CHARTER HALL GROUP — Interim / Quarterly Report 2010

Feb 23, 2010

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ASX ANNOUNCEMENT

CHARTER HALL ANNOUNCES 1H FY10 RESULTS

Wednesday, 24 February 2010

1H FY10 IN SUMMARY

• Underlying Earnings of $14.2 million and Underlying EPS of 2.02 cents per security (cps)

• – 1H FY10 distribution of $11.2 million representing 1.60cps

• Assets Under Management $3.0 billion, down from $3.4 billion at 30 June 2009

• Net tangible assets (NTA) of $0.60 per security

• Gearing of 12%[2]

KEY FINANCIALS

	1H FY10	1H FY09
Revenue	$27.2m	$31.9m
AIFRS loss after tax	($65.8m)	($16.6m)
Underlying Earnings1	$14.2m	$20.9m
Underlying EPS1	2.02cps	4.80cps
DPS	1.60cps	3.96cps
	31 Dec 09	30 June 09
NTA	$0.60	$0.71
Gearing	12%2	2%
Assets Under Management	$3.0bn	$3.4bn

EARNINGS

Charter Hall has delivered Underlying Earnings for the six month period to 31 December 2009 of $14.2 million, representing Underlying EPS of 2.02cps.

1 Excluding fair value adjustments, gains and losses on sale, non-cash tax benefits and non cash expenses.

2 Includes consolidation of the Core Plus Retail Fund (CPRF). CHC drawn debt balance excluding CPRF is nil. Calculated as total borrowings net of cash divided by total tangible assets net of cash.

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The earnings were generated from revenue of $27.2 million, down from $31.9 million in the previous corresponding period. The reduction in Underlying Earnings from $20.9 million to $14.2 million was primarily due to lower income from co-investments, base fees and development management fees.

The Group recorded a statutory loss after tax of $65.8 million. This loss is after a loss on sale of $10.5 million and non-cash fair value adjustments of $68.3 million, comprising a $68.9 million decline in value of investments in Charter Hall managed funds[2] and a $0.6 million increase in the valuation of the mark to market of financial derivatives. These non-cash movements do not impact the operating cash flow or Underlying Earnings of the Group[3] . The Group reported operating cash flow of $11.3 million for the period, slightly above the 1H FY10 distribution of $11.2 million.

INVESTMENT FUNDS

Valuations have decreased over 1H FY10 with cap rates softening by 33bps on average. An increase in demand and transaction evidence suggests that property values have now bottomed in Australia.

Charter Hall has now largely completed the asset sale program for the managed investment funds. The Group believes that the managed funds, with long weighted average lease expiries (WALE), high fixed annual rent increases and high quality tenants are well positioned to recover strongly as the market improves.

DEVELOPMENT

Charter Hall’s active development pipeline comprises six projects with an end value in excess of $500 million undertaken in Charter Hall Opportunity Fund 4 (CHOF4) and Charter Hall Opportunity Fund 5 (CHOF5). In addition, the Group’s managed funds control a $288 million landbank.

During 1H FY10, Charter Hall has substantially completed the development of four of the six active projects in the Opportunity Funds with leasing substantially progressed. In addition, Charter Hall has completed the active development projects undertaken in the Core Plus series of funds.

CHOF4 has sold two office assets during the period. A 50% interest in 275 George Street, Brisbane was sold for $166 million, representing a cap rate of 6.97% and achieving a 1.3 times equity multiple for investors. The remaining 50% interest in 275 George Street is held by Charter Hall’s Core Plus Office Fund. CHOF4 also sold a 50% interest in Alluvion, Mounts Bay Road in Perth for $95 million, representing a cap rate of 7.58% and achieving an equity multiple of 1.5 times.

2 Includes $15.3 million impairment of goodwill as result of consolidation of CPRF

3 In addition to the loss on sale and the fair value adjustments, a number of further adjustments are made to derive underlying earnings from AIFRS reported profit, including the backing out of a tax benefit and adding back the non cash LTI expenses.

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The sale of Alluvion and 275 George Street underlines Charter Hall’s ability as a property specialist to deliver positive returns despite the extremely challenging conditions over the last two years.

CHOF5 has recently committed to its first new development project in 18 months. Lacrosse is a residential development in Melbourne’s Docklands precinct with an expected completion value of $165 million. Equity in CHOF5 has now been more than 90% allocated. The equity raising for Charter Hall’s sixth opportunity fund, CHOF6, is targeted for calendar year 2010.

Charter Hall’s 50% interest in industrial developer CIP contributed $1.5 million to the Group’s net profit for 1H FY10. The CIP business has maintained profitability through the downturn, despite challenging market conditions. The re-emergence of investor demand for long WALE investment assets augurs well for both the Opportunistic and CIP development business models.

BALANCE SHEET AND CAPITAL MANAGEMENT

Total Group net assets decreased from $494 million at 30 June 2009 to $417 million. NTA per security has reduced from $0.71 to $0.60. This reduction is primarily due to a reduction in value of Charter Hall’s investments. As a result of the Core Plus retail Fund (CPRF) consolidation, the Group’s debt balance increased from $14.2 million at 30 June 2009 to $90.2 million. The drawn balance of $90.2 million relates wholly to CPRF debt that is secured only by retail assets in that fund. The debt is non-recourse to CPRF investors, including Charter Hall.

Charter Hall’s gearing at 31 December 2009 was 11.9%, with look through gearing at 33.5%. The Group has an undrawn “headstock” debt facility of $50 million and cash and other liquid assets of $23 million.

ACQUISITION OF MACQUARIE REAL ESTATE PLATFORM

Charter Hall announced the acquisition of the majority of Macquarie’s real estate fund management platform on 12 February 2010. Charter Hall is currently raising $305 million via a placement (including an $85 million placement to Macquarie as part consideration for the management rights) and entitlement issue to fund the acquisition. The settlement of the placement and the institutional and early retail component of the entitlement issue will take place on 26 February 2010. Charter Hall will settle the first part of the platform acquisition on 1 March 2010 with the balance scheduled to settle following the completion of the final retail component of the entitlement offer on 15 March 2010.

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The Group believes this strategic acquisition towards the low point in the real estate cycle will deliver long term value for securityholders. Charter Hall expects that improving real estate fundamentals will drive growth for Charter Hall going forward in addition to the acquisition FY11 EPS accretion of approximately 18%.

OUTLOOK

The outlook for the Group has improved over the last six months. A combination of increased demand and transaction activity indicates property values have likely bottomed in Australia. Access to debt capital has improved and development fundamentals are also improving. As outlined above, Charter Hall intends to launch the equity raising of CHOF6 within the next two months and is targeting to complete this raising during calendar year 2010.

Charter Hall confirms FY10 Underlying EPS guidance of 4.1cps (provided on 12 February 2010) and DPS guidance of 3.00cps to 3.20cps.

As previously indicated, Charter Hall will pay a distribution of 1.60cps for the half year ending 31 December 2009. The distribution for 2H FY10 is therefore forecast to be in the range of 1.40cps to 1.60cps.

Please refer to the accompanying Appendix 4D and the Half Year Results Presentation for a more comprehensive description and analysis of the Group’s 1H FY10 results.

ENDS

David Southon David Harrison Jo Stiles Joint Managing Director Joint Managing Director Marketing & Communications Manager 0418 479 155 0412 259 751 0414 499 199 davids@charterhall.com.au davidh@charterhall.com.au jos@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, Brisbane, Perth, Adelaide and Auckland. Established in 1991 and listed on the ASX in 2005 as a stapled security under the code CHC, Charter Hall Group combines Charter Hall Limited with Charter Hall Property Trust, which will now own and/or manage over $10 billion in real estate assets. The Charter Hall Group has achieved a solid track record across its activities demonstrating a 19 year history of managing wholesale and retail capital, making it one of Australia’s leading property fund managers. Charter Hall’s success has been underpinned by a highly skilled and motivated management team with diverse expertise across property sectors and risk-return profiles.

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