY11

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CIP P&L (100%) FY10 FY09
($m) ($m)
Gross profit 10.8 15.1
Corporate overhead
Net profit before tax		 (6.4)
4.4		 (9.0)
6.1
Income tax (1.3) (1.8)
Net profit after tax 3.1 4.2
CHC profit share (50%) 1.5 2.1

  • Re-emergence of investor demand for long WALE industrial properties augurs well for CIP’s pre-sale development model

  • CHC is exploring various investment outcomes for CIP’s pre-leased properties

  • Significant increase in development pipeline and strong nationwide tenant enquiry

  • Current tenant pre-commitments include Toll (15 years); Brisbane City Council (25 years); Volkswagen Group Australia (13 years); P&O (15 years); Boart Longyear (10 years)

  • Proven source of quality investment product for CPIF and DIF

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27

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Leasing Services

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  • Charter Hall provides leasing services across its managed funds

  • $0.5m of revenue in FY10, expect stronger contribution in FY11

  • Group’s internal leasing expertise provides real value for development and repositioning of projects

Top five tenants by area within managed funds (sqm)

Top five tenants in recent developments (sqm)

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Telstra 236,000 American Express 93,000
Schnucks 163,000 Telstra 50,000
Aust. Government 150,000 Commonwealth Bank 50,000
Woolworths 105,000 Harvey Norman 29,000
Wesfarmers 86,000 Coles 17,000
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NOTE: Wesfarmers Group includes Coles, Bunnings, Kmart, Target, Officeworks, Liquorland, First Choice Liquor, Vintage Cellars, Gresham Partners

28

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Property Management Services

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  • Substantial property management business acquired as part of Macquarie platform transaction

  • Sydney head office with three satellite offices throughout Australia

  • Providing property management services across most Australian portfolios.

  • In-house property and financial management delivers an improved and consistent service to both tenants and funds

  • FY10 revenue of $4.5m generated from managing 112 properties

  • Target to increase property management services provided by CHC across the funds

  • Fees recoverable from tenants and charged at market based rates

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Fund No. of properties under
property mgmt		 Representing % of
asset portfolio
(by value)		 FY10 Property mgmt
revenue
($m)
Core Plus Funds 32 81% 1.5
DPF 8 100% 0.2
Other Direct 0 0% 0.0
CHIF’s 9 100% 0.3
CQO 0 0% 0.0
CQR (from 1 March 2010 only) 63 56% 2.6
FY10 Property Management Revenue 112 29% 4.5

29

Charter Hall Group

05 Financials and capital management

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Income Statement

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FY10 FY09
$m $m
Direct net property income 14.1 2.0
Indirect property income 18.1 24.4
Total CHPT income 32.2 26.4
Development investment income1 1.1 1.5
Fund management and other corporate income 40.9 30.0
Total CHL income 42.0 31.5
Total income 74.2 57.9
Expenses2 (34.6) (20.8)
EBIT 39.6 37.1
Net interest expense (1.4) (2.3)
Minority Interest (3.3) -
Operating Earnings 34.9 34.8
Weighted number of securities (m)3 850.2 457.4
EPS (cents) 4.11cps 7.61cps

NOTES:

  1. Excludes derivative financial instrument expense of CHOF 4 & 5 and inventory writedowns 2. Excludes employee LTI non-cash expense of $1.3m 3. Excludes LTI securities

31

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Operating Earnings Bridge

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7.61cps (2.10)
(0.13)
(1.59)
+0.31 4.11cps
FY09 EPS June 2009 Equity DRP Drop in operational Platform acquisition FY10 EPS
Raising earnings
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32

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Operating Earnings Reconciliation

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FY10
($15.7m) +$49.2m
($15.3m)
($53.0m)
4.11cps 3.20cps
+$34.9m
+$29.8m
+$0.2m
AIFRS Profit FV Adjustments CPRF Other Gain/loss on sale Operating Earnings Distribution
Consolidation or purchase
Impairment
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NOTES:

  1. Other includes business combination acquisition costs ($6.6m), non-operating movements in equity accounted investments ($7.8m) and other non cash adjustments ($1.2m)

33

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Balance Sheet

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$m 30 June 2010
CHC excl CPRF		 30 June 2010
CPRF		 30 June 2010
CHC consolidated1		 30 June 20091
Cash 26.8 1.6 28.4 1.9
Total Tangible assets 616.2 252.8 869.0 523.5
Total Assets 735.5 252.8 988.3 523.5
Borrowings 0.0 91.2 91.2 14.2
Total liabilities 68.6 96.6 165.2 29.5
Total equity 666.9 156.2 823.1 494.0
Net assets attributable to minority interest - (50.6) (50.6) -
Total equity post minority interest 666.9 105.6 772.5 494.0
Total securities on issue2 1,162.4 698.0
Net tangible assets (cps) 56.2cps 70.8cps
Balance sheet gearing3 6.5% 2.4%
Look through gearing (non-recourse debt)4 37.1% 42.8%

NOTES:

  1. FY09 CHC accounts reflects CPRF as an investment. CHC FY10 accounts show CPRF on a consolidated basis 2. Excludes 50.3m LTI securities and options and performance rights per note 41(b) of the Appendix 4E 3. Calculated as debt net of cash divided by total assets net of cash

  2. Calculated by incorporating CHC’s proportional share of assets (net of cash) and debt (net of cash) of the funds in which it co-invests

34

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Capital Management

Managed Funds[1]

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Fund CHC CPOF CPRF CPIF CQO CQR CHDPF CHUF DPF
Asset values ($m)2 960 1,163 251 406 3,333 1,945 500 152 153
Net debt drawn ($m)2 - 505 90 165 1,116 746 219 N/A 83
Duration (years)3 - 2.1 1.0 1.4 2.7 2.8 0.4 N/A 1.6
Loan to value ratio
Balance sheet 0% 43% 36% 41% 33% 38% 44% N/A 54%
Look through 37% 43% 36% 39% 45% 43% 47% N/A 60%
Target Gearing 0-10% 35-45% 35-45% 35-45% 35-45%5 30-40%4 40-45% Nil 50-55%

NOTES:

  1. Analysis excludes opportunity fund debt facilities

  2. Asset and debt values shown net of cash. Represent Balance Sheet values 3. Calculated on a weighted average basis

  3. On a balance sheet basis

  4. On a look through basis

35

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Capital Management

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Managed Funds

  • Debt expiry profile by fund based on drawn debt

  • No maturities until 2H FY11

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$2,000m
$1,800m
Opportunistic (Opp) Wholesale Investment (WI)
$1,600m CQR Direct Investor Funds (DIF) CQO
CQR
$1,400m
$1,200m
$1,000m CQR
CQO
CQR
$800m CQR
CQO
$600m
DIF
CQO
$400m
DIF DIF WI
$200m
WI
$0m OppWI Opp Opp CQODIF
2010 2011 2012 2013 2014 2015+
Financial Year
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36

Charter Hall Group

06 Outlook and guidance

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Outlook and guidance

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� Direct market showing signs of recovery

  • In general capitalisation rates stabilised and now compressing

  • Improved capacity and pricing in debt markets will provide further stimulus to the property cycle recovery

  • The Group has formulated clear strategies across all funds

  • Focus on income and capital growth based on property fundamentals

  • Lessons learned from GFC considered in strategies, capital management and risk appetite

  • Charter Hall’s medium to long term performance underpinned by growth in equity flows to property and reputation as a leading specialist property fund manager

  • Equity flows underpinned by projected superannuation fund flows

  • Expect equity flows to gather pace now asset values have stabilised and confidence re-emerges

  • Current expectation of FY11 EPS growth in the region of 20%, which would allow for an increase in FY11 DPS in the region of 25%

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38

Charter Hall Group 07 Appendix

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Appendix A – CHPT Co-Investments

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30 JUNE 10 MOVEMENT 30 JUNE 2009
CHPT stake
(%)
CHPT
investment
($m)

Acquisitions/
(Sales)
($m)
Fair Value
Movement
($m)
CHPT stake
(%)
CHPT
investment
($m)
17%
25%
66%
32%
25%
8%
7%
4%
112.6
55.8
103.3
22.1
41.6
155.1
82.3
9.8
582.6
CPOF
CPIF
CPRF
DPF
CHUF
CQO
CQR
CHDPF
Total		 -
(9.4)		 23%
122.0
(6.2)
-		 25%
62.0
(37.7)
1.2		 65%
139.9
(6.2)
6.0		 26%
22.3
(6.5)
0.1		 25%
48.0
43.7
111.5		 -
-
13.0
69.3		 -
-
8.5
1.3		 -
-
(8.1)
196.5		 394.3

40

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Appendix B – Earnings Reconciliation

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FY10 FY09
($m) ($m)
NPAT (AIFRS) excludes non-controlling interest 0.2 (82.2)
Fair value adjustments 53.0 (115.3)
CPRF consolidation impairment 15.3 -
Gain/loss on sale or purchase (49.2) (1.3)
Other 15.7 3.1
Operating Earnings 34.9 34.8

41

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Appendix C - Cashflow Reconciliation

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FY10
$1.4m ($1.0m)
$3.5m $38.8m
$34.9m
Operating Earnings Other Change in trade debtors Change in trade creditors Operating Cashflow
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NOTE: Other includes: Depreciation, non cash equity accounted profit, and CPRF’s non-controlling interest

42

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Appendix D – AUM

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� Reconciliation of FUM change over FY10

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+$0.6bn ($0.9bn)
+$7.2bn
($0.1bn)
+$10.2bn
+$3.4bn
FY09 Macquarie Platform Additions Sales Valuation Changes FY10
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NOTE: FY09 balance reflects FUM as reported in the FY09 Result Presentation (24 August 2009)

43

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Appendix D - AUM

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� Assets under management (FUM) of $10.2bn across 20 funds

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Charter Hall FUM
$10.2bn
Wholesale Investor Funds Retail Investor Funds Listed Funds
$2.51bn $1.55bn $6.16bn
Opportunistic Core Plus
$0.71bn $1.80bn
DPF CHUF CHDPF
$0.15bn $0.15bn $0.50bn
CHOF4 CHOF5 CPOF CPIF [5] CQO [2] CQR [3]
$0.10bn $0.61bn $1.14bn $0.42bn $4.11bn $2.05bn
CHIFs [4] DIF DRF [6,7]
$0.44bn $0.03bn $0.28bn
Wholesale
mandates
$0.23bn
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NOTES:

  1. All numbers as at 30 June 2010

  2. Total look through property value (Refer to Side 12 of the CQO FY10 results presentation) and 50% of the on completion Collins Street value ($131.7m), minus the Collins Street book value of land ($15.5m)

  3. Total look through property value (refer to slide 18 of the CQR FY10 results presentation)

  4. CHIF includes MMPT, MPIF

  5. CPIF includes the on completion value of Volkswagen ($57.2m)

  6. CPRF includes the on completion value of 61 Nepean Highway ($54.2m)

  7. On 11 May 2011, CHC announced a proposal to restructure CPRF into retail investor fund DRF

44

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Appendix E – Unlisted Portfolio Detail

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CORE PLUS OFFICE FUND (CPOF) BOOK VALUE INDEPENDENT MKT CAP MKT CAP MCR VALUER’S WALE MIN. RENT
VALUATION RATE RATE CHANGE DISCOUNT REVIEW
DATE 30 JUN 10 31 DEC 09 RATE/ IRR
($m) (%) (%) (%) (%) (YEARS) (%)
331 & 333 George St, Sydney, NSW 73.0 31-Dec-09 7.50% 7.50% 0.00% 9.25% 2.6 3.74%
New York Hotel, Union St, Pyrmont, NSW 1.3 30-Jun-10 6.50% 7.00% -0.50% N/A 1.8 4.00%
167 Macquarie St, Sydney, NSW 82.0 30-Jun-10 7.25% 7.75% -0.50% 9.25% 5.0 3.76%
34 Hunter St, Sydney, NSW 35.0 31-Mar-10 7.25% 7.25% 0.00% 9.50% 1.0 4.27%
St George Bank, Kogarah, NSW 117.1 30-Jun-10 8.25% 8.00% 0.25% 9.00% 11.2 3.00%
Northbank Plaza, Brisbane, QLD 164.1 30-Jun-10 7.75% 7.75% 0.00% 9.50% 7.2 4.48%
275 George St, Brisbane, QLD (50%) 161.5 30-Sep-09 7.00% 7.00% 0.00% 9.00% 9.0 4.46%
Hatch, 144 Stirling St, Perth, WA 49.5 31-Dec-09 8.75% 8.75% 0.00% 9.75% 7.8 4.00%
225 St Georges Terrace, Perth, WA (50%) 89.0 30-Jun-10 8.25% 8.50% -0.25% 9.50% 3.4 5.12%
109 St Georges Terrace, Perth, WA 62.5 31-Dec-09 9.25% 9.25% 0.00% 10.25% 3.3 3.78%
51 Pirie St, Adelaide, SA 13.6 30-Jun-10 9.75% 9.75% 0.00% 10.50% 1.7 3.00%
Bank SA, Adelaide, SA 19.8 30-Jun-10 9.00% 9.00% 0.00% 10.50% 11.2 3.00%
11 Exhibition St, Melbourne, VIC 171.5 30-Jun-10 7.00% 6.75% 0.25% 9.25% 5.5 4.14%
150 Queen St, Melbourne, VIC 24.5 30-Jun-10 8.75% 9.00% -0.25% 10.00% 1.0 3.66%
570 Bourke St, Melbourne, VIC (50%) 80.0 30-Jun-10 8.00% 8.50% -0.50% 9.75% 4.4 3.68%
Total / Average 1,144.4 7.76% 7.79% -0.03% 9.40% 6.1 3.95%

45

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Appendix F – Unlisted Portfolio Detail

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CORE PLUS INDUSTRIAL FUND (CPIF) BOOK INDEPENDENT MKT CAP MKT CAP MCR VALUER’S WALE MIN. RENT
VALUE VALUATION RATE RATE CHANGE DISCOUNT REVIEW
DATE 30 JUN 10 31 DEC 09 RATE/ IRR
($m) (%) (%) (%) (%) (YEARS) (%)
372 Eastern Valley Way, Chatswood, NSW 29.8 30-Jun-10 8.25% 8.50% -0.25% 9.50% 6.1 3.49%
56 Anzac Street, Chullora, NSW 17.2 31-Dec-09 9.75% 9.75% 0.00% 10.50% 2.1 4.50%
55-65 Sky Rd, MABP (Kathmandu), VIC 7.2 30-Sep-09 9.25% 9.25% 0.00% 10.00% 6.3 3.50%
130-138 Link Rd, MABP, VIC 14.0 30-Sep-09 10.00% 10.00% 0.00% 10.00% 1.4 3.25%
309 Fitzgerald Rd, Derrimut, VIC 27.0 31-Dec-09 8.00% 8.00% 0.00% 9.50% 17.4 3.50%
Schenker, MABP, VIC 11.6 30-Jun-10 9.00% 9.00% 0.00% 10.00% 8.9 3.50%
Coles,, Perth Airport, WA (75%) 126.0 30-Jun-10 7.90% 8.00% -0.10% 9.75% 17.9 2.75%
Myer, 123-135 Kewdale Rd Kewdale WA 33.0 30-Jun-10 8.25% 9.00% -0.75% 9.75% 4.5 4.00%
17 Sugarmill Rd, Meeandah, QLD 18.7 30-Jun-10 9.00% 8.50% 0.50% 9.75% 1.7 3.70%
140 -160 Robinson Road, Geebung, QLD 24.8 31-Dec-09 8.30% 8.30% 0.00% 9.50% 4.2 3.39%
Toll, 7 Viola Place, Brisbane Airport, QLD 8.4 31-Dec-09 9.15% 9.15% 0.00% 9.75% 6.7 3.25%
Smorgon, 30 Main Beach Rd, Pinkenba QLD 25.2 30-Jun-10 8.00% 8.00% 0.00% 9.50% 13.5 3.25%
Volkswagon, Chullora, NSW1 27.7 N/A N/A N/A N/A N/A 13.03 3.25%
200 Holt St, Pinkenba, QLD2 10.0 30-Jun-09 N/A N/A N/A N/A 7.83 N/A
772-776 Boundary Rd, Richlands, QLD2 6.0 30-Jun-10 N/A N/A N/A N/A N/A N/A
Total / Average 386.5 8.34% 8.45% -0.10% 9.73% 9.9 3.25%

NOTES:

  1. Includes book value of Chullora. On completion value of Chullora is equal to $57.2m

  2. Development Project

  3. Reflect on forecast on completion WALEs

46

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Appendix G – Unlisted Portfolio Detail

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DIRECT RETAIL FUND (DRF) BOOK INDEPENDENT MKT CAP MKT CAP MCR VALUER’S WALE MIN. RENT
VALUE VALUATION RATE RATE CHANGE DISCOUNT REVIEW
DATE 30 JUN 10 31 DEC 09 RATE/ IRR
($m) (%) (%) (%) (%) (YEARS) (%)
Menai Central, Sydney, NSW 34.7 30-Jun-10 8.50% 8.50% 0.00% 9.75% 6.8 3.31%
Home HQ, Whitehorse Rd, Nunawading, VIC 62.0 30-Jun-10 8.50% 8.50% 0.00% 10.00% 6.1 3.57%
Mentone Showrooms, Mentone, VIC 18.3 30-Sep-09 9.00% 9.00% 0.00% 10.00% 2.8 3.00%
Harvey Norman, 61 Nepean Highway, Mentone, VIC1 21.2 30-Jun-09 8.00% 8.00% 0.00% 9.75% N/A N/A
Bunnings, Stafford, QLD 18.5 30-Jun-10 7.25% 7.50% -0.25% 9.00% 9.0 3.00%
Home HQ, 339 Brisbane St, Ipswich, QLD 27.0 30-Jun-10 8.25% 8.25% 0.00% 9.50% 7.2 3.37%
Foodtown, Auckland, New Zealand (in $Am) 19.4 31-Dec-09 9.00% 9.00% 0.00% 10.00% 9.0 1.68%
Wiley Group, Stafford, QLD2 11.2 30-Jun-09 8.60% N/A N/A 9.75% 9.0 4.00%
Lake Macquarie, Fair/Mount Hutton, NSW2 33.0 30-Jun-10 8.75% N/A N/A 9.75% 7.7 4.40%
Total / Average 245.3 8.35% 8.42% -0.02% 9.77% 7.8 3.64%

NOTES:

  1. Value represents land value only ($54m completion val). Market Cap Rates, Discount rates and WALE reflect forecasted completion values

  2. Redcliffe has been sold and the proceeds have been used to purchase Lake Macquarie and Wiley Stafford (Windorah) – Sale of Contract agreement have been executed

47

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Appendix H – Unlisted Portfolio Detail

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DIVERSIFIED PROPERTY FUND (DPF) BOOK INDEPENDENT MKT CAP MKT CAP MCR VALUER’S WALE MIN.
VALUE VALUATION RATE RATE CHANGE DISCOUNT RENT
DATE 30 JUN 10 31 DEC 09 RATE/ IRR REVIEW
($m) (%) (%) (%) (%) (YEARS) (%)
400 Kent Street, Sydney, NSW (75%) 40.1 30-Jun-10 7.50% 7.80% -0.30% 9.25% 6.3 3.75%
EMI, 98-100 Glover Street, Cremorne, NSW 8.8 30-Jun-09 8.25% 8.25% 0.00% 9.50% 0.7 3.00%
53 Berry Street, North Sydney, NSW 19.4 30-Sep-09 8.50% 8.50% 0.00% 9.50% 2.5 3.95%
1-5 & 15 Jets Ct, Tullamarine VIC 9.3 30-Jun-10 9.37% 8.50% 0.87% 10.00% 6.8 3.69%
22-28 Compark Circuit, Mulgrave, VIC 6.0 30-Sep-09 8.75% 8.50% 0.25% 9.00% 2.8 3.00%
46-50 Kings Park Road, West Perth, WA 26.1 30-Jun-10 8.50% 8.50% 0.00% 9.75% 3.2 3.98%
181 St Georges Terrace, Perth, WA 24.2 31-Dec-09 8.50% 8.50% 0.00% 9.75% 5.1 4.90%
Coles, Horrie Miller Drive, Perth Airport, WA (25%)1 16.7 30-Jun-10 7.90% 8.00% -0.10% 9.75% 17.9 2.75%
Total / Average 150.7 8.17% 8.21% -0.03% 9.58% 7.4 3.55%

NOTES:

  1. DPF’s interest in the Perth RDC Trust has been equity accounted, 25% of the trust asset value is $43m and 25% of the trust’s debt exposure is $26m

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Appendix I – Unlisted Portfolio Detail

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DIRECT PROPERTY FUND (CHDPF) BOOK INDEPENDENT MKT CAP MKT CAP MCR VALUER’S WALE
VALUE VALUATION DATE RATE RATE CHANGE DISCOUNT
30 JUN 10 31 DEC 09 RATE/ IRR
($m) (%) (%) (%) (%) (YEARS)
2 Wentworth St, Parramatta, NSW 35.1 31-Dec-09 8.50% 8.50% 0.00% 9.50% 3.0
68 Pitt St, Sydney, NSW 88.4 31-Dec-09 7.90% 8.00% -0.10% 9.25% 4.7
154 Pacific Hwy, St Leonards, NSW 26.8 31-Dec-09 9.75% 8.75% 1.00% 9.75% 3.5
165 Walker St, North Sydney, NSW 24.0 31-Dec-09 9.10% 9.10% 0.00% 9.25% 2.9
504 Pacific Hwy, St Leonards, NSW 34.3 31-Dec-09 9.25% 9.00% 0.25% 9.50% 2.9
1 Nicholson St, Melbourne, VIC 60.2 31-Dec-09 8.25% 8.50% -0.25% 9.75% 7.3
71 Queens Rd, Melbourne, VIC 22.5 31-Dec-09 9.25% 9.50% -0.25% 10.25% 2.7
200 Queen St, Melbourne, VIC 90.0 31-Mar-10 8.25% 8.50% -0.25% 9.75% 6.3
300 Adelaide St, Brisbane, QLD 52.1 31-Dec-09 9.00% 9.00% 0.00% 9.75% 3.3
Kohoku, Tokyo, Japan (45% interest) 14.6 30-Jun-10 N/A N/A N/A N/A 13.8
Total / Average 448.1 30-Sep-09 8.57% 8.61% -0.04% 9.61% 4.8

49

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Disclaimer

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This presentation has been prepared by Charter Hall Group (Charter Hall Limited (ABN 57 113 531 150) and Charter Hall Funds Management Limited (ABN 31 082 991 786) (AFSL 262861) as the responsible entity for Charter Hall Property Trust (ARSN 113 339 147). It is a presentation of general background information about the Group’s activities current at the date of this presentation, 24 August 2010. It is a summary and does not purport to be complete. It is to be read in conjunction with the Charter Hall Consolidated Full Year Financial Report filed with the Australian Securities Exchange in August 2010. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. A reader should, before making any decisions in relation to their investment or potential investment in the Charter Hall Group, seek their own professional advice. This presentation is not an offer or invitation for subscription or purchase of securities or other financial products.

Indications of, and guidance on, future earnings and financial position and performance are “forward-looking statements”. Due care and attention has been used in the preparation of forecast information. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Group, that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements.

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Fund Key

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Fund Key
Listed Funds
CQO Charter Hall Office REIT
CQR Charter Hall Retail REIT
Wholesale Investment Funds
CPOF Core Plus Office Fund
CPIF Core Plus Industrial Fund
Wholesale Opportunistic Funds
CHOF4 Charter Hall Opportunistic Fund 4
CHOF5 Charter Hall Opportunistic Fund 5
Retail Investor Funds
DPF Diversified Property Fund
CHUF Charter Hall Umbrella Fund
CHIFs Charter Hall Investment Funds
CHDPF Charter Hall Direct Property Fund
MMPT Macquarie Martin Place Trust
MPIF Macquarie Property Income Fund
DRF (CPRF) Direct Retail Fund

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Further information

David Southon Joint Managing Director +61 2 8908 4025 [email protected]

Jelte Bakker Chief Financial Officer +61 2 8908 4035 [email protected]

David Harrison Joint Managing Director +61 2 8908 4033 [email protected] Kylie Ramsden Head of Listed Investor Relations +61 2 8295 1016 [email protected]

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charterhall.com.au

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