INGENIA COMMUNITIES GROUP — Interim / Quarterly Report 2011

Feb 27, 2011

ING Real Estate ~~Community Living Group~~ AUSTRALIA

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28 February 2011
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A enda g

Highlights and Overview

Key Financials

Capital Management

Portfolio Update

Strategy and Outlook

Appendices

Hi hli hts g g

Progress driven by increased management capability and improved operational performance

Performance benefitted from renewed management focus

• Occupancy rates higher than 12 months ago as management initiatives take effect

• Organic growth projects progressed to assist replacement of earnings from divested assets and terminated hedges

Capital position continues to be a challenge and is an ongoing focus

• Disciplined approach to capital allocation ensuring efficient use of funds

• Divestment of non-core or underperforming assets continuing to realise value

• Write down of Garden Villages prompted pre-payment to Australian debt facility

Growth initiatives identified to enhance business performance

• Mid-way through value enhancement strategy to unlock value from challenging Garden Villages portfolio including conversion of three rental villages to DMF model

• Continued conversion of three rental villages to DMF[1] model to release free cash

• ING REIMA strategic review completed – focus on best future ownership structure for ILF

Overview

ING Real Estate Community Living Group (ILF)

AUSTRALIAN PORTFOLIO

OVERSEAS PORTFOLIO

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Garden Villages Portfolio (A$93m)

• Australian Rental portfolio

• 100% ILF ownership

• 30 assets across Australia

Garden Villages to DMF Conversion (A$21m)

• Assets undergoing conversion from rental model to DMF

• � 100% ILF ownership

• 3 assets based in Queensland

Settlers Lifestyle Portfolio (A$63m)

• Australian DMF portfolio

• 100% ILF ownership

• 4 assets, primarily located in WA

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US Seniors Portfolio (US$305m)[1]

• Rental portfolio, JV with a leading seniors housing REIT

• 50% ILF ownership of 20 assets (100% of Lynbrook)

• 21 assets across 10 states, managed by US operators

NZ Students Portfolio (NZ$30m)[2]

• 3 assets based in Wellington

• � 90% ILF ownership

US Students (US$23m)

• Announced portfolio exit November 2009

• �7 assets handed back by 31 December 2010, 1 sold in July 2010 and 9 assets remaining

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Ke Financials
y
Residents at Settlers Meadow Springs, WA
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Ke Financials y

Results reflect the shift in focus from passive landlord to active asset manager to drive value

		6 months to	6 months to
KeyFinancial Metrics		31 December 2010	31 December 2009
Statutory profit/(loss)	$m	10.3	(51.6)
Operating income1	$m	4.6	10.7
Operating income per unit	cents	1.0	2.4
Net cashflow from operations2	$m	4.3	14.0
		31 December 2010	30 June 2010
Gearing3	%	72%	73%
Net Tangible Assets (NTA) per unit	cents	25.7	24.9

• Operating income impacted by asset sales, hedge close-outs and refinancing costs

• Improving liquidity, earnings and cashflow remains key focus of management

Ke Financials y

Operating result versus statutory result

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$m
12.0
0.5 10.3
0.7
10.0
7.0
8.0
6.0
4.6 (1.7)
4.0
(0.8)
2.0
-
Operating Income Mark-to-market Loss on Property Fair Gain on disposal Other Statutory Profit
derivatives revaluation of Value Movements of investment
new property
constructions
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Ke Financials y

NTA per unit firming as US Seniors revaluation offsets Garden Villages decline

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A$ cents per unit
27.0
1.7 25.7 25.7
24.9
(1.6)
25.0
1.0
(0.3)
23.0
21.0
1.5 NZ and US Students (6%)
19.0
1.6 AU Conversion (6%)
3.8 AU Settlers (15%)
8.2 AU Garden Villages (32%)
17.0
10.6 US Seniors (41%)
15.0
30-Jun-10 Foreign Other Operating Valuations 31-Dec-10 3 0/06 /2 009
currency income NTA breakdown (cents per unit)
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• ILF’s US Seniors valuations improvements driven by increased investor demand for assets

• and higher occupancy rates however impacted by strengthening AUD/USD exchange rate

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Ca ital Mana ement
p g
Residents at Settlers Rockhampton, QLD
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Capital Management

Capital position ongoing management focus

• Long dated debt profile with average debt duration of 6.8 years

• Australian gearing increased to 51% following $16m termination payment for remaining capital hedges

• A$8m prepayment to Australian facility due to devaluation of Garden Villages portfolio

• US gearing supported by debt that is non-recourse, fixed rate, long-term and covenant light

• NZ Students refinancing progressing ahead of August 2011 expiry

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Debt maturity profile Look through portfolio gearing
A$m
300 90%
80%
250
70%
200 60%
50%
150
40%
100 30%
20%
50 August
2011 10%
0 0%
FY2011 FY2012 FY2013 FY2014 FY2015 >FY2015 Australian NZ Students US Seniors Total
Seniors
Australian Seniors US Seniors NZ Students
Australian debt Offshore debt
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Capital Management

Liquidity and access to capital remains a challenge

Progress made over previous six months towards releasing free cash

• Conversion of three rental villages to DMF model

• Divestment of non-performing assets to repay debt

• Sell down of Settlers Stage 8 Ridgewood Rise development

Short-term free cash position dependent on factors which are continuously monitored

• Risk of downward revaluations of Garden Village assets increasing Fund LVR

• Timing of asset sales

• Timing of sell down of balance of Ridgewood Stage 8

• Renegotiation of NZ student housing contract with University and refinancing of NZ$20.8m facility

• Proof of concept for Garden Villages DMF conversion initiative

Active management of the liquidity position aims to maintain a workable cash position

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Portfolio U date
p
Settlers Gladstone, QLD
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Portfolio U date p

Portfolio focused on core Australian and US seniors markets

	Australian	Australian	Australian	US Seniors	NZ	Portfolio	Portfolio
31 December	Garden	Conversion	Settlers	(Rental)	Students	31 Dec 20101	30 Jun 20101
2010	Villages	Properties	(DMF)
	(Rental)
Properties	30	3	4	21	3	61	62
Units	1,574	216	655	3,860	359	6,664	6,727
Book Value	A$93m	A$21m	A$63m	US$305m	NZ$30m	A$497m	A$550m
Occupancy	78%	NA	97%	88%	97%	86%	84%
Occupancy Trend

• Portfolio mix being optimised through divestment of non-performing villages and conversions

• Conversion of three rental villages to DMF model underway with encouraging acceptance to date

Portfolio U date – Australian Seniors p

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Snapshot of Australian Seniors portfolio ILF owns and operates a large and diverse portfolio of Seniors communities

WESTERN AUSTRALIA

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Garden Villages
No of properties: 5
Total value: A$21.5m
Total units: 272
Settler Lifestyle
No of properties: 3
Total value: A$55.9m
Total units: 506
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TASMANIA

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Garden Villages
No of properties: 4
Total value: A$13.0m
Total units: 196
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QUEENSLAND Garden Villages No of properties: 6 Total value: A$18.0m Total units: 349 Conversion Properties No of properties: 3 Total value: $A20.7m Total units: 216 Settler Lifestyle No of properties: 1 Total value: A$7.4m Total units: 149

NEW SOUTH WALES Garden Villages No of properties: 7 Total value: A$20.1m Total units: 348

VICTORIA Garden Villages No of properties: 8

Portfolio U date – Australian Seniors p

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Australian economic fundamentals forecast

	Garden Villages Settlers	Garden Villages Settlers	Garden Villages Settlers	Garden Villages Settlers
	Market Direction	Outlook for next 12 months	Market Direction	Outlook for next 12 months
Occupancy		Improved product presentation, marketing and service delivery		Increasing demand offset by housing market malaise
Supply		Limited new supply due to scarcity of capital and high development costs		Capital constrained with focus on industry consolidation.
Demand		Continued stable growth driven by ageing population		Improving however constrained by slow residential activity
Labour costs		Upward pressure as labour market tightens		Upward pressure as labour market tightens
Pricing Power		Price growth limited and pegged to pension		Some pricing power due to limited new supply offset by flat housing market

Portfolio Update – Garden Villages

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KEY DATA
	31 Dec 2010	31 Dec 20091
Occupancy:	78%	70%
Net property income:	A$3.6m	A$2.6m
Total properties:	30	34
Total units:	1,574	1,840
Development pipeline units:	76	162

Garden Villages portfolio occupancy trend since Dec 2009

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%
80
78
76
74
72
70
68
Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec-
09 10 10 10 10 10 10 10 10 10 10 10 10
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KEY ACTIVITY OVER 6 MONTHS

• Increased occupancy to 78% supported by superior presentation and service delivery

• Doubled sales lead conversion rate from 2% to 4%

• Conversion of three rental villages to Deferred Management Fee (DMF) model in progress

• Consolidated Garden Villages and Settlers operations and reduced fixed operating cost structure

• Completed divestment of Kingston Gardens and Ipswich Gardens both in excess of book value

• One village sustained significant damage during recent QLD floods and was temporarily closed. Flood damage is a fully insured event

Portfolio Update – Garden Villages

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Valuations impacted by external factors despite improvements in portfolio performance

VALUATION METRICS

	31 Dec 20101	30 Jun 2010
Total properties:	33	34
Portfolio valuation	$113m	$129m
Capitalisation rate	9.9%	8.8%

• Significant performance enhancement and value driving initiatives successfully executed in 2010

• Further work required in 2011 however stable platform established

Valuation Overview

• 31 December 2010 valuations reflect significant expansion in capitalisation rates from 8.8% to 9.9% resulting from distressed transactions in market

• Capitalisation movement principal driver in downward valuation movements

• Current improvement in overall performance for Garden Villages not reflected in recent valuations

Portfolio Update – Garden Villages

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Garden Villages Portfolio – Value Enhancement Strategy

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Occupancy now at all
Intense management
Increase NOI to
Drive Value in focus to lift time high since
Core Assets occupancy rate to internalisation of ~$7.5m pa with
target 8 to 10% yield
85% management
Phased conversion Potential release of
Successful project
DMF of three villages to launch in October >$18m in operating
Conversion DMF model to cashflow over next 3
2010
maximise value years
Sell impaired Two villages sold, Potential release of
Divest Under- villages that are further divestments >$12m to reduce
performers chronic planned gearing and fund
underperformers growth
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Portfolio U date – Conversion Pro erties p p

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KEY DATA as at 30 Jun 2010 KEY DATA
	31 Dec 20101
Total properties:	3
Total units:	216
Conditional Contracts:	25
Development pipeline units:	86

KEY ACTIVITY OVER 6 MONTHS

• Capital upgrade and refurbishment of three DMF conversion villages completed September 2010 (Stage 1) with expenditure to date of $1.6m

• Successful project launch in October 2010

• Regulatory approval received December 2010

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• First property settlements scheduled for March 2011

• Pre planning and review of development scope for Stage 2 conversions underway

• Several other properties in Garden Villages portfolio may have potential for conversion

• End sales value >$36m based on current units available

Portfolio U date – Settlers Lifest le p y

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KEY DATA as at 30 Jun KEY DATA	2010
	31 Dec 2010	31 Dec 2009
Occupancy:	96.9%	95.8%
Net property income:	$1.6m	$2.2m
Total properties:	4	4
Total units:	655	651
Development pipeline units:	82	82

KEY ACTIVITY OVER 6 MONTHS

• Continued focus on product presentation and unit upgrades across all villages to drive sales

• Improved sales and marketing function with strong focus on driving brand awareness and market penetration in WA / QLD

• Consistently maintained high occupancy above 97%

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Settlers Ridgewood Rise

• Stage 8: development of 22 houses well progressed and due for staged completion to April 2011

• Significant pre-sales achieved with 12.5% uplift in average house price since previous Stage (over FY09)

• Five settlements achieved by January 2011

• Forecast settlement of 18 remaining completed and under development units by July 2011

Portfolio U date – US Seniors p

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Geographically diverse portfolio with clusters in key markets of New York and Florida

TENNESSEE MICHIGAN OHIO NEW YORK (LONG ISLAND) No of properties: 1 No of properties: 2 No of properties: 3 No of properties: 6 Total value: US$33.9m Total value: US$51.7m Total value: US$34.2m Total value: US$241.9m Total units: 179 Total units: 527 Total units: 476 Total units: 909 COLORADO RHODE ISLAND No of properties: 1 No of properties: 1 Total value: US$22.4m Total value: US$25.4m Total units: 155 Total units: 170 OKLAHOMA VIRGINIA No of properties: 1 No of properties: 1 Total value: US$34.1m Total value: US$46.3m Total units: 198 Total units: 207 ALABAMA FLORIDA No of properties: 1 No of properties: 4 Total value: US$26.7m Total value: US$70.5m Total units: 226 Total units: 813

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ILF purchased the 1% interest of the US Portfolio from REIMA, giving it 50% ownership interest in the US
JV properties (except for Lynbrook in New York owned at 100%)
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Portfolio U date – US Seniors p

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	Market Direction	Outlook for next 12 months
Occupancy		Driven by pent-up demand although conditional on continued US economic recovery
Supply		Limited new supply due to tight access of finance, however expect steady increase as projects postponed during GFC come back on line
Demand		Rapidly ageing needs-based population
Labour costs		Large and accessible pool of labour and high unemployment
Rental rate growth		Focus on margins and modest yearly rate increases (2 – 4%)

Portfolio U date – US Seniors p

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KEY DATA[1]

	**31 Dec 2010 **	31 Dec 2009
Occupancy:	88.0%	87.3%
Net property income:	US$11.2m	US$10.9m
Total properties:2	21	21
Total units:	3,860	3,810

US Seniors portfolio occupancy % 88.5

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88.0
87.5
87.0
86.5
86.0
85.5
85.0
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KEY ACTIVITY OVER 6 MONTHS

• Unit refurbishment programs underway to improve occupancies and increase average rental price

• Units reconfigured to meet market demand

• Increased focus on Sales and Marketing programs at each village to maintain pricing position and drive occupancy

• Increased focus on local market activity and community outreach has supported occupancy rate improvements

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Portfolio U date – NZ Students p

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KEY DATA

	31 Dec 2010	31 Dec 2009
Occupancy:	97%1	98%
Net property income:	NZ$1.4m	NZ$1.1m
Total properties:	3	3
Total units:	359	359

KEY ACTIVITY OVER 6 MONTHS

• Three assets in Wellington to be retained in portfolio to extract full value for unitholders

• Negotiations underway with University for a new longterm contract

• Active discussions for refinancing NZ$20.8m[2] debt facility ahead of expiry in August 2011

• Established new revenue streams including commercial tenancies and billboard advertising

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Portfolio U date – NZ Students p

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Renegotiation of long term university contract key to portfolio value

• Current contracts with VUW[1] due to expire December 2012 and December 2013

• VUW hold an option to extend the student accommodation contracts for a further five years

• Management working with VUW to negotiate a new long term contract to improve certainty of income

While student fundamentals remain strong the portfolio has been challenged by

• Introduction of the University Student admission cap across New Zealand

• VUW launch of Joan Stevens Hall (increasing supply of student beds by 236 beds)

• VUW repositioning existing on-campus housing (University Hall) to focus exclusively on international students

Portfolio remains supported by VUW 90% occupancy income guarantee during student year

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Strate and Outlook
gy
Residents at Meadow Springs, WA
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Strate and Outlook gy

Close the NTA gap

Market Factors > Issue: A-REIT Value Reinstate sector discount and Gap Distributions strategic review impact Asset Value > Issue: currently > Focus: Actively restricted due to Uncertainty pursue options for NTA per unit banking covenants new ownership and liquidity structure Capital > Issue: Garden constraints Villages seen as low Structure > Focus: Improve yielding with performance and downside risk capital position to > Issue: Australian > Focus: improve reinstate distributions Current gearing limits capital operating as soon as possible management options Trading performance, Value > Focus: disciplined convert assets for approach to capital highest and best allocation and further use and divest non-

Strate and Outlook gy

To provide unitholders with exposure to a quality, high performing portfolio of Seniors communities in Australia and the United States

• Improve occupancy

• across all portfolios

Increase enquiry conversion rates and retention of residents

• Invest in unit

• upgrades across Australia and the US

• Build and develop

• team capabilities across sales and operations

Reposition assets for highest and best use across portfolio

Timely rent reviews to extract value from assets

• Divest underperforming

• assets

• Convert three rental

• villages to DMF model

Complete commercial assessment village expansion opportunities

Identify pipeline of village acquisition opportunities

Acquire new development projects for longer term

Strate and Outlook gy

ILF continues through rebuilding phase with capable and industry experienced management team focused on restoring unitholder value

Key risk remains around Garden Villages and residential property markets

Immediate focus is to successfully execute Garden Villages conversion strategy and to increase occupancy rates across portfolio

Liquidity remains a challenge and Management is focused on maintaining workable cash position

Exploring options with US Seniors joint venture partner to unlock value

Attractive acquisition and development opportunities emerging in Australia however access to capital remains a key challenge

No distribution forecast for FY2011 due to capital constraints and banking covenants

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A endices
pp
Settlers Gladstone, QLD
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A endix 1 pp

pendix 1
	H1 FY11	H1 FY10
Operating Income1	(A$m)	(A$m)
Continuing Operations
US Seniors	3.0	2.9
Australian Seniors
- Garden Villages	3.6	2.6
- Conversion Properties	(0.8)	-
- Settlers Lifestyle	1.6	2.2
NZ Students	0.6	0.3
Finance Costs	(4.4)	(2.5)
Management Fee	(0.7)	(1.7)
Fund Administration	(0.5)	(1.4)
	2.4	2.4
Divested or Exiting Operations
US Seniors / Meridian Portfolio	-	3.2
Canadian Seniors / Regency Portfolio	-	1.3
US Students	(0.5)	0.3
Derivatives income	2.7	3.6
Operating Income	4.6	10.7

A endix 2 pp

Look through balance sheet

As at 31 December 2010 (A$m)	US Seniors	Australian Seniors	NZ Students	US1 Students	Total
Cash	2.3	11.3	1.5		15.1
Investment property and property
under development	297.8	322.1	22.8		642.8
Derivatives	-	0.1	-		0.1
Other assets	12.3	2.7	0.2		15.2
Total assets	312.4	336.2	24.5		673.2
Interest bearing liabilities	259.2	102.7	14.3		376.2
Derivatives	-	0.1	-		0.1
Village residents’ loans	-	145.7	-		145.7
Other liabilities	6.5	27.7	-		34.2
Total liabilities	265.8	276.2	14.2		556.2
Net assets	46.7	60.0	10.2	(3.4)	113.5
Net asset value per unit - cents	10.6c	13.7c	2.3c	(0.8)c	25.8
Assets less cash and resident loans	310.2	179.2	23.0		512.4
Total debt less cash	257.0	91.4	12.8		361.2

Look through gearing (%)[2]

A endix 3 pp

Cashflow in detail

Cashflow in detail
	Amount A$m
Opening cash at 1 July 2010	20.2
Cashflow generated from operations:
Australian Seniors	2.7
US Seniors	1.9
US Students	0.0
NZ Students	0.0
Borrowing costs paid	(4.3)
Interest rate swaps	3.9
Net Cashflows from Operations	4.2
Proceeds from sale of investment properties:
Kingston Garden Village	3.0
Proceeds from sale of equity accounted investments:
Canadian Seniors (Regency)	0.6
US Seniors (Meridian)	0.1
Capital expenditure and development costs	(3.8)
Contributions to associates:
US Seniors	0.0
NZ Students	0.0
Net Cashflows from Investing	(0.1)
Termination of derivatives	(16.0)
Debt drawdowns – Australian Seniors debt	17.0
Debt repayments – Australian Seniors debt	(13.2)
Net Cashflows from Financing	(12.2)

A endix 4 pp

US portfolio revaluations improved following increased investment demand offset by downward valuations for Australian Seniors assets

					31 Dec 10
	31 Dec 10	30 Jun 10	Movement	Movement	Cap rate3
Valuations1	Valuation	Valuation2	($m)	(%)	(%)	Key drivers of valuation movement
US Seniors1	304.8	269.5	35.3	13.1%	7.7%	Increased investor demand tightening cap
(US$m)						rates and enhanced by improving NOI
Australian Seniors	92.5	103.2	(10.7)	(10.4)%	10.1%	Forced competitor divestments softened
Garden Villages (Rental)						industry cap rates
Australian Seniors	20.7	23.1	(2.4)	(10.3)%	9.3%	Valued as rental villages pending proof of
Conversion Assets						concept
Australian Seniors	63.3	59.7	3.6	6.1%	13.1%	Development of additional units and higher unit
Settlers (DMF)						turnover
NZ Students1	29.9	29.9	0.0	0.0%	10.9%	Flat market
(NZ$m)

A endix 5 pp

Debt Facilities

Debt Facilities
	Australian Seniors		US Seniors	NZ Students
Limit ($m)	Core debt A$95.9m Revolver A$21.0m Total A$116.9m2		US$265.2m1	NZ$18.7m1
		Total A$116.9m2
Amount drawn ($m)		A$102.7m	US$265.2m1	NZ$18.7m1
Loan to value ratio (LVR) actual		59.7%	N/A	59.6%
LVR bank covenant		50% - 65%3,4	N/A	60%
Interest cover ratio (ICR) actual		2.0x	N/A	2.1x
ICR bank covenant		1.4x	N/A	1.5x
Leverage Ratio		80.0%	N/A	N/A
Leverage Covenant5		85%	N/A	N/A
% Hedged (interest rates)6		58%	100%	0%
Facility expiry		Mar 2013	Dec 2013 to Nov 2042	Aug 2011

1. ILF interest only

2. Subsequent to 31 December 2010, the revolver limit was permanently reduced to $15m with the total facility limit reduced to $110.9m

A endix 6 – NTA er Unit Sensitivit pp p y

US Seniors business highly leveraged to upswing in US valuations

NTA per Unit ($A cents)	NTA per Unit ($A cents)	Change in US Portfolio Capitalisation Rate
		8.7% (+1%) 8.2% (+0.5%) 7.7% 7.2% (-0.5%) 6.7% (-1%)
Change in US Portfolio Occupancy	90.0%	-5.8c -1.9c +2.5c +7.4c +13.1c
	89.0%	-6.9c -3.1c +1.2c +6.1c +11.7c
	88.0%	-7.9c -4.2c 10.6 c +4.8c +10.3c
	87.0%	-9.0c -5.4c -1.2c +3.5c +8.9c
	86.0%	-10.1c -6.5c -2.5c +2.2c +7.5c

A endix 7 – US Students pp

Progress

• Have sold all properties where value exceeded debt

• Seven properties were handed back as at 31 December 2010

• We are engaged with lenders for all remaining properties

Timing

• Majority of the remaining assets are likely to be off the balance sheet by June 2011

• Nine properties remaining to undergo hand-back with discussions underway

Costs

• Total cost for the US Students hand back remains as previously advised at $4.5 - $5m, with the amount fully provided for from 31 December 2009

Disclaimer

A copy of this presentation will be made available on www.ingrealestate.com.au

This presentation was prepared by ING Management Limited (ABN 15 006 065 032) (the "Responsible Entity") in respect of ING Real Estate Community Living Fund (ARSN 107 459 576) and ING Real Estate Community Living Management Trust (ARSN 122 928 410) (together ING Real Estate Community Living Group, ILF or the Fund). Information contained in this presentation is current as at 28 February 2011. This presentation is provided for information purposes only and has been prepared without taking account of any particular reader's financial situation, objectives or needs. Nothing contained in this presentation constitutes investment, legal, tax or other advice. Accordingly, readers should, before acting on any information in this presentation, consider its appropriateness, having regard to their objectives, financial situation and needs, and seek the assistance of their financial or other licensed professional adviser before making any investment decision. This presentation does not constitute an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, nor does it form the basis of any contract or commitment.

The forward looking statements included in this presentation involve subjective judgment and analysis and are subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to, the Responsible Entity. In particular, they speak only as of the date of these materials, they assume the success of ILF's business strategies, and they are subject to significant regulatory, business, competitive and economic uncertainties and risks. Actual future events may vary materially from forward looking statements and the assumptions on which those statements are based. Given these uncertainties, readers are cautioned not to place reliance on such forward looking statements.

The Responsible Entity, or persons associated with it, may have an interest in the securities mentioned in this presentation, and may earn fees as a result of transactions described in this presentation or transactions in securities in ILF.

Except as required by law, no representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information, opinions and conclusions, or as to the reasonableness of any assumption, contained in this presentation. By reading this presentation and to the extent permitted by law, the reader releases the Responsible Entity and its affiliates, and any of their respective directors, officers, employees, representatives or advisers from any liability (including, without limitation, in respect of