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1 Challenger Diversified Property Group Half-year update 31 December 2013 Challenger Diversified Property Group comprising: Challenger Diversified Property Trust 1 (ARSN ) Challenger Diversified Property Trust 2 (ARSN ) Responsible Entity Challenger Listed Investments Limited (ABN ) (AFSL )

2 Table of contents Vision and strategy 1 Key points 2 Fund Manager s report 4 Portfolio summary 6 Unitholder information 8 Directory IBC Important notice The material in this Half-year update 31 December 2013 ( Update ) is provided by Challenger Listed Investments Limited (ABN ) (AFSL ) ( Challenger or CLIL ), as Responsible Entity of the Challenger Diversified Property Trust 1 (ARSN ) and the Challenger Diversified Property Trust 2 (ARSN ) which together comprise the Challenger Diversified Property Group ( Group ). The material is general background information about the Group s activities and is current at the date of this Update. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These individual circumstances should be considered with professional advice when deciding if an investment is appropriate. Any investment in CDI is subject to investment risk and other risks, including possible loss of income and principal invested. None of CLIL, Challenger Management Services Limited (ABN )(AFSL )( CMSL ), Challenger Limited (ABN ) or any other member of the Challenger Limited group of companies gives any guarantee or assurance as to the performance of CDI or the repayment of capital. Nothing in this presentation should be considered a solicitation, offer or invitation to buy, subscribe or sell any, or a recommendation of, financial products. Any forward looking statements included in this Update involve subjective judgment and analysis and are subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to, CLIL. In particular, they speak only as of the date of these materials, they assume the success of CDI s business strategies, and they are subject to significant regulatory, business, competitive and economic uncertainties and risks. Actual future events may vary materially from forward looking statements and assumptions on which those statements are based. Given these uncertainties, recipients are cautioned not to place undue reliance on such forward looking statements. Any past performance information provided in this Update is not a reliable indication of future performance. Further information including the 31 December 2013 half-year financial report and Results presentation is available on CDI s website

3 Vision and strategy Challenger Diversified Property Group (ASX:CDI) Our vision is to be a member of the ASX 200 Property Index and the preferred mid-cap Australian diversified REIT. We will continue to focus on our three pronged strategy of enhancing the composition of the portfolio, improving our leasing metrics and providing active capital management. We have a strong track record on executing each of these objectives. Challenger Diversified Property Group Half-year update 31 December

4 Key points Results for the six months ended 31 December 2013 (1H14) Net profit after tax $15.2m Normalised earnings per unit (EPU) 1 up 4% to 11.1 cents ($23.9m) FY14 Normalised EPU guidance of 22.3 cents 2 8.9% 3 yield Distribution per unit (DPU) up 7% to 9.2 cents ($19.7m) FY14 DPU guidance of 18.5 cents 7.4% 3 yield 1 Normalised EPU calculated as normalised earnings divided by weighted average units on issue. Refer to 1H14 results presentation (page 30) for detailed reconciliation between net profit after tax (statutory) and normalised earnings available on our website 2 Normalised EPU guidance makes no allowance for a performance fee or asset sales/acquisitions. 3 Based on 31 January 2014 closing price of $ Source: IRESS S&P ASX 200 Property Accumulation Index. 2 Challenger Diversified Property Group Half-year update 31 December 2013

5 Performance comparison since inception October 2006 index = Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 CDI Accum Index S&P/ASX 200 Prop Accum Index 9% outperformance for 1H14 against benchmark 4 52% outperformance since inception against benchmark 4 Net tangible assets per unit $2.71 trading at a 8% 3 discount Challenger Diversified Property Group Half-year update 31 December

6 Fund Manager s report On 4 February 2014 Challenger Diversified Property Group (ASX: CDI) announced its financial results for the six months ending 31 December For some time we have had a consistent strategy and its successful execution has enabled us to grow earnings and distributions for our unitholders. For the six months, CDI generated a normalised profit of $23.9 million, with normalised earnings per unit increasing by 4% to 11.1 cents per unit. Statutory net profit after tax, which includes the impact of changes to property valuations and other adjustments, decreased by $5.6 million to $15.2 million. Your distribution for the six months was 9.2 cents per unit, which was up 7% from last year and includes 2.4 cents per unit of tax deferred income. This distribution represents a normalised profit payout ratio of 82% and was paid on 28 February CDI s closing unit price at 31 December 2013 was $2.50 and net tangible assets per unit was $2.71 per unit. I am pleased to report that CDI has continued to outperformed its benchmark, the S&P ASX 200 Property Accumulation Index. CDI outperformed by 9% in the last six months and has outperformed by 52% since the fund was listed in The value of the property portfolio at 31 December 2013 was $867 million and represents a diversified and environmentally sustainable portfolio. We continue to reposition the portfolio with the objective of enhancing CDI s future earnings, which includes taking an active approach to leasing. Our focus on actively managing lease expiries provides sustainable rental income growth and is fundamental to reducing future vacancies. The weighted average lease expiry of the portfolio is 4.6 years, which is similar to prior years. CDI is committed to improving the environmental sustainability of its properties. The portfolio summary provides details of the energy rating of each rateable building, using the NABERS energy rating scale. The average NABERS energy rating across the entire office portfolio is 3.7 stars, and we are committed to lifting this. 4 Challenger Diversified Property Group Half-year update 31 December 2013

7 I am pleased to reaffirm our normalised earnings and distribution per unit guidance for the 2014 full year. Normalised earnings per unit of 22.3 cents and a distribution per unit of 18.5 cents is expected, both representing a 4% increase on the 2013 year. For further information on CDI or the result for the six months, visit our website On behalf of the CDI team, thank you for your ongoing support. I look forward to updating you on CDI s progress and achievements throughout the year. Yours sincerely Trevor Hardie Fund Manager Challenger Diversified Property Group Half-year update 31 December

8 Portfolio summary Property Office portfolio Lettable area (sqm) Occupancy at 31 Dec 2013 (by income) (%) Weighted average lease expiry (WALE) (by income) (years) Current valuation ($m) Total/average 169, Retail portfolio Total/average 44, Industrial portfolio Total/average 95, Hi tech office portfolio Total/average 20, Australian portfolio total/average 328, French portfolio Total/average 42, Investment portfolio total/average 371, Development portfolio 6.8 Numbers may not add due to rounding. 6 Challenger Diversified Property Group Half-year update 31 December 2013

9 Diversified investment portfolio Sector diversification (by value) 18% 4% 59% Geographic diversification (by value) 7% 3% 3%2% 25% 5% 19% 30% 25% Office Retail Industrial Hi-tech office NSW ACT VIC QLD SA WA TAS France Tenant diversification by type (by gross income) 29% 33% Tenant credit rating 1 (by gross income) 8% 25% 3% 41% 14% Government Listed Multinational Private 35% AAA AA+ A BBB+ BBB BB+ B NR 12% 1 Tenant credit rating based on external agency ratings and Challenger internal ratings using rating agency methodology. Challenger Diversified Property Group Half-year update 31 December

10 Unitholder information ASX listing Challenger Diversified Property Group (CDI) is listed on the Australian Securities Exchange (ASX). CDI s units trade under the ASX code CDI. Unit prices are published daily in major Australian metropolitan newspapers, and are also accessible on the CDI and ASX website. The CDI website The CDI website ( contains important information about CDI, including unit prices, market announcements, annual reports and a summary of CDI s property portfolio. Unitholder enquiries If you have queries relating to your unit holding or wish to provide a change of address, Tax File Number, instructions for payment of distributions or annual report elections, please contact the Unit Registry, Link Market Services Limited, using the contact details located on the inside back cover. Alternatively, visit the Link Investor Service Centre at where you can access information about your unit holding and update your holding details online. If you have any questions relating to the management of CDI, please contact Challenger on , or send an to cdi@challenger.com.au. Distributions CDI pays distributions six monthly for the periods ending 31 December and 30 June. Distribution payments can be paid by: direct credit to a nominated Australian financial institution account; or a cheque mailed to your registered unitholding address. An Annual Taxation Statement is sent to you in August each year. This statement includes important taxation information and should be retained by you to assist in completing your tax return. 8 Challenger Diversified Property Group Half-year update 31 December 2013

11 Directory Challenger Diversified Property Group Comprising: Challenger Diversified Property Trust 1 ARSN Challenger Diversified Property Trust 2 ARSN Australian Securities Exchange (ASX) code CDI Responsible Entity Challenger Listed Investments Limited ABN AFSL Directors of Responsible Entity Michael Cole (Chair) Geoff McWilliam Ian Moore Brendan O Connor Rob Woods Phil Peters (as alternate director for Rob Woods) Manager Challenger Management Services Limited ABN Address Level Pitt Street Sydney NSW 2000 Telephone: Facsimile: cdi@challenger.com.au Website: Registry Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Telephone: Telephone (outside Australia): Facsimile: Company Secretary Michael Vardanega Andrew Brown

12 16371/0214 Level Pitt Street Sydney NSW 2000 Telephone Facsimile