Q4 FY14. A-REIT HIGHLIGHTS A snapshot of Australian Real Estate Investment Trusts transaction activity

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1 Q4 FY A-REIT HIGHLIGHTS A snapshot of Australian Real Estate Investment Trusts transaction activity

2 A-REIT HIGHLIGHTS 1 A snapshot of Australian Real Estate Investment Trusts transaction activity The Australian Real Estate Investment Trust (A-REIT) sector has experienced a strong rebound since the GFC, characterised by the improved strength of the A-REITs balance sheets together with favourable market fundamentals. With this, their focus has shifted to enhancing returns through strategic acquisitions, asset management and well-timed divestments. The confidence in the sector is best highlighted by the six initial public offerings (IPOs) undertaken during FY, raising a total of $1.6 billion. In preparing the A-REIT Highlights Snapshot we have sought to research and analyse capital raisings, mergers and acquisitions (M&A), and IPOs in the sector to provide a succinct overview of the strategic activity of A-REITs over the last quarter. CAPITAL RAISING Capital raising activity has been relatively quiet in Q4. It has, however, been characterised by a focus on funding acquisitions rather than reducing debt levels. As more acquisition opportunities develop, and market conditions further improve, we should see capital raising activity increase in the coming quarters. M&A Q4 A-REIT activity was particularly driven by mergers and acquisitions. The low interest rate environment encouraged property acquisitions that could maintain conservative gearing levels without the need for extensive further capital raisings. In terms of corporate activity, the Australand takeover and Westfield Group restructure represent high profile sector transactions. IPOs The A-REIT IPO market was comparatively subdued in Q4 which was expected following five listings in Q2, raising a total of approximately $1.4 billion. A-REITs are still perceived as an attractive investment opportunity and with favourable market conditions we can expect to see further listings in future quarters.

3 CAPITAL RAISINGS 2 A total value of $196 million was raised by A-REITs in Q4. TOTAL CAPITAL RAISING ($ MILLION) Q4-213 Q1-2 Q2-2 Q3-2 Q4-2 1,4 1,2 1, ($ MILLION) Q4 saw the lowest amount of equity raised by value and the least number of transactions over the last year. The total capital raised was 2% less then the corresponding previous period. Typically, capital raisings are undertaken to improve balance sheet gearing metrics or fund acquisitions. The decreased level of capital raising activity in this quarter suggests there are either less acquisition opportunities, or A-REITs are comfortable with their balance sheet position such that acquisitions have a higher debt funding component. NO. OF TRANSACTIONS GENERATION HEALTHCARE REIT In May 2, Generation Healthcare REIT raised $5.3 million at an offer price of $1.2 per unit, through an entitlement offer and an institutional placement. The funds raised were to be used to fund the acquisition of Queensland Eye Hospital at 55 Little Edward Street, Brisbane, the refurbishment and expansion of Epworth Freemasons Private Hospital, and associated transaction costs. 2 AVERAGE ($ MILLION)! Q4-213 Q1-2 Q2-2 Q3-2 Q4-2 QUARTER 4 HIGHLIGHTS GROWTHPOINT PROPERTIES AUSTRALIA In June 2, Growthpoint Properties Australia (Growthpoint) raised $125 million through a 1 for 9.37 rights issue of 52 million stapled securities at an issue price of $2.4. This was used to partly fund the acquisition of the New South Wales Police Headquarters in Parramatta ($241.1 million). Following the raising and acquisition, gearing is forecast to be 43.4% which is within the fund s 4%-45% target gearing ratio. Growthpoint s rights offer in Q4 followed a $15 million raise in Q2 through an institutional placement ($5 million) and a 1 for 1.5 rights offer at $2.45 per share ($1 million). Proceeds from these capital raisings were predominantly used to fund progress payments for a $6.2 million portfolio of three industrial properties, fund the acquisition of industrial property in Victoria for $23.2 million, and reduce debt levels ($45.9 million). Q4 was especially quiet when compared to Q4 13 which saw 11 transactions totalling $1.3 billion. We note however that Quarter 4 in 213 was characterised by two unusually large placements by Mirvac Group and Stockland each raising $4 million.

4 MERGERS & ACQUISITIONS 3 Q4 saw 21 buy-side and 1 sell-side transactions. TOTAL TRANSACTION VALUE ($ BILLION) Q4-213 Q1-2 A-REIT ACQUIRERS Q2-2 A-REIT AS SELLERS Q3-2 Q4-2 6, 5, 4, 3, 2, 1, Q4 saw A-REITs involved in 21 buy-side and 1 sell-side transactions, totalling $2.3 billion and $1.5 billion respectively. In some transactions, different A-REITs were both acquirers and vendors. In terms of asset acquisitions, A-REITs remain net buyers of property which suggests A-REITs see upside to property valuations. The level of corporate transaction activity continues, albeit at a slow pace compared to pre-gfc levels. 3 NO. OF TRANSACTIONS 15 GTP GROUP The GPT Group, together with the funds it manages, were involved in seven transactions in Q4. In April 2, the GPT Wholesale Office Fund exercised a call option to acquire office properties at 75 Collins Street (1%), 2 Southbank Blvd, (5%) 1 Shelley Street (1%), 655 Collins Street (1%) in Melbourne for approximately $68 million from Dexus. This follows the completion of Dexus CPA acquisition noted opposite. AVERAGE ($ MILLION) A-REIT ACQUIRERS A-REIT AS SELLERS Q4-213 Q1-2 Q2-2 Q3-2 Q4-2 On a yearly analysis, Q4 performed on trend. While Q3 was exceptionally strong in terms of transaction value it was driven by the $3.5 billion acquisition of the Commonwealth Property Office (CPA) by Dexus Property Group and Canada Pension Plan Investment Board. The hostile takeover of CPA was completed in March 2. We note that if not for this transaction, Q3 would have only seen seven transactions totalling $1.3 billion bringing it in line with the other quarters. QUARTER 4 HIGHLIGHTS The GPT Wholesale Shopping Centre Fund also acquired 5% of Northland Shopping centre for $496 million. The GPT Group acquired two further assets in Q4, being Vantage Complex, and Metroplex at $63 million and $36 million respectively. The Vantage complex will be used as a seed asset for establishing GPT s new metropolitan office fund. The Optus Centre in Fortitude Valley, Brisbane which was acquired for $11 million in November 213 will be the other seed asset. GROWTHPOINT As noted, Growthpoint acquired the New South Wales Police Headquarters in Parramatta from Australand. The purchase price of $241.1 million represented a FY15 yield of 7.5% and the property is fully leased to the NSW State Government. The transaction represents investment into a growing Western Sydney region supported by forecast population growth and significant government commitments to infrastructure projects.

5 IPOs IPO activity in the A-REIT sector experienced a strong surge in activity in FY 4 Quarter Company Name Date Listed Sector Q4 Westfield Corporation* 24/6/2 Retail Q4 Scentre Group* 24/6/2 Retail Q4 36 Capital Office Fund 23/4/2 Office Q3 CFX Co Limited* 12/3/2 Retail Q3 Rural Funds Group 11/2/2 Specialised Q2 National Storage REIT 19/12/213 Specialised Q2 GDI Property Group Limited 17/12/213 Office % of IPOs by Sector Favourable market conditions, and improvements in the sector s pricing metrics, has made the listing of new A-REITs more attractive. This trend is likely to continue into FY15. Q2 Hotel Property Investments 1/12/213 Specialised Q2 Industria REIT 3/12/213 Industrial Q2 Australian Industrial REIT 21/1/213 Industrial Q4 13 Arena REIT 13/6/213 Healthcare *Compliance listing NUMBER OF IPOs Q4 13 Q1 Q2 Q3 Q4 Office Specialised Retail Healthcare Industrial QUARTER 4 HIGHLIGHTS 36 CAPITAL OFFICE FUND In April 2, 36 Capital Office Fund listed on the ASX, raising approximately $155 million at an issue price of $2 per share. Proceeds from the issue were used to settle two acquisitions (154 Melbourne Street, South Brisbane, and Kingsford Smith Drive, Brisbane) for $73.5 million and $62 million respectively. Gearing following the raising and transaction was 36.5%, within the Fund s targeted gearing range of 3% to 45%. 36 Capital Office Fund is a listed pure office REIT focused on Australian, stable rent collecting suburban A-grade and CBD B-grade office markets. WESTFIELD RETAIL TRUST Q4 saw one new initial public offering and the compliance listing related to the restructuring of Westfield Retail Trust on the ASX. In June 2, Westfield Retail Trust (WRT) merged with a part of Westfield Group (WDC) to form Scentre Group (SCG) and Westfield Corp (WFD). Westfield Group separated its Australian and New Zealand businesses with its international business and merged those with WRT. SCG and WFD listed with a market capitalisation of approximately $17 billion and $ billion. $155 million was raised in April 2 when 36 Capital Office Fund was listed on the ASX

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