Macquarie Office Trust. Letter from Your CEO

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1 December 2000 newsletter Macquarie Office Trust Letter from Your CEO Welcome to the December 2000 edition of the Macquarie Office Trust (Trust) Newsletter. The Australian office markets are continuing to benefit from a growing economy with high levels of net office absorption resulting in improved rental growth. We are expecting a strong performance in the next round of revaluations especially from our Melbourne portfolio. We are pleased to report that it has been a very busy period with over 27,000 square metres of new leases completed since balance date and the acquisition of a 17.5% interest in the 2 Park Street Trust, which owns the recently completed Citigroup Centre in Sydney. Argus Centre, Melbourne, VIC In this edition, we outline the results of the Annual Unitholders Meeting, report on the latest leasing results, provide a taxation update, and discuss our successful AAA rated Commercial Mortgage Backed Securities (CMBS) debt refinancing. The Trust continues to perform strongly and is the number one performer in the listed office trust sector over the two, three and five year periods to 31 October 2000 with a five year accumulated return of 11.8% per annum, in excess of the UBS Warburg commercial index of 9.2% per annum for the same period. In November, we made an offer to Unitholders to subscribe for up to $3,000 in additional units in the Trust s Unit Purchase Plan at a 2.5% discount to the market price at that time, so that Unitholders could increase their holding in the Trust. We would like to remind investors that they can access up to date information on the Trust at our website at We value your feedback on any issues so please feel free to us at propfunds@macquarie.com.au or phone us on We wish you all the best for the festive season and a Happy and Prosperous New Year. Simon Jones Chief Executive Officer Macquarie Office Trust

2 newsletter Trust Pioneers New CMBS Debt Financing In line with the Manager s track record of innovative management, the Trust announced the successful launch of a Commercial Mortgage Backed Securities (CMBS) programme in July this year. The CMBS programme replaced the Trust s Medium Term Note Programme and provides the Trust with a lower cost of debt funding than is available through alternative sources of borrowing such as bank debt. The CMBS issue was awarded the highest possible rating of AAA from International Ratings Agency, Standard and Poor s, which is the first AAA rating in the Listed Property Trust sector. The rating was awarded based on the quality of the 16 secured properties, the strength of the underlying cashflows, the legal integrity of the structure, the level of insurance coverage and liquidity support. In July, $224 million of securities were issued at a margin of 35 basis points over the swap rate and a further $16 million were issued at a margin of 33 basis points in September, following strong institutional interest. The CMBS Programme gives the Trust a source of low cost debt which provides a lower overall cost of capital. Argus Centre, Melbourne, VIC Investment in 2 Park Street Trust The Trust has acquired a 17.5% interest in the listed 2 Park Street Trust (formerly MTM Office Trust) to provide Unitholders with a strategic investment in one of Sydney s newest premium office towers. The 2 Park Street Trust owns a single property, the Citigroup Centre at 2 Park Street, Sydney, opposite the Sydney Town Hall. The property was completed in July 2000 with the major tenants being Citigroup and Gilbert and Tobin on 14 year and 12 year leases respectively. The property is a landmark premium building with approximately 74,000 square metres of office accommodation. Currently, 24% of the building is vacant and is expected to be fully leased by the second half of next year. Our intention is to increase our level of ownership in the 2 Park Street Trust provided that further units can be obtained at an attractive price. For the time being, the Manager will not be charging a base management fee on this investment. Citigroup Centre, 2 Park Street, Sydney, NSW

3 Australia Post and CSIRO Renew at Celsius House, Melbourne Australia Post have exercised a three year option at Celsius House over Levels 21 to 23 comprising 3,378 square metres. The current rent of $141 per square metre gross will be reviewed to open market rent from 1 December 2000 by independent valuers in a rental determination. CSIRO have also exercised an option for a further 3.5 year term over 391 square metres from 14 October A new tenant, Expert Information Services, has leased 562 square metres at Celsius House on Level 25 for eight years commencing 1 September 2000 at $220 per square metre gross with reviews two yearly to market and 5% fixed reviews in alternate years. The building is now 100% leased. Celsius House has recently completed a facade refurbishment as shown below. Melbourne CBD Office Market Has Highest Rental Growth Throughout the calendar year 2000, the Melbourne CBD office market has been the fastest growing office market in the country. Rapid take-up of both prime and secondary space, together with the absence of significant new supply, have caused market rents to rise in excess of 40% over the past year. In spite of this rapid growth, market rents in most buildings are still below levels which would make new construction economically feasible, which means that investors can expect the recent trend of strong growth to continue in the short to medium term. The three CBD properties acquired by the Trust near the low point of the cycle, being the Argus Centre, Celsius House and Zurich House, are starting to see the benefits of this growth with market rent levels having risen between 40% and 60% over the past year. We expect to capture the Melbourne office market rental growth in the forthcoming market rental reviews. This should in turn lead to positive revaluation results as the increased rentals flow through to the capital values of each property. Telstra Takes New Lease at Parramatta We are pleased to announce that Telstra have exercised an option for a further five year term at Wentworth Place, Parramatta over 7,241 square metres of office accommodation and 96 car spaces, commencing 1 December The commencing rental is currently being determined by an independent valuer and we expect a positive outcome for the Trust against the current passing rental. Wentworth Place, Parramatta, NSW Celsius House, Melbourne, VIC

4 Growth in Sydney North Shore Office Markets The North shore office markets continue to prosper with positive net absorption and a reduction in vacancy rates to 1.8% for North Sydney and under 3% for St Leonards. St Leonards and North Sydney have also experienced substantial rental growth which has had a positive impact on all three Trust buildings on the North shore. Charter Grove, St Leonards IBM Australia Ltd has renewed its lease for 2,101 square metres for a further five years from 10 September 2000 at a net rent of $310 per square metre with reviews two yearly to market and fixed 4% reviews in alternate years. This reflects a 10% increase in rent over the last 12 months since the last market review on the premises. The lease for the leisure centre has been assigned from Healthlands Australia Pty Ltd to Fitness First PLC, a substantial UK based gymnasium operator following their acquisition of the Australian Healthlands gym chain in November. 2 Elizabeth Plaza, North Sydney Significant leasing and rent reviews in the last quarter continue to improve performance of the building, including the following: Successful lease renewal of the 9th floor to Knight Frank (NSW) Pty Ltd for six years at $345 net per square metre, or $212,175 per annum. Successful reletting of the balance of the second floor of 346 square metres to Cadden Crowe Recruitment Consultants for a six year lease at $345 net per square metre. A market rent review on levels one and four leased to Australian Provincial Newspapers was settled at $320 net per square metre reflecting an increase of 40% in rent, or $115,085 per annum. NCR House, North Sydney Since acquisition there has been a smooth transition in the management of the building. The Trust has been able to benefit from the buoyant office rental market currently being experienced in North Sydney by setting new rental benchmarks in the building with the Shell Coal Level 22 tenancy increasing in rent to $335 net per square metre, a 20% premium to the average office rents of $280 per square metre currently in the building. Unit Purchase Plan Announced On 7 November the Manager announced an offer to Unitholders to apply for up to $3,000 worth of units under the Trust s Unit Purchase Plan ("UPP"). This offering is consistent with the Manager s aim to provide Unitholders with the opportunity to increase their investment in the Trust. It was not possible to offer a UPP earlier in June, when a placement was made to institutions for the NCR House acquisition, as the UPP can only be offered once every twelve months and it had previously been offered in October The offering was priced at $1.12 per unit which was the average trading price on the ASX over the ten trading days to 7 November, discounted by 2.5% and rounded to the nearest cent. Rental Increase at Lang Centre, Parramatta The rent for the Office of State Revenue s 8,750 square metres of office accommodation and 65 car spaces was recently reviewed to market by an independent valuer at rental determination, effective 1 December This resulted in a 7% increase in total gross rental of $180,816 per annum. The rental for the office component increased from $280 to $300 per square metre gross, indicative of the market growth experienced within the Parramatta market since the last review. NCR House, North Sydney, NSW Lang Centre, Parramatta, NSW

5 Resolution Passed at November Annual Meeting The Trust held its Annual Meeting on 13 November. In addition to updating Unitholders on the Trust s progress, a single resolution to ratify the previous placement of 42,000,000 units issued in June 2000, was approved with 98% of votes in favour. Thank you to those Unitholders who completed a proxy voting form. As some resolutions require a minimum of 25% of all Unitholders to vote we urge Unitholders to return their proxy forms in the reply paid envelopes for any future meetings. Your assistance in this regard would be greatly appreciated. Taxation Update The implementation of systems for the Trust to handle the introduction of the Goods and Services Tax (GST) on 1 July 2000 has gone smoothly and the Trust has successfully completed each of its monthly Business Activity Statements (BAS) correctly and on time. The Treasury released draft legislation on its proposals for the Taxation of Trusts on 11 October This proposed legislation only partially achieves the Ralph Report s initial proposal for a unified entity regime under which similar activities and investments carried on by different types of entities (trusts, companies etc) would be taxed similarly. For trusts with no discretionary entitlements (this includes Macquarie Office Trust), the proposed laws do not change the way the Trust is taxed and thus there should be no significant change for Unitholders, and going forward, the Trust would retain its existing tax benefits. The legislation is in draft format and we will continue to monitor its progress through the legislative process. Environmental Awards The Trust has been actively involved with the launch of the Sustainable Energy Association of Victoria (SEAV). Three of the Trust's Melbourne properties have been independently audited to determine the energy efficiency rating of each building. The Trust is very pleased to advise that we have been awarded energy efficiency ratings between "Very Good" and "Excellent". These results demonstrate the Trust's commitment to energy management which make both economic and environmental sense. Additional Telecommunications Income The Trust is capitalising on the opportunity to increase income from its properties by the installation of telecommunications equipment including mobile repeaters, broad band cabling and microwave dishes etc. The Trust has been successful in negotiating favourable commercial agreements for the installation of equipment within our properties. This not only provides an additional income stream (currently contributing approximately $175,000 per annum) but also provides our tenants with access to the latest telecommunications infrastructure. The Argus Centre and the Jetset Centre now have dedicated internet sites that provide our tenants and visitors with information on the buildings. The tenants have secure access to specific services which include electronic purchasing of goods and services, and the ability to log service calls directly to our on site Facilities Manager. The internet addresses are and and we encourage Unitholders to visit the web sites. Cost Effective Facilities Management The Trust continues to rationalise the service contracts required to effectively operate and maintain its properties. To this end, we are implementing innovative, performance based facilities management contracts that provide a focussed maintenance service that is delivered in a fully compliant and cost effective manner. A national performance based lift maintenance contract will also be implemented in the new year which will again realise savings of around 20% and an increased service level to the Trust. Jetset Centre, Melbourne, VIC

6 How to Access Details of Your Unitholding Proceed to our internet site at Click on the left hand menu option titled Investor Relations, then click on the left hand menu option titled Check your Unitholding. At the bottom of this page is a link for you to click on, this will take you into the ASX Perpetual Registrars internet site. For security reasons you will need your security reference number (insert the number only, excluding the S, I or D), full name of the holding and the postcode of the mailing address of the holding. Once these details are entered into the fields the site will take you directly to your holding, from here you will be able to see the total number of units you own, see if you are in the Distribution Reinvestment Plan, whether your Tax File Number has been recorded and numerous other items. Duplicate Holdings Did you receive two or more copies of this newsletter? If so, you may unintentionally have multiple holdings in the Trust. If you would like to merge these holdings together so that you no longer receive two or more items of all correspondence, contact either your broker (if you are broker sponsored) or the Unit Registry, ASX Perpetual Registrars on (if you are issuer sponsored). How to Contact Us Manager ABN Macquarie Office Management Limited Level 13, No. 1 Martin Place SYDNEY NSW 2000 Tel: (02) (local call cost) Fax: (02) propfunds@macquarie.com.au Internet: Unit Registry ASX Perpetual Registrars Limited Level 8, 580 George Street SYDNEY NSW 2000 Tel: (local call cost) registrars@aprl.com.au Trust Timetable December Quarter Distribution March Quarter Distribution Quarter Ending 31 December March 2001 Ex-Distribution Date 21 December March 2001 Distribution Payment Date 9 February April 2001 Disclaimer The Macquarie Office Trust Newsletter is for information purposes only and does not constitute an offer for sale or investment in the Macquarie Office Trust. In preparing this Newsletter, we have obtained information from sources we believe to be reliable, but do not offer any guarantees as to its accuracy or completeness. Neither this Newsletter nor any of its contents may be used for any purpose without the consent and knowledge of Macquarie Office Trust. The forecasts provided in this Newsletter are based upon our opinion of the market as at this date and are subject to change, dependent on future changes in the market.