CHARTER HALL GROUP — Investor Presentation 2017

Oct 9, 2017

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Western Sydney University, 1 Parramatta Square, Parramatta NSW

Charter Hall | Market Update | 10 October 2017

Agenda

1.	Group Transaction Market Update	David Harrison
2.	Equity Flows / Direct Business Update	Richard Stacker
3.	Office Market Update	Adrian Taylor
4.	Retail Market Update	Greg Chubb
5.	Industrial Market Update	Sean McMahon
6.	Capital Market Update	Russell Proutt
7.	Group Outlook	David Harrison

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David Harrison

Managing Director & Group CEO

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Richard Stacker

Group Executive – Global Investor Relations

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Adrian Taylor

Group Executive – Office

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Greg Chubb

Group Executive – Retail

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Sean McMahon

Chief Investment Officer & Group Executive – Industrial

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Russell Proutt

Chief Financial Officer

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Charter Hall

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990 La Trobe St, Melbourne VIC

Charter Hall | Market Update | 10 October 2017

Charter Hall Transactional Activity

• Transaction revenue is a regular feature of earnings which we expect to continue

• Gross transactions in Q1 FY18 reached $1,076m

Q1 FY18	Office	Industrial	Retail	TOTAL
Acquisitions	$190m	$121m	$454m	$765m
Divestments	($206m)	-	($105m)	($310m)
Net transactions	($16m)	$121m	$350m	$455m
Gross transactions	$396m	$121m	$559m	$1,076m

FY17	Office	Industrial	Retail	TOTAL
Acquisitions	$922m	$1,354m	$687m	$2,963m
Divestments	($894m)	($941m)	($417m)	($2,252m)
Net transactions	$29m	$413m	$270m	$711m
Gross transactions	$1,816m	$2,295m	$1,104m	$5,215m

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Charter Hall | Market Update | 10 October 2017

Total Market Transactions

Charter Hall’s share of transactions has averaged ~13% of the total market transactions volume

Total Market Transaction Volume ($bn)

CHC % of Total Transactions, by Sector

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$35b 25%
$30b
20%
$25b
15%
$20b
$15b
10%
$10b
5%
$5b
- 0%
FY15 FY16 FY17 1Q18
CHC Total Transactions CHC % of Total Transactions
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35%
30%
25%
20%
15%
10%
5%
0%
FY15 FY16 FY17 1Q18
Office Industrial Retail
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Source: JLL, Charter Hall Research

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Charter Hall | Market Update | 10 October 2017

Activity Expected to be Similar to 2016

Australian commercial property markets transaction volumes, 2004 to 2017*

• Overall volumes are slightly lower than same time in 2016, however with current transaction activity expected to be near 2016 levels by year end

• Office remains most active with nearly 70% of all activity and industrial has been less active in 2017

• The retail sector is also more subdued on a relative basis and the recent retraction of the Blackstone portfolio is evidence of this

*As at September 2017 Source: JLL Research

Offshore buyers and sellers, 1989 to 2017*

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• Offshore activity remains at cyclical high levels remaining at ~30% of all activity which has been a growing trend since the GFC

• Investment spreads remain relatively attractive for offshore parties with tier one investment stock providing attractive risk premia spreads to bonds

• M&A activity increasing with recent announcements regarding Propertylink and Industria REIT

*As at September 2017 Source: JLL Research

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Charter Hall | Market Update | 10 October 2017

Sale & Leaseback

• CHC continues to be a major player within the sale and leaseback market with ~$3.0bn[1] sale and leaseback transactions undertaken over the last 4+ years

• CHC continues to see success sourcing off-market opportunities through loyal existing tenants

• Management believe there is still opportunity to do more within new and existing sectors

• Global market volatility likely to continue to assist the sale and leaseback story as corporates continue strategic efforts to ensure balance sheet stability and focus on their core business operations/efficiencies

Examples of CHC’s Sale and Leaseback Relationships

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Notes

1. Sale and leaseback transactions from FY14 to FY18 YTD.

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Charter Hall | Market Update | 10 October 2017

Recent Sale & Leaseback Activity

Recent sale & leaseback case studies highlight managements capabilities and the continued confidence from tenants in CHC’s ability to work collaboratively and execute upon mutually beneficial portfolio transactions

• Charter Hall settled on a portfolio of 10 industrial properties valued at ~$182.5m  Predominantly cold storage distribution centres

• • The sale and leaseback transaction was secured by a high quality lease covenant with Primo and a WALE of

• Lederer Portfolio 10.5 years  Predominantly triple net leases

• • Multiple funds acquired portfolio:  CPIF - $81m

• DIF4 - $59m

• DCSF (new Direct vehicle) - $37m

• • In early 2016, Woolworths announced the sale of its Masters Home Improvement Business (including the property portfolio), with Home Consortium the ultimate acquirer

• Home Consortium • Subject to completion, this will lead to the acquisition of a ~$188m portfolio of 6 freehold Masters stores subject to new 12 year net leases to Bunnings and a strategic development site located at Frenchs Forest for ~$32m

• CHC’s relationship with Bunnings throughout the sale process gave Home Consortium the confidence a transaction could be executed between the 3 parties

• Completion anticipated to occur by mid- October 2017[1]

• All portfolio and transaction numbers in this presentation assume completion of this transaction

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Charter Hall | Market Update | 10 October 2017

Recent Sale & Leaseback Activity – Repeat Business

67% of all CHC leasing activity is underpinned by repeat tenant customers. Coca Cola is a major tenant repeat customer that recently committed to a major sale & leaseback in Brisbane.

Coca Cola Amatil Facility, Richlands

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• CPIF exchanged to purchase a freehold Industrial site of 24.89ha with existing improvements of ~50,000sqm and ~31,000sqm under construction from Coca Cola Amatil (Aust) Pty Limited (CCA) on a sale and lease back arrangement for $157m at a initial yield of ~5.25%

• Under the lease, a parent company guarantee will be provided by the listed entity Coca Cola Amatil Limited (ASX:CCL) who have a market cap of $7.14bn

• CCA will enter into a 20 year Triple Net Lease from 1 December 2017 when practical completion of the facility is due to complete

• This acquisition is a prime example of major tenant customer repeat business and is the 3[rd] major transaction undertaken with CCA

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Charter Hall | Market Update | 10 October 2017 Equity Flows / Direct Business Update Richard Stacker, Group Executive – Global Investor Relations Wild Breads, 45 Kiln St, Darra QLD

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Charter Hall | Market Update | 10 October 2017

Equity Flows

Consistent equity flows within the funds platform

• Ability to access all 3 equity sources evident in record FY17 equity raised

• Momentum in equity continuing in FY18 and expected to continue across all 3 equity sources

• Local and offshore investors attracted by Funds’ outperformance, core strategy with emphasis on long lease product, ability to secure assets on/off market and originate build to hold opportunities

• Wholesale equity – CPOF and CPIF closed FY17 capital raising oversubscribed. Good pipeline of opportunity to re-open in FY18. Larger groups looking for co-invest and Partnership opportunities

• Direct (unlisted retail) business continues to cement position with market leading and award winning product – DOF, DIF4, PFA and DCSF, model moving to more “open ended funds”

	FY14	FY15	FY16	FY17
Wholesale Pooled Funds	$651m	$653m	$606m	$776m
Wholesale Partnerships	$261m	$598m	$467m	$217m
Listed Funds1	$260m	$274m	$76m	$988m
Direct Funds2	$277m	$180m	$318m	$355m
Gross equity raised	$1,449m	$1,705m	$1,467m	$2,336m
Net equity raised	$987m	$1,297m	$1,099m	$1,689m

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

1. Listed Funds include equity raised in CHC, CQR and CLW

2. Funds and syndicates for retail, SMSF and high net worth investors

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Charter Hall | Market Update | 10 October 2017

Wholesale Equity Flows

Charter Hall continues to see a demand from local and offshore investors

• Equity flowing across 4 regions from 14 countries

• 50% of FY17 equity flow from offshore investors

• Australian real estate still attractive on a relative basis

• CPOF and CPIF potentially reopening due to significant pipeline

• Local and global investors looking for co-invest, partnership opportunities

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North America
FY17:$110m
FY16: $2m
Europe
FY17: $350m
FY16: $185m
Middle East
FY17: $5m Asia
FY17: $120m
FY16: $124m
Australia
FY17: $408m
FY16: $775m
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Charter Hall | Market Update | 10 October 2017

Wholesale Equity Flows

Wholesale Investors intentions – will allocations continue in the short & long term

• Across most alternative investments key investors concerns are valuation / pricing and deal flow

• Notwithstanding these concerns:

• Returns from Real Estate have in 91% of cases met or exceeded investors expectations

• 95% of investors intend to increase or maintain allocations to real estate

• Unallocated capital (“dry powder”) is close to 50% of current assets under management and the highest level ever

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Charter Hall | Market Update | 10 October 2017

Unlisted Direct Managed Funds

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Office Retail Industrial Diversified
$9.2bn $5.9bn $5.3bn
CHOT CPOF [1] BSWF [1] LWHP RP2 [2] LWIPs [3] CLP CPIF
$2.6bn $3.5bn $0.5bn $0.9bn $0.1bn $0.6bn $1.3bn $2.5bn
75
Mandates RP6 RP1 CPRF
$0.6bn $0.3bn $0.3bn $0.2bn
DOF PFA Workzone DAT DAT2 DIFs/CDC DCSF
$0.1bn $0.1bn
$1.2bn $0.3bn $0.1bn $0.8bn
VA BW Trust 8
$0.1bn $0.1bn
CLW [4] CQR CLW [4] CLW [4]
$0.4bn $2.9bn $0.4bn $0.7bn
Equity
Wholesale
Retail
Equity $2.8bn
ListedListed Equity
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Note Statistics on this page may not add due to rounding

1. CPOF holds 49.1% of the units in the Brisbane Square Wholesale Funds (BSWF)

2. CQR holds 47.5% of the units in RP2

3. LWIPs include LWIP1 and LWIP2. CLW hold 45% of the units in LWIP1

4. Charter Hall Long WALE REIT (CLW) is a $1.5bn listed REIT diversified across the Office, Industrial and Retail sectors

5. Charter Hall Diversified Consumer Staples Fund (DCSF), launch mid October 2017

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Charter Hall | Market Update | 10 October 2017

Grow the Direct Business with Resilience

Charter Hall Direct is an important component of Charter Hall’s funds business

The focus is on growth that is sustainable and institutional quality funds/assets that will go through cycles

• Gearing ranges in funds and syndicates are from 25% to 45% with average gearing of 40%;

• Continue to buy core real-estate and have lowered the fund distribution yields rather than lower the funds asset quality;

• Continue to focus on advised and direct (unadvised) investors

• Have not offered broad based liquidity features on the product suite to match competing funds

• Model moving to “evergreen” open ended funds from closed end single property syndicates

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Charter Hall | Market Update | 10 October 2017

Unlisted Retail Environment

• The unlisted retail sector AUM has continued to decline as managers wind down / list on ASX their funds. The market is now dominated by a few key players

• Charter Hall’s unlisted retail products can be categorised as being differentiated from those of its competitor universe:

• A strong market presence within the media

• Growing SMSF and adviser distribution channels

• High quality long WALE product and strong performance create a sustained competitive advantage and platform for future business growth

Unlisted retail sector AUM

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Source: PIR

• The competitor universe can be categorised having a more focused/niche strategy which may limit growth in adviser / direct investor space

• AMP - Diversified fund, lower quality assets or lower gearing. Hybrid - Unlisted/Listed option “Liquid” product

• Centuria use mainly single property syndicate models although initial move to fund of fund open end model

• Australian Unity more niche specialised investment mandates can be challenging to readily source product for

• With the competitor universe being positioned in such a manner, this enables these Managers to build strong brand loyalty within their niche but detracts from their broader market appeal as investors better understand the unlisted retail category and may limit their FUM growth potential

Direct Fund & Syndicate Managers Market Share

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Charter Hall
Direct, 25%
Other, 32%
Cromwell, 6% AMP, 19%
Aus Unity, 7%
Centuria, 11%
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Source: PIR

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Charter Hall | Market Update | 10 October 2017

Direct FUM

Growth in FUM has been combined with a continued improvement in the portfolio quality

Growth in Direct Funds Under Management

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19% p.a compound growth rate
from FY12 to FY17
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Note – the decrease in FUM through FY10 to FY13 was driven by a repositioning of the business model and winding up of historical funds

• Growth in FUM through FY18-19 will be driven by existing and new funds:

• DOF

• DIF4

• PFA

• DCSF

• Future net FUM growth tempered by wind up of syndicates and liquidity events for funds

• Long leased assets has been a key criteria applied to acquisitions. Examples of long lease asset acquisitions:

• Coles HQ (DOF) – 13 years

• 105 Phillip St (DOF) – 12 years

Portfolio WALE – Direct business

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• Port Adelaide (PFA) – 15 years

• Inghams SA (DIF4) – 23 years

• JBS Meats (DIF4) – 12 years

• CLP (DIF4) – 9 years

• WOW Dandenong (DIF3) – 20 years

• Aurizon (DOF) – 12 years

• WSU (DOF) – 15 years

• Bunnings Burnie (DCSF) – 9 years

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Charter Hall | Market Update | 10 October 2017

Fund Performance

Above benchmark performance achieved across the majority of Direct funds

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Charter Hall | Market Update | 10 October 2017

Adviser Friendly Product

Fund series now set up for the “Many to one” benefits of distributing through financial advisers

Why Charter Hall Direct open funds are more suitable for advisers?

• Advisers margins are under pressure - product needs to be easily accessible and scalable

• Administration Platform friendly – Mac Wrap, BT Wrap, Panorama, Colonial First Wrap etc.

• More SMSF Advised and Direct investors using platforms to administer investments

• The nature of “Direct Investors” is that they like to spread their investments across products – CHC open ended products will allow this

Direct FUM composition – open end vs closed end funds

Approvals by dealerships and wraps

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Open end Closed end

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10
5
3
6
8
4
54
47 49
31 27 29
0
0
DIF1 DIF2 DIF3 DIF4 DOF PFA DCSF
Dealerships Wrap Products
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Charter Hall | Market Update | 10 October 2017

Direct (Unadvised) Investors – Digital increasingly important

Marketing efforts focused on continuing to leverage Direct’s market leading brand position

• Spend focused across digital, print, events, research and PR

• Customer insights gained from digital footprints left by investors - allowing greater focus of marketing efforts

• Continuing initiatives including educational videos, sponsorship and leverage of SMSF Association, one to many “face to face” events

• New digital initiatives – online virtual community, online applications, launch of new Fund Centre Tool

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Charter Hall |

Artist impression of 11 Breakfast Creek Road, Newstead QLD

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Charter Hall | Market Update | 10 October 2017

Office Funds Management Portfolio

			Portfolio	Portfolio	No. of	No. of	WALE1	Occupancy1	WACR1
			Value ($bn)	Size (000 sqm)1	Assets	Tenant Customers1	(years)	(%)	(%)
30	Sep	17	9.2	989	50	470	6.5	98.5%	5.87%

Diversification by Geography[1]

Diversification by Fund

Diversification by Equity Source

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CHDVAT CLW Listed Fund
WA CHDWT 1% 4% 4%
13% 1% Retail Wholesale
DOF Equity Partnership
CHOT 18%
12% Equity
SA 28%
28%
4%
PFA
NSW
3%
42%
BSWF
6%
VIC
19%
Mandates
6%
Wholesale
Pooled
QLD CPOF Equity
21% 38% 50%
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1. Data as at 30 June 2017

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Charter Hall | Market Update | 10 October 2017

Charter Hall Managed Office Property Platform Office Investment Management is a core competency with integrated capability in capital cities

88 real estate professionals

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QUEENSLAND (Team members)
10 properties Office & Asset Management: 2
9 properties Property Management: 6
Queensland Investment Management: 1
Western Development Services: 4
Australia Technical Services: 1
4 properties
South
Australia NEW SOUTH WALES (Team members)
15 Properties Office & Asset Management: 6
Property Management: 6
New South Investment Management: 7
Development Services: 6
PERTH (Team members) Wales Technical Services: 4
Office & Asset Management: 3
Property Management: 8Investment Management: 1 11 properties VICTORIA (Team members)
Development Services: 1 Victoria Office & Asset Management: 7
Technical Services: 1 Property Management: 7
Investment Management: 1
Development Services: 3
1 property Technical Services: 2
Tasmania
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9 Castlereagh St, Sydney NSW 11 Exhibition St, Melbourne VIC
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Charter Hall | Market Update | 10 October 2017

Office Managed Funds

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Office $9.2bn Retail $5.9bn Industrial $5.3bn
CHOT CPOF [1] BSWF [1] LWHP RP2 [2] LWIPs [3] CLP CPIF
$2.6bn $3.5bn $0.5bn $0.9bn $0.1bn $0.6bn $1.3bn $2.5bn
75
Mandates RP6 RP1 CPRF
$0.6bn $0.3bn $0.3bn $0.2bn
DOF PFA Workzone DAT DAT2 DIFs/CDC
$0.1bn $0.1bn
$1.2bn $0.3bn $0.1bn $0.8bn
VA BW Trust 8
$0.1bn $0.1bn
CLW [4] CQR CLW [4] CLW [4]
$0.4bn $2.9bn $0.4bn $0.7bn
Equity
Wholesale
Retail Equity
ListedListed Equity
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Note Statistics on this page may not add due to rounding

1. CPOF holds 49.1% of the units in the Brisbane Square Wholesale Funds (BSWF)

2. CQR holds 47.5% of the units in RP2

3. LWIPs include LWIP1 and LWIP2. CLW hold 45% of the units in LWIP1

4. Charter Hall Long WALE REIT (CLW) is a $1.5bn listed REIT diversified across the Office, Industrial and Retail sectors

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Charter Hall | Market Update | 10 October 2017

Favourable Office Market Outlook

Population has been the primary driver of tenant demand, with a very strong outlook

• While peaks and troughs emerge from economic cycles, occupied office stock is fundamentally driven by Australia’s total population level

• The 2015 Intergenerational Report forecasts Australia’s population to reach 37.8 million by 2050. This rate of growth should see tenant requirements rise by approximately 4.3 million square metres during the next 20 years

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Office Stock Population
Total Occupied CBD Office Stock
(million sq m) (million)
(LHS)
22.0 39.0
Aust Population (RHS) Forecast
21.0 37.0
20.0 35.0
19.0 33.0
28yr Correlation: 98.7%
18.0 31.0
17.0 29.0
16.0 27.0
15.0 25.0
14.0 23.0
Population forecast from 2015
13.0 Intergenerational Report 21.0
growth rate
12.0 19.0
11.0 17.0
10.0 15.0
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Strong population growth

Improving employment fundamentals

Positive effective rental growth and fundamentals

Strong investment demand for prime grade assets

Source: PCA, ABS

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Charter Hall | Market Update | 10 October 2017

Office Macro Drivers Favourable

• Employment and population growth forecasts exceed other developed economies

• Over the year to Jun-17, 175,400 full-time jobs were created across Australia

• Australian job ads as at Jun-17 risen to their highest level since Aug-12. The number of professional job ads for WA and QLD have increased to 2-year and 5-year highs respectively

IMF Population Growth Projections (2017-22)

Australia is growing faster than comparable investment countries

White Collar Employment Growth by City & Sector (2016-2021)

White collar employment healthy across Australian capital cities

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8% 7.3%
6%
3.9%
4% 3.3% 3.0%
2%
0.5%
0%
-2%
-2.1%
-4%
Australia United United China Germany Japan
States Kingdom
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18%
Education Fin & Ins IT & Telco Mining Professional Public Admin Total
15%
12%
9%
6%
3%
0%
-3%
Sydney Melbourne Brisbane Adelaide Perth
Source: ABS, DEEWR, Charter Hall Research
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Source: ABS, IMF, Charter Hall Research

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Charter Hall | Market Update | 10 October 2017

Office Fundamentals Favourable

Australian CBD Office Rent Forecast 2017-2026

• Secondary CDB occupancy has contracted for the past five consecutive years as tenant focus on buildings with quality internal facilities and technology continues to drive demand of new developments

• Upcoming supply levels moderating in comparison to previous 10 years

• Australian CBD office market to contract in size in 2017 – the first time since 2001 as a result of the increased levels of withdrawals

Brisbane to lead all markets over the next 10 years

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Brisbane 5.2%
Adelaide 5.0%
Perth 4.5%
Melbourne 3.3%
Sydney 2.6%
0% 1% 2% 3% 4% 5% 6%
Average Annual Change
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Source: JLL Research, Charter Hall Research

Premium & A-Grade offices have dominated Net Absorption

Australian CBD office net absorption

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Net Absorption
(sqm)
400,000
Prime Secondary
300,000
200,000
100,000
0
-100,000
-200,000
-300,000
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Upcoming supply levels moderating

Net Australian CBD office supply 2006-2021

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Net Supply
(sqm)
500,000
Adelaide Perth Brisbane Melbourne Sydney Forecast
400,000
300,000 Ave net supply
2006-16
200,000 Ave net supply
2017-21
100,000
0
-100,000
-200,000
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Source: PCA, JLL Research, Charter Hall Research

Source: PCA, JLL Research, Charter Hall Research

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Charter Hall | Market Update | 10 October 2017

Recent Office Transactions

• Office acquisitions typically demonstrate strong tenant covenants, long leases, strong fixed rent reviews and lower capex

• 15 non-core office assets sold in FY16/17 to enhance portfolio quality

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Architect image Architect image Architect image
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• Acquisition: 1 Shelley Street, Sydney NSW

• Acquired on-market in Jul-16 in 50/50 JV with Morgan Stanley on 5.5% market cap rate

• 7.5 yrs WALE, 4.0% fixed review

• Prime island site benefiting from amenity immediately adjacent Barrangaroo and significantly under-rented

Acquisitions: 105 Phillip Street, Parramatta NSW

• Acquired on initial yield of 5.30% in July 2017

• Pre-committed to Department of Education for 12 years with 3.75% annual reviews from below market starting rent

Acquisition: 370 Queen Street, Brisbane QLD

• Amalgamated 3 sites off-market in Aug-17 and formed 50/50 JV with Investa Commercial Property Fund

• Rare Golden Triangle development site accommodating ~45,000sqm with completion from mid 2022 (end value ~$500 million 100% interest)

Acquisition:

990 La Trobe Street, Melbourne VIC

• Acquired off-market in Aug-17

• WALE 10.0 yrs, to Melbourne Water

• Initial yield of 5.53%, fixed 4.0% review pa

Disposal: 109 St Georges Tce, Perth WA

Disposal:

• 97 William Street, Adelaide SA

• Sold via on-market • Sold via on-market campaign in Sep-17 campaign in Nov-16,

• • Sale Price $71.77m 20% premium to book value

• Sale Price $71.77m value

• ($5,167/sqm) with 1.4 yr WALE and • The asset required vacancy approaching significant capital to 80% with major the heritage façade upgrade required within the next 3 years

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Charter Hall | Market Update | 10 October 2017

Charter Hall Integrated Development Capability

• Strong track record creating and delivering world class office projects

• 360,000sqm of NLA across 14 projects developed to date

• Pipeline of ~$2.35 billion across 9 assets which will create

• ~265,000sqm of total lettable area

• Attractive stage in cycle to use active skills to create core assets

• Access to assets in highly contested Eastern seaboard markets

• Attractive return enhancement through accretive yield to cost metrics and reduced transaction costs

• Aid portfolio construction and geographic diversification (modern

  • assets, low capex, long WALE, strong reviews)

• As all development activities are undertaken by our Funds in their own capacity, development profits are earned by the Fund investors which helps attract capital

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Charter Hall | Market Update | 10 October 2017

1 Parramatta Square Video

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Charter Hall | Market Update | 10 October 2017

Development Committed & Pipeline ~ $2.35bn, ~265,000sqm

Focus on creating build to core opportunities

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FY 2018 FY 2019 FY 2020+
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	900 Ann Street, Fortitude Valley (Brisbane) QLD • Fund through development • Pre-committed to Aurizon on a 12 year lease 105 Philip Street, Parramatta (Sydney) NSW • Fund through development • Fully pre- committed NSW government on 12 year lease Raine Square, Perth WA • 15,000 sqm retail redevelopment underway GPO Exchange, Adelaide SA • Lease agreed with South Australian government department for 12,188 sqm • Additional lease negotiations progressing 130 Lonsdale Street, Melbourne VIC • 100% interest • Lease negotiations well progressed 11 Breakfast Creek Road, Newstead (Brisbane) QLD • Prominent gateway building • In pre- commitment market 140 Lonsdale Street, Melbourne VIC • Completes precinct of 130 and 150 Lonsdale Street • In pre- commitment market Brisbane Square Tower 2, Brisbane QLD • Marquee gateway site into Brisbane’s most active district • In pre- commitment market 370 Queen Street, Brisbane QLD • Aggregation of 3 sites & Golden Triangle • 50% interest	900 Ann Street, Fortitude Valley (Brisbane) QLD • Fund through development • Pre-committed to Aurizon on a 12 year lease 105 Philip Street, Parramatta (Sydney) NSW • Fund through development • Fully pre- committed NSW government on 12 year lease Raine Square, Perth WA • 15,000 sqm retail redevelopment underway GPO Exchange, Adelaide SA • Lease agreed with South Australian government department for 12,188 sqm • Additional lease negotiations progressing 130 Lonsdale Street, Melbourne VIC • 100% interest • Lease negotiations well progressed 11 Breakfast Creek Road, Newstead (Brisbane) QLD • Prominent gateway building • In pre- commitment market 140 Lonsdale Street, Melbourne VIC • Completes precinct of 130 and 150 Lonsdale Street • In pre- commitment market Brisbane Square Tower 2, Brisbane QLD • Marquee gateway site into Brisbane’s most active district • In pre- commitment market 370 Queen Street, Brisbane QLD • Aggregation of 3 sites & Golden Triangle • 50% interest	900 Ann Street, Fortitude Valley (Brisbane) QLD • Fund through development • Pre-committed to Aurizon on a 12 year lease 105 Philip Street, Parramatta (Sydney) NSW • Fund through development • Fully pre- committed NSW government on 12 year lease Raine Square, Perth WA • 15,000 sqm retail redevelopment underway GPO Exchange, Adelaide SA • Lease agreed with South Australian government department for 12,188 sqm • Additional lease negotiations progressing 130 Lonsdale Street, Melbourne VIC • 100% interest • Lease negotiations well progressed 11 Breakfast Creek Road, Newstead (Brisbane) QLD • Prominent gateway building • In pre- commitment market 140 Lonsdale Street, Melbourne VIC • Completes precinct of 130 and 150 Lonsdale Street • In pre- commitment market Brisbane Square Tower 2, Brisbane QLD • Marquee gateway site into Brisbane’s most active district • In pre- commitment market 370 Queen Street, Brisbane QLD • Aggregation of 3 sites & Golden Triangle • 50% interest	900 Ann Street, Fortitude Valley (Brisbane) QLD • Fund through development • Pre-committed to Aurizon on a 12 year lease 105 Philip Street, Parramatta (Sydney) NSW • Fund through development • Fully pre- committed NSW government on 12 year lease Raine Square, Perth WA • 15,000 sqm retail redevelopment underway GPO Exchange, Adelaide SA • Lease agreed with South Australian government department for 12,188 sqm • Additional lease negotiations progressing 130 Lonsdale Street, Melbourne VIC • 100% interest • Lease negotiations well progressed 11 Breakfast Creek Road, Newstead (Brisbane) QLD • Prominent gateway building • In pre- commitment market 140 Lonsdale Street, Melbourne VIC • Completes precinct of 130 and 150 Lonsdale Street • In pre- commitment market Brisbane Square Tower 2, Brisbane QLD • Marquee gateway site into Brisbane’s most active district • In pre- commitment market 370 Queen Street, Brisbane QLD • Aggregation of 3 sites & Golden Triangle • 50% interest	900 Ann Street, Fortitude Valley (Brisbane) QLD • Fund through development • Pre-committed to Aurizon on a 12 year lease 105 Philip Street, Parramatta (Sydney) NSW • Fund through development • Fully pre- committed NSW government on 12 year lease Raine Square, Perth WA • 15,000 sqm retail redevelopment underway GPO Exchange, Adelaide SA • Lease agreed with South Australian government department for 12,188 sqm • Additional lease negotiations progressing 130 Lonsdale Street, Melbourne VIC • 100% interest • Lease negotiations well progressed 11 Breakfast Creek Road, Newstead (Brisbane) QLD • Prominent gateway building • In pre- commitment market 140 Lonsdale Street, Melbourne VIC • Completes precinct of 130 and 150 Lonsdale Street • In pre- commitment market Brisbane Square Tower 2, Brisbane QLD • Marquee gateway site into Brisbane’s most active district • In pre- commitment market 370 Queen Street, Brisbane QLD • Aggregation of 3 sites & Golden Triangle • 50% interest	900 Ann Street, Fortitude Valley (Brisbane) QLD • Fund through development • Pre-committed to Aurizon on a 12 year lease 105 Philip Street, Parramatta (Sydney) NSW • Fund through development • Fully pre- committed NSW government on 12 year lease Raine Square, Perth WA • 15,000 sqm retail redevelopment underway GPO Exchange, Adelaide SA • Lease agreed with South Australian government department for 12,188 sqm • Additional lease negotiations progressing 130 Lonsdale Street, Melbourne VIC • 100% interest • Lease negotiations well progressed 11 Breakfast Creek Road, Newstead (Brisbane) QLD • Prominent gateway building • In pre- commitment market 140 Lonsdale Street, Melbourne VIC • Completes precinct of 130 and 150 Lonsdale Street • In pre- commitment market Brisbane Square Tower 2, Brisbane QLD • Marquee gateway site into Brisbane’s most active district • In pre- commitment market 370 Queen Street, Brisbane QLD • Aggregation of 3 sites & Golden Triangle • 50% interest	900 Ann Street, Fortitude Valley (Brisbane) QLD • Fund through development • Pre-committed to Aurizon on a 12 year lease 105 Philip Street, Parramatta (Sydney) NSW • Fund through development • Fully pre- committed NSW government on 12 year lease Raine Square, Perth WA • 15,000 sqm retail redevelopment underway GPO Exchange, Adelaide SA • Lease agreed with South Australian government department for 12,188 sqm • Additional lease negotiations progressing 130 Lonsdale Street, Melbourne VIC • 100% interest • Lease negotiations well progressed 11 Breakfast Creek Road, Newstead (Brisbane) QLD • Prominent gateway building • In pre- commitment market 140 Lonsdale Street, Melbourne VIC • Completes precinct of 130 and 150 Lonsdale Street • In pre- commitment market Brisbane Square Tower 2, Brisbane QLD • Marquee gateway site into Brisbane’s most active district • In pre- commitment market 370 Queen Street, Brisbane QLD • Aggregation of 3 sites & Golden Triangle • 50% interest	900 Ann Street, Fortitude Valley (Brisbane) QLD • Fund through development • Pre-committed to Aurizon on a 12 year lease 105 Philip Street, Parramatta (Sydney) NSW • Fund through development • Fully pre- committed NSW government on 12 year lease Raine Square, Perth WA • 15,000 sqm retail redevelopment underway GPO Exchange, Adelaide SA • Lease agreed with South Australian government department for 12,188 sqm • Additional lease negotiations progressing 130 Lonsdale Street, Melbourne VIC • 100% interest • Lease negotiations well progressed 11 Breakfast Creek Road, Newstead (Brisbane) QLD • Prominent gateway building • In pre- commitment market 140 Lonsdale Street, Melbourne VIC • Completes precinct of 130 and 150 Lonsdale Street • In pre- commitment market Brisbane Square Tower 2, Brisbane QLD • Marquee gateway site into Brisbane’s most active district • In pre- commitment market 370 Queen Street, Brisbane QLD • Aggregation of 3 sites & Golden Triangle • 50% interest	900 Ann Street, Fortitude Valley (Brisbane) QLD • Fund through development • Pre-committed to Aurizon on a 12 year lease 105 Philip Street, Parramatta (Sydney) NSW • Fund through development • Fully pre- committed NSW government on 12 year lease Raine Square, Perth WA • 15,000 sqm retail redevelopment underway GPO Exchange, Adelaide SA • Lease agreed with South Australian government department for 12,188 sqm • Additional lease negotiations progressing 130 Lonsdale Street, Melbourne VIC • 100% interest • Lease negotiations well progressed 11 Breakfast Creek Road, Newstead (Brisbane) QLD • Prominent gateway building • In pre- commitment market 140 Lonsdale Street, Melbourne VIC • Completes precinct of 130 and 150 Lonsdale Street • In pre- commitment market Brisbane Square Tower 2, Brisbane QLD • Marquee gateway site into Brisbane’s most active district • In pre- commitment market 370 Queen Street, Brisbane QLD • Aggregation of 3 sites & Golden Triangle • 50% interest
	900 Ann Street, Fortitude Valley (Brisbane) QLD • Fund through development • Pre-committed to Aurizon on a 12 year lease	105 Philip Street, Parramatta (Sydney) NSW • Fund through development • Fully pre- committed NSW government on 12 year lease	Raine Square, Perth WA • 15,000 sqm retail redevelopment underway	GPO Exchange, Adelaide SA • Lease agreed with South Australian government department for 12,188 sqm • Additional lease negotiations progressing	130 Lonsdale Street, Melbourne VIC • 100% interest • Lease negotiations well progressed	11 Breakfast Creek Road, Newstead (Brisbane) QLD • Prominent gateway building • In pre- commitment market	140 Lonsdale Street, Melbourne VIC • Completes precinct of 130 and 150 Lonsdale Street • In pre- commitment market	Brisbane Square Tower 2, Brisbane QLD • Marquee gateway site into Brisbane’s most active district • In pre- commitment market	370 Queen Street, Brisbane QLD • Aggregation of 3 sites & Golden Triangle • 50% interest

Note: Images shown on this slide are artist impressions

31

Charter Hall | Market Update | 10 October 2017

Tenant Customer Themes

Current feedback themes are summarised below, and are all underpinned by innovation:

1. Employee Experience should be part of the asset strategy – Service and the Physical space. Are we fostering a connected community ? No one forgets the first visit to an Apple store, W Hotel, etc

2. Flexibility – in how tenants need space, leasing practices, (co-working, third space, etc)

3. Wellness – people go home feeling better than when they arrived at work – how are our assets contributing?

4. Customisation - Build the Internet of Workplace that recognises people and their needs

5. Consistency of service – across sector

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32

Charter Hall | Market Update | 10 October 2017

Sustainability, Wellbeing, Community & Innovation

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INNOVATION

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Charter Hall has Australia’s largest Green Star footprint with 178 Green Star Performance ratings across operating assets, and 18 Green Star Design and As Built ratings in our developments

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National Average NABERS Weighted Rating
Energy Water
Office 4.5 3.4
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National FM contract Driverless cars think tank Customer lobby collaboration

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Charter Hall is a member of GRESB, with six funds responding in FY17. Existing funds CHOT and CPOF achieved top quartile Green Star status in FY16

COMMUNITY

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Charter Hall has four registered International WELL Building Projects

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OUR
OUR PEOPLE OUR PLACES
PARTNERSHIPS
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33

Charter Hall | Market Update | 10 October 2017

Flexispace

No. 1 Martin Place, Sydney and 570 Bourke Street, Melbourne

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34

Charter Hall | Market Update | 10 October 2017

Office Funds Outperforming

• CPOF was granted inclusion into the IPD Core Office Index from July 2017

• CPOF was the highest performing multi-asset fund (all sectors) over 1,2 and 3 years and number two over 5 years

• If CHOT were in the Index, it would be number one performer over 1, 2, 3 and 5 years

• Syndicates and Mandates have consistently performed strongly

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48%
26%
25%
21%
19%
18% 18% 18%
16%
15%
14% 14%
12% 13% 12%
12 Months 3 Years 5 Years
CHOT CPOF BSWF DOF PFA MSCI/IPD
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35

Note: Data on this page reflects the period up to 30 June 2017

Charter Hall | Market Update | 10 October 2017

Retail Market Update Greg Chubb, Group Executive - Retail

Lansell Square, Bendigo VIC

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Charter Hall | Market Update | 10 October 2017

Retail Funds Management Portfolio

			Portfolio	Portfolio	No. of	No. of	WALE1	Occupancy1	WACR1
			Value ($bn)	Size (000 sqm)1	Assets	Tenant Customers1	(years)	(%)	(%)
30	Sep	17	5.9	1,228	173	2,030	8.5	97.5%	6.08%

Diversification by Geography[1]

Diversification by asset type

WALE[1] by asset type

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WA NT Automotive
11% 1% Hospitality 3%
TAS 15% Automotive 11.5 years
1%
ACT
3%
SA
4% NSW Hospitality 17.3 years
47%
VIC
12%
Hardware Hardware 9.9 years
16%
Shopping Centres 6.5 years
Shopping
QLD Centres
21% 66%
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1. Data as at 30 June 2017

37

Charter Hall | Market Update | 10 October 2017

Retail Managed Funds

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Office $9.2bn Retail $5.9bn Industrial $5.3bn
CHOT CPOF [1] BSWF [1] LWHP RP2 [2] LWIPs [3] CLP CPIF
$2.6bn $3.5bn $0.5bn $0.9bn $0.1bn $0.6bn $1.3bn $2.5bn
75
Mandates RP6 RP1 CPRF
$0.6bn $0.3bn $0.3bn $0.2bn
DOF PFA Workzone DAT DAT2 DIFs/CDC
$0.1bn $0.1bn
$1.2bn $0.3bn $0.1bn $0.8bn
VA BW Trust 8
$0.1bn $0.1bn
CLW [4] CQR CLW [4] CLW [4]
$0.4bn $2.9bn $0.4bn $0.7bn
Equity
Wholesale
Retail Equity
ListedListed Equity
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Note Statistics on this page may not add due to rounding

1. CPOF holds 49.1% of the units in the Brisbane Square Wholesale Funds (BSWF)

2. CQR holds 47.5% of the units in RP2

3. LWIPs include LWIP1 and LWIP2. CLW hold 45% of the units in LWIP1

4. Charter Hall Long WALE REIT (CLW) is a $1.5bn listed REIT diversified across the Office, Industrial and Retail sectors

38

Charter Hall | Market Update | 10 October 2017

Retail Fund Performance

• The Retail portfolio continues to track strongly against the MSCI/IPD Index all Retail funds considerably outperforming the index over the three years to 30 June 2017 (or since inception)

• We continue to divest smaller assets with limited prospects for growth, reinvesting those funds into higher growth potential assets via both development opportunities and acquisitions

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19.9%
19.0%
17.8% 13.7% 17.4%
10.9%
11.5%
14.7% 10.0%
12.8%
6.7% 12.6%
6.4% 4.7%
MSCI/IPD Core
Funds Retail 3
Years - 10%
8.0% 8.1% 7.9%
7.4%
6.3% 6.3% 6.2%
1 2 2 2,3 2,4 2
CQR RP1 RP2 RP6 LWHP LWIPs DAT
Income Return (3 Years) Capital Return (3 Years)
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Note: Performance shown for the period 3 years to 2017 unless otherwise stated

1. CQR returns are calculated as distributions plus the uplift in Net Tangible Assets

2. Performance shown since inception as Fund has a track record of less than 3 years

3. LWHP represents the combined return for BP1, BP2 and TTP from the reset date of 31 December 2014

4. LWIPs represents the combined return for LWIP1 and LWIP2 since inception

39

Charter Hall | Market Update | 10 October 2017

Retail Strategy

Convenience and community focussed

VISION

The pre-eminent owner and manager of Australian long WALE and non-discretionary retail assets

Key Drivers

Active asset management

Enhance portfolio quality

Attract and retain talent

Selective acquisitions

Strong tenant relationships Catchment knowledge Monitoring market trends Pro-active leasing

Investing alongside our capital partners

Strong track record of value enhancing redevelopments

Centre centric approach

Employer of choice

Reward and recognition

Non-core disposal

40

Charter Hall | Market Update | 10 October 2017

Charter Hall Integrated Retail Platform

Focussed on convenience and community

• A fully integrated management structure, over 150 property professionals provide end-to-end retail tenant led solutions

• Specific focus on convenience based non-discretionary retail Australia wide

• Retailer sales driven operating platform connected specifically to local communities

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Asset Management Operations Leasing Development
3 dedicated property 110 dedicated property 25 dedicated property 10 dedicated property
professionals professionals professionals professionals
Group services Corporate development / finance / treasury / legal / company secretary
Charter Hall Retail Platform
Over 150 dedicated retail property professionals
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It is only through continued interaction with our tenants that we develop a greater understanding of their businesses and customer needs

41

Charter Hall | Market Update | 10 October 2017

Our Sustainability Achievements

3.5 Star Average 62 Green Star 72 Climate Risk NABERS Performance Ratings Ratings Energy Rating

CQR NATIONAL 3.5 NABERS ENERGY RETAIL WEIGHTED AVERAGE RATING

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WA 3.5 NABERS
Energy Retail
Weighted Average
Rating QLD 3.5 NABERS
Energy Retail Weighted
Average Rating
NSW 3.5 NABERS
Energy Retail Weighted
Average Rating
SA 4 Star NABERS
Energy Retail Weighted
Vic. 3.5 NABERS Energy
Average Rating
Retail Weighted
Average Rating
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Inaugural
GRESB Rating
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• Energy pricing strategy delivering

• LED upgrades resulting in 1.469 GWh savings in energy

• 250Kwh solar system commenced at Singleton Square

• Investigating solar energy projects with the aim of concurrent rollout across 17 retail centres

• Energy contracts locked in until FY20

42

Charter Hall | Market Update | 10 October 2017

Retail Markets

• Over the past 20 years Charter Hall’s preferred retail exposures of food-anchored and hardware & garden centres have shown superior growth in retail trade. Led by trade in supermarkets, non-discretionary retail spending has now overtaken discretionary retail spending over the year to May 2017

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Supermarkets Hardware & Garden
Household Goods Ex-H&G Clothing & Department Stores
250%
200%
Hardware & Garden
CAGR 5-yr: 6.5%; 20-yr 6.0%
150% Supermarkets
CAGR 5-yr: 4.2%; 20-yr 5.4%
Household Goods (ex H&G)
100% CAGR 5-yr: 3.3%; 20-yr 4.4%
Clothing & Dept. Stores
50% CAGR 5-yr: 2.8%; 20-yr 3.6%
0%
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Source: ABS, Charter Hall Research

43

Charter Hall | Market Update | 10 October 2017

Changing Consumption Patterns

• Continued increase in consumption of food, retail and catering

• Strong performance from supermarkets continues

• Changes to specialty mix reflecting shift to food and services

• Convenience and community focus demonstrating retail resilience

20 Year Change in Household Consumption Basket

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5.5% pts
3.6% pts
0.7% pts 0.1% pts
-0.40%
-2.7% pts
-6.6% pts
Retail Housing Utilities Health Transport Communication Recreation
& Finance & Education
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Food Share of Retail Turnover

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Source: Urbis

44

Charter Hall | Market Update | 10 October 2017

Retail Case Study - Acquisition

Arana Hills Plaza, QLD

• Acquired by CQR in December 2016 for $67.1m

• Subregional centre with total GLA of 16,406sqm, anchored by Coles, Kmart and Aldi with 23 specialty shops, 4 kiosks and service station

• The key features of the property include:

• Located approximately 12km north-west of the Brisbane CBD on a prominent 5.61 hectare site with on-grade parking for 822 cars (over 5 per 100sqm of GLA)

• Strong main trade area of 38,660 residents, forecast to grow at 0.9% p.a. for the next 10 years, with income per capita 7% above the Brisbane average, reflecting a large proportion of residents employed in white collar occupations

• Anchor tenants on long leases, with strong sales performance (both Coles and Kmart MAT is above their respective turnover thresholds and growing)

	Acquisition
Value	$67.1m
Core Cap Rate	6.00%
WALE - Whole Property - Anchor Tenants	8.4 years 12.4 years
5 year NOI growth forecast	2.90%
Fully-Leased Market Net Income p.a. *	$4.2m

• Opportunities exist for additional income from introduction of a new car wash and 2 new pad sites, with terms agreed subject to planning approvals

• Includes $0.3m additional income from ATM, car wash and pad sites

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45

Charter Hall | Market Update | 10 October 2017

Retail Case Study – Development

Lake Macquarie Fair, NSW

• Integration of a small adjoining neighbourhood centre and Centre repositioning to increase GLA from 20,343sqm to 22,273sqm comprising:

• Replacement of Coles supermarket with a new full line 4,221sqm tenancy (exclusive of a 175sqm Liquorland)

• Refurbished and expanded mini-major of 643sqm

• Specialty tenant increase from 6,117sqm to 6,718sqm

• Project Completion anticipated in April 2018 following $58.3m spend.

• Centre supermarket MAT in 2019 forecast at over $93M

	Project Forecast
Project Cost	$58.3m
Completion Date	April 2018
Incremental Income	$3.3m
Year 1 Yield	6.96%
10year IRR1	9.67%
Uplift on Book Value($)	$7.0m
CapRate	6.50%

• Value at completion estimated to be $142.2M

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1. Fully leased IRR on project cost

46

Charter Hall | Market Update | 10 October 2017

Retail Case Study – Small Projects

Goulburn Plaza, NSW

• Acquired by CQR in August 2015 for $67m

• Opportunity identified to reset the Coles lease and carry out an expansion of the supermarket by approximately 300 sqm

• The key features of the project included:

• New lease with Coles for the expanded tenancy. Increase in Coles term of 10years. Full refurbishment of the Coles tenancy and relocation of Liquorland into an adjacent specialty tenancy

• Improvement of tenancy mix through changes to Liquorland and relocation of Lowes into surrendered Dick Smith site

• Ambience upgrade including toilet and parents room refurbishment; car park improvements to increase safety, lighting and accessibility; and external painting to entries and street facades

	Acquisition	Current
Value	$67.0m	$82.7m
Cap Rate	7.00%	6.00%
WALE	3.8 years	6.2 years
5 year NOI growth forecast	-	3.0%
Passing NOI	$4.7m	$4.9m

• Works commenced in April 2016 and were completed by August 2016.

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47

Charter Hall |

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485 Dohertys Rd, Truganina VIC

Charter Hall | Market Update | 10 October 2017

Industrial Funds Management Portfolio

			Portfolio	Portfolio	No. of	No. of	WALE1	Occupancy1	WACR1
			Value ($bn)	Size (m sqm)1	Assets	Tenant Customers1	(years)	(%)	(%)
30	Sep	17	5.3	2,840	111	158	9.2	97.4%	6.41%

Diversification by Geography

Diversification by Fund

Diversification by Equity Source

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CLW Retail Listed
WA
14% 12% Equity Fund
DCSF 16% 13%
TAS CDC 1%
ACT 1% NSW 2%
1% 39% DIF4
SA 3% CPIF
5% DIF3 46%
6%
DIF2
5%
Wholesale
VIC Partnership
22% CLP Equity
25% Wholesale 25%
Pooled
QLD
18% Equity
46%
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1. Data as at 30 June 2017

49

Charter Hall | Market Update | 10 October 2017

Industrial Managed Funds

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Office $9.2bn Retail $5.9bn Industrial $5.3bn
CHOT CPOF [1] BSWF [1] LWHP RP2 [2] LWIPs [3] CLP CPIF
$2.6bn $3.5bn $0.5bn $0.9bn $0.1bn $0.6bn $1.3bn $2.5bn
75
Mandates RP6 RP1 CPRF
$0.6bn $0.3bn $0.3bn $0.2bn
DOF PFA Workzone DAT DAT2 DIFs/CDC
$0.1bn $0.1bn
$1.2bn $0.3bn $0.1bn $0.8bn
VA BW Trust 8
$0.1bn $0.1bn
CLW [4] CQR CLW [4] CLW [4]
$0.4bn $2.9bn $0.4bn $0.7bn
Equity
Wholesale
Retail Equity
ListedListed Equity
----- End of picture text -----

Note Statistics on this page may not add due to rounding

1. CPOF holds 49.1% of the units in the Brisbane Square Wholesale Funds (BSWF)

2. CQR holds 47.5% of the units in RP2

3. LWIPs include LWIP1 and LWIP2. CLW hold 45% of the units in LWIP1

4. Charter Hall Long WALE REIT (CLW) is a $1.5bn listed REIT diversified across the Office, Industrial and Retail sectors

50

Charter Hall | Market Update | 10 October 2017

Industrial Fund Performance

• Charter Hall industrial funds have performed strongly over the past 3 years and continue to do so supported by solid economic fundamentals and long WALE leases to quality tenant covenants in key metropolitan locations within Australia

• A high proportion of total return derived from income, industrial assets offer an attractive proposition on a risk-return basis and a compelling case for allocation to investor portfolios

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DIF2
15.2%
CLP
14.0% 6.9%
DIF2
6.9%
12.8% CPIF 6.9%
DIF3
5.1% 11.7% 11.8% MSCI/IPD
MSCI/IPD 10.8%
4.3% 4.4%
CPIF 10.1%
9.3%
CLP
3.0%
8.0%
8.2%
1.9%
7.7%
Capital Return 7.4% 7.4%
7.1%
6.3%
Income Return 6.1%
1 Year 3 Years
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Note: Data on this page reflects the period up to 30 June 2017

51

Charter Hall | Market Update | 10 October 2017

Industrial Market Update

• Industrial tenant demand continues to gather momentum with leasing activity totalling 2.22 million square metres over the 12 months to FY17, up from 1.79 million square metres leased in FY-16

• Whilst investor demand for prime industrial assets remained strong, a lack of quality assets in prime locations has led to investors turning their attention towards core plus opportunities in the secondary market, leading to greater tightening in secondary yields

Major Industrial Leasing Activity

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square metres
2,500,000
ADELAIDE PERTH BRISBANE MELBOURNE SYDNEY
2,000,000
1,500,000
1,000,000
500,000
0
2012 2013 2014 2015 2016 2017
YTD
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Source: JLL, ABS, Charter Hall Research

Corporate Revenue Growth in Key Sectors

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----- Start of picture text -----

0.2%
Retail
2.2%
7.9%
Logistics
2.8%
-2.3%
Wholesale
-0.9%
6.9%
Manufacturing 0.5%
12mo Growth 5yr CAGR
-4% -2% 0% 2% 4% 6% 8% 10%
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Industrial Leasing by Sector 2016Q2-2017Q2

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----- Start of picture text -----

Other
Logistics 10%
19%
Construction
4%
Retail
Trade
21%
Manufacturing
25%
Wholesale Trade
21%
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Charter Hall | Market Update | 10 October 2017

Industrial Market Update – Demand Analysis

Material uplift evident in the past 12 months

• Leasing activity in FY-17 was led by take-up in Sydney and Melbourne which accounted for 72% of take-up recorded nationally.

• In Q2-17, leasing activity in Perth increased to its highest quarterly level since Q4-2015. Brisbane and Adelaide industrial markets also recorded rises in industrial leasing activity over Q2-17.

• Wholesale, retail trade and logistics continued to drive industrial tenant demand, accounting for 61% of all leases signed in FY-17.

Major Industrial Leasing Activity 12 Month Comparison

Major Industrial Leasing Activity by Type: FY-17

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1,200,000
12 months to 2016-Q2
12 months to 2017-Q2
1,000,000
800,000
600,000
400,000
200,000
-
Sydney Melbourne Brisbane Perth Adelaide
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D&C Pre-lease Occupier Leased Sub-Lease
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Sydney Melbourne Brisbane Perth Adelaide
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Source: JLL, Charter Hall Research

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Charter Hall | Market Update | 10 October 2017

Industrial Market Update – Supply Analysis

Stock under construction presently low, with high commitment rate

• Of the industrial space currently under construction, 97% is being developed is Melbourne, Brisbane and Sydney

• Pre-commitment rates remain high, with less than 10% of space currently under construction available for lease

								Committ	ed A	vailabale
Sydney	South Sydney
	Outer South West
	Outer North West
	Outer Central West
	North
	Inner West
Melbourne	West
	South East
	North
	City Fringe
Perth	South
	North
	East
Brisbane	Trade Coast
	Southern
	Northern
Adelaide	Outer South
	Outer North
	North West
	North East
	Inner West/East

Source: JLL, Charter Hall Research

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Charter Hall | Market Update | 10 October 2017

Industrial Sector Trends

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Structural
Adjustment
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Technology
Impact
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• Current levels of infrastructure investment and population growth support strong industrial sector expansion

• Old facilities are becoming obsolete or converted to residential creating further need for prime industrial stock

• Institutional grade industrial stock is anticipated to expand from circa $35bn now to around $55bn over 10 years

• Automation is addressing rising labour costs, increased consumer volumes and supply / operational efficiencies

• E-commerce is creating demand for reduced delivery time, proximity to infrastructure nodes, warehousing capacity and landlord’s ability to deliver broader integrated distribution network solutions

• Tenant occupancy requirements are becoming increasingly complex, costly and wide reaching

Partnering & Collaboration

• Tenants are seeking broader portfolio solutions to meet their logistical and business needs

• Landlord to play increasingly active role in assisting tenants with solving fit out cost and complexity, operational aspects and specialised nature of occupancies

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Sustainability
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• Trend driven by rising energy costs and energy usage, regulatory frameworks, organisational focus on sustainability by tenants themselves and economic viability of ESD technology

• Sustainability activities to reduce environmental footprint are now not only socially but economically viable

• Knowledge and readiness to implement best practice initiatives will offer a competitive advantage to landlords

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Charter Hall | Market Update | 10 October 2017

Charter Hall Approach

• Charter Hall is well positioned to capitalise on these evolving trends

• Multi-sector relationship with key major tenants are enabling early phase discussions on future logistics occupancy and financing requirements as part of broader business solutions

• Targeting replenishment of CPIF’s land banks to capitalise on tenant new build occupancy requirements

• Strong origination capabilities to source strategic assets off-market that will capitalise on the extensive national infrastructure pipeline

• Increasingly leveraging our office and industrial sustainability knowledge to deliver our tenants cost efficiencies that economically and socially meet the organisations broader sustainability objectives

Charter Hall’s Major Cross Sector Tenant Customer Relationships

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Overview of Wesfarmers Subsidiary Leases

Sector	Area	Tenancies
	(000’s sqm)	(#)
Retail	462	99
Industrial	282	6
Office	42	4
Total	786	109

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Overview of Woolworths Group Subsidiary Leases

• Future proofing of development projects to meet growing sustainability requirements

Sector	Area	Tenancies
	(000’s sqm)	(#)
Retail	470	136
Industrial	247	6
Office	1	1
Total	718	143

56

Charter Hall | Market Update | 10 October 2017

Tenant Customer Case Study

Challenge

• 21,500sqm facility was being developed at CPIF’s 2 Hume Hwy

• 1 Chullora for Fastway Couriers on a 10-year pre-lease

• Australia Post, CPIF’s tenant at the nearby 56 Anzac Ave Chullora

• 2 occupying 10,000sqm on a one-year lease, had a requirement for a new 20,000sqm facility on a 15-year lease

• Shriro Holdings also occupied 10,000sqm at 56 Anzac Ave on a 1-

• 3 year lease

Solution

• A Move Australia Post to 2 Hume Hwy into the facility being developed for Fastway Couriers

• B Move Shriro out of 56 Anzac St to another facility

• C Move Fastway Couriers into 56 Anzac St across 20,000sqm by joining the two tenancies previously occupied by Australia Post and Shriro

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2 Hume Hwy Chullora
21,500sqm
15 years 10 years
Third Party
Asset
56 Anzac St Chullora
Australia Post Shriro Holdings
10,000sqm 10,000sqm
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Outcome

• Creation of value uplift via a significantly longer WALE across the two assets

• Increased CPIF exposure to long Government tenancy

• Demonstrated ability to partner with tenant customers assisting with future pre-leasing activity

57

Charter Hall | Market Update | 10 October 2017

Development Approach

Sydney Development Strategy

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• Targeting infill sites that:

• Have existing industrial zoning

• Can be immediately developed

• Are strategic in nature

• Have easy access to orbital road network

• The strategy aims to both capitalise on strong market fundamentals in Sydney and shorten the development cycle thereby reducing the risk of holding land for longer

• This approach alleviates the need for new infrastructure and planning approvals

• In addition to the sites currently being developed or held as inventory in Sydney, we have identified several more opportunities that are consistent with this strategy

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|

Charter Hall

No.1 Martin Place, Sydney NSW

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Charter Hall | Market Update | 10 October 2017

Capital Deployment

• Deployment of the May 2017 equity raise continues to be ahead of schedule with $250m deployed into identified investments.

• Notably since the announcement of the FY17 Results Charter Hall:

• Deployed $30m into the LWHP to help fund the acquisition of 6 former Masters assets

• After extensive due diligence made the decision not to proceed with the CPRF acquisition, sourcing alternatives

Sector	Investment	Size	Indicative timing	Update
Industrial	Charter Hall Prime Industrial Fund (CPIF)	$20m	Q3 FY17	Deployed
Industrial	Direct Industrial Fund No. 4 (DIF4)	$30m	Q4 FY17	Deployed
Office	Brisbane Square Wholesale Fund (BSWF)	$95m	Q4 FY17	Deployed
Office	Charter Hall Prime Office Fund (CPOF)	$30m	Q4 FY17	Deployed
Diversified	Direct Consumer Staples Fund (DCSF)	$25m	Q4 FY17	Deployed
Office	Charter Hall PFA Fund (PFA)	$10m	Q4 FY17	Deployed
Retail (Liquor)	Long WALE Investment Partnership (LWIP)	$10m	Q1 FY18	Deployed
Retail (Hardware)	Long WALE Hardware Partnership (LWHP)	$30m	Q1 FY18	Deployed
Total identified investment	opportunities deployed / committed	$250m
Retail (Shopping)	Charter Hall Prime Retail Fund (CPRF)	$41m	Q1 FY18	Not proceeding
Office	Counter Cyclical Trust (CCT)	$25m	During FY18	Sourcing Acquisitions
Retail (Shopping)	Retail Partnership No. 6 Trust (RP6)	$17m	During FY18	Sourcing Acquisitions
Total identified investment	opportunities with an indicative investment timing during FY18	$83m
Total identified investment	opportunities	$333m

60

Charter Hall | Market Update | 10 October 2017

Capital Management Priorities

• Diversification (ongoing)

• Expanded access – ability to source volume

• Support the growth of FUM and platform

• Conservative financing profile

• Low gearing

• Headroom to covenants

• Manageable maturity profile

• Ongoing focus on risk and controls

Debt expiry profile ($m)[1]

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2,756
2,245
1,452
800
700
382
276
-
FY18 FY19 FY20 FY21 FY22 FY23 FY 24 & 25 FY26 FY27+
Industrial Retail Office Diversified Corporate
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Drawn Debt ($m) and Gearing (%) by Sector¹

1. Debt expiry profile and gearing as at 30 June 2017

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4,000 34.6%
3,500
3,000
37.6%
2,500
19.6%
2,000
1,500
1,000
30.3%
500
0.0%
0
Corporate Office Retail Industrial Diversified
Drawn Debt Undrawn Debt
Debt Facility ($m)
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61

Charter Hall | Market Update | 10 October 2017 Group Outlook David Harrison, Managing Director & Group CEO 333 George Street, Sydney NSW

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Charter Hall | Market Update | 10 October 2017

Our Strategy

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

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ACCESS

DEPLOY

MANAGE

INVEST

Accessing equity from wholesale, retail and listed investors.

Creating value through attractive investment opportunities.

Funds management, asset management, leasing and development services.

Investing alongside our capital partners.

FY18 YTD

$176m

gross equity raised

$1.1bn

gross transactions

$20.4bn h 3%

FUM

$1.6bn h 3%

Direct equity raising

Launched Charter Hall Direct PFA fund DOF open for new raising DCSF launch imminent

Wholesale equity raising

$0.8bn acquisitions $0.3bn divestments

Strong development activity

• $2.0bn of development projects underway

FUM Movement

$455m net acquisitions $70m development capex $40m revaluations

Co-invested in a new direct fund – Direct Consumer Staples Fund

Re-opening pooled funds

1 YEAR[1]

$2.3bn

gross equity raised

$5.2bn

gross transactions

$2.4bn

FUM growth

$430m increase in PI[2]

39% growth

$3.0bn acquisitions $2.3bn divestments

329 assets

19.8%[3]

Total Property Investment Return

1. Data based on 12 months to 30 June 2017

2. PI refers to the Property Investment Portfolio

3. Total Property Investment Return calculated as distributions received from funds plus the growth in investment value divided by the opening investment value of the Property Investment Portfolio. This excludes any investments held for less than a year

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Charter Hall | Market Update | 10 October 2017

Funds Under Management Growth

Funds under management movement ($bn)

Funds under management by equity source ($bn)

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$0.8bn ($0.3bn)
$0.0bn $0.1bn $20.4bn $19.8bn $20.4bn
$2.8bn
$17.5bn $2.8bn
$19.8bn $2.5bn
$4.3bn
$13.6bn $4.1bn
$2.5bn
$11.4bn $1.9bn
$9.9bn $1.7bn $2.2bn
$1.7bn $2.0bn
$1.8bn
$12.4bn $12.9bn $13.3bn
$9.5bn
$7.8bn
$6.5bn
Jun-17 Acquisitions Disposals Revaluations Capex Sep-17 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Sep-17
Wholesale Listed Retail
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1. Compound annual growth rate (CAGR) from 30 June 2013 to 30 June 2017

64

Charter Hall | Market Update | 10 October 2017

Property Investment Portfolio

			Portfolio	No. of	WALE1	Occupancy1	WARR1	WACR1	WADR1
			Value ($m)	Properties	(years)	(%)	(%)	(%)	(%)
30	Sep	17	1,577	297	7.4	97.7	3.6	6.09	7.3

Diversification by Geography[1]

Diversification by Fund

Diversification by Sector

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WA NT/ACT/TAS CLW
15% 2% $167m CQR
DCSF $322m
$62m
DIF4
$29m
SA NSW
5% 39% CPIF RPs
$117m $41m
$1,527m CPRF
$45m
CLP
$139m LWHP
$80m
LWIPs
VIC
$29m
21% BSWF
$104m
CHOT
$203m
QLD CPOF
18% $238m
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Retail -
Shopping
Industrial
Centres
27%
26%
Retail -
Long WALE
10%
Office
37%
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1. Data as at 30 September 2017

65

Charter Hall | Market Update | 10 October 2017

Conclusion

We believe the investment landscape will continue to accommodate growth

• Relative attractiveness of commercial property

• Continued equity flows from all equity sources

• We continue to expect asset values to remain well supported

• With $3 billion of investment capacity across all funds, Charter Hall is well placed to continue FUM growth via a strong development pipeline and selective acquisitions

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1 Shelley Street, Sydney NSW
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105 Phillip Street, Sydney NSW

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Charter Hall |

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1 Shelley St, Sydney NSW
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Charter Hall | Market Update | 10 October 2017

Fund Key and Glossary

Listed Entities

CHC	Charter Hall Group
CQR	Charter Hall Retail REIT
CLW	Charter Hall Long WALE REIT
Wholesale
BSWF	Brisbane Square Wholesale Fund
CHOT	Charter Hall Office Trust
CLP	Core Logistics Partnership
CPIF	Charter Hall Prime Industrial Fund
CPOF	Charter Hall Prime Office Fund
CPRF	Charter Hall Prime Retail Fund
LWHP	Long WALE Hardware Partnership
LWIP	Long WALE Investment Partnership
LWIP2	Long WALE Investment Partnership No. 2
RP1	Retail Partnership No.1
RP2	Retail Partnership No.2
RP6	Retail Partnership No.6

Direct Funds

BW Trust	BW Trust (Direct syndicate)
CDC	Charter Hall Direct CDC Trust
DIF2, DIF3, DIF4	Direct Industrial Fund series
DOF	Direct Office Fund
PFA	Charter Hall PFA Fund
VA	Charter Hall Direct VA Trust
DAT, DAT2	Charter Hall Direct Automotive Trust Series
Other
CAGR	Compound Annual Growth Rate
Cap Rate	Capitalisation Rate
FUM	Funds Under Management
NTA	Net Tangible Assets
OEPS	Operating Earnings per Security
PFM	Property Funds Management
PI	Property Investments
WACR	Weighted Average Cap Rate
WALE	Weighted Average Lease Expiry

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Charter Hall | Market Update | 10 October 2017

Contact Us

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David Harrison

Managing Director & Group CEO

Charter Hall Group

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

Sean McMahon

Chief Investment Officer & Group Executive – Industrial

Charter Hall Group

T: +61 2 02 8651 9147 sean.mcmahon@charterhall.com.au

Adrian Taylor Group Executive - Office

Charter Hall Group

T: +61 2 8651 9102 adrian.taylor@charterhall.com.au

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Russell Proutt Chief Financial Officer

Charter Hall Group

T: +61 2 8651 9493 russell.proutt@charterhall.com.au

Richard Stacker

Group Executive - Global Investor Relations

Charter Hall Group

T: +61 2 8651 9260 richard.stacker@charterhall.com.au

Greg Chubb Group Executive – Retail

Charter Hall Group

T: +61 2 8651 9355 greg.chubb@charterhall.com.au

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Charter Hall | Market Update | 10 October 2017

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 30 June 2017 unless otherwise stated. All references to dollars ($) are to Australian dollars, unless otherwise stated.

70

Sydney Head Office Charter Hall | Le ~~vel 20, No.1 Martin Place~~ Sydney, NSW, 2000 T: +61 2 8651 9000

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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

Suite 604, 147 Pirie Street Adelaide SA 5000 T: +61 8 8417 5900

www.charterhall.com.au