Angus McNaughton Managing Director, Property Colonial First State Global Asset Management CPA

Transcription

1 Angus McNaughton Managing Director, Property Colonial First State Global Asset Management CPA 2 Southbank Boulevard, MELBOURNE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

2 Commonwealth Bank of Australia (CBA) preliminary proposal Highly conditional, indicative and incomplete proposal put to CMIL CBA put a preliminary proposal to CMIL 1 on 24 July 2013 The proposal to internalise the management of CPA is highly conditional, indicative and incomplete CMIL can give no assurance the proposal, or any other proposal, will proceed CMIL has established an Independent Board Committee (IBC) made up of the three independent Directors The IBC has engaged independent advisers to assist in its consideration of the proposal The Board has strong corporate governance protocols We will continue to focus on business as usual 1. Commonwealth Managed Investments Limited (CMIL) is the Responsible Entity of CPA. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Contents We take a 360 o approach to office property investment, drawing on an integrated investment and asset management platform 5 State of the market 24 Responsible property investment 7 Strategy 27 Australian office markets 14 Financial highlights 34 Development update 16 Capital management 39 Strategic focus for FY14 19 Portfolio overview 40 Outlook 655 Collins Street, MELBOURNE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

3 State of the market Two-speed economy continues Economy Growth continues Signs of improving global economic growth Transactional activity Transaction volumes have been strong Support for current book values yet limited capitalisation rate compression A-REIT sector Challenged by rising bond yields and softening space market fundamentals Rising long-dated bond yields and softening space market fundamentals to moderate capital return prospects High and stable income yields continue to attract investors 58 Mounts Bay Road, PERTH Office environment Office fundamentals remain challenging Changing economic growth drivers are creating a challenging environment as the resource sector slows and servicerelated sectors have yet to take up this slack CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Charles Moore Fund Manager Commonwealth Property Office Fund CPA 145 Ann Street, BRISBANE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

4 Overview Vision, objective and strategy VISION To be the leading manager of Australian office property OBJECTIVE To actively manage our portfolio to improve income quality and provide long-term sustainable returns for investors STRATEGY Active asset management Disciplined investment decisions Prudent capital management Investing responsibly CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Strategy Delivering on strategy over the longer term Active asset management Protect and enhance our income streams through active asset management, including leasing and tenant engagement, to create compelling places to work How do we do this? Position assets to meet tenant demand for Amenity Quality Sustainability Emerging trends Ensuring we maintain High occupancy A long WALE High tenant satisfaction rating High tenant retention Our results over the longer term Over the past five years Average occupancy of 96. Average WALE of 4.7 years Top quartile tenant satisfaction ratings Tenant retention of 73.3% Portfolio now has 9 Prime-grade office assets with average floor plates of 1,800 sqm Average portfolio NABERS Energy rating of 4.5 stars 1 1. Without the use of GreenPower. 2 and 4 Dawn Fraser Avenue, SYDNEY OLYMPIC PARK CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

5 Strategy Delivering on strategy over the longer term Disciplined investment decisions Enhance portfolio quality through strategic acquisitions, divestments and developments How do we do this? Maintain active asset recycling program Refurbish assets to improve market position and optimise returns Identify developments which enhance the portfolio and meet the following criteria <2 of total assets on a cost to complete basis >1 IRR Target yield > 7% Our results over the longer term $900m of assets sold over the past five years with an average IRR of 10.1% (p.a.) $1.2b of assets purchased over the past five years with an average IRR (p.a.) of 8.5% 1 since acquisition (including transaction costs) Development exposure at 6.9% $550m of developments delivered an average IRR of 12.8% (p.a.) 1. Includes: 145 Ann Street, Brisbane; 25% interest in 201 Kent Street, Sydney; 10 Eagle Street, Brisbane; 58 Mounts Bay Road, Perth; 655 Collins Street, Melbourne; Lonsdale Street, Melbourne (including QV retail); and, 750 Collins Street, Melbourne. 145 Ann Street, BRISBANE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Strategy Delivering on strategy over the longer term Disciplined investment decisions Enhance portfolio quality through strategic acquisitions, divestments and developments Location and number of assets FY13 Market 1, % 5 years Market size 3 ago Now Target Peer avg. 2 NLA Sydney, NSW Melbourne, VIC Brisbane, QLD Perth, WA Adelaide, SA Location and number of assets FY08 Canberra, ACT Grade 1, % 5 years ago Now Target Peer avg. 2 Market size NLA Premium A-grade Prime B-grade By value. 3. Jones Lang LaSalle, as at 30 June As at 31 December Refer to Appendix 4 for further information. Source: CFSGAM Property Research. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

6 Strategy Delivering on strategy over the longer term Prudent capital management Optimise our debt pricing, balanced against diversity, duration and hedging strategies How do we do this? Maintain key ratios and ratings Gearing target range 25% to 35% Standard & Poor s A- rating Interest cover ratio >2.0 times Hedging o Short term 65% to 85% o Long term 1 3 to 6 Our results over the longer term Over the past five years Average gearing of 25.3% Average interest cover ratio of 3.7 times Average hedging of 94% Over the past nine years S&P s A- and Moody s A3 ratings maintained 1. Five years. 10 Shelley Street, SYDNEY CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Strategy Delivering on strategy over the longer term Investing responsibly Managing ESG risks to create and maintain value for our investors How do we do this? Maintain compliance with the ASX Corporate Governance Council s principles and recommendations Maintain leading position amongst A-REIT peers in responsible property investment Optimise asset efficiency through leading sustainability initiatives Actively engage tenants Our results over the longer term Environment $12.0m in avoided energy costs and $0.5m in avoided water costs since 2007 Lead rankings in GRESB and CDP Social Building vertical communities through tenant portals, end of trip facilities, green leases, concierge services and waste and recycling training Governance Compliance with the ASX Corporate Governance Council s principles and recommendations, and peer recognised (APREA) for industry best practice 655 Collins Street, MELBOURNE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

7 FY13 achievements Delivering on strategy Target Distribution of 6.40 cpu Active asset management Result Exceeded guidance at 6.55 cpu, an increase of 7.6% on the prior year Achieved 5.1% 1 in net property income growth Achieved weighted average 4.5-stars NABERS Energy rating for the portfolio 2 Sold 45 Pirie Street, Adelaide Sold Site 4B, Sydney Olympic Park Disciplined investment decisions Sold option for 8 Exhibition Street, Melbourne Acquired a further 25% interest in 201 Kent Street, Sydney Anchor tenant secured for 5 Martin Place, Sydney and construction commenced Prudent capital management Investing responsibly Restructured $665m in debt, improving diversity and duration Preserved a low weighted average cost of debt at 5.6% Ranked number 1 in APREA best practices awards, CDP and Global Real Estate Sustainability Benchmark 1. Like-for-like net property income growth was 2.. Net property income and like-for-like net property income are unaudited, non-ifrs financial information and are not key earnings measures of the Fund. They are used by management to monitor the performance of the property portfolio. Please refer to Appendix 2 for the calculation of net property income and like-for-like net property income. 2. Without buying GreenPower. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Financial highlights Solid fundamentals have underpinned value for unitholders Key metrics For the year ended/as at 30-Jun Jun-12 Change % Net profit Appendix 2 $145.4m $256.4m (43.3) FFO 1 $207.0m $200.8m 3.1 Distribution per unit Appendix c 6.09c 7.6 Net property income Appendix 2 $255.9m $243.4m 5.1 Total assets $3.8b $3.7b 1.6 NTA per unit Appendix 3 $1.15 $1.16 (0.9) Driven by lower valuations, reduced increases and some losses On a like-for-like basis, net property income growth was 2. Gearing % Notes on FFO in this presentation: From 1 July 2012, FFO replaced Distributable Income. FFO is a key earnings measure used by management to assess the operating performance of the Fund. FFO equals net profit excluding: fair value adjustments from investment properties, associates and derivatives; straight-lining revenue; the movement in fair value of unrealised performance fees; non-cash convertible notes interest expense; the amortisation of fit-out incentives, cash incentives and leasing commissions and adjustments for other items. 30 June 2012 has been restated to reflect the adoption of FFO on 1 July 2012 that resulted in the Fund adding back amortisation of fit-out incentives, cash incentives and leasing commissions of $18.5m to the net profit for the year ended 30 June 2012, to enable a like-for-like comparison to be made. From 1 July 2012, the Fund distributes 7 to 8 of FFO or the Fund s taxable income, whichever is greater, for any financial period. Prior to 1 July 2012, the Fund distributed either 7 to 8 of distributable income or the Fund s taxable income which ever was the greater for any financial period. 2. Gearing equals borrowings as a proportion of total assets. For this calculation, total assets exclude the fair value of derivatives, and borrowings is the amount drawn down as per Note 11 of the Financial Report, adjusted for the fair value of cross currency swaps. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

8 Financial highlights Reconciling net profit to distribution and impact of FFO Reconciliation Restated $m, for the year ended 30-Jun Jun-12 Net profit Adjustments: Net loss/(gain) from properties and associates valuations (113.1) Net loss from derivatives valuations Straight-lining rental revenue (6.0) (5.2) Non-cash convertible notes interest expense Amortisation of fit-out incentives, cash incentives and leasing commissions Other items FFO Appendix Predominantly driven by upcoming lease expiries in two assets and weak market fundamentals Amortisation costs remain steady Amount withheld in accordance with distribution policy (53.3) (56.6) Distribution FFO (cents per unit) Payout ratio % 72.9% Distribution (cents per unit) Appendix Mid-point of payout range 1. Including net gain or losses on asset sales. 2. As a result of the delay in the practical completion of 145 Ann Street, Brisbane, the Fund added back the net of the capitalised coupon and capitalised interest incurred from July 2012 to November 2012 ($1.7m) to net profit to derive FFO. This has been partially offset by a procurement fee of $1.2m earned for the sale of the 8 Exhibition Street, Melbourne option to a third party. This amount is expected to be received in August Alternative basic earnings per unit as defined by Note 17 of the Financial Report. 4. Distribution per unit divided by alternative basic earnings per unit. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Capital management Optimising price, diversity and duration Key debt statistics As at 30-Jun Jun-12 Weighted average interest rate 1 5.6% 5.5% Weighted average duration of debt (years) Portion of debt hedged % 87.5% Weighted average hedged rate 2 5.1% 4.9% Undrawn debt facilities $345m $430m Long-term credit rating Moody s A3 A3 Capital management activities have increased the weighted average debt duration Covers all project costs Long-term credit rating S&P A- A- Gearing 25.2% 24. Loan to value ratio % 27.4% Interest cover ratio 4 (times) Including line fees and margins. 2. Including all fixed-rate debt. 3. Calculated as total liabilities divided by total assets, excluding the option component of the convertible notes and the non-cash impact of the fair value of derivatives. 4. Calculated as earnings before interest divided by net interest expense. For the purposes of this calculation, earnings represents net profit excluding all fair value adjustments, straight-lining revenue, borrowing costs and net interest expense on interest rate swaps. Interest expense is the sum of borrowing costs, net interest expense on interest rate swaps, and capitalised interest, less non-cash convertible notes interest expense. Refer to Appendix 3 for further information. Throughout the year we took advantage of stronger capital markets to restructure $665m of debt. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

9 Capital management Debt expiry staggered and diversity maintained Debt maturity profile 1 Facilities expiring $m % FY Sources of debt 1 FY FY FY FY FY % 39% BEYOND Total facilities 1, Drawn debt 949 Undrawn debt % 15% Key: Bank debt Medium term notes Convertible notes 2 US Private Placement 1. Excludes short term notes expiring in FY14 which are backed by bank debt facilities. 2. Convertible notes have an investor put option in December Our debt remains well diversified, with limited near-term expiries. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Michael Sheffield Assistant Fund Manager Commonwealth Property Office Fund CPA Lonsdale Street, MELBOURNE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

10 Portfolio overview Solid statistics Key metrics As at 30-Jun Jun-12 Number of office properties Investment properties ($m) 1 3,736 3,671 Weighted average capitalisation rate 7.6% 7.5% Under/(over) renting position (0.7)% (1.2)% Total area 2 (sqm) 789, ,221 Number of tenants Occupancy % 95.5% WALE years 4.9 years Tenant retention 75.9% 73.6% Average rental review uplift 4.1% 3.8% NABERS Energy rating (stars) Solid occupancy maintained 4.7 years with terms agreed Retention rates remain elevated Achieved long-term target NABERS Water rating (stars) Includes investments in associates. 2. Excluding 5 Martin Place, Sydney (under redevelopment). 3. By income. By area, CPA occupancy rate was 97. at 30 June By income. Refer to Appendix 4 for more information. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Portfolio overview Leasing achievements Leases executed Leased Including terms agreed Area (sqm) 69, ,337 2 % of CPA portfolio New Renewal Leasing spreads by ownership (%) Rent reviews 30-Jun-13 Actual 30-Jun-14 Forecast Area (sqm) 652, ,546 % of portfolio % of fixed increases Average rent increase (%) Major leasing Tenant 1. Comprised 55% new leases and 45% renewed leases. 2. As at 1 August Average rental increase for the year to 30 June 2013 is based on all rent reviews. Fixed rent reviews equated to 4. and market reviews equated to 5.3%. 4. Average rental increase for the year to 30 June 2014 is based on all fixed rent reviews. 5. Income based on CPA s share of ownership. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Area sqm Income 5 % New or renewal Start date 5 Martin Place, SYDNEY Ashurst 13, New Mar Kent Street, SYDNEY AON Corporation 10, Renewal Jul Terms agreed 385 Bourke Street, MELBOURNE Confidential 15,000 - New Dec North Terrace, ADELAIDE Confidential 6,072 - New Mar Castlereagh Street, SYDNEY BNP Paribas 5,397 - Renewal Jul North Terrace, ADELAIDE Confidential 4,733 - New Mar Bourke Street, MELBOURNE CBA (retail) 3,661 - Renewal Jan Lonsdale Street, MELBOURNE Linking Melbourne Auth. 2,569 - New Dec-13 7 Term years

11 Portfolio overview Expiry risk concentrated to a few assets Property Tenant Area sqm % CPA income Expiry Progress 225 George Street, SYDNEY Vacant 12, Terms agreed over 2,495 sqm 10 Eagle Street, BRISBANE Vacant 4, Marketing 4.5 floors, with good enquiry 56 Pitt Street, SYDNEY Vacant 3, Terms agreed over part level 1 60 Castlereagh Street, SYDNEY Vacant 2, sqm terms agreed Other vacant space Vacant 5, Terms agreed 1,045 sqm Current vacancies: TOTAL 27, (or 3.2% with terms agreed) 108 North Terrace, ADELAIDE SA Government 20, Mar-14 Heads of agreement signed for 10,805 sqm 222 Lonsdale Street, MELBOURNE Telstra 18, Jun-14 In discussions with Telstra 385 Bourke Street, MELBOURNE CBA 18, Nov-13 Confidential terms agreed over 15,000 sqm 180 Lonsdale Street, MELBOURNE BHP 10, Sep-13 Currently marketing 60 Castlereagh Street, SYDNEY BNP Paribas 8, Jun-14 Heads of agreement over 5,397 sqm 180 Lonsdale Street, MELBOURNE NAB 7, Sep-13 Heads of agreement signed for 2,569 sqm Other expiries Various 34, Various Other terms agreed 2,177 sqm FY14 expiries: TOTAL 117, (or 8.7% with terms agreed) 225 George Street, SYDNEY Ashurst 13, Jul-15 Space actively being marketed 14 Lee Street, SYDNEY NSW Government 13, Jun-15 Commenced discussions with tenant 101 George Street, SYDNEY CBA 7, Oct-14 In discussions with CBA for renewal 180 Lonsdale Street, MELBOURNE GHD 5, Dec-14 Commenced discussions with tenant 385 Bourke Street, MELBOURNE CBA (retail) 2, Oct-14 Terms agreed with CBA for 3,661 sqm Other expiries Various 42, Various FY15 expiries: TOTAL 85, CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Portfolio overview Asset recycling program continues to improve portfolio quality + Acquisition, Apr Kent Street, SYDNEY (25% interest) Purchase price (excluding transaction costs) $77.3m Capitalisation rate 7.4% Occupancy (by income) 98.4% WALE (by income) 4.5 years Discount rate 9. Solid A-grade asset positioned to take advantage of growing sector - Disposal, May Pirie Street, ADELAIDE Sale price (excluding transaction costs) $87.0m IRR (p.a.) (including transaction costs) 11.2% Portfolio overweight to South Australia Mature building, sale in line with book value - Disposal, Dec-12 Site 4B, SYDNEY OLYMPIC PARK Sale price (excluding transaction costs) Non-core development land $4.7m 201 Kent Street, SYDNEY - Disposal, Jun-13 Option for 8 Exhibition Street, MELBOURNE Option sale price $1.2m CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

12 Vacancy rate Prime yield Yield curve Prime yield Portfolio overview Asset valuations - yields and capital values Movement in CPA investment yields Period ending Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 NTA per unit $1.11 $1.13 $1.16 $1.15 $1.15 Yield real bond spread 1 Quarterly rests to Jun Relatively cheap 1 Yield less indexed bond less historical average spread Prime yield (weighted by six major CBD markets) Weighted average capitalisation rate 7.6% 7.5% 7.5% 7.6% 7.6% Weighted average discount rate Weighted average terminal yield 9.3% 9.3% 9.3% 9.3% 9.2% 7.8% 7.8% 7.8% 7.8% 7.7% Relatively expensive Source: Jones Lang LaSalle and CFSGAM Property Research. Prime yields and vacancy Quarterly rests to Jun-13 Prime yield (weighted by six major markets) (RHS) National vacancy rate (LHS) Prime yields and yield curve Annual rests to Jun-13 Prime yield (weighted by six major CBD markets) (RHS) Yield curve (AUD 10 yr minus 3 yr) (LHS) 12% 8.5% 1.2% 8.5% % 8. 8% 7.5% 0.4% 7.5% 6% % 6.5% -0.4% 6.5% 2% Source: Jones Lang LaSalle and CFSGAM Property Research. -0.8% Source: Bloomberg, Jones Lang LaSalle and CFSGAM Property Research. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Responsible property investment Enhancing value 40.8% more energy efficient 1 $12.0m of avoided costs % lower emissions intensity % more water efficient 1 $0.5m of avoided costs 3 67% diversion from landfill 2 $0.5m of avoided costs 4 NABERS ratings Energy rating 5 (stars) Water rating (stars) Since FY07 on a per square metre basis. 2. Excluding those buildings where CPA does not have operational control over waste and recycling. 3. Since FY Since FY Excluding GreenPower. Responsible property investment is: Environmental - efficiency in asset performance by using less resources Social - stakeholder engagement to provide compelling places to work and do business Governance - principles for compliance, transparency and stability FY13 achievements First in 2012 Global Real Estate Sustainability Benchmark Survey (out of 451 property funds) Joint leader in carbon performance and joint highest disclosure in 2012 Carbon Disclosure Project response in Australia and New Zealand Achieved our long-term target NABERS Energy rating of 4.5-stars on a portfolio weighted average basis 2012 best practice award from Asia Pacific Real Estate Association CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

13 Tenant satisfaction Responsible property investment Top quartile in tenant satisfaction Tenant satisfaction survey 8 78% CPA has the right team in place, with a continuous focus on tenant engagement Top quartile in tenant satisfaction survey 76% 74% 72% 7 Building vertical communities through End of trip facilities In-building web portals and concierge services Sustainable business practices and initiatives to reduce environmental impacts Green lease initiatives 68% Key: CPA Peer average Source: Campbell Scholtens. The survey between 2009 and 2011 was provided by Campbell Consulting and from 2012 to 2013 by Campbell Scholtens. 180 Lonsdale Street, MELBOURNE 10 Eagle Street, BRISBANE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Australian office markets CPA 750 Collins Street, MELBOURNE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

14 Compound annual growth rate Annual change Australian office markets White collar employment growth White Collar Employment Leading Index National CBD employment Quarterly rests National (six major CBD markets) Leading Index 6% 4% One-year lead Our leading index suggests white collar employment growth should stabilise and grow over the next 12 months 2% Lead indicators have stabilised at a national level Historically, this has been linked to a rebound in employment -2% Source: Deloitte Access Economics, Bloomberg and CFSGAM Property Research, to Jun-13. Lead indicators include: Job ads Business conditions and confidence Consumption Stock market Economic performance CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Australian office markets White collar employment growth Five-year forecast white collar employment growth Major CBD markets 5% 4% 3% 2% Longer-term growth expected to be stronger in all markets. 1% -1% -2% SYD MEL BNE PER ADL CAN Key: Five-year forecast year historic Source: Deloitte Access Economics and CFSGAM Property Research, as at March-13. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

15 Australian office markets Supply Five-year supply forecast versus historical average % of total stock, % 14% 12% 1 Limited short-term supply. 8% 6% 4% 2% -2% SYD MEL BNE PER ADL CAN Key: Five-year forecast supply supply 20-year average five-year rolling Source: Jones Lang LaSalle and CFSGAM Property Research. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Australian office markets Demand National net absorption five-year forecasts % of total stock, ending % 12% 1 8% 6% 4% Net absorption in the resource states particularly weak in the short term. 2% -2% -4% SYD MEL BNE PER ADL CAN Key: Five-year forecast absorption demand 20-year average five-year rolling Source: Jones Lang LaSalle and CFSGAM Property Research. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

16 Compound annual growth rate Australian office markets Five-year demand, supply and vacancy forecast Forecast demand, supply and vacancy to 2017 Australian CBD office markets 12% 16% 1 8% 14% 12% 1 Demand expected to exceed supply. 6% 8% 4% 2% 6% 4% 2% SYD MEL BNE PER ADL CAN Key: Demand (LHS) Supply (LHS) Current vacancy (RHS) Forecast vacancy (RHS) Source: Jones Lang LaSalle and CFSGAM Property Research, forecast as at Jun-13. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Australian office markets Growth rates Nominal gross effective rent five-year forecasts CBD office markets 4% 3% 2% 1% Resource states are lagging. -1% -2% -3% -4% -5% SYD MEL BNE PER ADL CAN Source: CFSGAM Property Research, as at Jun-13. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

17 Charles Moore Fund Manager Commonwealth Property Office Fund CPA 225 George Street, SYDNEY CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Development update Key development projects Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Beyond Project Total cost 1 $m Cost to complete $m 5 Martin Place, SYDNEY 5 Martin Place Lonsdale Street, MELBOURNE 385 Bourke Street Bourke Street, MELBOURNE 180 Lonsdale Street North Terrace, ADELAIDE 108 North Terrace Total CPA share. Key: Development Refurbishment Capex split, $m FY13 Actual 2 FY14 Forecast FY15 Forecast Capex Leasing fees Tenant incentives Including 145 Ann Street post development completion 22 November 2012 CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

18 Development update 5 Martin Place, SYDNEY Progress Demolition complete Unique features meeting market demand Best value Premium-grade asset in the CBD core Targeting 5-star Green Star, NABERS Energy and Water ratings Key development metrics Financial Estimated cost 1 ($m) 215 CPA costs to complete ($m) 153 Target year-one yield 2 (%) ~7 Target IRR (%) >10 Leasing Available floors 12 Leased 3 (%) 44 Net lettable area (sqm) 33,860 November 2011 Timetable Commencement Oct-12 Target completion date Early Artist s Martin impression Place, SYDNEY Artists impression Artist s impression 1. Including land, construction costs, incentives, leasing fees and an allowance for finance costs. CPA share. 2. On a fully-leased basis on completion. 3. Of office NLA. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Development update 385 Bourke Street, MELBOURNE Overview Competitive repositioning Key development metrics Office, retail and foyer upgrade. New end of trip facilities Concierge services, tenant portal launched Targeting 4.5-star NABERS Energy rating High quality A-grade building, central core, column free, excellent natural light Refurbished space in CBD core with rentals comparable to Docklands Limited competing stock on completion Financial Estimated cost 1 ($m) - Office - Retail CPA costs to complete ($m) Office 47 - Retail 17 Target IRR (%) >10 Yield on cost (%) ~7 Leasing CBA office expiry (sqm) Nov-13 CBA retail expiry (sqm) Oct ,279 Terms agreed 2 (%) 75 Timetable Target commencement Target completion Sep-13 Aug-14 Artist s impression 1. Including construction costs, incentives and leasing fees. 2. Includes office, retail, storage, vaults and other. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

19 Development update 180 Lonsdale Street, MELBOURNE Overview Competitive repositioning Key development metrics Office and foyer upgrade to refresh building New end of trip facilities Targeting 4.5-star NABERS Energy rating Refurbished, highly efficient, side-core 1,800 sqm floor plates Signage and naming rights available with modern services Good value, prime space Financial Estimated cost 1 ($m) 17 CPA costs to complete ($m) 17 Target IRR (%) >10 Yield on cost (%) ~9 Leasing BHP Billiton/NAB expiries (sqm) Sep-13 17,939 Terms agreed (%) 14 Timetable Target commencement Target completion Aug-13 Apr Including construction costs, incentives, leasing fees for CPA s share. Artist s impression CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Development update 108 North Terrace, ADELAIDE Overview Competitive repositioning Key development metrics Minor refurbishment ahead of SA Government expiry Mar-14 Targeting 4.5-star NABERS Energy rating Quality office space available at competitive rentals Financial Estimated cost 1 ($m) 27 CPA costs to complete ($m) 27 Target IRR (%) >10 Yield on cost (%) ~6.5 Leasing SA Govt expiry (sqm) Mar-14 20,112 Terms agreed (sqm) 10,805 Timetable November 2011 Target commencement Dec-13 Target completion Jun Including construction costs, incentives and leasing fees. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

20 Strategic focus for FY14 Active asset management Maintain strong portfolio occupancy Forward solve upcoming lease expiries, with a particular focus on upcoming expiries in Melbourne assets Enhance tenant experience Continue to outperform peers in tenant satisfaction surveys Roll out vertical communities through new website portals Introduce digital advertising, end of trip facilities and concierge services in select properties Disciplined investment decisions Progress developments and refurbishments 5 Martin Place, Sydney redevelopment 180 Lonsdale Street, Melbourne refurbishment 385 Bourke Street, Melbourne refurbishment 108 North Terrace, Adelaide refurbishment Seek opportunities to recycle assets within the portfolio Strategically divest non-core assets to further enhance portfolio quality Prudent capital management Maintain a strong balance sheet Maintain a competitive cost of debt Investigate opportunities to extend or diversify sources of debt Investing responsibly Maintain global leadership position Target all assets to be rated 4.5-stars NABERS Energy Maintain best practice in corporate governance Develop materiality framework for further stakeholder engagement 385 Bourke Street, MELBOURNE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Outlook 222 Lonsdale Street, MELBOURNE Operating environment to remain challenging Active asset management and quality portfolio will drive solid outcomes Distribution guidance of 6.55cpu 1 Payout ratio ~75% FFO 1. Assuming no performance fees are payable for the full 12-month period, the Fund s taxable income is no more than 6.55 cents per unit and there is no unforeseen material deterioration in existing economic conditions. Guidance is based upon the current operating model. Refer to Note 20 of the Financial Report for details concerning potential changes to this operating model, which may impact upon future distributions. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

21 Appendices 1 Key dates 5 Australian office markets 2 Financial 6 Asset recycling 3 Capital management 7 Unit buy-back 4 Portfolio overview 385 Bourke Street, MELBOURNE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 1 Key dates Investor calendar Date 1 Event 28-Aug-13 Payment of June 2013 distribution, and FY13 annual tax statement despatch date 23-Dec-13 Ex-distribution date for December 2013 distribution 31-Dec-13 Record date for December 2013 distribution 18-Feb-14 1H14 interim result announcement 28-Feb-14 Payment of December 2013 distribution 24-Jun-14 Ex-distribution date for June 2014 distribution 30-Jun-14 Record date for June 2014 distribution 19-Aug annual result announcement 29-Aug-14 Payment of June 2014 distribution 1. These dates are indicative only and may be subject to change. CPA CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

22 Appendix 2 Financial Reconciliation of net profit Attribution analysis of net profit over FY13 $m $ $36.5 +$13.3 -$ $ $5.6 =$ Year ended June 2012 Net change from properties and associates valuations Net change from borrowing costs Net change from derivative valuations Net change in net property income1 Other Year ended June 2013 CPA 1. Includes straight-lining of rental revenue. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 2 Financial Contributors to distribution upgrades through FY13 Attribution analysis to FY13 DPU growth Distribution cents per unit = FY13 guidance Net property income Interest expense Acquisition of 25% of 201 Kent Street Other FY13 actual CPA CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

23 Appendix 2 Financial Calculation of net property income and like-for-like net property income For the year ending Extracted from the Consolidated Statement of Comprehensive Income in the Financial Report 30-Jun-13 ($m) 30-Jun-12 ($m) Change Rental and other property income Share of net profits from associates before fair value adjustments (10.4) Rates, taxes and other outgoings (77.7) (75.9) Repairs and maintenance (12.2) (8.1) Bad and doubtful debts expense (0.1) (0.4) Adjustments Straight-lining revenue 1 (6.0) (5.2) Net property income (%) 6.6 Like-for-like adjustments Net property income from development-affected properties 2 (11.3) (0.9) Net property income adjustment for changes in ownership of 3 (25.8) (28.0) properties Like-for-like net property income Refer to Note 2 of the Financial Report for further detail. 2. Properties have been excluded from the like-for-like calculation where income has been significantly affected by development in either year. Properties excluded are 145 Ann Street, Brisbane and 5 Martin Place, Sydney. 3. Properties have been excluded from the like-for-like calculation where there was a change in ownership in either year. Properties excluded are: 201 Kent Street, Sydney; 10 Eagle Street, Brisbane; 45 Pirie Street, Adelaide; 1 and 5 Mill Street, Perth; 197 St Georges Terrace, Perth; and 259 George Street, Sydney. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 2 Financial Reconciliation of net property income to distribution $m Restated For the year ended 30-Jun Jun-12 Net property income Interest Alignment fee income Other revenue Total Borrowing costs 2 (51.1) (47.8) Responsible Entity s base fee 1 (17.0) (13.7) Auditor s remuneration Other expenses 1 (2.3) (2.0) Total (70.9) (64.0) Amortisation of fit-out incentives, cash incentives and leasing commissions Other items FFO Amount withheld in accordance with distribution policy (53.3) (56.6) Distribution Extracted from the Consolidated Statement of Comprehensive Income in the Financial Report. 2. Includes borrowing costs and net interest expense on derivatives extracted from the Consolidated Statement of Comprehensive Income in the Financial Report, adjusted for the non-cash convertible notes interest expense as per Note 2 of the Financial Report. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

24 Appendix 2 Financial Earnings reconciliation $m Restated For the year ended 30-Jun Jun-12 FFO Less: maintenance capex, fit-out and cash incentives and leasing commissions AFFO Distribution FFO cents per unit AFFO cents per unit Distribution cents per unit Payout ratio (% of FFO) AFFO ratio (% of FFO) AFFO is an unaudited, non-ifrs measure and not a key earnings measure of the Fund. It has been included for comparative purposes with our peers. 2. FFO per unit is calculated as FFO divided by the weighted average number of units. 3. AFFO per unit is calculated as AFFO divided by the number of units on issue at the end of the reporting period. CPA CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 2 Financial FFO to PCA guidelines reconciliation CPA FFO Restated $m, for the year ended 30-Jun Jun-12 FFO Less: amortisation of leasing commissions Plus: amortisation of rent-free periods PCA FFO CPA AFFO Restated $m, for the year ended 30-Jun Jun-12 CPA AFFO Plus: amortisation of rent-free periods Plus: leasing commissions Less: rent free Less: derivative close out costs Less: amortisation of leasing commissions PCA AFFO Property Council of Australia (PCA) FFO and AFFO are unaudited, non-ifrs measures and not key earnings measures of the Fund. They have been included for comparative purposes with our peers. The Fund did not adopt PCA FFO and AFFO as it is monitoring the reaction of the market participants to the new guidelines. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

25 Target band Appendix 3 Capital management Reconciliation of net tangible asset backing per unit (NTA) Attribution analysis to change in NTA over FY13 Cents per unit $ $1.5 -$0.1 -$ $115.5 =$ As at Jun-12 NTA Retained earnings Property valuations Mark-to-market of derivatives Other As at Jun-13 NTA CPA CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 3 Capital management Gearing and debt covenants Gearing history For the financial years ended 30 June 5 45% 4 35% 3 25% 2 15% 1 5% CPA has never wavered from its strategy of being a conservatively geared A-REIT Key debt covenants Threshold 30-Jun Jun-12 Loan to value ratio 1 (LVR) 45% or less 28.6% 27.4% Interest cover ratio 2 (ICR) 2.0 times or greater 4.4 times 4.1 times 1. Calculated as total liabilities divided by total assets, excluding the effect of the option component of the convertible notes and the fair value of derivatives. 2. Calculated as earnings before interest divided by net interest expense. For the purposes of this calculation, earnings represents net profit excluding all fair value adjustments, straight-lining revenue, borrowing costs and net interest expense on interest rate swaps. Interest expense is the sum of borrowing costs, net interest expense on interest rate swaps, and capitalised interest, less non-cash convertible notes interest expense. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

26 Appendix 3 Capital management Hedging profile Hedge maturity profile 1 For the financial years ended 30 June 1, % 6% 5% Hedged debt 30-Jun Jun-12 Proportion of overall debt 95.9% 87.5% Weighted average interest rate 1, 2 5.1% 4.9% Weighted average duration years 3.6 years 400 4% 200 3% % Key: Face value of hedges ($m) (LHS) Weighted average interest rate on hedged debt (RHS) Hedging profile 1 FY14 FY15 FY16 FY17 FY18 FY19 Face value of hedges ($m) Weighted average interest rate on hedged debt 2 (%) Average percentage hedged over the financial year (%) CPA 1. Including convertible notes and fixed-interest medium term notes. 2. Excluding fees and margins. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 3 Capital management CPA has outperformed over a number of time periods Total returns 1 One year Three years 2 Five years 2 Ten years 2 CPA (%) S&P/ASX 200 Property Accumulation Index (%) CPA has demonstrated longterm stable returns compared to the A-REIT sector 1. Total return comprises unit price performance and distribution income yield. Note: Past performance is not indicative of future performance. 2. Compound annual returns. Source: UBS Australia CPA 60 Castlereagh Street, SYDNEY CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

27 Appendix 4 Portfolio overview Key statistics by asset Ownership Book Occupancy Over/(under) Average value Grade rate 1 renting rent FY14 expiries 2 WALE Cap rate Discount rate 3 Property % $m % % $/sqm % Years % % 145 Ann Street, BRISBANE A 100 (1.2) Bourke Street, MELBOURNE A 100 (4.2) Galleria, MELBOURNE (2.1) 1, Castlereagh Street, SYDNEY A 91.4 (5.3) Colin Street, WEST PERTH A Collins Street, MELBOURNE A 100 (4.6) Collins Street, MELBOURNE A and 4 Dawn Fraser Avenue, A 100 (9.4) SYDNEY OLYMPIC PARK 4 10 Eagle Street, BRISBANE A Finlay Crisp Centre, CANBERRA B 100 N/A George Street, BURWOOD A 100 (2.3) George Street, PARRAMATTA A George Street, PARRAMATTA A George Street, SYDNEY Prem 84.3 (4.9) 1, By income. 2. Excludes current vacancy. 3. Used to calculate the discounted cash flow valuation over 10 years. 4. Represents the value of CPA s units in the respective Trust. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 4 Portfolio overview Key statistics by asset (continued) Ownership Book Occupancy Over/(under) Average value Grade rate 1 renting rent FY14 expiries 2 WALE Cap rate Discount rate 3 Property % $m % % $/sqm % Years % % 201 Kent Street, SYDNEY A Lee Street, SYDNEY A 100 (14.7) Lonsdale Street, MELBOURNE - Office A 100 (6.9) QV retail (including car park and creche) Martin Place, SYDNEY Development asset 201 Miller Street, NORTH SYDNEY A Mounts Bay Road, PERTH A 100 (1.5) North Terrace, ADELAIDE A Pitt Street, SYDNEY B Pitt Street, SYDNEY - Office A Retail (3.2) 1, Shelley Street, SYDNEY A Southbank Boulevard, MELBOURNE A 99.1 (3.9) Waymouth Street, ADELAIDE Prem TOTAL PORTFOLIO 96.2 (0.7) CPA 1. By income. 2. Excludes current vacancy. 3. Used to calculate the discounted cash flow valuation over 10 years. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

28 Appendix 4 Portfolio overview Portfolio well diversified by location and grade Geographic diversification By value Property grade diversification By value 6.1% 2.1% 3.9% 6.6% % 11.6% 46.3% % Key: Sydney NSW Melbourne VIC Brisbane QLD Adelaide SA Perth WA Canberra ACT Key: Premium A-grade B-grade Other 1 The portfolio remains weighted to the broader and more stable Sydney and Melbourne markets The portfolio has a bias towards higher grade assets CPA 1. Other comprises QV retail and car park at Lonsdale Street, Melbourne. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 4 Portfolio overview Portfolio well diversified by tenant type and lease duration Top 15 tenants % income Tenant diversification By income Accommodation and Food Services Administrative and Support Services Agriculture, Forestry and Fishing Arts and Recreation Services Commonwealth Bank 10.3 Federal Government 5.9 AMP 5.7 SA Government 4.5 KPMG 3.6 NSW Government 3.6 Deloitte 2.4 Fairfax Media 2.4 Telstra 2.4 GHD 2.2 Clough Projects Pty Limited 2.0 PwC 2.0 IAG 1.8 Lease expiry profile By area Construction Education and Training Electricity, Gas, Water and Waste Services Financial and Insurance Services Health Care and Social Assistance Information Media and Telecommunications Manufacturing Mining Other Services Professional, Scientific and Technical Services Public Administration and Safety Retail Trade Rental, Hiring and Real Estate Services Transport, Postal and Warehousing Wholesale Trade 35.6% Energy Australia 1.5 BNP Paribas 1.4 Top % 12.9% 10.7% 8.3% 1 3.8% Vacancy FY14 FY15 FY16 FY17 FY18 Beyond CPA CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

29 Capital expenditure Office demand US GDP, YoY (%) Office demand Change in occupied space EPS expectations Change in occupied space S&P/ASX200, YoY Five year forecast CAGR Appendix 5 Australian office markets White collar employment growth weighted by CPA s market exposure Forecast white collar employment growth CBD office markets as at 31-Mar Outperformance Slowing down 2.5% BNE MEL % SYD PER ADL 1. CAN Recovery 0.5% 2.5% 1.5% 0.5% -0.5% Sustained deterioration -1.5% -2.5% Relative to historical average (5 years) Bubble size weighted by CPA's geographical asset allocation. Source: Deloitte Access Economics and CFSGAM Property Research. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 5 Australian office markets Tailwinds Fwd EPS expectations and office demand Sydney CBD office market Occupied space YoY (LHS) Fwd EPS YoY (RHS) S&P/ASX200 and office demand Sydney CBD office market Occupied space six month lagging (LHS) S&P/ASX 200 (RHS) 6% 45% 6% 45% 4% 3 4% 3 2% 15% 2% 15% -2% -15% -2% -15% -4% -3-4% -3-6% -45% Source: Bloomberg, Jones Lang LaSalle and CFSGAM Property Research, quarterly rests Mar-13. Capex intentions WCE industries and office demand Annual change WCE capex - F&I, RHRE, Comms and PBS (adv 3 months (LHS)) Office demand service CBDs (SYD, MEL, ADE, CAN) 6% Smoothed Correlation 81% Source: ABS, Jones Lang LaSalle and CFSGAM Property Research, quarterly to Mar-13. 5% 3% 2% -2% -3% -6% Source: Bloomberg, Jones Lang LaSalle and CFSGAM Property Research, quarterly rests to Jun-13. US GDP and office demand Annual change CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August US GDP Sydney Source: Bloomberg, Jones Lang LaSalle and CFSGAM Property Research, quarterly rests to Jun % 8% 6% 4% 2% -2% -4% -6%

30 161 Castlereagh Street 8-12 Chifley Square 180 Thomas Street 175 Liverpool Street 99 Elizabeth Street Cumberland Street 52 Martin Place Martin Place 20 Martin Place George Street 333 George Street 34 Hunter Street 171 Macquarie Place 1 Farrer Place Martin Place 155 Clarence Street Martin Place 1 Farrer Place 1 Martin Place 5 Martin Place Hickson Road T2 Hickson Road T George Street 20 Martin Place 1 Martin Place 225 George Street 182 George Street Pitt Street 55 Market Street 60 Martin Place 255 Elizabeth Street 50 Bridge Street 151 Clarence Street 19 Pitt Street 301 George Street 200 George Street 33 Bligh Street Pitt Street 333 George Street 1 Wheat Street 55 Market Street 255 Elizabeth Street 1 Martin Place 225 George Street 30 Hickson Road 201 Sussex Street 680 George Street 10 Shelley Street 301 George Street Hickson Road T1 30 Hickson Road 60 Martin Place 182 George Street Pitt Street 10 Shelley Street 201 Sussex Street 680 George Street 50 & 58 Park street 1 Alfred Street 19 Pitt Street 680 George Street 151 Clarence Street Square metres Corrs & QBE Macquarie Ashurst Westpac and Gilbert + Tobin ANZ & Freehills Ernst & Young KPMG & LLC Unemployment rate NAB capacity utilisation Capital expenditure, QoQ Office demand, YoY Job advertisments, YoY Net absorption, YoY Net absorption, YoY NAB profitability Index Appendix 5 Australian office markets Headwinds ANZ job advertisements and office demand Monthly rests to Jun-13, job ads to Jul-13 55% Net absorption, 6 months lagging ANZ job ads 5% NAB profitability and office demand Monthly rests, service CBD office markets to Jun-13, profitability to Jul-13 6% Net absorption, 3 months lagging (LHS) Profitability, 3mma 25 35% 4% 5% 20 15% 3% 4% 15 2% 3% 10-5% 1% 2% 5-25% 1% % -1% -1% % % -2% Source: Bloomberg, ABS and CFSGAM Property Research. Source: Bloomberg, NAB and CFSGAM Property Research. Unemployment and capacity utilisation Monthly rests to Jun-13 Unemployment rate, % inverted (LHS) Capacity utilisation 3mma, adv 6mths (RHS) Mining capital expenditure and Perth office demand Quarterly rests to Jun-13 Mining capex Net absorption Perth 3% 25% % % 83 15% 6. 6% % 79 5% 2. 8% % 75-5% Source: NAB, ABS and CFSGAM Property Research. Source: ABS, Jones Lang LaSalle and CFSGAM Property Research. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 5 Australian office markets Sydney supply New development and refurbishment Sydney CBD forecasts at Jun , ,000 60,000 40,000 20, ,000-40,000 Source: Jones Lang LaSalle and CFSGAM Property Research. Key: Available Pre-commit Withdrawal Refurbishment Barangaroo withdrawals /backfill CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

31 Space (000 sqm) Vacancy rate 171 Collins Street 700 Bourke Street 735 Collins Street 850 Collins Street Exhibition Street 838 Collins Street Collins Street 383 King Street 120 Spencer Street 555 Collins Street 150 Queen Street 277 Collins Street 350 Queen Street 90 Collins Street 55 Collins Street 150 Collins Street 720 Bourke Street 360 Collins Street 700 Collins Street 383 King Street 120 Spencer Street 555 Collins Street 180 Lonsdale Street 222 Lonsdale Street 385 Bourke Street 313 Spencer Street 567 Collins Street 699 Bourke Street 700 Collins Street 360 Collins Street 80 Collins Street Aurecon Architects Institute BHP / Evans & Partners Westpac CBA / Marsh Mercer NAB CBA / Service Stream Victoria Police AGL Energy Medibank Corrs / Leighton Appendix 5 Australian office markets Melbourne supply Melbourne CBD development, refurbishment and backfill , sqm (000s) forecasts at Jun Source: Jones Lang LaSalle and CFSGAM Property Research. Key: Available Pre-commit Withdrawal Refurbishment/backfill CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 5 Australian office markets Sydney, NSW Sydney space market fundamentals Annual rests forecasts at Jun % Forecast Market summary 100 5% Moderate demand conditions to continue in the short term 50 Limited supply in the short term 0-5% CPA Sydney No. of assets % Portfolio % by value 46.3% Vacancy by income 6. WALE by income 3.7 years Key: Net additions Net absorption Vacancy (RHS) Statistics exclude 5 Martin Place which has been withdrawn for redevelopment Source: Jones Lang LaSalle data and CFSGAM Property Research forecasts. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

32 Space (000 sqm) Vacancy rate Space (000 sqm) Vacancy rate Appendix 5 Australian office markets Melbourne, VIC Melbourne space market fundamentals Annual rests forecasts at Jun Forecast 15% Market summary 100 5% Soft demand conditions 50 Solid supply in the short term 0-5% CPA Melbourne No. of assets % Portfolio % by value 30. Vacancy by income 0.7% WALE by income 4.7 years Key: Net additions Net absorption Vacancy (RHS) CPA Source: Jones Lang LaSalle data and CFSGAM Property Research forecasts. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 5 Australian office markets Brisbane, QLD Brisbane space market fundamentals Annual rests forecasts at Jun Forecast 15% Market summary 100 5% Demand to be limited in the short term 50 Limited completions until % CPA Brisbane No. of assets % Portfolio % by value 11.6% Vacancy by income 7.7% WALE by income 5.5 years Key: Net additions Net absorption Vacancy (RHS) Source: Jones Lang LaSalle data and CFSGAM Property Research forecasts. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

33 Space (000 sqm) Vacancy rate Space (000 sqm) Vacancy rate Appendix 5 Australian office markets Perth, WA Perth space market fundamentals Annual rests forecasts at Jun Forecast 15% Market summary 100 5% Supply and demand to remain soft in 2013 and Vacancy rate anticipated to increase over the next few years 0-5% CPA Perth No. of assets % Portfolio % by value 3.9% Vacancy by income 0. WALE by income 6.6 years Key: Net additions Net absorption Vacancy (RHS) CPA Source: Jones Lang LaSalle data and CFSGAM Property Research forecasts. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 5 Australian office markets Adelaide, SA Adelaide space market fundamentals Annual rests forecasts at Jun Forecast 15% Market summary 60 5% Supply in 2013 expected to outweigh demand 40 Vacancy rate anticipated to stay at elevated levels 20-5% CPA Adelaide 0-1 No. of assets % Portfolio % by value 6.1% Vacancy by income 1.5% WALE by income 2.6 years Key: Net additions Net absorption Vacancy (RHS) Source: Jones Lang LaSalle data and CFSGAM Property Research forecasts. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

34 Space (000 sqm) Vacancy rate Appendix 5 Australian office markets Canberra, ACT Canberra space market fundamentals Annual rests forecasts at Jun Forecast 15% Market summary 60 5% Vacancy rate anticipated to remain elevated over the forecast period 40 Solid supply outweighs demand 20-5% 0-1 CPA Canberra No. of assets % Portfolio % by value 2.1% Vacancy by income 0. WALE by income 4.1 years Key: Net additions Net absorption Vacancy (RHS) CPA Source: Jones Lang LaSalle data and CFSGAM Property Research forecasts. CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 6 Asset recycling Long-term benefits of asset recycling - Disposal, Dec-11 Governor Stirling Complex 1 Mill Street, 5 Mill Street and 197 St Georges Terrace, PERTH Purchased Purchase price Oct-02 $93.5m Sale price 1 $152.0m IRR on investment (p.a.) (pre-transaction costs) 18.8% 1 Mill Street, PERTH Perth CBD office market total return over same period 2 (p.a.) 15.1% Benefits of transaction Repaid debt, increasing balance sheet flexibility Reinvested proceeds into unit buy-back 5 Mill Street, PERTH Diversified away from volatile Perth market Avoided $110m in capital expenditure Improved portfolio quality 1. Excludes transaction costs. 2. Source: IPD. 197 St Georges Terrace, PERTH CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

35 Appendix 6 Asset recycling Long-term benefits of asset recycling - Disposal, May Pirie Street, ADELAIDE Purchased Purchase price Sale price 1 Oct-02 $55.2m $87.0m IRR on investment (p.a.) pre-transaction costs) 11.2% Adelaide CBD office market total return over same period 2 (p.a.) 12.2% Benefits of transaction Repaid debt, increasing balance sheet flexibility Diversified away from softening Adelaide market Improved portfolio quality 1. Excludes transaction costs. 2. Source: IPD. 45 Pirie Street, ADELAIDE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 6 Asset recycling Long-term benefits of asset recycling - Disposal, Oct George Street, SYDNEY Purchased Purchase price Apr-99, Oct-05 $267.1m Sale price 1 $395m IRR on investment (pre-transaction costs) 2 (p.a.) 9.2% Sydney CBD office market total return over same period 3 (p.a.) 8.3% Benefits of transaction Repaid debt, increasing balance sheet flexibility Reinvested proceeds into unit buy-back Improved portfolio quality 1. Excludes transaction costs. 2. From June Source: IPD. 259 George Street, SYDNEY CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August

36 Appendix 6 Asset recycling Long-term benefits of asset recycling + Acquisition, Nov-10, Dec-10 Melbourne portfolio 655 Collins Street, MELBOURNE Purchase price 1 $91.6m IRR since acquisition (pre-transaction costs) 10.7% 750 Collins Street, MELBOURNE Purchase price 1 $220.0m IRR since acquisition (pre-transaction costs) 11.6% 655 Collins Street, MELBOURNE Lonsdale Street, MELBOURNE Purchase price 1 $269.8m IRR since acquisition (pre-transaction costs) 11.3% Melbourne CBD office market total 11.1% return over same period Collins Street, MELBOURNE Benefits of transaction Improved geographic diversification Accretive to returns Enhanced portfolio quality and increased WALE 1. Excludes transaction costs. 2. Source: IPD Lonsdale Street, MELBOURNE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August Appendix 7 Unit buy-back On and off-market unit buy-back + Capital management, Dec-11 On and off-market unit buy-back Initiated Dec-11 Units bought back 111,120,139 Average purchase price $0.97 IRR on investment to 30-Jun % Benefits of transaction CPA was trading at a discount to NTA, with the transaction providing accretion compared to alternative investment propositions Sold high risk assets to reinvest in CPA s own diversified portfolio Reduced the number of units on issue, strengthening NTA per unit for investors Units acquired strategically and within an agreed price range relative to accretion value for CPA 11 Waymouth Street, ADELAIDE CPA Commonwealth Property Office Fund 2013 Annual Results Presentation 20 August