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CHARTER HALL GROUP Investor Presentation 2011

May 17, 2011

64645_rns_2011-05-17_701353da-2695-424b-99e7-d3ccc1da1753.pdf

Investor Presentation

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Charter Hall Group

Investor Day 2011

18 May 2011

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Charter Hall Group

01 Opening Address David Southon Joint Managing Director

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Charter Hall Group

Fully integrated property group

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  • 20 years in business

  • Approx. 270 employees

  • Offices around Australia, and in Chicago (US), and Warsaw (Poland)

  • Approx. 300 assets

  • $10.4bn funds under management

3

Our investment proposition

  • Our competitive advantage

  • Access to off balance sheet equity

  • Dynamic business model

  • Creation of value through in-house property skills

  • Our core competencies

  • Experienced management team

  • Strong property expertise across all sectors

  • Industry relationships

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4

Dynamic business model

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Charter Hall Group (ASX:CHC)

Stapled Security

Charter Hall Property Trust (CHPT)

Charter Hall Limited (CHL)

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Property Investment Property
Total co-investments: $605m Funds Management
EBITDA: 60% EBITDA: 33%
$163m co-investment $283m co-investment $119m book value (intangible)
Wholesale Listed Funds
Unlisted Funds  Investment management
$3.2bn FUM $5.8bn FUM  Asset management
 Property management
$140m co-investment $19m investment  Development management
Retail Investor  Leasing services
Direct Property
Funds
 Transaction services
$1.5bn FUM $19m FUM
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Development Investment Total co-investments: $58m EBITDA: 7%

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$27m investment
CIP
50% interest
$31m co-investment
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Wholesale Opportunistic
Investments in CHOF4 and CHOF5
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Note: FUM as at 31 December 2010, co-investments as at 31 March 2011

5

Experienced management team

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Strong management and property services capabilities

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David Harrison / David Southon
Joint Managing Directors
Cedric Fuchs
Chief Financial Officer
Executive Director
Wholesale Investment
Charter Hall Office REIT Charter Hall Retail REIT Opportunistic Funds Mgmt Unlisted Retail
Funds Mgmt
Adrian Taylor Steven Sewell Michael Winnem Richard Stacker
Andrew Glass
Shared services
Asset management Leasing services Corporate finance Finance and treasury Corporate affairs Investor relations
Development services Property management Transactions HR IT Admin & support
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Approximately 270 employees

6

Strong property expertise across all core property sectors

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HIGHER RISK OPPORTUNISTIC DIVERSIFIED VEHICLES (Development) Charter Hall Opportunistic Fund 4 / Charter Hall Opportunistic Fund 5 CORE PLUS OFFICE VEHICLES INDUSTRIAL VEHICLES (70% Core 30% Enhanced) Core Plus Office Fund Core Plus Industrial Fund

CORE DIVERSIFIED VEHICLES INVESTMENTS Charter Hall Direct Property Fund / Charter Hall Diversified Property Fund Charter Hall Investment Funds (2 – 7) / Charter Hall Umbrella Fund OFFICE VEHICLES RETAIL VEHICLES INDUSTRIAL VEHICLES Charter Hall Office REIT Charter Hall Retail REIT Direct Industrial Fund No. 1 Martin Place Trust Direct Retail Fund LOWER RISK OFFICE RETAIL INDUSTRIAL

7

Business update

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  • Activities since half year results

  • Executed $75 million Group debt facility

  • Significant progress on a range of development projects

  • Progressing initiatives to reweight listed entities to Australia

  • Increased stake in CQO to strategic weighting of 10%

  • Ongoing capital raising efforts – wholesale and retail

  • Earnings and distribution guidance reconfirmed

  • FY11 operating EPS guidance of 20cps represents growth of approx. 22% on FY10

  • Estimated FY11 DPS of 16cps represents growth of approx. 25% on FY10

8

Key business goals

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  • Recycling assets to optimise earnings and total investor returns

  • Continue to re-weight FUM platform to Australia

Short term < 1 year

  • Utilise in-house skills to reposition existing assets and enhance portfolio values

  • Additional balance sheet allocation to incubate development opportunities and access scale through partnering with external capital

  • Leverage off development expertise to create value and drive development management revenue

Medium term 1 to 2 years

  • Enhance return on equity through recycling co-investment capital

  • Grow FUM through existing and new products that satisfy investor appetite

  • Reducing number of funds under management but increasing the value of individual assets within key funds

  • Improve funds management business profitability through margin expansion, both fee revenue growth and cost efficiencies

Long term > 2 years

  • Establish fund platforms that grow organically via accretive acquisitions

  • Use scalability to continue to drive EBIT margin expansion for CHC  Maintain and enhance reputation as a leading fully integrated property group amongst the investment community

9

Order of the day

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Presentations on key business units

  • Wholesale unlisted funds – Andrew Glass

  • Retail investor funds – Richard Stacker

  • Charter Hall Office REIT update – Adrian Taylor

  • Charter Hall Retail REIT update – Steven Sewell

  • Asset and property management – Craig Newman

  • Development management – Chris Chapple

  • Sustainability – Claire Orton

  • Charter Hall Opportunistic Funds – Michael Winnem

  • CIP – Paul McKenna

Property tour

  • No.1 Martin Place, CitiCentre, 68 Pitt Street, Home HQ North Shore and Little Bay

  • 20 year anniversary dinner

  • Quay, Overseas Passenger Terminal, Circular Quay West

10

Charter Hall Group 02 Wholesale Investment Funds Andrew Glass Head of Wholesale Investment Funds Management

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Wholesale Investment Funds

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  • Total assets in the superannuation sector of $1.32 trillion (Aust ranked 4[th] globally, Mercer)

  • Latest APRA statistics highlight quarterly contributions of $13.1 billion received by industry, corporate and public sector funds (Dec qtr 2010)

  • Charter Hall sources and manages a large cross-section of pension capital (both domestic and offshore)

  • Industry Superannuation Funds Corporate Superannuation Funds

  • Public Sector Super Funds Charities and Endowment Funds

  • Sovereign Wealth Funds Global Fund-of-fund Managers

  • Charter Hall manages and co-invests in two sector specific, unlisted wholesale funds Core Plus Office Fund (CPOF) and Core Plus Industrial Fund (CPIF) on behalf of pension fund managers.

  • Core Plus strategy provides the flexibility to enhance returns through repositioning and redeveloping assets (up to 30% of portfolio) - leveraging of Charter Hall’s core skills.

  • At present, majority of our Core Plus portfolio comprises fully income producing assets – effectively a core product with higher gearing in a recovering market

  • Charter Hall also manages pension capital with demand for direct real estate exposure but without the inhouse property capability.

12

Wholesale Investment Funds

Core Plus Office Fund (CPOF)

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Overview

  • Launched in 2006 to hold A-grade office assets in CBD locations across Australia

  • $1.4bn in gross assets across 15 properties – exposure to all major capitals cities

  • Fund managed by Chris Forbes (joined in 2006)

  • Investment mandate allows for up to 30% exposure to redevelopment or repositioning projects. Currently, 100% of the portfolio core, with 5 assets held for redevelopment

  • CPOF established to target total return on unitholder’s equity of 12% (after all fees)

  • CHC co-investment stake at $110m (16% holding) – significant alignment of interest

  • Asset management fee of 45bps on Gross Asset Value

  • Waterfall performance fee structure: 15% of excess return above 11% and 20% of excess return above 13%; no performance fees are forecast for FY11

  • CPOF is also serviced in-house by Charter Hall’s property management, development management, leasing and facilities management teams at pricing benchmarked to market rates

13

Wholesale Investment Funds

Core Plus Office Fund (CPOF)

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Capital raising

  • Fund opened to new capital in 3Q 2010 – supported by asset consultants

  • Purpose of raising: acquire new assets at or near the bottom of the valuation cycle – de-leveraging completed through asset sales

  • From current unit pricing, medium term net equity IRR in excess of 13% with lower gearing at 40%

  • Commitments of $95m from existing and new investors

  • New additional equity committed/under due diligence

14

Wholesale Investment Funds

Core Plus Office Fund (CPOF)

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Recent acquisitions

Proceeds raised have been applied to acquire:

  • Remaining 50% in 570 Bourke street, Melbourne ($76.5m); and

  • 50% interest in Brisbane Square ($159m)with joint venture partner TelstraSuper

Brisbane Square

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  • Off-market acquisition of a new core office asset (57,000sqm)

  • Building fully leased to government institution (54%) and domestic bank (45%) reflecting an 11 year WALE

  • Passing income 40% below market rent and purchase price 30% below replacement cost

  • Joint venture with TelstraSuper on a 50:50 basis

  • Charter Hall team completed full due diligence on behalf of the joint venture in a highly compressed time frame.

  • Expected property IRR in excess of 200bps above core total return benchmark

  • Purchase price at more than 10% below independent value

15

Wholesale Investment Funds Core Plus Industrial Fund (CPIF)

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Overview

  • Launched in 2007 to own modern logistics facilities on long term leases

  • $500m in gross assets across 16 properties – exposure to all major capital cities

  • Fund managed by Paul Ford (joined in 2006)

  • Investment mandate allows for up to 30% exposure to redevelopment or repositioning projects.

  • Portfolio comprises core assets, two fully pre-committed assets under construction ($135m end value) and two land holdings ($15m)

  • CPIF established to target total return on unitholder’s equity of 11%

  • CHC co-investment stake at $55m (21% holding) – significant alignment of interest

  • CIP provides ongoing access to a strong deal-flow pipeline

  • Fund management fee of 45bps on Gross Asset Value

  • Waterfall performance fee structure: 15% of excess return above 10% and 20% of excess return above 12%

  • CPIF is serviced in-house by Charter Halls’s property management, development management and leasing services at pricing benchmarked to market rates

16

Wholesale Investment Funds Core Plus Industrial Fund (CPIF) Capital raising

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  • Fund opened to new capital in 3Q 2010 – supported by asset consultants

  • Purpose of raising: to acquire new assets at or near the bottom of the valuation cycle – no de-leveraging was required as fund retained uncalled equity capacity

  • From current unit pricing, medium term net equity IRR in excess of 14% with lower gearing at 38%. Weighted Average Lease Expiry in excess of 11 years

  • New domestic investor has committed $60m and new offshore investor $13m – may increase exposure to $20m

  • Total of $80m of new equity committed/process of top up since opening

17

Wholesale Investment Funds

Core Plus Industrial Fund (CPIF)

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Recent acquisitions

Proceeds raised have been applied to acquire:

  • 24 Muir Road, Chullora on a forward funded basis ($51m); and

  • Woolworths Regional Distribution Facility on a forward funded basis ($75m)

24 Muir Road, Chullora

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–

Acquired vacant industrial site (5.4ha) located in core logistics precinct in Sydney (off-market)

Site pre-committed on 13 year lease to Volkswagen Australia (26,650sqm) as new head office and distribution centre

Significant stamp duty savings achieved through forward funding structure

Transaction sourced through CIP

Purchase price at 8.7% passing yield versus 8.0% independent valuation cap rate

18

Wholesale Investment Funds Third Party mandate business

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Overview

  • Larger domestic pension funds have expressed demand for holding real estate assets directly

  • Costs involved in establishing an in-house property team are prohibitive

  • Offshore investors who have in-house resources do not want to risk managing assets from a distance

  • Charter Hall provides a cost effective solution for these investors through transaction sourcing, asset management, property management, leasing, facilities management and finance facilitation

  • Fee structures are individually negotiated for each mandate. Can be a combination of base fees, fee for service or a performance fee approach.

  • This business seen as a growing contributor to earnings going forward and is not capital intensive. At present, Charter Hall provides funds management services provided across $563m of third party assets.

19

Wholesale Investment Funds Third Party mandate business

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275 George Street, Brisbane

  • 41,000sqm prime CBD office building (5 Star Green Star rating)

  • Developed by Charter Hall Opportunity Fund 4.

  • 50% sold to K-REIT, Singapore for $166m in Feb 2010

  • Charter Hall continues to provide property and asset management services

  • Balance held by CPOF

20

Wholesale Investment Funds

Third Party mandate business

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Investor Trends - Australia

  • Wholesale investors: total return focus with five to ten year investment horizon.

  • Holding illiquid - due diligence critical and generally underwritten by specialist asset consultant research.

  • Domestic pension capital has moved back into unlisted funds

  • Equity flows have been to core funds that provide relatively low risk and low returns:

  • No debt or very low levels of gearing (ie 0% to 25%)

  • High quality asset base (ie premium office buildings, regional shopping centres, large scale industrial portfolios)

  • Large value portfolio (ie $3bn+) which is insensitive to development activity

  • Core Plus strategy provides benefits of core with enhanced returns from repositioning opportunities or de-risked development projects

  • Charter Hall’s core plus strategy continues to be supported by the key asset consultants and pension capital

  • Equity flows will continue to cycle into the higher returns offered by the Core Plus series of funds.

21

Wholesale Investment Funds

Third Party mandate business

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Investor Trends - Offshore

  • Offshore groups are “first movers” across the pool of pension capital

  • Offshore fund-of-fund managers most active offshore investor group in Australian unlisted funds.

  • Fund-of-fund groups actively engaged on the CPOF and CPIF raisings. Require total return in excess of core to cover their own management fees and (in some cases) foreign exchange hedging costs.

  • Fund-of-fund groups also support a relatively higher level of gearing (ie 35% to 45%) in a rising market.

  • Within the Asian region, Australia continues to offer the best mix of:

  • property transparency rule of law limited capital flow restrictions

  • – - high quality pool of service providers market driven rents and values

  • – - stable banking sector favourable tax treatment

  • High Australian dollar has mixed impact but investors requiring full foreign exchange hedging have deferred investment. Sizeable universe who will continue to invest on the basis of global diversification or a flexible mandate.

  • Charter Hall well positioned to capture offshore equity flows in core plus funds and/or third party mandate business

22

Charter Hall Group

03

Retail investor funds Richard Stacker CEO, Charter Hall Direct Property

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Charter Hall Direct Property

Overview

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Charter Hall Direct Property Management Ltd

Funds under under under under management
$1.5 billion
Number of Funds
13

  • Retail investors benefit from the Group’s:

  • Highly experienced property specialists

  • Pipeline of investment grade property

  • Focus on quality assets and tenants

  • Products suitable for investors seeking income and some growth

  • Self managed super funds

  • Retirees

  • Wealth Accumulators

  • High net worth individuals

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130 Stirling Street, Perth, WA

24

Charter Hall Direct Property

Retail Investor Funds - Business/Fund Objectives

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  • Providing educational and practical strategies for advisers and their investors in making portfolio and lead the unlisted property sector by investment decisions around property

  • Provide retail investors access to Institutional quality unlisted funds that provide:

  • Sector specific quality property

  • Strict investment mandates

  • Stable, tax deferred income and capital growth prospects from long leases

  • Conservative gearing (35-45%) timed for cycle

  • Clear liquidity / exit mechanism

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Sector Specific
Direct Industrial Fund
¹
Direct Retail Fund
¹
Direct Property Fund (office)
¹
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Closed end syndicates

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No.1 Martin Place Trust
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130 Stirling Street Trust

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Property securities

Property Securities Fund (AREITs)

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¹
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¹ refer to Lonsec disclaimer at back of presentation

25

Charter Hall Direct Property

Team/Product

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CEO
RETAIL INVESTOR FUNDS
Richard Stacker
FUND MANAGER FUND MANAGER FUND MANAGER HEAD OF RETAIL
PSF OFFICE/SYNDICATES INDUSTRIAL RETAIL DISTRIBUTION
Steven Bennett Richard Mason Campbell Aitken Ross Victor
DIF DRF
CHDPF
$110m (open)¹ $179m (open)
$500m (open)
$200m (target) $350m (target)
MARKETING &
COMMUNICATIONS
¹ subject to settlement expected Enza Capurso
late May 2011
1MPT
RELIANCE $230m
Andrew McGrath/
David Curtis
FINANCE
130 Stirling St Paul McPherson
& CHIFs 2-6
$180m
DPF
$170m PROPERTY
Trent James
CHUF
$150m
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26

Charter Hall Direct Property

Unlisted property funds – pre and post GFC

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Fund Manager1 2010 Ranking 2008 Ranking Total Assets
($M)		 % of Total
Industry
~~Centro Properties Group~~ 1 1 4,193 22%
~~Orchard Funds Limited (Group Rank~~ing) 2 2 1,817 10%
Charter Hall Funds Management Ltd 3 10+ 1,500 8%
~~Becton Investment Management Ltd~~ 2 4 3 1,355 7%
APGF Management Ltd 5 9 1,342 7%
~~Brookfield Multiplex Capital Management Ltd~~ 6 5 857 5%
Abacus Funds Management Ltd 7 8 851 5%
~~Peet Ltd~~ 8 7 795 4%
~~Stockland Trust Management Ltd~~ 9 10 602 3%
~~Investa Funds Management Ltd~~ 10 10+ 570 3%
~~Westpac Funds Management Ltd~~ - 6 567 -
~~Mirvac~~ - 4 0 -
Total Assets 13,882 72%

¹ Fund managers marked with a red line no longer active

2 Managed now by 360 Capital Group & Century Funds Management

27

Charter Hall Direct Property Accessing Self Managed Super Fund (SMSF) growth – the opportunity

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$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
$500bn
$1.26 trillion
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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  • Currently $1.26 trillion superannuation FUM

  • Forecast to grow to a 2020 balance of between $2.5 trillion to $3.0 trillion

  • SMSF fastest growing sector in superannuation space

  • 75% of equity inflows into our funds coming from SMSF

28

Charter Hall Direct Property

Longevity vs. Investment Risk

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  • Experiences like the Global Financial Crisis may cause some investors to favour defensive assets eg. term deposits

  • Investors may lock in losses by selling down growth assets at bottom of cycle

  • Low levels of growth assets remaining in a portfolio (shares and property) may be insufficient to provide growth in the retirement balance. This increases the longevity risk

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Female baby boomers have a 50% chance of living beyond age 90, and males have a 34% chance

Source: Beyond Three Score Years and Ten: Prospects for Longevity in Australia, Heather Booth and Leonie Tickle, Research School of Social Sciences, ANU, February 2004.

29

Charter Hall Direct Property

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Issues faced by Unlisted Retail Sector (post GFC)

Issues Lesson learned Outcome
Lower quality assets increased Diversified portfolio of investment
Asset quality income, valuation and refinancing grade assets;
risk Long term leases
Gearing adjusted for point in the Lower initial gearing levels 35-45%
Leverage cycle and room for valuations and reduced gearing as valuations
declines rise
Distributions Payout ratios >100% of income
unsustainable		 Payout ratios adjusted for asset
maintenance capital
Liquidity Unlisted core property is illiquid
and long term		 Limited or no liquidity with defined
exit mechanism
Manager capability Inappropriate actions and lack of
transparency breached investor
trust		 Managers removed, increased
transparency and ultimately
investor confidence in the sector
with fewer managers

30

Charter Hall Direct Property Funds launched to meet new retail investor requirements

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  • Term of investment and exit

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Strict investment mandate Target equity
Initial
2/3 years & portfolio
assets
Acquire quality portfolio size
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Liquidity
Asset management period
event
5 years
Potential disposal and return of (7 years)
capital where appropriate
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  • Timing of cycle attractive / investment grade assets

  • Strict investment mandate / maximum fund size

  • Conservative gearing (35-45% timed for cycle)

  • Long term income streams growing from rents

  • Return of capital if asset sold – no reinvestment

  • Seven year life with liquidity event (investor choice, no vote)

31

Charter Hall Direct Property

Example - Direct Industrial Fund

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Properties State Lettable Area
(sqm)		 Development
Cost		 Independent
Valuation		 Committed
Occupancy		 Initial Lease
Term		 Fixed Rent
Increases
Toll Fleet & Auto Logistics Centre VIC 6,318 $23.2 million $24.4 million 100% 15.0yrs 3.5%pa
Grace Worldwide Logistics Facility QLD 21,880 $28.6 million $29.6 million 100% 12.0yrs 3.5%pa
Australia Post Distribution Centre NSW 6,750 $15.0 million $15.5 million 100% 15.0yrs 2.9%pa
Coles Distribution (25% interest) WA 21,810* $42.0 million $42.0 million 100% 17.3yrs 2.7%pa
Total / Weighted Average 56,758 $108.3 million $111.5 million 100% 15.1yrs 3.1%pa

*Total area 100% interest sqm

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Toll Fleet & Auto Logistics Centre

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Grace Worldwide Logistics Facility

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Australia Post Distribution Centre

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Coles Distribution Centre

32

Charter Hall Direct Property

Outlook

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  • Business positioned and recognised as leading unlisted retail sector

  • Preferred partner for major dealerships and boutique planning firms for unlisted property allocation

  • Inflows into growth assets such as property, will increase as financial advisers and investors manage investment and longevity risk

  • Business well positioned to capture growth in SMSF and property allocation

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Longevity Investment
risk risk
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33

Charter Hall Group 04 Charter Hall Office REIT Adrian Taylor CEO, Charter Hall Office REIT

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Charter Hall Office REIT Team Structure

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Board
Majority Independent Directors with Independent Chairman
CEO
Chief Operating Officer Head of US Portfolio Management Chief Financial Officer
Charter Hall Group shared service
Financial management Asset & Facilities management Property management
Development management Leasing services Transaction services
Investor Relations Communications Marketing
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35

Charter Hall Office REIT Strategic initiatives enhancing earnings quality

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  • Agreed terms over 7.3% of portfolio since December 2010

  • Active Portfolio  Rent increases over 16% of the portfolio since December 2010

  • Management  WALE of 4.8 years  Sold interest in Japanese assets

  • Re-weight to  Advancing negotiations to exit Atrium, Berlin

  • Australia  Finance and asset initiatives to re-weight from the United States are progressing well

  • Since June, resolved almost $1.0b of debt, including:

  • Proactive – Australian Syndicate Refinance ($600 million)

  • Capital – United States Secured Credit Facility (US$275 million)

  • Management  Extended average debt maturity to 2.7 years  Cancelled redundant US interest rate swaps

36

Charter Hall Office REIT Outperformance since announcement of strategic initiatives

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  • CQO unit price increased by 45.8% between announcement of strategic initiatives in August and 16 May 2011, while the ASX 200 REIT Index performance was -3.1% in the same period

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3.60
OPERATIONAL AU DEBT
3.40
UPDATE FACILITY SIGNED
3.20 CONSOLIDATION US SECURED
FINALISED CREDIT FACILITY
3.00
STRATEGY SALE OF
ANNOUNCED JAPAN
2.80
50% SALE 171
COLLINS ST
2.60
2.40
2.20
Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11
CQO S&P A-REIT 200
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37

Note: ASX 200 REIT is relative to CQO unit price

Charter Hall Office REIT Active Portfolio Management

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  • Key achievements to 1 May 2011 include:

  • Leases agreed across 85,700 square metres since December 2010

  • 5 Queens Road, Melbourne – occupancy recently taken to 100%

  • NCR House, North Sydney – terms agreed over 2,629 square metres, occupancy now 96% from 90%

  • Promenade II, Atlanta – terms agreed over 61,326 square feet since 31 Dec, occupancy now 57% from 56%

  • SunTrust Center, Orlando – terms agreed over 51,466 square feet since 31 Dec or 71,334 for FY11 YTD, occupancy now up to 78%

  • One California Place, Los Angeles - Converted 272,878 square feet of LOI’s to signed leases

  • Included in the FTSE4Good Index for the fourth consecutive year

  • Portfolio WALE at 4.8 years

  • Portfolio occupancy at 86%

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38

Charter Hall Office REIT United States strategy update

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Current status

  • Bank of America Merrill Lynch (BoAML) has engaged with a broad range of parties seeking their interest in respect of the US portfolio

  • Invitation for Expressions of interests has closed with broad ranging submissions received for parts or all of the United States portfolio

  • The interest is currently being evaluated by BoAML, management and the Board

  • We will keep the market informed as appropriate

39

Charter Hall Office REIT Proactive Capital management

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  • Closed US$275m secured credit facility for five of its United States assets

  • Comprises $190m five-year term loan and $85m revolver facility for capital expenditure

  • Refinances loan maturities and One & Three Christina Center and 745 Atlantic Avenue

  • Enhances the REIT’s liquidity position through the US$85m revolver facility and ~US$88m net proceeds

  • Increases US weighted average debt maturity from 3.3 years to 3.9 years

  • Reduces the US average drawn all-in-cost from 5.6% to ~5.2%

  • All US debt now financed in local jurisdictions and increases natural hedging for US debt

  • One California Plaza debt refinancing

  • Short term extension to 1 July 2011

  • Finalising loan documentation

 Cancelled USD interest rate swaps

  • US over hedged interest rate position removed

  • Enhances future earnings

40

Charter Hall Office REIT Outlook

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  • Reconfirm FY11 operating earnings guidance to approximately 26 cpu[1 ] despite FX impact

CQO positioned to capitalise on economic and property recovery and CQO investors are expected to benefit from:

  • Continued execution of strategy

  • Strengthening capital markets and liquidity

  • Improved quality of earnings and REIT portfolio metrics

  • Our focus on improving occupancy and NOI of high quality Australian and United States portfolios to drive earnings and capital values

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1 Barring unforeseen circumstances

41

Charter Hall Group

05

Charter Hall Retail REIT Steven Sewell CEO, Charter Hall Retail REIT

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Charter Hall Retail REIT

Highlights

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Highlights
Since March 2010, acquired six properties valued at $265m1 at average initial
Reweighting to yield of 8.9%

Australia		 Contracted to acquire eight neighbourhood and sub-regional properties from
Woolworths in 50/50 partnership with Telstra Super for $266m1
Funding secured to replace A$CMBS at 1.80% margin, reduced from 4.27%



Capital
Management		 Buy-back of units initiated – 660,000 units completed
Weighted average debt maturity extended
Proceeds of A$127m realised from New Zealand & US portfolio sales
Contracted to sell seven non-core Australian and US assets for A$40.3m
Active asset management continues to drive solid property performance in the
Core Portfolio REIT’s core portfolio of Australia and Europe

Performance		 Same property net operating income (NOI) growth increased to 3.2% with
occupancy remaining steady at 98.5%

43

  1. Calculated on a 100% basis

Charter Hall Retail REIT

Balance sheet strength and liquidity

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Positioned to take advantage of identified growth opportunities and deliver solid returns to investors

- Sale of non core assets:

  • 15 New Zealand properties sold for NZ$85.3m, remaining two expected to settle by September 2011

  • Sale of Desco Regency JV portfolio completed in May 2011 for US$168.0m

  • Completed or contracted to sell seven low value non-core assets in Australia and United States

Gearing impact1 Improved liquidity position
Balance Sheet Look-through Net proceeds (A$m)
New Zealand portfolio (2.1%) (1.8%) 64.1
Seven non-core assets (1.3%) (1.1%) 8.02
Desco Regency JV (2.1%) (5.0%) 63.0
Total 135.1

Post all completed and contracted transactions, pro-forma December 2010 balance sheet gearing is 35.8%[3]

  1. Reflects the impact of the transaction on the REIT’s 31 December 2010 balance sheet

  2. Net of A$CMBS repayment of $31.6m

  3. 31 December 2010 balance sheet adjusted for all completed and contracted transactions including the sale of 15 New Zealand properties, Desco Regency JV, portfolio of seven wholly owned United States assets and seven individual low value non-core assets in Australia and United States offset by the acquisition of the Woolworths portfolio and Gordon Shopping Centre

44

Charter Hall Retail REIT Woolworths portfolio acquisition

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The REIT has contracted to acquire six neighbourhood and two sub-regional shopping centres in a newly formed 50/50 joint venture with Telstra Super

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  • The portfolio represents an excellent fit for the REIT and positions it as a pre-eminent owner of quality

  • neighbourhood and sub-regional shopping centres

  • The transaction is forecast to be accretive to FY12 earnings, provides geographic diversification and materially increases the REIT’s anchor WALE[1] from 9.2 years to 11.1

years

  1. Calculated as at 31 March 2011

  2. N = Neighbourhood shopping centre, SR = Sub-regional shopping centre

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Rutherford Marketplace (N)
NSW
Greater Sydney metro area
Carnes Hill Marketplace (SR)
Pemulwuy Marketplace (N)
Thornleigh Marketplace (N)
Windsor Marketplace (N)
West Ryde Marketplace (N)
VIC
Highlands Marketplace (SR)
45
Pakington Strand Shopping Centre (N)
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Charter Hall Retail REIT Australian CMBS refinancing

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  • Funding commitment to repay A$CMBS facility in September 2011, twelve months ahead of its maturity

  • Refinanced by a placement of notes to Australian superannuation fund manager, UniSuper

Key Terms:

  • Facility limit: $250m

  • Margin: 1.80%

  • Maturity: September 2015

Transaction Impact:

  • Full year earnings benefit of 2.1 cents per unit, or approximately 7.5% accretion on an annualised basis

  • Weighted average debt maturity[1] increases from 3.2 years to 4.0 years

  • Reduces the REIT’s weighted average debt cost by 0.7%[1]

  • Collateral pool valued at over A$737m, representing a loan to value ratio of 33.9%

  • Transaction remains subject to completion of documentation and rating agency confirmation of the AAA credit rating on the notes

  • Calculated based on the REIT’s debt facilities and floating interest rates as at 31 March 2011

46

Charter Hall Retail REIT Core portfolio performance

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March 2011

Performance metrics Number of
properties		 Occupancy Same
property NOI
growth1		 Rent growth2 Anchor
WALE3
Australia 62 98.7% 3.7% 10.0% 9.2 years
Europe 7 98.3% 1.8% 4.5% 3.3 years
Total 69 98.5% 3.2% 8.9% 8.9 years

  • Same property NOI growth increased to 3.2% following strong leasing activity across Australian and European markets

  • Quality of portfolio improved with acquisition of quality neighbourhood and sub-regional Australian shopping centres and contracted disposals of non-core properties

  • Terms agreed with Coles for a major refurbishment of its tenancy at Manuka Terrace – forecast to substantially increase foot traffic at the centre and position the anchor as one of the leading supermarkets in the area

  • Nine months ended 31 March 2011

  • On comparable specialty units including new lease and renewal transactions, calculated for the 3 months ended 31 March 2011

  • Weighted by the REIT’s share of base rent

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Charter Hall Retail REIT Unit price performance

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125.0
120.0
115.0
110.0
105.0
100.0
95.0
30 Jun 10 31 Jul 10 31 Aug 10 30 Sep 10 31 Oct 10 30 Nov 10 31 Dec 10 31 Jan 11 28 Feb 11 31 Mar 11 30 Apr 11
CQR S&P A-REIT 200
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  • The REIT’s unit price has outperformed the broader A-REIT index by 17.4% since announcing its strategy on 20 August 2010 to continue reweighting to the Australian market

  • Based on forecast FY11 earnings, CQR trades at a P/E multiple of 11.5x[1]

  • Continues to trade 9.7% below NTA and at NTA, yield is 8.7% based on forecast FY11 earnings[1]

  • Assuming mid point of FY11 earnings guidance range and unit price at 17 May 2011 Source: IRESS – closing price from 30 Jun 2010 to 17 May 2011

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Charter Hall Retail REIT Relative performance

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Despite an attractive earnings yield and strong forecast earnings growth compared to its listed peers, CQR continues to trade at a significant discount to NTA

NTA Premium / (Discount)

Capitalisation Rate

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WDC BWP CQR CFX WRT
26.0%
(8.6%) (9.7%)
(12.2%)
(14.4%)
FY11 Consensus EPS / DPS Yield
8.7%
7.6% 7.5%
6.9% 6.9% 7.0% 7.3% 6.8%
6.4%
5.4%
CFX WRT WDC BWP CQR
EPU Yield DPU Yield
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8.13%
7.64%
6.52%
6.10% 6.28%
WRT WDC CFX BWP CQR
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FY13 Consensus EPS growth
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5.0%
4.3%
3.4%
2.5%
2.1%
CQR BWP WDC CFX WRT
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Source: Iress, Factset, and Company filings

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Charter Hall Retail REIT Strategy and outlook

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  • Reinforce leadership position as pre-eminent owner of neighbourhood and sub-regional shopping centres in Australia

  • Focus on completion of remaining contracted offshore disposals and redeployment of net proceeds to optimise long term income and capital growth for investors

  • Active asset management of existing core portfolio

Earnings and distributions

  • Earnings guidance reiterated, barring unforeseen events:

  • FY11 operating earnings forecast at the upper end of 27.0 – 28.0 cents per unit

  • Payout ratio increased to be in the range of between 85% and 95% of operating earnings

  • The completion of contracted sales and subsequent redeployment of capital will see earnings quality confirmed

  • Earnings positioned for growth in FY12 and beyond

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Questions and answers

51

Charter Hall Group 06 Asset and property management Craig Newman Head of Asset Management

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Asset and property management Overview

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  • The Charter Hall asset management team provides services over commercial, industrial and retail assets which seek to improve property performance by maximising income and asset values.

  • Team of 20 asset managers and support members with local offices in Sydney, Melbourne, Brisbane & Perth

  • Chicago based US team

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CQO CQR CPOF CPIF CHDPF
Asset Management
Strategy
Operations
Property Management
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Asset and property management Office asset locations

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Asset and property management Industrial asset locations

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Asset and property management What does the team do?

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 Mission: maximise income and value, maintain high occupancy levels & tenant retention

  • Key functions:

  • Setting strategies for leasing : vacancies and renewals

  • Driving rental growth through direct negotiation of leases and rent reviews

  • Completing internal valuations & co-ordinating external valuations

  • Strategic asset plans

  • Identifying capital expenditure projects & budgets

  • Refurbishment/repositioning

  • Overseeing property and facilities management teams

  • Internal analysis & reporting

 Monitoring & managing asset performance

 Customer focus : building tenant relationships

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Asset and property management

Deliverables - outputs for fund managers

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Item Frequency Use
Strategic asset plans Annual Key action items
Hold/Sell/Trade assessment
Budgets – income & expenditure Annual – reviewed monthly Income forecasting
Budgets – capital expenditure Annual – reviewed half yearly Income forecasting
Tenant surveys Annual Feedback from tenants
Internal valuations Half yearly
Income forecasts & lease up
assumptions		 Half yearly – reviewed monthly
Market research & updates Quarterly
Leasing recommendations As required Deal summaries & recommendation
Comparison to forecasts
Board reporting Quarterly Updating on asset management activities

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Asset and property management Integrated property business

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Utilising skills and experience across the Group

Leveraging across services Leveraging across services Leveraging across services
Property management Budgets
Property performance
Tenant relationships		 Setting and managing assets to achieve income targets
Monthly management meetings
Direct communication
Leasing services Project leasing
Tenant Representatives		 Larger vacancies (i.e. >7,000 sqm) to secure tenants
Awareness of leasing opportunities across combined
portfolio
Development services Redevelopment
opportunities		 Assessing the development potential of select assets
New development projects (eg 171 Collins Street)
Asset services Building refurbishments
Capex projects
Sustainability		 Repositioning assets & premises for re-leasing
Co-ordinating major building works
Roadmaps and works implementation for NABERS ratings
Marketing Leasing/Branding
Tenant/Agent events		 Preparation of marketing collateral

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Asset and property management Delivering results…

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Recent leasing achievements by the Australian team include:

Asset Tenant CHDPF
300 La Trobe St,
Melbourne VIC		 • Telstra renewal over 23,482 sqm for 12 years
5 Queens Rd,
Melbourne VIC		 •
Beca renewal over 3,359 sqm + expansion
over additional 1,674 sqm to 29% NLA
Avaya House, North
Ryde, NSW		 • Lease extension to 2016 over 5,041 sqm
68 Pitt St, Sydney
NSW		 • Citigroup flagship retail store with 10 year lease
• Pacific Smiles Group (NIB) lease over 878 sqm

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Asset and property management Integrated property management

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  • Mission: Deliver quality integrated property services to maximise asset performance

  • On 1 January 2011 Charter Hall extended internal property management over CQO & CHDPF

  • Team functions:

  • Day-to-day running of office, retail and industrial assets

  • Financial & operational performance

  • Rent collection

  • Maintaining the building fabric and systems

  • Team skills:

  • Property management & administration

  • Property accounting

  • Leasing

  • OHS&E

  • Facilities management

  • Marketing

  • The team 100 strong across Australia

  • Instrumental piece in the Charter Hall integrated business model

  • Business is driven through relationships – with tenants, local community stakeholders and fund and asset managers

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Asset and property management Charter Hall Property Management

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Key statistics are as follows:

Total Retail Office & Industrial
No of Properties 147 77 70
No of Tenants 2,001 1,451 550
GLA (‘000 sqm) 1,524 524 1,000

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Charter Hall Group 07 Development Services Chris Chapple Head of Development Services

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Development Services

 Team of 20 highly skilled people

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  • Provide active development management services to all funds

  • Completed in excess of $3.5 billion of projects

  • Proven ability to provide innovative property solutions

  • Long standing relationships with our partners

 Ability to understand and deliver on needs of consumers, tenants and owners

 Commitment to delivering integrated sustainable solutions

  • Recognition by industry and peers

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Development Services Development Profile

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29 projects

Active Over book 1,000 $1.8b dwellings

170,000sqm office space

190,000sqm 120,000sqm retail industrial space space

As at 31 December 2010.

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Development Services Value of development book

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Sector

State

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Industrial NZ
SA
Household 8% 2%
6% Tas
Retail
3%
6%
WA NSW
Retail Commercial 18% 37%
22% 47%
Residential Vic Qld
19% 24% 8%
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As at 31 December 2010.

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Development Services Active development book

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Name Address Sector Fund Anticipated
Completion Date
40 Creek St 40 Creek Street,
Brisbane, QLD		 Commercial CHOF5 Completed
Home HQ,
North Shore		 Corner of Frederick Street and Reserve Road,
Artarmon, NSW		 Household Retail CHOF4 Completed
Australia Post,
Kingsgrove		 Richland Street,
Kingsgrove, NSW		 Industrial DIF June 2011
Volkswagen,
Chullora		 24 Muir Road,
Chullora, NSW		 Industrial CPIF August 2011
Grace Willawong 450 Sherbrooke Road,
Willawong, QLD		 Industrial DIF August 2011
Woolworths,
Tasmania		 Airport City Business Park, Evandale Road,
Launceston, Tas		 Industrial CPIF April 2012
Home HQ Hastings,
New Zealand		 501 and 700 Caroline Road,
Hastings, New Zealand		 Household Retail CHOF5 May 2012
Allenstown Plaza,
Rockhampton		 Corner Derby Street and Canning Street,
Allenstown, QLD		 Retail CQR Mid 2012
Caboolture Park
Shopping Centre		 60-78 King Street,
Caboolture, QLD		 Retail CQR Mid 2012
Lacrosse Apartments,
Stage 1		 Indicative Image
675 Latrobe Street,
Melbourne Docklands, VIC		 Residential CHOF5 July 2012
Aquilo Oak Avenue,
Mentone, VIC		 Residential CHOF4/5 December 2012
Gowrie Street Mall,
Singleton		 Gowrie Street Mall,
Singleton, NSW		 Retail CQR Early 2013
171 Collins Street
(50%)		 171 Collins St,
Melbourne, VIC		 Commercial CQO Mid 2013
Little Bay
(50%)		 Indicative Image
1408 Anzac Parade,
Little Bay, NSW		 Residential CHOF5 Progressive Completion
Dec 2012 – Dec 2014

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Development Services Recent achievements

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  • Secured development partner (TA Global) to develop the $600 million Little Bay project (CHOF5). Works commenced on site by CIP.

  • BHPB pre-committed to 12,000sqm at 171 Collins Street (CQO). Brookfield Multiplex subsequently commenced construction on the $270 million office building, which is due for completion mid 2013.

  • Home HQ North Shore (CHOF4) was awarded the Best Retail/Commercial Development at the UDIA NSW Austral Bricks Awards for Excellence 2010 and the MBA Excellence in Construction Award in the category ‘Adaptive re-use of an historic building’.

  • Development Applications lodged for Gowrie Street Mall, Singleton (CQR) and Allenstown Plaza, Rockhampton (CQR). A revised consent has been received for Work//Zone, Perth (CHOF5). 51 Pirie Street, Adelaide (CPOF) has also received Development Consent.

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Development Services Recent achievements

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  • Lacrosse apartments in Docklands, Melbourne (CHOF5) has achieved 98% pre-sales 12 months before completion and Aquilo (in Mentone) (CHOF5) has achieved over 80% pre-sales with completion not due until end 2012.

  • Mitre 10 and The Warehouse Group committed to Home HQ Hastings (CHOF5), with works now commenced on site.

  • Established charity partnerships with Lighthouse Foundation and Statewide Autistic Services.

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Development Services Commercial developments

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Pirie Street

51 Pirie Street, Adelaide, SA

CPOF

 21 storey, A-grade office building  32,700sqm (NLA)  Completion – Late 2014

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171 Collins

171 Collins Street, Melbourne, Vic

CQO

 Premium grade 31,000sqm office development  Completion – Mid 2013  JV with Cbus Property  BHPB pre-committed to 12,000sqm

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Development Services Retail developments

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Gowrie Street Mall

Corner Gowrie Street and John Street, Singleton, NSW

CQR

  • A redeveloped and extended neighbourhood shopping centre

  • 20,611sqm (NLA)

  • Completion – Early 2013

Allenstown Plaza

Corner Derby Street and Canning Street, Allenstown, QLD

CQR

  • Redeveloped neighbourhood shopping centre

  • 8,122sqm (NLA)

  • Completion – Mid 2012

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Development Services Industrial developments

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Volkswagen 24 Muir Road Chullora, Sydney, NSW

CPIF

  • Warehouse and Distribution Centre

  • 26,650sqm (NLA)

  • Completion – August 2011

  • Development constructed by CIP

Grace

450 Sherbrooke Road, Willawong, QLD

DIF

  • Logistics Facility

  • 17,000sqm (NLA)

  • Completion – August 2011

  • Development constructed by CIP

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Charter Hall Group 08 Sustainability Claire Orton Head of Sustainability

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Sustainability

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What does sustainability mean for Charter Hall?

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Sustainability and our developments

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Home HQ North Shore

130 Stirling Street

  • ♦ First development to achieve Green Star Retail Centre rating

  • ♦ Practical Completion June 2009

  • ♦ 100% leased to key tenants

  • ♦ Adaptive re-use of heritage listed building

  • ♦ Sustainable design features

  • ♦ Accessibility by public transport

  • ♦ Achieved 5 star NABERS Energy Rating

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Sustainability and our managed properties

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Implementing energy efficiency strategies is delivering results in the retail sector:

  • ♦ Orange Metro Plaza achieves 20% reduction in energy consumption in 1 year

  • ♦ Savings on energy costs of 10% in 2010

  • ♦ Achieved through improved monitoring & management practices

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Long term investments improve energy efficiency in the office sector:

  • ♦ CHDPF’s 1 Nicholson Street improved its NABERS Energy rating from 0 to 3 stars in 2009/10

  • ♦ Reducing electricity use by 5% in 2010

  • ♦ Aligning property upgrades to improve sustainability performance with leasing requirements

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Sustainability and our stakeholders

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Connecting with communities

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Development projects continue to partner with local charities:

  • ♦ $95,000 raised for Young Care by 40 Creek Street, Brisbane development

  • ♦ $20,000 raised to date for Lighthouse Foundation by Lacrosse Apartment development

  • ♦ $21,000 raised to date for Statewide Autistic Services Inc by Aquilo development

Aligning with our investors

  • ♦ Charter Hall is a signatory to the United Nations Principles of Responsible Investment

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  • ♦ CQO and CQR retained their listing on the FTSE4 Good in 2011

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Sustainability and our future

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 Ensuring oversight of our sustainability activities by senior management

 Continue to collect robust, auditable sustainability data

 Establishing measurable objectives and targets for each Fund

 Developing and implementing property specific sustainability road-maps

 Continue to support initiatives local to our business activities

 Effective disclosure of our sustainability performance

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Questions and answers

79

Charter Hall Group

09 Charter Hall Opportunistic Funds Michael Winnem Head of Wholesale Opportunistic Funds Management

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Charter Hall Opportunistic Funds CHOF series

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  • Targets projects with Gross Equity IRR of 20% +

  • Fund Management Fee (FMF) of 1% on drawn equity, equity drawn from investors as required to meet project requirements

  • Performance Fees payable at 33.34% of profit above an equity IRR hurdle of 13% before tax, fund management fee, performance fees, payable at the end of each project

  • CHOF projects also generate development management (approximately 3% of total project cost) and leasing fees for the Group

  • Investment Committee comprises 2 executive members and 2 independent members

  • Debt provided at the project level, with no recourse to other projects, the fund or investors

  • Charter Hall co-investment in CHOF4 was 3% ($5 million)

  • Charter Hall co-investment in CHOF5 was 15% ($45 million)

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Charter Hall Opportunistic Funds CHOF4 - (2005 Vintage)

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 CHOF4 is fully allocated ($165 million committed equity) with diversity across eight projects

  • Forecast gross equity IRR of 19.7%

  • Two projects yet to be realised

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Home HQ North Shore Reserve Rd, Artarmon, NSW

  • First 4 Star Green Star Household Retail Centre in Australia

  • 98% leased with strong tenancy mix that appeals to Centre’s demographic

  • Comprehensive marketing plan being implemented with tenant participation to establish trading history and raise Centre awareness

  • Forecast asset sale in July 2012

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Gepps X Trade Centre Port Wakefield Road, Adelaide, SA

  • 30,000sqm Industrial/Showroom Site

  • Heads of Agreement signed with Bunnings Trade for a 6,000sqm facility on part of the site.

  • Sale campaign under way for balance of the site

  • Completion – June 2012

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Charter Hall Opportunistic Funds CHOF5 – (2007 Vintage)

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 CHOF5 has currently allocated 94% of its equity ($300 million committed equity) across six projects

  • Forecast gross equity IRR of 8.3%

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40 Creek St

40 Creek St, Brisbane, QLD

  • 12,373sqm commercial office building fully refurbished to an A grade standard

  • Currently 74% leased, leasing market improving, forecast 100% leased by December 2011

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Home HQ Hastings Caroline Road, Hastings, New Zealand

  • 25,500sqm household retail centre

  • Three anchor tenants secured for the site, The Warehouse (6,300sqm), Mitre 10 Mega (11,000sqm) and Fishing Camping Outdoors (1,400sqm), 73% of GLA

  • Construction underway with The Warehouse and Mitre 10 facilities due for completion later this year

83

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Charter Hall Opportunistic Funds CHOF5

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WorkZone

202 Pier Street, Perth, WA

  • Development Application approved for a 27,911sqm commercial office building

  • Construction tendered with price and program within feasibility allowances

  • Major leasing pre-commitment close to being secured with strong leasing interest in balance of area

  • Completion – mid 2013

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Little Bay 1408 Anzac Parade, Little Bay, NSW

  • Masterplan approved for 570 dwellings (apartments, townhouses, houses)

  • Remediation and site works have commenced

  • Staged sale of project will commence in September 2011

  • Completion – June 2014

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Charter Hall Opportunistic Funds CHOF5

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Aquilo

Oak Avenue, Mentone, Melbourne, Vic

  • 119 architecturally designed townhouses over three stages

  • First 27 townhouses under construction with completion scheduled for December 2011

  • Currently exchanged on 97 townhouses (82%)

  • Completion – November 2012

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Lacrosse Apartments Stage 1 675 LaTrobe Street, Docklands, Melbourne, Vic

  • 312 apartments in a 22 level high rise tower

  • Construction approximately 30% complete

  • 298 contracts exchanged (96%)

  • Completion – July 2012

85

Charter Hall Opportunistic Funds New Fund Initiatives

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  • Limited investor appetite for equity commitments to blind pooled funds, such as CHOF6 at this point in the cycle

  • Appetite for project by project equity commitments

  • Investor interest in Segregated Mandate style funds with identified opportunities.

  • Investor interest in buy, build, hold strategies as a way to secure core product (i.e. yield on cost focus)

  • Charter Hall has allocated additional balance sheet capital to secure /incubate development opportunities that will be sold down to investors.

  • Target returns from opportunistic +20% IRR on equity.

86

Charter Hall Opportunistic Funds Case Study – Home HQ North Shore

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  • Heritage listed industrial building which has been converted into a modern functional 3 level household retail centre

  • First 4 Star Green Star Household retail centre in Australia

  • 22,200sqm facility with strong tenancy mix, 98% occupancy with a weighted average lease expiry (WALE) of 7.14 (income) and 7.66% (area)

  • Majority of anchor tenants secured directly by Charter Hall through existing relationships

  • The centre has been recognised with three awards:

  • 2010 Urban Taskforce Development Excellence Award for Best Adaptive Reuse

  • 2010 MBA Excellence in Construction Award for Best Adaptive Reuse of a Heritage Building

  • 2010 UDIA NSW Award for Best Retail/Commercial Development

  • Demonstrates Charter Hall development expertise with market leading centre that was leased during the GFC

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87

Charter Hall Group 10 CIP Paul McKenna Managing Director, CIP

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CIP Overview
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  • Specialist developer of Commercial and Industrial Property

  • Active in each of the capital cities. Brisbane, Sydney, Melbourne, Adelaide and Perth

  • Experienced Senior Management Team

  • Hands on ‘In house” expertise to provide fully integrated services to clients

  • Service culture that promotes client satisfaction and leads to repeat business

  • CIP Business is very scalable and can react quickly to changes in economy and market

  • Generally greater than 90% of revenue is forward sold i.e. after pre-lease is signed but prior to significant on site expenditure. This assists in reducing the impact of property valuation movements.

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Laminex, Murrarrie QLD M

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Coles Myer, Goulburn NSWM

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Developing Relationships

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Histor of CIP
y
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  • CIP Founded in 2003

  • Initially managing and developing Santilli family industrial portfolio

  • CIP quickly gained support from network of tenants and investors

  • CIP assembled a highly skilled, experienced team of professionals

  • Most had worked with founders in other corporate positions

  • Turnover and margin grew rapidly prior to Global Financial Crisis (GFC)

  • Charter Hall acquired 50% interest in CIP in 2007. The other 50% is held by entities associated with Paul McKenna, Dennis Santilli and Therese Lynch.

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Alinta, Axxess Car Park, VIC

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Harcourt Education, Port Melbourne VIC

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CIP Net Profit Before Tax
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Financial Year
Actual
NPBT
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Senior Mana ement Team
g
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  • A Broad range of skills is required to successfully operate

  • The senior management team has intentionally been assembled to have a wide and varied range of qualifications

  • Staff have qualifications in many fields including;

  • Planning

  • Architectural

  • Structural Engineering

  • Civil Engineering

  • Quantity Surveying

  • Project Management

  • Property Economics

  • Legal

  • Accounting

  • CIP’s management structure has been implemented to maximize a culture of open communication and review

  • Each division has executive depth as well as senior experience

  • This maximises innovation, service & growth but minimises risk. A genuine team effort and team result.

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CIP Executive Structure
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CIP Board of Directors
David Southern
David Harrison
Dennis Santilli
Paul McKenna
Deputy Managing Managing
Director Director
Therese Lynch Paul McKenna
Chief Financial Procurement &
Officer Design Director New Business Commercial/Legal Administration General Manager Acquisition
Director Director Construction Director
Director
Construction
Business Manager Planning & InfrastructureGeneral Manager General Manager Design Legal General ManagerNew Business & General Manager Procurement General Manager (VIC & NSW) General ManagerAcquisitions
Employees
98
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Clients
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  • CIP’s revenue is intentionally spread both geographically and across market sectors.(e.g. Development, Design & Construct Building, Project Management)

  • This assists in reducing the impact of negative trends in any particular geographic or market sector

  • CIP has developed a wide variety end user relationships

  • In addition CIP has developed a network of joint venture partners that assists in providing additional spread across the industry e.g. Melbourne Airport, Australand, & Charter Hall

  • CIP has also developed a range of design and construct building clients that provide additional diversity of income (e.g. Walker Corporation, Charter Hall, Goodman, Toll Property)

  • CIP has actively grown Project Management and Development Management activity (e.g. ING Bank & Hatia Corporation, Toll Property)

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DHL, Melbourne Airport Business Park VIC

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Clients
(cont…)
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  • CIP has placed its product with a variety of end investors. Charter Hall managed funds have continued to be a strong investor in CIP product where the product meets investment criteria. (e.g. Coles WA, VGA Chullora NSW, Smorgans Pinkenba QLD- CPIF, Grace Willawong QLD, Toll Auto Toll Fleet Altona VIC - DIF; Little Bay Civil works - CHOF5

  • CIP has a service culture that to date has resulted in a high level of repeat business.

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Star Track Express, Melbourne Airport VIC

Home HQ, Ipswich QLD

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Reject Shop, Melbourne Airport VIC

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Building Success

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Current Projects
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State Current Projects
Queensland •
Grace, Willawong, QLD Willawong
—
12 year pre‐lease
—
21,880m2 Office, Warehouse
•
Brisbane Bus depot, Sherwood, QLD
—
25 year pre‐lease
—
6.3 Ha Site
•
Logan link industrial development, Berrinba, QLD
—
Development management of 60Ha Industrial Estate
NSW •
Volkswagen Group Australia (VGA) Chullora, NSW
—
13 year pre‐lease
—
10,650m2 Head Office & training centre
—
16,165m2 Parts Warehouse
•
Little Bay Infrastructure Works, Little Bay, NSW
—
Design and construct contract $48 Million value

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Current Projects
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State Current Projects
VIC •
Toll Dnata
—
Design and construct Building contract at Melbourne Airport
•
Primus, Melbourne Airport Business Park, VIC
—
10 year pre‐lease
—
18,036m2 office warehouse
SA •
P&O – Gillman, SA
—
15 Year pre‐lease
—
30,000m2 site for Office/Warehouse & Container Park
•
Boart Longyear, Burbridge Business Park , SA
—
10 Year Pre‐lease
—
6,800m2 Office/Warehouse
WA •
GE Oil and Gas Jandakot Airport, WA
—
Design and Construction Management of $33m Industry facility

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Case Stud
y
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VGA – Chullora

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Case Stud
y
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VGA – Chullora (cont…)

  • CIP approach landowner of 7Ha parcel of well located land within Chullora Technology Park

  • The corporation who owned the land had no further need for the land

  • CIP agreed to purchase the land subject to acquiring a suitable pre-lease for part or all of the site

  • CIP submitted the site to a number of existing clients in addition to a few potential clients

  • CIP prepared a development proposal for VGA including architectural layouts and images of how their Corporate office, Training centre and Parts Warehouse could be incorporated onto the site

  • CIP provided the investment opportunity to Charter Hall. The investment met the investment criteria for CPIF

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VGA, Chullora NSW

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VGA, Chullora NSW

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Case Stud
y
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VGA – Chullora (cont…)

  • CIP & Charter Hall worked in close partnership to close out the necessary lease & investment documentation

  • CIP Design team work closely with client to prepare the detailed design to clients operational requirements

  • CIP Planning team prepare necessary authority applications and negotiated terms of approval

  • CIP Construction team deliver the project for the client and investor in accordance with project documents

  • CIP Construction team stay in touch with client to complete any additional works or defects once facility is operational

  • CIP New Business Team commence marketing the residual 1.9Ha of land that remain following completion of the VGA pre-lease.

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Case Stud
y
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Brisbane Bus Depot

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Case Stud
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Brisbane Bus Depot (cont…)

Brisbane Council call for expressions of interest for a party to buy 7.8Ha of land at Sherwood, Design and Construct a purpose built Bus Depot and enter a 25 year lease back with the successful party.

  • The Bus Depot included a Service Garage, Fuel Depot, Offices, Recreational area and extensive Hardstand

  • CIP was successful in being registered for the bid

  • CIP tendered for the project and was successful in being awarded the project by Brisbane City Council.

  • CIP Design Team worked closely with the operators of the facility to improve the layouts and design.

  • CIP Submitted the necessary applications and obtained development approval for the new layouts.

  • CIP agreed terms with a suitable investor for the 25 year pre-lease including an obligation to fund construction.

  • Documentation of the Development agreements with the Investor should be completed will be completed early June.

  • Construction commenced and will be completed early next calendar year (2012)

  • A residual portion of land approximately 1Ha will be retained by CIP for future development or sale

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Outlook for CIP
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  • CIP is readily scalable

  • CIP is well positioned to take advantage of improving markets as the economic recovery matures.

  • CIP growth is largely dependent on business confidence & business growth in the economic community

  • The medium term prospects for economic growth are promising.

  • CIP has weathered the GFC well, maintaining staff levels & it’s ability to service clients

  • There is now only a limited number of other competitors who operate actively on a national level.

  • Many of the large corporate clients prefer to deal with Developers who operate in each of the major industrial markets.

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Coles, Perth Airport WA

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Fosters, Rosehill NSW

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Grace, Willawong QLD

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Questions and answers

104

Important Information

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) (“CHFML”) as the responsible entity for Charter Hall Property Trust (ARSN 113 339 147 (“CHPT”). It is a presentation of general background information about the Group’s activities. It is a summary and does not purport to be complete. 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.

CHFML does not receive fees in respect of the general financial product advice it may provide, however it will receive fees for operating CHPT which, in accordance with the CHPT Constitution, are calculated by reference to the value of the assets of and performance of CHPT. Entities within the Charter Hall Group may receive fees for managing the assets of, and providing resources to CHFML. For more detail on fees, see the CHPT website. To contact us call 1300 652 790 (local call cost). Neither this document nor any of its contents may be used for any purpose without the prior consent of CHFML. All figures stated herein are in Australian dollars unless otherwise stated.

Charter Hall fund’s currently accepting investments

The responsible entity of Charter Hall Direct Industrial Fund (“DIF”), Charter Hall Direct property Fund (“CHDPF”) and Charter Hall Direct Retail Fund (“DRF”) is Charter Hall Direct Property Management Limited (“CHDPML”) (ABN 56 073 623 784, AFSL 226849). CHDPML has issued a product disclosure statement (“PDS”) for DIF dated 13 July 2010 and for CHDPF dated 20 December 2010 and DRF dated 22 December 2010. The responsible entity of Charter Hall Diversified Property Fund (“DPF”) is Charter Hall Funds Management Limited (“CHFML”) (ABN 31 082 991 786). CHFML has issued a product disclosure statement (“PDS”) for DPF dated 25 July 2008 together with a Supplementary PDS dated 13 July 2010. The PDSs for all of the aforementioned funds (“Funds”) set out the offer to apply for units in the Funds. If you are considering an investment in a Fund or Funds you should read the relevant PDS in its entirety and consider the information set out in the PDS in relation to the offer. You can request a copy of a Fund’s PDS, free of charge, by calling CHDPML or CHFML, as the case may be, on 1300 652 790.

To the extent that this document refers to a product which is currently being offered under a PDS, that information has been made available to the recipient for information purposes only. It is not intended to be, and does not constitute a product disclosure statement, prospectus, short form prospectus or profile statement as those terms are defined in the Corporations Act. It does not constitute an offer for the issue, sale or purchase of any securities, or any recommendation in relation to investing in any asset.

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105

Charter Hall Group

Property tour Asset notes

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Further information

David Southon Joint Managing Director +61 2 8908 4025 [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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