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1 GENERATION HEALTHCARE REIT (ASX CODE: GHC) 2013 QUEENSLAND CONFERENCE 9 OCTOBER 2013 generationreit.com.au

2 AGENDA Who/what is Generation Healthcare The Healthcare Sector A Snap shot Why Healthcare property Generation Healthcare REIT overview Organic growth pipeline Key attributes for investors 2

3 WHO/WHAT IS GENERATION HEALTHCARE Australia s sole ASX listed healthcare real estate investment trust Portfolio that includes: hospitals medical centres laboratories other purpose built healthcare properties 3

4 MANDATE To invest into high quality healthcare property to deliver attractive risk adjusted returns for our investors 4

5 AUSTRALIA S HEALTH CARE SECTOR 5

6 THE HEALTH SECTOR A SNAP SHOT SCALE 9.3% 1 of GDP at $130.3 billion RATE OF GROWTH Expenditure growing at 5.3% p.a. on a compounding basis over the past 10 years WORKFORCE Now the largest employer in Australia at 11.4% of the workforce UNIQUE DEMAND DRIVERS Ageing population Growing population Technology advances Consumer expectations = Defensive 1 Health expenditure Australia released 26 September Source: Australian Institute of Health and Welfare. 6

7 We are living longer 7

8 AUSTRALIA S GROWING AND AGING POPULATION Over 65 s require 4X health $ Over 85 s require 9X health $ Source: ABS 8

9 WHY HEALTHCARE PROPERTY 9

10 WHY HEALTHCARE PROPERTY Healthcare industry stands to benefit from longterm industry demand drivers Healthcare is largely a mandatory spend not discretionary Healthcare real estate assets are well placed to capture long term growth and value creation taking place within the broader healthcare industry Low levels of institutional ownership of healthcare property provides opportunity Sector-leading historical risk-adjusted returns over the last six years measured by independent research house IPD High barriers to entry Regulatory environment stable and politically sensitive to material changes Largely purpose built facilities 10

11 SUBSECTOR VIEW Sub Sector Indicative Yield 1. Hospitals 7.75% % 2. Residential Aged Care 9.0%+ 3. Primary Care 8.0% - 9.0% 4. Mental Health 8.5% % 5. Health Support Services 7.5% - 9.0% 11

12 AUSTRALIAN HEALTHCARE PROPERTY PERFORMANCE Independent research house IPD launched a healthcare property index in March participants, circa $1 billon of property over a 6 year duration Healthcare property sector delivered: the highest return highest risk adjusted return lowest risk lowest downside risk The healthcare property sector has the lowest correlation with other property sectors making it a desirable addition to a diversified property portfolio Sector Annual return Return volatility Sharpe ratio Downside risk Healthcare 10.9% 1.9% % Hotel 9.9% 5.2% % Office 7.3% 4.6% % Retail 7.2% 2.8% % Industrial 6.0% 4.1% % Source: IPD - for the 6 years ending December

13 AVERAGE ANNUAL RETURN AUSTRALIAN HEALTHCARE PROPERTY PERFORMANCE Healthcare property delivers lowest risk and highest return 12% 10% 8% 6% Risk-reward trade-off for property seven year sample period to June 2013 Healthcare Composite Retail Industrial Hotel Prime Office Office 4% 2% 0% 0% 2% 4% 6% 8% 10% 12% Source: IPD - for the 6.5 years ending June 2013 ANNUAL VOLATILITY 13

14 U.S. HEALTHCARE REIT PERFORMANCE U.S. healthcare REITs have performed strongly, reflecting underlying strength of asset class Total cumulative return by US REIT sector, to 31 Dec Sector Since year 5-year 3-year 1-year Self-storage 1,648% 473% 139% 110% 20% Healthcare 1,024% 399% 79% 63% 20% Residential 735% 249% 77% 80% 7% Retail 731% 212% 25% 90% 27% Industrial/ Office 579% 97% -12% 37% 19% Diversified 373% 162% 20% 43% 12% REIT subindices relative returns 500 All REITs Office 450 Retail Healthcare Industrial Diversified Mortgage 199% 21% 23% 43% 20% Lodging/ Resorts 113% 77% -7% 38% 13% 50 0 Sep-01 Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13 AVERAGE 675% 211% 43% 63% 17% Source: NAREIT Source: Bloomberg, as at 13 September

15 GENERATION HEALTHCARE REIT 15

16 OVERVIEW OF GHC GHC was listed on the ASX in May 2006 and has a current market capitalisation of circa $113 million Substantial 1, 3 and 5-year outperformance of ASX300 A-REIT index underpinned by distributions High quality portfolio of 10 properties with strong organic growth potential Long WALE at 11.9 years and high occupancy at 99.1% Exposure to a defensive sector with unique demand profile Attractive risk-adjusted income yield and capital growth potential Unit Register circa 2,700 investors, 45% / 55 % institutional to retail with strong institutional interest Total return performance since IPO Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Key metrics Total assets 1 $236m Gearing (look through) % EV $225m Market capitalisation $113m Average daily turnover (last 6 months) 69,000 FY14(f) DPU yield (forecast $ DPU) 6.96% 2 Debt maturity 1 WALE 1 GHC (all distributions reinvested at DRP price) ASX300 AREIT Accumulation Index 2.5 years 11.9 years Occupancy % Source: Management information, IRESS, Bloomberg ASX, as at 24 September As at 30 June Assumed unit price of $

17 GHC has provided unitholders with high quality returns 17

18 UNITHOLDER RETURNS GHC FY13 investor returns FY13 total unitholder return of 37.2% Outperformed S&P/ASX300 Property Accumulation Index on 1, 3 and 5 years bases GHC total unitholder return by time period (p.a.) GHC cumulative total unitholder return since IPO 40% 35% 30% 25% 20% 15% 10% 5% 0% GHC 37% ASX300 AREIT Accumulation Index 24% 21% 19% 13% 0% 1 year 3 years 5 years GHC (all distributions reinvested at DRP price) ASX300 AREIT Accumulation Index 0 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 18

19 HIGH QUALITY PORTFOLIO A high quality portfolio of 10 properties located across 3 eastern seaboard States Portfolio geographic diversity Net Income by state Portfolio tenant diversity Top 10 tenants QLD 43.94% NSW 9.15% VIC 46.90% 30 June 2013 Epworth Foundation $4.34m 22.1% Australian Red Cross Blood Service $2.81m 14.3% Baulderstone Pty Ltd $1.80m 9.2% Pulse Health Limited $1.80m 9.2% Healthscope Ltd $1.70m 8.7% Queensland University of Technology $0.76m 3.8% Melbourne Health $0.55m 2.8% Sonic Healthcare Limited $0.45m 2.3% Primary Healthcare Ltd $0.32m 1.6% Frankston Private Day Surgery $0.32m 1.6% Total $14.86m 75.6% % 19

20 MANAGEMENT Generation Healthcare REIT (GHC) is managed by an external manager owned 67.5% by APN Property Group Limited and 32.5% by senior management post August 2011 sale of management rights by ING Real Estate APN is a Melbourne based ASX-listed property fund manager with >$1.73bn FUM across 18 funds as at 30 June 2013 APN and related entities have a ~17% stake providing strong alignment Miles Wentworth Chief Executive Officer 18 years experience in healthcare property sector in Australia & NZ Strong background in accounting and finance Depth of experience in healthcare property funds management with a focus on strategy, capital management, finance and investor relations Formerly CEO of NZ listed Vital Healthcare Property Trust (VHP) Chris Adams Director 19 years experience in healthcare property sector Significant expertise in healthcare property acquisitions, transaction structuring, large scale hospital developments and portfolio management Previously Founding Director of a specialist healthcare advisory group with key advisory roles to a number of leading healthcare sector participants Also established Calan Healthcare (now Vital Healthcare) presence in Australia in 1999 including the purchase of a number of healthcare properties and businesses 20

21 VALUE ADD MANAGER THROUGH Active asset management Development management and project structuring Proactive debt management and negotiation Value buying / strategic positioning Portfolio risk minimisation and value maximisation Active sourcing of attractive new acquisition opportunities 21

22 ORGANIC GROWTH PIPELINE Casey Strategic Development Site in one Victoria s fastest and largest LGA s Development site acquired in February 2013 A 12,200 sqm (1.2 hectare) site, strategically located directly opposite the Casey Public Hospital, providing a significant opportunity to develop a scale co-located medical campus over time Public hospital forecast to grow materially A three stage development to include: 1. a specialist / cancer focussed medical centre, 2. a significant private hospital 3. increased beds / theatres / consulting suites Development envelope in excess of $150 million 3.1% 22

23 ORGANIC GROWTH PIPELINE Casey Development Site Chisholm Institute Casey Public Hospital Stage 1 Specialist Centre Feasibility work for Stage 2 being a private hospital is underway 23

24 RECENT ACQUISITIONS Casey Specialist Centre First stage (of three potential stages) is a 3,400 sqm (NLA) circa $20 million specialist consulting building expected to start before the end of the 2013 calendar year 3.1% 24

25 ORGANIC GROWTH PIPELINE Frankston Private proposed brownfield expansion Proposed brownfield expansion to Frankston Private to provide 96 inpatient beds at an estimated project cost of circa $35 million (minimum 50% being for GHC) Adjoining land for the expansion is secured by way of an option A planning permit was approved at the July 2013 Frankston City Council meeting Additional strategic land holding of 2,775sqm adjacent to the existing Frankston Private was acquired by the joint venture in June 2013 to enhance the development options over the medium term Frankston Private Proposed Extension, VIC 25

26 ORGANIC GROWTH PIPELINE Frankston Private proposed brownfield expansion Cont. Frankston Public 150m away Frankston Private Contolled 1 Acquired 21 June 2013 Artists impression of proposed expansion 1 One of the Fund s joint venture partners owns the site with the joint venture having a 5 year option over it 26

27 FY14 GUIDANCE Forecast Underlying Net Operating Income Per Unit Full year forecast to 30 June 2014 of at least 8.62 cpu 1 Forecast Distribution Per Unit Full year forecast of 7.86 cpu, an increase of 7% on FY13 Distribution to be allocated evenly between the first and second half Forecast payout ratio of 91% 1 Excludes any performance fees to the manager that may become due and payable 27

28 IN SUMMARY... KEY ATTRIBUTES FOR INVESTORS 1. Defensive sector = defensive earnings 2. Existing high quality portfolio and tenants 3. Long weighted average lease term and high occupancy 4. Attractive (tax advantaged) income yield 5. Experienced management with proven track record 6. Strong growth potential via organic growth, acquisition and pre-committed new builds ASX ticker code: GHC 28

29 DISCLAIMER This presentation was prepared by APN Funds Management Limited (ABN ) (the "Responsible Entity") in respect of Generation Healthcare REIT (ARSN ) ( GHC"). Information contained in this presentation is current as at 9 October This presentation is provided for information purposes only and has been prepared without taking account of any particular reader s financial situation, objectives or needs. Nothing contained in this presentation constitutes investment, legal, tax or other advice. Accordingly, readers should, before acting on any information in this presentation, consider its appropriateness, having regard to their objectives, financial situation and needs, and seek the assistance of their financial or other licensed professional adviser before making any investment decision. This presentation does not constitute an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, nor does it form the basis of any contract or commitment. Except as required by law, no representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information, opinions and conclusions, or as to the reasonableness of any assumption, contained in this presentation. By reading this presentation and to the extent permitted by law, the reader releases the Responsible Entity and its affiliates, and any of their respective directors, officers, employees, representatives or advisers from any liability (including, without limitation, in respect of direct, indirect or consequential loss or damage or loss or damage arising by negligence) arising in relation to any reader relying on anything contained in or omitted from this presentation. The forward looking statements included in this presentation involve subjective judgment and analysis and are subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to, the Responsible Entity. In particular, they speak only as of the date of these materials, they assume the success of GHC's business strategies, and they are subject to significant regulatory, business, competitive and economic uncertainties and risks. Actual future events may vary materially from forward looking statements and the assumptions on which those statements are based. Given these uncertainties, readers are cautioned not to place reliance on such forward looking statements. The Responsible Entity, or persons associated with it, may have an interest in the securities mentioned in this presentation, and may earn fees as a result of transactions described in this presentation or transactions in securities in GHC. 29