2 A-REIT 2014 SURVEY

Transcription

1 A-REIT 2014 Survey

2 2 A-REIT 2014 SURVEY

3 A-REIT 2014 SURVEY 3 CONTENTS A-REITs deliver another solid performance in A-REIT Rankings 6 Key Findings in Top 10 A-REITs 11 A-REIT Insights 19 Sector Challenges in FY15 22 Method of Ranking 23

4

5 A-REIT 2014 SURVEY 5 A-REITS DELIVER ANOTHER SOLID PERFORMANCE IN 2014 The BDO Corporate Finance Team is proud to present the 20th edition of the annual BDO A-REIT Survey In FY14, Australian retail investment trusts delivered strong returns across the board, continuing the sector s dramatic recovery and reinvention of the past few years, having been almost left for dead after the GFC. A-REITs demonstrated once again in FY14 the positive effects of a return to conservative management, while a refocus on low gearing levels, de-risking of asset portfolios and active capital management has been rewarded and boosted by a strong level of M&A activity and a renewed demand by investors for stable yields. Whilst the low interest rate environment boosted consumer s confidence and business alike, it also had a positive effect on asset valuations and income for trusts, making the sector s 11% total return over the period, more attractive than Australian bonds (which returned 6.1% in FY14). Specifically, property trusts have now delivered annualised returns of 14% over the past one, three and five-year periods, based on the S&P/ ASX 200 A-REIT index. Over the past financial year, A-REITs have also managed to increase operating income yield, maintain a stable distribution yield, reach a median premium to NTA and have seen steady gains in asset values. Through their continued strong performance, A-REITs are, once again, viewed as a highly attractive investment that mixes sustainable portfolios with solid yields and moderate gearing. Interestingly, a trend in the top A-REIT performers for FY14 is the number of trusts that invest in non-traditional asset classes (pubs, healthcare, senior living and childcare). The rise of the specialist A-REIT has been evident in the sector since the GFC, and is highlighted by Ingenia, who once again topped the survey rankings. In the previous year s BDO A-REIT Survey, conversations with senior executives across the sector highlighted challenges regarding the increasing difficulty in finding quality assets, and then having to compete for them against overseas investors. These A-REIT insiders also pointed to the potential for any upward moves on the relatively conservative gearing levels of 2013 to reduce future investor appeal. This year, we have again sought input from key personnel within top performing A-REITs, and asked them to share their outlook for the year ahead, as well as outline the challenges they see for the sector. Some of the issues they raised included, the possibility of managers not maintaining their discipline in terms of leverage-risk and the pricing of acquisitions, or taking more risk in reaction to the current interest environment. They also expressed concerns about the continuing uncertainty around the next growth cycle, as the Australia economy transitions from the resources boom. The BDO Corporate Finance team congratulates Ingenia Communities Group for being the top performing A-REIT for the third year in a row. We also thank all those who generously shared their insights into the performance of their trust and the challenges that lie ahead in the coming year. We hope you find value in this report and look forward to bringing you the sector s FY15 performance next year.

6 6 A-REIT 2014 SURVEY 2014 A-REIT RANKINGS Ingenia Communities Group Generation Healthcare REIT Charter Hall Group ALE Property Group Folkestone Education Trust 6 Cromwell Property Group 7 Growthpoint Properties Australia 8 Industria REIT Fund Capital Industrial Fund 10 Australand Holdings 11 Multiplex European Property Fund 12 Astro Japan Property 13 Arena REIT 14 Abacus Property Group 15 GDI Property Group 16 Investa Office Fund 17 Dexus Property Group 18 Charter Hall Retail REIT 19 National Storage REIT 20 Shopping Centres Australasia Property Group 21 Hotel Property Investments 22 Goodman Group 23 BWP Trust 24 Brookfield Prime Property Fund 25 The GPT Group 26 CFS Retail Property Trust 27 Carindale Property 28 Australian Industrial REIT 29 Mirvac Group 30 Federation Centres 31 Stocklands Group 32 Galileo Japan Trust 33 Aspen Group Limited 34 Mirvac Industrial Trust 35 BlackWall Property Trust 36 Trinity Group 37 RNY Property Trust 38 Lantern Group 39 Real Estate Capital Partners USA Property Trust

7 A-REIT 2014 SURVEY 7 KEY FINDINGS IN 2014 THE RISE OF THE NICHE REIT Australian property trusts have traditionally been generalist in nature, concentrating their investments across retail, office, industrial and residential properties. Currently, almost half of the A-REIT index is comprised of retail trusts, with diversified REITs making up another 35%. The remainder of the index is composed of dedicated industrial and office REITs, as well as a small segment of speciality, or niche, REITs. While niche trusts are only minor players in the A-REIT index, they are a growing sector whose value is clearly demonstrated by the strong performance of Ingenia, Generation Healthcare, ALE and Folkestone in the 2014 BDO A-REIT Survey. Although specialty trusts focusing on hotels, tourism and leisure have long had a presence amongst A-REITs, the emergence of Australian property trusts in niche areas such as seniors living, healthcare and education is a relatively recent development. However, the role of the niche property trust is well established amongst global REITS, and there is clear evidence that such trusts often perform better than their traditional counterparts. With healthcare alone representing around 7% of global listed property assets, it s clear that niche trusts will continue to build their presence on the Australian REIT index. In doing so, they will offer investors access to other sectors not yet fully developed in the Australian market, such as mobile phone towers, energy infrastructure, student housing or even detention centres. The appeal of niche REITs is that they combine simplification and specialisation, and operate in sectors with sound growth prospects. In turn this leaves them less vulnerable to property market slowdowns than over-leveraged pure property trusts. Likewise, in a market that remains receptive to new products, niche offerings do not rely so much on quickly achieving scale as is the case with traditional funds. As a result, the cost of market entry can be considerably lower for niche players. Ultimately, as most niche REITs are designed around a specific purpose, one of the key concerns for investors will be the quality of the people managing the assets, the strength of their management teams, and their industry track record. As the performance of a niche REIT is closely correlated to the performance of its industry sector, its potential risk may be easier to assess than that of a traditional property trust. This also allows investors to put together a goal-oriented portfolio whose bias can be altered toward different market sectors as conditions change. In the past few years, the costs of borrowing and the low returns offered by fixed term deposits have helped make traditional A-REITs a very attractive investment proposition. A change in those conditions, as well as the increasing difficulty in sourcing good returns, will no doubt further ensure that the rise of the niche REIT continues. A STABLE SECTOR The S&P/ASX 200 A-REIT Accumulation Index recorded a 11% total return over the period. The sector has continued to provide an attractive alternative for investors seeking to switch out of lower risk and lower yielding income investments. The further increase in the spread between the median distribution yield of the sector (5.9%), and other income investments, has kept the sector attractive for investors from an income yield perspective % 20.00% 0.00% % % % % %

8 8 A-REIT 2014 SURVEY GEARING In FY14, median gearing increased slightly from 29% to 32.6%, with the cost of debt remaining low. A-REITs have continued to focus on keeping conservative gearing levels, and the increase in median gearing in FY14 is seen as a result of the attractive debt and capital markets for A-REITs, as managers have been able to replace expensive debt with lower interest rates. Over FY14, A-REITs have also looked to diversify sources of debt and increase maturities on the back of the low interest rates environment. This lower cost of debt has also continued to buoy the earnings per unit and distribution growth for the sector % Average Gearing 25.00% 0.00% Average WAIR 6.27% 5.20% 4.07% 4.15%

9

10

11 A-REIT 2014 SURVEY 11 TOP 10 A-REITS 1 Ingenia Communities Group 1st in 1-year return rankings (56%) 4th in 3-year return rankings (67%) Ingenia Communities Group (INA), the top performing trust of the 2012 and 2013 BDO A-REIT Survey has, once again, achieved the Survey s top ranking. Ingenia s success highlights why a growing number of investors are becoming increasingly attracted to specialist, or niche, A-REITs. Ingenia owns, operates and develops a diversified portfolio of senior living communities in Australia, which it continues to grow through a strong focus on the lifestyle parks sector. During FY14, the Group increased its exposure to this sector with a series of targeted acquisitions, which were funded using a mix of debt and equity raised from a June 2013 placement on $21 million, and a September 2013 rights issue of $62 million. The total purchase value of assets acquired by the Group during FY14 was $117 million, consisting of thirteen lifestyle parks and five rental villages. With the group now boasting a portfolio of 57 communities, across a mix of Active Lifestyle Estates, Garden Villages and Settler communities, Ingenia is firmly positioned as a significant provider of affordable seniors housing in Australia. In fact, since February 2013, Ingenia has become the largest owner, operator and developer of lifestyle and tourism parks in NSW and is presently assessing opportunities in South East Queensland. The Group s strong results for FY14 were underpinned by a significantly increased contribution from the recurring rental income streams of both the Active Lifestyle Estates and Garden Villages portfolios, offset by cessation of US distributions following divestment in the prior year. The Group has continued to adopt a conservative capital management approach with LVR at 33.9%, which is comfortably within the 30-35% target range and the all in cost of Australian debt has reduced by 126 basis points to 5.1%. The key immediate business priorities of the Group are to: Increase the rate of new home delivery within the Active Lifestyle Estates development pipeline Grow occupancy of the Garden Villages portfolio towards the midterm target of 92% Sell recently completed homes and explore opportunities to reduce exposure to the Settlers portfolio, and Invest available capital into further accretive lifestyle parks Highlights of the fiscal year included: Full year distribution of 1.15 cents per security Net asset value increased by 1.1 cents per security to 35.5 cents Total 1 year return of 55.8% The Group s vision is to be a leading Australian provider of affordable seniors living accommodation whilst delivering value to all stakeholders, including delivering strong earnings growth to security holders and providing an affordable community environment for residents.

12 12 A-REIT 2014 SURVEY 2 Generation Healthcare REIT 3 Charter Hall Group 5th in 1 Year Return rankings (31%) 2nd in 3 Year Return rankings (65%) 8th in Movement in NTA rankings (9%) 5th in Movement in NTA rankings (12%) 1st in Premium to NTA rankings (75%) 8th in 3 Year Return rankings (34%) Generation Healthcare REIT (GHC) is Australia s only ASX-listed REIT that invests exclusively in healthcare properties. With a portfolio of twelve properties including hospitals, medical centres, laboratories and other purpose built healthcare facilities located across Victoria, NSW and Queensland, Generation Healthcare has a total of $325 million in assets under management. During FY14, Generation Healthcare acquired a minority interest in a secured debt position associated with Waratah Private Hospital for $6.15 million, and a medical office building in Spring Hill, Queensland, for $44.5 million. The group also reduced debt pricing, extended tenor and diversified maturity risk. Highlights of the fiscal year included: 9% increase in distributions at 8 cents per unit Completed two equity raisings totalling $82.8 million Increase in NTA per unit of $0.09 (9%) Charter Hall Group (CHC) owns and manages 209 commercial properties in Australia. The Group s assets include retail centres, office buildings and industrial buildings. Charter Hall Group owns and manages a large range of quality commercial properties, comprising office buildings, supermarketanchored retail centres, and a rapidly growing stable of industrial assets on behalf of its institutional, wholesale and retail investors. In FY14, Charter Hall Group delivered a one-year return of 16%, an 18% increase in operating earnings, and a 10.4% increase in distributions per security at 22.3 cents. Highlights of the fiscal year included: 10.4% increase in distributions per security at 22.3 cents $1.8 billion in co-acquisitions, $1.2 billion in co-divestments One-year total return of 16.3% The Fund remains focused on providing unit holders with attractive, risk-adjusted returns generated by a quality, diversified portfolio of healthcare properties. Charter Hall Group has focused on reweighting its Property Investment portfolio over the last 3 years towards a more diversified portfolio with greater security of income.

13 A-REIT 2014 SURVEY 13 4 ALE Property Group 5 Folkestone Education Trust 3rd in Premium to NTA rankings (45%) 10th in Three Year Return rankings (23%) 4th in Movement in NTA rankings (12%) 5th in Three Year Return rankings (39%) ALE Property Group (LEP) is Australia s largest listed freehold owner of pub properties. ALE owns a property portfolio of 86 pubs across five states in Australia. In FY14, the Group successfully raised $335 million in debt through a medium-term note issue. The issue was the largest by an A-REIT since During the year, ALE also completed a hedge restructure, with 100% of debt at around 8 years and cost-of-debt fixed at 4.35% per annum. The value of the Group s properties increased 5% during the fiscal year, and ALE s one and three-year returns were 15% and 23% respectively. Highlights of the fiscal year included: Net assets increased by 2.42% Distribution of cents per security $335 million refinancing Folkestone Education Trust (FET) invests in educationrelated direct property predominantly in the learning sector. With a geographically diverse portfolio of 357 properties, anchored by 27 tenants, Folkestone is Australia s only listed trust dedicated to investing in early learning real estate in Australia and New Zealand. The Trust changed its name from the Australian Education Trust (AEU) to Folkestone Education Trust in June During FY14, it had an annual distribution of 12 cents per unit, and increased NTA per unit by 12% to $1.50. It also completed acquisitions of five established centres, increasing the Trust s portfolio by 27 properties. Folkestone completed a $45 million dollar equity raising in FY14 and was included in the S&P/ASX 300 Property Index. Highlights of the fiscal year included: 5.8% increase in distributions per security at 12.7 cents 12.1% increase in NTA per security at $1.50 cents We expect low interest rates to continue to drive investors to quality yield alternatives like ALE. The Folkestone Education Trust aims to provide unitholders with a secure, growing income stream and long term capital growth through investing in education-related direct property, predominantly in the early learning sector.

14 14 A-REIT 2014 SURVEY 6 Cromwell Property Group 7 Growthpoint Properties Australia 1st in Distribution Return rankings (11%) 4th in Premium to NTA rankings (38%) Cromwell Property Group (CMW) has over $3.7 billion in assets under management and manages 33 separate properties. Included in the S&P/ASX 200, Cromwell s predominantly Australianfocused commercial property portfolio is valued at $2.2 billion, while its funds management business has $1.3 billion of assets under management. In FY14 the Group increased distributions 5% to 7.6 cents per security, while NTA per security increased from $0.70 to $0.73 cents per unit. Cromwell also reduced its gearing from 46% to 42%. Highlights of the fiscal year included: NTA per security increase to $0.73 from $0.70 Distributions of 7.6 cents per security 7th in distribution Return rankings (8%) 9th in Premium to NTA rankings (19%) Growthpoint Properties Australia (GOZ) invests in Australian property in the industrial, office and retail sectors. Growthpoint s philosophy is to be a pure landlord, with 100% of its income derived from commercial real estate rentals under leases to quality tenants. With a portfolio of more than 50 properties, 28% of which are leased to Woolworths, the Trust is listed on the S&P/ASX 300. In FY14, Growthpoint s distributions per security reached 19 cents and gearing reduced to 40.9% following $345 million in acquisitions, including a $241 million office building in NSW, in line with the Group s strategy to significantly increase its exposure in that State. Highlights of the fiscal year included: 10.8% 1 year total return $331.5 million new equity raised 19 cents distribution per security 8% increase in NTA per security to $2.16 External funds management earnings increased, reflecting the continuing success of Cromwell in delivering new products to the market and an increase in recurring revenue from assets under management. This highlights the attractiveness of having the funds management business, which can provide Cromwell with additional growth to complement the property income stream. The primary indicator of success over any period is whether distributions have met or exceeded market guidance, and grown from the previous corresponding period. Distribution guidance for FY14 was met and distributions were 3.8% above FY13. The second most important success indicator is maintenance or improvement of the property portfolio demonstrated by a range of metrics such as weighted average lease expiry (increased from 6.8 years to 6.9 years over the year to 30 June 2014 despite 12 months passing), diversification of income (there was a significant increase in exposure to NSW and Growthpoint s broad exposure to tenants, locations and sectors was maintained).

15 A-REIT 2014 SURVEY 15 8 Industria REIT Fund Capital Industrial Fund 2nd in distribution Return rankings (10%) Industria REIT Fund (IDR) has a portfolio of 18 industrial, technology park and business park assets in capital cities in Australia. Industria s total portfolio was valued at $404 million at the end of FY14, and consisted of 18 assets with 93% occupancy during the period. In FY14, Industria delivered its first distribution cents per security - while its NTA per security at IPO of $1.94 was increased to $2.00. Industria completed over 5,300 sqm of leasing transactions in FY14. Highlights of the fiscal year included: Increased NTA per security 3.1% from IPO to $2.00 Property portfolio increased by 9.4% 9.54 cents distribution per security Industria REIT has a clear investment strategy of delivering a stable cash distribution with the potential of capital growth by investing in a modern, well-located, high quality portfolio that is well diversified by geography, sector and tenant. The workspace sector provides a unique investment proposition amongst the A-REIT sector. Industria REIT benefits from a simple, conservative capital structure. 3rd in distribution Return rankings (9%) 3rd in movement in NTA rankings (14%) 10th in 1 year return rankings (10%) 360 Capital Industrial Fund (TIX) invests in industrial properties, while 360 Capital Investment Management Limited is the responsible entity of the fund. As at 30 June Capital Industrial s top five tenants included Woolworths, the Reject Shop, Visy Industries, Green Biscuits and Elite Logistics. The Fund s portfolio of assets are geographically diversified with properties in NSW, VIC, QLD, WA, SA and the ACT Highlights of the fiscal year included: Distributions per unit of 18.6 cents per unit Gearing reduced to 42.1% from 45.5% in FY13 Portfolio value increased by 10% and NTA per unit by 14% The recent increase in demand for industrial property investments is expected to remain strong, which may lead to a firming of capitalisation rates, however the ongoing value of assets may be influenced by changes in market conditions outside the Fund s control.

16 16 A-REIT 2014 SURVEY 10 Australand Holdings 5th in operating cash yield rankings (12%) 3rd in 1 year return rankings (35%) Australand Holdings (ALZ) was recently acquired by Frasers Centrepoint Limited, via an off-market takeover offer. Having previously, acquired a 19% stake in Australand via Stocklands, Singapore-based Frasers Centrepoint acquired 98.39% of Australand for $2.6 billion in September 2014, with the full acquisition completed in October Australand s portfolio included $2.4 billion of office towers and logistics facilities. Highlights of the fiscal year included: Distributions per security of cents Investment property revaluation gaisn of $75.7 million While business confidence has improved, operating conditions in the commercial and industrial sectors are expected to remain challenging for 2014.

17 A-REIT 2014 SURVEY 17

18

19 A-REIT 2014 SURVEY 19 A-REIT INSIGHTS The A-REIT sector is now reaping the benefits of a renewed focus on the fundamentals of conservative portfolio management, moving away from the pre-gfc approach of highly leveraged assets and inflated yields. This change in focus has been demonstrated, in recent years, by a return to defensive management strategies, lower gearing levels, and investments in higher quality Australian assets. As a result the sector has seen positive movements in operating profits, cash yields, distributions and premiums to NTA, and strong investor returns. To help gain further insights into the outlook for the A-REIT market and some of the challenges perceived over the next 12 months, BDO spoke to a number of senior management personnel from the A-REITs that were ranked in the Top 10 for FY14. Following are extracts from some of these conversations: A-REIT SECTOR OUTLOOK Interest rates, level of returns and capital growth We are expecting low interest rates to continue to drive investors to quality yield alternatives like ALE. At the same time there are also some signs of wholesale capital accepting lower returns than the listed capital markets. Andrew Wilkinson, Managing Director, ALE Property Group With lower growth, lower inflation and a lower interest rate environment expected to remain for the foreseeable future, coupled with solid underlying property fundamentals, the outlook for commercial property is compelling. Offering relatively strong yields compared with long-term bank deposits, A-REITs are well positioned to benefit from increasing support from investors looking for a relatively high income, steady capital growth and lower than market volatility over the long term. Asset values are appreciating as the demand for high quality industrial, technology park and business park assets from both occupiers and investors remains strong. Laurence Parisi, Fund Manager, Industria REIT The opportunities of an aging and growing population The underlying drivers of an ageing population will continue to benefit the sector through growing demand for seniors housing. Research indicates that this population will need to fund more years of retirement than previously and for many Australians this retirement will be funded from a relatively small pool of superannuation, supplemented by the pension and other government support. These fundamentals will drive continued demand for seniors housing and in particular a need for affordable housing options. We see the sector as continuing to provide attractive investment returns, particular within the Lifestyle Parks segment where there are opportunities for demand growth as the benefits of this affordable and financially flexible model are communicated to a growing pool of potential residents. Simon Owen, Chief Executive Officer, Ingenia Communities The healthcare sector outlook is expected to remain favourable for the foreseeable future, driven by continued population growth, an ageing population, medical treatment innovation and rising health related expenditure. Healthcare is a defensive investment sector with demand for healthcare services linked to the above factors and less so to the performance of the broader economy. Simone Newman, Head of Group Marketing and Distribution, Generation Healthcare

20 20 A-REIT 2014 SURVEY Increased IPO and M&A activity We anticipate that commercial capital values will remain strong with significant investment demand from offshore and domestic institutions keeping yields low. Tenancy demand is likely to improve, but it is still below historic levels and vacancy rates in the office sector are set to remain high. A-REITs offer attractive risk adjusted yields with growth and are generally well capitalised. As a result, strong demand for A-REIT equity (offering yield) will lead to new IPOs and a lack of direct market purchase opportunities will likely result in further M&A activity. Dion Andrews, Chief Financial Officer, Growthpoint CHALLENGES FACING THE SECTOR The quality of management decision making Market participants not maintaining their discipline in terms of both pricing and risk is a concern - those signs are starting to emerge. Andrew Wilkinson, Managing Director, ALE Property Group Competition for acquisitions and maintaining balance between returns and growth Ingenia is well placed to continue to grow and deliver investment returns. Challenges include: Increasing competition for acquisitions in the Lifestyle Parks sector; Successfully delivering on development sales targets; Educating some individual markets on the benefits of Lifestyle Parks as a new and affordable option for seniors living; Providing homes quickly enough to meet demand in key developments such as Ettalong Beach Holiday Village; Continuing to strike the right balance between capital returns and reinvestment in growth Simon Owen, Chief Executive Officer, Ingenia Communities

21 A-REIT 2014 SURVEY 21 The transition from the resources boom As the Australian economy continues to transition from the recent resources boom,the ability to avoid a recession is a key challenge for not only the A-REIT sector but for the broader economy. A rebound in business confidence and sentiment remain the key drivers. Laurence Parisi, Fund Manager, Industria REIT Broader economic issues will also be potentially challenging including the continued slowdown in the resources sector, low growth in Australia and elsewhere and a reduction in quantitative easing, particularly in the USA. All of these matters will impact on the Australian economy which will in turn impact on the real estate sector. Dion Andrews, Chief Financial Officer, Growthpoint Meeting the changing needs and demands of tenants Weakened tenant demand and continued new supply will present a number of leasing and re-leasing challenges particularly in the office sector and for older buildings which are no longer in highly sought after areas, have older improvements and/or are not able to adjust to new tenant requirements such as changed floor plate requirements or higher sustainability measures. Dion Andrews, Chief Financial Officer, Growthpoint Meeting rising demand while managing the cost pressures that continue to run significantly ahead of inflation and rapid technological changes are key challenges that our tenants and the sector in general face going forward. Working closely with our tenants across our portfolio to adapt and grow continues to be the focus. Simone Newman, Head of Group Marketing and Distribution, Generation Healthcare

22 22 A-REIT 2014 SURVEY SECTOR CHALLENGES IN FY15 From our discussions with senior executives of top performing A-REITs, we have identified some of the key challenges facing the sector over the next 12 months. ECONOMIC ISSUES The broader economic environment will shape much of the A-REIT sector s direction over the short- to medium-term. As the Australian economy transitions through the slowdown of the resources sector, possible easing of growth in Australia, together with share market dynamics both domestically and internationally, will present yield and asset growth challenges to A-REITs and possible threats to share pricing. GROWTH AND YIELD PRESSURE A-REITs have returned to a position of stability offering solid yields, conservative gearing, capital growth and low volatility. As investors become increasingly re-attracted to the sector, pressure is likely to build on managers to continue yield and asset growth. Over FY14, much of the growth for top performing A-REITs has been derived from acquisitions, lower debt costs, and positive asset valuations. Managers will continue to face competition for new acquisitions and will need to find an equilibrium between returns for shareholders and increasing investment in growth. RISK TAKING As growth and yield pressure rises for managers, a key question going forward is whether the sector will see increased risk-taking creep back into A-REIT strategy. This year saw a slight increase in gearing levels. It remains to be seen whether gearing will increase further in the face of debt being readily available at attractive pricing. The ability of A-REITs to continue to attract funds via capital raising will also be key to both future growth from acquisition and the level of leverage going forward.

23 A-REIT 2014 SURVEY 23 METHOD OF RANKING A total score of 100 (maximum) has been used, comprising 65 points for financial criteria and 35 points for investment criteria. In determining the final rankings the scores of each component were aggregated (not the rankings) such that relative performances within each criterion are maintained in determining the overall rankings. FINANCIAL CRITERIA The tests used in the financial criteria and assigned weightings are as follows. FINANCIAL CRITERIA 2013 SCORE Operating Cash Yield (on net assets) 15 Distribution Yield 10 Tax Deferred Distribution Percentage 10 Movement in NTA 15 Premium/Discount to NTA 15 PERFECT SCORE 65 INVESTMENT CRITERIA The tests used in the investment criteria and assigned weightings are as follows. INVESTMENT CRITERIA 2013 SCORE Total Return (One Year) 20 Total Return (Three Year) 10 Volume of Trading on ASX 5 PERFECT SCORE 35 In each of the above tests the scores were scaled so that the top performer in each test received the maximum available score for that criterion. Ranks were then assigned based on the scaled scores. MEDIAN RESULTS For an entity which could not be scored equitably in a particular criteria, due to its recent listing, the unique nature of an entity s activities, or lack of available information for the relevant criteria, that entity was allocated a median result for the purpose of ranking. This ranking was then weighted and scored as usual.

24 bdo.com.au NEW SOUTH WALES NORTHERN TERRITORY QUEENSLAND SOUTH AUSTRALIA TASMANIA VICTORIA WESTERN AUSTRALIA Distinctively different it s how we see you AUDIT TAX ADVISORY This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the BDO member firms in Australia to discuss these matters in the context of your particular circumstances. BDO (Australia) Ltd and each BDO member firm in Australia, their partners and/or directors, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it. BDO refers to one or more of the independent member firms of BDO International Ltd, a UK company limited by guarantee. Each BDO member firm in Australia is a separate legal entity and has no liability for another entity s acts and omissions. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees. BDO is the brand name for the BDO network and for each of the BDO member firms BDO (Australia) Ltd. All rights reserved. CF