CHARTER HALL GROUP — Interim / Quarterly Report 2009

Jul 13, 2009

Charter Hall Group Update

14 July 2009

Charter Hall (CHC, or the Group) provides an update on its portfolio of managed funds together with operational highlights for the six months ended 30 June 2009.

CHC is a specialist in property ownership, development and management. The Group has a straightforward, domestically focused business model with Funds Under Management (FUM) across the risk and return spectrum. These attributes have placed CHC in a strong position to work through the current challenging market conditions. The Group has maintained focus on its strategy to de-risk both its managed funds and the listed balance-sheet, making substantial progress over the last six months in this regard including:

• The capital raising and strategic investment by the Gandel Group (Gandel);

• Strong progress with its asset sales program to reduce the leverage in the investment funds;

• Successfully refinanced the major debt facilities for both CPOF and CPIF; and

• The lease up or extension of leases on approximately 75,000m[2] of space across the funds.

CHC is also pleased to note that following the recent capital raising, the Group gained inclusion in the S&P/ASX 200 A-REIT index, representing a significant milestone for CHC.

In accordance with the Group’s valuation policy, all asset valuations in the Investment Funds’ portfolios are reviewed quarterly. As a result of this process, valuations on 54% of the assets in these portfolios (by value) have been written down since 31 December 2008, based on independent valuations or directors’ valuations in accordance with achieved sales. Including the 31 December 2008 valuations, 100% of all Investment Funds’ portfolios have been revalued over the last six months. The reduction in the current portfolio carrying values represent a movement in cap rate, on a like-for-like basis, of 74 basis points (bps) since 30 June 2008. The Group’s successful de-risking strategy has ensured that, despite the reduction in values across portfolios, CHC has not breached covenants in any of the finance facilities across the funds, with substantial headroom remaining in these facilities.

CHC’s on-balance sheet portfolio of equity stakes in its managed Investment Funds shows an occupancy level of 98%, weighted average lease expiry (WALE) of eight years and a weighted average cap rate of 7.66%. Further details are summarised in the table on page 2 of this update.

As a result of asset sales and valuation falls, CHC’s FUM has decreased to $3.4 billon.

Investment portfolio update

Core Plus Office Fund (CPOF) - $1,452 million

After a review of the entire CPOF portfolio in both the March and June quarters of this financial year, valuations on 64% of the portfolio (by value) were written down, resulting in a current weighted average cap rate of 7.60%. Including the 31 December 2008 valuations, 100% of this portfolio has now been revalued over the last six months.

The CPOF portfolio enjoys a high occupancy of 96.4% and one of the longest WALE’s in the office sector at seven years. CPOF’s tenant mix remains of the highest quality, with 87% of the portfolio leased to government bodies and nationally or internationally recognised tenants.

Core Plus Industrial Fund (CPIF) - $358 million

CPIF has also undertaken March and June quarterly reviews of its entire portfolio, with valuations on 38% of the portfolio (by value) written down. Including the 31 December 2008 valuations, 100% of the portfolio has now been revalued over the last six months. The current weighted average cap rate of the portfolio is 7.82%. Current CPIF occupancy is 96.5% with a WALE of 9.4 years, underpinned by strong tenant covenants with, for example, 18 and 15 year leases to Coles and Smorgon Steel respectively.

CPIF has demonstrated a solid performance in the current challenging market environment. CPIF continues to secure lease renewals and extensions above forecast rental levels and is progressing the delivery of its enhanced activity.

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130 Stirling Street, Perth WA

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L to R: 275 George Street, Brisbane; Bunnings portfolio and 11 Exhibition Street, Melbourne.

Core Plus Retail Fund (CPRF) - $302 million

Following the recently announced asset sales, the CPRF portfolio consists of nine properties with a current weighted average cap rate of 7.59%. After both March and June quarterly reviews of the entire CPRF portfolio, valuations on 57% of the current portfolio (by value) were written down, bringing the percentage of the portfolio revalued in the last six months to 100%, including the 31 December 2008 valuations.

After completion of the announced asset sales, CPRF has an exposure of 69% to bulky goods and 31% to neighbourhood shopping centres. The bulky goods portfolio is anchored by strong tenant covenants, such as Bunnings and Harvey Norman, and the shopping centres are anchored by Woolworths and Coles.

A strong WALE of 8.8 years backs the current occupancy of 100% (including rental guarantees) and provides income stability into the future, with no significant lease expiries until 2013.

Diversified Property Fund (DPF) - $194 million

After a review of the entire DPF portfolio in both the June and March quarters of this financial year, valuations on 27% of the portfolio (by value) were written down resulting in a current weighted average cap rate of 7.95%. Including the 31 December 2008 valuations, 100% of this portfolio has now been revalued over the last six months.

During the June quarter, DPF Management renewed five leases that were nearing their lease expiry, extending the WALE of the portfolio to an impressive 7.5 years. The DPF portfolio currently has an occupancy rate of 98%.

Charter Hall Umbrella Fund (CHUF) - $195 million

CHUF is a fund which predominantly invests in CHC managed funds. As such CHUF has effectively had valuations on 50% of its portfolio written down over the March and June quarters of this financial year, and 100% of the portfolio including the 31 December 2008 valuations.

CHUF continues to outperform its peers, principally as a result of its overweight position in the unlisted property sector, which has provided exposure to high quality assets with a WALE of 8.2 years and a current occupancy of 98%.

CHC is pleased to advise that CHUF has now been re-opened to investment inflows, with investors able to invest under a newly released supplementary Product Disclosure Statement, available on the Charter Hall website www.charterhall.com.au

Opportunity funds update

Conditions remain challenging for development and re-positioning projects due to the tight credit markets, reduction in asset values and a decline in demand for space due to the economic downturn.

Despite these challenges, projects in CHC’s two opportunity funds continue to progress well, being largely stabilised by significant pre-leasing as well as design and construct guaranteed maximum price contracts. In addition, all projects have discrete, non-recourse finance facilities in place on a project-by-project basis, with no cross collateralisation.

Where appropriate completed projects will be sold, however in cases where sales cannot be negotiated the projects will be held in existing structures and sold at a later stage.

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----- Start of picture text ----- Investment Valuation Summary CHPT equity Market Valuers’ FY09 like for like30 June 2009 co-investment cap rate discount rate change in cap rate [1]($m) (%) (%) (%)CPOF [2] 122 7.60% 9.32% 0.77%CPIF 62 7.82% 9.39% 0.74%CPRF 139 7.59% 9.38% 0.51%DPF 22 7.95% 9.40% 0.90%CHUF 48 7.70% 9.36% 0.70%Total/ CHC portfolio weighted average 393 7.66% 9.36% 0.67% [3]----- End of picture text -----

1. Includes only those assets in the current portfolio.

Analysis shown on a proforma basis post sale of $30 million of CPOF units to Gandel.

1. Change in cap rate of 67bps differs from the portfolio cap rate movement of 74bps as CHC’s investment exposure to each funds varies.

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L to R: Alluvion, 54 Mounts Bay Road, Perth; 40 Creek Street, Brisbane; Atrium, 50 Union Street, Pyrmont and 225 St Georges Terrace, Perth.

Charter Hall Opportunity Fund No.4 (CHOF4)

275 George Street, Brisbane Qld

Construction of 275 George Street, CHC’s landmark office tower in Brisbane, reached Practical Completion on 6 April 2009, approximately three months ahead of schedule. This project was undertaken as a 50/50 Joint Venture between CHOF4 and CPOF. The building’s energy efficient design has achieved a 5 Star Green Star rating and is targeting a 4.5 Star NABERS Energy rating. 275 George Street comprises 40,000m[2] of prime office space, which is 98% leased on 10 year lease terms to Telstra and Queensland Gas Corporation (a subsidiary of British Gas), with the retail area now 47% leased.

Gepps Cross Centre, Adelaide SA

The Gepps Cross Centre, a 32,000m[2] bulky retail project in Adelaide, reached Practical Completion as scheduled on 5 June 2009. This project was undertaken as a 50/50 Joint Venture between CHOF4 and Axiom. The Centre currently has leases executed and terms agreed over 75% of the space and is open and trading strongly.

Home HQ North Shore, Artarmon NSW

Construction works are continuing on Home HQ North Shore, an integrated 22,000m[2] bulky goods centre in Artarmon, with completion expected in November this year. Lease documentation has been executed with key anchor tenants including The Good Guys, JB Hi-Fi and Barbeques Galore. Heads of Agreement have also been signed with a number of major tenants including Freedom, Bay Leather Republic and Snooze. As lease agreements with these tenants are finalised, the Centre will be 55% leased, with the balance of the space under negotiation. Home HQ North Shore is targeting to become the first bulky goods retail centre to achieve a 4 Star Green Star rating.

Alluvion, 58 Mounts Bay Road, Perth WA

Construction of the Perth CBD A-grade office tower, ‘Alluvion’ at 58 Mounts Bay Road, is progressing well with completion remaining on schedule for April 2010. This project is a 50/50 Joint Venture between CHC and Cape Bouvard Investments. Agreements for Lease have been signed on approximately 95% of the 22,400m[2] of prime office space. Alluvion has achieved a 4 Star Green Star rating and is targeting a 4.5 Star NABERS Energy rating.

Mentone Residential, Mentone Vic

The Mentone residential project located on Oak Avenue, Mentone (approximately 20 kilometres south east of Melbourne CBD), comprises a proposal to develop 119 townhouses on the site. A town planning application has been lodged with approval anticipated in late August 2009.

Charter Hall Opportunity Fund No.5 (CHOF5)

40 Creek Street, Brisbane Qld

The refurbishment works at 40 Creek Street, a 12,444m[2] office tower in Brisbane, reached Practical Completion on 29 June 2009. To date, two tenants have executed an Agreement for Lease for levels 17 and 16 respectively, with terms agreed for a large portion of the retail space. The focus remains on leasing the balance of the available space in this well located property in the heart of Brisbane’s CBD.

1406-1408 Anzac Parade, Little Bay NSW

The Little Bay development, an 11.4 hectare master-planned residential project in Sydney’s east, recently lodged its Stage 1 Master Plan Application with Randwick City Council. This application establishes the design controls for the site and once approved will enable the remediation and infrastructure works to proceed, creating 10 residential development superlots across the site.

Home HQ Hastings, Hastings NZ

CHOF5’s Home HQ Hastings project includes an approval for an 18,000m[2] bulky goods centre in New Zealand. Terms have now been agreed with Whakatu Coldstores for a new five year lease over their current premises, situated on a portion of the site. It is anticipated that this section of the site will be offered to the market during the next quarter, while negotiations continue with anchor tenants for the remaining bulky good centre.

WORKZONE, 202 Pier Street, Perth WA

The proposed 27,000m[2] office project at 202 Pier Street in Perth continues to attract interest from prospective tenants, with a number of encouraging prospects including both large corporates and government tenants. This project will only proceed once a satisfactory leasing pre-commitment has been secured.

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L to R: 181 St Georges Terrace, Perth; Home HQ Nunawading, Melbourne and 34 Hunter Street, Sydney.

Asset sale program

CHC continues to pursue its announced asset sales program as part of a Group-wide initiative to reduce gearing in the Investment Funds. CHC announced target asset sales of $430 million in May and has now exchanged contracts on sales totalling $228 million, including the recently secured sale of Bunnings Penrith from the CPRF portfolio on 9 July for $21.8 million. The sales achieved reflect relatively strong cap rates, with details summarised in the table below.

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----- Start of picture text ----- Fund Total Percentage Contracts Weightedtargeted of portfolio exchanged averagesales sale corecap rateCPOF ~$300m 20% $62.6m 7.35%CPRF ~$80m+ 20% $134.0m 7.97%DPF ~$50m 20% $31.7m 8.58%Total ~$430m+ $228.3m 7.88%----- End of picture text -----

Capital management and net assets of CHC

Over the previous half year, the Group has implemented a number of capital management initiatives, providing CHC with strong financial flexibility.

Further information

David Harrison Joint Managing Director 02 8908 4033 davidh@charterhall.com.au

David Southon Joint Managing Director 02 8908 4025 davids@charterhall.com.au

About the Charter Hall Group

Charter Hall Group is a property funds management and development company, based in Sydney with offices in Melbourne, Adelaide, Brisbane, Perth and Auckland. Established in 1991 and listed on the ASX in 2005 as a stapled security, Charter Hall Group combines Charter Hall Limited with Charter Hall Property Trust (CHC).

The Group currently has an FUM of $3.4 billion and has recently been included in the S&P/ASX 200 A-REIT index. www.charterhall.com.au

Gandel has made a strategic investment of $75 million in the Group. This comprises an investment of $30 million in CHC, the acquisition of $30 million of CPOF units from CHC and a $15 million equity commitment to the new CHC managed Special Situations Fund.

Other initiatives over the period include the $49 million entitlement offer, as well as the significant progress made on the asset sale program across managed funds. As previously announced, CHC also successfully refinanced the major portfolio finance facilities for both CPOF and CPIF, securing new three year terms at market pricing. Both facilities continue to be non-recourse to all investors, including CHC.

Based on the movements in valuations in CHC’s on-balance sheet portfolio of investments as outlined in this release, the previously announced impairment of the carrying value of the investment in industrial developer CIP of $15.5 million and the sale of CPOF units to Gandel, the unaudited proforma estimated net tangible assets (NTA) of CHC at 30 June 2009 is 69 cents.

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