GPT GROUP — Management Reports 2004

Apr 28, 2004

CEO & FUND MANAGER'S REPORT

BY NIC LYONS AND MICHAEL O'BRIEN TO

MEETING OF UNITHOLDERS 29 April 2004

Michael and I are very pleased to be presenting to you what I believe is a very strong result for GPT in 2003, and to give you an update on more positive news across the portfolios, which further enhances our position for performance over the remainder of 2004.

Over 2003 we achieved a strong result, despite some challenges.

The distribution for the 12 months was 21.2 cents per unit, an increase of almost 4% over 2002.

Earnings per unit for the 12 month period was up 5.6% on the previous corresponding period, at 21.6 cents per unit.

Although this increase was assisted by a change in the fee structure, this result is one which we are particularly pleased with.

It was achieved despite challenging office and tourism market conditions and reflects the benefits of our diverse, high quality portfolio, the intensive asset management of the portfolio, and acquisitions and developments over the past 18 months.

Over the year we also accessed a number of opportunities which will secure future growth:

• Our current developments are successfully being completed.
• We acquired some great assets which contribute further diversity and have improved the quality of our portfolio, including our first investments in the masterplanned urban communities sector.

These activities not only improved the quality of our assets, but further enhanced the diversity of GPT's income, and the Trust's medium term growth prospects.

The distribution of 21.2 cpu for 2003 continued a trend in increasing distributions over the last 5 years.

Underlying earnings also exceeded our target, with just over 3% growth.

As this table shows, over the past few years GPT has been evolving in a way that has allowed us to improve our level of earnings growth.

We've progressively moved earnings growth from 2 to 3% - and 3% or better is our target for future growth.

We have done this prudently, and in a way which is consistent with our core investment approach:

• We have modestly increased gearing. In 2002 unitholders approved an increase in the Trust's gearing limit, and we implemented a policy range for gearing of 20-30%. This has allowed us to take greater advantage of GPT's strong credit rating and balance sheet in funding acquisitions and developments.
• We have also entered new sectors, further diversifying the Trust's income base, while accessing quality assets which have the ability to deliver higher levels of return. Hotels in 1997, bulky goods in 2001, and masterplanned urban communities in 2003, were all examples of this approach.

Over 2003 GPT's NTA increased significantly - indicating the quality of our Retail portfolio in particular.

The NTA of \$2.73 represented an increase of 5% on the previous year.

Continuing the trend of earnings growth, we today announced a distribution of 5.4 cents per unit for the March quarter.

For Split Trust income units, the distribution is 4.725 cents per unit, and Growth unitholders will receive 0.675 cents. This distribution will be paid to unitholders on 24 May.

Now let's look at the total return provided by GPT.

For the year ended 31 December 2003, we achieved a total return of 8.2% - only slightly below the index return of 8.8%.

This performance reflected the lower earnings growth and outlook from the office and hotel portfolios. which were affected by adverse market conditions, as well as the strong performance of the residential sector, which assisted the returns of a number of entities in the Index.

Although our performance was only slightly below the Index, no performance fee was paid, and unitholders benefited from a reduced base management fee.

You can see that in 2000 and 2002, GPT's total return compared favourably with this benchmark, and we outperformed the Index.

So, how is GPT placed for future performance?

GPT has a strong balance sheet and a broad range of investments, and is well placed to access future growth opportunities.

We have total assets of over \$7.7 billion - with investments across five major property sectors, giving unitholders exposure to a broad range of quality assets, and a diverse income stream.

Our gearing is currently sitting at just over 26% of total assets - well within the policy range set by the Board. Our borrowings are well diversified - with debt maturities out to 2029, and we are fully hedged against interest rate movements.

We continue to have the highest credit rating of any trust in the Australian LPT sector, and this is reflected in the competitive cost of our debt.

So, we are well placed to fund future earnings enhancing activities, and have a solid platform to continue to increase our earnings and provide increased returns to unitholders.

Our established and future development pipeline, our entry into masterplanned communities as well as recent acquisitions, position the Trust well to continue to deliver on the goals we have set.

To talk in more detail about how our portfolios are positioned and their recent performance. I'll now hand over to Michael O'Brien, GPT's Fund Manager.

As you can see GPT now has \$7.6 billion invested in quality assets across four major property sectors

Let's now look at each of those portfolios in more detail.

Turning firstly to the Retail Portfolio, which, at \$3.8 billion, now represents 50% of the Trust's property assets.

The image that you can see is of the Hive precinct which is part of the Erina Fair expansion. This development was completed ahead of schedule in November last year.

Income from the Retail Portfolio was up 11% on the previous year, a great result.

This reflected solid performance from our shopping centres, where base rents increased on average by over 4%, and the Homemaker assets again contributed to growth.

Our 15 shopping centres are in great shape, with high productivity and reasonable operating costs for retailers. Across the centres, total sales increased by close to 3%, and specialty sales per square metre across the regional assets remains 5% above the industry average.

Nine of our shopping centres were revalued in 2003, resulting in a positive net revaluation of \$194.5m.

This contributed almost 10 cents to the Trust's Net Tangible Assets per unit.

It's worth recapping our Homemaker strategy briefly, as it has been a great success.

We entered this sector just over two years ago, recognising the potential growth of this area of retailing, which was not being captured in our existing assets. This strategy has been proven sound, with income from the portfolio up almost 19% in 2003.

We've successfully expanded the portfolio with the acquisition of Homemaker City Epping in 2003, and in March of this year we committed to the second stage of the Fortitude Valley Homemaker City in Brisbane.

Developments are a very big part of our retail portfolio's growth platform, and across the portfolio there is an extensive pipeline of works which extends through to 2008, giving us access to medium term arowth.

Within the next 12 months we anticipate having commenced a further \$510 million in works at Macarthur Square, Penrith, and Rouse Hill.

By investing your capital in what are already strongly performing assets, not only are we enhancing the performance of those assets, we are achieving superior returns to those being achieved in the marketplace for acquisitions.

Let's now look at some of our recent and current developments in more detail.

Erina Fair, one of our best performing centres, is located on the NSW Central Coast. A major development was completed, fully leased and ahead of schedule in November.

The development included some exciting new concepts, with a real focus on the community. This has resulted in the creation of an asset which is a genuine Town Centre - where you can shop, see a movie, take the family ice skating or spend time at the library or community centre.

Already the centre is trading very well:

• December centre Sales and traffic were up around 30%
• December specialty sales were up over 50%.

We are targetting a year 1 yield of 8.5% on the development, and are very confident of reporting that we have achieved this forecast next year.

This is a view of the new Town Square precinct, which is the heart of the centre. You can see some of the outdoor aspects of the centre here. And this is another aspect of the Erina development - showing the very innovative and environmentally friendly food court.

In addition to using a sophisticated shading system to maximise the use of natural light, displacement ventilation is used to cool the area.

Melbourne Central is the next major development, and we are making great progress.

This is a photo of a section of one of the early stages of the Latrobe Street building which opened late last year.

With a little under nine months to go, we have already committed 90% of the centre's base rent.

We have attracted some great new retailers and concepts to the Centre, including the first Australian stores for key international retailers such as Gstar and Tommy Hilfiger. This is a major project on which we will spend \$245 million, and expect to achieve an 8.5% initial yield.

Now to the Office Portfolio which at over \$2.9 billion accounts for 39% of the Trust's property assets.

As many of you will know, 2003 saw a continuation of the previous year's environment of weak tenant demand, which has impacted on rent and vacancy rates.

The first part of this year, however, has shown early stages of an improvement in office market conditions

Despite this environment, GPT's portfolio performed well, with income up 3.8% in 2003, and an occupancy rate above the overall market.

In line with our strategy of maintaining a quality portfolio, we continued to improve the portfolio with a number of acquisitions and developments.

Occupancy across the portfolio remains relatively high, reflecting the focus we have placed on leasing.

This image is a depiction of the first of the two National Buildings at Victoria Harbour in Melbourne. The first Building was complete in 2003, and the second building will be complete this year. These are modern, campus style facilities which represent an excellent addition to the portfolio. The National is tenanting each building for 12 years, and the project will deliver yield on cost in excess of 8%.

In December we acquired a 25% interest in what is broadly acknowledged as one of the best office assets in Australia - 1 Farrer Place. The buildings, which are also known as Governor Phillip and Governor Macquarie Towers, add a premium asset to the portfolio, and enhance our exposure to the Sydney CBD - the market which we believe will exhibit the best long-term performance.

And we've announced only this month, our acquisition of the third stage of the Darling Park Complex. also in Sydney. The 29,000 sqm office tower, already close to 50% committed to a blue chip tenant, Marsh and Mercer, is now being constructed on the site circled in red here and will be complete in mid 2006.

We continue to work hard on leasing across the portfolio.

This is important because it reduces the Trust's expiry risk in any one period, and helps us to remove volatility from our income stream. Over 2003, we leased over 47,000 som across GPT's office assets. and to date this year we have already leased or agreed terms over almost 70,000sgm of space.

This gives us confidence that there is a recovery underway.

You can see the benefit of this leasing in the blue bars on this graph - as you can see we now have very little space becoming vacant over the remainder of this year, and reasonably low vacancy, the majority of which is in Sydney.

We are very happy with how this portfolio is positioned, and are confident of undertaking further leasing over the remainder of this year.

The Hotel and Tourism Portfolio is valued at \$530 million, and represents 7% of the portfolio.

We were pleased to deliver an increase in income of 4.1% in 2003 despite a volatile year, due to SARS and the Iraq war. While income from Ayers Rock Resort was flat. Four Points on Darling Harbour in Sydney performed exceptionally well, resulting in strong growth in income.

With early signs of a strengthening in inbound demand, we are cautiously optimistic about the outlook for this year.

And now on to our industrial and business park portfolio.

The image you can see here, is of the Austrak Business Park at Somerton, which includes significant land for future growth. We are very confident about this site, which includes one of the first intermodal rail terminals in Australia. We have been focused on growing this portfolio, and have made good progress in the last 2 years.

Not only was income up by 38% in 2003, we have also secured future growth.

• We completed of a new facility at Altona for Just Jeans.
• The development of the third Quad site at Olympic Park is underway and in January this year we acquired 8 Herb Elliot Avenue at Homebush Bay.

With expansion land totalling 350.000sqm, we're confident of further expanding this portfolio and increasing returns in the short term.

And finally, on to the Master Planned Urban Communities sector which we entered in early 2003.

This picture is of the North Shore precinct within the Twin Waters residential community.

In October GPT acquired an interest in the Twin Waters Resort which will be the final stage of this very successful residential community on the Sunshine Coast of Queensland.

In this sector our strategy focuses on large scale, long term projects which give us the opportunity to time development stages in line with market cycles.

We are undertaking these projects in JV with a very established and experienced partner. Lend Lease. To further reduce volatility and risk these projects are largely focused on the home occupier market in high population growth areas.

Last year we reported on our success, with Lend Lease, in being selected as preferred tenderer on a \$1 billion project at Rouse Hill in Sydney's north-west. We've now finalised negotiations with Landcom and received approval of the masterplan for the site.

This is a great start for the portfolio which we are confident of building over time.

The outlook for the Trust is positive.

Over 2003 and into 2004, a highlight has been the improvement in the quality of the portfolio through acquisitions and developments.

In retail, our developments are not only providing strong returns but positioning the assets for stronger growth in the future.

Our entry into the development of masterplanned communities with Lend Lease, gives us another income stream and an opportunity to enhance our future growth profile.

With a strong balance sheet the Trust is in great shape to continue to deliver earnings growth.

That concludes our presentation.