Accelerating success.

Transcription

1 I N V E S T M E N T R E V I E W / 1 5 O F F I C E Accelerating success.

2 C O N T E N T S I N T R O D U C T I O N 04 KEY FINDINGS 06 OFFICE DEMAND ENVIRONMENT 08 YEAR IN REVIEW 12 TRANSACTION TRENDS 16 MAJOR TRANSACTION OVERVIEW 18 CASE STUDIES 18 FOSUN 19 MIRVAC PORTFOLIO 20 AQUALAND CLARENCE STREET 22 RACQ 23 2 RIVERSIDE QUAY 24 OFFICE SECTOR OUTLOOK 26 VALUATION OUTLOOK 28 INVESTMENT OUTLOOK 29 TRANSACTION LIST 34 YOUR OFFICE INVESTMENT AND VALUATION SERVICES SPECIALISTS NAB, 700 Bourke Street, Melbourne: Sold by Colliers International, has been voted Australia's Best Workplace in the 2015 BOSSA Survey Over the last financial year, we have witnessed the largest volumes of office investment in Australian history. Demand for quality office investments by both local and offshore groups continues to drive the market, with more than $15 billion worth of office stock changing hands over the year to June 2015 an impressive increase of $925 million on the previous financial year. The biggest deal, the sale of 62.5 per cent of T1 at Barangaroo to Qatar Authority (QIA) and Australian Prime Property Fund (APPF) Commercial for a total of $875 million in contributed equity, occurred in the final days of the financial year. This was QIA's first investment in the Australian property market and is just one of a number of entries into our market by global sovereign wealth funds. The fully leased, on completion value of the building will be circa $2 billion. China Corporation (CIC) were the successful bidders for what became the biggest sale globally (year to date) when it purchased the Investa Property Trust (IPT) in late July 2015 for circa $2.5 billion. The sale of this portfolio represents a new benchmark for prime grade yields in Melbourne and Sydney. The sale reportedly transacted at 5.1 per cent initial yield. Yields across all office grades are under pressure. The Investa sale is further evidence of Premium Grade property achieving sub 5.5 per cent yields, particularly at the core end of the market in the Sydney. The Barangaroo sale, along with deals at 161 Castlereagh Street (5.7 per cent) and 52 Martin Place (5.2 per cent), further support this. Tenant demand in the key markets of Sydney and Melbourne is now firmly in recovery mode, providing further confidence for the investment market. A sustained low interest rate environment and the falling Australian dollar are also providing more encouragement to both local investors and offshore groups. The biggest challenge for capital markets will be on the supply side providing enough investment stock to satisfy this unprecedented demand. We trust you find the inaugural Colliers International Australian Office Review insightful. JOHN MARASCO MANAGING DIRECTOR CAPITAL MARKETS AND INVESTMENT SERVICES ANNEKE THOMPSON ASSOCIATE DIRECTOR RESEARCH /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 3

3 KEY FINDINGS YEAR IN REVIEW s volumes of office investments greater than $20 million in the FYE 2015 exceeded FYE 2014 volumes, and another record year was achieved. The Australian market recorded $15.0 billion worth of investment sales, versus $14.1 billion in FYE 2014; The largest transaction of 2014/15 was the 62.5 per cent sale of T1 at Barangaroo to Qatar Authority and Australian Prime Property Fund (APPF) Commercial for $875 million in contributed equity. The fully leased, on completion value of the building will be circa $2 billion; Colliers International recorded the highest volume of metro office market sales on record. Metro office market sales are also at their second highest proportion they have ever been, at 39 per cent of total office investment sales; Offshore purchasers were the most dominant purchaser group Australia wide, accounting for $6.89 billion worth of total office investment sales in the country, followed by local institutions, which purchased $6.0 billion worth of assets; Private offshore buyers dramatically increased their presence in the Australian market. In FYE 2014, they purchased $673 million worth of office property, and this increased to $1.81 billion in FYE Over 80 per cent these private offshore buyers were from China and Hong Kong. TRANSACTION TRENDS The biggest trend we will see over the course of the next year is these institutions buying out whole funds with (mostly offshore) capital partners, as well as participating in fund through arrangements with some of Australia's major developers; The influx of capital to the Australian property market looks set to continue unabated, with many local property groups forming partnerships with local super funds, private equity groups and offshore funds to create significant buying mandates. The best examples of capital partnering mandates are those that bid for Investa Property Trust; Although not a new trend in the Australian property scene, fund through developments will continue to become more and more sought after, as large local and offshore super funds, sovereign wealth funds and private equity funds search for the best office investments in an increasingly competitive environment. OUTLOOK The key difference in the current buying cycle is that a greater level of capital is being sourced from equity markets, compared with the debt-driven buying cycle that peaked in Average gearing levels for A-REITs sits at a comfortable 28.9 per cent, far below the peak of the pre-gfc market cycle, where average gearing levels were around 40 per cent, with some even leveraged above 60 per cent; The depth of demand in a globally low interest rate environment is seeing investment return metrics compress with a considerable rate of velocity. In this theme, Australian office return metrics are very much being compared on a global scale. Even on a fully effective income based yield comparison, Australian office markets still offer more attractive returns when compared to other major global office markets. OFFICE INVESTMENT VOLUMES BY CITY Sydney Melbourne Brisbane Adelaide Canberra Office Transactions 2013/ /15 % Change Number % Perth $ AUD $2.2 b $2.1 b $0.3 b $0.4 b $0.3 b $0.3 b $0.4 b $0.1 b $3.5 b $4.4 b RECORD INVESTMENT YEAR 2013/14 $14.10 BILLION 7% $7.3 b $7.7 b /15 $15.06 BILLION 179 Elizabeth Street, Sydney: Marketed by Colliers International on behalf of La Salle. NATIONAL OFFICE TRANSACTIONS ³$20 MILLION ³$10 MILLION 2010/ / / /14 $7.637 $9.302 $ $ In terms of current yield metrics for quality office assets in the major s of Sydney and Melbourne, we believe that a disconnect currently exists between valuation metrics and potential market pricing, with compression in the order of 50-75bp anticipated to be crystallised over H The results of the Investa (Morgan Stanley) IPT portfolio offering will go some way in providing the transactional evidence to support this. Offshore capital looking for investment opportunities in Australia will continue, more broadly, to be the underlying driver of demand and yield compression in our major eastern seaboard markets. However, while European, South Korean, American and Canadian pension funds are already active in our markets, we see the emergence of Chinese insurance companies into the Australian market as potentially increasing further the volume of capital looking for core and core plus assets. Total Value $ billion $ billion +7% Average Value $83.1 million $88.1 million +6% 2014/15 VALUE OF SALES (BILLIONS) $ /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 5

4 OFFICE DEMAND ENVIRONMENT Demand from tenants in our s is really a tale of two markets - Sydney and Melbourne are pulling away from the other cities as they continue to see improvement in tenant enquiries and leasing deals. The other capital cities Perth, Brisbane and Adelaide remain in a subdued demand environment, and are expected to be dealing with higher than average vacancy levels for some time yet. The Sydney office leasing market is currently the market leader in the country, with almost twice as much office space leased in the first half of 2015, compared to the same time in Colliers International's internal data indicates there has been 112,937sqm leased in the Sydney market in the year to June 2015, compared to 64,629sqm in the first half of Nationally, there has been a 13 per cent increase in the number of leasing deals done nationally in 2015, compared to the first half of The amount of space leased, in square metres, is up 22 per cent from 198,360sqm last year to 241,551sqm this year. Larger firms are now driving demand for office accommodation in 2015 compared to 2014, when we saw smaller space in strong demand. Enquiry data for the second quarter of 2015 also shows a significant shift in the industries searching for office space. In 2014, the government sector dominated demand as they put large requirements into the market. However, as we move into the second half of 2015 the business services, communications and finance sectors are catching up, both in enquiry levels and leasing deals being negotiated, particularly in Sydney and Melbourne. As a result of the increase in leasing activity, vacancy in the Sydney has declined from 7.4 per cent in January 2015 to 6.3 per cent in July 2015, and in the Melbourne, the vacancy rate has declined from 9.1 to 8.1 per cent over the same period. Both markets have seen an increase in supply levels over the same period, although withdrawals have also worked in favour of the market. Withdrawals in the Sydney, Melbourne and Brisbane markets for the year to June 2015 totalled 121,701sqm. The market most affected by withdrawal activity was Melbourne, where 64,435sqm was withdrawn. This included the withdrawal of 555 Collins Street, which was vacated by NAB in The owner of the building, Fragrance Group, plans to convert the building to residential use. In Brisbane, withdrawal activity certainly helped the market achieve a decrease in vacancy, and this example is indicative of what lies ahead for our markets, as continued interest from residential developers further tightens the leasing market. The vacancy rate in Brisbane decreased from 15.5 per cent in January 2015 to 15 per cent in July Withdrawals are also having an impact on the Brisbane market, as competition for redevelopment sites continues to intensify as previously planned commercial developments are converted into residential opportunities. This is expected to continue to constrain new commercial development in the medium term. Vacancy in the Perth increased from 14.8 to 16.6 per cent, and we believe the peak is yet to hit this market. Current forecasts suggest that the peak will be reached in mid 2016, as modest demand levels and new supply continue to drag on the market. Lendlease Core Plus Office Fund Portfolio: Sold by Colliers International to LaSalle on behalf of Lendlease, for $285,500,000. The reduction in vacancy in Melbourne and Sydney has resulted in an increase in net effective rents in those cities. The largest growth was seen in the Premium end of the market. Sydney Premium Grade rents increased 5.5 per cent over the year to June 2015, while Melbourne Premium Grade rents rose by a modest 0.4 per cent. A Grade space fared slightly NATIONAL VACANCY RATES 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% better, increasing by 5.7 per cent and 1.0 per cent respectively. Premium Grade rents in the Brisbane, Perth and Adelaide s have all declined over the year to June 2015, with a low demand environment and cost savvy tenants both having an impact on incentives. Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Sydney Melbourne Brisbane Perth Adelaide Canberra Civic 35 Clarence Street, Sydney: Sold by Colliers International to from AMP Capital Investors on behalf of Sunsuper for $137,100,000. Source: Colliers International, PCA OMR July /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 7

5 YEAR IN REVIEW s volumes of office investments greater than $20 million in the FYE 2015 exceeded FYE 2014 volumes, and another record year was achieved. The Australian market recorded $14.83 billion worth of investment sales, versus $14.1 billion in FYE The number of sales year on year was, remarkably, the same. Colliers International recorded 170 investment sales in each of the 2014 and 2015 financial years. Transaction activity in Sydney and Melbourne kept up the strong pace set in FYE There were 73 sales in Sydney (75 in 2014) and 53 in Melbourne (50 in 2014). A slowdown in activity occurred in the Perth, which recorded 2 sales in FYE 2015, versus 7 sales the previous financial year. While Brisbane volumes increased slightly in FYE 2015, a number of the sales recorded were assets purchased with residential conversion in mind. The slowdown in activity in these markets can be attributed to the growing unease as to the ability of leasing activity in those markets to recover in the near future. That being said, there is still a significant amount of capital chasing well-let assets in the Brisbane that have the ability to ride out the current leasing cycle, particularly from those buyers that have been priced out of the Melbourne and Sydney s. While positive signs can be seen in both the Sydney and Melbourne leasing markets, including an increase in enquiry and renewed demand from the sub 1,000sqm tenant market, Brisbane and Perth both face a longer period of slow office demand. By total sales volume, transaction activity increased marginally in both Canberra and Adelaide, and more dramatically in Sydney and Melbourne. For the first time in a financial year, Melbourne recorded over $4 billion in office asset sales. The total increase in sales volumes in Melbourne year on year was $904 million. The once in a generation sale of the two (2) Cbus office assets -700 Bourke St and the CBW Complex - with a total sales value of $1.04 billion, certainly contributed to this, however, the lack of supply and tightly held nature of the Sydney market, also meant that many institutions and offshore investors looked further south to Melbourne for investment opportunities. Sydney, however, remained the dominant city in terms of sales volumes, recording $7.69 billion worth of sales. The biggest transaction in the Sydney market occurred in the dying days of the financial year - that being the $875 million partial sale of T1 at Barangaroo to Qatar Authority and Australian Prime Property Fund (APPF) Commercial. The past 12 months in the investment sales market has also seen investors move up the risk curve, with investors moving out of markets and into metro markets. Colliers International recorded the highest volume of metro office market sales on record. Metro office market sales are also at their second highest proportion they have ever been, at 39 per cent of total office investment sales. The most remarkable story for Metro office markets occurred in Sydney, where metro sales volumes outperformed even Melbourne sales volumes in FYE The Sydney metro office market offers some quality investment grade assets with good tenant covenants, and in 2015 it was predominately offshore and institutional purchasers who acquired assets, although private investors also increased their activity compared to The volume of offshore investment in the Sydney metro market was greatly increased by the sale of Australand's assets to Singapore's Frasers Centrepoint. Six (6) of the assets that formed part of this sale were located in Sydney metro markets, with their total value exceeding $700 million. The largest sale in the Sydney metro market was also to an offshore buyer. This was the sale of 101 Miller Street & Greenwood Plaza to Henderson Global Investors and TIAA CREF for $302.6 million in November OFFICE INVESTMENT SALES BY MARKET TYPE Metro 32% 68% 60% 82% 74% OFFICE INVESTMENT SALES BY MARKET TYPE FYE 2015 Sydney Melbourne Brisbane Adelaide Canberra Perth $ AUD Metro 40% $642.2 m $430.9 m $81.1 m $243.9 m $35 m $ 72.8 m Metro 18% $1.48 b $1.22 b Metro 26% Metro 24% 76% $2.92 b Metro 20% 80% $3.39 b Metro 36% 64% Metro 39% 61% $4.29 b Metro Barangaroo South, Tower 1: Partially transacted to Qatar Authority and Australian Prime Property Fund (APPF) Commercial. HIGHEST METRO OFFICE SALES VOLUMES ON RECORD $5.8 BILLION Parramatta saw almost half a billion dollars of investment activity (greater than $20 million) in 2015, and other than Rhodes (whose total sales volumes were derived from the Frasers Centrepoint/Australand deal), was the precinct that attracted the most sales activity in metro Sydney. Centuria, Eureka, VennCap Real Estate and GDI Property all invested in the precinct over 2015, using both local and offshore capital. Parramatta has become increasingly popular with investors who are attracted to the strong occupancy fundamentals of the market. The office vacancy rate in January 2015 was 6.3 per cent, and this increased/decreased to 7.4 per cent in July These vacancy rates are some of the lowest of all PCA monitored SYDNEY AND MELBOURNE CONTINUE TO DOMINATE SALES 28 6 Metro markets in Australia. At the prime end of the market, the vacancy rate is virtually negligible, with only 6,573sqm of space currently available. Tenant demand remains consistently strong in Parramatta, with Government, financial and professional services firms the key tenant groups driving demand. Supply, however, is muted. The only building currently under construction is Parramatta Square (Stage 1), a 26,500sqm which is almost fully pre-committed by the University of Western Sydney. The development is due for completion in late 2016, and was sold by Leighton Properties in December 2014 to Charter Hall's Core Plus Office Fund and Direct Office Fund on a fund through basis /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 9

6 Offshore purchasers were the most dominant group Australia wide, accounting for $6.89 billion worth of total office investment sales in the country, followed by local institutions, which purchased $6.0 billion worth of assets. While offshore buyers and local institutions were by far the biggest buyer types in the country, sales volumes for offshore buyers were only slightly up from the previous year, and actually decreased by 11 per cent for local institutions. The biggest increase in buyer activity was from Private Investors (80 per cent) and Syndicates (83 per cent). Record low interest rates in Australia are likely major drivers for these groups, who tend to borrow locally and are more susceptible to interest rate movements. While the offshore group of buyers became the biggest purchaser group in 2015, there was also a dramatic change in the type of offshore buyer purchasing in Australian office markets. In FYE 2014, offshore institutions purchased $5.64 billion worth of Australian property. This declined to $4.92 billion in FYE Private offshore buyers, however, dramatically increased their presence in the Australian market. In FYE 2014, they purchased $673 million worth of office property, and this increased to $1.81 billion in FYE Over 80 per cent these private offshore buyers are from China and Hong Kong. Private Chinese investment into Australian office markets increased from $223 million in FYE 2014 to $1.11 billion in FYE Almost half a billion dollars worth of this private Chinese investment comes from the Dalian Wanda Group. In January 2015, Dalian Wanda purchased Fairfax House at Pitt Street Sydney for $73 million, and in the same month purchased Goldfields House (1 Alfred St Sydney) from global investment giant Blackstone for $415 million. Both sites are earmarked for residential redevelopment. The Chinese appetite for Australian property is now spreading from the residential and development site markets, to office assets. While some assets have no doubt been purchased with long term redevelopment potential in mind, Chinese investors are now seeking a long term safe haven for assets, and the Sydney and Melbourne markets in particular offer the global city characteristics they are after, as well as a reasonably generous yields by global standards. OFFSHORE GROUPS THE MOST DOMINANT PURCHASER GROUP $6.89b 46% of sales by value OFFSHORE INVESTMENTS BY PURCHASER TYPE FYE 2014 FYE 2015 BIGGEST INCREASE CHINA & HONG KONG BUYERS PRIVATE 11% OTHER 1% INSTITUTION 89% PRIVATE 28% OTHER 2% INSTITUTION 71% The sheer volume of demand in the markets has resulted in yield compression across the country. The volume of activity in the Melbourne saw average yield compression of 43bp over FYE 2015, with an average low of yield of 6.38 per cent and an average high of 6.88 per cent for A Grade property. Newer assets with a very long WALE and strong tenant covenant can exceed these yield expectations however, as 700 Bourke St did when it sold on a 5.75 per cent initial yield. This asset is 100 per cent leased to NAB, with a 13.8 year WALE at sale time. In Sydney, the two tier investment market continues, with a split between yields achieved on pure investment assets and those A GRADE YIELDS LOW HIGH Movement FYE 2015 Sydney Core 6.03% 6.38% -38bp Melbourne 6.38% 6.88% -43bp Brisbane 6.75% 7.25% -50bp Adelaide 7.00% 8.50% -38bp Canberra 6.50% 7.25% -50bp Perth 7.25% 8.25% -13bp METRO MARKETS BACK IN VOGUE SALES IN FYE 2015 THE PROPORTION WAS 26% IN 2000 with long term redevelopment potential. Sizeable sale prices are evident for assets with residential upside which far exceed their commercial book value. This is despite the degree of planning risk and often long lease periods to gain vacant possession prior to enabling conversion. Many overseas buyers view such acquisitions as an opportunity to gain a foothold in the Australian market, being less motivated by monetary return relative to value. Institutions continue to act as the dominant vendor in Australian office investment markets. Just over 54 per cent of all assets are sold by institutions, which is in line with long term averages. In FYE 2015, offshore groups sold more stock than any year previously, and this trend will continue with the sale of US-based Morgan Stanley Real Estate Investing's (MSREI) Investa Property Group. The increase in sales amongst offshore groups is expected given that offshore buyers began to build significant scale in the Australian market back in Assets purchased in that cycle may be entering the end of their investment life cycle for some of these groups. Developers significantly reduced their selling in FYE In FYE 2014 they accounted for almost 11.5 per cent of all sales, and in FYE 2015 this reduced to 7.75 per cent. This is mainly for a lack of opportunity, with some of the major office assets currently being built, such as Walker Corporation's Collins Square in Melbourne and Daisho's 180 Ann Street in Brisbane, being built on develop and hold strategies by their owners. Sydney's T1 at Barangaroo, however, was an exception to this, and provided the biggest purchasing opportunity of the year by its developer, Lendlease. MORE SALES SYDNEY METRO SYDNEY METRO SALES VOLUMES OUTPACED EVEN MELBOURNE SALES MELBOURNE OFFICE INVESTMENTS SALES BY PURCHASER TYPE $16 $14 OFFICE INVESTMENTS SALES BY VENDOR TYPE $16 $14 $AUD BILLIONS $12 $10 $8 $6 $AUD BILLIONS $12 $10 $8 $6 $4 $4 $2 $ Corporate Government Institution Offshore Private Syndicate Undisclosed Corporate Developer Government Institution Offshore Private Syndicate Undisclosed /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 11

7 TRANSACTION TRENDS The trends in buyer demand that we saw in FYE 2014 were further cemented in FYE that is, a focus on Core and Core Plus assets in Sydney and Melbourne. In a climate where leasing markets are still trending at higher than average vacancy rates, lower risk opportunities are setting the benchmark in the investment market. The sale of 52 Martin Place, Sydney to REST Super probably reflected the lowest yield of the past financial year. It transacted in July 2014 for $555 million on a 5.60 per cent equivalent reversionary yield. A lack of supply, however, plus the re-emergence of private buyers and unlisted retail funds, is driving the market further up the risk curve, to metro markets and to value add opportunities in our s. It is also forcing institutions with strong capital mandates to invest to look for more innovative ways to acquire Core and Core Plus assets. The biggest trend we see over the course of the next year is these institutions buying out whole funds with (mostly offshore) capital partners, as well as participating in fund through arrangements with some of Australia's major developers. OWNERSHIP TRANSFERS PROVIDING RARE OPPORTUNITIES FOR MAJOR OFFSHORE GROUPS Holding some of Australia's most sought after Premium and A Grade office assets, including Deutsche Bank Place, 225 George Street, and 400 George Street, all in Sydney, as well as 120 Collins Street in Melbourne, MSREI's Investa Property Group's balance sheet assets, known as the Investa Property Trust (IPT) was recently sold for circa $2.5 billion to China Corporation (CIC). The portfolio is considered one of the best in Australia, and was highly sought after by some of Australia's, and indeed the world's major property groups. The final purchase price is believed to have represented a blended equivalent reversionary yield of 5.1 per cent. This transaction has been closely followed by all major players in the property market, as it is exceptionally rare for this many Core assets to transact in the market at any one time, and gives a firm indication as to exactly where yields are sitting for Premium Grade assets. The purchase was the second in the Australian market by CIC - their first being their purchase of Centennial Plaza in late and comes after a sustained buying spree by the group in the major global property markets. CIC is the world's largest state investment fund, and fourth biggest sovereign wealth fund. The purchase gives them immediate scale in the Australian market, and a rare portfolio of buildings that meets its investment mandate. NEW BENCHMARK SET FOR PREMIUM GRADE ASSETS The other major fund buyout occurred in September 2014, when the Singapore Exchange listed Frasers Centrepoint acquired the Australian-listed property developer and investor, Australand Property Group. The transaction was enacted quite differently to the Investa transaction however, with Frasers Centrepoint effectively enacting a takeover of Australand through increasing its shareholding in Australand to over the 50 per cent threshold, thereby making its $2.6 billion offer for the group unconditional. Stockland Property Group originally made a play for their local rival Australand, buying up a 19.9 per cent stake in March 2014, however Frasers quickly moved in with a cash offer for the group that Australand's board had recommended its shareholders accept. Australand had long been a takeover target, with the battle for the group beginning in 2010, when GPT Group launched a non-binding offer, but only for the office, industrial and development assets. The takeover has given Frasers access to a significant exposure to the and VIC residential markets, as Australand was one of the biggest developers in the country. There is also about $2 billion of prime city-based office towers in Sydney and Melbourne as well as industrial property in the portfolio. Frasers, 88 per cent owned by the Thailand-based TCC Group, were motivated by the opportunity to expand its portfolio into the high yielding and high growth Australian market. Frasers has also co-developed the One Central Park mixed use residential and retail project in Sydney's Broadway area, and its associate recently bought the Sydney Sofitel Wentworth hotel. 818 Bourke Street, Melbourne: Sold by Colliers International to Hines Global REIT on behalf of GPT Group for $152,500, Bourke Street, Melbourne: Sold by Colliers International to CIMB on behalf of an offshore client for $90,000,000. CAPITAL PARTNERING - LOCAL MANAGERS WITH OFFSHORE CAPITAL The influx of capital to the Australian property market looks set to continue unabated, with many local property groups forming partnerships with local super funds, private equity groups and offshore funds to create significant buying mandates. The best examples of capital partnering mandates are those that bid for Investa Property Group. The successful bidder, CIC, originally partnered with LaSalle to bid for the assets. Other partnerships that bid for the assets included Cromwell Property Group, who teamed with South Africa's Redefine Properties Ltd, as well as Australia's own sovereign wealth fund, Future Fund and one of our largest super funds, First State Super. DEXUS Property Group brought in capital partner Abu Dhabi Authority (ADIA), while US Private Equity Firm Blackstone originally partnered with local property giant Mirvac. The biggest single asset capital partnership occurred in the highly sought after Sydney. A new Lendlease managed wholesale open-ended property fund has been created to invest in Tower 1 at Barangaroo, which is due for completion in September The Qatar Authority (QIA) will take a 37.5 per cent stake of the equity (about $525 million) and the Lendlease managed Australian Prime Property Fund Commercial will take another 25 per cent stake ($350 million) - further boosting the fund's exposure to Barangaroo. Lendlease itself will hold the remaining 37.5 per cent. The fully leased, on completion value of the building will be circa $2 billion. QIA had previously invested $250 million into APPF, a strategic play that allowed them to build the relationship with Lendlease that eventually led to the Barangaroo deal. QIA has an investment mandate to buy core, flagship assets in major cities in Europe and Asia, and the partnership with Lendlease gave them the rare opportunity of a premium flagship asset in Australia's most sought after office market. Other offshore groups that have partnered with local property groups include the Canadian Pension Fund PSP, which has formed a close relationship with Charter Hall. PSP partnered with the property group to purchase Raine Square (together with Telstra Super) in Perth and the Gasometer 2 building in Newstead, Queensland in This followed PSP teaming up with Singapore sovereign wealth fund GIC in 2012 to privatise the $1.7 billion Charter Hall Office REIT. The use of a local partner by offshore super funds, sovereign wealth funds and private equity groups is a structure that allows this capital to access the relatively high yielding Australian office market, as well as local expertise and management. Many of these offshore groups have little to no physical presence in Australia, and are keen to avoid the expense and complexity of creating their own management team in Australia. The reputations of our biggest property groups can also not be discounted, and there is an understanding that the local knowledge acquired by these groups after many years of activity in the Australian market would be difficult to replicate. FUND THROUGH PURCHASES AND NEW DEVELOPMENTS OFFER SOUGHT AFTER BUYING OPPORTUNITIES Although not a new trend in the Australian property scene, fund through developments will continue to become more and more sought after, as large local and offshore super funds, sovereign wealth funds and private equity funds search for the best office investments in an increasingly competitive environment. Both newly completed developments and pre-committed development opportunities are keenly sought after by well capitalised groups, who are seeking a long WALE that rides out the current vacancy cycle, and a near future-proofed, quality A Grade asset /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 13

8 Mirvac has demonstrated the success of capital partnering through numerous fund through arrangements on developments in both Sydney and Melbourne. In early 2014, Mirvac and US financial services group TIAA-CREF announced their first fund through arrangement, with TIAA-CREF acquiring a 50 per cent interest in the recently completed 699 Bourke Street development, anchored by tenant AGL. The total price paid for the 50 per cent interest in 699 Bourke Street was $73 million. Mirvac had previously entered into a similar arrangement with AMP Capital Wholesale Office Fund on the 200 George Street development in Sydney. The total consideration for this deal was $317 million. More recently, in December 2014, Mirvac sold a 50 per cent interest Riverside Quay to ISPT for $106 million again in a fund through basis. TIAA-CREF have continued to build their relationship with Mirvac through the acquisition of 50 per cent of 110 Miller Street, North Sydney, as part of their 60 per cent owned joint venture with Henderson Global Investors, TIAA Henderson Real Estate. TIAA Henderson Real Estate purchased the 50 per cent share from Eureka Funds for $310 million in October Mirvac own the other 50 per cent share of the building, and are also the asset manager. In late 2014, two of Charter Hall's managed funds - their Core Plus Office Fund (CPOF) and Direct Office Fund (DOF) - entered into an agreement with Leighton Properties to purchase a 50 per cent interest each in a new development in Parramatta's. The development, known as 1PSQ and located at 169 Macquarie Street, was purchased for a total of $16.25 million, and the development is expected to cost the funds a total of $220.5 million over the next two years until the development completes in late The 26,500sqm building is fully pre-committed by the University of Western Sydney (UWS) on a fifteen (15) year lease, with options. Both of Charter Hall's funds were attracted to the long lease, high calibre tenant and modern office building, which met the brief of both of the funds' mandates. QATAR INVESTMENT AUTHORITY MAKES FIRST FORAY INTO AUSTRALIA INITIAL EQUITY CONTRIBUTION German property giant Union Real Estate (UIRE), advised by Eureka Funds, has recently purchased 155 Clarence Street for $145 million from developer St Hilliers, after they undertook a speculative $120 million development of the site and completed it in early At the time of purchase, the building was almost fully occupied. A St Hilliers development fund bought the heritage building in 2011 for close to $30 million, with one of the key investors in the fund being First State Super. The building, which has been transformed into an A-grade tower, has had its facade restored and the interior completely refurbished. The weighted average lease expiry is more than five years and the building has a net lettable area of 12,500sqm. This is UIRE's second foray into the Australian property market, after they purchased Flight Centre's new headquarters in Brisbane (271 Grey Street, Brisbane) on a fund through basis for $200 million in June That building is due for completion in mid These two (2) purchases are typical of the type of asset that large offshore pension funds are looking for - brand new or refurbished, with long WALE and good tenant covenants. 210 George Street, Sydney: Sold by Colliers International to Anton Capital (together with 220 George Street) on behalf of Mirvac Group for $99,150,000. OFFSHORE ACQUISITIONS BY AUSTRALIAN INVESTORS GROWING Although we are only half way through the year, offshore investment levels by Australian investors are double 2014 levels. In 2014, Australian investors spent $US2.3 billion. YTD 2015, this has jumped to $US4.7 billion. Almost all of the volume in 2015 can be attributed to Australian Super and Lendlease. In 2015, Australian Super's activity has included purchasing a 25 per cent stake in Ala Moana Centre in Hawaii, a 49 per cent stake in an eight-asset office portfolio, in and around Washington DC, a 50 per cent stake in the mixeduse King's Cross Central development in London and a 49 per cent stake in a $US605 million Boston office tower. The Ala Moana deal is a direct result of a strategic partnership with QIC, which in late 2013 was awarded an open-ended mandate from AustralianSuper to seek out investment opportunities in prime US retail properties. Henderson Global Investors manages investments on behalf of AustralianSuper in the UK retail market. Offshore investment into metro markets increased from $2.25 billion in FYE 2014, to $2.63 billion (for assets over $20 million), while private investment more than doubled, increasing from $477 million to $1.15 billion. Private investors currently have access to low priced debt, however are finding themselves priced out of hotly contested markets. PRIVATE INVESTMENT IN METRO MARKETS EXPLODES FYE 2014 $477 MILLION FYE 2015 $1.15 BILLION 220 George Street, Sydney: Sold by Colliers International to Anton Capital (together with 210 George Street) on behalf of Mirvac Group for $99,150,000. In a sign of growing demand from Australian super funds for offshore investment opportunities, Australia's $109 billion Future Fund has given TIAA CREF and a TIAA-CREF joint venture mandates to invest in unlisted property around the world and the organisation is now looking to attract other major Australian funds. The second most active investor was Lendlease, purchasing a 30 per cent stake in a consortium to develop the urban regeneration development site at Paya Lebar Central in Singapore and a share of The Lifestyle Quarter at TRX in Kuala Lumpur. The most popular destinations have been the US, Singapore, Malaysia and New Zealand. Compared to other regions, Australian investors are still spending a relatively small amount offshore. In Singapore and Canada, more than 80 per cent of total real estate expenditure is offshore. Although growth has been strong in Australia, it still amounts to just 32 per cent. METRO MARKETS UNDERGOING TRANSFORMATION Metro markets are becoming increasingly popular, and particular pockets of the market are attracting the institutional and offshore investment that previously focussed almost solely on markets. Institutional buyers prefer the established metro markets of Parramatta, North Ryde, North Sydney in Sydney, Fortitude Valley and West End in Brisbane, and St Kilda Road, Southbank, Camberwell and Hawthorn in Melbourne. A number of groups, including Centuria and GPT, have recently created listed Metro office funds, however, it is offshore and private buyers who are driving the demand for metro office. Parramatta is a market that is undergoing increasing interest from a multitude of investor types. This market offers two distinct types of commercial stock which appeal to two completely different buyer profiles. Above-$100 million assets such as the Justice Precinct, which was sold for $170.1 million in December 2014 to Eureka Funds, offer secure investment grade stock with solid long-term covenants. These appeal to super funds, wholesale funds and other annuity type purchasers. The 6.6 per cent initial yield achieved demonstrates the competition for such assets. The sub-$100 million market appeals to local investors who have a greater appetite for risk and seek value-add opportunities. The $33.15 million sale brokered by Colliers International of 87 Marsden Street in December 2014 on a 7.73 per cent yield typifies the sub-$100 million market. This asset was purchased by an overseas family trust funded by low interest rates abroad. The buyer was attracted to the generous yield comparative to global markets. St Leonards is another market attracting interest from investors, even as the market actually contracts in size as buildings are taken out of stock and converted to residential. Indeed, this trend is only increasing the value of remaining office stock. Private investment firm Altis Property Partners recently purchased Space 207 from Blackstone and fund manager Primewest for $165 million. The location of Space 207 in St Leonards, which stands to benefit from state spending on infrastructure, was believed to be a key reason for its appeal /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 15

9 FYE 2015 SALES VOLUME RECORD $ 15,008,000,000 SA SALES TOTAL $431 MILLION 60 Flinders St $80,400, King William St $74,000, Pirie St $72,000, Flinders St $49,600, Flinders St $41,333, Wakefield St $37,750, Pirie St $28,630, Currie St $25,200, Light Sq $22,000,000 ACT SALES TOTAL $325 MILLION 45 Benjamin Way $82,000,000 6 Chan St $71,500, Bowes St $60,000, Marcus Clarke St $49,100, Sydney Ave $32,000, Kirkpatrick St $30,462,941 MAJOR TRANSACTIONS WA SALES TOTAL $108 MILLION 59 Albany Hwy $72,800, St Georges Terr $35,000,000 SALES TOTAL $7.69 BILLION VIC SALES TOTAL $4.36 BILLION QLD SALES TOTAL $2.09 BILLION 52 Martin Pl $555,000,000 Hickson Rd $525,000,000 1 Alfred St $415,000, Liverpool St $392,750,000 Hickson Road $350,000, Miller St $302,600, Castlereagh St $240,000, Pitt St $200,000, Kent St $173,000, Marsden St $170,100,000 1f Homebush Bay Dr $157,986, Walker St $157,500,000 1d Homebush Bay Dr $154,176, Clarence St $137,100, Elizabeth St $120,666, Carrington St $118,000, Miller St $116,500, Pacific Hwy $115,000,000 1b Homebush Bay Dr $114,420, Coward St $113,588, George St $112,300, George St $112,300,000 8 Central Ave $110,000, Lee St $107,555, Pitt St $102,000, Christie St $96,400, Pitt St $94,000, Harris St $90,000, Carrington St $88,000, Coward St $87,869, Langston Pl $85,000, Eden Park Dr $81,800, George St $81,675, Lee St $81,497, Railway Pde $80,000, Pyrmont Bridge Rd $80,000, Harris St $75,300, Pitt St $73,000, Bligh St $70,000, George St $68,242, Elizabeth St $67,000, Pacific Hwy $65,400, Arthur St $58,000,000 4a - 4 f Huntley St $51,700, a Crown St $50,250,000 Forest Rd & Gloucester Rd $50,000,000 2 Meredith St $50,000,000 2 Elizabeth Plz $47,500, Woniora Rd $47,000, Bourke St $46,600, Wentworth St $45,050, Chalmers St $45,000, Pirrama Rd $42,000, Pacific Hwy $41,500, George St $41,000, Solent Cir $38,915, George St $38,700, Arthur St $37,000, Elsie St $35,600, Bourke Rd $35,000, Talavera Rd $34,000, Marsden St $33,150, George St $31,757, Pitt St $30,650, Fitzwilliam St $29,000,000 8 Windmill St $28,000, Narabang Way $25,700,000 3 Horwood Pl $25,400,000 Clunies Ross St $25,080, York St $25,000, Wentworth Ave $22,123, York St $21,250, Miller St $20,000,000 CBW Complex $608,100, Bourke St $433,500, Collins St $222,500, Exhibition St $208,000, William St $125,000, Bourke St $152,500,000 2 Riverside Quay $106,000, Market St $105,295, Queen St $96,200, Brougham St $95,800, St Kilda Rd $94,000, St Kilda Rd $90,000, Bourke St $90,000, Siddeley St $86,000, Salmon St $86,000, Gladstone St $83,000, St Kilda Road $82,100, Bourke St $82,000, St Kilda Rd $81,500, St Kilda Rd $80,000, Collins St $76,000, Burwood Hwy $70,000, Queen St $68,750, Blackburn Rd $63,000, Wellington Rd $62,600, King St $61,500, Collins St $60,000, King St $52,500, Collins St $51,000,000 B8, 576 Swan St $46,500, Little Collins St $45,500, St Kilda Rd $45,000, Victoria St $42,300, St Kilda Rd $41,800, Rosslyn St $40,000, Chapel St $40,000, Camberwell Rd $39,350, Albert St $36,600,000 2 Luton Ln $34,050, Collins St $34,000, Collins St $32,000, Dorcas St $30,750, Clarke St $30,400, Collins St $28,275, Queen St $25,500, Collins St $25,000, Flinders Ln $23,600, Burwood Rd $23,350, Railway Pde $23,000, Collins St $22,680, Prospect St $22,000, Springvale Rd $22,000, William St $21,600,000 1 Eagle St $499,790, Adelaide St $224,000, Albert St $209,268,000 1 King St $131,885, Ann St $131,800, Montague Rd $92,750, Donkin St $82,000, Ann St $65,500, Campbell St $62,000, Edward St $60,000, Queen St $49,000, Adelaide St $47,500, Adelaide St $47,500, Robina Town Centre Dr $46,000, Makerston St $42,500, George St $35,000, Coronation Dr $33,400, Margaret St $33,000, George St $30,250, Felix St $25,800, Donkin St $25,650, Brunswick St $23,000, High St $21,500, Marie St $20,475, Ferry Rd $20,000, George St $20,000, Buchanan St $20,000, /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 17

10 CASE STUDIES FIVE DOCK & AUBURN, SYDNEY AND FORTITUDE VALLEY, BRISBANE FOSUN'S FORAY INTO AUSTRALIA Chinese investor, Forte, as part of the Fosun Conglomerate, made its first development foray into the Australian property market when it acquired a 75 per cent share in three major development opportunities in Sydney and Brisbane with EG Funds. Colliers International introduced EG Funds to Forte through the Colliers International Australian Showcase in March 2014 and negotiated a deal for the joint venture partnership worth approximately $100 million. The eventual deal of the joint venture had Forte acquire 75 per cent share in three major developments which has an end value in the vicinity of $650 million, including projects at Five Dock and Auburn in Sydney, and Fortitude Valley in Brisbane, encompassing over 1,000 apartments. MIRVAC OFFICE PORTFOLIO, VIC & ACT FIVE ASSETS IN THREE STATES Mirvac's Diversified Office Portfolio consisted of five high profile office buildings located in established core markets, benefiting from existing or new infrastructure investment. Geographically spread across three major Australian office investment markets, the portfolio included 210 & 220 George Street, Sydney ($ million); Salmon Street, Port Melbourne ($86 million); and 54 & 60 Marcus Clarke Street, Canberra ($63.26 million). The portfolio offered diversity of income from more than 100 tenants including major corporate and government tenants such as Department of Education, Norton Rose, St George Bank, GM Holden, Aecom Australia, ICBC and Wilson Parking. The international campaign generated strong competition from both domestic and offshore purchasers. Date July 2015 Vendor Purchaser 210 & 220 George St, Sydney 54 & 60 Marcus Clarke St, Canberra Salmon St, Port Melbourne price Passing initial yield 8.10% NLA Capital value AMP Capital Anton Capital Centuria Altis Property Partners $ million 52,780sqm 4,706.5 /sqm /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 19

11 35 CLARENCE STREET, SYDNEY LOCATION, VIEWS AND AMENITY SEAL THE DEAL AQUALAND FIVE TRANSACTIONS IN 12 MONTHS In 2014, Colliers International met with key decision makers of Aqualand's parent company. The group subsequently completed five transactions over 12 months, acquiring $530 million of Australian property across a diversified portfolio. CSIRO North Ryde ($170 million): commercial asset Melrose Park ($130 million): residential development site 168 Walker St, North Sydney ($157.5 million): commercial asset with residential upside 33 Herbert St, St Leonards ($40 million): commercial asset with residential upside Lindfield Rd, Lindfield ($27 million): residential development Colliers International worked closely with Aqualand to identify a strategy acquisition platform to assist the group in acquiring non income-producing developments and investment profile assets. The strategy continues to yield results for Aqualand as the group looks to build their $1 billion investment portfolio. 35 Clarence Street commands one of the best locations in the improving western corridor of Sydney's, close to the rapidly developing Barangaroo precinct. Completed circa 2000, 35 Clarence Street captures 270 degree views of the including the Sydney Harbour Bridge. The property enjoys an abundance of natural light with efficiently shaped floor plates, ideal for subdivision. First class amenities include an indoor-outdoor cafe and newsagency, a childcare centre on the lower ground level and 62 car space. acquired the property from AMP Capital Investors on behalf of Sunsuper in January 2015 for $137.1 million, in a transaction facilitated by Colliers International. Date January 2015 Vendor AMP Capital Purchaser Challenger price $137,100,000 Passing initial yield 6.88% NLA 15,207sqm Site area 1,355sqm Net passing income $9,418,469 (NET) WALE 4 years by income /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 21

12 RACQ, 60 EDWARD STREET, BRISBANE SOLD FOR A 10% PREMIUM ABOVE BOOK VALUE 2 RIVERSIDE QUAY, SOUTHBANK, MELBOURNE 50% FUND-THROUGH 60 Edward Street is one of the best B-grade office buildings in the Brisbane. It is an 18-level building with two levels of basement car parking for 112 cars, ground floor retail and 14 upper floors of quality office accommodation. Significant capital works have recently been completed and the property approximately 77 per cent leased at the time of sale. RACQ purchased the building for $60 million from vendor AMP Life in December 2014, representing the largest B-grade transaction in the Brisbane in RACQ was in the market for approximately 12 months looking for the right building in the to consolidate its accommodation requirements from three different locations around Brisbane. Date December 2014 Vendor AMP Capital Purchaser RACQ price $60 million Passing initial yield 7.35% NLA 10,725sqm Site area 1,836sqm Net passing income $4.41 million per annum WALE 2.2 years 2 Riverside Quay, Southbank is a new office building which is to be constructed above an existing eight storey multi-deck and basement car park. A 50 per cent interest in 2 Riverside Quay, Southbank was acquired by the ISPT Core Fund on a 'fund-through' basis from Mirvac Property Trust at a price of $106,000,000. The current development is supported by a 12 year leasing precommitment to PricewaterhouseCoopers over per cent of the building, with a five year rental support agreement over the remaining uncommitted space. 535 of the existing 571 car parking bays are leased to Wilson Parking for a term of 12 years from completion of the project. Overall a WALE of years by area and years by Income is produced. The asset has a target completion date of November Having been sale advisor to Mirvac during lease negotiations an, Mirvac appointed Colliers exclusively to conduct the sell-down. Date December 2014 Vendor Mirvac Property Trust Purchaser ISPT Core Fund (50% interest) price $106 million Passing initial yield 6.12% NLA 21,040sqm Site area 2,194sqm Net passing income $12,974,776 per annum WALE years /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 23

13 OFFICE SECTOR OUTLOOK A key question amongst all investors in office real estate in Australia, is when will yields hit a low in the current office cycle? The answer to the question has never been more complex, with capital flowing in from local and global markets whose drivers are many and varied, as well as both cheap debt and equity fuelling the cycle. Australian office yields have been going through a slow, but relatively sustained period of yield compression since early Over the 5 years to March 2015, average A Grade yields have compressed in the Sydney by 64bp to now be almost 7.00 per cent (6.25 per cent in the Core market). Melbourne has seen the greatest level of compression, firming by 113bp to now average 6.75 per cent. What is remarkable about this period of yield compression is both the length and restraint YIELD MOVEMENTS - AVERAGE A GRADE YIELDS 0.8% of it, particularly given it was followed by a period of rapid and severe yield decompression after the impact of the global credit crisis was felt. In Sydney, Average A Grade yields softened by a staggering 242bp over just 6 quarters between June 2008 and September 2009, and in Melbourne by 188bp over the same period of time. The drivers behind yield compression follow the rules of that most basic of microeconomic principles - supply and demand. In a high demand environment, prices will rise and yields will in turn decrease, and vice versa. The critical question to answer when trying to pick the turning point in the current yield cycle is just how long the high demand environment can be sustained. Sydney Melbourne 0.6% 0.4% 0.2% 363 Adelaide Street, Brisbane: Sold by Colliers International to Valparaise Capital Partners on behalf of Investa Property Group for $47,500,000. 0% -0.2% -0.4% -0.6% -0.8% -1.0% JUN-80 JUN-81 JUN-82 JUN-83 JUN-84 JUN-85 JUN-86 JUN-87 JUN-88 JUN-89 JUN-90 JUN-91 JUN-92 JUN-93 JUN-94 JUN-95 JUN-96 JUN-97 JUN-98 JUN-99 JUN-00 JUN-01 JUN-02 JUN-03 JUN-04 JUN-05 JUN-06 JUN-07 JUN-08 JUN-09 JUN-10 JUN-11 JUN-12 JUN-13 JUN-14 BOND / YIELD SPREAD BACK IN POSITIVE TERRITORY Over the past 10 years, the greatest spread between BBB Corporate Bonds (10 year) and Sydney Average A Grade yields was 6.30 per cent in December This was when BBB Corporate Bond yields blew out from 9.03 per cent to per cent in one quarter, following the collapse of Lehmann Brothers in September 2008 and the onset of the Global Financial Crisis (GFC). Property yields soon followed suit, as buyers fled from the market given debt was no longer available and super funds quickly found themselves over allocated to property due to falling equity markets. As property yields softened over 2009, the spreads moved to be virtually zero. It was over the next two and a half year period that yield spreads stayed relatively constant, and now with bond yields retreating further, we are back in positive territory. This provides some comfort to current buyers, as even though a well let, good quality commercial property asset can be one of the safest investments available, a level of risk premium should always be applied to the bond rate. However, when yields begin to retreat further following some major benchmark transactions (Investa key among these), the closing of the gap between the bond and property yield, may cause some decline in overall demand from more cautious investors. GEARING LEVELS MODEST s volumes of and Metro Office stock in FYE 2015 were over $1 billion up on FYE 2008 levels. The key difference in the current buying cycle is that a greater level of capital is being sourced from equity markets than from the debt-driven buying cycle that peaked in Average gearing levels for A-REITs sits at a comfortable 28.9 per cent, far below the peak of the pre-gfc market cycle, where average gearing levels were around 40 per cent, with some even leveraged above 60 per cent. mandates of the major property groups are also far more conservative this time around. Most groups have shed their offshore ambitions, focussing instead on core Australian markets that they understand well, and where they can prove their capability to institutional investors. When interest rates do start to move in the upward direction, Australian property trusts are in a much better position to withstand the higher borrowing costs than the previous cycle. Goods Shed North, 710 Collins Street, Melbourne: Sold by Colliers International on behalf of Grollo Group to Abacus Property Group for $76,500,000. BBB CORPORATE BOND/SYDNEY A GRADE YIELD SPREAD YIELD SPREAD 3.00% 2.00% 1.00% 0.00% -1.00% -2.00% -3.00% -4.00% -5.00% -6.00% -7.00% MAR 2005 SEP 2005 MAR 2006 SEP 2006 MAR 2007 SEP 2007 MAR 2008 SEP 2008 MAR 2009 SEP 2009 MAR 2010 SEP 2010 MAR 2011 SEP 2011 MAR 2012 SEP 2012 MAR 2013 SEP 2013 MAR 2014 SEP 2014 MAR /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 25

14 VALUATION OUTLOOK Capital in-flow and demand remains particularly strong for well-leased quality office assets within all major s, and even extending into fringe and metro markets where long dated annuity style cash flows to strong tenancy covenants are available. The opportunity to secure trophy office towers in key s, even if they have short to medium term cash flow issues, also remains a strong desire for a variety of potential purchaser profiles. For major acquisition opportunities we continue to see a broad cross section of investors vying for a position, including global sovereign funds (some represented by local managers), private equity, REITs and wholesale funds, including both offshore pension funds (some represented by local managers) and local superannuation funds. The depth of demand in a globally low interest rate environment is seeing investment return metrics compress with a considerable rate of velocity. In this theme, Australian office return metrics are very much being compared on a global scale. Even on a fully effective income based yield comparison, Australian office markets still offer more attractive returns when compared to other major global office markets. One of our distinguishing points of difference and attractions on a global basis lies in the ability to purchase long term (10+ years) annuity style cash flows to high quality tenants with fixed annual increases, providing a safe haven from the perceived uncertainty for space markets over the short to medium term. In terms of current yield metrics for quality office assets in the major s of Sydney and Melbourne, we believe that a disconnect currently exists between valuation metrics and potential market pricing, with compression in the order of 50-75bp anticipated to be crystallised over H The results of the Investa (Morgan Stanley) IPT portfolio offering will go some way in providing the transactional evidence to support this. In our opinion this portfolio transaction will be the catalyst for not only a confirmation of yield compression and alignment of valuation metrics with real time market pricing, but will result in a variety of on-market transaction opportunities by Q4 2015, and potentially a further 'run' on market pricing with corresponding yield compression. In this theme, we consider that our forecast outlook will be supported by the prevailing depth of off-shore capital seeking opportunities in Australia who are currently enjoying a strong exchange rate advantage. With the AUD down some 30 per cent from peak rates, off-shore investors into Australia are generally seeing limited FOREX risk, and in many cases are not seeking hedging security. For quality office assets it would appear that Australia is very much in sync with other major global markets where the theme is one of 'lower for longer', whereby lower return metrics, as it relates to initial yield, running yield and total return (IRR) are anticipated and tolerable for quality cash flow credentialed assets. For secondary office markets, there is still a theme of yield compression, however not at the same velocity as that outlined above for quality and well-leased assets. The prevailing level of tenant incentives and costs associated with tenancy churn for short WALE assets somewhat puts a dampener of strong yield compression. Within the Sydney in particular we have seen a strong theme of acquisition by Asian developers seeking residential conversion or redevelopment opportunities for key sites, with preference for corner and or sites offering potential views of harbour and / or parks. Assets fitting the required conversion or redevelopment criteria are being sought after at pricing that equates to between 50 and 100 bp tighter than what might ordinarily be considered normal investment metrics. We see a continuation of this theme over the short to medium term. 192 Pitt Street, Sydney: Sold by Colliers International on behalf of private clients for $32,800, Exhibition Street, Melbourne: Currently being marketed by Colliers International on behalf of AMP Capital Wholesale Office Fund /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 27

15 INVESTMENT OUTLOOK DETAILED TRANSACTION LIST Chinese insurance companies are shaping up to be a dominant new force behind increased offshore investment in Australian property. Offshore capital looking for investment opportunities in Australia will continue, more broadly, to be the underlying driver of demand and yield compression in our major eastern seaboard markets. However, while European, South Korean, American and Canadian pension funds are already active in our markets, we see the emergence of Chinese insurance companies into the Australian market as potentially increasing further the volume of capital looking for core and core plus assets. China's sovereign wealth fund CIC, the fourth largest of its kind in the world has already been successful in securing the highly sought after Investa portfolio. It is expected that other major Chinese life companies will follow CIC into the market. The largest of these is the state-backed China Life Insurance Co., which has a market capitalisation of circa $USD 140 billion. China Life has yet to make an acquisition in the Australian market, but did recently purchase 70 per cent of one of Britain's biggest towers, 10 Upper Bank Street in London's Canary Wharf, for million ($AUD $1.1 billion approx). This was China Life's first European property investment. Other Chinese life groups include Ping An Life Insurance Company of China, with a market cap of $USD 115 billion, who recently teamed with China Life to purchase a majority stake in a $500 million development in Boston in the United States. Like the Canary Wharf deal, this was the first US acquisition for both groups. In 2012, the Chinese government relaxed rules surrounding foreign investment by China life companies. These companies have since been on the lookout to diversify their asset bases. Further pushing the drive into property was the increase in the real estate holdings threshold for these companies, which increased from 15 per cent to 30 per cent in Recent instability in the Chinese stock market is also expected to encourage these Chinese life groups to increase their involvement in Australia's key real estate markets. With yields in Shanghai and Beijing sitting at roughly 3 to 4 per cent, office assets in Melbourne, Sydney and Brisbane compare very favourably even at this point in the yield cycle. Overall, we expect that the continued influx of foreign capital more generally will set Australian office markets on a path of continued yield compression throughout the next year at least. These major buyers, however, have mandates for only the very best assets in their target markets, so we expect compression to be felt most strongly at the premium and A Grade end. Local private investors and smaller cap institutions will target less crowded metropolitan markets for yields, as they have done over the past year. This will drive continued strong demand in popular markets such as Parramatta, St Leonards and North Sydney in New South Wales and Fortitude Valley in Brisbane. CHINA OUTBOUND CAPITAL *source: forecast from President Xi Jinping, APEC Forum, Beijing $USD 660 BILLION $USD 1.25* TRILLION 135 King Street, Sydney: Sold by Colliers International to Investa Commercial Property Fund on behalf of Colonial First State Global Asset for $130,750,000. Address Suburb State Type Stake Price Date NEW SOUTH WALES 52 Martin Pl Sydney Hickson Rd Sydney Equity Contribution Initial Yield $/sqm Vendor Purchaser 100.0% $555,000,000 Jul % $14,129 QIC Global Real Estate REST Industry Super 37.5% $525,000,000 Jun-2015 $19,700 Lend Lease Qatar Authority 1 Alfred St Sydney Development 100.0% $415,000,000 Jan % $18,100 Blackstone Dalian Wanda Group 175 Liverpool St Sydney Hickson Rd Sydney 101 Miller St North Sydney 161 Castlereagh St Sydney 320 Pitt St Sydney 201 Kent St Sydney 160 Marsden St Parramatta Equity Contribution 100.0% $392,750,000 Nov % $8,100 GIC Real Estate Shimao Property 25.0% $350,000,000 Jun-2015 $19,700 Lend Lease 50.0% $302,600,000 Nov % $8,254 Eureka Funds management 25.0% $240,000,000 Apr % $15,990 LaSalle 100.0% $200,000,000 Jun % $6,859 Equity Commonwealth Trust 100.0% $173,000,000 Jul % $4,338 DEXUS Office Trust JV CPP Board APPF Henderson Global Investors JV TIAA-CREF Blackstone Propertylink Investa Commercial Property Fund 100.0% $170,100,000 Dec % $7,880 Government Eureka Funds Mgmt 1f Homebush Bay Dr Rhodes Equity Buyout 100.0% $157,986,911 Oct-2014 $8,944 Australand Frasers Centrepoint 168 Walker St North Sydney 100.0% $157,500,000 Jan % $8,289 Anton Capital Aqualand 1d Homebush Bay Dr Rhodes Equity Buyout 100.0% $154,176,760 Oct-2014 $8,944 Australand Frasers Centrepoint 35 Clarence St Sydney 100.0% $137,100,000 Dec % $8, Elizabeth St Sydney Development 100.0% $120,666,667 Mar-2015 n/a 60 Carrington St Sydney 73 Miller St North Sydney 201 Pacific Hwy St Leonards $11,706 AMP Capital Investors OBO SunSuper Cbus Property 100.0% $118,000,000 Nov-2014 $6,105 PAG 100.0% $116,500,000 Jan % $7,941 Morgan Stanley 100.0% $115,000,000 Jun % $6,937 Evoce JV Aoyuan Property Brookfield Property Partners Fosun Int'l Ltd JV Propertylink Abacus Property Group JV Goldman Sachs 1b Homebush Bay Dr Rhodes Equity Buyout 100.0% $114,420,657 Oct % $8,944 Australand Frasers Centrepoint Coward St Mascot Equity Buyout 100.0% $113,588,866 Oct-2014 $8,944 Australand Frasers Centrepoint 309 George St Sydney 309 George St Sydney 8 Central Ave Eveleigh 100.0% $112,300,000 Mar % $9,357 Abacus Property Group JV AM alpha 100.0% $112,300,000 May % $12,002 Abacus Property Group JV AM alpha Flagship Property 50.0% $110,000,000 Apr % $3,018 Holdings JV Rebel Property Group HK Realway HK Realway Centuria Capital Ltd JV SEB Asset Lee St Sydney Equity Buyout 100.0% $107,555,509 Oct-2014 $8,570 Australand Frasers Centrepoint 338 Pitt St Sydney Christie St St Leonards 50 Pitt St Sydney 100 Harris St Pyrmont 50 Carrington St Sydney 100.0% $102,000,000 Dec-2014 $5,490 AMP Capital Investors 100.0% $96,400,000 Jul % $5,332 GIC (Govt of Singapore) JV PSP s JV Charter Hall Visionary Group Australasian Property s JV Wingate Group 100.0% $94,000,000 Nov % $9,498 Hawaiian CIMB 100.0% $90,000,000 Dec-2014 $3,462 Private Private 100.0% $88,000,000 Dec % $7,793 Dexus Brookfield Property Partners Coward St Mascot Equity Buyout 100.0% $87,869,850 Oct % $8,570 Australand Frasers Centrepoint 12 Langston Pl Epping 100.0% $85,000,000 Oct % $9,504 Undisclosed Cbus Property 6-7 Eden Park Dr Macquarie Park 110 George St Parramatta 20 Lee St Condell Park Railway Pde Burwood 55 Pyrmont Bridge Rd Pyrmont 100.0% $81,800,000 Mar % $18,129 Investa Property Group Altis Property Partners 100.0% $81,675,000 Oct % $3,895 Charter Hall's PFA Diversified Property Trust and Westlawn Property Trust Longbow Enterprise Equity Buyout 100.0% $81,497,777 Oct-2014 $8,944 Australand Frasers Centrepoint 100.0% $80,000,000 Oct % $4, Capital Office Fund Holdmark Developments 100.0% $80,000,000 Oct-2014 $5,333 Recievers Blackwall /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 29

16 Address Suburb State Type Stake Price Date Initial Yield $/sqm Vendor Purchaser 19 Harris St Pyrmont Portfolio 100.0% $75,300,000 Nov % $5,379 Lend Lease Pitt St Sydney 4-6 Bligh St Sydney 100.0% $73,000,000 Jan George St Sydney Portfolio 100.0% $68,242,730 May Elizabeth St Sydney 201 Pacific Hwy St Leonards 140 Arthur St North Sydney 4a - 4 f Huntley St Alexandria 285a Crown St Surry Hills Forest Rd And Gloucester Rd Hurstville 2 Meredith St Bankstown 2 Elizabeth Plz North Sydney Related Party Transfer $13,722 Everbright Real Estate JV AXF 100.0% $70,000,000 Jun-2015 $7,025 Cromwell $10,680 Mirvac Group 100.0% $67,000,000 Oct % $10,748 Uniting Church Property Trust 100.0% $65,400,000 Jul % $3,945 Challenger Diversified LaSalle Dalian Wanda Group Fortius Funds Anton Capital OBO Goldman Sachs Offshore Private Company 100.0% $58,000,000 Jun % $7,073 CorVal Partners HK Realway 100.0% $51,700,000 Dec-2014 $5,170 Bricktop CorVal Partners 100.0% $50,250,000 Nov % $11,167 EG Funds Clipper Property 100.0% $50,000,000 Jul-2014 #DIV/0! GE Capital Real Estate Undisclosed 100.0% $50,000,000 May % $3,621 Fortius Funds SC Capital Partners 100.0% $47,500,000 Nov % $6,059 Altis Property Partners Marprop 20 Woniora Rd Hurstville Development 100.0% $47,000,000 Oct-2014 n/a $3, Capital Private Bourke St Waterloo 100.0% $46,600,000 Oct % $4,873 Private Private Invester 2-10 Wentworth St Parramatta 100.0% $45,050,000 Nov-2014 $4,124 Charter Hall Office Trust Centuria Capital Ltd Chalmers St Redfern Pirrama Rd Pyrmont 203 Pacific Hwy St Leonards George St Sydney 21 Solent Circuit Baulkham Hills 80 George St Parramatta 132 Arthur St North Sydney 2-14 Elsie St Burwood 15 Bourke Rd Mascot 15 Talavera Rd Macquarie Park 87 Marsden St Parramatta Related Party Transfer 100.0% $45,000,000 Jul-2014 $4,013 South Sydney Rabbitohs JV Trivest Pty Ltd 100.0% $42,000,000 Nov % $10,500 Abacus Property Group JV Heitman 100.0% $41,500,000 Jul % $3,543 Challenger Diversified Salvation Army MarksHenderson Company 100.0% $41,000,000 Nov % $12,152 Private Foreign Private Investor 100.0% $38,915,306 Mar % $10,837 Altis Property Partners IAPF 100.0% $38,700,000 Apr % $8,123 Heathley Ltd GDI Property Group OBO GDI No 4 Office Trust 100.0% $37,000,000 Nov-2014 $4,684 Valad Property Group Centennial Capital 100.0% $35,600,000 Aug-2014 $5,547 EG Funds Mgmt Rebel Property Group JV Ashe Morgan 100.0% $35,000,000 Feb-2015 $3,953 Capital Corporation CR Kennedy 100.0% $34,000,000 Jul % $2,637 AMP Propertylink 100.0% $33,150,000 Dec % $4,977 Quintessential Equity 210 George St Sydney Portfolio 100.0% $31,757,151 May-2015 $4,970 Mirvac Group 92 Pitt St Sydney 1-3 Fitzwilliam St Parramatta 8 Windmill St Sydney 13 Narabang Way Belrose 3 Horwood Pl Parramatta 100.0% $30,650,000 Feb % $6,521 LaSalle 100.0% $29,000,000 Jul-2014 $2,964 Chandru Enterprises VennCap Real Estate OBO Hilti Group Anton Capital OBO Goldman Sachs EG Funds Mgmt Raffles Education Corp Ltd 100.0% $28,000,000 Jul % $7,330 Meat Industry Emp Fund MarksHenderson 100.0% $25,700,000 Nov % $2,999 Undisclosed 100.0% $25,400,000 Mar % $5,053 MAB Funds Clunies Ross St Prospect Portfolio 100.0% $25,080,000 Nov % $2,347 Lend Lease 125 York St Sydney Wentworth Ave Surry Hills 143 York St Sydney Miller St Pyrmont s Total $7.69 billion 100.0% $25,000,000 Jul-2014 $8,986 Centennial Property Group Stronghold s Advisory JV Beelee Property Trust Australian Executor Trustees LaSalle Undisclosed 100.0% $22,123,000 Dec % $6,807 W Property Security Capital Corp 100.0% $21,250,000 Apr % $8,019 Undisclosed Yeh Family 100.0% $20,000,000 Dec % $4,108 Aveo EG Funds Mgmt Address Suburb State Type Stake Price Date VICTORIA CBW Complex Melbourne VIC 700 Bourke St Docklands VIC 357 Collins St Melbourne VIC 321 Exhibition St Melbourne VIC 114 William St Melbourne VIC 818 Bourke St Docklands VIC 2 Riverside Quay Southbank VIC 40 Market St Melbourne VIC 31 Queen St Melbourne VIC 60 Brougham St Geelong VIC 484 St Kilda Rd Melbourne VIC 509 St Kilda Rd Melbourne VIC 575 Bourke St Melbourne VIC Siddeley St Docklands VIC Salmon St Port Melbourne VIC 441 St Kilda Rd Melbourne VIC 6-20 Gladstone St Moonee Ponds VIC 565 Bourke St Melbourne Vic 600 St Kilda Rd Melbourne VIC Related Party Transfer Related Party Transfer sale Initial Yield $/sqm Vendor Purchaser 100.0% $608,100,000 Sep % $7,470 Cbus Property GPT Group 100.0% $433,500,000 Sep % $6,900 Cbus Property 100.0% $222,500,000 Apr % $6,971 Australand 100.0% $208,000,000 Jul % $6,887 Cromwell Property Group 100.0% $125,000,000 Jun % $5,961 Trackelly No 6 Pty Ltd AMP Capital Wholesale Fund Frasers Commercial Trust (FCOT) Invesco Real Estate CorVal on behalf of Straits Real Estate Pty Ltd 100.0% $152,500,000 Oct % $6,539 GPT Hines Global REIT 50.0% $106,000,000 Dec-2014 $10,076 Mirvac Group ISPT 100.0% $105,295,000 Sep % $8,767 DEXUS MTAA Super 100.0% $96,200,000 Jul % $4,982 Challenger Diversified Prop Grp 100.0% $95,800,000 Oct % $6,333 Laidlaw Family 100.0% $94,000,000 July % $4,613 Abacus Property Group JV Heitman Company Impact Group (IIG) UBS Grocon Real Estate 100.0% $90,000,000 Nov % $4,572 Calibre Capital Beville Group 100.0% $90,000,000 May % $5,563 RREEF Europe OBO BVV CIMB TrustCapital 50.0% $86,000,000 Oct % $1,720 Asset1 JV Macquarie Bank Australia Abacus Property Group JV KKR 100.0% $86,000,000 May % $3,906 Mirvac Altis Property Partners 100.0% $82,100,000 Oct % $5,091 Centuria Property Funds Dymocks Group 100.0% $83,000,000 Sep % $3, % $82,000,000 Jan-2015 $5,136 GIC (Govt of Singapore) JV PSP s JV Charter Hall Prime Value Asset Undisclosed 100.0% $81,500,000 Dec % $4,829 Arena Wharf s 499 St Kilda Rd Melbourne VIC Development 100.0% $80,000,000 Apr-2015 n/a $3,742 IGB Corp Qualitas / LAS Group 710 Collins St Docklands Vic 100.0% $76,500,000 Dec % $6,809 Grollo Group Abacus Property Group 301 Burwood Hwy Burwood VIC 350 Queen St Melbourne VIC Blackburn Rd Mt Waverley VIC 211 Wellington Rd Mulgrave VIC 100.0% $70,000,000 Feb-2015 $3,539 Banco JV Victor Smorgon Group Ryan Ouyang 100.0% $68,750,000 Oct-2014 $3,111 Kinetics Property Undisclosed 100.0% $63,000,000 Sep % $2,656 AMP Capital EG Funds Mgmt 100.0% $62,600,000 Dec-2014 $4,922 Australand Growthpoint 55 King St Melbourne VIC Portfolio 100.0% $61,500,000 Nov % $4,956 Lend Lease 600 Collins St Melbourne VIC King St West Melbourne 520 Collins St Melbourne VIC B8, 576 Swan St Richmond VIC 459 Little Collins St Melbourne VIC 553 St Kilda Rd Melbourne VIC 200 Victoria St Carlton VIC 432 St Kilda Rd Melbourne VIC 185 Rosslyn St West Melbourne LaSalle 100.0% $60,000,000 Mar % $8,000 Henkell Brothers Undisclosed VIC Development 100.0% $52,500,000 Mar-2015 n/a sale $13,134 Aspial Haileybury College 100.0% $51,000,000 May % $5,845 Jason Yeap Private 100.0% $46,500,000 Nov-2014 $5,582 Botannica 8 JV 360 Capital 100.0% $45,500,000 Sep % $4,619 Griffin Capital OBO Uniting Church Property Trust Juilliard Group 100.0% $45,000,000 Jul-2014 $4,425 Rosalia Real Estate IHC 100.0% $42,300,000 July % $5,346 IIG Australian Unity 100.0% $41,800,000 Dec % $4,584 Prime Value Asset Standard Life VIC Development 100.0% $40,000,000 Mar-2015 n/a $9,333 Australia Post Trenerry Property /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 31

17 Address Suburb State Type Stake Price Date Initial Yield $/sqm Vendor Purchaser 627 Chapel St South Yarra VIC Development 100.0% $40,000,000 Mar-2015 n/a $5,714 Henkell Brothers Fridcorp 293 Camberwell Rd Camberwell VIC 488 Albert St East Melbourne 2 Luton Ln Hawthorn VIC 446 Collins St Melbourne VIC 52 Collins St Melbourne VIC Dorcas St Clarke St South Melbourne South Melbourne 100.0% $39,350,000 Nov % $5,608 Bennelong Group Undisclosed VIC Development 100.0% $36,600,000 Nov-2014 n/a $5,365 VECCI Roman Catholic Church VIC 410 Collins St Melbourne VIC 235 Queen St Melbourne VIC 466 Collins St Melbourne VIC 301 Flinders Lane Melbourne VIC 290 Burwood Rd Hawthorn VIC 2-6 Railway Pde Camberwell VIC 100.0% $34,050,000 Nov % $6,015 Bennelong Group Undisclosed 100.0% $34,000,000 Mar % $6, % $32,000,000 May % $9,390 Trevor and Heather Cohen Australian National University Undisclosed MarksHenderson 100.0% $30,750,000 Jun % $4,042 Cromwell Crescent Wealth VIC Development 100.0% $30,400,000 Jul-2014 n/a $16,983 SMA Projects Brilliard Group 100.0% $28,275,000 Mar % $7,175 Vaughan Constructions Undisclosed 100.0% $25,500,000 Dec % $7,025 Melbourne Chambers Acland s 100.0% $25,000,000 Oct Collins St Melbourne VIC Development 100.0% $22,680,000 May-2015 n/a Prospect St Box Hill VIC 295 Springvale Rd Glen Waverley VIC 22 William St Melbourne VIC VIC s Total $4.41 billion QUEENSLAND 1 Eagle St Brisbane QLD 1 Eagle St Brisbane QLD 215 Adelaide St Brisbane QLD 53 Albert St Brisbane QLD 1 King St Fortitude Valley QLD 50 Ann St Brisbane QLD 144 Montague Rd South Brisbane QLD sale $24,131 Equiset The Golden Age Group 100.0% $23,600,000 Oct-2014 $4,148 Victoria University KLW Holdings Ltd 100.0% $23,350,000 Nov % $5,307 Bennelong Group Zagame Corp 100.0% $23,000,000 Feb-2015 $5,993 Undisclosed NATA $10,883 Ken Biddick Lian Beng Group 100.0% $22,000,000 Oct % $5,194 Fawlkner Property Xiaming Chen 100.0% $22,000,000 Feb % $4,231 Wharf s IOOF 100.0% $21,600,000 Aug % $3, % $249,895,107 Jun % $7, % $249,895,107 Jun % $7,606 Ronald s Pty Ltd Future Fund JV Stockland Future Fund JV Stockland Undisclosed DEXUS DEXUS Wholesale Office Fund 100.0% $224,000,000 Jun % $7,708 Pramerica 100.0% $209,268,000 Dec % $11,349 Hatham Holdings 100.0% $131,885,000 Jun % $7,951 Lend Lease Developments Impact Group 100.0% $131,800,000 Jul % $5,165 Harburg s CIMB 100.0% $92,750,000 Nov % $6,292 Hines Global REIT Maple Tree s 25 Donkin St West End QLD Development 100.0% $82,000,000 Feb-2015 n/a $4,880 Pointcorp 757 Ann St Fortitude Valley QLD 153 Campbell St Bowen Hills QLD 60 Edward St Brisbane QLD 100.0% $65,500,000 Jul % $7, % $62,000,000 Sep % $3,957 OPD Developers & Van Reit Centuria Funds Guangzhou R&F Prop Co Investec Australia Property Fund Sentinel Property Group 100.0% $60,000,000 Dec % $5,594 AMP Capital Investors RACQ 443 Queen St Brisbane QLD Development 100.0% $49,000,000 Jul-2014 n/a $8,791 Brice Group Cbus Property 363 Adelaide St Brisbane QLD Development 100.0% $47,500,000 May-2015 n/a $3,175 Investa Property Group Valparaiso Capital Partners 300 Adelaide St Brisbane QLD 100.0% $47,500,000 Nov % $3,615 Charter Hall Lei Shing Hong 35 Robina Town Centre Dr Robina QLD 30 Makerston St Brisbane QLD Related Party Transfer 100.0% $46,000,000 Apr % $4,687 Trident Corporation JV Alceon 100.0% $42,500,000 Jul % $2,901 Challenger Diversified Centuria Property Funds Limited Company 171 George St Brisbane QLD Development 100.0% $35,000,000 Jul-2014 n/a $8,438 Nielson Properties Toga s Address Suburb State Type Stake Price Date 555 Coronation Dr Toowong QLD Initial Yield $/sqm Vendor Purchaser 100.0% $33,400,000 Nov % $5,974 Sentinel Property Group 240 Margaret St Brisbane QLD Development 100.0% $33,000,000 Jul-2014 n/a $19, George St Brisbane QLD Portfolio 100.0% $30,250,000 Nov % $6, Felix St Brisbane QLD 25 Donkin St West End QLD 312 Brunswick St Fortitude Valley 74 High St Toowong QLD 16 Marie St Milton QLD 100.0% $25,800,000 Dec % $5,296 Seqwater Lend Lease Core Plus Fund Canberra Area Rugby League Centuria Funds Aspial Corporation Limited LaSalle 100.0% $25,650,000 Jul % $1,527 DEXUS Pointcorp QLD Development 100.0% $23,000,000 Sep-2014 n/a $9,087 EG Funds Mgmt Fosun Int'l Ltd 100.0% $21,500,000 Sep % $4,852 IOOF Holdings Darvenzia 100.0% $20,475,000 Dec % $5, Ferry Rd West End QLD Development 100.0% $20,000,000 Aug-2014 n/a $3, George St Brisbane QLD 41 Buchanan St West End QLD QLD s Total $2.09 billion ACT 45 Benjamin Way Belconnen ACT 6 Chan St Belconnen ACT 47 Bowes St Woden ACT 60 Marcus Clarke St Canberra ACT 44 Sydney Ave Canberra ACT 1212 Kirkpatrick St Weston ACT ACT s Total $325 million WESTERN AUSTRALIA 59 Albany Hwy Victoria Park WA 220 St Georges Terr Perth WA Related Party Transfer Related Party Transfer Related Party Transfer Penbry Pty Ltd & PM Properties Pty Ltd & Vigenmale Pty Ltd Australian Broadcasting Corporation AIMS Unity Pacific Stockwell 100.0% $20,000,000 Apr-2015 $3,115 Nielson Properties Forza Capital 100.0% $20,000,000 Oct % $3,383 BIS Properties (Brisbane) 100.0% $82,000,000 Jul % $2,641 Challenger Diversified 100.0% $71,500,000 Jul % $2,421 Challenger Diversified 100.0% $60,000,000 Jul % $2,698 Challenger Diversified Green Future (Aust) Pty Ltd Company Company Company 100.0% $49,100,000 Apr % $4,020 Mirvac Centuria Metropolitan 100.0% $32,000,000 Mar-2015 $3, Capital Quintessential Equity 100.0% $30,462,941 Aug % #DIV/0! Centuria Capital Ltd Sandran Pty Ltd 100.0% $72,800,000 Mar % $5, % $35,000,000 Dec-2014 $3,828 Finbar Group JV Wembley Lakes Estate Pty Ltd 220 St George's Terrace Pty Ltd Sim Lian Group Private Investor WA s Total $108 million SOUTH AUSTRALIA 60 Flinders St Adelaide SA Portfolio 100.0% $80,400,000 Nov % $5,111 Sachsenfonds Lend Lease King William St Adelaide SA 50.0% $74,000,000 Sep-2014 $4,312 Arena Abacus Property Group 151 Pirie St Adelaide SA 100.0% $72,000,000 Oct % $5,669 REAL I.S. Viv Padman 80 Flinders St Adelaide SA Portfolio 100.0% $49,600,000 Nov % $3,970 Sachsenfonds Lend Lease 81 Flinders St Adelaide SA 100.0% $41,333,897 Feb % $9,820 Norelco Holdings SA private syndicate 60 Wakefield St Adelaide SA 100 Pirie St Adelaide SA Currie St Adelaide SA Light Sq Adelaide SA SA s Total $431 million Related Party Transfer 100.0% $37,750,000 Mar % $2, % $28,630,000 Jul % $3, % $25,200,000 Jul % $1,789 South Australian Government Melis Developments (Recievers Appointed) Challenger Diversified Property Group Ascot Capital Pep Rocca Company 100.0% $22,000,000 Nov % $3,163 Sachsenfonds PrimeWest /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 33

18 First Half 2015 Australia & New Zealand First Half 2015 Australia First Half 2015 Australia and New Zealand First Half 2015 Australia and New Zealand Want real time data that matters most to your business? Colliers Edge is a subscription service developed by our in-house property research specialists, drawing on the expertise of our national network of operators. SYDNEY Matthew Meynell Head of, Australia James Barber James Quigley Adam Woodward Vince Kernahan Tom Green Associate Director, James Girvan Associate Director, Myles Brooks-Garrett Executive, Steam Leung, Asia Markets Paul Fernandes Director, Harry Bui Director, Miron Solomons Director, Brian McInally Associate Director, Jordan Lee Associate Director,, Asia Markets Michael Khouri Senior Executive, Emily Fan Executive,, Asia Markets Matt Pontey Executive, VALUATIONS Dwight Hillier Managing Director Jonathan Petsalis Director Office Cassandra Mortimer Associate Director Office Ben Masters Manager Office NORTH SYDNEY Jon Chomley Tom Appleby Executive, Henry Burke Associate Director, Ben Kirby Senior Executive, Corey Beauchamp Senior Executive, PARRAMATTA John McCann s Joe Sacco Executive, Mario Diab Executive, We provide clients with a quarterly series of real estate data, collected in a consistent and timely manner to ensure the highest standard of quality. Colliers Edge has the longest data time series for office, industrial and retail markets across all major Australian cities. Updated quarterly, Colliers Edge is an all-encompassing data analytics tool that can help your business make informed decisions. Want better insights, faster? Talk to a Colliers Edge expert today VIC MELBOURNE John Marasco Managing Director, & Nick Rathgeber Leigh Melbourne Michael Long Senior Analyst, Daniel Wolman Director, Matthew Stagg Director, Oliver Hay Senior Executive, David Sia Executive,, Asia Markets Chris Ling Executive, VALUATIONS Peter Volakos Director Office Steven Ellis Senior Valuer Office RESEARCH Anneke Thompson Associate Director MELBOURNE EAST Peter Bremner Jeremy Gruzewski Rob Joyes Hamish Burgess Manager, Ted Dwyer Manager, Ben Baines Senior Executive, Andrew Ryan Senior Executive, Damien Stone Executive, colliers.com.au/colliersedge Nerida Conisbee National Director Research nerida.conisbee@colliers.com Luke Dixon Associate Director Research luke.dixon@colliers.com QLD BRISBANE Tom Phipps Tom Barr Jason Lynch Don Mackenzie Jonathan Williams Executive, Capital Markets Hunter Higgins Director, Guy Stafford Senior Executive, Philip ODwyer Senior Executive, Pat George Executive, Richard Blanch Executive, VALUATIONS Craig Clayworth National Director Office Michelle Corven Senior Valuer Office GOLD COAST James Crawford Director, Steve Clark Executive, Improve your perspective. We have. Property Research worth talking about. ACT CANBERRA Tim Mutton Aaron Bruce Executive, Matthew Winter Executive, VALUATIONS Robert Rixon Director Office Research and Forecast report OFFICE Who will rule our s? Ownership changing the realm of office Research and Forecast Report HOTELS Research and Forecast Report INDUSTRIAL Research and Forecast Report RETAIL Size does matter Large format retail outperforms SA ADELAIDE Ian Thomas Alistair Mackie Paul Van Reesema Director, Oliver Totani Associate Director, VALUATIONS Heath Dowling Director Office Accelerating success. Hungry for prosperity? Hotel capital flows break new ground Accelerating success. Building scale Investors expand collections Accelerating success. Accelerating success. WA PERTH VALUATIONS John Del Dosso Director Dean Johnston Associate Director Ian Mickle Director, Nick Agapitos Director, Aaron Antonas Executive, NT DARWIN VALUATIONS Tony West Director /15 OFFICE INVESTMENT REVIEW A Colliers International Publication 35

19 Accelerating success. Disclaimer: Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. COPYRIGHT 2015.