©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed and subject to future revision.

REAL CAPITAL ANALYTICS Evaluating The Impact Of Capital

Property Funds Association, Cairns, 4th May 2015

2 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 2

Global Themes

Australia In A Global Context

Summary & Questions

RECORD YEAR, RECORD QUARTER IN 2014

3 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 3

Global Themes

4 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 4

NO SHORTAGE OF CAPITAL

©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed and subject to future revision.

CHANGE IN INVESTMENT VOLUMES 2014 VS 2013

©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed and subject to future revision.

7 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 7

2008 2009 2010 2011 2012 2013 2014 Market 2014 Sales Volume ($M) YOY Change

2 6 3 1 1 1 1 NYC Metro

3 1 2 2 2 2 2 London Metro

1 2 1 3 3 3 3 Tokyo

5 9 8 5 4 4 4 LA Metro

12 13 10 7 5 5 5 SF Metro

4 3 4 4 6 7 6 Paris

9 8 7 6 8 6 7 DC Metro

13 28 16 10 9 11 8 Chicago

48 21 18 20 17 13 9 Sydney

15 35 22 16 12 12 10 Dallas

8 4 5 8 7 8 11 Hong Kong

27 34 21 15 18 17 12 Boston

16 32 29 21 22 14 13 Atlanta

22 26 19 26 20 22 14 So Fla

21 39 20 18 13 10 15 Houston

63 29 24 33 31 28 16 Melbourne

28 15 17 22 28 23 17 Rhine-Ruhr

43 33 26 25 26 24 18 Frankfurt/Rhine-Main

29 7 11 11 19 21 19 Shanghai

6 22 12 23 21 25 20 Stockholm

35 46 30 31 11 19 21 Seattle

37 47 48 28 25 29 22 Denver

24 18 23 19 14 9 23 Berlin-Brandenburg

34 40 33 32 23 30 24 Phoenix

7 17 25 37 36 31 25 Amsterdam/Randstad

20 31 13 14 10 16 26 Toronto

46 63 42 35 42 38 27 Philly Metro

14 5 15 12 15 20 28 Seoul

39 20 38 29 32 26 29 Munich

45 79 39 48 27 34 30 Austin

Rankings

$57,012

$42,889

$38,894

$28,800

$26,666

$24,526

$14,275

$13,565

$13,051

$12,990

$12,964

$12,676

$11,976

$10,714

$9,159

$8,971

$8,367

$7,724

$7,612

$7,507

$7,365

$7,181

$7,006

$6,226

$6,109

$6,094

$5,923

$5,886

$5,838

$5,652

19%

-2%

15%

5%

51%

45%

-19%

9%

16%

5%

-5%

37%

22%

46%

-28%

50%

20%

14%

4%

16%

-8%

21%

-46%

14%

20%

-34%

49%

-25%

-9%

17%

RANKING THE MARKETS

2014 Most Active Markets Globally*

*Includes property types: Office, Industrial, Retail, Apartment, Hotel, $10mil+

8 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 8

CROSS-BORDER DRIVING EUROPEAN VOLUMES

$0

$100

$200

$300

$400

$500

$600

'08 '09 '10 '11 '12 '13 '14 '15

EMEA

'09 '10 '11 '12 '13 '14 '15

Chinese Land

Global

Continental

Domestic

Cross-Border % of Total

Asia-Pacific

USD Bn

0%

10%

20%

30%

40%

50%

60%

'09 '10 '11 '12 '13 '14

Americas

% Total

Rolling 12 Month, USD Billions

9 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 9

KEY CROSS-BORDER CAPITAL SOURCES

€0B €20B €40B €60B €80B

United States

Western Europe

Asia Other

Canada

China

United Kingdom

Middle East

Australia

Other Americas

Japan

CEE

India

Africa

EMEA

AsiaPac

Americas

Capital

Destination

YOY % EMEA

YOY 12 Months to Q1’2015 compared to same period Q1’2014

-200% 0% 200%

Capital Source

-200% 0% 200% -200% 0% 200%

YOY % APAC YOY % AMERICAS

10 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 10

CHINESE FLOWS RE-FOCUSING ON USA

€0B

€2B

€4B

€6B

€8B

€10B

€12B

€14B

€16B

€18B

2007 2008 2009 2010 2011 2012 2013 2014 2015

AsiaPac

Americas

EMEA

Chinese Cross-Border Flows

$4B

11 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 11

WHILE SOVEREIGN FUNDS TARGET LONDON

€0B €4B €8B

London

Paris

Bristol

Rome

Brussels

Moscow

Munich

Milan

Barcelona

Madrid

€Billion Transaction Volume

SWF European Targets SWF Global Targets

€0B €4B €8B

London

NYC Metro

Tokyo

LA Metro

Boston

DC Metro

Paris

SF Metro

Bristol

Seoul

€Billion Transaction Volume

38% 71%

12 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 12

AND PRIVATE EQUITY FUNDS ARE NET SELLERS?

-$120

-$100

-$80

-$60

-$40

-$20

$0

$20

$40

$60

$80

$100

2009 2010 2011 2012 2013 2014

$ B

illio

ns

Acquisition Disposition Net

Investment Activity of The 50 Largest Private Equity Funds

13 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 13

PRIVATE EQUITY FUNDS LOOKING FOR MISPRICING

-$10.0B -$5.0B $0.0B $5.0B

Peripherals

Benelux

India

France

Nordics

Latin America

Central Europe

Africa

Australia

United Kingdom

SE Asia

Japan

Germany

United States

Net Investment

12 Months to Q1’2015

14 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 14

TOP 25 GLOBAL BUYERS, LAST 12 MONTHS*

$0bn $5bn $10bn $15bn $20bn

BlackstoneDeutsche Annington

GICHyundai / KIA

GLPQIA

KlepierreJP Morgan

NBIMLone Star

TIAA-CREFCPPIB

StarwoodAXA Group

LaSalleClarion PartnersEssex PropertyColony Capital

NorthStarCredit Agricole

HinesCaisse de Depot

WP GlimcherBrookfield

DEXUS

Office

Retail

Industrial

Apartment

Hotel

Dev Sites

By Sector, €b

0% 50% 100%

Americas Asia-Pacific EMEABy Geography, %

* Excluding Chinese Land Sales; to end Q1’2015

15 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 15

BIGGEST QUESTION - PRIMARY OR SECONDARY?

US 6 Major Metros

US Average

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Init

ial Y

ield

Central London

UK Average

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Init

ial Y

ield

US Office UK Office

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Australia In A Global Context

17 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 17

PREQUIN DATA HIGHLIGHTS SLOWER RAISING*

Source: 2005 Prequin Real Estate Report

* US Dollars, Billions Raised

$0

$5

$10

$15

$20

$25

$30

$35

2006 2007 2008 2009 2010 2011 2012 2013 2014

Pan-Asia Other Asia Japan India China

18 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 18

CURRENTLY FAVOURED BY GLOBAL ALLOCATORS

2007, $37B

28%

35%

Australia China Hong Kong

India Singapore South Korea

Other Asia

57%

24%

Australia China Hong Kong

India Singapore South Korea

Other Asia

2014, $22B

Australia

Australia

Asia-Pacific Realised Transaction Volumes

19 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 19

AUSTRALIAN CAPITAL FLOWS

* Rolling 12 Month $AUD Billions

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

-600%

-400%

-200%

0%

200%

400%

600%

'08 '09 '10 '11 '12 '13 '14 '15

Cross-Border Institutional Listed/REITs Private User/Other Equity Fund

20 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 20

CROSS-BORDER INVESTORS (INTO AUSTRALIA)

5%

6%

7%

8%

9%

0%

10%

20%

30%

40%

50%

60%

'08 '09 '10 '11 '12 '13 '14 '15

Cross-Border

Commercial Yield

Cross-Border, % Total

2%

3%

4%

5%

6%

7%

8%

9%

HKG TOK LON NYC PAR SYD

Average

Prime

Secondary

International Comparisons

21 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 21

Compared to other Advanced Economies:

Stronger GDP growth outlook1

Stronger CPI outlook1

Transparent2

Market access

Strong international tenant base

Safe haven & “Asia-Pacific” allocation

WHY AUSTRALIA?

Notes: 1 IMF April 2015 report;

2 RCA data collection & JLL Transparency Index

22 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 22

BENCHMARK PRICING

Prime Office Yields

0%

1%

2%

3%

4%

5%

6%

Manhatten London Sydney

07 Peak Today

-150

-100

-50

0

50

100

150

200

250

300

Manhatten London Sydney

07 Peak Today

Spread to Bonds (bps)

23 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 23

AUSTRALIAN TRANSACTION YIELDS BY INVESTOR

6%

7%

8%

9%

10%

'10 '11 '12 '13 '14 '15

Australian Asia-Pacific

European North American

Realised Yields Compared*

Investments in Australia

Spread to Australian Yields*

Home nation investment yields

* Office Yields Only, Rolling 4Q Average

-3%

-2%

-1%

0%

'10 '11 '12 '13 '14 '15

Canada

Germany

United Kingdom

United States

24 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 24

AUSTRALIAN CAPITAL FLOWS - SUMMARY

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

Portfolio Individual

*$AUD Billions

Australian Capital Flows*

-100%

0%

100%

200%

'07 '08 '09 '10 '11 '12 '13 '14 15

YoY Change

Q4'14 Last 12 Months

Vol

($M)

YOY

Chg

Vol

($M)

YOY

Chg

Office $2,321.1 -3% $21,049.5 39%

Industrial $573.5 5% $5,730.1 63%

Retail $717.8 -43% $6,675.0 -17%

All Commercial $3,612.5 -14% $33,454.6 25%

Apartment $20.0 -94% $66.8 -85%

Hotel $504.4 212% $3,202.1 46%

Dev Site $970.0 -11% $6,469.2 73%

Grand Total* $5,106.9 -12% $43,192.6 31%

* Totals may not sum due to rounding

Q4'14 Last 12 Months

Market Vol

($M)

YOY

Chg

Vol

($M)

YOY

Chg

Sydney $2,513.0 21% $19,297.2 45%

Melbourne $975.8 -49% $11,673.5 57%

Brisbane $660.1 -6% $5,280.4 4%

Perth $264.7 -1% $1,388.1 -52%

Adelaide $79.1 -44% $1,260.8 96%

Canberra $46.0 -28% $628.6 13%

Gold Coast $362.1 483% $843.5 252%

Others $206.2 -62% $2,820.6 -4%

Grand Total* $5,106.9 -12% $43,192.6 31%

* Totals may not sum due to rounding

25 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 25

CROSS-BORDER INVESTOR ACQUISITIONS

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

'08 '09 '10 '11 '12 '13 '14 '15

Other Europe

Malaysia Greater China

Singapore North America

By Capital Source*

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

'08 '09 '10 '11 '12 '13 '14 '15

Apartment Dev Site

Hotel Industrial

Retail Office

By Property Type*

*$AUD Billions, Rolling 12 Month

26 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 26

TRANSACTION ACTIVITY BY CITY, SECTOR & SOURCE

$0B $4B $8B

Sydney - OfficeSydney - Retail

Sydney - IndustrialSydney - Apartment

Sydney - HotelSydney - Dev Site

Melbourne - OfficeMelbourne - Retail

Melbourne - IndustrialMelbourne - Apartment

Melbourne - HotelMelbourne - Dev Site

Brisbane - OfficeBrisbane - Retail

Brisbane - IndustrialBrisbane - Apartment

Brisbane - HotelBrisbane - Dev Site

Billions

Domestic Cross-BorderQ1 2015

27 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 27

IMPACT ON DOMESTIC YIELDS

5%

6%

7%

8%

9%

10%

'08 '09 '10 '11 '12 '13 '14 '15

Office Prime Retail Prime

Office Secondary Retail Secondary

Yield Bands - Australia

5%

6%

7%

8%

9%

10%

'08 '09 '10 '11 '12 '13 '14 '15

Uber-Prime

Prime

Secondary

Yield Bands – Sydney Office

28 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 28

OUTWARD TREND - AUSTRALIAN GLOBE TROTTING

0%

10%

20%

30%

40%

50%

60%

70%

80%

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15

% O

f Overall A

ustralian

Investm

ents In

vest

men

t V

olu

me

$B

, Ro

llin

g 1

2 M

on

th

Americas AsiaPac EMEA % of Australian Investment

29 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 29

CHANGING AUSTRALIAN GLOBAL INVESTORS

59%

17%

52%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1 2015*2007

% In

vest

men

t V

olu

me

Equity Fund

Institutional

Listed

Other

$0 $2 $3

AustralianSuper

Westfield

Goodman

QIC

Macquarie

Campus Living

Crown Resorts

QSuper

AMP

Lend Lease

2007 versus 2015 Top Overseas Investors

Last 3 Years

30 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 30

WHEN THE MUSIC STOPS?

$0B

$5B

$10B

$15B

$20B

$25B

$30B

$35B

$40B

$45B

$50B

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Australia

Canada

Germany

Japan

Malaysia

South Korea

UK

China

Cross-Border Investment Volumes $USD

$0B

$10B

$20B

$30B

$40B

$50B

$60B

$70B

$80B

$90B

$100B

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

United States

31 ©2015 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed. 31

Unlikely the global capital will leave suddenly;

Global capital likely to increase – an opportunity to

take profit, but what about re-investment?

Possible medium-term changing mix of investors as

yield levels less attractive to Western investors;

Developers continuing to see opportunity in Australia,

and a learning ground for “experience”;

CURSE THE GLOBAL CAPITAL?

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REAL CAPITAL ANALYTICS

+ 44 207 297 6860 | www.rcanalytics.com

THANK YOU

SIMON MALLINSON

Executive Managing Director EMEA & APAC

smallinson@rcanalytics.com