CHARTER HALL GROUP — Interim / Quarterly Report 2019

Nov 6, 2018

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ASX Release

Charter Hall Market Update and Folkestone Acquisition Completion

7 November 2018

Charter Hall Limited ACN 113 531 150 Charter Hall Funds Management Limited ABN 31 082 991 786 Level 20, No.1 Martin Place Sydney NSW 2000 GPO Box 2704 Sydney NSW 2001 T +61 2 8651 9000 F +61 2 9221 4655 www.charterhall.com.au

Charter Hall Group (ASX: CHC) (the Group) today announces a strong start to FY19 with updated FUM, equity flow, transactions and leasing activity, along with the successful completion of the Folkestone Limited acquisition. Key highlights for the period include:

Operational highlights

• Completed $205 million acquisition of Folkestone Limited, which comprises $1.6 billion of FUM

• Combined with a further $1.4 billion of net acquisitions, FUM has grown to $26.4 billion

• Increased portfolio of 779 properties across the office, industrial, retail and social infrastructure sectors comprising a weighted average lease expiry (WALE) of 7.7 years, occupancy of 97.9% and weighted average capitalisation rate (WACR) of 5.76%[1]

• 156 leasing deals executed across 172,000sqm of space in the office, industrial and retail sectors

• Total development pipeline of 37 office, industrial and retail projects with an on-completion value of $3.7 billion, de-risked through pre-leases and fixed price building contracts

Equity Flow

• Continued momentum in equity flows with $918 million gross equity raised across the Group YTD

• $641 million in equity raised across wholesale pooled funds and partnerships. Strong equity flows driven by recent raisings in CPOF and CPIF

• Direct Funds have continued to maintain their market leading status with a further $217 million raised across four open ended funds

• CLW successfully complete a $60 million institutional placement in October

• Property Investment Portfolio increased by 5.5% to $1.8 billion

Funds Under Management

• 13.8% growth in funds under management (FUM) to $26.4 billion across the office, industrial, retail and social infrastructure sectors

Charter Hall’s Managing Director and Group CEO, David Harrison said: “We are pleased to report both deployment and replenishment of investment capacity via new equity inflows, whilst retaining the resilience of our property portfolio evidenced by maintaining a 7.7 year WALE and 5.76% cap rate, high occupancy and high quality tenant customer base. Significant leasing activity across our cross-sector platform continues to de risk portfolios and enhance returns from value add development activity for the benefit of fund investors and securityholders.”

1 WALE, Occupancy and WACR as at 30 September

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Property Investment Performance

During the period, the Group’s Property Investment portfolio increased by $93 million or 5.5% to $1.8 billion. Occupancy remains strong at 97.4% and the WALE stable at 7.2 years. The Group’s Property Investments portfolio has expanded to include a $108 million investment into social infrastructure via the Folkestone Education Trust (ASX:FET) co investment, to be re-named the Charter Hall Education Trust. Following completion of the Folkestone Limited acquisition, Charter Hall has secured a 15.3% stake in FET.

Continued Property Funds Management Growth

As at 7 November, Group FUM has increased by 13.8%. During the period, the $1.6 billion Folkestone acquisition along with $1.4 billion of net acquisitions and $0.2 billion of capex saw the Group’s managed funds grow to $26.4 billion. There were minimal revaluations during the quarter, with market evidence pointing to further tightening of cap rates, particularly in the office sector.

Charter Hall continues to leverage its highly qualified and experienced in-house development team, providing its full suite of integrated property services to originate 37 office, industrial and retail projects with an on completion value of $3.7 billion, de-risked through pre-leases and fixed price building contracts. The Group has also successfully completed the acquisition of another high-quality development asset at 555 Collins St, Melbourne for the Charter Hall Prime Office Fund (CPOF) and announced another Education development in partnership with Western Sydney University.

Folkestone Acquisition completed

The Group also announces today the successful completion of the scheme implementation agreement for Charter Hall to acquire Folkestone Limited for a total consideration of $205 million, funded by cash from available investment capacity.

Charter Hall’s Managing Director and Group CEO, David Harrison said: “We are very pleased to have successfully completed this transaction and we look forward to the Folkestone team joining Charter Hall and the complementary skills they will bring as we work together to grow the funds management platform. I would like to thank Greg and his executive team, the Folkestone Board and investors for their support.”

The transaction grows Charter Hall’s funds under management (FUM) by $1.6 billion. The acquisition also sees the Group grow its investable universe into the social infrastructure and early learning sector.

Strategy and Outlook

Based on no material change of current market conditions and the completion of the Folkestone transaction, FY19 guidance is for 8-10% growth in post-tax operating earnings per security over FY18.

The distribution payout ratio is expected to be between 85% and 95% of operating earnings per security post-tax.

About Charter Hall

Charter Hall Group (ASX:CHC) is one of Australia’s leading fully integrated property groups, with over $26.4 billion of high quality, long leased property across the office, retail, industrial and social infrastructure sectors. The Group has offices in Sydney, Melbourne, Brisbane, Adelaide and Perth and oversees a portfolio of 779 properties that is more than 5.4 million square metres in size. The ASX100 Group has over 27 years’ experience managing and investing in high quality property on behalf of institutional, wholesale and retail clients.

Charter Hall’s success is driven by our focus on our tenant and investor customers. We look to partner with our tenants, growing with them and helping meet their property needs. We invest alongside our capital partners, creating value and generating superior investment returns together. Our $3.7 billion development pipeline creates new assets for our investors, improving future returns, while creating opportunities for our tenant partners to expand and adapt their businesses. Sustainability and innovation are key elements of our approach. By ensuring our actions are innovative, commercially sound and make a difference to our people, customers and the environment, Charter Hall makes a positive impact for its investors, the community and the Group.

For further information, please contact For media enquiries, please contact For investor enquiries, please contact David Harrison Angus Booth Philip Cheetham Managing Director and Group CEO Head of External Affairs & Head of Listed Investor Relations Charter Hall Communications Charter Hall T +61 2 8651 9142 Charter Hall T +61 2 8651 9214 david.harrison@charterhall.com.au T +61 2 8651 9223 philip.cheetham@charterhall.com.au angus.booth@charterhall.com.au

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November 2018

Charter Hall Group Market Update

Only about Children, Hawthorn, VIC

Charter Hall Group I Market Update

Group Highlights

Our Strategy

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Access

Accessing equity from listed, wholesale and retail investors

We use our property expertise to access, deploy, manage and invest equity in our core real estate sectors – office, retail, industrial and social infrastructure – to create value and generate superior returns for our customers.

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Deploy

Manage

Invest

Creating value through attractive investment opportunities

Funds management, asset management, leasing and development services

Investing alongside our capital partners

YTD FY19

GROSS EQUITY RAISED

$918m

FY18

GROSS EQUITY RAISED $1.7bn

FUM GROWTH

INCREASE IN PI TO $1.8bn $93m93mm 5.5%%

GROSS FUM GROWTH INCREASE IN PI TO $1.8bn TRANSACTIONS $3.2bn $93m93mm 5.5%% $2.2bn ACQUISITIONS DIVESTMENTS ADDITIONAL PROPERTIES $1.8bn $0.4bn 449 FOLKESTONE $1.6bn GROSS FUM GROWTH INCREASE IN PI TO $1.7bn TRANSACTIONS $3.4bn $179m 11.7% $3.5bn ACQUISITIONS DIVESTMENTS PROPERTIES TOTAL PROPERTY INVESTMENT RETURN[1] $2.5bn $1.0bn 330 12.3%

1. Calculated as distributions received from funds plus growth in investment value divided by the opening investment value of the PI portfolio. Excludes investments held for less than one year and investments in Direct Funds.

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Charter Hall Group I Market Update

Group Highlights

Operational Highlights[1]

Office

Industrial

Retail

55 LEASING TRANSACTIONS EXECUTED ACROSS 65,000sqm

10 LEASING TRANSACTIONS EXECUTED ACROSS 97,000sqm

91 LEASING TRANSACTIONS EXECUTED ACROSS 10,000sqm

130 LONSDALE 66%

PRE-LEASED[2]

$1.2bn GROSS TRANSACTIONS

$419m $497m GROSS TRANSACTIONS GROSS TRANSACTIONS

7 DEVELOPMENT PROJECTS COMPLETION VALUE $1.8bn

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DEVELOPMENT PROJECTS COMPLETION VALUE $1.6bn

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DEVELOPMENT PROJECTS DEVELOPMENT SPEND $325m

1. Leasing and Development as at 30 September. Transactions as at 7 November. 2. Includes Heads of Agreement

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Charter Hall Group I Market Update

Property Funds Management

Group Funds Management Portfolio[1]

	Portfolio Value	No. of	Gross Income	WALE	Occupancy	WACR
	($bn)	Properties	($m)	(years)	(%)	(%)
Nov 18	26.4	779	1,759	7.7	97.9	5.76
Jun 18	23.2	330	1,634	7.7	98.1	5.74

Diversification by equity source

Asset type diversification

WALE by sector

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Unlisted
Retail
Equity
16%
Listed
Funds $26.4bn
20%
Unlisted
Wholesale
Equity
64%
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Social Other
Infrastructure 1% 9.5 9.6
5%
7.9
Industrial
24%
6.5
Office
$26.4bn 46%
Shopping
Centre Retail
14%
Long WALE
Office Retail Social Industrial
Retail
Infrastructure
10%
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1. Portfolio value and number of properties as at 7 November. All other values as at 30 September.

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Charter Hall Group I Market Update

Property Funds Management

Funds Under Management Growth

Continued strong FUM growth – up 13.8% YTD

Funds under management movement ($bn)

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$26.4bn
$1.6bn
$1.8bn ($0.4bn) $0.2bn
$0.0bn
$23.2bn
Jun-18 Acquisitions Disposals Revaluations Capex Folkestone Nov-18
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Funds under management by equity source ($bn)

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Unlisted Wholesale Equity
Listed Funds
Unlisted Retail Equity
$26.4bn
$4.2bn
$23.2bn
$2.9bn
$19.8bn $5.4bn
$4.4bn
$17.5bn $2.8bn
$2.5bn
$4.1bn $16.8bn
$13.6bn $15.9bn
$2.5bn
$11.5bn $1.9bn
$12.9bn
$12.4bn
$9.9bn $1.7bn $2.2bn
$1.7bn
$2.0bn $9.5bn
$1.8bn
$7.8bn
$6.5bn
Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Nov-18
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Charter Hall Group I Market Update

Property Funds Management

Transactional Activity

Very strong transactional activity with gross transactions YTD of $2,164m

• All equity sources continue contributing to transaction volumes

• Gross transactions YTD does not include Folkestone acquisition

YTD FY19	Office	Industrial	Long WALE Retail	Shopping Centre Retail	Total
Acquisitions	1,052m	335m	293m	83m	1,764m
Divestments	(195m)	(84m)	(38m)	(83m)	(400m)
Net transactions	857m	251m	255m	-	1,363m
Gross transactions	1,247m	419m	331m	166m	2,164m
FY18	Office	Industrial	Long WALE Retail	Shopping Centre Retail	Total
Acquisitions	1,528m	371m	293m	333m	2,525m
Divestments	(623m)	(22m)	(38m)	(337m)	(1,020m)
Net transactions	905m	349m	255m	(4m)	1,505m
Gross transactions	2,151m	393m	331m	670m	3,545m

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Charter Hall Group I Market Update

Property Funds Management

Equity Flows[1]

Continued strong momentum in equity flows with $918m gross equity raised year to date

• Wholesale equity – CPIF and CPOF closed capital raisings with strong support from existing and new investors

• Direct Funds have continued to maintain their market leading status with a further $217m raised year to date across the four open ended funds

• Larger groups looking for co-invest and Partnership opportunities

• CLW successfully completed a $60m institutional placement in October

($m)	FY16	FY17	FY18	YTD FY19
Wholesale Pooled Funds	606	776	649	564
Wholesale Partnerships	467	217	322	77
Listed Funds	76	988	77	60
Direct Funds	318	355	653	217
Gross equity raised	1,467	2,336	1,701	918
Net equity raised	1,099	1,689	1,487	874

1. Equity flows includes equity received or returned only and excludes undrawn equity commitments

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Charter Hall Group I Market Update

Property Investment

Property Investment Portfolio

	Portfolio Value	No. of	WALE	Occupancy	WARR	WACR
	($m)	Properties	(years)	(%)	(%)	(%)
Nov 18	1,799	727	7.2	97.4	3.6	5.81
Jun 18	1,706	298	7.2	97.9	3.6	5.80

Diversification by Property Investment

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FET
CHOT
6%
14%
CLW
11%
DCSF
2%
DIF4
CPOF
2%
14%
CLP
8% $1,799m
CCT
1%
SSF
CPIF 2%
7% BSWF
6%
LWHP
5%
CQR LWIPs
17% Wholesale 1%
SC
6%
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Diversification by sector

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Social
Infrastructure
6%
Industrial
22%
Office
39%
$1,799m
Shopping
Centre Retail Long WALE
23% Retail
10%
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Charter Hall Group I Market Update

Additional Information

Contact Information

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David Harrison Managing Director & Group CEO Charter Hall Group

T: +61 2 8651 9142 E: david.harrison@charterhall.com.au

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Russell Proutt Chief Financial Officer Charter Hall Group

T: +61 2 8651 9493

E: russell.proutt@charterhall.com.au

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Sean McMahon Chief Investment Officer Charter Hall Group

T: +61 2 8651 9147

E: sean.mcmahon@charterhall.com.au

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Philip Cheetham Head of Listed Investor Relations Charter Hall Group

T: +61 2 8651 9214

E: philip.cheetham@charterhall.com.au

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Charter Hall Group I Market Update

Additional information

Disclaimer

IMPORTANT NOTICE & DISCLAIMER

This presentation has been prepared by Charter Hall Funds Management Limited ACN 082 991 786)) (together, with its related bodies corporate, the Charter Hall Group).

This presentation has been prepared without reference to your particular investment objectives, financial situation or needs and does not purport to contain all the information that a prospective investor may require in evaluating a possible investment, nor does it contain all the information which would be required in a product disclosure statement prepared in accordance with the requirements of the Corporations Act 2001 (Commonwealth) (Corporations Act). Prospective investors should conduct their own independent review, investigations and analysis of the information contained in or referred to in this presentation and the further due diligence information provided.

Statements in this presentation are made only as of the date of this presentation, unless otherwise stated. Charter Hall Group is not responsible for providing updated information to any prospective investors. Any forecast or other forward looking statement contained in this presentation may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct. There are usually differences between forecast and actual results because events and actual circumstances frequently do not occur as forecast and these differences may be material.

In making an investment decision, prospective investors must rely on their own examination of the Charter Hall Group, and any other information they consider relevant. All information is provided as indicative only. This presentation is provided to each prospective investor on the condition that it is strictly confidential and is for the sole use of prospective investors and their advisers. It must not be provided to any other party without the written consent of Charter Hall Group which it may withhold in its absolute discretion.

None of Charter Hall Group, its officers, employees, advisers or securityholders (together, the Beneficiaries) guarantee or make any representation or warranty as to, or take responsibility for, the accuracy, reliability or completeness of the information contained in this presentation. Nothing contained in this presentation nor any other related information made available to prospective investors is, or shall be relied on, as a promise, representation, warranty or guarantee, whether as to the past, present or the future. To the extent permitted by law, the Beneficiaries disclaim all liability that may otherwise arise due to any information contained in this presentation being inaccurate, or due to information being omitted from this document, whether by way of negligence or otherwise. Neither the Beneficiaries nor any other person guarantees the performance of an investment with or managed by Charter Hall Group.

All information contained herein is current as at 7 November 2018 unless otherwise stated. All references to dollars ($) are to Australian dollars, unless otherwise stated.

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Sydney Head Office Level 20, No.1 Martin Place Sydney, NSW, 2000 T: +61 2 8651 9000

Charter Hall Group I Market Update

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Melbourne

Level 12, 570 Bourke Street Melbourne VIC 3000

T: +61 3 9903 6100

Brisbane

Level 22, Northbank Plaza 69 Ann Street Brisbane QLD 4000 T: +61 7 3228 2000

Perth

Level 5, St Georges Square 225 St Georges Terrace Perth WA 6000 T: +61 8 9269 5900

Adelaide

Level 2, 80 Pirie Street Adelaide SA 5000 T: +61 8 8417 5900

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www.charterhall.com.au